Use these links to rapidly review the document
TABLE OF CONTENTS
Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10-Q
|
|
|
(Mark One) |
|
|
ý |
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30, 2014 |
OR |
o |
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period
from to
|
|
|
|
|
|
|
|
Commission
File Number |
|
Exact Name of Registrant as Specified in its Charter, Principal Office
Address and Telephone Number |
|
State of Incorporation
or Organization |
|
I.R.S. Employer
Identification No. |
001-32427 |
|
Huntsman Corporation
500 Huntsman Way
Salt Lake City, Utah 84108
(801) 584-5700 |
|
Delaware |
|
42-1648585 |
333-85141 |
|
Huntsman International LLC
500 Huntsman Way
Salt Lake City, Utah 84108
(801) 584-5700 |
|
Delaware |
|
87-0630358 |
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 |
|
|
YES ý |
|
|
NO o |
|
Huntsman International LLC |
|
|
YES ý |
|
|
NO o |
|
Indicate
by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted
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 and post such files).
|
|
|
|
|
|
|
|
Huntsman Corporation |
|
|
YES ý |
|
|
NO o |
|
Huntsman International LLC |
|
|
YES ý |
|
|
NO o |
|
Indicate
by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of "large
accelerated filer," "accelerated filer," and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):
|
|
|
|
|
|
|
|
|
Huntsman Corporation |
|
Large accelerated filer ý |
|
Accelerated filer o |
|
Non-accelerated filer o (Do not check if a
smaller reporting company) |
|
Smaller reporting company o |
Huntsman International LLC |
|
Large accelerated filer o |
|
Accelerated filer o |
|
Non-accelerated filer ý (Do not check if a
smaller reporting company) |
|
Smaller reporting company o |
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
|
|
|
|
|
|
|
|
Huntsman Corporation |
|
|
YES o |
|
|
NO ý |
|
Huntsman International LLC |
|
|
YES o |
|
|
NO ý |
|
On
October 20, 2014, 244,197,601 shares of common stock of Huntsman Corporation were outstanding and 2,728 units of membership interests of Huntsman International LLC were
outstanding. There is no trading market for Huntsman International LLC's units of membership interests. All of Huntsman International LLC's units of membership interests are held by
Huntsman Corporation.
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.
Table of Contents
HUNTSMAN CORPORATION AND SUBSIDIARIES
HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES
QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTERLY PERIOD
ENDED SEPTEMBER 30, 2014
TABLE OF CONTENTS
2
Table of Contents
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
HUNTSMAN CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(In Millions, Except Share and Per Share Amounts)
|
|
|
|
|
|
|
|
|
|
September 30,
2014 |
|
December 31,
2013 |
|
ASSETS |
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
Cash and cash equivalents(a) |
|
$ |
582 |
|
$ |
520 |
|
Restricted cash(a) |
|
|
10 |
|
|
9 |
|
Accounts and notes receivable (net of allowance for doubtful accounts of $36 and $42, respectively), ($554 and $521 pledged as collateral, respectively)(a)
|
|
|
1,639 |
|
|
1,542 |
|
Accounts receivable from affiliates |
|
|
37 |
|
|
33 |
|
Inventories(a) |
|
|
1,788 |
|
|
1,741 |
|
Prepaid expenses |
|
|
91 |
|
|
61 |
|
Deferred income taxes |
|
|
52 |
|
|
53 |
|
Other current assets(a) |
|
|
295 |
|
|
200 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets |
|
|
4,494 |
|
|
4,159 |
|
Property, plant and equipment, net(a) |
|
|
3,703 |
|
|
3,824 |
|
Investment in unconsolidated affiliates |
|
|
292 |
|
|
285 |
|
Intangible assets, net(a) |
|
|
71 |
|
|
87 |
|
Goodwill |
|
|
126 |
|
|
131 |
|
Deferred income taxes |
|
|
217 |
|
|
243 |
|
Notes receivable from affiliates |
|
|
|
|
|
1 |
|
Other noncurrent assets(a) |
|
|
506 |
|
|
458 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
9,409 |
|
$ |
9,188 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND EQUITY |
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
Accounts payable(a) |
|
$ |
1,133 |
|
$ |
1,067 |
|
Accounts payable to affiliates |
|
|
43 |
|
|
46 |
|
Accrued liabilities(a) |
|
|
629 |
|
|
726 |
|
Deferred income taxes |
|
|
43 |
|
|
43 |
|
Current portion of debt(a) |
|
|
274 |
|
|
277 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
2,122 |
|
|
2,159 |
|
Long-term debt(a) |
|
|
3,752 |
|
|
3,633 |
|
Notes payable to affiliates |
|
|
6 |
|
|
6 |
|
Deferred income taxes |
|
|
295 |
|
|
313 |
|
Other noncurrent liabilities(a) |
|
|
838 |
|
|
948 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
|
7,013 |
|
|
7,059 |
|
Commitments and contingencies (Notes 13 and 14) |
|
|
|
|
|
|
|
Equity |
|
|
|
|
|
|
|
Huntsman Corporation stockholders' equity: |
|
|
|
|
|
|
|
Common stock $0.01 par value, 1,200,000,000 shares authorized, 248,232,373 and 245,930,859 issued and 242,757,427 and 240,401,442 outstanding in 2014 and
2013, respectively |
|
|
3 |
|
|
2 |
|
Additional paid-in capital |
|
|
3,366 |
|
|
3,305 |
|
Treasury stock, 4,043,526 shares at both September 30, 2014 and December 31, 2013 |
|
|
(50 |
) |
|
(50 |
) |
Unearned stock-based compensation |
|
|
(17 |
) |
|
(13 |
) |
Accumulated deficit |
|
|
(425 |
) |
|
(687 |
) |
Accumulated other comprehensive loss |
|
|
(643 |
) |
|
(577 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Huntsman Corporation stockholders' equity |
|
|
2,234 |
|
|
1,980 |
|
Noncontrolling interests in subsidiaries |
|
|
162 |
|
|
149 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total equity |
|
|
2,396 |
|
|
2,129 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and equity |
|
$ |
9,409 |
|
$ |
9,188 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- (a)
- At
September 30, 2014 and December 31, 2013, respectively, $42 and $39 of cash and cash equivalents, $10 and $9 of restricted cash, $43 and
$41 of accounts and notes receivable (net), $64 and $54 of inventories, $5 and $3 of other current assets, $343 and $369 of property, plant and equipment (net), $17 each of intangible assets (net),
$27 and $28 of other noncurrent assets, $82 and $73 of accounts payable, $30 and $32 of accrued liabilities, $176 and $183 of current portion of debt, $44 and $64 of long-term debt, and $33 and $45 of
other noncurrent liabilities from consolidated variable interest entities are included in the respective Balance Sheet captions above. See "Note 5. Variable Interest Entities."
See accompanying notes to condensed consolidated financial statements (unaudited).
3
Table of Contents
HUNTSMAN CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(In Millions, Except Per Share Amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months
ended
September 30, |
|
Nine months
ended
September 30, |
|
|
|
2014 |
|
2013 |
|
2014 |
|
2013 |
|
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade sales, services and fees, net |
|
$ |
2,819 |
|
$ |
2,789 |
|
$ |
8,433 |
|
$ |
8,198 |
|
Related party sales |
|
|
65 |
|
|
53 |
|
|
194 |
|
|
176 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues |
|
|
2,884 |
|
|
2,842 |
|
|
8,627 |
|
|
8,374 |
|
Cost of goods sold |
|
|
2,369 |
|
|
2,335 |
|
|
7,157 |
|
|
7,067 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
|
|
515 |
|
|
507 |
|
|
1,470 |
|
|
1,307 |
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative |
|
|
227 |
|
|
238 |
|
|
700 |
|
|
697 |
|
Research and development |
|
|
40 |
|
|
35 |
|
|
113 |
|
|
105 |
|
Other operating expense (income) |
|
|
7 |
|
|
(1 |
) |
|
(2 |
) |
|
6 |
|
Restructuring, impairment and plant closing costs |
|
|
39 |
|
|
37 |
|
|
91 |
|
|
110 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses |
|
|
313 |
|
|
309 |
|
|
902 |
|
|
918 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income |
|
|
202 |
|
|
198 |
|
|
568 |
|
|
389 |
|
Interest expense |
|
|
(49 |
) |
|
(48 |
) |
|
(148 |
) |
|
(146 |
) |
Equity in income of investment in unconsolidated affiliates |
|
|
2 |
|
|
3 |
|
|
6 |
|
|
6 |
|
Loss on early extinguishment of debt |
|
|
|
|
|
|
|
|
|
|
|
(35 |
) |
Other (expense) income |
|
|
(1 |
) |
|
|
|
|
|
|
|
2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations before income taxes |
|
|
154 |
|
|
153 |
|
|
426 |
|
|
216 |
|
Income tax benefit (expense) |
|
|
40 |
|
|
(81 |
) |
|
(39 |
) |
|
(105 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations |
|
|
194 |
|
|
72 |
|
|
387 |
|
|
111 |
|
Loss from discontinued operations |
|
|
|
|
|
(2 |
) |
|
(7 |
) |
|
(4 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
194 |
|
|
70 |
|
|
380 |
|
|
107 |
|
Net income attributable to noncontrolling interests |
|
|
(6 |
) |
|
(6 |
) |
|
(19 |
) |
|
(20 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to Huntsman Corporation |
|
$ |
188 |
|
$ |
64 |
|
$ |
361 |
|
$ |
87 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic income (loss) per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations attributable to Huntsman Corporation common stockholders |
|
$ |
0.77 |
|
$ |
0.28 |
|
$ |
1.52 |
|
$ |
0.38 |
|
Loss from discontinued operations attributable to Huntsman Corporation common stockholders, net of tax |
|
|
|
|
|
(0.01 |
) |
|
(0.03 |
) |
|
(0.02 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to Huntsman Corporation common stockholders |
|
$ |
0.77 |
|
$ |
0.27 |
|
$ |
1.49 |
|
$ |
0.36 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares |
|
|
242.6 |
|
|
239.8 |
|
|
241.8 |
|
|
239.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted income (loss) per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations attributable to Huntsman Corporation common stockholders |
|
$ |
0.76 |
|
$ |
0.27 |
|
$ |
1.50 |
|
$ |
0.38 |
|
Loss from discontinued operations attributable to Huntsman Corporation common stockholders, net of tax |
|
|
|
|
|
(0.01 |
) |
|
(0.03 |
) |
|
(0.02 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to Huntsman Corporation common stockholders |
|
$ |
0.76 |
|
$ |
0.26 |
|
$ |
1.47 |
|
$ |
0.36 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares |
|
|
246.7 |
|
|
242.5 |
|
|
245.7 |
|
|
242.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts attributable to Huntsman Corporation common stockholders: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations |
|
$ |
188 |
|
$ |
66 |
|
$ |
368 |
|
$ |
91 |
|
Loss from discontinued operations, net of tax |
|
|
|
|
|
(2 |
) |
|
(7 |
) |
|
(4 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
188 |
|
$ |
64 |
|
$ |
361 |
|
$ |
87 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends per share |
|
$ |
0.125 |
|
$ |
0.125 |
|
$ |
0.375 |
|
$ |
0.375 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to condensed consolidated financial statements (unaudited).
4
Table of Contents
HUNTSMAN CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
(In Millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months
ended
September 30, |
|
Nine months
ended
September 30, |
|
|
|
2014 |
|
2013 |
|
2014 |
|
2013 |
|
Net income |
|
$ |
194 |
|
$ |
70 |
|
$ |
380 |
|
$ |
107 |
|
Other comprehensive (loss) income, net of tax: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translations adjustments, net of tax of $(17) and $3 for the three months ended, respectively, and $(19) and $2 for the nine months
ended, respectively |
|
|
(108 |
) |
|
53 |
|
|
(108 |
) |
|
(44 |
) |
Pension and other postretirement benefits adjustments, net of tax of $(5) and $(6) for the three months ended, respectively, and $(11) and $(21) for the
nine months ended, respectively |
|
|
16 |
|
|
18 |
|
|
33 |
|
|
68 |
|
Other, net |
|
|
1 |
|
|
3 |
|
|
2 |
|
|
5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive (loss) income, net of tax |
|
|
(91 |
) |
|
74 |
|
|
(73 |
) |
|
29 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income |
|
|
103 |
|
|
144 |
|
|
307 |
|
|
136 |
|
Comprehensive income attributable to noncontrolling interests |
|
|
(2 |
) |
|
(8 |
) |
|
(12 |
) |
|
(19 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income attributable to Huntsman Corporation |
|
$ |
101 |
|
$ |
136 |
|
$ |
295 |
|
$ |
117 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to condensed consolidated financial statements (unaudited).
5
Table of Contents
HUNTSMAN CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY (UNAUDITED)
(In Millions, Except Share Amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Huntsman Corporation Stockholders' Equity |
|
|
|
|
|
|
|
Shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
other
comprehensive
(loss) income |
|
|
|
|
|
|
|
Common
stock |
|
Common
stock |
|
Additional
paid-in
capital |
|
Treasury
stock |
|
Unearned
stock-based
compensation |
|
Accumulated
deficit |
|
Noncontrolling
interests in
subsidiaries |
|
Total
equity |
|
Balance, January 1, 2014 |
|
|
240,401,442 |
|
$ |
2 |
|
$ |
3,305 |
|
$ |
(50 |
) |
$ |
(13 |
) |
$ |
(687 |
) |
$ |
(577 |
) |
$ |
149 |
|
$ |
2,129 |
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
361 |
|
|
|
|
|
19 |
|
|
380 |
|
Other comprehensive loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(66 |
) |
|
(7 |
) |
|
(73 |
) |
Issuance of nonvested stock awards |
|
|
|
|
|
|
|
|
15 |
|
|
|
|
|
(15 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Vesting of stock awards |
|
|
1,006,291 |
|
|
|
|
|
7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7 |
|
Recognition of stock-based compensation |
|
|
|
|
|
|
|
|
7 |
|
|
|
|
|
11 |
|
|
|
|
|
|
|
|
|
|
|
18 |
|
Repurchase and cancellation of stock awards |
|
|
(298,045 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
(7 |
) |
|
|
|
|
|
|
|
(7 |
) |
Stock options exercised |
|
|
1,647,739 |
|
|
1 |
|
|
32 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
33 |
|
Dividends paid to noncontrolling interests |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4 |
) |
|
(4 |
) |
Cash received for a noncontrolling interest of a subsidiary |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5 |
|
|
5 |
|
Accrued and unpaid dividends |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1 |
) |
|
|
|
|
|
|
|
(1 |
) |
Dividends declared on common stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(91 |
) |
|
|
|
|
|
|
|
(91 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, September 30, 2014 |
|
|
242,757,427 |
|
$ |
3 |
|
$ |
3,366 |
|
$ |
(50 |
) |
$ |
(17 |
) |
$ |
(425 |
) |
$ |
(643 |
) |
$ |
162 |
|
$ |
2,396 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, January 1, 2013 |
|
|
238,273,422 |
|
$ |
2 |
|
$ |
3,264 |
|
$ |
(50 |
) |
$ |
(12 |
) |
$ |
(687 |
) |
$ |
(744 |
) |
$ |
123 |
|
$ |
1,896 |
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
87 |
|
|
|
|
|
20 |
|
|
107 |
|
Other comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30 |
|
|
(1 |
) |
|
29 |
|
Issuance of nonvested stock awards |
|
|
|
|
|
|
|
|
14 |
|
|
|
|
|
(14 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Vesting of stock awards |
|
|
1,067,888 |
|
|
|
|
|
5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5 |
|
Recognition of stock-based compensation |
|
|
|
|
|
|
|
|
6 |
|
|
|
|
|
10 |
|
|
|
|
|
|
|
|
|
|
|
16 |
|
Repurchase and cancellation of stock awards |
|
|
(304,209 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
(6 |
) |
|
|
|
|
|
|
|
(6 |
) |
Stock options exercised |
|
|
853,698 |
|
|
|
|
|
4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4 |
|
Excess tax benefit related to stock- based compensation |
|
|
|
|
|
|
|
|
4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4 |
|
Accrued and unpaid dividends |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2 |
) |
|
|
|
|
|
|
|
(2 |
) |
Dividends declared on common stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(90 |
) |
|
|
|
|
|
|
|
(90 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, September 30, 2013 |
|
|
239,890,799 |
|
$ |
2 |
|
$ |
3,297 |
|
$ |
(50 |
) |
$ |
(16 |
) |
$ |
(698 |
) |
$ |
(714 |
) |
$ |
142 |
|
$ |
1,963 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See
accompanying notes to condensed consolidated financial statements (unaudited).
6
Table of Contents
HUNTSMAN CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(In Millions)
|
|
|
|
|
|
|
|
|
|
Nine months
ended
September 30, |
|
|
|
2014 |
|
2013 |
|
Operating Activities: |
|
|
|
|
|
|
|
Net income |
|
$ |
380 |
|
$ |
107 |
|
Adjustments to reconcile net income to net cash used in operating activities: |
|
|
|
|
|
|
|
Equity in income of investment in unconsolidated affiliates |
|
|
(6 |
) |
|
(6 |
) |
Depreciation and amortization |
|
|
335 |
|
|
326 |
|
Loss on early extinguishment of debt |
|
|
|
|
|
35 |
|
Noncash interest expense |
|
|
8 |
|
|
7 |
|
Deferred income taxes |
|
|
(44 |
) |
|
31 |
|
Noncash loss on foreign currency transactions |
|
|
13 |
|
|
23 |
|
Stock-based compensation |
|
|
22 |
|
|
21 |
|
Noncash restructuring and impairment of assets |
|
|
36 |
|
|
7 |
|
Other, net |
|
|
(6 |
) |
|
5 |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
Accounts and notes receivable |
|
|
(161 |
) |
|
(146 |
) |
Inventories |
|
|
(112 |
) |
|
118 |
|
Prepaid expenses |
|
|
(32 |
) |
|
(16 |
) |
Other current assets |
|
|
(74 |
) |
|
17 |
|
Other noncurrent assets |
|
|
(32 |
) |
|
(108 |
) |
Accounts payable |
|
|
131 |
|
|
(18 |
) |
Accrued liabilities |
|
|
(59 |
) |
|
(45 |
) |
Other noncurrent liabilities |
|
|
(56 |
) |
|
30 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities |
|
|
343 |
|
|
388 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing Activities: |
|
|
|
|
|
|
|
Capital expenditures |
|
|
(351 |
) |
|
(295 |
) |
Cash received from unconsolidated affiliates |
|
|
38 |
|
|
48 |
|
Investment in unconsolidated affiliates |
|
|
(37 |
) |
|
(76 |
) |
Acquisition of businesses, net of cash acquired |
|
|
|
|
|
(66 |
) |
Proceeds from sale of businesses/assets |
|
|
15 |
|
|
(1 |
) |
Other, net |
|
|
(2 |
) |
|
2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities |
|
|
(337 |
) |
|
(388 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Continued)
7
Table of Contents
HUNTSMAN CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (Continued)
(In Millions)
|
|
|
|
|
|
|
|
|
|
Nine months
ended
September 30, |
|
|
|
2014 |
|
2013 |
|
Financing Activities: |
|
|
|
|
|
|
|
Net repayments under revolving loan facilities |
|
$ |
(1 |
) |
$ |
(3 |
) |
Net borrowings on overdraft facilities |
|
|
2 |
|
|
(2 |
) |
Repayments of short-term debt |
|
|
(8 |
) |
|
(18 |
) |
Borrowings on short-term debt |
|
|
10 |
|
|
14 |
|
Repayments of long-term debt |
|
|
(42 |
) |
|
(459 |
) |
Proceeds from issuance of long-term debt |
|
|
204 |
|
|
572 |
|
Repayments of notes payable |
|
|
(25 |
) |
|
(30 |
) |
Borrowings on notes payable |
|
|
32 |
|
|
34 |
|
Debt issuance costs paid |
|
|
(39 |
) |
|
(4 |
) |
Contingent consideration paid for acquisition |
|
|
(6 |
) |
|
|
|
Call premiums related to early extinguishment of debt |
|
|
|
|
|
(4 |
) |
Dividends paid to common stockholders |
|
|
(91 |
) |
|
(90 |
) |
Repurchase and cancellation of stock awards |
|
|
(7 |
) |
|
(6 |
) |
Proceeds from issuance of common stock |
|
|
32 |
|
|
4 |
|
Cash received for a noncontrolling interest of a subsidiary |
|
|
5 |
|
|
|
|
Excess tax benefit related to stock-based compensation |
|
|
|
|
|
4 |
|
Other, net |
|
|
(4 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by financing activities |
|
|
62 |
|
|
12 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash |
|
|
(6 |
) |
|
(2 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase in cash and cash equivalents |
|
|
62 |
|
|
10 |
|
Cash and cash equivalents at beginning of period |
|
|
520 |
|
|
387 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period |
|
$ |
582 |
|
$ |
397 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental cash flow information: |
|
|
|
|
|
|
|
Cash paid for interest |
|
$ |
145 |
|
$ |
152 |
|
Cash paid for income taxes |
|
|
156 |
|
|
60 |
|
During
the nine months ended September 30, 2014 and 2013, the amount of capital expenditures in accounts payable decreased by $31 million and $41 million,
respectively. During the nine months ended September 30, 2014 and 2013, we acquired assets under capital leases of $10 million and nil, respectively.
See accompanying notes to condensed consolidated financial statements (unaudited).
8
Table of Contents
HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(In Millions)
|
|
|
|
|
|
|
|
|
|
September 30,
2014 |
|
December 31,
2013 |
|
ASSETS |
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
Cash and cash equivalents(a) |
|
$ |
480 |
|
$ |
515 |
|
Restricted cash(a) |
|
|
10 |
|
|
9 |
|
Accounts and notes receivable (net of allowance for doubtful accounts of $36 and $42, respectively), ($554 and $521 pledged as collateral, respectively)(a)
|
|
|
1,639 |
|
|
1,542 |
|
Accounts receivable from affiliates |
|
|
340 |
|
|
325 |
|
Inventories(a) |
|
|
1,788 |
|
|
1,741 |
|
Prepaid expenses |
|
|
90 |
|
|
61 |
|
Deferred income taxes |
|
|
52 |
|
|
53 |
|
Other current assets(a) |
|
|
288 |
|
|
200 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets |
|
|
4,687 |
|
|
4,446 |
|
Property, plant and equipment, net(a) |
|
|
3,651 |
|
|
3,759 |
|
Investment in unconsolidated affiliates |
|
|
292 |
|
|
285 |
|
Intangible assets, net(a) |
|
|
72 |
|
|
88 |
|
Goodwill |
|
|
126 |
|
|
131 |
|
Deferred income taxes |
|
|
217 |
|
|
243 |
|
Notes receivable from affiliates |
|
|
|
|
|
1 |
|
Other noncurrent assets(a) |
|
|
505 |
|
|
458 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
9,550 |
|
$ |
9,411 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND EQUITY |
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
Accounts payable(a) |
|
$ |
1,133 |
|
$ |
1,067 |
|
Accounts payable to affiliates |
|
|
58 |
|
|
53 |
|
Accrued liabilities(a) |
|
|
627 |
|
|
742 |
|
Deferred income taxes |
|
|
43 |
|
|
44 |
|
Note payable to affiliate |
|
|
100 |
|
|
100 |
|
Current portion of debt(a) |
|
|
274 |
|
|
277 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
2,235 |
|
|
2,283 |
|
Long-term debt(a) |
|
|
3,752 |
|
|
3,633 |
|
Notes payable to affiliates |
|
|
713 |
|
|
779 |
|
Deferred income taxes |
|
|
286 |
|
|
303 |
|
Other noncurrent liabilities(a) |
|
|
832 |
|
|
938 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
|
7,818 |
|
|
7,936 |
|
Commitments and contingencies (Notes 13 and 14) |
|
|
|
|
|
|
|
Equity |
|
|
|
|
|
|
|
Huntsman International LLC members' equity: |
|
|
|
|
|
|
|
Members' equity, 2,728 units issued and outstanding |
|
|
3,159 |
|
|
3,138 |
|
Accumulated deficit |
|
|
(910 |
) |
|
(1,194 |
) |
Accumulated other comprehensive loss |
|
|
(679 |
) |
|
(618 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Huntsman International LLC members' equity |
|
|
1,570 |
|
|
1,326 |
|
Noncontrolling interests in subsidiaries |
|
|
162 |
|
|
149 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total equity |
|
|
1,732 |
|
|
1,475 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and equity |
|
$ |
9,550 |
|
$ |
9,411 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- (a)
- At
September 30, 2014 and December 31, 2013, respectively, $42 and $39 of cash and cash equivalents, $10 and $9 of restricted cash, $43 and
$41 of accounts and notes receivable (net), $64 and $54 of inventories, $5 and $3 of other current assets, $343 and $369 of property, plant and equipment (net), $17 each of intangible assets (net),
$27 and $28 of other noncurrent assets, $82 and $73 of accounts payable, $30 and $32 of accrued liabilities, $176 and $183 of current portion of debt, $44 and $64 of long-term debt, and $33 and $45 of
other noncurrent liabilities from consolidated variable interest entities are included in the respective Balance Sheet captions above. See "Note 5. Variable Interest Entities."
See accompanying notes to condensed consolidated financial statements (unaudited).
9
Table of Contents
HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(In Millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months
ended
September 30, |
|
Nine months
ended
September 30, |
|
|
|
2014 |
|
2013 |
|
2014 |
|
2013 |
|
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade sales, services and fees, net |
|
$ |
2,819 |
|
$ |
2,789 |
|
$ |
8,433 |
|
$ |
8,198 |
|
Related party sales |
|
|
65 |
|
|
53 |
|
|
194 |
|
|
176 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues |
|
|
2,884 |
|
|
2,842 |
|
|
8,627 |
|
|
8,374 |
|
Cost of goods sold |
|
|
2,368 |
|
|
2,331 |
|
|
7,150 |
|
|
7,054 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
|
|
516 |
|
|
511 |
|
|
1,477 |
|
|
1,320 |
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative |
|
|
226 |
|
|
236 |
|
|
696 |
|
|
692 |
|
Research and development |
|
|
40 |
|
|
35 |
|
|
113 |
|
|
105 |
|
Other operating expense (income) |
|
|
7 |
|
|
(1 |
) |
|
(2 |
) |
|
6 |
|
Restructuring, impairment and plant closing costs |
|
|
39 |
|
|
37 |
|
|
91 |
|
|
110 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses |
|
|
312 |
|
|
307 |
|
|
898 |
|
|
913 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income |
|
|
204 |
|
|
204 |
|
|
579 |
|
|
407 |
|
Interest expense |
|
|
(52 |
) |
|
(51 |
) |
|
(155 |
) |
|
(156 |
) |
Equity in income of investment in unconsolidated affiliates |
|
|
2 |
|
|
3 |
|
|
6 |
|
|
6 |
|
Loss on early extinguishment of debt |
|
|
|
|
|
|
|
|
|
|
|
(35 |
) |
Other (expense) income |
|
|
(1 |
) |
|
|
|
|
|
|
|
2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations before income taxes |
|
|
153 |
|
|
156 |
|
|
430 |
|
|
224 |
|
Income tax benefit (expense) |
|
|
51 |
|
|
(80 |
) |
|
(29 |
) |
|
(106 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations |
|
|
204 |
|
|
76 |
|
|
401 |
|
|
118 |
|
Loss from discontinued operations, net of tax |
|
|
|
|
|
(2 |
) |
|
(7 |
) |
|
(4 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
204 |
|
|
74 |
|
|
394 |
|
|
114 |
|
Net income attributable to noncontrolling interests |
|
|
(6 |
) |
|
(6 |
) |
|
(19 |
) |
|
(20 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to Huntsman International LLC |
|
$ |
198 |
|
$ |
68 |
|
$ |
375 |
|
$ |
94 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to condensed consolidated financial statements (unaudited).
10
Table of Contents
HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
(In Millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months
ended
September 30, |
|
Nine months
ended
September 30, |
|
|
|
2014 |
|
2013 |
|
2014 |
|
2013 |
|
Net income |
|
$ |
204 |
|
$ |
74 |
|
$ |
394 |
|
$ |
114 |
|
Other comprehensive (loss) income, net of tax: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translations adjustments, net of tax of $(17) and $3 for the three months ended, respectively, and $(19) and $2 for the nine months
ended, respectively |
|
|
(108 |
) |
|
53 |
|
|
(108 |
) |
|
(44 |
) |
Pension and other postretirement benefits adjustments, net of tax of $(5) and $(7) for the three months ended, respectively, and $(12) and $(22) for the
nine months ended, respectively |
|
|
18 |
|
|
19 |
|
|
38 |
|
|
71 |
|
Other, net |
|
|
1 |
|
|
2 |
|
|
2 |
|
|
5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive (loss) income, net of tax |
|
|
(89 |
) |
|
74 |
|
|
(68 |
) |
|
32 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income |
|
|
115 |
|
|
148 |
|
|
326 |
|
|
146 |
|
Comprehensive income attributable to noncontrolling interests |
|
|
(2 |
) |
|
(8 |
) |
|
(12 |
) |
|
(19 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income attributable to Huntsman International LLC |
|
$ |
113 |
|
$ |
140 |
|
$ |
314 |
|
$ |
127 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to condensed consolidated financial statements (unaudited).
11
Table of Contents
HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY (UNAUDITED)
(In Millions, Except Unit Amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Huntsman International LLC Members |
|
|
|
|
|
|
|
Members' equity |
|
|
|
Accumulated
other
comprehensive
loss |
|
|
|
|
|
|
|
Accumulated deficit |
|
Noncontrolling
interests in
subsidiaries |
|
Total equity |
|
|
|
Units |
|
Amount |
|
Balance, January 1, 2014 |
|
|
2,728 |
|
$ |
3,138 |
|
$ |
(1,194 |
) |
$ |
(618 |
) |
$ |
149 |
|
$ |
1,475 |
|
Net income |
|
|
|
|
|
|
|
|
375 |
|
|
|
|
|
19 |
|
|
394 |
|
Dividends paid to parent |
|
|
|
|
|
|
|
|
(91 |
) |
|
|
|
|
|
|
|
(91 |
) |
Other comprehensive loss |
|
|
|
|
|
|
|
|
|
|
|
(61 |
) |
|
(7 |
) |
|
(68 |
) |
Contribution from parent |
|
|
|
|
|
21 |
|
|
|
|
|
|
|
|
|
|
|
21 |
|
Dividends paid to noncontrolling interests |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4 |
) |
|
(4 |
) |
Cash received for a noncontrolling interest of a subsidiary |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5 |
|
|
5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, September 30, 2014 |
|
|
2,728 |
|
$ |
3,159 |
|
$ |
(910 |
) |
$ |
(679 |
) |
$ |
162 |
|
$ |
1,732 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, January 1, 2013 |
|
|
2,728 |
|
$ |
3,109 |
|
$ |
(1,224 |
) |
$ |
(791 |
) |
$ |
123 |
|
$ |
1,217 |
|
Net income |
|
|
|
|
|
|
|
|
94 |
|
|
|
|
|
20 |
|
|
114 |
|
Dividends paid to parent |
|
|
|
|
|
|
|
|
(90 |
) |
|
|
|
|
|
|
|
(90 |
) |
Other comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
33 |
|
|
(1 |
) |
|
32 |
|
Contribution from parent |
|
|
|
|
|
20 |
|
|
|
|
|
|
|
|
|
|
|
20 |
|
Excess tax benefit related to stock-based compensation |
|
|
|
|
|
4 |
|
|
|
|
|
|
|
|
|
|
|
4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, September 30, 2013 |
|
|
2,728 |
|
$ |
3,133 |
|
$ |
(1,220 |
) |
$ |
(758 |
) |
$ |
142 |
|
$ |
1,297 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to condensed consolidated financial statements (unaudited).
12
Table of Contents
HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(In Millions)
|
|
|
|
|
|
|
|
|
|
Nine months
ended
September 30, |
|
|
|
2014 |
|
2013 |
|
Operating Activities: |
|
|
|
|
|
|
|
Net income |
|
$ |
394 |
|
$ |
114 |
|
Adjustments to reconcile net income to net cash used in operating activities: |
|
|
|
|
|
|
|
Equity in income of investment in unconsolidated affiliates |
|
|
(6 |
) |
|
(6 |
) |
Depreciation and amortization |
|
|
322 |
|
|
308 |
|
Loss on early extinguishment of debt |
|
|
|
|
|
35 |
|
Noncash interest expense (income) |
|
|
15 |
|
|
(1 |
) |
Deferred income taxes |
|
|
(43 |
) |
|
6 |
|
Noncash loss on foreign currency transactions |
|
|
13 |
|
|
23 |
|
Noncash compensation |
|
|
21 |
|
|
20 |
|
Noncash restructuring and impairment of assets |
|
|
36 |
|
|
7 |
|
Other, net |
|
|
(6 |
) |
|
7 |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
Accounts and notes receivable |
|
|
(161 |
) |
|
(146 |
) |
Inventories |
|
|
(112 |
) |
|
118 |
|
Prepaid expenses |
|
|
(31 |
) |
|
(16 |
) |
Other current assets |
|
|
(67 |
) |
|
17 |
|
Other noncurrent assets |
|
|
(33 |
) |
|
(108 |
) |
Accounts payable |
|
|
124 |
|
|
(9 |
) |
Accrued liabilities |
|
|
(78 |
) |
|
(20 |
) |
Other noncurrent liabilities |
|
|
(50 |
) |
|
33 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities |
|
|
338 |
|
|
382 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing Activities: |
|
|
|
|
|
|
|
Capital expenditures |
|
|
(351 |
) |
|
(295 |
) |
Cash received from unconsolidated affiliates |
|
|
38 |
|
|
48 |
|
Investment in unconsolidated affiliates |
|
|
(37 |
) |
|
(76 |
) |
Acquisition of businesses, net of cash acquired |
|
|
|
|
|
(66 |
) |
Proceeds from sale of businesses/assets |
|
|
15 |
|
|
(1 |
) |
Increase in receivable from affiliate |
|
|
(4 |
) |
|
(16 |
) |
Other, net |
|
|
(2 |
) |
|
2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities |
|
|
(341 |
) |
|
(404 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Continued)
13
Table of Contents
HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (Continued)
(In Millions)
|
|
|
|
|
|
|
|
|
|
Nine months
ended
September 30, |
|
|
|
2014 |
|
2013 |
|
Financing Activities: |
|
|
|
|
|
|
|
Net repayments under revolving loan facilities |
|
$ |
(1 |
) |
$ |
(3 |
) |
Net borrowings on overdraft facilities |
|
|
2 |
|
|
(2 |
) |
Repayments of short-term debt |
|
|
(8 |
) |
|
(18 |
) |
Borrowings on short-term debt |
|
|
10 |
|
|
14 |
|
Repayments of long-term debt |
|
|
(42 |
) |
|
(459 |
) |
Proceeds from issuance of long-term debt |
|
|
204 |
|
|
572 |
|
Proceeds from notes payable to affiliate |
|
|
|
|
|
177 |
|
Repayments of notes payable to affiliate |
|
|
(65 |
) |
|
|
|
Repayments of notes payable |
|
|
(25 |
) |
|
(30 |
) |
Borrowings on notes payable |
|
|
32 |
|
|
34 |
|
Debt issuance costs paid |
|
|
(39 |
) |
|
(4 |
) |
Contingent consideration paid for acquisition |
|
|
(6 |
) |
|
|
|
Call premiums related to early extinguishment of debt |
|
|
|
|
|
(4 |
) |
Dividends paid to parent |
|
|
(91 |
) |
|
(90 |
) |
Cash received for a noncontrolling interest of a subsidiary |
|
|
5 |
|
|
|
|
Excess tax benefit related to stock-based compensation |
|
|
|
|
|
4 |
|
Other, net |
|
|
(2 |
) |
|
1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by financing activities |
|
|
(26 |
) |
|
192 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash |
|
|
(6 |
) |
|
(2 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Decrease) increase in cash and cash equivalents |
|
|
(35 |
) |
|
168 |
|
Cash and cash equivalents at beginning of period |
|
|
515 |
|
|
210 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period |
|
$ |
480 |
|
$ |
378 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental cash flow information: |
|
|
|
|
|
|
|
Cash paid for interest |
|
$ |
145 |
|
$ |
170 |
|
Cash paid for income taxes |
|
|
156 |
|
|
60 |
|
During
the nine months ended September 30, 2014 and 2013, the amount of capital expenditures in accounts payable decreased by $31 million and $41 million,
respectively. During the nine months ended September 30, 2014 and 2013, Huntsman Corporation contributed $21 million and $20 million related to stock-based compensation,
respectively. During the nine months ended September 30, 2014 and 2013, we acquired assets under capital leases of $10 million and nil, respectively.
