UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form
| (Mark One) | |
| | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| | |
| For the quarterly period ended | |
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| OR | |
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| | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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| For the transition period from to | |
| Commission |
| Exact Name of Registrant as Specified in its Charter, |
| State of |
| I.R.S. Employer |
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| | | | |
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| | | | |
Securities registered pursuant to Section 12(b) of the Act:
| Registrant |
| Title of each class |
| Trading Symbol | | Name of each exchange on which registered |
| Huntsman Corporation |
| |
| | | |
| Huntsman International LLC |
| NONE |
| NONE | | NONE |
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
| Huntsman Corporation | | No ☐ |
| Huntsman International LLC | | No ☐ |
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
| Huntsman Corporation | | No ☐ |
| Huntsman International LLC | | No ☐ |
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
| Huntsman Corporation | | Accelerated filer ☐ | Non-accelerated filer ☐ | Smaller reporting company | Emerging growth company |
| Huntsman International LLC | Large accelerated filer ☐ | Accelerated filer ☐ | | Smaller reporting company | Emerging Growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
| Huntsman Corporation | | ☐ |
| Huntsman International LLC | | ☐ |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
| Huntsman Corporation | Yes | No ☒ |
| Huntsman International LLC | Yes | No ☒ |
On October 25, 2022,
This Quarterly Report on Form 10-Q presents information for two registrants: Huntsman Corporation and Huntsman International LLC. Huntsman International LLC is a wholly-owned subsidiary of Huntsman Corporation and is the principal operating company of Huntsman Corporation. The information reflected in this Quarterly Report on Form 10-Q is equally applicable to both Huntsman Corporation and Huntsman International LLC, except where otherwise indicated. Huntsman International LLC meets the conditions set forth in General Instructions H(1)(a) and (b) of Form 10-Q and, to the extent applicable, is therefore filing this form with a reduced disclosure format.
HUNTSMAN CORPORATION AND SUBSIDIARIES
HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES
QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTERLY PERIOD
ENDED September 30, 2022
TABLE OF CONTENTS
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Huntsman Corporation and Subsidiaries: |
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Unaudited Condensed Consolidated Statements of Comprehensive (Loss) Income |
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7 | |
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Huntsman International LLC and Subsidiaries: |
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Unaudited Condensed Consolidated Statements of Comprehensive (Loss) Income |
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Huntsman Corporation and Subsidiaries and Huntsman International LLC and Subsidiaries: |
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Notes to Unaudited Condensed Consolidated Financial Statements |
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| Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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FORWARD-LOOKING STATEMENTS
Certain information set forth in this report contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements other than historical factual information are forward-looking statements, including without limitation statements regarding: projections of revenue, expenses, profit, profit margins, tax rates, tax provisions, cash flows, pension and benefit obligations and funding requirements, our liquidity position or other projected financial measures; projected impact of COVID-19 on our operations and future financial results; projected impact of the potential expansion of the Russia-Ukraine conflict on our operations and future financial results; management’s plans and strategies for future operations, including statements relating to anticipated operating performance, cost reductions, restructuring activities, new product and service developments, competitive strengths or market position, acquisitions, divestitures, business separations, spin-offs, or other distributions, strategic opportunities, securities offerings, stock repurchases, dividends and executive compensation; growth, declines and other trends in markets we sell into; new or modified laws, regulations and accounting pronouncements; outstanding claims, legal proceedings, tax audits and assessments and other contingent liabilities; foreign currency exchange rates and fluctuations in those rates; general economic and capital markets conditions; the timing of any of the foregoing; assumptions underlying any of the foregoing; and any other statements that address events or developments that we intend or believe will or may occur in the future. In some cases, forward-looking statements can be identified by terminology such as “believes,” “expects,” “may,” “will,” “should,” “anticipates” or “intends” or the negative of such terms or other comparable terminology, or by discussions of strategy. We may also make additional forward-looking statements from time to time. All such subsequent forward-looking statements, whether written or oral, by us or on our behalf, are also expressly qualified by these cautionary statements.
All forward-looking statements, including without limitation any projections derived from management’s examination of historical operating trends, are based upon our current expectations and various assumptions. Our expectations, beliefs and projections are expressed in good faith and we believe there is a reasonable basis for them, but there can be no assurance that management’s expectations, beliefs and projections will be achieved. All forward-looking statements apply only as of the date made. We undertake no obligation to publicly update or revise forward-looking statements whether because of new information, future events or otherwise, except as required by securities and other applicable law.
There are a number of risks and uncertainties that could cause our actual results to differ materially from the forward-looking statements contained in or contemplated by this report. Any forward-looking statements should be considered in light of the risks set forth in “Part II. Item 1A. Risk Factors” below and “Part I. Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2021.
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
HUNTSMAN CORPORATION AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(In Millions, Except Share and Per Share Amounts)
| September 30, | December 31, | |||||||
| 2022 | 2021 | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents(a) | $ | $ | ||||||
| Accounts and notes receivable (net of allowance for doubtful accounts of $ and $, respectively), ($ and $ pledged as collateral, respectively)(a) | ||||||||
| Accounts receivable from affiliates | ||||||||
| Inventories(a) | ||||||||
| Receivable associated with the Albemarle Settlement | ||||||||
| Other current assets | ||||||||
| Current assets held for sale | ||||||||
| Total current assets | ||||||||
| Property, plant and equipment, net(a) | ||||||||
| Investment in unconsolidated affiliates | ||||||||
| Intangible assets, net | ||||||||
| Goodwill | ||||||||
| Deferred income taxes | ||||||||
| Operating lease right-of-use assets | ||||||||
| Other noncurrent assets(a) | ||||||||
| Noncurrent assets held for sale | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable(a) | $ | $ | ||||||
| Accounts payable to affiliates | ||||||||
| Accrued liabilities(a) | ||||||||
| Current portion of debt(a) | ||||||||
| Current operating lease liabilities(a) | ||||||||
| Current liabilities held for sale | ||||||||
| Total current liabilities | ||||||||
| Long-term debt(a) | ||||||||
| Deferred income taxes | ||||||||
| Noncurrent operating lease liabilities(a) | ||||||||
| Other noncurrent liabilities(a) | ||||||||
| Noncurrent liabilities held for sale | ||||||||
| Total liabilities | ||||||||
| Commitments and contingencies (Notes 15 and 16) | ||||||||
| Equity | ||||||||
| Huntsman Corporation stockholders’ equity: | ||||||||
| Common stock $ par value, shares authorized, and shares issued and and shares outstanding, respectively | ||||||||
| Additional paid-in capital | ||||||||
| Treasury stock, and shares, respectively | ( | ) | ( | ) | ||||
| Unearned stock-based compensation | ( | ) | ( | ) | ||||
| Retained earnings | ||||||||
| Accumulated other comprehensive loss | ( | ) | ( | ) | ||||
| Total Huntsman Corporation stockholders’ equity | ||||||||
| Noncontrolling interests in subsidiaries | ||||||||
| Total equity | ||||||||
| Total liabilities and equity | $ | $ | ||||||
| (a) |
At September 30, 2022 and December 31, 2021, respectively, $22 and $1 of cash and cash equivalents, $4 and $12 of accounts and notes receivable (net), $60 and $64 of inventories, $161 each of property, plant and equipment (net), $29 and $23 of other noncurrent assets, $126 and $146 of accounts payable, $11 and $13 of accrued liabilities, $10 each of current portion of debt, $10 and $6 of current operating lease liabilities, $28 and $35 of long-term debt, $21 and $20 of noncurrent operating lease liabilities and $45 and $46 of other noncurrent liabilities from consolidated variable interest entities are included in the respective balance sheet captions above. See “Note 6. Variable Interest Entities.” |
See accompanying notes to condensed consolidated financial statements.
HUNTSMAN CORPORATION AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In Millions, Except Per Share Amounts)
| Three months |
Nine months |
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| ended |
ended |
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| September 30, |
September 30, |
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| 2022 |
2021 |
2022 |
2021 |
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| Revenues: |
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| Trade sales, services and fees, net |
$ | $ | $ | $ | ||||||||||||
| Related party sales |
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| Total revenues |
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| Cost of goods sold |
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| Gross profit |
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| Operating expenses: |
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| Selling, general and administrative |
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| Research and development |
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| Restructuring, impairment and plant closing costs (credits) |
( |
) | ||||||||||||||
| Gain on sale of India-based DIY business |
( |
) | ||||||||||||||
| Other operating expense (income), net |
( |
) | ( |
) | ( |
) | ||||||||||
| Total operating expenses |
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| Operating income |
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| Interest expense, net |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Equity in income of investment in unconsolidated affiliates |
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| Fair value adjustments to Venator investment, net |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Loss on early extinguishment of debt |
( |
) | ||||||||||||||
| Other income, net |
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| Income from continuing operations before income taxes |
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| Income tax expense |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Income from continuing operations |
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| (Loss) income from discontinued operations, net of tax |
( |
) | ||||||||||||||
| Net income |
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| Net income attributable to noncontrolling interests |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Net income attributable to Huntsman Corporation |
$ | $ | $ | $ | ||||||||||||
| Basic income per share: |
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| Income from continuing operations attributable to Huntsman Corporation common stockholders |
$ | $ | $ | $ | ||||||||||||
| (Loss) income from discontinued operations attributable to Huntsman Corporation common stockholders, net of tax |
( |
) | ||||||||||||||
| Net income attributable to Huntsman Corporation common stockholders |
$ | $ | $ | $ | ||||||||||||
| Weighted average shares |
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| Diluted income per share: |
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| Income from continuing operations attributable to Huntsman Corporation common stockholders |
$ | $ | $ | $ | ||||||||||||
| (Loss) income from discontinued operations attributable to Huntsman Corporation common stockholders, net of tax |
( |
) | ||||||||||||||
| Net income attributable to Huntsman Corporation common stockholders |
$ | $ | $ | $ | ||||||||||||
| Weighted average shares |
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| Amounts attributable to Huntsman Corporation: |
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| Income from continuing operations |
$ | $ | $ | $ | ||||||||||||
| (Loss) income from discontinued operations, net of tax |
( |
) | ||||||||||||||
| Net income |
$ | $ | $ | $ | ||||||||||||
See accompanying notes to condensed consolidated financial statements.
HUNTSMAN CORPORATION AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME
(In Millions)
| Three months |
Nine months |
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| ended |
ended |
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| September 30, |
September 30, |
|||||||||||||||
| 2022 |
2021 |
2022 |
2021 |
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| Net income |
$ | $ | $ | $ | ||||||||||||
| Other comprehensive (loss) income, net of tax: |
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| Foreign currency translations adjustments |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Pension and other postretirement benefits adjustments |
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| Other, net |
( |
) | ||||||||||||||
| Other comprehensive (loss) income, net of tax |
( |
) | ( |
) | ( |
) | ||||||||||
| Comprehensive (loss) income |
( |
) | ||||||||||||||
| Comprehensive loss (income) attributable to noncontrolling interests |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Comprehensive (loss) income attributable to Huntsman Corporation |
$ | ( |
) | $ | $ | $ | ||||||||||
HUNTSMAN CORPORATION AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
(In Millions, Except Share Amounts)
| Huntsman Corporation Stockholders' Equity | ||||||||||||||||||||||||||||||||||||
| Accumulated | ||||||||||||||||||||||||||||||||||||
| Shares | Additional | Unearned | other | Noncontrolling | ||||||||||||||||||||||||||||||||
| common | Common | paid-in | Treasury | stock-based | Retained | comprehensive | interests in | Total | ||||||||||||||||||||||||||||
| stock | stock | capital | stock | compensation | earnings | loss | subsidiaries | equity | ||||||||||||||||||||||||||||
| Balance, January 1, 2022 | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | $ | $ | ||||||||||||||||||||||
| Net income | — | |||||||||||||||||||||||||||||||||||
| Other comprehensive loss | — | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||||
| Issuance of nonvested stock awards | — | ( | ) | |||||||||||||||||||||||||||||||||
| Vesting of stock awards | ||||||||||||||||||||||||||||||||||||
| Recognition of stock-based compensation | — | |||||||||||||||||||||||||||||||||||
| Repurchase and cancellation of stock awards | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Stock options exercised | ( | ) | ||||||||||||||||||||||||||||||||||
| Treasury stock repurchased | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Dividends declared on common stock ($ per share) | — | ( | ) | ( | ) | |||||||||||||||||||||||||||||||
| Balance, March 31, 2022 | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Net income | — | |||||||||||||||||||||||||||||||||||
| Other comprehensive loss | — | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||||
| Vesting of stock awards | ||||||||||||||||||||||||||||||||||||
| Recognition of stock-based compensation | — | |||||||||||||||||||||||||||||||||||
| Repurchase and cancellation of stock awards | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Stock options exercised | ||||||||||||||||||||||||||||||||||||
| Treasury stock repurchased | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Dividends declared on common stock ($ per share) | — | ( | ) | ( | ) | |||||||||||||||||||||||||||||||
| Balance, June 30, 2022 | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Net income | — | |||||||||||||||||||||||||||||||||||
| Other comprehensive loss | — | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||||
| Vesting of stock awards | ||||||||||||||||||||||||||||||||||||
| Recognition of stock-based compensation | — | |||||||||||||||||||||||||||||||||||
| Repurchase and cancellation of stock awards | ( | ) | ||||||||||||||||||||||||||||||||||
| Stock options exercised | ||||||||||||||||||||||||||||||||||||
| Treasury stock repurchased | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Dividends declared on common stock ($ per share) | — | ( | ) | ( | ) | |||||||||||||||||||||||||||||||
| Balance, September 30, 2022 | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | $ | $ | ||||||||||||||||||||||
HUNTSMAN CORPORATION AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
(In Millions, Except Share Amounts)
| Huntsman Corporation Stockholders' Equity | ||||||||||||||||||||||||||||||||||||
| Accumulated | ||||||||||||||||||||||||||||||||||||
| Shares | Additional | Unearned | other | Noncontrolling | ||||||||||||||||||||||||||||||||
| common | Common | paid-in | Treasury | stock-based | Retained | comprehensive | interests in | Total | ||||||||||||||||||||||||||||
| stock | stock | capital | stock | compensation | earnings | loss | subsidiaries | equity | ||||||||||||||||||||||||||||
| Balance, January 1, 2021 | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | $ | $ | ||||||||||||||||||||||
| Net income | — | |||||||||||||||||||||||||||||||||||
| Other comprehensive loss | — | ( | ) | ( | ) | |||||||||||||||||||||||||||||||
| Issuance of nonvested stock awards | — | ( | ) | |||||||||||||||||||||||||||||||||
| Vesting of stock awards | ||||||||||||||||||||||||||||||||||||
| Recognition of stock-based compensation | — | |||||||||||||||||||||||||||||||||||
| Repurchase and cancellation of stock awards | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Stock options exercised | ( | ) | ||||||||||||||||||||||||||||||||||
| Dividends declared on common stock ($ per share) | — | ( | ) | ( | ) | |||||||||||||||||||||||||||||||
| Balance, March 31, 2021 | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Net income | — | |||||||||||||||||||||||||||||||||||
| Other comprehensive income | — | |||||||||||||||||||||||||||||||||||
| Vesting of stock awards | ||||||||||||||||||||||||||||||||||||
| Recognition of stock-based compensation | — | |||||||||||||||||||||||||||||||||||
| Repurchase and cancellation of stock awards | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Stock options exercised | ( | ) | ||||||||||||||||||||||||||||||||||
| Dividends declared to noncontrolling interests | — | ( | ) | ( | ) | |||||||||||||||||||||||||||||||
| Dividends declared on common stock ($ per share) | — | ( | ) | ( | ) | |||||||||||||||||||||||||||||||
| Balance, June 30, 2021 | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Net income | — | |||||||||||||||||||||||||||||||||||
| Other comprehensive (loss) income | — | ( | ) | ( | ) | |||||||||||||||||||||||||||||||
| Issuance of nonvested stock awards | — | ( | ) | |||||||||||||||||||||||||||||||||
| Vesting of stock awards | ||||||||||||||||||||||||||||||||||||
| Recognition of stock-based compensation | — | |||||||||||||||||||||||||||||||||||
| Repurchase and cancellation of stock awards | ( | ) | ||||||||||||||||||||||||||||||||||
| Stock options exercised | ||||||||||||||||||||||||||||||||||||
| Treasury stock repurchased | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Dividends declared on common stock ($ per share) | — | ( | ) | ( | ) | |||||||||||||||||||||||||||||||
| Balance, September 30, 2021 | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | $ | $ | ||||||||||||||||||||||
See accompanying notes to condensed consolidated financial statements.
HUNTSMAN CORPORATION AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Millions)
| Nine months | ||||||||
| ended | ||||||||
| September 30, | ||||||||
| 2022 | 2021 | |||||||
| Operating Activities: | ||||||||
| Net income | $ | $ | ||||||
| Less: Income from discontinued operations, net of tax | ( | ) | ( | ) | ||||
| Income from continuing operations | ||||||||
| Adjustments to reconcile income from continuing operations to net cash provided by operating activities from continuing operations: | ||||||||
| Equity in income of investment in unconsolidated affiliates | ( | ) | ( | ) | ||||
| Unrealized net losses on fair value adjustments to Venator investment | ||||||||
| Cash received from return on investment in unconsolidated subsidiary | ||||||||
| Depreciation and amortization | ||||||||
| Noncash lease expense | ||||||||
| Gain on disposal of businesses/assets | ( | ) | ||||||
| Loss on early extinguishment of debt | ||||||||
| Noncash restructuring and impairment charges | ( | ) | ||||||
| Deferred income taxes | ( | ) | ||||||
| Stock-based compensation | ||||||||
| Other, net | ( | ) | ( | ) | ||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts and notes receivable | ( | ) | ( | ) | ||||
| Inventories | ( | ) | ( | ) | ||||
| Other current assets | ||||||||
| Other noncurrent assets | ( | ) | ( | ) | ||||
| Accounts payable | ( | ) | ||||||
| Accrued liabilities | ( | ) | ||||||
| Other noncurrent liabilities | ( | ) | ( | ) | ||||
| Net cash provided by operating activities from continuing operations | ||||||||
| Net cash provided by (used in) operating activities from discontinued operations | ( | ) | ||||||
| Net cash provided by operating activities | ||||||||
| Investing Activities: | ||||||||
| Capital expenditures | ( | ) | ( | ) | ||||
| Cash received from sale of business | ||||||||
| Acquisition of business, net of cash acquired | ( | ) | ||||||
| Insurance proceeds for recovery of property damage | ||||||||
| Other, net | ||||||||
| Net cash used in investing activities from continuing operations | ( | ) | ( | ) | ||||
| Net cash used in investing activities from discontinued operations | ( | ) | ( | ) | ||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| Financing Activities: | ||||||||
| Net borrowings on revolving loan facilities | ||||||||
| Proceeds from issuance of long-term debt | ||||||||
| Repayments of long-term debt | ( | ) | ( | ) | ||||
| Debt issuance costs paid | ( | ) | ||||||
| Dividends paid to noncontrolling interests | ( | ) | ||||||
| Dividends paid to common stockholders | ( | ) | ( | ) | ||||
| Repurchase and cancellation of awards | ( | ) | ( | ) | ||||
| Repurchase of common stock | ( | ) | ( | ) | ||||
| Proceeds from issuance of common stock | ||||||||
| Costs of early extinguishment of debt | ( | ) | ||||||
| Other, net | ( | ) | ||||||
| Net cash used in financing activities | ( | ) | ( | ) | ||||
| Effect of exchange rate changes on cash | ( | ) | ( | ) | ||||
| Decrease in cash and cash equivalents | ( | ) | ( | ) | ||||
| Cash and cash equivalents at beginning of period | ||||||||
| Cash and cash equivalents at end of period | $ | $ | ||||||
| Supplemental cash flow information: | ||||||||
| Cash paid for interest | $ | $ | ||||||
| Cash paid for income taxes | ||||||||
As of September 30, 2022 and 2021, the amount of capital expenditures in accounts payable was $27 million and $52 million, respectively. For the nine months ended September 30, 2021, the amount of cash paid for taxes in connection with the earnout provision achieved under the terms of the sales agreement of the India-based do-it-yourself (“DIY”) business was $3 million. See “Note 4. Discontinued Operations and Business Dispositions— Sale of India-Based Do-It-Yourself Consumer Adhesives Business.”
