Huntsman Announces Third Quarter 2020 Earnings; Solid Recovery Trends in Core Markets

Three months ended

Nine months ended

September 30,

September 30,

In millions, except per share amounts

2020

2019

2020

2019

Revenues

$     1,510

$     1,687

$     4,350

$     5,140

Net income

$         57

$         41

$       706

$       290

Adjusted net income⁽¹⁾

$         70

$         95

$       105

$       288

Diluted income per share

$      0.22

$      0.13

$      3.13

$      1.12

Adjusted diluted income per share⁽¹⁾

$      0.32

$      0.41

$      0.47

$      1.24

Adjusted EBITDA⁽¹⁾

$       188

$       215

$       407

$       664

Net cash provided by operating activities from continuing operations

$         65

$       257

$       110

$       434

Free cash flow from continuing operations⁽²⁾

$         11

$       194

$        (60)

$       253

Adjusted free cash flow from continuing operations⁽⁶⁾

$       189

$       194

$       128

$       253

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

2020

2019

2020

2019

Revenues

$     1,510

$     1,687

$     4,350

$     5,140

Cost of goods sold

1,347

3,612

4,068

Gross profit

279

340

738

1,072

Operating expenses

208

231

660

695

Restructuring, impairment and plant closing costs (credits) 

12

(43)

34

(42)

Operating income

59

152

44

419

Interest expense

(24)

(27)

(63)

(86)

Equity in income of investment in unconsolidated affiliates

21

19

25

41

Fair value adjustments to Venator investment

6

(148)

(100)

(90)

Loss on early extinguishment of debt

-

-

-

(23)

Other income, net

10

7

27

16

Income (loss) from continuing operations before income taxes

72

3

(67)

277

Income tax expense

(15)

(30)

(9)

(113)

Income (loss) from continuing operations

57

(27)

(76)

164

Income from discontinued operations, net of tax⁽³⁾

-

68

782

126

Net income

57

41

706

290

Net income attributable to noncontrolling interests, net of tax

(9)

(11)

(15)

(31)

Net income attributable to Huntsman Corporation

$         30

$       691

$       259

Adjusted EBITDA⁽¹⁾

$       188

$       215

$       407

$       664

Adjusted net income⁽¹⁾

$         70

$         95

$       105

$       288

Basic income per share

$      0.22

$      0.13

$      3.13

$      1.12

Diluted income per share

$      0.22

$      0.13

$      3.13

$      1.12

Adjusted diluted income per share⁽¹⁾

$      0.32

$      0.41

$      0.47

$      1.24

Common share information:

Basic weighted average shares

220

227

221

230

Diluted weighted average shares

221

227

221

232

Diluted shares for adjusted diluted income per share

221

229

222

232

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

2020

2019

(Worse)

2020

2019

(Worse)

Segment Revenues:

Polyurethanes

$       936

$       993

(6%)

$     2,554

$     2,931

(13%)

Performance Products

238

281

(15%)

758

880

(14%)

Advanced Materials

199

256

(22%)

632

803

(21%)

Textile Effects

142

179

(21%)

424

583

(27%)

Corporate and Eliminations

(5)

(22)

n/m

(18)

(57)

n/m

Total

$     1,510

$     1,687

(10%)

$     4,350

$     5,140

(15%)

Segment Adjusted EBITDA⁽¹⁾:

Polyurethanes

$       156

$       146

7%

$       271

$       426

(36%)

Performance Products

36

38

(5%)

123

125

(2%)

Advanced Materials

25

51

(51%)

103

159

(35%)

Textile Effects

8

16

(50%)

24

66

(64%)

Corporate, LIFO and other

(37)

(36)

(3%)

(114)

(112)

(2%)

Total

$       188

$       215

(13%)

$       407

$       664

(39%)

n/m = not meaningful

See end of press release for footnote explanations.

