-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, IE1uecvKCjCm85hfUtoBmuUZqDyIUl6r9Gb9I7PB6dly4mNsXDUjgE/duc9o9ekN CIhXCbTqkHlJsVdQPSpGyw== 0001047469-04-015491.txt : 20040504 0001047469-04-015491.hdr.sgml : 20040504 20040504121722 ACCESSION NUMBER: 0001047469-04-015491 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 20040331 FILED AS OF DATE: 20040504 FILER: COMPANY DATA: COMPANY CONFORMED NAME: UNION CARBIDE CORP /NEW/ CENTRAL INDEX KEY: 0000100790 STANDARD INDUSTRIAL CLASSIFICATION: INDUSTRIAL ORGANIC CHEMICALS [2860] IRS NUMBER: 131421730 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-01463 FILM NUMBER: 04776329 BUSINESS ADDRESS: STREET 1: 39 OLD RIDGEBURY RD CITY: DANBURY STATE: CT ZIP: 06817-0001 BUSINESS PHONE: 2037942000 MAIL ADDRESS: STREET 1: 39 OLD RIDGEBURY RD CITY: DANBURY STATE: CT ZIP: 06817-0001 FORMER COMPANY: FORMER CONFORMED NAME: UNION CARBIDE CHEMICALS & PLASTICS CO INC DATE OF NAME CHANGE: 19940502 FORMER COMPANY: FORMER CONFORMED NAME: UNION CARBIDE CORP DATE OF NAME CHANGE: 19890806 FORMER COMPANY: FORMER CONFORMED NAME: UNION CARBIDE & CARBON CORP DATE OF NAME CHANGE: 19710317 10-Q 1 a2135508z10-q.htm 10-Q
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934

FOR THE QUARTER ENDED March 31, 2004

Commission file number 1-1463

UNION CARBIDE CORPORATION
(Exact name of registrant as specified in its charter)

New York (State or other jurisdiction of incorporation or organization)				13-1421730 (I.R.S. Employer Identification No.)
400 West Sam Houston Parkway South, Houston, Texas 77042 (Address of principal executive offices) (Zip Code)
713-798-2016 (Registrant's telephone number, including area code:)
Not applicable (Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No o.

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes o No ý.

At March 31, 2004, 1,000 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 Instructions H(1)(a) and (b) for Form 10-Q and is therefore filing this form with a reduced disclosure format.

Union Carbide Corporation
Table of Contents

			PAGE
PART I—FINANCIAL INFORMATION
	Item 1. Financial Statements		3
		Consolidated Statements of Income	3
		Consolidated Balance Sheets	4
		Consolidated Statements of Cash Flows	6
		Consolidated Statements of Comprehensive Income	6
		Notes to the Consolidated Financial Statements	7
	Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations		14
		Disclosure Regarding Forward-Looking Information	14
		Results of Operations	14
		Other Matters	17
	Item 3. Quantitative and Qualitative Disclosures About Market Risk		20
	Item 4. Controls and Procedures		20
PART II—OTHER INFORMATION
	Item 1. Legal Proceedings		20
	Item 6. Exhibits and Reports on Form 8-K		20
SIGNATURES			21
EXHIBIT INDEX			22

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Union Carbide Corporation and Subsidiaries
Consolidated Statements of Income

		Three Months Ended
In millions (Unaudited)		March 31, 2004			March 31, 2003
	Net trade sales	$	79		$	93
	Net sales to related companies		1,232			1,196

Total Net Sales			1,311			1,289

	Cost of sales		1,164			1,308
	Research and development expenses		24			25
	Selling, general and administrative expenses		6			10
	Amortization of intangibles		1			1
	Equity in earnings of nonconsolidated affiliates		85			10
	Sundry income (expense)—net		(38	)		(15	)
	Interest income		1			2
	Interest expense and amortization of debt discount		23			34

Income (Loss) before Income Taxes			141			(92	)

	Provision (Credit) for income taxes		50			(33	)

Net Income (Loss) Available for Common Stockholder		$	91		$	(59	)

Depreciation		$	78		$	79

Capital Expenditures		$	26		$	19

See Notes to the Consolidated Financial Statements.

Union Carbide Corporation and Subsidiaries
Consolidated Balance Sheets

In millions (Unaudited)			March 31, 2004		Dec. 31, 2003
Assets
Current Assets
	Cash and cash equivalents		$	22	$	21
	Accounts receivable:
		Trade (net of allowance for doubtful receivables—2004: $4; 2003: $4)		46		59
		Related companies		286		279
		Other		115		120
	Notes receivable from related companies			246		124
	Inventories			210		182
	Deferred income tax assets—current			55		56
	Asbestos-related insurance receivables—current			225		200

	Total current assets			1,205		1,041

Investments
	Investments in related companies			461		461
	Investments in nonconsolidated affiliates			594		626
	Other investments			32		35
	Noncurrent receivables			17		17

	Total investments			1,104		1,139

Property
	Property			7,376		7,375
	Less accumulated depreciation			5,175		5,132

	Net property			2,201		2,243

Other Assets
	Goodwill			26		26
	Other intangible assets (net of accumulated amortization—2004: $119; 2003: $118)			16		23
	Deferred income tax assets—noncurrent			745		783
	Asbestos-related insurance receivables—noncurrent			1,117		1,176
	Deferred charges and other assets			110		73

	Total other assets			2,014		2,081

Total Assets			$	6,524	$	6,504

See Notes to the Consolidated Financial Statements.

Union Carbide Corporation and Subsidiaries
Consolidated Balance Sheets

In millions (Unaudited)			March 31, 2004			Dec. 31, 2003
Liabilities and Stockholder's Equity
Current Liabilities
	Notes payable:
		Related companies	$	12		$	23
		Other		4			2
	Long-term debt due within one year			16			16
	Accounts payable:
		Trade		233			253
		Related companies		326			287
		Other		48			32
	Income taxes payable			81			77
	Asbestos-related liabilities—current			123			122
	Accrued and other current liabilities			219			237

	Total current liabilities			1,062			1,049

Long-Term Debt				1,272			1,272

Other Noncurrent Liabilities
	Pension and other postretirement benefits—noncurrent			505			524
	Asbestos-related liabilities—noncurrent			1,739			1,791
	Other noncurrent obligations			461			477

	Total other noncurrent liabilities			2,705			2,792

Minority Interest in Subsidiaries				3			3

Stockholder's Equity
	Common stock (1,000 shares authorized and issued)			—			—
	Additional paid-in capital			—			—
	Retained earnings			1,837			1,746
	Accumulated other comprehensive loss			(355	)		(358	)

	Net stockholder's equity			1,482			1,388

Total Liabilities and Stockholder's Equity			$	6,524		$	6,504

See Notes to the Consolidated Financial Statements.

Union Carbide Corporation and Subsidiaries
Consolidated Statements of Cash Flows

		Three Months Ended
In millions (Unaudited)		March 31, 2004			March 31, 2003
Operating Activities
	Net Income (Loss) Available for Common Stockholder	$	91		$	(59	)
	Adjustments to reconcile net income (loss) to net cash provided by operating activities:
	Depreciation and amortization		83			85
	Provision (Credit) for deferred income tax		39			(199	)
	Earnings/losses of nonconsolidated affiliates less than dividends received		34			38
	Net (gain) loss on sales of property		(1	)		14
	Other net (gain) loss		(1	)		1
	Changes in assets and liabilities that provided (used) cash:
	Accounts and notes receivable		46			(19	)
	Related company receivables		(129	)		174
	Inventories		(28	)		31
	Accounts payable		11			11
	Related company payables		39			52
	Other assets and liabilities		(152	)		(92	)

	Cash provided by operating activities		32			37

Investing Activities
	Capital expenditures		(26	)		(19	)
	Proceeds from sales of property		2			—
	Investments in nonconsolidated affiliates		(1	)		(8	)
	Collection of noncurrent note receivable from related company		—			17
	Proceeds from sales of investments		3			5

	Cash used in investing activities		(22	)		(5	)

Financing Activities
	Changes in short-term notes payable		2			4
	Changes in notes payable to related companies		(11	)		(34	)

	Cash used in financing activities		(9	)		(30	)

Summary
	Increase in cash and cash equivalents		1			2
	Cash and cash equivalents at beginning of year		21			25

	Cash and cash equivalents at end of period	$	22		$	27

See Notes to the Consolidated Financial Statements.

Union Carbide Corporation and Subsidiaries
Consolidated Statements of Comprehensive Income

		Three Months Ended
In millions (Unaudited)		March 31, 2004		March 31, 2003
Net Income (Loss) Available for Common Stockholder		$	91	$	(59	)

Other Comprehensive Income, Net of Tax
	Unrealized gains on investments		—		2
	Translation adjustments		3		2

	Total other comprehensive income		3		4

Comprehensive Income (Loss)		$	94	$	(55	)

See Notes to the Consolidated Financial Statements.

Union Carbide Corporation and Subsidiaries
Notes to the Consolidated Financial Statements

(Unaudited)

NOTE A CONSOLIDATED FINANCIAL STATEMENTS

The unaudited interim consolidated financial statements of Union Carbide Corporation and its subsidiaries (the "Corporation" or "UCC") were prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") and reflect all adjustments (consisting of normal recurring accruals) which, in the opinion of management, are considered necessary for a fair presentation of the results for the periods covered.

The Corporation is a wholly owned subsidiary of The Dow Chemical Company ("Dow"). In accordance with Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings Per Share," the presentation of earnings per share is not required in financial statements of wholly owned subsidiaries.

The Corporation's business activities comprise components of Dow's global operations rather than stand-alone operations. Dow conducts its worldwide operations through global businesses. Because there are no separable reportable business segments for UCC under SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information," 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.

