UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form
| (Mark One) | |
| | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| | |
| For the quarterly period ended | |
| | |
| OR | |
| | |
| | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| | |
| For the transition period from to | |
| Commission |
| Exact Name of Registrant as Specified in its Charter, |
| State of |
| I.R.S. Employer |
| | |
| | | | |
| | |
| | | | |
Securities registered pursuant to Section 12(b) of the Act:
| Registrant |
| Title of each class |
| Trading Symbol | | Name of each exchange on which registered |
| Huntsman Corporation |
| |
| | | |
| Huntsman International LLC |
| NONE |
| NONE | | NONE |
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
| Huntsman Corporation | | No ☐ |
| Huntsman International LLC | | No ☐ |
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
| Huntsman Corporation | | No ☐ |
| Huntsman International LLC | | No ☐ |
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
| Huntsman Corporation | | Accelerated filer ☐ | Non-accelerated filer ☐ | Smaller reporting company | Emerging growth company |
| Huntsman International LLC | Large accelerated filer ☐ | Accelerated filer ☐ | | Smaller reporting company | Emerging Growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
| Huntsman Corporation | | ☐ |
| Huntsman International LLC | | ☐ |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
| Huntsman Corporation | Yes | No ☒ |
| Huntsman International LLC | Yes | No ☒ |
On April 22, 2024,
This Quarterly Report on Form 10-Q presents information for two registrants: Huntsman Corporation and Huntsman International LLC. Huntsman International LLC is a wholly-owned subsidiary of Huntsman Corporation and is the principal operating company of Huntsman Corporation. The information reflected in this Quarterly Report on Form 10-Q is equally applicable to both Huntsman Corporation and Huntsman International LLC, except where otherwise indicated. Huntsman International LLC meets the conditions set forth in General Instructions H(1)(a) and (b) of Form 10-Q and, to the extent applicable, is therefore filing this form with a reduced disclosure format.
HUNTSMAN CORPORATION AND SUBSIDIARIES
HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES
QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTERLY PERIOD
ENDED March 31, 2024
TABLE OF CONTENTS
| |
|
Page |
| |
Huntsman Corporation and Subsidiaries: |
|
| |
||
| |
||
| |
Unaudited Condensed Consolidated Statements of Comprehensive (Loss) Income |
|
| |
7 | |
| |
||
| |
Huntsman International LLC and Subsidiaries: |
|
| |
||
| |
||
| |
Unaudited Condensed Consolidated Statements of Comprehensive (Loss) Income |
|
| |
||
| |
||
| |
Huntsman Corporation and Subsidiaries and Huntsman International LLC and Subsidiaries: |
|
| |
Notes to Unaudited Condensed Consolidated Financial Statements |
|
| Management’s Discussion and Analysis of Financial Condition and Results of Operations |
||
FORWARD-LOOKING STATEMENTS
Certain information set forth in this report contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements other than historical factual information are forward-looking statements, including without limitation statements regarding: projections of revenue, expenses, profit, profit margins, tax rates, tax provisions, cash flows, pension and benefit obligations and funding requirements, our liquidity position or other projected financial measures; management’s plans and strategies for future operations, including statements relating to anticipated operating performance, cost reductions, restructuring activities, new product and service developments, competitive strengths or market position, acquisitions, divestitures, spin-offs or other distributions, strategic opportunities, financing activities, stock repurchases, dividends and executive compensation; growth, declines and other trends in markets we sell into; new or modified laws, regulations and accounting pronouncements; outstanding claims, legal proceedings, or the potential outcomes thereof, tax audits and assessments and other contingent liabilities; foreign currency exchange rates and fluctuations in those rates; general economic and capital markets conditions; the timing of any of the foregoing; assumptions underlying any of the foregoing; and any other statements that address events or developments that we intend or believe will or may occur in the future. In some cases, forward-looking statements can be identified by terminology such as “believes,” “expects,” “may,” “will,” “should,” “anticipates” or “intends” or the negative of such terms or other comparable terminology, or by discussions of strategy. We may also make additional forward-looking statements from time to time. All such subsequent forward-looking statements, whether written or oral, by us or on our behalf, are also expressly qualified by these cautionary statements.
All forward-looking statements, including without limitation any projections derived from management’s examination of historical operating trends, are based upon our current expectations and various assumptions. Our expectations, beliefs and projections are expressed in good faith and we believe there is a reasonable basis for them, but there can be no assurance that management’s expectations, beliefs and projections will be achieved. All forward-looking statements apply only as of the date made. We undertake no obligation to publicly update or revise forward-looking statements whether because of new information, future events or otherwise, except as required by securities and other applicable law.
There are a number of risks and uncertainties that could cause our actual results to differ materially from the forward-looking statements contained in or contemplated by this report. Any forward-looking statements should be considered in light of the risks set forth in “Part II. Item 1A. Risk Factors” below and “Part I. Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2023.
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
HUNTSMAN CORPORATION AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(In Millions, Except Share and Per Share Amounts)
| March 31, | December 31, | |||||||
| 2024 | 2023 | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents(1) | $ | $ | ||||||
| Accounts and notes receivable (net of allowance for doubtful accounts of $), ($ and $ pledged as collateral, respectively)(1) | ||||||||
| Accounts receivable from affiliates | ||||||||
| Inventories(1) | ||||||||
| Other current assets | ||||||||
| Total current assets | ||||||||
| Property, plant and equipment, net(1) | ||||||||
| Investment in unconsolidated affiliates | ||||||||
| Intangible assets, net | ||||||||
| Goodwill | ||||||||
| Deferred income taxes | ||||||||
| Operating lease right-of-use assets | ||||||||
| Other noncurrent assets(1) | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable(1) | $ | $ | ||||||
| Accounts payable to affiliates | ||||||||
| Accrued liabilities(1) | ||||||||
| Current portion of debt(1) | ||||||||
| Current operating lease liabilities(1) | ||||||||
| Total current liabilities | ||||||||
| Long-term debt(1) | ||||||||
| Deferred income taxes | ||||||||
| Noncurrent operating lease liabilities(1) | ||||||||
| Other noncurrent liabilities(1) | ||||||||
| Total liabilities | ||||||||
| Commitments and contingencies (Notes 15 and 16) | ||||||||
| Equity | ||||||||
| Huntsman Corporation stockholders’ equity: | ||||||||
| Common stock $ par value, shares authorized, and shares issued and and shares outstanding, respectively | ||||||||
| Additional paid-in capital | ||||||||
| Treasury stock, shares | ( | ) | ( | ) | ||||
| Unearned stock-based compensation | ( | ) | ( | ) | ||||
| Retained earnings | ||||||||
| Accumulated other comprehensive loss | ( | ) | ( | ) | ||||
| Total Huntsman Corporation stockholders’ equity | ||||||||
| Noncontrolling interests in subsidiaries | ||||||||
| Total equity | ||||||||
| Total liabilities and equity | $ | $ | ||||||
| (1) |
At March 31, 2024 and December 31, 2023, respectively, $15 and $2 of cash and cash equivalents, $18 and $16 of accounts and notes receivable (net), $52 and $48 of inventories, $151 and $150 of property, plant and equipment (net), $33 and $32 of other noncurrent assets, $89 and $84 of accounts payable, $21 and $20 of accrued liabilities, $9 each of current portion of debt, $7 and $8 of current operating lease liabilities, $15 and $17 of long-term debt, $19 and $21 of noncurrent operating lease liabilities and $16 and $15 of other noncurrent liabilities from consolidated variable interest entities are included in the respective balance sheet captions above. See “Note 6. Variable Interest Entities.” These assets can only be used to settle obligations of the variable interest entities, and creditors of these liabilities do not have recourse to our general credit. |
See accompanying notes to condensed consolidated financial statements.
HUNTSMAN CORPORATION AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In Millions, Except Per Share Amounts)
| Three months | ||||||||
| ended | ||||||||
| March 31, | ||||||||
| 2024 | 2023 | |||||||
| Revenues: | ||||||||
| Trade sales, services and fees, net | $ | $ | ||||||
| Related party sales | ||||||||
| Total revenues | ||||||||
| Cost of goods sold | ||||||||
| Gross profit | ||||||||
| Operating expenses: | ||||||||
| Selling, general and administrative | ||||||||
| Research and development | ||||||||
| Restructuring, impairment and plant closing costs (credits) | ( | ) | ||||||
| Gain on acquisition of assets, net | ( | ) | ||||||
| Prepaid asset write-off | ||||||||
| Other operating loss (income), net | ( | ) | ||||||
| Total operating expenses | ||||||||
| Operating (loss) income | ( | ) | ||||||
| Interest expense, net | ( | ) | ( | ) | ||||
| Equity in income of investment in unconsolidated affiliates | ||||||||
| Other income, net | ||||||||
| (Loss) income from continuing operations before income taxes | ( | ) | ||||||
| Income tax benefit (expense) | ( | ) | ||||||
| (Loss) income from continuing operations | ( | ) | ||||||
| (Loss) income from discontinued operations, net of tax | ( | ) | ||||||
| Net (loss) income | ( | ) | ||||||
| Net income attributable to noncontrolling interests | ( | ) | ( | ) | ||||
| Net (loss) income attributable to Huntsman Corporation | $ | ( | ) | $ | ||||
| Basic (loss) income per share: | ||||||||
| (Loss) income from continuing operations attributable to Huntsman Corporation common stockholders | $ | ( | ) | $ | ||||
| (Loss) income from discontinued operations attributable to Huntsman Corporation common stockholders, net of tax | ( | ) | ||||||
| Net (loss) income attributable to Huntsman Corporation common stockholders | $ | ( | ) | $ | ||||
| Weighted average shares | ||||||||
| Diluted (loss) income per share: | ||||||||
| (Loss) income from continuing operations attributable to Huntsman Corporation common stockholders | $ | ( | ) | $ | ||||
| (Loss) income from discontinued operations attributable to Huntsman Corporation common stockholders, net of tax | ( | ) | ||||||
| Net (loss) income attributable to Huntsman Corporation common stockholders | $ | ( | ) | $ | ||||
| Weighted average shares | ||||||||
| Amounts attributable to Huntsman Corporation: | ||||||||
| (Loss) income from continuing operations | $ | ( | ) | $ | ||||
| (Loss) income from discontinued operations, net of tax | ( | ) | ||||||
| Net (loss) income | $ | ( | ) | $ | ||||
See accompanying notes to condensed consolidated financial statements.
HUNTSMAN CORPORATION AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME
(In Millions)
| Three months |
||||||||
| ended |
||||||||
| March 31, |
||||||||
| 2024 |
2023 |
|||||||
| Net (loss) income |
$ | ( |
) | $ | ||||
| Other comprehensive (loss) income, net of tax: |
||||||||
| Foreign currency translations adjustments |
( |
) | ||||||
| Pension and other postretirement benefits adjustments |
||||||||
| Other, net |
( |
) | ||||||
| Other comprehensive (loss) income, net of tax |
( |
) | ||||||
| Comprehensive (loss) income |
( |
) | ||||||
| Comprehensive income attributable to noncontrolling interests |
( |
) | ( |
) | ||||
| Comprehensive (loss) income attributable to Huntsman Corporation |
$ | ( |
) | $ | ||||
See accompanying notes to condensed consolidated financial statements.
HUNTSMAN CORPORATION AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
(In Millions, Except Share Amounts)
| Huntsman Corporation Stockholders' Equity |
||||||||||||||||||||||||||||||||||||
| Accumulated |
||||||||||||||||||||||||||||||||||||
| Shares |
Additional |
Unearned |
other |
Noncontrolling |
||||||||||||||||||||||||||||||||
| common |
Common |
paid-in |
Treasury |
stock-based |
Retained |
comprehensive |
interests in |
Total |
||||||||||||||||||||||||||||
| stock |
stock |
capital |
stock |
compensation |
earnings |
loss |
subsidiaries |
equity |
||||||||||||||||||||||||||||
| Balance, January 1, 2024 |
$ | $ | $ | ( |
) | $ | ( |
) | $ | $ | ( |
) | $ | $ | ||||||||||||||||||||||
| Net (loss) income |
— | ( |
) | ( |
) | |||||||||||||||||||||||||||||||
| Other comprehensive (loss) income |
— | ( |
) | ( |
) | |||||||||||||||||||||||||||||||
| Issuance of nonvested stock awards |
— | ( |
) | |||||||||||||||||||||||||||||||||
| Vesting of stock awards |
||||||||||||||||||||||||||||||||||||
| Recognition of stock-based compensation |
— | |||||||||||||||||||||||||||||||||||
| Repurchase and cancellation of stock awards |
( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||||||||
| Stock options exercised |
( |
) | ||||||||||||||||||||||||||||||||||
| Dividends declared on common stock ($0.25 per share) |
— | ( |
) | ( |
) | |||||||||||||||||||||||||||||||
| Balance, March 31, 2024 |
$ | $ | $ | ( |
) | $ | ( |
) | $ | $ | ( |
) | $ | $ | ||||||||||||||||||||||
| Huntsman Corporation Stockholders' Equity |
||||||||||||||||||||||||||||||||||||
| Accumulated |
||||||||||||||||||||||||||||||||||||
| Shares |
Additional |
Unearned |
other |
Noncontrolling |
||||||||||||||||||||||||||||||||
| common |
Common |
paid-in |
Treasury |
stock-based |
Retained |
comprehensive |
interests in |
Total |
||||||||||||||||||||||||||||
| stock |
stock |
capital |
stock |
compensation |
earnings |
loss |
subsidiaries |
equity |
||||||||||||||||||||||||||||
| Balance, January 1, 2023 |
$ | $ | $ | ( |
) | $ | ( |
) | $ | $ | ( |
) | $ | $ | ||||||||||||||||||||||
| Net income |
— | |||||||||||||||||||||||||||||||||||
| Other comprehensive income |
— | |||||||||||||||||||||||||||||||||||
| Issuance of nonvested stock awards |
— | ( |
) | |||||||||||||||||||||||||||||||||
| Vesting of stock awards |
||||||||||||||||||||||||||||||||||||
| Recognition of stock-based compensation |
— | |||||||||||||||||||||||||||||||||||
| Repurchase and cancellation of stock awards |
( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||||||||
| Stock options exercised |
( |
) | ||||||||||||||||||||||||||||||||||
| Treasury stock repurchased |
( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||||||||
| Distributions to noncontrolling interests |
— | ( |
) | ( |
) | |||||||||||||||||||||||||||||||
| Dividends declared on common stock ($0.2375 per share) |
— | ( |
) | ( |
) | |||||||||||||||||||||||||||||||
| Balance, March 31, 2023 |
$ | $ | $ | ( |
) | $ | ( |
) | $ | $ | ( |
) | $ | $ | ||||||||||||||||||||||
See accompanying notes to condensed consolidated financial statements.
