Huntsman Announces Strong Fourth Quarter 2017 Results; Net Leverage Reduced to 1.4x; The Board Approves a 30% Dividend Increase and Share Repurchases of up to $450 million

Three months ended

Twelve months ended

December 31,

September 30,

December 31,

In millions, except per share amounts

2017

2016

2017

2017

2016

Revenues

$2,203

$1,904

$            2,169

$8,358

$     7,518

Net income

$   287

$   137

$              179

$   741

$        357

Adjusted net income⁽¹⁾

$   186

$     50

$              164

$   604

$        352

Diluted income per share

$  1.00

$  0.53

$             0.60

$  2.61

$       1.36

Adjusted diluted income per share⁽¹⁾

$  0.76

$  0.21

$             0.67

$  2.48

$       1.47

Adjusted EBITDA⁽¹⁾

$   360

$   210

$              340

$1,259

$        997

Pro forma adjusted EBITDA⁽²⁾

$   360

$   204

$              340

$1,259

$        969

Net cash provided by operating activities

$   304

$   238

$              261

$   842

$        974

Free cash flow⁽³⁾

$   190

$   133

$              227

$   594

$        656

See end of press release for footnote explanations

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International participants

(617) 213 – 4857

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International participants

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Table 1 — Results of Operations

Three months ended

Twelve months ended

December 31,

December 31,

In millions, except per share amounts

2017

2016

2017

2016

Revenues

$2,203

$1,904

$8,358

$7,518

Cost of goods sold

1,694

1,548

6,546

5,992

Gross profit

509

356

1,812

1,526

Operating expenses

236

140

913

804

Restructuring, impairment and plant closing costs (credits)

7

(9)

20

47

Expenses associated with the merger

10

–

28

–

Operating income

256

225

851

675

Interest expense

(31)

(50)

(165)

(203)

Equity in income of investment in unconsolidated affiliates

9

1

13

5

Loss on early extinguishment of debt

(18)

–

(54)

(3)

Other income

–

1

2

–

Income before income taxes

216

177

647

474

Income tax benefit (expense)

14

(44)

(64)

(109)

Income from continuing operations

230

133

583

365

Income (loss) from discontinued operations, net of tax⁽⁴⁾

57

4

158

(8)

Net income

287

137

741

357

Net income attributable to noncontrolling interests, net of tax

(41)

(9)

(105)

(31)

Net income attributable to Huntsman Corporation

$   246

$   128

$   636

$   326

Adjusted EBITDA⁽¹⁾

$   360

$   210

$1,259

$   997

Adjusted net income⁽¹⁾

$   186

$     50

$   604

$   352

Basic income per share

$  1.03

$  0.54

$  2.67

$  1.38

Diluted income per share

$  1.00

$  0.53

$  2.61

$  1.36

Adjusted diluted income per share⁽¹⁾

$  0.76

$  0.21

$  2.48

$  1.47

Common share information:

Basic shares outstanding

240

236

238

236

Diluted shares

245

241

244

240

Diluted shares for adjusted diluted income per share

245

241

244

240

See end of press release for footnote explanations

Table 2 — Results of Operations by Segment

Three months ended

Twelve months ended

December 31,

Better /

December 31,

Better /

In millions

2017

2016

(Worse)

2017

2016

(Worse)

Segment Revenues:

Polyurethanes

$1,227

$   964

27%

$4,399

$3,667

20%

Performance Products

514

515

0%

2,109

2,126

(1)%

Performance Products, pro forma⁽²⁾

514

452

14%

2,109

1,885

12%

Advanced Materials

258

246

5%

1,040

1,020

2%

Textile Effects

190

184

3%

776

751

3%

Corporate and eliminations

14

(5)

n/m

34

(46)

n/m

Total

$2,203

$1,904

16%

$8,358

$7,518

11%

Total, pro forma⁽²⁾

$2,203

$1,841

20%

$8,358

$7,277

15%

Segment Adjusted EBITDA⁽¹⁾:

Polyurethanes

$   294

$   130

126%

$   850

$   569

49%

Performance Products

47

68

(31)%

296

316

(6)%

Performance Products, pro forma⁽²⁾

47

62

(24)%

296

288

3%

Advanced Materials

53

50

6%

219

223

(2)%

Textile Effects

19

14

36%

83

73

14%

Corporate, LIFO and other

(53)

(52)

(2)%

(189)

(184)

(3)%

Total

$   360

$   210

71%

$1,259

$   997

26%

Total, pro forma⁽²⁾

$   360

$   204

76%

$1,259

$   969

30%

n/m = not meaningful

See end of press release for footnote explanations

Table 3 — Factors Impacting Sales Revenue

Three months ended

December 31, 2017 vs. 2016

Average Selling Price^(a)

Local

Exchange

Sales Mix

Sales

Currency

Rate

& Other

Volume^(b)

Total

Polyurethanes

21%

4%

4%

(2)%

27%

Polyurethanes, adj

20%

4%

6%

(7)%

23%

(e)

Performance Products

8%

2%

6%

(16)%

0%

Performance Products, adj

3%

2%

1%

14%

20%

(c)(e)

Advanced Materials

2%

3%

1%

(1)%

5%

Textile Effects

(2)%

2%

(1)%

4%

3%

Total Company

13%

3%

7%

(7)%

16%

Total Company, adj

11%

3%

5%

0%

19%

(c)(e)

Twelve months ended

December 31, 2017 vs. 2016

Average Selling Price^(a)

Local

Exchange

Sales Mix

Sales

Currency

Rate

& Other

Volume^(b)

Total

Polyurethanes

18%

1%

3%

(2)%

20%

Polyurethanes, adj

19%

1%

2%

(1)%

21%

(d)(e)

Performance Products

7%

0%

3%

(11)%

(1)%

Performance Products, adj

3%

0%

1%

13%

17%

(c)(d)(e)

Advanced Materials

1%

1%

0%

0%

2%

Textile Effects

(2)%

0%

(2)%

7%

3%

Total Company

12%

0%

4%

(5)%

11%

Total Company, adj

11%

0%

2%

4%

17%

(c)(d)(e)

(a)

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

(b)

Excludes sales from by-products and raw materials.

(c)

Pro forma adjusted to exclude the sale of the European differentiated surfactants on December 30, 2016.

(d)

Pro forma adjusted to exclude the impact from Hurricane Harvey in 3Q17

(e)

Pro forma adjusted to exclude the impact of cetain planned maintenance outages and unplanned  weather related and other outages in 2016 & 2017

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

 Income Tax 

 Diluted Income 

 EBITDA 

Benefit (Expense)

 Net Income 

 Per Share 

Three months ended

Three months ended

Three months ended

Three months ended

December 31,

December 31,

December 31,

December 31,

In millions, except per share amounts

2017

2016

2017

2016

2017

2016

2017

2016

Net income

$    287

$  137

$  287

$   137

$ 1.17

$   0.57

Net income attributable to noncontrolling interests

(41)

(9)

(41)

(9)

(0.17)

(0.04)

Net income attributable to Huntsman Corporation

246

128

246

128

1.00

0.53

Interest expense  from continuing operations

31

50

Interest expense from discontinued operations⁽⁴⁾

11

–

Income tax (benefit) expense from continuing operations

(14)

44

$     14

$    (44)

Income tax expense (benefit) from discontinued operations⁽⁴⁾

26

(16)

Depreciation and amortization from continuing operations

84

80

Depreciation and amortization from discontinued operations⁽⁴⁾

–

30

Acquisition and integration expenses

2

1

(1)

–

1

1

–

–

EBITDA / Income from discontinued operations, net of tax⁽⁴⁾

(94)

(18)

 N/A 

 N/A 

(57)

(4)

(0.23)

(0.02)

Minority interest of discontinued operations(1)(4)

31

3

 N/A 

 N/A 

31

3

0.13

0.01

U.S. tax reform impact on minority interest

(6)

–

 N/A 

 N/A 

(6)

–

(0.02)

–

U.S. tax reform impact on tax expense

 N/A 

 N/A 

(52)

–

(52)

–

(0.21)

–

Gain on disposition of businesses/assets

(1)