Intercompany transactions and balances are eliminated in consolidation. Transactions with the Corporation's parent company, Dow, or other Dow subsidiaries have been reflected as related company transactions in the consolidated financial statements. See Note H for further discussion.

Certain reclassifications of prior year's amounts have been made to conform to the presentation adopted for 2004. These statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Corporation's Annual Report on Form 10-K for the year ended December 31, 2003.

NOTE B ACCOUNTING CHANGES

In December 2003, the Financial Accounting Standards Board ("FASB") revised SFAS No. 132, "Employers' Disclosures about Pensions and Other Postretirement Benefits." The revised standard requires new disclosures in addition to those required by the original standard about the assets, obligations, cash flows and net periodic benefit cost of defined benefit pension plans and other defined benefit postretirement plans. As revised, SFAS No. 132 was effective for financial statements with fiscal years ending after December 15, 2003. The interim-period disclosures required by this standard are effective for interim periods beginning after December 15, 2003. See Note G for the required disclosures.

In January 2004, the FASB issued FASB Staff Position ("FSP") No. 106-1, "Accounting and Disclosure Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003." The FSP permits a sponsor of a postretirement health care plan that provides a prescription drug benefit to make a one-time election to defer accounting for the effects of the Medicare Prescription Drug, Improvement and Modernization Act of 2003. Regardless of whether a sponsor elects that deferral, the FSP requires certain disclosures pending further consideration of the underlying accounting issues. The Corporation has elected to defer financial recognition of this legislation. See Note G for the required disclosures.

In March 2004, the FASB ratified the consensus reached by the Emerging Issues Task Force ("EITF") with respect to EITF Issue No. 03-16, "Accounting for Investments in Limited Liability Companies." According to EITF Issue No. 03-16, a limited liability company ("LLC") that maintains a "specific ownership account" for each investor should be viewed similar to a limited partnership for determining whether a noncontrolling investment in an LLC should be accounted for using the cost or equity method. The consensus applies to all investment in LLCs (except those required to be accounted for as debt securities) and is effective for reporting periods beginning after June 15, 2004. The Corporation is currently assessing the impact of adopting EITF Issue No. 03-16.

NOTE C IMPAIRMENT OF LONG-LIVED ASSETS

In the first quarter of 2003, certain studies regarding non-strategic or under-performing assets were completed and management made decisions relative to certain assets. These decisions resulted in the write-off of the net book value of three manufacturing facilities totaling $24 million and included in "Cost of sales" (the largest of which was $16 million associated with the impairment of the ethylene production facilities in Seadrift, Texas, which was shut down in the third quarter of 2003), and the impairment of a chemical transport vessel (sold in the second quarter of 2003) of $11 million included in "Sundry income (expense)—net".

NOTE D INVENTORIES

The following table provides a breakdown of inventories at March 31, 2004 and December 31, 2003:

Inventories (in millions)	March 31, 2004		December 31, 2003
Finished goods	$	75	$	59
Work in process		25		25
Raw materials		35		25
Supplies		75		73

Total inventories	$	210	$	182

The reserves reducing inventories from the first-in, first-out ("FIFO") basis to the last-in, first-out ("LIFO") basis amounted to $84 million at March 31, 2004 and $96 million at December 31, 2003.

NOTE E OTHER INTANGIBLE ASSETS

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

		At March 31, 2004							At December 31, 2003
(in millions)		Gross Carrying Amount		Accumulated Amortization			Net		Gross Carrying Amount		Accumulated Amortization			Net
Intangible assets with finite lives:
	Licenses and intellectual property	$	36	$	(32	)	$	4	$	36	$	(31	)	$	5
	Patents		5		(3	)		2		5		(3	)		2
	Software		93		(83	)		10		99		(83	)		16
	Other		1		(1	)		—		1		(1	)		—

	Total	$	135	$	(119	)	$	16	$	141	$	(118	)	$	23

Amortization expense for other intangible assets (not including software) was $1 million in the first quarter of 2004, compared with $1 million for the same period last year. Amortization expense for software, which is included in cost of sales, totaled $0.3 million in the first quarter of 2004, compared with $1 million in the first quarter of 2003. Total estimated amortization expense for 2004 and the five succeeding fiscal years is as follows:

(in millions)	Estimated Amortization Expense
2004	$	5.1
2005		1.9
2006		1.6
2007		1.4
2008		1.4
2009		1.4

NOTE F COMMITMENTS AND CONTINGENT LIABILITIES

Environmental

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. The Corporation had accrued obligations of $109 million at December 31, 2003 for environmental remediation and restoration costs, including $33 million for the remediation of Superfund sites. At March 31, 2004, the Corporation had accrued obligations of $107 million for environmental remediation and restoration costs, including $30 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 the ultimate cost with respect to these particular matters could range up to twice that amount. Inherent uncertainties exist in these estimates primarily due to unknown conditions, changing governmental regulations and legal standards regarding liability, and evolving technologies for handling site remediation and restoration. It is the opinion of the Corporation's management that the possibility is remote that costs in excess of those accrued or disclosed will have a material adverse impact on the Corporation's consolidated financial statements.

Litigation

The following disclosure should be read in conjunction with the Corporation's Annual Report on Form 10-K for the year ended December 31, 2003.

The Corporation and its subsidiaries are 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 regulatory proceedings; health, safety and environmental matters; employment; patents; contracts; taxes; and commercial disputes.

Separately, the Corporation is and has been involved in a large number of asbestos-related suits filed primarily in state courts during the past three 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 subsidiary, Amchem Products, Inc. ("Amchem"). In many cases, plaintiffs are unable to demonstrate that they have suffered any compensable loss as a result of such exposure, or that injuries incurred in fact resulted from exposure to the Corporation's products.

Influenced by the bankruptcy filings of numerous defendants in asbestos-related litigation and the prospects of various forms of state and national legislative reform, the rate at which plaintiffs filed asbestos-related suits against various companies, including the Corporation and Amchem, increased in 2001, 2002 and the first half of 2003. The rate of filing significantly abated in the second half of 2003 and the first quarter of 2004. The Corporation expects more asbestos-related suits to be filed against it and Amchem in the future, and will aggressively defend or reasonably resolve, as appropriate, both pending and future claims.

At the end of 2001 and through the third quarter of 2002, the Corporation had concluded it was not possible to estimate its cost of disposing of asbestos-related claims that might be filed against it and Amchem in the future due to a number of reasons. During the third and fourth quarters of 2002, the Corporation worked with Analysis, Research & Planning Corporation ("ARPC"), a consulting firm with broad experience in estimating resolution costs associated with mass tort litigation, including asbestos, to explore whether it would be possible to estimate the cost of disposing of pending and future asbestos-related claims that have been, and could reasonably be expected to be, filed against the Corporation and Amchem. ARPC concluded that it was not possible to estimate the full range of the cost of resolving future asbestos-related claims against UCC and Amchem because of various uncertainties associated with the litigation of those claims. Despite its inability to estimate the full range of the cost of resolving future asbestos-related claims, ARPC advised the Corporation that it would be possible to determine an estimate of a reasonable forecast of the cost of resolving pending and future asbestos-related claims likely to face UCC and Amchem if the following assumptions were made:

•: In the near term, the number of future claims to be filed against UCC and Amchem will be at a level consistent with levels experienced immediately prior to 2001.
•: The number of future claims to be filed against UCC and Amchem will decline at a fairly constant rate each year from 2003.
•: The percentage of claims settled by UCC and Amchem out of the total claims resolved (whether by settlement or dismissal) will be consistent with the percentage for 2001 and 2002.
•: The average settlement value for pending and future claims will be equivalent to those experienced during 2001 and 2002.

Based on the resulting study completed by ARPC in January 2003, the Corporation increased its December 31, 2002 asbestos-related liability for pending and future claims for the 15-year period ending in 2017 to $2.2 billion, excluding future defense and processing costs. Approximately 28 percent of the recorded liability related to pending claims and approximately 72 percent related to future claims.

2004, ARPC stated that an update at that time would not provide a more likely estimate of future events than that reflected in its study of the previous year and, therefore, the estimate in that study remained applicable. Based on the Corporation's own review of the asbestos claim and resolution activity and ARPC's response, the Corporation determined that no change to the accrual was required at that time. Management noted, however, that the total number of claims filed in 2003 did exceed the number of claims assumed to be filed in the ARPC study. After consultation with outside counsel and other consultants, management believes this fact was strongly influenced by the pending national legislation and tort reform initiatives in key states. The total number of claims filed in the first quarter of 2004 also exceeded the number of claims assumed to be filed in the ARPC study. However, based on the Corporation's review of 2004 activity, the Corporation determined that no change to the accrual was required at March 31, 2004.

The asbestos-related liability for pending and future claims was $1.8 billion at March 31, 2004 and $1.9 billion at December 31, 2003. At March 31, 2004, approximately 34 percent of the recorded liability related to pending claims and approximately 66 percent related to future claims At December 31, 2003, approximately 33 percent of the recorded liability related to pending claims and approximately 67 percent related to future claims.

At December 31, 2002, the Corporation increased the receivable for insurance recoveries related to its asbestos liability to $1.35 billion, substantially exhausting its asbestos product liability coverage. Combined with the previously mentioned increase in the asbestos-related liability at December 31, 2002, this resulted in a net income statement impact of $828 million, $522 million on an after-tax basis, in the fourth quarter of 2002. The insurance receivable related to the asbestos liability was determined after a thorough review of applicable insurance policies and the 1985 Wellington Agreement, to which the Corporation and many of its liability insurers are signatory parties, as well as other insurance settlements, with due consideration given to applicable deductibles, retentions and policy limits, and taking into account the solvency and historical payment experience of various insurance carriers. The receivable for insurance recoveries related to asbestos liability was $957 million at March 31, 2004 and $1.0 billion at December 31, 2003.

