Table of Contents


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 September 30, 2015

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 October 21, 2015, 245,442,518 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 SEPTEMBER 30, 2015

TABLE OF CONTENTS

 
   
  Page  

PART I

 

FINANCIAL INFORMATION

    3  

ITEM 1.

 

Financial Statements:

    3  

 

Huntsman Corporation and Subsidiaries:

       

 

Condensed Consolidated Balance Sheets (Unaudited)

    3  

 

Condensed Consolidated Statements of Operations (Unaudited)

    4  

 

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

    70  

ITEM 3.

 

Quantitative and Qualitative Disclosures About Market Risk

    96  

ITEM 4.

 

Controls and Procedures

    98  

PART II

 

OTHER INFORMATION

    99  

ITEM 1.

 

Legal Proceedings

    99  

ITEM 1A.

 

Risk Factors

    99  

ITEM 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

    99  

ITEM 6.

 

Exhibits

    99  

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)

 
  September 30,
2015
  December 31,
2014
 

ASSETS

             

Current assets:

             

Cash and cash equivalents(a)

  $ 433   $ 860  

Restricted cash(a)

    4     10  

Accounts and notes receivable (net of allowance for doubtful accounts of $28 and $34, respectively), ($463 and $472 pledged as collateral, respectively)(a)

    1,596     1,665  

Accounts receivable from affiliates

    36     42  

Inventories(a)

    1,850     2,025  

Prepaid expenses

    73     62  

Deferred income taxes

    59     62  

Other current assets(a)

    200     313  

Total current assets

    4,251     5,039  

Property, plant and equipment, net(a)

    4,380     4,423  

Investment in unconsolidated affiliates

    346     350  

Intangible assets, net(a)

    86     95  

Goodwill

    117     122  

Deferred income taxes

    424     435  

Other noncurrent assets(a)

    632     538  

Total assets

  $ 10,236   $ 11,002  

LIABILITIES AND EQUITY

             

Current liabilities:

             

Accounts payable(a)

  $ 1,037   $ 1,218  

Accounts payable to affiliates

    31     57  

Accrued liabilities(a)

    795     739  

Deferred income taxes

    44     51  

Current portion of debt(a)

    158     267  

Total current liabilities

    2,065     2,332  

Long-term debt(a)

    4,709     4,933  

Notes payable to affiliates

    7     6  

Deferred income taxes

    348     333  

Other noncurrent liabilities(a)

    1,316     1,447  

Total liabilities

    8,445     9,051  

Commitments and contingencies (Notes 13 and 14)

             

Equity

             

Huntsman Corporation stockholders' equity:

             

Common stock $0.01 par value, 1,200,000,000 shares authorized, 249,487,540 and 248,893,036 issued and 244,198,954 and 243,416,979 outstanding in 2015 and 2014, respectively

    3     3  

Additional paid-in capital

    3,419     3,385  

Treasury stock, 4,043,526 shares at both September 30, 2015 and December 31, 2014

    (50 )   (50 )

Unearned stock-based compensation

    (21 )   (14 )

Accumulated deficit

    (503 )   (493 )

Accumulated other comprehensive loss

    (1,245 )   (1,053 )

Total Huntsman Corporation stockholders' equity

    1,603     1,778  

Noncontrolling interests in subsidiaries

    188     173  

Total equity

    1,791     1,951  

Total liabilities and equity

  $ 10,236   $ 11,002  

(a)
At September 30, 2015 and December 31, 2014, respectively, $42 and $46 of cash and cash equivalents, $4 and $10 of restricted cash, $35 and $41 of accounts and notes receivable (net), $45 and $68 of inventories, $6 each of other current assets, $313 and $339 of property, plant and equipment (net), $36 and $40 of intangible assets (net), $28 and $27 of other noncurrent assets, $72 and $92 of accounts payable, $29 and $37 of accrued liabilities, $19 and $172 of current portion of debt, $139 and $36 of long-term debt, and $99 and $97 of other noncurrent liabilities from consolidated variable interest entities are included in the respective Balance Sheet captions above. See "Note 5. Variable Interest Entities."

   

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

3


Table of Contents


HUNTSMAN CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

(In Millions, Except Per Share Amounts)

 
  Three months
ended
September 30,
  Nine months
ended
September 30,
 
 
  2015   2014   2015   2014  

Revenues:

                         

Trade sales, services and fees, net

  $ 2,605   $ 2,819   $ 7,862   $ 8,433  

Related party sales

    33     65     105     194  

Total revenues

    2,638     2,884     7,967     8,627  

Cost of goods sold

    2,165     2,369     6,495     7,157  

Gross profit

    473     515     1,472     1,470  

Operating expenses:

                         

Selling, general and administrative

    232     227     727     700  

Research and development

    41     40     124     113  

Other operating expense (income)

    17     7     8     (2 )

Restructuring, impairment and plant closing costs

    14     39     221     91  

Total expenses

    304     313     1,080     902  

Operating income

    169     202     392     568  

Interest expense

    (49 )   (49 )   (158 )   (148 )

Equity in income of investment in unconsolidated affiliates

        2     5     6  

Loss on early extinguishment of debt

    (8 )       (31 )    

Other expense

        (1 )   (2 )    

Income from continuing operations before income taxes

    112     154     206     426  

Income tax (expense) benefit

    (49 )   40     (85 )   (39 )

Income from continuing operations

    63     194     121     387  

Loss from discontinued operations

            (4 )   (7 )

Net income

    63     194     117     380  

Net income attributable to noncontrolling interests

    (8 )   (6 )   (28 )   (19 )

Net income attributable to Huntsman Corporation

  $ 55   $ 188   $ 89   $ 361  

Basic income (loss) per share:

                         

Income from continuing operations attributable to Huntsman Corporation common stockholders

  $ 0.23   $ 0.77   $ 0.38   $ 1.52  

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

            (0.02 )   (0.03 )

Net income attributable to Huntsman Corporation common stockholders

  $ 0.23   $ 0.77   $ 0.36   $ 1.49  

Weighted average shares

    244.2     242.6     244.1     241.8  

Diluted income (loss) per share:

                         

Income from continuing operations attributable to Huntsman Corporation common stockholders

  $ 0.22   $ 0.76   $ 0.38   $ 1.50  

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

            (0.02 )   (0.03 )

Net income attributable to Huntsman Corporation common stockholders

  $ 0.22   $ 0.76   $ 0.36   $ 1.47  

Weighted average shares

    246.6     246.7     247.0     245.7  

Amounts attributable to Huntsman Corporation common stockholders:

                         

Income from continuing operations

  $ 55   $ 188   $ 93   $ 368  

Loss from discontinued operations, net of tax

            (4 )   (7 )

Net income

  $ 55   $ 188   $ 89   $ 361  

Dividends per share

  $ 0.125   $ 0.125   $ 0.375   $ 0.375  

   

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

4


Table of Contents


HUNTSMAN CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

(UNAUDITED)

(In Millions)