(97)

–

13

(1)

(84)

–

(0.35)

Loss on early extinguishment of debt

18

–

(7)

–

11

–

0.04

–

Expenses associated with merger, net of tax

10

–

(9)

–

1

–

–

–

Certain legal settlements and related (income) expenses

(12)

1

4

–

(8)

1

(0.03)

–

Net plant incident costs

3

–

(2)

–

1

–

–

–

Amortization of pension and postretirement actuarial losses

18

13

(5)

(2)

13

11

0.05

0.05

Restructuring, impairment and plant closing and transition costs (credits)

7

(9)

(1)

3

6

(6)

0.02

(0.02)

Adjusted⁽¹⁾

$    360

$  210

$    (59)

$    (30)

$  186

$    50

$ 0.76

$   0.21

Pro forma adjustments⁽²⁾

–

(6)

Pro forma adjusted EBITDA⁽¹⁾

$    360

$  204

Adjusted income tax expense⁽¹⁾

$   59

$   30

Net income attributable to noncontrolling interests, net of tax

41

9

Minority interest of discontinued operations(1)(4)

(31)

(3)

U.S. tax reform impact on minority interest

6

–

Adjusted pre-tax income⁽¹⁾

$  261

$   86

Adjusted effective tax rate

23%

35%

 Income Tax 

 Diluted Income 

 EBITDA 

Expense

 Net Income 

 Per Share 

Three months ended

Three months ended

Three months ended

Three months ended

September 30,

September 30,

September 30,

September 30,

In millions, except per share amounts

2017

2017

2017

2017

Net income

$    179

$  179

$ 0.73

Net income attributable to noncontrolling interests

(32)

(32)

(0.13)

Net income attributable to Huntsman Corporation

147

147

0.60

Interest expense  from continuing operations

39

Interest expense from discontinued operations⁽⁴⁾

8

Income tax expense from continuing operations

35

$    (35)

Income tax expense from discontinued operations⁽⁴⁾

17

Depreciation and amortization from continuing operations

80

Depreciation and amortization from discontinued operations⁽⁴⁾

9

Acquisition and integration expenses

10

(3)

7

0.03

EBITDA / Income from discontinued operations, net of tax⁽⁴⁾

(97)

 N/A 

(63)

(0.26)

Minority interest of discontinued operations⁽¹⁾⁽⁴⁾

12

 N/A 

12

0.05

Loss on early extinguishment of debt

35

(12)

23

0.09

Expenses associated with merger

12

(1)

11

0.05

Net plant incident costs

13

(4)

9

0.04

Amortization of pension and postretirement actuarial losses

19

(3)

16

0.07

Restructuring, impairment and plant closing and transition costs

1

1

2

0.01

Adjusted⁽¹⁾

$    340

$    (57)

$  164

$ 0.67

Adjusted income tax expense⁽¹⁾

$   57

Net income attributable to noncontrolling interests, net of tax

32

Minority interest of discontinued operations⁽¹⁾⁽⁴⁾

(12)

U.S. tax reform impact on minority interest

–

Adjusted pre-tax income⁽¹⁾

$  241

Adjusted effective tax rate

24%

 Income Tax 

 Diluted Income 

 EBITDA 

Expense

 Net Income 

 Per Share 

Twelve months ended

Twelve months ended

Twelve months ended

Twelve months ended

December 31,

December 31,

December 31,

December 31,

In millions, except per share amounts

2017

2016

2017

2016

2017

2016

2017

2016

Net income

$    741

$  357

$  741

$   357

$ 3.04

$   1.49

Net income attributable to noncontrolling interests

(105)

(31)

(105)

(31)

(0.43)

(0.13)

Net income attributable to Huntsman Corporation

636

326

636

326

2.61

1.36

Interest expense  from continuing operations

165

203

Interest expense (income) from discontinued operations⁽⁴⁾

19

(1)

Income tax expense from continuing operations

64

109

(64)

(109)

Income tax expense (benefit) from discontinued operations⁽⁴⁾

67

(24)