See accompanying notes to condensed consolidated financial statements.
HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(In Millions, Except Unit Amounts)
| September 30, | December 31, | |||||||
| 2022 | 2021 | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents(a) | $ | $ | ||||||
| Accounts and notes receivable (net of allowance for doubtful accounts of $ and $, respectively), ($ and $ pledged as collateral, respectively)(a) | ||||||||
| Accounts receivable from affiliates | ||||||||
| Inventories(a) | ||||||||
| Receivable associated with the Albemarle Settlement | ||||||||
| Other current assets | ||||||||
| Current assets held for sale | ||||||||
| Total current assets | ||||||||
| Property, plant and equipment, net(a) | ||||||||
| Investment in unconsolidated affiliates | ||||||||
| Intangible assets, net | ||||||||
| Goodwill | ||||||||
| Deferred income taxes | ||||||||
| Operating lease right-of-use assets | ||||||||
| Other noncurrent assets(a) | ||||||||
| Noncurrent assets held for sale | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable(a) | $ | $ | ||||||
| Accounts payable to affiliates | ||||||||
| Accrued liabilities(a) | ||||||||
| Current portion of debt(a) | ||||||||
| Current operating lease liabilities(a) | ||||||||
| Current liabilities held for sale | ||||||||
| Total current liabilities | ||||||||
| Long-term debt(a) | ||||||||
| Deferred income taxes | ||||||||
| Noncurrent operating lease liabilities(a) | ||||||||
| Other noncurrent liabilities(a) | ||||||||
| Noncurrent liabilities held for sale | ||||||||
| Total liabilities | ||||||||
| Commitments and contingencies (Notes 15 and 16) | ||||||||
| Equity | ||||||||
| Huntsman International LLC members’ equity: | ||||||||
| Members’ equity, units issued and outstanding | ||||||||
| Retained earnings | ||||||||
| Accumulated other comprehensive loss | ( | ) | ( | ) | ||||
| Total Huntsman International LLC members’ equity | ||||||||
| Noncontrolling interests in subsidiaries | ||||||||
| Total equity | ||||||||
| Total liabilities and equity | $ | $ | ||||||
| (a) |
At September 30, 2022 and December 31, 2021, respectively, $22 and $1 of cash and cash equivalents, $4 and $12 of accounts and notes receivable (net), $60 and $64 of inventories, $161 each of property, plant and equipment (net), $29 and $23 of other noncurrent assets, $126 and $146 of accounts payable, $11 and $13 of accrued liabilities, $10 each of current portion of debt, $10 and $6 of current operating lease liabilities, $28 and $35 of long-term debt, $21 and $20 of noncurrent operating lease liabilities and $45 and $46 of other noncurrent liabilities from consolidated variable interest entities are included in the respective balance sheet captions above. See “Note 6. Variable Interest Entities.” |
See accompanying notes to condensed consolidated financial statements.
HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In Millions)
| Three months |
Nine months |
|||||||||||||||
| ended |
ended |
|||||||||||||||
| September 30, |
September 30, |
|||||||||||||||
| 2022 |
2021 |
2022 |
2021 |
|||||||||||||
| Revenues: |
||||||||||||||||
| Trade sales, services and fees, net |
$ | $ | $ | $ | ||||||||||||
| Related party sales |
||||||||||||||||
| Total revenues |
||||||||||||||||
| Cost of goods sold |
||||||||||||||||
| Gross profit |
||||||||||||||||
| Operating expenses: |
||||||||||||||||
| Selling, general and administrative |
||||||||||||||||
| Research and development |
||||||||||||||||
| Restructuring, impairment and plant closing costs (credits) |
( |
) | ||||||||||||||
| Gain on sale of India-based DIY business |
( |
) | ||||||||||||||
| Other operating expense (income), net |
( |
) | ( |
) | ( |
) | ||||||||||
| Total operating expenses |
||||||||||||||||
| Operating income |
||||||||||||||||
| Interest expense, net |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Equity in income of investment in unconsolidated affiliates |
||||||||||||||||
| Fair value adjustments to Venator investment, net |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Loss on early extinguishment of debt |
( |
) | ||||||||||||||
| Other income, net |
||||||||||||||||
| Income from continuing operations before income taxes |
||||||||||||||||
| Income tax expense |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Income from continuing operations |
||||||||||||||||
| (Loss) income from discontinued operations, net of tax |
( |
) | ||||||||||||||
| Net income |
||||||||||||||||
| Net income attributable to noncontrolling interests |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Net income attributable to Huntsman International LLC |
$ | $ | $ | $ | ||||||||||||
See accompanying notes to condensed consolidated financial statements.
HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME
(In Millions)
| Three months |
Nine months |
|||||||||||||||
| ended |
ended |
|||||||||||||||
| September 30, |
September 30, |
|||||||||||||||
| 2022 |
2021 |
2022 |
2021 |
|||||||||||||
| Net income |
$ | $ | $ | $ | ||||||||||||
| Other comprehensive (loss) income, net of tax: |
||||||||||||||||
| Foreign currency translations adjustment |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Pension and other postretirement benefits adjustments |
||||||||||||||||
| Other, net |
( |
) | ||||||||||||||
| Other comprehensive (loss) income, net of tax |
( |
) | ( |
) | ( |
) | ||||||||||
| Comprehensive (loss) income |
( |
) | ||||||||||||||
| Comprehensive loss (income) attributable to noncontrolling interests |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Comprehensive (loss) income attributable to Huntsman International LLC |
$ | ( |
) | $ | $ | $ | ||||||||||
See accompanying notes to condensed consolidated financial statements.
HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
(In Millions, Except Unit Amounts)
| Huntsman International LLC Members | ||||||||||||||||||||||||
| Members' | Accumulated other | Noncontrolling | ||||||||||||||||||||||
| equity | comprehensive | interests in | Total | |||||||||||||||||||||
| Units | Amount | Retained earnings | loss | subsidiaries | equity | |||||||||||||||||||
| Balance, January 1, 2022 | $ | $ | $ | ( | ) | $ | $ | |||||||||||||||||
| Net income | — | |||||||||||||||||||||||
| Dividends paid to parent | — | ( | ) | ( | ) | |||||||||||||||||||
| Other comprehensive loss | — | ( | ) | ( | ) | ( | ) | |||||||||||||||||
| Contribution from parent | — | |||||||||||||||||||||||
| Balance, March 31, 2022 | ( | ) | ||||||||||||||||||||||
| Net income | — | |||||||||||||||||||||||
| Dividends paid to parent | — | ( | ) | ( | ) | |||||||||||||||||||
| Other comprehensive loss | — | ( | ) | ( | ) | ( | ) | |||||||||||||||||
| Contribution from parent | — | |||||||||||||||||||||||
| Balance, June 30, 2022 | ( | ) | ||||||||||||||||||||||
| Net income | — | |||||||||||||||||||||||
| Dividends paid to parent | — | ( | ) | ( | ) | |||||||||||||||||||
| Other comprehensive loss | — | ( | ) | ( | ) | ( | ) | |||||||||||||||||
| Contribution from parent | — | |||||||||||||||||||||||
| Balance, September 30, 2022 | $ | $ | $ | ( | ) | $ | $ | |||||||||||||||||
| Huntsman International LLC Members |
||||||||||||||||||||||||
| Members' |
Accumulated other |
Noncontrolling |
||||||||||||||||||||||
| equity |
comprehensive |
interests in |
Total |
|||||||||||||||||||||
| Units |
Amount |
Retained earnings |
loss |
subsidiaries |
equity |
|||||||||||||||||||
| Balance, January 1, 2021 |
$ | $ | $ | ( |
) | $ | $ | |||||||||||||||||
| Net income |
— | |||||||||||||||||||||||
| Dividends paid to parent |
— | ( |
) | ( |
) | |||||||||||||||||||
| Other comprehensive loss |
— | ( |
) | ( |
) | |||||||||||||||||||
| Contribution from parent |
— | |||||||||||||||||||||||
| Balance, March 31, 2021 |
( |
) | ||||||||||||||||||||||
| Net income |
— | |||||||||||||||||||||||
| Dividends paid to parent |
— | ( |
) | ( |
) | |||||||||||||||||||
| Other comprehensive income |
— | |||||||||||||||||||||||
| Contribution from parent |
— | |||||||||||||||||||||||
| Dividends declared to noncontrolling interests |
— | ( |
) | ( |
) | |||||||||||||||||||
| Balance, June 30, 2021 |
( |
) | ||||||||||||||||||||||
| Net income |
— | |||||||||||||||||||||||
| Dividends paid to parent |
— | ( |
) | ( |
) | |||||||||||||||||||
| Other comprehensive loss |
— | ( |
) | ( |
) | |||||||||||||||||||
| Contribution from parent |
— | |||||||||||||||||||||||
| Balance, September 30, 2021 |
$ | $ | $ | ( |
) | $ | $ | |||||||||||||||||
See accompanying notes to condensed consolidated financial statements.
HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Millions)
| Nine months | ||||||||
| ended | ||||||||
| September 30, | ||||||||
| 2022 | 2021 | |||||||
| Operating Activities: | ||||||||
| Net income | $ | $ | ||||||
| Less: Income from discontinued operations, net of tax | ( | ) | ( | ) | ||||
| Income from continuing operations | ||||||||
| Adjustments to reconcile income from continuing operations to net cash provided by operating activities from continuing operations: | ||||||||
| Equity in income of investment in unconsolidated affiliates | ( | ) | ( | ) | ||||
| Unrealized net losses on fair value adjustments to Venator investment | ||||||||
| Cash received from return on investment in unconsolidated subsidiary | ||||||||
| Depreciation and amortization | ||||||||
| Noncash lease expense | ||||||||
| Gain on disposal of businesses/assets | ( | ) | ||||||
| Loss on early extinguishment of debt | ||||||||
| Noncash restructuring and impairment charges | ( | ) | ||||||
| Deferred income taxes | ( | ) | ||||||
| Noncash compensation | ||||||||
| Other, net | ( | ) | ( | ) | ||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts and notes receivable | ( | ) | ( | ) | ||||
| Inventories | ( | ) | ( | ) | ||||
| Other current assets | ||||||||
| Other noncurrent assets | ( | ) | ( | ) | ||||
| Accounts payable | ( | ) | ||||||
| Accrued liabilities | ( | ) | ||||||
| Other noncurrent liabilities | ( | ) | ( | ) | ||||
| Net cash provided by operating activities from continuing operations | ||||||||
| Net cash provided by (used in) operating activities from discontinued operations | ( | ) | ||||||
| Net cash provided by operating activities | ||||||||
| Investing Activities: | ||||||||
| Capital expenditures | ( | ) | ( | ) | ||||
| Cash received from sale of business | ||||||||
| Acquisition of business, net of cash acquired | ( | ) | ||||||
| Increase in receivable from affiliate | ( | ) | ( | ) | ||||
| Insurance proceeds for recovery of property damage | ||||||||
| Other, net | ||||||||
| Net cash used in investing activities from continuing operations | ( | ) | ( | ) | ||||
| Net cash used in investing activities from discontinued operations | ( | ) | ( | ) | ||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| Financing Activities: | ||||||||
| Net borrowings on revolving loan facilities | ||||||||
| Proceeds from issuance of long-term debt | ||||||||
| Repayments of long-term debt | ( | ) | ( | ) | ||||
| Debt issuance costs paid | ( | ) | ||||||
| Dividends paid to noncontrolling interests | ( | ) | ||||||
| Dividends paid to parent | ( | ) | ( | ) | ||||
| Costs of early extinguishment of debt | ( | ) | ||||||
| Other, net | ( | ) | ||||||
| Net cash used in financing activities | ( | ) | ( | ) | ||||
| Effect of exchange rate changes on cash | ( | ) | ( | ) | ||||
| Decrease in cash and cash equivalents | ( | ) | ( | ) | ||||
| Cash and cash equivalents at beginning of period | ||||||||
| Cash and cash equivalents at end of period | $ | $ | ||||||
| Supplemental cash flow information: | ||||||||
| Cash paid for interest | $ | $ | ||||||
| Cash paid for income taxes | ||||||||
For September 30, 2022 and 2021, the amount of capital expenditures in accounts payable was $27 million and $52 million, respectively. For the nine months ended September 30, 2021, the amount of cash paid for taxes in connection with the earnout provision achieved under the terms of the sales agreement of the India-based DIY business was $3 million. See “Note 4. Discontinued Operations and Business Dispositions—Sale of India-Based Do-It-Yourself Consumer Adhesives Business.”
See accompanying notes to condensed consolidated financial statements.
HUNTSMAN CORPORATION AND SUBSIDIARIES
HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. GENERAL
Certain Definitions
For convenience in this report, the terms “Company,” “Huntsman,” “our,” “us” or “we” may be used to refer to Huntsman Corporation and, unless the context otherwise requires, its subsidiaries and predecessors. In this report, “Huntsman International” refers to Huntsman International LLC (our wholly-owned subsidiary).
In this report, we may use, without definition, the common names of competitors or other industry participants. We may also use the common names or abbreviations for certain chemicals or products.
Interim Financial Statements
Our unaudited interim condensed consolidated financial statements and Huntsman International’s unaudited interim condensed consolidated financial statements were prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP” or “U.S. GAAP”) and in management’s opinion reflect all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of results of operations, comprehensive income, financial position and cash flows for the periods presented. Results for interim periods are not necessarily indicative of those to be expected for the full year. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes to consolidated financial statements included in the Annual Report on Form 10-K for the year ended December 31, 2021 for our Company and Huntsman International.
Description of Businesses
We are a global manufacturer of differentiated organic chemical products. We operate in segments: Polyurethanes, Performance Products and Advanced Materials. Our products comprise a broad range of chemicals and formulations, which we market globally to a diversified group of consumer and industrial customers. Our products are used in a wide range of applications, including those in the adhesives, aerospace, automotive, construction products, durable and non-durable consumer products, electronics, insulation, medical, packaging, coatings and construction, power generation, refining and synthetic fiber industries. We are a leading global producer in many of our key product lines, including MDI, amines, maleic anhydride and epoxy-based polymer formulations.
On August 9, 2022, we entered into a definitive agreement to sell our textile chemicals and dyes business (“Textile Effects Business”) to Archroma, a portfolio company of SK Capital Partners (“Archroma”). Beginning in the third quarter of 2022, the results of our Textile Effects Business are reported as discontinued operations for all periods presented. For more information, see “Note 4. Discontinued Operations and Business Dispositions—Sale of Textile Effects Business.” An insignificant impact on earnings from businesses previously divested is also reported in discontinued operations.
We operate our businesses through Huntsman International, our wholly-owned subsidiary. Huntsman International is a Delaware limited liability company and was formed in 1999.
Huntsman Corporation and Huntsman International Financial Statements
Except where otherwise indicated, these notes relate to the condensed consolidated financial statements for both our Company and Huntsman International. The differences between our financial statements and Huntsman International’s financial statements relate primarily to different capital structures and purchase accounting recorded at our Company for the 2003 step-acquisition of Huntsman International Holdings LLC, the former parent company of Huntsman International that was merged into Huntsman International in 2005.
Principles of Consolidation
Our condensed consolidated financial statements include the accounts of our wholly-owned and majority-owned subsidiaries and any variable interest entities for which we are the primary beneficiary. Intercompany accounts and transactions have been eliminated.
Reclassfications
Certain amounts in the condensed consolidated financial statements for prior periods have been recast for all periods presented to conform with the current presentation. These reclassifications were to present the assets and liabilities of our Textile Effects Business as held for sale and its results of operations as discontinued operations. See “— Recent Developments” below as well as “Note 4. Discontinued Operations and Business Dispositions—Sale of Textile Effects Business.”
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Recent Developments
European Restructuring Program
In early November 2022, we announced our commitment and specific plans to further realign our cost structure beyond the current in-progress cost optimization programs with additional restructuring in Europe. The new program will include exiting and consolidating certain facilities, workforce relocation to lower cost locations and further personnel rationalization. In connection with this program, we expect to record restructuring expenses of approximately $
Sale of Textile Effects Business
On August 9, 2022, we entered into a definitive agreement to sell our Textile Effects Business to Archroma for a total enterprise value of $
2. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
There have been no recently issued accounting pronouncements during the nine months ended September 30, 2022 that are applicable to us.