HUNTSMAN CORPORATION AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Millions)
| Three months |
||||||||
| ended |
||||||||
| March 31, |
||||||||
| 2024 |
2023 |
|||||||
| Operating activities: |
||||||||
| Net (loss) income |
$ | ( |
) | $ | ||||
| Less: Loss (income) from discontinued operations, net of tax |
( |
) | ||||||
| (Loss) income from continuing operations |
( |
) | ||||||
| Adjustments to reconcile (loss) income from continuing operations to net cash used in operating activities from continuing operations: |
||||||||
| Equity in income of investment in unconsolidated affiliates |
( |
) | ( |
) | ||||
| Depreciation and amortization |
||||||||
| Noncash lease expense |
||||||||
| Gain on acquisition of assets, net |
( |
) | ||||||
| Noncash prepaid asset write-off |
||||||||
| Deferred income taxes |
( |
) | ( |
) | ||||
| Noncash stock-based compensation |
||||||||
| Other, net |
||||||||
| Changes in operating assets and liabilities: |
||||||||
| Accounts and notes receivable |
( |
) | ( |
) | ||||
| Inventories |
( |
) | ( |
) | ||||
| Other current assets |
( |
) | ||||||
| Other noncurrent assets |
( |
) | ( |
) | ||||
| Accounts payable |
( |
) | ||||||
| Accrued liabilities |
( |
) | ( |
) | ||||
| Other noncurrent liabilities |
( |
) | ( |
) | ||||
| Net cash used in operating activities from continuing operations |
( |
) | ( |
) | ||||
| Net cash used in operating activities from discontinued operations |
( |
) | ( |
) | ||||
| Net cash used in operating activities |
( |
) | ( |
) | ||||
| Investing activities: |
||||||||
| Capital expenditures |
( |
) | ( |
) | ||||
| Cash received from sale of businesses, net |
||||||||
| Other, net |
( |
) | ||||||
| Net cash (used in) provided by investing activities from continuing operations |
( |
) | ||||||
| Net cash used in investing activities from discontinued operations |
( |
) | ||||||
| Net cash (used in) provided by investing activities |
( |
) | ||||||
| Financing activities: |
||||||||
| Net borrowings (repayments) on revolving loan facilities |
( |
) | ||||||
| Repayments of long-term debt |
( |
) | ( |
) | ||||
| Principal payments on note payable |
( |
) | ||||||
| Dividends paid to common stockholders |
( |
) | ( |
) | ||||
| Distributions paid to noncontrolling interests |
( |
) | ||||||
| Repurchase and cancellation of awards |
( |
) | ( |
) | ||||
| Repurchase of common stock |
( |
) | ( |
) | ||||
| Other, net |
( |
) | ( |
) | ||||
| Net cash provided by (used in) financing activities |
( |
) | ||||||
| Effect of exchange rate changes on cash |
( |
) | ||||||
| Increase (decrease) in cash and cash equivalents |
( |
) | ||||||
| Cash and cash equivalents at beginning of period |
||||||||
| Cash and cash equivalents at end of period |
$ | $ | ||||||
| Supplemental cash flow information: |
||||||||
| Cash paid for interest |
$ | $ | ||||||
| Cash paid for income taxes |
||||||||
For both March 31, 2024 and 2023, the amount of capital expenditures in accounts payable was $21 million.
See accompanying notes to condensed consolidated financial statements.
HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(In Millions, Except Unit Amounts)
| March 31, |
December 31, |
|||||||
| 2024 |
2023 |
|||||||
| ASSETS |
||||||||
| Current assets: |
||||||||
| Cash and cash equivalents(1) |
$ | $ | ||||||
| Accounts and notes receivable (net of allowance for doubtful accounts of $13), ($290 and $224 pledged as collateral, respectively)(1) |
||||||||
| Accounts receivable from affiliates |
||||||||
| Inventories(1) |
||||||||
| Other current assets |
||||||||
| Total current assets |
||||||||
| Property, plant and equipment, net(1) |
||||||||
| Investment in unconsolidated affiliates |
||||||||
| Intangible assets, net |
||||||||
| Goodwill |
||||||||
| Deferred income taxes |
||||||||
| Operating lease right-of-use assets |
||||||||
| Other noncurrent assets(1) |
||||||||
| Total assets |
$ | $ | ||||||
| LIABILITIES AND EQUITY |
||||||||
| Current liabilities: |
||||||||
| Accounts payable(1) |
$ | $ | ||||||
| Accounts payable to affiliates |
||||||||
| Accrued liabilities(1) |
||||||||
| Current portion of debt(1) |
||||||||
| Current operating lease liabilities(1) |
||||||||
| Total current liabilities |
||||||||
| Long-term debt(1) |
||||||||
| Deferred income taxes |
||||||||
| Noncurrent operating lease liabilities(1) |
||||||||
| Other noncurrent liabilities(1) |
||||||||
| Total liabilities |
||||||||
| Commitments and contingencies (Notes 15 and 16) |
||||||||
| Equity |
||||||||
| Huntsman International LLC members’ equity: |
||||||||
| Members’ equity, 2,728 units issued and outstanding |
||||||||
| Retained earnings |
||||||||
| Accumulated other comprehensive loss |
( |
) | ( |
) | ||||
| Total Huntsman International LLC members’ equity |
||||||||
| Noncontrolling interests in subsidiaries |
||||||||
| Total equity |
||||||||
| Total liabilities and equity |
$ | $ | ||||||
| (1) |
At March 31, 2024 and December 31, 2023, respectively, $15 and $2 of cash and cash equivalents, $18 and $16 of accounts and notes receivable (net), $52 and $48 of inventories, $151 and $150 of property, plant and equipment (net), $33 and $32 of other noncurrent assets, $89 and $84 of accounts payable, $21 and $20 of accrued liabilities, $9 each of current portion of debt, $7 and $8 of current operating lease liabilities, $15 and $17 of long-term debt, $19 and $21 of noncurrent operating lease liabilities and $16 and $15 of other noncurrent liabilities from consolidated variable interest entities are included in the respective balance sheet captions above. See “Note 6. Variable Interest Entities.” These assets can only be used to settle obligations of the variable interest entities, and creditors of these liabilities do not have recourse to our general credit. |
See accompanying notes to condensed consolidated financial statements.
HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In Millions)
| Three months | ||||||||
| ended | ||||||||
| March 31, | ||||||||
| 2024 | 2023 | |||||||
| Revenues: | ||||||||
| Trade sales, services and fees, net | $ | $ | ||||||
| Related party sales | ||||||||
| Total revenues | ||||||||
| Cost of goods sold | ||||||||
| Gross profit | ||||||||
| Operating expenses: | ||||||||
| Selling, general and administrative | ||||||||
| Research and development | ||||||||
| Restructuring, impairment and plant closing costs (credits) | ( | ) | ||||||
| Gain on acquisition of assets, net | ( | ) | ||||||
| Prepaid asset write-off | ||||||||
| Other operating loss (income), net | ( | ) | ||||||
| Total operating expenses | ||||||||
| Operating (loss) income | ( | ) | ||||||
| Interest expense, net | ( | ) | ( | ) | ||||
| Equity in income of investment in unconsolidated affiliates | ||||||||
| Other income, net | ||||||||
| (Loss) income from continuing operations before income taxes | ( | ) | ||||||
| Income tax benefit (expense) | ( | ) | ||||||
| (Loss) income from continuing operations | ( | ) | ||||||
| (Loss) income from discontinued operations, net of tax | ( | ) | ||||||
| Net (loss) income | ( | ) | ||||||
| Net income attributable to noncontrolling interests | ( | ) | ( | ) | ||||
| Net (loss) income attributable to Huntsman International LLC | $ | ( | ) | $ | ||||
See accompanying notes to condensed consolidated financial statements.
HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME
(In Millions)
| Three months |
||||||||
| ended |
||||||||
| March 31, |
||||||||
| 2024 |
2023 |
|||||||
| Net (loss) income |
$ | ( |
) | $ | ||||
| Other comprehensive (loss) income, net of tax: |
||||||||
| Foreign currency translations adjustments |
( |
) | ||||||
| Pension and other postretirement benefits adjustments |
||||||||
| Other, net |
||||||||
| Other comprehensive (loss) income, net of tax |
( |
) | ||||||
| Comprehensive (loss) income |
( |
) | ||||||
| Comprehensive income attributable to noncontrolling interests |
( |
) | ( |
) | ||||
| Comprehensive (loss) income attributable to Huntsman International LLC |
$ | ( |
) | $ | ||||
See accompanying notes to condensed consolidated financial statements.
HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
(In Millions, Except Unit Amounts)
| Huntsman International LLC Members |
||||||||||||||||||||||||
| Members' |
Accumulated other |
Noncontrolling |
||||||||||||||||||||||
| equity |
comprehensive |
interests in |
Total |
|||||||||||||||||||||
| Units |
Amount |
Retained earnings |
loss |
subsidiaries |
equity |
|||||||||||||||||||
| Balance, January 1, 2024 |
$ | $ | $ | ( |
) | $ | $ | |||||||||||||||||
| Net (loss) income |
— | ( |
) | ( |
) | |||||||||||||||||||
| Other comprehensive (loss) income |
— | ( |
) | ( |
) | |||||||||||||||||||
| Dividends paid to parent |
— | ( |
) | ( |
) | |||||||||||||||||||
| Contribution from parent |
— | |||||||||||||||||||||||
| Distribution to parent |
— | ( |
) | ( |
) | |||||||||||||||||||
| Balance, March 31, 2024 |
$ | $ | $ | ( |
) | $ | $ | |||||||||||||||||
| Huntsman International LLC Members |
||||||||||||||||||||||||
| Members' | Accumulated other | Noncontrolling | ||||||||||||||||||||||
| equity |
comprehensive |
interests in |
Total |
|||||||||||||||||||||
| Units |
Amount |
Retained earnings |
loss |
subsidiaries |
equity |
|||||||||||||||||||
| Balance, January 1, 2023 |
$ | $ | $ | ( |
) | $ | $ | |||||||||||||||||
| Net income |
— | |||||||||||||||||||||||
| Other comprehensive income |
— | |||||||||||||||||||||||
| Dividends paid to parent |
— | ( |
) | ( |
) | |||||||||||||||||||
| Contribution from parent |
— | |||||||||||||||||||||||
| Distributions to noncontrolling interests |
— | ( |
) | ( |
) | |||||||||||||||||||
| Distribution to parent |
— | ( |
) | ( |
) | |||||||||||||||||||
| Balance, March 31, 2023 |
$ | $ | $ | ( |
) | $ | $ | |||||||||||||||||
See accompanying notes to condensed consolidated financial statements.
HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Millions)
| Three months |
||||||||
| ended |
||||||||
| March 31, |
||||||||
| 2024 |
2023 |
|||||||
| Operating activities: |
||||||||
| Net (loss) income |
$ | ( |
) | $ | ||||
| Less: Loss (income) from discontinued operations, net of tax |
( |
) | ||||||
| (Loss) income from continuing operations |
( |
) | ||||||
| Adjustments to reconcile (loss) income from continuing operations to net cash used in operating activities from continuing operations: |
||||||||
| Equity in income of investment in unconsolidated affiliates |
( |
) | ( |
) | ||||
| Depreciation and amortization |
||||||||
| Noncash lease expense |
||||||||
| Gain on acquisition of assets, net |
( |
) | ||||||
| Noncash prepaid asset write-off |
||||||||
| Deferred income taxes |
( |
) | ( |
) | ||||
| Noncash stock-based compensation |
||||||||
| Other, net |
( |
) | ||||||
| Changes in operating assets and liabilities: |
||||||||
| Accounts and notes receivable |
( |
) | ( |
) | ||||
| Inventories |
( |
) | ( |
) | ||||
| Other current assets |
( |
) | ||||||
| Other noncurrent assets |
( |
) | ( |
) | ||||
| Accounts payable |
( |
) | ||||||
| Accrued liabilities |
( |
) | ( |
) | ||||
| Other noncurrent liabilities |
( |
) | ( |
) | ||||
| Net cash used in operating activities from continuing operations |
( |
) | ( |
) | ||||
| Net cash used in operating activities from discontinued operations |
( |
) | ( |
) | ||||
| Net cash used in operating activities |
( |
) | ( |
) | ||||
| Investing activities: |
||||||||
| Capital expenditures |
( |
) | ( |
) | ||||
| Cash received from sale of businesses, net |
||||||||
| Increase in receivable from affiliate |
( |
) | ( |
) | ||||
| Other, net |
( |
) | ||||||
| Net cash (used in) provided by investing activities from continuing operations |
( |
) | ||||||
| Net cash used in investing activities from discontinued operations |
( |
) | ||||||
| Net cash (used in) provided by investing activities |
( |
) | ||||||
| Financing activities: |
||||||||
| Net borrowings (repayments) on revolving loan facilities |
( |
) | ||||||
| Repayments of long-term debt |
( |
) | ( |
) | ||||
| Principal payments on note payable |
( |
) | ||||||
| Dividends paid to parent |
( |
) | ( |
) | ||||
| Distributions paid to noncontrolling interests |
( |
) | ||||||
| Other, net |
( |
) | ||||||
| Net cash provided by (used in) financing activities |
( |
) | ||||||
| Effect of exchange rate changes on cash |
( |
) | ||||||
| Increase (decrease) in cash and cash equivalents |
( |
) | ||||||
| Cash and cash equivalents at beginning of period |
||||||||
| Cash and cash equivalents at end of period |
$ | $ | ||||||
| Supplemental cash flow information: |
||||||||
| Cash paid for interest |
$ | $ | ||||||
| Cash paid for income taxes |
||||||||
For both March 31, 2024 and 2023, the amount of capital expenditures in accounts payable was $21 million.
