UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10‑K10-K
(Mark One) |
☒ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, |
OR |
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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Commission | Exact Name of Registrant as Specified in its Charter, | State of | I.R.S. Employer | |||
| Huntsman Corporation | Delaware |
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| Huntsman International LLC | Delaware | 87-0630358 |
87‑0630358
Securities registered pursuant to Section 12(b) of the Exchange Act:
Registrant |
| Title of each class |
| Trading Symbol | Name of each exchange on which registered | |
Huntsman Corporation |
| Common Stock, par value $0.01 per share |
| HUN | New York Stock Exchange | |
Huntsman International LLC |
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| NONE |
Securities registered pursuant to Section 12(g) of the Exchange Act:
Registrant | Title of each class | |
Huntsman |
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Corporation/Huntsman International LLC | None |
None
Indicate by check mark if the registrant is a well‑knownwell-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Huntsman Corporation |
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Huntsman International LLC |
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Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act.
Huntsman |
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Corporation/Huntsman International LLC |
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Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act 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 |
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Corporation/Huntsman International LLC |
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Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S‑TS-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Huntsman |
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Corporation/Huntsman International LLC |
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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S‑K is not contained herein, and will not be contained, to the best of the registrants’ knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10‑K or any amendment to this Form 10‑K. ☒
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non‑acceleratednon-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer” “smaller reporting company,” and “emerging growth company” in Rule 12b‑212b-2 of the Exchange Act. Huntsman Corporation
Huntsman Corporation | Large accelerated filer ☒ | Accelerated filer ☐ |
| Smaller reporting company ☐ | Emerging Growth Companies ☐ |
Huntsman International LLC | Large accelerated filer ☐ | Accelerated filer ☐ |
| Smaller reporting company ☐ | Emerging Growth Companies ☐ |
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C.7262(b)) by the registered public accounting firm that prepared or issued.
Huntsman Corporation | Yes ☒ |
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Huntsman International LLC | Yes ☐ |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act.
Huntsman |
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Corporation/Huntsman International LLC |
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b‑212b-2 of the Exchange Act).
Huntsman |
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Corporation/Huntsman International LLC |
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On June 29, 2018,30, 2020, the last business day of the registrants’ most recently completed second fiscal quarter, the aggregate market value of voting and non‑votingnon-voting common equity held by non‑affiliatesnon-affiliates was as follows:
Registrant | Common Equity | Market Value Held by Nonaffiliates | ||
Huntsman Corporation | Common Stock | $ | ||
Huntsman International LLC | Units of Membership Interest | NA(2) |
(1) |
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(2) | All units of membership interest are held by Huntsman Corporation, an affiliate. |
(1)Based on the closing price of $29.20 per share of common stock as quoted on the New York Stock Exchange.
(2)All units of membership interest are held by Huntsman Corporation, an affiliate.
On January 31, 2019,February 1, 2021, the number of shares outstanding of each of the registrant’s classes of common equity were as follows:
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Registrant | Common Equity | Outstanding | |||
Huntsman Corporation | Common Stock |
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Huntsman International LLC | Units of Membership Interest | 2,728 |
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This Annual Report on Form 10‑K10-K 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 Annual Report on Form 10‑K10-K 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 (I)(1)(a) and (b) of Form 10‑K10-K and, to the extent applicable, is therefore filing this form with a reduced disclosure format.
Documents Incorporated by Reference
Part III: Proxy Statement for the 20182021 Annual Meeting of Stockholders to be filed within 120 days of
Huntsman Corporation’s fiscal year ended December 31, 2018.2020.
HUNTSMAN CORPORATION AND SUBSIDIARIES
HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES
20182020 ANNUAL REPORT ON FORM 10‑K10-K
HUNTSMAN CORPORATION AND SUBSIDIARIES HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES
This report includes information with respect to market share, industry conditions and forecasts that we obtained from internal industry research, publicly available information (including industry publications and surveys), and surveys and market research provided by consultants. The publicly available information and the reports, forecasts and other research provided by consultants generally state that the information contained therein has been obtained from sources believed to be reliable. We have not independently verified any of the data from 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, 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. Many of these terms are defined in the Glossary of Chemical Terms found at the conclusion of “Part I. Item 1. Business” below. Forward-Looking Statements
With respect to Huntsman Corporation, certain information set forth in this report contains All There are a number of risks and uncertainties that could cause our actual results to differ materially from the
General We are a global manufacturer of differentiated organic chemical products. Our Company, a Delaware corporation, was formed in 2004 to hold the Huntsman businesses, which were founded by Jon M. Huntsman. Mr. Huntsman founded the predecessor to our Company in 1970 as a small polystyrene plastics packaging company. Since then, we have grown through a series of We operate all of our businesses through Huntsman International, our Our principal executive offices are located at 10003 Woodloch Forest Drive, The Woodlands, Texas 77380, and our telephone number at that location is (281)
COVID-19 Update The outbreak of the coronavirus disease (“COVID-19”) has spread from China to many other countries, including the United States (“U.S.”). In March 2020, the World Health Organization characterized COVID-19 as a pandemic. As of December 31, 2020, there have not been any significant interruptions in our ability to provide our products and In response to the impact of COVID-19, we have implemented, and may continue to implement, cost saving initiatives, including:
For more information regarding our 2020 restructuring activities, see “Note 13. Restructuring, Impairment and Plant Closing Costs (Credits)” to our consolidated financial statements. Redemption of the 2021 Senior Notes On January 15, 2021, we redeemed in full €445 million (approximately $541 million) in aggregate principal amount of our 5.125% senior notes due 2021 ("2021 Senior Notes") at the redemption price equal to 100% of the principal amount of the notes, plus accrued and unpaid interest to, but not including, the redemption date. In connection with this redemption, we expect to incur an incremental cash tax liability of approximately $15 million in the first quarter of 2021 related to foreign currency exchange gains. Acquisition of Gabriel Performance Products On January 15, 2021, we completed the acquisition of Gabriel Performance Products ("Gabriel"), a North American specialty chemical manufacturer of specialty additives and epoxy curing agents for the coatings, adhesives, sealants and composite end-markets, from funds affiliated with Audax Private Equity in an all-cash transaction of approximately $250 million, subject to customary closing adjustments, funded from available liquidity. The acquired business will be integrated into our Advanced Materials segment. Sale of Assets at our Basel, Switzerland Site In November 2020, we entered into a sale and leaseback agreement to sell certain properties in Basel, Switzerland for approximately CHF 67 million (approximately $73 million) and to lease those properties back for five years. This transaction resulted in a pretax gain of approximately CHF 30 million (approximately $33 million). Sale of India-Based Do-It-Yourself Consumer Adhesives Business On November 3, 2020, we completed the sale of the India-based do-it-yourself consumer adhesives ("DIY") business, previously part of our Advanced Materials segment, to Pidilite Industries Ltd. and received cash of approximately $257 million. Under the terms of the agreement, we may receive up to approximately $28 million of additional cash under an earnout within 18 months if the business achieves certain sales revenue targets in line with the DIY business' 2019 performance. In connection with this sale, we recognized a pretax gain of $247 million in the fourth quarter of 2020, which was recorded in gain on sale of India-based DIY business in our consolidated statements of operations. Sale of Venator Interest
On December 23, 2020, we
In connection with
Other Significant Developments During 2020 Other significant developments that occurred during 2020 were as follows:
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We are a global manufacturer of differentiated organic chemical products. We operate in four segments: Polyurethanes, Performance Products, Advanced Materials and Textile Effects. In August 2017, we separated our
All four of
3 The following table identifies the key products, principal end markets and applications, representative customers, raw materials and representative competitors of each of our business segments: Non-GAAP Financial Measures Our consolidated financial statements are prepared in accordance with U.S. GAAP, which we supplement with certain non-GAAP financial information. These non-GAAP measures should not be considered in isolation or as a substitute for the related U.S. GAAP measures, and other companies may define such measures differently. We encourage investors to review our financial statements and the reconciliation of the non-GAAP financial measures to the most
directly comparable U.S. GAAP financial measures in their entirety and not to rely on any single financial measure. These non-GAAP measures exclude the impact of certain expenses that we do not believe are indicative of our core operating results. Adjusted EBITDA Our management uses adjusted EBITDA to assess financial performance. Adjusted EBITDA is defined as net income of Huntsman Corporation or Huntsman International, as appropriate, before interest, income tax, depreciation and amortization, net income attributable to noncontrolling interests and certain Corporate and other items, as well as eliminating the following adjustments: (a) business acquisition and integration We believe adjusted EBITDA is useful to investors in assessing the businesses’ ongoing financial performance and provides improved comparability between periods through the exclusion of certain items that management believes are not indicative of the businesses’ operational profitability and that may obscure underlying business results and trends. However, this measure should not be considered in isolation or viewed as a substitute for net income of Huntsman Corporation or Huntsman International, as appropriate, or other measures of performance determined in accordance with U.S. GAAP. Moreover, adjusted EBITDA as used herein is not necessarily comparable to other similarly titled measures of other companies due to potential inconsistencies in the methods of calculation. Our management believes this measure is useful to compare general operating performance from period to period and to make certain related management decisions. Adjusted EBITDA is also used by securities analysts, lenders and others in their evaluation of different companies because it excludes certain items that can vary widely across different industries or among companies within the same industry. For example, interest expense can be highly dependent on a company’s capital structure, debt levels and credit ratings. Therefore, the impact of interest expense on earnings can vary significantly among companies. In addition, the tax positions of companies can vary because of their differing abilities to take advantage of tax benefits and because of the tax policies of the various jurisdictions in which they operate. As a result, effective tax rates and tax expense can vary considerably among companies. Finally, companies employ productive assets of different ages and utilize different methods of acquiring and depreciating such assets. This can result in considerable variability in the relative costs of productive assets and the depreciation and amortization expense among companies. Nevertheless, our management recognizes that there are material limitations associated with the use of adjusted EBITDA in the evaluation of our Company as compared to net income of Huntsman Corporation or Huntsman International, as appropriate, which reflects overall financial performance. For example, we have borrowed money in order to finance our operations and interest expense is a necessary element of our costs and ability to generate revenue. Our management compensates for the limitations of using adjusted EBITDA by using this measure to supplement U.S. GAAP results to provide a more complete understanding of the factors and trends affecting the business rather than U.S. GAAP results alone.
Adjusted Net Income Adjusted net income is computed by eliminating the after tax amounts related to the following from net income attributable to Huntsman We believe adjusted net income is useful to investors in assessing the businesses’ ongoing financial performance and provides improved comparability between periods through the exclusion of certain items that management believes are not indicative of the businesses’ operational profitability and that may obscure underlying business results and trends.