3. BUSINESS COMBINATIONS
Acquisition of gaBRIEL Performance Products
On January 15, 2021, we completed the acquisition of Gabriel Performance Products, a North American specialty chemical manufacturer of specialty additives and epoxy curing agents for the coatings, adhesives, sealants and composite end-markets (the “Gabriel Acquisition”), from funds affiliated with Audax Private Equity in an all-cash transaction of approximately $
We accounted for the Gabriel Acquisition using the acquisition method. As such, we analyzed the fair value of tangible and intangible assets acquired and liabilities assumed. The allocation of acquisition cost to the assets acquired and liabilities assumed is summarized as follows (dollars in millions):
| Fair value of assets acquired and liabilities assumed: | ||||
| Cash paid for the Gabriel Acquisition | $ | |||
| Cash | $ | |||
| Accounts receivable | ||||
| Inventories | ||||
| Property, plant and equipment | ||||
| Intangible assets | ||||
| Goodwill | ||||
| Accounts payable | ( | ) | ||
| Accrued liabilities | ( | ) | ||
| Deferred income taxes | ( | ) | ||
| Total fair value of net assets acquired | $ |
The valuation was finalized during the first quarter of 2022. Intangible assets acquired included in this allocation consist of trademarks, technology and trade secrets, which are being amortized over a period of
PRO FORMA INFORMATION FOR ACQUISITION
If the Gabriel Acquisition were to have occurred on January 1, 2021, the following estimated pro forma revenues from continuing operations, net income and net income attributable to Huntsman Corporation and Huntsman International would have been reported (dollars in millions):
| Nine months | ||||
| ended | ||||
| September 30, 2021 | ||||
| Revenues | $ | |||
| Net income | ||||
| Net income attributable to Huntsman Corporation | ||||
| Nine months | ||||
| ended | ||||
| September 30, 2021 | ||||
| Revenues | $ | |||
| Net income | ||||
| Net income attributable to Huntsman International | ||||
4. DISCONTINUED OPERATIONS AND BUSINESS DISPOSITIONS
SaLE of tEXTILE eFFECTS bUSINESS
On August 9, 2022, we entered into a definitive agreement to sell our Textile Effects Business to Archroma for a total enterprise value of $
The following table reconciles the carrying amounts of major classes of assets and liabilities of discontinued operations to total assets and liabilities of discontinued operations that are classified as held for sale in our condensed consolidated balance sheets (dollars in millions):
| September 30, |
December 31, |
|||||||
| 2022 |
2021 |
|||||||
| Carrying amounts of major classes of assets held for sale: |
||||||||
| Accounts receivable |
$ | $ | ||||||
| Inventories |
||||||||
| Other current assets |
||||||||
| Total current assets |
||||||||
| Property, plant and equipment, net |
||||||||
| Deferred income taxes |
||||||||
| Operating lease right-of-use assets |
||||||||
| Other noncurrent assets |
||||||||
| Total noncurrent assets |
||||||||
| Total assets held for sale(1) |
$ | $ | ||||||
| Carrying amounts of major classes of liabilities held for sale: |
||||||||
| Accounts payable |
$ | $ | ||||||
| Accrued liabilities |
||||||||
| Current operating lease liabilities |
||||||||
| Total current liabilities |
||||||||
| Noncurrent operating lease liabilities |
||||||||
| Other noncurrent liabilities |
||||||||
| Total noncurrent liabilities |
||||||||
| Total liabilities held for sale(1) |
$ | $ | ||||||
| (1) |
Total assets and liabilities held for sale as of September 30, 2022 are classified as current because it is probable that the sale of our Textile Effects Business will close within a year. |
The following table reconciles major line items constituting pretax income of discontinued operations to after-tax income of discontinued operations, primarily related to our Textile Effects Business, as presented in our condensed consolidated statements of operations (dollars in millions):
| Three months | Nine months | |||||||||||||||
| ended | ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Major line items constituting pretax income of discontinued operations: | ||||||||||||||||
| Trade sales, services and fees, net | $ | $ | $ | $ | ||||||||||||
| Cost of goods sold | ||||||||||||||||
| Other expense items, net | ||||||||||||||||
| Income from discontinued operations before income taxes | ||||||||||||||||
| Income tax expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net (loss) income attributable to discontinued operations | $ | ( | ) | $ | $ | $ | ||||||||||
SALE OF INDIA-BASED DO-IT-YOURSELF CONSUMER ADHESIVES BUSINESS
On November 3, 2020, we completed the sale of the India-based DIY business to Pidilite Industries Ltd. and received cash of approximately $
SaLE of Venator InterEST
On December 23, 2020, we completed the sale of approximately
5. INVENTORIES
We state our inventories at the lower of cost or market, with cost determined using average cost, last-in first-out (“LIFO”) and first-in first-out methods for different components of inventory. Inventories consisted of the following (dollars in millions):
| September 30, | December 31, | |||||||
| 2022 | 2021 | |||||||
| Raw materials and supplies | $ | $ | ||||||
| Work in progress | ||||||||
| Finished goods | ||||||||
| Total | ||||||||
| LIFO reserves | ( | ) | ( | ) | ||||
| Net inventories | $ | $ | ||||||
For both September 30, 2022 and December 31, 2021, approximately
6. VARIABLE INTEREST ENTITIES
We evaluate our investments and transactions to identify variable interest entities for which we are the primary beneficiary. We hold a variable interest in the following joint ventures for which we are the primary beneficiary:
| ● |
Rubicon LLC is our |
| ● |
Arabian Amines Company (“AAC”) is our |
During the nine months ended September 30, 2022, there were no changes in our variable interest entities.
Creditors of these entities have no recourse to our general credit. See “Note 8. Debt—Direct and Subsidiary Debt.” As the primary beneficiary of these variable interest entities at September 30, 2022, the joint ventures’ assets, liabilities and results of operations are included in our condensed consolidated financial statements.
The following table summarizes the carrying amounts of our variable interest entities’ assets and liabilities included in our condensed consolidated balance sheet as of September 30, 2022 and our consolidated balance sheet as of December 31, 2021 (dollars in millions):
| September 30, |
December 31, |
|||||||
| 2022 |
2021 |
|||||||
| Current assets |
$ | $ | ||||||
| Property, plant and equipment, net |
||||||||
| Operating lease right-of-use assets |
||||||||
| Other noncurrent assets |
||||||||
| Deferred income taxes |
||||||||
| Total assets |
$ | $ | ||||||
| Current liabilities |
$ | $ | ||||||
| Long-term debt |
||||||||
| Noncurrent operating lease liabilities |
||||||||
| Other noncurrent liabilities |
||||||||
| Total liabilities |
$ | $ | ||||||
The revenues, income from continuing operations before income taxes and net cash provided by operating activities for our variable interest entities for the three and nine months ended September 30, 2022 and 2021 are as follows (dollars in millions):
| Three months |
Nine months |
|||||||||||||||
| ended |
ended |
|||||||||||||||
| September 30, |
September 30, |
|||||||||||||||
| 2022 |
2021 |
2022 |
2021 |
|||||||||||||
| Revenues |
$ | $ | $ | $ | ||||||||||||
| Income from continuing operations before income taxes |
||||||||||||||||
| Net cash provided by operating activities |
||||||||||||||||
7. RESTRUCTURING, IMPAIRMENT AND PLANT CLOSING COSTS
As of September 30, 2022 and December 31, 2021, accrued restructuring costs by type of cost and initiative consisted of the following (dollars in millions):
| Workforce reductions |
Other restructuring costs |
Total |
||||||||||
| Accrued liabilities as of January 1, 2022 |
$ | $ | $ | |||||||||
| 2022 charges for 2021 and prior initiatives |
||||||||||||
| 2022 charges for 2022 initiatives |
— | |||||||||||
| 2022 payments for 2021 and prior initiatives |
( |
) | ( |
) | ( |
) | ||||||
| 2022 payments for 2022 initiatives |
( |
) | ( |
) | ( |
) | ||||||
| Accrued liabilities as of September 30, 2022 |
$ | $ | $ | |||||||||
Details with respect to our reserves for restructuring, impairment and plant closing costs by segment and initiative are provided below (dollars in millions):
| Performance |
Advanced |
Corporate |
||||||||||||||||||
| Polyurethanes |
Products |
Materials |
and other |
Total |
||||||||||||||||
| Accrued liabilities as of January 1, 2022 |
$ | $ | $ | $ | $ | |||||||||||||||
| 2022 charges for 2021 and prior initiatives |
— | |||||||||||||||||||
| 2022 charges for 2022 initiatives |
— | |||||||||||||||||||
| 2022 payments for 2021 and prior initiatives |
( |
) | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||||
| 2022 payments for 2022 initiatives |
( |
) | ( |
) | ||||||||||||||||
| Accrued liabilities as of September 30, 2022 |
$ | $ | $ | $ | $ | |||||||||||||||
| Current portion of restructuring reserves |
$ | $ | $ | $ | $ | |||||||||||||||
| Long-term portion of restructuring reserves |
||||||||||||||||||||
Details with respect to cash and noncash restructuring charges from continuing operations for the three and nine months ended September 30, 2022 and 2021 are provided below (dollars in millions):
| Three months |
Nine Months |
|||||||||||||||
| ended |
ended |
|||||||||||||||
| September 30, |
September 30, |
|||||||||||||||
| 2022 |
2021 |
2022 |
2021 |
|||||||||||||
| Cash charges: |
||||||||||||||||
| 2022 (credits) charges for 2021 and prior initiatives |
$ | ( |
) | $ | — | $ | $ | — | ||||||||
| 2022 charges for 2022 initiatives |
— | — | ||||||||||||||
| 2021 charges for 2020 and prior initiatives |
— | |||||||||||||||
| 2021 charges for 2021 initiatives |
— | |||||||||||||||
| Noncash charges: |
||||||||||||||||
| Gain on sale of assets |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Accelerated depreciation |
||||||||||||||||
| Other noncash charges (credits) |
( |
) | ||||||||||||||
| Total restructuring, impairment and plant closing costs (credits) |
$ | $ | ( |
) | $ | $ | ||||||||||
Restructuring Activities
Beginning in the third quarter of 2022, our Corporate function implemented restructuring programs to optimize our global approaches to leveraging managed services in various information technology functions and to align and optimize our environmental, health and safety processes and systems. In connection with these restructuring programs, we recorded net restructuring expense of approximately $
Beginning in the first quarter of 2021, our Corporate function implemented a restructuring program to optimize our global approach to leveraging shared services capabilities. During the second quarter of 2022, this program was further expanded to include additional geographies. In connection with this restructuring program, we recorded net restructuring expense of approximately $
Beginning in the third quarter of 2020, our Polyurethanes segment implemented a restructuring program to optimize its downstream footprint. During the second quarter of 2022, this optimization program was further expanded to include the entire Polyurethanes business. In connection with this restructuring program, we recorded net restructuring expense of approximately $
Beginning in the second quarter of 2020, our Advanced Materials segment implemented restructuring programs in connection with the CVC Thermoset Specialties Acquisition, the alignment of the segment’s commercial organization and optimization of the segment’s manufacturing processes. In connection with these restructuring programs, we recorded net restructuring expense of approximately $
8. DEBT
Our outstanding debt, net of debt issuance costs, consisted of the following (dollars in millions):
| September 30, |
December 31, |
|||||||
| 2022 |
2021 |
|||||||
| Senior Credit Facilities: |
||||||||
| Revolving facility |
$ | $ | ||||||
| Amounts outstanding under A/R programs |
||||||||
| Senior notes |
||||||||
| Variable interest entities |
||||||||
| Other |
||||||||
| Total debt |
$ | $ | ||||||
| Current portion of debt |
$ | $ | ||||||
| Long-term portion of debt |
||||||||
| Total debt |
$ | $ | ||||||
Direct and Subsidiary Debt
Substantially all of our debt, including the facilities described below, has been incurred by our subsidiaries (primarily Huntsman International). Huntsman Corporation is not a guarantor of such subsidiary debt.
Certain of our subsidiaries have third-party debt agreements that contain certain restrictions with regard to dividends, distributions, loans or advances. In certain circumstances, the consent of a third party would be required prior to the transfer of any cash or assets from these subsidiaries to us.
Debt Issuance Costs
We record debt issuance costs related to a debt liability on the balance sheets as a reduction to the face amount of that debt liability. As of September 30, 2022 and December 31, 2021, the amount of debt issuance costs directly reducing the debt liability was $
Revolving Credit Facility
On May 20, 2022, Huntsman International entered into a new $
The following table presents certain amounts under our 2022 Revolving Credit Facility as of September 30, 2022 (monetary amounts in millions):
| Unamortized |
||||||||||||||||||||||
| discounts and |
||||||||||||||||||||||
| Committed |
Principal |
debt issuance |
Carrying |
|||||||||||||||||||
| Facility |
amount |
outstanding |
costs |
value |
Interest rate(2) |
Maturity |
||||||||||||||||
| 2022 Revolving Credit Facility |
$ | $ | (1) | $ | (1) | $ | (1) |
|
May 2027 | |||||||||||||
| (1) |
On September 30, 2022, we had an additional $ |
| (2) |
Interest rates on borrowings under the 2022 Revolving Credit Facility vary based on the type of loan and Huntsman International’s debt ratings. The representative interest rate for U.S. dollar borrowings as of September 30, 2022 was |
A/R Programs
Our U.S. accounts receivable securitization program (“U.S. A/R Programs”) and our European accounts receivable securitization program (“EU A/R Program” and collectively with the U.S. A/R Program, “A/R Programs”) are structured so that we transfer certain of our trade receivables to the U.S. special purpose entity (“U.S. SPE”) and the European special purpose entity (“EU SPE”) in transactions intended to be true sales or true contributions. The receivables collateralize debt incurred by the U.S. SPE and the EU SPE.
On July 1, 2021, we entered into amendments to our A/R Programs that, among other things, extended the respective scheduled termination dates of our A/R Programs from April 2022 to July 2024.
Information regarding our A/R Programs as of September 30, 2022 was as follows (monetary amounts in millions):
| Maximum funding |
Amount |
|||||||||||
| Facility |
Maturity |
availability(1) |
outstanding |
Interest rate(2) |
||||||||
| U.S. A/R Program |
|
$ | $ | (3) |
|
|||||||
| EU A/R Program |
|
€ | € |
|
||||||||
| (or approximately $96) |
||||||||||||
| (1) |
The amount of actual availability under our A/R Programs may be lower based on the level of eligible receivables sold, changes in the credit ratings of our customers, customer concentration levels and certain characteristics of the accounts receivable being transferred, as defined in the applicable agreements. |
| (2) |
The applicable rate for our U.S. A/R Program is defined by the lender as USD LIBOR. The applicable rate for our EU A/R Program is either USD LIBOR, EURIBOR or SONIA (Sterling Overnight Interbank Average Rate). In anticipation of the transition away from USD LIBOR, the amendments we made in July 2021 to our A/R Programs incorporated replacement rates for the USD LIBOR. |
| (3) |
As of September 30, 2022, we had approximately $ |
As of September 30, 2022 and December 31, 2021, $
Senior Notes
On January 15, 2021, Huntsman International redeemed in full million (approximately $
On May 26, 2021, Huntsman International completed a $
Variable Interest Entity Debt
On September 30, 2021, AAC, our consolidated
Compliance with Covenants
We believe that we are in compliance with the covenants contained in the agreements governing our material debt instruments, including our Revolving Credit Facility, our A/R Programs and our senior notes.
9. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
We are exposed to market risks, such as changes in interest rates, foreign exchange rates and commodity prices. From time to time, we enter into transactions, including transactions involving derivative instruments, to manage certain of these exposures. We also hedge our net investment in certain European operations.
Our revenues and expenses are denominated in various foreign currencies, and our cash flows and earnings are thus subject to fluctuations due to exchange rate variations. From time to time, we may enter into foreign currency derivative instruments to minimize the short-term impact of movements in foreign currency rates. Where practicable, we generally net multicurrency cash balances among our subsidiaries to help reduce exposure to foreign currency exchange rates. Certain other exposures may be managed from time to time through financial market transactions, principally through the purchase of spot or forward foreign exchange contracts (generally with maturities of year or less). We do not hedge our foreign currency exposures in a manner that would eliminate the effect of changes in exchange rates on our cash flows and earnings. As of September 30, 2022, we had approximately $
From time to time, we may purchase interest rate swaps and/or other derivative instruments to reduce the impact of changes in interest rates on our floating-rate exposures. Under interest rate swaps, we agree with other parties to exchange, at specified intervals, the difference between fixed-rate and floating-rate interest amounts calculated by reference to an agreed notional principal amount.
We review our non-U.S. dollar denominated debt and derivative instruments to determine the appropriate amounts designated as hedges. As of September 30, 2022, we have designated approximately million (approximately $
10. FAIR VALUE
The fair values of financial instruments were as follows (dollars in millions):
| September 30, 2022 |
December 31, 2021 |
|||||||||||||||
| Carrying |
Estimated |
Carrying |
Estimated |
|||||||||||||
| value |
fair value |
value |
fair value |
|||||||||||||
| Non-qualified employee benefit plan investments |
$ | $ | $ | $ | ||||||||||||
| Investment in Venator |
||||||||||||||||
| Option agreement for remaining Venator shares |
( |
) | ( |
) | ||||||||||||
| Long-term debt (including current portion) |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
The carrying amounts reported in the balance sheets of cash and cash equivalents, accounts receivable and accounts payable approximate fair value because of the immediate or short-term maturity of these financial instruments. Our investment in Venator is marked to fair value, which is obtained through market observable pricing using prevailing market prices (Level 1). Additionally, the estimated fair value of the option agreement related to the remaining ordinary shares we hold in Venator, which rounds to as of September 30, 2022, is based on a valuation technique using market observable inputs (Level 2). See “Note 4. Discontinued Operations and Business Dispositions—Sale of Venator Interest.” The fair values of non-qualified employee benefit plan investments are obtained through market observable pricing using prevailing market prices (Level 1). The estimated fair values of our long-term debt are based on quoted market prices for the identical liability when traded in an active market (Level 1). The fair value estimates presented herein are based on pertinent information available to management as of September 30, 2022 and December 31, 2021. Although we are not aware of any factors that would significantly affect the estimated fair value amounts, such amounts have not been comprehensively revalued for purposes of these financial statements since September 30, 2022, and current estimates of fair value may differ significantly from the amounts presented herein.
