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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

Form 10-Q

(Mark One)    

ý

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2012

OR

o

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                    to                  

 

Commission
File Number
  Exact Name of Registrant as Specified in its Charter,
Principal Office Address and Telephone Number
  State of Incorporation
or Organization
  I.R.S. Employer
Identification No.
 
 

001-32427

  Huntsman Corporation
500 Huntsman Way
Salt Lake City, Utah 84108
(801) 584-5700
  Delaware     42-1648585  
 

333-85141

 

Huntsman International LLC
500 Huntsman Way
Salt Lake City, Utah 84108
(801) 584-5700

 

Delaware

   
87-0630358
 



         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

  YES ý   NO o

Huntsman International LLC

  YES ý   NO o

         Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).

Huntsman Corporation

  YES ý   NO o

Huntsman International LLC

  YES ý   NO o

         Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer," and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):

Huntsman Corporation   Large accelerated filer ý   Accelerated filer o   Non-accelerated filer o   Smaller reporting company o
Huntsman International LLC   Large accelerated filer o   Accelerated filer o   Non-accelerated filer ý   Smaller reporting company o

         Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Huntsman Corporation

  YES o   NO ý

Huntsman International LLC

  YES o   NO ý



         On April 23, 2012, 239,329,000 shares of common stock of Huntsman Corporation were outstanding and 2,728 units of membership interests of Huntsman International LLC were outstanding. There is no trading market for Huntsman International LLC's units of membership interests. All of Huntsman International LLC's units of membership interests are held by Huntsman Corporation.



         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.

   


Table of Contents

HUNTSMAN CORPORATION AND SUBSIDIARIES
HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES
QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTERLY PERIOD
ENDED MARCH 31, 2012

TABLE OF CONTENTS

 
   
   
  Page

PART I

 

FINANCIAL INFORMATION

  3


ITEM 1.


 


Financial Statements:


 


3



 


Huntsman Corporation and Subsidiaries:


 

 



 

 

 


Condensed Consolidated Balance Sheets (Unaudited)


 


3



 

 

 


Condensed Consolidated Statements of Operations (Unaudited)


 


4



 

 

 


Condensed Consolidated Statements of Comprehensive Income (Unaudited)


 


5



 

 

 


Condensed Consolidated Statements of Cash Flows (Unaudited)


 


6



 

 

 


Condensed Consolidated Statements of Equity (Unaudited)


 


8



 


Huntsman International LLC and Subsidiaries:


 

 



 

 

 


Condensed Consolidated Balance Sheets (Unaudited)


 


9



 

 

 


Condensed Consolidated Statements of Operations (Unaudited)


 


10



 

 

 


Condensed Consolidated Statements of Comprehensive Income (Unaudited)


 


11



 

 

 


Condensed Consolidated Statements of Cash Flows (Unaudited)


 


12



 

 

 


Condensed Consolidated Statements of Equity (Unaudited)


 


14



 


Huntsman Corporation and Subsidiaries and Huntsman International LLC and Subsidiaries:


 

 



 

 

 


Notes to Condensed Consolidated Financial Statements (Unaudited)


 


15


ITEM 2.


 


Management's Discussion and Analysis of Financial Condition and Results of Operations


 


63


ITEM 3.


 


Quantitative and Qualitative Disclosures About Market Risk


 


81


ITEM 4.


 


Controls and Procedures


 


83


PART II


 


OTHER INFORMATION


 


84


ITEM 1.


 


Legal Proceedings


 


84


ITEM 1A.


 


Risk Factors


 


84


ITEM 2.


 


Unregistered Sales of Equity Securities and Use of Proceeds


 


84


ITEM 6.


 


Exhibits


 


85

2


Table of Contents


PART I. FINANCIAL INFORMATION

ITEM 1.    FINANCIAL STATEMENTS

        


HUNTSMAN CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(Dollars in Millions, Except Share and Per Share Amounts)

 
  March 31,
2012
  December 31,
2011
 

ASSETS

             

Current assets:

             

Cash and cash equivalents(a)

  $ 463   $ 554  

Restricted cash(a)

    15     8  

Accounts and notes receivable (net of allowance for doubtful accounts of $47 and $46, respectively), ($685 and $659 pledged as collateral, respectively)(a)

    1,801     1,529  

Accounts receivable from affiliates

    28     5  

Inventories(a)

    1,638     1,539  

Prepaid expenses

    48     46  

Deferred income taxes

    20     20  

Other current assets(a)

    196     245  
           

Total current assets

    4,209     3,946  

Property, plant and equipment, net(a)

    3,648     3,622  

Investment in unconsolidated affiliates

    223     202  

Intangible assets, net(a)

    87     91  

Goodwill

    108     114  

Deferred income taxes

    200     195  

Notes receivable from affiliates

    2     5  

Other noncurrent assets(a)

    476     482  
           

Total assets

  $ 8,953   $ 8,657  
           

LIABILITIES AND EQUITY

             

Current liabilities:

             

Accounts payable(a)

  $ 1,089   $ 862  

Accounts payable to affiliates

    39     50  

Accrued liabilities(a)

    658     695  

Deferred income taxes

    7     7  

Current portion of debt(a)

    193     212  
           

Total current liabilities

    1,986     1,826  

Long-term debt(a)

    3,628     3,730  

Notes payable to affiliates

    4     4  

Deferred income taxes

    328     309  

Other noncurrent liabilities(a)

    987     1,012  
           

Total liabilities

    6,933     6,881  

Commitments and contingencies (Notes 13 and 14)

             

Equity

             

Huntsman Corporation stockholders' equity:

             

Common stock $0.01 par value, 1,200,000,000 shares authorized, 243,364,206 and 241,836,001 issued and 237,786,226 and 235,746,087 outstanding in 2012 and 2011, respectively

    2     2  

Additional paid-in capital

    3,255     3,228  

Treasury stock, 4,043,526 shares at 2012 and 2011

    (50 )   (50 )

Unearned stock-based compensation

    (20 )   (12 )

Accumulated deficit

    (815 )   (947 )

Accumulated other comprehensive loss

    (468 )   (559 )
           

Total Huntsman Corporation stockholders' equity

    1,904     1,662  

Noncontrolling interests in subsidiaries

    116     114  
           

Total equity

    2,020     1,776  
           

Total liabilities and equity

  $ 8,953   $ 8,657  
           

(a)
At March 31, 2012 and December 31, 2011, respectively, $33 and $44 of cash and cash equivalents, $9 and $2 of restricted cash, $34 and $29 of accounts and notes receivable (net), $49 and $47 of inventories, $2 and $1 of other current assets, $399 and $403 of property, plant and equipment (net), $23 each of intangible assets (net), $22 and $21 of other noncurrent assets, $64 and $55 of accounts payable, $19 and $21 of accrued liabilities, $23 and $16 of current portion of debt, $256 and $264 of long-term debt, and $103 and $111 of other noncurrent liabilities from consolidated variable interest entities are included in the respective balance sheet captions above. See "Note 5. Variable Interest Entities."

   

See accompanying notes to condensed consolidated financial statements (unaudited).

3


Table of Contents


HUNTSMAN CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

(Dollars in Millions, Except Per Share Amounts)

 
  Three months
ended
March 31,
 
 
  2012   2011  

Revenues:

             

Trade sales, services and fees, net

  $ 2,853   $ 2,626  

Related party sales

    60     53  
           

Total revenues

    2,913     2,679  

Cost of goods sold

    2,363     2,219  
           

Gross profit

    550     460  

Operating expenses:

             

Selling, general and administrative

    221     218  

Research and development

    39     39  

Other operating expense

    5     34  

Restructuring, impairment and plant closing costs

        7  
           

Total expenses

    265     298  
           

Operating income

    285     162  

Interest expense, net

    (59 )   (59 )

Equity in income of investment in unconsolidated affiliates

    2     2  

Loss on early extinguishment of debt

    (1 )   (3 )
           

Income from continuing operations before income taxes

    227     102  

Income tax expense

    (60 )   (22 )
           

Income from continuing operations

    167     80  

Loss from discontinued operations, net of tax

    (4 )   (14 )
           

Income before extraordinary gain

    163     66  

Extraordinary gain on the acquisition of a business, net of tax of nil

        1  
           

Net income

    163     67  

Net income attributable to noncontrolling interests

        (5 )
           

Net income attributable to Huntsman Corporation

  $ 163   $ 62  
           

Basic income (loss) per share:

             

Income from continuing operations attributable to Huntsman Corporation common stockholders

  $ 0.71   $ 0.32  

Loss from discontinued operations attributable to Huntsman Corporation common stockholders, net of tax

    (0.02 )   (0.06 )
           

Net income attributable to Huntsman Corporation common stockholders

  $ 0.69   $ 0.26  
           

Weighted average shares

    236.5     237.6  
           

Diluted income (loss) per share:

             

Income from continuing operations attributable to Huntsman Corporation common stockholders

  $ 0.70   $ 0.31  

Loss from discontinued operations attributable to Huntsman Corporation common stockholders, net of tax

    (0.02 )   (0.05 )
           

Net income attributable to Huntsman Corporation common stockholders

  $ 0.68   $ 0.26  
           

Weighted average shares

    240.1     242.9  
           

Amounts attributable to Huntsman Corporation common stockholders:

             

Income from continuing operations

  $ 167   $ 75  

Loss from discontinued operations, net of tax

    (4 )   (14 )

Extraordinary gain on the acquisition of a business, net of tax

        1  
           

Net income

  $ 163   $ 62  
           

Dividends per share

  $ 0.10   $ 0.10  
           

   

See accompanying notes to condensed consolidated financial statements (unaudited).

4


Table of Contents


HUNTSMAN CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

(Dollars in Millions)

 
  Three months
ended
March 31,
 
 
  2012   2011  

Net income

  $ 163   $ 67  

Other comprehensive income, net of tax:

             

Foreign currency translations adjustments

    73     91  

Pension and other postretirement benefits adjustments

    19     4  

Other, net

    1     1  
           

Other comprehensive income

    93     96  
           

Comprehensive income

    256     163  

Comprehensive income attributable to noncontrolling interests

    (2 )   (6 )
           

Comprehensive income attributable to Huntsman Corporation

  $ 254   $ 157  
           

   

See accompanying notes to condensed consolidated financial statements (unaudited).

5


Table of Contents


HUNTSMAN CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(Dollars in Millions)

 
  Three months
ended
March 31,
 
 
  2012   2011  

Operating Activities:

             

Net income

  $ 163   $ 67  

Adjustments to reconcile net income to net cash provided by (used in) operating activities:

             

Extraordinary gain on the acquisition of a business, net of tax

        (1 )

Equity in income of investment in unconsolidated affiliates

    (2 )   (2 )

Depreciation and amortization

    109     103  

Loss on disposal of businesses/assets, net

    1      

Loss on early extinguishment of debt

    1     3  

Noncash interest expense

    7     8  

Deferred income taxes

    19     (16 )

Noncash loss (gain) on foreign currency transactions

    9     (3 )

Stock-based compensation

    10     8  

Other, net

    4     (1 )

Changes in operating assets and liabilities:

             

Accounts and notes receivable

    (239 )   (287 )

Inventories

    (65 )   (171 )

Prepaid expenses

    (1 )   1  

Other current assets

    53     (104 )

Other noncurrent assets

    (1 )   37  

Accounts payable

    186     213  

Accrued liabilities

    (51 )   73  

Other noncurrent liabilities

    (13 )   (52 )
           

Net cash provided by (used in) operating activities

    190     (124 )
           

Investing Activities:

             

Capital expenditures

    (81 )   (60 )

Investment in unconsolidated affiliates

    (34 )   (6 )

Cash received from unconsolidated affiliates

    15     9  

Acquisition of a business

    (2 )    

Increase in restricted cash

    (8 )    

Other, net

    1      
           

Net cash used in investing activities

    (109 )   (57 )
           

   

(Continued)

6


Table of Contents


HUNTSMAN CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (Continued)

(Dollars in Millions)

 
  Three months
ended
March 31,
 
 
  2012   2011  

Financing Activities:

             

Net repayments under revolving loan facilities

  $ (17 ) $  

Net borrowings on overdraft facilities

    3     7  

Repayments of short-term debt

    (4 )   (78 )

Borrowings on short-term debt

        65  

Repayments of long-term debt

    (109 )   (120 )

Proceeds from issuance of long-term debt

        9  

Repayments of notes payable

    (17 )   (9 )

Borrowings on notes payable

    1     1  

Debt issuance costs paid

    (4 )   (4 )

Call premiums related to early extinguishment of debt

    (1 )   (3 )

Dividends paid to common stockholders

    (24 )   (24 )

Repurchase and cancellation of stock awards

    (7 )   (8 )

Proceeds from issuance of common stock

    1     2  

Excess tax benefit related to stock-based compensation

    4     7  

Other, net

    (2 )   (1 )
           

Net cash used in financing activities

    (176 )   (156 )
           

Effect of exchange rate changes on cash

    4     3  
           

Decrease in cash and cash equivalents

    (91 )   (334 )

Cash and cash equivalents at beginning of period

    554     966  
           

Cash and cash equivalents at end of period

  $ 463   $ 632  
           

Supplemental cash flow information:

             

Cash paid for interest

  $ 82   $ 66  

Cash paid for income taxes

    13     5  

        During the three months ended March 31, 2012 and 2011, the amount of capital expenditures in accounts payable decreased by $13 million each.

