CONSOLIDATED FINANCIAL STATEMENTS

Basis of Presentation

The unaudited interim consolidated financial statements of The Dow Chemical Company and its subsidiaries (“Dow” or the “Company”) were prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and reflect all adjustments (including normal recurring accruals) which, in the opinion of management, are considered necessary for the fair presentation of the results for the periods presented. These statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016.

Effective August 31, 2017, pursuant to the merger of equals transaction contemplated by the Agreement and Plan of Merger, dated as of December 11, 2015, as amended on March 31, 2017, Dow and E. I. du Pont de Nemours and Company ("DuPont") each merged with subsidiaries of DowDuPont Inc. ("DowDuPont") and, as a result, Dow and DuPont became subsidiaries of DowDuPont (the "Merger"). 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. See Note 3 for additional information on the Merger.

Beginning September 1, 2017, transactions between DowDuPont, Dow and DuPont and their affiliates are reflected in these consolidated financial statements and will be disclosed as related party transactions, when material. Transactions between Dow and DuPont primarily consist of the sale and procurement of certain feedstocks and raw materials that are consumed in each company's manufacturing process. Transactions with DuPont during the month of September 2017 were not material to the consolidated financial statements.

Effective with the Merger, Dow’s business activities are components of its parent company’s business operations. Dow’s business activities, including the assessment of performance and allocation of resources, will be reviewed and managed by DowDuPont. Information used by the chief operating decision maker of Dow relates to the Company in its entirety. Accordingly, there are no separate reportable business segments for the Company under Accounting Standards Codification ("ASC") Topic 280 “Segment Reporting” and the Company’s business results are reported in this Form 10-Q as a single operating segment.

Significant Accounting Policy Updates

The Company's significant accounting policies were updated as a result of the Merger. See Note 1 to the Consolidated Financial Statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2016 for information on the Company's significant accounting policies.

Update to the Income Taxes Significant Accounting Policy

Effective with the Merger, the Company and DuPont are subsidiaries of DowDuPont. The Company is included in DowDuPont's consolidated tax groups and related income tax returns within certain jurisdictions. The Company will continue to record a separate tax liability for its share of the taxable income and tax attributes and obligations on DowDuPont’s consolidated income tax returns following a formula consistent with the economic sharing of tax attributes and obligations. Dow and DuPont compute the amount due to DowDuPont for their share of taxable income and tax attributes and obligations on DowDuPont’s consolidated tax return. The amounts reported as income tax payable or receivable represent the Company’s payment obligation (or refundable amount) to DowDuPont based on a theoretical tax liability calculated based on the methodologies agreed, elected or required in each combined or consolidated filing jurisdiction.

Integration and Separation Costs

The Company classifies expenses related to the Merger and the ownership restructure of Dow Corning Corporation ("Dow Corning") as "Integration and separation costs" in the consolidated statements of income. Merger-related costs include: costs incurred to prepare for and close the Merger, post-Merger integration expenses and costs incurred to prepare for the separation of the Company’s agriculture business, specialty products business and materials science business. The Dow Corning related-costs include: costs incurred to prepare for and close the ownership restructure, as well as integration expenses. These costs primarily consist of financial advisor, information technology, legal, accounting, consulting and other professional advisory fees associated with preparation and execution of these activities.

Adoption of Accounting Standards Update ("ASU") 2016-09, "Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting"

In the first quarter of 2017, the Company adopted ASU 2016-09 and elected to apply changes on a retrospective basis to the consolidated statements of cash flows related to the classification of excess tax benefits and employee taxes paid for share-based payment arrangements. See Note 2 for additional information. A summary of the changes made to the consolidated statements of cash flows for the nine months ended September 30, 2016, is included in the following table:



Summary of Changes to the Consolidated Statements of Cash Flows	Nine Months Ended
	Sep 30, 2016
In millions	As Filed			Updated
Operating Activities
Excess tax benefits from share-based payment arrangements	$	(39	)	$	—
Other assets and liabilities - net	$	455		$	520
Cash provided by operating activities	$	3,615		$	3,719
Financing Activities
Excess tax benefits from share-based payment arrangements	$	39		$	—
Employee taxes paid for share-based payment arrangements	$	—		$	(65	)
Cash used in financing activities	$	(2,688	)	$	(2,792	)

Changes in Financial Statement Presentation

As a result of the Merger, certain reclassifications of prior period amounts have been made to improve comparability and conform to the presentation that will be adopted for DowDuPont. Presentation changes were made to the consolidated statements of income, consolidated balance sheets, consolidated statements of cash flows and consolidated statements of equity. In addition, certain reclassifications of prior year's data have been made in the notes to the Consolidated Financial Statements to conform to the current period presentation.