See accompanying notes to condensed consolidated financial statements (unaudited).
14
Table of Contents
HUNTSMAN CORPORATION AND SUBSIDIARIES
HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. GENERAL
CERTAIN DEFINITIONS
For convenience in this report, the terms "Company," "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 100% owned subsidiary) and, unless the context
otherwise requires, its subsidiaries.
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 interim condensed consolidated financial statements (unaudited) and Huntsman International's interim condensed consolidated
financial statements (unaudited) 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 condensed consolidated financial statements (unaudited) 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, 2013 for our Company and Huntsman International.
DESCRIPTION OF BUSINESS
We are a global manufacturer of differentiated organic chemical products and of inorganic chemical products. 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, personal care and hygiene, durable and non-durable consumer products, electronics, medical, packaging, paints and coatings, power
generation, refining, synthetic fiber, textile chemicals and dye industries. We are a leading global producer in many of our key product lines, including MDI, amines, surfactants, maleic anhydride,
epoxy-based polymer formulations, textile chemicals, dyes and titanium dioxide.
We
operate in five segments: Polyurethanes, Performance Products, Advanced Materials, Textile Effects and Pigments. Our Polyurethanes, Performance Products, Advanced Materials and
Textile Effects segments produce differentiated organic chemical products and our Pigments segment produces primarily inorganic chemical products. In a series of transactions beginning in 2006, we
sold or shutdown substantially all of our Australian styrenics operations and our North American polymers and base chemicals operations. We report the results of these businesses as discontinued
operations.
15
Table of Contents
HUNTSMAN CORPORATION AND SUBSIDIARIES
HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
1. GENERAL (Continued)
COMPANY
Our Company, a Delaware corporation, was formed in 2004 to hold the Huntsman businesses. Jon M. Huntsman founded the predecessor
to our Company in 1970 as a small packaging company. Since then, we have grown through a series of acquisitions and now own a global portfolio of businesses.
Currently,
we operate all of our businesses through Huntsman International, our 100% 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 (unaudited) for both our
Company and Huntsman International. The differences between our financial statements and Huntsman International's financial statements relate primarily to the
following:
-
- 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;
-
- the different capital structures; and
-
- a note payable from Huntsman International to us.
PRINCIPLES OF CONSOLIDATION
Our condensed consolidated financial statements (unaudited) 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.
USE OF ESTIMATES
The preparation of financial statements in conformity with 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
Rockwood Acquisition
On October 1, 2014, we completed the acquisition of the Performance Additives and Titanium Dioxide businesses of Rockwood
Holdings, Inc. ("Rockwood"), which manufacture and market specialty titanium dioxide and performance additives products (the "Rockwood Acquisition"). We paid $1.04 billion in cash,
subject to certain purchase price adjustments, and assumed certain unfunded
16
Table of Contents
HUNTSMAN CORPORATION AND SUBSIDIARIES
HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
1. GENERAL (Continued)
pension
liabilities in connection with the Rockwood Acquisition. The acquisition was financed using a bank term loan.
The
following businesses were acquired from Rockwood:
-
- titanium dioxide, a white pigment derived from titanium bearing ores with strong specialty business in fibers, inks,
pharmaceuticals, food and cosmetics;
-
- functional additives made from barium and zinc based inorganics used to make colors more brilliant, primarily in
plastics, coatings, films, food, cosmetics, pharmaceuticals and paper;
-
- color pigments made from synthetic iron-oxide and other non-TiO2 inorganic pigments used by manufacturers of coatings and
colorants;
-
- timber treatment wood protection chemicals used primarily in residential and commercial applications;
-
- water treatment products used to improve water purity in industrial, commercial and municipal applications; and
-
- specialty automotive molded components.
The
unaudited condensed combined balance sheet of the acquired businesses as of June 30, 2014 and the unaudited condensed combined statements of operations, comprehensive income
(loss), cash flows, and changes in parent company equity of the acquired businesses for the six months ended June 30, 2014 and June 30, 2013 can be found in our current report on
Form 8-K filed on October 7, 2014.
In
connection with securing certain regulatory approvals required to complete the Rockwood Acquisition, we entered into a definitive agreement to sell our Ti02 product line used in
printing inks to Henan Billions Chemicals Co., Ltd. The sale does not include any manufacturing assets. The sale is expected to close in the fourth quarter of 2014.
Port Neches Manufacturing Disruption
During the third quarter of 2014, we experienced an unplanned manufacturing disruption on a production unit at our facility in Port
Neches, Texas for approximately three weeks. There were no injuries resulting from the equipment failure. The Port Neches facility manufactures methyl tertiary butyl ether (MTBE), propylene oxide (PO)
and propylene glycols (PG). The manufacturing disruption also impacted internal PO supply to downstream derivatives.
2. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
Accounting Pronouncements Adopted During 2014
In February 2013, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2013-04, Liabilities (Topic 405):
Obligations Resulting from Joint and Several Liability Arrangements for Which the Total Amount of the Obligation Is Fixed at the Reporting
17
Table of Contents
HUNTSMAN CORPORATION AND SUBSIDIARIES
HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
2. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS (Continued)
Date, requiring entities to measure obligations resulting from joint and several liability arrangements for which the total amount of the obligation is fixed at the reporting
date, as the sum of the amount the reporting entity agreed to pay on the basis of its arrangement among its co-obligors and any additional amount the reporting entity expects to pay on behalf of its
co-obligors. The amendments in this ASU are effective for fiscal years, and interim periods within those years, beginning after December 15, 2013. The amendments in this ASU should be applied
retrospectively to all prior periods presented for those obligations resulting from joint and several liability arrangements that exist at the beginning of an entity's fiscal year of adoption. We
adopted the amendments in this ASU effective January 1, 2014, and the initial adoption of the amendments in this ASU did not have any impact on our condensed consolidated financial statements
(unaudited).
In
March 2013, the FASB issued ASU No. 2013-05, Foreign Currency Matters (Topic 830): Parent's Accounting for the Cumulative Translation Adjustment upon
Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity, resolving diversity in practice and clarifying the
applicable guidance for the release of the cumulative translation adjustment into net income when a parent either sells a part or all of its investment in a foreign entity or no longer holds a
controlling financial interest in a subsidiary or group of assets that is a nonprofit activity or business within a foreign entity. We adopted the amendments in this ASU effective January 1,
2014, and the initial adoption of the amendments in this ASU did not have any impact on our condensed consolidated financial statements (unaudited).
In
July 2013, the FASB issued ASU No. 2013-11, Income Taxes (Topic 740): Presentation of an Unrecognized Tax Benefit When a Net Operating Loss
Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists, providing guidance on the presentation of unrecognized tax benefits in the financial statements as either
a reduction to a deferred tax asset or as a liability to better reflect the manner in which an entity would settle at the reporting date any additional income taxes that would result from the
disallowance of a tax position when net operating loss carryforwards ("NOLs"), similar tax losses or tax credit carryforwards exist. The amendments in this ASU do not require new recurring
disclosures. The amendments in this ASU are effective for fiscal years, and interim periods within those years, beginning after December 15, 2013. We adopted the amendments in this ASU
effective January 1, 2014, and the initial adoption of the amendments in this ASU did not have any impact on our condensed consolidated financial statements (unaudited).
Accounting Pronouncements Pending Adoption in Future Periods
In April 2014, the FASB issued ASU No. 2014-08, Presentation of Financial Statements (Topic 205) and
Property, Plant, and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity, changing the criteria for reporting
discontinued operations and enhancing reporting requirements for discontinued operations. A disposal
of a component of an entity or a group of components of an entity will be required to be reported in discontinued operations if the disposal represents a strategic shift that has (or will have) a
major effect on an entity's operations and financial results. Further, the amendments in this ASU will require an entity to present, for each comparative period, the assets and liabilities of a
disposal group that includes a discontinued operation separately in the asset and liability sections, respectively, of the statement of financial position. The
18
Table of Contents
HUNTSMAN CORPORATION AND SUBSIDIARIES
HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
2. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS (Continued)
amendments
in this ASU are effective prospectively for all disposals (or classifications as held for sale) of components of an entity that occur within annual periods beginning on or after
December 15, 2014, and interim periods within those years, and for all businesses that, on acquisition, are classified as held for sale that occur within annual periods beginning on or after
December 15, 2014, and interim periods within those years. We do not expect the adoption of the amendments in this ASU to have a significant impact on our condensed consolidated financial
statements (unaudited).
In
May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), outlining a single
comprehensive model for entities to use in accounting for revenues arising from contracts with customers and supersedes most current revenue recognition guidance. The amendments in this ASU are
effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. The amendments in this ASU should be applied retrospectively,
and early application is not permitted. We are currently evaluating the impact of the adoption of the amendments in this ASU on our condensed consolidated financial statements (unaudited).
In
August 2014, the FASB issued ASU No. 2014-15, Presentation of Financial StatementsGoing Concern (Subtopic 205-40): Disclosure of
Uncertainties about an Entity's Ability to Continue as a Going Concern, providing guidance about management's responsibility to evaluate whether there is substantial doubt
about an entity's ability to continue as a going concern and to provide related footnote disclosures. The amendments in this ASU are effective for the annual period ending after December 15,
2016, and for annual periods and interim periods thereafter. Early adoption is permitted. We do not expect the adoption of the amendments in this ASU to have a significant impact on our condensed
consolidated financial statements (unaudited).
3. BUSINESS COMBINATIONS
ROCKWOOD ACQUISITION
On October 1, 2014, we completed the Rockwood Acquisition and paid $1.04 billion in cash, subject to certain purchase
price adjustments, and assumed certain unfunded pension liabilities in connection with the Rockwood Acquisition. For more information, see "Note 1.
GeneralRecent DevelopmentsRockwood Acquisition." The majority of the acquired
businesses will be integrated into our Pigments segment. Transaction costs charged to expense related to this acquisition were $10 million for the nine months ended September 30, 2014
and were recorded in selling, general and administrative expenses in our condensed consolidated statements of operations (unaudited).
We
have accounted for the Rockwood Acquisition using the acquisition method. As such, we analyzed the fair value of tangible and intangible assets acquired and liabilities assumed. The
19
Table of Contents
HUNTSMAN CORPORATION AND SUBSIDIARIES
HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
3. BUSINESS COMBINATIONS (Continued)
preliminary
allocation of acquisition cost to the assets acquired and liabilities assumed is summarized as follows (dollars in millions):
|
|
|
|
|
Acquisition cost |
|
$ |
1,039 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of assets acquired and liabilities assumed: |
|
|
|
|
Cash |
|
$ |
68 |
|
Accounts receivable, net |
|
|
248 |
|
Inventories |
|
|
485 |
|
Prepaid expenses and other current assets |
|
|
31 |
|
Property, plant and equipment |
|
|
423 |
|
Intangible assets |
|
|
188 |
|
Deferred income taxes, non-current |
|
|
106 |
|
Other assets |
|
|
10 |
|
Accounts payable |
|
|
(154 |
) |
Accrued compensation |
|
|
(45 |
) |
Accrued expenses and other current liabilities |
|
|
(45 |
) |
Long-term debt, current |
|
|
(2 |
) |
Long-term debt, non-current |
|
|
(4 |
) |
Pension and related liabilities |
|
|
(240 |
) |
Other liabilities |
|
|
(30 |
) |
|
|
|
|
|
|
|
|
|
Total fair value of net assets acquired |
|
$ |
1,039 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
acquisition cost allocation is preliminary pending final determination of the fair value of assets acquired and liabilities assumed, including final valuation of property, plant and
equipment and intangible assets. For purposes of this preliminary allocation of fair value, we have assigned any excess of the acquisition cost of historical carrying values to property, plant and
equipment and no amounts have been allocated to goodwill. It is possible that changes to this allocation could occur. The estimated pro forma revenues and earnings information for the three and nine
months ended September 30, 2014 and 2013 has not been provided as that information is not yet available.
OXID ACQUISITION
On August 29, 2013, we completed the acquisition of the chemical business of Oxid L.P. (the "Oxid Acquisition"), a
privately-held manufacturer and marketer of specialty urethane polyols based in Houston, Texas. The acquisition cost of approximately $76 million consists of cash payments of approximately
$66 million and contingent consideration of $10 million. The contingent consideration relates to an earn-out agreement which will be paid over two years if certain conditions are met.
Related to this earn-out agreement, $6 million was paid during the nine months ended September 30, 2014. The acquired business has been integrated into our Polyurethanes segment.
Transaction costs charged to expense related to this acquisition were not significant.
We
have accounted for the Oxid Acquisition using the acquisition method. As such, we analyzed the fair value of tangible and intangible assets acquired and liabilities assumed. The
allocation of
20
Table of Contents
HUNTSMAN CORPORATION AND SUBSIDIARIES
HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
3. BUSINESS COMBINATIONS (Continued)
acquisition
cost to the assets acquired and liabilities assumed is summarized as follows (dollars in millions):
|
|
|
|
|
Cash paid for acquisition |
|
$ |
66 |
|
Contingent consideration |
|
|
10 |
|
|
|
|
|
|
|
|
|
|
Acquisition cost |
|
$ |
76 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of assets acquired and liabilities assumed: |
|
|
|
|
Accounts receivable |
|
$ |
9 |
|
Inventories |
|
|
14 |
|
Property, plant and equipment |
|
|
22 |
|
Intangible assets |
|
|
36 |
|
Accounts payable |
|
|
(4 |
) |
Accrued liabilities |
|
|
(1 |
) |
|
|
|
|
|
|
|
|
|
Total fair value of net assets acquired |
|
$ |
76 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intangible
assets acquired consist primarily of developed technology and customer relationships, both of which will be amortized over 15 years. If the Oxid Acquisition were to
have occurred on January 1, 2013, the following estimated pro forma revenues and net income attributable to Huntsman Corporation and Huntsman International would have been reported (dollars in
millions):
Huntsman Corporation
|
|
|
|
|
|
|
|
|
|
Pro Forma |
|
|
|
Three months
ended
September 30, 2013
(Unaudited) |
|
Nine months
ended
September 30, 2013
(Unaudited) |
|
Revenues |
|
$ |
2,868 |
|
$ |
8,446 |
|
Net income attributable to Huntsman Corporation |
|
|
67 |
|
|
94 |
|
Huntsman International
|
|
|
|
|
|
|
|
|
|
Pro Forma |
|
|
|
Three months
ended
September 30, 2013
(Unaudited) |
|
Nine months
ended
September 30, 2013
(Unaudited) |
|
Revenues |
|
$ |
2,868 |
|
$ |
8,446 |
|
Net income attributable to Huntsman International |
|
|
71 |
|
|
101 |
|
21
Table of Contents
HUNTSMAN CORPORATION AND SUBSIDIARIES
HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
4. INVENTORIES
Inventories are stated at the lower of cost or market, with cost determined using last-in first-out ("LIFO"), first-in first-out, and average costs methods for different components of
inventory. Inventories consisted of the following (dollars in millions):
|
|
|
|
|
|
|
|
|
|
September 30,
2014 |
|
December 31,
2013 |
|
Raw materials and supplies |
|
$ |
424 |
|
$ |
433 |
|
Work in progress |
|
|
78 |
|
|
92 |
|
Finished goods |
|
|
1,365 |
|
|
1,290 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
1,867 |
|
|
1,815 |
|
LIFO reserves |
|
|
(79 |
) |
|
(74 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net |
|
$ |
1,788 |
|
$ |
1,741 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For
September 30, 2014 and December 31, 2013, approximately 12% and 11%, respectively, of inventories were recorded using the LIFO cost method.
5. 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 four joint
ventures for which we are the primary beneficiary:
-
- Rubicon LLC manufactures products for our Polyurethanes and Performance Products segments. The structure of the
joint venture is such that the total equity investment at risk is not sufficient to permit the joint venture to finance its activities without additional financial support. By virtue of the operating
agreement with this joint venture, we purchase a majority of the output, absorb a majority of the operating costs and provide a majority of the additional funding.
-
- Pacific Iron Products Sdn Bhd manufactures products for our Pigments segment. In this joint venture we supply all the raw
materials through a fixed cost supply contract, operate the manufacturing facility and market the products of the joint venture to customers. Through a fixed price raw materials supply contract with
the joint venture we are exposed to the risk related to the fluctuation of raw material pricing.
-
- Arabian Amines Company manufactures products for our Performance Products segment. As required in the operating agreement
governing this joint venture, we purchase all of Arabian Amines Company's production and sell it to our customers. Substantially all of the joint venture's activities are conducted on our behalf.
-
- Sasol-Huntsman is our 50%-owned joint venture with Sasol that owns and operates a maleic anhydride facility in Moers,
Germany. This joint venture manufactures products for our Performance Products segment. The joint venture uses our technology and expertise, and we bear a disproportionate amount of risk of loss due
to a related-party loan to Sasol-Huntsman for which we bear the default risk.
22
Table of Contents
HUNTSMAN CORPORATION AND SUBSIDIARIES
HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
5. VARIABLE INTEREST ENTITIES (Continued)
Creditors
of these entities have no recourse to our general credit. As the primary beneficiary of these variable interest entities at September 30, 2014, the joint ventures'
assets, liabilities and results of operations are included in our condensed consolidated financial statements (unaudited).
The
following table summarizes the carrying amount of our variable interest entities' assets and liabilities included in our condensed consolidated balance sheets (unaudited), before
intercompany eliminations (dollars in millions):
|
|
|
|
|
|
|
|
|
|
September 30,
2014 |
|
December 31,
2013 |
|
Current assets |
|
$ |
186 |
|
$ |
147 |
|
Property, plant and equipment, net |
|
|
343 |
|
|
369 |
|
Other noncurrent assets |
|
|
68 |
|
|
76 |
|
Deferred income taxes |
|
|
28 |
|
|
28 |
|
Intangible assets |
|
|
17 |
|
|
17 |
|
Goodwill |
|
|
15 |
|
|
16 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
657 |
|
$ |
653 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities |
|
$ |
353 |
|
$ |
330 |
|
Long-term debt |
|
|
51 |
|
|
72 |
|
Deferred income taxes |
|
|
9 |
|
|
9 |
|
Other noncurrent liabilities |
|
|
32 |
|
|
45 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
$ |
445 |
|
$ |
456 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23
Table of Contents
HUNTSMAN CORPORATION AND SUBSIDIARIES
HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
6. RESTRUCTURING, IMPAIRMENT AND PLANT CLOSING COSTS
As of September 30, 2014 and December 31, 2013, accrued restructuring costs by type of cost and initiative consisted of the following (dollars in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Workforce
reductions(1) |
|
Demolition and
decommissioning |
|
Non-cancelable
lease and
contract
termination
costs |
|
Other
restructuring
costs |
|
Total(2) |
|
Accrued liabilities as of January 1, 2014 |
|
$ |
52 |
|
$ |
|
|
$ |
60 |
|
$ |
1 |
|
$ |
113 |
|
2014 charges for 2013 and prior initiatives |
|
|
40 |
|
|
5 |
|
|
4 |
|
|
11 |
|
|
60 |
|
2014 charges for 2014 initiatives |
|
|
6 |
|
|
|
|
|
|
|
|
|
|
|
6 |
|
Reversal of reserves no longer required |
|
|
(7 |
) |
|
|
|
|
|
|
|
(1 |
) |
|
(8 |
) |
2014 payments for 2013 and prior initiatives |
|
|
(39 |
) |
|
(5 |
) |
|
(6 |
) |
|
(10 |
) |
|
(60 |
) |
Net activity of discontinued operations |
|
|
|
|
|
|
|
|
(1 |
) |
|
|
|
|
(1 |
) |
Foreign currency effect on liability balance |
|
|
(3 |
) |
|
|
|
|
(4 |
) |
|
1 |
|
|
(6 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued liabilities as of September 30, 2014 |
|
$ |
49 |
|
$ |
|
|
$ |
53 |
|
$ |
2 |
|
$ |
104 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- (1)
- The
workforce reduction reserves relate to the termination of 635 positions, of which 496 positions had not been terminated as of September 30, 2014.
- (2)
- Accrued
liabilities by initiatives were as follows (dollars in millions):
|
|
|
|
|
|
|
|
|
|
September 30,
2014 |
|
December 31,
2013 |
|
2012 and prior initiatives |
|
$ |
68 |
|
$ |
95 |
|
2013 initiatives |
|
|
30 |
|
|
18 |
|
2014 initiatives |
|
|
6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
104 |
|
$ |
113 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
24
Table of Contents
HUNTSMAN CORPORATION AND SUBSIDIARIES
HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
6. RESTRUCTURING, IMPAIRMENT AND PLANT CLOSING COSTS (Continued)
Details
with respect to our reserves for restructuring, impairment and plant closing costs are provided below by segment and initiative (dollars in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Polyurethanes |
|
Performance
Products |
|
Advanced
Materials |
|
Textile
Effects |
|
Pigments |
|
Discontinued
Operations |
|
Corporate
and
Other |
|
Total |
|
Accrued liabilities as of January 1, 2014 |
|
$ |
9 |
|
$ |
10 |
|
$ |
12 |
|
$ |
68 |
|
$ |
2 |
|
$ |
3 |
|
$ |
9 |
|
$ |
113 |
|
2014 charges for 2013 and prior initiatives |
|
|
|
|
|
23 |
|
|
12 |
|
|
11 |
|
|
3 |
|
|
|
|
|
11 |
|
|
60 |
|
2014 charges for 2014 initiatives |
|
|
|
|
|
|
|
|
|
|
|
6 |
|
|
|
|
|
|
|
|
|
|
|
6 |
|
Reversal of reserves no longer required |
|
|
|
|
|
(1 |
) |
|
(4 |
) |
|
(2 |
) |
|
|
|
|
|
|
|
(1 |
) |
|
(8 |
) |
2014 payments for 2013 and prior initiatives |
|
|
(3 |
) |
|
(7 |
) |
|
(13 |
) |
|
(21 |
) |
|
(3 |
) |
|
|
|
|
(13 |
) |
|
(60 |
) |
Net activity of discontinued operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1 |
) |
|
|
|
|
(1 |
) |
Foreign currency effect on liability balance |
|
|
|
|
|
(1 |
) |
|
|
|
|
(4 |
) |
|
(1 |
) |
|
|
|
|
|
|
|
(6 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued liabilities as of September 30, 2014 |
|
$ |
6 |
|
$ |
24 |
|
$ |
7 |
|
$ |
58 |
|
$ |
1 |
|
$ |
2 |
|
$ |
6 |
|
$ |
104 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current portion of restructuring reserves |
|
$ |
2 |
|
$ |
24 |
|
$ |
6 |
|
$ |
7 |
|
$ |
1 |
|
$ |
2 |
|
$ |
6 |
|
$ |
48 |
|
Long-term portion of restructuring reserves |
|
|
4 |
|
|
|
|
|
1 |
|
|
51 |
|
|
|
|
|
|
|
|
|
|
|
56 |
|
Details
with respect to cash and noncash restructuring charges for the three and nine months ended September 30, 2014 and 2013 by initiative are provided below (dollars in
millions):
|
|
|
|
|
|
|
|
|
|
Three months
ended
September 30, 2014 |
|
Nine months
ended
September 30, 2014 |
|
Cash charges: |
|
|
|
|
|
|
|
2014 charges for 2013 and prior initiatives |
|
$ |
9 |
|
$ |
60 |
|
2014 charges for 2014 initiatives |
|
|
|
|
|
6 |
|
Pension related charges |
|
|
|
|
|
2 |
|
Reversal of reserves no longer required |
|
|
|
|
|
(8 |
) |
Noncash charges |
|
|
30 |
|
|
31 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total 2014 Restructuring, Impairment and Plant Closing Costs |
|
$ |
39 |
|
$ |
91 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25
Table of Contents
HUNTSMAN CORPORATION AND SUBSIDIARIES
HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
6. RESTRUCTURING, IMPAIRMENT AND PLANT CLOSING COSTS (Continued)
|
|
|
|
|
|
|
|
|
|
Three months
ended
September 30, 2013 |
|
Nine months
ended
September 30, 2013 |
|
Cash charges: |
|
|
|
|
|
|
|
2013 charges for 2012 and prior initiatives |
|
$ |
25 |
|
$ |
87 |
|
2013 charges for 2013 initiatives |
|
|
14 |
|
|
28 |
|
Pension related charges |
|
|
2 |
|
|
7 |
|
Reversal of reserves no longer required |
|
|
(10 |
) |
|
(19 |
) |
Non-cash charges |
|
|
6 |
|
|
7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total 2013 Restructuring, Impairment and Plant Closing Costs |
|
$ |
37 |
|
$ |
110 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2014 RESTRUCTURING ACTIVITIES
In connection with a September 2014 announcement of a feasibility study into a MDI production expansion at our Geismar, Louisiana
facility, we concluded that certain capitalized engineering costs associated with a previously planned MDI production expansion at our Rotterdam, The Netherlands facility were impaired and our
Polyurethanes segment recorded a noncash impairment charge of $16 million during the third quarter of 2014.
During
2013, our Performance Products segment initiated a restructuring program to refocus its surfactants business in Europe. In connection with this program, on June 25, 2014 we
completed the sale of our European commodity surfactants business, including the ethoxylation facility in Lavera, France to Wilmar. In addition, Wilmar has entered into a multi-year arrangement to
purchase certain sulphated surfactant products from our facilities in St. Mihiel, France and Castiglione delle Stiviere, Italy. Additionally, we intend to cease production at our Patrica, Italy
surfactants facility by late October 2014. During the nine months ended September 30, 2014, we recorded charges of $23 million primarily related to workforce reductions. We expect to
complete this program by the end of 2015.
During
the nine months ended September 30, 2014, our Advanced Materials segment recorded charges of $12 million primarily related to workforce reductions with our global
transformational change program designed to improve the segment's manufacturing efficiencies, enhance its commercial excellence and improve its long-term global competitiveness. We expect to incur
charges related to this program through the first quarter of 2015.
On
September 27, 2011, we announced plans to implement a significant restructuring of our Textile Effects segment, including the closure of our production facilities and business
support offices in Basel, Switzerland, as part of an ongoing strategic program aimed at improving the Textile Effects segment's long-term global competitiveness. In connection with this plan, during
the nine months ended September 30, 2014, our Textile Effects segment recorded charges of $9 million and an $8 million noncash charge for a pension settlement loss associated with
this initiative. We expect to incur charges related to this program through 2015. In June 2014, we announced plans for the closure our Qingdao, China plant to be completed by December 2015. During the
nine months ended September 30, 2014,
26
Table of Contents
HUNTSMAN CORPORATION AND SUBSIDIARIES
HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
6. RESTRUCTURING, IMPAIRMENT AND PLANT CLOSING COSTS (Continued)
we
recorded charges of $6 million primarily related to workforce reductions related to this initiative. We expect to incur charges related to this program through the end of 2016.
During
the nine months ended September 30, 2014, our Corporate and other segment recorded charges of $11 million in association with a reorganization of our global
information technology organization. We expect to incur charges related to this program through the end of 2015.
2013 RESTRUCTURING ACTIVITIES
During the nine months ended September 30, 2013, our Polyurethanes segment recorded charges of $3 million and reversed
charges of $7 million related to workforce reductions in association with our program to reduce annualized fixed costs. Our Polyurethanes segment also recorded pension-related settlement
charges of $7 million related to this program.
During
the nine months ended September 30, 2013, our Performance Products segment recorded charges of $12 million related primarily to workforce reductions in association
with plans to refocus our surfactants business in Europe and $5 million primarily related to workforce reductions in our Australian operation.
During
the nine months ended September 30, 2013, our Advanced Materials segment recorded charges of $33 million primarily related to workforce reductions in association
with our global transformational change program designed to improve the segment's manufacturing efficiencies, enhance commercial excellence and improve its long-term global competitiveness.
On
September 27, 2011, we announced plans to implement a significant restructuring of our Textile Effects business, including the closure of our production facilities and business
support offices in Basel, Switzerland, as part of an ongoing strategic program aimed at improving the Textile Effects segment's long-term global competitiveness. In connection with this plan, during
the nine months ended September 30, 2013, our Textile Effects segment recorded charges of $48 million as well as recorded a $6 million noncash charge for a pension settlement
loss. In addition, during the nine months ended September 30, 2013, we reversed charges of $8 million in relation to our consolidation of manufacturing activities and processes at our
site in Basel, Switzerland.
During
the nine months ended September 30, 2013, our Corporate and other segment recorded charges of $11 million primarily related to workforce reductions in association
with a reorganization of our global information technology organization.
27
Table of Contents
HUNTSMAN CORPORATION AND SUBSIDIARIES
HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
7. DEBT
Outstanding debt consisted of the following (dollars in millions):
Huntsman Corporation
|
|
|
|
|
|
|
|
|
|
September 30,
2014 |
|
December 31,
2013 |
|
Senior Credit Facilities: |
|
|
|
|
|
|
|
Term loans |
|
$ |
1,339 |
|
$ |
1,351 |
|
Amounts outstanding under A/R programs |
|
|
235 |
|
|
248 |
|
Senior notes |
|
|
1,219 |
|
|
1,061 |
|
Senior subordinated notes |
|
|
890 |
|
|
891 |
|
HPS (China) debt |
|
|
38 |
|
|
40 |
|
Variable interest entities |
|
|
220 |
|
|
247 |
|
Other |
|
|
85 |
|
|
72 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total debtexcluding debt to affiliates |
|
$ |
4,026 |
|
$ |
3,910 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current portion of debt |
|
$ |
274 |
|
$ |
277 |
|
Long-term portion |
|
|
3,752 |
|
|
3,633 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total debtexcluding debt to affiliates |
|
$ |
4,026 |
|
$ |
3,910 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total debtexcluding debt to affiliates |
|
$ |
4,026 |
|
$ |
3,910 |
|
Notes payable to affiliates-noncurrent |
|
|
6 |
|
|
6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total debt |
|
$ |
4,032 |
|
$ |
3,916 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
28
Table of Contents
HUNTSMAN CORPORATION AND SUBSIDIARIES
HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
7. DEBT (Continued)
Huntsman International
|
|
|
|
|
|
|
|
|
|
September 30,
2014 |
|
December 31,
2013 |
|
Senior Credit Facilities: |
|
|
|
|
|
|
|
Term loans |
|
$ |
1,339 |
|
$ |
1,351 |
|
Amounts outstanding under A/R programs |
|
|
235 |
|
|
248 |
|
Senior notes |
|
|
1,219 |
|
|
1,061 |
|
Senior subordinated notes |
|
|
890 |
|
|
891 |
|
HPS (China) debt |
|
|
38 |
|
|
40 |
|
Variable interest entities |
|
|
220 |
|
|
247 |
|
Other |
|
|
85 |
|
|
72 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total debtexcluding debt to affiliates |
|
$ |
4,026 |
|
$ |
3,910 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current portion of debt |
|
$ |
274 |
|
$ |
277 |
|
Long-term portion |
|
|
3,752 |
|
|
3,633 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total debtexcluding debt to affiliates |
|
$ |
4,026 |
|
$ |
3,910 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total debtexcluding debt to affiliates |
|
$ |
4,026 |
|
$ |
3,910 |
|
Notes payable to affiliates-current |
|
|
100 |
|
|
100 |
|
Notes payable to affiliates-noncurrent |
|
|
713 |
|
|
779 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total debt |
|
$ |
4,839 |
|
$ |
4,789 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DIRECT AND SUBSIDIARY DEBT
Huntsman Corporation's direct debt and guarantee obligations consist of a guarantee of certain indebtedness incurred from time to time
to finance certain insurance premiums. Substantially all of our other 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 are designated as nonguarantor subsidiaries and have third-party debt agreements. These debt agreements 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.
Senior Credit Facilities
As of September 30, 2014, our senior credit facilities ("Senior Credit Facilities") consisted of our revolving credit facility
("Revolving Facility"), our extended term loan B facility ("Extended Term
29
Table of Contents
HUNTSMAN CORPORATION AND SUBSIDIARIES
HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
7. DEBT (Continued)
Loan B"),
our extended term loan B facilityseries 2 ("Extended Term Loan BSeries 2") and our term loan C facility ("Term Loan C") as follows (dollars in
millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Facility
|
|
Committed
Amount |
|
Principal
Outstanding |
|
Carrying
Value |
|
Interest Rate(3) |
|
Maturity |
|
Revolving Facility |
|
$ |
600 |
(1) |
$ |
|
(2) |
$ |
|
(2) |
USD LIBOR plus 2.50% |
|
|
2017 |
|
Extended Term Loan B |
|
|
NA |
|
|
952 |
|
|
952 |
|
USD LIBOR plus 2.50% |
|
|
2017 |
|
Extended Term Loan BSeries 2 |
|
|
NA |
|
|
339 |
|
|
339 |
|
USD LIBOR plus 2.75% |
|
|
2017 |
|
Term Loan C |
|
|
NA |
|
|
50 |
|
|
48 |
|
USD LIBOR plus 2.25% |
|
|
2016 |
|
- (1)
- On
October 1, 2014, Huntsman International entered into the thirteenth amendment to the agreement governing the Senior Credit Facilities ("the Credit
Agreement"). The amendment increased revolving commitments in an aggregate principal amount of $25 million.
- (2)
- We
had no borrowings outstanding under our Revolving Facility; we had approximately $17 million (U.S. dollar equivalents) of letters of credit and
bank guarantees issued and outstanding under our Revolving Facility.
- (3)
- The
applicable interest rate of the Senior Credit Facilities is subject to certain secured leverage ratio thresholds. As of September 30, 2014, the
weighted average interest rate on our outstanding balances under the Senior Credit Facilities was approximately 3%.
Our
obligations under the Senior Credit Facilities are guaranteed by substantially all of our domestic subsidiaries and certain of our foreign subsidiaries (collectively, the
"Guarantors"), and are secured by a first priority lien on substantially all of our domestic property, plant and equipment, the stock of all of our material domestic subsidiaries and certain foreign
subsidiaries, and pledges of intercompany notes between certain of our subsidiaries.
Amendment to the Credit Agreement
On October 15, 2013, Huntsman International entered into a tenth amendment to the Credit Agreement. The amendment, among other
things, permits us to incur a senior secured term loan facility in an aggregate principal amount of $1.2 billion (the "New Term Loan") and to increase our Revolving Facility. In August 2014, we
entered into the eleventh and twelfth amendments, which modified the Credit Agreement to initially fund the New Term Loan into escrow and completed the increase of our Revolving Facility by
$200 million.
On
October 1, 2014, the New Term Loan was used to fund the Rockwood Acquisition. See "Note 1. GeneralRecent DevelopmentsRockwood Acquisition." The
New Term Loan matures on October 1, 2021 and will amortize in aggregate annual amounts equal to 1% of the original principal amount of the New Term Loan, payable quarterly commencing
March 31, 2015. The New Term Loan bears interest at an interest rate margin of LIBOR plus 3.00% (subject to a 0.75% floor). The $1.2 billion New Term Loan will be recorded at a carrying
value of $1,188 million as of October 1, 2014.
30
Table of Contents
HUNTSMAN CORPORATION AND SUBSIDIARIES
HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
7. DEBT (Continued)
The
commitments associated with the increase of our Revolving Facility bear interest at the same rate as the existing Revolving Facility and will mature on the same date as the existing
facility.
Notes
As of September 30, 2014, we had outstanding the following notes (monetary amounts in millions):
|
|
|
|
|
|
|
|
Notes
|
|
Maturity |
|
Interest
Rate |
|
Amount Outstanding |
Senior Notes ("2020 Senior Notes") |
|
November 2020 |
|
|
4.875 |
% |
$650 ($647 carrying value) |
Senior Notes ("2021 Senior Notes") |
|
April 2021 |
|
|
5.125 |
% |
€445 (€450 carrying value ($572)) |
Senior Subordinated Notes |
|
March 2020 |
|
|
8.625 |
% |
$350 |
Senior Subordinated Notes |
|
March 2021 |
|
|
8.625 |
% |
$530 ($540 carrying value) |
On
June 2, 2014, pursuant to an indenture entered into on December 23, 2013, Huntsman International issued €145 million (approximately
$197 million) aggregate principal amount of additional 2021 Senior Notes. The additional notes are recorded at carrying value €150 million (approximately
$190 million) as of September 30, 2014.
The
2021 Senior Notes bear interest at the rate of 5.125% per year payable semi-annually on April 15 and October 15 of each year and are due on April 15, 2021.
Huntsman International may redeem the 2021 Senior Notes in whole or in part at any time prior to January 15, 2021 at a price equal to 100% of the principal amount thereof plus a "make-whole"
premium and accrued and unpaid interest.