   

See accompanying notes to condensed consolidated financial statements (unaudited).

7


Table of Contents

HUNTSMAN CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY (UNAUDITED)
(Dollars in Millions)

 
  Huntsman Corporation Stockholders    
   
 
 
  Shares    
   
   
   
   
   
   
   
 
 
   
   
   
   
   
  Accumulated
other
comprehensive
(loss) income
   
   
 
 
  Common
stock
  Common
stock
  Additional
paid-in
capital
  Treasury
stock
  Unearned
stock-based
compensation
  Accumulated
deficit
  Noncontrolling
interests in
subsidiaries
  Total
equity
 

Balance, January 1, 2012

    235,746,087   $ 2   $ 3,228   $ (50 ) $ (12 ) $ (947 ) $ (559 ) $ 114   $ 1,776  

Net income

                        163             163  

Other comprehensive income

                            91     2     93  

Issuance of nonvested stock awards

            12         (12 )                

Vesting of stock awards

    2,141,910         10                         10  

Recognition of stock-based compensation

            2         4                 6  

Repurchase and cancellation of stock awards

    (533,266 )                   (7 )           (7 )

Stock options exercised

    431,495         1                         1  

Excess tax benefit related to stock-based compensation

            4                         4  

Dividends paid on common stock

                        (24 )           (24 )

Acquisition of a business

            (2 )                       (2 )
                                       

Balance, March 31, 2012

    237,786,226   $ 2   $ 3,255   $ (50 ) $ (20 ) $ (815 ) $ (468 ) $ 116   $ 2,020  
                                       

Balance, January 1, 2011

   
236,799,455
 
$

2
 
$

3,186
 
$

 
$

(11

)

$

(1,090

)

$

(297

)

$

60
 
$

1,850
 

Net income

                        62         5     67  

Other comprehensive income

                            95     1     96  

Issuance of nonvested stock awards

            11         (11 )                

Vesting of stock awards

    2,030,309         13                         13  

Recognition of stock-based compensation

            1         4                 5  

Repurchase and cancellation of stock awards

    (503,913 )                   (8 )           (8 )

Stock options exercised

    707,740         2                         2  

Excess tax benefit related to stock-based compensation

            7                         7  

Dividends paid on common stock

                        (24 )           (24 )
                                       

Balance, March 31, 2011

    239,033,591   $ 2   $ 3,220   $   $ (18 ) $ (1,060 ) $ (202 ) $ 66   $ 2,008  
                                       

See accompanying notes to condensed consolidated financial statements (unaudited).

8


Table of Contents


HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(Dollars in Millions)

 
  March 31,
2012
  December 31,
2011
 

ASSETS

             

Current assets:

             

Cash and cash equivalents(a)

  $ 230   $ 231  

Restricted cash(a)

    15     8  

Accounts and notes receivable (net of allowance for doubtful accounts of $47 and $46, respectively), ($685 and $659 pledged as collateral, respectively)(a)

    1,801     1,529  

Accounts receivable from affiliates

    181     148  

Inventories(a)

    1,638     1,539  

Prepaid expenses

    46     46  

Deferred income taxes

    41     40  

Other current assets(a)

    196     220  
           

Total current assets

    4,148     3,761  

Property, plant and equipment, net(a)

    3,542     3,510  

Investment in unconsolidated affiliates

    223     202  

Intangible assets, net(a)

    89     93  

Goodwill

    108     114  

Deferred income taxes

    169     163  

Notes receivable from affiliates

    2     5  

Other noncurrent assets(a)

    476     482  
           

Total assets

  $ 8,757   $ 8,330  
           

LIABILITIES AND EQUITY

             

Current liabilities:

             

Accounts payable(a)

  $ 1,089   $ 862  

Accounts payable to affiliates

    43     64  

Accrued liabilities(a)

    654     694  

Deferred income taxes

    29     29  

Note payable to affiliate

    100     100  

Current portion of debt(a)

    193     212  
           

Total current liabilities

    2,108     1,961  

Long-term debt(a)

    3,628     3,730  

Notes payable to affiliates

    541     439  

Deferred income taxes

    155     106  

Other noncurrent liabilities(a)

    986     1,003  
           

Total liabilities

    7,418     7,239  

Commitments and contingencies (Notes 13 and 14)

             

Equity

             

Huntsman International LLC members' equity:

             

Members' equity, 2,728 units issued and outstanding

    3,092     3,081  

Accumulated deficit

    (1,351 )   (1,493 )

Accumulated other comprehensive loss

    (518 )   (611 )
           

Total Huntsman International LLC members' equity

    1,223     977  

Noncontrolling interests in subsidiaries

    116     114  
           

Total equity

    1,339     1,091  
           

Total liabilities and equity

  $ 8,757   $ 8,330  
           

(a)
At March 31, 2012 and December 31, 2011, respectively, $33 and $44 of cash and cash equivalents, $9 and $2 of restricted cash, $34 and $29 of accounts and notes receivable (net), $49 and $47 of inventories, $2 and $1 of other current assets, $399 and $403 of property, plant and equipment (net), $23 each of intangible assets (net), $22 and $21 of other noncurrent assets, $64 and $55 of accounts payable, $19 and $21 of accrued liabilities, $23 and $16 of current portion of debt, $256 and $264 of long-term debt, and $103 and $111 of other noncurrent liabilities from consolidated variable interest entities are included in the respective balance sheet captions above. See "Note 5. Variable Interest Entities."

   

See accompanying notes to condensed consolidated financial statements (unaudited).

9


Table of Contents


HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

(Dollars in Millions)

 
  Three months
ended March 31,
 
 
  2012   2011  

Revenues:

             

Trade sales, services and fees, net

  $ 2,853   $ 2,626  

Related party sales

    60     53  
           

Total revenues

    2,913     2,679  

Cost of goods sold

    2,359     2,214  
           

Gross profit

    554     465  

Operating expenses:

             

Selling, general and administrative

    219     217  

Research and development

    39     39  

Other operating expense

    5     34  

Restructuring, impairment and plant closing costs

        7  
           

Total expenses

    263     297  
           

Operating income

    291     168  

Interest expense, net

    (61 )   (64 )

Equity in income of investment in unconsolidated affiliates

    2     2  

Loss on early extinguishment of debt

    (1 )   (3 )
           

Income from continuing operations before income taxes

    231     103  

Income tax expense

    (61 )   (22 )
           

Income from continuing operations

    170     81  

Loss from discontinued operations, net of tax

    (4 )   (14 )
           

Income before extraordinary gain

    166     67  

Extraordinary gain on the acquisition of a business, net of tax of nil

        1  
           

Net income

    166     68  

Net income attributable to noncontrolling interests

        (5 )
           

Net income attributable to Huntsman International LLC

  $ 166   $ 63  
           

   

See accompanying notes to condensed consolidated financial statements (unaudited).

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HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

(Dollars in Millions)

 
  Three months
ended
March 31,
 
 
  2012   2011  

Net income

  $ 166   $ 68  

Other comprehensive income, net of tax:

             

Foreign currency translations adjustments

    73     93  

Pension and other postretirement benefits adjustments

    21     5  

Other, net

    1      
           

Other comprehensive income

    95     98  
           

Comprehensive income

    261     166  

Comprehensive income attributable to noncontrolling interests

    (2 )   (6 )
           

Comprehensive income attributable to Huntsman International LLC

  $ 259   $ 160  
           

   

See accompanying notes to condensed consolidated financial statements (unaudited).

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HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(Dollars in Millions)

 
  Three months
ended
March 31,
 
 
  2012   2011  

Operating Activities:

             

Net income

  $ 166   $ 68  

Adjustments to reconcile net income to net cash provided by (used in) operating activities:

             

Extraordinary gain on the acquisition of a business, net of tax

        (1 )

Equity in income of investment in unconsolidated affiliates

    (2 )   (2 )

Depreciation and amortization

    103     98  

Loss on disposal of businesses/assets, net

    1      

Loss on early extinguishment of debt

    1     3  

Noncash interest expense

    9     13  

Deferred income taxes

    47     (16 )

Noncash loss (gain) on foreign currency transactions

    9     (3 )

Noncash compensation

    9     7  

Other, net

    4     (1 )

Changes in operating assets and liabilities:

             

Accounts and notes receivable

    (239 )   (287 )

Inventories

    (65 )   (171 )

Prepaid expenses

    1     3  

Other current assets

    27     (104 )

Other noncurrent assets

    (1 )   37  

Accounts payable

    183     209  

Accrued liabilities

    (53 )   73  

Other noncurrent liabilities

    (11 )   (50 )
           

Net cash provided by (used in) operating activities

    189     (124 )
           

Investing Activities:

             

Capital expenditures

    (81 )   (60 )

(Increase) decrease in receivable from affiliate

    (20 )   8  

Investment in unconsolidated affiliates

    (34 )   (6 )

Cash received from unconsolidated affiliates

    15     9  

Acquisition of a business

    (2 )    

Increase in restricted cash

    (8 )    

Other, net

    1      
           

Net cash used in investing activities

    (129 )   (49 )
           

   

(Continued)

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HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (Continued)

(Dollars in Millions)

 
  Three months
ended
March 31,
 
 
  2012   2011  

Financing Activities:

             

Net repayments under revolving loan facilities

  $ (17 ) $  

Net borrowings on overdraft facilities

    3     7  

Repayments of short-term debt

    (4 )   (78 )

Borrowings on short-term debt

        65  

Repayments of long-term debt

    (109 )   (120 )

Proceeds from issuance of long-term debt

        9  

Proceeds from notes payable to affiliate

    102      

Repayments of notes payable

    (17 )   (9 )

Borrowings on notes payable

    1     1  

Debt issuance costs paid

    (4 )   (4 )

Call premiums related to early extinguishment of debt

    (1 )   (3 )

Dividends paid to parent

    (24 )   (8 )

Excess tax benefit related to stock-based compensation

    4     7  

Other, net

    1      
           

Net cash used in financing activities

    (65 )   (133 )
           

Effect of exchange rate changes on cash

    4     3  
           

Decrease in cash and cash equivalents

    (1 )   (303 )

Cash and cash equivalents at beginning of period

    231     561  
           

Cash and cash equivalents at end of period

  $ 230   $ 258  
           

Supplemental cash flow information:

             

Cash paid for interest

  $ 82   $ 66  

Cash paid for income taxes

    13     5  

        During the three months ended March 31, 2012 and 2011, the amount of capital expenditures in accounts payable decreased by $13 million each. During the three months ended March 31, 2012 and 2011, Huntsman Corporation contributed $9 million and $7 million related to stock-based compensation, respectively.

   

See accompanying notes to condensed consolidated financial statements (unaudited).

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HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY (UNAUDITED)

(Dollars in Millions)

 
  Huntsman International LLC Members    
   
 
 
  Members' equity    
  Accumulated
other
comprehensive
(loss) income
   
   
 
 
  Accumulated
deficit
  Noncontrolling
interests in
subsidiaries
  Total equity  
 
  Units   Amount  

Balance, January 1, 2012

    2,728   $ 3,081   $ (1,493 ) $ (611 ) $ 114   $ 1,091  

Net income

            166             166  

Other comprehensive income

                93     2     95  

Dividends paid to parent

            (24 )           (24 )

Acquisition of a business

        (2 )               (2 )

Contribution from parent

        9                 9  

Excess tax benefit related to stock-based compensation

        4                 4  
                           

Balance, March 31, 2012

    2,728   $ 3,092   $ (1,351 ) $ (518 ) $ 116   $ 1,339  
                           

Balance, January 1, 2011

   
2,728
 
$

3,049
 
$

(1,667

)

$

(354

)

$

60
 
$

1,088
 

Net income

            63         5     68  

Other comprehensive income

                97     1     98  

Contribution from parent

        7                 7  

Dividends paid to parent

            (8 )           (8 )

Excess tax benefit related to stock-based compensation

        7                 7  
                           

Balance, March 31, 2011

    2,728   $ 3,063   $ (1,612 ) $ (257 ) $ 66   $ 1,260  
                           

   

See accompanying notes to condensed consolidated financial statements (unaudited).