Free Cash Flow We believe free cash flow is an important indicator of our liquidity as it measures the amount of cash we generate. Management internally uses a free cash flow measure: (a) to evaluate our liquidity, (b) evaluate strategic investments, (c) plan stock buyback and dividend levels and (d) evaluate our ability to incur and service debt. We have historically defined free cash flow as cash flows provided by operating activities and used in investing activities, excluding acquisition/disposition activities and including non-recurring separation costs. Starting with the quarter ended March 31, 2020, we updated our definition of free cash flow to a presentation more consistent with today’s market standard of net cash provided by operating activities less capital expenditures. 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. Adjusted Effective Tax Rate We believe that the effective tax rate of Huntsman Corporation or Huntsman International, as appropriate, is the performance measure calculated and presented in accordance with U.S. GAAP that is most directly comparable to adjusted effective tax rate. We believe our adjusted effective tax rate provides improved comparability between periods through the exclusion of certain items that management believes are not indicative of the businesses’ operational profitability and that may obscure underlying business results and trends. We do not provide reconciliations for adjusted effective tax rate on a forward-looking basis because we are unable to provide a meaningful or accurate calculation or estimation of reconciling items and the information is not available without unreasonable effort. This is due to the inherent difficulty of forecasting the timing and
Year Ended December 31, As discussed in “Note 4. Discontinued Operations and Business Dispositions—Sale of Chemical Intermediates Businesses” and “Note 4. Discontinued Operations and Business Dispositions—Separation and Deconsolidation of Venator” to our consolidated financial statements, the results from continuing operations presented exclude primarily the results of our Chemical Intermediates Businesses for all periods presented
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Segment Analysis
Year Ended December 31,2020 Compared with Year Ended December 31, 2018 Compared to Year Ended December 31, 20172019
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| Year ended December 31, |
| Favorable | ||||
(Dollars in millions) | 2018 |
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Revenues |
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Polyurethanes | $ | 5,094 |
| $ | 4,399 |
| 16% |
Performance Products |
| 2,355 |
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| 2,109 |
| 12% |
Advanced Materials |
| 1,116 |
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| 1,040 |
| 7% |
Textile Effects |
| 824 |
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| 776 |
| 6% |
Corporate and eliminations |
| (10) |
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| 34 |
| NM |
Total | $ | 9,379 |
| $ | 8,358 |
| 12% |
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Huntsman Corporation |
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Segment adjusted EBITDA(1) |
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Polyurethanes | $ | 946 |
| $ | 850 |
| 11% |
Performance Products |
| 367 |
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| 296 |
| 24% |
Advanced Materials |
| 225 |
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| 219 |
| 3% |
Textile Effects |
| 101 |
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| 83 |
| 22% |
Corporate and other |
| (170) |
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| (189) |
| 10% |
Total | $ | 1,469 |
| $ | 1,259 |
| 17% |
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Huntsman International |
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Segment adjusted EBITDA(1) |
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Polyurethanes | $ | 946 |
| $ | 850 |
| 11% |
Performance Products |
| 367 |
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| 296 |
| 24% |
Advanced Materials |
| 225 |
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| 219 |
| 3% |
Textile Effects |
| 101 |
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| 83 |
| 22% |
Corporate and other |
| (166) |
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| (185) |
| 10% |
Total | $ | 1,473 |
| $ | 1,263 |
| 17% |
Percent | ||||||||||||
Change | ||||||||||||
Year ended December 31, | Favorable | |||||||||||
(Dollars in millions) | 2020 | 2019 | (Unfavorable) | |||||||||
Revenues | ||||||||||||
Polyurethanes | $ | 3,584 | $ | 3,911 | (8 | )% | ||||||
Performance Products | 1,023 | 1,158 | (12 | )% | ||||||||
Advanced Materials | 839 | 1,044 | (20 | )% | ||||||||
Textile Effects | 597 | 763 | (22 | )% | ||||||||
Corporate and eliminations | (25 | ) | (79 | ) | NM | |||||||
Total | $ | 6,018 | $ | 6,797 | (11 | )% | ||||||
Huntsman Corporation | ||||||||||||
Segment adjusted EBITDA(1) | ||||||||||||
Polyurethanes | $ | 472 | $ | 548 | (14 | )% | ||||||
Performance Products | 164 | 168 | (2 | )% | ||||||||
Advanced Materials | 130 | 201 | (35 | )% | ||||||||
Textile Effects | 42 | 84 | (50 | )% | ||||||||
Corporate and other | (161 | ) | (155 | ) | (4 | )% | ||||||
Total | $ | 647 | $ | 846 | (24 | )% | ||||||
Huntsman International | ||||||||||||
Segment adjusted EBITDA(1) | ||||||||||||
Polyurethanes | $ | 472 | $ | 548 | (14 | )% | ||||||
Performance Products | 164 | 168 | (2 | )% | ||||||||
Advanced Materials | 130 | 201 | (35 | )% | ||||||||
Textile Effects | 42 | 84 | (50 | )% | ||||||||
Corporate and other | (155 | ) | (150 | ) | (3 | )% | ||||||
Total | $ | 653 | $ | 851 | (23 | )% | ||||||
NM—Not meaningful | |
| (1) | |
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Year ended December 31, 2020 vs 2019 | ||||||||||||||||
Average Selling Prices(1) | ||||||||||||||||
Local | Foreign Currency | Mix & | Sales | |||||||||||||
Currency | Translation Impact | Other | Volumes(2) | |||||||||||||
Period-Over-Period (Decrease) Increase | ||||||||||||||||
Polyurethanes | (3 | )% | — | — | (5 | )% | ||||||||||
Performance Products | (4 | )% | — | 3 | % | (11 | )% | |||||||||
Advanced Materials | 2 | % | (1 | )% | (2 | )% | (19 | )% | ||||||||
Textile Effects | (3 | )% | (1 | )% | (2 | )% | (16 | )% | ||||||||
Fourth Quarter 2020 vs Third Quarter 2020 | ||||||||||||||||
Average Selling Prices(1) | ||||||||||||||||
Local | Foreign Currency | Mix & | Sales | |||||||||||||
Currency | Translation Impact | Other | Volumes(2) | |||||||||||||
Period-Over-Period (Decrease) Increase | ||||||||||||||||
Polyurethanes | 10 | % | 2 | % | 1 | % | (3 | )% | ||||||||
Performance Products | 2 | % | 1 | % | (8 | )% | 16 | % | ||||||||
Advanced Materials | 1 | % | 1 | % | 1 | % | 1 | % | ||||||||
Textile Effects | 1 | % | 1 | % | — | 20 | % | |||||||||
(1) | Excludes revenues from tolling arrangements, byproducts and raw materials. |
(2) | Excludes sales volumes of byproducts and raw materials. |
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| Year ended December 31, 2018 vs 2017 | ||||||
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| Mix & |
| Sales |
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| Translation Impact |
| Other |
| Volumes(2) |
Period-Over-Period Increase (Decrease) |
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Polyurethanes |
| 5% |
| 2% |
| — |
| 9% |
Performance Products |
| 5% |
| 1% |
| (3)% |
| 9% |
Advanced Materials |
| 4% |
| 2% |
| — |
| 1% |
Textile Effects |
| 6% |
| — |
| — |
| — |
Total Company |
| 4% |
| 1% |
| (2)% |
| 9% |
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| Fourth Quarter 2018 vs Third Quarter 2018 | ||||||
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| Local |
| Foreign Currency |
| Mix & |
| Sales |
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| Currency |
| Translation Impact |
| Other |
| Volumes(2) |
Period-Over-Period Increase (Decrease) |
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Polyurethanes |
| (6)% |
| (1)% |
| (1) |
| (3)% |
Performance Products |
| — |
| — |
| (2)% |
| (5)% |
Advanced Materials |
| 2% |
| (1)% |
| 1% |
| (7)% |
Textile Effects |
| 1% |
| (1)% |
| (1)% |
| (4)% |
Total Company |
| (2)% |
| (1)% |
| (1)% |
| (5)% |
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Polyurethanes
Polyurethanes
The increasedecrease in revenues in our Polyurethanes segment for 20182020 compared to 20172019 was due to higherlower MDI average selling prices and higherlower overall polyurethanes sales volumes. MDI average selling prices increased in response to strong market conditions during the first three quarters of 2018. MTBE average selling prices increased primarily as a result of higher pricing for high octane gasoline. MDI sales volumes increased due to increased demand decreased across most major markets as well asin relation to the start-up of our new Chinese MDI facility in 2018. MTBEglobal economic slowdown resulting from the COVID-19 pandemic. Overall polyurethanes sales volumes increased duedecreased primarily in relation to the impact of maintenance outagesglobal economic slowdown and hurricane related production outages during 2017.the resulting decrease in demand across most major markets, partially offset by additional sales volumes in connection with the Icynene-Lapolla Acquisition. The increasedecrease in segment adjusted EBITDA was primarily due to higherlower component and polymeric systems margins largely driven by lower MDI pricing and MTBE marginslower polyurethanes sales volumes, partially offset by lower raw material costs and volumes, as well as the impact of MTBE maintenance outages and hurricane related production outages in 2017.lower fixed costs.
Performance Products
The increasedecrease in revenues in our Performance Products segment for 20182020 compared to 20172019 was due to higherlower sales volumes and lower average selling prices and higher sales volumes.prices. Sales volumes decreased primarily in relation to the global economic slowdown resulting from the COVID-19 pandemic. Average selling prices increaseddecreased primarily duerelated to strong market conditions across several of our derivatives businesses and in response to higherlower raw material costs. Sales volumes increased in our amines, maleic anhydride and ethylene glycol businesses. The increasedecrease in segment adjusted EBITDA was primarily due to higher margins and the impact of hurricane related production outages during 2017.lower sales volumes, mostly offset by lower fixed costs.
Advanced Materials
The increasedecrease in revenues in our Advanced Materials segment for 20182020 compared to 20172019 was due to lower sales volumes, slightly offset by higher average selling prices asprices. Sales volumes decreased significantly across all markets, except in our global power market, primarily in relation to the global economic slowdown resulting from the COVID-19 pandemic, partially offset by additional sales volumes remained relatively unchanged.related to the CVC Thermoset Specialties Acquisition. Average selling prices increased in response to higher raw material costscost increases, partially offset by the impact of a stronger U.S. dollar against major international currencies. The decrease in segment adjusted EBITDA was primarily due to lower sales volumes, partially offset by lower fixed costs.
Textile Effects
The decrease in revenues in our Textile Effects segment for 2020 compared to 2019 was due to lower average selling prices and lower sales volumes. Average selling prices decreased as a result of product mix change, competitive market pressures and the impact of a weakerstronger U.S. dollar against major international currencies. Sales volumes remained relatively unchanged as higher sales volumes across most markets in our core specialty business were offset by lower sales volumes in our commodity marketsdecreased primarily due to challenging industry conditions.significantly weaker demand in relation to the global economic slowdown resulting from the COVID-19 pandemic. The increasedecrease in segment adjusted EBITDA was primarily due to higher specialtylower sales volumes,revenues and lower capitalization of indirect costs because of reduced production, partially offset by higher raw material and fixed costs.
Textile Effects
The increase in revenues in our Textile Effects segment for 2018 compared to 2017 was due to higher average selling prices as sales volumes remained relatively unchanged. Average selling prices increased in response to higher raw material costs. Sales volumes remained relatively unchanged as higher sales volumes in our specialty business was offset by lower sales volumes in our value business. The increase in segment adjusted EBITDA was primarily due to higher average selling prices, partially offset by higher raw material costs and higher selling, general and administrativelower fixed costs.
Corporate and other
Corporate and other includes unallocated corporate overhead, unallocated foreign currency exchange gains and losses, LIFO inventory valuation reserve adjustments, loss on early extinguishment of debt, unallocated restructuring, impairment and plant closing costs, nonoperating income and expense benzene sales and gains and losses on the disposition of corporate assets. For 2018, adjusted EBITDA from Corporate and other for Huntsman Corporation increased by $19 million to a loss of $170 million from a loss of $189 million for 2017. For 2018, adjusted EBITDA from Corporate and other for Huntsman International increased by $19 million to a loss of $166 million from a loss of
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$185 million for 2017. The increase in segment adjusted EBITDA from Corporate and other resulted primarily from a decrease in unallocated corporate overhead and a decrease in LIFO inventory reserves.
Year Ended December 31, 2017 Compared with Year Ended December 31, 2016
As discussed in “Note 4. Discontinued Operations and Business Dispositions—Separation and Deconsolidation of Venator” to our consolidated financial statements, the results from continuing operations for all periods presented exclude the results of Venator and the results of our former polymers, base chemicals and Australian styrenics business. The increase of $310 million in net income attributable to Huntsman Corporation and the increase of $306 million in net income attributable to Huntsman International was the result of the following items:
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Segment Analysis
Year Ended December 31, 2017 Compared to Year Ended December 31, 2016
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| Percent |
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| Change |
| Year ended December 31, |
| Favorable | ||||
(Dollars in millions) | 2017 |
| 2016 |
| (Unfavorable) | ||
Revenues |
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Polyurethanes | $ | 4,399 |
| $ | 3,667 |
| 20% |
Performance Products |
| 2,109 |
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| 2,126 |
| (1)% |
Advanced Materials |
| 1,040 |
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| 1,020 |
| 2% |
Textile Effects |
| 776 |
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| 751 |
| 3% |
Corporate and eliminations |
| 34 |
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| (46) |
| NM |
Total | $ | 8,358 |
| $ | 7,518 |
| 11% |
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Huntsman Corporation |
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|
Segment adjusted EBITDA(1) |
|
|
|
|
|
|
|
Polyurethanes | $ | 850 |
| $ | 569 |
| 49% |
Performance Products |
| 296 |
|
| 316 |
| (6)% |
Advanced Materials |
| 219 |
|
| 223 |
| (2)% |
Textile Effects |
| 83 |
|
| 73 |
| 14% |
Corporate and other |
| (189) |
|
| (184) |
| (3)% |
Total | $ | 1,259 |
| $ | 997 |
| 26% |
|
|
|
|
|
|
|
|
Huntsman International |
|
|
|
|
|
|
|
Segment adjusted EBITDA(1) |
|
|
|
|
|
|
|
Polyurethanes | $ | 850 |
| $ | 569 |
| 49% |
Performance Products |
| 296 |
|
| 316 |
| (6)% |
Advanced Materials |
| 219 |
|
| 223 |
| (2)% |
Textile Effects |
| 83 |
|
| 73 |
| 14% |
Corporate and other |
| (185) |
|
| (180) |
| (3)% |
Total | $ | 1,263 |
| $ | 1,001 |
| 26% |
NM—Not meaningful
56
|
|
|
|
|
|
|
|
|
|
|
|
| Year ended December 31, 2017 vs 2016 | ||||||
|
| Average Selling Price(1) |
|
|
|
| ||
|
| Local |
| Foreign Currency |
| Mix & |
| Sales |
|
| Currency |
| Translation Impact |
| Other |
| Volumes(2) |
Period-Over-Period Increase (Decrease) |
|
|
|
|
|
|
|
|
Polyurethanes |
| 18% |
| 1% |
| 3% |
| (2)% |
Performance Products |
| 7% |
| — |
| 3% |
| (11)% |
Advanced Materials |
| 1% |
| 1% |
| — |
| — |
Textile Effects |
| (2)% |
| — |
| (2)% |
| 7% |
Total Company |
| 12% |
| — |
| 4 |
| (5)% |
|
|
|
|
Polyurethanes
The increase in revenues in our Polyurethanes segment for 2017 compared to 2016 was primarily due to higher average selling prices, partially offset by lower MTBE sales volumes. MDI average selling prices increased in response to higher raw material costs and continued strong market conditions. MTBE average selling prices increased primarily as a result of higher pricing for high octane gasoline. MDI sales volumes increased due to increased demand across most major markets. MTBE sales volumes decreased due to the impact of maintenance and hurricane related production outages during the second and third quarters of 2017. The increase in segment adjusted EBITDA was primarily due to higher MDI margins, partially offset by lower MTBE margins.