In addition, the Corporation had receivables for defense and resolution costs submitted to insurance carriers for reimbursement as follows:

Receivables for Costs Submitted to Insurance Carriers
(in millions)	March 31, 2004		December 31, 2003
Receivables for defense costs	$	93	$	94
Receivables for resolution costs		292		255

Total	$	385	$	349

The Corporation's insurance policies generally provide coverage for asbestos liability costs, including coverage for both resolution and defense costs. As previously noted, the Corporation increased its receivable for insurance recoveries related to its asbestos liability at December 31, 2002, thereby recording the full favorable income statement impact of its insurance coverage in 2002. Accordingly, defense and resolution costs recovered from insurers reduce the insurance receivable. Prior to increasing the insurance receivable related to the asbestos liability at December 31, 2002, the impact on results of operations for defense costs was the amount of those costs not covered by insurance. Since the Corporation expenses defense costs as incurred, defense costs for asbestos-related litigation (net of insurance) have impacted, and will continue to impact results of operations. The pretax impact for defense and resolution costs, net of insurance, was $25 million in the first quarter of 2004 and $30 million in the first quarter of 2003, and was reflected in "Cost of sales."

In September 2003, the Corporation filed a comprehensive insurance coverage case in the Circuit Court for Kanawha County in Charleston, West Virginia, seeking to confirm its rights to insurance for various asbestos claims. Although the Corporation already has settlements in place concerning coverage for asbestos claims with many of its insurers, including those covered by the 1985 Wellington Agreement, this lawsuit was filed against insurers that are not signatories to the Wellington Agreement and/or do not otherwise have agreements in place with the Corporation regarding their asbestos-related insurance coverage. The Corporation continues to believe that its recorded receivable for insurance recoveries from all insurance carriers is collectible. The Corporation reached this conclusion after a further review of its insurance policies, with due consideration given to applicable deductibles, retentions and policy limits, after taking into account the solvency and historical payment experience of various insurance carriers; existing insurance settlements; and the advice of outside counsel with respect to the applicable insurance coverage law relating to the terms and conditions of its insurance policies.

average cost of disposing of each such claim, coverage issues among insurers, and the continuing solvency of various insurance companies, as well as the numerous uncertainties surrounding asbestos litigation in the United States, could cause the actual costs and insurance recoveries to be higher or lower than those projected or those recorded.

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

While it is not possible at this time to determine with certainty the ultimate outcome of any of the legal proceedings and claims referred to in this filing, management believes that adequate provisions have been made for probable losses with respect to pending claims and proceedings, and that, except for the asbestos-related matters described above, the ultimate outcome of all known and future claims, after provisions for insurance, will not have a material adverse impact on the results of operations, cash flows and consolidated financial position of the Corporation. Should any losses be sustained in connection with any of such legal proceedings and claims in excess of provisions provided and available insurance, they will be charged to income when determinable.

Purchase Commitments

The Corporation has various purchase agreements. In December 2003, the Corporation assigned its rights and obligations under a purchase agreement for ethylene-related products to a wholly owned subsidiary of Dow. Total purchases under the ethylene-related agreement were $93 million in 2003.

The fixed and determinable portion of obligations under take or pay and throughput agreements at December 31, 2003 is presented in the following table:

Fixed and Determinable Portion of Take or Pay and Throughput Obligations at December 31, 2003 (in millions)
2004	$	17
2005		16
2006		16
2007		14
2008		14
2009 through expiration of contracts		45

Total	$	122

Guarantees

The Corporation has undertaken obligations to guarantee the performance of a nonconsolidated affiliate and a former subsidiary of the Corporation (via delivery of cash or other assets) if specified triggering events occur. Non-performance under a contract for commercial obligations by the guaranteed party triggers the obligation of the Corporation.

The following table provides a summary of the aggregate terms, maximum future payments, and associated liability reflected in the consolidated balance sheet for these guarantees.

Guarantees at March 31, 2004 and December 31, 2003
(in millions)		Final Expiration		Maximum Future Payments			Recorded Liability
Guarantees		2007		$	11		—

NOTE G PENSION PLANS AND OTHER POSTRETIREMENT BENEFITS

Net Periodic Benefit Cost for All Significant Plans
	Defined Benefit Pension Plans Three Months Ended						Other Postretirement Benefits Three Months Ended
(in millions)	March 31, 2004			March 31, 2003			March 31, 2004			March 31, 2003
Service cost	$	7		$	7		$	1		$	3
Interest cost		56			58			10			10
Expected return on plan assets		(88	)		(93	)		—			—
Amortization of prior service cost (credit)		1			1			(2	)		(2	)
Amortization of net loss		—			—			1			1

Net periodic benefit cost (credit)	$	(24	)	$	(27	)	$	10		$	12

Employer Contributions

Pension Plans

The Corporation has a defined benefit pension plan that covers substantially all employees in the United States. Benefits are based on length of service and the employee's three highest consecutive years of compensation.

The Corporation's funding policy is to contribute to the plan when pension laws and economics either require or encourage funding. As previously disclosed in the Corporation's financial statements for the year ended December 31, 2003, UCC does not expect to contribute assets to its qualified pension plan trust in 2004. No contributions were made in the first quarter of 2004. The Corporation also has a non-qualified supplemental pension plan. As previously disclosed, benefit payments to retirees under this plan are expected to be $5 million in 2004. In the first quarter of 2004, benefit payments of $1.0 million were made.

Other Postretirement Benefits

The Corporation provides certain health care and life insurance benefits to retired U.S. employees. The plan provides health care benefits, including hospital, physicians' services, drug and major medical expense coverage, and life insurance benefits. The Corporation and the retiree share the cost of these benefits, with the Corporation portion increasing as the retiree has increased years of credited service. There is a cap on the Corporation portion. These benefits are subject to change at any time.

The Corporation funds most of the cost of these health care and life insurance benefits as incurred. As previously disclosed in the Corporation's financial statements for the year ended December 31, 2003, UCC does not expect to contribute assets to its other postretirement benefit plans in 2004. Consistent with that expectation, no contributions were made in the first quarter of 2004. As previously disclosed, benefit payments to retirees under these plans are expected to be $52 million in 2004. In the first quarter of 2004, benefit payments of $26 million were made.

On December 8, 2003, the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (the "Act") was signed into law. The Act expanded Medicare to include, for the first time, coverage for prescription drugs. UCC sponsors retiree medical programs. The Corporation expects that this legislation will eventually reduce its costs for some of these programs.

At this point, the Corporation's analysis regarding the impact of the legislation is preliminary, as it awaits guidance from various governmental and regulatory agencies concerning the requirements that must be met to obtain these cost reductions, as well as the manner in which such savings should be measured. Based on this preliminary analysis, it appears that some of the Corporation's retiree medical plans may need to be modified in order to qualify for beneficial treatment under the Act.

Because of various uncertainties related to UCC's response to this legislation and the appropriate accounting methodology for this event, the Corporation has elected to defer financial recognition of this legislation until the FASB issues final accounting guidance. When issued, the final guidance could require the Corporation to change previously reported information. This deferral election is permitted under FSP No. 106-1, "Accounting and Disclosure Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003."

NOTE H RELATED PARTY TRANSACTIONS

The Corporation sells products to Dow to simplify the customer interface process. Products are sold to and purchased from Dow in accordance with the terms of Dow's longstanding intercompany pricing policies. The application of these policies results in products being sold to and purchased from Dow at market-based prices. The Corporation also procures certain commodities and raw materials through a Dow subsidiary and pays a commission to that Dow subsidiary based on the volume and type of commodities and raw materials purchased. The commission expense is included in "Sundry income (expense)—net" in the consolidated statements of income. Purchases from that Dow subsidiary were approximately $442 million in the first quarter of 2004 and $418 million in the first quarter of 2003.

The Corporation has a master services agreement with Dow whereby Dow provides services, including, but not limited to, accounting, legal, treasury (investments, cash management, risk management, insurance), procurement, human resources, environmental, health and safety, and business management for UCC. Under the master services agreement with Dow, for general administrative and overhead type services that Dow routinely allocates to various businesses, UCC is charged the cost of those services based on the Corporation's and Dow's relative manufacturing conversion costs. This arrangement results in a quarterly charge of approximately $5 million (included in "Sundry income (expense)—net").

For services that Dow routinely charges based on effort, UCC is charged the cost of such services on a fully absorbed basis, which includes direct and indirect costs. Additionally, certain Dow employees are contracted to UCC and Dow is reimbursed for all direct employment costs of such employees. Management believes the method used for determining expenses charged by Dow is reasonable. Dow provides these services by leveraging its centralized functional service centers to provide services at a cost that management believes provides an advantage to the Corporation.

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

As part of Dow's cash management process, UCC is a party to revolving loans with Dow that have LIBOR-based interest rates with varying maturities. On March 24, 2003, the revolving loan agreement with Dow that allowed the Corporation to borrow up to $1.5 billion was terminated and replaced with a new revolving loan agreement with Dow that allows the Corporation to borrow or obtain credit enhancements up to an aggregate of $1 billion. The new revolving loan agreement is secured, pursuant to a collateral agreement, by various assets, including UCC's deposit accounts, intercompany obligations, and equity interests in various subsidiaries and joint ventures. In an agreement effective January 1, 2004, the maturity date of the new revolving loan agreement was extended to March 25, 2005; however, Dow may demand repayment with a 30-day written notice to the Corporation. At March 31, 2004, there was $619 million available under the revolving loan agreement. The Corporation's note receivable from Dow under a separate revolving loan agreement was $212 million at March 31, 2004 and $100 million at December 31, 2003.