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HUNTSMAN CORPORATION AND SUBSIDIARIES

HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

1. GENERAL

CERTAIN DEFINITIONS

        For convenience in this report, the terms "Company," "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 100% owned subsidiary) and, unless the context otherwise requires, its subsidiaries; and "HPS" refers to Huntsman Polyurethanes Shanghai Ltd. (our consolidated splitting joint venture with Shanghai Chlor-Alkali Chemical Company, Ltd).

        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 interim condensed consolidated financial statements (unaudited) and Huntsman International's interim condensed consolidated financial statements (unaudited) 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 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 condensed consolidated financial statements (unaudited) 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, 2011 for our Company and Huntsman International.

DESCRIPTION OF BUSINESS

        We are a global manufacturer of differentiated organic chemical products and of inorganic chemical products. Our products comprise a broad range of chemicals and formulations, which we market globally to a diversified group of consumer and industrial customers. Our products are used in a wide range of applications, including those in the adhesives, aerospace, automotive, construction products, personal care and hygiene, durable and non-durable consumer products, electronics, medical, packaging, paints and coatings, power generation, refining, synthetic fiber, textile chemicals and dye industries. We are a leading global producer in many of our key product lines, including MDI, amines, surfactants, maleic anhydride, epoxy-based polymer formulations, textile chemicals, dyes and titanium dioxide.

        We operate in five segments: Polyurethanes, Performance Products, Advanced Materials, Textile Effects and Pigments. Our Polyurethanes, Performance Products, Advanced Materials and Textile Effects segments produce differentiated organic chemical products and our Pigments segment produces inorganic chemical products.

COMPANY

        Our Company, a Delaware corporation, was formed in 2004 to hold the Huntsman businesses. Jon M. Huntsman founded the predecessor to our Company in 1970 as a small packaging company.

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HUNTSMAN CORPORATION AND SUBSIDIARIES

HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

1. GENERAL (Continued)

Since then, we have grown through a series of acquisitions and now own a global portfolio of businesses.

        We operate all of our businesses through Huntsman International, our 100% owned subsidiary. Huntsman International is a Delaware limited liability company.

HUNTSMAN CORPORATION AND HUNTSMAN INTERNATIONAL FINANCIAL STATEMENTS

        Except where otherwise indicated, these notes relate to the condensed consolidated financial statements (unaudited) for both our Company and Huntsman International. The differences between our financial statements and Huntsman International's financial statements relate primarily to the following:

PRINCIPLES OF CONSOLIDATION

        Our condensed consolidated financial statements (unaudited) include the accounts of our wholly-owned and majority-owned subsidiaries and any variable interest entities for which we are the primary beneficiary. All intercompany accounts and transactions have been eliminated, except for intercompany sales between continuing and discontinued operations.

USE OF ESTIMATES

        The preparation of financial statements in conformity with 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.

RECENT DEVELOPMENTS

Amendment to Credit Agreement

        On March 6, 2012, Huntsman International entered into a seventh amendment to its senior secured credit facilities (the "Senior Credit Facilities"). The amendment among other things extended the maturity of our revolving credit facility ("Revolving Facility") from March 2014 to March 2017, increased capacity for revolving commitments to $400 million and extended $346 million of our term loan B facility ("Term Loan B"), which prior to this amendment had a maturity of April 2014, to a new stated maturity of April 2017 ("Extended Term Loan B—Series 2"). The amendment also increased the interest rate margin with respect to Extended Term Loan B—Series 2 to LIBOR plus 3.00%. For more information, see "Note 7. Debt—Direct and Subsidiary Debt—Amendment to Credit Agreement."

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HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

2. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

ACCOUNTING PRONOUNCEMENTS ADOPTED DURING 2012

        In May 2011, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2011-04, Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs, providing a consistent definition of fair value between U.S. GAAP and International Financial Reporting Standards ("IFRSs") as well as developing common requirements for measuring fair value and for disclosing information about fair value measurements in accordance with U.S. GAAP and IFRSs. The amendments in this ASU were effective prospectively for interim and annual periods beginning after December 15, 2011. We adopted the amendments of this ASU effective January 1, 2012, and the initial adoption of the amendments in this ASU did not have a significant impact on our condensed consolidated financial statements (unaudited).

        In June 2011, the FASB issued ASU No. 2011-05, Comprehensive Income (Topic 220): Presentation of Comprehensive Income, requiring entities to present net income and other comprehensive income in either a single continuous statement of comprehensive income or in two separate, but consecutive, statements of net income and other comprehensive income. The option to present components of other comprehensive income as part of the statement of equity is eliminated. The amendments do not change the option to present components of other comprehensive income either net of related tax effects or before related tax effects, with one amount shown for the aggregate income tax expense or benefit related to the total of other comprehensive income components. The amendments in this ASU were effective retrospectively for fiscal years, and interim periods within those years, beginning after December 15, 2011. We adopted this ASU effective January 1, 2012 and have presented our consolidated net income and consolidated comprehensive income in two separate, but consecutive, statements.

ACCOUNTING PRONOUNCEMENTS PENDING ADOPTION IN FUTURE PERIODS

        In September 2011, the FASB issued ASU No. 2011-08, Intangibles—Goodwill and Other (Topic 350): Testing Goodwill for Impairment. The guidance in this ASU is intended to reduce complexity and costs of the annual goodwill impairment test by providing entities with the option of performing a qualitative assessment to determine whether further impairment testing is necessary. The amendments in this ASU include examples of events and circumstances that might indicate that a reporting unit's fair value is less than its carrying value. The amendments in this ASU are effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011 with early adoption permitted. We did not early adopt the provisions of this ASU for our annual impairment test on July 1, 2011 and do not expect the adoption of the amendments in this ASU to have a significant impact on our condensed consolidated financial statements (unaudited).

3. BUSINESS COMBINATIONS

EMA ACQUISITION

        On December 30, 2011, we completed the acquisition of EMA Kimya Sistemleri Sanayi ve Ticaret A.S. (the "EMA Acquisition"), an MDI-based polyurethanes systems house in Istanbul, Turkey for

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HUNTSMAN CORPORATION AND SUBSIDIARIES

HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

3. BUSINESS COMBINATIONS (Continued)

approximately $11 million, net of cash acquired and including the repayment of assumed debt. We have accounted for the EMA Acquisition using the acquisition method and transaction costs charged to expense associated with this acquisition were not significant. For purposes of a preliminary allocation of the acquisition cost to assets acquired and liabilities assumed, we have assigned the excess of the acquisition cost over historical carrying values of $7 million to property, plant and equipment. This preliminary purchase price allocation is likely to change once we complete the analysis of the fair value of tangible and intangible assets acquired and liabilities assumed. Net sales and the net loss for the three months ended March 31, 2011 related to the business acquired were approximately $5 million and $(1) million, respectively.

LAFFANS ACQUISITION

        On April 2, 2011, we completed the acquisition of the chemical business of Laffans Petrochemicals Limited, an amines and surfactants manufacturer located in Ankleshwar, India (the "Laffans Acquisition") at a cost of approximately $23 million. The acquired business has been integrated into our Performance Products segment. Transaction costs charged to expense related to this acquisition were not significant.

        We have accounted for the Laffans Acquisition using the acquisition method. As such, we analyzed the fair value of tangible and intangible assets acquired and liabilities assumed. The allocation of acquisition cost to the assets acquired and liabilities assumed is summarized as follows (dollars in millions):

Acquisition cost

  $ 23  
       

Fair value of assets acquired and liabilities assumed:

       

Accounts receivable

  $ 9  

Inventories

    2  

Other current assets

    2  

Property, plant and equipment

    12  

Intangibles

    3  

Accounts payable

    (3 )

Accrued liabilities

    (1 )

Other noncurrent liabilities

    (1 )
       

Total fair value of net assets acquired

  $ 23  
       

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HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

3. BUSINESS COMBINATIONS (Continued)

        If this acquisition were to have occurred on January 1, 2011, the following estimated pro forma revenues and net income attributable to Huntsman Corporation and Huntsman International would have been reported (dollars in millions):

Huntsman Corporation

 
  Pro Forma
Three months
ended
March 31, 2011
 

Revenues

  $ 2,692  

Net income attributable to Huntsman Corporation

    62  

Huntsman International

 
  Pro Forma
Three months
ended
March 31, 2011
 

Revenues

  $ 2,692  

Net income attributable to Huntsman International

    63  

4. INVENTORIES

        Inventories are stated at the lower of cost or market, with cost determined using last-in first-out ("LIFO"), first-in first-out, and average costs methods for different components of inventory. Inventories consisted of the following (dollars in millions):

 
  March 31,
2012
  December 31,
2011
 

Raw materials and supplies

  $ 395   $ 374  

Work in progress

    103     92  

Finished goods

    1,226     1,162  
           

Total

    1,724     1,628  

LIFO reserves

    (86 )   (89 )
           

Net

  $ 1,638   $ 1,539  
           

        For both March 31, 2012 and December 31, 2011, approximately 12% of inventories were recorded using the LIFO cost method.

        In the normal course of operations we, at times, exchange raw materials and finished goods with other companies for the purpose of reducing transportation costs. The net nonmonetary open exchange positions are valued at cost. The amounts included in inventory under nonmonetary open exchange agreements receivable by us as of both March 31, 2012 and December 31, 2011 were $3 million. Other open exchanges are settled in cash and result in a net deferred profit margin. The amounts payable under these open exchange agreements as of March 31, 2012 and December 31, 2011 were $2 million and nil, respectively.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

5. VARIABLE INTEREST ENTITIES

        We evaluate our investments and transactions to identify variable interest entities ("VIEs") for which we are the primary beneficiary. We hold a variable interest in the following four joint ventures for which we are the primary beneficiary:

        Creditors of these VIEs have no recourse to our general credit, except in the event that we offer guarantees of specified indebtedness. As the primary beneficiary, the joint ventures' assets, liabilities and results of operations are included in our condensed consolidated financial statements (unaudited).

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HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

5. VARIABLE INTEREST ENTITIES (Continued)

        The following table summarizes the carrying amount of our variable interest entities' assets and liabilities included in our condensed consolidated balance sheets (unaudited), before intercompany eliminations (dollars in millions):

 
  March 31,
2012
  December 31,
2011
 

Current assets

  $ 180   $ 140  

Property, plant and equipment, net

    399     403  

Other noncurrent assets

    59     61  

Deferred income taxes

    45     45  

Intangible assets

    23     23  

Goodwill

    16     15  
           

Total assets

  $ 722   $ 687  
           

Current liabilities

  $ 195   $ 145  

Long-term debt

    261     269  

Deferred income taxes

    9     9  

Other noncurrent liabilities

    103     110  
           

Total liabilities

  $ 568   $ 533  
           

        The following table summarizes the fair value of Sasol-Huntsman's assets and liabilities recorded upon initial consolidation in our condensed consolidated balance sheets (unaudited), before intercompany eliminations (dollars in millions):

 
  April 1,
2011
   
 

Current assets

  $ 61        

Property, plant and equipment, net

    155        

Intangible assets

    16        

Goodwill

    17        
             

Total assets

  $ 249        
             

Current liabilities

  $ 23        

Long-term debt

    93        

Deferred income taxes

    8        

Other noncurrent liabilities

    7        
             

Total liabilities

  $ 131        
             

        Goodwill of $17 million was recognized upon consolidation of Sasol-Huntsman, of which approximately $12 million is deductible for income tax purposes. The total amount of goodwill decreased approximately $2 million from the date of consolidation to December 31, 2011 due to a change in the foreign currency exchange rate. The total amount of goodwill increased approximately

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HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

5. VARIABLE INTEREST ENTITIES (Continued)

$1 million from December 31, 2011 to March 31, 2012 due to a change in the foreign currency exchange rate. All other intangible assets are being amortized over an average useful life of 18 years.