The
2021 Senior Notes and 2020 Senior Notes are general unsecured senior obligations of Huntsman International and are guaranteed on a general unsecured senior basis by the Guarantors.
The indentures impose certain limitations on the ability of Huntsman International and its subsidiaries to, among other things, incur additional indebtedness secured by any principal properties, incur
indebtedness of nonguarantor subsidiaries, enter into sale and leaseback transactions with respect to any principal properties and consolidate or merge with or into any other person or lease, sell or
transfer all or substantially all of its properties and assets. Upon the occurrence of certain change of control events, holders of the 2021 Senior Notes and 2020 Senior Notes will have the right to
require that Huntsman International purchase all or a portion of such holder's notes in cash at a purchase price equal to 101% of the principal amount thereof plus accrued and unpaid interest to the
date of repurchase.
31
Table of Contents
HUNTSMAN CORPORATION AND SUBSIDIARIES
HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
7. DEBT (Continued)
Redemption of Notes and Loss on Early Extinguishment of Debt
We did not redeem or repurchase any of our notes during the nine months ended September 30, 2014. During the nine months ended
September 30, 2013, we redeemed or repurchased the following notes (monetary amounts in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
Date of Redemption
|
|
Notes |
|
Principal Amount of
Notes Redeemed |
|
Amount Paid
(Excluding Accrued
Interest) |
|
Loss on Early
Extinguishment
of Debt |
|
March 4, 2013 |
|
5.50% Senior Notes due 2016 |
|
$ |
200 |
|
$ |
200 |
|
$ |
34 |
|
Variable Interest Entity Debt
As of September 30, 2014, Arabian Amines Company, our consolidated 50%-owned joint venture, had $163 million outstanding
under its loan commitments and debt financing arrangements. Arabian Amines Company is currently not in compliance with certain financial covenants under its loan commitments. We do not guarantee these
loan commitments, and Arabian Amines Company is not a guarantor of any of our other debt obligations. Arabian Amines Company's noncompliance with its financial covenants does not affect any of our
debt obligations. While the lenders under the loan commitments have agreed to certain modifications, we continue discussions with Arabian Amines Company's lenders and expect to resolve the
noncompliance. As of September 30, 2014, the amounts outstanding under these loan commitments were classified as current in our condensed consolidated balance sheets (unaudited).
Note Payable from Huntsman International to Huntsman Corporation
As of September 30, 2014, we have a loan of $807 million to our subsidiary, Huntsman International (the "Intercompany
Note"). The Intercompany Note is unsecured and $100 million of the outstanding amount is classified as current as of September 30, 2014 on our condensed consolidated balance sheets
(unaudited). As of September 30, 2014, under the terms of the Intercompany Note, Huntsman International promises to pay us interest on the unpaid principal amount at a rate per annum based on
the previous monthly average borrowing rate obtained under our
U.S. accounts receivable securitization program ("U.S. A/R Program"), less 10 basis points (provided that the rate shall not exceed an amount that is 25 basis points less than the monthly average
borrowing rate obtained for the U.S. LIBOR-based borrowings under our Revolving Facility).
COMPLIANCE WITH COVENANTS
We believe that we are in compliance with the covenants contained in the agreements governing our material debt instruments, including
our Senior Credit Facilities, our U.S. A/R Program and our European accounts receivable securitization program ("European A/R Program" and collectively with the U.S. A/R Program, "A/R Programs") and
our notes. However, Arabian Amines Company, our consolidated 50%-owned joint venture, is currently not in compliance with certain financial covenants contained under its loan commitments. See
"Variable Interest Entity Debt" above.
32
Table of Contents
HUNTSMAN CORPORATION AND SUBSIDIARIES
HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
7. DEBT (Continued)
Our
material financing arrangements contain certain covenants with which we must comply. A failure to comply with a covenant could result in a default under a financing arrangement
unless we obtained an appropriate waiver or forbearance (as to which we can provide no assurance). A default under these material financing arrangements generally allows debt holders the option to
declare the underlying debt obligations immediately due and payable. Furthermore, certain of our material financing arrangements contain cross-default and cross-acceleration provisions under which a
failure to comply with the covenants in one financing arrangement may result in an event of default under another financing arrangement.
Our
Senior Credit Facilities are subject to a single financial covenant (the "Leverage Covenant") which applies only to the Revolving Facility and is calculated at the Huntsman
International level. The Leverage Covenant is applicable only if borrowings, letters of credit or guarantees are outstanding under the Revolving Facility (cash collateralized letters of credit or
guarantees are not deemed outstanding). The Leverage Covenant is a net senior secured leverage ratio covenant which requires that Huntsman International's ratio of senior secured debt to EBITDA (as
defined in the applicable agreement) is not more than 3.75 to 1.
If
in the future Huntsman International fails to comply with the Leverage Covenant, then we may not have access to liquidity under our Revolving Facility. If Huntsman International
failed to comply with the Leverage Covenant at a time when we had uncollateralized loans or letters of credit outstanding under the Revolving Facility, Huntsman International would be in default under
the Senior Credit
Facilities, and, unless Huntsman International obtained a waiver or forbearance with respect to such default (as to which we can provide no assurance), Huntsman International could be required to pay
off the balance of the Senior Credit Facilities in full, and we may not have further access to such facilities.
The
agreements governing our A/R Programs also contain certain receivable performance metrics. Any material failure to meet the applicable A/R Programs' metrics in the future could lead
to an early termination event under the A/R Programs, which could require us to cease our use of such facilities, prohibiting us from additional borrowings against our receivables or, at the
discretion of the lenders, requiring that we repay the A/R Programs in full. An early termination event under the A/R Programs would also constitute an event of default under our Senior Credit
Facilities, which could require us to pay off the balance of the Senior Credit Facilities in full and could result in the loss of our Senior Credit Facilities.
8. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
We are exposed to market risks, such as changes in interest rates, foreign exchange rates and commodity pricing risks. From time to time, we enter into transactions, including
transactions involving derivative instruments, to manage certain of these exposures.
33
Table of Contents
HUNTSMAN CORPORATION AND SUBSIDIARIES
HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
8. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES (Continued)
All derivatives, whether designated in hedging relationships or not, are recorded on our balance sheet at fair value. If the derivative is designated as a fair value hedge, the changes
in the fair value of the derivative and the hedged items are recognized in earnings. If the derivative is designated as a cash flow hedge, changes in the fair value of the derivative are recorded in
accumulated other comprehensive loss, to the extent effective, and will be recognized in the income statement when the hedged item affects earnings. To the extent applicable, we perform effectiveness
assessments in order to use hedge accounting at each reporting period. For a derivative that does not qualify as a hedge, changes in fair value are recognized in earnings.
We
also hedge our net investment in certain European operations. Changes in the fair value of the hedge in the net investment of certain European operations are recorded in accumulated
other comprehensive loss.
Our
cash flows and earnings are subject to fluctuations due to exchange rate variation. Our revenues and expenses are denominated in various foreign currencies. 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 one 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, 2014, we had approximately $175 million in notional amount (in U.S. dollar equivalents) outstanding in
forward foreign currency contracts.
On
December 9, 2009, we entered into a five-year interest rate contract to hedge the variability caused by monthly changes in cash flow due to associated changes in LIBOR under
our Senior Credit Facilities. The notional value of the contract is $50 million, and it has been designated as a cash flow hedge. The effective portion of the changes in the fair value of the
swap was recorded in other comprehensive loss. We will pay a fixed 2.6% on the hedge and receive the one-month LIBOR rate. As
of September 30, 2014, the fair value of the hedge was less than $1 million and was recorded in current liabilities on our condensed consolidated balance sheets (unaudited).
On
January 19, 2010, we entered into an additional five-year interest rate contract to hedge the variability caused by monthly changes in cash flow due to associated changes in
LIBOR under our Senior Credit Facilities. The notional value of the contract is $50 million, and it has been designated as a cash flow hedge. The effective portion of the changes in the fair
value of the swap was recorded as other comprehensive loss. We will pay a fixed 2.8% on the hedge and receive the one-month LIBOR rate. As of September 30, 2014, the fair value of the hedge was
less than $1million and was recorded in current liabilities on our condensed consolidated balance sheets (unaudited).
On
September 1, 2011, we entered into a $50 million forward interest rate contract that will begin in December 2014 with maturity in April 2017 and a $50 million
forward interest rate contract that will begin in January 2015 with maturity in April 2017. These two forward contracts are to hedge the variability caused by monthly changes in cash flow due to
associated changes in LIBOR under our Senior Credit Facilities once our existing interest rate hedges mature. These swaps are designated as
34
Table of Contents
HUNTSMAN CORPORATION AND SUBSIDIARIES
HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
8. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES (Continued)
cash
flow hedges and the effective portion of the changes in the fair value of the swaps were recorded in other comprehensive income. Both interest rate contracts will pay a fixed 2.5% on the hedge
and receive the one-month LIBOR rate once the contracts begin in 2014 and 2015, respectively. As of September 30, 2014, the combined fair value of these two hedges was $3 million and was
recorded in other noncurrent liabilities on our condensed consolidated balance sheets (unaudited).
In
2009, Sasol-Huntsman entered into derivative transactions to hedge the variable interest rate associated with its local credit facility. These derivative rate hedges include a
floating to fixed interest rate contract providing Sasol-Huntsman with EURIBOR interest payments for a fixed payment of 3.62% and a cap for future periods with a strike price of 3.62%. In connection
with the consolidation of Sasol-Huntsman as of April 1, 2011, the interest rate contract is now included in our consolidated results. See "Note 5. Variable Interest Entities." The
notional amount of the fixed rate contracts as of September 30, 2014 was €12 million (approximately $15 million) and the notional amount of caps as of
September 30, 2014 was €22 million (approximately $28 million) and the derivative transactions do not qualify for hedge accounting. As of September 30,
2014, the fair value of the hedges was less than €1 million (less than approximately $1 million) and was recorded in other noncurrent liabilities on our condensed
consolidated balance sheets (unaudited). For the three and nine months ended September 30, 2014, we recorded a reduction of interest expense of nil and €1 million
(approximately nil and $1 million), respectively, due to changes in the fair value of the hedges.
Beginning
in 2009, Arabian Amines Company entered into a 12-year floating to fixed interest rate contract providing for a receipt of LIBOR interest payments for a fixed payment of 5.02%.
In connection with the consolidation of Arabian Amines Company as of July 1, 2010, the interest rate contract is now included in our consolidated results. See "Note 5. Variable Interest
Entities." The notional amount of the swap as of September 30, 2014 was $28 million, and the interest rate contract is not designated as a cash flow hedge. As of September 30,
2014, the fair value of the swap was $3 million and was recorded in current liabilities on our condensed consolidated balance sheets (unaudited). For the three and nine months ended
September 30, 2014, we recorded additional (reduction of) interest expense of nil and ($1) million, respectively, due to changes in fair value of the swap. As of September 30, 2014,
Arabian Amines Company was not in compliance with certain financial covenants under its loan commitments. For more information, see "Note 7. DebtDirect and Subsidiary
DebtVariable Interest Entity Debt."
In
conjunction with the issuance of our 8.625% senior subordinated notes due 2020, we entered into cross-currency interest rate contracts with three counterparties. On March 17,
2010, we made payments of $350 million to these counterparties and received €255 million from these counterparties, and on maturity (March 15, 2015) we are
required to pay €255 million to these counterparties and will receive $350 million from these counterparties. On March 15 and September 15 of each year, we
will receive U.S. dollar interest payments of approximately $15 million (equivalent to an annual rate of 8.625%) and make interest payments of approximately €11 million
(equivalent to an annual rate of approximately 8.41%). This swap is designated as a hedge of net investment for financial reporting purposes. As of September 30, 2014, the fair value of this
swap was $30 million and was recorded in current assets on our condensed consolidated balance sheets (unaudited).
35
Table of Contents
HUNTSMAN CORPORATION AND SUBSIDIARIES
HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
8. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES (Continued)
We
finance certain of our non-U.S. subsidiaries with intercompany loans that are, in many cases, denominated in currencies other than the entities' functional currency. We manage the net
foreign currency exposure created by this debt through various means, including cross-currency swaps, the designation of certain intercompany loans as permanent loans because they are not expected to
be repaid in the foreseeable future and the designation of certain debt and swaps as net investment hedges.
Foreign
currency transaction gains and losses on intercompany loans that are not designated as permanent loans are recorded in earnings. Foreign currency transaction gains and losses on
intercompany loans that are designated as permanent loans are recorded in other comprehensive income. From time to time, we review such designation of intercompany loans.
We
review our non-U.S. dollar denominated debt and derivative instruments to determine the appropriate amounts designated as hedges. As of September 30, 2014, we have designated
approximately
€575 million (approximately $731 million) of euro-denominated debt and cross-currency interest rate contracts as a hedge of our net investment. For the three and nine
months ended September 30, 2014, the amount of gain recognized on the hedge of our net investment was $56 million and $62 million, respectively, and was recorded in other
comprehensive income on our condensed consolidated statements of comprehensive income (unaudited). As of September 30, 2014, we had approximately €967 million
(approximately $1,229 million) in net euro assets.
9. FAIR VALUE
The fair values of financial instruments were as follows (dollars in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2014 |
|
December 31, 2013 |
|
|
|
Carrying
Value |
|
Estimated
Fair Value |
|
Carrying
Value |
|
Estimated
Fair Value |
|
Non-qualified employee benefit plan investments |
|
$ |
21 |
|
$ |
21 |
|
$ |
21 |
|
$ |
21 |
|
Cross-currency interest rate contracts |
|
|
30 |
|
|
30 |
|
|
2 |
|
|
2 |
|
Interest rate contracts |
|
|
(7 |
) |
|
(7 |
) |
|
(10 |
) |
|
(10 |
) |
Long-term debt (including current portion) |
|
|
(4,026 |
) |
|
(4,069 |
) |
|
(3,910 |
) |
|
(4,010 |
) |
The
carrying amounts reported in our condensed consolidated balance sheets (unaudited) 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. The fair value of non-qualified employee benefit plan investments is obtained through market observable pricing using
prevailing market prices. The estimated fair values of our long-term debt are based on quoted market prices for the identical liability when traded as an asset in an active market (Level 1).
The
fair value estimates presented herein are based on pertinent information available to management as of September 30, 2014 and December 31, 2013. Although management is
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, 2014 and current estimates of fair value may differ significantly from the amounts presented herein.
36
Table of Contents
HUNTSMAN CORPORATION AND SUBSIDIARIES
HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
9. FAIR VALUE (Continued)
The
following assets and liabilities are measured at fair value on a recurring basis (dollars in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Amounts Using |
|
Description
|
|
September 30,
2014 |
|
Quoted prices in
active markets for
identical assets
(Level 1)(3) |
|
Significant other
observable
inputs
(Level 2)(3) |
|
Significant
unobservable
inputs
(Level 3)(3) |
|
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for sale equity securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity mutual funds |
|
$ |
21 |
|
$ |
21 |
|
$ |
|
|
$ |
|
|
Derivatives: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cross-currency interest rate contracts(1) |
|
|
30 |
|
|
|
|
|
30 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
51 |
|
$ |
21 |
|
$ |
30 |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate contracts(2) |
|
$ |
(7 |
) |
$ |
|
|
$ |
(7 |
) |
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Amounts Using |
|
Description
|
|
December 31,
2013 |
|
Quoted prices in
active markets for
identical assets
(Level 1)(3) |
|
Significant other
observable
inputs
(Level 2)(3) |
|
Significant
unobservable
inputs
(Level 3)(3) |
|
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for sale equity securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity mutual funds |
|
$ |
21 |
|
$ |
21 |
|
$ |
|
|
$ |
|
|
Derivatives: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cross-currency interest rate contracts(1) |
|
|
2 |
|
|
|
|
|
2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
23 |
|
$ |
21 |
|
$ |
2 |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate contracts(2) |
|
$ |
(10 |
) |
$ |
|
|
$ |
(10 |
) |
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- (1)
- The
income approach is used to calculate the fair value of these instruments. Fair value represents the present value of estimated future cash flows,
calculated using relevant interest rates, exchange rates, and yield curves at stated intervals. There were no material changes to the valuation methods or assumptions used to determine the fair value
during the current period.
- (2)
- The
income approach is used to calculate the fair value of these instruments. Fair value represents the present value of estimated future cash flows,
calculated using relevant interest rates and yield curves at stated intervals. There were no material changes to the valuation methods or assumptions used to determine the fair value during the
current period.
37
Table of Contents
HUNTSMAN CORPORATION AND SUBSIDIARIES
HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
9. FAIR VALUE (Continued)
- (3)
- There
were no transfers between Levels 1 and 2 within the fair value hierarchy for the nine months ended September 30, 2014 and the year ended
December 31, 2013. During the nine months ended September 30, 2014 and 2013, there were no instruments categorized as Level 3 within the fair value hierarchy.
We
also have assets that under certain conditions are subject to measurement at fair value on a non-recurring basis. These assets include property, plant and equipment and those
associated with acquired businesses, including goodwill and intangible assets. For these assets, measurement at fair value in periods subsequent to their initial recognition is applicable if one or
more is determined to be impaired. During the nine months ended September 30, 2014 and 2013, we recorded charges of $26 million and $1 million, respectively, for the impairment of
long-lived assets.
10. EMPLOYEE BENEFIT PLANS
Components of the net periodic benefit costs for the three and nine months ended September 30, 2014 and 2013 were as follows (dollars in millions):
Huntsman Corporation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Defined
Benefit Plans |
|
Other
Postretirement
Benefit Plans |
|
|
|
Three months
ended
September 30, |
|
Three months
ended
September 30, |
|
|
|
2014 |
|
2013 |
|
2014 |
|
2013 |
|
Service cost |
|
$ |
14 |
|
$ |
18 |
|
$ |
1 |
|
$ |
1 |
|
Interest cost |
|
|
36 |
|
|
32 |
|
|
1 |
|
|
2 |
|
Expected return on assets |
|
|
(48 |
) |
|
(44 |
) |
|
|
|
|
|
|
Amortization of prior service benefit |
|
|
(1 |
) |
|
(1 |
) |
|
(1 |
) |
|
(1 |
) |
Amortization of actuarial loss |
|
|
13 |
|
|
19 |
|
|
|
|
|
1 |
|
Special termination benefits |
|
|
|
|
|
2 |
|
|
|
|
|
|
|
Settlement loss |
|
|
10 |
|
|
6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic benefit cost |
|
$ |
24 |
|
$ |
32 |
|
$ |
1 |
|
$ |
3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
38
Table of Contents
HUNTSMAN CORPORATION AND SUBSIDIARIES
HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
10. EMPLOYEE BENEFIT PLANS (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Defined
Benefit Plans |
|
Other
Postretirement
Benefit Plans |
|
|
|
Nine months
ended
September 30, |
|
Nine months
ended
September 30, |
|
|
|
2014 |
|
2013 |
|
2014 |
|
2013 |
|
Service cost |
|
$ |
44 |
|
$ |
51 |
|
$ |
2 |
|
$ |
3 |
|
Interest cost |
|
|
110 |
|
|
97 |
|
|
4 |
|
|
4 |
|
Expected return on assets |
|
|
(146 |
) |
|
(130 |
) |
|
|
|
|
|
|
Amortization of prior service benefit |
|
|
(4 |
) |
|
(4 |
) |
|
(3 |
) |
|
(2 |
) |
Amortization of actuarial loss |
|
|
39 |
|
|
59 |
|
|
1 |
|
|
2 |
|
Special termination benefits |
|
|
3 |
|
|
7 |
|
|
|
|
|
|
|
Settlement loss |
|
|
11 |
|
|
6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic benefit cost |
|
$ |
57 |
|
$ |
86 |
|
$ |
4 |
|
$ |
7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Huntsman International
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Defined
Benefit Plans |
|
Other
Postretirement
Benefit Plans |
|
|
|
Three months
ended
September 30, |
|
Three months
ended
September 30, |
|
|
|
2014 |
|
2013 |
|
2014 |
|
2013 |
|
Service cost |
|
$ |
14 |
|
$ |
17 |
|
$ |
1 |
|
$ |
1 |
|
Interest cost |
|
|
36 |
|
|
32 |
|
|
1 |
|
|
2 |
|
Expected return on assets |
|
|
(48 |
) |
|
(44 |
) |
|
|
|
|
|
|
Amortization of prior service benefit |
|
|
(1 |
) |
|
(1 |
) |
|
(1 |
) |
|
(1 |
) |
Amortization of actuarial loss |
|
|
15 |
|
|
22 |
|
|
|
|
|
1 |
|
Special termination benefits |
|
|
|
|
|
2 |
|
|
|
|
|
|
|
Settlement loss |
|
|
10 |
|
|
6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic benefit cost |
|
$ |
26 |
|
$ |
34 |
|
$ |
1 |
|
$ |
3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
39
Table of Contents
HUNTSMAN CORPORATION AND SUBSIDIARIES
HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
10. EMPLOYEE BENEFIT PLANS (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Defined
Benefit Plans |
|
Other
Postretirement
Benefit Plans |
|
|
|
Nine months
ended
September 30, |
|
Nine months
ended
September 30, |
|
|
|
2014 |
|
2013 |
|
2014 |
|
2013 |
|
Service cost |
|
$ |
44 |
|
$ |
51 |
|
$ |
2 |
|
$ |
3 |
|
Interest cost |
|
|
110 |
|
|
97 |
|
|
4 |
|
|
4 |
|
Expected return on assets |
|
|
(146 |
) |
|
(130 |
) |
|
|
|
|
|
|
Amortization of prior service benefit |
|
|
(4 |
) |
|
(4 |
) |
|
(3 |
) |
|
(2 |
) |
Amortization of actuarial loss |
|
|
45 |
|
|
64 |
|
|
1 |
|
|
2 |
|
Special termination benefits |
|
|
3 |
|
|
7 |
|
|
|
|
|
|
|
Settlement loss |
|
|
11 |
|
|
6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic benefit cost |
|
$ |
63 |
|
$ |
91 |
|
$ |
4 |
|
$ |
7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
During
the nine months ended September 30, 2014 and 2013, we made contributions to our pension and other postretirement benefit plans of $113 million and
$130 million, respectively. During the remainder of 2014, we expect to contribute an additional amount of approximately $30 million to these plans, excluding expected contributions to
employee benefit plans assumed in the Rockwood Acquisition.
In
connection with employee terminations related to restructuring programs, we recorded noncash pension settlement losses of $11 million and $6 million for the nine months
ended September 30, 2014 and 2013, respectively.
Beginning
July 1, 2014, the Huntsman Defined Benefit Pension Plan was closed to new, non-union entrants. New, non-union entrants will be provided with a defined contribution plan
with a non-discretionary employer contribution and a company match.
11. HUNTSMAN CORPORATION STOCKHOLDERS' EQUITY
COMMON STOCK DIVIDENDS
During the quarter ended September 30, 2014, we paid cash dividends of $31 million, or $0.125 per share, to common
stockholders, and during each of the quarters ended September 30, 2013, June 30, 2014 and 2013 and March 31, 2014 and 2013, we paid cash dividends of $30 million, or $0.125
per share, to common stockholders.
40
Table of Contents
HUNTSMAN CORPORATION AND SUBSIDIARIES
HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
12. OTHER COMPREHENSIVE (LOSS) INCOME
The components of other comprehensive (loss) income and changes in accumulated other comprehensive loss by component were as follows (dollars in millions):
Huntsman Corporation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign
currency
translation
adjustment(a) |
|
Pension and
other
postretirement
benefits
adjustments, net
of tax(b) |
|
Other
comprehensive
income of
unconsolidated
affiliates |
|
Other,
net |
|
Total |
|
Amounts
attributable to
noncontrolling
interests |
|
Amounts
attributable to
Huntsman
Corporation |
|
Beginning balance, January 1, 2014 |
|
$ |
246 |
|
$ |
(851 |
) |
$ |
12 |
|
$ |
8 |
|
$ |
(585 |
) |
$ |
8 |
|
$ |
(577 |
) |
Other comprehensive (loss) income before reclassifications |
|
|
(108 |
) |
|
|
|
|
|
|
|
2 |
|
|
(106 |
) |
|
7 |
|
|
(99 |
) |
Amounts reclassified from accumulated other comprehensive loss(c) |
|
|
|
|
|
33 |
|
|
|
|
|
|
|
|
33 |
|
|
|
|
|
33 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net current-period other comprehensive (loss) income |
|
|
(108 |
) |
|
33 |
|
|
|
|
|
2 |
|
|
(73 |
) |
|
7 |
|
|
(66 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance, September 30, 2014 |
|
$ |
138 |
|
$ |
(818 |
) |
$ |
12 |
|
$ |
10 |
|
$ |
(658 |
) |
$ |
15 |
|
$ |
(643 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- (a)
- Amounts
are net of tax of $32 and $13 as of September 30, 2014 and January 1, 2014, respectively.
- (b)
- Amounts
are net of tax of $72 and $83 as of September 30, 2014 and January 1, 2014, respectively.
- (c)
- See
table below for details about these reclassifications.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign
currency
translation
adjustment(a) |
|
Pension and
other
postretirement
benefits
adjustments, net
of tax(b) |
|
Other
comprehensive
income of
unconsolidated
affiliates |
|
Other, net |
|
Total |
|
Amounts
attributable to
noncontrolling
interests |
|
Amounts
attributable to
Huntsman
Corporation |
|
Beginning balance, January 1, 2013 |
|
$ |
269 |
|
$ |
(1,036 |
) |
$ |
7 |
|
$ |
3 |
|
$ |
(757 |
) |
$ |
13 |
|
$ |
(744 |
) |
Other comprehensive (loss) income before reclassifications |
|
|
(44 |
) |
|
22 |
|
|
2 |
|
|
3 |
|
|
(17 |
) |
|
1 |
|
|
(16 |
) |
Amounts reclassified from accumulated other comprehensive loss(c) |
|
|
|
|
|
46 |
|
|
|
|
|
|
|
|
46 |
|
|
|
|
|
46 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net current-period other comprehensive (loss) income |
|
|
(44 |
) |
|
68 |
|
|
2 |
|
|
3 |
|
|
29 |
|
|
1 |
|
|
30 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance, September 30, 2013 |
|
$ |
225 |
|
$ |
(968 |
) |
$ |
9 |
|
$ |
6 |
|
$ |
(728 |
) |
$ |
14 |
|
$ |
(714 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- (a)
- Amounts
are net of tax of $18 and $20 as of September 30, 2013 and January 1, 2013, respectively.
- (b)
- Amounts
are net of tax of $176 and $197 as of September 30, 2013 and January 1, 2013, respectively.
- (c)
- See
table below for details about these reclassifications.
41
Table of Contents
HUNTSMAN CORPORATION AND SUBSIDIARIES
HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
12. OTHER COMPREHENSIVE (LOSS) INCOME (Continued)
|
|
|
|
|
|
|
|
|
|
|
Three months
ended
September 30, 2014 |
|
Nine months
ended
September 30, 2014 |
|
|
Details about Accumulated Other
Comprehensive Loss Components:
|
|
Amounts reclassified
from accumulated other
comprehensive loss |
|
Amounts reclassified
from accumulated other
comprehensive loss |
|
Affected line item
in the statement where
net income is presented |
Amortization of pension and other postretirement benefits: |
|
|
|
|
|
|
|
|
Prior service credit |
|
$ |
(2 |
) |
$ |
(7 |
) |
(a)(b) |
Actuarial loss |
|
|
13 |
|
|
40 |
|
(a)(b)(c) |
Settlement loss |
|
|
10 |
|
|
11 |
|
(a)(b) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21 |
|
|
44 |
|
Total before tax |
|
|
|
(5 |
) |
|
(11 |
) |
Income tax expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total reclassifications for the period |
|
$ |
16 |
|
$ |
33 |
|
Net of tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months
ended
September 30, 2013 |
|
Nine months
ended
September 30, 2013 |
|
|
Details about Accumulated Other
Comprehensive Loss Components:
|
|
Amounts reclassified
from accumulated other
comprehensive loss |
|
Amounts reclassified
from accumulated other
comprehensive loss |
|
Affected line item
in the statement where
net income is presented |
Amortization of pension and other postretirement benefits: |
|
|
|
|
|
|
|
|
Prior service credit |
|
$ |
(2 |
) |
$ |
(6 |
) |
(a)(b) |
Actuarial loss |
|
|
20 |
|
|
61 |
|
(a)(b)(c) |
Settlement loss |
|
|
6 |
|
|
6 |
|
(a)(b) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
24 |
|
|
61 |
|
Total before tax |
|
|
|
(6 |
) |
|
(15 |
) |
Income tax expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total reclassifications for the period |
|
$ |
18 |
|
$ |
46 |
|
Net of tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- (a)
- Amounts
in parentheses indicate credits on our condensed consolidated statements of operations (unaudited).
- (b)
- These
accumulated other comprehensive loss components are included in the computation of net periodic pension costs. See "Note 10. Employee Benefit
Plans."
- (c)
- Amounts
contain $1 million of actuarial losses related to discontinued operations for both of the three months ended September 30, 2014 and
2013, and $3 million and $5 million for the nine months ended September 30, 2014 and 2013, respectively.
42
Table of Contents
HUNTSMAN CORPORATION AND SUBSIDIARIES
HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
12. OTHER COMPREHENSIVE (LOSS) INCOME (Continued)
Huntsman International
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign
currency
translation
adjustment(a) |
|
Pension and other
postretirement
benefits adjustments,
net of tax(b) |
|
Other
comprehensive
income (loss) of
unconsolidated
affiliates |
|
Other, net |
|
Total |
|
Amounts
attributable to
noncontrolling
interests |
|
Amounts
attributable to
Huntsman
International |
|
Beginning balance, January 1, 2014 |
|
$ |
243 |
|
$ |
(883 |
) |
$ |
12 |
|
$ |
2 |
|
$ |
(626 |
) |
$ |
8 |
|
$ |
(618 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive (loss) income before reclassifications |
|
|
(108 |
) |
|
|
|
|
|
|
|
2 |
|
|
(106 |
) |
|
7 |
|
|
(99 |
) |
Amounts reclassified from accumulated other comprehensive loss(c) |
|
|
|
|
|
38 |
|
|
|
|
|
|
|
|
38 |
|
|
|
|
|
38 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net current-period other comprehensive (loss) income |
|
|
(108 |
) |
|
38 |
|
|
|
|
|
2 |
|
|
(68 |
) |
|
7 |
|
|
(61 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance, September 30, 2014 |
|
$ |
135 |
|
$ |
(845 |
) |
$ |
12 |
|
$ |
4 |
|
$ |
(694 |
) |
$ |
15 |
|
$ |
(679 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- (a)
- Amounts
are net of tax of $19 and nil as of September 30, 2014 and January 1, 2014, respectively.
- (b)
- Amounts
are net of tax of $101 and $113 as of September 30, 2014 and January 1, 2014, respectively.
- (c)
- See
table below for details about these reclassifications.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign
currency
translation
adjustment(a) |
|
Pension and other
postretirement
benefits adjustments,
net of tax(b) |
|
Other
comprehensive
income of
unconsolidated
affiliates |
|
Other, net |
|
Total |
|
Amounts
attributable to
noncontrolling
interests |
|
Amounts
attributable to
Huntsman
International |
|
Beginning balance, January 1, 2013 |
|
$ |
268 |
|
$ |
(1,076 |
) |
$ |
7 |
|
$ |
(3 |
) |
$ |
(804 |
) |
$ |
13 |
|
$ |
(791 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive (loss) income before reclassifications |
|
|
(44 |
) |
|
22 |
|
|
2 |
|
|
3 |
|
|
(17 |
) |
|
1 |
|
|
(16 |
) |
Amounts reclassified from accumulated other comprehensive loss(c) |
|
|
|
|
|
49 |
|
|
|
|
|
|
|
|
49 |
|
|
|
|
|
49 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net current-period other comprehensive (loss) income |
|
|
(44 |
) |
|
71 |
|
|
2 |
|
|
3 |
|
|
32 |
|
|
1 |
|
|
33 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance, September 30, 2013 |
|
$ |
224 |
|
$ |
(1,005 |
) |
$ |
9 |
|
$ |
|
|
$ |
(772 |
) |
$ |
14 |
|
$ |
(758 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- (a)
- Amounts
are net of tax of $5 and $7 as of September 30, 2013 and January 1, 2013, respectively.
- (b)
- Amounts
are net of tax of $206 and $228 as of September 30, 2013 and January 1, 2013, respectively.
- (c)
- See
table below for details about these reclassifications.
43
Table of Contents
HUNTSMAN CORPORATION AND SUBSIDIARIES
HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
12. OTHER COMPREHENSIVE (LOSS) INCOME (Continued)
|
|
|
|
|
|
|
|
|
|
|
Three months
ended
September 30, 2014 |
|
Nine months
ended
September 30, 2014 |
|
|
Details about Accumulated Other
Comprehensive Loss Components:
|
|
Amounts reclassified
from accumulated other
comprehensive loss |
|
Amounts reclassified
from accumulated other
comprehensive loss |
|
Affected line item
in the statement where
net income is presented |
Amortization of pension and other postretirement benefits: |
|
|
|
|
|
|
|
|
Prior service credit |
|
$ |
(2 |
) |
$ |
(7 |
) |
(a)(b) |
Actuarial loss |
|
|
15 |
|
|
46 |
|
(a)(b)(c) |
Settlement loss |
|
|
10 |
|
|
11 |
|
(a)(b) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23 |
|
|
50 |
|
Total before tax |
|
|
|
(5 |
) |
|
(12 |
) |
Income tax expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total reclassifications for the period |
|
$ |
18 |
|
$ |
38 |
|
Net of tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months
ended
September 30, 2013 |
|
Nine months
ended
September 30, 2013 |
|
|
Details about Accumulated Other
Comprehensive Loss Components:
|
|
Amounts reclassified
from accumulated other
comprehensive loss |
|
Amounts reclassified
from accumulated other
comprehensive loss |
|
Affected line item
in the statement where
net income is presented |
Amortization of pension and other postretirement benefits: |
|
|
|
|
|
|
|
|
Prior service credit |
|
$ |
(2 |
) |
$ |
(6 |
) |
(a)(b) |
Actuarial loss |
|
|
23 |
|
|
66 |
|
(a)(b)(c) |
Settlement loss |
|
|
6 |
|
|
6 |
|
(a)(b) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
27 |
|
|
66 |
|
Total before tax |
|
|
|
(8 |
) |
|
(17 |
) |
Income tax expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total reclassifications for the period |
|
$ |
19 |
|
$ |
49 |
|
Net of tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- (a)
- Amounts
in parentheses indicate credits on our condensed consolidated statements of operations (unaudited).
- (b)
- These
accumulated other comprehensive loss components are included in the computation of net periodic pension costs. See "Note 10. Employee Benefit
Plans."
- (c)
- Amounts
contain approximately $1 million of actuarial losses related to discontinued operations for both of the three months ended
September 30, 2014 and 2013, and $3 million and $5 million for the nine months ended September 30, 2014 and 2013, respectively.
13. COMMITMENTS AND CONTINGENCIES
LEGAL MATTERS
Asbestos Litigation
We have been named as a "premises defendant" in a number of asbestos exposure cases, typically claims by nonemployees of exposure to
asbestos while at a facility. These complaints generally do not provide specific information about the amount of damages being sought, the time period in which the alleged injuries occurred or the
alleged exposures giving rise to the asserted liability. This information, which would be central to any estimate of probable loss, generally must be obtained through legal discovery.
44
Table of Contents
HUNTSMAN CORPORATION AND SUBSIDIARIES
HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
13. COMMITMENTS AND CONTINGENCIES (Continued)
Where
a claimant's alleged exposure occurred prior to our ownership of the relevant "premises," the prior owners generally have contractually agreed to retain liability for, and to
indemnify us against, asbestos exposure claims. This indemnification is not subject to any time or dollar amount limitations. Upon service of a complaint in one of these cases, we tender it to the
prior owner. The prior owner accepts responsibility for the conduct of the defense of the cases and payment of any amounts due to the claimants. In our twenty-year experience with tendering these
cases, we have not made any payment with respect to any tendered asbestos cases. We believe that the prior owners have the intention and ability to continue to honor their indemnity obligations,
although we cannot assure you that they will continue to do so or that we will not be liable for these cases if they do not.