See accompanying notes to condensed consolidated financial statements.
HUNTSMAN CORPORATION AND SUBSIDIARIES
HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. GENERAL
Certain Definitions
For convenience in this report, the terms “Company,” “Huntsman,” “our,” “us” or “we” may be used to refer to Huntsman Corporation and, unless the context otherwise requires, its subsidiaries and predecessors. In this report, “Huntsman International” refers to Huntsman International LLC (our wholly-owned subsidiary).
In this report, we may use, without definition, the common names of competitors or other industry participants. We may also use the common names or abbreviations for certain chemicals or products.
Interim Financial Statements
Our unaudited interim condensed consolidated financial statements and Huntsman International’s unaudited interim condensed consolidated financial statements were prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP” or “U.S. GAAP”) and in management’s opinion reflect all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of results of operations, comprehensive (loss) income, financial position and cash flows for the periods presented. Results for interim periods are not necessarily indicative of those to be expected for the full year. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes to consolidated financial statements included in the Annual Report on Form 10-K for the year ended December 31, 2023 for our Company and Huntsman International.
Description of Businesses
We are a global manufacturer of diversified organic chemical products. We operate in
Huntsman Corporation and Huntsman International Financial Statements
Except where otherwise indicated, these notes relate to the condensed consolidated financial statements for both our Company and Huntsman International. The differences between our condensed consolidated financial statements and Huntsman International’s condensed consolidated financial statements relate primarily to different capital structures and purchase accounting recorded at our Company for the 2003 step-acquisition of Huntsman International Holdings LLC, the former parent company of Huntsman International that was merged into Huntsman International in 2005.
Principles of Consolidation
Our condensed consolidated financial statements include the accounts of our wholly-owned and majority-owned subsidiaries and any variable interest entities for which we are the primary beneficiary. Intercompany accounts and transactions have been eliminated.
Huntsman International declared and paid to us distributions in the form of certain affiliate accounts receivable during 2024 and 2023.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
2. ACCOUNTING STANDARDS
RECENTLY ADOPTED ACCOUNTING STANDARDS
On January 1, 2024, we adopted Financial Accounting Standards Board (FASB) Accounting Standards Update (ASU) No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures; however, the required disclosures are effective for our 2024 annual reporting and interim periods within fiscal years beginning after December 15, 2024. We are currently evaluating the impact of the adoption of this accounting standard on our consolidated financial statements and related disclosures.
ACCOUNTING STANDARDS PENDING ADOPTION IN FUTURE PERIODS
The following relevant accounting standard becomes effective subsequent to fiscal year 2024, and we are currently evaluating the impact of the future adoption of this accounting standard on our consolidated financial statements and related disclosures:
| ● | FASB ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, effective for annual periods of fiscal years beginning after December 15, 2024 and interim periods within fiscal years beginning after December 15, 2025 |
3. BUSINESS COMBINATIONS AND ACQUISITIONS
SEPARATION AND ACQUISITION OF ASSETS OF SLIC JOINT VENTURE
On January 31, 2024, we completed the planned separation and acquisition of assets of Shanghai Lianheng Isocyanate Company Ltd. (“SLIC”), our joint venture with BASF and three Chinese chemical companies. The final purchase price of the acquired assets will be determined based on an asset valuation, which we currently expect to be completed in the first half of 2024. The acquisition of the assets was funded in part with Huntsman Polyurethanes Shanghai Ltd., our 70%-owned consolidated joint venture in China (“HPS”), issuing a U.S. dollar equivalent note payable at closing of approximately $
The acquisition is being integrated into our Polyurethanes segment. Transaction costs related to this acquisition were material for the three months ended March 31, 2024.
We have accounted for the acquisition using the acquisition method. As such, we analyzed the fair value of assets acquired. The preliminary allocation of acquisition cost to the assets acquired is summarized as follow (dollars in millions):
| Fair value of assets acquired: | ||||
| Accounts receivable | $ | |||
| Inventories | ||||
| Property, plant and equipment | ||||
| Other long-term assets | ||||
| Deferred income taxes | ||||
| Total | $ |
The acquisition cost allocation is preliminary pending final determination of the fair value of assets acquired, including final valuation of certain inventories, property, plant and equipment, leases, other long-term assets and deferred taxes. It is possible that material changes to this preliminary valuation and allocation of acquisition cost could occur. The preliminary estimate of the total fair value of the assets acquired is in excess of the acquisition cost resulting in a preliminary net bargain purchase gain of approximately $
According to the operating agreement of the joint venture, SLIC sold all of its output to the joint venture partners with no external sales. After the separation and acquisition of assets, we use all of the output of the acquired assets for internal use. As such, the acquired business has no external revenues or net income.
4. DISCONTINUED OPERATIONS
SaLE of tEXTILE eFFECTS bUSINESS
On February 28, 2023, we completed the sale of our textile chemicals and dyes business (“Textile Effects Business”) to Archroma, a portfolio company of SK Capital Partners (“Archroma”), and during the first quarter of 2024, we finalized the purchase price valued at $
The following table reconciles major line items constituting pretax (loss) income of discontinued operations to after-tax (loss) income of discontinued operations, primarily related to our Textile Effects Business, as presented in our condensed consolidated statements of operations (dollars in millions):
| Three months |
||||||||
| ended |
||||||||
| March 31, |
||||||||
| 2024 |
2023 |
|||||||
| Major line items constituting pretax (loss) income of discontinued operations: |
||||||||
| Trade sales, services and fees, net |
$ | $ | ||||||
| Cost of goods sold |
( |
) | ||||||
| (Loss) gain on sale of our Textile Effects Business, net |
( |
) | ||||||
| Other expense items, net |
( |
) | ||||||
| (Loss) income from discontinued operations before income taxes |
( |
) | ||||||
| Income tax benefit (expense) |
( |
) | ||||||
| Net (loss) income attributable to discontinued operations |
$ | ( |
) | $ | ||||
5. INVENTORIES
We state our inventories at the lower of cost or market, with cost determined using average cost, last-in first-out (“LIFO”) and first-in first-out methods for different components of inventory. Inventories consisted of the following (dollars in millions):
| March 31, | December 31, | |||||||
| 2024 | 2023 | |||||||
| Raw materials and supplies | $ | $ | ||||||
| Work in progress | ||||||||
| Finished goods | ||||||||
| Total | ||||||||
| LIFO reserves | ( | ) | ( | ) | ||||
| Net inventories | $ | $ | ||||||
For both March 31, 2024 and December 31, 2023, approximately
6. VARIABLE INTEREST ENTITIES
We evaluate our investments and transactions to identify variable interest entities for which we are the primary beneficiary. We hold a variable interest in the following joint ventures for which we are the primary beneficiary:
| ● |
Rubicon LLC is our |
| ● |
Arabian Amines Company (“AAC”) is our |
During the three months ended March 31, 2024, there were no changes in our variable interest entities.
Creditors of our variable interest entities have no recourse to our general credit. See “Note 8. Debt—Direct and Subsidiary Debt.” As the primary beneficiary of these variable interest entities at March 31, 2024, the joint ventures’ assets, liabilities and results of operations are included in our condensed consolidated financial statements.
The following table summarizes the carrying amounts of our variable interest entities’ assets and liabilities included in our condensed consolidated balance sheet as of March 31, 2024 and our consolidated balance sheet as of December 31, 2023 (dollars in millions):
| March 31, |
December 31, |
|||||||
| 2024 |
2023 |
|||||||
| Current assets |
$ | $ | ||||||
| Property, plant and equipment, net |
||||||||
| Operating lease right-of-use assets |
||||||||
| Other noncurrent assets |
||||||||
| Deferred income taxes |
||||||||
| Total assets |
$ | $ | ||||||
| Current liabilities |
$ | $ | ||||||
| Long-term debt |
||||||||
| Noncurrent operating lease liabilities |
||||||||
| Other noncurrent liabilities |
||||||||
| Deferred income taxes |
||||||||
| Total liabilities |
$ | $ | ||||||
Certain operating activities for our variable interest entities for the three months ended March 31, 2024 and 2023 are as follows (dollars in millions):
| Three months |
||||||||
| ended |
||||||||
| March 31, |
||||||||
| 2024 |
2023 |
|||||||
| Income from continuing operations before income taxes |
$ | $ | ||||||
| Net cash provided by operating activities |
||||||||
7. RESTRUCTURING, IMPAIRMENT AND PLANT CLOSING COSTS
As of March 31, 2024 and December 31, 2023, accrued restructuring costs by type of cost consisted of the following (dollars in millions):
| Workforce reductions |
Other restructuring costs |
Total |
||||||||||
| Accrued liabilities as of January 1, 2024 |
$ | $ | $ | |||||||||
| Charges |
||||||||||||
| Payments |
( |
) | ( |
) | ( |
) | ||||||
| Accrued liabilities as of March 31, 2024 |
$ | $ | $ | |||||||||
Details with respect to our reserves for restructuring, impairment and plant closing costs by segment are provided below (dollars in millions):
| Performance |
Advanced |
Corporate |
||||||||||||||||||
| Polyurethanes |
Products |
Materials |
and other |
Total |
||||||||||||||||
| Accrued liabilities as of January 1, 2024 |
$ | $ | $ | $ | $ | |||||||||||||||
| Charges |
||||||||||||||||||||
| Payments |
( |
) | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||||
| Accrued liabilities as of March 31, 2024 |
$ | $ | $ | $ | $ | |||||||||||||||
| Current portion of restructuring reserves |
$ | $ | $ | $ | $ | |||||||||||||||
| Long-term portion of restructuring reserves |
||||||||||||||||||||
Details with respect to cash and noncash restructuring charges from continuing operations for the three months ended March 31, 2024 and 2023 are provided below (dollars in millions):
| Three months |
||||||||
| ended |
||||||||
| March 31, |
||||||||
| 2024 |
2023 |
|||||||
| Cash charges (credits) |
$ | $ | ( |
) | ||||
| Noncash charges: |
||||||||
| Accelerated depreciation |
||||||||
| Total restructuring, impairment and plant closing costs (credits) |
$ | $ | ( |
) | ||||
Restructuring Activities
Beginning in the first quarter of 2024, our Advanced Materials segment implemented a restructuring program to optimize the segment’s manufacturing processes and cost structure in the U.S. to better align with future market opportunities. In connection with this restructuring program, we recorded net restructuring expense of approximately $
Beginning in the fourth quarter of 2022, we implemented a restructuring program to further realign our cost structure with additional restructuring in Europe. This program is associated with all of our segments and includes exiting and consolidating certain facilities, workforce relocation to lower cost locations and further personnel rationalization. In connection with this restructuring program, we recorded net restructuring expense of approximately $
Beginning in the first quarter of 2021, our Corporate function implemented a restructuring program to optimize our global approach to leveraging shared services capabilities. During the second quarter of 2022, this program was further expanded to include additional geographies. During the three months ended March 31, 2024, we recorded net restructuring expense of approximately During the first quarter of 2023, we evaluated the then current developments of this program and related anticipated cash costs, and we recorded a net restructuring credit of approximately $
Beginning in the second quarter of 2020, our Advanced Materials segment implemented restructuring programs in connection with our 2020 acquisition of CVC Thermoset Specialties, the alignment of the segment’s commercial organization and optimization of the segment’s manufacturing processes. In connection with these restructuring programs, we recorded net restructuring expense of approximately and $
Beginning in the third quarter of 2020, our Polyurethanes segment implemented a restructuring program to optimize its downstream footprint. During the second quarter of 2022, this optimization program was further expanded to include the entire Polyurethanes business. In connection with this restructuring program, we recorded net restructuring expense of approximately $
8. DEBT
Our outstanding debt, net of debt issuance costs, consisted of the following (dollars in millions):
| March 31, |
December 31, |
|||||||
| 2024 |
2023 |
|||||||
| Senior credit facilities: |
||||||||
| Revolving facility |
$ | $ | ||||||
| Senior notes |
||||||||
| Amounts outstanding under A/R programs |
||||||||
| Note payable |
||||||||
| Variable interest entities |
||||||||
| Other |
||||||||
| Total debt |
$ | $ | ||||||
| Current portion of debt |
$ | $ | ||||||
| Long-term portion of debt |
||||||||
| Total debt |
$ | $ | ||||||
Direct and Subsidiary Debt
Substantially all of our debt, including the facilities described below, has been incurred by our subsidiaries (primarily Huntsman International). Huntsman Corporation is not a guarantor of such subsidiary debt.
Certain of our subsidiaries have third-party debt agreements that contain certain restrictions with regard to dividends, distributions, loans or advances. In certain circumstances, the consent of a third party would be required prior to the transfer of any cash or assets from these subsidiaries to us.