Table 3 – Factors Impacting Sales Revenue

Three months ended

September 30, 2020 vs. 2019

Average Selling Price^(a)

Local

Exchange

Sales Mix

Sales

Currency

Rate

& Other

Volume^(b)

Total

Polyurethanes

(5%)

1%

(2%)

0%

(6%)

Performance Products

(3%)

1%

6%

(19%)

(15%)

Advanced Materials

0%

(1%)

(10%)

(11%)

(22%)

Textile Effects

(7%)

(2%)

1%

(13%)

(21%)

Nine months ended

September 30, 2020 vs. 2019

Average Selling Price^(a)

Local

Exchange

Sales Mix

Sales

Currency

Rate

& Other

Volume^(b)

Total

Polyurethanes

(6%)

(1%)

0%

(6%)

(13%)

Performance Products

(5%)

(1%)

5%

(13%)

(14%)

Advanced Materials

1%

(2%)

(2%)

(18%)

(21%)

Textile Effects

(2%)

(2%)

(2%)

(21%)

(27%)

(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

2020

2019

2020

2019

2020

2019

2020

2019

Net income

$          57

$          41

$          57

$          41

$       0.26

$       0.18

Net income attributable to noncontrolling interests

(9)

(11)

(9)

(11)

(0.04)

(0.05)

Net income attributable to Huntsman Corporation

48

30

48

30

0.22

0.13

Interest expense from continuing operations

24

27

Income tax expense from continuing operations

15

30

$         (15)

$         (30)

Income tax expense from discontinued operations⁽³⁾

-

25

Depreciation and amortization from continuing operations

70

65

Depreciation and amortization from discontinued operations⁽³⁾

-

13

Business acquisition and integration expenses and purchase accounting inventory adjustments

9

3

(3)

(1)

6

2

0.03

0.01

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

-

(106)

 N/A 

 N/A 

-

(68)

-

(0.30)

Income from transition services arrangements

(1)

-

-

-

(1)

-

-

-

Fair value adjustments to Venator Investment^(a)

(6)

148

-

-

(6)

148

(0.03)

0.65

Certain legal and other settlements and related (income) expenses

(4)

1

1

-

(3)

1

(0.01)

-

Certain non-recurring information technology project implementation costs

1

1

-

-

1

1

-

-

Amortization of pension and postretirement actuarial losses

20

16

(4)

(5)

16

11

0.07

0.05

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

12

(43)

(3)

9

9

(34)

0.04

(0.15)

Plant incident remediation costs

-

5

-

(1)

-

4

-

0.02

Adjusted⁽¹⁾

$        188

$        215

$         (24)

$         (28)

$          70

$          95

$       0.32

$       0.41

Adjusted income tax expense⁽¹⁾

$          24

$          28

Net income attributable to noncontrolling interests, net of tax

9

11

Adjusted pre-tax income⁽¹⁾

$        103

$        134

Adjusted effective tax rate⁽⁴⁾

23%

21%

Effective tax rate

21%

n/m

 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

2020

2019

2020

2019

2020

2019

2020

2019

Net income

$        706

$        290

$        706

$        290

$       3.20

$       1.25

Net income attributable to noncontrolling interests

(15)

(31)

(15)

(31)

(0.07)

(0.13)

Net income attributable to Huntsman Corporation

691

259

691

259

3.13

1.12

Interest expense from continuing operations

63

86

Income tax expense from continuing operations

9

113

$          (9)

$       (113)

Income tax expense from discontinued operations⁽³⁾

239

44

Depreciation and amortization from continuing operations

206

201

Depreciation and amortization from discontinued operations⁽³⁾

-

59

Business acquisition and integration expenses and purchase accounting inventory adjustments

30

4

(6)

(1)

24

3

0.11

0.01

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

(1,021)

(229)

N/A

N/A

(782)

(126)

(3.54)

(0.54)

U.S. tax reform impact on tax expense

-

-

-

3

-

3

-

0.01

Impact of Switzerland income tax rate change

-

-

-

32

-

32

-

0.14

Gain on sale of businesses/assets

(1)

-

-

-

(1)

-

-

-

Income from transition services arrangements

(6)

-

1

-

(5)

-

(0.02)

-

Fair value adjustments to Venator Investment^(a)

100

90

-

-

100

90

0.45

0.39

Loss on early extinguishment of debt

-

23

-

(5)

-

18

-

0.08

Certain legal and other settlements and related expenses

2

1

-

-

2

1

0.01

-

Certain non-recurring information technology project implementation costs

3

1

-

-

3

1

0.01

-

Amortization of pension and postretirement actuarial losses

57

49

(12)

(13)

45

36

0.20

0.16

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

34

(42)

(7)

9

27

(33)

0.12

(0.14)

Plant incident remediation costs

1

5

-

(1)

1

4

-

0.02

Adjusted⁽¹⁾

$        407

$        664

$         (33)

$         (89)

$        105

$        288

$       0.47

$       1.24

Adjusted income tax expense⁽¹⁾

$          33

$          89

Net income attributable to noncontrolling interests, net of tax

15

31

Adjusted pre-tax income⁽¹⁾

$        153

$        408

Adjusted effective tax rate⁽⁴⁾

22%

22%

Effective tax rate

41%

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

N/A = not applicable

See end of press release for footnote explanations.

