Huntsman Announces First Quarter 2019 Earnings; Stable Downstream Margins

2018

Revenues

$2,034

$2,295

Net income

$   131

$   350

Adjusted net income⁽¹⁾

$   108

$   237

Diluted income per share

$  0.51

$  1.11

Adjusted diluted income per share⁽¹⁾

$  0.46

$  0.96

Adjusted EBITDA⁽¹⁾

$   257

$   405

Net cash (used in) provided by operating activities from continuing operations

$   (31)

$   111

Free cash flow⁽²⁾

$  (101)

$     56

See end of press release for footnote explanations

Participant dial-in numbers:

Domestic callers:                   

(877) 402-8037

International callers:               

(201) 378-4913

Table 1 – Results of Operations

Three months ended

March 31,

In millions, except per share amounts

2019

2018

Revenues

$2,034

$2,295

Cost of goods sold

1,637

1,755

Gross profit

397

540

Operating expenses

251

242

Restructuring, impairment and plant closing costs

1

2

Operating income

145

296

Interest expense

(30)

(27)

Equity in income of investment in unconsolidated affiliates

10

13

Fair value adjustments to Venator investment

76

-

Loss on early extinguishment of debt

(23)

-

Other income, net

4

7

Income before income taxes

289

Income tax expense

(52)

(53)

Income from continuing operations

130

236

Income from discontinued operations, net of tax⁽³⁾

1

114

Net income

131

350

Net income attributable to noncontrolling interests, net of tax

(12)

(76)

Net income attributable to Huntsman Corporation

$   274

Adjusted EBITDA⁽¹⁾

$   257

$   405

Adjusted net income⁽¹⁾

$   108

$   237

Basic income per share

$  0.51

$  1.14

Diluted income per share

$  0.51

$  1.11

Adjusted diluted income per share⁽¹⁾

$  0.46

$  0.96

Common share information:

Basic weighted average shares

233

241

Diluted weighted average shares

235

246

Diluted shares for adjusted diluted income per share

235

246

See end of press release for footnote explanations

Table 2 – Results of Operations by Segment

Three months ended

March 31,

Better /

In millions

2019

2018

(Worse)

Segment Revenues:

Polyurethanes

$1,067

$1,222

Performance Products

540

603

(10%)

Advanced Materials

272

279

(3%)

Textile Effects

189

200

(6%)

Corporate and eliminations

(9)

n/m

Total

$2,034

$2,295

(11%)

Segment Adjusted EBITDA⁽¹⁾:

Polyurethanes

$   140

$   261

(46%)

Performance Products

80

102

(22%)

Advanced Materials

53

59

(10%)

Textile Effects

22

26

(15%)

Corporate, LIFO and other

(43)

12%

Total

$   257

$   405

(37%)

n/m = not meaningful

See end of press release for footnote explanations

Table 3 – Factors Impacting Sales Revenue

Three months ended

March 31, 2019 vs. 2018

Average Selling Price^(a)

Local

Exchange

Sales Mix

Sales

Currency

Rate

& Other

Volume^(b)

Total

Polyurethanes

(13%)

(3%)

1%

2%

(13%)

Performance Products

(5%)

(2%)

4%

(7%)

(10%)

Advanced Materials

3%

(5%)

2%

(3%)

(3%)

Textile Effects

12%

(5%)

0%

(13%)

(6%)

Total Company

(6%)

(3%)

5%

(7%)

(11%)

(a) Excludes sales from tolling arrangements, by-products and raw materials.

(b) Excludes sales from by-products and raw materials.

Table 4 – Reconciliation of U.S. GAAP to Non-GAAP Measures

 Income Tax 

 Diluted Income 

 EBITDA 

(Expense) Benefit

 Net Income 

 Per Share 

Three months ended

Three months ended

Three months ended

Three months ended

March 31,

March 31,

March 31,

March 31,

In millions, except per share amounts

2019

2018

2019

2018

2019

2018

2019

2018

Net income

$    131

$    350

$    131

$    350

$   0.56

$   1.42

Net income attributable to noncontrolling interests

(12)

(76)

(12)

(76)

(0.05)

(0.31)

Net income attributable to Huntsman Corporation

119

274

119

274

0.51

1.11

Interest expense from continuing operations

30

27

Interest expense from discontinued operations⁽³⁾

-

9

Income tax expense from continuing operations

52

53

$     (52)

$     (53)