Revolving Credit Facility
On May 20, 2022, Huntsman International entered into a new $
The following table presents certain amounts under our 2022 Revolving Credit Facility as of March 31, 2024 (monetary amounts in millions):
| Unamortized | ||||||||||||||||||||
| discounts and | ||||||||||||||||||||
| Committed | Principal | debt issuance | Carrying | |||||||||||||||||
| Facility | amount | outstanding | costs | value | Interest rate(2) | Maturity | ||||||||||||||
| 2022 Revolving Credit Facility | $ | $ | (1) | $ | $ |
|
| |||||||||||||
| (1) |
On March 31, 2024, we had an additional $ |
| (2) |
Interest rates on borrowings under the 2022 Revolving Credit Facility vary based on the type of loan and Huntsman International’s debt ratings. The representative interest rate for U.S. dollar borrowings as of March 31, 2024 was |
Senior Notes
Our senior notes consisted of the following (monetary amounts in millions):
| Unamortized |
||||||||||||
| premiums, |
||||||||||||
| discounts |
||||||||||||
| and debt |
||||||||||||
| Notes |
Maturity |
Interest rate |
Amount outstanding |
issuance costs |
||||||||
| 2025 Senior notes |
April 2025 |
% |
|
$ | ||||||||
| 2029 Senior notes |
February 2029 |
% |
|
|||||||||
| 2031 Senior notes |
June 2031 |
% |
|
|||||||||
A/R Programs
Our U.S. accounts receivable securitization program (“U.S. A/R Program”) and our European accounts receivable securitization program (“EU A/R Program” and collectively with the U.S. A/R Program, “A/R Programs”) are structured so that we transfer certain of our trade receivables to the U.S. special purpose entity (“U.S. SPE”) and the European special purpose entity (“EU SPE”) in transactions intended to be true sales or true contributions. The receivables collateralize debt incurred by the U.S. SPE and the EU SPE.
On January 22, 2024, we entered into an amendment to our U.S. A/R Program that extended the scheduled maturity date of our U.S. A/R Program from July 2024 to January 2027. In addition, on January 31, 2024, we entered into an amendment to our EU A/R Program, effective as of February 15, 2024, that extended the scheduled maturity date of our EU A/R Program from July 2024 to July 2027. Aside from the extended maturity dates, these amendments to our A/R Programs secured substantially similar terms as those in the prior agreements.
Information regarding our A/R Programs as of March 31, 2024 was as follows (monetary amounts in millions):
| Maximum funding |
Amount |
|||||||||||
| Facility |
Maturity |
availability(1) |
outstanding |
Interest rate(2) |
||||||||
| U.S. A/R Program |
|
$ | $ | (3) |
|
|||||||
| EU A/R Program |
|
€ | € |
|
||||||||
| (1) |
The amount of actual availability under our A/R Programs may be lower based on the level of eligible receivables sold, changes in the credit ratings of our customers, customer concentration levels and certain characteristics of the accounts receivable being transferred, as defined in the applicable agreements. |
| (2) |
The applicable rate for our U.S. A/R Program is defined by the lender as Term SOFR. The applicable rate for our EU A/R Program is either Term SOFR, EURIBOR or SONIA (Sterling Overnight Interbank Average Rate). |
| (3) |
As of March 31, 2024, we had |
As of March 31, 2024 and December 31, 2023, $
Note Payable
As of March 31, 2024, HPS had an outstanding note payable to SLIC denominated in Chinese renminbi, the equivalent of $
Variable Interest Entity Debt
As of March 31, 2024, AAC, our consolidated
Debt Issuance Costs
We record debt issuance costs related to a debt liability on the balance sheets as a reduction to the face amount of that debt liability. As of March 31, 2024 and December 31, 2023, the amount of debt issuance costs directly reducing the debt liability was $
Compliance with Covenants
Our 2022 Revolving Credit Facility contains a financial covenant regarding the leverage ratio of Huntsman International and its subsidiaries. The 2022 Revolving Credit Facility also contains other customary covenants and events of default for credit facilities of this type. Upon an event of default that is not cured or waived within any applicable cure periods, in addition to other remedies that may be available to the lenders, the obligations under the 2022 Revolving Credit Facility may be accelerated.
The agreements governing our A/R Programs also contain certain receivable performance metrics. Any material failure to meet the applicable A/R Programs’ metrics 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 2022 Revolving Credit Facility, which could require us to pay off the balance of the 2022 Revolving Credit Facility in full and could result in the loss of our 2022 Revolving Credit Facility.
We believe that we are in compliance with the covenants contained in the agreements governing our material debt instruments, including our 2022 Revolving Credit Facility, our A/R Programs and our senior notes.
9. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
We are exposed to market risks, such as changes in interest rates, foreign exchange rates and commodity prices. From time to time, we enter into transactions, including transactions involving derivative instruments, to manage certain of these exposures. We also hedge our net investment in certain European operations. Changes in the fair value of the hedge in the net investment of certain European operations are recorded in other accumulated comprehensive loss.
Our revenues and expenses are denominated in various foreign currencies, and our cash flows and earnings are thus subject to fluctuations due to exchange rate variations. From time to time, we may enter into foreign currency derivative instruments to minimize the short-term impact of movements in foreign currency rates. Where practicable, we generally net multicurrency cash balances among our subsidiaries to help reduce exposure to foreign currency exchange rates. Certain other exposures may be managed from time to time through financial market transactions, principally through the purchase of spot or forward foreign exchange contracts (generally with maturities of year or less). We do not hedge our foreign currency exposures in a manner that would eliminate the effect of changes in exchange rates on our cash flows and earnings. As of March 31, 2024 and 2023, we had approximately $
From time to time, we may purchase interest rate swaps and/or other derivative instruments to reduce the impact of changes in interest rates on our floating-rate exposures. Under interest rate swaps, we agree with other parties to exchange, at specified intervals, the difference between fixed-rate and floating-rate interest amounts calculated by reference to an agreed notional principal amount.
We review our non-U.S. dollar denominated debt and derivative instruments to determine the appropriate amounts designated as hedges. As of March 31, 2024, we have designated approximately million (approximately $
10. FAIR VALUE
The fair values of financial instruments were as follows (dollars in millions):
| March 31, 2024 | December 31, 2023 | |||||||||||||||
| Carrying | Estimated | Carrying | Estimated | |||||||||||||
| value | fair value | value | fair value | |||||||||||||
| Non-qualified employee benefit plan investments | $ | $ | $ | $ | ||||||||||||
| Long-term debt (including current portion) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
The carrying amounts reported in the balance sheets of cash and cash equivalents, accounts receivable and accounts payable approximate fair value because of the immediate or short-term maturity of these financial instruments. The fair values of non-qualified employee benefit plan investments are obtained through market observable pricing using prevailing market prices (Level 1). The fair values of our senior notes are based on quoted market prices for the identical liability when traded in an active market (Level 1), and the fair values of all our other outstanding debt are based on observable inputs other than quoted prices (Level 2). The fair value estimates presented herein are based on pertinent information available to management as of March 31, 2024 and December 31, 2023. Although we are not aware of any factors that would significantly affect the estimated fair value amounts, such amounts have not been comprehensively revalued for purposes of these financial statements since March 31, 2024, and current estimates of fair value may differ significantly from the amounts presented herein.
During the three months ended March 31, 2024, we held
11. REVENUE RECOGNITION
The following tables disaggregate our revenue from continuing operations by major source for the three months ended March 31, 2024 and 2023 (dollars in millions):
| Performance |
Advanced |
Corporate and |
||||||||||||||||||
| 2024 |
Polyurethanes |
Products |
Materials |
eliminations |
Total |
|||||||||||||||
| Primary geographic markets(1) |
||||||||||||||||||||
| U.S. and Canada |
$ | $ | $ | $ | ( |
) | $ | |||||||||||||
| Europe |
( |
) | ||||||||||||||||||
| Asia Pacific |
( |
) | ||||||||||||||||||
| Rest of world |
||||||||||||||||||||
| $ | $ | $ | $ | ( |
) | $ | ||||||||||||||
| Major product groupings |
||||||||||||||||||||
| Diversified |
$ | $ | $ | |||||||||||||||||
| Specialty |
$ | |||||||||||||||||||
| Other |
||||||||||||||||||||
| Eliminations |
$ | ( |
) | ( |
) | |||||||||||||||
| $ | $ | $ | $ | ( |
) | $ | ||||||||||||||
| Performance |
Advanced |
Corporate and |
||||||||||||||||||
| 2023 |
Polyurethanes |
Products |
Materials |
eliminations |
Total |
|||||||||||||||
| Primary geographic markets(1) |
||||||||||||||||||||
| U.S. and Canada |
$ | $ | $ | $ | ( |
) | $ | |||||||||||||
| Europe |
( |
) | ||||||||||||||||||
| Asia Pacific |
( |
) | ||||||||||||||||||
| Rest of world |
||||||||||||||||||||
| $ | $ | $ | $ | ( |
) | $ | ||||||||||||||
| Major product groupings |
||||||||||||||||||||
| Diversified |
$ | $ | $ | |||||||||||||||||
| Specialty |
$ | |||||||||||||||||||
| Other |
||||||||||||||||||||
| Eliminations |
$ | ( |
) | ( |
) | |||||||||||||||
| $ | $ | $ | $ | ( |
) | $ | ||||||||||||||
| (1) |
Geographic information for revenues is based upon countries into which product is sold. |
12. EMPLOYEE BENEFIT PLANS
Components of the net periodic benefit cost from continuing operations for the three months ended March 31, 2024 and 2023 were as follows (dollars in millions):
| Other postretirement |
||||||||||||||||
| Defined benefit plans |
benefit plans |
|||||||||||||||
| Three months |
Three months |
|||||||||||||||
| ended |
ended |
|||||||||||||||
| March 31, |
March 31, |
|||||||||||||||
| 2024 |
2023 |
2024 |
2023 |
|||||||||||||
| Service cost |
$ | $ | $ | $ | ||||||||||||
| Interest cost |
||||||||||||||||
| Expected return on assets |
( |
) | ( |
) | ||||||||||||
| Amortization of prior service benefit |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Amortization of actuarial loss |
||||||||||||||||
| Net periodic benefit cost |
$ | $ | $ | $ | ||||||||||||
During the three months ended March 31, 2024 and 2023, we made contributions to our pension and other postretirement benefit plans related to continuing operations of $
13. HUNTSMAN CORPORATION STOCKHOLDERS’ EQUITY
Share Repurchase Program
On October 26, 2021, our Board of Directors approved a share repurchase program of $
Dividends on Common Stock
During the three months ended March 31, 2024 and 2023, we declared dividends of $
14. ACCUMULATED OTHER COMPREHENSIVE LOSS
The components of other comprehensive (loss) income and changes in accumulated other comprehensive loss by component were as follows (dollars in millions):
Huntsman Corporation
| Pension | ||||||||||||||||||||||||
| Foreign | and other | Amounts | Amounts | |||||||||||||||||||||
| currency | postretirement | attributable to | attributable to | |||||||||||||||||||||
| translation | benefits | noncontrolling | Huntsman | |||||||||||||||||||||
| adjustments(1) | adjustments(2) | Other, net | Total | interests | Corporation | |||||||||||||||||||
| Beginning balance, January 1, 2024 | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | ||||||||
| Other comprehensive (loss) income before reclassifications, gross | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||
| Tax impact | ||||||||||||||||||||||||
| Amounts reclassified from accumulated other comprehensive loss, gross(3) | ||||||||||||||||||||||||
| Tax impact | ||||||||||||||||||||||||
| Net current-period other comprehensive (loss) income | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||
| Ending balance, March 31, 2024 | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||||
| (1) | Amounts are net of tax of $ |
| (2) | Amounts are net of tax of $ |
| (3) | See table below for details about these reclassifications. |
| Pension | ||||||||||||||||||||||||
| Foreign | and other | Amounts | Amounts | |||||||||||||||||||||
| currency | postretirement | attributable to | attributable to | |||||||||||||||||||||
| translation | benefits | noncontrolling | Huntsman | |||||||||||||||||||||
| adjustments(1) | adjustments(2) | Other, net | Total | interests | Corporation | |||||||||||||||||||
| Beginning balance, January 1, 2023 | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||||
| Other comprehensive income (loss) before reclassifications, gross | ( | ) | ( | ) | ( | ) | ||||||||||||||||||
| Tax impact | ||||||||||||||||||||||||
| Amounts reclassified from accumulated other comprehensive loss, gross(3) | ||||||||||||||||||||||||
| Tax impact | ( | ) | ||||||||||||||||||||||
| Net current-period other comprehensive income (loss) | ( | ) | ( | ) | ||||||||||||||||||||
| Ending balance, March 31, 2023 | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||||
| (1) | Amounts are net of tax of $ |
| (2) | Amounts are net of tax of $ |
| (3) | See table below for details about these reclassifications. |
| Three months ended March 31, | ||||||||||
| 2024 | 2023 | |||||||||
| Amounts reclassified | Amounts reclassified | Affected line item in | ||||||||
| from accumulated | from accumulated | the statement | ||||||||
| Details about accumulated other | other | other | where net income | |||||||
| comprehensive loss components(1): | comprehensive loss | comprehensive loss | is presented | |||||||
| Amortization of pension and other postretirement benefits: | ||||||||||
| Prior service credit | $ | ( | ) | $ | ( | ) | (2)(3) | Other income, net | ||
| Actuarial loss | (2)(3) | Other income, net | ||||||||
| Curtailment gains | ( | ) | (2)(4) | Other income, net | ||||||
| Settlement losses | (2)(4) | Other income, net | ||||||||
| Total before tax | ||||||||||
| Income tax expense | ||||||||||
| Total reclassifications for the period | $ | $ | Net of tax | |||||||
| (1) | Pension and other postretirement benefits amounts in parentheses indicate credits on our condensed consolidated statements of operations. |
| (2) | These accumulated other comprehensive loss components are included in the computation of net periodic pension costs. See “Note 12. Employee Benefit Plans.” |
| (3) | Amounts include approximately and $ |
| (4) | In connection with the sale of our Textile Effects Business, we recognized $ |
Huntsman International
| Pension | ||||||||||||||||||||||||
| Foreign | and other | Amounts | Amounts | |||||||||||||||||||||
| currency | postretirement | attributable to | attributable to | |||||||||||||||||||||
| translation | benefits | noncontrolling | Huntsman | |||||||||||||||||||||
| adjustments(1) | adjustments(2) | Other, net | Total | interests | International | |||||||||||||||||||
| Beginning balance, January 1, 2024 | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | ||||||||
| Other comprehensive (loss) income before reclassifications, gross | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||
| Tax impact | ||||||||||||||||||||||||
| Amounts reclassified from accumulated other comprehensive loss, gross(3) | ||||||||||||||||||||||||
| Tax impact | ||||||||||||||||||||||||
| Net current-period other comprehensive (loss) income | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||
| Ending balance, March 31, 2024 | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | ||||||||
| (1) | Amounts are net of tax of $ |
| (2) | Amounts are net of tax of $ |
| (3) | See table below for details about these reclassifications. |
| Pension | ||||||||||||||||||||||||
| Foreign | and other | Amounts | Amounts | |||||||||||||||||||||
| currency | postretirement | attributable to | attributable to | |||||||||||||||||||||
| translation | benefits | noncontrolling | Huntsman | |||||||||||||||||||||
| adjustments(1) | adjustments(2) | Other, net | Total | interests | International | |||||||||||||||||||
| Beginning balance, January 1, 2023 | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||||
| Other comprehensive income (loss) before reclassifications, gross | ( | ) | ( | ) | ||||||||||||||||||||
| Tax impact | ||||||||||||||||||||||||
| Amounts reclassified from accumulated other comprehensive loss, gross(3) | ||||||||||||||||||||||||
| Tax impact | ( | ) | ||||||||||||||||||||||
| Net current-period other comprehensive (loss) income | ( | ) | ||||||||||||||||||||||
| Ending balance, March 31, 2023 | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||||
| (1) | Amounts are net of tax of $ |
| (2) | Amounts are net of tax of $ |
| (3) | See table below for details about these reclassifications. |
| Three months ended March 31, | ||||||||||
| 2024 | 2023 | |||||||||
| Amounts reclassified | Amounts reclassified | Affected line item in | ||||||||
| from accumulated | from accumulated | the statement | ||||||||
| Details about accumulated other | other | other | where net income | |||||||
| comprehensive loss components(1): | comprehensive loss | comprehensive loss | is presented | |||||||
| Amortization of pension and other postretirement benefits: | ||||||||||
| Prior service credit | $ | ( | ) | $ | ( | ) | (2)(3) | Other income, net | ||
| Actuarial loss | (2)(3) | Other income, net | ||||||||
| Curtailment gains | ( | ) | (2)(4) | Other income, net | ||||||
| Settlement losses | (2)(4) | Other income, net | ||||||||
| Total before tax | ||||||||||
| Income tax expense | ||||||||||
| Total reclassifications for the period | $ | $ | Net of tax | |||||||
| (1) | Pension and other postretirement benefits amounts in parentheses indicate credits on our condensed consolidated statements of operations. |
| (2) | These accumulated other comprehensive loss components are included in the computation of net periodic pension costs. See “Note 12. Employee Benefit Plans.” |
| (3) | Amounts include approximately and $ |
| (4) | In connection with the sale of our Textile Effects Business, we recognized $ |
15. COMMITMENTS AND CONTINGENCIES
Legal Matters
On April 19, 2024, the Louisiana Fourth Circuit Court of Appeal affirmed the $
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. We do not believe that the outcome of any of these matters will have a material effect on our financial condition, results of operations or liquidity.