 
  Three months
ended
September 30,
  Nine months
ended
September 30,
 
 
  2015   2014   2015   2014  

Net income

  $ 63   $ 194   $ 117   $ 380  

Other comprehensive loss, net of tax:

                         

Foreign currency translations adjustments, net of tax of $1 and $(17) for the three months ended, respectively, and $(19) each for the nine months ended

    (96 )   (108 )   (238 )   (108 )

Pension and other postretirement benefits adjustments, net of tax of $(5) each for the three months ended, and $(11) each for the nine months ended

    14     16     36     33  

Other, net

    (6 )   1     3     2  

Other comprehensive loss, net of tax

    (88 )   (91 )   (199 )   (73 )

Comprehensive (loss) income

    (25 )   103     (82 )   307  

Comprehensive income attributable to noncontrolling interests

    (6 )   (2 )   (21 )   (12 )

Comprehensive (loss) income attributable to Huntsman Corporation

  $ (31 ) $ 101   $ (103 ) $ 295  

   

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

5


Table of Contents

HUNTSMAN CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY (UNAUDITED)

(In Millions, Except Share Amounts)

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

Balance, January 1, 2015

    243,416,979   $ 3   $ 3,385   $ (50 ) $ (14 ) $ (493 ) $ (1,053 ) $ 173   $ 1,951  

Net income

                        89         28     117  

Other comprehensive loss

                            (192 )   (7 )   (199 )

Issuance of nonvested stock awards

            19         (19 )                

Vesting of stock awards

    1,037,743         6                         6  

Recognition of stock-based compensation

            7         12                 19  

Repurchase and cancellation of stock awards

    (304,340 )                   (7 )           (7 )

Stock options exercised

    48,572         1                         1  

Dividends paid to noncontrolling interests

                                (6 )   (6 )

Excess tax benefit related to stock-based compensation

            1                         1  

Dividends declared on common stock

                        (92 )           (92 )

Balance, September 30, 2015

    244,198,954   $ 3   $ 3,419   $ (50 ) $ (21 ) $ (503 ) $ (1,245 ) $ 188   $ 1,791  

Balance, January 1, 2014

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

Net income

                        361         19     380  

Other comprehensive loss

                            (66 )   (7 )   (73 )

Issuance of nonvested stock awards

            15         (15 )                

Vesting of stock awards

    1,006,291         7                         7  

Recognition of stock-based compensation

            7         11                 18  

Repurchase and cancellation of stock awards

    (298,045 )                   (7 )           (7 )

Stock options exercised

    1,647,739     1     32                         33  

Dividends paid to noncontrolling interests

                                (4 )   (4 )

Cash received for a noncontrolling interest of a subsidiary

                                5     5  

Accrued and unpaid dividends

                        (1 )           (1 )

Dividends declared on common stock

                        (91 )           (91 )

Balance, September 30, 2014

    242,757,427   $ 3   $ 3,366   $ (50 ) $ (17 ) $ (425 ) $ (643 ) $ 162   $ 2,396  

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

6


Table of Contents


HUNTSMAN CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(In Millions)

 
  Nine months
ended
September 30,
 
 
  2015   2014  

Operating Activities:

             

Net income

  $ 117   $ 380  

Adjustments to reconcile net income to net cash provided by operating activities:

             

Equity in income of investment in unconsolidated affiliates

    (5 )   (6 )

Depreciation and amortization

    297     335  

Loss on early extinguishment of debt

    31      

Noncash interest expense

    9     8  

Noncash restructuring and impairment charges

    87     36  

Deferred income taxes

    (51 )   (44 )

Noncash loss on foreign currency transactions

    12     13  

Stock-based compensation

    21     22  

Other, net

    2     (6 )

Changes in operating assets and liabilities:

             

Accounts and notes receivable

    (53 )   (161 )

Inventories

    46     (112 )

Prepaid expenses

    (13 )   (32 )

Other current assets

    50     (74 )

Other noncurrent assets

    (92 )   (32 )

Accounts payable

    (111 )   131  

Accrued liabilities

    74     (59 )

Other noncurrent liabilities

    (34 )   (56 )

Net cash provided by operating activities

    387     343  

Investing Activities:

             

Capital expenditures

    (454 )   (351 )

Cash received from unconsolidated affiliates

    33     38  

Investment in unconsolidated affiliates

    (38 )   (37 )

Acquisition of business, net of cash acquired

    (14 )    

Cash received from purchase price adjustment for business acquired

    18      

Proceeds from sale of businesses/assets

    1     15  

Cash received from termination of cross-currency interest rate contracts

    66      

Change in restricted cash

    5      

Other, net

        (2 )

Net cash used in investing activities

    (383 )   (337 )

   

(Continued)

7


Table of Contents


HUNTSMAN CORPORATION AND SUBSIDIARIES

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

(In Millions)

 
  Nine months
ended
September 30,
 
 
  2015   2014  

Financing Activities:

             

Net borrowings under revolving loan facilities

  $   $ (1 )

Net (repayments) borrowings on overdraft facilities

    (3 )   2  

Repayments of short-term debt

    (17 )   (8 )

Borrowings on short-term debt

    11     10  

Repayments of long-term debt

    (594 )   (42 )

Proceeds from issuance of long-term debt

    326     204  

Repayments of notes payable

    (24 )   (25 )

Borrowings on notes payable

    33     32  

Debt issuance costs paid

    (8 )   (39 )

Call premiums related to early extinguishment of debt

    (34 )    

Contingent consideration paid for business acquired

    (4 )   (6 )

Dividends paid to common stockholders

    (92 )   (91 )

Dividends paid to noncontrolling interests

    (6 )   (4 )

Repurchase and cancellation of stock awards

    (7 )   (7 )

Proceeds from issuance of common stock

    1     32  

Cash received for a noncontrolling interest of a subsidiary

        5  

Excess tax benefit related to stock-based compensation

    1      

Other, net

    (1 )    

Net cash (used in) provided by financing activities

    (418 )   62  

Effect of exchange rate changes on cash

    (13 )   (6 )

Decrease in cash and cash equivalents

    (427 )   62  

Cash and cash equivalents at beginning of period

    860     520  

Cash and cash equivalents at end of period

  $ 433   $ 582  

Supplemental cash flow information:

   
 
   
 
 

Cash paid for interest

  $ 158   $ 145  

Cash paid for income taxes

    81     156  

        As of September 30, 2015 and 2014, the amount of capital expenditures in accounts payable was $49 million and $40 million, respectively. During nine months ended September 30, 2015 and 2014, we acquired assets under capital leases of nil and $10 million, respectively.