Income tax (benefit) expense from discontinued operations⁽³⁾

(2)

20

Depreciation and amortization from continuing operations

90

82

Acquisition and integration expenses and purchase accounting adjustments

1

1

-

-

1

1

-

-

EBITDA / Loss (income) from discontinued operations, net of tax⁽³⁾

1

(143)

 N/A 

 N/A 

(1)

(114)

-

(0.46)

Noncontrolling interest of discontinued operations⁽¹⁾⁽³⁾

-

55

 N/A 

 N/A 

-

55

-

0.22

Fair value adjustments to Venator Investment ^(a)

(76)

-

-

-

(76)

-

(0.32)

-

Loss on early extinguishment of debt

23

-

(5)

-

18

-

0.08

-

Certain legal settlements and related expenses

-

7

-

(1)

-

6

-

0.02

Amortization of pension and postretirement actuarial losses

18

17

(4)

(4)

14

13

0.06

0.05

Impact of Switzerland income tax rate change

-

-

32

-

32

-

0.14

-

Restructuring, impairment and plant closing and transition costs 

1

3

-

(1)

1

2

-

0.01

Adjusted⁽¹⁾

$    257

$    405

$     (29)

$     (59)

$    108

$    237

$   0.46

$   0.96

Adjusted income tax expense⁽¹⁾

$      29

$      59

Net income attributable to noncontrolling interests, net of tax

12

76

Noncontrolling interest of discontinued operations⁽¹⁾⁽³⁾

-

(55)

Adjusted pre-tax income⁽¹⁾

$    149

$    317

Adjusted effective tax rate⁽⁴⁾

19%

19%

Effective tax rate

29%

18%

(a) Represents the changes in market value in Huntsman's remaining interesting in Venator.

See end of press release for footnote explanations

Table 5 – Selected Balance Sheet Items

March 31,

December 31,

In millions

2019

2018

Cash

$      444

$            340

Accounts and notes receivable, net

1,286

1,272

Inventories

1,228

1,134

Other current assets

178

212

Property, plant and equipment, net

3,055

3,064

Other noncurrent assets

2,449

1,931

Total assets

$         7,953

Accounts payable

$      911

$            961

Other current liabilities

531

554

Current portion of debt

276

96

Long-term debt

2,323

2,224

Other noncurrent liabilities

1,736

1,369

Huntsman Corporation stockholders' equity

2,620

2,520

Noncontrolling interests in subsidiaries

243

229

Total liabilities and equity

$    8,640

$         7,953

Table 6 – Outstanding Debt

March 31,

December 31,

In millions

2019

2018

Debt:

Revolving credit facility

$      235

$              50

Accounts receivable programs

276

252

Senior notes

1,969

1,892

Variable interest entities

85

86

Other debt

34

40

Total debt - excluding affiliates

2,599

2,320

Total cash

444

340

Net debt - excluding affiliates⁽⁵⁾

$    2,155

$         1,980

Table 7 – Summarized Statement of Cash Flows

Three months ended

March 31,

In millions

2019

2018

Total cash at beginning of period^(a)

$  340

$ 719

Net cash (used in) provided by operating activities - continuing operations

(31)

111

Net cash provided by operating activities - discontinued operations⁽³⁾

-

52

Net cash used in investing activities - continuing operations

(54)

(69)

Net cash used in investing activities - discontinued operations⁽³⁾

-

(67)

Net cash provided by (used in) financing activities

183

(86)

Effect of exchange rate changes on cash

6

16

Total cash at end of period^(a)

$  444

$ 676

Supplemental cash flow information - continuing operations:

Cash paid for interest

$   (26)

$  (12)

Cash paid for income taxes

(14)

(26)

Cash paid for capital expenditures

(70)

(55)

Depreciation and amortization

90

82

-

Changes in primary working capital:

Accounts and notes receivable

(13)

(104)

Inventories

(90)

(105)

Accounts payable

(35)

36

Total cash used in primary working capital

$ (138)

$ (173)

Free cash flow⁽²⁾:

Net cash (used in) provided by operating activities

$   (31)

$  111

Capital expenditures

(70)

(55)

Total free cash flow 

$ (101)

$   56

Adjusted EBITDA

$  257

$  405

Capital expenditures

(70)

(55)

Capital reimbursements

4

1

Interest

(26)

(12)

Income taxes

(14)

(26)

Primary working capital change

(138)

(173)

Restructuring

(9)

-

Pensions

(29)

(31)

Maintenance & other

(76)

(53)

Total free cash flow⁽²⁾ 

$ (101)

$   56

(a) Includes restricted cash and cash held in discontinued operations until the Deconsolidation of Venator.