The changes to the financial statements are summarized as follows:

Consolidated Statements of Income

Costs associated with integration and separation activities are now separately reported as “Integration and separation costs” and have been reclassified from “Cost of sales” and “Selling, general and administrative expenses.” In addition, “Interest income” has been reclassified to “Sundry income (expense) - net.” A summary of the changes made to the consolidated statements of income is as follows:



Summary of Changes to the Consolidated Statements of Income	Three Months Ended					Nine Months Ended
Summary of Changes to the Consolidated Statements of Income	Sep 30, 2016			Sep 30, 2016		Sep 30, 2016		Sep 30, 2016
In millions	As Filed			Updated		As Filed		Updated
Cost of sales	$	9,841		$	9,840	$	27,067	$	27,066
Selling, general and administrative expenses	$	864		$	738	$	2,393	$	2,166
Integration and separation costs	$	—		$	127	$	—	$	228
Sundry income (expense) - net	$	(4	)	$	22	$	1,305	$	1,369
Interest income	$	26		$	—	$	64	$	—

Consolidated Balance Sheets

The Company reclassified “Dividends payable” to “Accrued and other current liabilities” and the current portion of deferred revenue has been reclassified from “Accounts payable - Other” to “Accrued and other current liabilities.” In addition, certain derivative assets have been reclassified from “Accounts and notes receivable - Other” to “Other current assets” and certain derivative liabilities have been reclassified from “Accounts payable - Other” to “Accrued and other current liabilities.” A summary of the changes made to the consolidated balance sheets is as follows:



Summary of Changes to the Consolidated Balance Sheets	Dec 31, 2016
In millions	As Filed		Updated
Accounts and notes receivable - Other	$	4,358	$	4,312
Other current assets	$	665	$	711
Accounts payable - Other	$	2,401	$	2,097
Dividends payable	$	508	$	—
Accrued and other current liabilities	$	3,669	$	4,481

Consolidated Statements of Cash Flows

A summary of the changes made to the consolidated statements of cash flows is as follows:



Summary of Changes to the Consolidated Statements of Cash Flows	Nine Months Ended
	Sep 30, 2016
In millions	As Filed			Updated
Operating Activities
Net periodic pension benefit cost	$	—		$	312
Net gain on sales of assets, businesses and investments	$	—		$	(179	)
Net gain on sales of investments	$	(97	)	$	—
Net gain on sales of property, businesses and consolidated companies	$	(82	)	$	—
Other net loss	$	97		$	300
Accounts payable	$	695		$	1,031
Other assets and liabilities - net ¹	$	520		$	(331	)
Financing Activities
Transaction financing, debt issuance and other costs	$	(2	)	$	—
Other financing activities - net	$	—		$	(2	)

1. As updated for ASU 2016-09.

Consolidated Statements of Equity

A summary of the changes made to the consolidated statements of equity is as follows:



Summary of Changes to the Consolidated Statements of Equity	Nine Months Ended
	Sep 30, 2016
In millions	As Filed			Updated
Dividend equivalents on participating securities	$	(21	)	$	—
Other	$	—		$	(21	)

Prior to the Merger, the Company declared dividends of $1.38 per share for the nine months ended September 30, 2017 ($1.38 per share for the nine months ended September 30, 2016). Effective with the Merger, Dow no longer has publicly traded common stock. Dow's common shares are owned solely by its parent company, DowDuPont. As a result, the Company’s Board of Directors will review and determine on a periodic basis whether or not there will be a dividend distribution to DowDuPont.