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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 June 30, 2014

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
(Do not check if a smaller reporting company)
  Smaller reporting company o
Huntsman International LLC   Large accelerated filer o   Accelerated filer o   Non-accelerated filer ý
(Do not check if a smaller reporting company)
  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 July 21, 2014, 243,914,003 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 JUNE 30, 2014

TABLE OF CONTENTS

 
   
  Page  

PART I

 

FINANCIAL INFORMATION

    3  

ITEM 1.

 

Financial Statements:

     

 

Huntsman Corporation and Subsidiaries:

       

 

Condensed Consolidated Balance Sheets (Unaudited)

    3  

 

Condensed Consolidated Statements of Operations (Unaudited)

    4  

 

Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited)

    5  

 

Condensed Consolidated Statements of Equity (Unaudited)

    6  

 

Condensed Consolidated Statements of Cash Flows (Unaudited)

    7  

 

Huntsman International LLC and Subsidiaries:

       

 

Condensed Consolidated Balance Sheets (Unaudited)

    9  

 

Condensed Consolidated Statements of Operations (Unaudited)

    10  

 

Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited)

    11  

 

Condensed Consolidated Statements of Equity (Unaudited)

    12  

 

Condensed Consolidated Statements of Cash Flows (Unaudited)

    13  

 

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

    68  

ITEM 3.

 

Quantitative and Qualitative Disclosures About Market Risk

    91  

ITEM 4.

 

Controls and Procedures

    93  

PART II

 

OTHER INFORMATION

    93  

ITEM 1.

 

Legal Proceedings

    93  

ITEM 1A.

 

Risk Factors

    93  

ITEM 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

    94  

ITEM 6.

 

Exhibits

    94  

2


Table of Contents


PART I. FINANCIAL INFORMATION

ITEM 1.    FINANCIAL STATEMENTS

        


HUNTSMAN CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(In Millions, Except Share and Per Share Amounts)

 
  June 30,
2014
  December 31,
2013
 

ASSETS

             

Current assets:

             

Cash and cash equivalents(a)

  $ 403   $ 520  

Restricted cash(a)

    9     9  

Accounts and notes receivable (net of allowance for doubtful accounts of $41 and $42, respectively), ($651 and $521 pledged as collateral, respectively)(a)

    1,819     1,542  

Accounts receivable from affiliates

    51     33  

Inventories(a)

    1,847     1,741  

Prepaid expenses

    47     61  

Deferred income taxes

    53     53  

Other current assets(a)

    219     200  
           

Total current assets

    4,448     4,159  

Property, plant and equipment, net(a)

    3,776     3,824  

Investment in unconsolidated affiliates

    290     285  

Intangible assets, net(a)

    75     87  

Goodwill

    130     131  

Deferred income taxes

    240     243  

Notes receivable from affiliates

        1  

Other noncurrent assets(a)

    483     458  
           

Total assets

  $ 9,442   $ 9,188  
           
           

LIABILITIES AND EQUITY

             

Current liabilities:

             

Accounts payable(a)

  $ 1,117   $ 1,067  

Accounts payable to affiliates

    45     46  

Accrued liabilities(a)

    682     726  

Deferred income taxes

    43     43  

Current portion of debt(a)

    257     277  
           

Total current liabilities

    2,144     2,159  

Long-term debt(a)

    3,809     3,633  

Notes payable to affiliates

    5     6  

Deferred income taxes

    270     313  

Other noncurrent liabilities(a)

    906     948  
           

Total liabilities

    7,134     7,059  

Commitments and contingencies (Notes 13 and 14)

             

Equity

             

Huntsman Corporation stockholders' equity:

             

Common stock $0.01 par value, 1,200,000,000 shares authorized, 247,957,529 and 245,930,859 issued and 242,476,602 and 240,401,442 outstanding in 2014 and 2013, respectively

    2     2  

Additional paid-in capital

    3,359     3,305  

Treasury stock, 4,043,526 shares at both June 30, 2014 and December 31, 2013

    (50 )   (50 )

Unearned stock-based compensation

    (20 )   (13 )

Accumulated deficit

    (582 )   (687 )

Accumulated other comprehensive loss

    (556 )   (577 )
           

Total Huntsman Corporation stockholders' equity

    2,153     1,980  

Noncontrolling interests in subsidiaries

    155     149  
           

Total equity

    2,308     2,129  
           

Total liabilities and equity

  $ 9,442   $ 9,188  
           
           

(a)
At June 30, 2014 and December 31, 2013, respectively, $38 and $39 of cash and cash equivalents, $9 each of restricted cash, $45 and $41 of accounts and notes receivable (net), $57 and $54 of inventories, $6 and $3 of other current assets, $357 and $369 of property, plant and equipment (net), $18 and $17 of intangible assets (net), $26 and $28 of other noncurrent assets, $86 and $73 of accounts payable, $32 each of accrued liabilities, $180 and $183 of current portion of debt, $51 and $64 of long-term debt, and $39 and $45 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


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HUNTSMAN CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

(In Millions, Except Per Share Amounts)

 
  Three months
ended
June 30,
  Six months
ended
June 30,
 
 
  2014   2013   2014   2013  

Revenues:

                         

Trade sales, services and fees, net

  $ 2,921   $ 2,774   $ 5,614   $ 5,409  

Related party sales

    67     56     129     123  
                   

Total revenues

    2,988     2,830     5,743     5,532  

Cost of goods sold

    2,483     2,379     4,788     4,732  
                   

Gross profit

    505     451     955     800  

Operating expenses:

                         

Selling, general and administrative

    244     233     473     459  

Research and development

    37     34     73     70  

Other operating (income) expense

    (5 )   14     (9 )   7  

Restructuring, impairment and plant closing costs

    13     29     52     73  
                   

Total expenses

    289     310     589     609  
                   

Operating income

    216     141     366     191  

Interest expense

    (51 )   (47 )   (99 )   (98 )

Equity in income of investment in unconsolidated affiliates

    2     2     4     3  

Loss on early extinguishment of debt

                (35 )

Other income

        2     1     2  
                   

Income from continuing operations before income taxes

    167     98     272     63  

Income tax expense

    (43 )   (44 )   (79 )   (24 )
                   

Income from continuing operations

    124     54     193     39  

Loss from discontinued operations

            (7 )   (2 )
                   

Net income

    124     54     186     37  

Net income attributable to noncontrolling interests

    (5 )   (7 )   (13 )   (14 )
                   

Net income attributable to Huntsman Corporation

  $ 119   $ 47   $ 173   $ 23  
                   
                   

Basic income (loss) per share:

                         

Income from continuing operations attributable to Huntsman Corporation common stockholders

  $ 0.49   $ 0.20   $ 0.75   $ 0.11  

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

            (0.03 )   (0.01 )
                   

Net income attributable to Huntsman Corporation common stockholders

  $ 0.49   $ 0.20   $ 0.72   $ 0.10  
                   
                   

Weighted average shares

    241.8     239.7     241.3     239.4  
                   
                   

Diluted income (loss) per share:

                         

Income from continuing operations attributable to Huntsman Corporation common stockholders

  $ 0.48   $ 0.19   $ 0.74   $ 0.11  

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

            (0.03 )   (0.01 )
                   

Net income attributable to Huntsman Corporation common stockholders

  $ 0.48   $ 0.19   $ 0.71   $ 0.10  
                   
                   

Weighted average shares

    245.7     242.2     245.0     242.0  
                   
                   

Amounts attributable to Huntsman Corporation common stockholders:

                         

Income from continuing operations

  $ 119   $ 47   $ 180   $ 25  

Loss from discontinued operations, net of tax

            (7 )   (2 )
                   

Net income

  $ 119   $ 47   $ 173   $ 23  
                   
                   

Dividends per share

  $ 0.125   $ 0.125   $ 0.25   $ 0.25  
                   
                   

   