The
following table presents for the periods indicated certain information about cases for which service has been received that we have tendered to the indemnifying party, all of which
have been accepted by the indemnifying party.
|
|
|
|
|
|
|
|
|
|
Nine months
ended
September 30, |
|
|
|
2014 |
|
2013 |
|
Unresolved at beginning of period |
|
|
1,073 |
|
|
1,080 |
|
Tendered during period |
|
|
4 |
|
|
6 |
|
Resolved during period(1) |
|
|
1 |
|
|
13 |
|
Unresolved at end of period |
|
|
1,076 |
|
|
1,073 |
|
- (1)
- Although
the indemnifying party informs us when tendered cases have been resolved, it generally does not inform us of the settlement amounts relating to
such cases, if any. The indemnifying party has informed us that it typically manages our defense together with the defense of other entities in such cases and resolves claims involving multiple
defendants simultaneously, and that it considers the allocation of settlement amounts, if any, among defendants to be confidential and proprietary. Consequently, we are not able to provide the number
of cases resolved with payment by the indemnifying party or the amount of such payments.
We
have never made any payments with respect to these cases. As of September 30, 2014, we had an accrued liability of approximately $10 million relating to these cases and
a corresponding receivable of approximately $10 million relating to our indemnity protection with respect to these cases. We cannot assure you that our liability will not exceed our accruals or
that our liability associated with these cases would not be material to our financial condition, results of operations or liquidity. We are not able to estimate the amount or range of loss in excess
of our accruals. Additional asbestos exposure claims may be made against us in the future, and such claims could be material. However, because we are not able to estimate the amount or range of losses
associated with such claims, we have made no accruals with respect to unasserted asbestos exposure claims as of September 30, 2014.
Certain
cases in which we are a premises defendant are not subject to indemnification by prior owners or operators. However, we may be entitled to insurance or other recoveries in some
of these
45
Table of Contents
HUNTSMAN CORPORATION AND SUBSIDIARIES
HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
13. COMMITMENTS AND CONTINGENCIES (Continued)
cases.
The following table presents for the periods indicated certain information about these cases. Cases include all cases for which service has been received by us. Certain prior cases that were
filed in error against us have been dismissed.
|
|
|
|
|
|
|
|
|
|
Nine months
ended
September 30, |
|
|
|
2014 |
|
2013 |
|
Unresolved at beginning of period |
|
|
48 |
|
|
50 |
|
Filed during period |
|
|
5 |
|
|
2 |
|
Resolved during period |
|
|
5 |
|
|
2 |
|
Unresolved at end of period |
|
|
48 |
|
|
50 |
|
We
paid gross settlement costs for asbestos exposure cases that are not subject to indemnification of $531,000 and $48,000 for the nine months ended September 30, 2014 and 2013,
respectively. As of September 30, 2014, we had an accrual of $228,000 relating to these cases. We cannot assure you that our liability will not exceed our accruals or that our liability
associated with these cases would not be material to our financial condition, results of operations or liquidity. We are not able to estimate the amount or range of loss in excess of our accruals.
Additional asbestos exposure claims may be made against us in the future, and such claims could be material. However, because we are not able to estimate the amount or range of losses associated with
such claims, we have made no accruals with respect to unasserted asbestos exposure claims as of September 30, 2014.
Antitrust Matters
We have been named as a defendant in consolidated class action civil antitrust suits filed on February 9 and 12, 2010 in the
U.S. District Court for the District of Maryland alleging that we and our co-defendants and other asserted co-conspirators conspired to fix prices of titanium dioxide sold in the U.S. between at least
March 1, 2002 and the present. The other defendants named in this matter are DuPont, Kronos and Cristal (formerly Millennium). On August 28, 2012, the court certified a class consisting
of all U.S. customers who purchased titanium dioxide directly from the defendants (the "Direct Purchasers") since February 1, 2003. We and all other defendants settled the Direct Purchasers
litigation and the court approved the settlement on December 13, 2013. We have paid the settlement in an amount immaterial to our condensed consolidated financial statements (unaudited).
On
November 22, 2013, we were named as a defendant in a civil antitrust suit filed in the U.S. District Court for the District of Minnesota brought by a Direct Purchaser who opted
out of the Direct Purchasers class litigation (the "Opt Out Litigation"). On April 21, 2014, the court severed the claims against us from the other defendants and ordered our case transferred
to the U.S. District Court for the Southern District of Texas. Trial is scheduled for February 22, 2016. It is possible that additional claims will be filed by other Direct Purchasers who opted
out of the class litigation.
We
were also named as a defendant in a class action civil antitrust suit filed on March 15, 2013 in the U.S. District Court for the Northern District of California by the
purchasers of products made from titanium dioxide (the "Indirect Purchasers") making essentially the same allegations as the Direct
46
Table of Contents
HUNTSMAN CORPORATION AND SUBSIDIARIES
HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
13. COMMITMENTS AND CONTINGENCIES (Continued)
Purchasers.
On October 14, 2014, Plaintiffs filed their Second Amended Class Action Complaint narrowing the class of plaintiffs to merchants and consumers of architectural coatings containing
titanium dioxide. Plaintiffs have raised state antitrust claims under the laws of 16 states, consumer protection claims under the laws of 10 states, as well as unjust enrichment claims under the laws
of 20 states. The Opt-Out Litigation and Indirect Purchasers plaintiffs seek to recover injunctive relief, treble damages or the maximum damages allowed by state law, costs of suit and attorneys'
fees. We are not aware of any illegal conduct by us or any of our employees. Nevertheless, we have incurred costs relating to these claims and could incur additional costs in amounts which in the
aggregate could be material to us. Because of the overall complexity of these cases, we are unable to reasonably estimate any possible loss or range of loss associated with these claims and we have
made no accruals with respect to these claims.
Product Delivery Claim
We have been notified by a customer of potential claims related to our allegedly delivering a different product than it had ordered.
Our customer claims that it was unaware that the different product had been delivered until after it had been used to manufacture materials which were subsequently sold. Originally, the customer
stated that it had been notified of claims of up to an aggregate of €153 million (approximately $202 million) relating to this matter and believed that we may be
responsible for all or a portion of these potential claims. Our customer has since resolved some of these claims and the aggregate amount of the current claims is now approximately
€113 million (approximately $149 million). Based on the facts currently available to us, we believe that we are insured for any liability we may ultimately have in excess
of $10 million. However, no assurance can be given regarding our ultimate liability or costs. We believe our range of possible loss in this matter is between €0 and
€113 million (approximately $149 million), and we have made no accrual with respect to this matter.
Indemnification Matters
On July 3, 2012, Deutsche Bank Securities Inc. and Credit Suisse Securities (USA) LLC, or the banks, demanded that
we indemnify them for claims brought by certain MatlinPatterson entities that were formerly our stockholders ("MatlinPatterson") in litigation filed June 19, 2012 in the 9th District
Court in Montgomery County, Texas (the "Texas Litigation"). The banks assert that they are entitled to indemnification pursuant to the Agreement of Compromise and Settlement between the banks and our
Company, dated June 22, 2009, wherein the banks and our Company settled claims that we brought relating to the failed merger with Hexion. MatlinPatterson claims that the banks knowingly made
materially false representations about the nature of the financing for the acquisition of our Company by Hexion and that they suffered substantial losses to their 19 million shares of our
common stock as a result of the banks' misrepresentations. MatlinPatterson is asserting statutory fraud, common law fraud and aiding and abetting statutory fraud and are seeking actual damages,
exemplary damages, costs and attorney's fees and pre-judgment and post-judgment interest. On December 21, 2012, the court dismissed the Texas Litigation, a decision which was affirmed by the
Ninth Court of Appeals of Texas on May 15, 2014. A subsequent motion for rehearing by MatlinPatterson was denied by the same
47
Table of Contents
HUNTSMAN CORPORATION AND SUBSIDIARIES
HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
13. COMMITMENTS AND CONTINGENCIES (Continued)
appellate
court on June 12, 2014. A petition for discretionary review in the Texas Supreme Court was filed on July 28, 2014.
On
July 14, 2014, the banks demanded that we indemnify them for claims brought by certain former Company stockholders in litigation filed June 14, 2014 in the United States
District Court for the Eastern District of Wisconsin (the "Wisconsin Litigation"). The stockholders have made essentially the same allegations as MatlinPatterson made in the Texas Litigation and,
additionally, have named Apollo Global Management LLC and Apollo Management Holdings, L.P. as defendants. The plaintiffs in the Wisconsin Litigation assert claims for misrepresentation
and conspiracy to defraud. We denied the banks' indemnification demand for both the Texas Litigation and the Wisconsin Litigation.
Other Proceedings
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.
14. ENVIRONMENTAL, HEALTH AND SAFETY MATTERS
GENERAL
We are subject to extensive federal, state, local and international laws, regulations, rules and ordinances relating to operational and
process safety, pollution, protection of the environment, product management and distribution, and the generation, storage, handling, transportation, treatment, disposal and remediation of hazardous
substances and waste materials. In the ordinary course of business, we are subject to frequent environmental inspections and monitoring and occasional investigations by governmental enforcement
authorities. In addition, our production facilities require operating permits that are subject to renewal, modification and, in certain circumstances, revocation. Actual or alleged violations of
safety laws, environmental laws or permit requirements could result in restrictions or prohibitions on plant operations or product distribution, substantial civil or criminal sanctions, as well as,
under some environmental laws, the assessment of strict liability and/or joint and several liability. Moreover, changes in environmental regulations could inhibit or interrupt our operations, or
require us to modify our facilities or operations. Accordingly, environmental or regulatory matters may cause us to incur significant unanticipated losses, costs or liabilities.
ENVIRONMENTAL, HEALTH AND SAFETY SYSTEMS
We are committed to achieving and maintaining compliance with all applicable environmental, health and safety ("EHS") legal
requirements, and we have developed policies and management systems that are intended to identify the multitude of EHS legal requirements applicable to our operations, enhance compliance with
applicable legal requirements, improve the safety of our employees, contractors, community neighbors and customers and minimize the production and emission of wastes and other pollutants. Although EHS
legal requirements are constantly changing and are
48
Table of Contents
HUNTSMAN CORPORATION AND SUBSIDIARIES
HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
14. ENVIRONMENTAL, HEALTH AND SAFETY MATTERS (Continued)
frequently
difficult to comply with, these EHS management systems are designed to assist us in our compliance goals while also fostering efficiency and improvement and reducing overall risk to us.
EHS CAPITAL EXPENDITURES
We may incur future costs for capital improvements and general compliance under EHS laws, including costs to acquire, maintain and
repair pollution control equipment. For the nine months ended September 30, 2014 and 2013, our capital expenditures for EHS matters totaled $70 million and $53 million,
respectively. Because capital expenditures for these matters are subject to evolving regulatory requirements and depend, in part, on the timing, promulgation and enforcement of specific requirements,
our capital expenditures for EHS matters have varied significantly from year to year and we cannot provide assurance that our recent expenditures are indicative of future amounts we may spend related
to EHS and other applicable laws.
REMEDIATION LIABILITIES
We have incurred, and we may in the future incur, liability to investigate and clean up waste or contamination at our current or former
facilities or facilities operated by third
parties at which we may have disposed of waste or other materials. Similarly, we may incur costs for the cleanup of waste that was disposed of prior to the purchase of our businesses. Under some
circumstances, the scope of our liability may extend to damages to natural resources.
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 10 former facilities or third-party sites in the U.S. for which we have been notified of
potential claims against us for cleanup liabilities, including, but not limited to, sites listed under CERCLA. Based on current information and past experiences at other CERCLA sites, we do not expect
these third-party claims to have a material impact on our condensed consolidated financial statements (unaudited).
One
of these sites, the North Maybe Canyon Mine site, 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.
Another
of these sites, the Star Lake Canal site in Port Neches, TX, involves a discharge point for manufacturing facilities owned by us and several other local chemical manufacturers.
The U.S.
49
Table of Contents
HUNTSMAN CORPORATION AND SUBSIDIARIES
HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
14. ENVIRONMENTAL, HEALTH AND SAFETY MATTERS (Continued)
Environmental
Protection Agency (the "EPA") issued a draft Consent Decree related to cleanup at this site to us and a prior owner in September 2014. The prior owner has an indemnification obligation
and has accepted defense of this matter. As of September 30, 2014, we had an accrued liability of approximately $18 million relating to this matter and a corresponding receivable of
approximately $18 million relating to our indemnity protection.
In
addition, 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 Port Neches, Texas, and Geismar, Louisiana, facilities are 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.
By
letter dated March 7, 2006, our former Base Chemicals and Polymers facility in West Footscray, Australia was issued a cleanup notice by the Environmental Protection Authority
Victoria ("EPA Victoria") due to concerns about soil and groundwater contamination emanating from the site. On August 23, 2010, EPA Victoria revoked a second cleanup notice and issued a revised
notice that included a requirement for financial assurance for the remediation. As of September 30, 2014, we had an accrued liability of approximately $21 million related to estimated
environmental remediation costs at this site. We can provide no assurance that the authority will not seek to institute additional requirements for the site or that additional costs will not be
required for the cleanup.
In
many cases, our potential liability arising from historical contamination is based on operations and other events occurring prior to our ownership of a business or specific facility.
In these situations, we frequently obtained an indemnity agreement from the prior owner addressing remediation liabilities arising from pre-closing conditions. We have successfully exercised our
rights under these contractual covenants for a number of sites and, where applicable, mitigated our ultimate remediation liability. We cannot assure you, however, that the liabilities for all such
matters subject to indemnity will be honored by the prior owner or that our existing indemnities will be sufficient to cover our liabilities for such matters.
Based
on available information and the indemnification rights we believe are likely to be available, we believe that the costs to investigate and remediate known contamination will not
have a material effect on our financial statements. However, if such indemnities are not honored or do not fully cover the costs of investigation and remediation or we are required to contribute to
such costs, then such expenditures may have a material effect on our financial statements. At the current time, we are unable to estimate the total cost, exclusive of indemnification benefits, to
remediate any of the known contamination sites.
50
Table of Contents
HUNTSMAN CORPORATION AND SUBSIDIARIES
HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
14. ENVIRONMENTAL, HEALTH AND SAFETY MATTERS (Continued)
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 $44 million and $27 million for environmental liabilities as of September 30, 2014 and December 31, 2013, respectively. Of these amounts, $4 million and
$5 million were classified as accrued liabilities in our consolidated balance sheets as of September 30, 2014 and December 31, 2013, and $40 million and $22 million
were classified as other noncurrent liabilities in our consolidated balance sheets as of September 30, 2014 and December 31, 2013, respectively. In certain cases, our remediation
liabilities may be payable over periods of up to 30 years. We may incur losses for environmental remediation in excess of the amounts accrued; however, we are not able to estimate the amount or
range of such potential excess.
REGULATORY DEVELOPMENTS
The European Union regulatory framework for chemicals, called "REACH," became effective in 2007 and is designed to be phased in
gradually over 11 years. As a REACH-regulated company that manufactures in or imports more than one metric ton per year of a chemical substance into the European Economic Area, we were required
to pre-register with the European Chemicals Agency such chemical substances and isolated intermediates to take advantage of the 11 year phase-in period. To meet our compliance obligations, a
cross-business REACH team was established, through which we were able to fulfill all required pre-registrations, our first phase registrations by the November 30, 2010 deadline and our second
phase registrations by the May 31, 2013 deadline. While we continue our registration efforts to meet the next registration deadline of May 31, 2018, our REACH implementation team is now
strategically focused on the evaluation and authorization phases of the REACH process, directing its efforts to address "Substances of Very High Concern" and evaluating potential business
implications. Where warranted, evaluation of substitute chemicals will be an important element of our ongoing manufacturing sustainability efforts. As a chemical manufacturer with global operations,
we are also actively monitoring and addressing analogous regulatory regimes being considered or implemented outside of the European Union, such as in Korea and Taiwan.
Although
the total long-term cost for REACH compliance is unknown at this time, we spent approximately $4 million, $8 million and $5 million in 2013, 2012 and 2011,
respectively, to meet the initial REACH requirements. We cannot provide assurance that these recent expenditures are indicative of future amounts that we may be required to spend for REACH compliance.
GREENHOUSE GAS REGULATION
Globally, our operations are increasingly subject to regulations that seek to reduce emissions of "greenhouse gases" ("GHGs"), such as
carbon dioxide and methane, which may be contributing to changes in the earth's climate. At the Durban negotiations of the Conference of the Parties to the
51
Table of Contents
HUNTSMAN CORPORATION AND SUBSIDIARIES
HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
14. ENVIRONMENTAL, HEALTH AND SAFETY MATTERS (Continued)
Kyoto
Protocol in 2012, a limited group of nations, including the European Union, agreed to a second commitment period for the Kyoto Protocol, an international treaty that provides for reductions in
GHG emissions. More significantly, the European Union GHG Emissions Trading System, established pursuant to the Kyoto Protocol to reduce GHG emissions in the European Union, continues in its third
phase. The European Union parliament continues with a process to formalized "backloading"the withholding of GHG allowances to prop up carbon prices. In addition, the European Union has
recently announced its intentions to cut GHG emissions to 40% below 1990 levels by 2040 and impose a 27% renewable energy requirement at the European Union level. In the U.S., California has commenced
the first compliance period of its cap-and-trade program. In June 2013, China implemented its first pilot carbon emissions exchange in Shenzhen, China. Pilot carbon emissions schemes have also begun
in Beijing, Shanghai, Guangdong, and Tianjin. Further expansion of China's regional cap-and-trade is planned, and ultimately it is expected that these regional systems will form the backbone of a
national cap-and-trade program. As these programs have not been fully implemented and have experienced significant price volatility on low early trading volumes, we are unable at this time to
determine their impact on our operations.
Federal
climate change legislation in the U.S. appears unlikely in the near-term. As a result, domestic efforts to curb GHG emissions will continue to be led by the EPA's GHG regulations
and the efforts of states. To the extent that our domestic operations are subject to the EPA's GHG regulations, we may face increased capital and operating costs associated with new or expanded
facilities. Significant expansions of our existing facilities or construction of new facilities may be subject to the Clean Air Act's (the "CAA") Prevention of Significant Deterioration requirements
under the EPA's GHG "Tailoring Rule." Some of our facilities are also subject to the EPA's Mandatory Reporting of Greenhouse Gases rule, and any further regulation may increase our operational costs.
Under
a consent decree with states and environmental groups, the EPA is due to propose new source performance standards for GHG emissions from refineries. These standards could
significantly increase the costs of constructing or adding capacity to refineries and may ultimately increase the costs or decrease the supply of refined products. Either of these events could have an
adverse effect on our business.
We
are already managing and reporting GHG emissions, to varying degrees, as required by law for our sites in locations subject to Kyoto Protocol obligations and/or European Union
emissions trading scheme requirements. Although these sites are subject to existing GHG legislation, few have experienced or anticipate significant cost increases as a result of these programs,
although it is possible that GHG emission restrictions may increase over time. Potential consequences of such restrictions include capital requirements to modify assets to meet GHG emission
restrictions and/or increases in energy costs above the level of general inflation, as well as direct compliance costs. Currently, however, it is not possible to estimate the likely financial impact
of potential future regulation on any of our sites.
Finally,
it should be noted that some scientists have concluded that increasing concentrations of GHGs in the earth's atmosphere may produce climate changes that have significant
physical effects, such as increased frequency and severity of storms, droughts, and floods and other climatic events. If any of those effects were to occur, they could have an adverse effect on our
assets and operations.
52
Table of Contents
HUNTSMAN CORPORATION AND SUBSIDIARIES
HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
14. ENVIRONMENTAL, HEALTH AND SAFETY MATTERS (Continued)
PORT NECHES FLARING MATTER
As part of the EPA's national enforcement initiative on flaring operations and by letter dated October 12, 2012, the U.S.
Department of Justice (the "DOJ") notified us that we were in violation of the CAA based on our response to a 2010 CAA Section 114 Information Request. The EPA has used the enforcement
initiative to bring similar actions against refiners and other chemical manufacturers. Specifically, the EPA alleged violations at our Port Neches, Texas facility from 2007-2012 for flare operations
not consistent with good pollution control practice and not in compliance with certain flare-related regulations. As a result of these findings, the EPA referred this matter to the DOJ. We provided a
formal response to the DOJ and the EPA with a supplemental data submission on April 29, 2013. We have been engaged in discussions with the DOJ and the EPA regarding these alleged violations. We
are currently unable to determine the likelihood or magnitude of potential penalty or injunctive relief that may be incurred in resolving this matter.
15. STOCK-BASED COMPENSATION PLANS
Under the Huntsman Corporation Stock Incentive Plan, as amended and restated (the "Stock Incentive Plan"), a plan approved by stockholders, we may grant nonqualified stock options,
incentive stock options, stock appreciation rights, restricted stock, phantom stock, performance awards and other stock-based awards to our employees, directors and consultants and to employees and
consultants of our subsidiaries, provided that incentive stock options may be granted solely to employees. The terms of the grants are fixed at the grant date. As of September 30, 2014, we were
authorized to grant up to 37.2 million shares under the Stock Incentive Plan. As of September 30, 2014, we had 9 million shares remaining under the Stock Incentive Plan available
for grant. Option awards have a maximum contractual term of 10 years and generally must have an exercise price at least equal to the market price of our common stock on the date the option
award is granted. Stock-based awards generally vest over a three-year period.
The
compensation cost from continuing operations under the Stock Incentive Plan for our Company and Huntsman International were as follows (dollars in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months
ended
September 30, |
|
Nine months
ended
September 30, |
|
|
|
2014 |
|
2013 |
|
2014 |
|
2013 |
|
Huntsman Corporation compensation cost |
|
$ |
6 |
|
$ |
7 |
|
$ |
22 |
|
$ |
21 |
|
Huntsman International compensation cost |
|
|
6 |
|
|
7 |
|
|
21 |
|
|
20 |
|
The
total income tax benefit recognized in the statements of operations for us and Huntsman International for stock-based compensation arrangements was $4 million for each of the
nine months ended September 30, 2014 and 2013.
53
Table of Contents
HUNTSMAN CORPORATION AND SUBSIDIARIES
HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
15. STOCK-BASED COMPENSATION PLANS (Continued)
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.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months
ended
September 30, |
|
Nine months
ended
September 30, |
|
|
|
2014 |
|
2013 |
|
2014 |
|
2013 |
|
Dividend yield |
|
N/A |
|
|
2.9 |
% |
|
2.4 |
% |
|
2.8 |
% |
Expected volatility |
|
N/A |
|
|
60.9 |
% |
|
60.3 |
% |
|
62.5 |
% |
Risk-free interest rate |
|
N/A |
|
|
1.8 |
% |
|
1.7 |
% |
|
1.0 |
% |
Expected life of stock options granted during the period |
|
N/A |
|
|
5.6 years |
|
|
5.7 years |
|
|
5.6 years |
|
During
the three months ended September 30, 2014, no stock options were granted.
A
summary of stock option activity under the Stock Incentive Plan as of September 30, 2014 and changes during the nine months then ended is presented below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
Shares |
|
Weighted
Average
Exercise
Price |
|
Weighted
Average
Remaining
Contractual
Term |
|
Aggregate
Intrinsic
Value |
|
|
|
(in thousands)
|
|
|
|
(years)
|
|
(in millions)
|
|
Outstanding at January 1, 2014 |
|
|
10,019 |
|
$ |
15.39 |
|
|
|
|
|
|
|
Granted |
|
|
1,116 |
|
|
21.22 |
|
|
|
|
|
|
|
Exercised |
|
|
(1,648 |
) |
|
19.22 |
|
|
|
|
|
|
|
Forfeited |
|
|
(49 |
) |
|
17.64 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at September 30, 2014 |
|
|
9,438 |
|
|
15.39 |
|
|
5.1 |
|
$ |
100 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at September 30, 2014 |
|
|
7,103 |
|
|
14.33 |
|
|
4.0 |
|
|
83 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
weighted-average grant-date fair value of stock options granted during the nine months ended September 30, 2014 was $9.63 per option. As of September 30, 2014, there
was $14 million of total unrecognized compensation cost related to nonvested stock option arrangements granted under the Stock Incentive Plan. That cost is expected to be recognized over a
weighted-average period of approximately 1.9 years.
The
total intrinsic value of stock options exercised during the nine months ended September 30, 2014 and 2013 was $12 million each.
54
Table of Contents
HUNTSMAN CORPORATION AND SUBSIDIARIES
HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
15. STOCK-BASED COMPENSATION PLANS (Continued)
NONVESTED SHARES
Nonvested
shares granted under the Stock Incentive Plan consist of restricted stock, which is accounted for as an equity award, and phantom stock, which is
accounted for as a liability award because it can be settled in either stock or cash. A summary of the status of our nonvested shares as of September 30, 2014 and changes during the nine months
then ended is presented below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity Awards |
|
Liability Awards |
|
|
|
Shares |
|
Weighted
Average
Grant-Date
Fair Value |
|
Shares |
|
Weighted
Average
Grant-Date
Fair Value |
|
|
|
(in thousands)
|
|
|
|
(in thousands)
|
|
|
|
Nonvested at January 1, 2014 |
|
|
1,830 |
|
$ |
15.31 |
|
|
574 |
|
$ |
16.03 |
|
Granted |
|
|
730 |
|
|
21.22 |
|
|
237 |
|
|
21.22 |
|
Vested |
|
|
(723 |
)(1) |
|
16.08 |
|
|
(284 |
) |
|
15.98 |
|
Forfeited |
|
|
(17 |
) |
|
18.27 |
|
|
(24 |
) |
|
16.59 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonvested at September 30, 2014 |
|
|
1,820 |
|
|
17.35 |
|
|
503 |
|
|
18.48 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- (1)
- As
of September 30, 2014, a total of 388,299 restricted stock units were vested but not yet issued, of which 44,534 vested during the nine months
ended September 30, 2014. These shares have not been reflected as vested shares in this table because, in accordance with the restricted stock unit agreements, shares of common stock are not
issued for vested restricted stock units until termination of employment.
As
of September 30, 2014, there was $27 million of total unrecognized compensation cost related to nonvested share compensation arrangements granted under the Stock
Incentive Plan. That cost is expected to be recognized over a weighted-average period of approximately 1.9 years. The value of share awards that vested during the nine months ended
September 30, 2014 and 2013 was $19 million and $18 million, respectively.
16. 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 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
55
Table of Contents
HUNTSMAN CORPORATION AND SUBSIDIARIES
HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
16. INCOME TAXES (Continued)
the
nine months ended September 30, 2014 and 2013, on a discrete basis, we released a valuation allowance of $8 million and $7 million, respectively, on certain net deferred tax
assets in Luxembourg as a result of significant changes in estimated future taxable income resulting from increased intercompany receivables and, therefore, increased interest income in Luxembourg,
our primary treasury center outside of the U.S. During the nine months ended September 30, 2014 we released a valuation allowance of $1 million on certain net deferred tax assets in
Italy as a result of the restructuring of our European Performance Products business which caused our tax expense to be $7 million lower than it would have been because we are also able to
record a tax benefit for losses incurred during the nine months ended September 30, 2014.
During
the nine months ended September 30, 2014, after extensive analysis, we filed amended U.S. tax returns for tax years 2008 through 2012, along with our original U.S. tax
return for tax year 2013, which allowed us to utilize substantially all of our U.S. foreign tax credits. As a result of utilizing these assets
which had been subject to a valuation allowance, we recognized a discrete income tax benefit of $94 million in the third quarter of 2014.
During
the nine months ended September 30, 2014 and 2013, for unrecognized tax benefits that impact tax expense, we recorded a net increase in unrecognized tax benefits with a
corresponding income tax expense of $4 million for each period. Additional decreases in unrecognized tax benefits were offset by cash settlements or decrease in net deferred tax assets and,
therefore, did not affect income tax expense.
Huntsman Corporation
We recorded income tax expense of $39 million and $105 million for the nine months ended September 30, 2014 and
2013, respectively. Absent the $94 million benefit of U.S. foreign tax credits, our income tax expense would have been $133 million for the nine months ended September 30, 2014.
Our 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. Notably we continue to earn a significant portion of our pre-tax income in the United States with an approximate 35% federal and state blended effective tax rate.
Huntsman International
Huntsman International recorded income tax expense of $29 million and $106 million for the nine months ended
September 30, 2014 and 2013, respectively. Absent the $105 million benefit of U.S. foreign tax credits, Huntsman International's income tax expense would have been $134 million
for the nine months ended September 30, 2014. Our 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. Notably we continue to earn a significant portion of our pre-tax income in the United States with an approximate 35% federal and state blended
effective tax rate.
56
Table of Contents
HUNTSMAN CORPORATION AND SUBSIDIARIES
HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
17. NET INCOME PER SHARE
Basic income per share excludes dilution and is computed by dividing net income attributable to Huntsman Corporation common stockholders 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 available to Huntsman
Corporation common stockholders 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
ended
September 30, |
|
Nine months
ended
September 30, |
|
|
|
2014 |
|
2013 |
|
2014 |
|
2013 |
|
Numerator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted income from continuing operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations attributable to Huntsman Corporation |
|
$ |
188 |
|
$ |
66 |
|
$ |
368 |
|
$ |
91 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted net income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to Huntsman Corporation |
|
$ |
188 |
|
$ |
64 |
|
$ |
361 |
|
$ |
87 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares (denominator): |
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding |
|
|
242.6 |
|
|
239.8 |
|
|
241.8 |
|
|
239.5 |
|
Dilutive securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based awards |
|
|
4.1 |
|
|
2.7 |
|
|
3.9 |
|
|
2.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total weighted average shares outstanding, including dilutive shares |
|
|
246.7 |
|
|
242.5 |
|
|
245.7 |
|
|
242.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
stock-based awards of 1.1 million and 7.6 million weighted average equivalent shares of stock were outstanding during the three months ended September 30,
2014 and 2013, respectively, and additional stock-based awards of 1.0 million and 7.5 million weighted average equivalent shares of stock were outstanding during the nine months ended
September 30, 2014 and 2013, respectively. However, these stock-based awards were not included in the computation of diluted earnings per share for the three and nine months ended
September 30, 2014 and 2013 because the effect would be anti-dilutive.
18. OPERATING SEGMENT INFORMATION
We derive our revenues, earnings and cash flows from the manufacture and sale of a wide variety of differentiated chemical products. We have reported our operations through five
segments: Polyurethanes, Performance Products, Advanced Materials, Textile Effects and Pigments. We have organized our business and derived our operating segments around differences in product lines.
57
Table of Contents
HUNTSMAN CORPORATION AND SUBSIDIARIES
HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
18. OPERATING SEGMENT INFORMATION (Continued)
The
major products of each reportable operating segment are as follows:
|
|
|
Segment
|
|
Products |
Polyurethanes |
|
MDI, PO, polyols, PG, TPU, aniline and MTBE |
Performance Products |
|
amines, surfactants, LAB, maleic anhydride, other performance chemicals, EG, olefins and technology licenses |
Advanced Materials |
|
epoxy resin compounds and tooling materials; cross-linking, matting and curing agents; epoxy, acrylic and polyurethane-based adhesives and tooling resin materials |
Textile Effects |
|
textile chemicals and dyes |
Pigments |
|
titanium dioxide |
Sales
between segments are generally recognized at external market prices and are eliminated in consolidation. We use 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 EBITDA of operating segments excludes items that principally
apply to our Company as a whole. The revenues and EBITDA for each of our reportable operating segments are as follows (dollars in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months
ended
September 30, |
|
Nine months
ended
September 30, |
|
|
|
2014 |
|
2013 |
|
2014 |
|
2013 |
|
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Polyurethanes |
|
$ |
1,321 |
|
$ |
1,306 |
|
$ |
3,831 |
|
$ |
3,734 |
|
Performance Products |
|
|
762 |
|
|
779 |
|
|
2,360 |
|
|
2,278 |
|
Advanced Materials |
|
|
310 |
|
|
309 |
|
|
953 |
|
|
966 |
|
Textile Effects |
|
|
221 |
|
|
198 |
|
|
693 |
|
|
602 |
|
Pigments |
|
|
318 |
|
|
310 |
|
|
976 |
|
|
974 |
|
Eliminations |
|
|
(48 |
) |
|
(60 |
) |
|
(186 |
) |
|
(180 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
2,884 |
|
$ |
2,842 |
|
$ |
8,627 |
|
$ |
8,374 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Huntsman Corporation: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment EBITDA(1): |
|
|
|
|
|
|
|
|
|
|
|
|
|
Polyurethanes |
|
$ |
162 |
|
$ |
203 |
|
$ |
506 |
|
$ |
533 |
|
Performance Products |
|
|
123 |
|
|
106 |
|
|
332 |
|
|
260 |
|
Advanced Materials |
|
|
51 |
|
|
33 |
|
|
142 |
|
|
60 |
|
Textile Effects |
|
|
3 |
|
|
(18 |
) |
|
25 |
|
|
(54 |
) |
Pigments |
|
|
6 |
|
|
27 |
|
|
31 |
|
|
55 |
|
Corporate and other(2) |
|
|
(52 |
) |
|
(46 |
) |
|
(146 |
) |
|
(187 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtotal |
|
|
293 |
|
|
305 |
|
|
890 |
|
|
667 |
|
Discontinued Operations(3) |
|
|
|
|
|
(2 |
) |
|
(9 |
) |
|
(3 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
293 |
|
|
303 |
|
|
881 |
|
|
664 |
|
58
Table of Contents
HUNTSMAN CORPORATION AND SUBSIDIARIES
HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
18. OPERATING SEGMENT INFORMATION (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months
ended
September 30, |
|
Nine months
ended
September 30, |
|
|
|
2014 |
|
2013 |
|
2014 |
|
2013 |
|
Interest expense |
|
|
(49 |
) |
|
(48 |
) |
|
(148 |
) |
|
(146 |
) |
Income tax benefit (expense)continuing operations |
|
|
40 |
|
|
(81 |
) |
|
(39 |
) |
|
(105 |
) |
Income tax benefitdiscontinued operations |
|
|
|
|
|
|
|
|
2 |
|
|
|
|
Depreciation and amortization |
|
|
(96 |
) |
|
(110 |
) |
|
(335 |
) |
|
(326 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to Huntsman Corporation |
|
$ |
188 |
|
$ |
64 |
|
$ |
361 |
|
$ |
87 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Huntsman International: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment EBITDA(1): |
|
|
|
|
|
|
|
|
|
|
|
|
|
Polyurethanes |
|
$ |
162 |
|
$ |
203 |
|
$ |
506 |
|
$ |
533 |
|
Performance Products |
|
|
123 |
|
|
106 |
|
|
332 |
|
|
260 |
|
Advanced Materials |
|
|
51 |
|
|
33 |
|
|
142 |
|
|
60 |
|
Textile Effects |
|
|
3 |
|
|
(18 |
) |
|
25 |
|
|
(54 |
) |
Pigments |
|
|
6 |
|
|
27 |
|
|
31 |
|
|
55 |
|
Corporate and other(2) |
|
|
(53 |
) |
|
(46 |
) |
|
(148 |
) |
|
(187 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtotal |
|
|
292 |
|
|
305 |
|
|
888 |
|
|
667 |
|
Discontinued Operations(3) |
|
|
|
|
|
(2 |
) |
|
(9 |
) |
|
(3 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
292 |
|
|
303 |
|
|
879 |
|
|
664 |
|
Interest expense |
|
|
(52 |
) |
|
(51 |
) |
|
(155 |
) |
|
(156 |
) |
Income tax benefit (expense)continuing operations |
|
|
51 |
|
|
(80 |
) |
|
(29 |
) |
|
(106 |
) |
Income tax benefitdiscontinued operations |
|
|
|
|
|
|
|
|
2 |
|
|
|
|
Depreciation and amortization |
|
|
(93 |
) |
|
(104 |
) |
|
(322 |
) |
|
(308 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to Huntsman International |
|
$ |
198 |
|
$ |
68 |
|
$ |
375 |
|
$ |
94 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- (1)
- Segment
EBITDA is defined as net income attributable to Huntsman Corporation or Huntsman International, as appropriate, before interest, income tax,
depreciation and amortization, and certain Corporate and other items.
- (2)
- Corporate
and other 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, benzene sales and gains and losses on the disposition of corporate
assets.
- (3)
- The
operating results of our former polymers, base chemicals and Australian styrenics businesses are classified as discontinued operations, and,
accordingly, the revenues of these businesses are excluded for all periods presented. The EBITDA of our former polymers, base chemicals and Australian styrenics businesses are included in discontinued
operations for all periods presented.
59
Table of Contents
HUNTSMAN CORPORATION AND SUBSIDIARIES
HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
19. CONDENSED CONSOLIDATING FINANCIAL INFORMATION OF HUNTSMAN INTERNATIONAL LLC (UNAUDITED)
The following condensed consolidating financial statements (unaudited) present, in separate columns, financial information for the following: Huntsman International (on a parent only
basis), with its investment in subsidiaries recorded under the equity method; the Guarantors on a combined, and where appropriate, consolidated basis; and the nonguarantors on a combined, and where
appropriate, consolidated basis. Additional columns present eliminating adjustments and consolidated totals as of September 30, 2014 and December 31, 2013 and for the three and nine
months ended September 30, 2014 and 2013. There are no contractual restrictions limiting transfers of cash from the Guarantors to Huntsman International. Each of the Guarantors is 100% owned by
Huntsman International and has fully and unconditionally guaranteed, subject to certain customary release provisions, Huntsman International's outstanding notes on a joint and several basis.
