Huntsman Announces Strong and Consistent Growth in Second Quarter 2018 Earnings

Three months ended

Six months ended

June 30,

March 31,

June 30,

In millions, except per share amounts

2018

2017

2018

2018

2017

Revenues

$  2,404

$  2,054

$  2,295

$4,699

$  3,986

Net income

$    623

$    183

$    350

$   973

$     275

Adjusted net income(1)

$    246

$    144

$    237

$   483

$     254

Diluted income per share

$   1.71

$   0.69

$   1.11

$  2.82

$    1.00

Adjusted diluted income per share(1)

$   1.01

$   0.59

$   0.96

$  1.98

$    1.04

Adjusted EBITDA(1)

$    415

$    299

$    405

$   820

$     559

Net cash provided by operating activities

from continuing operations

$    228

$    207

$    111

$   339

$     277

Free cash flow(2)

$    174

$    154

$      56

$   230

$     177

See end of press release for footnote explanations

Call-in numbers for the conference call:

U.S. participants

(888) 680 - 0878

International participants

(617) 213 - 4855

Passcode

445 723 85#

Call-in numbers for the replay:

U.S. participants

(888) 286 - 8010

International participants

(617) 801 - 6888

Replay code

29385180

Table 1 – Results of Operations­­­­

Three months ended

Six months ended

June 30,

June 30,

In millions, except per share amounts

2018

2017

2018

2017

Revenues

$2,404

$2,054

$4,699

$3,986

Cost of goods sold

1,849

1,618

3,604

3,160

Gross profit

555

436

1,095

826

Operating expenses

254

220

496

439

Restructuring, impairment and plant closing costs

1

3

3

12

Expenses associated with the merger

1

6

1

6

Operating income

299

207

595

369

Interest expense

(29)

(47)

(56)

(95)

Equity in income of investment in unconsolidated affiliates

18

3

31

3

Loss on early extinguishment of debt

(3)

(1)

(3)

(1)

Other income, net

8

-

15

4

Income before income taxes

293

162

582

280

Income tax expense

(4)

(24)

(57)

(43)

Income from continuing operations

289

138

525

237

Income from discontinued operations, net of tax(3)

334

45

448

38

Net income

623

183

973

275

Net income attributable to noncontrolling interests, net of tax

(209)

(16)

(285)

(32)

Net income attributable to Huntsman Corporation

$   414

$   167

$   688

$   243

Adjusted EBITDA(1)

$   415

$   299

$   820

$   559

Adjusted net income(1)

$   246

$   144

$   483

$   254

Basic income per share

$  1.73

$  0.70

$  2.87

$  1.02

Diluted income per share

$  1.71

$  0.69

$  2.82

$  1.00

Adjusted diluted income per share(1)

$  1.01

$  0.59

$  1.98

$  1.04

Common share information:

Basic weighted average shares

239

238

240

238

Diluted weighted average shares

243

244

244

243

Diluted shares for adjusted diluted income per share

243

244

244

243

See end of press release for footnote explanations

Table 2 – Results of Operations by Segment

Three months ended

Six months ended

June 30,

Better /

June 30,

Better /

In millions

2018

2017

(Worse)

2018

2017

(Worse)

Segment Revenues:

Polyurethanes

$    1,313

$    1,022

28%

$    2,535

$    1,975

28%

Performance Products

593

561

6%

1,196

1,094

9%

Advanced Materials

292

260

12%

571

519

10%

Textile Effects

227

205

11%

427

393

9%

Corporate and eliminations

(21)

6

n/m

(30)

5

n/m

Total

$    2,404

$    2,054

17%

$    4,699

$    3,986

18%

Segment Adjusted EBITDA(1):

Polyurethanes

$      269

$      167

61%

$      530

$      311

70%

Performance Products

94

102

(8)%

196

186

5%

Advanced Materials

62

56

11%

121

110

10%

Textile Effects

29

24

21%

55

45

22%

Corporate, LIFO and other

(39)

(50)

22%

(82)

(93)

12%

Total

$      415

$      299

39%

$      820

$      559

47%

n/m = not meaningful

See end of press release for footnote explanations

Table 3 – Factors Impacting Sales Revenue

Three months ended

June 30, 2018 vs. 2017

Average Selling Price(a)

Local

Exchange

Sales Mix

Sales

Currency

Rate

& Other

Volume(b)

Total

Polyurethanes

10%

4%

0%

14%

28%

Polyurethanes, adj

10%

4%

5%

6%

25%

(c)(d)

Performance Products

4%

3%

5%

(6)%

6%

Performance Products, adj

4%

3%

4%

(3)%

8%

(c)(e)