Union Carbide Corporation and Subsidiaries

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Pursuant to General Instruction H of Form 10-Q "Omission of Information by Certain Wholly-Owned Subsidiaries," this section includes only management's narrative analysis of the results of operations for the three-month period ended March 31, 2004, the most recent period, compared with the three-month period ended March 31, 2003, the corresponding period in the preceding fiscal year.

References below to "Dow" refer to The Dow Chemical Company and its consolidated subsidiaries.

DISCLOSURE REGARDING FORWARD-LOOKING INFORMATION

The Private Securities Litigation Reform Act of 1995 provides a "safe harbor" for forward-looking statements made by or on behalf of Union Carbide Corporation (the "Corporation" or "UCC"). This section covers the current performance and outlook of the Corporation. The forward-looking statements contained in this section and in other parts of this document involve risks and uncertainties that may affect the Corporation's operations, markets, products, services, prices and other factors as more fully discussed elsewhere and in filings with the U.S. Securities and Exchange Commission (SEC). These risks and uncertainties include, but are not limited to, economic, competitive, legal, governmental and technological factors. Accordingly, there is no assurance that the Corporation's expectations will be realized. The Corporation assumes no obligation to provide revisions to any forward-looking statements should circumstances change, except as otherwise required by securities and other applicable laws.

RESULTS OF OPERATIONS

The Corporation reported net income of $91 million for the first quarter of 2004 compared with a net loss of $59 million for the first quarter of 2003. The substantial improvement was due to higher selling prices, improved operating rates, and a significant increase in earnings from the Corporation's joint ventures compared with last year.

Total net sales for the first quarter of 2004 were $1,311 million compared with $1,289 million for the first quarter of 2003, an increase of 2 percent. Selling prices to Dow are based on market prices for the related products. Average selling prices for most products were higher in the first quarter of 2004 compared with last year (led by ethylene glycol and polyethylene, the Corporation's principal products). However, volume was down compared with last year for most products, with the exception of polyethylene. Ethylene glycol volume declined compared with a year ago due to the restructuring of contracts in Canada.

Cost of sales decreased $144 million (11 percent) in the first quarter of 2004 compared with the first quarter of 2003. The decrease in cost of sales is primarily due to the impact of lower sales volume and improved operating rates, which more than offset the impact of higher feedstock and energy costs. Cost of sales in the first quarter of 2003 was unfavorably impacted by a $24 million asset impairment charge (see Note C to the Consolidated Financial Statements for further information).

Operating expenses (research and development, and selling, general and administrative expenses) were $30 million in the first quarter of 2004, down 14 percent, from $35 million in the first quarter of last year. The decline reflects annual adjustments to amounts rebilled to joint ventures for employee-related costs, and continued efforts to control expenses.

Equity in earnings of nonconsolidated affiliates increased to $85 million in the first quarter of 2004 from $10 million in the first quarter of 2003. The increase in first quarter results was due to a substantial improvement in results at the OPTIMAL Group and improved earnings at EQUATE Petrochemical Company K.S.C. and UOP LLC.

Sundry income (expense)—net includes a variety of income and expense items such as the gain or loss on foreign currency exchange, dividends from investments, commissions, charges for management services provided by Dow, and gains and losses on sales of investments and assets. Sundry income (expense) for the first quarter of 2004 was net expense of $38 million compared with net expense of $15 million for the first quarter last year. Results for the first quarter of 2004 included higher commission expense on feedstock purchases reflecting commission rate changes implemented in the third quarter of 2003, and an unfavorable litigation settlement related to one of the Corporation's joint ventures.

Interest income for the first quarter of 2004 was $1 million compared with $2 million for the first quarter of last year. Interest expense and amortization of debt discount for the first quarter of 2004 was $23 million compared with $34 million in the first quarter of last year. The reduction in interest expense is consistent with the lower debt levels at March 31, 2004 compared with March 31, 2003.

The effective tax rate for the first quarter of 2004 was 35.5 percent compared with 35.8 percent for the same quarter last year. The effective tax rate fluctuates based on, among other factors, where income is earned, the level of after-tax income from joint ventures, and the level of income relative to tax credits available.

Asbestos-Related Matters

The following disclosure should be read in conjunction with the Corporation's Annual Report on Form 10-K for the year ended December 31, 2003.

The Corporation is and has been involved in a large number of asbestos-related suits filed primarily in state courts during the past three 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 subsidiary, Amchem Products, Inc. ("Amchem"). In many cases, plaintiffs are unable to demonstrate that they have suffered any compensable loss as a result of such exposure, or that injuries incurred in fact resulted from exposure to the Corporation's products.

The table below provides information regarding asbestos-related claims filed against the Corporation and Amchem:

	Three Months Ended March 31, 2004		Twelve Months Ended December 31, 2003
Claims unresolved at beginning of period	193,891		200,882
Claims filed	12,034		122,586
Claims settled, dismissed or otherwise resolved	(7,688	)	(129,577	)

Claims unresolved at end of period	198,237		193,891

Claimants with claims against both Union Carbide and Amchem	68,198		66,656

Individual claimants at end of period	130,039		127,235

In more than 98 percent of the cases filed against the Corporation and Amchem no specific amount of damages is alleged or, if an amount is alleged, it merely represents jurisdictional amounts or amounts to be proven at trial. This percentage has been increasing with more recently filed cases. Even in those situations where specific damages are alleged, the claims frequently seek the same amount of damages, irrespective of the disease or injury. Plaintiffs' lawyers often sue dozens or even hundreds of defendants in individual lawsuits on behalf of hundreds or even thousands of claimants. As a result, even when specific damages are alleged with respect to a specific disease or injury, those damages are not expressly identified as to UCC, Amchem or any other particular defendant. 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 liability.

•: In the near term, the number of future claims to be filed against UCC and Amchem will be at a level consistent with levels experienced immediately prior to 2001.
•: The number of future claims to be filed against UCC and Amchem will decline at a fairly constant rate each year from 2003.
•: The percentage of claims settled by UCC and Amchem out of the total claims resolved (whether by settlement or dismissal) will be consistent with the percentage for 2001 and 2002.

•: The average settlement value for pending and future claims will be equivalent to those experienced during 2001 and 2002.

At each balance sheet date, the Corporation compares current asbestos claim and resolution activity to the assumptions in the ARPC study to determine whether the accrual continues to be appropriate. In addition, in November 2003, the Corporation requested ARPC to review the asbestos claim and resolution activity during 2003 and determine the appropriateness of updating its study. In its response to that request, ARPC reviewed and analyzed data through November 25, 2003 to determine the number of asbestos-related filings and costs associated with 2003 activity. In January 2004, ARPC stated that an update at that time would not provide a more likely estimate of future events than that reflected in its study of the previous year and, therefore, the estimate in that study remained applicable. Based on the Corporation's own review of the asbestos claim and resolution activity and ARPC's response, the Corporation determined that no change to the accrual was required at that time. Management noted, however, that the total number of claims filed in 2003 did exceed the number of claims assumed to be filed in the ARPC study. After consultation with outside counsel and other consultants, management believes this fact was strongly influenced by the pending national legislation and tort reform initiatives in key states. The total number of claims filed in the first quarter of 2004 also exceeded the number of claims assumed to be filed in the ARPC study. However, based on the Corporation's review of 2004 activity, the Corporation determined that no change to the accrual was required at March 31, 2004.

The annual average resolution payment per asbestos claimant and the rate of new claim filings has fluctuated both up and down since the beginning of 2001. Union Carbide's management expects such fluctuations to continue in the future based upon the number and type of claims settled in a particular period, the jurisdictions in which such claims arose, and the extent to which any proposed legislative reform related to asbestos litigation is being considered.

The asbestos-related liability for pending and future claims was $1.8 billion at March 31, 2004 and $1.9 billion at December 31, 2003. At March 31, 2004, approximately 34 percent of the recorded liability related to pending claims and approximately 66 percent related to future claims. At December 31, 2003, approximately 33 percent of the recorded liability related to pending claims and approximately 67 percent related to future claims.

At December 31, 2002, the Corporation increased the receivable for insurance recoveries related to its asbestos liability to $1.35 billion, substantially exhausting its asbestos product liability coverage. Combined with the previously mentioned increase in the asbestos-related liability at December 31, 2002, this resulted in a net income statement impact of $828 million, $522 million on an after-tax basis, in the fourth quarter of 2002. The insurance receivable related to the asbestos liability was determined after a thorough review of applicable insurance policies and the 1985 Wellington Agreement, to which the Corporation and many of its liability insurers are signatory parties, as well as other insurance settlements, with due consideration given to applicable deductibles, retentions and policy limits, and taking into account the solvency and historical payment experience of various insurance carriers. Union Carbide's receivable for insurance recoveries related to its asbestos liability was $957 million at March 31, 2004 and $1.0 billion at December 31, 2003.

In addition, the Corporation had receivables for defense and resolution costs submitted to insurance carriers for reimbursement as follows:

Receivables for Costs Submitted to Insurance Carriers

In millions	March 31, 2004		December 31, 2003
Receivables for defense costs	$	93	$	94
Receivables for resolution costs		292		255

Total	$	385	$	349

The following table provides information regarding defense and resolution costs related to asbestos-related claims filed against the Corporation and Amchem:

Defense and Resolution Costs

In millions	Three Months Ended March 31, 2004		Twelve Months Ended December 31, 2003
Defense costs for the period	$	24	$	110
Aggregate defense costs to date		282		258
Resolution costs for the period		59		293
Aggregate resolution costs to date		685		626

The Corporation's insurance policies generally provide coverage for asbestos liability costs, including coverage for both resolution and defense costs. As previously noted, the Corporation increased its receivable for insurance recoveries related to its asbestos liability at December 31, 2002, thereby recording the full favorable income statement impact of its insurance coverage in 2002. Accordingly, defense and resolution costs recovered from insurers reduce the insurance receivable. Prior to increasing the insurance receivable related to the asbestos liability at December 31, 2002, the impact on results of operations for defense costs was the amount of those costs not covered by insurance. Since the Corporation expenses defense costs as incurred, defense costs for asbestos-related litigation (net of insurance) have impacted and will continue to impact results of operations. The pretax impact for defense and resolution costs, net of insurance, was $25 million in the first quarter of 2004 and $30 million in the first quarter of 2003, and was reflected in "Cost of sales."