        If this consolidation had occurred on January 1, 2011, the approximate pro forma revenues attributable to both our Company and Huntsman International would have been $2,709 million for the three months ended March 31, 2011. There would have been no impact to the combined earnings attributable to us or Huntsman International excluding a one-time noncash gain of approximately $12 million recognized upon consolidation included in other operating expense in the condensed consolidated statements of operations (unaudited). Upon consolidation we also recognized a one-time noncash income tax expense of approximately $2 million. The fair value of the noncontrolling interest was estimated to be $61 million at April 1, 2011. The noncontrolling interest was valued at 50% of the fair value of the net assets as of April 1, 2011, as dictated by the ownership interest percentages, adjusted for certain tax consequences only applicable to one parent.

6. RESTRUCTURING, IMPAIRMENT AND PLANT CLOSING COSTS

        As of March 31, 2012 and December 31, 2011, accrued restructuring costs by type of cost and initiative consisted of the following (dollars in millions):

 
  Workforce
reductions(1)
  Demolition and
decommissioning
  Non-cancelable
lease costs
  Other
restructuring
costs
  Total(2)  

Accrued liabilities as of January 1, 2012

  $ 73   $   $ 11   $ 8   $ 92  

2012 charges for 2007 and prior initiatives

    2                 2  

2012 charges for 2009 initiatives

                1     1  

2012 charges for 2011 initiatives

    1             2     3  

2012 charges for 2012 initiatives

    5                 5  

Reversal of reserves no longer required

    (12 )               (12 )

2012 payments for 2007 and prior initiatives

    (1 )           (1 )   (2 )

2012 payments for 2009 initiatives

            (1 )   (1 )   (2 )

2012 payments for 2010 initiatives

    (2 )               (2 )

2012 payments for 2011 initiatives

    (7 )               (7 )

Net activity of discontinued operations

                (1 )   (1 )

Foreign currency effect on liability balance

    3                 3  
                       

Accrued liabilities as of March 31, 2012

  $ 62   $   $ 10   $ 8   $ 80  
                       

(1)
The total workforce reduction reserves of $62 million relate to the termination of 719 positions, of which 678 positions had not been terminated as of March 31, 2012.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

6. RESTRUCTURING, IMPAIRMENT AND PLANT CLOSING COSTS (Continued)

(2)
Accrued liabilities by initiatives were as follows (dollars in millions):

 
  March 31, 2012   December 31, 2011  

2007 initiatives and prior

  $ 2   $ 2  

2009 initiatives

    8     11  

2010 initiatives

    10     16  

2011 initiatives

    55     63  

2012 initiatives

    5      
           

Total

  $ 80   $ 92  
           

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HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

6. RESTRUCTURING, IMPAIRMENT AND PLANT CLOSING COSTS (Continued)

        Details with respect to our reserves for restructuring, impairment and plant closing costs are provided below by segment and initiative (dollars in millions):

 
  Polyurethanes   Performance
Products
  Advanced
Materials
  Textile
Effects
  Pigments   Discontinued
Operations
  Corporate
and Other
  Total  

Accrued liabilities as of January 1, 2012

  $   $ 1   $ 12   $ 69   $ 3   $ 6   $ 1   $ 92  

2012 charges for 2007 and prior initiatives

                2                 2  

2012 charges for 2009 initiatives

                    1             1  

2012 charges for 2011 initiatives

            1     2                 3  

2012 charges for 2012 initiatives

    5                             5  

Reversal of reserves no longer required

                (12 )               (12 )

2012 payments for 2007 and prior initiatives

                (2 )               (2 )

2012 payments for 2009 initiatives

                    (2 )           (2 )

2012 payments for 2010 initiatives

        (1 )       (1 )               (2 )

2012 payments for 2011 initiatives

            (5 )   (2 )               (7 )

Net activity of discontinued operations

                        (1 )       (1 )

Foreign currency effect on liability balance

                3                 3  
                                   

Accrued liabilities as of March 31, 2012

  $ 5   $   $ 8   $ 59   $ 2   $ 5   $ 1   $ 80  
                                   

Current portion of restructuring reserves

  $ 5   $   $ 7   $ 59   $ 2   $ 5   $ 1   $ 79  

Long-term portion of restructuring reserve

            1                     1  

Estimated additional future charges for current restructuring projects

                                                 

Estimated additional charges within one year

            1     11     4             16  

Estimated additional charges beyond one year

                10                 10  

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HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

6. RESTRUCTURING, IMPAIRMENT AND PLANT CLOSING COSTS (Continued)

        Details with respect to cash and non-cash restructuring charges for the periods ended March 31, 2012 and 2011 by initiative are provided below (dollars in millions):

 
  Three months
ended
March 31, 2012
 

Cash charges:

       

2012 charges for 2007 and prior initiatives

  $ 2  

2012 charges for 2009 initiatives

    1  

2012 charges for 2011 initiatives

    3  

2012 charges for 2012 initiatives

    5  

Reversal of reserves no longer required

    (12 )

Non-cash charges

    1  
       

Total 2012 restructuring, impairment and plant closing costs

  $  
       

 

 
  Three months
ended
March 31, 2011
 

Cash charges:

       

2011 charges for 2007 and prior initiatives

  $ 2  

2011 charges for 2009 initiatives

    1  

2011 charges for 2010 initiatives

    1  

2011 charges for 2011 initiatives

    5  

Reversal of reserves no longer required

    (2 )
       

Total 2011 restructuring, impairment and plant closing costs

  $ 7  
       

2012 RESTRUCTURING ACTIVITIES

        During the three months ended March 31, 2012, our Polyurethanes segment recorded charges of $5 million primarily related to cost reduction programs.

        During the three months ended March 31, 2012, our Advanced Materials segment recorded charges of $1 million and expects to incur additional charges of $1 million through December 31, 2012 primarily related to the reorganization of our global business structure and the relocation of our divisional headquarters from Basel, Switzerland to The Woodlands, Texas.

        On September 27, 2011, we announced plans to implement a significant restructuring of our Textile Effects segment, including the closure of our production facilities and business support offices in Basel, Switzerland, as part of an ongoing strategic program aimed at improving the Textile Effects segment's long-term global competitiveness. In connection with this plan, during the first quarter of 2012, we recorded a charge of $1 million primarily for workforce reductions. We expect to incur additional restructuring and plant closing charges of approximately $21 million through December 31, 2013. In addition, during the three months ended March 31, 2012, our Textile Effects segment recorded charges of $3 million primarily related to the closure of our St. Fons, France facility and a global transfer

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HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

6. RESTRUCTURING, IMPAIRMENT AND PLANT CLOSING COSTS (Continued)

pricing initiative. Also during the three months ended March 31, 2012, we reversed $12 million of reserves that were no longer required for workforce reductions at our production facility in Langweid, Germany, the consolidation of manufacturing activities and processes at our site in Basel, Switzerland and closure of our production facilities in Basel, Switzerland.

        During the three months ended March 31, 2012, our Pigments segment recorded charges of $1 million related to the closure of our Grimsby, U.K. plant. We expect to incur additional charges of $4 million through December 31, 2012, primarily related to the closure of our Grimsby, U.K. plant and workforce reductions at Scarlino, Italy.

7. DEBT

        Outstanding debt consisted of the following (dollars in millions):

Huntsman Corporation

 
  March 31,
2012
  December 31,
2011
 

Senior Credit Facilities:

             

Term loans

  $ 1,698   $ 1,696  

Amounts outstanding under A/R programs

    242     237  

Senior notes

    478     472  

Senior subordinated notes

    893     976  

HPS (China) debt

    161     167  

Variable interest entities

    279     281  

Other

    70     113  
           

Total debt—excluding debt to affiliates

  $ 3,821   $ 3,942  
           

Total current portion of debt

  $ 193   $ 212  

Long-term portion

    3,628     3,730  
           

Total debt—excluding debt to affiliates

  $ 3,821   $ 3,942  
           

Total debt—excluding debt to affiliates

  $ 3,821   $ 3,942  

Notes payable to affiliates-noncurrent

    4     4  
           

Total debt

  $ 3,825   $ 3,946  
           

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HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

7. DEBT (Continued)

Huntsman International

 
  March 31,
2012
  December 31,
2011
 

Senior Credit Facilities:

             

Term loans

  $ 1,698   $ 1,696  

Amounts outstanding under A/R programs

    242     237  

Senior notes

    478     472  

Senior subordinated notes

    893     976  

HPS (China) debt

    161     167  

Variable interest entities

    279     281  

Other

    70     113  
           

Total debt—excluding debt to affiliates

  $ 3,821   $ 3,942  
           

Total current portion of debt

  $ 193   $ 212  

Long-term portion

    3,628     3,730  
           

Total debt—excluding debt to affiliates

  $ 3,821   $ 3,942  
           

Total debt—excluding debt to affiliates

  $ 3,821   $ 3,942  

Notes payable to affiliates-current

    100     100  

Notes payable to affiliates-noncurrent

    541     439  
           

Total debt

  $ 4,462   $ 4,481  
           

DIRECT AND SUBSIDIARY DEBT

        Huntsman Corporation's direct debt and guarantee obligations consist of a guarantee of certain debt of HPS (our Chinese MDI joint venture) and certain indebtedness incurred from time to time to finance certain insurance premiums.

        Substantially all of our other debt, including the facilities described below, has been incurred by our subsidiaries (primarily Huntsman International); such subsidiary debt is nonrecourse to us and we have no contractual obligation to fund our subsidiaries' respective operations.

Amendment to Credit Agreement

        On March 6, 2012, Huntsman International entered into a seventh amendment to its Senior Credit Facilities. Among other things, the amendment:

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HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

7. DEBT (Continued)

        The amendment provides that, notwithstanding the stated maturity date, the termination date of the Revolving Facility commitments will accelerate if we do not repay, refinance or have a minimum level of liquidity available to enable us to repay our 5.50% senior notes due 2016, Term Loan B due April 19, 2014 and our term loan C facility ("Term Loan C") due June 30, 2016. Extended Term Loan B—Series 2 will accelerate if we do not repay or have a minimum level of liquidity available to enable us to repay our 5.50% senior notes due 2016 that remain outstanding during the three months prior to the maturity date of such notes. Extended Term Loan B—Series 2 will amortize in an amount equal to 1% of the principal amount, payable annually commencing on March 31, 2013.

Senior Credit Facilities

        As of March 31, 2012, our Senior Credit Facilities consisted of our Revolving Facility, our Term Loan B, our Term Loan C, our extended term loan B facility ("Extended Term Loan B") and our Extended Term Loan B—Series 2 as follows (dollars in millions):

Facility
  Committed
Amount
  Principal
Outstanding
  Carrying
Value
  Interest Rate(2)   Maturity  

Revolving Facility

  $ 400   $ (1) $ (1) USD LIBOR plus 2.50%     2017 (3)

Term Loan B

    NA   $ 307   $ 307   USD LIBOR plus 1.50%     2014  

Term Loan C

    NA   $ 427   $ 395   USD LIBOR plus 2.25%     2016  

Extended Term Loan B

    NA   $ 650   $ 650   USD LIBOR plus 2.50%     2017 (3)

Extended Term Loan B—Series 2

    NA   $ 346   $ 346   USD LIBOR plus 3.00%     2017 (3)

(1)
We had no borrowings outstanding under our Revolving Facility; we had approximately $19 million (U.S. dollar equivalents) of letters of credit and bank guarantees issued and outstanding under our Revolving Facility.

(2)
The applicable interest rate of the Senior Credit Facilities is subject to certain secured leverage ratio thresholds. As of March 31, 2012, the weighted average interest rate on our outstanding balances under the Senior Credit Facilities was approximately 3%.

(3)
The maturity of the Revolving Facility commitments will accelerate if we do not repay, refinance or have a minimum level of liquidity available to enable us to repay our 5.50% senior notes due 2016, Term Loan B due April 19, 2014 and Term Loan C due June 30, 2016. The maturity of Extended Term Loan B and Extended Term Loan B—Series 2 will accelerate if we do not repay, refinance or have a minimum level of liquidity available to enable us to refinance or repay our 5.50% senior

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HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

7. DEBT (Continued)

Date of Redemption
  Notes   Principal Amount of
Notes Redeemed
  Amount Paid
(Excluding Accrued
Interest)
  Loss on Early
Extinguishment of
Debt
 

March 26, 2012

  7.50% Senior
Subordinated Notes
Due 2015
  €64
(approximately $86)
  €65
(approximately $87)
  $ 1  

January 18, 2011

 

7.375% Senior
Subordinated Notes
due 2015

 

$100

 

$102

 
$

3
 

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

7. DEBT (Continued)

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

8. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES (Continued)

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

8. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES (Continued)

        A significant portion of our intercompany debt is denominated in euros. We also finance certain of our non-U.S. subsidiaries with intercompany loans that are, in many cases, denominated in currencies other than the entities' functional currency. We manage the net foreign currency exposure created by this debt through various means, including cross-currency swaps, the designation of certain intercompany loans as permanent loans because they are not expected to be repaid in the foreseeable future ("permanent loans") and the designation of certain debt and swaps as net investment hedges.