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

4


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HUNTSMAN CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)

(In Millions)

 
  Three months
ended
June 30,
  Six months
ended
June 30,
 
 
  2014   2013   2014   2013  

Net income

  $ 124   $ 54   $ 186   $ 37  

Other comprehensive income (loss), net of tax:

                         

Foreign currency translations adjustments, net of tax of $(2) and $1 for the three months ended, respectively, and $(2) and $(1) for the six months ended, respectively

    2     (30 )       (97 )

Pension and other postretirement benefits adjustments, net of tax of $(3) and $(5) for the three months ended, respectively, and $(6) and $(15) for the six months ended, respectively

    8     17     17     50  

Other, net

    1     1     1     2  
                   

Other comprehensive income (loss)

    11     (12 )   18     (45 )
                   

Comprehensive income (loss)

    135     42     204     (8 )

Comprehensive loss (income) attributable to noncontrolling interests

    2     (4 )   (10 )   (11 )
                   

Comprehensive income (loss) attributable to Huntsman Corporation

  $ 137   $ 38   $ 194   $ (19 )
                   
                   

   

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

5


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HUNTSMAN CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY (UNAUDITED)

(In Millions, Except Share Amounts)

 
  Huntsman Corporation Stockholders' Equity    
   
 
 
  Shares    
   
   
   
   
   
   
   
 
 
   
   
   
   
   
  Accumulated
other
comprehensive
loss
   
   
 
 
  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, 2014

    240,401,442   $ 2   $ 3,305   $ (50 ) $ (13 ) $ (687 ) $ (577 ) $ 149   $ 2,129  

Net income

                        173         13     186  

Other comprehensive income

                            21     (3 )   18  

Issuance of nonvested stock awards

            15         (15 )                

Vesting of stock awards

    1,003,482         7                         7  

Recognition of stock-based compensation

            5         8                 13  

Repurchase and cancellation of stock awards

    (296,925 )                   (7 )           (7 )

Stock options exercised

    1,368,603         28                         28  

Dividends paid to noncontrolling interests

                                (4 )   (4 )

Excess tax expense related to stock-based compensation

            (1 )                       (1 )

Accrued and unpaid dividends

                        (1 )           (1 )

Dividends declared on common stock

                        (60 )           (60 )
                                       

Balance, June 30, 2014

    242,476,602   $ 2   $ 3,359   $ (50 ) $ (20 ) $ (582 ) $ (556 ) $ 155   $ 2,308  
                                       
                                       

Balance, January 1, 2013

    238,273,422   $ 2   $ 3,264   $ (50 ) $ (12 ) $ (687 ) $ (744 ) $ 123   $ 1,896  

Net income

                        23         14     37  

Other comprehensive loss

                            (42 )   (3 )   (45 )

Issuance of nonvested stock awards

            14         (14 )                

Vesting of stock awards

    1,057,272         5                         5  

Recognition of stock-based compensation

            4         7                 11  

Repurchase and cancellation of stock awards

    (303,247 )                   (6 )           (6 )

Stock options exercised

    750,558         3                         3  

Excess tax benefit related to stock-based compensation

            4                         4  

Accrued and unpaid dividends

                        (2 )           (2 )

Dividends declared on common stock

                        (60 )           (60 )
                                       

Balance, June 30, 2013

    239,778,005   $ 2   $ 3,294   $ (50 ) $ (19 ) $ (732 ) $ (786 ) $ 134   $ 1,843  
                                       

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

6


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HUNTSMAN CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(In Millions)

 
  Six months
ended June 30,
 
 
  2014   2013  

Operating Activities:

             

Net income

  $ 186   $ 37  

Adjustments to reconcile net income to net cash used in operating activities:

             

Equity in income of investment in unconsolidated affiliates

    (4 )   (3 )

Depreciation and amortization

    239     216  

Loss on early extinguishment of debt

        35  

Noncash interest expense

    5     3  

Deferred income taxes

    (32 )   (69 )

Noncash loss on foreign currency transactions

    4     23  

Stock-based compensation

    16     14  

Impairment of assets

    6     1  

Other, net

    (2 )    

Changes in operating assets and liabilities:

             

Accounts and notes receivable

    (300 )   (186 )

Inventories

    (109 )   79  

Prepaid expenses

    14     10  

Other current assets

    (19 )   (30 )

Other noncurrent assets

    (13 )   (97 )

Accounts payable

    94     (60 )

Accrued liabilities

    (75 )   14  

Other noncurrent liabilities

    (27 )   11  
           

Net cash used in operating activities

    (17 )   (2 )
           

Investing Activities:

             

Capital expenditures

    (214 )   (181 )

Cash received from unconsolidated affiliates

    30     34  

Investment in unconsolidated affiliates

    (29 )   (32 )

Acquisition of businesses, net of cash acquired

        (7 )

Proceeds from sale of businesses/assets

    14     2  

Other, net

    (3 )   2  
           

Net cash used in investing activities

    (202 )   (182 )
           

   

(Continued)

7


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HUNTSMAN CORPORATION AND SUBSIDIARIES

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

(In Millions)

 
  Six months
ended June 30,
 
 
  2014   2013  

Financing Activities:

             

Net repayments under revolving loan facilities

  $ (1 ) $ (2 )

Net borrowings on overdraft facilities

    8     10  

Repayments of short-term debt

    (8 )   (18 )

Borrowings on short-term debt

    5     13  

Repayments of long-term debt

    (35 )   (418 )

Proceeds from issuance of long-term debt

    204     473  

Repayments of notes payable

    (16 )   (21 )

Borrowings on notes payable

    1     1  

Debt issuance costs paid

    (4 )   (3 )

Contingent consideration paid for acquisition

    (6 )    

Call premiums related to early extinguishment of debt

        (4 )

Dividends paid to common stockholders

    (60 )   (60 )

Repurchase and cancellation of stock awards

    (7 )   (6 )

Proceeds from issuance of common stock

    28     3  

Excess tax (expense) benefit related to stock-based compensation

    (1 )   4  

Other, net

    (5 )   1  
           

Net cash provided by (used in) financing activities

    103     (27 )
           

Effect of exchange rate changes on cash

    (1 )   (4 )
           

Decrease in cash and cash equivalents

    (117 )   (215 )

Cash and cash equivalents at beginning of period

    520     387  
           

Cash and cash equivalents at end of period

  $ 403   $ 172  
           
           

Supplemental cash flow information:

             

Cash paid for interest

  $ 91   $ 95  

Cash paid for income taxes

    143     46  

        During the six months ended June 30, 2014 and 2013, the amount of capital expenditures in accounts payable decreased by $32 million and $34 million, respectively. During the six months ended June 30, 2014 and 2013, we acquired assets under capital leases of $10 million and nil, respectively.