   

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

8


Table of Contents


HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(In Millions)

 
  September 30,
2015
  December 31,
2014
 

ASSETS

             

Current assets:

             

Cash and cash equivalents(a)

  $ 430   $ 710  

Restricted cash(a)

    4     10  

Accounts and notes receivable (net of allowance for doubtful accounts of $28 and $34, respectively), ($463 and $472 pledged as collateral, respectively)(a)

    1,596     1,665  

Accounts receivable from affiliates

    348     346  

Inventories(a)

    1,850     2,025  

Prepaid expenses

    72     61  

Deferred income taxes

    59     62  

Other current assets(a)

    200     306  

Total current assets

    4,559     5,185  

Property, plant and equipment, net(a)

    4,341     4,375  

Investment in unconsolidated affiliates

    346     350  

Intangible assets, net(a)

    87     96  

Goodwill

    117     122  

Deferred income taxes

    424     435  

Other noncurrent assets(a)

    631     538  

Total assets

  $ 10,505   $ 11,101  

LIABILITIES AND EQUITY

             

Current liabilities:

             

Accounts payable(a)

  $ 1,037   $ 1,218  

Accounts payable to affiliates

    54     74  

Accrued liabilities(a)

    799     736  

Deferred income taxes

    44     52  

Note payable to affiliate

    100     100  

Current portion of debt(a)

    158     267  

Total current liabilities

    2,192     2,447  

Long-term debt(a)

    4,709     4,933  

Notes payable to affiliates

    802     656  

Deferred income taxes

    342     326  

Other noncurrent liabilities(a)

    1,317     1,443  

Total liabilities

    9,362     9,805  

Commitments and contingencies (Notes 13 and 14)

             

Equity

             

Huntsman International LLC members' equity:

             

Members' equity, 2,728 units issued and outstanding

    3,187     3,166  

Accumulated deficit

    (958 )   (956 )

Accumulated other comprehensive loss

    (1,274 )   (1,087 )

Total Huntsman International LLC members' equity

    955     1,123  

Noncontrolling interests in subsidiaries

    188     173  

Total equity

    1,143     1,296  

Total liabilities and equity

  $ 10,505   $ 11,101  

(a)
At September 30, 2015 and December 31, 2014, respectively, $42 and $46 of cash and cash equivalents, $4 and $10 of restricted cash, $35 and $41 of accounts and notes receivable (net), $45 and $68 of inventories, $6 each of other current assets, $313 and $339 of property, plant and equipment (net), $36 and $40 of intangible assets (net), $28 and $27 of other noncurrent assets, $72 and $92 of accounts payable, $29 and $37 of accrued liabilities, $19 and $172 of current portion of debt, $139 and $36 of long-term debt, and $99 and $97 of other noncurrent liabilities from consolidated variable interest entities are included in the respective Balance Sheet captions above. See "Note 5. Variable Interest Entities."

   

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

9


Table of Contents


HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

(In Millions)

 
  Three months
ended
September 30,
  Nine months
ended
September 30,
 
 
  2015   2014   2015   2014  

Revenues:

                         

Trade sales, services and fees, net

  $ 2,605   $ 2,819   $ 7,862   $ 8,433  

Related party sales

    33     65     105     194  

Total revenues

    2,638     2,884     7,967     8,627  

Cost of goods sold

    2,164     2,368     6,492     7,150  

Gross profit

    474     516     1,475     1,477  

Operating expenses:

                         

Selling, general and administrative

    231     226     723     696  

Research and development

    41     40     124     113  

Other operating expense (income)

    17     7     8     (2 )

Restructuring, impairment and plant closing costs

    14     39     221     91  

Total expenses

    303     312     1,076     898  

Operating income

    171     204     399     579  

Interest expense

    (51 )   (52 )   (165 )   (155 )

Equity in income of investment in unconsolidated affiliates

        2     5     6  

Loss on early extinguishment of debt

    (8 )       (31 )    

Other expense

        (1 )   (1 )    

Income from continuing operations before income taxes

    112     153     207     430  

Income tax (expense) benefit

    (48 )   51     (85 )   (29 )

Income from continuing operations

    64     204     122     401  

Loss from discontinued operations, net of tax

            (4 )   (7 )

Net income

    64     204     118     394  

Net income attributable to noncontrolling interests

    (8 )   (6 )   (28 )   (19 )

Net income attributable to Huntsman International LLC

  $ 56   $ 198   $ 90   $ 375  

   

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

10


Table of Contents


HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

(UNAUDITED)

(In Millions)

 
  Three months
ended
September 30,
  Nine months
ended
September 30,
 
 
  2015   2014   2015   2014  

Net income

  $ 64   $ 204   $ 118   $ 394  

Other comprehensive loss, net of tax:

                         

Foreign currency translations adjustments, net of tax of $1 and $(17) for the three months ended, respectively, and $(19) each for the nine months ended

    (95 )   (108 )   (238 )   (108 )

Pension and other postretirement benefits adjustments, net of tax of $(4) and $(5) for the three months ended, respectively, and $(11) and $(12) for the nine months ended, respectively

    15     18     41     38  

Other, net

    (6 )   1     3     2  

Other comprehensive loss, net of tax

    (86 )   (89 )   (194 )   (68 )

Comprehensive (loss) income

    (22 )   115     (76 )   326  

Comprehensive income attributable to noncontrolling interests

    (6 )   (2 )   (21 )   (12 )

Comprehensive (loss) income attributable to Huntsman International LLC

  $ (28 ) $ 113   $ (97 ) $ 314  

   

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

11


Table of Contents


HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY (UNAUDITED)

(In Millions, Except Unit Amounts)

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

Balance, January 1, 2015

    2,728   $ 3,166   $ (956 ) $ (1,087 ) $ 173   $ 1,296  

Net income

            90         28     118  

Dividends paid to parent

            (92 )           (92 )

Other comprehensive loss

                (187 )   (7 )   (194 )

Contribution from parent

        20                 20  

Dividends paid to noncontrolling interests

                    (6 )   (6 )

Excess tax benefit related to stock-based compensation

        1                 1  

Balance, September 30, 2015

    2,728   $ 3,187   $ (958 ) $ (1,274 ) $ 188   $ 1,143  

Balance, January 1, 2014

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

Net income

            375         19     394  

Dividends paid to parent

            (91 )           (91 )

Other comprehensive loss

                (61 )   (7 )   (68 )

Contribution from parent

        21                 21  

Dividends paid to noncontrolling interests

                    (4 )   (4 )

Cash received for a noncontrolling interest of a subsidiary

                    5     5  

Balance, September 30, 2014

    2,728   $ 3,159   $ (910 ) $ (679 ) $ 162   $ 1,732  

   

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

12


Table of Contents


HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(In Millions)

 
  Nine months
ended
September 30,
 
 
  2015   2014  

Operating Activities:

             

Net income

  $ 118   $ 394  

Adjustments to reconcile net income to net cash provided by operating activities:

             

Equity in income of investment in unconsolidated affiliates

    (5 )   (6 )

Depreciation and amortization

    287     322  

Loss on early extinguishment of debt

    31      

Noncash interest expense

    15     15  

Noncash restructuring and impairment charges

    87     36  

Deferred income taxes

    (51 )   (43 )

Noncash loss on foreign currency transactions

    12     13  

Noncash compensation

    20     21  

Other, net

    3     (6 )