        Foreign currency transaction gains and losses on intercompany loans that are not designated as permanent loans are recorded in earnings. Foreign currency transaction gains and losses on intercompany loans that are designated as permanent loans are recorded in other comprehensive loss. From time to time, we review such designation of intercompany loans.

        From time to time, we review our non-U.S. dollar denominated debt and swaps to determine the appropriate amounts designated as hedges. As of March 31, 2012, we have designated €255 million (approximately $339 million) of euro-denominated debt and cross-currency interest rate swap as a hedge of our net investments. For the three months ended March 31, 2012, the amount of loss recognized on the hedge of our net investments was $13 million and was recorded as a loss in other comprehensive income. As of March 31, 2012, we had €1,223 million (approximately $1,628 million) in net euro assets.

9. FAIR VALUE

        The fair values of financial instruments were as follows (dollars in millions):

 
  March 31, 2012   December 31, 2011  
 
  Carrying
Value
  Estimated
Fair Value
  Carrying
Value
  Estimated
Fair Value
 

Non-qualified employee benefit plan investments

  $ 14   $ 14   $ 12   $ 12  

Cross-currency interest rate contracts

    17     17     27     27  

Interest rate contracts

    (17 )   (17 )   (17 )   (17 )

Long-term debt (including current portion)

    (3,821 )   (4,041 )   (3,942 )   (4,061 )

        The carrying amounts reported in our condensed consolidated balance sheets (unaudited) 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 value of non-qualified employee benefit plan investments is obtained through market observable pricing using prevailing market prices. The estimated fair values of our long-term debt are based on quoted market prices for the identical liability when traded as an asset in an active market.

        The fair value estimates presented herein are based on pertinent information available to management as of March 31, 2012 and December 31, 2011. Although management is 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, 2012, and current estimates of fair value may differ significantly from the amounts presented herein.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

9. FAIR VALUE (Continued)

        The following assets and liabilities are measured at fair value on a recurring basis (dollars in millions):

 
   
  Fair Value Amounts Using  
Description
  March 31,
2012
  Quoted prices in
active markets
for identical assets
(Level 1)(3)
  Significant other
observable
inputs
(Level 2)(3)
  Significant
unobservable
inputs
(Level 3)
 

Assets:

                         

Available-for-sale equity securities:

                         

Equity mutual funds

  $ 14   $ 14   $   $  

Derivatives:

                         

Cross-currency interest rate contracts(1)

    17         17      
                   

Total assets

  $ 31   $ 14   $ 17   $  
                   

Liabilities:

                         

Derivatives:

                         

Interest rate contracts(2)

  $ (17 ) $   $ (17 ) $  
                   

 

 
   
  Fair Value Amounts Using  
Description
  December 31,
2011
  Quoted prices in
active markets
for identical assets
(Level 1)(3)
  Significant other
observable
inputs
(Level 2)(3)
  Significant
unobservable
inputs
(Level 3)
 

Assets:

                         

Available-for-sale equity securities:

                         

Equity mutual funds

  $ 12   $ 12   $   $  

Derivatives:

                         

Cross-currency interest rate contracts(1)

    27             27  
                   

Total assets

  $ 39   $ 12   $   $ 27  
                   

Liabilities:

                         

Derivatives:

                         

Interest rate contracts(2)

  $ (17 ) $   $ (17 ) $  
                   

(1)
The income approach is used to calculate the fair value of these instruments. Fair value represents the present value of estimated future cash flows, calculated using relevant interest rates, exchange rates, and yield curves at stated intervals. There were no material changes to the valuation methods or assumptions used to determine the fair value during the current period.

(2)
The income approach is used to calculate the fair value of these instruments. Fair value represents the present value of estimated future cash flows, calculated using relevant interest rates and yield

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

9. FAIR VALUE (Continued)

(3)
There were no transfers between Levels 1 and 2 within the fair value hierarchy for the three months ended March 31, 2012 and December 31, 2011.

        The following table shows a reconciliation of beginning and ending balances for instruments measured at fair value on a recurring basis using significant unobservable inputs (Level 3) (dollars in millions):

Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
  Cross-Currency
Interest Rate
Contracts
  Total  

Beginning balance, January 1, 2012

  $ 27   $ 27  

Transfers into Level 3

         

Transfer out of Level 3(1)

    (27 )   (27 )

Total gains (losses):

             

Included in earnings

         

Included in other comprehensive income

         

Purchases, sales, issuances and settlements

         
           

Ending balance, March 31, 2012

  $   $  
           

The amount of total gains (losses) for the period included in earnings attributable to the change in unrealized gains (losses) relating to assets still held at March 31, 2012

  $   $  
           

 

Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
  Cross-Currency
Interest Rate
Contracts
  Total  

Beginning balance, January 1, 2011

  $ 19   $ 19  

Transfers into or out of Level 3

         

Total (losses) gains:

             

Included in earnings

         

Included in other comprehensive income

    (15 )   (15 )

Purchases, sales, issuances and settlements

         
           

Ending balance, March 31, 2011

  $ 4   $ 4  
           

The amount of total gains (losses) for the period included in earnings attributable to the change in unrealized gains (losses) relating to assets still held at March 31, 2011

  $   $  
           

(1)
We are party to cross-currency interest rate contracts that are measured at fair value in the financial statements. These instruments have historically been categorized by us as Level 3 within the fair value hierarchy due to an unobservable input associated with the

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

9. FAIR VALUE (Continued)

        Gains and losses (realized and unrealized) included in earnings for instruments measured at fair value on a recurring basis using significant unobservable inputs (Level 3) are reported in interest expense and other comprehensive income as follows (dollars in millions):

 
  Interest
expense
  Other
comprehensive
income
 

Total net gains included in earnings

  $   $  

Changes in unrealized gains relating to assets still held at March 31, 2012

         

 

 
  Interest
expense
  Other
comprehensive
income
 

Total net gains included in earnings

  $   $  

Changes in unrealized losses relating to assets still held at March 31, 2011

        (15 )

        We also have assets that under certain conditions are subject to measurement at fair value on a non-recurring basis. These assets include property, plant and equipment and those associated with acquired businesses, including goodwill and intangible assets. For these assets, measurement at fair value in periods subsequent to their initial recognition is applicable if one or more is determined to be impaired. During the three months ended March 31, 2012 and 2011, we had no impairments related to these assets.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

10. EMPLOYEE BENEFIT PLANS

        Components of the net periodic benefit costs for the three months ended March 31, 2012 and 2011 were as follows (dollars in millions):

Huntsman Corporation

 
  Defined
Benefit Plans
  Other
Postretirement
Benefit Plans
 
 
  Three months
ended
March 31,
  Three months
ended
March 31,
 
 
  2012   2011   2012   2011  

Service cost

  $ 16   $ 16   $ 1   $ 1  

Interest cost

    37     38     2     2  

Expected return on assets

    (46 )   (46 )        

Amortization of prior service cost

    (2 )   (1 )   (1 )   (1 )

Amortization of actuarial loss

    11     7          
                   

Net periodic benefit cost

  $ 16   $ 14   $ 2   $ 2  
                   

Huntsman International

 
  Defined
Benefit Plans
  Other
Postretirement
Benefit Plans
 
 
  Three months
ended
March 31,
  Three months
ended
March 31,
 
 
  2012   2011   2012   2011  

Service cost

  $ 16   $ 16   $ 1   $ 1  

Interest cost

    37     38     2     2  

Expected return on assets

    (46 )   (46 )        

Amortization of prior service cost

    (2 )   (1 )   (1 )   (1 )

Amortization of actuarial loss

    12     8          
                   

Net periodic benefit cost

  $ 17   $ 15   $ 2   $ 2  
                   

        During the first quarter of 2012, certain U.K. pension plans were closed to new entrants. For existing participants, benefits will only grow as a result of increases in pay. Defined contribution plans were established to replace these pension plans for future benefit accruals. This change did not have a significant impact on our pension liability.

        During the three months ended March 31, 2012 and 2011, we made contributions to our pension and other postretirement benefit plans of $48 million and $62 million, respectively. During the remainder of 2012, we expect to contribute an additional amount of $108 million to these plans.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

11. HUNTSMAN CORPORATION STOCKHOLDERS' EQUITY

SHARE REPURCHASE PROGRAM

        Effective August 5, 2011, our Board of Directors authorized our Company to repurchase up to $100 million in shares of our common stock. Repurchases under this program may be made through the open market 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, 2012, we did not repurchase any shares of our outstanding common stock under the repurchase program. As of March 31, 2012, there remained approximately $50 million of the amount authorized under the program that could be used for stock repurchases.

COMMON STOCK DIVIDENDS

        On March 30, 2012 and March 31, 2011, we paid cash dividends of $24 million, or $0.10 per share, to common stockholders of record as of March 15, 2012 and 2011, respectively.

12. OTHER COMPREHENSIVE INCOME

        The components of other comprehensive income were as follows (dollars in millions):

Huntsman Corporation

 
   
   
  Other
comprehensive income
 
 
  Accumulated other
comprehensive loss
  Three months
ended
 
 
  March 31,
2012
  December 31,
2011
  March 31,
2012
  March 31,
2011
 

Foreign currency translation adjustments, net of tax of $23 and $24 as of March 31, 2012 and December 31, 2011, respectively

  $ 291   $ 218   $ 73   $ 91  

Pension and other postretirement benefit adjustments, net of tax of $123 and $124 as of March 31, 2012 and December 31, 2011, respectively

    (781 )   (800 )   19     4  

Other comprehensive income of unconsolidated affiliates

    8     8          

Other, net

    4     3     1     1  
                   

Total

    (478 )   (571 )   93     96  

Amounts attributable to noncontrolling interests

    10     12     (2 )   (1 )
                   

Amounts attributable to Huntsman Corporation

  $ (468 ) $ (559 ) $ 91   $ 95  
                   

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

12. OTHER COMPREHENSIVE INCOME (Continued)

Huntsman International

 
   
   
  Other
comprehensive income
 
 
  Accumulated other
comprehensive loss
  Three months
ended
 
 
  March 31,
2012
  December 31,
2011
  March 31,
2012
  March 31,
2011
 

Foreign currency translation adjustments, net of tax of $9 and $11 as of March 31, 2012 and December 31, 2011, respectively

  $ 290   $ 217   $ 73   $ 93  

Pension and other postretirement benefit adjustments, net of tax of $154 and $156 as of March 31, 2012 and December 31, 2011, respectively

    (824 )   (845 )   21     5  

Other comprehensive income of unconsolidated affiliates

    8     8          

Other, net

    (2 )   (3 )   1      
                   

Total

    (528 )   (623 )   95     98  

Amounts attributable to noncontrolling interests

    10     12     (2 )   (1 )
                   

Amounts attributable to Huntsman International

  $ (518 ) $ (611 ) $ 93   $ 97  
                   

        Items of other comprehensive income of our Company and our consolidated affiliates have been recorded net of tax, with the exception of the foreign currency translation adjustments related to subsidiaries with earnings permanently reinvested. The tax effect is determined based upon the jurisdiction where the income or loss was recognized and is net of valuation allowances.

13. COMMITMENTS AND CONTINGENCIES

LEGAL MATTERS

Asbestos Litigation

        We have been named as a premises defendant in a number of asbestos exposure cases, typically claims by nonemployees of exposure to asbestos while at a facility. In the past, these cases typically have involved multiple plaintiffs bringing actions against multiple defendants, and the complaints have not indicated which plaintiffs were making claims against which defendants, where or how the alleged injuries occurred or what injuries each plaintiff claimed. These facts, which would be central to any estimate of probable loss, generally have been learned only through discovery.

        Where a claimant's alleged exposure occurred prior to our ownership of the relevant premises, the prior owners generally have contractually agreed to retain liability for, and to indemnify us against, asbestos exposure claims. This indemnification is not subject to any time or dollar amount limitations. Upon service of a complaint in one of these cases, we tender it to the prior owner. Rarely do the complaints in these cases state the amount of damages being sought. The prior owner accepts responsibility for the conduct of the defense of the cases and payment of any amounts due to the claimants. In our eighteen-year experience with tendering these cases, we have not made any payment

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13. COMMITMENTS AND CONTINGENCIES (Continued)

with respect to any tendered asbestos cases. We believe that the prior owners have the intention and ability to continue to honor their indemnity obligations, although we cannot assure you that they will continue to do so or that we will not be liable for these cases if they do not.