During the nine months ended September 30, 2022, we held
11. REVENUE RECOGNITION
The following tables disaggregate our revenue from continuing operations by major source for the three months ended September 30, 2022 and 2021 (dollars in millions):
| Performance |
Advanced |
Corporate and |
||||||||||||||||||
| 2022 |
Polyurethanes |
Products |
Materials |
eliminations |
Total |
|||||||||||||||
| Primary geographic markets(1) |
||||||||||||||||||||
| U.S. and Canada |
$ | $ | $ | $ | ( |
) | $ | |||||||||||||
| Europe |
( |
) | ||||||||||||||||||
| Asia Pacific |
( |
) | ||||||||||||||||||
| Rest of world |
( |
) | ||||||||||||||||||
| $ | $ | $ | $ | ( |
) | $ | ||||||||||||||
| Major product groupings |
||||||||||||||||||||
| MDI urethanes |
$ | $ | ||||||||||||||||||
| Differentiated |
$ | |||||||||||||||||||
| Specialty |
$ | |||||||||||||||||||
| Non-specialty |
||||||||||||||||||||
| Eliminations |
$ | ( |
) | ( |
) | |||||||||||||||
| $ | $ | $ | $ | ( |
) | $ | ||||||||||||||
| Performance |
Advanced |
Corporate and |
||||||||||||||||||
| 2021 |
Polyurethanes |
Products |
Materials |
eliminations |
Total |
|||||||||||||||
| Primary geographic markets(1) |
||||||||||||||||||||
| U.S. and Canada |
$ | $ | $ | $ | ( |
) | $ | |||||||||||||
| Europe |
( |
) | ||||||||||||||||||
| Asia Pacific |
( |
) | ||||||||||||||||||
| Rest of world |
||||||||||||||||||||
| $ | $ | $ | $ | ( |
) | $ | ||||||||||||||
| Major product groupings |
||||||||||||||||||||
| MDI urethanes |
$ | $ | ||||||||||||||||||
| Differentiated |
$ | |||||||||||||||||||
| Specialty |
$ | |||||||||||||||||||
| Non-specialty |
||||||||||||||||||||
| Eliminations |
$ | ( |
) | ( |
) | |||||||||||||||
| $ | $ | $ | $ | ( |
) | $ | ||||||||||||||
| (1) |
Geographic information for revenues is based upon countries into which product is sold. |
The following tables disaggregate our revenue from continuing operations by major source for the nine months ended September 30, 2022 and 2021 (dollars in millions):
| Performance |
Advanced |
Corporate and |
||||||||||||||||||
| 2022 |
Polyurethanes |
Products |
Materials |
eliminations |
Total |
|||||||||||||||
| Primary geographic markets(1) |
||||||||||||||||||||
| U.S. and Canada |
$ | $ | $ | $ | ( |
) | $ | |||||||||||||
| Europe |
( |
) | ||||||||||||||||||
| Asia Pacific |
( |
) | ||||||||||||||||||
| Rest of world |
( |
) | ||||||||||||||||||
| $ | $ | $ | $ | ( |
) | $ | ||||||||||||||
| Major product groupings |
||||||||||||||||||||
| MDI urethanes |
$ | $ | ||||||||||||||||||
| Differentiated |
$ | |||||||||||||||||||
| Specialty |
$ | |||||||||||||||||||
| Non-specialty |
||||||||||||||||||||
| Eliminations |
$ | ( |
) | ( |
) | |||||||||||||||
| $ | $ | $ | $ | ( |
) | $ | ||||||||||||||
| Performance |
Advanced |
Corporate and |
||||||||||||||||||
| 2021 |
Polyurethanes |
Products |
Materials |
eliminations |
Total |
|||||||||||||||
| Primary geographic markets(1) |
||||||||||||||||||||
| U.S. and Canada |
$ | $ | $ | $ | ( |
) | $ | |||||||||||||
| Europe |
( |
) | ||||||||||||||||||
| Asia Pacific |
( |
) | ||||||||||||||||||
| Rest of world |
||||||||||||||||||||
| $ | $ | $ | $ | ( |
) | $ | ||||||||||||||
| Major product groupings |
||||||||||||||||||||
| MDI urethanes |
$ | $ | ||||||||||||||||||
| Differentiated |
$ | |||||||||||||||||||
| Specialty |
$ | |||||||||||||||||||
| Non-specialty |
||||||||||||||||||||
| Eliminations |
$ | ( |
) | ( |
) | |||||||||||||||
| $ | $ | $ | $ | ( |
) | $ | ||||||||||||||
| (1) |
Geographic information for revenues is based upon countries into which product is sold. |
12. EMPLOYEE BENEFIT PLANS
Components of the net periodic benefit (credit) cost from continuing operations for the three and nine months ended September 30, 2022 and 2021 were as follows (dollars in millions):
Huntsman Corporation
| Other postretirement |
||||||||||||||||
| Defined benefit plans |
benefit plans |
|||||||||||||||
| Three months |
Three months |
|||||||||||||||
| ended |
ended |
|||||||||||||||
| September 30, |
September 30, |
|||||||||||||||
| 2022 |
2021 |
2022 |
2021 |
|||||||||||||
| Service cost |
$ | $ | $ | $ | ||||||||||||
| Interest cost |
||||||||||||||||
| Expected return on assets |
( |
) | ( |
) | ||||||||||||
| Amortization of prior service benefit |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Amortization of actuarial loss |
||||||||||||||||
| Net periodic benefit (credit) cost |
$ | ( |
) | $ | $ | $ | ||||||||||
| Other postretirement |
||||||||||||||||
| Defined benefit plans |
benefit plans |
|||||||||||||||
| Nine months |
Nine months |
|||||||||||||||
| ended |
ended |
|||||||||||||||
| September 30, |
September 30, |
|||||||||||||||
| 2022 |
2021 |
2022 |
2021 |
|||||||||||||
| Service cost |
$ | $ | $ | $ | ||||||||||||
| Interest cost |
||||||||||||||||
| Expected return on assets |
( |
) | ( |
) | ||||||||||||
| Amortization of prior service benefit |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Amortization of actuarial loss |
||||||||||||||||
| Settlement loss |
||||||||||||||||
| Net periodic benefit (credit) cost |
$ | ( |
) | $ | $ | $ | ||||||||||
Huntsman International
| Other postretirement |
||||||||||||||||
| Defined benefit plans |
benefit plans |
|||||||||||||||
| Three months |
Three months |
|||||||||||||||
| ended |
ended |
|||||||||||||||
| September 30, |
September 30, |
|||||||||||||||
| 2022 |
2021 |
2022 |
2021 |
|||||||||||||
| Service cost |
$ | $ | $ | $ | ||||||||||||
| Interest cost |
||||||||||||||||
| Expected return on assets |
( |
) | ( |
) | ||||||||||||
| Amortization of prior service benefit |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Amortization of actuarial loss |
||||||||||||||||
| Net periodic benefit (credit) cost |
$ | ( |
) | $ | $ | $ | ||||||||||
| Other postretirement |
||||||||||||||||
| Defined benefit plans |
benefit plans |
|||||||||||||||
| Nine months |
Nine months |
|||||||||||||||
| ended |
ended |
|||||||||||||||
| September 30, |
September 30, |
|||||||||||||||
| 2022 |
2021 |
2022 |
2021 |
|||||||||||||
| Service cost |
$ | $ | $ | $ | ||||||||||||
| Interest cost |
||||||||||||||||
| Expected return on assets |
( |
) | ( |
) | ||||||||||||
| Amortization of prior service benefit |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Amortization of actuarial loss |
||||||||||||||||
| Settlement loss |
||||||||||||||||
| Net periodic benefit (credit) cost |
$ | ( |
) | $ | $ | $ | ||||||||||
During the nine months ended September 30, 2022 and 2021, we made contributions to our pension and other postretirement benefit plans related to continuing operations of $
13. HUNTSMAN CORPORATION STOCKHOLDERS’ EQUITY
Share Repurchase Program
On October 26, 2021, our Board of Directors approved a new share repurchase program of $
Dividends on Common Stock
During the quarters ended September 30, 2022 and September 30, 2021, we declared dividends of $
14. ACCUMULATED OTHER COMPREHENSIVE LOSS
The components of other comprehensive (loss) income and changes in accumulated other comprehensive loss by component were as follows (dollars in millions):
Huntsman Corporation
| Pension | Other | |||||||||||||||||||||||||||
| Foreign | and other | comprehensive | Amounts | Amounts | ||||||||||||||||||||||||
| currency | postretirement | income of | attributable to | attributable to | ||||||||||||||||||||||||
| translation | benefits | unconsolidated | noncontrolling | Huntsman | ||||||||||||||||||||||||
| adjustments(a) | adjustments(b) | affiliates | Other, net | Total | interests | Corporation | ||||||||||||||||||||||
| Beginning balance, January 1, 2022 | $ | ( | ) | $ | ( | ) | $ | $ | $ | ( | ) | $ | $ | ( | ) | |||||||||||||
| Other comprehensive loss before reclassifications, gross | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||
| Tax expense | ||||||||||||||||||||||||||||
| Amounts reclassified from accumulated other comprehensive loss, gross(c) | ||||||||||||||||||||||||||||
| Tax expense | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||
| Net current-period other comprehensive (loss) income | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||
| Ending balance, September 30, 2022 | $ | ( | ) | $ | ( | ) | $ | $ | $ | ( | ) | $ | $ | ( | ) | |||||||||||||
| (a) | Amounts are net of tax of $ |
| (b) | Amounts are net of tax of $ |
| (c) | See table below for details about these reclassifications. |
| Pension | Other | |||||||||||||||||||||||||||
| Foreign | and other | comprehensive | Amounts | Amounts | ||||||||||||||||||||||||
| currency | postretirement | income of | attributable to | attributable to | ||||||||||||||||||||||||
| translation | benefits | unconsolidated | noncontrolling | Huntsman | ||||||||||||||||||||||||
| adjustments(a) | adjustments(b) | affiliates | Other, net | Total | interests | Corporation | ||||||||||||||||||||||
| Beginning balance, January 1, 2021 | $ | ( | ) | $ | ( | ) | $ | $ | $ | ( | ) | $ | $ | ( | ) | |||||||||||||
| Other comprehensive loss before reclassifications, gross | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||
| Tax expense | ||||||||||||||||||||||||||||
| Amounts reclassified from accumulated other comprehensive loss, gross(c) | ||||||||||||||||||||||||||||
| Tax expense | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||
| Net current-period other comprehensive (loss) income | ( | ) | ( | ) | ||||||||||||||||||||||||
| Ending balance, September 30, 2021 | $ | ( | ) | $ | ( | ) | $ | $ | $ | ( | ) | $ | $ | ( | ) | |||||||||||||
| (a) | Amounts are net of tax of $ |
| (b) | Amounts are net of tax of $ |
| (c) | See table below for details about these reclassifications. |
| Three Months Ended September 30, | ||||||||||
| 2022 | 2021 | |||||||||
| Amounts reclassified | Amounts reclassified | Affected line item in | ||||||||
| from accumulated | from accumulated | the statement | ||||||||
| Details about accumulated other | other | other | where net income | |||||||
| comprehensive loss components(a): | comprehensive loss | comprehensive loss | is presented | |||||||
| Amortization of pension and other postretirement benefits: | ||||||||||
| Prior service credit | $ | ( | ) | $ | ( | ) | (b)(c) | Other income, net | ||
| Actuarial loss | (b)(c) | Other income, net | ||||||||
| Total before tax | ||||||||||
| ( | ) | ( | ) | Income tax expense | ||||||
| Total reclassifications for the period | $ | $ | Net of tax | |||||||
| Nine Months Ended September 30, | ||||||||||
| 2022 | 2021 | |||||||||
| Amounts reclassified | Amounts reclassified | Affected line item in | ||||||||
| from accumulated | from accumulated | the statement | ||||||||
| Details about accumulated other | other | other | where net income | |||||||
| comprehensive loss components(a): | comprehensive loss | comprehensive loss | is presented | |||||||
| Amortization of pension and other postretirement benefits: | ||||||||||
| Prior service credit | $ | ( | ) | $ | ( | ) | (b)(c) | Other income, net | ||
| Settlement loss | (b) | Other income, net | ||||||||
| Actuarial loss | (b)(c) | Other income, net | ||||||||
| Total before tax | ||||||||||
| ( | ) | ( | ) | Income tax expense | ||||||
| Total reclassifications for the period | $ | $ | Net of tax | |||||||
| (a) | Pension and other postretirement benefits amounts in parentheses indicate credits on our condensed consolidated statements of operations. |
| (b) | These accumulated other comprehensive loss components are included in the computation of net periodic pension costs. See “Note 12. Employee Benefit Plans.” |
| (c) | Amounts include approximately $ |
Huntsman International
| Pension | Other | |||||||||||||||||||||||||||
| Foreign | and other | comprehensive | Amounts | Amounts | ||||||||||||||||||||||||
| currency | postretirement | income of | attributable to | attributable to | ||||||||||||||||||||||||
| translation | benefits | unconsolidated | noncontrolling | Huntsman | ||||||||||||||||||||||||
| adjustments(a) | adjustments(b) | affiliates | Other, net | Total | interests | International | ||||||||||||||||||||||
| Beginning balance, January 1, 2022 | $ | ( | ) | $ | ( | ) | $ | $ | $ | ( | ) | $ | $ | ( | ) | |||||||||||||
| Other comprehensive loss before reclassifications, gross | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||
| Tax expense | ||||||||||||||||||||||||||||
| Amounts reclassified from accumulated other comprehensive loss, gross(c) | ||||||||||||||||||||||||||||
| Tax expense | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||
| Net current-period other comprehensive (loss) income | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||
| Ending balance, September 30, 2022 | $ | ( | ) | $ | ( | ) | $ | $ | $ | ( | ) | $ | $ | ( | ) | |||||||||||||
| (a) | Amounts are net of tax of $ |
| (b) | Amounts are net of tax of $ |
| (c) | See table below for details about these reclassifications. |
| Pension | Other | |||||||||||||||||||||||||||
| Foreign | and other | comprehensive | Amounts | Amounts | ||||||||||||||||||||||||
| currency | postretirement | income of | attributable to | attributable to | ||||||||||||||||||||||||
| translation | benefits | unconsolidated | noncontrolling | Huntsman | ||||||||||||||||||||||||
| adjustments(a) | adjustments(b) | affiliates | Other, net | Total | interests | International | ||||||||||||||||||||||
| Beginning balance, January 1, 2021 | $ | ( | ) | $ | ( | ) | $ | $ | $ | ( | ) | $ | $ | ( | ) | |||||||||||||
| Other comprehensive loss before reclassifications, gross | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||
| Tax expense | ||||||||||||||||||||||||||||
| Amounts reclassified from accumulated other comprehensive loss, gross(c) | ||||||||||||||||||||||||||||
| Tax expense | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||
| Net current-period other comprehensive (loss) income | ( | ) | ( | ) | ||||||||||||||||||||||||
| Ending balance, September 30, 2021 | $ | ( | ) | $ | ( | ) | $ | $ | $ | ( | ) | $ | $ | ( | ) | |||||||||||||
| (a) | Amounts are net of tax of $ |
| (b) | Amounts are net of tax of $ |
| (c) | See table below for details about these reclassifications. |
| Three Months Ended September 30, | ||||||||||
| 2022 | 2021 | |||||||||
| Amounts reclassified | Amounts reclassified | Affected line item in | ||||||||
| from accumulated | from accumulated | the statement | ||||||||
| Details about accumulated other | other | other | where net income | |||||||
| comprehensive loss components(a): | comprehensive loss | comprehensive loss | is presented | |||||||
| Amortization of pension and other postretirement benefits: | ||||||||||
| Prior service credit | $ | ( | ) | $ | ( | ) | (b)(c) | Other income, net | ||
| Actuarial loss | (b)(c) | Other income, net | ||||||||
| Total before tax | ||||||||||
| ( | ) | ( | ) | Income tax expense | ||||||
| Total reclassifications for the period | $ | $ | Net of tax | |||||||
| Nine Months Ended September 30, | ||||||||||
| 2022 | 2021 | |||||||||
| Amounts reclassified | Amounts reclassified | Affected line item in | ||||||||
| from accumulated | from accumulated | the statement | ||||||||
| Details about accumulated other | other | other | where net income | |||||||
| comprehensive loss components(a): | comprehensive loss | comprehensive loss | is presented | |||||||
| Amortization of pension and other postretirement benefits: | ||||||||||
| Prior service credit | $ | ( | ) | $ | ( | ) | (b)(c) | Other income, net | ||
| Settlement loss | (b) | Other income, net | ||||||||
| Actuarial loss | (b)(c) | Other income, net | ||||||||
| Total before tax | ||||||||||
| ( | ) | ( | ) | Income tax expense | ||||||
| Total reclassifications for the period | $ | $ | Net of tax | |||||||
| (a) | Pension and other postretirement benefits amounts in parentheses indicate credits on our condensed consolidated statements of operations. |
| (b) | These accumulated other comprehensive loss components are included in the computation of net periodic pension costs. See “Note 12. Employee Benefit Plans.” |
| (c) | Amounts include approximately $ |
15. COMMITMENTS AND CONTINGENCIES
Legal Matters
On April 29, 2022, a New Orleans jury awarded us approximately $
We are a party to various other proceedings instituted by private plaintiffs, governmental authorities and others arising under provisions of applicable laws, including various environmental, products liability and other laws. Except as otherwise disclosed in this report, we do not believe that the outcome of any of these matters will have a material effect on our financial condition, results of operations or liquidity.
16. ENVIRONMENTAL, HEALTH AND SAFETY MATTERS
EHS Capital Expenditures
We may incur future costs for capital improvements and general compliance under environmental, health and safety (“EHS”) laws, including costs to acquire, maintain and repair pollution control equipment. For the nine months ended September 30, 2022 and 2021, our capital expenditures from continuing operations for EHS matters totaled $
Environmental Reserves
We have accrued liabilities relating to anticipated environmental cleanup obligations, site reclamation and closure costs and known penalties. Liabilities are recorded when potential liabilities are either known or considered probable and can be reasonably estimated. Our liability estimates are calculated using present value techniques as appropriate and are based upon requirements placed upon us by regulators, available facts, existing technology and past experience. The environmental liabilities do not include amounts recorded as asset retirement obligations. We had accrued $
Environmental Matters
Under the Comprehensive Environmental Response, Compensation, and Liability Act (“CERCLA”) and similar state laws, a current or former owner or operator of real property in the U.S. may be liable for remediation costs regardless of whether the release or disposal of hazardous substances was in compliance with law at the time it occurred, and a current owner or operator may be liable regardless of whether it owned or operated the facility at the time of the release. Outside the U.S., analogous contaminated property laws, such as those in effect in France and Australia, can hold past owners and/or operators liable for remediation at former facilities. Currently, there are approximately
Under the Resource Conservation and Recovery Act (“RCRA”) in the U.S. and similar state laws, we may be required to remediate contamination originating from our properties as a condition to our hazardous waste permit. Some of our manufacturing sites have an extended history of industrial chemical manufacturing and use, including on-site waste disposal. We are aware of soil, groundwater or surface contamination from past operations at some of our sites, and we may find contamination at other sites in the future. For example, our Geismar, Louisiana facility is the subject of ongoing remediation requirements imposed under RCRA. Similar laws exist in a number of locations in which we currently operate, or previously operated, manufacturing facilities, such as Australia, India, France, Hungary and Italy.
North Maybe Canyon Mine Remediation
The North Maybe Canyon Mine site is a CERCLA site and involves a former phosphorous mine near Soda Springs, Idaho, which is believed to have been operated by several companies, including a predecessor company to us. In 2004, the U.S. Forest Service notified us that we are a CERCLA potentially responsible party (“PRP”) for contamination originating from the site. In February 2010, we and Wells Cargo (another PRP) agreed to conduct a Remedial Investigation/Feasibility Study of a portion of the site and are currently engaged in that process. At this time, we are unable to reasonably estimate our potential liabilities at this site.
17. STOCK-BASED COMPENSATION PLANS
As of September 30, 2022, we had approximately
The compensation cost from continuing operations under the stock-based compensation plans for our Company and Huntsman International were as follows (dollars in millions):
| Three months | Nine months | |||||||||||||||
| ended | ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Huntsman Corporation compensation cost | $ | $ | $ | $ | ||||||||||||
| Huntsman International compensation cost | ||||||||||||||||
The total income tax benefit recognized in the condensed consolidated statements of operations for us and Huntsman International for stock-based compensation arrangements was $
Stock Options
The fair value of each stock option award is estimated on the date of grant using the Black-Scholes valuation model that uses the assumptions noted in the following table. Expected volatilities are based on the historical volatility of our common stock through the grant date. The expected term of options granted was estimated based on the contractual term of the instruments and employees’ expected exercise and post-vesting employment termination behavior. The risk-free rate for periods within the contractual life of the option was based on the U.S. Treasury yield curve in effect at the time of grant. The assumptions noted below represent the weighted average of the assumptions utilized for stock options granted during the periods.
| Nine months | ||||||||
| ended | ||||||||
| September 30, | ||||||||
| 2022(1) | 2021(2) | |||||||
| Dividend yield | NA | % | ||||||
| Expected volatility | NA | % | ||||||
| Risk-free interest rate | NA | % | ||||||
| Expected life of stock options granted during the period (in years) | NA | |||||||
| (1) | During the nine months ended September 30, 2022, |
| (2) | During the nine months ended September 30, 2021, stock options were only granted during the first quarter. |
A summary of stock option activity under the stock-based compensation plans as of September 30, 2022 and changes during the nine months then ended is presented below:
| Weighted | ||||||||||||||||
| Weighted | average | |||||||||||||||
| average | remaining | Aggregate | ||||||||||||||
| exercise | contractual | intrinsic | ||||||||||||||
| Option awards | Shares | price | term | value | ||||||||||||
| (in thousands) | (years) | (in millions) | ||||||||||||||
| Outstanding at January 1, 2022 | $ | |||||||||||||||
| Granted | ||||||||||||||||
| Exercised | ( | ) | ||||||||||||||
| Forfeited | ( | ) | ||||||||||||||
| Outstanding at September 30, 2022 | $ | |||||||||||||||
| Exercisable at September 30, 2022 | ||||||||||||||||
As of September 30, 2022, there was approximately $
The total intrinsic value of stock options exercised during the nine months ended September 30, 2022 and 2021 was approximately $
Nonvested Shares
Nonvested shares granted under the stock-based compensation plans consist of restricted stock and performance share unit awards, which are accounted for as equity awards, and phantom stock, which is accounted for as a liability award because it can be settled in either stock or cash. The fair value of each restricted stock and phantom stock award is estimated to be the closing stock price of Huntsman’s stock on the date of grant.