Performance Products
The decrease in revenues in our Performance Products segment for 2017 compared to 2016 was due to lower sales volumes principally because of the sale of the European surfactants business to Innospec Inc. on December 30, 2016, partially offset by higher sales volumes in our remaining businesses as well as higher average selling prices. Average selling prices increased primarily in response to higher raw material costs and favorable product mix effect partially from the sale of the European surfactants business. The decrease in segment adjusted EBITDA was primarily due to the sale of the European surfactants business to Innospec Inc. in 2016 and weather-related outages offset by higher sales volumes in our remaining businesses and lower fixed costs.
Advanced Materials
The increase in revenues in our Advanced Materials segment for 2017 compared to 2016 was primarily due to higher average selling prices. Average selling prices increased in response to higher raw material costs. Sales volumes remained relatively unchanged as growth in our higher value specialty markets was offset by reduced volumes as we withdrew from certain low margin businesses. The decrease in segment adjusted EBITDA was due to lower margins resulting from higher raw material costs and higher fixed costs.
Textile Effects
The increase in revenues in our Textile Effects segment for 2017 compared to 2016 was due to higher sales volumes, partially offset by lower average selling prices. Sales volumes increased in both textile chemicals and dyes, particularly in our Asia region. Average selling prices decreased primarily due to competitive market conditions. The increase in segment adjusted EBITDA was primarily due to higher sales volumes and lower selling, general and administrative costs.
Corporate and other
Corporate and other includes unallocated corporate overhead, unallocated foreign currency exchange gains and losses, LIFO inventory valuation reserve adjustments, loss on early extinguishment of debt, unallocated restructuring, impairment and plant closing costs, nonoperating income and expense, benzene sales and gains and losses on the disposition of corporate assets. For 2017,2020, adjusted EBITDA from Corporate and other for Huntsman Corporation decreased by $5$6 million to a loss of $189$161 million from a loss of $184$155 million for 2016.2019. For 2017,2020, adjusted EBITDA from
57
Corporate and other for Huntsman International decreased by $5 million to a loss of $185$155 million from a loss of $180$150 million for 2016.2019. The decrease in adjusted EBITDA from Corporate and other resulted primarily from a charge from a LIFO inventory reserve adjustment, partially offset by an increase in unallocated corporate overheadforeign currency exchange gains.
Year Ended December 31,2019 Compared with Year Ended December 31, 2018
For a comparison of our results of operations for the fiscal years ended December 31, 2019 and an increase in losses from benzene sales, partially offset by a decrease in LIFO inventory valuation expense.2018, see "Part II. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations" of our Annual Report on Form 10-K for the fiscal year ended December 31, 2019 filed with the SEC on February 13, 2020.
Liquidity
Liquidity and Capital Resources Capital Resources
The following is a discussion of our liquidity and capital resources and generally does not include separate information with respect to Huntsman International in accordance with General Instruction I of Form 10‑K.10-K.
Cash Flows forFor Year Ended December 31, 20182020 Compared to thewith Year Ended December 31, 2017
Net cash provided by operating activities from continuing operations for 2018 and 2017 was $963 million and $842 million, respectively. The increase in net cash provided by operating activities from continuing operations during 2018 compared with 2017 was primarily attributable to increased operating income as described in “—Results of Operations” above, partially offset by a $45 million unfavorable variance in operating assets and liabilities for 2018 compared with 2017.
Net cash used in investing activities from continuing operations for 2018 and 2017 was $677 million and $265 million, respectively. During 2018 and 2017, we paid $313 million and $282 million, respectively, for capital expenditures and paid $366 million and $14 million, respectively, for the acquisition of businesses, net of cash acquired. For more information concerning business acquisitions, see “Note 3. Business Combination” to our consolidated financial statements. During 2018 and 2017, we received proceeds of nil and $25 million, respectively, from the sale of assets and received nil and $7 million, respectively, from the termination of cross-currency interest rate contracts.
Net cash used in financing activities for 2018 and 2017 was $424 million and $519 million, respectively. The decrease in net cash used in financing activities was primarily due to borrowings on our 2018 Revolving Credit Facility and proceeds from the secondary offering of Venator in 2018 as well as net repayments of long-term debt in the 2017 period, partially offset by our repurchase of shares of our common stock under the share repurchase program and increased dividends paid to common stockholders and noncontrolling interests in 2018 as well as proceeds from the IPO of Venator in 2017.
Free cash flow from continuing operations for 2018 and 2017 were cash proceeds of $651 million and $594 million, respectively. The improvement in free cash flow was attributable to the changes in cash flows from operating and investing activities from continuing operations, excluding merger and acquisition activities.
Cash Flows for Year Ended December 31, 2017 Compared to the Year Ended December 31, 20162019
Net cash provided by operating activities from continuing operations for 20172020 and 20162019 was $842$277 million and $974$656 million, respectively. The decrease in net cash provided by operating activities from continuing operations during 20172020 compared with 20162019 was primarily attributable to an unfavorable variance of $424 million in operating assets and liabilities in 2017, offset in part by increaseddecreased operating income as described in “—Results of Operations” above.above, including $257 million of cash paid for taxes in connection with the sale of the Chemical Intermediates Businesses and the sale of the India-based DIY business, partially offset by a $338 million unfavorable variance in operating assets and liabilities for 2020 as compared with 2019.
Net cash used inprovided by (used in) investing activities from continuing operations for 20172020 and 20162019 was $265$1,462 million and $120$(201) million, respectively. During 20172020 and 2016,2019, we paid $282$249 million and $318$274 million, respectively, for capital expenditures. We paid $14expenditures, including $54 million and nil for the acquisition of$13 million during 2020 and 2019, respectively, on a business during the year ended December 31, 2017 and 2016, respectively. During 2017 and 2016new MDI splitter in Geismar, Louisiana. In January 2020, we received proceeds from the sale of businesses and assets of $25 million and $199 million, respectively, including proceeds of $199 million fromapproximately $1.92 billion for the sale of our European surfactants business during 2016. For further information, see “NoteChemical Intermediates Businesses. Additionally, in November 2020, we received approximately $257 million for the sale of the India-based DIY business. See "Note 4. Discontinued Operations and Business Dispositions—Sale of European Surfactants Manufacturing Facilities”Chemical Intermediates Businesses" and "Note 4. Discontinued Operations and Business Dispositions—Sale of India-Based Do-It-Yourself Consumer Adhesives Business" to our consolidated financial statements. In December 2020, we completed the sale of approximately 42.4 million ordinary shares of Venator and received approximately $99 million. See "Note 4. Discontinued operations and Business Dispositions—Separation and Deconsolidation of Venator" to our consolidated financial statements. During 20172020, we paid approximately $650 million for the acquisition of businesses, net of cash acquired. See "Note 3. Business Combinations and 2016,Acquisitions" to our consolidated financial statements. During the year ended December 31, 2020, we entered into a sale and leaseback agreement to sell certain properties in Basel, Switzerland, for which we received $7approximately $73 million and nil, respectively,in proceeds from the terminationsale of cross-currency interest rate contracts.assets. During the year ended December 31, 2019, we received approximately $49 million in proceeds from the sale of assets in connection with the closure of certain Textile Effects facilities and offices in Basel, Switzerland. During 2019, we received $16 million in proceeds from the settlement of the December 3, 2018 sale of Venator ordinary shares to Bank of America N.A.
Net cash used in financing activities for 20172020 and 20162019 was $519$655 million and $723$450 million, respectively. The decreaseincrease in net cash used in financing activities was primarily due to the increase in repayments on our Revolving Credit Facility during 2020 as compared with 2019, the repayment in full of our 364-day term loan facility ("2019 Term Loan") in the third quarter of 2020 and the proceeds from the IPO and secondary offering of Venator, offset in part by an increase in net repaymentsissuance of our revolving loan facility and net repayments2029 Senior Notes in the first quarter of long‑term debt2019, partially offset by a decrease in repurchases of common stock during 20172020 as compared with 2016.2019 and cash paid in the third quarter of 2019 to acquire the 50% noncontrolling interest that we did not own in the Sasol-Huntsman joint venture.
Free cash flow from continuing operations for 20172020 and 20162019 were cash proceeds of $594cash of $28 million and $655$382 million, respectively. The decreasereduction in free cash flow was primarily attributable to the changesdecrease in cash flowsprovided by operating activities from operating and investing activities, excluding merger and acquisition activities.continuing operations, partially offset by a decrease in cash used for capital expenditures during 2020 as compared with 2019.
58
TableCash Flows For Year Ended December 31,2019Compared with Year Ended December 31, 2018
For a comparison of Contentsour cash flows for the fiscal years ended December 31, 2019 and 2018, see "Part II. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations" of our Annual Report on Form 10-K for the fiscal year ended December 31, 2019 filed with the SEC on February 13, 2020.
Changes in Financial Condition
The following information summarizes our working capital (dollars in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| December 31, |
| Less |
|
|
| December 31, |
| Increase |
| Percent | |||||
|
| 2018 |
| Acquisitions(2) |
| Subtotal |
| 2017 |
| (Decrease) |
| Change | |||||
Cash and cash equivalents |
| $ | 340 |
| $ | (2) |
| $ | 338 |
| $ | 470 |
| $ | (132) |
| (28)% |
Restricted cash |
|
| — |
|
| — |
|
| — |
|
| 11 |
|
| (11) |
| (100)% |
Accounts and notes receivable, net |
|
| 1,272 |
|
| (31) |
|
| 1,241 |
|
| 1,283 |
|
| (42) |
| (3)% |
Inventories |
|
| 1,134 |
|
| (25) |
|
| 1,109 |
|
| 1,073 |
|
| 36 |
| 3% |
Prepaid expenses |
|
| 66 |
|
| (1) |
|
| 65 |
|
| 60 |
|
| 5 |
| 8% |
Other current assets |
|
| 146 |
|
| — |
|
| 146 |
|
| 202 |
|
| (56) |
| (28)% |
Current assets held for sale(1) |
|
| — |
|
| — |
|
| — |
|
| 2,880 |
|
| (2,880) |
| (100)% |
Total current assets |
|
| 2,958 |
|
| (59) |
|
| 2,899 |
|
| 5,979 |
|
| (3,080) |
| (52)% |
Accounts payable |
|
| 961 |
|
| (17) |
|
| 944 |
|
| 964 |
|
| (20) |
| (2)% |
Accrued liabilities |
|
| 554 |
|
| (4) |
|
| 550 |
|
| 569 |
|
| (19) |
| (3)% |
Current portion of debt |
|
| 96 |
|
| — |
|
| 96 |
|
| 40 |
|
| 56 |
| 140% |
Current liabilities held for sale(1) |
|
| — |
|
| — |
|
| — |
|
| 1,692 |
|
| (1,692) |
| (100)% |
Total current liabilities |
|
| 1,611 |
|
| (21) |
|
| 1,590 |
|
| 3,265 |
|
| (1,675) |
| (51)% |
Working capital |
| $ | 1,347 |
| $ | (38) |
| $ | 1,309 |
| $ | 2,714 |
| $ | (1,405) |
| (52)% |
December 31, | Less | December 31, | Increase | Percent | ||||||||||||||||||||
2020 | Acquisitions(1) | Subtotal | 2019 | (Decrease) | Change | |||||||||||||||||||
Cash and cash equivalents | $ | 1,593 | $ | (7 | ) | $ | 1,586 | $ | 525 | $ | 1,061 | 202 | % | |||||||||||
Accounts and notes receivable, net | 910 | (48 | ) | 862 | 953 | (91 | ) | (10 | )% | |||||||||||||||
Inventories | 848 | (69 | ) | 779 | 914 | (135 | ) | (15 | )% | |||||||||||||||
Other current assets | 217 | (1 | ) | 216 | 155 | 61 | 39 | % | ||||||||||||||||
Current assets held for sale(2) | — | — | — | 1,208 | (1,208 | ) | (100 | )% | ||||||||||||||||
Total current assets | 3,568 | (125 | ) | 3,443 | 3,755 | (312 | ) | (8 | )% | |||||||||||||||
Accounts payable | 876 | (20 | ) | 856 | 822 | 34 | 4 | % | ||||||||||||||||
Accrued liabilities | 458 | (11 | ) | 447 | 420 | 27 | 6 | % | ||||||||||||||||
Current portion of debt | 593 | — | 593 | 212 | 381 | 180 | % | |||||||||||||||||
Current operating lease liabilities | 52 | — | 52 | 42 | 10 | 24 | % | |||||||||||||||||
Current liabilities held for sale(2) | — | — | — | 512 | (512 | ) | (100 | )% | ||||||||||||||||
Total current liabilities | 1,979 | (31 | ) | 1,948 | 2,008 | (60 | ) | (3 | )% | |||||||||||||||
Working capital | $ | 1,589 | $ | (94 | ) | $ | 1,495 | $ | 1,747 | $ | (252 | ) | (14 | )% | ||||||||||
(1) | Represents combined amounts related to the Icynene-Lapolla Acquisition and the CVC Thermoset Specialties Acquisition. For more information, see “Note 3. Business Combinations and Acquisitions” to our consolidated financial statements. |
| (2) |
|
|
|
Excluding the effects of business acquisitions, ourOur working capital decreased by $1,405$252 million primarily as a result of the net impact of the following significant changes:
| ● | The |
● |
|
● | Inventories decreased by $135 million primarily due to lower inventory costs and volumes. |
● | Other current assets increased by $61 million primarily due to an increase in current income tax receivable and in prepaid insurance. |
● | Accounts payable increased by $34 million primarily due to an increase in days payable outstanding year-over-year and higher capital expenditures in the fourth quarter of 2020 compared to the fourth quarter of 2019. |
● | Current portion of debt increased by |
|
|
DirectDirect and Subsidiary Debt Subsidiary Debt
See “Note 14.15. Debt—Direct and Subsidiary Debt” to our consolidated financial statements.