        The following table presents for the periods indicated certain information about cases for which service has been received that we have tendered to the prior owner, all of which have been accepted.

 
  Three months
ended
March 31,
 
 
  2012   2011  

Unresolved at beginning of period

    1,080     1,116  

Tendered during period

    1     2  

Resolved during period(1)

        39  

Unresolved at end of period

    1,081     1,079  

(1)
Although the indemnifying party informs us when tendered cases have been resolved, it generally does not inform us of the settlement amounts relating to such cases, if any. The indemnifying party has informed us that it typically manages our defense together with the defense of other entities in such cases and resolves claims involving multiple defendants simultaneously, and that it considers the allocation of settlement amounts, if any, among defendants to be confidential and proprietary. Consequently, we are not able to provide the number of cases resolved with payment by the indemnifying party or the amount of such payments.

        We have never made any payments with respect to these cases. As of March 31, 2012, we had an accrued liability of $10 million relating to these cases and a corresponding receivable of $10 million relating to our indemnity protection with respect to these cases. We cannot assure you that our liability will not exceed our accruals or that our liability associated with these cases would not be material to our financial condition, results of operations or liquidity; accordingly, we are not able to estimate the amount or range of loss in excess of our accruals. Additional asbestos exposure claims may be made against us in the future, and such claims could be material. However, because we are not able to estimate the amount or range of losses associated with such claims, we have made no accruals with respect to unasserted asbestos exposure claims as of March 31, 2012.

        Certain cases in which we are a premises defendant are not subject to indemnification by prior owners or operators. The following table presents for the periods indicated certain information about

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13. COMMITMENTS AND CONTINGENCIES (Continued)

these cases. Cases include all cases for which service has been received by us. Certain prior cases that were filed in error against us have been dismissed.

 
  Three months
ended
March 31,
 
 
  2012   2011  

Unresolved at beginning of period

    36     37  

Filed during period

    3     4  

Resolved during period

    1     1  

Unresolved at end of period

    38     40  

        We paid gross settlement costs for asbestos exposure cases that are not subject to indemnification of $82,000 and nil during the three months ended March 31, 2012 and 2011, respectively. As of March 31, 2012, we had an accrual of $259,000 relating to these cases. We cannot assure you that our liability will not exceed our accruals or that our liability associated with these cases would not be material to our financial condition, results of operations or liquidity; accordingly, we are not able to estimate the amount or range of loss in excess of our accruals. Additional asbestos exposure claims may be made against us in the future, and such claims could be material. However, because we are not able to estimate the amount or range of losses associated with such claims, we have made no accruals with respect to unasserted asbestos exposure claims as of March 31, 2012.

Antitrust Matters

        We were named as a defendant in civil class action antitrust suits alleging that between 1999 and 2004 we conspired with Bayer, BASF, Dow and Lyondell to fix the prices of MDI, TDI, polyether polyols, and related systems ("polyether polyol products") sold in the U.S. in violation of the federal Sherman Act. These cases are consolidated as the "Polyether Polyols" cases in multidistrict litigation pending in the U.S. District Court for the District of Kansas.

        In addition, we and the other Polyether Polyols defendants were named as defendants in three civil antitrust suits brought by certain direct purchasers of polyether polyol products that opted out of the class certified in the Kansas multidistrict litigation. The relevant time frame for these cases is 1994 to 2004 and they are referred to as the "direct action cases." The class action and the direct action cases were consolidated in the Kansas court for the purposes of discovery and other pretrial matters.

        In the second quarter of 2011, we settled the class action and were dismissed as a defendant. On December 29, 2011, we entered into a settlement agreement with the direct action plaintiffs for an amount immaterial to our financial statements and were dismissed from those cases on December 30, 2011.

        Two similar civil antitrust class action cases were filed May 5 and 17, 2006 in the Superior Court of Justice, Ontario Canada and Superior Court, Province of Quebec, District of Quebec, on behalf of purported classes of Canadian direct and indirect purchasers of MDI, TDI and polyether polyols. On April 11, 2012, we reached agreement to resolve these cases for an amount immaterial to our consolidated financial statements. The Canadian settlement is subject to court approval.

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13. COMMITMENTS AND CONTINGENCIES (Continued)

        A purported class action case filed February 15, 2005 by purchasers in California of products containing rubber and urethane chemicals and pending in Superior Court of California, County of San Francisco is stayed pending resolution of the Kansas multidistrict litigation. The plaintiffs in this matter make similar claims against the defendants as the class plaintiffs in the Kansas multidistrict litigation.

        We have been named as a defendant in two purported class action civil antitrust suits alleging that we and our co-defendants and other co-conspirators conspired to fix prices of titanium dioxide sold in the U.S. between at least March 1, 2002 and the present. The cases were filed on February 9 and 12, 2010 in the U.S. District Court for the District of Maryland and a consolidated complaint was filed on April 12, 2010. The other defendants named in this matter are E.I. du Pont de Nemours and Company, Kronos Worldwide Inc., Millennium Inorganic Chemicals, Inc. and the National Titanium Dioxide Company Limited (d/b/a Cristal). A class certification hearing is scheduled for August 13, 2012 and trial is set to begin September 9, 2013. Discovery is ongoing.

        In all of the antitrust litigation currently pending against us, the plaintiffs generally are seeking injunctive relief, treble damages, costs of suit and attorneys fees. We are not aware of any illegal conduct by us or any of our employees. Nevertheless, we have incurred costs relating to these claims and could incur additional costs in amounts material to us. As alleged damages in these cases have not been specified, and because of the overall complexity of these cases, we are unable to reasonably estimate any possible loss or range of loss with respect to these claims.

Product Delivery Claim

        We have been notified by a customer of potential claims related to our allegedly delivering a different product from that which it had ordered. Our customer claims that it was unaware that the different product had been delivered until after it had been used to manufacture materials which were subsequently sold. The customer has indicated that it has been notified of claims of up to an aggregate of €153 million (approximately $200 million) relating to this matter and believes that we may be responsible for all or a portion of these potential claims. We are investigating this matter and based on the facts currently available to us, we believe that we are insured for any liability we may ultimately have in excess of $10 million. However, no assurance can be given regarding our ultimate liability or costs to us. We believe the range of possible loss to our Company in this matter to be between €0 and €153 million and have made no accrual with respect to this matter.

Other Proceedings

        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. Except as otherwise disclosed in this report, 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.

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14. ENVIRONMENTAL, HEALTH AND SAFETY MATTERS

ENVIRONMENTAL, HEALTH AND SAFETY MATTERS

General

        We are subject to extensive federal, state, local and international laws, regulations, rules and ordinances relating to safety, pollution, protection of the environment, product management and distribution, and the generation, storage, handling, transportation, treatment, disposal and remediation of hazardous substances and waste materials. In the ordinary course of business, we are subject to frequent environmental inspections and monitoring and occasional investigations by governmental enforcement authorities. In addition, our production facilities require operating permits that are subject to renewal, modification and, in certain circumstances, revocation. Actual or alleged violations of safety laws, environmental laws or permit requirements could result in restrictions or prohibitions on plant operations or product distribution, substantial civil or criminal sanctions, as well as, under some environmental laws, the assessment of strict liability and/or joint and several liability. Moreover, changes in environmental regulations could inhibit or interrupt our operations, or require us to modify our facilities or operations. Accordingly, environmental or regulatory matters may cause us to incur significant unanticipated losses, costs or liabilities.

Environmental, Health and Safety Systems

        We are committed to achieving and maintaining compliance with all applicable environmental, health and safety ("EHS") legal requirements, and we have developed policies and management systems that are intended to identify the multitude of EHS legal requirements applicable to our operations, enhance compliance with applicable legal requirements, ensure the safety of our employees, contractors, community neighbors and customers and minimize the production and emission of wastes and other pollutants. Although EHS legal requirements are constantly changing and are frequently difficult to comply with, these EHS management systems are designed to assist us in our compliance goals while also fostering efficiency and improvement and minimizing overall risk to us.

EHS Capital Expenditures

        We may incur future costs for capital improvements and general compliance under EHS laws, including costs to acquire, maintain and repair pollution control equipment. For the three months ended March 31, 2012 and 2011, our capital expenditures for EHS matters totaled $19 million and $13 million, respectively. Because capital expenditures for these matters are subject to evolving regulatory requirements and depend, in part, on the timing, promulgation and enforcement of specific requirements, our capital expenditures for EHS matters have varied significantly from year to year and we cannot provide assurance that our recent expenditures are indicative of future amounts we may spend related to EHS and other applicable laws.

Remediation Liabilities

        We have incurred, and we may in the future incur, liability to investigate and clean up waste or contamination at our current or former facilities or facilities operated by third parties at which we may have disposed of waste or other materials. Similarly, we may incur costs for the cleanup of waste that

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14. ENVIRONMENTAL, HEALTH AND SAFETY MATTERS (Continued)

was disposed of prior to the purchase of our businesses. Under some circumstances, the scope of our liability may extend to damages to natural resources.

        Under the Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA") and similar state laws, a current or former owner or operator of real property 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, such as those in effect in France and Australia, can hold past owners and/or operators liable for remediation at former facilities. We have been notified by third parties of claims against us for cleanup liabilities at approximately 10 former facilities or third party sites, including, but not limited to, sites listed under CERCLA. Based on current information and past experiences at other CERCLA sites, we do not expect any of these third party claims to have a material impact on our condensed consolidated financial statements (unaudited).

        One of these sites, the North Maybe Canyon Mine CERCLA site, includes an abandoned phosphorous mine near Soda Springs, Idaho believed to have been operated by one of our predecessor companies (El Paso Products Company). In 2004, the U.S. Forest Service (the "Forest Service") notified us that we are a CERCLA potentially responsible party ("PRP") for the mine site involving selenium contaminated surface water. Under a 2004 administrative order, the current mine lessee, Nu-West Industries, Inc., began undertaking the investigation required for a CERCLA removal process. In 2008, the site was transitioned to the CERCLA remedial action process, which requires a remedial investigation/feasibility study ("RI/FS"). In 2009, the Forest Service notified the three PRPs (our Company, Nu-West and Wells Cargo) that it would undertake the RI/FS itself. On February 19, 2010, in conjunction with Wells Cargo, we agreed to jointly comply with a unilateral administrative order ("UAO") to conduct an RI/FS of a significant area of the site, although we are alleged to have had only a limited historical presence in the investigation area. In March 2010, following the initiation of litigation by Nu-West, the Forest Service assumed Nu-West's original investigation obligations. On June 15, 2010, we received the UAO which had been executed by the Forest Service and we are presently carrying out the requirements of the order. At this time, we do not believe that any loss in this matter will have a material impact on our condensed consolidated financial statements (unaudited).

        In addition, under the Resource Conservation and Recovery Act ("RCRA") and similar state laws, we may be required to remediate contamination originating from our properties as a condition to our hazardous waste permit. 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 Port Neches, Texas, and Geismar, Louisiana, facilities are the subject of ongoing remediation requirements under RCRA authority. Similar laws exist in a number of locations in which we currently operate, or previously operated, manufacturing facilities, such as Australia, India, France, Hungary and Italy.

        In June of 2006, an agreement was reached between the local regulatory authorities and our Advanced Materials site in Pamplona, Spain to relocate our manufacturing operations in order to facilitate new urban development desired by the city. Subsequently, as required by the authorities, soil

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and groundwater sampling was performed and followed by a quantitative risk assessment. In October 2010, the local authorities approved our proposed two-phase remedial approach. The first phase was installed in 2011 and involves groundwater extraction and treatment in one limited area of the site. The second phase, not yet defined, would proceed during site redevelopment. As the second phase remediation has not yet been defined, we are unable to reasonably estimate any possible loss or range of loss.

        By letter dated March 7, 2006, our Base Chemicals and Polymers facility in West Footscray, Australia, was issued a clean-up notice by the Environmental Protection Authority Victoria ("EPA Victoria") due to concerns about soil and groundwater contamination emanating from the site. The agency revoked the original clean-up notice on September 4, 2007 and issued a revised clean-up notice due to "the complexity of contamination issues" at the site. In the third quarter of 2009, we recorded a $30 million liability related to estimated environmental remediation costs at this site. On August 23, 2010, EPA Victoria revoked the second clean-up notice and issued a revised notice that included a requirement for financial assurance for the remediation. We have reached agreement with the agency that a mortgage on the land will be held by the agency as financial surety during the period covered by the current clean-up notice, which ends on July 30, 2014. We can provide no assurance that the agency will not seek to institute additional requirements for the site or that additional costs will not be associated with the clean up. This facility has been closed and demolished.