   

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

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HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(In Millions)

 
  June 30,
2014
  December 31,
2013
 

ASSETS

             

Current assets:

             

Cash and cash equivalents(a)

  $ 308   $ 515  

Restricted cash(a)

    9     9  

Accounts and notes receivable (net of allowance for doubtful accounts of $41 and $42, respectively), ($651 and $521 pledged as collateral, respectively)(a)

    1,817     1,542  

Accounts receivable from affiliates

    352     325  

Inventories(a)

    1,847     1,741  

Prepaid expenses

    45     61  

Deferred income taxes

    53     53  

Other current assets(a)

    213     200  
           

Total current assets

    4,644     4,446  

Property, plant and equipment, net(a)

    3,722     3,759  

Investment in unconsolidated affiliates

    290     285  

Intangible assets, net(a)

    77     88  

Goodwill

    130     131  

Deferred income taxes

    239     243  

Notes receivable from affiliates

        1  

Other noncurrent assets(a)

    483     458  
           

Total assets

  $ 9,585   $ 9,411  
           
           

LIABILITIES AND EQUITY

             

Current liabilities:

             

Accounts payable(a)

  $ 1,117   $ 1,067  

Accounts payable to affiliates

    57     53  

Accrued liabilities(a)

    694     742  

Deferred income taxes

    44     44  

Note payable to affiliate

    100     100  

Current portion of debt(a)

    257     277  
           

Total current liabilities

    2,269     2,283  

Long-term debt(a)

    3,809     3,633  

Notes payable to affiliates

    712     779  

Deferred income taxes

    259     303  

Other noncurrent liabilities(a)

    900     938  
           

Total liabilities

    7,949     7,936  

Commitments and contingencies (Notes 13 and 14)

             

Equity

             

Huntsman International LLC members' equity:

             

Members' equity, 2,728 units issued and outstanding

    3,152     3,138  

Accumulated deficit

    (1,077 )   (1,194 )

Accumulated other comprehensive loss

    (594 )   (618 )
           

Total Huntsman International LLC members' equity

    1,481     1,326  

Noncontrolling interests in subsidiaries

    155     149  
           

Total equity

    1,636     1,475  
           

Total liabilities and equity

  $ 9,585   $ 9,411  
           
           

(a)
At June 30, 2014 and December 31, 2013, respectively, $38 and $39 of cash and cash equivalents, $9 each of restricted cash, $45 and $41 of accounts and notes receivable (net), $57 and $54 of inventories, $6 and $3 of other current assets, $357 and $369 of property, plant and equipment (net), $18 and $17 of intangible assets (net), $26 and $28 of other noncurrent assets, $86 and $73 of accounts payable, $32 each of accrued liabilities, $180 and $183 of current portion of debt, $51 and $64 of long-term debt, and $39 and $45 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).

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HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

(In Millions)

 
  Three months
ended
June 30,
  Six months
ended
June 30,
 
 
  2014   2013   2014   2013  

Revenues:

                         

Trade sales, services and fees, net

  $ 2,921   $ 2,774   $ 5,614   $ 5,409  

Related party sales

    67     56     129     123  
                   

Total revenues

    2,988     2,830     5,743     5,532  

Cost of goods sold

    2,482     2,374     4,782     4,723  
                   

Gross profit

    506     456     961     809  

Operating expenses:

                         

Selling, general and administrative

    243     232     470     456  

Research and development

    37     34     73     70  

Other operating (income) expense

    (5 )   14     (9 )   7  

Restructuring, impairment and plant closing costs

    13     29     52     73  
                   

Total expenses

    288     309     586     606  
                   

Operating income

    218     147     375     203  

Interest expense

    (52 )   (51 )   (103 )   (105 )

Equity in income of investment in unconsolidated affiliates

    2     2     4     3  

Loss on early extinguishment of debt

                (35 )

Other income

        2     1     2  
                   

Income from continuing operations before income taxes

    168     100     277     68  

Income tax expense

    (43 )   (44 )   (80 )   (26 )
                   

Income from continuing operations

    125     56     197     42  

Loss from discontinued operations, net of tax

            (7 )   (2 )
                   

Net income

    125     56     190     40  

Net income attributable to noncontrolling interests

    (5 )   (7 )   (13 )   (14 )
                   

Net income attributable to Huntsman International LLC

  $ 120   $ 49   $ 177   $ 26  
                   
                   

   

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

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HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)

(In Millions)

 
  Three months
ended
June 30,
  Six months
ended
June 30,
 
 
  2014   2013   2014   2013  

Net income

  $ 125   $ 56   $ 190   $ 40  

Other comprehensive income (loss), net of tax:

                         

Foreign currency translations adjustments, net of tax of $(2) and $1 for the three months ended, respectively, and $(2) and $(1) for the six months ended, respectively

    3     (30 )       (97 )

Pension and other postretirement benefits adjustments, net of tax of $(3) and $(4) for the three months ended, respectively, and $(7) and $(15) for the six months ended, respectively

    10     19     20     52  

Other, net

        1     1     3  
                   

Other comprehensive income (loss)

    13     (10 )   21     (42 )
                   

Comprehensive income (loss)

    138     46     211     (2 )

Comprehensive loss (income) attributable to noncontrolling interests

    2     (4 )   (10 )   (11 )
                   

Comprehensive income (loss) attributable to Huntsman International LLC

  $ 140   $ 42   $ 201   $ (13 )
                   
                   

   

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

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HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY (UNAUDITED)

(In Millions, Except Unit Amounts)

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

Balance, January 1, 2014

    2,728   $ 3,138   $ (1,194 ) $ (618 ) $ 149   $ 1,475  

Net income

            177         13     190  

Dividends paid to parent

            (60 )           (60 )

Other comprehensive income

                24     (3 )   21  

Contribution from parent

        15                 15  

Dividends paid to noncontrolling interests

                    (4 )   (4 )

Excess tax expense related to stock-based compensation

        (1 )               (1 )
                           

Balance, June 30, 2014

    2,728   $ 3,152   $ (1,077 ) $ (594 ) $ 155   $ 1,636  
                           
                           

Balance, January 1, 2013

    2,728   $ 3,109   $ (1,224 ) $ (791 ) $ 123   $ 1,217  

Net income

            26         14     40  

Dividends paid to parent

            (60 )           (60 )

Other comprehensive loss

                (39 )   (3 )   (42 )

Contribution from parent

        13                 13  

Excess tax benefit related to stock-based compensation

        4                 4  
                           

Balance, June 30, 2013

    2,728   $ 3,126   $ (1,258 ) $ (830 ) $ 134   $ 1,172  
                           
                           

   

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)

(In Millions)

 
  Six months
ended June 30,
 
 
  2014   2013  

Operating Activities:

             

Net income

  $ 190   $ 40  

Adjustments to reconcile net income to net cash used in operating activities:

             

Equity in income of investment in unconsolidated affiliates

    (4 )   (3 )

Depreciation and amortization

    229     204  

Loss on early extinguishment of debt

        35  

Noncash interest expense

    9     10  

Deferred income taxes

    (31 )   (67 )

Noncash loss on foreign currency transactions

    4     23  

Noncash compensation

    15     13  

Impairment of assets

    6     1  

Other, net

    (2 )   2  

Changes in operating assets and liabilities:

             

Accounts and notes receivable

    (299 )   (186 )

Inventories

    (109 )   79  

Prepaid expenses

    15     11  

Other current assets

    (13 )   (30 )

Other noncurrent assets

    (13 )   (97 )

Accounts payable

    89     (67 )

Accrued liabilities

    (80 )   12  

Other noncurrent liabilities

    (23 )   14  
           

Net cash used in operating activities

    (17 )   (6 )
           

Investing Activities:

             

Capital expenditures

    (214 )   (181 )

Cash received from unconsolidated affiliates

    30     34  

Investment in unconsolidated affiliates

    (29 )   (32 )

Acquisition of businesses, net of cash acquired

        (7 )

Proceeds from sale of businesses/assets

    14     2  

Increase in receivable from affiliate

    (5 )    

Other, net

    (3 )   2  
           

Net cash used in investing activities

    (207 )   (182 )
           

   

(Continued)

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HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

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

(In Millions)

 
  Six months
ended June 30,
 
 
  2014   2013  

Financing Activities:

             

Net repayments under revolving loan facilities

  $ (1 ) $ (2 )

Net borrowings on overdraft facilities

    8     10  

Repayments of short-term debt

    (8 )   (18 )

Borrowings on short-term debt

    5     13  

Repayments of long-term debt

    (35 )   (418 )

Proceeds from issuance of long-term debt

    204     473  

Proceeds from notes payable to affiliate

        177  

Repayments of notes payable to affiliate

    (65 )    

Repayments of notes payable

    (16 )   (21 )

Borrowings on notes payable

    1     1  

Debt issuance costs paid

    (4 )   (3 )

Contingent consideration paid for acquisition

    (6 )    

Call premiums related to early extinguishment of debt

        (4 )

Dividends paid to parent

    (60 )   (60 )

Excess tax (expense) benefit related to stock-based compensation

    (1 )   4  

Other, net

    (4 )   1  
           

Net cash provided by financing activities

    18     153  
           

Effect of exchange rate changes on cash

    (1 )   (4 )
           

Decrease in cash and cash equivalents

    (207 )   (39 )

Cash and cash equivalents at beginning of period

    515     210  
           

Cash and cash equivalents at end of period

  $ 308   $ 171  
           
           

Supplemental cash flow information:

             

Cash paid for interest

  $ 91   $ 95  

Cash paid for income taxes

    143     46  

        During the six months ended June 30, 2014 and 2013, the amount of capital expenditures in accounts payable decreased by $32 million and $34 million, respectively. During the six months ended June 30, 2014 and 2013, Huntsman Corporation contributed $15 million and $13 million related to stock-based compensation, respectively. During the six months ended June 30, 2014 and 2013, we acquired assets under capital leases of $10 million and nil, respectively.