60
Table of Contents
HUNTSMAN CORPORATION AND SUBSIDIARIES
HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
19. CONDENSED CONSOLIDATING FINANCIAL INFORMATION OF HUNTSMAN INTERNATIONAL LLC (UNAUDITED) (Continued)
HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES
CONDENSED CONSOLIDATING BALANCE SHEETS (UNAUDITED)
AS OF SEPTEMBER 30, 2014
(In Millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
Company |
|
Guarantors |
|
Nonguarantors |
|
Eliminations |
|
Consolidated
Huntsman
International
LLC |
|
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
159 |
|
$ |
|
|
$ |
321 |
|
$ |
|
|
$ |
480 |
|
Restricted cash |
|
|
|
|
|
|
|
|
10 |
|
|
|
|
|
10 |
|
Accounts and notes receivable, net |
|
|
41 |
|
|
125 |
|
|
1,467 |
|
|
6 |
|
|
1,639 |
|
Accounts receivable from affiliates |
|
|
1,856 |
|
|
4,494 |
|
|
148 |
|
|
(6,158 |
) |
|
340 |
|
Inventories |
|
|
107 |
|
|
317 |
|
|
1,368 |
|
|
(4 |
) |
|
1,788 |
|
Prepaid expenses |
|
|
46 |
|
|
16 |
|
|
61 |
|
|
(33 |
) |
|
90 |
|
Deferred income taxes |
|
|
12 |
|
|
|
|
|
58 |
|
|
(18 |
) |
|
52 |
|
Other current assets |
|
|
642 |
|
|
5 |
|
|
209 |
|
|
(568 |
) |
|
288 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets |
|
|
2,863 |
|
|
4,957 |
|
|
3,642 |
|
|
(6,775 |
) |
|
4,687 |
|
Property, plant and equipment, net |
|
|
404 |
|
|
1,010 |
|
|
2,236 |
|
|
1 |
|
|
3,651 |
|
Investment in unconsolidated affiliates |
|
|
5,773 |
|
|
1,289 |
|
|
198 |
|
|
(6,968 |
) |
|
292 |
|
Intangible assets, net |
|
|
35 |
|
|
1 |
|
|
36 |
|
|
|
|
|
72 |
|
Goodwill |
|
|
(16 |
) |
|
82 |
|
|
60 |
|
|
|
|
|
126 |
|
Deferred income taxes |
|
|
316 |
|
|
|
|
|
212 |
|
|
(311 |
) |
|
217 |
|
Notes receivable from affiliates |
|
|
23 |
|
|
613 |
|
|
|
|
|
(636 |
) |
|
|
|
Other noncurrent assets |
|
|
102 |
|
|
197 |
|
|
207 |
|
|
(1 |
) |
|
505 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
9,500 |
|
$ |
8,149 |
|
$ |
6,591 |
|
$ |
(14,690 |
) |
$ |
9,550 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable |
|
$ |
47 |
|
$ |
258 |
|
$ |
821 |
|
$ |
7 |
|
$ |
1,133 |
|
Accounts payable to affiliates |
|
|
3,351 |
|
|
739 |
|
|
2,127 |
|
|
(6,159 |
) |
|
58 |
|
Accrued liabilities |
|
|
104 |
|
|
655 |
|
|
470 |
|
|
(602 |
) |
|
627 |
|
Deferred income taxes |
|
|
|
|
|
57 |
|
|
8 |
|
|
(22 |
) |
|
43 |
|
Note payable to affiliate |
|
|
100 |
|
|
|
|
|
|
|
|
|
|
|
100 |
|
Current portion of debt |
|
|
37 |
|
|
|
|
|
237 |
|
|
|
|
|
274 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
3,639 |
|
|
1,709 |
|
|
3,663 |
|
|
(6,776 |
) |
|
2,235 |
|
Long-term debt |
|
|
3,434 |
|
|
|
|
|
318 |
|
|
|
|
|
3,752 |
|
Notes payable to affiliates |
|
|
707 |
|
|
|
|
|
642 |
|
|
(636 |
) |
|
713 |
|
Deferred income taxes |
|
|
26 |
|
|
214 |
|
|
(1 |
) |
|
47 |
|
|
286 |
|
Other noncurrent liabilities |
|
|
124 |
|
|
141 |
|
|
567 |
|
|
|
|
|
832 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
|
7,930 |
|
|
2,064 |
|
|
5,189 |
|
|
(7,365 |
) |
|
7,818 |
|
Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Huntsman International LLC members' equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Members' equity |
|
|
3,159 |
|
|
4,348 |
|
|
2,408 |
|
|
(6,756 |
) |
|
3,159 |
|
Accumulated (deficit) income |
|
|
(910 |
) |
|
389 |
|
|
(448 |
) |
|
59 |
|
|
(910 |
) |
Accumulated other comprehensive (loss) income |
|
|
(679 |
) |
|
1,348 |
|
|
(715 |
) |
|
(633 |
) |
|
(679 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Huntsman
International LLC members' equity |
|
|
1,570 |
|
|
6,085 |
|
|
1,245 |
|
|
(7,330 |
) |
|
1,570 |
|
Noncontrolling interests in subsidiaries |
|
|
|
|
|
|
|
|
157 |
|
|
5 |
|
|
162 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total equity |
|
|
1,570 |
|
|
6,085 |
|
|
1,402 |
|
|
(7,325 |
) |
|
1,732 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and equity |
|
$ |
9,500 |
|
$ |
8,149 |
|
$ |
6,591 |
|
$ |
(14,690 |
) |
$ |
9,550 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
61
Table of Contents
HUNTSMAN CORPORATION AND SUBSIDIARIES
HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
19. CONDENSED CONSOLIDATING FINANCIAL INFORMATION OF HUNTSMAN INTERNATIONAL LLC (UNAUDITED) (Continued)
HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES
CONDENSED CONSOLIDATING BALANCE SHEETS
AS OF DECEMBER 31, 2013
(In Millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
Company |
|
Guarantors |
|
Nonguarantors |
|
Eliminations |
|
Consolidated
Huntsman
International
LLC |
|
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
308 |
|
$ |
|
|
$ |
207 |
|
$ |
|
|
$ |
515 |
|
Restricted cash |
|
|
|
|
|
|
|
|
9 |
|
|
|
|
|
9 |
|
Accounts and notes receivable, net |
|
|
28 |
|
|
130 |
|
|
1,384 |
|
|
|
|
|
1,542 |
|
Accounts receivable from affiliates |
|
|
2,386 |
|
|
4,823 |
|
|
140 |
|
|
(7,024 |
) |
|
325 |
|
Inventories |
|
|
112 |
|
|
297 |
|
|
1,339 |
|
|
(7 |
) |
|
1,741 |
|
Prepaid expenses |
|
|
70 |
|
|
64 |
|
|
47 |
|
|
(120 |
) |
|
61 |
|
Deferred income taxes |
|
|
12 |
|
|
|
|
|
59 |
|
|
(18 |
) |
|
53 |
|
Other current assets |
|
|
379 |
|
|
4 |
|
|
199 |
|
|
(382 |
) |
|
200 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets |
|
|
3,295 |
|
|
5,318 |
|
|
3,384 |
|
|
(7,551 |
) |
|
4,446 |
|
Property, plant and equipment, net |
|
|
390 |
|
|
954 |
|
|
2,414 |
|
|
1 |
|
|
3,759 |
|
Investment in unconsolidated affiliates |
|
|
5,393 |
|
|
1,178 |
|
|
178 |
|
|
(6,464 |
) |
|
285 |
|
Intangible assets, net |
|
|
48 |
|
|
1 |
|
|
39 |
|
|
|
|
|
88 |
|
Goodwill |
|
|
(17 |
) |
|
82 |
|
|
66 |
|
|
|
|
|
131 |
|
Deferred income taxes |
|
|
323 |
|
|
|
|
|
239 |
|
|
(319 |
) |
|
243 |
|
Notes receivable from affiliates |
|
|
22 |
|
|
658 |
|
|
1 |
|
|
(680 |
) |
|
1 |
|
Other noncurrent assets |
|
|
67 |
|
|
172 |
|
|
220 |
|
|
(1 |
) |
|
458 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
9,521 |
|
$ |
8,363 |
|
$ |
6,541 |
|
$ |
(15,014 |
) |
$ |
9,411 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable |
|
$ |
50 |
|
$ |
267 |
|
$ |
750 |
|
$ |
|
|
$ |
1,067 |
|
Accounts payable to affiliates |
|
|
3,655 |
|
|
1,476 |
|
|
1,946 |
|
|
(7,024 |
) |
|
53 |
|
Accrued liabilities |
|
|
138 |
|
|
517 |
|
|
590 |
|
|
(503 |
) |
|
742 |
|
Deferred income taxes |
|
|
|
|
|
57 |
|
|
8 |
|
|
(21 |
) |
|
44 |
|
Note payable to affiliate |
|
|
100 |
|
|
|
|
|
|
|
|
|
|
|
100 |
|
Current portion of debt |
|
|
28 |
|
|
|
|
|
249 |
|
|
|
|
|
277 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
3,971 |
|
|
2,317 |
|
|
3,543 |
|
|
(7,548 |
) |
|
2,283 |
|
Long-term debt |
|
|
3,290 |
|
|
|
|
|
343 |
|
|
|
|
|
3,633 |
|
Notes payable to affiliates |
|
|
772 |
|
|
|
|
|
687 |
|
|
(680 |
) |
|
779 |
|
Deferred income taxes |
|
|
25 |
|
|
200 |
|
|
39 |
|
|
39 |
|
|
303 |
|
Other noncurrent liabilities |
|
|
137 |
|
|
140 |
|
|
661 |
|
|
|
|
|
938 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
|
8,195 |
|
|
2,657 |
|
|
5,273 |
|
|
(8,189 |
) |
|
7,936 |
|
Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Huntsman International LLC members' equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Members' equity |
|
|
3,138 |
|
|
4,354 |
|
|
2,215 |
|
|
(6,569 |
) |
|
3,138 |
|
Accumulated (deficit) income |
|
|
(1,194 |
) |
|
66 |
|
|
(450 |
) |
|
384 |
|
|
(1,194 |
) |
Accumulated other comprehensive (loss) income |
|
|
(618 |
) |
|
1,286 |
|
|
(645 |
) |
|
(641 |
) |
|
(618 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Huntsman
International LLC members' equity |
|
|
1,326 |
|
|
5,706 |
|
|
1,120 |
|
|
(6,826 |
) |
|
1,326 |
|
Noncontrolling interests in subsidiaries |
|
|
|
|
|
|
|
|
148 |
|
|
1 |
|
|
149 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total equity |
|
|
1,326 |
|
|
5,706 |
|
|
1,268 |
|
|
(6,825 |
) |
|
1,475 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and equity |
|
$ |
9,521 |
|
$ |
8,363 |
|
$ |
6,541 |
|
$ |
(15,014 |
) |
$ |
9,411 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
62
Table of Contents
HUNTSMAN CORPORATION AND SUBSIDIARIES
HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
19. CONDENSED CONSOLIDATING FINANCIAL INFORMATION OF HUNTSMAN INTERNATIONAL LLC (UNAUDITED) (Continued)
HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS AND COMPREHENSIVE
INCOME (LOSS) (UNAUDITED)
THREE MONTHS ENDED SEPTEMBER 30,
2014
(In Millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
Company |
|
Guarantors |
|
Nonguarantors |
|
Eliminations |
|
Consolidated
Huntsman
International
LLC |
|
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade sales, services and fees, net |
|
$ |
336 |
|
$ |
772 |
|
$ |
1,711 |
|
$ |
|
|
$ |
2,819 |
|
Related party sales |
|
|
66 |
|
|
123 |
|
|
341 |
|
|
(465 |
) |
|
65 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues |
|
|
402 |
|
|
895 |
|
|
2,052 |
|
|
(465 |
) |
|
2,884 |
|
Cost of goods sold |
|
|
323 |
|
|
700 |
|
|
1,813 |
|
|
(468 |
) |
|
2,368 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
|
|
79 |
|
|
195 |
|
|
239 |
|
|
3 |
|
|
516 |
|
Selling, general and administrative |
|
|
43 |
|
|
32 |
|
|
151 |
|
|
|
|
|
226 |
|
Research and development |
|
|
12 |
|
|
11 |
|
|
17 |
|
|
|
|
|
40 |
|
Other operating (income) expense |
|
|
(3 |
) |
|
1 |
|
|
9 |
|
|
|
|
|
7 |
|
Restructuring, impairment and plant closing costs |
|
|
3 |
|
|
3 |
|
|
33 |
|
|
|
|
|
39 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income |
|
|
24 |
|
|
148 |
|
|
29 |
|
|
3 |
|
|
204 |
|
Interest (expense) income |
|
|
(49 |
) |
|
9 |
|
|
(12 |
) |
|
|
|
|
(52 |
) |
Equity in income of investment in affiliates and subsidiaries |
|
|
107 |
|
|
|
|
|
2 |
|
|
(107 |
) |
|
2 |
|
Other income |
|
|
|
|
|
|
|
|
|
|
|
(1 |
) |
|
(1 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations before income taxes |
|
|
82 |
|
|
157 |
|
|
19 |
|
|
(105 |
) |
|
153 |
|
Income tax benefit (expense) |
|
|
116 |
|
|
(54 |
) |
|
(11 |
) |
|
|
|
|
51 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations |
|
|
198 |
|
|
103 |
|
|
8 |
|
|
(105 |
) |
|
204 |
|
Loss from discontinued operations, net of tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
198 |
|
|
103 |
|
|
8 |
|
|
(105 |
) |
|
204 |
|
Net income attributable to noncontrolling interests |
|
|
|
|
|
|
|
|
(5 |
) |
|
(1 |
) |
|
(6 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to Huntsman International LLC |
|
$ |
198 |
|
$ |
103 |
|
$ |
3 |
|
$ |
(106 |
) |
$ |
198 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
198 |
|
$ |
103 |
|
$ |
8 |
|
$ |
(105 |
) |
$ |
204 |
|
Other comprehensive loss |
|
|
(84 |
) |
|
(91 |
) |
|
(96 |
) |
|
182 |
|
|
(89 |
) |
Comprehensive income attributable to noncontrolling interests |
|
|
|
|
|
|
|
|
(1 |
) |
|
(1 |
) |
|
(2 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income (loss) attributable to Huntsman International LLC |
|
$ |
114 |
|
$ |
12 |
|
$ |
(89 |
) |
$ |
76 |
|
$ |
113 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
63
Table of Contents
HUNTSMAN CORPORATION AND SUBSIDIARIES
HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
19. CONDENSED CONSOLIDATING FINANCIAL INFORMATION OF HUNTSMAN INTERNATIONAL LLC (UNAUDITED) (Continued)
HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS AND COMPREHENSIVE
INCOME (UNAUDITED)
THREE MONTHS ENDED SEPTEMBER 30, 2013
(In Millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
Company |
|
Guarantors |
|
Nonguarantors |
|
Eliminations |
|
Consolidated
Huntsman
International
LLC |
|
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade sales, services and fees, net |
|
$ |
283 |
|
$ |
830 |
|
$ |
1,676 |
|
$ |
|
|
$ |
2,789 |
|
Related party sales |
|
|
207 |
|
|
118 |
|
|
308 |
|
|
(580 |
) |
|
53 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues |
|
|
490 |
|
|
948 |
|
|
1,984 |
|
|
(580 |
) |
|
2,842 |
|
Cost of goods sold |
|
|
415 |
|
|
723 |
|
|
1,771 |
|
|
(578 |
) |
|
2,331 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
|
|
75 |
|
|
225 |
|
|
213 |
|
|
(2 |
) |
|
511 |
|
Selling, general and administrative |
|
|
37 |
|
|
38 |
|
|
161 |
|
|
|
|
|
236 |
|
Research and development |
|
|
12 |
|
|
9 |
|
|
14 |
|
|
|
|
|
35 |
|
Other operating (income) expense |
|
|
(8 |
) |
|
(7 |
) |
|
14 |
|
|
|
|
|
(1 |
) |
Restructuring, impairment and plant closing costs |
|
|
2 |
|
|
3 |
|
|
32 |
|
|
|
|
|
37 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss) |
|
|
32 |
|
|
182 |
|
|
(8 |
) |
|
(2 |
) |
|
204 |
|
Interest (expense) income |
|
|
(45 |
) |
|
11 |
|
|
(17 |
) |
|
|
|
|
(51 |
) |
Equity in (loss) income of investment in affiliates and subsidiaries |
|
|
(3 |
) |
|
(23 |
) |
|
2 |
|
|
27 |
|
|
3 |
|
Other income |
|
|
1 |
|
|
|
|
|
1 |
|
|
(2 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income from continuing operations before income taxes |
|
|
(15 |
) |
|
170 |
|
|
(22 |
) |
|
23 |
|
|
156 |
|
Income tax benefit (expense) |
|
|
83 |
|
|
(168 |
) |
|
5 |
|
|
|
|
|
(80 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations |
|
|
68 |
|
|
2 |
|
|
(17 |
) |
|
23 |
|
|
76 |
|
Income (loss) from discontinued operations, net of tax |
|
|
|
|
|
1 |
|
|
(3 |
) |
|
|
|
|
(2 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
|
68 |
|
|
3 |
|
|
(20 |
) |
|
23 |
|
|
74 |
|
Net income attributable to noncontrolling interests |
|
|
|
|
|
|
|
|
(6 |
) |
|
|
|
|
(6 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to Huntsman International LLC |
|
$ |
68 |
|
$ |
3 |
|
$ |
(26 |
) |
$ |
23 |
|
$ |
68 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
68 |
|
$ |
3 |
|
$ |
(20 |
) |
$ |
23 |
|
$ |
74 |
|
Other comprehensive income |
|
|
72 |
|
|
288 |
|
|
52 |
|
|
(338 |
) |
|
74 |
|
Comprehensive income attributable to noncontrolling interests |
|
|
|
|
|
|
|
|
(8 |
) |
|
|
|
|
(8 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income attributable to Huntsman International LLC |
|
$ |
140 |
|
$ |
291 |
|
$ |
24 |
|
$ |
(315 |
) |
$ |
140 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
64
Table of Contents
HUNTSMAN CORPORATION AND SUBSIDIARIES
HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
19. CONDENSED CONSOLIDATING FINANCIAL INFORMATION OF HUNTSMAN INTERNATIONAL LLC (UNAUDITED) (Continued)
HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) (UNAUDITED)
NINE MONTHS ENDED SEPTEMBER 30, 2014
(In Millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
Company |
|
Guarantors |
|
Nonguarantors |
|
Eliminations |
|
Consolidated
Huntsman
International
LLC |
|
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade sales, services and fees, net |
|
$ |
907 |
|
$ |
2,388 |
|
$ |
5,138 |
|
$ |
|
|
$ |
8,433 |
|
Related party sales |
|
|
242 |
|
|
380 |
|
|
1,053 |
|
|
(1,481 |
) |
|
194 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues |
|
|
1,149 |
|
|
2,768 |
|
|
6,191 |
|
|
(1,481 |
) |
|
8,627 |
|
Cost of goods sold |
|
|
944 |
|
|
2,174 |
|
|
5,517 |
|
|
(1,485 |
) |
|
7,150 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
|
|
205 |
|
|
594 |
|
|
674 |
|
|
4 |
|
|
1,477 |
|
Selling, general and administrative |
|
|
126 |
|
|
110 |
|
|
460 |
|
|
|
|
|
696 |
|
Research and development |
|
|
36 |
|
|
30 |
|
|
47 |
|
|
|
|
|
113 |
|
Other operating (income) expense |
|
|
(13 |
) |
|
(6 |
) |
|
17 |
|
|
|
|
|
(2 |
) |
Restructuring, impairment and plant closing costs |
|
|
5 |
|
|
5 |
|
|
81 |
|
|
|
|
|
91 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income |
|
|
51 |
|
|
455 |
|
|
69 |
|
|
4 |
|
|
579 |
|
Interest (expense) income |
|
|
(142 |
) |
|
27 |
|
|
(40 |
) |
|
|
|
|
(155 |
) |
Equity in income of investment in affiliates and subsidiaries |
|
|
323 |
|
|
2 |
|
|
6 |
|
|
(325 |
) |
|
6 |
|
Other income |
|
|
2 |
|
|
|
|
|
|
|
|
(2 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations before income taxes |
|
|
234 |
|
|
484 |
|
|
35 |
|
|
(323 |
) |
|
430 |
|
Income tax benefit (expense) |
|
|
139 |
|
|
(160 |
) |
|
(8 |
) |
|
|
|
|
(29 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations |
|
|
373 |
|
|
324 |
|
|
27 |
|
|
(323 |
) |
|
401 |
|
Income (loss) from discontinued operations, net of tax |
|
|
2 |
|
|
|
|
|
(9 |
) |
|
|
|
|
(7 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
375 |
|
|
324 |
|
|
18 |
|
|
(323 |
) |
|
394 |
|
Net income attributable to noncontrolling interests |
|
|
|
|
|
|
|
|
(15 |
) |
|
(4 |
) |
|
(19 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to Huntsman International LLC |
|
$ |
375 |
|
$ |
324 |
|
$ |
3 |
|
$ |
(327 |
) |
$ |
375 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
375 |
|
$ |
324 |
|
$ |
18 |
|
$ |
(323 |
) |
$ |
394 |
|
Other comprehensive (loss) income |
|
|
(61 |
) |
|
62 |
|
|
(77 |
) |
|
8 |
|
|
(68 |
) |
Comprehensive income attributable to noncontrolling interests |
|
|
|
|
|
|
|
|
(8 |
) |
|
(4 |
) |
|
(12 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income (loss) attributable to Huntsman International LLC |
|
$ |
314 |
|
$ |
386 |
|
$ |
(67 |
) |
$ |
(319 |
) |
$ |
314 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
65
Table of Contents
HUNTSMAN CORPORATION AND SUBSIDIARIES
HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
19. CONDENSED CONSOLIDATING FINANCIAL INFORMATION OF HUNTSMAN INTERNATIONAL LLC (UNAUDITED) (Continued)
HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) (UNAUDITED)
NINE MONTHS ENDED SEPTEMBER 30, 2013
(In Millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
Company |
|
Guarantors |
|
Nonguarantors |
|
Eliminations |
|
Consolidated
Huntsman
International
LLC |
|
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade sales, services and fees, net |
|
$ |
798 |
|
$ |
2,434 |
|
$ |
4,966 |
|
$ |
|
|
$ |
8,198 |
|
Related party sales |
|
|
592 |
|
|
357 |
|
|
943 |
|
|
(1,716 |
) |
|
176 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues |
|
|
1,390 |
|
|
2,791 |
|
|
5,909 |
|
|
(1,716 |
) |
|
8,374 |
|
Cost of goods sold |
|
|
1,208 |
|
|
2,206 |
|
|
5,353 |
|
|
(1,713 |
) |
|
7,054 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
|
|
182 |
|
|
585 |
|
|
556 |
|
|
(3 |
) |
|
1,320 |
|
Selling, general and administrative |
|
|
112 |
|
|
111 |
|
|
469 |
|
|
|
|
|
692 |
|
Research and development |
|
|
38 |
|
|
28 |
|
|
39 |
|
|
|
|
|
105 |
|
Other operating (income) expense |
|
|
|
|
|
(3 |
) |
|
9 |
|
|
|
|
|
6 |
|
Restructuring, impairment and plant closing costs |
|
|
9 |
|
|
14 |
|
|
87 |
|
|
|
|
|
110 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss) |
|
|
23 |
|
|
435 |
|
|
(48 |
) |
|
(3 |
) |
|
407 |
|
Interest (expense) income |
|
|
(139 |
) |
|
32 |
|
|
(49 |
) |
|
|
|
|
(156 |
) |
Equity in income (loss) of investment in affiliates and subsidiaries |
|
|
204 |
|
|
(110 |
) |
|
5 |
|
|
(93 |
) |
|
6 |
|
Loss on early extinguishment of debt |
|
|
(35 |
) |
|
|
|
|
|
|
|
|
|
|
(35 |
) |
Other income |
|
|
2 |
|
|
|
|
|
2 |
|
|
(2 |
) |
|
2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations before income taxes |
|
|
55 |
|
|
357 |
|
|
(90 |
) |
|
(98 |
) |
|
224 |
|
Income tax benefit (expense) |
|
|
39 |
|
|
(149 |
) |
|
4 |
|
|
|
|
|
(106 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations |
|
|
94 |
|
|
208 |
|
|
(86 |
) |
|
(98 |
) |
|
118 |
|
Income (loss) from discontinued operations, net of tax |
|
|
|
|
|
1 |
|
|
(5 |
) |
|
|
|
|
(4 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
|
94 |
|
|
209 |
|
|
(91 |
) |
|
(98 |
) |
|
114 |
|
Net income attributable to noncontrolling interests |
|
|
|
|
|
|
|
|
(20 |
) |
|
|
|
|
(20 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to Huntsman International LLC |
|
$ |
94 |
|
$ |
209 |
|
$ |
(111 |
) |
$ |
(98 |
) |
$ |
94 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
94 |
|
$ |
209 |
|
$ |
(91 |
) |
$ |
(98 |
) |
$ |
114 |
|
Other comprehensive income |
|
|
33 |
|
|
109 |
|
|
9 |
|
|
(119 |
) |
|
32 |
|
Comprehensive income attributable to noncontrolling interests |
|
|
|
|
|
|
|
|
(19 |
) |
|
|
|
|
(19 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income (loss) attributable to Huntsman International LLC |
|
$ |
127 |
|
$ |
318 |
|
$ |
(101 |
) |
$ |
(217 |
) |
$ |
127 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
66
Table of Contents
HUNTSMAN CORPORATION AND SUBSIDIARIES
HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
19. CONDENSED CONSOLIDATING FINANCIAL INFORMATION OF HUNTSMAN INTERNATIONAL LLC (UNAUDITED) (Continued)
HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS (UNAUDITED)
NINE MONTHS ENDED SEPTEMBER 30, 2014
(In Millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
Company |
|
Guarantors |
|
Nonguarantors |
|
Eliminations |
|
Consolidated
Huntsman
International
LLC |
|
Net cash (used in) provided by operating activities |
|
$ |
(50 |
) |
$ |
135 |
|
$ |
254 |
|
$ |
(1 |
) |
$ |
338 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures |
|
|
(50 |
) |
|
(122 |
) |
|
(179 |
) |
|
|
|
|
(351 |
) |
Cash received from unconsolidated affiliates |
|
|
|
|
|
38 |
|
|
|
|
|
|
|
|
38 |
|
Investment in affiliate |
|
|
(45 |
) |
|
(10 |
) |
|
|
|
|
55 |
|
|
|
|
Investment in unconsolidated affiliates |
|
|
|
|
|
(25 |
) |
|
(12 |
) |
|
|
|
|
(37 |
) |
Proceeds from sale of businesses/assets |
|
|
3 |
|
|
|
|
|
12 |
|
|
|
|
|
15 |
|
Increase in receivable from affiliate |
|
|
(4 |
) |
|
|
|
|
|
|
|
|
|
|
(4 |
) |
Other, net |
|
|
|
|
|
|
|
|
(2 |
) |
|
|
|
|
(2 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities |
|
|
(96 |
) |
|
(119 |
) |
|
(181 |
) |
|
55 |
|
|
(341 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net repayments under revolving loan facilities |
|
|
|
|
|
|
|
|
(1 |
) |
|
|
|
|
(1 |
) |
Net borrowings on overdraft facilities |
|
|
|
|
|
|
|
|
2 |
|
|
|
|
|
2 |
|
Repayments of short-term debt |
|
|
|
|
|
|
|
|
(8 |
) |
|
|
|
|
(8 |
) |
Borrowings on short-term debt |
|
|
|
|
|
|
|
|
10 |
|
|
|
|
|
10 |
|
Repayments of long-term debt |
|
|
(13 |
) |
|
|
|
|
(29 |
) |
|
|
|
|
(42 |
) |
Proceeds from issuance of long-term debt |
|
|
204 |
|
|
|
|
|
|
|
|
|
|
|
204 |
|
Repayments of notes payable to affiliate |
|
|
(65 |
) |
|
|
|
|
|
|
|
|
|
|
(65 |
) |
Repayments of notes payable |
|
|
(24 |
) |
|
|
|
|
(1 |
) |
|
|
|
|
(25 |
) |
Borrowings on notes payable |
|
|
31 |
|
|
|
|
|
1 |
|
|
|
|
|
32 |
|
Debt issuance costs paid |
|
|
(39 |
) |
|
|
|
|
|
|
|
|
|
|
(39 |
) |
Contingent consideration paid for acquisition |
|
|
(6 |
) |
|
|
|
|
|
|
|
|
|
|
(6 |
) |
Contribution from parent |
|
|
|
|
|
10 |
|
|
70 |
|
|
(80 |
) |
|
|
|
Distribution to parent |
|
|
|
|
|
(25 |
) |
|
|
|
|
25 |
|
|
|
|
Dividends paid to parent |
|
|
(91 |
) |
|
(1 |
) |
|
|
|
|
1 |
|
|
(91 |
) |
Cash received for a noncontrolling interest of a subsidiary |
|
|
|
|
|
|
|
|
5 |
|
|
|
|
|
5 |
|
Other, net |
|
|
|
|
|
|
|
|
(2 |
) |
|
|
|
|
(2 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by financing activities |
|
|
(3 |
) |
|
(16 |
) |
|
47 |
|
|
(54 |
) |
|
(26 |
) |
Effect of exchange rate changes on cash |
|
|
|
|
|
|
|
|
(6 |
) |
|
|
|
|
(6 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Decrease) increase in cash and cash equivalents |
|
|
(149 |
) |
|
|
|
|
114 |
|
|
|
|
|
(35 |
) |
Cash and cash equivalents at beginning of period |
|
|
308 |
|
|
|
|
|
207 |
|
|
|
|
|
515 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period |
|
$ |
159 |
|
$ |
|
|
$ |
321 |
|
$ |
|
|
$ |
480 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
During
the third quarter of 2014, we capitalized $116 million of intercompany notes as a noncash transaction between guarantor and nonguarantor entities.
67
Table of Contents
HUNTSMAN CORPORATION AND SUBSIDIARIES
HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
19. CONDENSED CONSOLIDATING FINANCIAL INFORMATION OF HUNTSMAN INTERNATIONAL LLC (UNAUDITED) (Continued)
HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS (UNAUDITED)
NINE MONTHS ENDED SEPTEMBER 30, 2013
(In Millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
Company |
|
Guarantors |
|
Nonguarantors |
|
Eliminations |
|
Consolidated
Huntsman
International
LLC |
|
Net cash (used in) provided by operating activities |
|
$ |
(13 |
) |
$ |
108 |
|
$ |
288 |
|
$ |
(1 |
) |
$ |
382 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures |
|
|
(35 |
) |
|
(76 |
) |
|
(184 |
) |
|
|
|
|
(295 |
) |
Cash received from unconsolidated affiliates |
|
|
|
|
|
48 |
|
|
|
|
|
|
|
|
48 |
|
Investment in affiliate |
|
|
(23 |
) |
|
(8 |
) |
|
|
|
|
31 |
|
|
|
|
Investment in unconsolidated affiliates |
|
|
|
|
|
(44 |
) |
|
(32 |
) |
|
|
|
|
(76 |
) |
Acquisition of a business, net of cash acquired |
|
|
(66 |
) |
|
|
|
|
|
|
|
|
|
|
(66 |
) |
Proceeds from sale of businesses/assets |
|
|
|
|
|
(3 |
) |
|
2 |
|
|
|
|
|
(1 |
) |
Increase in receivable from affiliate |
|
|
(16 |
) |
|
|
|
|
|
|
|
|
|
|
(16 |
) |
Other, net |
|
|
|
|
|
|
|
|
2 |
|
|
|
|
|
2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities |
|
|
(140 |
) |
|
(83 |
) |
|
(212 |
) |
|
31 |
|
|
(404 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net repayments under revolving loan facilities |
|
|
|
|
|
|
|
|
(3 |
) |
|
|
|
|
(3 |
) |
Net repayments on overdraft facilities |
|
|
|
|
|
|
|
|
(2 |
) |
|
|
|
|
(2 |
) |
Repayments of short-term debt |
|
|
|
|
|
|
|
|
(18 |
) |
|
|
|
|
(18 |
) |
Borrowings on short-term debt |
|
|
|
|
|
|
|
|
14 |
|
|
|
|
|
14 |
|
Repayments of long-term debt |
|
|
(393 |
) |
|
|
|
|
(66 |
) |
|
|
|
|
(459 |
) |
Proceeds from issuance of long-term debt |
|
|
570 |
|
|
|
|
|
2 |
|
|
|
|
|
572 |
|
Proceeds from notes payable to affiliate |
|
|
177 |
|
|
|
|
|
|
|
|
|
|
|
177 |
|
Repayments of notes payable |
|
|
(24 |
) |
|
|
|
|
(6 |
) |
|
|
|
|
(30 |
) |
Borrowings on notes payable |
|
|
33 |
|
|
|
|
|
1 |
|
|
|
|
|
34 |
|
Debt issuance costs paid |
|
|
(4 |
) |
|
|
|
|
|
|
|
|
|
|
(4 |
) |
Call premiums and other costs related to early extinguishment of debt |
|
|
(4 |
) |
|
|
|
|
|
|
|
|
|
|
(4 |
) |
Contribution from parent |
|
|
|
|
|
8 |
|
|
57 |
|
|
(65 |
) |
|
|
|
Distribution to parent |
|
|
|
|
|
(34 |
) |
|
|
|
|
34 |
|
|
|
|
Dividends paid to parent |
|
|
(90 |
) |
|
(1 |
) |
|
|
|
|
1 |
|
|
(90 |
) |
Excess tax benefit related to stock-based compensation |
|
|
4 |
|
|
|
|
|
|
|
|
|
|
|
4 |
|
Other, net |
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities |
|
|
270 |
|
|
(27 |
) |
|
(21 |
) |
|
(30 |
) |
|
192 |
|
Effect of exchange rate changes on cash |
|
|
|
|
|
|
|
|
(2 |
) |
|
|
|
|
(2 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in cash and cash equivalents |
|
|
117 |
|
|
(2 |
) |
|
53 |
|
|
|
|
|
168 |
|
Cash and cash equivalents at beginning of period |
|
|
7 |
|
|
2 |
|
|
201 |
|
|
|
|
|
210 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period |
|
$ |
124 |
|
$ |
|
|
$ |
254 |
|
$ |
|
|
$ |
378 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
68
Table of Contents
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FORWARD-LOOKING STATEMENTS
With respect to Huntsman Corporation, certain information set forth in this report contains "forward-looking statements" within the
meaning of the federal securities laws. Huntsman International is a limited liability company, and, pursuant to Section 21E(b)(2)(E) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), the safe harbor for certain forward-looking statements is inapplicable to it. Forward-looking statements include statements concerning our plans, objectives, goals, strategies, future
events, future revenues or performance, capital expenditures, financing needs, plans or intentions relating to acquisitions and other information that is
not historical information. In some cases, forward-looking statements can be identified by terminology such as "believes," "expects," "may," "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 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 result or 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 which may be
made to reflect events or circumstances after the date made or to reflect the occurrence of unanticipated events.
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 referenced in "Part I. Item 1A. Risk Factors" in our Annual Report on Form 10-K for the year ended
December 31, 2013.
OVERVIEW
Business
We are a global manufacturer of differentiated organic chemical products and of inorganic chemical products. 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, personal care and hygiene, durable and non-durable consumer products, electronics, medical, packaging, paints and coatings, power
generation, refining, synthetic fiber, textile chemicals and dye industries. We are a leading global producer in many of our key product lines, including MDI, amines, surfactants, maleic anhydride,
epoxy-based polymer formulations, textile chemicals, dyes and titanium dioxide. We had revenues for the nine months ended September 30, 2014 and 2013 of $8,627 million and
$8,374 million, respectively.
We
operate in five segments: Polyurethanes, Performance Products, Advanced Materials, Textile Effects and Pigments. Our Polyurethanes, Performance Products, Advanced Materials and
Textile Effects segments produce differentiated organic chemical products and our Pigments segment produces primarily inorganic chemical products.