Changes in operating assets and liabilities:

             

Accounts and notes receivable

    (53 )   (161 )

Inventories

    46     (112 )

Prepaid expenses

    (13 )   (31 )

Other current assets

    43     (67 )

Other noncurrent assets

    (92 )   (33 )

Accounts payable

    (118 )   124  

Accrued liabilities

    80     (78 )

Other noncurrent liabilities

    (27 )   (50 )

Net cash provided by operating activities

    383     338  

Investing Activities:

             

Capital expenditures

    (454 )   (351 )

Cash received from unconsolidated affiliates

    33     38  

Investment in unconsolidated affiliates

    (38 )   (37 )

Acquisition of business, net of cash acquired

    (14 )    

Cash received from purchase price adjustment for business acquired

    18      

Proceeds from sale of businesses/assets

    1     15  

Increase in receivable from affiliate

    (1 )   (4 )

Cash received from termination of cross-currency interest rate contracts

    66      

Change in restricted cash

    5      

Other, net

        (2 )

Net cash used in investing activities

    (384 )   (341 )

   

(Continued)

13


Table of Contents


HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

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

(In Millions)

 
  Nine months
ended
September 30,
 
 
  2015   2014  

Financing Activities:

             

Net borrowings under revolving loan facilities

  $   $ (1 )

Net (repayments) borrowings on overdraft facilities

    (3 )   2  

Repayments of short-term debt

    (17 )   (8 )

Borrowings on short-term debt

    11     10  

Repayments of long-term debt

    (594 )   (42 )

Proceeds from issuance of long-term debt

    326     204  

Repayments of notes payable to affiliate

    (50 )   (65 )

Proceeds from issuance of notes payable from affiliate

    195      

Repayments of notes payable

    (24 )   (25 )

Borrowings on notes payable

    33     32  

Debt issuance costs paid

    (8 )   (39 )

Call premiums related to early extinguishment of debt

    (34 )    

Contingent consideration paid for business acquired

    (4 )   (6 )

Dividends paid to noncontrolling interests

    (6 )   (4 )

Dividends paid to parent

    (92 )   (91 )

Excess tax benefit related to stock-based compensation

    1      

Cash received for a noncontrolling interest of a subsidiary

        5  

Other, net

        2  

Net cash used in financing activities

    (266 )   (26 )

Effect of exchange rate changes on cash

    (13 )   (6 )

Decrease

    (280 )   (35 )

Cash and cash equivalents at beginning of period

    710     515  

Cash and cash equivalents at end of period

  $ 430   $ 480  

Supplemental cash flow information:

             

Cash paid for interest

  $ 158   $ 145  

Cash paid for income taxes

    81     156  

        As of September 30, 2015 and 2014, the amount of capital expenditures in accounts payable was $49 million and $40 million, respectively. During the nine months ended September 30, 2015 and 2014, Huntsman Corporation contributed $20 million and $21 million, respectively, related to stock-based compensation. During the nine months ended September 30, 2015 and 2014, we acquired assets under capital leases of nil and $10 million, respectively.

   

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

14


Table of Contents


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, 2014 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, titanium dioxide and color pigments.

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

15


Table of Contents


HUNTSMAN CORPORATION AND SUBSIDIARIES

HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

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

1. GENERAL (Continued)

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. 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.

RECENT DEVELOPMENTS

Share Repurchase Program

        On September 29, 2015, our Board of Directors authorized our Company to repurchase up to $150 million in shares of our common stock. Repurchases under this program may be made through open market transactions, in privately negotiated transactions, accelerated share repurchase programs or by other means. The timing and actual number of any shares repurchased will depend on a variety of factors, including market conditions. The share repurchase authorization does not have an expiration date and repurchases may be commenced, suspended or discontinued from time to time without prior notice. During the nine months ended September 30, 2015, we did not repurchase any shares of our outstanding common stock under the authorized repurchase program. We intend to begin repurchasing shares under this program beginning in the fourth quarter of 2015.

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

16


Table of Contents


HUNTSMAN CORPORATION AND SUBSIDIARIES

HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

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

1. GENERAL (Continued)

contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

2. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

Accounting Pronouncements Adopted During 2015

        In April 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("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 adopted the amendments in this ASU effective January 1, 2015, and the initial adoption of the amendments in this ASU did not have a significant impact on our condensed consolidated financial statements (unaudited).

Accounting Pronouncements Pending Adoption in Future Periods

        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. In August 2015, the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date, deferring the effective date of ASU No. 2014-09 for all entities by one year. The amendments in these ASUs are effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. The amendments in ASU No. 2014-09 should be applied retrospectively, and early application is permitted. We are currently evaluating the impact of the adoption of the amendments in ASU No. 2014-09 on our condensed consolidated financial statements (unaudited).

        In August 2014, the FASB issued ASU No. 2014-15, Presentation of Financial Statements—Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity's Ability to Continue as a Going Concern, providing guidance about management's responsibility to evaluate whether there is substantial doubt about an entity's ability to continue as a going concern and to provide related footnote disclosures. The amendments in this ASU are effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. Early adoption is permitted.

17


Table of Contents


HUNTSMAN CORPORATION AND SUBSIDIARIES

HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

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

2. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS (Continued)

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 January 2015, the FASB issued ASU No. 2015-01, Income Statement—Extraordinary and Unusual Items (Subtopic 225-20): Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items, eliminating from US GAAP the concept of extraordinary items. Reporting entities will no longer have to assess whether a particular event or transaction event is extraordinary. The amendments in this ASU are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. A reporting entity may apply the amendments prospectively or may also apply them retrospectively to all prior periods presented in the financial statements. Early adoption is permitted provided that the guidance is applied from the beginning of the fiscal year of adoption. 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 February 2015, the FASB issued ASU No. 2015-02, Consolidation (Topic 810): Amendments to the Consolidation Analysis. The amendments in this ASU change the analysis that a reporting entity must perform to determine whether it should consolidate certain types of legal entities by placing more emphasis on risk of loss when determining a controlling financial interest. These amendments affect areas specific to limited partnerships and similar legal entities, evaluating fees paid to a decision maker or service provider as a variable interest, the effects of both fee arrangements and related parties on the primary beneficiary determination and certain investment funds. The amendments in this ASU are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. A reporting entity may apply the amendments retrospectively or using a modified retrospective approach. Early adoption is permitted, including adoption in an interim period provided that any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. 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 April 2015, the FASB issued ASU No. 2015-03, Interest—Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs. The amendments in this ASU require that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts, and that amortization of debt issuance costs shall be reported as interest expense. The recognition and measurement guidance for debt issuance costs are not affected by the amendments in this ASU. The amendments in this ASU are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015, with early application permitted. Entities would apply the new guidance retrospectively to all prior periods. We do not expect the adoption of the amendment in this ASU to have a significant impact on our condensed consolidated financial statements (unaudited).

