Union Carbide Earnings 2020-12-31

Balance Sheet	Income Statement	Cash Flow
Assets, Equity	Rev, G Profit, Net Income	Ops, Inv, Fin

ucc-20201231

Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

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

For the fiscal year ended December 31, 2020

☐ 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

Securities registered pursuant to section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

☐ Yes R No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

☐ Yes R No

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.

R Yes ☐ No

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 and post such files).

R Yes ☐ No

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

☐

Table of Contents

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 has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S. C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐

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

☐ Yes R No

At February 5, 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 I(1)(a) and (b) of Form 10-K and is therefore filing this Form with the reduced disclosure format.

DOCUMENTS INCORPORATED BY REFERENCE

None

Table of Contents

Union Carbide Corporation

ANNUAL REPORT ON FORM 10-K

For the Fiscal Year Ended December 31, 2020

TABLE OF CONTENTS


PART I		PAGE
Item 1.	Business.	5
Item 1A.	Risk Factors.	7
Item 1B.	Unresolved Staff Comments.	10
Item 2.	Properties.	10
Item 3.	Legal Proceedings.	11
Item 4.	Mine Safety Disclosures.	11

PART II
Item 5.	Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.	12
Item 6.	Selected Financial Data.	12
Item 7.	Management's Discussion and Analysis of Financial Condition and Results of Operations.	12
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk.	22
Item 8.	Financial Statements and Supplementary Data.	23
Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.	60
Item 9A.	Controls and Procedures.	60
Item 9B.	Other Information.	60

PART III
Item 10.	Directors, Executive Officers and Corporate Governance.	61
Item 11.	Executive Compensation.	61
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.	61
Item 13.	Certain Relationships and Related Transactions, and Director Independence.	61
Item 14.	Principal Accounting Fees and Services.	61

PART IV
Item 15.	Exhibits, Financial Statement Schedules.	62
Item 16.	Form 10-K Summary.	65

SIGNATURES		67

Table of Contents


Union Carbide Corporation and Subsidiaries

Throughout this Annual Report on Form 10-K, 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 are “forward‑looking statements” within the meaning of the 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 cause actual results to differ materially from those projected, anticipated or implied in the 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 continuing global and regional economic impacts of the coronavirus disease 2019 pandemic and other public health-related risks and events on the Corporation’s business; and developments related to contemplated restructuring activities and proposed divestitures or acquisitions such as workforce reduction, manufacturing facility and/or asset closure and related exit and disposal activities, and the benefits and costs associated with each of the 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 such forward-looking statements is included in the section of this Annual Report on Form 10-K titled “Risk Factors.” 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.

Table of Contents


Union Carbide Corporation and Subsidiaries
PART I

ITEM 1. BUSINESS

THE CORPORATION

Union Carbide Corporation is a chemicals and polymers company that has been a wholly owned subsidiary of The Dow Chemical Company ("TDCC") since 2001. Except as otherwise indicated by the context, the terms "Corporation" or "UCC" as used herein mean Union Carbide Corporation and its consolidated subsidiaries.

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. This included transferring certain Corporation assets and liabilities aligned with the specialty products business to TDCC. 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 to the Consolidated Financial Statements for additional information.

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 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. In addition, in order to simplify the customer interface process, the Corporation sells substantially all of its products to TDCC. Products are sold to TDCC at prices determined in accordance with the terms of an agreement between UCC and TDCC.

Available Information

The Corporation's Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8‑K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, are available free of charge through the Financial Reports-SEC Filings section of the Corporation's website at www.unioncarbide.com, as soon as reasonably practicable after the reports are electronically filed or furnished with the U.S. Securities and Exchange Commission ("SEC"). The SEC maintains a website that contains these reports as well as proxy statements and other information regarding issuers that file electronically. The SEC's website is www.sec.gov. The Corporation's website and its content are not deemed incorporated by reference into this report.

PRODUCTS

The following is a description of the Corporation's principal products:

Ethylene Oxide/Ethylene Glycol (“EO/EG”) - ethylene oxide, a chemical intermediate primarily used in the manufacture of monoethylene glycol (“MEG”), polyethylene glycol, glycol ethers, ethanolamines, surfactants and other performance chemicals and polymers; di- and triethylene glycol, used in a variety of applications, including boat construction, shoe manufacturing, natural gas-drying and other moisture-removing applications, and plasticizers for safety glasses; and tetraethylene glycol, used predominantly in the production of plasticizers for automotive windows. MEG is used extensively in the production of polyester fiber, resin and film, automotive antifreeze and engine coolants, and aircraft anti-icing and deicing fluids.

Hydrocarbons - ethylene and propylene; internal feedstocks that are primarily consumed by downstream product lines to optimize integration benefits and drive low costs.

Table of Contents

Industrial Chemicals and Polymers - broad range of products for specialty applications, including animal food supplements, personal care, industrial and household cleaning, coatings for beverage and food cans, industrial coatings and many other industrial uses. Product lines include acrolein and derivatives, ethyleneamines, CARBOWAX™ and SENTRY™ Polyethylene Glycols and Methoxypolyethylene Glycols, TERGITOL™ and TRITON™ Surfactants, UCAR™ Deicing Fluids, UCARTHERM™ Heat Transfer Fluids and UCON™ Fluids.

Polyethylene - includes FLEXOMER™ Polyethylene, very low-density polyethylene resins used as impact modifiers in other polymers and to produce flexible hose and tubing, frozen-food bags and stretch wrap; TUFLIN™ Linear Low Density and UNIVAL™ High Density Polyethylene resins used in high-volume applications such as housewares; milk, water, bleach and detergent bottles; grocery sacks; trash bags; packaging; and water and gas pipe.

Solvents and Intermediates - includes oxo aldehydes, acids and alcohols used as chemical intermediates and industrial solvents and in herbicides, plasticizers, paint dryers, jet-turbine lubricants, lube oil additives, and food and feed preservatives; and esters, which serve as solvents in industrial coatings and printing inks and in the manufacturing processes for pharmaceuticals and polymers.

Technology Licensing and Catalysts - includes catalysts for supply and licensing of the METEOR™ Process for EO/EG and the LP OXO process for oxo alcohols; and licensing of the METEOR™ Process for EO/EG and the LP OXO process for oxo alcohols through Dow Technology Investments LLC, a 50:50 joint venture with Dow Global Technologies LLC, a TDCC subsidiary.

Vinyl Acetate Monomer - a building block for the manufacture of a variety of polymers used in water-based emulsion paints, adhesives, paper coatings, textiles, safety glass and acrylic fibers.

Wire and Cable Applications - polyolefin-based compounds for high-performance insulation, semiconductives and jacketing systems for power distribution, telecommunications, and flame-retardant wire and cable insulation. Key product lines include: REDI-LINK™ Polyethylene-Based Wire and Cable Compounds, SI-LINK™ Polyethylene-Based Low Voltage Insulation Compounds, UNIGARD™ HP High-Performance Flame-Retardant Compounds, UNIGARD™ RE Reduced Emissions Flame‑Retardant Compounds, and UNIPURGE™ Purging Compounds.

COMPETITION

The chemical industry has been historically competitive and this competitive environment is expected to continue. Large, multinational chemical firms, as well as the chemical divisions of the major national and international oil companies, provide substantial competition both in the United States and abroad.

PATENTS, LICENSES AND TRADEMARKS

The Corporation continually applies for and obtains U.S. and foreign patents that relate to a wide variety of products and processes, has a substantial number of pending patent applications throughout the world and is licensed under a number of patents. At December 31, 2020, the Corporation owned 73 active U.S. patents and 414 active foreign patents related to a wide variety of products and processes. These patents expire as follows:


Remaining Life of Patents Owned at Dec 31, 2020	United States	Rest of World
Within 5 years	16	89
6 to 10 years	41	279
11 to 15 years	15	46
16 to 20 years	1	—
Total	73	414

The Corporation also has a large number of trademarks. Although the Corporation considers that its patents, licenses and trademarks in the aggregate constitute a valuable asset, it does not regard its business as being materially dependent on any single or group of related patents, licenses or trademarks.

PROTECTION OF THE ENVIRONMENT

Matters pertaining to the environment are discussed in Management's Discussion and Analysis of Financial Condition and Results of Operations, and Notes 1 and 14 to the Consolidated Financial Statements.

Table of Contents

OTHER ACTIVITIES

Dividends

On a quarterly basis, the Corporation's Board of Directors ("Board") reviews and determines if there will be a dividend distribution to its parent company and sole shareholder, TDCC. The Board takes into consideration the level of earnings and cash flows, among other factors, in determining the amount of the dividend distribution. The Corporation declared and paid cash dividends of $362 million to TDCC in 2020; dividends paid to TDCC were $570 million in 2019. On February 2, 2021, the Board approved a dividend to TDCC of $40 million, payable on or before March 26, 2021.