Debt Issuance Costs
See “Note 14.15. Debt—Direct and Subsidiary Debt—Debt Issuance Costs” to our consolidated financial statements.
Revolving Credit Facility
See “Note 14.15. Debt—Direct and Subsidiary Debt—Revolving Credit Facility” to our consolidated financial statements.
Term Loan Credit Facility
59
Table of ContentsSee “Note 15. Debt—Direct and Subsidiary Debt—Term Loan Credit Facility” to our consolidated financial statements.
A/R Programs
See “Note 14.15. Debt—Direct and Subsidiary Debt—A/R Programs” to our consolidated financial statements.
Notes
See “Note 14.15. Debt—Direct and Subsidiary Debt—Notes” to our consolidated financial statements.
Variable Interest Entity Debt
See “Note 14.15. Debt—Direct and Subsidiary Debt—Variable Interest Entity Debt” to our consolidated financial statements.
Other Debt
See “Note 14. Debt—Direct and Subsidiary Debt—Other Debt” to our consolidated financial statements.
Note Payable from Huntsman International to Huntsman Corporation
See “Note 14.15. Debt—Direct and Subsidiary Debt—Note Payable from Huntsman International to Huntsman Corporation” to our consolidated financial statements.
Compliance With Covenants
Compliance With Covenants
See “Note 14.15. Debt—Compliance with Covenants” to our consolidated financial statements.
Maturities
Maturities
See “Note 14.15. Debt—Maturities” to our consolidated financial statements.
Short‑Term and Long‑Term Liquidity
Short-Term Liquidity
We depend upon our cash, new $1.2 billion 2018 Revolving Credit Facility, U.S. accounts receivable securitization program (“U.S. A/R Program,Program”) and European accounts receivable securitization program (“EU A/R Program” and collectively with the U.S. A/R Program, “A/R Programs”) and other debt instruments to provide liquidity for our operations and working capital needs. As of December 31, 2018,2020, we had $1,525$2,952 million of combined cash and unused borrowing capacity, consisting of $340$1,593 million in cash, and restricted cash, $44$1,194 million in availability under our 2018 Revolving Credit Facility and $1,141$165 million in availability under our A/R Programs. Our liquidity can be significantly impacted by various factors. The following matters had, or are expected to have, a significant impact on our liquidity:
|
|
| ● | Cash |
| ● | During |
|
|
60
| ● | During |
|
|
| ● | On February 7, 2018 and on May 3, 2018, our Board of Directors authorized our Company to repurchase up to an additional $950 million in shares of our common stock in addition to the $50 million remaining under our September 2015 share repurchase authorization. Repurchases may be made through the open market, including through accelerated share repurchase programs, or in privately negotiated transactions, and repurchases may be commenced or suspended from time to time without prior notice. Shares of common stock acquired through the repurchase program are held in treasury at cost. During | |
| ● | During 2020, management implemented cost realignment and synergy plans. In connection with these plans, we expect to achieve annualized cost savings and synergy benefits of more than $120 million by the end of 2023 with associated net cash restructuring and integration costs of approximately $100 million. See "Note 13. Restructuring, Impairment and Plant Closing Costs (Credits)" to our consolidated financial statements. | ||
| ● | In November 2020, we entered into a sale and leaseback agreement to sell certain properties in Basel, Switzerland for approximately CHF 67 (approximately $73 million) and to lease those properties back for five years. | ||
| ● | On November 3, 2020, we completed the sale of the India-based DIY business, part of the Advanced Materials segment, to Pidilite Industries Ltd. and received cash of approximately $257 million. Under the terms of the agreement, we may receive up to approximately $28 million of additional cash under an earnout within 18 months if the business achieves certain sales revenue targets in line with the DIY business' 2019 | ||
● | On December 23, 2020, we |
|
| ||
| ● | On January 15, 2021, we redeemed in full €445 million (approximately $541 million) in aggregate principal amount of our 2021 Senior Notes at the redemption price equal to | ||
| ● | On January 15, 2021, we completed the acquisition of Gabriel, a North American specialty chemical manufacturer of specialty additives and epoxy curing agents for the coatings, adhesives, sealants and composite end-markets, from funds affiliated with Audax Private Equity in an all-cash transaction of approximately $250 million, subject to customary closing adjustments, funded from available liquidity. The |
Long-Term Liquidity
| ● | We |
provided by operations. |
|
|
|
|
As of December 31, 2018,2020, we had $96$593 million classified as current portion of debt, including $545 million on our 2021 Senior Notes, which we redeemed in full on January 15, 2021, debt at our variable interest entities of $25$47 million and certain other short‑termshort-term facilities and scheduled amortization payments totaling $71$1 million. Although we cannot provide assurances, weWe intend to renew, repay or extend the majority of these short‑termshort-term facilities in the next twelve months.
As of December 31, 2018,2020, we had approximately $315$491 million of cash and cash equivalents, including restricted cash, held by our foreign subsidiaries, including our variable interest entities. WeWith the exception of certain amounts that we expect to repatriate in the foreseeable future, we intend to use cash held in our foreign subsidiaries to fund our local operations. Nevertheless, we could repatriate additional cash as dividends and the repatriation of cash as a dividend would generally not be subject to U.S. taxation as a result of the U.S. Tax Reform Act, buttaxation. However, such repatriation may potentially be subject to limited foreign withholding taxes. Cash held by certain foreign subsidiaries, including our variable interest
61
entities, may be subject to changing monetary policies of governments and legal restrictions, including those arising from the interests of our partners, which could limit the amounts available for repatriation.
Contractual Obligations and Commercial Commitments
Our obligations under long‑term debt (including the current portion), lease agreements and other contractual commitments as of December 31, 2018 are summarized below (dollars in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 2019 |
| 2020 - 2021 |
| 2022 - 2023 |
| After 2023 |
| Total | |||||
Long-term debt, including current portion |
| $ | 96 |
| $ | 1,466 |
| $ | 404 |
| $ | 354 |
| $ | 2,320 |
Interest(1) |
|
| 110 |
|
| 155 |
|
| 59 |
|
| 25 |
|
| 349 |
Operating leases |
|
| 59 |
|
| 105 |
|
| 94 |
|
| 234 |
|
| 492 |
Purchase commitments(2) |
|
| 1,424 |
|
| 1,521 |
|
| 1,043 |
|
| 1,794 |
|
| 5,782 |
Total(3)(4) |
| $ | 1,689 |
| $ | 3,247 |
| $ | 1,600 |
| $ | 2,407 |
| $ | 8,943 |
(1) Interest calculated using interest rates as of December 31, 2018 and contractual maturity dates assuming no refinancing or extension of debt instruments.
(2) We have various purchase commitments extending through 2039 for materials, suppliesRestructuring, Impairment and services entered into in the ordinary course of business. Included in the purchase commitments table above are contracts which require minimum volume purchases that extend beyond one year or are renewable annually and have been renewed for 2018. Certain contracts allow for changes in minimum required purchase volumes in the event of a temporary or permanent shutdown of a facility. To the extent the contract requires a minimum notice period, such notice period has been included in the above table. The contractual purchase price for substantially all of these contracts is variable based upon market prices, subject to annual negotiations. We have estimated our contractual obligations by using the terms of our current pricing for each contract. We also have a limited number of contracts which require a minimum payment even if no volume is purchased. We believe that all of our purchase obligations will be utilized in our normal operations. For the years ended December 31, 2018, 2017 and 2016, we made minimum payments of nil, nil and $1 million, respectively, under such take or pay contracts without taking the product. Plant Closing Costs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 5-Year | |
|
|
|
|
|
|
|
|
|
|
| Average | |
|
| 2019 |
| 2020 - 2021 |
| 2022 - 2023 |
| Annual | ||||
Pension plans |
| $ | 88 |
| $ | 177 |
| $ | 202 |
| $ | 67 |
Other postretirement obligations |
|
| 6 |
|
| 12 |
|
| 12 |
|
| 6 |
|
|
Off‑Balance Sheet Arrangements
No off‑balance sheet arrangements exist.
Restructuring, Impairment and Plant Closing Costs
For a discussion of restructuring plans and the costs involved, see “Note 12.13. Restructuring, Impairment and Plant Closing Costs” to our consolidated financial statements.
Recently Issued Accounting Pronouncements
62
Recently Issued Accounting Pronouncements
For a discussion of recently issued accounting pronouncements, see “Note 2. Summary of Significant Accounting Policies—Recently Issued Accounting Pronouncements”Policies" to our consolidated financial statements.
Critical Accounting PoliciesCritical Accounting Estimates
This discussion and analysis of financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of financial statements and related disclosures in conformity with U.S. GAAP requires managementus to make judgments, estimates and assumptions that affect the reported amounts ininvolve a significant level of estimation and uncertainty and are reasonably likely to have a material impact on our consolidated financial statements. Our significant accounting policies are summarized in “Note 2. Summarycondition and/or results of Significant Accounting Policies” to our consolidated financial statements.operations. Summarized below are our critical accounting policies:estimates.
Income Taxes
We use the asset and liability method of accounting for income taxes.
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial and tax reporting purposes. We evaluate deferred tax assets to determine whether it is more likely than not that they will be realized; valuation allowances are recorded to offset deferred tax assets unlikely to be realized. Valuation allowances are reviewed on a tax jurisdiction basis to analyze whether there is sufficient positive or negative evidence to support a change in judgment about the realizability of the related deferred tax assets for each jurisdiction.assets. These conclusions require significant judgment.judgments. In evaluating the objective evidence that historical results provide, we consider the cyclicality of businesses and cumulative income or losses during the applicable period.losses. Cumulative historical losses incurred over the period limitsperiods of time limit our ability to consider othermore subjective evidence such as our projections for the future.of future taxable income. Changes in expected future taxable income and tax planning strategies in applicable jurisdictions could affect our assessment of the realization of deferred tax assets in those jurisdictions.assets. Our judgments regarding valuation allowances are also influenced by factors outside of business results that could impact our ability to utilize a deferred tax asset. As of December 31, 2018,2020, we had total valuation allowances of $227$206 million, which represents a decrease of $25 million from the prior year, and we have recognized net deferred tax assets of $76 million. See “Note 18.20. Income Taxes” to our consolidated financial statements for more information regarding our deferred tax assets and valuation allowances.
Accounting for uncertainty in income taxes prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement
Employee Benefit Programs
We sponsor several contributory and non‑contributorynon-contributory defined benefit plans, covering employees primarily in the U.S., the U.K., The Netherlands, Belgium and Switzerland, but also covering employees in a number of other countries. We fund the material plans through trust arrangements (or local equivalents) where the assets are held separately from us. We also sponsor unfunded postretirement plans which provide medical and, in some cases, life insurance benefits covering certain employees in the U.S. and Canada. Amounts recorded in our consolidated financial statements are recorded based upon actuarial valuations performed by various independent actuaries. Inherent in these valuations are numerous assumptions regarding expected long‑termlong-term rates of return on plan assets, discount rates, compensation increases, mortality rates and health care cost trends. Each of these critical estimates are subject to uncertainty and are assessed by us using historical data, as well as projections of future conditions. These assumptions and changes during the period are described in “Note 17.19. Employee Benefit Plans” to our consolidated financial statements.
63
Management,We retain third party actuaries to assist us with the advice of actuaries, uses judgmentjudgments necessary to make assumptions on which our employee pension and postretirement benefit plan obligations and expenses are based. The effect of a 1% change in three key assumptions is summarized as follows (dollars in millions):
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| Statement of |
| Balance Sheet | ||
Assumptions |
| Operations(1) |
| Impact(2) | ||
Discount rate |
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|
—1% increase |
| $ | (35) |
| $ | (449) |
—1% decrease |
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| 37 |
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| 512 |
Expected long-term rates of return on plan assets |
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—1% increase |
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| (27) |
|
| — |
—1% decrease |
|
| 27 |
|
| — |
Rate of compensation increase |
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|
—1% increase |
|
| 8 |
|
| 93 |
—1% decrease |
|
| (8) |
|
| (89) |
Statement of | Balance Sheet | |||||||
Assumptions | Operations(1) | Impact(2) | ||||||
Discount rate | ||||||||
—1% increase | $ | (36 | ) | $ | (545 | ) | ||
—1% decrease | 44 | 622 | ||||||
Expected long-term rates of return on plan assets | ||||||||
—1% increase | (21 | ) | — | |||||
—1% decrease | 21 | — | ||||||
Rate of compensation increase | ||||||||
—1% increase | 10 | 54 | ||||||
—1% decrease | (6 | ) | (61 | ) | ||||
(1) | Estimated (decrease) increase |
(2) | Estimated (decrease) increase |
We are subject to legal proceedings and claims arising out of our business operations. We routinely assess the likelihood of any adverse outcomes to these matters, as well as ranges of probable losses. A determination of the amount of the reserves required, if any, for these contingencies is made after analysis of each known claim. We have an active risk management program consisting of numerous insurance policies secured from many carriers. These policies often provide coverage that is intended to minimize the financial impact, if any, of the legal proceedings. The required reserves may change in the future due to new developments in each matter. For further information, see “Note 19. Commitments and Contingencies—Legal Matters” to our consolidated financial statements.