16. ENVIRONMENTAL, HEALTH AND SAFETY MATTERS
EHS Capital Expenditures
We may incur future costs for capital improvements and general compliance under environmental, health and safety (“EHS”) laws, including costs to acquire, maintain and repair pollution control equipment. For the three months ended March 31, 2024 and 2023, our capital expenditures from continuing operations for EHS matters totaled $
Environmental Reserves
We have accrued liabilities relating to anticipated environmental cleanup obligations, site reclamation and closure costs and known penalties. Liabilities are recorded when potential liabilities are either known or considered probable and can be reasonably estimated. Our liability estimates are calculated using present value techniques as appropriate and are based upon requirements placed upon us by regulators, available facts, existing technology and past experience. The environmental liabilities do not include amounts recorded as asset retirement obligations. We had accrued $
Environmental Matters
Under the Comprehensive Environmental Response, Compensation, and Liability Act (“CERCLA”) and similar state laws, a current or former owner or operator of real property in the U.S. may be liable for remediation costs regardless of whether the release or disposal of hazardous substances was in compliance with law at the time it occurred, and a current owner or operator may be liable regardless of whether it owned or operated the facility at the time of the release. Outside the U.S., analogous contaminated property laws can hold past owners and/or operators liable for remediation at former facilities. Currently, there are approximately 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.
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. Similar laws exist in a number of non-U.S. locations in which we currently operate, or previously operated, manufacturing facilities. Some of our manufacturing sites have an extended history of industrial chemical manufacturing and use, including on-site waste disposal. We are aware of soil, groundwater or surface contamination from past operations at some of our sites, and we may find contamination at other sites in the future. For example, our Geismar, Louisiana facility is the subject of ongoing remediation requirements imposed under RCRA.
17. STOCK-BASED COMPENSATION PLANS
As of March 31, 2024, we had approximately
The compensation cost from continuing operations under the stock-based compensation plans for our Company and Huntsman International were as follows (dollars in millions):
| Three months | ||||||||
| ended | ||||||||
| March 31, | ||||||||
| 2024 | 2023 | |||||||
| Huntsman Corporation compensation cost | $ | $ | ||||||
| Huntsman International compensation cost | ||||||||
The total income tax benefit recognized in the condensed consolidated statements of operations for us and Huntsman International for stock-based compensation arrangements was and $
Stock Options
The fair value of each stock option award is estimated on the date of grant using the Black-Scholes valuation model. Expected volatilities were 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.
During each of the three months ended March 31, 2024 and 2023,
A summary of stock option activity under the stock-based compensation plans as of March 31, 2024 and changes during the three months then ended is presented below:
| Weighted | ||||||||||||||||
| Weighted | average | |||||||||||||||
| average | remaining | Aggregate | ||||||||||||||
| exercise | contractual | intrinsic | ||||||||||||||
| Option awards | Shares | price | term | value | ||||||||||||
| (in thousands) | (years) | (in millions) | ||||||||||||||
| Outstanding at January 1, 2024 | $ | |||||||||||||||
| Exercised | ( | ) | ||||||||||||||
| Forfeited | ( | ) | ||||||||||||||
| Outstanding and exercisable at March 31, 2024 | $ | |||||||||||||||
As of March 31, 2024, there was
The total intrinsic value of stock options exercised during the three months ended March 31, 2024 and 2023 was approximately $
Nonvested Shares
Nonvested shares granted under the stock-based compensation plans consist of restricted stock and performance share unit awards, which are accounted for as equity awards, and phantom stock, which is accounted for as a liability award because it can be settled in either stock or cash. The fair value of each restricted stock and phantom stock award is estimated to be the closing stock price of Huntsman’s stock on the date of grant.
For our performance share unit awards, the performance criteria are total stockholder return of our common stock relative to the total stockholder return of a specified industry peer group for the -year performance periods. The fair value of each performance share unit award is estimated using a Monte Carlo simulation model that uses various assumptions, including an expected volatility rate and a risk-free interest rate. For the three months ended March 31, 2024 and 2023, the weighted-average expected volatility rate was
A summary of the status of our nonvested shares as of March 31, 2024 and changes during the three months then ended is presented below:
| Equity awards | Liability awards | ||||||||||||||||
| Weighted | Weighted | ||||||||||||||||
| average | average | ||||||||||||||||
| grant-date | grant-date | ||||||||||||||||
| Shares | fair value | Shares | fair value | ||||||||||||||
| (in thousands) | (in thousands) | ||||||||||||||||
| Nonvested at January 1, 2024 | $ | $ | |||||||||||||||
| Granted | |||||||||||||||||
| Vested | ( | ) | (1) | ( | ) | ||||||||||||
| Forfeited | ( | ) | (2) | ( | ) | ||||||||||||
| Nonvested at March 31, 2024 | |||||||||||||||||
| (1) | As of March 31, 2024, a total of |
| (2) | A total of |
As of March 31, 2024, there was approximately $
18. INCOME TAXES
We use the asset and liability method of accounting for income taxes. Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial and tax reporting purposes. We evaluate deferred tax assets to determine whether it is more likely than not that they will be realized. Valuation allowances are reviewed on an individual tax jurisdiction basis to analyze whether there is sufficient positive or negative evidence to support a change in judgment about the realizability of the related deferred tax assets. These conclusions require significant judgment. In evaluating the objective evidence that historical results provide, we consider the cyclicality of our businesses and cumulative income or losses during the applicable period. Cumulative losses incurred over the applicable period limits our ability to consider other subjective evidence such as our projections for the future. Changes in expected future income in applicable jurisdictions could affect the realization of deferred tax assets in those jurisdictions.
Huntsman Corporation
We recorded income tax benefit (expense) from continuing operations of $
Huntsman International
Huntsman International recorded income tax (benefit) expense from continuing operations of $
19. EARNINGS PER SHARE
Basic income per share excludes dilution and is computed by dividing net income attributable to Huntsman Corporation by the weighted average number of shares outstanding during the period. Diluted income per share reflects all potential dilutive common shares outstanding during the period and is computed by dividing net income attributable to Huntsman Corporation by the weighted average number of shares outstanding during the period increased by the number of additional shares that would have been outstanding as potential dilutive securities. Diluted income per share is computed using the treasury stock method for all stock-based awards. In periods with reported loss from continuing operations attributable to Huntsman Corporation, all stock-based awards are generally deemed anti-dilutive and would be excluded from the calculation of diluted income per share from continuing operations, discontinued operations and net income regardless of whether there is income or loss from discontinued operations and net income.
Basic and diluted (loss) income per share is determined using the following information (in millions):
| Three months |
||||||||
| ended |
||||||||
| March 31, |
||||||||
| 2024 |
2023 |
|||||||
| Numerator: |
||||||||
| (Loss) income from continuing operations attributable to Huntsman Corporation |
$ | ( |
) | $ | ||||
| Net (loss) income attributable to Huntsman Corporation |
$ | ( |
) | $ | ||||
| Denominator: |
||||||||
| Weighted average shares outstanding |
||||||||
| Dilutive shares: |
||||||||
| Stock-based awards |
||||||||
| Total weighted average shares outstanding, including dilutive shares |
||||||||
Additional stock-based awards of approximately
20. OPERATING SEGMENT INFORMATION
We derive our revenues, earnings and cash flows from the manufacture and sale of a wide variety of diversified organic chemical products. We have
The major products of each reportable operating segment are as follows:
| Segment |
|
Products |
| Polyurethanes |
|
MDI, polyols, TPU and other polyurethane-related products |
| Performance Products |
|
Performance amines, ethyleneamines and maleic anhydride |
| Advanced Materials |
|
Technologically-advanced epoxy, phenoxy, acrylic, polyurethane and acrylonitrile-butadiene-based polymer formulations; high performance thermoset resins, curing agents, toughening agents, and carbon nanomaterials |
Sales between segments are generally recognized at external market prices and are eliminated in consolidation. We use adjusted EBITDA to measure the financial performance of our global business units and for reporting the results of our operating segments. This measure includes all operating items relating to the businesses. The adjusted EBITDA of operating segments excludes items that principally apply to our Company as a whole. The following schedule includes revenues and adjusted EBITDA for each of our reportable operating segments (dollars in millions).