In the first quarter of 2019, as part 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 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.

ITEM 1A. RISK FACTORS

The factors described below represent the Corporation's principal risks.

COVID-19 PANDEMIC - RELATED RISKS

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 oil price fluctuations due in part to the global spread of COVID-19 and the continued increase in global cases, 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; price declines; reduced profitability; supply chain disruptions impeding the Corporation’s ability to ship and/or receive product; temporary idling or permanent closure of select manufacturing facilities and/or manufacturing assets; asset impairment charges; interruptions or limitations to manufacturing operations imposed by local, state or federal governments; workforce absenteeism and distraction; labor shortages; increased cyber security risk and data accessibility disruptions due to remote working arrangements; and workforce reductions. Additional risks may include, but are not limited to: shortages of key raw materials; additional asset impairment charges; increased obligations related to the Corporation’s pension and other postretirement benefit plans; and 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. The adverse impact of the COVID-19 pandemic on the Corporation may also have the effect of heightening many of the other risks described in this "Risk Factors" section.

MACROECONOMIC RISKS

Global Economic Considerations: The Corporation operates in a global, competitive environment, which gives rise to operating and market risk exposure.

The Corporation sells substantially all of its products to TDCC, which operates in a competitive, global environment, and competes worldwide for sales. Increased levels of competition could result in lower prices or lower sales volume, which could have a negative impact on the Corporation's results of operations. Sales of TDCC's products are also subject to extensive federal, state, local and foreign laws and regulations, trade agreements, import and export controls, and duties and tariffs. The imposition of additional regulations, controls and duties and tariffs or changes to bilateral and regional trade agreements could result in lower sales volume, which could negatively impact the Corporation's results of operations.

Table of Contents

Economic conditions around the world, and in certain industries in which the Corporation and TDCC do business, also impact sales price and volume. As a result, market uncertainty or an economic downturn in the geographic regions or industries in which UCC products are sold could reduce demand for these products and result in decreased sales volume, which could have a negative impact on UCC's results of operations.

Financial Flexibility: Market conditions could reduce TDCC's financial flexibility, which could impact the financial flexibility of the Corporation.

Adverse economic conditions could reduce TDCC's flexibility to respond to changing business and economic conditions or to fund capital expenditures or working capital needs. The economic environment could result in a contraction in the availability of credit in the marketplace and reduce sources of liquidity for TDCC and could result in higher borrowing costs. Since TDCC is a service provider, material debtor, and the major customer of the Corporation, reduced financial flexibility for TDCC could potentially impact the financial flexibility of the Corporation.

Pension and Other Postretirement Benefits: Increased obligations and expenses related to the Corporation's defined benefit pension plans and other postretirement benefit plan could negatively affect UCC's financial condition and results of operations.

The Corporation has defined benefit pension plans and an other postretirement benefit plan (the "plans") in the United States. The assets of the Corporation's funded plans are primarily invested in fixed income securities, equity securities of U.S. and foreign issuers and alternative investments, including investments in real estate, private equity and absolute return strategies. Changes in the market value of plan assets, investment returns, discount rates, mortality rates, regulations and the rate of increase in compensation levels and health care cost trends may affect the funded status of the Corporation's plans and could cause volatility in the net periodic benefit cost, future funding requirements of the plans and the funded status of the plans. A significant increase in the Corporation's obligations or future funding requirements could have a negative impact on the Corporation's results of operations and cash flows for a particular period and on the Corporation's financial position.

Supply/Demand Balance: Earnings generated by the Corporation vary based in part on the balance of supply relative to demand within the industry.

The balance of supply relative to demand within the industry may be significantly impacted by the addition of new capacity, especially for basic commodities where capacity is generally added in large increments as world-scale facilities are built. This may disrupt industry balances and result in downward pressure on prices due to the increase in supply, which could negatively impact the Corporation's results of operations.

LEGAL AND REGULATORY RISKS

Environmental Compliance: The costs of complying with evolving regulatory requirements could negatively impact the Corporation's financial results. Actual or alleged violations of environmental laws or permit requirements could result in restrictions or prohibitions on plant operations, substantial civil or criminal sanctions, as well as the assessment of strict liability and/or joint and several liability.

The Corporation is subject to extensive federal, state, local and foreign laws, regulations, rules and ordinances relating to pollution, protection of the environment, climate change, greenhouse gas emissions and the generation, storage, handling, transportation, treatment, disposal and remediation of hazardous substances and waste materials. At December 31, 2020, the Corporation had accrued obligations of $133 million ($132 million at December 31, 2019) for probable environmental remediation and restoration costs, including $18 million ($20 million at December 31, 2019) for the remediation of Superfund sites. 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. Costs and capital expenditures relating to environmental, health or safety matters are subject to evolving regulatory requirements and depend on the timing of the promulgation and enforcement of specific standards which impose the requirements. Moreover, changes in environmental regulations could inhibit or interrupt the Corporation's operations, or require modifications to its facilities. Accordingly, environmental, health or safety regulatory matters could result in significant unanticipated costs or liabilities. For additional information, see Part II, Item 7. Other Matters, Environmental Matters in Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Table of Contents

Litigation: The Corporation is party to a number of claims and lawsuits arising out of the normal course of business with respect to commercial matters, including product liability, governmental tax and regulation disputes, and other actions.

The Corporation is 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 proceedings; health, safety and environmental matters; employment matters; patent infringement; contracts; and commercial litigation. With the exception of the possible effect of the asbestos-related liability described below, it is the opinion of the Corporation's management that the possibility is remote that the aggregate of all such claims and lawsuits will have a material adverse impact on the Corporation's consolidated financial statements.

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. At December 31, 2020, the Corporation's total asbestos-related liability for pending and future claims, including future defense and processing costs, was $1,098 million ($1,165 million at December 31, 2019). See Notes 1 and 14 to the Consolidated Financial Statements for more information on asbestos-related matters.

Health and Safety: Increased concerns regarding the safe use of chemicals and plastics in commerce and their potential impact on the environment have resulted in more restrictive regulations and could lead to new regulations.

Concerns regarding the safe use of chemicals and plastics in commerce and their potential impact on health and the environment reflect a growing trend in societal demands for increasing levels of product safety and environmental protection. These concerns could manifest themselves in stockholder proposals, preferred purchasing, delays or failures in obtaining or retaining regulatory approvals and continued pressure for more stringent regulatory intervention and litigation. These concerns could also influence public perceptions, the viability or continued sales of the Corporation's products, the Corporation's reputation and the cost to comply with regulations. In addition, terrorist attacks and natural disasters have increased concerns about the security and safety of chemical production and distribution. These concerns could have a negative impact on the Corporation's results of operations.

Local, state, federal and foreign governments continue to propose new regulations related to the security of chemical plant locations and the transportation of hazardous chemicals, which could result in higher operating costs.

Plastic Waste: Increased concerns regarding plastic waste in the environment, consumers selectively reducing their consumption of plastic products due to recycling concerns, or new or more restrictive regulations and rules related to plastic waste could reduce demand for the Corporation’s plastic products and could negatively impact the Corporation’s financial results.

Local, state, federal and foreign governments have been increasingly proposing and in some cases approving bans on certain plastic-based products including single-use plastics, plastic straws and utensils. In addition, plastics have faced increased public scrutiny due to negative coverage of plastic waste in the environment, including the world’s oceans. Substantially all of the Corporation's sales are to TDCC, which is one of the world’s largest producers of plastics. Therefore, increased regulation on the use of plastics could cause reduced demand for the Corporation’s polyethylene products which could negatively impact the Corporation's financial condition, results of operations and cash flows.

OPERATIONAL RISKS

Raw Materials: Availability of purchased feedstocks and energy, and the volatility of these costs, impact the Corporation's operating costs and add variability to earnings.

Purchased feedstock and energy costs account for a substantial portion of the Corporation's total production costs and operating expenses. The Corporation purchases hydrocarbon raw materials including ethane, propane, butane and naphtha as feedstocks. The Corporation also purchases certain monomers, primarily ethylene and propylene, to supplement internal production, as well as other raw materials. The Corporation purchases natural gas, primarily to generate electricity, and purchases electric power to supplement internal generation.

Table of Contents

Feedstock and energy costs generally follow price trends in crude oil and natural gas, which are sometimes volatile. Ultimately, the ability to pass on underlying cost increases is dependent on market conditions. Conversely, when feedstock and energy costs decline, selling prices generally decline as well. As a result, volatility in these costs could impact the Corporation's results of operations.