Table 5 – Selected Balance Sheet Items

September 30,

December 31,

In millions

2020

2019

Cash

$            1,168

$              525

Accounts and notes receivable, net

889

953

Inventories

819

914

Other current assets

125

155

Current assets held for sale

-

1,208

Property, plant and equipment, net

2,477

2,383

Other noncurrent assets

2,619

2,182

Total assets

$            8,097

$            8,320

Accounts payable

$              725

$              822

Other current liabilities

629

462

Current portion of debt

567

212

Current liabilities held for sale

-

512

Long-term debt

1,557

2,177

Other noncurrent liabilities

1,242

1,311

Huntsman Corporation stockholders' equity

3,222

2,687

Noncontrolling interests in subsidiaries

155

137

Total liabilities and equity

$            8,097

$            8,320

Table 6 – Outstanding Debt

September 30,

December 31,

In millions

2020

2019

Debt:

Revolving credit facility

$                 -

$                40

Accounts receivable programs

52

167

Term loan

-

103

Senior notes

2,003

1,963

Variable interest entities

50

65

Other debt

19

51

Total debt - excluding affiliates

2,124

2,389

Total cash

1,168

525

Net debt - excluding affiliates⁽⁵⁾

$              956

$            1,864

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

2020

2019

2020

2019

Total cash at beginning of period

$         1,254

$           449

$           525

$           340

Net cash provided by operating activities from continuing operations

65

257

110

434

Net cash provided by (used in) operating activities from discontinued operations⁽³⁾

18

126

(22)

222

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

(47)

(11)

1,105

(111)

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

-

(13)

-

(31)

Net cash used in financing activities

(129)

(383)

(546)

(431)

Effect of exchange rate changes on cash

7

(7)

(4)

(5)

Total cash at end of period

$         1,168

$           418

$         1,168

$           418

Free cash flow from continuing operations⁽²⁾:

Net cash provided by operating activities

$             65

$           257

$           110

$           434

Capital expenditures

(54)

(63)

(170)

(181)

Free cash flow from continuing operations

$             11

$           194

$            (60)

$           253

Taxes paid on sale of Chemical Intermediates Businesses

$           178

$              -

$           188

$              -

Adjusted free cash flow from continuing operations⁽⁶⁾:

$           189

$           194

$           128

$           253

Supplemental cash flow information:

Cash paid for interest

$              (9)

$            (12)

$            (49)

$            (65)

Cash paid for income taxes

(187)

(34)

(242)

(102)

Cash paid for restructuring and integration

(10)

(3)

(24)

(14)

Cash paid for pensions

(27)

(29)

(73)

(68)

Depreciation and amortization

70

65

206

201

Change in primary working capital:

Accounts and notes receivable

$            (76)

$           116

$           103

$             69

Inventories

75

(5)

154

19

Accounts payable

111

(4)

(85)

(16)

Total change in primary working capital

$           110

$           107

$           172

$             72

See end of press release for footnote explanations.

(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 our liquidity, (b) evaluate strategic investments, (c) plan stock buyback and dividend levels and (d) evaluate our ability to incur and service debt. We have historically defined free cash flow as cash flows provided by operating activities and used in investing activities, excluding acquisition/disposition activities and including non-recurring separation costs. Starting with the quarter ended March 31, 2020, we updated our definition of free cash flow to a presentation more consistent with today's market standard of net cash provided by operating activities less capital expenditures. Using our updated definition, our free cash flow for the years ended December 31, 2019, 2018, and 2017 were $382 million, $453 million, and $438 million, respectively. 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.

(3)

During the third quarter 2019, we entered into an agreement to sell our Chemical Intermediates Businesses. Results from these businesses, including the associated gain on sale, was treated as discontinued operations until the completion of the sale on January 3, 2020.

(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. 

(6)

Adjusted free cash flow is defined as free cash flow, as described above, adjusted by excluding the taxes paid in connection with the sale of our Chemical Intermediates Businesses.  We believe that adjusted free cash flow provides a useful comparison from period to period because it excludes the impact of cash taxes unrelated to our operations. Additionally, the proceeds received from the sale of our Chemical Intermediates Businesses was classified as cash provided by investing activities and therefore was not factored into our free cash flow.  As result, we believe the adjustment to exclude the taxes paid associated with this sale provides a meaningful measure of our free cash flow.