| Three months | ||||||||
| ended | ||||||||
| March 31, | ||||||||
| 2024 | 2023 | |||||||
| Revenues: | ||||||||
| Polyurethanes | $ | $ | ||||||
| Performance Products | ||||||||
| Advanced Materials | ||||||||
| Total reportable segments’ revenues | ||||||||
| Intersegment eliminations | ( | ) | ( | ) | ||||
| Total | $ | $ | ||||||
| Huntsman Corporation: | ||||||||
| Segment adjusted EBITDA(1): | ||||||||
| Polyurethanes | $ | $ | ||||||
| Performance Products | ||||||||
| Advanced Materials | ||||||||
| Total reportable segments’ adjusted EBITDA | ||||||||
| Reconciliation of total reportable segments’ adjusted EBITDA to (loss) income from continuing operations before income taxes: | ||||||||
| Interest expense, net—continuing operations | ( | ) | ( | ) | ||||
| Depreciation and amortization—continuing operations | ( | ) | ( | ) | ||||
| Corporate and other costs, net(2) | ( | ) | ( | ) | ||||
| Net income attributable to noncontrolling interests | ||||||||
| Other adjustments: | ||||||||
| Business acquisition and integration expenses and purchase accounting inventory adjustments | ( | ) | ( | ) | ||||
| Fair value adjustments to Venator investment, net | ( | ) | ||||||
| Certain legal and other settlements and related expenses | ( | ) | ( | ) | ||||
| Certain nonrecurring information technology project implementation costs | ( | ) | ||||||
| Amortization of pension and postretirement actuarial losses | ( | ) | ( | ) | ||||
| Restructuring, impairment and plant closing and transition (costs) credits(3) | ( | ) | ||||||
| (Loss) income from continuing operations before income taxes | ( | ) | ||||||
| Income tax benefit (expense)—continuing operations | ( | ) | ||||||
| (Loss) income from discontinued operations, net of tax | ( | ) | ||||||
| Net (loss) income | $ | ( | ) | $ | ||||
| Three months | ||||||||
| ended | ||||||||
| March 31, | ||||||||
| 2024 | 2023 | |||||||
| Huntsman International: | ||||||||
| Segment adjusted EBITDA(1): | ||||||||
| Polyurethanes | $ | $ | ||||||
| Performance Products | ||||||||
| Advanced Materials | ||||||||
| Total reportable segments’ adjusted EBITDA | ||||||||
| Reconciliation of total reportable segments’ adjusted EBITDA to (loss) income from continuing operations before income taxes: | ||||||||
| Interest expense, net—continuing operations | ( | ) | ( | ) | ||||
| Depreciation and amortization—continuing operations | ( | ) | ( | ) | ||||
| Corporate and other costs, net(2) | ( | ) | ( | ) | ||||
| Net income attributable to noncontrolling interests | ||||||||
| Other adjustments: | ||||||||
| Business acquisition and integration expenses and purchase accounting inventory adjustments | ( | ) | ( | ) | ||||
| Fair value adjustments to Venator investment, net | ( | ) | ||||||
| Certain legal and other settlements and related expenses | ( | ) | ( | ) | ||||
| Certain nonrecurring information technology project implementation costs | ( | ) | ||||||
| Amortization of pension and postretirement actuarial losses | ( | ) | ( | ) | ||||
| Restructuring, impairment and plant closing and transition (costs) credits(3) | ( | ) | ||||||
| (Loss) income from continuing operations before income taxes | ( | ) | ||||||
| Income tax benefit (expense)—continuing operations | ( | ) | ||||||
| (Loss) income from discontinued operations, net of tax | ( | ) | ||||||
| Net (loss) income | $ | ( | ) | $ | ||||
| (1) |
We use segment adjusted EBITDA as the measure of each segment’s profit or loss. We believe that segment adjusted EBITDA more accurately reflects what the chief operating decision maker uses to make decisions about resources to be allocated to the segments and assess their financial performance. Segment adjusted EBITDA is defined as net income of Huntsman Corporation or Huntsman International, as appropriate, before interest, income tax, depreciation and amortization, net income attributable to noncontrolling interests and certain Corporate and other items, as well as eliminating the following adjustments: (a) business acquisition and integration expenses and purchase accounting inventory adjustments; (b) fair value adjustments to Venator investment, net; (c) certain legal and other settlements and related expenses; (d) certain nonrecurring information technology project implementation costs; (e) amortization of pension and postretirement actuarial losses; (f) restructuring, impairment, plant closing and transition (costs) credits; and (g) (loss) income from discontinued operations, net of tax. |
| (2) | Corporate and other costs, net includes unallocated corporate overhead, unallocated foreign currency exchange gains and losses, LIFO inventory valuation reserve adjustments, nonoperating income and expense and gains and losses on the disposition of corporate assets. |
| (3) |
Includes costs associated with transition activities related primarily to our Corporate program to optimize our global approach to leverage shared services capabilities. |
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
As discussed in “Note 4. Discontinued Operations—Sale of Textile Effects Business” to our condensed consolidated financial statements, the results from continuing operations primarily exclude the results of our Textile Effects Business for all periods presented. For each of our Company and Huntsman International, the following tables set forth the condensed consolidated results of operations (dollars in millions, except per share amounts):
Huntsman Corporation
| Three months |
||||||||||||
| ended |
||||||||||||
| March 31, |
Percent |
|||||||||||
| 2024 |
2023 |
change |
||||||||||
| Revenues |
$ | 1,470 | $ | 1,606 | (8 | )% | ||||||
| Cost of goods sold |
1,269 | 1,337 | (5 | )% | ||||||||
| Gross profit |
201 | 269 | (25 | )% | ||||||||
| Operating expenses, net |
209 | 215 | (3 | )% | ||||||||
| Restructuring, impairment and plant closing costs (credits) |
11 | (7 | ) | NM | ||||||||
| Gain on acquisition of assets, net |
(52 | ) | — | NM | ||||||||
| Prepaid asset write-off |
71 | — | NM | |||||||||
| Operating (loss) income |
(38 | ) | 61 | NM | ||||||||
| Interest expense, net |
(19 | ) | (18 | ) | 6 | % | ||||||
| Equity in income of investment in unconsolidated affiliates |
19 | 12 | 58 | % | ||||||||
| Other expense, net |
2 | — | NM | |||||||||
| (Loss) income from continuing operations before income taxes |
(36 | ) | 55 | NM | ||||||||
| Income tax benefit (expense) |
20 | (11 | ) | NM | ||||||||
| (Loss) income from continuing operations |
(16 | ) | 44 | NM | ||||||||
| (Loss) income from discontinued operations, net of tax(1) |
(7 | ) | 122 | NM | ||||||||
| Net (loss) income |
(23 | ) | 166 | NM | ||||||||
| Reconciliation of net (loss) income to adjusted EBITDA: |
||||||||||||
| Net income attributable to noncontrolling interests |
(14 | ) | (13 | ) | 8 | % | ||||||
| Interest expense, net from continuing operations |
19 | 18 | 6 | % | ||||||||
| Income tax (benefit) expense from continuing operations |
(20 | ) | 11 | NM | ||||||||
| Income tax (benefit) expense from discontinued operations |
(1 | ) | 15 | NM | ||||||||
| Depreciation and amortization from continuing operations |
69 | 69 | — | |||||||||
| Other adjustments: |
||||||||||||
| Business acquisition and integration expenses and purchase accounting inventory adjustments |
20 | 1 | ||||||||||
| EBITDA from discontinued operations(1) |
8 | (137 | ) | |||||||||
| Fair value adjustments to Venator investment, net |
— | 1 | ||||||||||
| Certain legal and other settlements and related expenses |
1 | 1 | ||||||||||
| Certain nonrecurring information technology project implementation costs |
— | 2 | ||||||||||
| Amortization of pension and postretirement actuarial losses |
8 | 8 | ||||||||||
| Restructuring, impairment and plant closing and transition costs (credits)(2) |
14 | (6 | ) | |||||||||
| Adjusted EBITDA(3) |
$ | 81 | $ | 136 | (40 | )% | ||||||
| Net cash used in operating activities from continuing operations |
$ | (63 | ) | $ | (122 | ) | (48 | )% | ||||
| Net cash (used in) provided by investing activities from continuing operations |
(30 | ) | 493 | NM | ||||||||
| Net cash provided by (used in) financing activities |
108 | (379 | ) | NM | ||||||||
| Capital expenditures from continuing operations |
(42 | ) | (46 | ) | (9 | )% | ||||||
Huntsman International
| Three months |
||||||||||||
| ended |
||||||||||||
| March 31, |
Percent |
|||||||||||
| 2024 |
2023 |
change |
||||||||||
| Revenues |
$ | 1,470 | $ | 1,606 | (8 | )% | ||||||
| Cost of goods sold |
1,269 | 1,337 | (5 | )% | ||||||||
| Gross profit |
201 | 269 | (25 | )% | ||||||||
| Operating expenses, net |
207 | 213 | (3 | )% | ||||||||
| Restructuring, impairment and plant closing costs (credits) |
11 | (7 | ) | NM | ||||||||
| Gain on acquisition of assets, net |
(52 | ) | — | NM | ||||||||
| Prepaid asset write-off |
71 | — | NM | |||||||||
| Operating (loss) income |
(36 | ) | 63 | NM | ||||||||
| Interest expense, net |
(19 | ) | (18 | ) | 6 | % | ||||||
| Equity in income of investment in unconsolidated affiliates |
19 | 12 | 58 | % | ||||||||
| Other expense, net |
2 | — | NM | |||||||||
| (Loss) income from continuing operations before income taxes |
(34 | ) | 57 | NM | ||||||||
| Income tax benefit (expense) |
20 | (11 | ) | NM | ||||||||
| (Loss) income from continuing operations |
(14 | ) | 46 | NM | ||||||||
| (Loss) income from discontinued operations, net of tax(1) |
(7 | ) | 122 | NM | ||||||||
| Net (loss) income |
(21 | ) | 168 | NM | ||||||||
| Reconciliation of net (loss) income to adjusted EBITDA: |
||||||||||||
| Net income attributable to noncontrolling interests |
(14 | ) | (13 | ) | 8 | % | ||||||
| Interest expense, net from continuing operations |
19 | 18 | 6 | % | ||||||||
| Income tax (benefit) expense from continuing operations |
(20 | ) | 11 | NM | ||||||||
| Income tax (benefit) expense from discontinued operations |
(1 | ) | 15 | NM | ||||||||
| Depreciation and amortization from continuing operations |
69 | 69 | — | |||||||||
| Other adjustments: |
||||||||||||
| Business acquisition and integration expenses and purchase accounting inventory adjustments |
20 | 1 | ||||||||||
| EBITDA from discontinued operations(1) |
8 | (137 | ) | |||||||||
| Fair value adjustments to Venator investment, net |
— | 1 | ||||||||||
| Certain legal and other settlements and related expenses |
1 | 1 | ||||||||||
| Certain nonrecurring information technology project implementation costs |
— | 2 | ||||||||||
| Amortization of pension and postretirement actuarial losses |
8 | 8 | ||||||||||
| Restructuring, impairment and plant closing and transition costs (credits)(2) |
14 | (6 | ) | |||||||||
| Adjusted EBITDA(3) |
$ | 83 | $ | 138 | (40 | )% | ||||||
| Net cash used in operating activities from continuing operations |
$ | (62 | ) | $ | (122 | ) | (49 | )% | ||||
| Net cash (used in) provided by investing activities from continuing operations |
(39 | ) | 385 | NM | ||||||||
| Net cash provided by (used in) financing activities |
116 | (271 | ) | NM | ||||||||
| Capital expenditures from continuing operations |
(42 | ) | (46 | ) | (9 | )% | ||||||
Huntsman Corporation
| Three months |
Three months |
|||||||||||||||||||||||
| ended |
ended |
|||||||||||||||||||||||
| March 31, 2024 |
March 31, 2023 |
|||||||||||||||||||||||
| Tax and |
Tax and |
|||||||||||||||||||||||
| Gross |
other(4) |
Net |
Gross |
other(4) |
Net |
|||||||||||||||||||
| Reconciliation of net (loss) income to adjusted net income |
||||||||||||||||||||||||
| Net (loss) income |
$ | (23 | ) | $ | 166 | |||||||||||||||||||
| Net income attributable to noncontrolling interests |
(14 | ) | (13 | ) | ||||||||||||||||||||
| Business acquisition and integration expenses and purchase accounting inventory adjustments |
$ | 20 | $ | (18 | ) | 2 | $ | 1 | $ | — | 1 | |||||||||||||
| Loss (income) from discontinued operations(1)(5) |
8 | (1 | ) | 7 | (137 | ) | 15 | (122 | ) | |||||||||||||||
| Fair value adjustments to Venator investment, net |
— | — | — | 1 | — | 1 | ||||||||||||||||||
| Certain legal and other settlements and related expenses |
1 | — | 1 | 1 | — | 1 | ||||||||||||||||||
| Certain nonrecurring information technology project implementation costs |
— | — | — | 2 | — | 2 | ||||||||||||||||||
| Amortization of pension and postretirement actuarial losses |
8 | (1 | ) | 7 | 8 | (1 | ) | 7 | ||||||||||||||||
| Restructuring, impairment and plant closing and transition costs (credits)(2) |
14 | (5 | ) | 9 | (6 | ) | — | (6 | ) | |||||||||||||||
| Adjusted net (loss) income(3) |
$ | (11 | ) | $ | 37 | |||||||||||||||||||
| Weighted average shares-basic |
171.8 | 182.7 | ||||||||||||||||||||||
| Weighted average shares-diluted |
171.8 | 184.4 | ||||||||||||||||||||||
| Basic net (loss) income attributable to Huntsman Corporation per share: |
||||||||||||||||||||||||
| (Loss) income from continuing operations |
$ | (0.18 | ) | $ | 0.17 | |||||||||||||||||||
| (Loss) income from discontinued operations |
(0.04 | ) | 0.67 | |||||||||||||||||||||
| Net (loss) income |
$ | (0.22 | ) | $ | 0.84 | |||||||||||||||||||
| Diluted net (loss) income attributable to Huntsman Corporation per share: |
||||||||||||||||||||||||
| (Loss) income from continuing operations |
$ | (0.18 | ) | $ | 0.17 | |||||||||||||||||||
| (Loss) income from discontinued operations |
(0.04 | ) | 0.66 | |||||||||||||||||||||
| Net (loss) income |
$ | (0.22 | ) | $ | 0.83 | |||||||||||||||||||
| Other non-GAAP measures: |
||||||||||||||||||||||||
| Diluted adjusted net (loss) income per share(3) |
$ | (0.06 | ) | $ | 0.20 | |||||||||||||||||||
| Net cash used in operating activities from continuing operations |
$ | (63 | ) | $ | (122 | ) | ||||||||||||||||||
| Capital expenditures from continuing operations |
(42 | ) | (46 | ) | ||||||||||||||||||||
| Free cash flow from continuing operations(3) |
$ | (105 | ) | $ | (168 | ) | ||||||||||||||||||
| Effective tax rate |
56 | % | 20 | % | ||||||||||||||||||||
| Impact of non-GAAP adjustments(6) |
1 | % | (1 | )% | ||||||||||||||||||||
| Adjusted effective tax rate |
57 | % | 19 | % | ||||||||||||||||||||
NM—Not meaningful
| (1) |
Includes the net (loss) gain on the sale of our Textile Effects Business. |
| (2) |
Includes costs associated with transition activities related primarily to our Corporate program to optimize our global approach to leverage shared services capabilities. |
| (3) |
See “—Non-GAAP Financial Measures.” |
| (4) |
The income tax impacts, if any, are computed on the pre-tax adjustments using a with and without approach. |
| (5) |
In addition to income tax impacts, this adjusting item is also impacted by depreciation and amortization expense and interest expense. |
| (6) | For details regarding the tax impacts of our non-GAAP adjustments, please see the reconciliation of our net (loss) income to adjusted net income noted above. |
Non-GAAP Financial Measures
Our condensed consolidated financial statements are prepared in accordance with GAAP, which we supplement with certain non-GAAP financial information. These non-GAAP measures should not be considered in isolation or as a substitute for the related GAAP measures, and other companies may define such measures differently. We encourage investors to review our financial statements and the reconciliation of the non-GAAP financial measures to the most directly comparable GAAP financial measures in their entirety and not to rely on any single financial measure. These non-GAAP measures exclude the impact of certain income and expenses that we do not believe are indicative of our core operating results.
Adjusted EBITDA
Our management uses adjusted EBITDA to assess financial performance. Adjusted EBITDA is defined as net income of Huntsman Corporation or Huntsman International, as appropriate, before interest, income tax, depreciation and amortization, net income attributable to noncontrolling interests and certain Corporate and other items, as well as eliminating the following adjustments: (a) business acquisition and integration expenses and purchase accounting inventory adjustments; (b) EBITDA from discontinued operations; (c) fair value adjustments to Venator investment, net; (d) certain legal and other settlements and related expenses; (e) certain nonrecurring information technology project implementation costs; (f) amortization of pension and postretirement actuarial losses; and (g) restructuring, impairment and plant closing and transition costs (credits). We believe that net income of Huntsman Corporation or Huntsman International, as appropriate, is the performance measure calculated and presented in accordance with U.S. GAAP that is most directly comparable to adjusted EBITDA.