The amounts recorded for the asbestos-related liability and related insurance receivable described above were based upon currently known facts. However, projecting future events, such as the number of new claims to be filed each year, the average cost of disposing of each such claim, coverage issues among insurers, and the continuing solvency of various insurance companies, as well as the numerous uncertainties surrounding asbestos litigation in the United States, could cause the actual costs and insurance recoveries to be higher or lower than those projected or those recorded.

OTHER MATTERS

Accounting Changes

See Note B to the Consolidated Financial Statements for a discussion of accounting changes and recently issued accounting pronouncements.

Critical Accounting Policies

The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America ("GAAP") requires management to make judgments, assumptions and estimates that affect the amounts reported in the Consolidated Financial Statements and accompanying notes. Note A to the Consolidated Financial Statements in the Corporation's Annual Report on Form 10-K for the year ended December 31, 2003, describes the significant accounting policies and methods used in the preparation of the Consolidated Financial Statements. Following are the Corporation's critical 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 issue and an actuarial analysis of historical claims experience for incurred but not reported matters. 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 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 F to the Consolidated Financial Statements.

Asbestos-Related Matters

The Corporation, and a former subsidiary, Amchem Products, Inc. ("Amchem"), are and have been involved in a large number of asbestos-related suits filed primarily in state courts during the past three decades. Based on a study completed by Analysis, Research & Planning Corporation ("ARPC") in January 2003, the Corporation increased its December 31, 2002 asbestos-related liability for pending and future claims for the 15-year period ending in 2017 to $2.2 billion, excluding future defense and processing costs. The Corporation also increased the receivable for insurance recoveries related to its asbestos liability to $1.35 billion at December 31, 2002.

At each balance sheet date, the Corporation compares current asbestos claim and resolution activity to the assumptions used in the ARPC study to determine whether the accrual continues to be appropriate. Based on the Corporation's review of 2004 activity, the Corporation determined that no change to the accrual was required at March 31, 2004.

The Corporation's asbestos-related liability for pending and future claims was $1.8 billion at March 31, 2004 and $1.9 billion at December 31, 2003. The Corporation's receivable for insurance recoveries related to its asbestos liability was $957 million at March 31, 2004 and $1.0 billion at December 31, 2003. In addition, the Corporation had receivables of $385 million at March 31, 2004 and $349 million at December 31, 2003 for insurance recoveries for defense and resolution costs.

The amounts recorded by the Corporation for the asbestos-related liability and related insurance receivable were based upon currently known facts. However, projecting future events, such as the number of new claims to be filed each year, the average cost of disposing of each such claims, coverage issues among insurers, and the continuing solvency of various insurance companies, as well as the numerous uncertainties surrounding asbestos litigation in the United States, could cause the actual costs and insurance recoveries for the Corporation to be higher or lower than those projected or those recorded.

For additional information, see Asbestos-Related Matters in Management's Discussion and Analysis of Financial Condition and Results of Operations and Note F 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 conditions, changing governmental regulations and legal standards regarding liability, and evolving technologies. The recorded liabilities are adjusted periodically as remediation efforts progress or as additional technical or legal information becomes available. The Corporation had accrued obligations of $109 million at December 31, 2003, for environmental remediation and restoration costs, including $33 million for the remediation of Superfund sites. At March 31, 2004, the Corporation had accrued obligations of $107 million for environmental remediation and restoration costs, including $30 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 the ultimate cost with respect to these particular matters could range up to twice that amount. For further discussion, see Note F to the Consolidated Financial Statements in this filing and Environmental Matters in Management's Discussion and Analysis of Financial Condition and Results of Operations in the Corporation's Annual Report on Form 10-K for the year ended December 31, 2003.

Pension 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 be settled at December 31, 2003, 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 L to the Consolidated Financial Statements in the Corporation's Annual Report on Form 10-K for the year ended December 31, 2003. In accordance with GAAP, 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.

The expected long-term rate of return on assets is developed with input from the Corporation's actuarial firm, which includes the actuary's review of the asset class return expectations of several respected consultants and economists, based on broad equity and bond indices. The Corporation's historical experience with the pension fund asset performance and comparisons to expected returns of peer companies with similar fund assets is also considered. The long-term rate of return assumption used for determining net periodic pension expense for 2003 was 9 percent. This assumption was maintained at 9 percent for determining 2004 net periodic pension expense. The actual rate of return in

2003 was 17 percent. Future actual pension income 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 Corporation bases the determination of pension expense or income on a market-related valuation of plan assets, which 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. For the year ending December 31, 2003, $492 million of net losses remain to be recognized in the calculation of the market-FFrelated value of plan assets. These net losses will result in increases in future pension expense as they are recognized in the market-related value of assets. The increase or decrease in the market-related value of assets due to the recognition of prior gains and losses is presented in the following table:

Increase (Decrease) in Market-Related Asset Value due to Recognition of Prior Asset Gains and Losses In millions
2004	$	(231	)
2005		(218	)
2006		(85	)
2007		42

Total	$	(492	)

The discount rate utilized for determining future pension obligations is based on long-term bonds receiving an AA- or better rating by a recognized rating agency. The resulting discount rate decreased from 6.75 percent at December 31, 2002, to 6.25 percent at December 31, 2003.

For 2004, the Corporation decreased its assumption for the long-term rate of increase in compensation levels from 5 percent for 2003 to 4.5 percent.

Based on the revised pension assumptions and changes in the market-related value of assets due to the recognition of prior asset gains and losses, the Corporation expects to record $1 million less in income for pension and other postretirement benefits in 2004 than it did in 2003.

The value of the qualified plan assets increased from $3.4 billion at December 31, 2002, to $3.7 billion at December 31, 2003. The investment performance increased the funded status of the qualified plans, net of benefit obligations, by $148 million from December 31, 2002 to December 31, 2003. This increase was somewhat mitigated by a decline in the discount rate assumption. For 2004, the Corporation expects to make cash contributions of approximately $57 million for the pension and other postretirement benefit plans.

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 March 31, 2004, the Corporation had a net deferred tax asset balance of $800 million and no valuation allowance. In evaluating the ability to realize its deferred tax assets, the Corporation relied principally on forecasted taxable income using historical and projected future operating results, the reversal of existing temporary differences and the availability of tax planning strategies.

At December 31, 2003, the Corporation had deferred tax assets for tax loss and tax credit carryforwards of $575 million, $39 million of which is subject to expiration in the years 2004-2008. In order to realize these deferred tax assets for tax loss and tax credit carryforwards, the Corporation needs taxable income of approximately $1.6 billion 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 2004-2008 is approximately $110 million.

For additional information, see Note R to the Consolidated Financial Statements in the Corporation's Annual Report on Form 10-K for the year ended December 31, 2003.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

ITEM 4. CONTROLS AND PROCEDURES

As of the end of the period covered by this Quarterly Report on Form 10-Q, the Corporation carried out an evaluation, under the supervision and with the participation of the Corporation's Disclosure Committee and the Corporation's management, including the Chief Executive Officer and the Chief Financial Officer, of the effectiveness of the design and operation of the Corporation's disclosure controls and procedures pursuant to Exchange Act Rule 15d-15(e). Based upon that evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that the Corporation's disclosure controls and procedures are effective in timely alerting them to material information relating to the Corporation (including its consolidated subsidiaries) required to be included in the Corporation's periodic SEC filings. No change in the Corporation's internal control over financial reporting occurred during the Corporation's most recent fiscal quarter that materially affected, or is reasonably likely to materially affect, the Corporation's internal control over financial reporting.

PART II—OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

No material developments in any legal proceedings, including asbestos-related matters, occurred during the first quarter of 2004. For a summary of the history and current status of legal proceedings, including asbestos-related matters, see Management's Discussion and Analysis of Financial Condition and Results of Operations, Asbestos-Related Matters; and Note F to the Consolidated Financial Statements.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a): Exhibits.

Exhibit No.		Exhibit Description
3.2		Amended and Restated Bylaws of Union Carbide Corporation, amended as of April 22, 2004.
23		Analysis, Research & Planning Corporation's Consent.
31.1		Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2		Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1		Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2		Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

(b): Reports on Form 8-K.

No Current Reports on Form 8-K were filed by the Corporation during the first quarter of 2004.

Union Carbide Corporation and Subsidiaries
Signatures

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

	UNION CARBIDE CORPORATION Registrant
Date: May 4, 2004

	By:	/s/ FRANK H. BROD Frank H. Brod, Vice President and Controller The Dow Chemical Company Authorized Representative of Union Carbide Corporation

	By:	/s/ EDWARD W. RICH Edward W. Rich, Vice President, Treasurer and Chief Financial Officer

Union Carbide Corporation and Subsidiaries
Exhibit Index

EXHIBIT NO.		DESCRIPTION
3.2		Amended and Restated Bylaws of Union Carbide Corporation, amended as of April 22, 2004.
23		Analysis, Research & Planning Corporation's Consent.
31.1		Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2		Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1		Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2		Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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Union Carbide Corporation and Subsidiaries Consolidated Balance Sheets
Union Carbide Corporation and Subsidiaries Consolidated Balance Sheets
Union Carbide Corporation and Subsidiaries Consolidated Statements of Cash Flows
Union Carbide Corporation and Subsidiaries

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Union Carbide Corporation and Subsidiaries Exhibit Index
EX-3.2 2 a2135508zex-3_2.htm EXHIBIT 3.2
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EXHIBIT 3.2

Union Carbide Corporation
Bylaws

(Amended and restated as of April 22, 2004)

ARTICLE I

OFFICES

SECTION 1.1 OFFICE. The office of the corporation shall be located in the County of Harris, State of Texas.

