Huntsman Announces Third Quarter 2019 Earnings; Strong Cash Flow Generation in the Quarter; Divestiture of the Chemical Intermediates and Surfactants Businesses on Track

Three months ended

Nine months ended

September 30,

September 30,

In millions, except per share amounts

2019

2018

2019

2018

Revenues

$     1,687

$     1,968

$     5,140

$     5,783

Net income (loss)

$         41

$          (8)

$       290

$       965

Adjusted net income⁽¹⁾

$         95

$       170

$       288

$       552

Diluted income (loss) per share

$      0.13

$     (0.05)

$      1.12

$      2.79

Adjusted diluted income per share⁽¹⁾

$      0.41

$      0.71

$      1.24

$      2.27

Adjusted EBITDA⁽¹⁾

$       215

$       308

$       664

$       954

Net cash provided by operating activities from continuing operations

$       257

$       248

$       434

$       446

Free cash flow from continuing operations⁽²⁾

$       197

$       191

$       258

$       300

See end of press release for footnote explanations and reconciliations of non-GAAP measures

Participant dial-in numbers:

Domestic callers:

(877) 402-8037

International callers:

(201) 378-4913

Table 1 – Results of Operations

Three months ended

Nine months ended

September 30,

September 30,

In millions, except per share amounts

2019

2018

2019

2018

Revenues

$     1,687

$     1,968

$     5,140

$     5,783

Cost of goods sold

1,501

4,068

4,371

Gross profit

340

467

1,072

1,412

Operating expenses

231

238

695

711

Restructuring, impairment and plant closing (credits) costs

(43)

5

(42)

8

Merger costs

-

1

-

2

Operating income

152

223

419

691

Interest expense

(27)

(30)

(86)

(86)

Equity in income of investment in unconsolidated affiliates

19

14

41

45

Fair value adjustments to Venator investment

(148)

-

(90)

-

Loss on early extinguishment of debt

-

-

(23)

(3)

Other income, net

7

6

16

22

Income from continuing operations before income taxes

3

213

277

669

Income tax expense

(30)

(16)

(113)

(41)

(Loss) income from continuing operations

(27)

197

164

628

Income (loss) from discontinued operations, net of tax⁽³⁾

68

(205)

126

337

Net income (loss)

41

(8)

290

965

Net income attributable to noncontrolling interests, net of tax

(11)

(3)

(31)

(288)

Net income (loss) attributable to Huntsman Corporation

$        (11)

$       259

$       677

Adjusted EBITDA⁽¹⁾

$       215

$       308

$       664

$       954

Adjusted net income⁽¹⁾

$         95

$       170

$       288

$       552

Basic income (loss) per share

$      0.13

$     (0.05)

$      1.12

$      2.83

Diluted income (loss) per share

$      0.13

$     (0.05)

$      1.12

$      2.79

Adjusted diluted income per share⁽¹⁾

$      0.41

$      0.71

$      1.24

$      2.27

Common share information:

Basic weighted average shares

227

238

230

239

Diluted weighted average shares

227

241

232

243

See end of press release for footnote explanations

Table 2 – Results of Operations by Segment

Three months ended

Nine months ended

September 30,

Better /

September 30,

Better /

In millions

2019

2018

(Worse)

2019

2018

(Worse)

Segment Revenues:

Polyurethanes

$      993

$   1,126

$     2,931

$3,268

(10%)

Performance Products

281

329

(15%)

880

991

(11%)

Advanced Materials

256

279

(8%)

803

850

(6%)

Textile Effects

179

204

(12%)

583

631

(8%)

Corporate and Eliminations

(22)

30

n/m

(57)

43

n/m

Total

$  1,687

$   1,968

(14%)

$     5,140

$5,783

(11%)

Segment Adjusted EBITDA⁽¹⁾:

Polyurethanes

$     146

$     218

(33%)

$       426

$   668

(36%)

Performance Products

38

54

(30%)

125

158

(21%)

Advanced Materials

51

56

(9%)

159

177

(10%)

Textile Effects

16

25

(36%)

66

80

(18%)

Corporate, LIFO and other

(36)

(45)

20%

(112)

(129)

13%

Total

$     215

$     308

(30%)

$       664

$   954

(30%)

n/m = not meaningful

See end of press release for footnote explanations

Table 3 – Factors Impacting Sales Revenue

Three months ended

September 30, 2019 vs. 2018

Local

Exchange

Sales Mix

Sales

Currency

Rate

& Other

Volume^(b)

Total

Polyurethanes

(13%)

(2%)

2%

1%

(12%)

Performance Products

(5%)

(2%)

3%

(11%)

(15%)

Advanced Materials

1%

(2%)

4%

(11%)

(8%)

Textile Effects

(2%)

(1%)

(2%)

(7%)

(12%)

Total Company

(15%)

(2%)

7%

(4%)

(14%)

Nine months ended

September 30, 2019 vs. 2018

Average Selling Price^(a)

Local

Exchange

Sales Mix

Sales

Currency

Rate

& Other

Volume^(b)

Total

Polyurethanes

(13%)

(3%)