        In April 2015, the FASB issued ASU No. 2015-05, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer's Accounting for Fees Paid in a Cloud Computing Arrangement. The amendments in this ASU provide guidance that will help entities evaluate the accounting for fees paid by a customer in a cloud computing arrangement, including whether a cloud computing arrangement includes a software license. If a cloud computing arrangement includes a software license, then the customer should account for the software license consistent with the acquisition of other software

18


Table of Contents


HUNTSMAN CORPORATION AND SUBSIDIARIES

HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

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

2. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS (Continued)

licenses; otherwise, the customer should account for the arrangement as a service contract. The amendments in this ASU are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. Entities can elect to adopt the amendments either prospectively to all arrangements entered into after the effective date or retrospectively to all prior periods. We do not expect the adoption of the amendment in this ASU to have a significant impact on our condensed consolidated financial statements (unaudited).

        In July 2015, the FASB issued ASU No. 2015-11, Inventory (Topic 330): Simplifying the Measurement of Inventory. The amendments in this ASU do not apply to inventory that is measured using last-in, first-out (LIFO) or the retail inventory method, but rather does apply to all other inventory, which includes inventory that is measured using first-in, first-out (FIFO) or average cost. An entity should measure in scope inventory at the lower of cost and net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. Subsequent measurement is unchanged for inventory measured using LIFO or the retail inventory method. The amendments in this ASU are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016. The amendments in this ASU should be applied prospectively with earlier application permitted as of the beginning of an interim or annual reporting period. We do not expect the adoption of the amendment in this ASU to have a significant impact on our condensed consolidated financial statements (unaudited).

        In September 2015, the FASB issued ASU No. 2015-16, Business Combinations (Topic 805): Simplifying the Accounting for Measurement-Period Adjustments. The amendments in this ASU require that an acquirer recognize adjustments to provisional amounts that are identified during the measurement period in the current reporting period in which the adjustment amounts are determined and calculated as if the accounting had been completed at the acquisition date. The amendments in this ASU also require an entity to present separately on the face of the income statement or disclose in the notes the portion of the amount recorded in current-period earnings by line item that would have been recorded in previous reporting periods if the adjustment to the provisional amounts had been recognized as of the acquisition date. The amendments in this ASU are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. The amendments in this ASU should be applied prospectively to adjustments to provisional amounts that occur after the effective date of this ASU with earlier application permitted for financial statements that have not been issued. We do not expect the adoption of the amendment in this ASU to have a significant impact on our condensed consolidated financial statements (unaudited).

3. BUSINESS COMBINATIONS

ROCKWOOD ACQUISITION

        On October 1, 2014, we completed the acquisition of the Performance Additives and Titanium Dioxide businesses (the "Rockwood Acquisition") of Rockwood Holdings, Inc. ("Rockwood"). We paid $1.02 billion in cash and assumed certain unfunded pension liabilities in connection with the Rockwood Acquisition. The acquisition was financed using a bank term loan. The majority of the acquired businesses have been integrated into our Pigments and Additives segment. Transaction costs charged to

19


Table of Contents


HUNTSMAN CORPORATION AND SUBSIDIARIES

HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

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

3. BUSINESS COMBINATIONS (Continued)

expense related to this acquisition were approximately nil and $5 million for the three months ended September 30, 2015 and 2014, respectively, and approximately nil and $10 million for the nine months ended September 30, 2015 and 2014, respectively, and were recorded in selling, general and administrative expenses in our condensed consolidated statements of operations (unaudited).

        The following businesses were acquired from Rockwood:

        In connection with securing certain regulatory approvals required to complete the Rockwood Acquisition, we sold our TiO2 TR52 product line used in printing inks to Henan Billions Chemicals Co., Ltd. ("Henan") in December 2014. The sale did not include any manufacturing assets but does include an agreement to supply TR52 product to Henan during a transitional period.

        We have accounted for the Rockwood Acquisition using the acquisition method. As such, we analyzed the fair value of tangible and intangible assets acquired and liabilities assumed. The allocation

20


Table of Contents


HUNTSMAN CORPORATION AND SUBSIDIARIES

HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

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

3. BUSINESS COMBINATIONS (Continued)

of acquisition cost to the assets acquired and liabilities assumed is summarized as follows (dollars in millions):

Cash paid for Rockwood Acquisition in 2014

  $ 1,038  

Purchase price adjustment received in 2015

    (18 )

Net acquisition cost

  $ 1,020  

Fair value of assets acquired and liabilities assumed:

       

Cash

  $ 77  

Accounts receivable, net

    220  

Inventories

    401  

Prepaid expenses and other current assets

    55  

Property, plant and equipment

    665  

Intangible assets

    31  

Deferred income taxes, non-current

    106  

Other assets

    8  

Accounts payable

    (146 )

Accrued expenses and other current liabilities

    (106 )

Long-term debt, non-current

    (3 )

Pension and related liabilities

    (233 )

Deferred income taxes, non-current

    (9 )

Other liabilities

    (30 )

Total fair value of net assets acquired

    1,036  

Noncontrolling interest

    (16 )

Total

  $ 1,020  

        During the second quarter of 2015, we received $18 million related to the settlement of certain purchase price adjustments. As a result of the finalization of the valuation of the assets and liabilities, reallocations were made in certain property, plant and equipment, deferred tax, accrued liability and other long-term liability balances. None of the fair value of this acquisition was allocated to goodwill. Intangible assets acquired consist primarily of developed technology, trademarks and customer relationships, all of which are being amortized over nine years. The noncontrolling interest primarily relates to Viance, LLC ("Viance"), a 50%-owned joint venture with Dow Chemical acquired as part of the Rockwood Acquisition. The noncontrolling interest was valued at 50% of the fair value of the net assets of Viance as of October 1, 2014, as dictated by the ownership interest percentages. If the Rockwood Acquisition were to have occurred on January 1, 2013, the following estimated pro forma

21


Table of Contents


HUNTSMAN CORPORATION AND SUBSIDIARIES

HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

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

3. BUSINESS COMBINATIONS (Continued)

revenues and net income attributable to Huntsman Corporation and Huntsman International would have been reported (dollars in millions, except per share amounts):

Huntsman Corporation

 
  Pro Forma   Pro Forma  
 
  Three months
ended
September 30, 2014
(Unaudited)
  Nine months
ended
September 30, 2014
(Unaudited)
 

Revenues

  $ 3,257   $ 9,786  

Net income attributable to Huntsman Corporation

    203     410  

Income per share:

             

Basic

  $ 0.84   $ 1.70  

Diluted

    0.82     1.67  

Huntsman International

 
  Pro Forma   Pro Forma  
 
  Three months
ended
September 30, 2014
(Unaudited)
  Nine months
ended
September 30, 2014
(Unaudited)
 

Revenues

  $ 3,257   $ 9,786  

Net income attributable to Huntsman International

    213     424  

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):

 
  September 30,
2015
  December 31,
2014
 

Raw materials and supplies

  $ 472   $ 508  

Work in progress

    121     96  

Finished goods

    1,305     1,494  

Total

    1,898     2,098  

LIFO reserves

    (48 )   (73 )

Net inventories

  $ 1,850   $ 2,025  

        For September 30, 2015 and December 31, 2014, approximately 10% and 9%, respectively, of inventories were recorded using the LIFO cost method.