69
Table of Contents
RECENT DEVELOPMENTS
Rockwood Acquisition
On October 1, 2014, we completed the acquisition of the Performance Additives and Titanium Dioxide businesses of Rockwood, which
manufacture and market specialty titanium dioxide and performance additives products. We paid $1.04 billion in cash, subject to certain purchase price adjustments, and assumed certain unfunded
pension liabilities in connection with the Rockwood Acquisition. The acquisition was financed using a bank term loan.
The
following businesses were acquired from Rockwood:
-
- titanium dioxide, a white pigment derived from titanium bearing ores with strong specialty business in fibers, inks,
pharmaceuticals, food and cosmetics;
-
- functional additives made from barium and zinc based inorganics used to make colors more brilliant, primarily in
plastics, coatings, films, food, cosmetics, pharmaceuticals and paper;
-
- color pigments made from synthetic iron-oxide and other non-TiO2 inorganic pigments used by manufacturers of coatings and
colorants;
-
- timber treatment wood protection chemicals used primarily in residential and commercial applications;
-
- water treatment products used to improve water purity in industrial, commercial and municipal applications; and
-
- specialty automotive molded components.
The
unaudited condensed combined balance sheet of the acquired businesses as of June 30, 2014 and the unaudited condensed combined statements of operations, comprehensive income
(loss), cash flows, and changes in parent company equity of the acquired businesses for the six months ended June 30, 2014 and June 30, 2013 can be found in our current report on
Form 8-K filed on October 7, 2014.
In
connection with securing certain regulatory approvals required to complete the Rockwood Acquisition, we entered into a definitive agreement to sell our Ti02 product line used in
printing inks to Henan Billions Chemicals Co., Ltd. The sale does not include any manufacturing assets. The sale is expected to close in the fourth quarter of 2014.
Port Neches Manufacturing Disruption
During the third quarter of 2014, we experienced an unplanned manufacturing disruption on a production unit at our facility in Port
Neches, Texas. There were no injuries resulting from the equipment failure. The Port Neches facility manufactures methyl tertiary butyl ether (MTBE), propylene oxide (PO) and propylene glycols (PG).
The manufacturing disruption also impacted internal PO supply to downstream derivatives. The affected unit was off-line for approximately three weeks, with an estimated negative impact of
approximately $30 million EBITDA for our Polyurethanes segment.
OUTLOOK
We continue to experience growing demand for key products such as MDI polyurethanes, amines, aerospace composites and textile dyes and
chemicals and broad earnings growth from products across our business segments. With the successful completion of the Rockwood Acquisition, we believe we can deliver synergies within the next couple
of years that will drive strong earnings growth for years to come.
70
Table of Contents
The
following is a summary of the key trends in our business segments:
Polyurethanes:
-
- Strong MDI demand in the U.S. and Asia, modest demand in Europe
-
- Improving sales price leverage
-
- Fourth quarter 2014 seasonal slowdown
-
- PO/MTBE maintenance outage in the first quarter 2015
Performance Products:
-
- Benefits of European surfactants restructuring expected in 2015
-
- Improving amines sales volumes and margins
-
- U.S. Gulf Coast raw material cost advantage
-
- Fourth quarter 2014 seasonal slowdown
Advanced Materials:
-
- Strong aerospace market
-
- Fourth quarter 2014 seasonal slowdown in Europe
Textile Effects:
-
- Selective growth above underlying market demand
-
- New environmental regulations impacting raw materials costs
Pigments:
-
- Approximately $130 million of synergies from integration of former Rockwood businesses
We
expect to spend approximately $550 million in 2014 on capital expenditures, net of reimbursements, and including approximately $50 million in the fourth quarter for the
acquired Rockwood businesses, including the Augusta, Georgia facility.
We
expect our 2014 adjusted effective tax rate to be approximately 30%, including the impact of the Rockwood Acquisition.
71
Table of Contents
RESULTS OF OPERATIONS
For each of our Company and Huntsman International, the following tables set forth the unaudited condensed consolidated results of
operations (dollars in millions, except per share amounts):
Huntsman Corporation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months
ended
September 30, |
|
|
|
Nine months
ended
September 30, |
|
|
|
|
|
Percent
Change |
|
Percent
Change |
|
|
|
2014 |
|
2013 |
|
2014 |
|
2013 |
|
Revenues |
|
$ |
2,884 |
|
$ |
2,842 |
|
|
1 |
% |
$ |
8,627 |
|
$ |
8,374 |
|
|
3 |
% |
Cost of goods sold |
|
|
2,369 |
|
|
2,335 |
|
|
1 |
% |
|
7,157 |
|
|
7,067 |
|
|
1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
|
|
515 |
|
|
507 |
|
|
2 |
% |
|
1,470 |
|
|
1,307 |
|
|
12 |
% |
Operating expenses |
|
|
274 |
|
|
272 |
|
|
1 |
% |
|
811 |
|
|
808 |
|
|
|
|
Restructuring, impairment and plant closing costs |
|
|
39 |
|
|
37 |
|
|
5 |
% |
|
91 |
|
|
110 |
|
|
(17 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income |
|
|
202 |
|
|
198 |
|
|
2 |
% |
|
568 |
|
|
389 |
|
|
46 |
% |
Interest expense |
|
|
(49 |
) |
|
(48 |
) |
|
2 |
% |
|
(148 |
) |
|
(146 |
) |
|
1 |
% |
Equity in income of investment in unconsolidated affiliates |
|
|
2 |
|
|
3 |
|
|
(33 |
)% |
|
6 |
|
|
6 |
|
|
|
|
Loss on early extinguishment of debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(35 |
) |
|
NM |
|
Other (expense) income |
|
|
(1 |
) |
|
|
|
|
NM |
|
|
|
|
|
2 |
|
|
NM |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations before income taxes |
|
|
154 |
|
|
153 |
|
|
1 |
% |
|
426 |
|
|
216 |
|
|
97 |
% |
Income tax benefit (expense) |
|
|
40 |
|
|
(81 |
) |
|
NM |
|
|
(39 |
) |
|
(105 |
) |
|
(63 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations |
|
|
194 |
|
|
72 |
|
|
169 |
% |
|
387 |
|
|
111 |
|
|
249 |
% |
Loss from discontinued operations, net of tax |
|
|
|
|
|
(2 |
) |
|
NM |
|
|
(7 |
) |
|
(4 |
) |
|
75 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
194 |
|
|
70 |
|
|
177 |
% |
|
380 |
|
|
107 |
|
|
255 |
% |
Net income attributable to noncontrolling interests |
|
|
(6 |
) |
|
(6 |
) |
|
|
|
|
(19 |
) |
|
(20 |
) |
|
(5 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to Huntsman Corporation |
|
|
188 |
|
|
64 |
|
|
194 |
% |
|
361 |
|
|
87 |
|
|
315 |
% |
Interest expense |
|
|
49 |
|
|
48 |
|
|
2 |
% |
|
148 |
|
|
146 |
|
|
1 |
% |
Income tax expense from continuing operations |
|
|
(40 |
) |
|
81 |
|
|
NM |
|
|
39 |
|
|
105 |
|
|
(63 |
)% |
Income tax benefit from discontinued operations |
|
|
|
|
|
|
|
|
|
|
|
(2 |
) |
|
|
|
|
NM |
|
Depreciation and amortization |
|
|
96 |
|
|
110 |
|
|
(13 |
)% |
|
335 |
|
|
326 |
|
|
3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA(1) |
|
$ |
293 |
|
$ |
303 |
|
|
(3 |
)% |
$ |
881 |
|
$ |
664 |
|
|
33 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
72
Table of Contents
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months
ended
September 30, |
|
|
|
Nine months
ended
September 30, |
|
|
|
|
|
2014 |
|
2013 |
|
|
|
2014 |
|
2013 |
|
|
|
Reconciliation of EBITDA to adjusted EBITDA: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA(1) |
|
$ |
293 |
|
$ |
303 |
|
|
|
|
$ |
881 |
|
$ |
664 |
|
|
|
|
Acquisition expenses and integration costs |
|
|
10 |
|
|
9 |
|
|
|
|
|
27 |
|
|
14 |
|
|
|
|
EBITDA from discontinued operations |
|
|
|
|
|
2 |
|
|
|
|
|
9 |
|
|
3 |
|
|
|
|
Gain on disposition of businesses/assets |
|
|
|
|
|
|
|
|
|
|
|
(2 |
) |
|
|
|
|
|
|
Loss on early extinguishment of debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
35 |
|
|
|
|
Certain legal settlements and related expenses |
|
|
1 |
|
|
|
|
|
|
|
|
3 |
|
|
8 |
|
|
|
|
Amortization of pension and postretirement actuarial losses |
|
|
12 |
|
|
19 |
|
|
|
|
|
37 |
|
|
56 |
|
|
|
|
Restructuring, impairment and plant closing and transition costs (credits)(3): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Polyurethanes |
|
|
16 |
|
|
|
|
|
|
|
|
18 |
|
|
3 |
|
|
|
|
Performance Products |
|
|
4 |
|
|
13 |
|
|
|
|
|
27 |
|
|
17 |
|
|
|
|
Advanced Materials |
|
|
5 |
|
|
3 |
|
|
|
|
|
10 |
|
|
30 |
|
|
|
|
Textile Effects |
|
|
11 |
|
|
24 |
|
|
|
|
|
25 |
|
|
56 |
|
|
|
|
Pigments |
|
|
|
|
|
|
|
|
|
|
|
3 |
|
|
3 |
|
|
|
|
Corporate and other |
|
|
4 |
|
|
3 |
|
|
|
|
|
10 |
|
|
11 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total restructuring, impairment and plant closing and transition costs (credits)(3) |
|
|
40 |
|
|
43 |
|
|
|
|
|
93 |
|
|
120 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA(1) |
|
$ |
356 |
|
$ |
376 |
|
|
|
|
$ |
1,048 |
|
$ |
900 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities |
|
|
|
|
|
|
|
|
|
|
$ |
343 |
|
$ |
388 |
|
|
(12 |
)% |
Net cash used in investing activities |
|
|
|
|
|
|
|
|
|
|
|
(337 |
) |
|
(388 |
) |
|
(13 |
)% |
Net cash provided by financing activities |
|
|
|
|
|
|
|
|
|
|
|
62 |
|
|
12 |
|
|
417 |
% |
73
Table of Contents
Huntsman International
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months
ended
September 30, |
|
|
|
Nine months
ended
September 30, |
|
|
|
|
|
Percent
Change |
|
Percent
Change |
|
|
|
2014 |
|
2013 |
|
2014 |
|
2013 |
|
Revenues |
|
$ |
2,884 |
|
$ |
2,842 |
|
|
1 |
% |
$ |
8,627 |
|
$ |
8,374 |
|
|
3 |
% |
Cost of goods sold |
|
|
2,368 |
|
|
2,331 |
|
|
2 |
% |
|
7,150 |
|
|
7,054 |
|
|
1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
|
|
516 |
|
|
511 |
|
|
1 |
% |
|
1,477 |
|
|
1,320 |
|
|
12 |
% |
Operating expenses |
|
|
273 |
|
|
270 |
|
|
1 |
% |
|
807 |
|
|
803 |
|
|
|
|
Restructuring, impairment and plant closing costs |
|
|
39 |
|
|
37 |
|
|
5 |
% |
|
91 |
|
|
110 |
|
|
(17 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income |
|
|
204 |
|
|
204 |
|
|
|
|
|
579 |
|
|
407 |
|
|
42 |
% |
Interest expense |
|
|
(52 |
) |
|
(51 |
) |
|
2 |
% |
|
(155 |
) |
|
(156 |
) |
|
(1 |
)% |
Equity in income of investment in unconsolidated affiliates |
|
|
2 |
|
|
3 |
|
|
(33 |
)% |
|
6 |
|
|
6 |
|
|
|
|
Loss on early extinguishment of debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(35 |
) |
|
NM |
|
Other (expense) income |
|
|
(1 |
) |
|
|
|
|
NM |
|
|
|
|
|
2 |
|
|
NM |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations before income taxes |
|
|
153 |
|
|
156 |
|
|
(2 |
)% |
|
430 |
|
|
224 |
|
|
92 |
% |
Income tax benefit (expense) |
|
|
51 |
|
|
(80 |
) |
|
NM |
|
|
(29 |
) |
|
(106 |
) |
|
(73 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations |
|
|
204 |
|
|
76 |
|
|
168 |
% |
|
401 |
|
|
118 |
|
|
240 |
% |
Loss from discontinued operations, net of tax |
|
|
|
|
|
(2 |
) |
|
NM |
|
|
(7 |
) |
|
(4 |
) |
|
75 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
204 |
|
|
74 |
|
|
176 |
% |
|
394 |
|
|
114 |
|
|
246 |
% |
Net income attributable to noncontrolling interests |
|
|
(6 |
) |
|
(6 |
) |
|
|
|
|
(19 |
) |
|
(20 |
) |
|
(5 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to Huntsman International LLC |
|
|
198 |
|
|
68 |
|
|
191 |
% |
|
375 |
|
|
94 |
|
|
299 |
% |
Interest expense |
|
|
52 |
|
|
51 |
|
|
2 |
% |
|
155 |
|
|
156 |
|
|
(1 |
)% |
Income tax expense from continuing operations |
|
|
(51 |
) |
|
80 |
|
|
NM |
|
|
29 |
|
|
106 |
|
|
(73 |
)% |
Income tax benefit from discontinued operations |
|
|
|
|
|
|
|
|
|
|
|
(2 |
) |
|
|
|
|
NM |
|
Depreciation and amortization |
|
|
93 |
|
|
104 |
|
|
(11 |
)% |
|
322 |
|
|
308 |
|
|
5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA(1) |
|
$ |
292 |
|
$ |
303 |
|
|
(4 |
)% |
$ |
879 |
|
$ |
664 |
|
|
32 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
74
Table of Contents
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months
ended
September 30, |
|
|
|
Nine months
ended
September 30, |
|
|
|
|
|
2014 |
|
2013 |
|
|
|
2014 |
|
2013 |
|
|
|
Reconciliation of EBITDA to adjusted EBITDA: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA(1) |
|
$ |
292 |
|
$ |
303 |
|
|
|
|
$ |
879 |
|
$ |
664 |
|
|
|
|
Acquisition expenses and integration costs |
|
|
10 |
|
|
9 |
|
|
|
|
|
27 |
|
|
14 |
|
|
|
|
EBITDA from discontinued operations |
|
|
|
|
|
2 |
|
|
|
|
|
9 |
|
|
3 |
|
|
|
|
Gain on disposition of businesses/assets |
|
|
|
|
|
|
|
|
|
|
|
(2 |
) |
|
|
|
|
|
|
Loss on early extinguishment of debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
35 |
|
|
|
|
Certain legal settlements and related expenses |
|
|
1 |
|
|
|
|
|
|
|
|
3 |
|
|
8 |
|
|
|
|
Amortization of pension and postretirement actuarial losses |
|
|
14 |
|
|
24 |
|
|
|
|
|
43 |
|
|
61 |
|
|
|
|
Restructuring, impairment and plant closing and transition costs (credits)(3): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Polyurethanes |
|
|
16 |
|
|
|
|
|
|
|
|
18 |
|
|
3 |
|
|
|
|
Performance Products |
|
|
4 |
|
|
13 |
|
|
|
|
|
27 |
|
|
17 |
|
|
|
|
Advanced Materials |
|
|
5 |
|
|
3 |
|
|
|
|
|
10 |
|
|
30 |
|
|
|
|
Textile Effects |
|
|
11 |
|
|
24 |
|
|
|
|
|
25 |
|
|
56 |
|
|
|
|
Pigments |
|
|
|
|
|
|
|
|
|
|
|
3 |
|
|
3 |
|
|
|
|
Corporate and other |
|
|
4 |
|
|
3 |
|
|
|
|
|
10 |
|
|
11 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total restructuring, impairment and plant closing and transition costs (credits)(3) |
|
|
40 |
|
|
43 |
|
|
|
|
|
93 |
|
|
120 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA(1) |
|
$ |
357 |
|
$ |
381 |
|
|
|
|
$ |
1,052 |
|
$ |
905 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities |
|
|
|
|
|
|
|
|
|
|
$ |
338 |
|
$ |
382 |
|
|
(12 |
)% |
Net cash used in investing activities |
|
|
|
|
|
|
|
|
|
|
|
(341 |
) |
|
(404 |
) |
|
(16 |
)% |
Net cash (used in) provided by financing activities |
|
|
|
|
|
|
|
|
|
|
|
(26 |
) |
|
192 |
|
|
NM |
|
75
Table of Contents
Huntsman Corporation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months
ended
September 30, |
|
Nine months
ended
September 30, |
|
|
|
2014 |
|
2013 |
|
2014 |
|
2013 |
|
Reconciliation of net income to adjusted net income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to Huntsman Corporation |
|
$ |
188 |
|
$ |
64 |
|
$ |
361 |
|
$ |
87 |
|
Acquisition expenses and integration costs, net of tax of $(2) and $(1) for the three months ended, respectively, and $(6) and $(2) for the nine months
ended, respectively |
|
|
8 |
|
|
8 |
|
|
21 |
|
|
12 |
|
Impact of certain foreign tax credit elections |
|
|
(94 |
) |
|
|
|
|
(94 |
) |
|
|
|
Loss from discontinued operations, net of tax of nil each for the three months ended and $(2) and nil for the nine months ended, respectively |
|
|
|
|
|
2 |
|
|
7 |
|
|
4 |
|
Discount amortization on settlement financing, net of tax of nil each for the three months ended, respectively, and nil and $(2) for the nine months
ended, respectively |
|
|
|
|
|
2 |
|
|
|
|
|
5 |
|
Gain on disposition of businesses/assets, net of tax of nil each for the three months ended and $1 and nil for the nine months ended,
respectively |
|
|
|
|
|
|
|
|
(1 |
) |
|
|
|
Loss on early extinguishment of debt, net of tax of nil each for the three months ended and nil and $(13) for the nine months ended,
respectively |
|
|
|
|
|
|
|
|
|
|
|
22 |
|
Certain legal settlements and related expenses, net of tax of nil each for the three months ended and nil and $(2) for the nine months ended,
respectively |
|
|
1 |
|
|
|
|
|
3 |
|
|
6 |
|
Amortization of pension and postretirement actuarial losses, net of tax of $(2) each for the three months ended and $(10) and $(13) for the nine months
ended, respectively |
|
|
10 |
|
|
17 |
|
|
27 |
|
|
43 |
|
Restructuring, impairment and plant closing and transition costs(3), net of tax of $(6) and $(4) for the three months ended, respectively, and $(20) and
$(27) for the nine months ended, respectively |
|
|
34 |
|
|
39 |
|
|
73 |
|
|
93 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted net income(2) |
|
$ |
147 |
|
$ |
132 |
|
$ |
397 |
|
$ |
272 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares-basic |
|
|
242.6 |
|
|
239.8 |
|
|
241.8 |
|
|
239.5 |
|
Weighted average shares-diluted |
|
|
246.7 |
|
|
242.5 |
|
|
245.7 |
|
|
242.1 |
|
Weighted average shares for adjusted income per share-diluted |
|
|
246.7 |
|
|
242.5 |
|
|
245.7 |
|
|
242.1 |
|
Net income per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
0.77 |
|
$ |
0.27 |
|
$ |
1.49 |
|
$ |
0.36 |
|
Diluted |
|
|
0.76 |
|
|
0.26 |
|
|
1.47 |
|
|
0.36 |
|
Other non-GAAP measures: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted income per share(2): |
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
0.61 |
|
$ |
0.55 |
|
$ |
1.64 |
|
$ |
1.14 |
|
Diluted |
|
|
0.60 |
|
|
0.54 |
|
|
1.62 |
|
|
1.12 |
|
76
Table of Contents
Huntsman International
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months
ended
September 30, |
|
Nine months
ended
September 30, |
|
|
|
2014 |
|
2013 |
|
2014 |
|
2013 |
|
Reconciliation of net income to adjusted net income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to Huntsman International |
|
$ |
198 |
|
$ |
68 |
|
$ |
375 |
|
$ |
94 |
|
Acquisition expenses and integration costs, net of tax of $(2) and $(1) for the three months ended, respectively, and $(6) and $(2) for the nine months
ended, respectively |
|
|
8 |
|
|
8 |
|
|
21 |
|
|
12 |
|
Impact of certain foreign tax credit elections |
|
|
(105 |
) |
|
|
|
|
(105 |
) |
|
|
|
Loss from discontinued operations, net of tax of nil each for the three months ended and $(2) and nil for the nine months ended, respectively |
|
|
|
|
|
2 |
|
|
7 |
|
|
4 |
|
Discount amortization on settlement financing, net of tax of nil each for the three months ended, respectively, and nil and $(2) for the nine months
ended, respectively |
|
|
|
|
|
2 |
|
|
|
|
|
5 |
|
Gain on disposition of businesses/assets, net of tax of nil each for the three months ended and $1 and nil for the nine months ended,
respectively |
|
|
|
|
|
|
|
|
(1 |
) |
|
|
|
Loss on early extinguishment of debt, net of tax of nil each for the three months ended and nil and $(13) for the nine months ended,
respectively |
|
|
|
|
|
|
|
|
|
|
|
22 |
|
Certain legal settlements and related expenses, net of tax of nil each for the three months ended and nil and $(2) for the nine months ended,
respectively |
|
|
1 |
|
|
|
|
|
3 |
|
|
6 |
|
Amortization of pension and postretirement actuarial losses, net of tax of $(2) and $(3) for the three months ended, respectively, and $(10) and $(14)
for the nine months ended, respectively |
|
|
12 |
|
|
21 |
|
|
33 |
|
|
47 |
|
Restructuring, impairment and plant closing and transition costs(3), net of tax of $(6) and $(4) for the three months ended, respectively, and $(20) and
$(27) for the nine months ended, respectively |
|
|
34 |
|
|
39 |
|
|
73 |
|
|
93 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted net income(2) |
|
$ |
148 |
|
$ |
140 |
|
$ |
406 |
|
$ |
283 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NMNot
Meaningful
- (1)
- Our
management uses EBITDA and adjusted EBITDA to assess financial performance. EBITDA is defined as net income (loss) attributable to Huntsman Corporation
or Huntsman International, as appropriate, before interest, income taxes, depreciation and amortization. Adjusted EBITDA is computed by eliminating the following from EBITDA: (a) acquisition
expenses and integration costs; (b) EBITDA from discontinued operations; (c) gain on disposition of businesses/assets; (d) loss on early extinguishment of debt; (e) certain
legal settlements and related expenses; (f) amortization of pension and postretirement actuarial losses; and (g) restructuring, impairment, plant closing and transition costs.
EBITDA
and adjusted EBITDA may not necessarily be comparable to other similarly titled measures used by other companies. There are material limitations associated with our use of these measures
because they do not reflect overall financial performance, including the effects of interest, income taxes, depreciation and amortization. Our management compensates for the limitations of these
measures by using them as a supplement to GAAP results.
- (2)
- Adjusted
net income is computed by eliminating the after-tax amounts related to the following from net income attributable to Huntsman Corporation or
Huntsman International, as appropriate:
77
Table of Contents
(a) acquisition
expenses and integration costs; (b) impact of certain foreign tax credit elections; (c) loss from discontinued operations; (d) discount amortization on
settlement financing; (e) gain on disposition of businesses/assets; (f) loss on early extinguishment of debt; (g) certain legal settlements and related expenses;
(h) amortization of pension and postretirement actuarial losses; and (i) restructuring, impairment and plant closing and transition costs. The income tax impacts, if any, of each
adjusting item represent a ratable allocation of the total difference between the unadjusted tax expense and the total adjusted tax expense, computed without consideration of any adjusting items using
a with and without approach. We do not adjust for changes in tax valuation allowances because we do not believe it provides more meaningful information than is provided under GAAP. Basic adjusted
income per share excludes dilution and is computed by dividing adjusted net income by the weighted average number of shares outstanding during the period. 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.
- (3)
- Includes
cost associated with the transition of our Textile Effects segment's production from Basel, Switzerland to a tolling facility. These transition
costs were included in cost of sales on our condensed consolidated statement of operations (unaudited).
Adjusted
net income and adjusted income per share amounts are presented solely as supplemental information.
Three Months Ended September 30, 2014 Compared with Three Months Ended September 30, 2013
For the three months ended September 30, 2014, net income attributable to Huntsman Corporation was $188 million on
revenues of $2,884 million, compared with net income attributable to Huntsman Corporation of $64 million on revenues of $2,842 million for the same period of 2013. For the three
months ended September 30, 2014, net income attributable to Huntsman International was $198 million on revenues of $2,884 million, compared with net income attributable to
Huntsman International of $68 million on revenues of $2,842 million for the same period of 2013. The increase of $124 million in net income attributable to Huntsman Corporation
and the increase of $130 million in net income attributable to Huntsman International was the result of the following items:
-
- Revenues for the three months ended September 30, 2014 increased by $42 million, or 1%, as compared with
the 2013 period. The increase was due principally to higher average selling prices in our Performance Products, Advanced Materials and Textile Effects segments, and higher sales volumes in our
Pigments segment. See "Segment Analysis" below.
-
- Our gross profit and the gross profit of Huntsman International for the three months ended September 30, 2014
increased by $8 million and $5 million, or 2% and 1%, respectively, as compared with the 2013 period. The increase resulted from higher gross margins in our Performance Products,
Advanced Materials and Textile Effects segments. See "Segment Analysis" below.
-
- Operating expenses for the three months ended September 30, 2014 increased by $2 million and
$3 million, respectively, or 1% each, as compared with the 2013 period, primarily related to an increase in legal settlement costs.
78
Table of Contents
-
- Restructuring, impairment and plant closing costs for the three months ended September 30, 2014 increased to
$39 million from $37 million in the 2013 period. For more information concerning restructuring activities, see "Note 6. Restructuring, Impairment and Plant Closing Costs" to our
condensed consolidated financial statements (unaudited).
-
- Our income tax expense decreased and the income tax expense of Huntsman International decreased by $121 million
and $131 million, respectively, as compared with the same period in 2013, primarily due to the benefit of utilizing U.S. foreign tax credits, which had been subject to a valuation allowance.
Excluding the impact of the U.S. foreign tax credits, our income tax expense decreased and the income tax expense of Huntsman International decreased by $27 million and $26 million,
respectively, as compared with the same period in 2013. For the three months ended September 30, 2014, excluding the impact of the benefit of our U.S. foreign tax credits, our effective tax
rate was 35%, which is lower than our effective tax rate of 53% for the three months ended September 30, 2013 primarily due to various valuation allowance releases in 2014 and because our
Textile Effects segment's restructuring charges in 2013 received nominal tax benefit. Our 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 concerning taxes, see "Note 16. Income Taxes" to our condensed consolidated
financial statements (unaudited).
79
Table of Contents
Segment Analysis
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months
ended
September 30, |
|
|
|
|
|
Percent
Change
Favorable
(Unfavorable) |
|
|
|
2014 |
|
2013 |
|
Revenues |
|
|
|
|
|
|
|
|
|
|
Polyurethanes |
|
$ |
1,321 |
|
$ |
1,306 |
|
|
1 |
% |
Performance Products |
|
|
762 |
|
|
779 |
|
|
(2 |
)% |
Advanced Materials |
|
|
310 |
|
|
309 |
|
|
|
|
Textile Effects |
|
|
221 |
|
|
198 |
|
|
12 |
% |
Pigments |
|
|
318 |
|
|
310 |
|
|
3 |
% |
Eliminations |
|
|
(48 |
) |
|
(60 |
) |
|
20 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
2,884 |
|
$ |
2,842 |
|
|
1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Huntsman Corporation |
|
|
|
|
|
|
|
|
|
|
Segment EBITDA(1) |
|
|
|
|
|
|
|
|
|
|
Polyurethanes |
|
$ |
162 |
|
$ |
203 |
|
|
(20 |
)% |
Performance Products |
|
|
123 |
|
|
106 |
|
|
16 |
% |
Advanced Materials |
|
|
51 |
|
|
33 |
|
|
55 |
% |
Textile Effects |
|
|
3 |
|
|
(18 |
) |
|
NM |
|
Pigments |
|
|
6 |
|
|
27 |
|
|
(78 |
)% |
Corporate and other |
|
|
(52 |
) |
|
(46 |
) |
|
(13 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtotal |
|
|
293 |
|
|
305 |
|
|
(4 |
)% |
Discontinued Operations |
|
|
|
|
|
(2 |
) |
|
NM |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
293 |
|
$ |
303 |
|
|
(3 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Huntsman International |
|
|
|
|
|
|
|
|
|
|
Segment EBITDA(1) |
|
|
|
|
|
|
|
|
|
|
Polyurethanes |
|
$ |
162 |
|
$ |
203 |
|
|
(20 |
)% |
Performance Products |
|
|
123 |
|
|
106 |
|
|
16 |
% |
Advanced Materials |
|
|
51 |
|
|
33 |
|
|
55 |
% |
Textile Effects |
|
|
3 |
|
|
(18 |
) |
|
NM |
|
Pigments |
|
|
6 |
|
|
27 |
|
|
(78 |
)% |
Corporate and other |
|
|
(53 |
) |
|
(46 |
) |
|
(15 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtotal |
|
|
292 |
|
|
305 |
|
|
(4 |
)% |
Discontinued Operations |
|
|
|
|
|
(2 |
) |
|
NM |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
292 |
|
$ |
303 |
|
|
(4 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- (1)
- For
more information, including reconciliation of segment EBITDA to net income attributable to Huntsman Corporation or Huntsman International, as
appropriate, see "Note 18. Operating Segment Information" to our condensed consolidated financial statements (unaudited).
80
Table of Contents
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
September 30, 2014 vs. 2013 |
|
|
|
Average Selling
Price(1) |
|
|
|
|
|
|
|
Local
Currency |
|
Foreign
Currency
Translation
Impact |
|
Sales Mix |
|
Sales
Volumes(2) |
|
Period-Over-Period Increase (Decrease) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Polyurethanes |
|
|
|
|
|
|
|
|
6 |
% |
|
(5 |
)% |
Performance Products |
|
|
5 |
% |
|
|
|
|
1 |
% |
|
(8 |
)% |
Advanced Materials |
|
|
4 |
% |
|
1 |
% |
|
3 |
% |
|
(8 |
)% |
Textile Effects |
|
|
17 |
% |
|
1 |
% |
|
3 |
% |
|
(9 |
)% |
Pigments |
|
|
(5 |
)% |
|
1 |
% |
|
1 |
% |
|
6 |
% |
Total Company |
|
|
3 |
% |
|
1 |
% |
|
|
|
|
(3 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
September 30, 2014 vs. June 30, 2014 |
|
|
|
Average Selling
Price(1) |
|
|
|
|
|
|
|
Local
Currency |
|
Foreign
Currency
Translation
Impact |
|
Sales Mix |
|
Sales
Volumes(2) |
|
Period-Over-Period Increase (Decrease) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Polyurethanes |
|
|
(2 |
)% |
|
|
|
|
7 |
% |
|
(4 |
)% |
Performance Products |
|
|
(1 |
)% |
|
|
|
|
(2 |
)% |
|
(6 |
)% |
Advanced Materials |
|
|
(1 |
)% |
|
|
|
|
1 |
% |
|
(4 |
)% |
Textile Effects |
|
|
1 |
% |
|
|
|
|
(1 |
)% |
|
(11 |
)% |
Pigments |
|
|
(1 |
)% |
|
(1 |
)% |
|
|
|
|
(4 |
)% |
Total Company |
|
|
|
|
|
|
|
|
2 |
% |
|
(5 |
)% |
- (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 three months ended September 30, 2014 compared to the same period
of 2013 was primarily due to improved MDI sales, partially offset by lower PO/MTBE sales volumes. MDI average selling prices increased in the Americas and European regions, partially offset by lower
component pricing in China. PO/MTBE average selling prices were essentially unchanged. PO/MTBE sales volumes decreased primarily as a result of an unplanned manufacturing disruption at our Port
Neches, Texas facility in the third quarter of 2014. The decrease in PO/MTBE sales volumes was partially offset by an increase in MDI sales volumes due to improved demand in the Americas and Asian
regions and across most major markets. The decrease in segment EBITDA was due to lower PO/MTBE earnings, partially offset by higher MDI earnings. During the three months ended September 30,
2014 and 2013, our Polyurethanes segment recorded restructuring, impairment and plant closing costs of $16 million and nil, respectively. For more information concerning restructuring
activities, see "Note 6. Restructuring, Impairment and Plant Closing Costs" to our condensed consolidated financial statements (unaudited).
81
Table of Contents
Performance Products
The decrease in revenues in our Performance Products segment for the three months ended September 30, 2014 compared to the same
period of 2013 was primarily due to lower sales volumes, partially offset by higher average selling prices. Sales volumes decreased primarily in connection with the restructuring of our European
surfactants business in the second quarter of 2014, partially offset by increased sales volumes in amines and maleic anhydride. Average selling prices increased in response to higher raw material
costs and continued strong market conditions for amines, maleic anhydride and specialty surfactants. The increase in segment EBITDA was primarily due to higher margins and lower restructuring charges,
which more than offset lower sales volumes. During the three months ended September 30, 2014 and 2013, our Performance Products segment recorded restructuring, impairment and plant closing
costs of $4 million and $13 million, respectively. For more information concerning restructuring activities, see "Note 6. Restructuring, Impairment and Plant Closing Costs" to our
condensed consolidated financial statements (unaudited).
Advanced Materials
Revenues in our Advanced Materials segment for the three months ended September 30, 2014 compared to the same period of 2013
were essentially unchanged. Average selling prices increased in all regions and across most markets primarily due to certain price increase initiatives and our focus on higher value markets. Sales
volumes decreased primarily due to our restructuring efforts. During the fourth quarter of 2013, we closed two of our base resins production units as we focus on higher value markets, such as
aerospace, transportation and industrial and coatings and construction. The increase in segment EBITDA was primarily due to higher margins and improved sales mix, partially offset by higher
manufacturing and selling, general and administrative costs, and higher restructuring, impairment and plant closing costs. During the three months ended September 30, 2014 and 2013, our
Advanced Materials segment recorded restructuring, impairment and plant closing costs of $5 million and $3 million, respectively. For more information concerning restructuring
activities, see "Note 6. Restructuring, Impairment and Plant Closing Costs" to our condensed consolidated financial statements (unaudited).
Textile Effects
The increase in revenues in our Textile Effects segment for the three months ended September 30, 2014 compared to the same
period of 2013 was primarily due to higher average selling prices, partially offset by lower sales volumes. Average selling prices increased primarily in response to higher raw material costs and
improved sales mix. Sales volumes decreased primarily due to the de-selection of lower value business. The increase in segment EBITDA was primarily due to higher margins and lower restructuring,
impairment and plant closing and transition costs, partially offset by higher selling, general and administrative costs. During the three months ended September 30, 2014 and 2013, our Textile
Effects segment recorded restructuring, impairment and plant closing and transition costs of $11 million and $24 million, respectively. For more information concerning restructuring
activities, see "Note 6. Restructuring, Impairment and Plant Closing Costs" to our condensed consolidated financial statements (unaudited).
Pigments
The increase in revenues in our Pigments segment for the three months ended September 30, 2014 compared to the same period of
2013 was primarily due to higher sales volumes, partially offset by lower average selling prices. Sales volumes increased primarily as a result of higher end-use demand, particularly in the
Asia-Pacific region. Average selling prices decreased primarily as a result of high industry inventory levels. The decrease in segment EBITDA was primarily
due to lower margins and higher acquisition expenses and integration costs, partially offset by higher sales volumes. During the
82
Table of Contents
three
months ended September 30, 2014 and 2013, our Pigments segment recorded acquisition expenses and integration costs of $6 million and $5 million, respectively. For more
information concerning acquisition expenses and integration costs, see "Note 1. GeneralRecent DevelopmentsRockwood Acquisition" to our condensed consolidated financial
statements (unaudited).
Corporate and other
Corporate and other 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, benzene sales and gains and losses on the
disposition of corporate assets. For the three months ended September 30, 2014, EBITDA from Corporate and other for Huntsman Corporation decreased by $6 million to a loss of
$52 million from a loss of $46 million for the same period in 2013. For the three months ended September 30, 2014, EBITDA from Corporate and other for Huntsman International
decreased by $7 million to a loss of $53 million from a loss of $46 million for the same period of 2013. The decrease in EBITDA from Corporate and other resulted primarily from an
increase in unallocated foreign currency exchange loss of $6 million ($6 million loss in 2014 compared to nil in 2013).