Contingent Loss Accruals
We are subject to legal proceedings and claims arising out of our business operations. We routinely assess the likelihood of any adverse outcomes to these matters, as well as ranges of probable losses. A determination of the amount of the reserves required, if any, for these contingencies is made after analysis of each known claim. We have an active risk management program consisting of numerous insurance policies secured from many carriers. These policies often provide coverage that is intended to minimize the financial impact, if any, of the legal proceedings. The required reserves may change in the future due to new developments in each matter. For further information, see “Note 19. Commitments and Contingencies—Legal Matters” to our consolidated financial statements.
Goodwill
We test our goodwill for impairment at least annually (at the beginning of the third quarter) and when events and circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. Goodwill has been assigned to reporting units for purposes of impairment testing. Approximately 63% and 31% of our goodwill balance relates to our MDI urethanes reporting unit and our Advanced Materials reporting unit, respectively. The remaining goodwill relates to two other reporting units.
Fair value is estimated using the market approach, as well as the income approach based on discounted cash flow projections. The estimated fair values of our reporting units are dependent on several significant assumptions including, among others, market information, discount rates, operating results, earnings projections and anticipated future cash flows.
We tested goodwill for impairment at the beginning of the third quarter of 2018 as part of the annual impairment testing procedures and determined that no goodwill impairment existed. Our most recent fair value determination resulted in an amount that exceeded the carrying amounts of all reporting units by a significant margin.
64
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to market risks, such as changes in interest rates, foreign exchange rates and commodity prices. From time to time, we enter into transactions, including transactions involving derivative instruments, to manage certain of these exposures. We also hedge our net investment in certain European operations. Changes in the fair value of the hedge in the net investment of certain European operations are recorded in accumulated other comprehensive loss.
In connection with the December 3, 2018 sale of Venator ordinary shares to Bank of America N.A., we recorded a forward swap.
Interest Rate Risks
See “Note 4. Discontinued Operations16. Derivative Instruments and Business Dispositions” and “Note 16. Fair Value”Hedging Activities—Interest Rate Risk” to our consolidated financial statements.
Interest Rate RisksForeign Exchange Rate Risk
Through our borrowing activities, we are exposed to interest rate risk. Such risk arises due to the structure of our debt portfolio, including the mix of fixed
See “Note 16. Derivative Instruments and floating interest rates. Actions taken to reduce interest rate risk include managing the mix and rate characteristics of various interest-bearing liabilities, as well as entering into interest rate derivative instruments.
From time to time, we may purchase interest rate swaps and/or other derivative instruments to reduce the impact of changes in interest rates on our floating-rate long-term debt. Under interest rate swaps, we agree with other parties to exchange, at specified intervals, the difference between fixed-rate and floating-rate interest amounts calculated by reference to an agreed notional principal amount.
Huntsman International had 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 Facilities. These swaps were designated as cash flow hedges and the effective portion of the changes in the fair value of the swaps were recorded in other comprehensive (loss) income. These swaps expired in April 2017.
During 2018, accumulated other comprehensive loss of nil was reclassified to earnings. The actual amount that will be reclassified to earnings over the next twelve months may vary from this amount due to changing market conditions. We would be exposed to credit losses in the event of nonperformance by a counterparty to our derivative financial instruments. We anticipate, however, that the counterparties will be able to fully satisfy their obligations under the contracts. Market risk arises from changes in interest rates.
Hedging Activities—Foreign Exchange Rate Risk
Our cash flows and earnings are subjectRisk” to fluctuations due to exchange rate variation. Our revenues and expenses are denominated in various currencies. We 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 throughconsolidated financial market transactions, principally through the purchase of spot or forward foreign exchange contracts (generally with maturities of three months or less). We do not hedge our currency exposures in a manner that would eliminate the effect of changes in exchange rates on our cash flows and earnings. As of December 31, 2018 and 2017, we had approximately $151 million and $93 million, respectively, notional amount (in U.S. dollar equivalents) outstanding in foreign currency contracts with a term of approximately one month.statements.
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. The swap was designated as a hedge of net investment for financial reporting purposes. In August 2017, we terminated these cross-currency interest rate contracts and received $7 million from the counterparties.
A portion of our debt is denominated in euros. We also finance certain of our non-U.S. subsidiaries with intercompany loans that are, in many cases, denominated in currencies other than the entities’ functional currency. We manage the net foreign currency exposure created by this debt through various means, including cross-currency swaps, the designation of certain intercompany loans as permanent loans because they are not expected to be repaid in the foreseeable future and the designation of certain debt and swaps as net investment hedges.
Foreign currency transaction gains and losses on intercompany loans that are not designated as permanent loans are recorded in earnings. Foreign currency transaction gains and losses on intercompany loans that are designated as permanent loans are recorded in other comprehensive (loss) income. From time to time, we review such designation of intercompany loans.
65
Commodity Prices Risk
We review our non‑U.S. dollar denominated debt
See “Note 16. Derivative Instruments and derivative instruments to determine the appropriate amounts designated as hedges. As of December 31, 2018, for our continuing operations, we have designated approximately €510 million (approximately $581 million) of euro‑denominated debt as a hedge of our net investment. For the years ended December 31, 2018, 2017 and 2016, for our continuing operations, the amounts recognized on the hedge of our net investment were a gain of $35 million, a loss of $96 million and a gain of $27 million, respectively, and were recorded in other comprehensive (loss) income.
Hedging Activities—Commodity Prices RiskRisk” to our consolidated financial statements.
Inherent in our business is exposure to price changes for several commodities. However, our exposure to changing commodity prices is somewhat limited since the majority of our raw materials are acquired at posted or market related prices, and sales prices for many of our finished products are at market related prices which are largely set on a monthly or quarterly basis in line with industry practice. Consequently, we do not generally hedge our commodity exposures.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Our consolidated financial statements required by this item are included on the pages immediately following the Index to Consolidated Financial Statements appearing on page F‑1.F-1.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
There have been no changes in our independent accountants, Deloitte & Touche LLP, or disagreements with them on matters of accounting or financial disclosure.
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation
Evaluation of Disclosure Controls Disclosure Controls and ProceduresProcedures
Our management, with the participation of our chief executive officer and chief financial officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a‑15(e)13a-15(e) and 15d‑15(e)15d-15(e) under the Exchange Act) as of December 31, 2018.2020. Based on this evaluation, our chief executive officer and chief financial officer have concluded that, as of December 31, 2018,2020, our disclosure controls and procedures were effective, in that they ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is (1) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and (2) accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure.
Changes
Changes in Internal Control Over Financial Reporting Internal Control Over Financial Reporting
No changes to our internal control over financial reporting occurred during the quarter ended December 31, 20182020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting (as defined in Rules 13a‑15(f)13a-15(f) and 15d‑15(f)15d-15(f) under the Exchange Act).
Management’s Report
Management’s Report on Internal Control Over Financial Reporting Internal Control Over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control framework and processes for our Company and Huntsman International are designed to provide reasonable assurance to management, Huntsman International’s Board of Managers and our Board of Directors regarding the reliability of financial reporting and the preparation of our consolidated financial statements in accordance with accounting principles generally accepted in the United States of America.
Our internal control over financial reporting for our Company and Huntsman International includes those policies and procedures that:
● |
|
|
| ● | provide reasonable assurance that transactions are recorded properly to allow for the preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and |
66
expenditures of our Company and Huntsman International are being made only in accordance with authorizations of management and Directors of our Company and Huntsman |
● | provide reasonable assurance regarding prevention or timely detection of |
| ● | provide reasonable assurance |
fraud. |
|
provide reasonable assurance as to the detection of fraud.
Because of its inherent limitations, a system of internal control over financial reporting can provide only reasonable assurance and may not prevent or detect misstatements. Further, because of changing conditions, effectiveness of internal control over financial reporting may vary over time.
Our management assessed the effectiveness of our internal control over financial reporting for our Company and Huntsman International and concluded that, as of December 31, 2018,2020, such internal control is effective. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control—Integrated Framework (2013).
Our independent registered public accountants,accounting firm, Deloitte & Touche LLP, with direct access to our Board of Directors through our Audit Committee, have audited our consolidated financial statements prepared by our Company and Huntsman International and have issued attestation reports on internal control over financial reporting for our Company and Huntsman International.Company.
67
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and Board of Directors and Stockholders of
Huntsman Corporation
Opinion on Internal Control over Financial Reporting
We have audited the internal control over financial reporting of Huntsman Corporation and subsidiaries (the “Company”) as of December 31, 2018,2020, based on criteria established in Internal Control — Integrated Framework (2013)issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2018,2020, based on criteria established in Internal Control — Integrated Framework (2013)issued by COSO.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended December 31, 20182020, of the Company and our report dated February 12, 2019,2021, expressed an unqualified opinion on those financial statements.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ DELOITTE & TOUCHE LLP
Houston, Texas
February 12, 2019
68
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Managers and Members of
Huntsman International LLC
Opinion on Internal Control over Financial Reporting
We have audited the internal control over financial reporting of Huntsman International and subsidiaries (the “Company”) as of December 31, 2018, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2018, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended December 31, 2018 of the Company and our report dated February 12, 2019, expressed an unqualified opinion on those financial statements.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ DELOITTE & TOUCHE LLP
Houston, Texas
February 12, 20192021
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None.
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Information relating to our Directors (including identification of our Audit Committee’s financial expert(s)) and executive officers will be disclosed in the definitive Proxy Statement for our Annual Meeting of Stockholders and is incorporated herein by reference. See also the information regarding executive officers of the registrant set forth in Part I under the caption “Executive Officers of the Registrant” in reliance on General Instruction G to Form 10‑K.10-K.
Code of Ethics
Our Company has
We have adopted a code of ethics, as defined by Item 406(b) of Regulation S‑KS-K under the Exchange Act, that applies to our principal executive officer, principal financial officer and principal accounting officer or controller. A copy of the code of ethics is posted on our website, at www.huntsman.com. We intend to disclose any amendments to, or waivers from, our code of ethics on our website.
ITEM 11. EXECUTIVE COMPENSATION
Information relating to executive compensation and our equity compensation plans will be disclosed in the definitive Proxy Statement for our Annual Meeting of Stockholders and is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
Information with respect to beneficial ownership of our common stock by each Director and all Directors and officers of our Company as a group will be disclosed in the definitive Proxy Statement for our Annual Meeting of Stockholders and is incorporated herein by reference.
Information relating to any person who beneficially owns in excess of 5five percent of the total outstanding shares of our common stock will be disclosed in the definitive Proxy Statement for our Annual Meeting of Stockholders and is incorporated herein by reference.
Information with respect to compensation plans under which equity securities are authorized for issuance will be disclosed in the definitive Proxy Statement for our Annual Meeting of Stockholders and is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Information with respect to certain relationships and related transactions will be disclosed in the definitive Proxy Statement for our Annual Meeting of Stockholders and is incorporated herein by reference.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Information with respect to principal accountant fees and services, and the disclosure of the Audit Committee’s pre‑approvalpre-approval policies and procedures are contained in the definitive Proxy Statement for our Annual Meeting of Stockholders and are incorporated herein by reference.
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ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) | Documents filed with this report. |
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1. | Consolidated Financial Statements: |
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See Index to Consolidated Financial Statements on page F‑1F-1
2. | Financial Statement Schedules: |
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Other than as stated on the Index to Consolidated Financial Statements on page F‑1F-1 with respect to Schedule I, and Schedule II, financial statement schedules are omitted because they are not required or are not applicable or the required information is shown in the consolidated financial statements or notes thereto.
3. | Exhibits: |
|
The exhibits to this report are listed on the Exhibit Index below.