Depreciation and amortization from continuing operations

319

318

Depreciation and amortization from discontinued operations⁽⁴⁾

68

114

Acquisition and integration expenses

19

12

(5)

(3)

14

9

0.06

0.04

EBITDA / Income from discontinued operations, net of tax⁽⁴⁾

(312)

(81)

 N/A 

 N/A 

(158)

8

(0.65)

0.03

Minority interest of discontinued operations⁽¹⁾⁽⁴⁾

49

11

 N/A 

 N/A 

49

11

0.20

0.05

U.S. tax reform impact on minority interest

(6)

–

 N/A 

 N/A 

(6)

–

(0.02)

–

U.S. tax reform impact on tax expense

 N/A 

 N/A 

(52)

–

(52)

–

(0.21)

–

Gain on disposition of businesses/assets

(9)

(97)

–

13

(9)

(84)

(0.04)

(0.35)

Loss on early extinguishment of debt

54

3

(19)

(1)

35

2

0.14

0.01

Expenses associated with merger

28

–

(10)

–

18

–

0.07

–

Certain legal settlements and related (income) expenses

(11)

1

4

–

(7)

1

(0.03)

–

Net plant incident costs

16

–

(6)

–

10

–

0.04

–

Amortization of pension and postretirement actuarial losses

73

55

(16)

(12)

57

43

0.23

0.18

Restructuring, impairment and plant closing and transition costs

20

48

(3)

(12)

17

36

0.07

0.15

Adjusted⁽¹⁾

$  1,259

$  997

$  (171)

$  (124)

$  604

$   352

$ 2.48

$   1.47

Pro forma adjustments⁽²⁾

–

(28)

Pro forma adjusted EBITDA⁽¹⁾

$  1,259

$  969

Adjusted income tax expense⁽¹⁾

$  171

$   124

Net income attributable to noncontrolling interests, net of tax

105

31

Minority interest of discontinued operations⁽¹⁾⁽⁴⁾

(49)

(11)

U.S. tax reform impact on minority interest

6

–

Adjusted pre-tax income⁽¹⁾

$  837

$   496

Adjusted effective tax rate

20%

25%

See end of press release for footnote explanations

Table 5 — Selected Balance Sheet Items

December 31,

September 30,

December 31,

In millions

2017

2017

2016

Cash

$             481

$              451

$             396

Accounts and notes receivable, net

1,283

1,247

1,183

Inventories

1,073

1,084

918

Other current assets

262

240

281

Current assets held for sale

2,880

2,745

777

Property, plant and equipment, net

3,098

3,035

3,034

Other assets

1,167

1,181

1,137

Noncurrent assets held for sale

–

–

1,463

Total assets

$         10,244

$            9,983

$          9,189

Accounts payable

$             964

$              891

$             790

Other current liabilities

569

537

471

Current portion of debt

40

29

50

Current liabilities held for sale

1,692

1,633

467

Long-term debt

2,258

2,845

4,122

Other liabilities

1,350

1,457

1,429

Noncurrent liabilities held for sale

–

–

393

Total equity

3,371

2,591

1,467

Total liabilities and equity

$         10,244

$            9,983

$          9,189

Table 6 — Outstanding Debt

December 31,

December 31,

In millions

2017

2016

Debt:

Senior credit facilities

$               –

$          1,967

Accounts receivable programs

180

208

Senior notes

1,927

1,812

Variable interest entities

107

126

Other debt

84

59

Total debt – excluding affiliates

2,298

4,172

Total cash

481

396

Net debt- excluding affiliates

$          1,817

$          3,776

Table 7 — Summarized Statement of Cash Flows

Three months ended

Twelve months ended

December 31,

December 31,

In millions

2017

2016

2017

2016

Total cash at beginning of period^(a)

$    637

$450

$   425

$ 269

Net cash provided by operating activities – continuing operations

304

238

842

974

Net cash provided by operating activities – discontinued operations⁽⁴⁾

172

2

377

114

Net cash (used in) provided by investing activities – continuing operations

(120)

94

(265)

(119)

Net cash used in investing activities – discontinued operations⁽⁴⁾

(110)

(26)

(159)

(83)

Net cash used in financing activities

(170)