(1)

We use adjusted EBITDA to measure the operating performance of our business and for planning and evaluating the performance of our business segments.  We provide adjusted net income because we feel it provides meaningful insight for the investment community into the performance of our business.  We believe that net income (loss) is the performance measure calculated and presented in accordance with generally accepted accounting principles in the U.S. ("GAAP") that is most directly comparable to adjusted EBITDA and adjusted net income (loss).  Additional information with respect to our use of each of these financial measures follows:

Adjusted EBITDA, adjusted net income (loss) and adjusted diluted income (loss) per share, as used herein, are not necessarily comparable to other similarly titled measures of other companies.

Adjusted EBITDA is computed by eliminating the following from net income (loss):  (a) net income attributable to noncontrolling interests, net of tax; (b) interest; (c) income taxes; (d) depreciation and amortization (e) amortization of pension and postretirement actuarial losses (gains); (f) restructuring, impairment and plant closing costs (credits); and further adjusted for certain other items set forth in reconciliation of adjusted EBITDA to net income (loss) in Table 4 above. 

Adjusted net income (loss) and adjusted diluted income (loss) per share are computed by eliminating the after tax impact of the following items from net income (loss): (a) net income attributable to noncontrolling interest; (b) amortization of pension and postretirement actuarial losses (gains); (c) restructuring, impairment and plant closing costs (credits); and further adjusted for certain other items set forth in reconciliation of adjusted EBITDA to net income (loss) in Table 4 above.  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 provide reconciliations for adjusted EBITDA, adjusted net income (loss) or adjusted diluted income (loss) per share on a forward-looking basis because we are unable to provide a meaningful or accurate calculation or estimation of reconciling items and the information is not available without unreasonable effort. This is due to the inherent difficulty of forecasting the timing and amount of certain items, such as, but not limited to, (a) business acquisition and integration expenses and purchase accounting adjustments, (b) merger costs, and (c) certain legal and other settlements and related costs. Each of such adjustments has not yet occurred, are out of our control and/or cannot be reasonably predicted. For the same reasons, we are unable to address the probable significance of the unavailable information. 

(2)

Management internally uses a free cash flow measure: (a) to evaluate the Company's liquidity, (b) to evaluate strategic investments, (c) to plan stock buyback and dividend levels and (d) to evaluate the Company's ability to incur and service debt. Free cash flow is not a defined term under U.S. GAAP, and it should not be inferred that the entire free cash flow amount is available for discretionary expenditures. The Company defines free cash flow as cash flow provided by operating activities less cash flow used in investing activities, excluding acquisition/disposition activities and non-recurring separation costs. Free cash flow is typically derived directly from the Company's condensed consolidated statement of cash flows; however, it may be adjusted for items that affect comparability between periods.

(3)

During the third quarter of 2017 we separated our Pigments and Additives division through an Initial Public Offering of Venator Materials PLC.  Additionally, during the first quarter 2010 we closed our Australian styrenics operations.  Results from these associated businesses are treated as discontinued operations.

(4)

We believe adjusted effective tax rate provides improved comparability between periods through the exclusion of certain items that management believes are not indicative of the businesses' operational profitability and that may obscure underlying business results and trends. In our view, effective tax rate is the performance measure calculated and presented in accordance with U.S. GAAP that is most directly comparable to adjusted effective tax rate.

The reconciliation of historical adjusted effective tax rate and effective tax rate is set forth in Table 4 above. We do not provide reconciliations for adjusted effective tax rate on a forward-looking basis because we are unable to provide a meaningful or accurate calculation or estimation of reconciling items and the information is not available without unreasonable effort. This is due to the inherent difficulty of forecasting the timing and amount of certain items, such as, but not limited to, (a) business acquisition and integration expenses, (b) merger costs, and (c) certain legal and other settlements and related costs. Each of such adjustments has not yet occurred, are out of our control and/or cannot be reasonably predicted. For the same reasons, we are unable to address the probable significance of the unavailable information. 

(5)

Net debt is a measure we use to monitor how much debt we have after taking into account our total cash. We use it as an indicator of our overall financial position, and calculate it by taking our total debt, including the current portion, and subtracting total cash.