22


Table of Contents


HUNTSMAN CORPORATION AND SUBSIDIARIES

HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

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

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 joint ventures for which we are the primary beneficiary:

        Creditors of these entities have no recourse to our general credit. See "Note 7. Debt—Direct and Subsidiary Debt." As the primary beneficiary of these variable interest entities at September 30, 2015, the joint ventures' assets, liabilities and results of operations are included in our condensed consolidated financial statements (unaudited).

23


Table of Contents


HUNTSMAN CORPORATION AND SUBSIDIARIES

HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

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

5. VARIABLE INTEREST ENTITIES (Continued)

        The following table summarizes the carrying amount of our variable interest entities' assets and liabilities included in our condensed consolidated balance sheets (unaudited), before intercompany eliminations, as of September 30, 2015 and December 31, 2014 (dollars in millions):

 
  September 30,
2015
  December 31,
2014
 

Current assets

  $ 132   $ 186  

Property, plant and equipment, net

    313     340  

Other noncurrent assets

    82     70  

Deferred income taxes

    52     50  

Intangible assets

    36     39  

Goodwill

    13     14  

Total assets

  $ 628   $ 699  

Current liabilities

  $ 156   $ 356  

Long-term debt

    147     42  

Deferred income taxes

    8     9  

Other noncurrent liabilities

    99     97  

Total liabilities

  $ 410   $ 504  

        For more information regarding the Rockwood Acquisition, see "Note 3. Business Combinations—Rockwood Acquisition."

24


Table of Contents


HUNTSMAN CORPORATION AND SUBSIDIARIES

HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

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

6. RESTRUCTURING, IMPAIRMENT AND PLANT CLOSING COSTS

        As of September 30, 2015 and December 31, 2014, 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, 2015

  $ 87   $   $ 48   $ 3   $ 138  

2015 charges for 2014 and prior initiatives

    57     5     7     18     87  

2015 charges for 2015 initiatives

    44             1     45  

Pigments and Additives opening balance sheet liabilities

    1                 1  

Reversal of reserves no longer required

    (1 )               (1 )

2015 payments for 2014 and prior initiatives

    (44 )   (5 )   (4 )   (17 )   (70 )

2015 payments for 2015 initiatives

    (11 )           (1 )   (12 )

Net activity of discontinued operations

            (1 )       (1 )

Foreign currency effect on liability balance

    (7 )               (7 )

Accrued liabilities as of September 30, 2015

  $ 126   $   $ 50   $ 4   $ 180  

(1)
The workforce reduction reserves relate to the termination of 1,389 positions, of which 1,279 positions had not been terminated as of September 30, 2015.

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

 
  September 30,
2015
  December 31,
2014
 

2013 and prior initiatives

  $ 65   $ 75  

2014 initiatives

    85     63  

2015 initiatives

    30      

Total

  $ 180   $ 138  

25


Table of Contents


HUNTSMAN CORPORATION AND SUBSIDIARIES

HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

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

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

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

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

Accrued liabilities as of January 1, 2015

  $ 6   $ 9   $ 5   $ 54   $ 59   $ 1   $ 4   $ 138  

2015 charges for 2014 and prior initiatives

    2     2     1     15     63         4     87  

2015 charges for 2015 initiatives

    14         2     2     26         1     45  

Pigments and Additives opening balance sheet liabilities

                    1             1  

Reversal of reserves no longer required

                            (1 )   (1 )

2015 payments for 2014 and prior initiatives

    (4 )   (5 )   (1 )   (14 )   (41 )       (5 )   (70 )

2015 payments for 2015 initiatives

    (7 )               (4 )       (1 )   (12 )

Net activity of discontinued operations

                        (1 )       (1 )

Foreign currency effect on liability balance

        (1 )   (1 )       (5 )           (7 )

Accrued liabilities as of September 30, 2015

  $ 11   $ 5   $ 6   $ 57   $ 99   $   $ 2   $ 180  

Current portion of restructuring reserves

  $ 9   $ 5   $ 4   $ 20   $ 99   $   $ 2   $ 139  

Long-term portion of restructuring reserves

    2         2     37                 41  

26


Table of Contents


HUNTSMAN CORPORATION AND SUBSIDIARIES

HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

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

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

        Details with respect to cash and noncash restructuring charges for the three and nine months ended September 30, 2015 and 2014 by initiative are provided below (dollars in millions):

 
  Three months
ended
September 30, 2015
  Nine months
ended
September 30, 2015
 

Cash charges:

             

2015 charges for 2014 and prior initiatives

  $ 11   $ 87  

2015 charges for 2015 initiatives

    1     45  

Pension related charges

        3  

Reversal of reserves no longer required

        (1 )

Accelerated depreciation

    2     77  

Non-cash charges

        10  

Total 2015 Restructuring, Impairment and Plant Closing Costs

  $ 14   $ 221  

 

 
  Three months
ended
September 30, 2014
  Nine months
ended
September 30, 2014
 

Cash charges:

             

2014 charges for 2013 and prior initiatives

  $ 9   $ 60  

2014 charges for 2014 initiatives

        6  

Pension related charges

        2  

Reversal of reserves no longer required

        (8 )

Non-cash charges

    30     31  

Total 2014 Restructuring, Impairment and Plant Closing Costs

  $ 39   $ 91  

2015 RESTRUCTURING ACTIVITIES

        In June 2015, our Polyurethanes segment announced a restructuring program in Europe. In connection with this restructuring program, we recorded restructuring expense of $14 million in the nine months ended September 30, 2015 related primarily to workforce reductions.

        In June 2015, our Advanced Materials segment initiated a restructuring program in Europe. In connection with this restructuring program, we recorded restructuring expense of $6 million in the nine months ended September 30, 2015 related primarily to workforce reductions and accelerated depreciation recorded as restructuring, impairment and plant closing costs.

        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 nine months ended September 30, 2015, our Textile Effects segment recorded charges of $6 million for non-cancelable

27


Table of Contents


HUNTSMAN CORPORATION AND SUBSIDIARIES

HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

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

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

long-term contract termination costs, $4 million for decommissioning and $2 million in other restructuring costs associated with this initiative. In addition, we recorded charges of $5 million associated with other initiatives. We expect to finalize negotiations for settlement of certain of these non-cancelable long-term contracts during the fourth quarter of 2015.

        On December 1, 2014, we announced that we are taking significant action to improve the global competitiveness of our Pigments and Additives segment. As part of a comprehensive restructuring program, we plan to reduce our workforce by approximately 900 positions. In connection with this restructuring program, during the nine months ended September 30, 2015, our Pigments and Additives segment recorded charges of $51 million for workforce reductions, $3 million for pension related charges and $12 million in other restructuring costs associated with this initiative. We expect to complete this program by the middle of 2016.