While the Corporation expects abundant and cost-advantaged supplies of natural gas liquids ("NGLs") in the United States to persist for the foreseeable future, if NGLs become significantly less advantaged than crude oil-based feedstocks, it could have a negative impact on the Corporation's results of operations and future investments. Also, if the Corporation's key suppliers of feedstocks and energy are unable to provide the raw materials required for production, it could have a negative impact on the Corporation's results of operations.

Operational Event: A significant operational event could negatively impact the Corporation's results of operations.

As a diversified chemical manufacturing company, the Corporation's operations, the transportation of products, cyber-attacks, pandemics or severe weather conditions and other natural phenomena (such as freezing, drought, hurricanes, earthquakes, tsunamis, floods, etc.) could result in an unplanned event that could be significant in scale and could negatively impact operations, neighbors or the public at large, which could have a negative impact on the Corporation's results of operations.

Major hurricanes have caused significant disruption in UCC's operations on the U.S. Gulf Coast, logistics across the region, and the supply of certain raw materials, which had an adverse impact on volume and cost for some of UCC's products. Due to the Corporation's substantial presence on the U.S. Gulf Coast, similar severe weather conditions or other natural phenomena in the future could negatively impact UCC's results of operations.

Cyber Threat: The risk of loss of the Corporation's intellectual property, trade secrets or other sensitive business information or disruption of operations could negatively impact the Corporation's financial results.

Cyber-attacks or security breaches could compromise confidential, business critical information, cause a disruption in the Corporation's operations or harm the Corporation's reputation. The Corporation has attractive information assets, including intellectual property, trade secrets and other sensitive, business critical information. While the Corporation has a comprehensive cyber-security program that is continuously reviewed, maintained and upgraded, a significant cyber-attack could result in the loss of critical business information and/or could negatively impact operations, which could have a negative impact on the Corporation's financial results.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 2. PROPERTIES

The Corporation operates eight manufacturing sites in three countries. The Corporation considers its properties to be in good operating condition and that its machinery and equipment have been well maintained. The following are the major production sites:


United States:			Hahnville (St. Charles), Louisiana; Seadrift and Texas City, Texas.

All of UCC's plants are owned or leased, subject to certain easements of other persons that, in the opinion of management, do not substantially interfere with the continued use of such properties or materially affect their value. No title examination of the properties has been made for the purpose of this report.

A summary of property, classified by type, is contained in Note 10 to the Consolidated Financial Statements.

Table of Contents

ITEM 3. LEGAL PROCEEDINGS

Asbestos-Related Matters

For additional information, see Asbestos-Related Matters in Management's Discussion and Analysis of Financial Condition and Results of Operations, and Notes 1 and 14 to the Consolidated Financial Statements.

Environmental Proceedings

On July 5, 2018, the Corporation received a draft consent decree from the U.S. Environmental Protection Agency, the U.S. Department of Justice and the Louisiana Department of Environmental Quality relating to the operation of steam-assisted flares at UCC's olefins manufacturing facility in Hahnville (St. Charles), Louisiana. On January 19, 2021, a proposed final consent decree was filed in the U.S. District Court for the Eastern District of Louisiana to address these matters. Notice of the consent decree was published in the Federal Register on January 28, 2021 and public comments are required to be submitted within 30 days of that publication. The consent decree would require the Corporation to pay approximately $900,000 in civil penalty and approximately $100,000 to specified local projects in Louisiana. The consent decree would further require the Corporation to install and operate additional air pollution control and monitoring technology on these steam-assisted flares at an estimated cost of approximately $120 million, to be completed over the next several years.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

Table of Contents


Union Carbide Corporation and Subsidiaries
PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

The Corporation is a wholly owned subsidiary of TDCC; therefore, there is no public trading market for the Corporation's common stock.

ITEM 6. SELECTED FINANCIAL DATA

Omitted pursuant to General Instruction I of Form 10‑K.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Pursuant to General Instruction I of Form 10-K "Omission of Information by Certain Wholly-Owned Subsidiaries," this section includes only management's narrative analysis of the results of operations for the year ended December 31, 2020, the most recent fiscal year, compared with the year ended December 31, 2019, the fiscal year immediately preceding it.

References below 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 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. This included transferring certain Corporation assets and liabilities aligned with TDCC's specialty products business to TDCC (the "Business Separation"). 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.

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 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.

Statement on COVID-19 and Oil Price Volatility

Overview of UCC’s Response to COVID-19

The pandemic caused by coronavirus disease 2019 ("COVID-19") has impacted all geographic regions where 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 and demand fundamentals, which continued into the second half of 2020. Financial markets also continued a gradual recovery in the second half of 2020.

Dow Inc. (together, with TDCC and its consolidated subsidiaries, “Dow”) directs global safety, crisis management and security protocols for all of Dow’s assets and workforce, which includes the assets and workforce of UCC.

Table of Contents

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.

In the second quarter of 2020, the CMTs initiated implementation of Dow’s comprehensive Return to Workplace ("RTW") 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. A significant number of employees continue to work remotely as the Corporation and Dow monitors the pandemic evolution, awaiting acceptable and safe levels to implement its RTW phases. If ongoing mitigation efforts are successful, U.S. sites expect to implement additional RTW phases in the first and second quarters of 2021. The Corporation continues to encourage its workforce to practice safe behaviors in the workplace and while away from work to help prevent community spread of COVID-19.

During this public health crisis, UCC is focused on the health and safety of its employees, contractors, customers and suppliers around the world and maintaining 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 stabilize in 2021. Contingency plans remain in place in the event of significant impacts from COVID-19 infection resurgences.

Dow took proactive measures to electively focus on cash and maintain financial strength with a continued emphasis on safe, reliable operations and disciplined capital allocation. In accordance with these actions, the Corporation reduced its 2020 capital expenditures target and temporarily idled one of the Corporation’s U.S. polyethylene production units to balance production to demand across markets more severely affected by restrained economic activity. The polyethylene production unit returned to more normalized operating rates in the third quarter of 2020. Further, on September 30, 2020, the Corporation's Board of Directors (the "Board") approved restructuring actions that were aligned to the structural cost improvement initiatives announced by Dow Inc. in response to the continued economic impact from the pandemic caused by COVID-19. The restructuring program is designed to reduce structural costs and enable the Corporation to further enhance competitiveness while the COVID-19 economic recovery gains traction. This program includes workforce cost reductions and actions to rationalize the Corporation's manufacturing assets. See Note 6 to the Consolidated Financial Statements for additional information.

Review of 2020 Financial Impacts from COVID-19

The Corporation's sales declined 15 percent in 2020 compared with 2019, as the COVID-19 pandemic disrupted the global economy and supply and demand fundamentals. The most significant impacts from the pandemic occurred in the first nine months of the year, with year-over-year sales declines of 18 percent, with a gradual yet uneven recovery beginning to take hold in the fourth quarter.

Local price declined in the first and second quarters of 2020, largely impacted by lower global energy prices. In March and April 2020, crude oil prices declined significantly, due in part to the COVID-19 pandemic, coupled with increased supply from oil producers, resulting in margin compression in the second quarter of 2020. Crude oil prices increased in the latter half of the second quarter as supply and demand fundamentals improved, driving higher feedstock costs, with the Corporation experiencing continued margin compression due to pricing pressures through the remainder of the year. See Results of Operations in this report for further discussion of 2020 operating results.

Table of Contents

At the time of this filing, the ultimate severity and duration of the COVID-19 pandemic 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 for the year ended December 31, 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 United States. There have been no significant impacts to the Corporation's provision for income taxes in 2020 as a result of the CARES Act legislation.

RESULTS OF OPERATIONS

Net Sales

Total net sales for 2020 were $3,703 million, compared with net sales of $4,377 million in 2019, a decrease of 15 percent. Net sales to related companies, principally to TDCC, were $3,574 million for 2020, compared with $4,239 million for 2019, a decrease of 16 percent. Selling prices to TDCC are determined in accordance with the terms of an agreement between UCC and TDCC.

Average selling price decreased 14 percent in 2020 compared with 2019 with price decreases across all products, primarily in response to lower feedstock and other raw material costs and resulting pricing pressures, with the largest decreases in polyethylene, oxo alcohols, plastics for wire and cable applications and glycol ethers. Volume was down 1 percent in 2020 compared with 2019, as decreases resulting from the divestiture of the Corporation's acetone derivatives product line, the Business Separation and polyethylene volume declines, resulting primarily from planned and unplanned outages, more than offset demand growth in home and personal care products and ethylene oxide/ethylene glycol.

Cost of Sales

Cost of sales in 2020 was $3,245 million, down 7 percent from $3,500 million in 2019. The decline in cost of sales was driven by lower feedstock and other raw material costs, lower volume, the divestiture of the Corporation's acetone derivatives product line, the impact of the Business Separation and a one-time charge of $55 million related to environmental remediation matters at a number of current and historical sites, recorded in the third quarter of 2019.