SECTION 1.2 ADDITIONAL OFFICES. The corporation may also have offices and places of business at such other places, within or without the State of New York, as the Board of Directors may from time to time determine or the business of the corporation may require.

ARTICLE II

SHAREHOLDERS

SECTION 2.1 CERTIFICATES REPRESENTING SHARES. Certificates representing shares shall set forth thereon the statements prescribed by any applicable provision of law and shall be signed by the President or a Vice President and by the Secretary or an Assistant Secretary or the Treasurer or an Assistant Treasurer and may be sealed with the corporate seal or a facsimile thereof. The signature of the officers upon a certificate may be facsimiles if the certificate is countersigned by a transfer agent or registered by a registrar other than the corporation itself or its employee. In case any officer who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer before such certificate is issued, it may be issued by the corporation with the same effect as if he were such officer at the date of its issue.

A Certificate representing shares shall not be issued until the full amount of consideration therefor has been paid except as Section 504 of the Business Corporation Law may otherwise permit.

No Certificate representing shares shall be issued in place of any certificate alleged to have been lost, destroyed or stolen, except on production of such evidence of such loss, destruction or theft and on delivery to the corporation, if the Board of Directors shall so require, of a bond of indemnity in such amount upon such terms and secured by such surety as the Board of Directors may in its discretion require.

SECTION 2.2 FRACTIONAL SHARE INTERESTS. The corporation may issue certificates for fractions of a share where necessary to effect transactions authorized by the Business Corporation Law which shall entitle the holder in proportion to his fractional holdings, to exercise voting rights, receive dividends and participate in liquidating distributions; or it may pay in cash the fair value of fractions of a share as of the time when those entitled to receive such fractions are determined; or it may issue scrip in registered or bearer form over the manual or facsimile signature of an officer of the corporation or of its agent, exchangeable as therein provided for full shares, but such scrip shall not entitle the holder to any rights of a shareholder except as therein provided.

SECTION 2.3 SHARE TRANSFERS. Upon compliance with provisions restricting the transferability of shares, if any, transfers of shares of the corporation shall be made only on the share record of the corporation by the registered holder thereof, or by his attorney thereunto authorized by power of attorney duly executed and filed with the Secretary of the corporation or with a transfer agent or a registrar, if any, and on surrender of the certificate or certificates for such shares properly endorsed and the payment of all taxes due thereon.

SECTION 2.4 RECORD DATE FOR SHAREHOLDERS. For the purpose of determining the shareholders entitled to notice of or to vote at any meeting of shareholders or any adjournment thereof, or to express consent to or dissent from any proposal without a meeting, or for the purpose of determining shareholders entitled to receive payment of any dividend or the allotment of any rights, or for the purpose of any other action, the directors may fix, in advance, a date as the record date for any such determination of shareholders. Such date shall not be more than sixty days nor less than ten days before the date of

such meeting, nor more than sixty days prior to any other action. If no record date is fixed, the record date for the determination of shareholders entitled to notice of or to vote at a meeting of shareholders shall be at the close of business on the day next preceding the day on which notice is given, or, if no notice is given, the day on which the meeting is held; the record date for determining shareholders for any other purpose shall be at the close of business on the day on which the resolution of the directors relating thereto is adopted. When a determination of shareholders of record entitled to notice of or to vote at any meeting of shareholders has been made as provided in this paragraph, such determination shall apply to any adjournment thereof, unless the directors fix a new record date under this paragraph for the adjourned meeting.

MEANING OF CERTAIN TERMS. As used herein in respect of the right to notice of a meeting of shareholders or a waiver thereof or to participate or vote thereat or to consent or dissent in writing in lieu of a meeting, as the case may be, the term "share" or "shares" or "shareholder" or "shareholders" refers to an outstanding share or shares and to a holder or holders of record of outstanding shares when the corporation is authorized to issue only one class of shares, and said reference is also intended to include any outstanding share or shares and any holder or holders of record of outstanding shares of any class upon which or upon whom the Certificate of Incorporation confers such rights where there are two or more classes or series of shares or upon which or upon whom the Business Corporation Law confers such rights notwithstanding that the Certificate of Incorporation may provide for more than one class or series of shares, one or more of which are limited or denied such rights thereunder.

SECTION 2.5 MEETINGS.

TIME. The annual meeting shall be held on the date fixed, from time to time, by the directors. A special meeting shall be held on the date fixed by the directors except when the Business Corporation Law confers the right to fix the date upon shareholders.

PLACE. Annual meetings and special meetings shall be held at such place, within or without the State of New York, as the directors may, from time to time, fix. Whenever the directors shall fail to fix such place, or, whenever shareholders entitled to call a special meeting shall call the same, the meeting shall be held at the offices of the corporation in Houston, Texas.

CALL. Annual meetings may be called by the directors or by any officer instructed by the directors to call the meeting or by the President. Special meetings may be called in like manner except when the directors are required by the Business Corporation Law to call a meeting, or except when the shareholders are entitled by said Law to demand the call of a meeting.

NOTICE OR ACTUAL OR CONSTRUCTIVE WAIVER OF NOTICE. The notice of all meetings shall be in writing, shall state the place, date, and hour of the meeting, and, shall state the name and capacity of the person issuing the same. The notice for a special meeting shall indicate that it is being issued by or at the direction of the person or persons calling the meeting. The notice of an annual meeting shall state that the meeting is called for the election of directors and for the transaction of other business which may properly come before the meeting, and shall (if any other action which could be taken at a special meeting is to be taken at such annual meeting) state the purpose or purposes. The notice of a special meeting shall in all instances state the purpose or purposes for which the meeting is called. If any action is proposed to be taken which would, if taken, entitle shareholders to receive payment for their shares, the notice shall include a statement of that purpose and to that effect and shall be accompanied by a copy of Section 623 of the Business Corporation Law or an outline of its material terms. A copy of the notice of any meeting shall be given, personally, electronically or by mail, not less than ten days nor more than sixty days before the date of the meeting, unless the lapse of the prescribed period of time shall have been waived, to each shareholder at his record address or at such other address which he may have furnished by notice in writing to the Secretary of the corporation. If transmitted electronically, notice shall be directed to the shareholder's electronic mail address as supplied by the shareholder to the Secretary of the corporation or as otherwise directed pursuant to the shareholder's authorization or instructions. If a meeting is adjourned to another time or place, and, if any announcement of the adjourned time or place is made at the meeting, it shall not be necessary to give notice of the adjourned meeting unless the directors, after adjournment, fix a new record date for the adjourned meeting. Notice of a meeting need not be given to any shareholder who submits a signed waiver of notice before or after the meeting. The attendance of a shareholder at a meeting without protesting prior to the conclusion of the meeting the lack of notice of such meeting shall constitute a waiver of notice by him.

SHAREHOLDER LIST AND CHALLENGE. A list of shareholders as of the record date, certified by the Secretary or other officer responsible for its preparation or by the transfer agent, if any, shall be produced at any meeting of shareholders upon the request thereat or prior thereto of any shareholder. If the right to vote at any meeting is challenged, the inspectors of election, or person presiding thereat, shall require such list of shareholders to be produced as evidence of the right of the persons challenged to vote at such meeting, and all persons who appear from such list to be shareholders entitled to vote thereat may vote at such meeting.

CONDUCT OF MEETING. Meetings of the shareholders shall be presided over by any one of the following officers—the Chairman of the Board, if any, the President, a Vice President, or, if none of the foregoing is in office and present, by a chairman to be chosen by the shareholders. The Secretary of the corporation, or in his absence, an Assistant Secretary, shall act as Secretary of the meeting, but if neither the Secretary nor Assistant Secretary is present, the chairman of the meeting shall appoint a Secretary of the meeting.

PROXY REPRESENTATION. Every shareholder may authorize another person or persons to act for him by proxy in all matters in which a shareholder is entitled to participate, whether by waiving notice of any meeting, voting or participating at a meeting, or expressing consent or dissent without a meeting. Every proxy must be signed by the shareholder or his attorney-in-fact. No proxy shall be valid after the expiration of eleven months from the date thereof unless otherwise provided in the proxy. Every proxy shall be revocable at the pleasure of the shareholder executing it, except as otherwise provided by the Business Corporation Law.

QUORUM. Except for a special election of directors pursuant to Section 603(b) of the Business Corporation Law, and except as herein otherwise provided, the holders of a majority of the votes of shares entitled to vote thereat shall constitute a quorum at a meeting of shareholders for the transaction of any business. When a quorum is once present to organize a meeting, it is not broken by the subsequent withdrawal of any shareholders. The shareholders present may adjourn the meeting despite the absence of a quorum.

VOTING. Each share of common stock shall entitle the holder thereof to one vote. In the election of directors, a plurality of the votes cast shall elect. Any other action shall be authorized by a majority of the votes cast except where the Business Corporation Law prescribes a different proportion of votes.

SECTION 2.6 SHAREHOLDER ACTION WITHOUT MEETINGS. Whenever shareholders are required or permitted to take any action by vote, such action may be taken without a meeting on written consent, setting forth the action so taken, signed by the holders of all outstanding shares entitled to vote thereon.

ARTICLE III

BOARD OF DIRECTORS

SECTION 3.1 FUNCTIONS AND DEFINITIONS. The business of the corporation shall be managed by its Board of Directors. The word "director" means any member of the Board of Directors. The use of the phrase "entire board" herein refers to the total number of directors which the corporation would have if there were no vacancies.