Advanced Materials

4%

4%

2%

2%

12%

Textile Effects

3%

3%

(1)%

6%

11%

Total Company

6%

4%

1%

6%

17%

Total Company, adj

7%

4%

2%

3%

16%

(c)(d)(e) 

Six months ended

June 30, 2018 vs. 2017

Average Selling Price(a)

Local

Exchange

Sales Mix

Sales

Currency

Rate

& Other

Volume(b)

Total

Polyurethanes

12%

5%

(1)%

12%

28%

Polyurethanes, adj

12%

5%

1%

8%

26%

(c)(d)

Performance Products

5%

3%

0%

1%

9%

Performance Products, adj

6%

3%

(1)%

2%

10%

(c)(e)

Advanced Materials

3%

6%

2%

(1)%

10%

Textile Effects

1%

3%

1%

4%

9%

Total Company

7%

5%

(1)%

7%

18%

Total Company, adj

7%

5%

(1)%

6%

17%

(c)(d)(e) 

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

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

(c) Pro forma adjusted to exclude the impact from maintenance outages in 2Q17.

(d) Pro forma adjusted to exclude the impact from unplaned outages in 2Q18 at Rotterdam onset by third party constraints.

(e) Pro forma adjusted to exclude the impact from maintenance outages in 2Q18.

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

 Income Tax 

 Diluted Income 

 EBITDA 

(Expense) Benefit

 Net Income 

 Per Share 

Three months ended

Three months ended

Three months ended

Three months ended

June 30,

June 30,

June 30,

June 30,

In millions, except per share amounts

2018

2017

2018

2017

2018

2017

2018

2017

Net income

$      623

$      183

$      623

$      183

$2.57

$0.75

Net income attributable to noncontrolling interests

(209)

(16)

(209)

(16)

(0.86)

(0.07)

Net income attributable to Huntsman Corporation

414

167

414

167

1.71

0.69

Interest expense from continuing operations

29

47

Interest expense from discontinued operations(3)

11

-

Income tax expense from continuing operations

4

24

$        (4)

$      (24)

Income tax expense from discontinued operations(3)

84

21

Depreciation and amortization from continuing operations

83

79

Depreciation and amortization from discontinued operations(3)

-

29

Acquisition and integration expenses and purchase accounting adjustments

7

4

(2)

-

5

4

0.02

0.02

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

(429)

(95)

 N/A 

 N/A 

(334)

(45)

(1.38)

(0.18)

Noncontrolling interest of discontinued operations(1)(3)

188

3

 N/A 

 N/A 

188

3

0.77

0.01

U.S. tax reform impact on tax expense

 N/A 

 N/A 

49

-

49

-

0.20

-

Release of significant income tax valuation allowances (a)

 N/A 

 N/A 

(95)

-

(95)

-

(0.39)

-

Gain on disposition of businesses/assets

-

(8)

-

-

-

(8)

-

(0.03)

Loss on early extinguishment of debt

3

1

(1)

-

2

1

0.01

-

Expenses associated with merger, net of tax

1

6

-

-

1

6

-

0.02

Certain legal and other settlements and related expenses

1

1

-

-

1

1

-

-

Amortization of pension and postretirement actuarial losses

18

17

(4)

(4)

14

13

0.06

0.05

Restructuring, impairment and plant closing and transition costs 

1

3

-

(1)

1

2

-

0.01

Adjusted(1)

$      415

$      299

$      (57)

$      (29)

$      246

$      144

$1.01

$0.59

Adjusted income tax expense(1)

$       57

$       29

Net income attributable to noncontrolling interests, net of tax

209

16

Noncontrolling interest of discontinued operations(1)(3)

(188)

(3)

Adjusted pre-tax income(1)

$      324

$      186

Adjusted effective tax rate(4)

18%

16%

Effective tax rate

1%

15%

 Income Tax 

 Diluted Income 

 EBITDA 

Expense

 Net Income 

 Per Share 

Three months ended

Three months ended

Three months ended

Three months ended

March 31,

March 31,

March 31,

March 31,

In millions, except per share amounts

2018

2018

2018

2018

Net income

$      350

$      350

$1.42

Net income attributable to noncontrolling interests

(76)

(76)

(0.31)

Net income attributable to Huntsman Corporation

274

274

1.11

Interest expense from continuing operations

27

Interest expense from discontinued operations(3)

9

Income tax expense from continuing operations

53

$      (53)

Income tax expense from discontinued operations(3)