   

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.

        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, 2013 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. In a series of transactions beginning in 2006, we sold or shutdown substantially all of our Australian styrenics operations and our North American polymers and base chemicals operations. We report the results of these businesses as discontinued operations.

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.

        Currently, we operate all of our businesses through Huntsman International, our 100% owned subsidiary. Huntsman International is a Delaware limited liability company and was formed in 1999.

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. Intercompany accounts and transactions have been eliminated.

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

Performance Additives and Titanium Dioxide Acquisition

        On September 17, 2013, we entered into a definitive agreement (the "Stock Purchase Agreement") with Rockwood Holdings, Inc. ("Rockwood"), which was amended on March 20, 2014. Pursuant to the Stock Purchase Agreement, as amended, we will acquire Rockwood's Performance Additives and Titanium Dioxide businesses for approximately $1.05 billion in cash, subject to certain purchase price adjustments, and the assumption of certain unfunded pension liabilities estimated at $225 million as of June 30, 2013. The transaction remains subject to regulatory approvals and customary closing conditions, and we continue to work with the European Commission in their review of the proposed acquisition of Rockwood's Performance Additives and Titanium Dioxide business. We have proposed certain remedies we believe address the Commission's concerns and are confident that final approval

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HUNTSMAN CORPORATION AND SUBSIDIARIES

HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

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

1. GENERAL (Continued)

will be secured by the end of the third quarter of 2014. To accommodate possible delays that may arise from the European Commission review, we have entered into an amendment to the Stock Purchase Agreement to extend its term to the end of October. This extension is conditioned on also extending the financing arrangements, which we are in the process of doing.

Restructuring of the European Surfactants Business

        In connection with the restructuring of our European surfactants business, on June 25, 2014 we completed the sale of our European commodity surfactants business, including the ethoxylation facility in Lavera, France, to Wilmar Europe Holdings B.V. ("Wilmar"). In connection with this sale, we recognized a gain of $2 million in the second quarter of 2014. In addition, Wilmar has entered into a multi-year arrangement to purchase certain sulphated surfactants products from our facilities in St. Mihiel, France and Castiglione delle Stiviere, Italy. Additionally, we intend to cease production at our Patrica, Italy surfactants facility by October 2014.

2. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

Accounting Pronouncements Adopted During 2014

        In February 2013, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2013-04, Liabilities (Topic 405): Obligations Resulting from Joint and Several Liability Arrangements for Which the Total Amount of the Obligation Is Fixed at the Reporting Date, requiring entities to measure obligations resulting from joint and several liability arrangements for which the total amount of the obligation is fixed at the reporting date, as the sum of the amount the reporting entity agreed to pay on the basis of its arrangement among its co-obligors and any additional amount the reporting entity expects to pay on behalf of its co-obligors. The amendments in this ASU are effective for fiscal years, and interim periods within those years, beginning after December 15, 2013. The amendments in this ASU should be applied retrospectively to all prior periods presented for those obligations resulting from joint and several liability arrangements that exist at the beginning of an entity's fiscal year of adoption. We adopted the amendments in this ASU effective January 1, 2014, and the initial adoption of the amendments in this ASU did not have any impact on our condensed consolidated financial statements (unaudited).

        In March 2013, the FASB issued ASU No. 2013-05, Foreign Currency Matters (Topic 830): Parent's Accounting for the Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity, resolving diversity in practice and clarifying the applicable guidance for the release of the cumulative translation adjustment into net income when a parent either sells a part or all of its investment in a foreign entity or no longer holds a controlling financial interest in a subsidiary or group of assets that is a nonprofit activity or business within a foreign entity. We adopted the amendments in this ASU effective January 1, 2014, and the initial adoption of the amendments in this ASU did not have any impact on our condensed consolidated financial statements (unaudited).

        In July 2013, the FASB issued ASU No. 2013-11, Income Taxes (Topic 740): Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit

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HUNTSMAN CORPORATION AND SUBSIDIARIES

HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

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

2. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS (Continued)

Carryforward Exists, providing guidance on the presentation of unrecognized tax benefits in the financial statements as either a reduction to a deferred tax asset or as a liability to better reflect the manner in which an entity would settle at the reporting date any additional income taxes that would result from the disallowance of a tax position when net operating loss carryforwards ("NOLs"), similar tax losses or tax credit carryforwards exist. The amendments in this ASU do not require new recurring disclosures. The amendments in this ASU are effective for fiscal years, and interim periods within those years, beginning after December 15, 2013. We adopted the amendments in this ASU effective January 1, 2014, and the initial adoption of the amendments in this ASU did not have any impact on our condensed consolidated financial statements (unaudited).

Accounting Pronouncements Pending Adoption in Future Periods

        In April 2014, the FASB issued ASU No. 2014-08, Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity, changing the criteria for reporting discontinued operations and enhancing reporting requirements for discontinued operations. A disposal of a component of an entity or a group of components of an entity will be required to be reported in discontinued operations if the disposal represents a strategic shift that has (or will have) a major effect on an entity's operations and financial results. Further, the amendments in this ASU will require an entity to present, for each comparative period, the assets and liabilities of a disposal group that includes a discontinued operation separately in the asset and liability sections, respectively, of the statement of financial position. The amendments in this ASU are effective prospectively for all disposals (or classifications as held for sale) of components of an entity that occur within annual periods beginning on or after December 15, 2014, and interim periods within those years, and for all businesses that, on acquisition, are classified as held for sale that occur within annual periods beginning on or after December 15, 2014, and interim periods within those years. We do not expect the adoption of the amendments in this ASU to have a significant impact on our condensed consolidated financial statements (unaudited).

        In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), outlining a single comprehensive model for entities to use in accounting for revenues arising from contracts with customers and supersedes most current revenue recognition guidance. The amendments in this ASU are effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. The amendments in this ASU should be applied retrospectively, and early application is not permitted. We are currently evaluating the impact of the adoption of the amendments in this ASU on our condensed consolidated financial statements (unaudited).

3. BUSINESS COMBINATIONS

OXID ACQUISITION

        On August 29, 2013, we completed the acquisition of the chemical business of Oxid L.P. (the "Oxid Acquisition"), a privately-held manufacturer and marketer of specialty urethane polyols based in Houston, Texas. The acquisition cost of approximately $76 million consists of cash payments of approximately $66 million and contingent consideration of $10 million. The contingent consideration

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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)

relates to an earn-out agreement which will be paid over two years if certain conditions are met. Related to this earn-out agreement, $6 million was paid during the six months ended June 30, 2014. The acquired business has been integrated into our Polyurethanes segment. Transaction costs charged to expense related to this acquisition were not significant.