1%

5%

(10%)

Performance Products

(1%)

(3%)

2%

(9%)

(11%)

Advanced Materials

2%

(4%)

2%

(6%)

(6%)

Textile Effects

7%

(3%)

(2%)

(10%)

(8%)

Total Company

0%

(3%)

(7%)

(1%)

(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

September 30,

September 30,

September 30,

September 30,

In millions, except per share amounts

2019

2018

2019

2018

2019

2018

2019

2018

Net income (loss)

$     41

$     (8)

$    41

$   (8)

$   0.18

$ (0.03)

Net income attributable to noncontrolling interests

(11)

(3)

(11)

(3)

(0.05)

(0.01)

Net income (loss) attributable to Huntsman Corporation

30

(11)

30

(11)

0.13

Interest expense from continuing operations

27

30

Interest expense from discontinued operations⁽³⁾

-

10

Income tax expense from continuing operations

30

16

$     (30)

$     (16)

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

25

(41)

Depreciation and amortization from continuing operations

65

62

Depreciation and amortization from discontinued operations⁽³⁾

13

23

Business acquisition and integration expenses

3

2

(1)

-

2

2

0.01

0.01

EBITDA / (Income) loss from discontinued operations, net of tax⁽³⁾

(106)

213

 n/a 

 n/a 

(68)

205

(0.30)

0.85

Noncontrolling interest of discontinued operations⁽¹⁾⁽³⁾

-

(21)

-

-

-

(21)

-

(0.09)

Release of significant income tax valuation allowances^(a)

-

-

-

(24)

-

(24)

-

(0.10)

Merger costs, net of tax

-

1

-

-

-

1

-

0.00

Fair value adjustments to Venator Investment^(b)

148

-

-

-

148

-

0.65

-

Certain legal settlements and related expenses

1

1

-

(1)

1

-

0.00

-

Certain non-recurring information technology project implementation costs

1

-

-

-

1

-

0.00

-

Amortization of pension and postretirement actuarial losses

16

18

(5)

(4)

11

14

0.05

0.06

Restructuring, impairment and plant closing and transition (credits) costs 

(43)

5

9

(1)

(34)

4

(0.15)

0.02

Net plant incident costs

5

-

(1)

-

4

-

0.02

-

Adjusted⁽¹⁾

$     215

$     308

$     (28)

$      (46)

$    95

$  170

$   0.41

$  0.71

Adjusted income tax expense⁽¹⁾

$    28

$    46

Net income attributable to noncontrolling interests, net of tax

11

3

Noncontrolling interest of discontinued operations⁽¹⁾⁽³⁾

-

21

Adjusted pre-tax income⁽¹⁾

$  134

$  240

Adjusted effective tax rate⁽⁴⁾

21%

19%

Effective tax rate

n/m

8%

 Income Tax 

 Diluted Income 

 EBITDA 

(Expense) Benefit

 Net Income 

 Per Share 

Nine months ended

Nine months ended

Nine months ended

Nine months ended

September 30,

September 30,

September 30,

September 30,

In millions, except per share amounts

2019

2018

2019

2018

2019

2018

2019

2018

Net income

$    290

$     965

$    290

$  965

$   1.25

$  3.97

Net income attributable to noncontrolling interests

(31)

(288)

(31)

(288)

(0.13)

(1.19)

Net income attributable to Huntsman Corporation

259

677

259

677

1.12

2.79

Interest expense from continuing operations

86

86

   Interest expense from discontinued operations⁽³⁾

-

30

Income tax expense from continuing operations

113

41

$   (113)

$      (41)

Income tax expense from discontinued operations⁽³⁾

44

95

Depreciation and amortization from continuing operations

201

187

Depreciation and amortization from discontinued operations⁽³⁾

59

63

Business acquisition and integration expenses

4

10

(1)

(2)

3

8

0.01

0.03

EBITDA / (Income) loss from discontinued operations, net of tax⁽³⁾

(229)

(525)

 n/a 

 n/a 

(126)

(337)

(0.54)

(1.39)

Noncontrolling interest of discontinued operations⁽¹⁾⁽³⁾

-

222

-

-

-

222

-

0.91

U.S. tax reform impact on tax expense

-

-

3

49

3

49

0.01

0.20

Release of significant income tax valuation allowances^(a)

-

-

-

(119)

-

(119)

-

(0.49)

Impact of Switzerland income tax rate change

-

-

32

-

32

-

0.14

-

Merger costs, net of tax

-

2

-

-

-

2

-

0.01

Fair value adjustments to Venator Investment^(b)

90

-

-

-

90

-

0.39

-

Loss on early extinguishment of debt

23

3

(5)

(1)

18

2

0.08

0.01

Certain legal settlements and related expenses

1

4

-

(1)

1

3

0.00

0.01

Certain non-recurring information technology project implementation costs

1

-

-

-

1

-

0.00

-

Amortization of pension and postretirement actuarial losses

49

50

(13)

(12)

36

38

0.16

0.16

Restructuring, impairment and plant closing and transition (credits) costs 

(42)

9

9

(2)

(33)

7

(0.14)