        On February 12, 2015, we announced a plan to close the 'black end' manufacturing operations and ancillary activities at our Calais, France site, which will reduce our titanium dioxide capacity by approximately 100 kilotons, or 13% of our European titanium dioxide capacity. In connection with this announcement, we began to accelerate depreciation on the affected assets and recorded accelerated depreciation in the nine months ended September 30, 2015 of $73 million as restructuring, impairment and plant closing costs. In addition, during the nine months ended September 30, 2015, we recorded charges of $21 million for workforce reductions and non-cash charges of $10 million. We expect to complete this program by the end of 2016.

        On March 4, 2015, we announced plans to restructure our color pigments business, another step in our previously announced plan to significantly restructure our global Pigments and Additives segment, and recorded restructuring expense of approximately $5 million in the nine months ended September 30, 2015 primarily related to workforce reductions. We expect to complete this program by the middle of 2016.

2014 RESTRUCTURING ACTIVITIES

        In connection with a September 2014 announcement of a feasibility study into a MDI production expansion at our Geismar, Louisiana facility, we concluded that certain capitalized engineering costs associated with a previously planned MDI production expansion at our Rotterdam, The Netherlands facility were impaired and our Polyurethanes segment recorded a noncash impairment charge of $16 million during the third quarter of 2014.

        During 2013, our Performance Products segment initiated a restructuring program to refocus its 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. During the nine months ended September 30, 2014, we recorded charges of $23 million primarily related to workforce reductions.

        During the nine months ended September 30, 2014, our Advanced Materials segment recorded charges of $12 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.

28


Table of Contents


HUNTSMAN CORPORATION AND SUBSIDIARIES

HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

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

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

        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 nine months ended September 30, 2014, our Textile Effects segment recorded charges of $9 million and an $8 million noncash charge for a pension settlement loss associated with this initiative. In June 2014, we announced plans for the closure our Qingdao, China plant to be completed by December 2015. During the nine months ended September 30, 2014, we recorded charges of $6 million primarily related to workforce reductions related to this initiative.

        During the nine months ended September 30, 2014, our Corporate and other segment recorded charges of $11 million in association with a reorganization of our global information technology organization.

7. DEBT

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

Huntsman Corporation

 
  September 30,
2015
  December 31,
2014
 

Senior Credit Facilities:

             

Term loans

  $ 2,507   $ 2,528  

Amounts outstanding under A/R programs

    217     229  

Senior notes

    1,883     1,596  

Senior subordinated notes

        531  

Variable interest entities

    158     207  

Other

    102     109  

Total debt—excluding debt to affiliates

  $ 4,867   $ 5,200  

Total current portion of debt

  $ 158   $ 267  

Long-term portion

    4,709     4,933  

Total debt—excluding debt to affiliates

  $ 4,867   $ 5,200  

Total debt—excluding debt to affiliates

  $ 4,867   $ 5,200  

Notes payable to affiliates-noncurrent

    7     6  

Total debt

  $ 4,874   $ 5,206  

29


Table of Contents


HUNTSMAN CORPORATION AND SUBSIDIARIES

HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

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

7. DEBT (Continued)

Huntsman International

 
  September 30,
2015
  December 31,
2014
 

Senior Credit Facilities:

             

Term loans

  $ 2,507   $ 2,528  

Amounts outstanding under A/R programs

    217     229  

Senior notes

    1,883     1,596  

Senior subordinated notes

        531  

Variable interest entities

    158     207  

Other

    102     109  

Total debt—excluding debt to affiliates

  $ 4,867   $ 5,200  

Total current portion of debt

  $ 158   $ 267  

Long-term portion

    4,709     4,933  

Total debt—excluding debt to affiliates

  $ 4,867   $ 5,200  

Total debt—excluding debt to affiliates

  $ 4,867   $ 5,200  

Notes payable to affiliates-current

    100     100  

Notes payable to affiliates-noncurrent

    802     656  

Total debt

  $ 5,769   $ 5,956  

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 September 30, 2015, our senior credit facilities ("Senior Credit Facilities") consisted of our revolving credit facility ("Revolving Facility"), our extended term loan B facility ("Extended Term Loan B"), our extended term loan B facility—series 2 ("Extended Term Loan B—Series 2"), our 2015

30


Table of Contents


HUNTSMAN CORPORATION AND SUBSIDIARIES

HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

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

7. DEBT (Continued)

extended term loan B facility ("2015 Extended Term Loan B"), our 2014 term loan facility ("2014 Term Loan"), and our term loan C facility ("Term Loan C") as follows (dollars in millions):

Facility
  Committed
Amount
  Principal
Outstanding
  Carrying
Value
  Interest Rate(4)   Maturity

Revolving Facility(1)

  $ 625   $   $   USD LIBOR plus 2.50%   2017

Extended Term Loan B

    NA     312     312   USD LIBOR plus 2.50%   2017

Extended Term Loan B—Series 2

    NA     192     192   USD LIBOR plus 3.00%   2017

2015 Extended Term Loan B(2)

    NA     773     773   USD LIBOR plus 3.00%   2019

2014 Term Loan(3)

    NA     1,191     1,181   USD LIBOR plus 3.00%   2021

Term Loan C

    NA     50     49   USD LIBOR plus 2.25%   2016

(1)
We had no borrowings outstanding under our Revolving Facility; we had approximately $16 million (U.S. dollar equivalents) of letters of credit and bank guarantees issued and outstanding under our Revolving Facility.

(2)
On August 10, 2015, we entered into a fourteenth amendment to the agreement governing the Senior Credit Facilities (the "Credit Agreement"). The Amendment extends the stated maturity date of $773 million aggregate principal amount of our Extended Term Loan B and Extended Term Loan B—Series 2 from April 19, 2017 to April 19, 2019 and increases the interest rate margin with respect to the 2015 Extended Term Loan B to LIBOR plus 3.00%.

(3)
The 2014 Term Loan is subject to a 0.75% LIBOR floor.

(4)
The applicable interest rate of the Senior Credit Facilities is subject to certain secured leverage ratio thresholds. As of September 30, 2015, 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.

A/R Programs

        Our U.S. accounts receivable securitization program ("U.S. A/R Program") and our European accounts receivable securitization program ("EU A/R Program" and collectively with the U.S. A/R Program, "A/R Programs") are structured so that we transfer certain of our trade receivables to the U.S. special purpose entity ("U.S. SPE") and the European special purpose entity ("EU SPE") in transactions intended to be true sales or true contributions. The receivables collateralize debt incurred

31


Table of Contents


HUNTSMAN CORPORATION AND SUBSIDIARIES

HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

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

7. DEBT (Continued)

by the U.S. SPE and the EU SPE. Information regarding our A/R Programs as of September 30, 2015 was as follows (monetary amounts in millions):

Facility
  Maturity   Maximum Funding
Availability(1)
  Amount
Outstanding
  Interest Rate(2)

U.S. A/R Program

  March 2018   $250   $90(3)   Applicable rate plus 0.95%

EU A/R Program

  March 2018   €225   €114   Applicable rate plus 1.10%

      (approximately $251)   (approximately $127)    

(1)
The amount of actual availability under our A/R Programs may be lower based on the level of eligible receivables sold, changes in the credit ratings of our customers, customer concentration levels and certain characteristics of the accounts receivable being transferred, as defined in the applicable agreements.