        We have accounted for the Oxid 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):

Cash paid for acquisition

  $ 66  

Contingent consideration

    10  
       

Acquisition cost

  $ 76  
       
       

Fair value of assets acquired and liabilities assumed:

       

Accounts receivable

  $ 9  

Inventories

    14  

Property, plant and equipment

    22  

Intangible assets

    36  

Accounts payable

    (4 )

Accrued liabilities

    (1 )
       

Total fair value of net assets acquired

  $ 76  
       
       

        Intangible assets acquired consist primarily of developed technology and customer relationships, both of which will be amortized over 15 years. If this acquisition were to have occurred on January 1, 2013, the following estimated pro forma revenues and net loss attributable to Huntsman Corporation and Huntsman International would have been reported (dollars in millions):

Huntsman Corporation

 
  Pro Forma   Pro Forma  
 
  Three months
ended
June 30, 2013
(Unaudited)
  Six months
ended
June 30, 2013
(Unaudited)
 

Revenues

  $ 2,856   $ 5,578  

Net income attributable to Huntsman Corporation

    50     27  

Huntsman International

 
  Pro Forma   Pro Forma  
 
  Three months
ended
June 30, 2013
(Unaudited)
  Six months
ended
June 30, 2013
(Unaudited)
 

Revenues

  $ 2,856   $ 5,578  

Net income attributable to Huntsman International

    52     30  

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HUNTSMAN CORPORATION AND SUBSIDIARIES

HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

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

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):

 
  June 30,
2014
  December 31,
2013
 

Raw materials and supplies

  $ 454   $ 433  

Work in progress

    90     92  

Finished goods

    1,382     1,290  
           

Total

    1,926     1,815  

LIFO reserves

    (79 )   (74 )
           

Net

  $ 1,847   $ 1,741  
           
           

        For both June 30, 2014 and December 31, 2013, approximately 11% of inventories were recorded using the LIFO cost method.

5. VARIABLE INTEREST ENTITIES

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

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HUNTSMAN CORPORATION AND SUBSIDIARIES

HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

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

5. VARIABLE INTEREST ENTITIES (Continued)

        Creditors of these entities have no recourse to our general credit. As the primary beneficiary of these variable interest entities at June 30, 2014, the joint ventures' assets, liabilities and results of operations are included in our condensed consolidated financial statements (unaudited).

        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):

 
  June 30,
2014
  December 31,
2013
 

Current assets

  $ 189   $ 147  

Property, plant and equipment, net

    357     369  

Other noncurrent assets

    70     76  

Deferred income taxes

    28     28  

Intangible assets

    18     17  

Goodwill

    16     16  
           

Total assets

  $ 678   $ 653  
           
           

Current liabilities

  $ 364   $ 330  

Long-term debt

    57     72  

Deferred income taxes

    9     9  

Other noncurrent liabilities

    39     45  
           

Total liabilities

  $ 469   $ 456  
           
           

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HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

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

6. RESTRUCTURING, IMPAIRMENT AND PLANT CLOSING COSTS

        As of June 30, 2014 and December 31, 2013, 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 and
contract
termination
costs
  Other
restructuring
costs
  Total(2)  

Accrued liabilities as of January 1, 2014

  $ 52   $   $ 60   $ 1   $ 113  

2014 charges for 2013 and prior initiatives

    38     4     3     6     51  

2014 charges for 2014 initiatives

    6                 6  

Reversal of reserves no longer required

    (7 )           (1 )   (8 )

2014 payments for 2013 and prior initiatives

    (30 )   (4 )   (3 )   (6 )   (43 )

Foreign currency effect on liability balance

            (1 )       (1 )
                       

Accrued liabilities as of June 30, 2014

  $ 59   $   $ 59   $   $ 118  
                       
                       

(1)
The workforce reduction reserves relate to the termination of 646 positions, of which 507 positions had not been terminated as of June 30, 2014.

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

 
  June 30,
2014
  December 31,
2013
 

2012 and prior initiatives

  $ 75   $ 95  

2013 initiatives

    37     18  

2014 initiatives

    6      
           

Total

  $ 118   $ 113  
           
           

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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, 2014

  $ 9   $ 10   $ 12   $ 68   $ 2   $ 3   $ 9   $ 113  

2014 charges for 2013 and prior initiatives

        23     9     10     3         6     51  

2014 charges for 2014 initiatives

                5             1     6  

Reversal of reserves no longer required

        (1 )   (4 )   (2 )           (1 )   (8 )

2014 payments for 2013 and prior initiatives

    (2 )   (3 )   (12 )   (16 )   (3 )       (7 )   (43 )

Foreign currency effect on liability balance

                    (1 )           (1 )
                                   

Accrued liabilities as of June 30, 2014

  $ 7   $ 29   $ 5   $ 65   $ 1   $ 3   $ 8   $ 118  
                                   
                                   

Current portion of restructuring reserves

  $ 3   $ 29   $ 3   $ 9   $ 1   $ 3   $ 8   $ 56  

Long-term portion of restructuring reserves

    4         2     56                 62  

        Details with respect to cash and noncash restructuring charges for the six months ended June 30, 2014 and 2013 by initiative are provided below (dollars in millions):

 
  Three months
ended
June 30, 2014
  Six months
ended
June 30, 2014
 

Cash charges:

             

2014 charges for 2013 and prior initiatives

  $ 10   $ 51  

2014 charges for 2014 initiatives

    6     6  

Pension related charges

    1     2  

Reversal of reserves no longer required

    (4 )   (8 )

Non-cash charges

        1  
           

Total 2014 Restructuring, Impairment and Plant Closing Costs

  $ 13   $ 52  
           
           

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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)


 
  Three months
ended
June 30, 2013
  Six months
ended
June 30, 2013
 

Cash charges:

             

2013 charges for 2012 and prior initiatives

  $ 18   $ 62  

2013 charges for 2013 initiatives

    12     14  

Pension related charges

    1     5  

Reversal of reserves no longer required

    (2 )   (9 )

Non-cash charges

        1  
           

Total 2013 Restructuring, Impairment and Plant Closing Costs

  $ 29   $ 73  
           
           

2014 RESTRUCTURING ACTIVITIES

        During 2013, our Performance Products segment initiated a restructuring program to refocus our surfactants business in Europe. In connection with this program, on June 25, 2014 we completed the sale of our European commodity surfactants business, including the ethoxylation facility in Lavera, France to Wilmar. In addition, Wilmar has entered into a multi-year arrangement to purchase certain sulphated surfactant products from our facilities in St. Mihiel, France and Castiglione delle Stiviere, Italy. Additionally, we intend to cease production at our Patrica, Italy surfactants facility by October 2014. During the six months ended June 30, 2014, we recorded charges of $23 million primarily related to workforce reductions, reversed reserves of $1 million that were no longer required and recorded a charge of $1 million for the impairment of long-lived assets relating to the sale of our Lavera, France manufacturing facility to Wilmar.

        During the six months ended June 30, 2014, our Advanced Materials segment recorded charges of $9 million primarily related to workforce reductions with our global transformational change program designed to improve the segment's manufacturing efficiencies, enhance its commercial excellence and improve its long-term global competitiveness. Our Advanced Materials segment also reversed reserves of $4 million related to this initiative that were no longer required.

        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 six months ended June 30, 2014, our Textile Effects segment recorded charges of $2 million for long-term contract termination costs, $4 million for decommissioning, $1 million for workforce reduction and $1 million in other restructuring costs associated with this initiative. Additionally, we reversed reserves of $2 million related to this initiative that were no longer required. In June 2014, we announced plans for the closure our Qingdao, China plant to be completed by December 2015. During the six months ended June 30, 2014, we recorded charges of $5 million primarily related to workforce reductions related to this initiative. Additionally, we recorded charges of $1 million for long-term contract termination costs and $1 million for workforce reductions for other restructuring initiatives.

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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)

        During the six months ended June 30, 2014, our Corporate and other segment recorded charges of $6 million and reversed reserves of $1 million primarily related to workforce reductions in association with a reorganization of our global information technology organization. Additionally, we recorded charges of $1 million for other restructuring initiatives.