0.03

Net plant incident costs

5

-

(1)

-

4

-

0.02

-

Adjusted⁽¹⁾

$     664

$     954

$     (89)

$    (129)

$    288

$  552

$   1.24

$  2.27

Adjusted income tax expense⁽¹⁾

$      89

$  129

Net income attributable to noncontrolling interests, net of tax

31

288

Noncontrolling interest of discontinued operations⁽¹⁾⁽³⁾

-

(222)

Adjusted pre-tax income⁽¹⁾

$    408

$  747

Adjusted effective tax rate⁽⁴⁾

22%

17%

Effective tax rate

41%

6%

(a)

During the nine months ended September 30, 2018, we released $119 million of valuation allowances in Switzerland, the U.K., and Luxembourg.  We eliminated the effect of this significant change in tax valuation allowances from our presentation of adjusted net income to allow investors to better compare our ongoing financial performance from period to period. We do not adjust for insignificant changes in tax valuation allowances because we do not believe this provides more meaningful information than is provided under GAAP.

(b)

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

n/m = not meaningful;  n/a = not applicable

See end of press release for footnote explanations

Table 5 – Selected Balance Sheet Items

September 30,

December 31,

In millions

2019

2018

Cash

$             418

$             340

Accounts and notes receivable, net

1,090

1,183

Inventories

961

1,000

Other current assets

152

203

Current assets held for sale

1,108

232

Property, plant and equipment, net

2,324

2,353

Other noncurrent assets

2,062

1,765

Noncurrent assets held for sale

-

877

Total assets

$          8,115

$          7,953

Accounts payable

$             744

$             793

Other current liabilities

443

497

Current portion of debt

132

96

Current liabilities held for sale

586

225

Long-term debt

2,204

2,224

Other noncurrent liabilities

1,368

1,086

Noncurrent liabilities held for sale

-

283

Huntsman Corporation stockholders' equity

2,482

2,520

Noncontrolling interests in subsidiaries

156

229

Total liabilities and equity

$          8,115

$          7,953

Table 6 – Outstanding Debt

September 30,

December 31,

In millions

2019

2018

Debt:

Revolving credit facility

$                 -

$               50

Accounts receivable programs

197

252

Term loan

101

-

Senior notes

1,947

1,892

Variable interest entities

72

86

Other debt

19

40

Total debt - excluding affiliates

2,336

2,320

Total cash

418

340

Net debt - excluding affiliates⁽⁵⁾

$            1,918

$          1,980

See end of press release for footnote explanations

Table 7 – Summarized Statement of Cash Flows

Three months ended

Nine months ended

September 30,

September 30,

In millions

2019

2018

2019

2018

Total cash at beginning of period^(a)

$        449

$           763

$        340

$   719

Net cash provided by operating activities - continuing operations

257

248

434

446

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

126

46

222

488

Net cash used in investing activities - continuing operations

(11)

(54)

(111)

(514)

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

(13)

(116)

(31)

(297)

Net cash used in financing activities

(383)

(181)

(431)

(117)

Effect of exchange rate changes on cash

(7)

(9)

(5)

(28)

Total cash at end of period^(a)

$        418

$           697

$        418

$   697

Supplemental cash flow information - continuing operations:

Cash paid for interest

$         (12)

$           (14)

$         (65)

$    (73)

Cash paid for income taxes

(26)

(39)

(88)

(115)

Cash paid for capital expenditures

(63)

(59)

(181)

(148)

Depreciation and amortization

65

62

201

187

Changes in primary working capital:

Accounts and notes receivable

116

(30)

69

(135)

Inventories

(5)

(69)

19

(158)

Accounts payable

(4)

32

(16)

53

Total cash received from (used in) primary working capital

$        107

$           (67)

$          72

$  (240)

Free cash flow - continuing operations⁽²⁾:

Net cash provided by operating activities

$        257

$           248

$        434

$   446

Capital expenditures

(63)

(59)

(181)

(148)

All other investing activities, excluding acquisition and disposition activities^(b)

3

1

5

-

Non-recurring merger costs^(c)

-

1

-

2

Free cash flow - continuing operations

$        197

$           191

$        258

$   300

Adjusted EBITDA

$        215

$           308

$        664

$   954

Capital expenditures

(63)

(59)

(181)

(148)

Capital reimbursements

2

1

9

4

Interest

(12)

(14)

(65)

(73)

Income taxes

(26)

(39)

(88)

(115)

Primary working capital change

107

(67)

72

(240)

Restructuring

(3)

(2)

(14)

(7)

Pensions

(37)

(36)

(91)

(94)

Maintenance & other

14

99

(48)

19

Free cash flow - continuing operations⁽²⁾

$        197

$           191

$        258

$   300

(a)

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

Represents "Acquisition of business, net of cash acquired", "Cash received from purchase price adjustment for business acquired", and "Proceeds from sale of business/assets".

(c)

Represents payments associated with one-time costs of the terminated merger of equals with Clariant.

(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 2019, we entered into an agreement to sell our Chemical Intermediates and Surfactants businesses, which are now reported as held for sale.  In 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.