(b) | Description of exhibits. |
|
Incorporated by Reference | ||||||||
Number |
| Description |
| Form |
| Exhibit |
| Filing Date |
3.1 | Amended and Restated Certificate of Incorporation of Huntsman Corporation | 8-K | 3.1 | May 12, 2014 | ||||
3.2* | Sixth Amended and Restated Bylaws of Huntsman Corporation dated as of June 16, 2020 (as amended by Amendment to Sixth Amended and Restated Bylaws of Huntsman Corporation, effective as of October 28, 2020) |
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| |||||
4.2 | S-1 | 4.68 | February 8, 2005 | |||||
4.3 | S-8 | 4.8 | February 10, 2006 | |||||
4.4 | 10-K | 4.32 | February 22, 2008 | |||||
4.5 | 8-K | 4.1 | November 17, 2014 | |||||
4.6 | Form of 5.125% Senior Note (included as Exhibit A to Exhibit 4.11) | 8-K | 4.1 | November 17, 2014 | ||||
4.7 | 8-K | 4.1 | April 2, 2015 | |||||
4.8 | Form of 4.25% Senior Notes due 2025 (included as Exhibit A to Exhibit 4.14) | 8-K | 4.2 | April 2, 2015 | ||||
4.9 | 8-K | 4.1 | March 13, 2019 | |||||
4.10 | 8-K | 4.2 | March 13, 2019 | |||||
4.11 | Form of 4.500% Senior Notes due 2029 (included as Exhibit A to Exhibit 4.12) | 8-K | 4.3 | March 13, 2019 | ||||
4.12 | 10-K | 4.14 | February 13, 2020 | |||||
10.1 | S-1/A | 10.27 | January 28, 2005 | |||||
10.2 | S-1/A | 10.25 | February 8, 2005 | |||||
10.3 | Amended and Restated Huntsman Supplemental Executive Retirement Plan (File No. 001-32427) | 8-K | 10.1 | December 30, 2005 | ||||
10.4 | Huntsman Supplemental Executive MPP Plan (File No. 001-32427) | 8-K | 10.2 | December 30, 2005 | ||||
10.5 | Amended and Restated Huntsman Supplemental Savings Plan (File No. 001-32427) | 8-K | 10.3 | December 30, 2005 | ||||
10.6 | Huntsman Outside Directors Elective Deferral Plan (File No. 001-32427) | 8-K | 10.4 | December 30, 2005 | ||||
| 10.7 | Form of Form of Restricted Stock Unit Agreement for Outside Directors, effective for grants prior to February 6, 2008 | S-8 | 4.8 | February 10, 2006 | ||||
| 10.8 | Form of Restricted Stock Unit Agreement for Outside Directors, effective for grants from February 6, 2008 to September 21, 2010 | 10-K | 4.32 | February 22, 2008 | ||||
10.9 | First Amendment to Huntsman Supplemental Executive Retirement Plan (File No. 001-32427) | 10-K | 10.32 | February 22, 2008 | ||||
10.10 | First Amendment to Huntsman Supplemental Executive MPP Plan (File No. 001-32427) | 10-K | 10.33 | February 22, 2008 | ||||
10.11 | First Amendment to Huntsman Supplemental Savings Plan (File No. 001-32427) | 10-K | 10.34 | February 22, 2008 | ||||
10.12 | Second Amendment to Huntsman Supplemental Savings Plan (File No. 001-32427) | 10-K | 10.35 | February 22, 2008 | ||||
10.13 | First Amendment to Huntsman Outside Directors Elective Deferral Plan (File No. 001-32427) | 10-K | 10.36 | February 22, 2008 | ||||
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| Incorporated by Reference | ||
Number |
| Description | Form | Exhibit | Filing Date |
| 2.1 |
| 8-K | 2.1 | March 31, 2018 | |
| 3.1 |
| Amended and Restated Certificate of Incorporation of Huntsman Corporation | 8-K | 3.1 | May 12, 2014 |
| 3.2 |
| Fifth Amended and Restated Bylaws of Huntsman Corporation dated as of December 21, 2016 | 8-K | 3.1 | December 23, 2016 |
| 4.1 |
| 8-K | 10.1 | February 16, 2005 | |
| 4.2 |
| S-1 | 4.68 | February 8, 2005 | |
| 4.3 |
| S-8 | 4.8 | February 10, 2006 | |
| 4.4 |
| 10-K | 4.32 | February 22, 2008 | |
| 4.5 |
| 8-K | 4.1 | November 19, 2012 | |
| 4.6 |
| Form of 4.875% Senior Note due 2020 (included as Exhibit A to Exhibit 4.5) | 8-K | 4.2 | November 19, 2012 |
| 4.7 |
| 8-K | 4.1 | December 23, 2013 | |
| 4.8 |
| Form of 51/8% Senior Note (included as Exhibit A to Exhibit 4.8) | 8-K | 4.2 | December 23, 2013 |
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|
|
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|
|
|
|
|
| Incorporated by Reference | ||
Number |
| Description | Form | Exhibit | Filing Date |
| 4.9 |
| 8-K | 4.1 | November 17, 2014 | |
| 4.10 |
| Form of 51/8% Senior Note (included as Exhibit A to Exhibit 4.11) | 8-K | 4.2 | November 17, 2014 |
| 4.11 |
| 8-K | 4.1 | April 2, 2015 | |
| 4.12 |
| Form of 4.25% Senior Notes due 2025 (included as Exhibit A to Exhibit 4.14) | 8-K | 4.2 | April 2, 2015 |
| 10.1 |
| S-1/A | 10.27 | January 28, 2005 | |
| 10.2 |
| S-1/A | 10.19 | February 8, 2005 | |
| 10.3 |
| Form of Nonqualified Stock Option Agreement, effective for grants prior to February 21, 2011 | S-1/A | 10.20 | February 8, 2005 |
| 10.4 |
| S-1/A | 10.25 | February 8, 2005 | |
| 10.5 |
| Amended and Restated Huntsman Supplemental Executive Retirement Plan (File No. 001‑32427) | 8-K | 10.1 | December 30, 2005 |
| 10.6 |
| Huntsman Supplemental Executive MPP Plan (File No. 001‑32427) | 8-K | 10.2 | December 30, 2005 |
| 10.7 |
| Amended and Restated Huntsman Supplemental Savings Plan (File No. 001‑32427) | 8-K | 10.3 | December 30, 2005 |
| 10.8 |
| Huntsman Outside Directors Elective Deferral Plan (File No. 001‑32427) | 8-K | 10.4 | December 30, 2005 |
| 10.9 |
| First Amendment to Huntsman Supplemental Executive Retirement Plan (File No. 001‑32427) | 10-K | 10.32 | February 22, 2008 |
| 10.10 |
| First Amendment to Huntsman Supplemental Executive MPP Plan (File No. 001‑32427) | 10-K | 10.33 | February 22, 2008 |
| 10.11 |
| First Amendment to Huntsman Supplemental Savings Plan (File No. 001‑32427) | 10-K | 10.34 | February 22, 2008 |
| 10.12 |
| Second Amendment to Huntsman Supplemental Savings Plan (File No. 001‑32427) | 10-K | 10.35 | February 22, 2008 |
| 10.13 |
| First Amendment to Huntsman Outside Directors Elective Deferral Plan (File No. 001‑32427) | 10-K | 10.36 | February 22, 2008 |
| 10.14 |
| 8-K | 10.1 | October 22, 2009 | |
| 10.15 |
| 8-K | 10.2 | October 22, 2009 | |
72
| 10.14 | U.S. Receivables Loan Agreement dated as of October 16, 2009 (File No. 001-32427) | 8-K | 10.1 | October 22, 2009 | ||||
10.15 | 8-K | 10.2 | October 22, 2009 |
10.16 | Second Amendment to Huntsman Supplemental Executive Retirement Plan (File No. 001-32427) | 10-K | 10.38 | February 17, 2011 | ||||
10.17 | Third Amendment to Huntsman Supplemental Executive Retirement Plan (File No. 001-32427) | 10-K | 10.39 | February 17, 2011 | ||||
10.18 | 10-K | 10.42 | February 17, 2011 | |||||
10.19 | 10-K | 10.43 | February 17, 2011 | |||||
10.20 | 8-K | 10.1 | April 20, 2011 | |||||
10.21 | Second Amendment to Huntsman Outside Directors Elective Deferral Plan (File No. 001-32427) | 10-Q | 10.5 | May 5, 2011 | ||||
10.22 | Third Amendment to Huntsman Outside Directors Elective Deferral Plan (File No. 001-32427) | 10-Q | 10.6 | May 5, 2011 | ||||
10.23 | Huntsman Corporation Stock Incentive Plan (amended and restated) (File No. 001-32427) | S-8 | 4.1 | May 10, 2011 | ||||
10.24 | 10-K | 10.56 | February 12, 2013 | |||||
10.25 | 8-K | 10.1 | May 2, 2013 | |||||
| 10.26 | Huntsman Corporation Stock Incentive Plan (amended and restated) | 8-K | 10.1 | May 12, 2014 | ||||
10.27 | 10-K | 10.66 | February 18, 2015 | |||||
10.28 | Master Amendment No. 4 to the U.S. Receivables Loan Agreement, U.S. Servicing Agreement and Transaction Documents and Waiver, dated as of March 30, 2015 | 8-K | 10.2 | April 2, 2015 | ||||
10.29 | 8-K | 10.1 | May 11, 2016 | |||||
10.30 | S-8 | 99.1 | May 31, 2016 | |||||
10.31 | 10-K | 10.66 | February 15, 2017 | |||||
10.32 | 10-K | 10.67 | February 15, 2017 | |||||
10.33 | 10-K | 10.68 | February 15, 2017 | |||||
10.34 | 10-K | 10.69 | February 15, 2017 | |||||
10.35 | 10-K | 10.70 | February 15, 2017 | |||||
10.36 | 10-K | 10.71 | February 15, 2017 | |||||
10.37 | 10-Q | 10.2 | April 26, 2017 | |||||
10.38 | 8-K | 10.1 | May 23, 2018 | |||||
10.39 | 8-K | 10.1 | April 24, 2019 | |||||
10.40 | Amended and Restated European Receivables Loan Agreement, dated as of April 18, 2019 | 8-K | 10.2 | April 24, 2019 | ||||
| 10.41* | Amended and Restated European Contribution Agreement, dated as of April 18, 2019 | |||||||
| 10.42 | Master Amendment No. 8 to the U.S. Receivables Loan Agreement, U.S. Servicing Agreement, U.S. Receivables Purchase Agreement and Transaction Documents, dated as of December 3, 2019 | 10-K | 10.52 | February 13, 2020 | ||||
10.43 | Huntsman Executive Severance Plan (as amended and restated effective February 19, 2020) | 8-K | 10.1 | February 19, 2020 |
| 10.44 | Second Amended and Restated Severance Agreement dated February 19, 2020, between Huntsman Corporation and Peter R. Huntsman | 8-K | 10.2 | February 19, 2020 | ||||
| 10.45* | Master Amendment No. 9 to the U.S. Receivables Loan Agreement, U.S. Servicing Agreement, U.S. Receivables Purchase Agreement and Transaction Documents and Waiver, dated as of October 30, 2020 | |||||||
21.1* | ||||||||
23.1* | ||||||||
| 23.2* | Consent of Independent Registered Public Accounting Firm | |||||||
31.1* | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |||||||
31.2* | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |||||||
32.1* | Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |||||||
32.2* | Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |||||||
101.INS* | XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. | |||||||
101.SCH* | Inline XBRL Taxonomy Extension Schema | |||||||
101.CAL* | Inline XBRL Taxonomy Extension Calculation Linkbase | |||||||
101.LAB* | Inline XBRL Taxonomy Extension Label Linkbase | |||||||
101.PRE* | Inline XBRL Taxonomy Extension Presentation Linkbase | |||||||
101.DEF* | Inline XBRL Taxonomy Extension Definition Linkbase | |||||||
104* | The cover page from this Annual Report on Form 10-K, formatted in Inline XBRL and contained in Exhibit 101 |
* Filed herewith.
|
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| Incorporated by Reference | ||
Number |
| Description | Form | Exhibit | Filing Date |
| 10.16 |
| 8-K | 10.3 | October 22, 2009 | |
| 10.17 |
| 8-K | 10.4 | October 22, 2009 | |
| 10.18 |
| Second Amendment to Huntsman Supplemental Executive Retirement Plan (File No. 001‑32427) | 10-K | 10.38 | February 17, 2011 |
| 10.19 |
| Third Amendment to Huntsman Supplemental Executive Retirement Plan (File No. 001‑32427) | 10-K | 10.39 | February 17, 2011 |
| 10.20 |
| 10-K | 10.40 | February 17, 2011 | |
| 10.21 |
| 10-K | 10.41 | February 17, 2011 | |
| 10.22 |
| 10-K | 10.42 | February 17, 2011 | |
| 10.23 |
| 10-K | 10.43 | February 17, 2011 | |
| 10.24 |
| 8-K | 10.1 | April 20, 2011 | |
| 10.25 |
| 8-K | 10.2 | April 20, 2011 | |
| 10.26 |
| Second Amendment to Huntsman Outside Directors Elective Deferral Plan (File No. 001‑32427) | 10-Q | 10.5 | May 5, 2011 |
| 10.27 |
| Third Amendment to Huntsman Outside Directors Elective Deferral Plan (File No. 001‑32427) | 10-Q | 10.6 | May 5, 2011 |
| 10.28 |
| Huntsman Corporation Stock Incentive Plan (amended and restated) (File No. 001‑32427) | S-8 | 4.1 | May 10, 2011 |
| 10.29 |
| 10-K | 10.56 | February 12, 2013 | |
| 10.30 |
| 8-K | 10.1 | May 2, 2013 | |
| 10.31 |
| Master Amendment No. 3 to the European Receivables Loan Agreement dated as of April 29, 2013 | 8-K | 10.2 | May 2, 2013 |
| 10.32 |
| 10-Q | 10.3 | October 29, 2013 | |
| 10.33 |
| Huntsman Corporation Stock Incentive Plan (amended and restated) | 8-K | 10.1 | May 12, 2014 |
| 10.34 |
| 10-K | 10.65 | February 18, 2015 | |
73
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|
|
| Incorporated by Reference | ||
Number |
| Description | Form | Exhibit | Filing Date |
| 10.35 |
| 10-K | 10.66 | February 18, 2015 | |
| 10.36 |
| 8-K | 10.1 | March 9, 2015 | |
| 10.37 |
| 8-K | 10.2 | April 2, 2015 | |
| 10.38 |
| 8-K | 10.1 | May 11, 2016 | |
| 10.39 |
| S-8 | 99.1 | May 31, 2016 | |
| 10.40 |
| Form of Restricted Stock Agreement effective for grants from May 5, 2016 to January 31, 2017 | S-8 | 99.2 | May 31, 2016 |
| 10.41 |
| Form of Phantom Share Agreement effective for grants from May 5, 2016 to January 31, 2017 | S-8 | 99.3 | May 31, 2016 |
| 10.42 |
| 10-K | 10.66 | February 15, 2017 | |
| 10.43 |
| 10-K | 10.67 | February 15, 2017 | |
| 10.44 |
| 10-K | 10.68 | February 15, 2017 | |
| 10.45 |
| 10-K | 10.69 | February 15, 2017 | |
| 10.46 |
| 10-K | 10.70 | February 15, 2017 | |
| 10.47 |
| 10-K | 10.71 | February 15, 2017 | |
| 10.48 |
| 10-Q | 10.1 | April 26, 2017 | |
| 10.49 |
| 10-Q | 10.2 | April 26, 2017 | |
| 10.50 |
| 8-K | 10.2 | December 22, 2017 | |
| 10.51 |
| 8-K | 10.1 | May 23, 2018 | |
21.1* |
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| |
23.1* |
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| |
31.1* |
| Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes‑Oxley Act of 2002 |
|
|
|
31.2* |
| Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes‑Oxley Act of 2002 |
|
|
|
32.1* |
| Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes‑Oxley Act of 2002 |
|
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|
32.2* |
| Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes‑Oxley Act of 2002 |
|
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74
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75
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrants have duly caused this report to be signed on their behalf by the undersigned, thereunto duly authorized.