(2)
Applicable rate for our U.S. A/R Program is defined by the lender as either USD LIBOR or CP rate. Applicable rate for our EU A/R Program is either GBP LIBOR, USD LIBOR or EURIBOR. In addition, the U.S. SPE and the EU SPE are obligated to pay unused commitment fees to the lenders based on the amount of each lender's commitment.

(3)
As of September 30, 2015, we had approximately $7 million (U.S. dollar equivalents) of letters of credit issued and outstanding under our U.S. A/R Program.

        During the three months ended March 31, 2015, we entered into amendments to our A/R Programs that, among other things, extend the scheduled commitment termination dates and reduce the applicable borrowing margins. As of September 30, 2015 and December 31, 2014, $463 million and $472 million, respectively, of accounts receivable were pledged as collateral under our A/R Programs.

Notes

        As of September 30, 2015, we had outstanding the following notes (monetary amounts in millions):

Notes
  Maturity   Interest
Rate
  Amount Outstanding

2020 Senior Notes

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

2021 Senior Notes

  April 2021     5.125 % €445 (€449 carrying value ($501))

2022 Senior Notes

  November 2022     5.125 % $400

2025 Senior Notes

  April 2025     4.25 % €300 ($335)

        On March 31, 2015, Huntsman International completed a €300 million (approximately $326 million) offering of 4.25% senior notes due April 1, 2025 ("2025 Senior Notes"). On April 17, 2015, Huntsman International applied the net proceeds of this offering to redeem $289 million ($294 million carrying value) of its 8.625% senior subordinated notes due 2021 ("2021 Senior Subordinated Notes").

        The 2025 Senior Notes bear interest at 4.25% per year, payable semi-annually on April 1 and October 1, and are due on April 1, 2025. Huntsman International may redeem the 2025 Senior Notes

32


Table of Contents


HUNTSMAN CORPORATION AND SUBSIDIARIES

HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

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

7. DEBT (Continued)

in whole or in part at any time prior to January 1, 2025 at a price equal to 100% of the principal amount thereof plus a "make-whole" premium and accrued and unpaid interest.

        The 2020, 2021, 2022 and 2025 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 2020, 2021, 2022 and 2025 Senior Notes will have the right to require that Huntsman International purchase all or a portion of such holder's 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.

Redemption of Notes and Loss on Early Extinguishment of Debt

        During the nine months ended September 30, 2015, we redeemed or repurchased the following notes (dollars in millions):

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

September 2015

  2021 Senior Subordinated Notes   $ 195   $ 204   $ 7  

April 2015

  2021 Senior Subordinated Notes     289     311     20  

January 2015

  2021 Senior Subordinated Notes     37     40     3  

Variable Interest Entity Debt

        As of September 30, 2015, Arabian Amines Company, our consolidated 50%-owned joint venture, had $148 million outstanding under its loan commitments and debt financing arrangements. On April 29, 2015, Arabian Amines Company obtained a waiver of certain financial covenants from the lender as well as a waiver of prior noncompliance under the debt financing agreements. As of September 30, 2015, Arabian Amines Company is in compliance with its debt financing arrangements and we have classified $16 million as current debt and $132 million as long-term debt on our condensed consolidated balance sheets (unaudited). We do not guarantee these loan commitments and Arabian Amines Company is not a guarantor of any of our other debt obligations.

Other Debt

        On July 24, 2015, Huntsman Polyurethanes Shanghai ("HPS"), our consolidated splitting joint venture, entered into a financing arrangement to fund the construction of our MDI plant in China. As part of the financing, HPS has secured commitments of a RMB 669 million (approximately $105 million) term loan and a RMB 423 million (approximately $66 million) working capital facility.

33


Table of Contents


HUNTSMAN CORPORATION AND SUBSIDIARIES

HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

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

7. DEBT (Continued)

These facilities are unsecured, and we do not provide a guarantee of these loan commitments. We expect to begin drawing down on these facilities by the end of the year.

Note Payable from Huntsman International to Huntsman Corporation

        As of September 30, 2015, we had a loan of $895 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 September 30, 2015 on our condensed consolidated balance sheets (unaudited). As of September 30, 2015, 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. 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 A/R Programs and our notes.

        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.

34


Table of Contents


HUNTSMAN CORPORATION AND SUBSIDIARIES

HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

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

7. DEBT (Continued)

        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 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 as an unrealized currency translation adjustment 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 September 30, 2015, we had approximately $208 million in notional amount (in U.S. dollar equivalents) outstanding in forward foreign currency contracts.

        Huntsman International has entered into several interest rate contracts to hedge the variability caused by monthly changes in cash flow due to associated changes in LIBOR under our Senior Credit

35


Table of Contents


HUNTSMAN CORPORATION AND SUBSIDIARIES

HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

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

8. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES (Continued)

Facilities. These swaps are designated as cash flow hedges and the effective portion of the changes in the fair value of the swaps are recorded in other comprehensive loss (dollars in millions):

September 30, 2015
Notional
Value
  Effective Date   Maturity   Fixed
Rate
  Fair Value
$ 50   December 2014   April 2017     2.5 % $1 noncurrent liability
  50   January 2015   April 2017     2.5 % 2 noncurrent liability

        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 September 30, 2015 was $24 million, and the interest rate contract is not designated as a cash flow hedge. As of September 30, 2015, the fair value of the swap was $3 million and was recorded in noncurrent liabilities on our condensed consolidated balance sheets (unaudited). For the three and nine months ended September 30, 2015, we recorded a reduction of interest expense of nil each due to changes in fair value of the swap.

        In November 2014, we entered into two five year cross-currency interest rate contracts and one eight year cross-currency interest rate contract to swap an aggregate notional $200 million for an aggregate notional €161 million. This swap is designated as a hedge of net investment for financial reporting purposes. Under the cross-currency interest rate contract, we will receive fixed U.S. dollar payments of $5 million semiannually on May 15 and November 15 (equivalent to an annual rate of 5.125%) and make interest payments of approximately €3 million (equivalent to an annual rate of approximately 3.6%). As of September 30, 2015, the fair value of this swap was $28 million and was recorded in noncurrent assets.

        On March 17, 2010, we entered into three five year cross-currency interest rate contracts to swap an aggregate notional $350 million for an aggregate notional €255 million. This swap was designated as a hedge of net investment for financial reporting purposes. During the three months ended March 31, 2015, we terminated these cross-currency interest rate contracts and received $66 million in payments from the counterparties.

        W