Research and Development, Selling, General and Administrative Expenses

Research and development expenses were $24 million in 2020, compared with $25 million in 2019. Selling, general and administrative expenses ("SG&A") were $9 million in 2020, compared with $4 million in 2019. The increase in SG&A expenses was driven in part by administrative fees associated with ongoing service arrangements.

Restructuring and Asset Related Charges - Net

2020 Restructuring Program

On September 30, 2020, the Board approved restructuring actions that were aligned to the structural cost improvement initiatives announced by Dow Inc. in response to the continued economic impact from the pandemic caused by COVID-19. The restructuring program is designed to reduce structural costs and enable the Corporation to further enhance competitiveness while the COVID-19 economic recovery gains traction. This program includes workforce cost reductions and actions to rationalize the Corporation's manufacturing assets. These actions are expected to be substantially complete by the end of 2021.

As a result of these actions, in the third quarter of 2020, the Corporation recorded pretax restructuring charges of $13 million, consisting of severance and related benefit costs of $9 million and asset write-downs and write-offs of $4 million.

DowDuPont Cost Synergy Program

In September and November 2017, the Corporation approved restructuring actions that were aligned with DowDuPont's synergy targets. In connection with this program, the Corporation recorded pretax restructuring charges for severance and related benefit costs of $2 million in 2020 and $4 million in 2019. This program was completed in 2020.

Table of Contents

2019 Asset Related Charges

On August 13, 2019, the Corporation entered into a definitive agreement to sell its acetone derivatives product line to ALTIVIA Ketones & Additives, LLC. As a result of this planned transaction, the Corporation recognized a pretax impairment charge of $75 million in the third quarter of 2019, which was included in "Restructuring and asset related charges - net" in the consolidated statements of income. The transaction closed November 1, 2019. See Notes 5 and 18 to the Consolidated Financial Statements for additional information.

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, commissions, non-operating pension and other postretirement benefit plan credits or costs and gains and losses on sales of investments and assets. Sundry income (expense) - net for 2020 was income of $168 million, compared with expense of $82 million in 2019. The increase in sundry income in 2020 was primarily the result of the sale of UCC's marine and terminal operations and assets at its site in St. Charles, Louisiana ("St. Charles"), which resulted in a pretax gain of $185 million, and the sale of UCC's rail infrastructure operations and assets at its sites in St. Charles and Seadrift, Texas, which resulted in a pretax gain of $86 million, partially offset by a pretax loss of $19 million on the early extinguishment of debt. See Notes 5, 7 and 13 to the Consolidated Financial Statements for additional information.

Interest Income

Interest income for 2020 was $12 million, compared with $36 million in 2019. The decrease in interest income primarily resulted from the impact of the significant drop in interest rates due to the current interest rate environment. See Note 19 to the Consolidated Financial Statements for additional information.

Interest Expense and Amortization of Debt Discount

Interest expense and amortization of debt discount was $33 million in 2020 compared with $30 million in 2019. The increase in interest expense and amortization of debt discount was primarily due to the recognition of interest and penalties related to the settlement of sales and use tax disputes in Seadrift, Texas, and Texas City, Texas, which was partially offset by reduced interest expense resulting from the early extinguishment of debt in September 2020. See Notes 13 and 19 to the Consolidated Financial Statements for additional information related to the Corporation's debt financing and cash management activities.

Provision for Income Taxes

The Corporation reported a tax provision of $130 million in 2020, which resulted in an overall effective tax rate of 23.3 percent. The tax rate for 2020 was unfavorably impacted by an accrual to return adjustment. In 2019, the Corporation reported a tax provision of $64 million, which resulted in an overall effective tax rate of 9.3 percent. The tax rate for 2019 was favorably impacted by the restoration of tax basis in assets, driven by a court judgment that did not involve the Corporation, and deductions allowed in the United States for certain sales to foreign customers. The underlying factors affecting UCC's overall effective tax rates are summarized in Note 8 to the Consolidated Financial Statements.

Net Income Attributable to UCC

The Corporation reported net income of $427 million in 2020, compared with net income of $627 million in 2019.

Capital Expenditures

Capital spending in 2020 was $135 million, compared with $196 million in 2019. Capital spending decreased in 2020 as spending for U.S. Gulf Coast projects and site infrastructure projects continues to trend down and the Corporation reduced its 2020 capital expenditures target to retain the financial strength of the Corporation and Dow Inc. in response to the COVID-19 pandemic.

In accordance with a proposed final consent decree filed on January 19, 2021, the Corporation would be required to install and operate additional air pollution control and monitoring technology on its steam-assisted flares at its olefins manufacturing facility in St. Charles. These installations are expected to result in additional capital expenditures of approximately $120 million, to be completed over the next several years. See Part I, Item 3, Legal Proceedings for more information on Environmental Proceedings.

OTHER MATTERS

Recent Accounting Guidance

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

Table of Contents

Critical Accounting Estimates

The preparation of financial statements and related disclosures in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") 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 describes the significant accounting policies and methods used in preparation of the Consolidated Financial Statements. Following are the Corporation's accounting policies impacted by judgments, assumptions and estimates.

Litigation

The Corporation is subject to legal proceedings and claims arising out of the normal course of business. The Corporation routinely assesses the likelihood of any adverse judgments or outcomes to these matters, as well as ranges of probable losses. A determination of the amount of the reserves required, if any, for these contingencies is made after thoughtful analysis of each known claim, with the exception of asbestos-related matters, which is described in the following section. The Corporation has an active risk management program consisting of numerous insurance policies secured from many carriers. These policies provide coverage that is utilized to minimize the financial impact, if any, of the legal proceedings. The required reserves may change in the future due to new developments in each matter. For further discussion, see Note 14 to the Consolidated Financial Statements.

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"). Each year, Ankura Consulting Group, LLC ("Ankura") performs a review for UCC based upon historical asbestos claims and resolution activity and historical defense spending. UCC compares current asbestos claim, resolution and defense spending activity to the results of the most recent Ankura study at each balance sheet date to determine whether the asbestos-related liability for pending and future claims, including future defense and processing costs, continues to be appropriate.

For additional information, see Part I, Item 3. Legal Proceedings; Asbestos-Related Matters in Management's Discussion and Analysis of Financial Condition and Results of Operations; and Notes 1 and 14 to the Consolidated Financial Statements.

Environmental Matters

The Corporation determines the costs of environmental remediation of its facilities and formerly owned facilities based on evaluations of current law and existing technologies. Inherent uncertainties exist in such evaluations primarily due to unknown environmental conditions, changing governmental regulations and legal standards regarding liability, and emerging remediation technologies. The recorded liabilities are adjusted periodically as remediation efforts progress or as additional technical or legal information becomes available. At December 31, 2020, the Corporation had accrued obligations of $133 million for probable environmental remediation and restoration costs, including $18 million for the remediation of Superfund sites. 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. For further discussion, see Environmental Matters in Notes 1 and 14 to the Consolidated Financial Statements.

Pension Plans and Other Postretirement Benefits

The amounts recognized in the consolidated financial statements related to pension and other postretirement benefits are determined from actuarial valuations. Inherent in these valuations are assumptions including expected return on plan assets, discount rates at which the liabilities could have been settled at December 31, 2020, rate of increase in future compensation levels, mortality rates and health care cost trend rates. These assumptions are updated annually and are disclosed in Note 17 to the Consolidated Financial Statements. Actual results that differ from the assumptions are accumulated and amortized over future periods and, therefore, affect expense recognized and obligations recorded in future periods.

Table of Contents

The Corporation uses the spot rate approach to determine the discount rate utilized to measure the service cost and interest cost components of net periodic pension and other postretirement benefit costs. Under the spot rate approach, the Corporation calculates service cost and interest cost by applying individual spot rates from the Willis Towers Watson U.S. RATE:Link 60-90 corporate yield curve (based on 60th to 90th percentile high-quality corporate bond yields) to the separate expected cash flow components of service cost and interest cost.

The Corporation determines the expected long-term rate of return on plan assets by performing a detailed analysis of key economic and market factors driving historical returns for each asset class and formulating a projected return based on factors in the current environment. Factors considered include, but are not limited to, inflation, real economic growth, interest rate yield, interest rate spreads, and other valuation measures and market metrics. The expected long-term rate of return for each asset class is then weighted based on the strategic asset allocation approved by the governing body for each plan. The Corporation's historical experience with the pension fund asset performance is also considered. The expected long-term rate of return is an assumption and not what is expected to be earned in any one particular year. The weighted-average long-term rate of return assumption used for determining net periodic pension expense for 2020 and 2019 was 6.8 percent. This assumption will also be used for determining 2021 net periodic pension expense. Future actual pension expense will depend on future investment performance, changes in future discount rates and various other factors related to the population of participants in the Corporation's pension plans.