We believe adjusted EBITDA is useful to investors in assessing the businesses’ ongoing financial performance and provides improved comparability between periods through the exclusion of certain items that management believes are not indicative of the businesses’ operational profitability and that may obscure underlying business results and trends. However, this measure should not be considered in isolation or viewed as a substitute for net income of Huntsman Corporation or Huntsman International, as appropriate, or other measures of performance determined in accordance with U.S. GAAP. Moreover, adjusted EBITDA as used herein is not necessarily comparable to other similarly titled measures of other companies due to potential inconsistencies in the methods of calculation. Our management believes this measure is useful to compare general operating performance from period to period and to make certain related management decisions. Adjusted EBITDA is also used by securities analysts, lenders and others in their evaluation of different companies because it excludes certain items that can vary widely across different industries or among companies within the same industry. For example, interest expense can be highly dependent on a company’s capital structure, debt levels and credit ratings. Therefore, the impact of interest expense on earnings can vary significantly among companies. In addition, the tax positions of companies can vary because of their differing abilities to take advantage of tax benefits and because of the tax policies of the various jurisdictions in which they operate. As a result, effective tax rates and tax expense can vary considerably among companies. Finally, companies employ productive assets of different ages and utilize different methods of acquiring and depreciating such assets. This can result in considerable variability in the relative costs of productive assets and the depreciation and amortization expense among companies.
Nevertheless, our management recognizes that there are material limitations associated with the use of adjusted EBITDA in the evaluation of our Company as compared to net income of Huntsman Corporation or Huntsman International, as appropriate, which reflects overall financial performance. For example, we have borrowed money in order to finance our operations and interest expense is a necessary element of our costs and ability to generate revenue. Our management compensates for the limitations of using adjusted EBITDA by using this measure to supplement U.S. GAAP results to provide a more complete understanding of the factors and trends affecting the business rather than U.S. GAAP results alone.
Adjusted Net Income
Adjusted net income is computed by eliminating the after-tax amounts related to the following from net income attributable to Huntsman Corporation: (a) business acquisition and integration expenses and purchase accounting inventory adjustments; (b) loss (income) from discontinued operations; (c) fair value adjustments to Venator investment, net; (d) certain legal and other settlements and related expenses; (e) certain nonrecurring information technology project implementation costs; (f) amortization of pension and postretirement actuarial losses; and (g) restructuring, impairment and plant closing and transition costs (credits). Basic adjusted net income per share excludes dilution and is computed by dividing adjusted net income by the weighted average number of shares outstanding during the period. Adjusted diluted net income per share reflects all potential dilutive common shares outstanding during the period and is computed by dividing adjusted net income by the weighted average number of shares outstanding during the period increased by the number of additional shares that would have been outstanding as dilutive securities. Adjusted net income and adjusted net income per share amounts are presented solely as supplemental information.
We believe adjusted net income is useful to investors in assessing the businesses’ ongoing financial performance and provides improved comparability between periods through the exclusion of certain items that management believes are not indicative of the businesses’ operational profitability and that may obscure underlying business results and trends.
Free Cash Flow
We believe free cash flow is an important indicator of our liquidity as it measures the amount of cash we generate. Management internally uses a free cash flow measure: (a) to evaluate our liquidity, (b) evaluate strategic investments, (c) plan stock buyback and dividend levels and (d) evaluate our ability to incur and service debt.
Adjusted Effective Tax Rate
We believe that the effective tax rate of Huntsman Corporation or Huntsman International, as appropriate, is the performance measure calculated and presented in accordance with U.S. GAAP that is most directly comparable to adjusted effective tax rate. We believe our adjusted effective tax rate provides improved comparability between periods through the exclusion of certain items, such as, business acquisition and integration expenses and purchase accounting inventory adjustments, certain legal and other settlements and related expenses, gains on sale of businesses/assets and certain tax only items, including tax law changes not yet enacted, that we believe are not indicative of the businesses’ operational profitability and that may obscure underlying business results and trends.
Our forward-looking adjusted effective tax rate is calculated based on our forecast effective tax rate, and the range of our forward-looking adjusted effective tax rate equals the range of our forecast effective tax rate. We disclose forward-looking adjusted effective tax rate because we cannot adequately forecast certain items and events that may or may not impact us in the near future, such as business acquisition and integration expenses and purchase accounting inventory adjustments, certain legal and other settlements and related expenses, gains on sale of businesses/assets and certain tax only items, including tax law changes not yet enacted. Each of such adjustment has not yet occurred, is out of our control and/or cannot be reasonably predicted. In our view, our forward-looking adjusted effective tax rate represents the forecast effective tax rate on our underlying business operations but does not reflect any adjustments related to the items noted above that may occur and can cause our effective tax rate to differ.
Three Months Ended March 31, 2024 Compared with Three Months Ended March 31, 2023
For the three months ended March 31, 2024, loss from continuing operations attributable to Huntsman Corporation was $30 million, a decrease of $61 million from income of $31 million in the 2023 period. For the three months ended March 31, 2024, loss from continuing operations attributable to Huntsman International was $28 million, a decrease of $61 million from income of $33 million in the 2023 period. The decreases noted above were the result of the following items:
| ● |
Revenues for the three months ended March 31, 2024 decreased by $136 million, or 8%, as compared with the 2023 period. The decrease was primarily due to lower average selling prices in all our segments, partially offset by higher sales volumes in our Polyurethanes and Performance Products segments. See “—Segment Analysis” below. |
| ● |
Gross profit for the three months ended March 31, 2024 decreased by $68 million, or 25%, as compared with the 2023 period. The decrease resulted from lower gross profits in all our segments. See “—Segment Analysis” below. |
| ● |
Restructuring, impairment and plant closing costs (credits) were $11 million for the three months ended March 31, 2024 as compared with $(7) million in the 2023 period. For further information, see “Note 7. Restructuring, Impairment and Plant Closing Costs” to our condensed consolidated financial statements. |
| ● | Gain on acquisition of assets, net was approximately $52 million for the three months ended March 31, 2024 related to a preliminary net bargain purchase gain related to the separation and acquisition of assets of SLIC. For further information, see “Note 3. Business Combinations and Acquisitions—Separation and Acquisition of Assets of SLIC Joint Venture” to our condensed consolidated financial statements. |
| ● | Prepaid asset write-off was approximately $71 million for the three months ended March 31, 2024. Concurrent with the acquisition of assets of SLIC, we wrote off certain prepaid assets related to operating agreements with SLIC and other joint venture partners. For further information, see “Note 3. Business Combinations and Acquisitions—Separation and Acquisition of Assets of SLIC Joint Venture” to our condensed consolidated financial statements. |
| ● | Equity in income of investment in unconsolidated affiliates for the three months ended March 31, 2024 increased to $19 million from $12 million in the 2023 period, primarily related to an increase in income at our joint venture in China. |
| ● |
Our income tax benefit (expense) and the income tax benefit (expense) of Huntsman International for the three months ended March 31, 2024 was a benefit of $20 million as compared with expense of $11 million in the 2023 period. The increase in income tax benefit was primarily due to the increase in loss from continuing operations before income taxes as well as a discrete tax benefit of $18 million resulting from the write-off of certain prepaid assets related to operating agreements with SLIC and other joint venture partners concurrent with the separation and acquisition of assets of SLIC. For further information, see “Note 3. Business Combinations and Acquisitions—Separation and Acquisition of Assets of SLIC Joint Venture” to our condensed consolidated financial statements. Our income tax benefit (expense) is significantly affected by the mix of income and losses in the tax jurisdictions in which we operate along with the impact of valuation allowances in certain tax jurisdictions. For further information, see “Note 18. Income Taxes” to our condensed consolidated financial statements. |
Segment Analysis
| Three months |
Percent |
|||||||||||
| ended |
change |
|||||||||||
| March 31, |
(unfavorable ) |
|||||||||||
| (Dollars in millions) |
2024 |
2023 |
favorable |
|||||||||
| Revenues |
||||||||||||
| Polyurethanes |
$ | 926 | $ | 991 | (7 | )% | ||||||
| Performance Products |
291 | 334 | (13 | )% | ||||||||
| Advanced Materials |
261 | 289 | (10 | )% | ||||||||
| Total reportable segments’ revenues |
1,478 | 1,614 | (8 | )% | ||||||||
| Intersegment eliminations |
(8 | ) | (8 | ) | NM | |||||||
| Total |
$ | 1,470 | $ | 1,606 | (8 | )% | ||||||
| Huntsman Corporation |
||||||||||||
| Segment adjusted EBITDA(1) |
||||||||||||
| Polyurethanes |
$ | 39 | $ | 66 | (41 | )% | ||||||
| Performance Products |
42 | 71 | (41 | )% | ||||||||
| Advanced Materials |
43 | 48 | (10 | )% | ||||||||
| Total reportable segments’ adjusted EBITDA |
124 | 185 | (33 | )% | ||||||||
| Corporate and other |
(43 | ) | (49 | ) | 12 | % | ||||||
| Total |
$ | 81 | $ | 136 | (40 | )% | ||||||
| Huntsman International |
||||||||||||
| Segment adjusted EBITDA(1) |
||||||||||||
| Polyurethanes |
$ | 39 | $ | 66 | (41 | )% | ||||||
| Performance Products |
42 | 71 | (41 | )% | ||||||||
| Advanced Materials |
43 | 48 | (10 | )% | ||||||||
| Total reportable segments’ adjusted EBITDA |
124 | 185 | (33 | )% | ||||||||
| Corporate and other |
(41 | ) | (47 | ) | 13 | % | ||||||
| Total |
$ | 83 | $ | 138 | (40 | )% | ||||||
NM—Not meaningful
| (1) |
For further information, including reconciliation of total reportable segments’ adjusted EBITDA to income from continuing operations before income taxes of Huntsman Corporation or Huntsman International, as appropriate, see “Note 20. Operating Segment Information” to our condensed consolidated financial statements. |
| Three months ended March 31, 2024 vs 2023 |
||||||||||||
| Average selling price(1) |
||||||||||||
| Local |
Foreign currency |
Sales |
||||||||||
| currency and mix |
translation impact |
volumes(2) |
||||||||||
| Period-over-period increase (decrease) |
||||||||||||
| Polyurethanes |
(16 | )% | — | 9 | % | |||||||
| Performance Products |
(17 | )% | — | 4 | % | |||||||
| Advanced Materials |
(6 | )% | — | (4 | )% | |||||||
| (1) |
Excludes revenues from tolling arrangements, byproducts and raw materials. |
| (2) |
Excludes sales volumes of byproducts and raw materials. |
Polyurethanes
The decrease in revenues in our Polyurethanes segment for the three months ended March 31, 2024 compared to the same period of 2023 was primarily due to lower MDI average selling prices and unfavorable sales mix, partially offset by higher sales volumes. MDI average selling prices decreased primarily due to less favorable supply and demand dynamics. Sales volumes increased due to modestly improved demand and share gains in certain markets, primarily in the Americas and Europe regions. The decrease in segment adjusted EBITDA was primarily due to lower MDI average selling prices, partially offset by lower raw materials costs, higher sales volumes, higher equity earnings and cost savings from our cost optimization programs.
Performance Products
The decrease in revenues in our Performance Products segment for the three months ended March 31, 2024 compared to the same period of 2023 was primarily due to lower average selling prices and unfavorable sales mix, partially offset by higher sales volumes. Average selling prices decreased primarily due to competitive pressure, particularly in Europe. Sales volumes increased primarily due to improvement in industrial and construction activity as well as increased demand in coatings and adhesives and lubes markets. The decrease in segment adjusted EBITDA was primarily due to lower average selling prices, partially offset by higher sales volumes and lower raw materials costs.
Advanced Materials
The decrease in revenues in our Advanced Materials segment for the three months ended March 31, 2024 compared to the same period of 2023 was primarily due to lower average selling prices and lower sales volumes. Average selling prices decreased primarily in response to lower raw materials costs. Sales volumes decreased in our general industry and commodity markets, partially offset by an increase in our aerospace and electrical infrastructure markets in response to customer demand. The decrease in segment adjusted EBITDA was primarily due to lower sales volumes and foreign currency exchange rate fluctuations, partially offset by improved sales mix.
Corporate and other
Corporate and other includes unallocated corporate overhead, unallocated foreign currency exchange gains and losses, LIFO inventory valuation reserve adjustments, loss on early extinguishment of debt, unallocated restructuring, impairment and plant closing costs, nonoperating income and expense and gains and losses on the disposition of corporate assets. For the three months ended March 31, 2024, adjusted EBITDA from Corporate and other for Huntsman Corporation was a loss of $43 million as compared to a loss of $49 million for the same period of 2023. For the three months ended March 31, 2024, adjusted EBITDA from Corporate and other for Huntsman International was a loss of $41 million as compared to a loss of $47 million for the same period of 2023. The increase in adjusted EBITDA from Corporate and other resulted primarily from a decrease in corporate overhead, partially offset by a decrease in unallocated foreign currency exchange gains and an increase in LIFO valuation losses.
Liquidity and Capital Resources
The following is a discussion of our liquidity and capital resources and generally does not include separate information with respect to Huntsman International in accordance with General Instructions H(1)(a) and (b) of Form 10-Q.
Cash Flows for the Three Months Ended March 31, 2024 Compared with the Three Months Ended March 31, 2023
Net cash used in operating activities from continuing operations for the three months ended March 31, 2024 and 2023 was $63 million and $122 million, respectively. The decrease in net cash used in operating activities from continuing operations during the three months ended March 31, 2024 as compared with the same period of 2023 was primarily attributable to a net cash inflow of $112 million related to changes in operating assets and liabilities, partially offset by increased operating loss as described in “—Results of Operations” above for the three months ended March 31, 2024 as compared with the same period of 2023.