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 $36 million for environmental liabilities as of both March 31, 2012 and December 31, 2011. Of these amounts, $5 million and $7 million were classified as accrued liabilities in our condensed consolidated balance sheets (unaudited) as of March 31, 2012 and December 31, 2011, respectively, and $31 million and $29 million were classified as other noncurrent liabilities in our condensed consolidated balance sheets (unaudited) as of March 31, 2012 and December 31, 2011, respectively. In certain cases, our remediation liabilities may be payable over periods of up to 30 years.

REGULATORY DEVELOPMENTS

        On June 1, 2007, the EU regulatory framework for chemicals called "REACH" took effect, designed to be phased in over 11 years. As a REACH-regulated company that manufactures in or imports more than one metric ton per year of a chemical substance into the European Economic Area, we were required to pre-register with the European Chemicals Agency ("ECHA"), such chemical substances and isolated intermediates to take advantage of the 11 year phase-in period. To meet our compliance obligations, a cross-business REACH team was established, through which we were able to fulfill all required pre-registrations and our first phase registrations by the November 30, 2010 deadline.

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14. ENVIRONMENTAL, HEALTH AND SAFETY MATTERS (Continued)

While we continue our registration efforts to meet the next registration deadline of June 2013, our REACH implementation team is now strategically focused on the authorization phase of the REACH process, directing its efforts to address "Substances of Very High Concern" and evaluating potential business implications. Where warranted, evaluation of substitute chemicals will be an important element of our ongoing manufacturing sustainability efforts. As a chemical manufacturer with global operations, we are also actively monitoring and addressing analogous regulatory regimes being considered or implemented outside of the EU.

        Although the total long-term cost for REACH compliance is unknown at this time, we spent approximately $5 million, $9 million and $3 million in 2011, 2010 and 2009, respectively, to meet the initial REACH requirements. We cannot provide assurance that these recent expenditures are indicative of future amounts that we may be required to spend for REACH compliance.

GREENHOUSE GAS REGULATION

        Although the existence of binding emissions limitations under international treaties such as the Kyoto Protocol is in doubt after 2012, we expect some or all of our operations to be subject to regulatory requirements to reduce emissions of greenhouse gases ("GHGs"). Even in the absence of a new global agreement to limit GHGs, we may be subject to additional regulation under the European Union Emissions Trading System as well as new national and regional GHG trading programs. For example, our operations in Australia and selected U.S. states may be subject to future GHG regulations under emissions trading systems in those jurisdictions.

        Because the United States has not adopted federal climate change legislation, domestic GHG efforts are likely to be guided by EPA regulations in the near future. While EPA's GHG programs are currently subject to judicial challenge, our domestic operations may become subject to EPA's regulatory requirements when implemented. In particular, expansions of our existing facilities or construction of new facilities may be subject to the Clean Air Act's Prevention of Significant Deterioration Requirements under EPA's GHG "Tailoring Rule." In addition, certain aspects of our operations may be subject to GHG emissions monitoring and reporting requirements. If we are subject to EPA GHG regulations, we may face increased monitoring, reporting, and compliance costs.

        We are already managing and reporting GHG emissions, to varying degrees, as required by law for our sites in locations subject to Kyoto Protocol obligations and/or EU emissions trading scheme requirements. Although these sites are subject to existing GHG legislation, few have experienced or anticipate significant cost increases as a result of these programs, although it is possible that GHG emission restrictions may increase over time. Potential consequences of such restrictions include capital requirements to modify assets to meet GHG emission restrictions and/or increases in energy costs above the level of general inflation, as well as direct compliance costs. Currently, however, it is not possible to estimate the likely financial impact of potential future regulation on any of our sites.

        Finally, it should be noted that some scientists have concluded that increasing concentrations of GHG in the earth's atmosphere may produce climate changes that have significant physical effects, such as increased frequency and severity of storms, droughts, and floods and other climatic events. If any of those effects were to occur, they could have an adverse effect on our assets and operations.

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14. ENVIRONMENTAL, HEALTH AND SAFETY MATTERS (Continued)

INDIA INVESTIGATION

        During the third quarter of 2010, we completed an internal investigation of the operations of Petro Araldite Pvt. Ltd. ("PAPL"), our majority owned joint venture in India. PAPL manufactures base liquid resins, base solid resins and formulated products in India. The investigation initially focused on allegations of illegal disposal of hazardous waste and waste water discharge and related reporting irregularities. Based upon preliminary findings, the investigation was expanded to include a review of the production and off-book sales of certain products and waste products. The investigation included the legality under Indian law and U.S. law, including the U.S. Foreign Corrupt Practices Act, of certain payments made by employees of the joint venture to government officials in India. Records at the facility covering nine months in 2009 and early 2010 show that less than $11,000 in payments were made to officials for that period; in addition, payments in unknown amounts may have been made by individuals from the facility in previous years.

        In May and July 2010, PAPL fully disclosed the environmental noncompliance issues to the local Indian environmental agency, the TNPCB. All environmental compliance and reporting issues have been addressed to the agency's satisfaction other than the use of freshwater for the dilution of wastewater effluent discharges and including the remediation of several off-site solid waste disposal areas. Both remaining issues are being addressed. At TNPCB's direction, we submitted a plan for the remediation of the off-site waste disposal areas, which the TNPCB approved. The impacted off-site soil was excavated and relocated to the site. Final commercial disposal methods for the removed waste await approval from TNPCB, although we do not anticipate the costs to be material.

        Also in May 2010, we voluntarily contacted the U.S. Securities and Exchange Commission ("SEC") and the DOJ to advise them of our investigation and that we intend to cooperate fully with each of them. We met with the SEC and the DOJ in October 2010 to discuss this matter and we continue to cooperate with these agencies. Steps have been taken to halt all known illegal or improper activity, including the termination of employment of management employees as appropriate.

        No conclusions can be drawn at this time as to whether any government agencies will open formal investigations of these matters or what remedies such agencies may seek. Governmental agencies could assess material civil and criminal penalties and fines against PAPL and potentially against us and could issue orders that adversely affect the operations of PAPL. We cannot, however, determine at this time the magnitude of the penalties and fines that could be assessed, the total costs to remediate the prior noncompliance or the effects of implementing any necessary corrective measures on PAPL's operations.

15. STOCK-BASED COMPENSATION PLANS

        Under the Huntsman Corporation Stock Incentive Plan, as amended and restated (the "Stock Incentive Plan"), a plan approved by stockholders, we may grant nonqualified stock options, incentive stock options, stock appreciation rights, restricted stock, phantom stock, performance awards and other stock-based awards to our employees, directors and consultants and to employees and consultants of our subsidiaries, provided that incentive stock options may be granted solely to employees. The terms of the grants are fixed at the grant date. As of March 31, 2012, we were authorized to grant up to 32.6 million shares under the Stock Incentive Plan. As of March 31, 2012, we had 8 million shares

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15. STOCK-BASED COMPENSATION PLANS (Continued)

remaining under the Stock Incentive Plan available for grant. Option awards have a maximum contractual term of 10 years and generally must have an exercise price at least equal to the market price of our common stock on the date the option award is granted. Stock-based awards generally vest over a three-year period.

        The compensation cost from continuing operations under the Stock Incentive Plan for our Company and Huntsman International were as follows (dollars in millions):

 
  Three
months
ended
March 31,
 
 
  2012   2011  

Huntsman Corporation compensation costs

  $ 10   $ 8  

Huntsman International compensation costs

    9     7  

        The total income tax benefit recognized in the statements of operations for us and Huntsman International for stock-based compensation arrangements were $3 million and $2 million, respectively, for the three months ended March 31, 2012 and 2011.

STOCK OPTIONS

        The fair value of each stock option award is estimated on the date of grant using the Black-Scholes valuation model that uses the assumptions noted in the following table. Expected volatilities are 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. The assumptions noted below represent the weighted average of the assumptions utilized for stock options granted during the periods.

 
  Three months
ended
March 31,
 
 
  2012   2011  

Dividend yield

  3.0 % 3.3 %

Expected volatility

  65.3 % 65.6 %

Risk-free interest rate

  1.3 % 2.8 %

Expected life of stock options granted during the period

  6.6 years   6.6 years  

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15. STOCK-BASED COMPENSATION PLANS (Continued)

        A summary of stock option activity under the Stock Incentive Plan as of March 31, 2012 and changes during the three months then ended is presented below:

Option Awards
  Shares   Weighted
Average
Exercise
Price
  Weighted
Average
Remaining
Contractual
Term
  Aggregate
Intrinsic
Value
 
 
  (in thousands)
   
  (years)
  (in millions)
 

Outstanding at January 1, 2012

    10,345   $ 13.83              

Granted

    1,363     13.41              

Exercised

    (432 )   3.05              

Forfeited

    (59 )   17.63              
                         

Outstanding at March 31, 2012

    11,217     14.17     6.1   $ 38  
                         

Exercisable at March 31, 2012

    9,041     14.13     5.3     37  
                         

        The weighted-average grant-date fair value of stock options granted during the three months ended March 31, 2012 was $6.36 per option. As of March 31, 2012, there was $14 million of total unrecognized compensation cost related to nonvested stock option arrangements granted under the Stock Incentive Plan. That cost is expected to be recognized over a weighted-average period of approximately 2.2 years.

        The total intrinsic value of stock options exercised during the three months ended March 31, 2012 and 2011 was $5 million and $10 million, respectively.

NONVESTED SHARES

        Nonvested shares granted under the Stock Incentive Plan consist of restricted stock, which is accounted for as an equity award, and phantom stock, which is accounted for as a liability award

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because it can be settled in either stock or cash. A summary of the status of our nonvested shares as of March 31, 2012 and changes during the three months then ended is presented below:

 
  Equity Awards   Liability Awards  
 
  Shares   Weighted
Average
Grant-Date
Fair Value
  Shares   Weighted
Average
Grant-Date
Fair Value
 
 
  (in thousands)
   
  (in thousands)
   
 

Nonvested at January 1, 2012

    2,287   $ 9.92     1,100   $ 9.42  

Granted

    934     13.41     383     13.41  

Vested

    (1,385) (1)   7.05     (757 )   6.53  

Forfeited

    (11 )   15.30     (28 )   15.79  
                       

Nonvested at March 31, 2012

    1,825     13.86     698     14.50  
                       

(1)
As of March 31, 2012, a total of 494,512 restricted stock units were vested, of which 50,335 vested during the three months ended March 31, 2012. These shares have not been reflected as vested shares in this table because, in accordance with the restricted stock unit agreements, shares of common stock are not issued for vested restricted stock units until termination of employment.

        As of March 31, 2012, there was $29 million of total unrecognized compensation cost related to nonvested share compensation arrangements granted under the Stock Incentive Plan. That cost is expected to be recognized over a weighted-average period of approximately 2.2 years. The value of share awards that vested during the three months ended March 31, 2012 and 2011 was $21 million and $22 million, respectively.

16. 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 a 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 for each jurisdiction. These conclusions require significant judgment. In evaluating the objective evidence that historical results provide, we consider the cyclicality of 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. During the three months ended March 31, 2012, on a discrete basis, we changed our judgment about certain valuation allowances, primarily related to operations of the Textile Effects segment, resulting in a net $1 million expense for changes in valuation allowances related to certain net deferred tax assets in Guatemala, Indonesia and China, with no single change to a valuation allowance greater than $2 million. During the three months ended March 31, 2011, we released a valuation allowance of $5 million on certain net deferred tax assets in Luxembourg.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

16. INCOME TAXES (Continued)

        During the three months ended March 31, 2012, we recorded a net increase in unrecognized tax benefits with a corresponding income tax expense of $1 million and during the three months ended March 31, 2011, we recorded a net decrease in unrecognized tax benefits with a corresponding income tax benefit of $1 million, resulting from the settlement of tax audits, the effective settlement of certain tax positions and the expiration of statutes of limitations, net of additions.