The discount rates utilized to measure the pension and other postretirement benefit obligations are based on the yield on high-quality corporate fixed income investments at the measurement date. Future expected actuarially determined cash flows for the plans are individually discounted at the spot rates under the Willis Towers Watson U.S. RATE:Link 60-90 corporate yield curve (based on 60th to 90th percentile high-quality corporate bond yields) to arrive at the plan’s obligations as of the measurement date. The weighted-average discount rate utilized to measure pension obligations was 2.53 percent at December 31, 2020 and 3.29 percent at December 31, 2019.

The value of the qualified plan assets totaled $3.1 billion at December 31, 2020, unchanged from December 31, 2019. The underfunded status of the qualified plan increased by $185 million at December 31, 2020, compared with December 31, 2019. The Corporation did not make contributions to the qualified plan in 2020.

The assumption for the long-term rate of increase in compensation levels was 4.25 percent at December 31, 2020 and 2019. Since 2002, the Corporation has used a generational mortality table to determine the duration of its pension and other postretirement obligations.

The Corporation bases the determination of pension expense on a market-related valuation of plan assets that reduces year-to-year volatility. This market-related valuation recognizes investment gains or losses over a five-year period from the year in which they occur. Investment gains or losses for this purpose represent the difference between the expected return calculated using the market-related value of plan assets and the actual return based on the market value of plan assets. Since the market-related value of plan assets recognizes gains or losses over a five-year period, the future value of plan assets will be impacted when previously deferred gains or losses are recorded. Over the life of the plan, both gains and losses have been recognized and amortized. At December 31, 2020, $177 million of net gains remain to be recognized in the calculation of the market-related value of plan assets. These net gains will result in decreases in future pension expense as they are recognized in the market-related value of assets.

The net increase in the market-related value of assets due to the recognition of prior gains is presented in the following table:


Net Increase in Market-Related Asset Value Due to Recognition of Prior Gains
In millions
2021	$	46
2022	23
2023	79
2024	29
Total	$	177

Table of Contents

At December 31, 2020, the Corporation expects pension expense to decrease in 2021 by approximately $15 million. The decrease in pension expense is primarily due to the lower interest cost component.

A 25 basis point adjustment in the long-term return on assets assumption would change total pension expense for 2021 by $7 million. A 25 basis point adjustment in the discount rate assumption would have an immaterial impact on the total pension expense for 2021.

Income Taxes

Deferred tax assets and liabilities are determined based on temporary differences between the financial reporting and tax bases of assets and liabilities, applying enacted tax rates expected to be in effect for the year in which the differences are expected to reverse. Based on the evaluation of available evidence, both positive and negative, the Corporation recognizes future tax benefits, such as net operating loss carryforwards and tax credit carryforwards, to the extent that realizing these benefits is considered more likely than not.

At December 31, 2020, the Corporation had a net deferred tax asset balance of $494 million, after valuation allowances of $18 million. In evaluating the ability to realize the deferred tax assets, the Corporation relies on, in order of increasing subjectivity, taxable income in prior carryback years, the future reversals of existing taxable temporary differences, tax planning strategies and forecasted taxable income using historical and projected future operating results.

At December 31, 2020, the Corporation had deferred tax assets for tax loss and tax credit carryforwards of $34 million, of which $21 million is subject to expiration in the years 2021 through 2025. In order to realize these deferred tax assets for tax loss and tax credit carryforwards, the Corporation needs taxable income of approximately $1,121 million across multiple jurisdictions. The taxable income needed to realize the deferred tax assets for tax loss and tax credit carryforwards that are subject to expiration between 2021 and 2025 is $406 million.

The Corporation recognizes the financial statement effects of an uncertain tax position when it is more likely than not, based on technical merits, that the position will be sustained upon examination. At December 31, 2020, the Corporation had a liability for uncertain tax positions of $1 million.

The Corporation accrues for non-income tax contingencies when it is probable that a liability to a taxing authority has been incurred and the amount of the contingency can be reasonably estimated. At December 31, 2020, the Corporation had an immaterial tax contingency reserve. For additional information, see Note 8 to the Consolidated Financial Statements.

Environmental Matters

Environmental Policies

The Corporation is committed to world-class environmental, health and safety ("EH&S") performance, as demonstrated by a long-standing commitment to Responsible Care®, as well as a strong commitment to Dow Inc.'s 2025 Sustainability Goals - goals that set the standard for sustainability in the chemical industry by focusing on improvements in UCC's local corporate citizenship and product stewardship, and by actively pursuing methods to reduce the Corporation's environmental impact.

The EH&S management system ("EMS") defines the "who, what, when and how" needed for the Corporation to achieve the policies, requirements, performance objectives, leadership expectations and public commitments. EMS is also designed to minimize the long-term cost of environmental protection and to comply with applicable laws and regulations. To ensure effective utilization, EMS is integrated into a company-wide management system for EH&S, Operations, Quality and Human Resources, including implementation of the global EH&S Work Process to improve EH&S performance and to ensure ongoing compliance worldwide.

The Corporation adheres to a waste management hierarchy that minimizes the impact of wastes and emissions on the environment. UCC first works to eliminate or minimize the generation of waste and emissions at the source through research, process design, plant operations and maintenance. Next, UCC finds ways to reuse and recycle materials. Finally, unusable or non-recyclable hazardous waste is treated before disposal to eliminate or reduce the hazardous nature and volume of the waste. Treatment may include destruction by chemical, physical, biological or thermal means. Disposal of waste materials in landfills is considered only after all other options have been thoroughly evaluated. UCC has specific requirements for waste that is transferred to non-UCC facilities, including the periodic auditing of these facilities.

Table of Contents

Chemical Security

Public and political attention continues to be placed on the protection of U.S. critical infrastructure, including the chemical industry, from security threats. Terrorist attacks and natural disasters have increased global concerns about the security and safety of chemical production and distribution. UCC continues to improve its security plans, placing emphasis on the safety of UCC communities and people by being prepared to meet risks at any level and to address both internal and external identifiable risks. UCC's security plans are designed to avert interruptions of normal business operations that could have a material impact on the Corporation's results of operations, financial condition and cash flows.

UCC is a Responsible Care® company and adheres to the Responsible Care® Security Code, which requires that all aspects of security - including facility, transportation and cyberspace - be assessed and gaps addressed. Through global implementation of the Security Code, including voluntary security enhancements and upgrades, UCC has permanently heightened its level of security - not just in the United States, but worldwide. Further, the Corporation’s Distribution Risk Review process addresses potential threats in all modes of transportation across the Company’s supply chain. In 2019, Dow Inc. established its Global Security Operations Center ("GSOC") to provide 24-hour/day, 365-day/year real-time monitoring of global risks to Dow Inc. assets and people, which includes UCC assets and people. The GSOC employs state-of-the-art social media monitoring, threat reporting and geo-fencing capabilities to analyze global risks and report those risks, facilitating decision-making and actions to prevent Dow Inc. and UCC crises.

To reduce vulnerabilities, UCC maintains security measures that meet or exceed regulatory and industry security standards in all areas in which UCC operates. Assessment and improvement costs are not considered material to the Corporation's consolidated financial statements.

Climate Change

Climate change matters for UCC are likely to be driven by several categories of risks related to the transition to a lower-carbon economy (“Transition Risks”) and risks related to the physical impacts of climate change (“Physical Risks”).

Transition Risks

Transition Risks include carbon pricing mechanisms, a transition to lower emissions technology, increased cost of raw materials, and mandates on and regulation of existing products and services. Carbon pricing is a market-based strategy for lowering global warming emissions by putting a monetary value on carbon emissions so the costs of climate impacts and opportunities for low-carbon energy options are reflected in production and consumption choices.

Carbon pricing mechanisms will not only increase UCC’s direct costs to operate but will also result in increased energy costs. UCC mitigates the direct cost impact of existing regulation through research and development projects designed to increase energy efficiency and capital investment projects that will reduce the Corporation’s energy usage and carbon footprint.

Physical Risks

Operationally, climate change may result in more frequent severe weather events, potential changes in precipitation patterns and extreme variability in weather patterns, which can disrupt operations. The Corporation has engineered susceptible facilities, particularly on the U.S. Gulf Coast, to better withstand severe weather and rising sea levels, and continues to study the long-term implications of changing climate parameters on water availability, plant siting issues and other impacts. Preparedness plans are developed that detail actions needed in the event of severe weather. These measures have historically been in place and these activities and associated costs are driven by normal operational preparedness.