Net cash (used in) provided by investing activities from continuing operations for the three months ended March 31, 2024 and 2023 was $(30) million and $493 million, respectively. During the three months ended March 31, 2024 and 2023, we paid $42 million and $46 million for capital expenditures, respectively. During the three months ended March 31, 2024, we received $12 million for the sale of businesses, net, related to the resolution of net working capital from the sale of our Textile Effects Business. During the three months ended March 31, 2023, we received $541 million for the sale of businesses, net, primarily related to net proceeds of $530 million from the sale of our Textile Effects Business. See “Note 4. Discontinued Operations—Sale of Textile Effects Business” to our condensed consolidated financial statements.
Net cash provided by (used in) financing activities for the three months ended March 31, 2024 and 2023 was $108 million and $(379) million, respectively. During the three months ended March 31, 2024 and 2023, we had net borrowings from (repayments against) our 2022 Revolving Credit Facility and our A/R Programs of $191 million and $(220) million, respectively. During the three months ended March 31, 2024, HPS paid approximately $28 million against the note payable with SLIC for the acquisition of assets. See “Note 3. Business Combinations and Acquisitions—Separation and Acquisition of Assets of SLIC Joint Venture” to our condensed consolidated financial statements. During the three months ended March 31, 2023, we paid $97 million for repurchases of our common stock.
Free cash flow from continuing operations for the three months ended March 31, 2024 and 2023 was a use of cash of $105 million and $168 million, respectively. The increase in free cash flow from continuing operations was primarily attributable to a decrease in cash used in operating activities from continuing operations and a decrease in cash used for capital expenditures during the three months ended March 31, 2024 as compared with the same period of 2023.
Changes in Financial Condition
The following information summarizes our working capital position (dollars in millions):
| March 31, |
December 31, |
Increase |
Percent |
|||||||||||||
| 2024 |
2023 |
(decrease) |
change |
|||||||||||||
| Cash and cash equivalents |
$ | 552 | $ | 540 | $ | 12 | 2 | % | ||||||||
| Accounts and notes receivable, net |
837 | 753 | 84 | 11 | % | |||||||||||
| Inventories |
896 | 867 | 29 | 3 | % | |||||||||||
| Other current assets |
158 | 154 | 4 | 3 | % | |||||||||||
| Total current assets |
2,443 | 2,314 | 129 | 6 | % | |||||||||||
| Accounts payable |
745 | 719 | 26 | 4 | % | |||||||||||
| Accrued liabilities |
386 | 395 | (9 | ) | (2 | )% | ||||||||||
| Current portion of debt |
396 | 12 | 384 | NM | ||||||||||||
| Current operating lease liabilities |
52 | 46 | 6 | 13 | % | |||||||||||
| Total current liabilities |
1,579 | 1,172 | 407 | 35 | % | |||||||||||
| Working capital |
$ | 864 | $ | 1,142 | $ | (278 | ) | (24 | )% | |||||||
Our working capital decreased by $278 million as a result of the net impact of the following significant changes:
| ● |
The increase in cash and cash equivalents of $12 million resulted from the matters identified on our condensed consolidated statements of cash flows. See also “—Cash Flows for the Three Months Ended March 31, 2024 Compared with the Three Months Ended March 31, 2023.” |
| ● | Accounts and notes receivable, net increased by $84 million primarily due to higher revenues in the first quarter of 2024 compared to the fourth quarter of 2023. |
| ● | Inventories increased by $29 million primarily due to seasonally higher inventory volumes. |
| ● |
Accounts payable increased by $26 million primarily due to higher inventory purchases, partially offset due to a decrease in non-trade payables related to insurance premiums. |
| ● | Accrued liabilities decreased by $9 million primarily due to a decrease in accrued restructuring costs and accrued rebates, partially offset by an increase in accrued compensation costs. |
| ● | Current portion of debt increased by $384 million primarily due to proceeds from net borrowings on our 2022 Revolving Credit Facility and an outstanding U.S. dollar equivalent note payable with SLIC of approximately $190 million for the acquisition of assets. |
Liquidity
We depend upon our cash, our 2022 Revolving Credit Facility, A/R Programs and other debt instruments to provide liquidity for our operations and working capital needs. As of March 31, 2024, we had $1,607 million of combined cash and unused borrowing capacity, consisting of $552 million in cash, $995 million in availability under our 2022 Revolving Credit Facility and $60 million in availability under our A/R Programs. Our liquidity can be significantly impacted by various factors. The following matters are expected to have a significant impact on our liquidity:
Short-Term Liquidity
| ● |
During 2024, we expect to spend approximately $200 million on capital expenditures. Our future expenditures include certain environmental, health and safety upgrades; expansions and upgrades of our existing manufacturing and other facilities; construction of new facilities; certain cost reduction projects, including those described below; and certain information technology expenditures. We expect to fund capital expenditures with cash provided by operations. |
| ● |
During the remainder of 2024, we expect to make additional contributions to our pension and other postretirement benefit plans of approximately $23 million. |
| ● | On January 31, 2024, we completed the planned separation and acquisition of assets of SLIC, our joint venture with BASF and three Chinese chemical companies. The final purchase price of the acquired assets will be determined based on an asset valuation, which we currently expect to be completed in the first half of 2024. The acquisition of the assets was funded in part with HPS issuing a U.S. dollar equivalent note payable at closing of approximately $218 million, as adjusted to reflect the preliminary valuation and is subject to further change pending the final valuation. As of March 31, 2024, the note payable has been reduced by approximately $28 million to reflect cash payments made during the quarter. We expect that the remainder of the note payable will be paid by the end of 2024 using available funds at HPS. Upon liquidation of the joint venture, all remaining cash of SLIC, primarily resulting from the proceeds received by SLIC, will be distributed back to the joint venture partners. We currently anticipate that the liquidation will be completed by mid-2025. |
| ● | On February 28, 2023, we completed the sale of our Textile Effects Business to Archroma, and during the first quarter of 2024, we finalized the purchase price valued at $597 million, which includes adjustments to the purchase price for working capital plus the assumption of underfunded pension liabilities. During the first quarter of 2024, we have paid cash taxes of approximately $1 million, and we expect to pay additional cash taxes of approximately $11 million. See “Note 4. Discontinued Operations—Sale of Textile Effects Business” to our condensed consolidated financial statements. |
| ● | During 2020 and 2021, management implemented cost realignment and synergy plans and, in November 2022, committed to further plans to realign our cost structure with additional restructuring in Europe, including exiting and consolidating certain facilities, workforce relocation to lower cost locations and further personnel rationalization. In connection with these plans, we have achieved combined annualized cost savings and synergy benefits in excess of $280 million. Associated with these plans, we expect total cash costs of approximately $293 million (including approximately $56 million of capital expenditures) through 2025, of which we have spent approximately $255 million through the first quarter of 2024 (including approximately $39 million of capital expenditures). Of the remaining cash costs, the majority will be payments related to our restructuring in Europe, primarily for personnel who have exited as of the end of 2023 as well as capital expenditures related to our research and development footprint, which is included in our overall future capital expenditures projections. |
| ● | As of March 31, 2024, we have approximately $547 million remaining under the authorization of our existing share repurchase program. Repurchases may be commenced or suspended from time to time without prior notice. |
Long-Term Liquidity
| ● | On January 22, 2024, we entered into an amendment to our U.S. A/R Program that extended the scheduled maturity date of our U.S. A/R Program from July 2024 to January 2027. In addition, on January 31, 2024, we entered into an amendment to our EU A/R Program, effective as of February 15, 2024, that extended the scheduled maturity date of our EU A/R Program from July 2024 to July 2027. Aside from the extended maturity dates, these amendments to our A/R Programs secured substantially similar terms as those in the prior agreements. |
| ● |
On April 19, 2024, the Louisiana Fourth Circuit Court of Appeal affirmed the $93.1 million jury verdict and district court judgment in our favor in our long-running court battle against Praxair/Linde, one of the industrial gas suppliers to our Geismar, Louisiana MDI manufacturing site. The case was filed after Praxair refused to maintain properly its own Geismar facility and then repeatedly failed to supply our requirements for industrial gases needed to manufacture MDI under long-term supply contracts that expired in 2013. After adding mandatory pre-judgment and post-judgment interest to the award, we expect damages to exceed $135 million before deducting for taxes and legal contingency fees. The award remains subject to further potential review but, if affirmed or reviewed by the Louisiana Supreme Court, we would expect to receive net proceeds of approximately $50 million to $60 million. We have not yet recognized the award in our condensed consolidated statements of operations and the timing of the resolution of this matter is uncertain. |
| ● | On February 16, 2024, our Board of Directors declared a $0.25 per share cash dividend on our common stock. This represents an approximate 5% increase from the previous dividend. |
As of March 31, 2024, we had $396 million classified as current portion of debt, including $195 million outstanding under our 2022 Revolving Credit Facility, an outstanding U.S. dollar equivalent note payable of approximately $190 million related to the separation and acquisition of assets of the SLIC joint venture, debt at our variable interest entities of $9 million and certain other short-term facilities and scheduled amortization payments totaling $2 million. We intend to renew, repay or extend the majority of these short-term facilities in the next twelve months.
As of March 31, 2024, we had approximately $529 million of cash and cash equivalents held by our foreign subsidiaries, including our variable interest entities. With the exception of certain amounts that we expect to repatriate in the foreseeable future, we intend to use cash held in our foreign subsidiaries to fund our local operations. Nevertheless, we could repatriate additional cash as dividends, and the repatriation of cash as a dividend would generally not be subject to U.S. taxation. However, such repatriation may potentially be subject to limited foreign withholding taxes.
For more information regarding our debt, see “Note 8. Debt” to our condensed consolidated financial statements.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to market risks, such as changes in interest rates, foreign exchange rates and commodity prices. From time to time, we enter into transactions, including transactions involving derivative instruments, to manage certain of these exposures. We also hedge our net investment in certain European operations. See “Note 9. Derivative Instruments and Hedging Activities” to our condensed consolidated financial statements.
ITEM 4. CONTROLS AND PROCEDURES
Our management, with the participation of our chief executive officer and chief financial officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of March 31, 2024. Based on this evaluation, our chief executive officer and chief financial officer have concluded that, as of March 31, 2024, 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 March 31, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act). However, we can only give reasonable assurance that our internal controls over financial reporting will prevent or detect material misstatements on a timely basis.
There have been no material developments with respect to the legal proceedings referenced in Part I, Item 3 of our Annual Report on Form 10-K for the year ended December 31, 2023.
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, 2023.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
The following table provides information with respect to shares of our common stock that we repurchased as part of our share repurchase program and shares of restricted stock granted under our stock incentive plans that we withheld upon vesting to satisfy our tax withholding obligations during the three months ended March 31, 2024.
| Total number of |
Approximate dollar |
|||||||||||||||
| shares purchased |
value of shares that |
|||||||||||||||
| Total number |
Average |
as part of publicly |
may yet be purchased |
|||||||||||||
| of shares |
price paid |
announced plans |
under the plans or |
|||||||||||||
| purchased |
per share(1) |
or programs(2) |
programs(2) |
|||||||||||||
| January 1 - January 31 |
— | $ | — | — | $ | 547,000,000 | ||||||||||
| February 1 - February 29 |
188,126 | 24.21 | — | 547,000,000 | ||||||||||||
| March 1 - March 31 |
— | — | — | 547,000,000 | ||||||||||||
| Total |
188,126 | 24.21 | — | |||||||||||||
| (1) | Represents net purchase price per share, exclusive of any fees or commissions. |
| (2) |
On October 26, 2021, our Board of Directors approved a share repurchase program of $1 billion. On March 25, 2022, our Board of Directors increased the authorization of our share repurchase program from $1 billion to $2 billion. The share repurchase program is supported by our free cash flow generation. Repurchases may be made in the open market, including through accelerated share repurchase programs, or in privately negotiated transactions, and repurchases may be commenced or suspended from time to time without prior notice. Shares of common stock acquired through the repurchase program are held in treasury at cost. During the three months ended March 31, 2024, we did not repurchase any shares of our common stock. |
EXHIBIT INDEX
| |
|
|
Incorporated by reference |
|||||
| Exhibit number |
|
Exhibit description |
Form |
Exhibit |
Filing date |
|||
| 10.1 | Master Amendment No. 11 to U.S. Receivables Loan Agreement, U.S. Servicing Agreement, U.S. Receivables Purchase Agreement and Transaction Documents, dated as of January 22, 2024 | 10-K | 10.43 | February 22, 2024 | ||||
| 10.2 | Further Amended and Restated European Receivables Loan Agreement, dated as of January 31, 2024 | 10-K | 10.44 | February 22, 2024 | ||||
| 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 |
* |
Inline XBRL Instance Document - The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document |
|
|
|
|||
| 101.SCH |
* |
Inline XBRL Taxonomy Extension Schema |
|
|
|
|||
| 101.CAL |
* |
Inline XBRL Taxonomy Extension Calculation Linkbase |
|
|
|
|||
| 101.LAB |
* |
Inline XBRL Taxonomy Extension Label Linkbase |
|
|
|
|||
| 101.PRE |
* |
Inline XBRL Taxonomy Extension Presentation Linkbase |
|
|
|
|||
| 101.DEF |
* |
Inline XBRL Taxonomy Extension Definition Linkbase |
|
|
|
|||
| 104 |
The cover page from this Quarterly Report on Form 10-Q, formatted in Inline XBRL and contained in Exhibit 101 |
|
|
|
||||
| * | Filed herewith |
||
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: May 3, 2024 |
HUNTSMAN CORPORATION |
|
| |
HUNTSMAN INTERNATIONAL LLC |
|
| |
|
|
| |
By: |
/s/ PHILIP M. LISTER |
| |
|
Philip M. Lister |
| |
|
Executive Vice President and Chief Financial Officer |
| |
|
and Manager (Principal Financial Officer) |
| |
|
|
| |
By: |
/s/ STEVEN C. JORGENSEN |
| |
|
Steven C. Jorgensen |
| |
|
Vice President and Controller (Authorized Signatory and |
| |
|
Principal Accounting Officer) |