        During the three months ended March 31, 2012, we were granted a tax holiday for the period from January 1, 2012 through December 31, 2016 with respect to certain income from Pigments products manufactured in Malaysia. We are required to make certain investments in order to enjoy the benefits of the tax holiday and we intend to make these investments. During the three months ended March 31, 2012, we recorded a discrete benefit of $3 million from de-recognition of a net deferred tax liability that will reverse during the holiday period. The amount of tax benefit to be realized from the tax holiday is directly dependent on the amount of future pre-tax income generated. We expect that the effects of the tax holiday will not be material to our provision for income taxes.

Huntsman Corporation

        Excluding the tax effects resulting from the net valuation allowance changes, the net unrecognized tax benefit items and the Malaysia tax holiday discussed above, we recorded income tax expense of $61 million and $28 million for the three months ended March 31, 2012 and 2011, respectively. Our tax expense is affected by the mix of income and losses in the tax jurisdictions in which we operate, as impacted by the presence of valuation allowances in certain tax jurisdictions.

Huntsman International

        Excluding the tax effects resulting from the net valuation allowance changes, the net unrecognized tax benefit items and the Malaysia tax holiday discussed above, Huntsman International recorded income tax expense of $62 million and $28 million for the three months ended March 31, 2012 and 2011, respectively. Our tax expense is affected by the mix of income and losses in the tax jurisdictions in which we operate, as impacted by the presence of valuation allowances in certain tax jurisdictions.

17. DISCONTINUED OPERATIONS

AUSTRALIAN STYRENICS BUSINESS SHUTDOWN

        During the first quarter of 2010, we ceased operation of our former Australian styrenics business. The following results of operations of our former Australian styrenics business have been presented as

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

17. DISCONTINUED OPERATIONS (Continued)

discontinued operations in the condensed consolidated statements of operations (unaudited) (dollars in millions):

 
  Three months
ended
March 31,
 
 
  2012   2011  

Revenues

  $ 9   $ 9  

Costs and expenses, net of credits

    (14 )   (30 )
           

Operating loss

    (5 )   (21 )

Income tax benefit

    1     7  
           

Loss from discontinued operations, net of tax

  $ (4 ) $ (14 )
           

        In 2006, product defect actions were filed against our subsidiary Huntsman Chemical Company Australia Pty Limited ("HCCA") in Australian courts relating to the sale and supply of vinyl ester resins that were used in the manufacture of fiberglass swimming pools. HCCA ceased manufacturing these specific resin formulations by 2004 and sold the business that manufactured and sold these resins in 2007.

        During the first quarter of 2011, HCCA increased its estimate of probable loss related to these claims and recorded a liability for the full estimated value of the claims and a corresponding receivable relating to our indemnity protection with a net charge to discontinued operations for any potential shortfall in insurance coverage. Following mediation held in August 2011, HCCA and its insurers reached an agreement with two claimants to settle their claims for amounts within our insurance coverage after our self-insured retention was satisfied. Accordingly, during the third quarter of 2011, HCCA reduced its estimate of probable loss proportionately and reversed a portion of the liability related to this matter. The settlements were paid in the fourth quarter of 2011.

18. NET INCOME PER SHARE

        Basic income per share excludes dilution and is computed by dividing net income attributable to Huntsman Corporation common stockholders 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 available to Huntsman Corporation common stockholders 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.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

18. NET INCOME PER SHARE (Continued)

        Basic and diluted income per share is determined using the following information (in millions):

 
  Three months
ended
March 31,
 
 
  2012   2011  

Numerator:

             

Income from continuing operations:

             

Income from continuing operations attributable to Huntsman Corporation

  $ 167   $ 75  
           

Net income:

             

Net income attributable to Huntsman Corporation

  $ 163   $ 62  
           

Denominator:

             

Shares

             

Weighted average shares outstanding

    236.5     237.6  

Dilutive securities:

             

Stock-based awards

    3.6     5.3  
           

Total weighted average shares outstanding, including dilutive shares

    240.1     242.9  
           

        Additional stock-based awards of 8.0 million and 7.1 million weighted average equivalent shares of stock were outstanding during the three months ended March 31, 2012 and 2011, respectively. However, these stock-based awards were not included in the computation of diluted earnings per share for the three months ended March 31, 2012 and 2011 periods because the effect would be anti-dilutive.

19. OPERATING SEGMENT INFORMATION

        We derive our revenues, earnings and cash flows from the manufacture and sale of a wide variety of differentiated chemical products. We have reported our operations through five segments: Polyurethanes, Performance Products, Advanced Materials, Textile Effects and Pigments. We have organized our business and derived our operating segments around differences in product lines.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

19. OPERATING SEGMENT INFORMATION (Continued)

        The major products of each reportable operating segment are as follows:

Segment
  Products
Polyurethanes   MDI, PO, polyols, PG, TPU, aniline and MTBE

Performance Products

 

amines, surfactants, LAB, maleic anhydride, other performance chemicals, EG, olefins and technology licenses

Advanced Materials

 

epoxy resin compounds and formulations; cross-linking, matting and curing agents; epoxy, acrylic and polyurethane-based adhesives and tooling resin formulations

Textile Effects

 

textile chemicals and dyes

Pigments

 

titanium dioxide

        Sales between segments are generally recognized at external market prices and are eliminated in consolidation. We use 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 EBITDA of operating segments excludes items that principally apply to our

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

19. OPERATING SEGMENT INFORMATION (Continued)

Company as a whole. The revenues and EBITDA for each of our reportable operating segments are as follows (dollars in millions):

 
  Three months
ended
March 31,
 
 
  2012   2011  

Revenues

             

Polyurethanes

  $ 1,220   $ 1,047  

Performance Products

    807     804  

Advanced Materials

    340     350  

Textile Effects

    185     190  

Pigments

    424     364  

Eliminations

    (63 )   (76 )
           

Total

  $ 2,913   $ 2,679  
           

Huntsman Corporation

             

Segment EBITDA(1)

             

Polyurethanes

  $ 171   $ 114  

Performance Products

    89     115  

Advanced Materials

    31     39  

Textile Effects

    (5 )   (11 )

Pigments

    146     84  

Corporate and other(2)

    (41 )   (81 )
           

Subtotal

    391     260  

Discontinued Operations(3)

    (1 )   (21 )
           

Total

    390     239  

Interest expense, net

    (59 )   (59 )

Income tax expense—continuing operations

    (60 )   (22 )

Income tax benefit—discontinued operations

    1     7  

Depreciation and amortization

    (109 )   (103 )
           

Net income attributable to Huntsman Corporation

  $ 163   $ 62  
           

Huntsman International

             

Segment EBITDA(1)

             

Polyurethanes

  $ 171   $ 114  

Performance Products

    89     115  

Advanced Materials

    31     39  

Textile Effects

    (5 )   (11 )

Pigments

    146     84  

Corporate and other(2)

    (41 )   (80 )
           

Subtotal

    391     261  

Discontinued Operations(3)

    (1 )   (21 )
           

Total

    390     240  

Interest expense, net

    (61 )   (64 )

Income tax expense—continuing operations

    (61 )   (22 )

Income tax benefit—discontinued operations

    1     7  

Depreciation and amortization

    (103 )   (98 )
           

Net income attributable to Huntsman International

  $ 166   $ 63  
           

(1)
Segment EBITDA is defined as net income attributable to Huntsman Corporation or Huntsman International, as appropriate, before interest, income tax, depreciation and amortization, and certain Corporate and other items.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

19. OPERATING SEGMENT INFORMATION (Continued)

(2)
Corporate and other includes unallocated corporate overhead, unallocated foreign exchange gains and losses, LIFO inventory valuation reserve adjustments, loss on early extinguishment of debt, unallocated restructuring, impairment and plant closing costs, non-operating income and expense and gains and losses on the disposition of corporate assets.

(3)
The operating results of our former polymers, base chemicals and Australian styrenics businesses are classified as discontinued operations, and, accordingly, the revenues of these businesses are excluded for all periods presented. The EBITDA of our former polymers, base chemicals and Australian styrenics businesses are included in discontinued operations for all periods presented. For more information, see "Note 17. Discontinued Operations."

20. CONDENSED CONSOLIDATING FINANCIAL INFORMATION OF HUNTSMAN INTERNATIONAL LLC (UNAUDITED)

        The following condensed consolidating financial statements (unaudited) present, in separate columns, financial information for the following: Huntsman International (on a parent only basis), with its investment in subsidiaries recorded under the equity method; the Guarantors on a combined, and where appropriate, consolidated basis; and the nonguarantors on a combined, and where appropriate, consolidated basis. Additional columns present eliminating adjustments and consolidated totals as of March 31, 2012 and December 31, 2011 and for the three months ended March 31, 2012 and 2011. There are no contractual restrictions limiting transfers of cash from the Guarantors to Huntsman International. Each of the Guarantors is 100% owned by Huntsman International and has fully and unconditionally guaranteed Huntsman International's outstanding notes on a joint and several basis.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

20. CONDENSED CONSOLIDATING FINANCIAL INFORMATION OF HUNTSMAN INTERNATIONAL LLC (UNAUDITED) (Continued)

HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES
CONDENSED CONSOLIDATING BALANCE SHEETS (UNAUDITED)
AS OF MARCH 31, 2012
(Dollars in Millions)

 
  Parent
Company
  Guarantors   Nonguarantors   Eliminations   Consolidated
Huntsman
International LLC
 

ASSETS

                               

Current assets:

                               

Cash and cash equivalents

  $ 2   $ 3   $ 225   $   $ 230  

Restricted cash

            15         15  

Accounts and notes receivable, net

    26     213     1,562         1,801  

Accounts receivable from affiliates

    1,317     3,384     182     (4,702 )   181  

Inventories

    100     283     1,261     (6 )   1,638  

Prepaid expenses

    10     4     39     (7 )   46  

Deferred income taxes

    6         50     (15 )   41  

Other current assets

    101     4     191     (100 )   196  
                       

Total current assets

    1,562     3,891     3,525     (4,830 )   4,148  

Property, plant and equipment, net

    385     864     2,291     2     3,542  

Investment in unconsolidated affiliates

    5,641     1,675     148     (7,241 )   223  

Intangible assets, net

    37     2     53     (3 )   89  

Goodwill

    (17 )   82     43         108  

Deferred income taxes

    163         194     (188 )   169  

Notes receivable from affiliates

    20     941     2     (961 )   2  

Other noncurrent assets

    75     132     269         476  
                       

Total assets

  $ 7,866   $ 7,587   $ 6,525   $ (13,221 ) $ 8,757  
                       

LIABILITIES AND EQUITY

                               

Current liabilities:

                               

Accounts payable

  $ 78   $ 235   $ 776   $   $ 1,089  

Accounts payable to affiliates

    2,590     1,017     1,138     (4,702 )   43  

Accrued liabilities

    74     192     495     (107 )   654  

Deferred income taxes

        39     7     (17 )   29  

Note payable to affiliate

    100                 100  

Current portion of debt

    38         155         193  
                       

Total current liabilities

    2,880     1,483     2,571     (4,826 )   2,108  

Long-term debt

    3,037         591         3,628  

Notes payable to affiliates

    537         965     (961 )   541  

Deferred income taxes

        142     99     (86 )   155  

Other noncurrent liabilities

    189     168     629         986  
                       

Total liabilities

    6,643     1,793     4,855     (5,873 )   7,418  

Equity

                               

Huntsman International LLC members' equity:

                               

Members' equity

    3,092     4,751     2,408     (7,159 )   3,092  

Accumulated deficit

    (1,351 )   (616 )   (344 )   960     (1,351 )

Accumulated other comprehensive (loss) income

    (518 )   1,659     (468 )   (1,191 )   (518 )
                       

Total Huntsman International LLC members' equity

    1,223     5,794     1,596     (7,390 )   1,223  

Noncontrolling interests in subsidiaries

            74     42     116  
                       

Total equity

    1,223     5,794     1,670     (7,348 )   1,339  
                       

Total liabilities and equity

  $ 7,866   $ 7,587   $ 6,525   $ (13,221 ) $ 8,757  
                       

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

20. CONDENSED CONSOLIDATING FINANCIAL INFORMATION OF HUNTSMAN INTERNATIONAL LLC (UNAUDITED) (Continued)


HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES
CONDENSED CONSOLIDATING BALANCE SHEETS (UNAUDITED)
AS OF DECEMBER 31, 2011
(Dollars in Millions)

 
  Parent
Company
  Guarantors   Nonguarantors   Eliminations   Consolidated
Huntsman
International LLC
 

ASSETS

                               

Current assets:

                               

Cash and cash equivalents

  $ 4   $   $ 227   $   $ 231  

Restricted cash