The Corporation continues to elevate its internal focus and external positions to focus on the root cause of greenhouse gas ("GHG") emissions, including the sustainable use of energy. Through Dow’s energy efficiency programs and focused GHG management efforts, the Corporation has and is continuing to reduce its GHG emissions footprint.

Table of Contents

Environmental Remediation

UCC accrues the costs of remediation of its facilities and formerly owned facilities based on current law and existing technologies. The nature of such remediation includes, for example, the management of soil and groundwater contamination. The policies adopted to properly reflect the monetary impacts of environmental matters are discussed in Note 1 to the Consolidated Financial Statements. To assess the impact on the consolidated financial statements, environmental experts review currently available facts to evaluate the probability and scope of potential liabilities. Inherent uncertainties exist in such evaluations primarily due to unknown environmental conditions, changing governmental regulations and legal standards regarding liability, and emerging remediation technologies. These liabilities are adjusted periodically as remediation efforts progress or as additional technical or legal information becomes available. The Corporation had an accrued liability of $115 million at December 31, 2020 and $112 million at December 31, 2019, related to the remediation of current or former UCC-owned sites.

In addition to current and former UCC-owned sites, under the Federal Comprehensive Environmental Response, Compensation and Liability Act and equivalent state laws (hereafter referred to collectively as "Superfund Law"), UCC is liable for remediation of other hazardous waste sites where UCC allegedly disposed of, or arranged for the treatment or disposal of, hazardous substances. Because Superfund Law imposes joint and several liability upon each party at a site, UCC has evaluated its potential liability in light of the number of other companies that also have been named potentially responsible parties ("PRPs") at each site, the estimated apportionment of costs among all PRPs, and the financial ability and commitment of each to pay its expected share. Management's estimate of the Corporation's remaining liability for the remediation of Superfund sites was $18 million at December 31, 2020 and $20 million at December 31, 2019, which has been accrued, although the ultimate cost with respect to these sites could exceed that amount. The Corporation has not recorded any third-party recovery related to these sites as a receivable.

Information regarding environmental sites is provided below:


Environmental Sites	UCC-owned Sites 1		Superfund Sites 2
	2020	2019	2020	2019
Number of sites at Jan 1	25	25	67	68
Sites added during year	—	—	—	1
Sites closed during year	—	—	(1)	(2)
Number of sites at Dec 31	25	25	66	67

1.UCC-owned sites are sites currently or formerly owned by UCC. In the United States, remediation obligations are imposed by the Resource Conservation and Recovery Act or analogous state law.

2.Superfund sites are sites, including sites not owned by UCC, where remediation obligations are imposed by Superfund Law.

In total, the Corporation's accrued liability for probable environmental remediation and restoration costs was $133 million at December 31, 2020, compared with $132 million at December 31, 2019. 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, however, 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.

In the third quarter of 2019, the Corporation recorded a pretax charge of $55 million, included in "Cost of sales" in the consolidated statements of income, related to environmental remediation matters at a number of current and historical locations. The charge primarily resulted from the culmination of long-standing negotiations and discussions with regulators and agencies, including technical studies supporting higher cost estimates for final or staged remediation plans, and the Corporation’s review of its closure strategies and obligations to monitor ongoing operations and maintenance activities.

The amounts charged to income on a pretax basis related to environmental remediation totaled $49 million in 2020, $93 million in 2019 and $38 million in 2018. The amounts charged to income on a pretax basis related to operating the Corporation's pollution abatement facilities, excluding internal recharges, totaled $98 million in 2020,

Table of Contents

$109 million in 2019 and $113 million in 2018. Capital expenditures for environmental protection were $5 million in 2020, $11 million in 2019 and $9 million in 2018.

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. 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	2020	2019	2018
Claims unresolved at Jan 1	11,117	12,780	15,427
Claims filed	4,857	5,743	6,599
Claims settled, dismissed or otherwise resolved	(6,848)	(7,406)	(9,246)
Claims unresolved at Dec 31	9,126	11,117	12,780
Claimants with claims against both UCC and Amchem	(2,904)	(3,837)	(4,675)
Individual claimants at Dec 31	6,222	7,280	8,105

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 Part I, Item 3. Legal Proceedings and Asbestos-Related Matters in Notes 1 and 14 to the Consolidated Financial Statements.

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 December 31, 2020.

Table of Contents

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

UCC’s business operations give rise to market risk exposure due to changes in foreign exchange rates, interest rates, commodity prices and other market factors such as equity prices. To manage such risks effectively, the Corporation enters into hedging transactions, pursuant to established guidelines and policies that enable it to mitigate the adverse effects of financial market risk. Derivatives used for this purpose are designated as hedges per the accounting guidance related to derivatives and hedging activities, where appropriate.

The global nature of UCC’s business requires active participation in the foreign exchange markets. As a result of investments, production facilities and other operations on a global basis, the Corporation has assets, liabilities and cash flows in currencies other than the U.S. dollar. The primary objective of the Corporation’s foreign exchange risk management is to optimize the U.S. dollar value of net assets and cash flows. To achieve this objective, the Corporation hedges on a net exposure basis using foreign currency forward contracts, over-the-counter option contracts, cross-currency swaps and nonderivative instruments in foreign currencies. Exposures primarily relate to assets, liabilities and cash flows denominated in foreign currencies. The largest exposures are denominated in the Canadian dollar as well as the currencies of Europe and Asia Pacific.

The main objective of interest rate risk management is to reduce the total funding cost to the Corporation and to alter the interest rate exposure to the desired risk profile. To achieve this objective, the Corporation hedges using interest rate swaps, “swaptions,” and exchange-traded instruments. The Corporation’s primary exposure is to the U.S. dollar yield curve.

UCC uses value-at-risk ("VAR"), stress testing and scenario analysis for risk measurement and control purposes. VAR estimates the maximum potential loss in fair market values given a certain move in prices over a certain period of time, using specified confidence levels. The VAR methodology used by the Corporation is a variance/covariance model. This model uses a 97.5 percent confidence level and includes at least one year of historical data. The 2020 and 2019 year-end and average daily VAR for the aggregate of all positions are shown below:


Total Daily VAR at Dec 31	2020				2019
In millions	Year-end		Average		Year-end		Average
Interest rate	$	3	$	4	$	2	$	2

Table of Contents

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholder and the Board of Directors of Union Carbide Corporation

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Union Carbide Corporation and subsidiaries (the "Corporation") as of December 31, 2020 and 2019, the related consolidated statements of income, comprehensive income, equity, and cash flows, for each of the three years in the period ended December 31, 2020, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Corporation as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America.

Changes in Accounting Principles

As discussed in Note 1 to the financial statements, in the first quarter of 2019, the Corporation changed the method of accounting for leases due to the adoption of ASC Topic 842, Leases.

Basis for Opinion

These financial statements are the responsibility of the Corporation's management. Our responsibility is to express an opinion on the Corporation's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Corporation in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Corporation is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Corporation’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which they relate.

Asbestos – Refer to Note 1 and Note 14 to the Financial Statements

Critical Audit Matter Description

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. The Corporation expects more asbestos-related suits to be filed against the

Table of Contents

Corporation and its former subsidiary Amchem Products, Inc. in the future, and will aggressively defend or reasonably resolve, as appropriate, both pending and future claims. Since 2003, the Corporation has engaged a third-party actuarial specialist to review the Corporation's historical asbestos-related claim and resolution activity in order to assist management in estimating the Corporation's asbestos-related liability. The Corporation considers 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.

The Corporation considers the following summarized assumptions and judgments in arriving at the estimated liability:

•The average resolution value calculated by the Corporation to settle each pending and future claim

•The Corporation’s estimation of the number of pending and future claims

•The curve of how claims will occur over the estimated period through the terminal year

•The estimated terminal year 2049 (date at which future claims will cease)

Given the significant judgments made by management to estimate the asbestos liability, performing audit procedures to evaluate the reasonableness of management’s estimates and assumptions related to average resolution value of pending and future claims, estimated number of pending and future claims, valuation of future claims, curve of how claims will occur, and estimated terminal date required a high degree of auditor judgment and an increased extent of effort, including the need to involve our actuarial specialists.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to management’s estimate and assumptions of the asbestos liability included the following, among others:

•We tested the effectiveness of internal controls related to the asbestos liability including management’s controls over the determination of average resolution value of pending and future claims, estimated number of claims, valuation of future claims, curve of how claims will occur, and the estimated terminal date.

•We evaluated the methods and assumptions used by management to estimate the asbestos liability by:

◦Testing the underlying data that served as the basis for the actuarial analysis, including historical claims, to test that the inputs to the actuarial estimate were reasonable.