2013 RESTRUCTURING ACTIVITIES

        During the six months ended June 30, 2013, our Polyurethanes segment recorded charges of $3 million and reversed reserves of $5 million related to workforce reductions in association with our program to reduce annualized fixed costs by approximately $75 million. Our Polyurethanes segment also recorded pension-related settlement charges of $5 million related to this program.

        During the six months ended June 30, 2013, our Performance Products segment recorded charges of $4 million primarily related to workforce reductions in our Australian operation.

        During the six months ended June 30, 2013, our Advanced Materials segment recorded charges of $28 million primarily related to workforce reductions with our global transformational change program designed to improve the segment's manufacturing efficiencies, enhance its commercial excellence and improve its long-term global competitiveness. Our Advanced Materials segment also recorded a $1 million noncash charge for asset impairments and reversed reserves of $2 million related to this initiative.

        On September 27, 2011, we announced plans to implement a significant restructuring of our Textile Effects business, 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 six months ended June 30, 2013, our Textile Effects segment recorded charges of $19 million for long-term fixed cost contracts, $8 million for decommissioning, $2 million for other restructuring and $1 million for workforce reduction and reversed reserves of $2 million related to workforce reduction associated with this initiative.

        During the six months ended June 30, 2013, our Pigments segment recorded charges of $3 million primarily related to the closure of our Grimsby, U.K. plant.

        During the six months ended June 30, 2013, our Corporate and other segment recorded charges of $8 million primarily related to workforce reductions in association with a reorganization of our global information technology organization.

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

7. DEBT

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

Huntsman Corporation

 
  June 30,
2014
  December 31,
2013
 

Senior Credit Facilities:

             

Term loans

  $ 1,339   $ 1,351  

Amounts outstanding under A/R programs

    245     248  

Senior notes

    1,258     1,061  

Senior subordinated notes

    890     891  

HPS (China) debt

    33     40  

Variable interest entities

    231     247  

Other

    70     72  
           

Total debt—excluding debt to affiliates

  $ 4,066   $ 3,910  
           
           

Total current portion of debt

  $ 257   $ 277  

Long-term portion

    3,809     3,633  
           

Total debt—excluding debt to affiliates

  $ 4,066   $ 3,910  
           
           

Total debt—excluding debt to affiliates

  $ 4,066   $ 3,910  

Notes payable to affiliates—noncurrent

    5     6  
           

Total debt

  $ 4,071   $ 3,916  
           
           

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HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

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

7. DEBT (Continued)

Huntsman International

 
  June 30,
2014
  December 31,
2013
 

Senior Credit Facilities:

             

Term loans

  $ 1,339   $ 1,351  

Amounts outstanding under A/R programs

    245     248  

Senior notes

    1,258     1,061  

Senior subordinated notes

    890     891  

HPS (China) debt

    33     40  

Variable interest entities

    231     247  

Other

    70     72  
           

Total debt—excluding debt to affiliates

  $ 4,066   $ 3,910  
           
           

Total current portion of debt

  $ 257   $ 277  

Long-term portion

    3,809     3,633  
           

Total debt—excluding debt to affiliates

  $ 4,066   $ 3,910  
           
           

Total debt—excluding debt to affiliates

  $ 4,066   $ 3,910  

Notes payable to affiliates—current

    100     100  

Notes payable to affiliates—noncurrent

    712     779  
           

Total debt

  $ 4,878   $ 4,789  
           
           

DIRECT AND SUBSIDIARY DEBT

        Huntsman Corporation's direct debt and guarantee obligations consist of a guarantee of 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). Huntsman Corporation is not a guarantor of such subsidiary debt.

        Certain of our subsidiaries are designated as nonguarantor subsidiaries and have third-party debt agreements. These debt agreements contain certain restrictions with regard to dividends, distributions, loans or advances. In certain circumstances, the consent of a third party would be required prior to the transfer of any cash or assets from these subsidiaries to us.

Senior Credit Facilities

        As of June 30, 2014, our senior credit facilities ("Senior Credit Facilities") consisted of our revolving credit facility ("Revolving Facility"), our extended term loan B facility ("Extended Term

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

7. DEBT (Continued)

Loan B"), our extended term loan B facility—series 2 ("Extended Term Loan B—Series 2") and our term loan C facility ("Term Loan C") as follows (dollars in millions):

Facility
  Committed
Amount
  Principal
Outstanding
  Carrying
Value
  Interest Rate(3)   Maturity  

Revolving Facility

  $ 400 (1) $ (2) $ (2) USD LIBOR plus 2.50%     2017  

Extended Term Loan B

    NA     952     952   USD LIBOR plus 2.50%     2017  

Extended Term Loan B—Series 2

    NA     339     339   USD LIBOR plus 2.75%     2017  

Term Loan C

    NA     50     48   USD LIBOR plus 2.25%     2016  

(1)
We have commitments with certain financial institutions to provide for a $200 million increase to our Revolving Facility ("Revolving Increase") to an aggregate Revolving Facility committed amount of $600 million upon completion of the acquisition of the Performance Additives and Titanium Dioxide businesses of Rockwood.

(2)
We had no borrowings outstanding under our Revolving Facility; we had approximately $17 million (U.S. dollar equivalents) of letters of credit and bank guarantees issued and outstanding under our Revolving Facility.

(3)
The applicable interest rate of the Senior Credit Facilities is subject to certain secured leverage ratio thresholds. As of June 30, 2014, the weighted average interest rate on our outstanding balances under the Senior Credit Facilities was approximately 3%.

        Our obligations under the Senior Credit Facilities are guaranteed by substantially all of our domestic subsidiaries and certain of our foreign subsidiaries (collectively, the "Guarantors"), and are secured by a first priority lien on substantially all of our domestic property, plant and equipment, the stock of all of our material domestic subsidiaries and certain foreign subsidiaries, and pledges of intercompany notes between certain of our subsidiaries.

Amendment to the Credit Agreement

        On October 15, 2013, Huntsman International entered into a tenth amendment to the agreement governing the Senior Credit Facilities (the "Credit Agreement"). The amendment, among other things, permits us to incur a senior secured term loan facility in an aggregate principal amount of $1.2 billion (the "New Term Loan") and to increase our Revolving Facility.

        We have entered into commitments with certain financial institutions to provide for the New Term Loan and provide for $200 million of the Revolving Increase. We intend to use the net proceeds of the New Term Loan, when funded, to pay the cash consideration related to Huntsman International's acquisition of the Performance Additives and Titanium Dioxide businesses of Rockwood. If the acquisition is not consummated, we may use the net proceeds to refinance certain indebtedness of Huntsman International. These commitments will expire on September 17, 2014. We intend to make certain modifications to these financing arrangements that will effectively extend the expiration date to December 17, 2014.

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HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

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

7. DEBT (Continued)

        The New Term Loan will mature on the seventh anniversary of the date such New Term Loan is funded and will amortize in aggregate annual amounts equal to 1% of the original principal amount of the New Term Loan, payable quarterly commencing with the first full fiscal quarter ended after the date the New Term Loan is funded. The Revolving Increase will mature on the same date as the Revolving Facility.

Notes

        As of June 30, 2014, we had outstanding the following notes (monetary amounts in millions):

Notes
  Maturity   Interest
Rate
  Amount Outstanding

Senior Notes ("2020 Senior Notes")

  November 2020     4.875 % $650 ($647 carrying value)

Senior Notes ("2021 Senior Notes")

  April 2021     5.125 % €445 (€450 carrying value ($611))

Senior Subordinated Notes

  March 2020     8.625 % $350

Senior Subordinated Notes

  March 2021     8.625 % $530 ($540 carrying value)

        On June 2, 2014, pursuant to an indenture entered into on December 23, 2013, Huntsman International issued €145 million (approximately $197 million) aggregate principal amount of additional 2021 Senior Notes. The notes are recorded at carrying value €150 million (approximately $204 million) as of June 30, 2014.