Discontinued Operations
The operating results of our former polymers, base chemicals and Australian styrenics businesses are classified as discontinued
operations, and, accordingly, the revenues of these businesses are excluded from revenues for all periods presented. The EBITDA of these former businesses are included in discontinued operations for
all periods presented. The loss from discontinued operations represents the operating results, legal costs, restructuring, impairment and plant closing costs and gain (loss) on disposal with respect
to our former businesses.
Nine Months Ended September 30, 2014 Compared with Nine Months Ended September 30, 2013
For the nine months ended September 30, 2014, net income attributable to Huntsman Corporation was $361 million on
revenues of $8,627 million, compared with net income attributable to Huntsman Corporation of $87 million on revenues of $8,374 million for the same period of 2013. For the nine
months ended September 30, 2014, net income attributable to Huntsman International was $375 million on revenues of $8,627 million, compared with net income attributable to
Huntsman International of $94 million on revenues of $8,374 million for the same period of 2013. The increase of $274 million in net income attributable to Huntsman Corporation
and the increase of $281 million in net income attributable to Huntsman International was the result of the following items:
-
- Revenues for the nine months ended September 30, 2014 increased by $253 million, or 3%, as compared with
the 2013 period. The increase was due principally to higher average selling prices in our Performance Products, Advanced Materials and Textile Effects segments and higher sales volumes in our
Polyurethanes, Performance Products and Pigments segments. See "Segment Analysis" below.
-
- Our gross profit and the gross profit of Huntsman International for the nine months ended September 30, 2014
increased by $163 million and $157 million, respectively, or 12% each, as compared with the 2013 period. The increase resulted from higher gross margins in our Performance Products,
Advanced Materials and Textile Effects segments. See "Segment Analysis" below.
-
- Operating expenses for the nine months ended September 30, 2014 increased by $3 million and
$4 million, respectively, or less than 1% each, as compared with the 2013 period, primarily related to higher acquisition and integration related costs and higher foreign currency losses,
partially offset by lower legal settlement costs.
83
Table of Contents
-
- Restructuring, impairment and plant closing costs for the nine months ended September 30, 2014 decreased to
$91 million from $110 million in the 2013 period. For more information concerning restructuring activities, see "Note 6. Restructuring, Impairment and Plant Closing Costs" to our
condensed consolidated financial statements (unaudited).
-
- Loss on early extinguishment of debt for the nine months ended September 30, 2014 decreased to nil from
$35 million in the 2013 period. The loss in the 2013 period resulted primarily from the repurchase of the remainder of our 5.50% senior notes due 2016. For more information, see "Note 7.
DebtDirect and Subsidiary DebtRedemption of Notes and Loss on Early Extinguishment of Debt" to our condensed consolidated financial statements (unaudited).
-
- Our income tax expense decreased and the income tax expense of Huntsman International decreased by $66 million and
$77 million, respectively, as compared with the same period in 2013, primarily due to the benefit of utilizing U.S. foreign tax credits, which had been subject to a valuation allowance.
Excluding the impact of the U.S. foreign tax credits, our income tax expense increased and the income tax expense of Huntsman International increased by $28 million, as compared with the same
period in 2013. For the nine months ended September 30, 2014, excluding the impact of the benefit of our U.S. foreign tax credits, our effective tax rate was 31%, which is lower than our
effective tax rate of 49% for the nine months ended September 30, 2013, primarily due to various valuation allowance releases in 2014 and because our Textile Effects segment's restructuring
charges in 2013 received nominal tax benefit. Our 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 concerning taxes, see "Note 16. Income Taxes" to our condensed consolidated financial statements (unaudited).
84
Table of Contents
Segment Analysis
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months
ended
September 30, |
|
|
|
|
|
Percent
Change
Favorable
(Unfavorable) |
|
|
|
2014 |
|
2013 |
|
Revenues |
|
|
|
|
|
|
|
|
|
|
Polyurethanes |
|
$ |
3,831 |
|
$ |
3,734 |
|
|
3 |
% |
Performance Products |
|
|
2,360 |
|
|
2,278 |
|
|
4 |
% |
Advanced Materials |
|
|
953 |
|
|
966 |
|
|
(1 |
)% |
Textile Effects |
|
|
693 |
|
|
602 |
|
|
15 |
% |
Pigments |
|
|
976 |
|
|
974 |
|
|
|
|
Eliminations |
|
|
(186 |
) |
|
(180 |
) |
|
(3 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
8,627 |
|
$ |
8,374 |
|
|
3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Huntsman Corporation Segment EBITDA(1) |
|
|
|
|
|
|
|
|
|
|
Polyurethanes |
|
$ |
506 |
|
$ |
533 |
|
|
(5 |
)% |
Performance Products |
|
|
332 |
|
|
260 |
|
|
28 |
% |
Advanced Materials |
|
|
142 |
|
|
60 |
|
|
137 |
% |
Textile Effects |
|
|
25 |
|
|
(54 |
) |
|
NM |
|
Pigments |
|
|
31 |
|
|
55 |
|
|
(44 |
)% |
Corporate and other |
|
|
(146 |
) |
|
(187 |
) |
|
22 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtotal |
|
|
890 |
|
|
667 |
|
|
33 |
% |
Discontinued Operations |
|
|
(9 |
) |
|
(3 |
) |
|
(200 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
881 |
|
$ |
664 |
|
|
33 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Huntsman International Segment EBITDA(1) |
|
|
|
|
|
|
|
|
|
|
Polyurethanes |
|
$ |
506 |
|
$ |
533 |
|
|
(5 |
)% |
Performance Products |
|
|
332 |
|
|
260 |
|
|
28 |
% |
Advanced Materials |
|
|
142 |
|
|
60 |
|
|
137 |
% |
Textile Effects |
|
|
25 |
|
|
(54 |
) |
|
NM |
|
Pigments |
|
|
31 |
|
|
55 |
|
|
(44 |
)% |
Corporate and other |
|
|
(148 |
) |
|
(187 |
) |
|
21 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtotal |
|
|
888 |
|
|
667 |
|
|
33 |
% |
Discontinued Operations |
|
|
(9 |
) |
|
(3 |
) |
|
(200 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
879 |
|
$ |
664 |
|
|
32 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- (1)
- For
more information, including reconciliation of segment EBITDA to net income attributable to Huntsman Corporation or Huntsman International, as
appropriate, see "Note 18. Operating Segment Information" to our condensed consolidated financial statements (unaudited).
85
Table of Contents
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended
September 30, 2014 vs. 2013 |
|
|
|
Average Selling Price(1) |
|
|
|
|
|
|
|
Local
Currency |
|
Foreign
Currency
Translation
Impact |
|
Sales Mix |
|
Sales
Volumes(2) |
|
Period-Over-Period Increase (Decrease) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Polyurethanes |
|
|
(1 |
)% |
|
|
|
|
3 |
% |
|
1 |
% |
Performance Products |
|
|
4 |
% |
|
|
|
|
(1 |
)% |
|
1 |
% |
Advanced Materials |
|
|
6 |
% |
|
|
|
|
5 |
% |
|
(12 |
)% |
Textile Effects |
|
|
17 |
% |
|
(1 |
)% |
|
2 |
% |
|
(3 |
)% |
Pigments |
|
|
(5 |
)% |
|
2 |
% |
|
|
|
|
3 |
% |
Total Company |
|
|
2 |
% |
|
|
|
|
(1 |
)% |
|
2 |
% |
- (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, 2014 compared to the same period
of 2013 was primarily due to higher
sales volumes and improved sales mix, partially offset by lower average selling prices. MDI sales volumes increased due to improved demand in the Americas and Asian regions and across most major
markets, partially offset by a decrease in PO/MTBE sales volumes primarily as a result of two manufacturing disruptions at our Port Neches, Texas facility in the second and third quarters of 2014.
PO/MTBE average selling prices decreased primarily due to less favorable market conditions. MDI average selling prices increased in the Americas and European regions, partially offset by lower
component pricing in China. The decrease in segment EBITDA was primarily due to lower PO/MTBE earnings, partially offset by higher MDI sales margins. During the nine months ended September 30,
2014 and 2013, our Polyurethanes segment recorded restructuring, impairment and plant closing costs of $18 million and $3 million, respectively. For more information concerning
restructuring activities, see "Note 6. Restructuring, Impairment and Plant Closing Costs" to our condensed consolidated financial statements (unaudited).
Performance Products
The increase in revenues in our Performance Products segment for the nine months ended September 30, 2014 compared to the same
period of 2013 was primarily due to higher average selling prices and slightly higher sales volumes. Average selling prices increased in response to higher raw material costs and continued strong
market conditions for amines, maleic anhydride and specialty surfactants. Sales volumes were up slightly primarily as a result of increased demand for amines and maleic anhydride, partially offset by
a decline in sales volumes of surfactants, which resulted primarily from the restructuring of our European surfactants business. The increase in segment EBITDA was primarily due to the impact of our
scheduled maintenance in the first quarter of 2013, estimated at $55 million, and increased margins in amines and maleic anhydride, partially offset by higher restructuring charges. During the
nine months ended September 30, 2014 and 2013, our Performance Products segment recorded restructuring, impairment and plant closing costs of $27 million and $17 million,
respectively. For more information concerning restructuring activities, see "Note 6. Restructuring, Impairment and Plant Closing Costs" to our condensed consolidated financial statements
(unaudited).
86
Table of Contents
Advanced Materials
The decrease in revenues in our Advanced Materials segment for the nine months ended September 30, 2014 compared to the same
period of 2013 was primarily due to lower sales volumes, partially offset by higher average selling prices and improved sales mix. Sales volumes
decreased primarily in our coatings and construction market due to our restructuring efforts, partially offset by higher demand in the wind market in the Americas and Asia Pacific regions. During the
fourth quarter of 2013, we closed two of our base resins production units as we focus on higher value markets, such as aerospace, transportation and industrial and coatings construction. During the
nine months ended September 30, 2014, we also experienced an unplanned production outage due to a raw materials supply disruption in the Americas. Average selling prices increased in all
regions and across most markets primarily due to certain price increase initiatives and a focus on higher value markets. The increase in segment EBITDA was primarily due to higher margins, improved
sales mix,lower restructuring, impairment and plant closing costs and lower selling, general and administrative costs as a result of recent restructuring efforts. During the nine months ended
September 30, 2014 and 2013, our Advanced Materials segment recorded restructuring, impairment and plant closing costs of $10 million and $30 million, respectively. For more
information concerning restructuring activities, see "Note 6. Restructuring, Impairment and Plant Closing Costs" to our condensed consolidated financial statements (unaudited).
Textile Effects
The increase in revenues in our Textile Effects segment for the nine months ended September 30, 2014 compared to the same period
of 2013 was primarily due to higher average selling prices, partially offset by lower sales volumes. Average selling prices increased primarily in response to higher raw material costs and improved
sales mix. Sales volumes decreased primarily due to the de-selection of lower value business. The increase in segment EBITDA was primarily due to higher margins, lower manufacturing costs and lower
restructuring, impairment and plant closing and transition costs, partially offset by higher selling, general and administrative costs. During the nine months ended September 30, 2014 and 2013,
our Textile Effects segment recorded restructuring, impairment and plant closing and transition costs of $25 million and $56 million, respectively. For more information concerning
restructuring activities, see "Note 6. Restructuring, Impairment and Plant Closing Costs" to our condensed consolidated financial statements (unaudited).
Pigments
The increase in revenues in our Pigments segment for the nine months ended September 30, 2014 compared to the same period of
2013 was primarily due to higher sales volumes, partially offset by lower average selling prices. Sales volumes increased primarily as a result of higher end-use demand, particularly in the European
and Asia-Pacific regions. Average selling prices decreased primarily as a result of high industry inventory levels, partially offset by the strength of the euro against the U.S. dollar. The decrease
in segment EBITDA was primarily due to lower margins and higher acquisition expenses and integration costs, partially offset by higher sales volumes and lower manufacturing and selling, general and
administrative costs. During the nine months ended September 30, 2014 and 2013, our Pigments segment recorded acquisition expenses and integration costs of $18 million and
$5 million, respectively. For more information concerning acquisition expenses and integration costs, see "Note 1. GeneralRecent DevelopmentsRockwood
Acquisition" to our condensed consolidated financial statements (unaudited). During the nine months ended September 30, 2014 and 2013, our Pigments segment recorded restructuring, impairment
and plant closing costs of $3 million each. For more information concerning restructuring activities, see "Note 6. Restructuring, Impairment and Plant Closing Costs" to our condensed
consolidated financial statements (unaudited).
87
Table of Contents
Corporate and other
Corporate and other 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, benzene sales and gains and losses on the
disposition of corporate assets. For the nine months ended September 30, 2014, EBITDA from Corporate and other for Huntsman Corporation increased by $41 million to a loss of
$146 million from a loss of $187 million for the same period in 2013. For the nine months ended September 30, 2014, EBITDA from Corporate and other for Huntsman International
increased by $39 million to a loss of $148 million from a loss of $187 million for the same period in 2013. The increase in EBITDA from Corporate and other resulted primarily from
a $16 million increase in income from benzene sales ($8 million gain in 2014 compared to $8 million loss in 2013), a decrease in legal settlements of $5 million (nil in
2014 compared to $5 million of expense in 2013) and a decrease in loss on early extinguishment of debt of $35 million (nil in 2014 compared to $35 million loss in 2013). For more
information concerning the loss on early extinguishment of debt, see "Note 7. DebtDirect and Subsidiary DebtRedemption of Notes and Loss on Early Extinguishment of
Debt" to our condensed consolidated financial statements (unaudited). The increase in EBITDA was partially offset by a $7 million increase in LIFO inventory valuation expense ($5 million
of expense in 2014 compared to $2 million of income in 2013) and an increase in unallocated foreign currency exchange loss of $5 million ($6 million loss in 2014 compared to
$1 million loss in 2013).
Discontinued Operations
The operating results of our former polymers, base chemicals and Australian styrenics businesses are classified as discontinued
operations, and, accordingly, the revenues of these businesses are excluded from revenues for all periods presented. The EBITDA of these former businesses are included in discontinued operations for
all periods presented. The loss from discontinued operations represents the operating results, legal costs, restructuring, impairment and plant closing costs and gain (loss) on disposal with respect
to our former businesses.
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
Net cash provided by operating activities for the nine months ended September 30, 2014 and 2013 was $343 million and
$388 million, respectively. The decrease in net cash provided by operating activities during the nine months ended September 30, 2014 compared with the same period in 2013 was primarily
attributable to a $227 million unfavorable variance in operating assets and liabilities for the nine months ended September 30, 2014 as compared with the same period of 2013, offset in
part by an increase in operating income as described in "Results of Operations" above.
Net
cash used in investing activities for the nine months ended September 30, 2014 and 2013 was $337 million and $388 million, respectively. During the nine months
ended September 30, 2014 and 2013, we paid $351 million and $295 million, respectively, for capital expenditures. During the nine months ended September 30, 2014 and 2013,
we made investments in Louisiana Pigment Company, L.P. of $25 million and $44 million, respectively, and in Nanjing Jinling Huntsman New Materials Co., Ltd of $12
and $25 million, respectively, and we received dividends from Louisiana Pigment Company, L.P.
88
Table of Contents
of
$38 million and $48 million, respectively. During the nine months ended September 30, 2014 and 2013, we paid nil and $66 million, respectively, for the acquisition of
businesses.
Net
cash provided by financing activities for the nine months ended September 30, 2014 and 2013 was $62 million and $12 million, respectively. The increase in net
cash provided by financing activities was primarily due to higher net borrowings during the 2014 period as compared to the 2013.
Changes in Financial Condition
The following information summarizes our working capital position (dollars in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30,
2014 |
|
December 31,
2013 |
|
Increase
(Decrease) |
|
Percent
Change |
|
Cash and cash equivalents |
|
$ |
582 |
|
$ |
520 |
|
$ |
62 |
|
|
12 |
% |
Restricted cash |
|
|
10 |
|
|
9 |
|
|
1 |
|
|
11 |
% |
Accounts and notes receivable, net |
|
|
1,676 |
|
|
1,575 |
|
|
101 |
|
|
6 |
% |
Inventories |
|
|
1,788 |
|
|
1,741 |
|
|
47 |
|
|
3 |
% |
Prepaid expenses |
|
|
91 |
|
|
61 |
|
|
30 |
|
|
49 |
% |
Deferred income taxes |
|
|
52 |
|
|
53 |
|
|
(1 |
) |
|
(2 |
)% |
Other current assets |
|
|
295 |
|
|
200 |
|
|
95 |
|
|
48 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets |
|
|
4,494 |
|
|
4,159 |
|
|
335 |
|
|
8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable |
|
|
1,176 |
|
|
1,113 |
|
|
63 |
|
|
6 |
% |
Accrued liabilities |
|
|
629 |
|
|
726 |
|
|
(97 |
) |
|
(13 |
)% |
Deferred income taxes |
|
|
43 |
|
|
43 |
|
|
|
|
|
|
|
Current portion of debt |
|
|
274 |
|
|
277 |
|
|
(3 |
) |
|
(1 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
2,122 |
|
|
2,159 |
|
|
(37 |
) |
|
(2 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Working capital |
|
$ |
2,372 |
|
$ |
2,000 |
|
$ |
372 |
|
|
19 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Our
working capital increased by $372 million as a result of the net impact of the following significant changes:
-
- The increase in cash and cash equivalents of $62 million resulted from the matters identified on our condensed
consolidated statements of cash flows (unaudited).
-
- Accounts and notes receivable increased by $101 million mainly due to higher sales in the third quarter of 2014
compared with the fourth quarter of 2013.
-
- Inventories increased by $47 million mainly due to higher inventory levels primarily in our Polyurethanes and
Performance Products segments resulting from the timing of a MTBE shipment occurring in early October 2014, anticipated scheduled maintenance outages at certain manufacturing facilities during the
first quarter of 2015 and higher raw material costs.
-
- Prepaid expenses increased by $30 million mainly due to increases in prepaid financing costs in connection with
financing the Rockwood Acquisition and prepaid insurance.
-
- Other current assets increased by $95 million mainly due to increases in income taxes receivable and the value of
cross-currency interest rate contracts.
-
- Accounts payable increased by $63 million mainly due to higher purchases to support the higher inventory balance.
-
- Accrued liabilities decreased by $97 million mainly due to decreases in accrued taxes other than income taxes of
$25 million, income taxes payable of $15 million, accrued rebates of $19 million and accrued restructuring, impairment and plant closing costs of $8 million.
89
Table of Contents
DIRECT AND SUBSIDIARY DEBT
Huntsman Corporation's direct debt and guarantee obligations consist of a guarantee of certain indebtedness incurred from time to time
to finance certain insurance premiums. Substantially all of our other 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 are designated as nonguarantor subsidiaries and have third-party debt agreements. These debt agreements 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.
Senior Credit Facilities
As of September 30, 2014, our Senior Credit Facilities consisted of our Revolving Facility, our Extended Term Loan B, our
Extended Term Loan BSeries 2 and our Term Loan C as follows (dollars in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Facility
|
|
Committed
Amount |
|
Principal
Outstanding |
|
Carrying
Value |
|
Interest Rate(3) |
|
Maturity |
|
Revolving Facility |
|
$ |
600 |
(1) |
$ |
|
(2) |
$ |
|
(2) |
USD LIBOR plus 2.50% |
|
|
2017 |
|
Extended Term Loan B |
|
|
NA |
|
|
952 |
|
|
952 |
|
USD LIBOR plus 2.50% |
|
|
2017 |
|
Extended Term Loan BSeries 2 |
|
|
NA |
|
|
339 |
|
|
339 |
|
USD LIBOR plus 2.75% |
|
|
2017 |
|
Term Loan C |
|
|
NA |
|
|
50 |
|
|
48 |
|
USD LIBOR plus 2.25% |
|
|
2016 |
|
- (1)
- On
October 1, 2014, Huntsman International entered into the thirteenth amendment to the Credit Agreement. The amendment increased revolving
commitments in an aggregate principal amount of $25 million.
- (2)
- We
had no borrowings outstanding under our Revolving Facility; we had approximately $17 million (U.S. dollar equivalents) of letters of credit and
bank guarantees issued and outstanding under our Revolving Facility.
- (3)
- The
applicable interest rate of the Senior Credit Facilities is subject to certain secured leverage ratio thresholds. As of September 30, 2014, the
weighted average interest rate on our outstanding balances under the Senior Credit Facilities was approximately 3%.
Our
obligations under the Senior Credit Facilities are guaranteed by our Guarantors, and are secured by a first priority lien on substantially all of our domestic property, plant and
equipment, the stock of all of our material domestic subsidiaries and certain foreign subsidiaries, and pledges of intercompany notes between certain of our subsidiaries.
Amendment to the Credit Agreement
On October 15, 2013, Huntsman International entered into a tenth amendment to the Credit Agreement. The amendment, among other
things, permits us to incur the New Term Loan and to increase our Revolving Facility. In August 2014, we entered into the eleventh and twelfth amendments, which modified the Credit Agreement to
initially fund the New Term Loan into escrow and completed the increase of our Revolving Facility of $200 million.
On
October 1, 2014, the New Term Loan was used to fund the Rockwood Acquisition. The New Term Loan matures on October 1, 2021 and will amortize in aggregate annual amounts
equal to 1% of the original principal amount of the New Term Loan, payable quarterly commencing March 31, 2015. The New Term Loan bears interest at an interest rate margin of LIBOR plus 3.00%
(subject to a
90
Table of Contents
0.75%
floor). The $1.2 billion New Term Loan will be recorded at a carrying value of $1,188 million as of October 1, 2014.
The
commitments associated with the increase of our Revolving Facility bear interest at the same rate as the existing Revolving Facility and will mature on the same date as the existing
facility.
Notes
As of September 30, 2014, we had outstanding the following notes (monetary amounts in millions):
|
|
|
|
|
|
|
|
Notes
|
|
Maturity |
|
Interest
Rate |
|
Amount Outstanding |
2020 Senior Notes |
|
November 2020 |
|
|
4.875 |
% |
$650 ($647 carrying value) |
2021 Senior Notes |
|
April 2021 |
|
|
5.125 |
% |
€445 (€450 carrying value ($572)) |
Senior Subordinated Notes |
|
March 2020 |
|
|
8.625 |
% |
$350 |
Senior Subordinated Notes |
|
March 2021 |
|
|
8.625 |
% |
$530 ($540 carrying value) |
On
June 2, 2014, pursuant to an indenture entered into on December 23, 2013, Huntsman International issued €145 million (approximately
$197 million) aggregate principal amount of additional 2021 Senior Notes. The additional notes are recorded at carrying value €150 million (approximately
$190 million) as of September 30, 2014.
The
2021 Senior Notes bear interest at the rate of 5.125% per year payable semi-annually on April 15 and October 15 of each year and are due on April 15, 2021.
Huntsman International may redeem the 2021 Senior Notes in whole or in part at any time prior to January 15, 2021 at a price equal to 100% of the principal amount thereof plus a "make-whole"
premium and accrued and unpaid interest.
The
2021 Senior Notes and 2020 Senior Notes are general unsecured senior obligations of Huntsman International and are guaranteed on a general unsecured senior basis by the Guarantors.
The indentures impose certain limitations on the ability of Huntsman International and its subsidiaries to, among other things, incur additional indebtedness secured by any principal properties, incur
indebtedness of nonguarantor subsidiaries, enter into sale and leaseback transactions with respect to any principal properties and consolidate or merge with or into any other person or lease, sell or
transfer all or substantially all of its properties and assets. Upon the occurrence of certain change of
control events, holders of the 2021 Senior Notes and 2020 Senior Notes will have the right to require that Huntsman International purchase all or a portion of such holder's notes in cash at a purchase
price equal to 101% of the principal amount thereof plus accrued and unpaid interest to the date of repurchase.
Redemption of Notes and Loss on Early Extinguishment of Debt
We did not redeem or repurchase any of our notes during the nine months ended September 30, 2014. During the nine months ended
September 30, 2013, we redeemed or repurchased the following notes (monetary amounts in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
Date of Redemption
|
|
Notes |
|
Principal Amount of
Notes Redeemed |
|
Amount Paid
(Excluding Accrued
Interest) |
|
Loss on Early
Extinguishment
of Debt |
|
March 4, 2013 |
|
5.50% Senior Notes due 2016 |
|
$ |
200 |
|
$ |
200 |
|
$ |
34 |
|
91
Table of Contents
Variable Interest Entity Debt
As of September 30, 2014, Arabian Amines Company, our consolidated 50%-owned joint venture, had $163 million outstanding
under its loan commitments and debt financing arrangements. Arabian Amines Company is currently not in compliance with certain financial covenants under its loan commitments. We do not guarantee these
loan commitments, and Arabian Amines Company is not a guarantor of any of our other debt obligations. Arabian Amines Company's noncompliance with its financial covenants does not affect any of our
debt obligations. While the lenders under the loan commitments have agreed to certain modifications, we continue discussions with Arabian Amines Company's lenders and expect to resolve the
noncompliance. As of September 30, 2014, the amounts outstanding under these loan commitments were classified as current in our condensed consolidated balance sheets (unaudited).
Note Payable from Huntsman International to Huntsman Corporation
As of September 30, 2014, we have a loan of $807 million to our subsidiary, Huntsman International. The Intercompany Note
is unsecured and $100 million of the outstanding amount is classified as current as of September 30, 2014 on our condensed consolidated balance sheets (unaudited). As of
September 30, 2014, under the terms of the Intercompany Note, Huntsman International promises to pay us interest on the unpaid principal amount at a rate per annum based on the previous monthly
average borrowing rate obtained under our U.S. A/R Program, less 10 basis points (provided that the rate shall not exceed an amount that is 25 basis points less than the monthly average borrowing rate
obtained for the U.S. LIBOR-based borrowings under our Revolving Facility).
COMPLIANCE WITH COVENANTS
We believe that we are in compliance with the covenants contained in the agreements governing our material debt instruments, including
our Senior Credit Facilities, our A/R Programs and our notes. However, Arabian Amines Company, our consolidated 50%-owned joint venture, is currently not in compliance with certain financial covenants
contained under its loan commitments. See "Variable Interest Entity Debt" above.
Our
material financing arrangements contain certain covenants with which we must comply. A failure to comply with a covenant could result in a default under a financing arrangement
unless we obtained an appropriate waiver or forbearance (as to which we can provide no assurance). A default under these material financing arrangements generally allows debt holders the option to
declare the underlying debt obligations immediately due and payable. Furthermore, certain of our material financing arrangements contain cross-default and cross-acceleration provisions under which a
failure to comply with the covenants in one financing arrangement may result in an event of default under another financing arrangement.
Our
Senior Credit Facilities are subject to the Leverage Covenant which applies only to the Revolving Facility and is calculated at the Huntsman International level. The Leverage
Covenant is applicable only if borrowings, letters of credit or guarantees are outstanding under the Revolving Facility (cash collateralized letters of credit or guarantees are not deemed
outstanding). The Leverage Covenant is a net senior secured leverage ratio covenant which requires that Huntsman International's ratio of senior secured debt to EBITDA (as defined in the applicable
agreement) is not more than 3.75 to 1.
If
in the future Huntsman International fails to comply with the Leverage Covenant, then we may not have access to liquidity under our Revolving Facility. If Huntsman International
failed to comply with the Leverage Covenant at a time when we had uncollateralized loans or letters of credit outstanding
under the Revolving Facility, Huntsman International would be in default under the Senior Credit Facilities, and, unless Huntsman International obtained a waiver or forbearance with respect to
92
Table of Contents
such
default (as to which we can provide no assurance), Huntsman International could be required to pay off the balance of the Senior Credit Facilities in full, and we may not have further access to
such facilities.
The
agreements governing our A/R Programs also contain certain receivable performance metrics. Any material failure to meet the applicable A/R Programs' metrics in the future could lead
to an early termination event under the A/R Programs, which could require us to cease our use of such facilities, prohibiting us from additional borrowings against our receivables or, at the
discretion of the lenders, requiring that we repay the A/R Programs in full. An early termination event under the A/R Programs would also constitute an event of default under our Senior Credit
Facilities, which could require us to pay off the balance of the Senior Credit Facilities in full and could result in the loss of our Senior Credit Facilities.
SHORT-TERM AND LONG-TERM LIQUIDITY
We depend upon our cash, credit facilities, A/R Programs and other debt instruments to provide liquidity for our operations and working
capital needs. As of September 30, 2014, we had $1,365 million of combined cash and unused borrowing capacity, consisting of $592 million in cash and restricted cash, $583 million
in availability under our Revolving Facility, and $190 million in availability under our A/R Programs. Our liquidity can be significantly impacted by various factors. The following matters had,
or are expected to have, a significant impact on our liquidity:
-
- Cash invested in our accounts receivable and inventory, net of accounts payable, increased by approximately
$142 million for the nine months ended September 30, 2014, as reflected in our condensed consolidated statements of cash flows (unaudited). We expect volatility in our working capital
components to continue.
-
- During 2014, we expect to spend approximately $550 million on capital expenditures, net of reimbursements, and
including approximately $50 million for the acquired Rockwood businesses, including the Augusta, Georgia facility. Our future expenditures include certain EHS maintenance and upgrades; periodic
maintenance and repairs applicable to major units of manufacturing facilities; expansions of our existing facilities or construction of new facilities; certain cost reduction projects; and certain
information technology expenditures. We expect to fund this spending with cash provided by operations.
-
- During the nine months ended September 30, 2014, we made contributions to our pension and postretirement benefit
plans of $113 million. During 2014, we expect to contribute an additional amount of approximately $30 million to these plans.
-
- We are also involved in a number of cost reduction programs for which we have established restructuring accruals. As of
September 30, 2014, we had $102 million of accrued restructuring costs from continuing operations, and we expect to incur and pay additional restructuring and plant closing costs of up
to approximately $39 million.
-
- During the nine months ended September 30, 2014, after extensive analysis, we filed amended U.S. tax returns for
tax years 2008 thought 2012, along with our original U.S. tax return for tax year 2013, which allowed us to utilize substantially all of our U.S. foreign tax credits. As a result of utilizing these
assets, we realized reductions in our cash taxes paid of $25 million for the nine months ended September 30, 2014 and expect to realize an additional $42 million reduction in
future cash taxes paid.
-
- On October 1, 2014, Huntsman completed the Rockwood Acquisition for a purchase price of $1.04 billion in
cash, subject to certain purchase price adjustments. See "Note 1. Recent DevelopmentsRockwood Acquisition" to our condensed consolidated financial statements (unaudited). The
transaction was financed by a $1.2 billion New Term Loan under our existing
93
Table of Contents
As
of September 30, 2014, we had $274 million classified as current portion of debt, including debt at our variable interest entities of $176 million, a borrowing
facility and short term debt in China for Huntsman Polyurethanes Shanghai Ltd. (our consolidated splitting joint venture with Shanghai Chlor-Alkali Chemical Company, Ltd)
totaling $38 million, our scheduled Senior Credit Facilities amortization payments totaling $14 million, our annual financing of various insurance premiums totaling $23 million,
and certain other short-term facilities and scheduled amortization payments totaling $23 million. Although we cannot provide assurances, we intend to renew or extend the majority of these
short-term facilities in the current period.
As
of September 30, 2014, we had approximately $323 million of cash and cash equivalents, including restricted cash held by our foreign subsidiaries, including our variable
interest entities. Additionally, we have material intercompany debt obligations owed to us by our non-U.S. subsidiaries. We intend to use cash held in our foreign subsidiaries to fund our local
operations. Nevertheless, we could repatriate cash as dividends or as repayments of intercompany debt. If foreign cash were repatriated as dividends, the dividends could be subject to U.S. federal and
state income taxes without any offsetting foreign tax credit relief. At present, we estimate that we will generate sufficient cash in our U.S. operations, together with the payments of intercompany
debt, if necessary, to meet our cash needs in the U.S and we do not expect to repatriate cash to the U.S. as dividends. Cash held by certain foreign subsidiaries, including our variable interest
entities, may also be subject to legal restrictions, including those arising from the interests of our partners, which could limit the amounts available for repatriation.
RESTRUCTURING, IMPAIRMENT AND PLANT CLOSING COSTS
Our Polyurethanes, Performance Products, Advanced Materials and Textile Effects segments are involved in cost reduction programs that
are expected to reduce costs in these businesses by approximately $240 million. These cost savings are expected to be achieved through the beginning of 2015. For further discussion of these
plans and the costs involved, see "Note 6. Restructuring, Impairment and Plant Closing Costs" to our condensed consolidated financial statements (unaudited).
LEGAL PROCEEDINGS
For a discussion of legal proceedings, see "Note 13. Commitments and ContingenciesLegal Matters" and
"Note 14. Environmental, Health and Safety Matters" to our condensed consolidated financial statements (unaudited).
ENVIRONMENTAL, HEALTH AND SAFETY MATTERS
For a discussion of environmental, health and safety matters, see "Note 14. Environmental, Health and Safety Matters" to our
condensed consolidated financial statements (unaudited).
94
Table of Contents
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
For a discussion of recently issued accounting pronouncements, see "Note 2. Recently Issued Accounting Pronouncements" to our
condensed consolidated financial statements (unaudited).
CRITICAL ACCOUNTING POLICIES
Our critical accounting policies are presented in Management's Discussion and Analysis of Financial Condition and Results of Operations
included in our Annual Report on Form 10-K for the year ended December 31, 2013.
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 pricing risks. From time to
time, we enter into transactions, including transactions involving derivative instruments, to manage certain of these exposures.
All
derivatives, whether designated in hedging relationships or not, are recorded on our balance sheet at fair value. If the derivative is designated as a fair value hedge, the changes
in the fair value of the derivative and the hedged items are recognized in earnings. If the derivative is designated as a cash flow hedge, changes in the fair value of the derivative are recorded in
accumulated other comprehensive loss, to the extent effective, and will be recognized in the income statement when the hedged item affects earnings. To the extent applicable, we perform effectiveness
assessments in order to use hedge accounting at each reporting period. For a derivative that does not qualify as a hedge, changes in fair value are recognized in earnings.
We
also hedge our net investment in certain European operations. Changes in the fair value of the hedge in the net investment of certain European operations are recorded in accumulated
other comprehensive loss.
Our
cash flows and earnings are subject to fluctuations due to exchange rate variation. Our revenues and expenses are denominated in various foreign currencies. 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 one 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, 2014, we had approximately $175 million in notional amount (in U.S. dollar equivalents) outstanding in
forward foreign currency contracts.
On
December 9, 2009, we entered into a five-year interest rate contract to hedge the variability caused by monthly changes in cash flow due to associated changes in LIBOR under
our Senior Credit Facilities. The notional value of the contract is $50 million, and it has been designated as a cash flow hedge. The effective portion of the changes in the fair value of the
swap was recorded in other comprehensive loss. We will pay a fixed 2.6% on the hedge and receive the one-month LIBOR rate. As of September 30, 2014, the fair value of the hedge was less than
$1 million and was recorded in current liabilities on our condensed consolidated balance sheets (unaudited).
On
January 19, 2010, we entered into an additional five-year interest rate contract to hedge the variability caused by monthly changes in cash flow due to associated changes in
LIBOR under our Senior Credit Facilities. The notional value of the contract is $50 million, and it has been designated as a cash flow hedge. The effective portion of the changes in the fair
value of the swap was recorded as other comprehensive loss. We will pay a fixed 2.8% on the hedge and receive the one-month LIBOR
95
Table of Contents
rate.
As of September 30, 2014, the fair value of the hedge was less than $1million and was recorded in current liabilities on our condensed consolidated balance sheets (unaudited).
On
September 1, 2011, we entered into a $50 million forward interest rate contract that will begin in December 2014 with maturity in April 2017 and a $50 million
forward interest rate contract that will begin in January 2015 with maturity in April 2017. These two forward contracts are to hedge the variability caused by monthly changes in cash flow due to
associated changes in LIBOR under our Senior Credit Facilities once our existing interest rate hedges mature. These swaps are designated as cash flow hedges and the effective portion of the changes in
the fair value of the swaps were recorded in other comprehensive income. Both interest rate contracts will pay a fixed 2.5% on the hedge and receive the one-month LIBOR rate once the contracts begin
in 2014 and 2015, respectively. As of September 30, 2014, the combined fair value of these two hedges was $3 million and was recorded in other noncurrent liabilities on our condensed
consolidated balance sheets (unaudited).
In
2009, Sasol-Huntsman entered into derivative transactions to hedge the variable interest rate associated with its local credit facility. These derivative rate hedges include a
floating to fixed interest rate contract providing Sasol-Huntsman with EURIBOR interest payments for a fixed payment of 3.62% and a cap for future periods with a strike price of 3.62%. In connection
with the consolidation of Sasol-Huntsman as of April 1, 2011, the interest rate contract is now included in our consolidated results. See "Note 5. Variable Interest Entities." The
notional amount of the fixed rate contracts as of September 30, 2014 was €12 million (approximately $15 million) and the notional amount of caps as of
September 30, 2014 was €22 million (approximately $28 million) and the derivative transactions do not qualify for hedge accounting. As of September 30,
2014, the fair value of the hedges was less than €1 million (less than approximately $1 million) and was recorded in other noncurrent liabilities on our condensed
consolidated balance sheets (unaudited). For the three and nine months ended September 30, 2014, we recorded a reduction of interest expense of nil and €1 million
(approximately nil and $1 million), respectively, due to changes in the fair value of the hedges.