We grant two types of performance share unit awards. For one type of performance share unit award, the performance criteria are total stockholder return of our common stock relative to the total stockholder return of a specified industry peer group for the -year performance periods. The fair value of each performance share unit award is estimated using a Monte Carlo simulation model that uses various assumptions, including an expected volatility rate and a risk-free interest rate. For the nine months ended September 30, 2022 and 2021, the weighted-average expected volatility rate was
During the first quarter of 2022, we began issuing a second type of performance award, which also includes a market condition. The performance criteria are our corporate free cash flow achieved relative to targets set by management, modified for the total stockholder return of our common stock relative to the total stockholder return of a specified industry peer group for the -year performance period. The fair value of each performance share unit award is estimated using a Monte Carlo simulation model that uses various assumptions, including an expected volatility rate and a risk-free interest rate. For the nine months ended September 30, 2022, the weighted-average expected volatility rate was
A summary of the status of our nonvested shares as of September 30, 2022 and changes during the nine months then ended is presented below:
| Equity awards | Liability awards | ||||||||||||||||
| Weighted | Weighted | ||||||||||||||||
| average | average | ||||||||||||||||
| grant-date | grant-date | ||||||||||||||||
| Shares | fair value | Shares | fair value | ||||||||||||||
| (in thousands) | (in thousands) | ||||||||||||||||
| Nonvested at January 1, 2022 | $ | $ | |||||||||||||||
| Granted | |||||||||||||||||
| Vested | ( | ) | (1)(2) | ( | ) | ||||||||||||
| Forfeited | ( | ) | ( | ) | |||||||||||||
| Nonvested at September 30, 2022 | |||||||||||||||||
| (1) | As of September 30, 2022, a total of |
| (2) | A total of |
As of September 30, 2022, there was approximately $
18. INCOME TAXES
We use the asset and liability method of accounting for income taxes. Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial and tax reporting purposes. We evaluate deferred tax assets to determine whether it is more likely than not that they will be realized. Valuation allowances are reviewed on an individual tax jurisdiction basis to analyze whether there is sufficient positive or negative evidence to support a change in judgment about the realizability of the related deferred tax assets. These conclusions require significant judgment. In evaluating the objective evidence that historical results provide, we consider the cyclicality of our businesses and cumulative income or losses during the applicable period. Cumulative losses incurred over the applicable period limits our ability to consider other subjective evidence such as our projections for the future. Changes in expected future income in applicable jurisdictions could affect the realization of deferred tax assets in those jurisdictions.
During the nine months ended September 30, 2022 and 2021, there was
Huntsman Corporation
We recorded income tax expense from continuing operations of $
Huntsman International
Huntsman International recorded income tax expense from continuing operations of $
19. EARNINGS PER SHARE
Basic income per share excludes dilution and is computed by dividing net income attributable to Huntsman Corporation by the weighted average number of shares outstanding during the period. Diluted income per share reflects all potential dilutive common shares outstanding during the period and is computed by dividing net income attributable to Huntsman Corporation by the weighted average number of shares outstanding during the period increased by the number of additional shares that would have been outstanding as dilutive securities.
Basic and diluted income per share is determined using the following information (in millions):
| Three months |
Nine months |
|||||||||||||||
| ended |
ended |
|||||||||||||||
| September 30, |
September 30, |
|||||||||||||||
| 2022 |
2021 |
2022 |
2021 |
|||||||||||||
| Numerator: |
||||||||||||||||
| Income from continuing operations attributable to Huntsman Corporation |
$ | $ | $ | $ | ||||||||||||
| Net income attributable to Huntsman Corporation |
$ | $ | $ | $ | ||||||||||||
| Denominator: |
||||||||||||||||
| Weighted average shares outstanding |
||||||||||||||||
| Dilutive shares: |
||||||||||||||||
| Stock-based awards |
||||||||||||||||
| Total weighted average shares outstanding, including dilutive shares |
||||||||||||||||
Additional stock-based awards of approximately
20. OPERATING SEGMENT INFORMATION
We derive our revenues, earnings and cash flows from the manufacture and sale of a wide variety of differentiated and commodity chemical products. We have
The major products of each reportable operating segment are as follows:
| Segment |
|
Products |
| Polyurethanes |
|
MDI, polyols, TPU and other polyurethane-related products |
| Performance Products |
|
Specialty amines, ethyleneamines, maleic anhydride and technology licenses |
| Advanced Materials |
|
Specialty resin compounds; cross-linking, matting, and curing and toughening agents; epoxy, acrylic and polyurethane-based formulations; specialty nitrile latex, alkyd resins and carbon nano materials |
Sales between segments are generally recognized at external market prices and are eliminated in consolidation. We use adjusted EBITDA to measure the financial performance of our global business units and for reporting the results of our operating segments. This measure includes all operating items relating to the businesses. The adjusted EBITDA of operating segments excludes items that principally apply to our Company as a whole. The following schedule includes revenues and adjusted EBITDA for each of our reportable operating segments (dollars in millions). We have revised our prior year presentation below to reconcile total reportable segments’ adjusted EBITDA to income from continuing operations before income taxes, in addition to net income, and removed “corporate and other costs, net” from the total reportable segments’ adjusted EBITDA and included such amounts in the reconciliation to income from continuing operations before income taxes. Additionally, we have revised our prior year presentation of total reportable segments’ revenues, in which we removed intersegment eliminations from the total reportable segments’ revenues.
| Three months |
Nine months |
|||||||||||||||
| ended |
ended |
|||||||||||||||
| September 30, |
September 30, |
|||||||||||||||
| 2022 |
2021 |
2022 |
2021 |
|||||||||||||
| Revenues: |
||||||||||||||||
| Polyurethanes |
$ | $ | $ | $ | ||||||||||||
| Performance Products |
||||||||||||||||
| Advanced Materials |
||||||||||||||||
| Total reportable segments’ revenue |
||||||||||||||||
| Intersegment eliminations |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Total |
$ | $ | $ | $ | ||||||||||||
| Huntsman Corporation: |
||||||||||||||||
| Segment adjusted EBITDA(1): |
||||||||||||||||
| Polyurethanes |
$ | $ | $ | $ | ||||||||||||
| Performance Products |
||||||||||||||||
| Advanced Materials |
||||||||||||||||
| Total reportable segments’ adjusted EBITDA |
||||||||||||||||
| Reconciliation of total reportable segments’ adjusted EBITDA to income from continuing operations before income taxes: |
||||||||||||||||
| Interest expense, net—continuing operations |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Depreciation and amortization—continuing operations |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Corporate and other costs, net(2) |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Net income attributable to noncontrolling interests |
||||||||||||||||
| Other adjustments: |
||||||||||||||||
| Business acquisition and integration expenses and purchase accounting inventory adjustments |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Fair value adjustments to Venator investment, net |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Loss on early extinguishment of debt |
( |
) | ||||||||||||||
| Certain legal and other settlements and related expenses |
( |
) | ( |
) | ( |
) | ||||||||||
| Costs associated with the Albemarle Settlement, net |
( |
) | ( |
) | ||||||||||||
| (Loss) gain on sale of business/assets |
( |
) | ( |
) | ||||||||||||
| Income from transition services arrangements |
||||||||||||||||
| Certain nonrecurring information technology project implementation costs |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Amortization of pension and postretirement actuarial losses |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Plant incident remediation (costs) credits |
( |
) | ( |
) | ( |
) | ||||||||||
| Restructuring, impairment and plant closing and transition costs(3) |
( |
) | ( |
) | ( |
) | ||||||||||
| Income from continuing operations before income taxes |
||||||||||||||||
| Income tax expense—continuing operations |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| (Loss) income from discontinued operations |
( |
) | ||||||||||||||
| Net income |
$ | $ | $ | $ | ||||||||||||
| Three months |
Nine months |
|||||||||||||||
| ended |
ended |
|||||||||||||||
| September 30, |
September 30, |
|||||||||||||||
| 2022 |
2021 |
2022 |
2021 |
|||||||||||||
| Huntsman International: |
||||||||||||||||
| Segment adjusted EBITDA(1): |
||||||||||||||||
| Polyurethanes |
$ | $ | $ | $ | ||||||||||||
| Performance Products |
||||||||||||||||
| Advanced Materials |
||||||||||||||||
| Total reportable segments’ adjusted EBITDA |
||||||||||||||||
| Reconciliation of total reportable segments’ adjusted EBITDA to income from continuing operations before income taxes: |
||||||||||||||||
| Interest expense, net—continuing operations |
(16 | ) | (15 | ) | (46 | ) | (52 | ) | ||||||||
| Depreciation and amortization—continuing operations |
(72 | ) | (68 | ) | (207 | ) | (205 | ) | ||||||||
| Corporate and other costs, net(2) |
(36 | ) | (47 | ) | ( |
) | ( |
) | ||||||||
| Net income attributable to noncontrolling interests |
15 | 16 | 46 | 49 | ||||||||||||
| Other adjustments: |
||||||||||||||||
| Business acquisition and integration expenses and purchase accounting inventory adjustments |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Fair value adjustments to Venator investment, net |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Loss on early extinguishment of debt |
— | — | — | (27 | ) | |||||||||||
| Certain legal and other settlements and related expenses |
( |
) | ( |
) | ( |
) | ||||||||||
| Costs associated with the Albemarle Settlement, net |
( |
) | ( |
) | ||||||||||||
| (Loss) gain on sale of business/assets |
( |
) | ( |
) | ||||||||||||
| Income from transition services arrangements |
||||||||||||||||
| Certain nonrecurring information technology project implementation costs |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Amortization of pension and postretirement actuarial losses |
(10 | ) | (19 | ) | (32 | ) | (58 | ) | ||||||||
| Plant incident remediation (costs) credits |
( |
) | ( |
) | ( |
) | ||||||||||
| Restructuring, impairment and plant closing and transition costs(3) |
( |
) | ( |
) | ( |
) | ||||||||||
| Income from continuing operations before income taxes |
145 | 254 | 726 | 566 | ||||||||||||
| Income tax expense—continuing operations |
(30 | ) | (35 | ) | (156 | ) | (102 | ) | ||||||||
| (Loss) income from discontinued operations |
( |
) | ||||||||||||||
| Net income |
$ | 114 | $ | 225 | $ | 600 | $ | 500 | ||||||||
| (1) |
We use segment adjusted EBITDA as the measure of each segment’s profit or loss. We believe that segment adjusted EBITDA more accurately reflects what the chief operating decision maker uses to make decisions about resources to be allocated to the segments and assess their financial performance. Segment adjusted EBITDA is defined as net income of Huntsman Corporation or Huntsman International, as appropriate, before interest, income tax, depreciation and amortization, net income attributable to noncontrolling interests, certain Corporate and other items and income from discontinued operations, as well as eliminating the following adjustments: (a) business acquisition and integration expenses and purchase accounting inventory adjustments; (b) fair value adjustments to Venator investment, net; (c) loss on early extinguishment of debt; (d) certain legal and other settlements and related expenses; (e) costs associated with the Albemarle Settlement, net; (f) (loss) gain on sale of business/assets; (g) income from transition services arrangements related to the sale of our Chemical Intermediates Businesses to Indorama; (h) certain nonrecurring information technology project implementation costs; (i) amortization of pension and postretirement actuarial losses; (j) plant incident remediation credits (costs); and (k) restructuring, impairment, plant closing and transition costs. |
| (2) | Corporate and other costs, net includes unallocated corporate overhead, unallocated foreign exchange gains and losses, LIFO inventory valuation reserve adjustments, loss on early extinguishment of debt, unallocated restructuring, impairment and plant closing costs, nonoperating income and expense and gains and losses on the disposition of corporate assets. |
| (3) |
Includes costs associated with transition activities related primarily to our Corporate program to optimize our global approach to leverage shared services capabilities. |
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
We operate in three segments: Polyurethanes, Performance Products and Advanced Materials. Our products comprise a broad range of chemicals and formulations, which we market globally to a diversified group of consumer and industrial customers. Our products are used in a wide range of applications, including those in the adhesives, aerospace, automotive, construction products, durable and non-durable consumer products, electronics, insulation, medical, packaging, coatings and construction, power generation, refining and synthetic fiber industries. We are a leading global producer in many of our key product lines, including MDI, amines, maleic anhydride and epoxy-based polymer formulations. Our revenues from continuing operations for the three months ended September 30, 2022 and 2021 were $2,011 million and $2,097 million, respectively, and for the nine months ended September 30, 2022 and 2021 were $6,373 million and $5,558 million, respectively.
Recent Developments
European Restructuring Program
In early November 2022, we announced our commitment and specific plans to further realign our cost structure beyond the current in-progress cost optimization programs with additional restructuring in Europe. The new program will include exiting and consolidating certain facilities, workforce relocation to lower cost locations and further personnel rationalization. In connection with this program, we expect to record restructuring expenses of approximately $50 million through 2023.
Sale of Textile Effects Business
On August 9, 2022, we entered into a definitive agreement to sell our Textile Effects Business to Archroma for a total enterprise value of $718 million, which includes the assumption of approximately $125 million in net underfunded pension liabilities as of December 31, 2021. We anticipate the transaction will close no later than the first half of 2023. Beginning in the third quarter of 2022, the results of our Textile Effects Business are reported as discontinued operations for all periods presented. For more information, see “Note 4. Discontinued Operations and Business Dispositions—Sale of Textile Effects Business” to our condensed consolidated financial statements.
Outlook
We expect the following factors to impact our operating segments:
Polyurethanes:
| ● |
Fourth quarter 2022 adjusted EBITDA estimated to be between $55 million and $85 million |
| ● |
European profitability negatively driven by high energy prices and declining demand |
| ● |
Americas end markets weaker, particularly in construction |
| ● |
Modest increase in automotive market sales volumes year-over-year |
|
| ● | Lower production rates to reduce inventory and match lower demand |
Performance Products:
| ● |
Fourth quarter 2022 adjusted EBITDA estimated to be between $60 million and $80 million |
| ● |
Lower sales volumes year-over-year, primarily in Europe and in construction markets |
| ● |
Adjusted EBITDA margin expected to be within 20% to 25% |
Advanced Materials:
| ● |
Fourth quarter 2022 adjusted EBITDA estimated to be between $40 million and $45 million |
| ● |
Automotive and aerospace markets remain stable |
| ● |
Demand headwinds in industrial markets |
In the third quarter of 2022, both our effective tax rate and our adjusted effective tax rate were 21%. For 2022, our adjusted effective tax rate is expected to be approximately 22% to 24%. For further information, see “—Non-GAAP Financial Measures” and “Note 18. Income Taxes” to our condensed consolidated financial statements.
Refer to “Forward-Looking Statements” for a discussion of our use of forward-looking statements in this Quarterly Report on Form 10-Q.