◦Comparing management’s prior-year assumptions of expected development and ultimate loss to actuals incurred during the current year to identify potential bias in the determination of the asbestos-related liabilities.

•With the assistance of our actuarial specialists, we developed independent estimates of the asbestos-related liabilities, including loss data and industry claim development factors, and compared our estimates to management’s estimates.

•We read external information included in regulatory filings and news releases to search for contradictory evidence.


/s/ DELOITTE & TOUCHE LLP
Midland, Michigan
February 5, 2021

We have served as the Corporation's auditor since 2001.

Table of Contents

Union Carbide Corporation and Subsidiaries

Consolidated Statements of Income


(In millions) For the years ended Dec 31,	2020		2019		2018
Net trade sales	$	129	$	138	$	136
Net sales to related companies	3,574		4,239		5,310
Total net sales	3,703		4,377		5,446
Cost of sales	3,245		3,500		4,047
Research and development expenses	24		25		21
Selling, general and administrative expenses	9		4		6

Restructuring and asset related charges - net	15		79		3
Integration and separation costs	—		2		3

Sundry income (expense) - net	168		(82)		(62)
Interest income	12		36		28
Interest expense and amortization of debt discount	33		30		30
Income before income taxes	557		691		1,302
Provision for income taxes	130		64		247
Net income attributable to Union Carbide Corporation	$	427	$	627	$	1,055

See Notes to the Consolidated Financial Statements.

Table of Contents

Union Carbide Corporation and Subsidiaries

Consolidated Statements of Comprehensive Income


(In millions) For the years ended Dec 31,	2020		2019		2018
Net income attributable to Union Carbide Corporation	$	427	$	627	$	1,055
Other comprehensive income (loss), net of tax
Cumulative translation adjustments	1		1		2

Pension and other postretirement benefit plans	(106)		(105)		43

Total other comprehensive income (loss)	(105)		(104)		45
Comprehensive income attributable to Union Carbide Corporation	$	322	$	523	$	1,100

See Notes to the Consolidated Financial Statements.

Table of Contents

Union Carbide Corporation and Subsidiaries

Consolidated Balance Sheets


(In millions, except share amounts) At Dec 31,	2020		2019
Assets
Current Assets
Cash and cash equivalents	$	11	$	11
Accounts receivable:
Trade (net of allowance for doubtful receivables 2020: $—; 2019: $—)	26		26
Related companies	698		658
Other	27		17
Income taxes receivable	337		337
Notes receivable from related companies	1,660		1,505
Inventories	223		247
Other current assets	17		20
Total current assets	2,999		2,821
Investments
Investments in related companies	237		238

Other investments	22		22
Noncurrent receivables	124		118
Noncurrent receivables from related companies	66		66
Total investments	449		444
Property
Property	7,089		7,247
Less accumulated depreciation	5,824		5,878
Net property	1,265		1,369
Other Assets
Intangible assets (net of accumulated amortization 2020: $97; 2019: $90)	16		22
Operating lease right-of-use assets	123		89
Deferred income tax assets	494		507
Deferred charges and other assets	29		26
Total other assets	662		644
Total Assets	$	5,375	$	5,278
Liabilities and Equity
Current Liabilities
Notes payable to related companies	$	33	$	32
Notes payable - other	—		6
Long-term debt due within one year	2		1
Accounts payable:
Trade	229		218
Related companies	409		386
Other	28		10
Operating lease liabilities - current	19		16
Income taxes payable	23		25
Asbestos-related liabilities - current	85		105
Accrued and other current liabilities	139		126
Total current liabilities	967		925
Long-Term Debt	391		473
Other Noncurrent Liabilities
Pension and other postretirement benefits - noncurrent	1,340		1,154
Asbestos-related liabilities - noncurrent	1,013		1,060
Operating lease liabilities - noncurrent	105		74
Other noncurrent obligations	201		194
Total other noncurrent liabilities	2,659		2,482
Stockholders' Equity
Common stock (authorized: 1,000 shares of $0.01 par value each; issued: 935.51 shares)	—		—
Additional paid-in capital	141		141
Retained earnings	2,987		2,922
Accumulated other comprehensive loss	(1,770)		(1,665)
Union Carbide Corporation's stockholders' equity	1,358		1,398


Total Liabilities and Equity	$	5,375	$	5,278

See Notes to the Consolidated Financial Statements.

Table of Contents

Union Carbide Corporation and Subsidiaries

Consolidated Statements of Cash Flows


(In millions) For the years ended Dec 31,	2020		2019		2018
Operating Activities
Net income attributable to Union Carbide Corporation	$	427	$	627	$	1,055
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	210		204		207
Provision (credit) for deferred income tax	46		(10)		35

Net (gain) loss on sales of property and investments	(271)		6		—



Restructuring and asset related charges - net	15		79		3
Net periodic pension benefit cost	56		52		43
Pension contributions	(2)		(2)		(42)
Net loss on early extinguishment of debt	19		—		—

Changes in assets and liabilities:
Accounts and notes receivable	(6)		13		23
Related company receivables	(194)		105		(100)
Inventories	33		23		(26)
Accounts payable	28		(51)		(6)
Related company payables	24		(121)		(169)
Asbestos-related payments	(67)		(95)		(109)
Other assets and liabilities	(42)		(82)		(113)
Cash provided by operating activities	276		748		801
Investing Activities
Capital expenditures	(135)		(196)		(250)


Change in noncurrent receivable from related company	—		(13)		—
Proceeds from sales of property	330		21		—


Purchases of investments	—		—		(1)
Proceeds from sales of investments	—		4		3
Cash provided by (used for) investing activities	195		(184)		(248)
Financing Activities
Dividends paid to parent	(362)		(570)		(553)
Changes in short-term notes payable	(6)		5		1
Payments on long-term debt	(84)		(1)		(1)
Transaction financing, debt issuance and other costs	(19)		—		—
Cash used for financing activities	(471)		(566)		(553)
Summary
Increase (decrease) in cash and cash equivalents	—		(2)		—
Cash and cash equivalents at beginning of year	11		13		13
Cash and cash equivalents at end of year	$	11	$	11	$	13

See Notes to the Consolidated Financial Statements.

Table of Contents

Union Carbide Corporation and Subsidiaries

Consolidated Statements of Equity


(In millions) For the years ended Dec 31,	2020		2019		2018
Common Stock
Balance at beginning and end of period	$	—	$	—	$	—
Additional Paid-in Capital
Balance at beginning of period	141		138		138
Capital contribution from The Dow Chemical Company	—		3		—
Balance at end of period	141		141		138
Retained Earnings
Balance at beginning of period	2,922		3,338		2,582
Adoption of accounting standard (Note 1)	—		—		254
Net income attributable to Union Carbide Corporation	427		627		1,055
Dividends declared	(362)		(1,042)		(553)
Other	—		(1)		—
Balance at end of period	2,987		2,922		3,338
Accumulated Other Comprehensive Loss, Net of Tax
Balance at beginning of period	(1,665)		(1,561)		(1,352)
Adoption of accounting standard (Note 1)	—		—		(254)
Other comprehensive income (loss)	(105)		(104)		45
Balance at end of period	(1,770)		(1,665)		(1,561)
Union Carbide Corporation's Stockholder's Equity	$	1,358	$	1,398	$	1,915

See Notes to the Consolidated Financial Statements.

Table of Contents


Union Carbide Corporation and Subsidiaries
Notes to the Consolidated Financial Statements

Table of Contents

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation and Basis of Presentation

Except as otherwise indicated by the context, the terms "Corporation" and "UCC" as used herein mean Union Carbide Corporation and its consolidated subsidiaries. The accompanying consolidated financial statements of the Corporation were prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") and include the assets, liabilities, revenues and expenses of all majority-owned subsidiaries over which the Corporation exercises control and, when applicable, entities for which the Corporation has a controlling financial interest. Investments in nonconsolidated affiliates (20-50 percent owned companies, joint ventures and partnerships) are accounted for using the equity method.

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.

TDCC conducts its worldwide operations through global businesses. The Corporation’s business activities comprise components of TDCC’s global businesses rather than stand-alone operations. Because there are no 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.

Table of Contents

("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.

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 19 for additional information.

Use of Estimates in Financial Statement Preparation

The preparation of financial statements in accordance with U.S. GAAP requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. The Corporation's consolidated financial statements include amounts that are based on management's best estimates and judgments. Actual results could differ from those estimates.

Significant Accounting Policies

Asbestos-Related Matters

Accruals for asbestos-related matters, including defense and processing costs, are recorded based on an analysis of claim and resolution activity, defense spending and pending and future claims. These accruals are assessed at each balance sheet date to determine if the asbestos-related liability remains appropriate. Accruals for asbestos-related matters are included in the consolidated balance sheets in "Asbestos-related liabilities - current" and "Asbestos-related liabilities - noncurrent." See Note 14 for additional information.