SECTION 3.2 QUALIFICATIONS AND NUMBER. Each director shall be at least eighteen years of age. A director need not be a shareholder, a citizen of the United States, or a resident of the State of New York. The number of Directors constituting the entire Board of Directors shall be not less than three nor more than ten. Such number may be fixed from time to time by action of the directors or of the shareholders, or, if the number is not so fixed, the number shall be one where there continues to be only one person who or which owns all of the shares of the corporation beneficially and of record. The number of directors may be increased or decreased by action of directors or shareholders, provided that any action of the directors to effect such increase or decrease shall require the vote of a majority of the entire board. No decrease shall shorten the term of any incumbent director.

SECTION 3.3 ELECTION AND TERM. Directors who are elected at an annual meeting of shareholders, and directors who are elected in the interim to fill vacancies and newly created directorships, shall hold office until the next annual meeting of shareholders and until their successors have been elected and qualified. In the interim between annual

meetings of shareholders or of special meetings of shareholders called for the election of directors, newly created directorships and any vacancies in the Board of Directors, including vacancies resulting from the removal of directors for cause or without cause, may be filled by the vote of the remaining directors then in office, although less than a quorum exists. If the number of directors then in office is less than a quorum, such newly created directorships and vacancies may be filled by a vote of a majority of the directors then in office.

SECTION 3.4 MEETINGS.

TIME. Meetings shall be held at such time as the Board of Directors shall fix, except that the first meeting of a newly elected Board of Directors shall be held as soon after its election as the directors may conveniently assemble.

PLACE. Meetings shall be held at such place within or without the State of New York as shall be fixed by the Board of Directors.

CALL. No call shall be required for regular meetings for which the time and place have been fixed. Special meetings may be called by the President, a Vice President, the Secretary, an Assistant Secretary or a majority of the directors in office.

NOTICE OR ACTUAL OR CONSTRUCTIVE WAIVER. No notice shall be required for regular meetings for which the time and place have been fixed. Notice of the time and place of special meetings shall be given to each director by mailing such notice at least five days prior to the meeting, or orally, or electronically, or by personal service or by telegram at least two days prior to the meeting. The notice of any meeting need not specify the purpose of the meeting. Any requirement of furnishing a notice shall be waived by any director who signs a waiver of notice before or after the meeting, or who attends the meeting without protesting, prior thereto or at its commencement, the lack of notice to him.

QUORUM AND ACTION. A majority of the entire board shall constitute a quorum except when a vacancy or vacancies prevents such majority, whereupon a majority of the directors in office shall constitute a quorum, provided such majority shall constitute at least one-third of the entire board. A majority of the directors present, whether or not a quorum is present, may adjourn a meeting to another time and place. Except as otherwise provided herein or in any applicable provision of law, the vote of a majority of the directors present at the time of the vote at a meeting of the board, if a quorum is present at such time, shall be the act of the board.

CHAIRMAN OF THE MEETING. The Chairman of the board, if any and if present, shall preside at all meetings. Otherwise, the President, if present, or any other director chosen by the Board of Directors, shall preside.

SECTION 3.5 REMOVAL OF DIRECTORS. Any or all of the directors may be removed for cause or without cause by vote of the shareholders. One or more of the directors may be removed for cause by the Board of Directors.

SECTION 3.6 COMMITTEES OF DIRECTORS. The Board of Directors may, by resolution passed by a majority of the entire board, designate from their number one or more directors to constitute an Executive Committee which shall possess and may exercise all the powers and authority of the Board of Directors in the management of the affairs of the corporation between meetings of the board (except to the extent prohibited by applicable provisions of the Business Corporation Law), and/or such other committee or committees, which to the extent provided in the resolution, shall have and may exercise the powers of the Board of Directors in the management of the business affairs of the corporation and may authorize the seal of the corporation to be affixed to all papers which may require it. Such committee or committees shall have such name or names as may be determined from time to time by resolution adopted by the Board of Directors. All such committees shall serve at the pleasure of the board. Each committee shall keep regular minutes of its meetings and report the same to the Board of Directors when required.

SECTION 3.7 CONFERENCE TELEPHONE. Any one or more members of the Board of Directors or any committee thereof may participate in a meeting of such board or committee by means of a conference telephone or similar communications equipment allowing all persons participating in the meeting to hear each other at the same time. Such participation shall constitute presence in person at such meeting.

SECTION 3.8 ACTION IN WRITING. Any action required or permitted to be taken at any meeting of the Board of Directors or any committee thereof may be taken without a meeting if all members of the board or the committee, as the case may be, consent in writing to the adoption of a resolution authorizing the action, and the resolution and the written consents thereto are filed with the minutes of the proceedings of the Board of Directors or committee.

SECTION 3.9 COMPENSATION. The directors may be paid their expenses, if any, of attendance at each meeting of the Board of Directors and may be paid a fixed sum for attendance at each meeting of the Board of Directors or a stated salary as Director. No such payment shall preclude any director from serving the corporation in any other capacity and receiving compensation therefor. Members of special or standing committees may be allowed like compensation for attending committee meetings.

SECTION 3.10 INTERESTED DIRECTORS. No contract or transaction between the corporation and one or more of its directors or officers, or between the corporation and any other corporation, partnership, association or organization in which one or more of the directors or officers of the corporation are also directors or officers of such corporation, partnership, association or organization, or have a financial interest therein, shall be voidable solely for this reason, or solely because the director or officer is present at or participates in the meeting of the Board of Directors of the corporation or any committee thereof that authorizes the contract or transaction, or solely because the votes of any said director or directors are counted for such purpose if:

(a) The material facts as to the relationship or interest of the director or directors to the contract or transaction are disclosed or known to the Board of Directors of the corporation or any committee thereof, and the Board of Directors of the corporation or committee in good faith authorizes the contract or transaction by the affirmative vote of a majority of the disinterested directors, even though the disinterested directors may be less than a quorum; or

(b) The material facts as to the relationship or interest of the director or directors to the contract or transaction are disclosed or are known to the shareholders of the corporation entitled to vote thereon, and the contract or transaction is specifically approved in good faith by vote of the shareholders; or

(c) The contract or transaction is fair as to the corporation as of the time the contract or transaction is authorized, approved or ratified by the Board of Directors of the corporation, by a committee thereof or by the shareholders.

Common or interested Directors may be counted in determining the presence of a quorum at a meeting of the Board of Directors or of a committee thereof that authorized the contract or transaction.

ARTICLE IV

OFFICERS

SECTION 4.1 EXECUTIVE OFFICERS. The directors may elect or appoint a Chairman of the Board of Directors, a President, one or more Vice Presidents, a Secretary, one or more Assistant Secretaries, a Treasurer, one or more Assistant Treasurers, and such other officers as they may determine. Any two or more offices may be held by the same person except the offices of President and Secretary.

SECTION 4.2 TERM OF OFFICE; REMOVAL. Unless otherwise provided in the resolution of election or appointment, each officer shall hold office until the meeting of the Board of Directors following the next meeting of shareholders and until his successor has been elected and qualified. The Board of Directors may remove any officer for cause or without cause.

SECTION 4.3 AUTHORITY AND DUTIES. All officers, as between themselves and the corporation, shall have such authority and perform such duties in the management of the corporation as may be provided in these Bylaws, or, to the extent not so provided, by the Board of Directors.

SECTION 4.4 THE PRESIDENT. The President shall be the chief executive officer of the corporation. Subject to the direction and control of the Board of Directors, he shall be in general charge of the business and affairs of the corporation.

SECTION 4.5 VICE PRESIDENTS. Any Vice President that may have been appointed, in the absence or disability of the President shall perform the duties and exercise the power of the President, in the order of their seniority, and shall perform such other duties as the President or Board of Directors shall prescribe.

SECTION 4.6 THE SECRETARY. The Secretary shall keep in safe custody the seal of the corporation and affix it to any instrument when authorized by the Board of Directors, and shall perform such other duties as may be prescribed by the Board of Directors.

SECTION 4.7 THE TREASURER. The Treasurer shall have the care and custody of the corporate funds, and other valuable effects, including securities, and shall keep full and accurate accounts of receipts and disbursements in books belonging to the corporation and shall deposit all moneys and other valuable effects in the name and to the credit of the corporation in such depositories as may be designated by the Board of Directors. The Treasurer shall disburse the funds of the corporation as may be ordered by the board, taking proper vouchers for such disbursements, and shall render to the President and directors, at the regular meetings of the board, or whenever they may require it, an account of all his transactions as Treasurer and of the financial condition of the corporation. If required by the Board of Directors, the Treasurer shall give the corporation a bond for such term, in such sum and with such surety or sureties as shall be satisfactory to the board for the faithful performance of the duties of his office and for the restoration to the corporation, in case of his death, resignation, retirement or removal from office, of all books, papers, vouchers, money and other property of whatever kind in his possession or under his control belonging to the corporation.

ARTICLE V

BOOKS AND RECORDS

The corporation shall keep correct and complete books and records of account and shall keep minutes of the proceedings of the shareholders, of the Board of Directors, and any committee which the directors may appoint, and shall keep at the office of the corporation's Secretary or any Assistant Secretary, wherever such office might be located, within or without the State of New York or at the office of the transfer agent or registrar, if any, in the State of Texas, a record containing the names and addresses of all shareholders, the number and class of shares held by each, and the date when they respectively became the owners of record thereof. Any of the foregoing books, minutes, or records may be in written form or in any other form capable of being converted into written form within a reasonable time.