Results of Operations
For each of our Company and Huntsman International, the following tables set forth the condensed consolidated results of operations from continuing operations (dollars in millions, except per share amounts):
Huntsman Corporation
| Three months |
Nine months |
|||||||||||||||||||||||
| ended |
ended |
|||||||||||||||||||||||
| September 30, |
Percent |
September 30, |
Percent |
|||||||||||||||||||||
| 2022 |
2021 |
change |
2022 |
2021 |
change |
|||||||||||||||||||
| Revenues |
$ | 2,011 | $ | 2,097 | (4 | )% | $ | 6,373 | $ | 5,558 | 15 | % | ||||||||||||
| Cost of goods sold |
1,662 | 1,660 | — | 5,017 | 4,397 | 14 | % | |||||||||||||||||
| Gross profit |
349 | 437 | (20 | )% | 1,356 | 1,161 | 17 | % | ||||||||||||||||
| Operating expenses, net |
199 | 208 | (4 | )% | 621 | 597 | 4 | % | ||||||||||||||||
| Restructuring, impairment and plant closing costs (credits) |
12 | (1 | ) | NM | 36 | 34 | 6 | % | ||||||||||||||||
| Operating income |
138 | 230 | (40 | )% | 699 | 530 | 32 | % | ||||||||||||||||
| Interest expense, net |
(16 | ) | (15 | ) | 7 | % | (46 | ) | (52 | ) | (12 | )% | ||||||||||||
| Equity in income of investment in unconsolidated affiliates |
21 | 34 | (38 | )% | 55 | 118 | (53 | )% | ||||||||||||||||
| Fair value adjustments to Venator investment, net |
(7 | ) | (3 | ) | 133 | % | (9 | ) | (28 | ) | (68 | )% | ||||||||||||
| Loss on early extinguishment of debt |
— | — | — | — | (27 | ) | (100 | )% | ||||||||||||||||
| Other income, net |
10 | 7 | 43 | % | 23 | 21 | 10 | % | ||||||||||||||||
| Income from continuing operations before income taxes |
146 | 253 | (42 | )% | 722 | 562 | 28 | % | ||||||||||||||||
| Income tax expense |
(30 | ) | (34 | ) | (12 | )% | (155 | ) | (101 | ) | 53 | % | ||||||||||||
| Income from continuing operations |
116 | 219 | (47 | )% | 567 | 461 | 23 | % | ||||||||||||||||
| (Loss) income from discontinued operations, net of tax |
(1 | ) | 6 | NM | 30 | 36 | (17 | )% | ||||||||||||||||
| Net income |
115 | 225 | (49 | )% | 597 | 497 | 20 | % | ||||||||||||||||
| Reconciliation of net income to adjusted EBITDA: |
||||||||||||||||||||||||
| Net income attributable to noncontrolling interests |
(15 | ) | (16 | ) | (6 | )% | (46 | ) | (49 | ) | (6 | )% | ||||||||||||
| Interest expense, net from continuing operations |
16 | 15 | 7 | % | 46 | 52 | (12 | )% | ||||||||||||||||
| Income tax expense from continuing operations |
30 | 34 | (12 | )% | 155 | 101 | 53 | % | ||||||||||||||||
| Income tax expense from discontinued operations |
7 | 9 | (22 | )% | 14 | 18 | (22 | )% | ||||||||||||||||
| Depreciation and amortization from continuing operations |
72 | 68 | 6 | % | 207 | 205 | 1 | % | ||||||||||||||||
| Depreciation and amortization from discontinued operations |
3 | 4 | (25 | )% | 11 | 14 | (21 | )% | ||||||||||||||||
| Other adjustments: |
||||||||||||||||||||||||
| Business acquisition and integration expenses and purchase accounting inventory adjustments |
1 | 5 | 11 | 19 | ||||||||||||||||||||
| EBITDA from discontinued operations |
(9 | ) | (19 | ) | (55 | ) | (68 | ) | ||||||||||||||||
| Fair value adjustments to Venator investment, net |
7 | 3 | 9 | 28 | ||||||||||||||||||||
| Loss on early extinguishment of debt |
— | — | — | 27 | ||||||||||||||||||||
| Certain legal and other settlements and related expenses |
1 | — | 15 | 10 | ||||||||||||||||||||
| Costs associated with the Albemarle Settlement, net |
1 | — | 3 | — | ||||||||||||||||||||
| Loss (gain) on sale of business/assets |
16 | — | 27 | (30 | ) | |||||||||||||||||||
| Income from transition services arrangements |
— | (2 | ) | (2 | ) | (6 | ) | |||||||||||||||||
| Certain nonrecurring information technology project implementation costs |
1 | 2 | 4 | 6 | ||||||||||||||||||||
| Amortization of pension and postretirement actuarial losses |
10 | 19 | 32 | 56 | ||||||||||||||||||||
| Plant incident remediation costs (credits) |
1 | 2 | (4 | ) | 3 | |||||||||||||||||||
| Restructuring, impairment and plant closing and transition costs(2) |
14 | — | 44 | 36 | ||||||||||||||||||||
| Adjusted EBITDA(1) |
$ | 271 | $ | 349 | (22 | )% | $ | 1,068 | $ | 919 | 16 | % | ||||||||||||
| Net cash provided by operating activities from continuing operations |
$ | 595 | $ | 182 | 227 | % | ||||||||||||||||||
| Net cash used in investing activities from continuing operations |
(176 | ) | (430 | ) | (59 | )% | ||||||||||||||||||
| Net cash used in financing activities |
(905 | ) | (809 | ) | 12 | % | ||||||||||||||||||
| Capital expenditures from continuing operations |
(186 | ) | (241 | ) | (23 | )% | ||||||||||||||||||
Huntsman International
| Three months |
Nine months |
|||||||||||||||||||||||
| ended |
ended |
|||||||||||||||||||||||
| September 30, |
Percent |
September 30, |
Percent |
|||||||||||||||||||||
| 2022 |
2021 |
change |
2022 |
2021 |
change |
|||||||||||||||||||
| Revenues |
$ | 2,011 | $ | 2,097 | (4 | )% | $ | 6,373 | $ | 5,558 | 15 | % | ||||||||||||
| Cost of goods sold |
1,662 | 1,660 | — | 5,017 | 4,397 | 14 | % | |||||||||||||||||
| Gross profit |
349 | 437 | (20 | )% | 1,356 | 1,161 | 17 | % | ||||||||||||||||
| Operating expenses, net |
200 | 207 | (3 | )% | 617 | 591 | 4 | % | ||||||||||||||||
| Restructuring, impairment and plant closing costs (credits) |
12 | (1 | ) | NM | 36 | 34 | 6 | % | ||||||||||||||||
| Operating income |
137 | 231 | (41 | )% | 703 | 536 | 31 | % | ||||||||||||||||
| Interest expense, net |
(16 | ) | (15 | ) | 7 | % | (46 | ) | (52 | ) | (12 | )% | ||||||||||||
| Equity in income of investment in unconsolidated affiliates |
21 | 34 | (38 | )% | 55 | 118 | (53 | )% | ||||||||||||||||
| Fair value adjustments to Venator investment, net |
(7 | ) | (3 | ) | 133 | % | (9 | ) | (28 | ) | (68 | )% | ||||||||||||
| Loss on early extinguishment of debt |
— | — | — | — | (27 | ) | (100 | )% | ||||||||||||||||
| Other income, net |
10 | 7 | 43 | % | 23 | 19 | 21 | % | ||||||||||||||||
| Income from continuing operations before income taxes |
145 | 254 | (43 | )% | 726 | 566 | 28 | % | ||||||||||||||||
| Income tax expense |
(30 | ) | (35 | ) | (14 | )% | (156 | ) | (102 | ) | 53 | % | ||||||||||||
| Income from continuing operations |
115 | 219 | (47 | )% | 570 | 464 | 23 | % | ||||||||||||||||
| (Loss) income from discontinued operations, net of tax |
(1 | ) | 6 | NM | 30 | 36 | (17 | )% | ||||||||||||||||
| Net income |
114 | 225 | (49 | )% | 600 | 500 | 20 | % | ||||||||||||||||
| Reconciliation of net income to adjusted EBITDA: |
||||||||||||||||||||||||
| Net income attributable to noncontrolling interests |
(15 | ) | (16 | ) | (6 | )% | (46 | ) | (49 | ) | (6 | )% | ||||||||||||
| Interest expense, net from continuing operations |
16 | 15 | 7 | % | 46 | 52 | (12 | )% | ||||||||||||||||
| Income tax expense from continuing operations |
30 | 35 | (14 | )% | 156 | 102 | 53 | % | ||||||||||||||||
| Income tax expense from discontinued operations |
7 | 9 | (22 | )% | 14 | 18 | (22 | )% | ||||||||||||||||
| Depreciation and amortization from continuing operations |
72 | 68 | 6 | % | 207 | 205 | 1 | % | ||||||||||||||||
| Depreciation and amortization from discontinued operations |
3 | 4 | (25 | )% | 11 | 14 | (21 | )% | ||||||||||||||||
| Other adjustments: |
||||||||||||||||||||||||
| Business acquisition and integration expenses and purchase accounting inventory adjustments |
1 | 5 | 11 | 19 | ||||||||||||||||||||
| EBITDA from discontinued operations |
(9 | ) | (19 | ) | (55 | ) | (68 | ) | ||||||||||||||||
| Fair value adjustments to Venator investment, net |
7 | 3 | 9 | 28 | ||||||||||||||||||||
| Loss on early extinguishment of debt |
— | — | — | 27 | ||||||||||||||||||||
| Certain legal and other settlements and related expenses |
1 | — | 15 | 10 | ||||||||||||||||||||
| Costs associated with the Albemarle Settlement, net |
1 | — | 3 | — | ||||||||||||||||||||
| Loss (gain) on sale of business/assets |
16 | — | 27 | (30 | ) | |||||||||||||||||||
| Income from transition services arrangements |
— | (2 | ) | (2 | ) | (6 | ) | |||||||||||||||||
| Certain nonrecurring information technology project implementation costs |
1 | 2 | 4 | 6 | ||||||||||||||||||||
| Amortization of pension and postretirement actuarial losses |
10 | 19 | 32 | 58 | ||||||||||||||||||||
| Plant incident remediation costs (credits) |
1 | 2 | (4 | ) | 3 | |||||||||||||||||||
| Restructuring, impairment and plant closing and transition costs(2) |
14 | — | 44 | 36 | ||||||||||||||||||||
| Adjusted EBITDA(1) |
$ | 270 | $ | 350 | (23 | )% | $ | 1,072 | $ | 925 | 16 | % | ||||||||||||
| Net cash provided by operating activities from continuing operations |
$ | 597 | $ | 186 | 221 | % | ||||||||||||||||||
| Net cash used in investing activities from continuing operations |
(942 | ) | (535 | ) | 76 | % | ||||||||||||||||||
| Net cash used in financing activities |
(139 | ) | (706 | ) | (80 | )% | ||||||||||||||||||
| Capital expenditures from continuing operations |
(186 | ) | (241 | ) | (23 | )% | ||||||||||||||||||
Huntsman Corporation
| Three months |
Three months |
|||||||||||||||||||||||
| ended |
ended |
|||||||||||||||||||||||
| September 30, 2022 |
September 30, 2021 |
|||||||||||||||||||||||
| Tax and |
Tax and |
|||||||||||||||||||||||
| Gross |
other(3) |
Net |
Gross |
other(3) |
Net |
|||||||||||||||||||
| Reconciliation of net income to adjusted net income |
||||||||||||||||||||||||
| Net income |
$ | 115 | $ | 225 | ||||||||||||||||||||
| Net income attributable to noncontrolling interests |
(15 | ) | (16 | ) | ||||||||||||||||||||
| Business acquisition and integration expenses and purchase accounting inventory adjustments |
$ | 1 | $ | (1 | ) | — | $ | 5 | $ | (2 | ) | 3 | ||||||||||||
| (Income) loss from discontinued operations(4) |
(9 | ) | 10 | 1 | (19 | ) | 13 | (6 | ) | |||||||||||||||
| Fair value adjustments to Venator investment, net |
7 | — | 7 | 3 | — | 3 | ||||||||||||||||||
| Certain legal and other settlements and related expenses |
1 | (1 | ) | — | — | — | — | |||||||||||||||||
| Costs associated with the Albemarle Settlement, net |
1 | (1 | ) | — | — | — | — | |||||||||||||||||
| Loss on sale of businesses/assets |
16 | (4 | ) | 12 | — | — | — | |||||||||||||||||
| Income from transition services arrangements |
— | — | — | (2 | ) | — | (2 | ) | ||||||||||||||||
| Certain nonrecurring information technology project implementation costs |
1 | — | 1 | 2 | — | 2 | ||||||||||||||||||
| Amortization of pension and postretirement actuarial losses |
10 | (2 | ) | 8 | 19 | (4 | ) | 15 | ||||||||||||||||
| Plant incident remediation costs |
1 | — | 1 | 2 | — | 2 | ||||||||||||||||||
| Restructuring, impairment and plant closing and transition costs(2) |
14 | (3 | ) | 11 | — | — | — | |||||||||||||||||
| Adjusted net income(1) |
$ | 141 | $ | 226 | ||||||||||||||||||||
| Weighted average shares-basic |
197.7 | 219.4 | ||||||||||||||||||||||
| Weighted average shares-diluted |
199.2 | 221.3 | ||||||||||||||||||||||
| Basic net income attributable to Huntsman Corporation per share: |
||||||||||||||||||||||||
| Income from continuing operations |
$ | 0.52 | $ | 0.93 | ||||||||||||||||||||
| Income from discontinued operations |
(0.01 | ) | 0.02 | |||||||||||||||||||||
| Net income |
$ | 0.51 | $ | 0.95 | ||||||||||||||||||||
| Diluted net income attributable to Huntsman Corporation per share: |
||||||||||||||||||||||||
| Income from continuing operations |
$ | 0.51 | $ | 0.92 | ||||||||||||||||||||
| Income from discontinued operations |
(0.01 | ) | 0.02 | |||||||||||||||||||||
| Net income |
$ | 0.50 | $ | 0.94 | ||||||||||||||||||||
| Other non-GAAP measures: |
||||||||||||||||||||||||
| Diluted adjusted net income per share(1) |
$ | 0.71 | $ | 1.02 | ||||||||||||||||||||
| Nine months |
Nine months |
|||||||||||||||||||||||
| ended |
ended |
|||||||||||||||||||||||
| September 30, 2022 |
September 30, 2021 |
|||||||||||||||||||||||
| Tax and |
Tax and |
|||||||||||||||||||||||
| Gross |
other(3) |
Net |
Gross |
other(3) |
Net |
|||||||||||||||||||
| Reconciliation of net income to adjusted net income |
||||||||||||||||||||||||
| Net income |
$ | 597 | $ | 497 | ||||||||||||||||||||
| Net income attributable to noncontrolling interests |
(46 | ) | (49 | ) | ||||||||||||||||||||
| Business acquisition and integration expenses and purchase accounting inventory adjustments |
$ | 11 | $ | (3 | ) | 8 | $ | 19 | $ | (4 | ) | 15 | ||||||||||||
| Income from discontinued operations(4) |
(55 | ) | 25 | (30 | ) | (68 | ) | 32 | (36 | ) | ||||||||||||||
| Fair value adjustments to Venator investment, net |
9 | — | 9 | 28 | — | 28 | ||||||||||||||||||
| Loss on early extinguishment of debt |
— | — | — | 27 | (6 | ) | 21 | |||||||||||||||||
| Certain legal and other settlements and related expenses |
15 | (4 | ) | 11 | 10 | (3 | ) | 7 | ||||||||||||||||
| Costs associated with the Albemarle Settlement, net |
3 | (1 | ) | 2 | — | — | — | |||||||||||||||||
| Loss (gain) on sale of businesses/assets |
27 | (6 | ) | 21 | (30 | ) | 4 | (26 | ) | |||||||||||||||
| Income from transition services arrangements |
(2 | ) | — | (2 | ) | (6 | ) | 1 | (5 | ) | ||||||||||||||
| Certain nonrecurring information technology project implementation costs |
4 | (1 | ) | 3 | 6 | (1 | ) | 5 | ||||||||||||||||
| Amortization of pension and postretirement actuarial losses |
32 | (7 | ) | 25 | 56 | (13 | ) | 43 | ||||||||||||||||
| Plant incident remediation (credits) costs |
(4 | ) | 1 | (3 | ) | 3 | — | 3 | ||||||||||||||||
| Restructuring, impairment and plant closing and transition costs(2) |
44 | (11 | ) | 33 | 36 | (8 | ) | 28 | ||||||||||||||||
| Adjusted net income(1) |
$ | 628 | $ | 531 | ||||||||||||||||||||
| Weighted average shares-basic |
205.2 | 220.2 | ||||||||||||||||||||||
| Weighted average shares-diluted |
207.2 | 222.2 | ||||||||||||||||||||||
| Basic net income attributable to Huntsman Corporation per share: |
||||||||||||||||||||||||
| Income from continuing operations |
$ | 2.54 | $ | 1.87 | ||||||||||||||||||||
| Income from discontinued operations |
0.15 | 0.16 | ||||||||||||||||||||||
| Net income |
$ | 2.69 | $ | 2.03 | ||||||||||||||||||||
| Diluted net income attributable to Huntsman Corporation per share: |
||||||||||||||||||||||||
| Income from continuing operations |
$ | 2.52 | $ | 1.86 | ||||||||||||||||||||
| Income from discontinued operations |
0.14 | 0.16 | ||||||||||||||||||||||
| Net income |
$ | 2.66 | $ | 2.02 | ||||||||||||||||||||
| Other non-GAAP measures: |
||||||||||||||||||||||||
| Diluted adjusted net income per share(1) |
$ | 3.03 | $ | 2.39 | ||||||||||||||||||||
| Net cash provided by operating activities from continuing operations |
$ | 595 | $ | 182 | ||||||||||||||||||||
| Capital expenditures from continuing operations |
(186 | ) | (241 | ) | ||||||||||||||||||||
| Free cash flow from continuing operations(1) |
$ | 409 | $ | (59 | ) | |||||||||||||||||||
| Effective tax rate |
21 | % | 18 | % | ||||||||||||||||||||
| Impact of non-GAAP adjustments(5) |
1 | % | — | |||||||||||||||||||||
| Adjusted effective tax rate(1) |
22 | % | 18 | % | ||||||||||||||||||||
| Other cash flow measures: |
||||||||||||||||||||||||
| Taxes paid on sale of business(6) |
$ | — | $ | (3 | ) | |||||||||||||||||||
| Cash received from the Albemarle Settlement, net(7) |
78 | — | ||||||||||||||||||||||
NM—Not meaningful
| (1) |
See “—Non-GAAP Financial Measures.” |
| (2) |
Includes costs associated with transition activities related primarily to our Corporate program to optimize our global approach to leverage shared services capabilities. |
| (3) |
The income tax impacts, if any, are computed on the pre-tax adjustments using a with and without approach. |
| (4) |
In addition to income tax impacts, this adjusting item is also impacted by depreciation and amortization expense and interest expense. |
| (5) | For details regarding the tax impacts of our non-GAAP adjustments, please see the reconciliation of our net income to adjusted net income noted above. |
| (6) | Represents the taxes paid in the second quarter of 2021 in connection with the earnout provision achieved under the terms of the sales agreement of the India-based DIY business. For more information, see “Note 4. Discontinued Operations and Business Dispositions—Sale of India-Based Do-It-Yourself Consumer Adhesives Business” to our condensed consolidated financial statements. |
| (7) | Represents cash received of $332.5 million, net of legal fees and cash taxes paid of approximately $255 million. |
Non-GAAP Financial Measures
Our condensed consolidated financial statements are prepared in accordance with GAAP, which we supplement with certain non-GAAP financial information. These non-GAAP measures should not be considered in isolation or as a substitute for the related GAAP measures, and other companies may define such measures differently. We encourage investors to review our financial statements and the reconciliation of the non-GAAP financial measures to the most directly comparable GAAP financial measures in their entirety and not to rely on any single financial measure. These non-GAAP measures exclude the impact of certain income and expenses that we do not believe are indicative of our core operating results.
Adjusted EBITDA
Our management uses adjusted EBITDA to assess financial performance. Adjusted EBITDA is defined as net income of Huntsman Corporation or Huntsman International, as appropriate, before interest, income tax, depreciation and amortization, net income attributable to noncontrolling interests and certain Corporate and other items, as well as eliminating the following adjustments: (a) business acquisition and integration expenses and purchase accounting inventory adjustments; (b) EBITDA from discontinued operations; (c) fair value adjustments to Venator investment, net; (d) loss on early extinguishment of debt; (e) certain legal and other settlements and related expenses; (f) costs associated with the Albemarle Settlement, net; (g) loss (gain) on sale of business/assets; (h) income from transition services arrangements related to the sale of our Chemical Intermediates Businesses to Indorama; (i) certain nonrecurring information technology project implementation costs; (j) amortization of pension and postretirement actuarial losses; (k) plant incident remediation (credits) costs; and (l) restructuring, impairment and plant closing and transition costs. We believe that net income of Huntsman Corporation or Huntsman International, as appropriate, is the performance measure calculated and presented in accordance with U.S. GAAP that is most directly comparable to adjusted EBITDA.
We believe adjusted EBITDA is useful to investors in assessing the businesses’ ongoing financial performance and provides improved comparability between periods through the exclusion of certain items that management believes are not indicative of the businesses’ operational profitability and that may obscure underlying business results and trends. However, this measure should not be considered in isolation or viewed as a substitute for net income of Huntsman Corporation or Huntsman International, as appropriate, or other measures of performance determined in accordance with U.S. GAAP. Moreover, adjusted EBITDA as used herein is not necessarily comparable to other similarly titled measures of other companies due to potential inconsistencies in the methods of calculation. Our management believes this measure is useful to compare general operating performance from period to period and to make certain related management decisions. Adjusted EBITDA is also used by securities analysts, lenders and others in their evaluation of different companies because it excludes certain items that can vary widely across different industries or among companies within the same industry. For example, interest expense can be highly dependent on a company’s capital structure, debt levels and credit ratings. Therefore, the impact of interest expense on earnings can vary significantly among companies. In addition, the tax positions of companies can vary because of their differing abilities to take advantage of tax benefits and because of the tax policies of the various jurisdictions in which they operate. As a result, effective tax rates and tax expense can vary considerably among companies. Finally, companies employ productive assets of different ages and utilize different methods of acquiring and depreciating such assets. This can result in considerable variability in the relative costs of productive assets and the depreciation and amortization expense among companies.
Nevertheless, our management recognizes that there are material limitations associated with the use of adjusted EBITDA in the evaluation of our Company as compared to net income of Huntsman Corporation or Huntsman International, as appropriate, which reflects overall financial performance. For example, we have borrowed money in order to finance our operations and interest expense is a necessary element of our costs and ability to generate revenue. Our management compensates for the limitations of using adjusted EBITDA by using this measure to supplement U.S. GAAP results to provide a more complete understanding of the factors and trends affecting the business rather than U.S. GAAP results alone.