        The 2021 Senior Notes bear interest at the rate of 5.125% per year payable semi-annually on April 15 and October 15 of each year and are due on April 15, 2021. Huntsman International may redeem the 2021 Senior Notes in whole or in part at any time prior to January 15, 2021 at a price equal to 100% of the principal amount thereof plus a "make-whole" premium and accrued and unpaid interest.

        The 2021 Senior Notes and 2020 Senior Notes are general unsecured senior obligations of Huntsman International and are guaranteed on a general unsecured senior basis by the Guarantors. The indentures impose certain limitations on the ability of Huntsman International and its subsidiaries to, among other things, incur additional indebtedness secured by any principal properties, incur indebtedness of nonguarantor subsidiaries, enter into sale and leaseback transactions with respect to any principal properties and consolidate or merge with or into any other person or lease, sell or transfer all or substantially all of its properties and assets. Upon the occurrence of certain change of control events, holders of the 2021 Senior Notes and 2020 Senior Notes will have the right to require that Huntsman International purchase all or a portion of such holder's 2021 and 2020 Senior Notes in cash at a purchase price equal to 101% of the principal amount thereof plus accrued and unpaid interest to the date of repurchase.

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

7. DEBT (Continued)

Redemption of Notes and Loss on Early Extinguishment of Debt

        We did not redeem or repurchase any of our notes during the six months ended June 30, 2014. During the six months ended June 30, 2013, we redeemed or repurchased the following notes (monetary amounts in millions):

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

March 4, 2013

  5.50% Senior Notes due 2016   $ 200   $ 200   $ 34  

Variable Interest Entity Debt

        As of June 30, 2014, Arabian Amines Company, our consolidated 50%-owned joint venture, had $166 million outstanding under its loan commitments and debt financing arrangements. Arabian Amines Company is currently not in compliance with certain financial covenants under its loan commitments. We do not guarantee these loan commitments, and Arabian Amines Company is not a guarantor of any of our other debt obligations. Arabian Amines Company's noncompliance with its financial covenants does not affect any of our debt obligations. While the lenders under the loan commitments have agreed to certain modifications, we continue discussions with Arabian Amines Company's lenders and expect to resolve the noncompliance. As of June 30, 2014, the amounts outstanding under these loan commitments were classified as current in our condensed consolidated balance sheets (unaudited).

Note Payable from Huntsman International to Huntsman Corporation

        As of June 30, 2014, we have a loan of $807 million to our subsidiary, Huntsman International (the "Intercompany Note"). The Intercompany Note is unsecured and $100 million of the outstanding amount is classified as current as of June 30, 2014 on our condensed consolidated balance sheets (unaudited). As of June 30, 2014, under the terms of the Intercompany Note, Huntsman International promises to pay us interest on the unpaid principal amount at a rate per annum based on the previous monthly average borrowing rate obtained under our U.S. accounts receivable securitization program ("U.S. A/R Program"), less 10 basis points (provided that the rate shall not exceed an amount that is 25 basis points less than the monthly average borrowing rate obtained for the U.S. LIBOR-based borrowings under our Revolving Facility).

COMPLIANCE WITH COVENANTS

        We believe that we are in compliance with the covenants contained in the agreements governing our material debt instruments, including our Senior Credit Facilities, our U.S. A/R Program and our European accounts receivable securitization program ("European A/R Program" and collectively with the U.S. A/R Program, "A/R Programs") and our notes. However, Arabian Amines Company, our consolidated 50%-owned joint venture, is currently not in compliance with certain financial covenants contained under its loan commitments. See "—Variable Interest Entity Debt" above.

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HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

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

7. DEBT (Continued)

        Our material financing arrangements contain certain covenants with which we must comply. A failure to comply with a covenant could result in a default under a financing arrangement unless we obtained an appropriate waiver or forbearance (as to which we can provide no assurance). A default under these material financing arrangements generally allows debt holders the option to declare the underlying debt obligations immediately due and payable. Furthermore, certain of our material financing arrangements contain cross-default and cross-acceleration provisions under which a failure to comply with the covenants in one financing arrangement may result in an event of default under another financing arrangement.

        Our Senior Credit Facilities are subject to a single financial covenant (the "Leverage Covenant") which applies only to the Revolving Facility and is calculated at the Huntsman International level. The Leverage Covenant is applicable only if borrowings, letters of credit or guarantees are outstanding under the Revolving Facility (cash collateralized letters of credit or guarantees are not deemed outstanding). The Leverage Covenant is a net senior secured leverage ratio covenant which requires that Huntsman International's ratio of senior secured debt to EBITDA (as defined in the applicable agreement) is not more than 3.75 to 1.

        If in the future Huntsman International fails to comply with the Leverage Covenant, then we may not have access to liquidity under our Revolving Facility. If Huntsman International failed to comply with the Leverage Covenant at a time when we had uncollateralized loans or letters of credit outstanding under the Revolving Facility, Huntsman International would be in default under the Senior Credit Facilities, and, unless Huntsman International obtained a waiver or forbearance with respect to such default (as to which we can provide no assurance), Huntsman International could be required to pay off the balance of the Senior Credit Facilities in full, and we may not have further access to such facilities.

        The agreements governing our A/R Programs also contain certain receivable performance metrics. Any material failure to meet the applicable A/R Programs' metrics in the future could lead to an early termination event under the A/R Programs, which could require us to cease our use of such facilities, prohibiting us from additional borrowings against our receivables or, at the discretion of the lenders, requiring that we repay the A/R Programs in full. An early termination event under the A/R Programs would also constitute an event of default under our Senior Credit Facilities, which could require us to pay off the balance of the Senior Credit Facilities in full and could result in the loss of our Senior Credit Facilities.

8. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

        We are exposed to market risks, such as changes in interest rates, foreign exchange rates and commodity pricing risks. From time to time, we enter into transactions, including transactions involving derivative instruments, to manage certain of these exposures.

        All derivatives, whether designated in hedging relationships or not, are recorded on our balance sheet at fair value. If the derivative is designated as a fair value hedge, the changes in the fair value of the derivative and the hedged items are recognized in earnings. If the derivative is designated as a cash flow hedge, changes in the fair value of the derivative are recorded in accumulated other

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

8. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES (Continued)

comprehensive loss, to the extent effective, and will be recognized in the income statement when the hedged item affects earnings. To the extent applicable, we perform effectiveness assessments in order to use hedge accounting at each reporting period. For a derivative that does not qualify as a hedge, changes in fair value are recognized in earnings.

        We also hedge our net investment in certain European operations. Changes in the fair value of the hedge in the net investment of certain European operations are recorded in accumulated other comprehensive loss.

        Our cash flows and earnings are subject to fluctuations due to exchange rate variation. Our revenues and expenses are denominated in various foreign currencies. From time to time, we may enter into foreign currency derivative instruments to minimize the short-term impact of movements in foreign currency rates. Where practicable, we generally net multicurrency cash balances among our subsidiaries to help reduce exposure to foreign currency exchange rates. Certain other exposures may be managed from time to time through financial market transactions, principally through the purchase of spot or forward foreign exchange contracts (generally with maturities of one year or less). We do not hedge our foreign currency exposures in a manner that would eliminate the effect of changes in exchange rates on our cash flows and earnings. As of June 30, 2014, we had approximately $215 million in notional amount (in U.S. dollar equivalents) outstanding in forward foreign currency contracts.

        On December 9, 2009, we entered into a five-year interest rate contract to hedge the variability caused by monthly changes in cash flow due to associated changes in LIBOR under our Senior Credit Facilities. The notional value of the contract is $50 million, and it has been designated as a cash flow hedge. The effective portion of the changes in the fair value of the swap was recorded in other comprehensive loss. We will pay a fixed 2.6% on the hedge and receive the one-month LIBOR rate. As of June 30, 2014, the fair value of the hedge was $1 million and was recorded in current liabilities on our condensed consolidated balance sheets (unaudited).