20

Depreciation and amortization from continuing operations

82

Acquisition and integration expenses and purchase accounting adjustments

1

-

1

-

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

(143)

 N/A 

(114)

(0.46)

Noncontrolling interest of discontinued operations(1)(3)

55

 N/A 

55

0.22

Certain legal and other settlements and related costs

7

(1)

6

0.02

Amortization of pension and postretirement actuarial losses

17

(4)

13

0.05

Restructuring, impairment and plant closing and transition costs

3

(1)

2

0.01

Adjusted(1)

$      405

$      (59)

$      237

$0.96

Adjusted income tax expense(1)

$       59

Net income attributable to noncontrolling interests, net of tax

76

Noncontrolling interest of discontinued operations(1)(3)

(55)

Adjusted pre-tax income(1)

$      317

Adjusted effective tax rate(4)

19%

Effective tax rate

18%

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

 Income Tax 

 Diluted Income 

 EBITDA 

(Expense) Benefit

 Net Income 

 Per Share 

Six months ended

Six months ended

Six months ended

Six months ended

June 30,

June 30,

June 30,

June 30,

In millions, except per share amounts

2018

2017

2018

2017

2018

2017

2018

2017

Net income

$      973

$      275

$      973

$      275

$3.98

$1.13

Net income attributable to noncontrolling interests

(285)

(32)

(285)

(32)

(1.17)

(0.13)

Net income attributable to Huntsman Corporation

688

243

688

243

2.82

1.00

Interest expense from continuing operations

56

95

Interest expense from discontinued operations(3)

20

-

Income tax expense from continuing operations

57

43

(57)

(43)

Income tax expense from discontinued operations(3)

104

24

Depreciation and amortization from continuing operations

165

155

Depreciation and amortization from discontinued operations(3)

-

59

Acquisition and integration expenses and purchase accounting adjustments

8

7

(2)

(1)

6

6

0.02

0.02

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

(572)

(121)

 N/A 

 N/A 

(448)

(38)

(1.83)

(0.16)

Noncontrolling interest of discontinued operations(1)(3)

243

6

 N/A 

 N/A 

243

6

1.00

0.02

U.S. tax reform impact on tax expense

 N/A 

 N/A 

49

-

49

-

0.20

-

Release of significant income tax valuation allowances (a)

 N/A 

 N/A 

(95)

-

(95)

-

(0.39)

-

Gain on disposition of businesses/assets

-

(8)

-

-

-

(8)

-

(0.03)

Loss on early extinguishment of debt

3

1

(1)

-

2

1

0.01

-

Expenses associated with merger

1

6

-

-

1

6

-

0.02

Certain legal and other settlements and related expenses

8

1

(1)

-

7

1

0.03

-

Amortization of pension and postretirement actuarial losses

35

36

(8)

(8)

27

28

0.11

0.12

Restructuring, impairment and plant closing and transition costs

4

12

(1)

(3)

3

9

0.01

0.04

Adjusted(1)

$      820

$      559

$     (116)

$      (55)

$      483

$      254

$1.98

$1.04

Adjusted income tax expense(1)

$      116

$       55

Net income attributable to noncontrolling interests, net of tax

285

32

Noncontrolling interest of discontinued operations(1)(3)

(243)

(6)

Adjusted pre-tax income(1)

$      641

$      335

Adjusted effective tax rate(4)

18%

16%

Effective tax rate

10%

15%

(a)

During the six months ended June 30, 2018, we released $95 million of valuation allowances in Switzerland and the U.K. We eliminated the effect of this significant change in tax valuation allowances from our presentation of adjusted net income to allow investors to better compare our ongoing financial performance from period to period. We do not adjust for insignificant changes in tax valuation allowances because we do not believe this provides more meaningful information than is provided under GAAP.

See end of press release for footnote explanations

Table 5 – Selected Balance Sheet Items

June 30,

March 31,

December 31,

In millions

2018

2018

2017

Cash

$            409

$            453

$            481

Accounts and notes receivable, net

1,377

1,407

1,283

Inventories

1,178

1,203

1,073

Other current assets

251

262

262

Current assets held for sale

3,158

3,060

2,880

Property, plant and equipment, net

3,014

3,117

3,098

Other noncurrent assets

1,667

1,201

1,167

Total assets

$       11,054

$       10,703

$       10,244

Accounts payable

$            993

$            993

$            964

Other current liabilities

469

533

569

Current portion of debt

255

36

40

Current liabilities held for sale

1,578

1,721

1,692

Long-term debt

2,311

2,298

2,258

Other noncurrent liabilities

1,378

1,353

1,350

Total equity

4,070

3,769

3,371

Total liabilities and equity

$       11,054

$       10,703

$       10,244

Table 6 – Outstanding Debt

June 30,

March 31,

December 31,

In millions

2018

2018

2017

Debt:

Credit facility

$            225

$              -

$              -

Accounts receivable programs

268

184

180

Senior notes

1,906

1,964

1,927

Variable interest entities

97

105

107

Other debt

70

81

84

Total debt - excluding affiliates

2,566

2,334

2,298

Total cash

409

453

481

Net debt - excluding affiliates(5)

$         2,157

$         1,881

$         1,817

LTM Adjusted EBITDA(1)

$         1,520

$         1,404

$         1,259

LTM Net income

950

834

636

Net debt - excluding affiliates / LTM Adjusted EBITDA(1)(5)

1.4x

1.3x

1.4x

Total debt - excluding affiliates / LTM Net income

2.7x

2.8x

3.6x

Table 7 – Summarized Statement of Cash Flows

Three months ended

Six months ended

June 30,

June 30,

In millions

2018

2017

2018

2017

Total cash at beginning of period(a)

$         676

$         469

$      719

$      425

Net cash provided by operating activities - continuing operations

228

207

339

277

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

249

94

301

117

Net cash used in investing activities - continuing operations

(411)

(48)

(480)

(95)

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

(94)

(12)

(161)

12

Net cash provided by (used in) financing activities

150

(193)

64

(224)

Effect of exchange rate changes on cash

(35)

3

(19)

8

-

Total cash at end of period(a)

$         763

$         520

$      763

$      520

Supplemental cash flow information - continuing operations:

Cash paid for interest

$          (47)

$          (56)

$       (59)

$       (92)

Cash (paid) received for income taxes

(51)

65

(77)

57

Cash paid for capital expenditures

(54)

(50)

(109)

(101)

Depreciation and amortization

83

79

165

155

-

Changes in primary working capital:

Accounts and notes receivable

10

(65)

(94)

(120)

Inventories

(2)

(28)

(107)

(137)

Accounts payable

14

(4)

50

79

Total cash received from (used in) primary working capital

$           22

$          (97)

$     (151)

$     (178)

Three months ended

Six months ended

June 30,

June 30,

2018

2017

2018

2017

Free cash flow(2):

Net cash provided by operating activities

$         228

$         207

$      339

$      277

Capital expenditures

(54)

(50)

(109)

(101)

All other investing activities, excluding acquisition 

   and disposition activities(b)

(1)

(3)

(1)

1

Non-recurring merger costs(c)

1

-

1

-

Total free cash flow 

$         174

$         154

$      230

$      177

Adjusted EBITDA

$         415

$         299

$      820

$      559

Capital expenditures

(54)

(50)

(109)

(101)

Capital reimbursements

1

-

2

1

Interest

(47)

(56)

(59)

(92)

Income taxes

(51)

65

(77)

57

Primary working capital change

22

(97)

(151)

(178)

Restructuring

(6)

(10)

(6)

(19)

Pensions

(28)

(22)

(59)

(37)

Maintenance & other

(78)

25

(131)

(13)

Total free cash flow(2) 

$         174

$         154

$      230

$      177

(a)

Includes restricted cash and cash held in discontinued operations.

(b) 

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

Footnotes

(1)

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

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

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

Adjusted net income (loss) and adjusted diluted income (loss) per share are computed by eliminating the after tax impact of the following items from net income (loss): (a) net income attributable to noncontrolling interest; (b) amortization of pension and postretirement actuarial losses (gains); (c) restructuring, impairment and plant closing costs (credits); and further adjusted for certain other items set forth in reconciliation of adjusted EBITDA to net income (loss) in Table 4 above.  The income tax impacts, if any, of each adjusting item represent a ratable allocation of the total difference between the unadjusted tax expense and the total adjusted tax expense, computed without consideration of any adjusting items using a with and without approach.

We do not provide reconciliations for adjusted EBITDA, adjusted net income (loss) or adjusted diluted income (loss) per share on a forward-looking basis because we are unable to provide a meaningful or accurate calculation or estimation of reconciling items and the information is not available without unreasonable effort. This is due to the inherent difficulty of forecasting the timing and amount of certain items, such as, but not limited to, (a) business acquisition and integration expenses and purchase accounting adjustments, (b) merger costs, and (c) certain legal and other settlements and related costs. Each of such adjustments has not yet occurred, are out of our control and/or cannot be reasonably predicted. For the same reasons, we are unable to address the probable significance of the unavailable information. 

(2)

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

(3)

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

(4)

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

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

(5)

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