Adjusted Net Income
Adjusted net income is computed by eliminating the after-tax amounts related to the following from net income attributable to Huntsman Corporation: (a) business acquisition and integration expenses and purchase accounting inventory adjustments; (b) income from discontinued operations; (c) fair value adjustments to Venator investment, net; (d) loss on early extinguishment of debt; (e) certain legal and other settlements and related expenses; (f) costs associated with the Albemarle Settlement, net; (g) gain on sale of business/assets; (h) income from transition services arrangements related to the sale of our Chemical Intermediates Businesses to Indorama; (i) certain nonrecurring information technology project implementation costs; (j) amortization of pension and postretirement actuarial losses; (k) plant incident remediation (credits) costs; and (l) restructuring, impairment and plant closing and transition costs. Basic adjusted net income per share excludes dilution and is computed by dividing adjusted net income by the weighted average number of shares outstanding during the period. Adjusted diluted net income per share reflects all potential dilutive common shares outstanding during the period and is computed by dividing adjusted net income by the weighted average number of shares outstanding during the period increased by the number of additional shares that would have been outstanding as dilutive securities. Adjusted net income and adjusted net income per share amounts are presented solely as supplemental information.
We believe adjusted net income is useful to investors in assessing the businesses’ ongoing financial performance and provides improved comparability between periods through the exclusion of certain items that management believes are not indicative of the businesses’ operational profitability and that may obscure underlying business results and trends.
Free Cash Flow
We believe free cash flow is an important indicator of our liquidity as it measures the amount of cash we generate. Management internally uses a free cash flow measure: (a) to evaluate our liquidity, (b) evaluate strategic investments, (c) plan stock buyback and dividend levels and (d) evaluate our ability to incur and service debt.
Adjusted Effective Tax Rate
We believe that the effective tax rate of Huntsman Corporation or Huntsman International, as appropriate, is the performance measure calculated and presented in accordance with U.S. GAAP that is most directly comparable to adjusted effective tax rate. We believe our adjusted effective tax rate provides improved comparability between periods through the exclusion of certain items, such as, business acquisition and integration expenses and purchase accounting inventory adjustments, certain legal and other settlements and related expenses, gains on sale of businesses/assets and certain tax only items, including tax law changes not yet enacted, that we believe are not indicative of the businesses’ operational profitability and that may obscure underlying business results and trends.
Our forward-looking adjusted effective tax rate is calculated based on our forecast effective tax rate, and the range of our forward-looking adjusted effective tax rate equals the range of our forecast effective tax rate. We disclose forward-looking adjusted effective tax rate because we cannot adequately forecast certain items and events that may or may not impact us in the near future, such as business acquisition and integration expenses and purchase accounting inventory adjustments, certain legal and other settlements and related expenses, gains on sale of businesses/assets and certain tax only items, including tax law changes not yet enacted. Each of such adjustment has not yet occurred, is out of our control and/or cannot be reasonably predicted. In our view, our forward-looking adjusted effective tax rate represents the forecast effective tax rate on our underlying business operations but does not reflect any adjustments related to the items noted above that may occur and can cause our effective tax rate to differ.
Three Months Ended September 30, 2022 Compared with Three Months Ended September 30, 2021
As discussed in “Note 4. Discontinued Operations and Business Dispositions—Sale of Textile Effects Business” to our condensed consolidated financial statements, the results from continuing operations primarily exclude the results of our Textile Effects Business for all periods presented. For the three months ended September 30, 2022, income from continuing operations attributable to Huntsman Corporation was $101 million, a decrease of $102 million from $203 million in the 2021 period. For the three months ended September 30, 2022, income from continuing operations attributable to Huntsman International was $100 million, a decrease of $103 million from $203 million in the 2021 period. The decreases noted above were the result of the following items:
| ● |
Revenues for the three months ended September 30, 2022 decreased by $86 million, or 4%, as compared with the 2021 period. The decrease was primarily due to lower sales volumes in all our segments, partially offset by higher average selling prices in all our segments. See “—Segment Analysis” below. |
| ● |
Gross profit for the three months ended September 30, 2022 decreased by $88 million, or 20%, as compared with the 2021 period. The decrease resulted primarily from lower gross profits in our Polyurethanes segment. See “—Segment Analysis” below. |
| ● | Our operating expenses, net and the operating expenses, net of Huntsman International for the three months ended September 30, 2022 decreased by $9 million and $7 million, respectively, or 4% and 3%, respectively, as compared with the 2021 period, primarily related to a decrease in selling, general and administrative expenses. |
| ● |
Restructuring, impairment and plant closing costs were $12 million for the three months ended September 30, 2022 as compared with a credit of $1 million in the 2021 period. For further information, see “Note 7. Restructuring, Impairment and Plant Closing Costs” to our condensed consolidated financial statements. |
| ● | Equity in income of investment in unconsolidated affiliates for the three months ended September 30, 2022 decreased to $21 million from $34 million in the 2021 period, primarily related to a decrease in income at our PO/MTBE joint venture in China, in which we hold a 49% interest. |
| ● |
Fair value adjustments to our investment in Venator and the related option to sell our remaining Venator shares, net was a net loss of $7 million for the three months ended September 30, 2022 as compared with a net loss of $3 million in the 2021 period. For further information, see “Note 4. Discontinued Operations and Business Dispositions—Sale of Venator Interest” to our condensed consolidated financial statements. |
| ● |
Our income tax expense for the three months ended September 30, 2022 decreased to $30 million from $34 million in the 2021 period. The income tax expense of Huntsman International for the three months ended September 30, 2022 decreased to $30 million from $35 million in the 2021 period. The decrease in income tax expense was primarily due to the decrease in pretax income, exclusive of the fair value adjustments to our investment in Venator. Our income tax expense is significantly affected by the mix of income and losses in the tax jurisdictions in which we operate, as impacted by the presence of valuation allowances in certain tax jurisdictions. For further information, see “Note 18. Income Taxes” to our condensed consolidated financial statements. |
| Three months |
Percent |
|||||||||||
| ended |
change |
|||||||||||
| September 30, |
favorable |
|||||||||||
| (Dollars in millions) |
2022 |
2021 |
(unfavorable) |
|||||||||
| Revenues |
||||||||||||
| Polyurethanes |
$ | 1,257 | $ | 1,403 | (10 | )% | ||||||
| Performance Products |
434 | 399 | 9 | % | ||||||||
| Advanced Materials |
328 | 304 | 8 | % | ||||||||
| Total reportable segments’ revenue |
2,019 | 2,106 | (4 | )% | ||||||||
| Intersegment eliminations |
(8 | ) | (9 | ) | NM | |||||||
| Total |
$ | 2,011 | $ | 2,097 | (4 | )% | ||||||
| Huntsman Corporation |
||||||||||||
| Segment adjusted EBITDA(1) |
||||||||||||
| Polyurethanes |
$ | 138 | $ | 246 | (44 | )% | ||||||
| Performance Products |
110 | 103 | 7 | % | ||||||||
| Advanced Materials |
58 | 48 | 21 | % | ||||||||
| Total reportable segments’ adjusted EBITDA |
306 | 397 | (23 | )% | ||||||||
| Corporate and other |
(35 | ) | (48 | ) | 27 | % | ||||||
| Total |
$ | 271 | $ | 349 | (22 | )% | ||||||
| Huntsman International |
||||||||||||
| Segment adjusted EBITDA(1) |
||||||||||||
| Polyurethanes |
$ | 138 | $ | 246 | (44 | )% | ||||||
| Performance Products |
110 | 103 | 7 | % | ||||||||
| Advanced Materials |
58 | 48 | 21 | % | ||||||||
| Total reportable segments’ adjusted EBITDA |
306 | 397 | (23 | )% | ||||||||
| Corporate and other |
(36 | ) | (47 | ) | 23 | % | ||||||
| Total |
$ | 270 | $ | 350 | (23 | )% | ||||||
NM—Not meaningful
| (1) |
For further information, including reconciliation of total reportable segments’ adjusted EBITDA to income from continuing operations before income taxes of Huntsman Corporation or Huntsman International, as appropriate, see “Note 20. Operating Segment Information” to our condensed consolidated financial statements. |
| Three months ended September 30, 2022 vs 2021 |
||||||||||||||||
| Average selling price(1) |
||||||||||||||||
| Local |
Foreign currency |
Mix & |
Sales |
|||||||||||||
| currency |
translation impact |
other |
volumes(2) |
|||||||||||||
| Period-over-period increase (decrease) |
||||||||||||||||
| Polyurethanes |
12 | % | (5 | )% | (1 | )% | (16 | )% | ||||||||
| Performance Products |
23 | % | (4 | )% | 3 | % | (13 | )% | ||||||||
| Advanced Materials |
16 | % | (7 | )% | 15 | % | (16 | )% | ||||||||
| Three months ended September 30, 2022 vs June 30, 2022 |
||||||||||||||||
| Average selling price(1) |
||||||||||||||||
| Local |
Foreign currency |
Mix & |
Sales |
|||||||||||||
| currency |
translation impact |
other |
volumes(2) |
|||||||||||||
| Period-over-period increase (decrease) |
||||||||||||||||
| Polyurethanes |
(1 | )% | (2 | )% | — | (4 | )% | |||||||||
| Performance Products |
(1 | )% | (1 | )% | 1 | % | (11 | )% | ||||||||
| Advanced Materials |
2 | % | (3 | )% | 2 | % | (3 | )% | ||||||||
| (1) |
Excludes revenues from tolling arrangements, byproducts and raw materials. |
| (2) |
Excludes sales volumes of byproducts and raw materials. |
Polyurethanes
The decrease in revenues in our Polyurethanes segment for the three months ended September 30, 2022 compared to the same period of 2021 was primarily due to lower sales volumes and the negative impact of weaker major international currencies against the U.S. dollar, partially offset by higher MDI average selling prices. Sales volumes decreased primarily due to lower demand, particularly in our European and construction markets. The decrease in segment adjusted EBITDA was primarily due to lower sales volumes, lower MDI margins in Europe and Asia, the negative impact of weaker major international currencies against the U.S. dollar and lower equity earnings from our minority-owned joint venture in China, partially offset by higher MDI margins in the Americas and lower fixed costs.
Performance Products
The increase in revenues in our Performance Products segment for the three months ended September 30, 2022 compared to the same period of 2021 was primarily due to higher average selling prices, partially offset by lower sales volumes. Average selling prices increased primarily due to commercial excellence programs and in response to an increase in raw material costs. Sales volumes decreased primarily due to a shift in business strategy as well as lower demand, particularly in Europe. The increase in segment adjusted EBITDA was primarily due to increased revenues and margins, partially offset by higher costs.
Advanced Materials
The increase in revenues in our Advanced Materials segment for the three months ended September 30, 2022 compared to the same period of 2021 was primarily due to higher average selling prices, partially offset by lower sales volumes. Average selling prices increased largely in response to higher raw material, energy and logistics costs as well as improved sales mix. Sales volumes decreased primarily due to deselection of lower margin business. The increase in segment adjusted EBITDA was primarily due to higher sales prices and improved sales mix.
Corporate and other
Corporate and other includes unallocated corporate overhead, unallocated foreign currency exchange gains and losses, LIFO inventory valuation reserve adjustments, loss on early extinguishment of debt, unallocated restructuring, impairment and plant closing costs, nonoperating income and expense and gains and losses on the disposition of corporate assets. For the three months ended September 30, 2022, adjusted EBITDA from Corporate and other for Huntsman Corporation was a loss of $35 million as compared to a loss of $48 million for the same period of 2021. For the three months ended September 30, 2022, adjusted EBITDA from Corporate and other for Huntsman International was a loss of $36 million as compared to a loss of $47 million for the same period of 2021. The increase in adjusted EBITDA from Corporate and other resulted primarily from an increase in unallocated foreign currency exchange gains and a decrease in corporate overhead costs and LIFO valuation losses.
Nine Months Ended September 30, 2022 Compared with Nine Months Ended September 30, 2021
As discussed in “Note 4. Discontinued Operations and Business Dispositions—Sale of Textile Effects Business” to our condensed consolidated financial statements, the results from continuing operations primarily exclude the results of our Textile Effects Business for all periods presented. For the nine months ended September 30, 2022, income from continuing operations attributable to Huntsman Corporation was $521 million, an increase of $109 million from $412 million in the 2021 period. For the nine months ended September 30, 2022, income from continuing operations attributable to Huntsman International was $524 million, an increase of $109 million from $415 million in the 2021 period. The increases noted above were the result of the following items:
| ● |
Revenues for the nine months ended September 30, 2022 increased by $815 million, or 15%, as compared with the 2021 period. The increase was primarily due to higher average selling prices in all our segments, partially offset by lower sales volumes in all our segments. See “—Segment Analysis” below. |
| ● |
Gross profit for the nine months ended September 30, 2022 increased by $195 million, or 17%, as compared with the 2021 period. The increase resulted primarily from higher gross profits in our Performance Products and Advanced Materials segments. See “—Segment Analysis” below. |
| ● | Our operating expenses, net and the operating expenses, net of Huntsman International for the nine months ended September 30, 2022 increased by $24 million and $26 million, respectively, or 4% for both, as compared with the 2021 period, primarily related to the gain on sale of the India-based DIY business pursuant to an earnout provision in the second quarter of 2021 and an increase in legal expenses and selling, general and administrative expenses. |
| ● | Interest expense, net for the nine months ended September 30, 2022 decreased by $6 million, or 12%, as compared with the 2021 period, primarily related to the redemption in full of our 2022 Senior Notes in the first half of 2021. For further information, see “Note 8. Debt—Direct and Subsidiary Debt—Senior Notes” to our condensed consolidated financial statements. |
| ● | Equity in income of investment in unconsolidated affiliates for the nine months ended September 30, 2022 decreased to $55 million from $118 million in the 2021 period, primarily related to a decrease in income at our PO/MTBE joint venture in China, in which we hold a 49% interest. |
| ● |
Fair value adjustments to our investment in Venator and the related option to sell our remaining Venator shares, net was a net loss of $9 million for the nine months ended September 30, 2022 as compared with a net loss of $28 million in the 2021 period. For further information, see “Note 4. Discontinued Operations and Business Dispositions—Sale of Venator Interest” to our condensed consolidated financial statements. |
| ● | Loss on early extinguishment of debt was nil for the nine months ended September 30, 2022 as compared with $27 million in the 2021 period, primarily due to the full redemption of our 2022 Senior Notes in the second quarter of 2021. For further information, see “Note 8. Debt—Direct and Subsidiary Debt—Senior Notes” to our condensed consolidated financial statements. |
| ● |
Our income tax expense for the nine months ended September 30, 2022 increased to $155 million from $101 million in the 2021 period. The income tax expense of Huntsman International for the nine months ended September 30, 2022 increased to $156 million from $102 million in the 2021 period. The increase in income tax expense was primarily due to the increase in pretax income, exclusive of the fair value adjustments to our investment in Venator. Our income tax expense is significantly affected by the mix of income and losses in the tax jurisdictions in which we operate, as impacted by the presence of valuation allowances in certain tax jurisdictions. For further information, see “Note 18. Income Taxes” to our condensed consolidated financial statements. |
| Nine months |
Percent |
|||||||||||
| ended |
Change |
|||||||||||
| September 30, |
Favorable |
|||||||||||
| 2022 |
2021 |
(Unfavorable) |
||||||||||
| Revenues |
||||||||||||
| Polyurethanes |
$ | 3,996 | $ | 3,626 | 10 | % | ||||||
| Performance Products |
1,406 | 1,075 | 31 | % | ||||||||
| Advanced Materials |
999 | 881 | 13 | % | ||||||||
| Total reportable segments’ revenue |
6,401 | 5,582 | 15 | % | ||||||||
| Intersegment eliminations |
(28 | ) | (24 | ) | NM | |||||||
| Total |
$ | 6,373 | $ | 5,558 | 15 | % | ||||||
| Huntsman Corporation |
||||||||||||
| Segment adjusted EBITDA(1) |
||||||||||||
| Polyurethanes |
$ | 591 | $ | 661 | (11 | )% | ||||||
| Performance Products |
408 | 254 | 61 | % | ||||||||
| Advanced Materials |
192 | 150 | 28 | % | ||||||||
| Total reportable segments’ adjusted EBITDA |
1,191 | 1,065 | 12 | % | ||||||||
| Corporate and other |
(123 | ) | (146 | ) | 16 | % | ||||||
| Total |
$ | 1,068 | $ | 919 | 16 | % | ||||||
| Huntsman International |
||||||||||||
| Segment adjusted EBITDA(1) |
||||||||||||
| Polyurethanes |
$ | 591 | $ | 661 | (11 | )% | ||||||
| Performance Products |
408 | 254 | 61 | % | ||||||||
| Advanced Materials |
192 | 150 | 28 | % | ||||||||
| Total reportable segments’ adjusted EBITDA |
1,191 | 1,065 | 12 | % | ||||||||
| Corporate and other |
(119 | ) | (140 | ) | 15 | % | ||||||
| Total |
$ | 1,072 | $ | 925 | 16 | % | ||||||
NM—Not meaningful
| (1) |
For further information, including reconciliation of total reportable segments’ adjusted EBITDA to income from continuing operations before income taxes of Huntsman Corporation or Huntsman International, as appropriate, see “Note 20. Operating Segment Information” to our condensed consolidated financial statements. |
| Nine months ended September 30, 2022 vs September 30, 2021 |
||||||||||||||||
| Average Selling Price(1) |
||||||||||||||||
| Local |
Foreign Currency |
Mix & |
Sales |
|||||||||||||
| Currency |
Translation Impact |
Other |
Volumes(2) |
|||||||||||||
| Period-Over-Period (Decrease) Increase |
||||||||||||||||
| Polyurethanes |
21 | % | (4 | )% | (1 | )% | (6 | )% | ||||||||
| Performance Products |
34 | % | (3 | )% | 4 | % | (4 | )% | ||||||||
| Advanced Materials |
19 | % | (5 | )% | 16 | % | (17 | )% | ||||||||
| (1) |
Excludes revenues from tolling arrangements, byproducts and raw materials. |
| (2) |
Excludes sales volumes of byproducts and raw materials. |
Polyurethanes
The increase in revenues in our Polyurethanes segment for the nine months ended September 30, 2022 compared to the same period of 2021 was primarily due to higher MDI average selling prices, partially offset by lower sales volumes and the negative impact of weaker major international currencies against the U.S. dollar. Sales volumes decreased primarily due to lower demand, particularly in our European and construction markets. The decrease in segment adjusted EBITDA was primarily due to lower equity earnings from our minority-owned joint venture in China, lower sales volumes and the negative impact of weaker major international currencies against the U.S. dollar, partially offset by higher margins and lower fixed costs.
Performance Products
The increase in revenues in our Performance Products segment for the nine months ended September 30, 2022 compared to the same period of 2021 was primarily due to higher average selling prices, partially offset by lower sales volumes. Average selling prices increased primarily due to commercial excellence programs and in response to an increase in raw material costs. Sales volumes decreased primarily due to a shift in business strategy as well as lower demand, particularly in Europe. The increase in segment adjusted EBITDA was primarily due to increased revenues and margins, partially offset by higher costs.
Advanced Materials
The increase in revenues in our Advanced Materials segment for the nine months ended September 30, 2022 compared to the same period of 2021 was primarily due to higher average selling prices, partially offset by lower sales volumes. Average selling prices increased largely in response to higher raw material, energy and logistics costs as well as improved sales mix. Sales volumes decreased primarily due to deselection of lower margin business. The increase in segment adjusted EBITDA was primarily due to higher sales prices and improved sales mix.