        On January 19, 2010, we entered into an additional five-year interest rate contract to hedge the variability caused by monthly changes in cash flow due to associated changes in LIBOR under our Senior Credit Facilities. The notional value of the contract is $50 million, and it has been designated as a cash flow hedge. The effective portion of the changes in the fair value of the swap was recorded as other comprehensive loss. We will pay a fixed 2.8% on the hedge and receive the one-month LIBOR rate. As of June 30, 2014, the fair value of the hedge was $1 million and was recorded in current liabilities on our condensed consolidated balance sheets (unaudited).

        On September 1, 2011, we entered into a $50 million forward interest rate contract that will begin in December 2014 with maturity in April 2017 and a $50 million forward interest rate contract that will begin in January 2015 with maturity in April 2017. These two forward contracts are to hedge the variability caused by monthly changes in cash flow due to associated changes in LIBOR under our Senior Credit Facilities once our existing interest rate hedges mature. These swaps are designated as cash flow hedges and the effective portion of the changes in the fair value of the swaps were recorded in other comprehensive income. Both interest rate contracts will pay a fixed 2.5% on the hedge and receive the one-month LIBOR rate once the contracts begin in 2014 and 2015, respectively. As of

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

8. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES (Continued)

June 30, 2014, the combined fair value of these two hedges was $3 million and was recorded in other noncurrent liabilities on our condensed consolidated balance sheets (unaudited).

        In 2009, Sasol-Huntsman entered into derivative transactions to hedge the variable interest rate associated with its local credit facility. These derivative rate hedges include a floating to fixed interest rate contract providing Sasol-Huntsman with EURIBOR interest payments for a fixed payment of 3.62% and a cap for future periods with a strike price of 3.62%. In connection with the consolidation of Sasol-Huntsman as of April 1, 2011, the interest rate contract is now included in our consolidated results. See "Note 5. Variable Interest Entities." The notional amount of the hedges as of June 30, 2014 was €25 million (approximately $34 million) and the derivative transactions do not qualify for hedge accounting. As of June 30, 2014, the fair value of the hedges was less than €1 million (less than approximately $1 million) and was recorded in other noncurrent liabilities on our condensed consolidated balance sheets (unaudited). For the three and six months ended June 30, 2014, we recorded a reduction of interest expense of nil and €1 million (approximately $1 million), respectively, due to changes in the fair value of the hedges.

        Beginning in 2009, Arabian Amines Company entered into a 12-year floating to fixed interest rate contract providing for a receipt of LIBOR interest payments for a fixed payment of 5.02%. In connection with the consolidation of Arabian Amines Company as of July 1, 2010, the interest rate contract is now included in our consolidated results. See "Note 5. Variable Interest Entities." The notional amount of the swap as of June 30, 2014 was $30 million, and the interest rate contract is not designated as a cash flow hedge. As of June 30, 2014, the fair value of the swap was $3 million and was recorded in current liabilities on our condensed consolidated balance sheets (unaudited). For the three and six months ended June 30, 2014, we recorded additional (reduction of) interest expense of nil each due to changes in fair value of the swap. As of June 30, 2014, Arabian Amines Company was not in compliance with certain financial covenants under its loan commitments. For more information, see "Note 7. Debt—Direct and Subsidiary Debt—Variable Interest Entity Debt."

        In conjunction with the issuance of our 8.625% senior subordinated notes due 2020, we entered into cross-currency interest rate contracts with three counterparties. On March 17, 2010, we made payments of $350 million to these counterparties and received €255 million from these counterparties, and on maturity (March 15, 2015) we are required to pay €255 million to these counterparties and will receive $350 million from these counterparties. On March 15 and September 15 of each year, we will receive U.S. dollar interest payments of approximately $15 million (equivalent to an annual rate of 8.625%) and make interest payments of approximately €11 million (equivalent to an annual rate of approximately 8.41%). This swap is designated as a hedge of net investment for financial reporting purposes. As of June 30, 2014, the fair value of this swap was $3 million and was recorded in current assets on our condensed consolidated balance sheets (unaudited).

        We 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 and the designation of certain debt and swaps as net investment hedges.

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HUNTSMAN CORPORATION AND SUBSIDIARIES

HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

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

8. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES (Continued)

        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 income. From time to time, we review such designation of intercompany loans.

        We review our non-U.S. dollar denominated debt and derivative instruments to determine the appropriate amounts designated as hedges. As of June 30, 2014, we have designated approximately €475 million (approximately $645 million) of euro-denominated debt and cross-currency interest rate contracts as a hedge of our net investment. For the three and six months ended June 30, 2014, the amount of gain recognized on the hedge of our net investment was $5 million and $6 million, respectively, and was recorded in other comprehensive income on our condensed consolidated statements of comprehensive income (unaudited). As of June 30, 2014, we had approximately €1,028 million (approximately $1,397 million) in net euro assets.

9. FAIR VALUE

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

 
  June 30, 2014   December 31, 2013  
 
  Carrying
Value
  Estimated
Fair Value
  Carrying
Value
  Estimated
Fair Value
 

Non-qualified employee benefit plan investments

  $ 21   $ 21   $ 21   $ 21  

Cross-currency interest rate contracts

    3     3     2     2  

Interest rate contracts

    (9 )   (9 )   (10 )   (10 )

Long-term debt (including current portion)

    (4,066 )   (4,197 )   (3,910 )   (4,010 )

        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 (Level 1).

        The fair value estimates presented herein are based on pertinent information available to management as of June 30, 2014 and December 31, 2013. 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 June 30, 2014 and current estimates of fair value may differ significantly from the amounts presented herein.

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HUNTSMAN CORPORATION AND SUBSIDIARIES

HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

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
  June 30,
2014
  Quoted prices in active
markets for identical
assets (Level 1)(3)
  Significant other
observable inputs
(Level 2)(3)
  Significant
unobservable inputs
(Level 3)(3)
 

Assets:

                         

Available-for sale equity securities:

                         

Equity mutual funds

  $ 21   $ 21   $   $  

Derivatives:

                         

Cross-currency interest rate contracts(1)              

    3         3      
                   

Total assets

  $ 24   $ 21   $ 3   $  
                   
                   

Liabilities:

                         

Derivatives:

                         

Interest rate contracts(2)

  $ (9 ) $   $ (9 ) $  
                   
                   

 

 
   
  Fair Value Amounts Using  
Description
  December 31,
2013
  Quoted prices in active
markets for identical
assets (Level 1)(3)
  Significant other
observable inputs
(Level 2)(3)
  Significant
unobservable inputs
(Level 3)(3)
 

Assets:

                         

Available-for sale equity securities:

                         

Equity mutual funds

  $ 21   $ 21   $   $  

Derivatives:

                         

Cross-currency interest rate contracts(1)

    2         2      
                   

Total assets

  $ 23   $ 21   $ 2   $  
                   
                   

Liabilities:

                         

Derivatives:

                         

Interest rate contracts(2)

  $ (10 ) $   $ (10 ) $  
                   
                   

(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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HUNTSMAN CORPORATION AND SUBSIDIARIES

HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

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 six months ended June 30, 2014 and the year ended December 31, 2013. During the six months ended June 30, 2014 and 2013, there were no instruments categorized as Level 3 within the fair value hierarchy.

        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 six months ended June 30, 2014 and 2013, we recorded charges of $6 million and $1 million, respectively, for the impairment of long-lived assets.

10. EMPLOYEE BENEFIT PLANS

        Components of the net periodic benefit costs for the three and six months ended June 30, 2014 and 2013 were as follows (dollars in millions):

Huntsman Corporation

 
  Defined
Benefit Plans
  Other
Postretirement
Benefit Plans
 
 
&nb