Dated: February 12, 20192021
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of Huntsman Corporation in the capacities indicated on the 12th day of February
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of Huntsman International LLC in the capacities indicated on the 12th day of February
48 HUNTSMAN CORPORATION AND SUBSIDIARIES HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and Board of Directors Huntsman Corporation
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Huntsman Corporation and subsidiaries (the
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Change in Accounting Principle As discussed in Note 2 to the financial statements, effective January 1, 2019, the Company adopted the Financial Accounting Standards Board Accounting Standards Update No. 2016-02, Leases (Topic 842).
Basis for Opinion
These financial statements are the responsibility of the
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
Critical Audit Matter The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the Audit Committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Income Taxes—Realizability of Deferred Tax Assets—Refer to Notes 2 and 20 to the financial statements Critical Audit Matter Description The Company recognizes deferred income taxes for tax attributes and for differences between the financial statement and tax carrying amounts of assets and liabilities at enacted statutory tax rates in effect for the years in which the deferred tax liability or asset are expected to be settled or realized. A valuation allowance is provided to offset deferred tax assets if, based upon the available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. The Company files tax returns in multiple jurisdictions with complex tax laws and regulations. Valuation allowances are evaluated on a tax jurisdiction basis to analyze whether there is sufficient positive or negative evidence to support a change in judgment about the realizability of the related deferred tax assets for each jurisdiction. In evaluating the objective evidence that historical results provide, the Company considers the cyclicality of businesses and cumulative income or losses during the applicable period. Cumulative losses incurred over the period limits the Company’s ability to consider other subjective evidence such as taxable income for the future. The Company’s valuation allowances as of December 31, 2020, were $206 million. We identified management’s determination that it is not more likely than not that sufficient taxable income will be generated in the future to realize some of its deferred tax assets as a critical audit matter because of the significant judgments and estimates management makes related to future taxable income. This required a high degree of auditor judgment and an increased extent of effort, including the need to involve our income tax specialists, when performing audit procedures to evaluate the reasonableness of management’s estimates of future taxable income. How the Critical Audit Matter Was Addressed in the Audit Our audit procedures related to estimated future taxable income and the determination of whether it is more likely than not that the deferred tax assets will be realized included the following, among others:
/s/ DELOITTE & TOUCHE LLP
Houston, Texas
We have served as the Company’s auditor since 1984.
HUNTSMAN CORPORATION AND SUBSIDIARIES (In Millions, Except
See accompanying notes to consolidated financial statements.
HUNTSMAN CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (In Millions, Except Share and Per Share Amounts)
See accompanying notes to consolidated financial statements.
HUNTSMAN CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In Millions)
See accompanying notes to consolidated financial statements.
HUNTSMAN CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EQUITY (In Millions, Except Share Amounts)
See accompanying notes to consolidated financial statements.
HUNTSMAN CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In Millions)
(continued)
F-8 HUNTSMAN CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued) (In Millions)
As of December 31, See accompanying notes to consolidated financial statements.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Members and Board of Managers Huntsman International LLC
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Huntsman International LLC and subsidiaries
As discussed in Note 2 to the
Basis for Opinion
These financial statements are the responsibility of
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the Board of Managers and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Income Taxes—Realizability of Deferred Tax Assets—Refer to Notes 2 and 20 to the financial statements Critical Audit Matter Description Huntsman International recognizes deferred income taxes for tax attributes and for differences between the financial statement and tax carrying amounts of assets and liabilities at enacted statutory tax rates in effect for the years in which the deferred tax liability or asset are expected to be settled or realized. A valuation allowance is provided to offset deferred tax assets if, based upon the available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. Huntsman International files tax returns in multiple jurisdictions with complex tax laws and regulations. Valuation allowances are evaluated on a tax jurisdiction basis to analyze whether there is sufficient positive or negative evidence to support a change in judgment about the realizability of the related deferred tax assets for each jurisdiction. In evaluating the objective evidence that historical results provide, Huntsman International considers the cyclicality of businesses and cumulative income or losses during the applicable period. Cumulative losses incurred over the period limits Huntsman International’s ability to consider other subjective evidence such as taxable income for the future. Huntsman International’s valuation allowances as of December 31, 2020, were $206 million. We identified management’s determination that it is not more likely than not that sufficient taxable income will be generated in the future to realize some of its deferred tax assets as a critical audit matter because of the significant judgments and estimates management makes related to future taxable income. This required a high degree of auditor judgment and an increased extent of effort, including the need to involve our income tax specialists, when performing audit procedures to evaluate the reasonableness of management’s estimates of future taxable income. How the Critical Audit Matter Was Addressed in the Audit Our audit procedures related to estimated future taxable income and the determination of whether it is more likely than not that the deferred tax assets will be realized included the following, among others:
/s/ DELOITTE & TOUCHE LLP
Houston, Texas
We have served as
HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES (In Millions, Except Unit Amounts)
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
See accompanying notes to consolidated financial statements.
HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In Millions)
|
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|
| Year ended December 31, | |||||||||||
| Year ended December 31, | 2020 | 2019 | 2018 | ||||||||||||||||
Revenues: | 2018 |
| 2017 |
| 2016 | |||||||||||||||
Trade sales, services and fees, net | $ | 9,220 |
| $ | 8,208 |
| $ | 7,387 | $ | 5,903 | $ | 6,664 | $ | 7,451 | ||||||
Related party sales |
| 159 |
|
| 150 |
|
| 131 | 115 | 133 | 153 | |||||||||
Total revenues |
| 9,379 |
|
| 8,358 |
|
| 7,518 | 6,018 | 6,797 | 7,604 | |||||||||
Cost of goods sold |
| 7,351 |
|
| 6,546 |
|
| 5,993 | 4,918 | 5,415 | 5,837 | |||||||||
Gross profit |
| 2,028 |
|
| 1,812 |
|
| 1,525 | 1,100 | 1,382 | 1,767 | |||||||||
Operating expenses: |
|
|
|
|
|
|
|
| ||||||||||||
Selling, general and administrative |
| 825 |
|
| 793 |
|
| 768 | 769 | 781 | 784 | |||||||||
Research and development |
| 152 |
|
| 138 |
|
| 137 | 135 | 137 | 145 | |||||||||
Restructuring, impairment and plant closing (credits) costs |
| (5) |
|
| 20 |
|
| 47 | ||||||||||||
Restructuring, impairment and plant closing costs (credits) | 49 | (41 | ) | (7 | ) | |||||||||||||||
Merger costs |
| 2 |
|
| 28 |
|
| — | 0 | 0 | 2 | |||||||||
Other operating expense (income), net |
| 8 |
|
| (23) |
|
| (101) | ||||||||||||
| Gain on sale of India-based DIY business | (247 | ) | 0 | 0 | ||||||||||||||||
Other operating (income) expense, net | (45 | ) | 31 | 8 | ||||||||||||||||
Total operating expenses |
| 982 |
|
| 956 |
|
| 851 | 661 | 908 | 932 | |||||||||
Operating income |
| 1,046 |
|
| 856 |
|
| 674 | 439 | 474 | 835 | |||||||||
Interest expense |
| (136) |
|
| (181) |
|
| (215) | ||||||||||||
Interest expense, net | (88 | ) | (126 | ) | (136 | ) | ||||||||||||||
Equity in income of investment in unconsolidated affiliates |
| 55 |
|
| 13 |
|
| 5 | 42 | 54 | 55 | |||||||||
Fair value adjustments to Venator investment |
| (62) |
|
| — |
|
| — | ||||||||||||
Fair value adjustments to Venator investment and related loss on disposal | (88 | ) | (18 | ) | (62 | ) | ||||||||||||||
Loss on early extinguishment of debt |
| (3) |
|
| (54) |
|
| (3) | 0 | (23 | ) | (3 | ) | |||||||
Other income, net |
| 24 |
|
| 6 |
|
| 14 | 33 | 16 | 27 | |||||||||
Income from continuing operations before income taxes |
| 924 |
|
| 640 |
|
| 475 | 338 | 377 | 716 | |||||||||
Income tax expense |
| (93) |
|
| (61) |
|
| (108) | ||||||||||||
Income tax (expense) benefit | (46 | ) | 41 | (41 | ) | |||||||||||||||
Income from continuing operations |
| 831 |
|
| 579 |
|
| 367 | 292 | 418 | 675 | |||||||||
(Loss) income from discontinued operations, net of tax |
| (195) |
|
| 155 |
|
| (13) | ||||||||||||
Income (loss) from discontinued operations, net of tax | 775 | 169 | (39 | ) | ||||||||||||||||
Net income |
| 636 |
|
| 734 |
|
| 354 | 1,067 | 587 | 636 | |||||||||
Net income attributable to noncontrolling interests |
| (313) |
|
| (105) |
|
| (31) | (32 | ) | (36 | ) | (313 | ) | ||||||
Net income attributable to Huntsman International LLC | $ | 323 |
| $ | 629 |
| $ | 323 | $ | 1,035 | $ | 551 | $ | 323 | ||||||
See accompanying notes to consolidated financial statements.
F-11
HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(In Millions)
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| |||||
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| |||||
|
| Year ended December 31, | |||||||
|
| 2018 |
| 2017 |
| 2016 | |||
Net income |
| $ | 636 |
| $ | 734 |
| $ | 354 |
Other comprehensive (loss) income, net of tax: |
|
|
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|
|
|
|
|
|
Foreign currency translation adjustments |
|
| (194) |
|
| 210 |
|
| (170) |
Pension and other postretirement benefits adjustments |
|
| (37) |
|
| 112 |
|
| (212) |
Other, net |
|
| (6) |
|
| (1) |
|
| (1) |
Other comprehensive (loss) income, net of tax |
|
| (237) |
|
| 321 |
|
| (383) |
Comprehensive income (loss) |
|
| 399 |
|
| 1,055 |
|
| (29) |
Comprehensive income attributable to noncontrolling interests |
|
| (266) |
|
| (127) |
|
| (23) |
Comprehensive income (loss) attributable to Huntsman Corporation |
| $ | 133 |
| $ | 928 |
| $ | (52) |
Year ended December 31, | ||||||||||||
2020 | 2019 | 2018 | ||||||||||
Net income | $ | 1,067 | $ | 587 | $ | 636 | ||||||
Other comprehensive loss, net of tax: | ||||||||||||
Foreign currency translations adjustment | 41 | 2 | (194 | ) | ||||||||
Pension and other postretirement benefits adjustments | (16 | ) | (35 | ) | (37 | ) | ||||||
Other, net | 0 | (1 | ) | (6 | ) | |||||||
Other comprehensive loss, net of tax | 25 | (34 | ) | (237 | ) | |||||||
Comprehensive income | 1,092 | 553 | 399 | |||||||||
Comprehensive income attributable to noncontrolling interests | (38 | ) | (31 | ) | (266 | ) | ||||||
Comprehensive income attributable to Huntsman International LLC | $ | 1,054 | $ | 522 | $ | 133 | ||||||
See accompanying notes to consolidated financial statements.