Corporate and other
Corporate and other includes unallocated corporate overhead, unallocated foreign currency exchange gains and losses, LIFO inventory valuation reserve adjustments, loss on early extinguishment of debt, unallocated restructuring, impairment and plant closing costs, nonoperating income and expense and gains and losses on the disposition of corporate assets. For the nine months ended September 30, 2022, adjusted EBITDA from Corporate and other for Huntsman Corporation was a loss of $123 million as compared to a loss of $146 million for the same period of 2021. For the nine months ended September 30, 2022, adjusted EBITDA from Corporate and other for Huntsman International was a loss of $119 million as compared to a loss of $140 million for the same period of 2021. The increase in adjusted EBITDA from Corporate and other resulted primarily from an increase in unallocated foreign currency exchange gains and a decrease in corporate overhead costs and LIFO valuation losses.
Liquidity and Capital Resources
The following is a discussion of our liquidity and capital resources and does not include separate information with respect to Huntsman International in accordance with General Instructions H(1)(a) and (b) of Form 10-Q.
Cash Flows for the Nine Months Ended September 30, 2022 Compared with the Nine Months Ended September 30, 2021
Net cash provided by operating activities from continuing operations for the nine months ended September 30, 2022 and 2021 was $595 million and $182 million, respectively. The increase in net cash provided by operating activities from continuing operations during the nine months ended September 30, 2022 compared with the same period in 2021 was primarily attributable to increased operating income as described in “—Results of Operations” above for the nine months ended September 30, 2022 as compared with the same period of 2021 as well as a net cash inflow of $143 million related to changes in operating assets and liabilities.
Net cash used in investing activities from continuing operations for the nine months ended September 30, 2022 and 2021 was $176 million and $430 million, respectively. During the nine months ended September 30, 2022 and 2021, we paid $186 million and $241 million for capital expenditures, respectively. During the nine months ended September 30, 2021, we received $43 million for the sale of businesses, primarily due to the receipt of $28 million pursuant to an earnout provision in connection with the sale of the India-based DIY business, and we paid $245 million for the acquisition of businesses, primarily related to approximately $242 million paid for the Gabriel Acquisition, net of cash acquired.
Net cash used in financing activities for the nine months ended September 30, 2022 and 2021 was $905 million and $809 million, respectively. During the nine months ended September 30, 2022 and 2021, we paid $755 million and $102 million for repurchases of our common stock, respectively. During the nine months ended September 30, 2021, we redeemed in full €445 million (approximately $541 million) in aggregate principal amount of our 2021 Senior Notes, and we redeemed in full $400 million in aggregate principal amount of our 2022 Senior Notes. Additionally, during the nine months ended September 30, 2021, we issued $400 million in aggregate principal amount of our 2031 Senior Notes and received borrowings of approximately 104 million SAR (approximately $27 million) related to funding on a new term loan facility of our consolidated 50%-owned joint venture, AAC. See “Note 8. Debt—Direct and Subsidiary Debt—Variable Interest Entity Debt” to our condensed consolidated financial statements.
Free cash flow from continuing operations for the nine months ended September 30, 2022 and 2021 was a source of cash of $409 million and a use of cash of $59 million, respectively. The increase in free cash flow was primarily attributable to the increase in cash provided by operating activities from continuing operations as well as a decrease in cash used for capital expenditures during the nine months ended September 30, 2022 as compared with the same period in 2021.
Changes in Financial Condition
The following information summarizes our working capital position (dollars in millions):
| September 30, |
December 31, |
(Decrease) |
Percent |
|||||||||||||
| 2022 |
2021 |
Increase |
Change |
|||||||||||||
| Cash and cash equivalents |
$ | 515 | $ | 1,041 | $ | (526 | ) | (51 | )% | |||||||
| Accounts and notes receivable, net |
1,004 | 1,015 | (11 | ) | (1 | )% | ||||||||||
| Inventories |
1,079 | 1,038 | 41 | 4 | % | |||||||||||
| Receivable associated with the Albemarle Settlement |
— | 333 | (333 | ) | (100 | )% | ||||||||||
| Other current assets |
115 | 155 | (40 | ) | (26 | )% | ||||||||||
| Current assets held for sale(1) |
483 | 346 | 137 | 40 | % | |||||||||||
| Total current assets |
3,196 | 3,928 | (732 | ) | (19 | )% | ||||||||||
| Accounts payable |
898 | 1,114 | (216 | ) | (19 | )% | ||||||||||
| Accrued liabilities |
393 | 713 | (320 | ) | (45 | )% | ||||||||||
| Current portion of debt |
12 | 12 | — | — | ||||||||||||
| Current operating lease liabilities |
50 | 49 | 1 | 2 | % | |||||||||||
| Current liabilities held for sale(1) |
242 | 163 | 79 | 48 | % | |||||||||||
| Total current liabilities |
1,595 | 2,051 | (456 | ) | (22 | )% | ||||||||||
| Working capital |
$ | 1,601 | $ | 1,877 | $ | (276 | ) | (15 | )% | |||||||
| (1) |
Total assets and liabilities held for sale as of September 30, 2022 are classified as current because it is probable that the sale of our Textile Effects Business will close within a year. For more information see “Note 4. Discontinued Operations and Business Dispositions—Sale of Textile Effects Business” to our condensed consolidated financial statements. |
Our working capital decreased by $276 million as a result of the net impact of the following significant changes:
| ● |
The decrease in cash and cash equivalents of $526 million resulted from the matters identified on our condensed consolidated statements of cash flows. See also “—Cash Flows for the Nine Months Ended September 30, 2022 Compared with the Nine Months Ended September 30, 2021.” |
| ● |
Inventories increased by $41 million primarily due to higher inventory costs. |
| ● | Receivable associated with the arbitration award we won on October 28, 2021 in excess of $600 million against Albemarle Corporation (“Albemarle”) for fraud and breach of contract (the “Albemarle Settlement”) decreased to nil due to the receipt of the final arbitration award payment of $332.5 million during the second quarter of 2022. |
| ● | Other current assets decreased by $40 million primarily due to amortization of deferred charges related to insurance premiums. |
| ● |
Accounts payable decreased by $216 million primarily due to a decrease in non-trade payables related to insurance premiums and a reduction of capital accruals. |
| ● | Accrued liabilities decreased by $320 million primarily related to the payment of legal fees and cash taxes associated with the Albemarle Settlement and a decrease in accrued compensation costs and current income taxes payable. |
Direct and Subsidiary Debt
See “Note 8. Debt—Direct and Subsidiary Debt” to our condensed consolidated financial statements.
Debt Issuance Costs
See “Note 8. Debt—Direct and Subsidiary Debt—Debt Issuance Costs” to our condensed consolidated financial statements.
Revolving Credit Facility
See “Note 8. Debt—Direct and Subsidiary Debt—Revolving Credit Facility” to our condensed consolidated financial statements.
A/R Programs
See “Note 8. Debt—Direct and Subsidiary Debt—A/R Programs” to our condensed consolidated financial statements.
Senior Notes
See “Note 8. Debt—Direct and Subsidiary Debt—Senior Notes” to our condensed consolidated financial statements.
Variable Interest Entity Debt
See “Note 8. Debt—Direct and Subsidiary Debt—Variable Interest Entity Debt” to our condensed consolidated financial statements.
Compliance with Covenants
See “Note 8. Debt—Compliance with Covenants” to our condensed consolidated financial statements.
We depend upon our cash, Revolving Credit Facility, A/R Programs and other debt instruments to provide liquidity for our operations and working capital needs. As of September 30, 2022, we had $1,946 million of combined cash and unused borrowing capacity, consisting of $515 million in cash, $1,189 million in availability under our Revolving Credit Facility and $242 million in availability under our A/R Programs. Our liquidity can be significantly impacted by various factors. The following matters are expected to have a significant impact on our liquidity:
Short-Term Liquidity
| ● |
Cash invested in our accounts receivable and inventory, net of accounts payable, was approximately $301 million for the nine months ended September 30, 2022, as reflected in our condensed consolidated statements of cash flows. We expect volatility in our working capital components to continue. |
| ● |
During 2022, we expect to spend approximately $280 million on capital expenditures. Our future expenditures include certain environmental, health and safety maintenance and upgrades; periodic maintenance and repairs applicable to major units of manufacturing facilities; expansions of our existing facilities; certain cost reduction projects; and certain information technology expenditures. We expect to fund capital expenditures with cash provided by operations. |
| ● |
During the nine months ended September 30, 2022, we made contributions to our pension and other postretirement benefit plans related to continuing operations of $35 million. During 2022, we expect to contribute an additional amount of approximately $10 million to these plans. |
| ● | During the nine months ended September 30, 2022, we repurchased 22,853,686 shares of our common stock for approximately $752 million, excluding commissions, under our share repurchase program. From October 1, 2022 through October 25, 2022, we repurchased an additional 1,539,537 shares of our common stock for approximately $40 million, excluding commissions. |
| ● | On October 28, 2021, we won an arbitration award in excess of $600 million against Albemarle. On November 4, 2021, Albemarle agreed to waive any appeal and pay $665 million, of which we received $332.5 million on December 2, 2021 and received a final payment of $332.5 million on May 2, 2022. We paid legal fees and cash taxes of approximately $255 million in the second quarter of 2022. |
| ● | On August 9, 2022, we entered into a definitive agreement to sell our Textile Effects Business to Archroma for a total enterprise value of $718 million, which includes the assumption of approximately $125 million in net underfunded pension liabilities as of December 31, 2021. We anticipate the transaction will close no later than the first half of 2023. |
Long-Term Liquidity
| ● | During 2020, management implemented cost realignment and synergy plans. In connection with these plans, we remain committed to achieving annualized cost savings and synergy benefits of approximately $140 million during 2023, as previously communicated. Associated with these plans, we expect net cash restructuring and integration costs, including capital expenditures, of approximately $115 million, of which we have spent approximately $102 million to date. |
| ● | During 2021, management announced additional cost realignment plans. In connection with these plans, we currently expect to achieve annualized cost savings of approximately $100 million by the end of 2023. Associated with these plans, we expect net cash restructuring and integration costs, including capital expenditures, of approximately $135 million through 2024, of which we have spent approximately $25 million to date. |
| ● |
In early November 2022, we announced our commitment and specific plans to further realign our cost structure beyond the current in-progress cost optimization programs with additional restructuring in Europe. The new program will include exiting and consolidating certain facilities, workforce relocation to lower cost locations and further personnel rationalization. In connection with this program, we expect to record restructuring expenses of approximately $50 million through 2023, and we have identified approximately $40 million of annualized cost savings to be achieved by the end of 2023. |
| ● | On February 14, 2022, our Board of Directors declared a $0.2125 per share cash dividend on our common stock. This represents a 13% increase from the previous dividend. |
| ● |
On April 29, 2022, a New Orleans jury awarded us approximately $94 million in our long-running court battle against Praxair/Linde, one of the industrial gas suppliers to our Geismar, Louisiana MDI manufacturing site. The case was filed after Praxair refused to properly maintain its own Geismar facility and then repeatedly failed to supply our requirements for industrial gas needed to manufacture MDI under long-term supply contracts that expired in 2013. After the court applies the appropriate amount of interest, we expect that total damages awarded to us will exceed $125 million. The award is subject to appeal, and as such, we have not yet recognized the award in our condensed consolidated statements of operations. |
| ● | On May 20, 2022, Huntsman International entered into the 2022 Revolving Credit Facility. Borrowings will bear interest at the rates specified in the credit agreement governing the 2022 Credit Facility, which will vary based on the type of loan and Huntsman International’s debt ratings. Under the credit agreement, the interest rate margin and the commitment fee rates are also subject to adjustments based on the Company’s performance on specified sustainability target thresholds with respect to annual percentage reduction in operational greenhouse gas emissions intensity and annual percentage reduction in water consumption intensity. Unless previously terminated in accordance with its terms, the credit agreement will mature in May 2027. Huntsman International may increase the 2022 Revolving Credit Facility commitments up to an additional $500 million, subject to the satisfaction of certain conditions. In connection with entering into the 2022 Revolving Credit Facility, Huntsman International terminated all commitments and repaid all obligations under its 2018 $1.2 billion senior unsecured credit facility. See “Note 8. Debt—Direct and Subsidiary Debt—Revolving Credit Facility” to our condensed consolidated financial statements. |
As of September 30, 2022, we had $12 million classified as current portion of debt, including debt at our variable interest entities of $10 million and certain other short-term facilities and scheduled amortization payments totaling $2 million. We intend to renew, repay or extend the majority of these short-term facilities in the next twelve months.
As of September 30, 2022, we had approximately $462 million of cash and cash equivalents held by our foreign subsidiaries, including our variable interest entities. We intend to use cash held in our foreign subsidiaries to fund our local operations. Nevertheless, we could repatriate cash as dividends, which dividends would generally not be subject to U.S. taxation as a result of the U.S. Tax Reform Act. However, such repatriation may potentially be subject to certain foreign withholding taxes.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to market risks, such as changes in interest rates, foreign exchange rates and commodity prices. From time to time, we enter into transactions, including transactions involving derivative instruments, to manage certain of these exposures. We also hedge our net investment in certain European operations. See “Note 9. Derivative Instruments and Hedging Activities” to our condensed consolidated financial statements.
ITEM 4. CONTROLS AND PROCEDURES
Our management, with the participation of our chief executive officer and chief financial officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of September 30, 2022. Based on this evaluation, our chief executive officer and chief financial officer have concluded that, as of September 30, 2022, our disclosure controls and procedures were effective, in that they ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is (1) recorded, processed, summarized and reported within the time periods specified in the Commission’s rules and forms and (2) accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure.
No changes to our internal control over financial reporting occurred during the quarter ended September 30, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act). However, we can only give reasonable assurance that our internal controls over financial reporting will prevent or detect material misstatements on a timely basis.
There have been no material developments with respect to the legal proceedings referenced in Part I, Item 3 of our Annual Report on Form 10-K for the year ended December 31, 2021.
For information regarding risk factors, see “Part I. Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2021. In addition to the risk factors noted in the Annual Report on Form 10-K, the following risk factor is applicable to us.
The proposed sale of our Textile Effects Business is contingent upon the satisfaction of a number of conditions, will require significant time and attention of our management and may have an adverse effect on us if not completed.
On August 9, 2022, we entered into a definitive agreement to sell our Textile Effects Business to Archroma for a total enterprise value of $718 million, which includes the assumption of approximately $125 million in net underfunded pension liabilities as of December 31, 2021. Completion of the proposed sale is subject to the satisfaction of various closing conditions, including but not limited to regulatory approvals. There can be no assurance that any of such conditions will be satisfied and that the proposed sale will be successfully completed. These or other unanticipated developments could delay or prevent the transaction from closing or cause it to occur on terms or conditions that are less favorable than anticipated, which could cause our common stock to experience negative reactions from the financial markets.
In pursuing the proposed sale, our ongoing businesses may be adversely affected, and we may be subject to certain risks and consequences, including, but not limited to, the following:
• execution of the proposed sale has required, and will continue to require, significant time and attention from management, which may postpone the execution of other initiatives that may have been beneficial to us;
• completion of the proposed sale will require strategic, structural and process realignment and restructuring actions within our operations, which could lead to a disruption of our operations, as well as the loss of, or inability to recruit, key personnel needed to operate and grow our businesses;
• completion of the proposed sale may require certain management and procedural redundancies as we prepare for closing, which may result in operating inefficiencies; and
• whether or not the proposed sale is completed, we may be responsible for certain costs and expenses, such as legal, accounting and other professional fees, which may be significant.
Any of these factors could have a material adverse effect on our financial condition, results of operations, cash flows and the price of our common stock.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
The following table provides information with respect to shares of our common stock that we repurchased as part of our share repurchase program and shares of restricted stock granted under our stock incentive plans that we withheld upon vesting to satisfy our tax withholding obligations during the three months ended September 30, 2022.
| Total number of |
Approximate dollar |
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| shares purchased |
value of shares that |
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| Total number |
Average |
as part of publicly |
may yet be purchased |
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| of shares |
price paid |
announced plans |
under the plans or |
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| purchased |
per share(1) |
or programs(2) |
programs(2) |
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| July 1 - July 31 |
1,944,359 | $ | 28.86 | 1,943,177 | $ | 1,342,000,000 | ||||||||||
| August 1 - August 31 |
3,815,850 | 29.37 | 3,814,930 | 1,230,000,000 | ||||||||||||
| September 1 - September 30 |
3,175,239 | 26.16 | 3,174,808 | 1,147,000,000 | ||||||||||||
| Total |
8,935,448 | 28.12 | 8,932,915 | |||||||||||||
| (1) | Represents net purchase price per share, exclusive of any fees or commissions. |
| (2) |
On October 26, 2021, our Board of Directors approved a new share repurchase program of $1 billion. In conjunction with the inception of this program, we retired our prior share repurchase program. On March 25, 2022, our Board of Directors increased the authorization of our existing share prepurchase program from $1 billion of repurchases to $2 billion. Similar to our prior share repurchase program, the share repurchase program will be supported by our free cash flow generation. Repurchases may be made in the open market, including through accelerated share repurchase programs, or in privately negotiated transactions, and repurchases may be commenced or suspended from time to time without prior notice. Shares of common stock acquired through the repurchase program are held in treasury at cost. During the third quarter of 2022, we repurchased 8,932,915 shares of our common stock for approximately $251 million, excluding commissions. |
See the Exhibit Index at the end of this Quarterly Report on Form 10-Q for exhibits filed with this report.
EXHIBIT INDEX
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Incorporated by Reference |
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Exhibit Description |
Form |
Exhibit |
Filing Date |
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| 2.1 | * | Equity and Asset Purchase Agreement, dated as of August 9, 2022, by and among Huntsman, Archroma, Archroma Germany and solely for purposes set forth in the Purchase Agreement, the Archroma Financing Party. | 8-K | 2.1 | August 9, 2022 | |||
| 31.1 |
** |
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
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| 31.2 |
** |
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
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| 32.1 |
** | Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
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| 32.2 |
** | Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
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| 101.INS |
** |
Inline XBRL Instance Document - The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document |
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| 101.SCH |
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Inline XBRL Taxonomy Extension Schema |
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| 101.CAL |
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Inline XBRL Taxonomy Extension Calculation Linkbase |
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| 101.LAB |
** |
Inline XBRL Taxonomy Extension Label Linkbase |
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| 101.PRE |
** |
Inline XBRL Taxonomy Extension Presentation Linkbase |
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| 101.DEF |
** |
Inline XBRL Taxonomy Extension Definition Linkbase |
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| 104 |
The cover page from this Quarterly Report on Form 10-Q, formatted in Inline XBRL and contained in Exhibit 101 |
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| * | Schedules have been omitted pursuant to Item 601(b)(2) of Regulation S-K. Huntsman agrees to furnish supplementally to the SEC a copy of any omitted schedule upon request by the SEC. | ||
| ** | Filed herewith |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrants have duly caused this report to be signed on their behalf by the undersigned thereunto duly authorized.
| Dated: November 4, 2022 |
HUNTSMAN CORPORATION |
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HUNTSMAN INTERNATIONAL LLC |
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By: |
/s/ PHILIP M. LISTER |
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Philip M. Lister |
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Executive Vice President and Chief Financial Officer |
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and Manager (Principal Financial Officer) |
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By: |
/s/ STEVEN C. JORGENSEN |
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Steven C. Jorgensen |
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Vice President and Controller (Authorized Signatory and |
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Principal Accounting Officer) |