Beginning
in 2009, Arabian Amines Company entered into a 12-year floating to fixed interest rate contract providing for a receipt of LIBOR interest payments for a fixed payment of 5.02%.
In connection with the consolidation of Arabian Amines Company as of July 1, 2010, the interest rate contract is now included in our consolidated results. See "Note 5. Variable Interest
Entities." The notional amount of the swap as of September 30, 2014 was $28 million, and the interest rate contract is not designated as a cash flow hedge. As of September 30,
2014, the fair value of the swap was $3 million and was recorded in current liabilities on our condensed consolidated balance sheets (unaudited). For the three and nine months ended
September 30, 2014, we recorded additional (reduction of) interest expense of nil and ($1) million, respectively, due to changes in fair value of the swap. As of September 30, 2014,
Arabian Amines Company was not in compliance with certain financial covenants under its loan commitments. For more information, see "Note 7. DebtDirect and Subsidiary
DebtVariable Interest Entity Debt."
In
conjunction with the issuance of our 8.625% senior subordinated notes due 2020, we entered into cross-currency interest rate contracts with three counterparties. On March 17,
2010, we made payments of $350 million to these counterparties and received €255 million from these counterparties, and on maturity (March 15, 2015) we are
required to pay €255 million to these counterparties and will receive $350 million from these counterparties. On March 15 and September 15 of each year, we
will receive U.S. dollar interest payments of approximately $15 million (equivalent to an annual rate of 8.625%) and make interest payments of approximately €11 million
(equivalent to an annual rate of approximately 8.41%). This swap is designated as a hedge of net investment for financial reporting purposes. As of September 30, 2014, the fair value of this
swap was $30 million and was recorded in current assets on our condensed consolidated balance sheets (unaudited).
96
Table of Contents
We
finance certain of our non-U.S. subsidiaries with intercompany loans that are, in many cases, denominated in currencies other than the entities' functional currency. We manage the net
foreign currency exposure created by this debt through various means, including cross-currency swaps, the designation of certain intercompany loans as permanent loans because they are not expected to
be repaid in the foreseeable future and the designation of certain debt and swaps as net investment hedges.
Foreign
currency transaction gains and losses on intercompany loans that are not designated as permanent loans are recorded in earnings. Foreign currency transaction gains and losses on
intercompany loans that are designated as permanent loans are recorded in other comprehensive income. From time to time, we review such designation of intercompany loans.
We
review our non-U.S. dollar denominated debt and derivative instruments to determine the appropriate amounts designated as hedges. As of September 30, 2014, we have designated
approximately €575 million (approximately $731 million) of euro-denominated debt and cross-currency interest rate contracts as a hedge of our net investment. For the three and
nine months ended September 30, 2014, the amount of gain recognized on the hedge of our net investment was $56 million and $62 million, respectively, and was recorded in other
comprehensive income on our condensed consolidated statements of comprehensive income (unaudited). As of September 30, 2014, we had approximately €967 million
(approximately $1,229 million) in net euro assets.
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, 2014. Based on this evaluation, our chief executive
officer and chief financial officer have concluded that, as of September 30, 2014, 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, 2014 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. Ineffective internal
controls over financial reporting could cause investors to lose confidence in our reported financial information and could result in a lower trading price for our securities.
97
Table of Contents
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Star Lake Canal CERCLA site in Port Neches, TX involves a discharge point for manufacturing facilities owned by us and several
other local chemical manufacturers. The EPA issued a draft Consent Decree related to cleanup at this site to us and a prior owner in September 2014. The prior owner has an indemnification obligation
and has accepted defense of this matter. As of September 30, 2014, we had an accrued liability of approximately $18 million relating to this matter and a corresponding receivable of
approximately $18 million relating to our indemnity protection.
ITEM 1A. RISK FACTORS
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, 2013.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
ISSUER PURCHASES OF EQUITY SECURITIES
The following table provides information with respect to shares of restricted stock granted under our Stock Incentive Plan that we
withheld upon vesting to satisfy our tax withholding obligations during the three months ended September 30, 2014.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period
|
|
Total
Number of
Shares
Purchased |
|
Average
Price Paid
per Share |
|
Total Number of
Shares Purchased
as Part of Publicly
Announced
Plans or Programs |
|
Maximum Number
(or Approximate
Dollar Value) of
Shares that May Yet Be
Purchased Under the
Plans or Programs |
|
July |
|
|
|
|
$ |
|
|
|
|
|
|
|
|
August |
|
|
780 |
|
|
26.99 |
|
|
|
|
|
|
|
September |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
780 |
|
$ |
26.99 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ITEM 6. EXHIBITS
|
|
|
|
|
2.1 |
|
Amendment No. 2 to Stock Purchase Agreement dated as of July 24, 2014 by and between Rockwood Specialties Group, Inc. and Huntsman International LLC (incorporated by reference to Exhibit 10.2 to
our quarterly report on Form 10-Q filed on July 30, 2014) |
|
2.2 |
* |
Amendment No. 3 to Stock Purchase Agreement dated as of September 30, 2014 by and between Rockwood Specialties Group, Inc. and Huntsman International LLC |
|
10.1 |
|
Eleventh Amendment, dated as of August 12, 2014, to Credit Agreement, dated as of August 16, 2005, among Huntsman International LLC, the lenders from time to time party thereto, and JPMorgan Chase Bank,
N.A., as administrative agent (incorporated by reference to Exhibit 10.1 to our current report on Form 8-K filed on August 15, 2014) |
|
10.2 |
|
Twelfth Amendment, dated as of August 13, 2014, to Credit Agreement, dated as of August 16, 2005, among Huntsman International LLC, the lenders from time to time party thereto, and JPMorgan Chase Bank,
N.A., as administrative agent (incorporated by reference to Exhibit 10.1 to our current report on Form 8-K filed on August 15, 2014) |
98
Table of Contents
|
|
|
|
|
10.3 |
|
Thirteenth Amendment to Credit Agreement, dated as of October 1, 2014, among Huntsman International LLC, the subsidiary guarantors party thereto, the lenders from time to time party thereto, and JPMorgan Chase
Bank, N.A., as administrative agent (incorporated by reference to Exhibit 10.1 to our current report on Form 8-K filed on October 7, 2014) |
|
31.1 |
|
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
|
31.2 |
|
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
|
32.1 |
|
Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
|
32.2 |
|
Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
|
101.INS |
|
XBRL Instance Document |
|
101.SCH |
|
XBRL Taxonomy Extension Schema |
|
101.CAL |
|
XBRL Taxonomy Extension Calculation Linkbase |
|
101.LAB |
|
XBRL Taxonomy Extension Label Linkbase |
|
101.PRE |
|
XBRL Taxonomy Extension Presentation Linkbase |
|
101.DEF |
|
XBRL Taxonomy Extension Definition Linkbase |
99
Table of Contents
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: October 27, 2014 |
|
HUNTSMAN CORPORATION
HUNTSMAN INTERNATIONAL LLC |
|
|
By: |
|
/s/ J. KIMO ESPLIN
J. Kimo Esplin Executive Vice President and Chief Financial
Officer (Principal Financial Officer) |
|
|
By: |
|
/s/ RANDY W. WRIGHT
Randy W. Wright Vice President and Controller (Authorized
Signatory and Principal Accounting Officer) |
100
Table of Contents
EXHIBIT INDEX
|
|
|
|
|
2.1 |
|
Amendment No. 2 to Stock Purchase Agreement dated as of July 24, 2014 by and between Rockwood Specialties Group, Inc. and Huntsman International LLC (incorporated by reference to Exhibit 10.2 to
our quarterly report on Form 10-Q filed on July 30, 2014) |
|
2.2 |
* |
Amendment No. 3 to Stock Purchase Agreement dated as of September 30, 2014 by and between Rockwood Specialties Group, Inc. and Huntsman International LLC |
|
10.1 |
|
Eleventh Amendment, dated as of August 12, 2014, to Credit Agreement, dated as of August 16, 2005, among Huntsman International LLC, the lenders from time to time party thereto, and JPMorgan Chase Bank,
N.A., as administrative agent (incorporated by reference to Exhibit 10.1 to our current report on Form 8-K filed on August 15, 2014) |
|
10.2 |
|
Twelfth Amendment, dated as of August 13, 2014, to Credit Agreement, dated as of August 16, 2005, among Huntsman International LLC, the lenders from time to time party thereto, and JPMorgan Chase Bank,
N.A., as administrative agent (incorporated by reference to Exhibit 10.1 to our current report on Form 8-K filed on August 15, 2014) |
|
10.3 |
|
Thirteenth Amendment to Credit Agreement, dated as of October 1, 2014, among Huntsman International LLC, the subsidiary guarantors party thereto, the lenders from time to time party thereto, and JPMorgan
Chase Bank, N.A., as administrative agent (incorporated by reference to Exhibit 10.1 to our current report on Form 8-K filed on October 7, 2014) |
|
31.1 |
|
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
|
31.2 |
|
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
|
32.1 |
|
Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
|
32.2 |
|
Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
|
101.INS |
|
XBRL Instance Document |
|
101.SCH |
|
XBRL Taxonomy Extension Schema |
|
101.CAL |
|
XBRL Taxonomy Extension Calculation Linkbase |
|
101.LAB |
|
XBRL Taxonomy Extension Label Linkbase |
|
101.PRE |
|
XBRL Taxonomy Extension Presentation Linkbase |
|
101.DEF |
|
XBRL Taxonomy Extension Definition Linkbase |
- *
- Filed
herewith. The schedules to Amendment No. 3 to Stock Purchase Agreement have been omitted pursuant to Item 601(b)(2) of
Regulation S-K. The Registrant will furnish a supplemental copy of the schedule to the Securities and Exchange Commission upon request.
Exhibit 2.2
EXECUTION VERSION
AMENDMENT NO. 3 TO STOCK PURCHASE AGREEMENT
AND WAIVER AGREEMENT
Amendment No. 3 to the Stock Purchase Agreement and Waiver Agreement (this Amendment), dated as of September 30, 2014, to the Stock Purchase Agreement, dated as of September 17, 2013, as amended by the Amendment to the Stock Purchase Agreement dated as of March 20, 2014 and the Amendment No. 2 to the Stock Purchase Agreement dated July 24, 2014 (the Stock Purchase Agreement), between Rockwood Specialties Group, Inc., a Delaware corporation (Parent), and Huntsman International LLC, a Delaware limited liability company (Buyer and, together with Parent, the Parties).
RECITALS
WHEREAS, capitalized terms used but not defined herein shall have the meanings assigned thereto in the Stock Purchase Agreement; and
WHEREAS, the Parties desire to amend and waive certain sections of the Stock Purchase Agreement.
NOW, THEREFORE, the Parties agree as follows:
SECTION 1. Section 1.3. Section 1.3 is amended by replacing its last sentence in its entirety as follows:
The Closing shall be deemed to be effective between the parties as of 12:01 a.m. (Eastern Time) on the Closing Date, except to the extent a Local Transfer Agreement provides for a different effective time for the transactions contemplated such Local Transfer Agreement.
SECTION 2. Section 1.4(a).
(a) Section 1.4(a)(v) and (ix) are amended by, in each case, adding a copy of before the words a counterpart (Ausfertigung).
(b) Sections 1.4(a)(vi), 1.4(a)(vii), 1.4(a)(xii), 1.4(a)(xiii), 1.4(a)(xx)(B) and 1.4(a)(xxvii) are amended by replacing them in their entirety as follows:
(vi) (A) share certificates representing all of the Shares of the Italian Company, duly endorsed before an Italian notary public in the name of Buyer, in proper form for transfer of such Shares from Parent to Buyer, and evidence of the recording of such transfer in the share register of the Italian Company, (B) an executed version of a notarial quota transfer agreement effecting the transfer of all the Shares in Nuodex Italiana from KL 2 to Buyer, together with evidence that the other quotaholders in Nuodex Italiana have waived their preemptive rights related to such Shares and have consented to the transfer of such Shares and with any other consent or waiver required to perfect the transfer of full ownership title to such Shares to Buyer, as well as the quotaholders book, if any, updated in respect of the sale and purchase of such Shares by
Buyer from KL 2, and (C) on the Closing Date, but after payment of the Estimated Purchase Price, (1) a copy of the share register of the Italian Company evidencing the recording of the transfer in such share register, and (2) a copy of the quotaholders book of Nuodex Italiana, if any, updated in respect of the sale and purchase of the Shares in Nuodex Italiana by Buyer from KL 2;
(vii) (A) share certificates representing all of the Shares of Holliday Chemical España duly endorsed by KL 2 in favor of Buyer; and (B) on the Closing Date, but after payment of the Estimated Purchase Price, a copy of the shares registry book (libro registro de acciones nominativas) of Holliday Chemical España updated in respect of the sale and purchase of all of such Shares;
(xii) the written resignations of each director and officer of the Transferred Companies as set forth in Schedule 1.4(a)(xii) of the Disclosure Letter, such resignations to take effect either before the Closing or subject to and as of the Closing Date, as the case may be;
(xiii) the written resignations of all supervisory board members of the Transferred Companies set forth on Schedule 1.4(a)(xiii) of the Disclosure Letter, such resignations to take effect either before the Closing or subject to and as of the Closing, as the case may be;
(xx)(B) adopted by RSGG and Parent as sole shareholders of Rockwood Specialties GmbH approving the sale and transfer of all of the Shares held by Rockwood Specialties GmbH pursuant to the terms of this Agreement and the execution and delivery of the Ancillary Documents to be executed and delivered by Rockwood Specialties GmbH and the performance by Rockwood Specialties GmbH of its obligations thereunder;
(xxvii) the Lease Agreements, duly executed by Parent or its Affiliates (other than a Transferred Company), as landlord, and the applicable Transferred Company designated by Buyer, as tenant;
(c) Section 1.4(a) is amended by adding the following new clause (xxix):
(xxix) the Put Option Agreement in the form attached as Exhibit E (the Put Option Agreement), duly executed by Parent.
SECTION 3. Section 1.4(b)(v). Section 1.4(b) is amended by deleting clause (v) thereof in its entirety and adding a new clause (v) as follows:
(v) the Put Option Agreement, duly executed by Buyer.
SECTION 4. Section 4.6(b). Section 4.6(b) is amended by adding the words use commercially reasonable efforts after the words Buyer shall.
SECTION 5. Section 4.10. Section 4.10 is amended by adding and Agency Agreements after the words other than the Business Agreements and by adding the following second sentence:
2
Parent shall not terminate the Agency Agreement before the earlier of the date (i) that all of the Remote Employees covered by such Agency Agreement have accepted their offers from Buyer or one of its Affiliates and (ii) that is 30 days following the Closing Date. Buyer shall hold harmless and indemnify Parent and its Affiliates from any payment made by Parent and its Affiliates pursuant to the Agency Agreement after the Closing and prior to their termination.
SECTION 6. Section 4.11(b)(ii). Section 4.11(b)(ii) is amended by, in each case, deleting the word Intercompany.
SECTION 7. Section 4.19. Section 4.19 is amended by replacing the second sentence thereof in its entirety with the following sentence:
For the avoidance of doubt, following the Closing, Parent and its Affiliates shall (a) retain all rights to control their insurance policies and programs, including the right to exhaust, settle, release, commute, buy back or otherwise resolve disputes with respect to any of its insurance policies and programs, notwithstanding whether any such policies or programs apply to any liabilities of Buyer or the Transferred Companies; and (b) solely with respect to matters for which Parent is required to indemnify Buyer pursuant to this Agreement (without regard to any Threshold Amount, Basket Amount or Environmental Deductible), at Buyers sole cost and expense, use commercially reasonable efforts to pursue claims that have been notified by Parent or its Affiliates (including a Transferred Company) prior to Closing under their insurance policies and programs in respect to any claims or Proceedings with respect to product safety, defects, deficiencies, negligence or liability with respect to any products manufactured, produced, distributed or sold by the Business or any services performed by the Business prior to the Closing and turn over to Buyer any insurance proceeds received by Parent or Parents Affiliates under their insurance policies and programs in respect of such claims or Proceedings, in each case, net of (i) any fees and expenses incurred by Parent or its Affiliates (including, prior to Closing, the Transferred Companies) in pursuing such claims which have not previously been reimbursed by Buyer, (ii) any deductibles applicable to any such claims and (iii) any increase in insurance premiums payable by Parent or its Affiliates as a result of the pursuit of such claims; provided, however, that if Buyer desires to initiate a Proceeding in respect of any such claim, Parent and its Affiliates, as applicable, shall either (A) assign such claim to Buyer or (B) if Parent and its Affiliates are unable to assign such claim pursuant to the applicable insurance policy or program, initiate and pursue Proceeding for such claim on behalf of Buyer, at Buyers direction and sole cost and expense, with counsel reasonably acceptable to Parent and Buyer; provided, further, that except as set forth in clause (B) of the preceding provision, Parent and its Affiliates shall not be required to initiate Proceedings for claims against issuers of such insurance policies and programs.
SECTION 8. Section 4.22(b). The second sentence of Section 4.22(b) is amended by replacing the words audited consolidated balance sheets with the words audited combined balance sheets.
SECTION 9. Section 4.29. Section 4.29 is amended by replacing the words Parent and Buyer shall enter into lease agreements with the words Parent and the Transferred Companies designated by Buyer shall enter into lease agreements.
3
SECTION 10. Sections 4.31 and 4.32. New Sections 4.31 and 4.32 shall be inserted at the end of Article IV as follows:
4.31 Shenzhen Put Option Agreement. Effective as of the Closing, Parent and Buyer shall enter into the Put Option Agreement.
4.32. Rockwood Italia Lithium Patent. In the event that Rockwood Italia S.p.A. (Rockwood Italia) has not completed the transfer of its European patent with the Application no. 09752748.5 2111 and the Patent no. 2349925 to Rockwood Lithium GmbH or an Affiliate thereof (other than a Transferred Company) prior to the Closing, following the Closing Date, upon the reasonable request of Parent and at Parents sole cost and expense, Buyer shall reasonably cooperate, and shall cause Rockwood Italia to reasonably cooperate, with Parent to cause such transfer to occur as promptly as reasonably practicable following the Closing Date, including to execute and deliver or cause to be executed and delivered such instruments as may be reasonably required to complete such transfer.
SECTION 11. Section 8.2.
(a) Clause (k) of Section 8.2 is hereby amended by deleting the word and at the end of such clause.
(b) Clause (l) of Section 8.2 is hereby amended by deleting the period at the end of such clause and replacing it with ; and.
(c) Section 8.2 is hereby amended by inserting a new clause (m) following clause (l) of Section 8.2 as follows:
(m) the Proceeding in the Civil Court of Turin with EOS Italia s.rl. (EOS) related to the Put Option between Rockwood Italia S.p.A. and EOS related to RockLife s.r.l. and any other Proceedings related to the foregoing.
SECTION 12. Section 8.3.
(a) Clause (c) of Section 8.3 is hereby amended by deleting the word and at the end of such clause.
(b) Clause (d) of Section 8.3 is hereby amended by deleting the period at the end of such clause and replacing it with ;.
(c) Section 8.3 is hereby amended by inserting new clauses (e) and (f) as follows:
(e) (i) the first $500,000 of any insurance co-pay payable by Rockwood Italia S.p.A. or other Transferred Companies related to the irradiation of Parents Sicovit and Feroxide products prior to the Closing Date and (ii) the first $4.0 million of Losses arising out of Third-Party Claims for product liability against Rockwood Italia S.p.A. or other Transferred Companies related the matter described in the foregoing clause (i) and not covered by insurance of Rockwood Italia S.p.A. or other Transferred Companies; and
4
(f) any Losses of Parent or its Affiliates in connection with insolvency or bankruptcy proceedings of, and relating to, any dividend paid by, the withdrawal of cash from, or the repayment of shareholder loans by, as applicable, Silo Pigmente GmbH, Rockwood Pigmente Holding GmbH, Sachtleben Wasserchemie Holding GmbH, Sachtleben Wasserchemie GmbH, Sachtleben Chemie GmbH and Sachtleben Pigments Oy, in each case, between September 23, 2014 and the Closing Date; provided that Buyers liability pursuant to this Section 8.3(f) shall be limited to (i) the amount by which the line item for each such Transferred Company shown on Annex 2 of the Estimated Closing Statement delivered by Parent to Buyer on September 23, 2014 exceeds the corresponding line item shown on Annex 2 of the Estimated Closing Statement delivered by Parent to Buyer on September 29, 2014 and (ii) Parents reasonable defense costs and expenses incurred in connection with such insolvency or bankruptcy proceeding (including reasonable investigatory fees and expenses and fees and disbursements of counsel).
SECTION 13. Section 8.4. Section 8.4(e) is hereby amended by replacing the words 1.0% of the Base Purchase Price with the words 1.2% of the Base Purchase Price.
SECTION 14. Section 9.5(a). Section 9.5(a) is amended by replacing it in its entirety as follows:
(a) Buyer shall, effective as of the Closing, provide the Sachtleben Pigments Oy Pension Fund with a contribution, letter of credit or guarantee in an amount sufficient to cover any underfunding of the Sachtleben Pigments Oy Pension Fund (Sachtleben Pigments Oy:n Eläkesäätiö) as of the Closing Date and. Buyer shall use its reasonable best efforts to obtain the release of HSBC Bank USA, N.A. from the Standby Letter of Credit, dated March 19, 2013 issued by HSBC Bank USA, N.A. in favor of the Sachtleben Pigments Oy Pension Fund (the HSBC Letter of Credit) as promptly as practicable (and in no event no later than by October 31, 2014). Buyer shall hold harmless and indemnify Parent and its Affiliates from any payment made by Parent and its Affiliates pursuant to the HSBC Letter of Credit after the Closing and prior to the release thereof. Buyer shall reimburse Parent for one-half of the fees and expenses incurred by Parent or its Affiliates (including any interest payable by Parent or its Affiliates in connection with the HSBC Letter of Credit) in connection with maintaining the HSBC Letter of Credit after the Closing and prior to the release thereof.
SECTION 15. Section 10.1. Section 10.1 is hereby amended by inserting the following new second sentence:
Notwithstanding the foregoing, Buyer and Parent shall share equally the fees and expenses incurred in connection with notarizations and similar form requirements required by applicable Legal Requirements for the Local Transfer Agreements.
SECTION 16. Exhibit A.
(a) The following definition is added to Exhibit A:
5
Agency Agreement shall mean the Agency Agreement made and entered into between Sachtleben Chemie GmbH, and Chemetall S.A., a corporation duly organized and existing under the laws of Spain, dated as of December 31, 2009.
(b) The definition of Augusta Sites is amended by replacing it in its entirety as follows:
Augusta Sites shall mean the real property located at (i) 7011 Muirkirk Road, Beltsville, Maryland 20705 (including parcel on Conway Road); (ii) each of Bommensaal, Martinstraße 1, Marktstraße 1, Schulstraße and Müuhlstrasse 118, 65396 Walluf, Hessen, Germany, land register Oberwalluf folio 749; (iii) Oberwallufer Schlag, Walkenberg, Mühlstraße 47, land register Niederwalluf folio no. 1666, (iv) Auf der Rinn, Martinsthal, land register Martinsthal folio no. 1043; (v) 555 East Church Road, King of Prussia, Pennsylvania 19406; (vi) each of 303 E. Hoffmeister, 311 E. Hoffmeister, and 351 E. Hoffmeister, St. Louis, Missouri 63125; (vi) 9620 Perrin Avenue, 9634 Perrin Avenue, 9636 Perrin Avenue, 9704 Perrin Avenue, and 9708 Perrin Avenue, St. Louis Missouri 63125; (vii) 407 E. Arlee Avenue and 411 E. Arlee Avenue, St. Louis Missouri 63125; (viii) 9726 Adair Avenue, St. Louis Missouri 63125; and (ix) 74 Swisher Drive, Cartersville, Georgia 30120.
(c) The definition of Financing Information is amended by deleting the word and before the words (ii) unaudited combined balance sheets and by inserting the words and (iii) unaudited combined balance sheet of the Business as of June 30, 2014 and unaudited combined statements of income and cash flows of the Business for the six month periods ended June 30, 2014 and June 30, 2013, in each case, prepared on a basis of accounting consistent with the 2012 Carve-Out Financial Statements, except that such financial statements are subject to normal and recurring year-end audit adjustments (the effect of which would not be material); before the words and (b) customary due diligence.
(c) The definition of Long-Term Sites is amended by replacing it in its entirety as follows:
Long-Term Sites shall mean the real property located at 1525 Wood Avenue, Easton, Pennsylvania 18045.
(d) The definition of Retained Companies is amended by replacing it in its entirety as follows:
Retained Companies shall mean Southern Color N.A., Inc. and Excalibur Realty Company.
(e) The definition of Working Capital is amended by adding a new sentence at the end thereof as follows:
For the avoidance of doubt, in determining Working Capital, any payable up to EUR700,000 plus any VAT payable thereon under that certain Turnkey Construction
6
Agreement (Accordo di Costruzione Chiavi in Mano) between Rockwood Italia S.P.A. and Soimar S.R.L. dated May 9, 2014 shall be disregarded.
SECTION 17. Exhibit E. A new Exhibit E in the form of Exhibit E attached hereto shall be attached to the Stock Purchase Agreement.
SECTION 18. Schedules.
(a) Schedule 2.1 is amended by adding 32. Excalibur Realty UK Limited, a limited liability company incorporated under the laws of England and Wales at the end of the section Transferred Companies.
(b) Schedule 2.2 is amended by adding the following at the end of the section Transferred Companies.
Entity: Excalibur Realty UK Limited
Number of Authorized and Issued and Outstanding Shares or Ownership Interests: One Ordinary Share of £1
Holder of Equity Interests at Closing: Rockwood Specialties Limited
(c) Schedule 2.9(a) is amended by adding the following at the end of the section 3. UK:
Owner: Excalibur Realty UK Limited
Address: Liverpool Road East, Kidsgrove, Stoke-on Trent S77 3AA, United Kingdom
Land Registry Title Number: SF245761
Owner: Excalibur Realty UK Limited
Address: Longshank Lane, Birtley, United Kingdom
Land Registry Title Number: TY276218
(d) Schedule 2.11(h)(i) is amended by replacing it in its entirety with the Schedule 2.11(h)(i) attached hereto.
(e) Schedule 8.4(f) is amended by replacing it in its entirety with the Schedule 8.4(f) attached hereto.
(f) Schedule A-2 is amended by deleting and the transfer of Excalibur Realty UK Limited below from item No. 1 in the section Retained Companies/Leased Sites/Assets and by deleting the section Transfer of Excalibur Realty UK Limited in its entirety.
7
(g) Schedule A-4 is amended by deleting the following from the Leased Property section:
Shenzhen, China West Zhongshanyuan Road, Nanshan District, Shenzhen City, China, real property certificate no. Shen Fang Di Zi No. 4000353607
Birtley, UK Longshank Lane, Birtley, United Kingdom
Kidsgrove, UK Liverpool Road East, Kidsgrove, Stoke-on Trent S77 3AA
and is further amended by replacing the Term section in its entirety as follows:
Term: |
· Beltsville, MD 3 years, with one 4-year renewal term, exercisable by Buyer
· Walluf, GER 3 years, with one 4-year renewal term, exercisable by Buyer
· St. Louis, MO 3 years, with one 4-year renewal term, exercisable by Buyer
· Hainhausen, GER 3 years, with one 4-year renewal term, exercisable by Buyer
· Valdosta, GA 3 years, with one 4 year renewal term, exercisable by Buyer
· East St. Louis, MO 3 years, with one 4-year renewal term, exercisable by Buyer
· Easton, PA 5 years, with one 5-year renewal term, exercisable by Buyer
· Cartersville, GA 3 years, with one 4-year renewal term, exercisable by Buyer.
· King of Prussia, PA 3 years, with one 4-year renewal term, exercisable by Buyer
Notwithstanding the foregoing, Tenant shall have the option to terminate any lease prior to the termination date upon 90 days written notice to Parent. |
SECTION 19. Waivers.
(a) Notwithstanding the fact that the Closing Date will occur more than forty-five (45) days after June 30, 2014, Buyer hereby irrevocably and unconditionally waives Parents
8
obligation set forth in Section 4.22(a)(iii) of the Stock Purchase Agreement to use its commercially reasonable efforts to deliver unaudited combined balance sheets and related statements of income and cash flows of the Business for the fiscal quarter ended June 30, 2014.
(b) Buyer hereby irrevocably and unconditionally waives and releases, on its own behalf and on behalf of each of its Affiliates (including the Transferred Companies) and its and their respective successors and assigns, any claims of any nature whatsoever in law and in equity or arising out of fraud, both past and present, and whether known or unknown, based upon, resulting from or arising out of:
(i) the inaccuracy or breach of Parents representations, warranties or covenants contained in Stock Purchase Agreement or otherwise, including any claim Buyer or any of its Affiliates (including the Transferred Companies) may have for fraud or willful misconduct due to (i) the falsified accounting records at Rockwood Italia S.p.A.s Turin facility as set forth in Parent Guarantors quarterly and annual reports filed with the Securities and Exchange Commission following the date of the Stock Purchase Agreement and prior to the date of this Amendment or disclosed in writing to David Stryker, John Heskett, Troy Keller or Sean Pettey prior to the date of this Amendment, or (ii) the restatement of Parent Guarantors financial statements as a result of the foregoing as set forth in such quarterly or annual reports, (the Turin Financial Statement Matters);
(ii) the termination of former employees of Rockwood Italia S.p.A. as part of Rockwood Italia S.p.A.s internal investigation of the Turin Financial Statement Matters; and
(iii) any failure by Parent to obtain Buyers consent prior to entering into that certain Turnkey Construction Agreement (Accordo di Costruzione Chiavi in Mano) between Rockwood Italia S.P.A. and Soimar S.R.L. dated May 9, 2014 up to an amount of Losses equal to EUR700,000 plus any VAT payable thereon.
SECTION 20. Ongoing Monitoring. From and after the Closing Date, Buyer shall cause Sachtleben Chemie GmbH to continue to perform the ongoing maintenance and monitoring services for the Metalon Landfills (as defined below) provided as of the Closing Date (the Landfill Services) in the same manner and to the same extent as had been conducted in the twelve months prior to the Closing Date, other than any such additional or enhanced measures required by applicable Law or caused by a deterioration of the condition of the Metalon Landfills; provided that such additional or enhanced measures do not result in a materially greater cost to Buyer. Buyer shall provide the Landfill Services for an annual fee of EUR10,000, which amount represents one-half of the costs allocated by Sachtleben Chemie GmbH to perform ongoing maintenance and monitoring of all of the landfills at its facility in Duisburg, Germany, provided that the parties shall re-evaluate and, if necessary, adjust the annual fee payable every 5 years if such fee no longer reflects the costs of Sachleben Chemie GmbH to provide the Landfill Services. Parent shall indemnify, defend and hold harmless the Buyer Indemnitees from and against any and all Losses sustained by any Buyer Indemnitee in connection with any claim related to the Landfill Services or arising out of any Third Party Claim arising out of Buyers or its Affiliates provision of Landfill Services pursuant to this Section 20; provided, however, that Parent shall not be required to indemnify any Buyer Indemnitee against any Loss to the extent
9
such Loss results from the gross negligence, bad faith or willful misconduct of Buyer, such Buyer Indemnitee or any other Person involved at Buyers behest in the provision of the Landfill Services to Parent or the breach by Buyer or any of its Affiliates of its obligations under this Section 20. Buyer shall indemnify, defend and hold harmless the Parent Indemnitees from and against any and all Losses sustained by any Parent Indemnitee in connection with any claim arising out of the gross negligence, bad faith or willful misconduct of Buyer or its Affiliates in the performance by Buyer or its Affiliates of the Landfill Services. The Parties agree that the indemnity set forth in this Section 20 shall be the exclusive remedy of the Parties with respect to any claims (other than claims arising from fraud) a Party may have against the other Party or such other Partys Affiliates arising out of the Landfill Services. For purposes of this Section 20, Metalon Landfills shall mean the landfills located at Sachtleben Chemie GmbHs facility in Duisburg, Germany transferred by Sachtleben Chemie GmbH to Metalon Environmental Management and Solutions GmbH prior to the Closing Date.
SECTION 21. Effect of Amendment. Except as expressly set forth herein, this Amendment shall not alter, modify, amend or in any way affect any of the terms, conditions, obligations, covenants or agreements contained in the Stock Purchase Agreement or any Ancillary Documents, all of which are ratified and affirmed in all respects and shall continue in full force and effect. Following the date of this Amendment, (a) all references to the Stock Purchase Agreement in the Stock Purchase Agreement or in any Ancillary Document shall be deemed to be the Stock Purchase Agreement, as amended by this Amendment, and (b) each reference to hereof, hereunder and herein and each other similar reference and each reference to this Agreement and each other similar reference contained in the Stock Purchase Agreement shall refer to the Stock Purchase Agreement, as amended by this Amendment.
SECTION 22. Counterparts. This Amendment may be executed in any number of counterparts with the same effect as if all Parties had signed the same document. All counterparts shall be construed together and shall constitute one and the same instrument. Execution and delivery of this Amendment by exchange of facsimile or other electronically transmitted counterparts (such as pdf) bearing the signature of a Party shall be equally as effective as delivery of a manually executed counterpart by such Party.
SECTION 23. Miscellaneous. The Parties hereby agree that the provisions of Article X of the Stock Purchase Agreement shall apply mutatis mutandis to the execution and delivery of, the interpretation and construction of, and the performance of the Parties respective obligations under, this Amendment.
10
IN WITNESS WHEREOF, the Parties have caused this Amendment to be duly executed as of the day and year first above written.
|
ROCKWOOD SPECIALTIES GROUP, INC. |
|
|
|
|
|
By: |
/s/ Michael W. Valente |
|
Name: |
Michael W. Valente |
|
Title: |
Vice President, General Counsel and Assistant Secretary |
[Amendment No. 3 to Stock Purchase Agreement and Waiver Agreement]
|
HUNTSMAN INTERNATIONAL LLC |
|
|
|
|
|
By: |
/s/ John R. Heskett |
|
Name: |
John R. Heskett |
|
Title: |
Vice President, Planning and Treasurer |
[Amendment No. 3 to Stock Purchase Agreement and Waiver Agreement]
Exhibit 31.1
CERTIFICATION PURSUANT TO EXCHANGE ACT RULES 13A-14(A) and 15D- 14(A),
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Peter R. Huntsman, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Huntsman Corporation and Huntsman International LLC;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrants as of, and for, the periods presented in this report;
4. The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrants and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrants, including their consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and
5. The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors or board of managers, as applicable (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting.
Date: October 27, 2014
|
/s/ PETER R. HUNTSMAN |
|
Peter R. Huntsman
Chief Executive Officer |
Exhibit 31.2
CERTIFICATION PURSUANT TO EXCHANGE ACT RULES 13A-14(A) and 15D- 14(A),
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, J. Kimo Esplin, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Huntsman Corporation and Huntsman International LLC;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrants as of, and for, the periods presented in this report;
4. The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrants and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrants, including their consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and
5. The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors or board of managers, as applicable (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting.
Date: October 27, 2014
|
/s/ J. KIMO ESPLIN |
|
J. Kimo Esplin
Chief Financial Officer |
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report on Form 10-Q of Huntsman Corporation and Huntsman International LLC (the Companies) for the period ended September 30, 2014 as filed with the Securities and Exchange Commission on the date hereof (the Report), I, Peter R. Huntsman, Chief Executive Officer of the Companies, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Companies.
/s/ PETER R. HUNTSMAN |
|
Peter R. Huntsman
Chief Executive Officer
October 27, 2014 |
|
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report on Form 10-Q of Huntsman Corporation and Huntsman International LLC (the Companies) for the period ended September 30, 2014 as filed with the Securities and Exchange Commission on the date hereof (the Report), I, J. Kimo Esplin, Chief Financial Officer of the Companies, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Companies.
/s/ J. KIMO ESPLIN |
|
J. Kimo Esplin
Chief Financial Officer
October 27, 2014 |
|
Huntsman (NYSE:HUN)
Historical Stock Chart
From Feb 2024 to Mar 2024
Huntsman (NYSE:HUN)
Historical Stock Chart
From Mar 2023 to Mar 2024