ARTICLE VI

INDEMNIFICATION

SECTION 6.1 MANDATORY INDEMNIFICATION OF DIRECTORS, OFFICERS AND EMPLOYEES. The Company shall indemnify any person who was or is a defendant or is threatened to be made a defendant to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that such person:

(a) Is or was a Director, officer or employee of the Company; or

(b) Is or was a Director, officer or employee of the Company and is or was serving at the request of the Company as a director, trustee, member, officer, employee or agent of another corporation, partnership, limited liability company, joint venture, trust or other enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such action, suit or proceeding;

such indemnification to be provided to the full extent such person would be entitled to indemnification under the then current Bylaws of The Dow Chemical Company if he or she were a Director (in the case of Directors of the Company), officer (in case of officers of the Company) or employee (in case of employees of the Company) of The Dow Chemical Company; provided, however, that if any provision(s) of the indemnification provided hereunder shall be invalid under the laws governing the Company, such provision(s) shall be ineffective to the extent of such invalidity, without invalidating or affecting in any manner whatsoever the remaining provisions of such indemnification. Any repeal, amendment or

modification of this Section 6.1 shall not affect any rights or obligations then existing between the Company and any then incumbent or former Director, officer or employee with respect to any state of facts then or theretofore existing or any action, suit or proceeding theretofore or thereafter brought based in whole or in part upon such state of facts.

SECTION 6.2 PERMITTED INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS. The Company may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that such person:

(a) Is or was a Director, officer, employee or agent of the Company; or

(b) Is or was a Director, officer, employee or agent of the Company and is or was serving at the request of the Company as a director, trustee, member, officer, employee or agent of another corporation, partnership, limited liability company, joint venture, trust or other enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such action, suit or proceeding;

such indemnification to be provided to the full extent The Dow Chemical Company would be permitted to indemnify such person under the then current Bylaws of The Dow Chemical Company if he or she were a Director (in the case of Directors of the Company), officer (in the case of officers of the Company), employee (in the case of employees of the Company) or agent (in the case of agents of the Company) of The Dow Chemical Company; provided, however, that if any provision(s) of the indemnification provided hereunder shall be invalid under the laws governing the Company, such provision(s) shall be ineffective to the extent of such invalidity, without invalidating or affecting in any manner whatsoever the remaining provisions of such indemnification.

SECTION 6.3 JUDICIAL DETERMINATION OF INDEMNIFICATION. Any incumbent or former Director, officer or employee may apply to any court of competent jurisdiction in the Company's jurisdiction of formation to order indemnification to the extent mandated under Section 6.1 above. The basis of such order of indemnification by a court shall be a determination by such court that indemnification of the incumbent or former Director, officer or employee is proper in the circumstances. Notice of any application for indemnification pursuant to this Section 6.3 shall be given to the Company promptly upon the filing of such application.

SECTION 6.4 EXPENSES PAYABLE IN ADVANCE. If permitted by the laws governing the Company, expenses incurred by any Director or officer in defending or investigating a threatened or pending action, suit or proceeding shall be paid by the Company in advance of the final disposition of such action, suit or proceeding, upon receipt of an undertaking by or on behalf of the Director or officer to repay such amount if it ultimately shall be determined that the Director or officer is not entitled to be indemnified by the Company as authorized in this Section VI. Such expenses incurred by other employees and agents may be so paid upon such terms and conditions, if any, as the Board of Directors deems appropriate.

SECTION 6.5 NONEXCLUSIVITY. The indemnification and advancement of expenses mandated or permitted by, or granted pursuant to, this Section VI shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled under any Bylaw, agreement, contract, vote of stockholders or disinterested Directors, or pursuant to the direction (howsoever embodied) of any court of competent jurisdiction or otherwise both as to action by the person in an official capacity and as to action in another capacity while holding such office, it being the policy of the Company that indemnification of the persons specified in Sections 6.1 or 6.2 above as defendants shall be made to the fullest extent provided hereunder. The provisions of this Section VI shall not be deemed to preclude the indemnification of any person who is not specified in Sections 6.1 or 6.2 above, but whom the Company has the power or obligation to indemnify under the laws of the Company's jurisdiction of formation or otherwise.

SECTION 6.6 INSURANCE. The Company may purchase and maintain insurance on behalf of any person who is or was a Director, officer, employee or agent of the Company, or is or was serving at the request of the Company as a director, officer, trustee, member, employee or agent of another corporation, partnership, limited liability company, joint venture, trust or other enterprise, against any liability asserted against and incurred by such person in any such capacity, or

arising out of the person's status as such, whether or not the Company would have the power or the obligation to indemnify the Director, officer, employee or agent of the Company against such liability under the provisions of this Section VI.

SECTION 6.7 DEFINITIONS. For the purposes of this Section VI references to "the Company" shall include, in addition to the resulting company, any constituent company (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers, trustees, members, employees and/or agents, so that any person who is or was a director, officer, trustee, member, employee or agent of such constituent company, or is or was serving at the request of such constituent company as a director, officer, trustee, member, employee or agent of another corporation, partnership, limited liability company, joint venture, trust or other enterprise, shall stand in the same position under the provisions of this Section VI with respect to the resulting or surviving company as such person would have with respect to such constituent company if its separate existence had continued. The term "other enterprise" as used in this Section VI shall include employee benefit plans. References to "fines" in this Section VI shall include excise taxes assessed on a person with respect to an employee benefit plan. The phrase "serving at the request of the Company" shall include any service as a Director, officer, employee or agent of the Company that imposes duties on, or involves services by, such Director, officer, employee or agent with respect to any employee benefit plan, its participants or beneficiaries.

SECTION 6.8 SURVIVAL. The indemnification and advancement of expenses provided by, or granted pursuant to, this Section VI shall continue as to a person who has ceased to be a Director, officer, employee or agent of the Company and shall inure to the benefit of the heirs, executors and administrators of such person.

ARTICLE VII

CORPORATE SEAL

The corporate seal, if any, shall be in such form as the Board of Directors shall prescribe.

ARTICLE VIII

FISCAL YEAR

The fiscal year of the corporation shall be as fixed by the Board of Directors.

ARTICLE IX

AMENDMENTS

These Bylaws may be amended or repealed or new Bylaws may be adopted at any regular or special meeting of shareholders at which a quorum is present or represented, by a majority of the votes cast by the shares entitled to vote in the election of any directors, provided notice of the proposed alteration, amendment or repeal be contained in the notice of such meeting. These Bylaws may also be amended or repealed or new Bylaws may be adopted by the affirmative vote of a majority of the Board of Directors at any regular or special meeting of the Board, however, the directors may not amend or repeal any Bylaw or adopt any new Bylaw, the statutory control over which is vested exclusively in the said shareholders or in the incorporators. Bylaws adopted by the incorporators or directors may be amended or repealed by the shareholders.

As of April 22, 2004

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EXHIBIT 3.2

EX-23 3 a2135508zex-23.htm EXHIBIT 23
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EXHIBIT 23

Analysis, Research & Planning Corporation's Consent

Union Carbide Corporation:

Analysis, Research & Planning Corporation ("ARPC") hereby consents to the use of ARPC's name and the reference to ARPC's reports dated January 9, 2003 and January 26, 2004 appearing in this Quarterly Report on Form 10-Q of Union Carbide Corporation for the quarter ended March 31, 2004.

/s/ B. THOMAS FLORENCE B. Thomas Florence President Analysis, Research & Planning Corporation April 26, 2004

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EXHIBIT 23

EX-31.1 4 a2135508zex-31_1.htm EXHIBIT 31.1
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EXHIBIT 31.1

Union Carbide Corporation and Subsidiaries

Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, John R. Dearborn, President and Chief Executive Officer of Union Carbide Corporation, certify that:

1.

I have reviewed this quarterly report on Form 10-Q of Union Carbide Corporation;

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.

The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a): designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b): evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
c): disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.

The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function):

a): all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b): any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: May 4, 2004
		/s/ JOHN R. DEARBORN John R. Dearborn President and Chief Executive Officer

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Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
EX-31.2 5 a2135508zex-31_2.htm EXHIBIT 31.2

EXHIBIT 31.2

Union Carbide Corporation and Subsidiaries

Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Edward W. Rich, Vice President, Treasurer and Chief Financial Officer of Union Carbide Corporation, certify that:

1.

I have reviewed this quarterly report on Form 10-Q of Union Carbide Corporation;

2.

3.

4.

a): designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b): evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
c): disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.

a): all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b): any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: May 4, 2004

/s/ EDWARD W. RICH

Edward W. Rich
Vice President, Treasurer and
Chief Financial Officer

EX-32.1 6 a2135508zex-32_1.htm EXHIBIT 32.1
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EXHIBIT 32.1

Union Carbide Corporation and Subsidiaries

Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

I, John R. Dearborn, President and Chief Executive Officer of Union Carbide Corporation (the "Corporation"), certify that:

1.: the Quarterly Report on Form 10-Q of the Corporation for the quarter ended March 31, 2004 as filed with the Securities and Exchange Commission on the date hereof (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2.: the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Corporation.

/s/ JOHN R. DEARBORN

John R. Dearborn
President and Chief Executive Officer
May 4, 2004

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EXHIBIT 32.1

Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
EX-32.2 7 a2135508zex-32_2.htm EXHIBIT 32.2
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EXHIBIT 32.2

Union Carbide Corporation and Subsidiaries

Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

I, Edward W. Rich, Vice President, Treasurer and Chief Financial Officer of Union Carbide Corporation (the "Corporation"), certify that:

1.: the Quarterly Report on Form 10-Q of the Corporation for the quarter ended March 31, 2004 as filed with the Securities and Exchange Commission on the date hereof (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2.: the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Corporation.

/s/ EDWARD W. RICH

Edward W. Rich
Vice President, Treasurer and Chief Financial Officer
May 4, 2004

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EXHIBIT 32.2

Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
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