(326)

(519)

(723)

Effect of exchange rate changes on cash

6

(7)

18

(6)

Change in restricted cash

–

–

–

(1)

–

Total cash at end of period^(a)

$    719

$425

$   719

$ 425

Supplemental cash flow information – continuing operations:

Cash paid for interest

$     (47)

$ (66)

$   (169)

$(205)

Cash paid for income taxes

(45)

(11)

(9)

(40)

Cash paid for capital expenditures

(123)

(104)

(282)

(318)

Depreciation and amortization

84

80

319

318

–

Changes in primary working capital:

Accounts and notes receivable

(35)

(22)

(183)

(25)

Inventories

14

44

(104)

177

Accounts payable

59

57

154

46

Total cash provided by (used in)  primary working capital

$      38

$  79

$   (133)

$ 198

Three months ended

Twelve months ended

December 31,

December 31,

2017

2016

2017

2016

Free cash flow⁽³⁾:

Net cash provided by operating activities

$    304

$238

$    842

$ 974

Capital expenditures

(123)

(104)

(282)

(318)

All other investing activities, excluding acquisition and disposition activities^(b)

(1)

(1)

6

–

Non-recurring merger costs^(c)

10

–

28

–

Total free cash flow 

$    190

$133

$    594

$ 656

Adjusted EBITDA

$    360

$210

$ 1,259

$ 997

Capital expenditures

(123)

(104)

(282)

(318)

Capital reimbursements

2

4

3

32

Interest

(47)

(66)

(169)

(205)

Income taxes

(45)

(11)

(9)

(40)

Primary working capital change

38

79

(133)

198

Restructuring

(10)

(4)

(36)

(46)

Pensions

(26)

(15)

(111)

(60)

Maintenance & other

41

40

72

98

Total free cash flow⁽³⁾ 

$    190

$133

$   594

$ 656

(a)

Includes restricted cash and cash held in discontinued operations.

(b)

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

(c)

Represents payments associated with one-time costs of the terminated merger of equals with Clariant.

(1)

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

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

Adjusted EBITDA is computed by eliminating the following from net income (loss):  (a) net income attributable to noncontrolling interest, net of tax; (b) interest; (c) income taxes; (d) depreciation and amortization; (e) acquisition and integration expenses; (f) EBITDA from discontinued operations; (g) minority interest of discontinued operations; (h) U.S. tax reform impact on minority interest; (i) loss (gain) on disposition of businesses/assets; (j) loss on early extinguishment of debt; (k) expenses associated with merger, net of tax; (l) certain legal settlements and related (income) expenses; (m) net plant incident costs; (n) amortization of pension and postretirement actuarial losses (gains) and; (p) restructuring, impairment and plant closing costs (credits). The reconciliation of adjusted EBITDA to net income (loss) is set forth in Table 4 above.

Adjusted net income (loss) and adjusted diluted income (loss) per share are computed by eliminating the after tax impact of the following items from net income (loss): (a) net income attributable to noncontrolling interest; (b) acquisition and integration expenses; (c) loss (income) from discontinued operations; (d) minority interest of discontinued operations; (e) U.S. tax reform impact on minority interest; (f) U.S. tax reform impact on tax expense; (g) loss (gain) on disposition of businesses/assets; (h) loss on early extinguishment of debt; (i) expenses associated with merger, net of tax; (j) certain legal settlements and related (income) expenses;  (k) net plant incident costs; (l) amortization of pension and postretirement actuarial losses (gains); and (m) restructuring, impairment and plant closing costs (credits). The income tax impacts, if any, of each adjusting item represent a ratable allocation of the total difference between the unadjusted tax expense and the total adjusted tax expense, computed without consideration of any adjusting items using a with and without approach.  We do not adjust for changes in tax valuation allowances because we do not believe it provides more meaningful information than is provided under GAAP.   The reconciliation of adjusted net income (loss) to net income (loss) is set forth in Table 4 above.

(2)

Pro forma adjusted to exclude the sale of our European differentiated surfactants business to Innospec on December 30, 2016 as if it had occurred at the beginning of the relevant period.

(3)

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

(4)

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