Legal Costs

The Corporation expenses legal costs as incurred, with the exception of defense and processing costs associated with asbestos-related matters.

Foreign Currency Translation

While the Corporation's consolidated subsidiaries are primarily based in the United States, the Corporation has small subsidiaries in Asia Pacific and the rest of the world. For those subsidiaries, the local currency has been primarily used as the functional currency. Translation gains and losses of those operations that use local currency as the functional currency are included in the consolidated balance sheets in "Accumulated other comprehensive loss" ("AOCL"). Where the U.S. dollar is used as the functional currency, foreign currency translation gains and losses are reflected in income.

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. These accruals are adjusted periodically as assessment and remediation efforts progress or as additional technical or legal information becomes available. Accruals for environmental liabilities are included in the consolidated balance sheets in "Accrued and other current liabilities" and "Other noncurrent obligations" at undiscounted amounts. Accruals for related insurance or other third-party recoveries for environmental liabilities are recorded when it is probable that a recovery will be realized and are included in the consolidated balance sheets in "Accounts receivable - Other."

Environmental costs are capitalized if the costs extend the life of the property, increase its capacity, and/or mitigate or prevent contamination from future operations. Environmental costs are also capitalized in recognition of legal asset retirement obligations resulting from the acquisition, construction and/or normal operation of a long-lived asset. Costs related to environmental contamination treatment and cleanup are charged to expense. Estimated future incremental operations, maintenance and management costs directly related to remediation are accrued when such costs are probable and reasonably estimable.

Cash and Cash Equivalents

Cash and cash equivalents include time deposits and investments with maturities of three months or less at the time of purchase.

Table of Contents

Financial Instruments

The Corporation calculates the fair value of financial instruments using quoted market prices when available. When quoted market prices are not available for financial instruments, the Corporation uses standard pricing models with market-based inputs that take into account the present value of estimated future cash flows.

Inventories

Inventories are stated at the lower of cost or net realizable value. The method of determining cost for each subsidiary varies among last-in, first-out ("LIFO"); first-in, first-out ("FIFO"); and average cost, and is used consistently from year to year.

The Corporation routinely exchanges and swaps raw materials and finished goods with other companies to reduce delivery time, freight and other transportation costs. These transactions are treated as non-monetary exchanges and are valued at cost.

Property

Land, buildings and equipment are carried at cost less accumulated depreciation. Property under finance lease agreements is carried at the present value of lease payments over the lease term less accumulated amortization. Depreciation is based on the estimated service lives of depreciable assets and is calculated using the straight-line method. Fully depreciated assets are retained in property and accumulated depreciation accounts until they are removed from service. In the case of disposals, assets and related accumulated depreciation are removed from the accounts, and the net amounts, less proceeds from disposal, are included in income.

Impairment and Disposal of Long-Lived Assets

The Corporation evaluates long-lived assets and certain identifiable intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. When undiscounted future cash flows are not expected to be sufficient to recover an asset's carrying amount, the asset is written down to its fair value based on bids received from third parties or a discounted cash flow analysis based on market participant assumptions.

Long-lived assets to be disposed of by sale, if material, are classified as held for sale and reported at the lower of carrying amount or fair value less cost to sell, and depreciation is ceased. Long-lived assets to be disposed of other than by sale are classified as held and used until they are disposed of and reported at the lower of carrying amount or fair value, and depreciation is recognized over the remaining useful life of the assets.

Other Intangible Assets

Finite-lived intangible assets, such as developed technology and software, are amortized over their estimated useful lives, generally on a straight-line basis for periods ranging primarily from three to twenty years.

Asset Retirement Obligations

The Corporation records asset retirement obligations as incurred and reasonably estimable, including obligations for which the timing and/or method of settlement are conditional on a future event that may or may not be within the control of the Corporation. The fair values of obligations are recorded as liabilities on a discounted basis and are accreted over time for the change in present value. Costs associated with the liabilities are capitalized and amortized over the estimated remaining useful life of the asset, generally for periods of 10 years or less.

Investments in Related Companies

Investments in related companies consist of the Corporation's ownership interests in TDCC subsidiaries located in the United States and Latin America. The Corporation accounts for these investments using the cost method as it does not have significant influence over the operating and financial policies of these related companies.

Leases

Effective January 1, 2019, UCC adopted Accounting Standards Update ("ASU") 2016-02, "Leases (Topic 842)," and the associated ASUs (collectively, "Topic 842"). The Corporation added the following significant accounting policy for leases as a result of the adoption of Topic 842:

UCC determines whether a contract contains a lease at contract inception. A contract contains a lease if there is an identified asset and the Corporation has the right to control the asset. Operating lease right-of-use (“ROU”) assets represent UCC’s right to use an underlying asset for the lease term, and lease liabilities represent UCC’s obligation

10-K	2020-12-31	Filed 2021-02-05
10-Q	2020-09-30	Filed 2020-10-23
10-Q	2020-06-30	Filed 2020-07-24
10-Q	2020-03-31	Filed 2020-05-01
10-K	2019-12-31	Filed 2020-02-07
10-Q	2019-09-30	Filed 2019-10-25
10-Q	2019-06-30	Filed 2019-07-25
10-Q	2019-03-31	Filed 2019-05-03
10-K	2018-12-31	Filed 2019-02-11
10-Q	2018-09-30	Filed 2018-11-02
10-Q	2018-06-30	Filed 2018-08-03
10-Q	2018-03-31	Filed 2018-05-04
10-K	2017-12-31	Filed 2018-02-15
10-Q	2017-09-30	Filed 2017-11-06
10-Q	2017-06-30	Filed 2017-07-27
10-Q	2017-03-31	Filed 2017-04-27
10-K	2016-12-31	Filed 2017-02-09
10-Q	2016-09-30	Filed 2016-10-27
10-Q	2016-06-30	Filed 2016-07-28
10-Q	2016-03-31	Filed 2016-04-29
10-K	2015-12-31	Filed 2016-02-12
10-Q	2015-09-30	Filed 2015-10-27
10-Q	2015-06-30	Filed 2015-07-29
10-Q	2015-03-31	Filed 2015-04-29
10-K	2014-12-31	Filed 2015-02-13
10-Q	2014-09-30	Filed 2014-10-28
10-Q	2014-06-30	Filed 2014-07-29
10-Q	2014-03-31	Filed 2014-04-29
10-K	2013-12-31	Filed 2014-02-14
10-Q	2013-09-30	Filed 2013-10-29
10-Q	2013-06-30	Filed 2013-07-30
10-Q	2013-03-31	Filed 2013-04-30
10-K	2012-12-31	Filed 2013-02-15
10-Q	2012-09-30	Filed 2012-10-30
10-Q	2012-06-30	Filed 2012-08-01
10-Q	2012-03-31	Filed 2012-05-02
10-K	2011-12-31	Filed 2012-02-15
10-Q	2011-09-30	Filed 2011-11-01
10-Q	2011-06-30	Filed 2011-08-03
10-Q	2011-03-31	Filed 2011-05-04
10-K	2010-12-31	Filed 2011-02-18
10-Q	2010-09-30	Filed 2010-11-03
10-Q	2010-06-30	Filed 2010-08-04
10-Q	2010-03-31	Filed 2010-05-04
10-K	2009-12-31	Filed 2010-02-19

EX-10.5.18	ucc2020-10kxex10518.htm
EX-23	ucc2020-10kxex23.htm
EX-31.1	ucc2020-10kxex311.htm
EX-31.2	ucc2020-10kxex312.htm
EX-32.1	ucc2020-10kxex321.htm
EX-32.2	ucc2020-10kxex322.htm


ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES


ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS


ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK


Note		Page
1	Summary of Significant Accounting Policies	30
2	Recent Accounting Guidance	34
3	Business Separation	34
4	Revenue	35
5	Divestitures	36
6	Restructuring and Asset Related Charges - Net	37
7	Supplementary Information	38
8	Income Taxes	38
9	Inventories	41
10	Property	41
11	Investments in Related Companies	41
12	Intangible Assets	42
13	Notes Payable and Long-Term Debt	43
14	Commitments and Contingent Liabilities	44
15	Leases	46
16	Accumulated Other Comprehensive Loss	49
17	Pension Plans and Other Postretirement Benefits	49
18	Fair Value Measurements	56
19	Related Party Transactions	57
20	Business and Geographic Regions	59


ITEM 1. BUSINESS


ITEM 2. PROPERTIES

UCC 10K Annual Report

Union Carbide Earnings 2020-12-31