F-12
HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EQUITY
(In Millions, Except Unit Amounts)
|
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|
| Huntsman International LLC Members | |||||||||||||||||||||||
|
| Huntsman International LLC Members |
|
|
|
|
|
| (Accumulated | Accumulated | |||||||||||||||||||||||||||||||
|
|
|
|
|
|
| (Accumulated |
| Accumulated |
|
|
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|
|
| deficit) | other | Noncontrolling | |||||||||||||||||||||||
|
|
|
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|
|
| deficit) |
| other |
| Noncontrolling |
|
|
| Members’ equity | retained | comprehensive | interests in | Total | ||||||||||||||||||||||
|
| Members’ equity |
| Retained |
| comprehensive |
| interests in |
| Total | Units | Amount | earnings | loss | subsidiaries | equity | |||||||||||||||||||||||||
|
| Units |
| Amount |
| earnings |
| loss |
| subsidiaries |
| equity | |||||||||||||||||||||||||||||
Beginning balance, January 1, 2016 |
| 2,728 |
| $ | 3,196 |
| $ | (983) |
| $ | (1,316) |
| $ | 187 |
| $ | 1,084 | ||||||||||||||||||||||||
Beginning balance, January 1, 2018 | 2,728 | $ | 3,616 | $ | (270 | ) | $ | (1,263 | ) | $ | 751 | $ | 2,834 | ||||||||||||||||||||||||||||
Cumulative effect of changes in fair value of equity investments | 0 | 0 | 10 | (10 | ) | 0 | 0 | ||||||||||||||||||||||||||||||||||
Net income |
| — |
|
| — |
|
| 323 |
|
| — |
|
| 31 |
|
| 354 | — | 0 | 323 | 0 | 313 | 636 | ||||||||||||||||||
Other comprehensive loss | — | 0 | 0 | (195 | ) | (42 | ) | (237 | ) | ||||||||||||||||||||||||||||||||
Dividends paid to parent |
| — |
|
| — |
|
| (119) |
|
| — |
|
| — |
|
| (119) | — | 0 | (154 | ) | 0 | 0 | (154 | ) | ||||||||||||||||
Other comprehensive income |
| — |
|
| — |
|
| — |
|
| (375) |
|
| (8) |
|
| (383) | ||||||||||||||||||||||||
Contribution from parent |
| — |
|
| 33 |
|
| — |
|
| — |
|
| — |
|
| 33 | — | 26 | 0 | 0 | 0 | 26 | ||||||||||||||||||
Dividends paid to noncontrolling interests |
| — |
|
| — |
|
| — |
|
| — |
|
| (30) |
|
| (30) | — | 0 | 0 | 0 | (69 | ) | (69 | ) | ||||||||||||||||
Excess tax benefit related to stock-based compensation |
| — |
|
| (3) |
|
| — |
|
| — |
|
| — |
|
| (3) | ||||||||||||||||||||||||
Balance, December 31, 2016 |
| 2,728 |
|
| 3,226 |
|
| (779) |
|
| (1,691) |
|
| 180 |
|
| 936 | ||||||||||||||||||||||||
Net income |
| — |
|
| — |
|
| 629 |
|
| — |
|
| 105 |
|
| 734 | ||||||||||||||||||||||||
Dividends paid to parent |
| — |
|
| — |
|
| (120) |
|
| — |
|
| — |
|
| (120) | ||||||||||||||||||||||||
Other comprehensive income |
| — |
|
| — |
|
| — |
|
| 428 |
|
| (107) |
|
| 321 | ||||||||||||||||||||||||
Contribution from parent |
| — |
|
| 35 |
|
| — |
|
| — |
|
| — |
|
| 35 | ||||||||||||||||||||||||
Contribution from noncontrolling interests |
| — |
|
| — |
|
| — |
|
| — |
|
| 5 |
|
| 5 | ||||||||||||||||||||||||
Dividends paid to noncontrolling interests |
| — |
|
| — |
|
| — |
|
| — |
|
| (34) |
|
| (34) | ||||||||||||||||||||||||
Disposition of a portion of Venator |
| — |
|
| 413 |
|
| — |
|
| — |
|
| — |
|
| 413 | 0 | 18 | 0 | 0 | 0 | 18 | ||||||||||||||||||
Costs of the IPO and secondary offering of Venator |
| — |
|
| (58) |
|
| — |
|
| — |
|
| — |
|
| (58) | ||||||||||||||||||||||||
Costs of secondary offering of Venator | 0 | (2 | ) | 0 | 0 | 0 | (2 | ) | |||||||||||||||||||||||||||||||||
Noncontrolling interest from partial disposal of Venator |
| — |
|
| — |
|
| — |
|
| — |
|
| 602 |
|
| 602 | 0 | 0 | 0 | 0 | 27 | 27 | ||||||||||||||||||
Balance, December 31, 2017 |
| 2,728 |
|
| 3,616 |
|
| (270) |
|
| (1,263) |
|
| 751 |
|
| 2,834 | ||||||||||||||||||||||||
Cumulative effect of changes in fair value of equity investments |
| — |
|
| — |
|
| 10 |
|
| (10) |
|
| — |
|
| — | ||||||||||||||||||||||||
Net income |
| — |
|
| — |
|
| 323 |
|
| — |
|
| 313 |
|
| 636 | ||||||||||||||||||||||||
Dividends paid to parent |
| — |
|
| — |
|
| (154) |
|
| — |
|
| — |
|
| (154) | ||||||||||||||||||||||||
Other comprehensive income |
| — |
|
| — |
|
| — |
|
| (195) |
|
| (42) |
|
| (237) | ||||||||||||||||||||||||
Contribution from parent |
| — |
|
| 26 |
|
| — |
|
| — |
|
| — |
|
| 26 | ||||||||||||||||||||||||
Disposition of a portion of Venator |
| — |
|
| 18 |
|
| — |
|
| — |
|
| — |
|
| 18 | ||||||||||||||||||||||||
Costs of the secondary offering of Venator |
| — |
|
| (2) |
|
| — |
|
| — |
|
| — |
|
| (2) | ||||||||||||||||||||||||
Noncontrolling interest from partial disposal of Venator |
| — |
|
| — |
|
| — |
|
| — |
|
| 27 |
|
| 27 | ||||||||||||||||||||||||
Dividends paid to noncontrolling interests |
| — |
|
| — |
|
| — |
|
| — |
|
| (69) |
|
| (69) | ||||||||||||||||||||||||
Deconsolidation of Venator |
| — |
|
| — |
|
| — |
|
| 160 |
|
| (751) |
|
| (591) | — | 0 | 0 | 160 | (751 | ) | (591 | ) | ||||||||||||||||
Balance, December 31, 2018 |
| 2,728 |
| $ | 3,658 |
| $ | (91) |
| $ | (1,308) |
| $ | 229 |
| $ | 2,488 | 2,728 | 3,658 | (91 | ) | (1,308 | ) | 229 | 2,488 | ||||||||||||||||
Net income | — | 0 | 551 | 0 | 36 | 587 | |||||||||||||||||||||||||||||||||||
Other comprehensive loss | — | 0 | 0 | (44 | ) | 10 | (34 | ) | |||||||||||||||||||||||||||||||||
Dividends paid to parent | — | 0 | (148 | ) | 0 | 0 | (148 | ) | |||||||||||||||||||||||||||||||||
Contribution from parent | — | 28 | 0 | 0 | 0 | 28 | |||||||||||||||||||||||||||||||||||
Dividends declared to noncontrolling interests | — | 0 | 0 | 0 | (65 | ) | (65 | ) | |||||||||||||||||||||||||||||||||
Acquisition of noncontrolling interests, net of tax | — | (11 | ) | 0 | 0 | (73 | ) | (84 | ) | ||||||||||||||||||||||||||||||||
Balance, December 31, 2019 | 2,728 | 3,675 | 312 | (1,352 | ) | 137 | 2,772 | ||||||||||||||||||||||||||||||||||
Net income | — | 0 | 1,035 | 0 | 32 | 1,067 | |||||||||||||||||||||||||||||||||||
Other comprehensive loss | — | 0 | 0 | 19 | 6 | 25 | |||||||||||||||||||||||||||||||||||
Dividends paid to parent | — | 0 | (144 | ) | 0 | 0 | (144 | ) | |||||||||||||||||||||||||||||||||
Contribution from parent | — | 26 | 0 | 0 | 0 | 26 | |||||||||||||||||||||||||||||||||||
Dividends declared to noncontrolling interests | — | 0 | 0 | 0 | (21 | ) | (21 | ) | |||||||||||||||||||||||||||||||||
Balance, December 31, 2020 | 2,728 | $ | 3,701 | $ | 1,203 | $ | (1,333 | ) | $ | 154 | $ | 3,725 | |||||||||||||||||||||||||||||
See accompanying notes to consolidated financial statements.
F-13
HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Millions)
|
|
|
|
|
|
|
|
| |||||||||||||
|
| Year ended December 31, | Year ended December 31, | ||||||||||||||||||
|
| 2018 |
| 2017 |
| 2016 | 2020 | 2019 | 2018 | ||||||||||||
Operating Activities: |
|
|
|
|
|
|
|
| |||||||||||||
Net income |
| $ | 636 |
| $ | 734 |
| $ | 354 | $ | 1,067 | $ | 587 | $ | 636 | ||||||
Less: Loss (income) from discontinued operations, net of tax |
|
| 195 |
|
| (155) |
|
| 13 | ||||||||||||
Less: (Income) loss from discontinued operations, net of tax | (775 | ) | (169 | ) | 39 | ||||||||||||||||
Income from continuing operations |
|
| 831 |
|
| 579 |
|
| 367 | 292 | 418 | 675 | |||||||||
Adjustments to reconcile income from continuing operations to net cash provided by operating activities from continuing operations: |
|
|
|
|
|
|
|
|
| ||||||||||||
Equity in income of investment in unconsolidated affiliates |
|
| (55) |
|
| (13) |
|
| (5) | (42 | ) | (54 | ) | (55 | ) | ||||||
Unrealized losses on fair value adjustments to Venator investment |
|
| 62 |
|
| — |
|
| — | ||||||||||||
Unrealized losses on fair value adjustments to Venator investment and related loss on disposal | 88 | 19 | 62 | ||||||||||||||||||
Cash received from return on investment in unconsolidated subsidiary | 19 | 24 | 0 | ||||||||||||||||||
Depreciation and amortization |
|
| 340 |
|
| 311 |
|
| 306 | 283 | 270 | 252 | |||||||||
Loss (gain) on disposal of businesses/assets, net |
|
| 4 |
|
| (6) |
|
| (94) | ||||||||||||
Noncash lease expense | 63 | 55 | 0 | ||||||||||||||||||
(Gain) loss on disposal of businesses/assets | (281 | ) | (49 | ) | 3 | ||||||||||||||||
Loss on early extinguishment of debt |
|
| 3 |
|
| 54 |
|
| 3 | 0 | 23 | 3 | |||||||||
Noncash interest expense |
|
| 22 |
|
| 25 |
|
| 27 | ||||||||||||
Noncash restructuring and impairment (credits) charges |
|
| (22) |
|
| 1 |
|
| (4) | ||||||||||||
Noncash restructuring and impairment charges (credits) | 7 | 3 | (22 | ) | |||||||||||||||||
Deferred income taxes |
|
| (121) |
|
| (50) |
|
| 3 | 172 | (91 | ) | (172 | ) | |||||||
Noncash gain on foreign currency transactions |
|
| (3) |
|
| (5) |
|
| (2) | ||||||||||||
Noncash compensation |
|
| 26 |
|
| 35 |
|
| 31 | 26 | 28 | 26 | |||||||||
Other, net |
|
| 7 |
|
| 7 |
|
| 1 | 8 | 36 | 26 | |||||||||
Changes in operating assets and liabilities, net of effects of acquisitions: |
|
|
|
|
|
|
|
|
| ||||||||||||
Changes in operating assets and liabilities: | |||||||||||||||||||||
Accounts and notes receivable |
|
| (14) |
|
| (181) |
|
| (25) | 100 | 138 | (23 | ) | ||||||||
Inventories |
|
| (86) |
|
| (104) |
|
| 177 | 145 | 77 | (80 | ) | ||||||||
Prepaid expenses |
|
| (8) |
|
| (10) |
|
| 5 | (9 | ) | (27 | ) | (8 | ) | ||||||
Other current assets |
|
| 60 |
|
| 21 |
|
| 12 | (56 | ) | 48 | 59 | ||||||||
Other noncurrent assets |
|
| (76) |
|
| (60) |
|
| 44 | (55 | ) | (90 | ) | (41 | ) | ||||||
Accounts payable |
|
| (13) |
|
| 138 |
|
| 35 | 30 | 7 | (9 | ) | ||||||||
Accrued liabilities |
|
| 43 |
|
| 57 |
|
| 123 | (126 | ) | (51 | ) | 44 | |||||||
| Taxes paid on sale of Chemical Intermediates Businesses | (231 | ) | 0 | 0 | |||||||||||||||||
Other noncurrent liabilities |
|
| (54) |
|
| 37 |
|
| (36) | (154 | ) | (139 | ) | (53 | ) | ||||||
Net cash provided by operating activities from continuing operations |
|
| 946 |
|
| 836 |
|
| 968 | 279 | 645 | 687 | |||||||||
Net cash provided by operating activities from discontinued operations |
|
| 244 |
|
| 372 |
|
| 110 | ||||||||||||
Net cash (used in) provided by operating activities from discontinued operations | (24 | ) | 241 | 503 | |||||||||||||||||
Net cash provided by operating activities |
|
| 1,190 |
|
| 1,208 |
|
| 1,078 | 255 | 886 | 1,190 | |||||||||
|
|
|
|
|
|
|
|
|
| ||||||||||||
Investing Activities: |
|
|
|
|
|
|
|
|
| ||||||||||||
Capital expenditures |
|
| (313) |
|
| (282) |
|
| (318) | (249 | ) | (274 | ) | (251 | ) | ||||||
Investment in unconsolidated affiliates |
|
| — |
|
| — |
|
| (1) | ||||||||||||
Cash received from sale of businesses | 2,181 | 0 | 0 | ||||||||||||||||||
| Cash received from the sale of Venator shares | 99 | 0 | 0 | ||||||||||||||||||
Acquisition of businesses, net of cash acquired |
|
| (366) |
|
| (14) |
|
| — | (650 | ) | 0 | (366 | ) | |||||||
Increase in receivable from affiliate | 273 | (1 | ) | (16 | ) | ||||||||||||||||
Proceeds from sale of businesses/assets |
|
| — |
|
| 25 |
|
| 199 | 75 | 50 | 0 | |||||||||
Increase in receivable from affiliate |
|
| (16) |
|
| (15) |
|
| 6 | ||||||||||||
Cash received from termination of cross-currency interest rate contracts |
|
| — |
|
| 7 |
|
| — | ||||||||||||
Cash received from forward swap contract related to the sale of investment in Venator |
|
| 3 |
|
| — |
|
| — | 0 | 16 | 3 | |||||||||
Other, net |
|
| — |
|
| — |
|
| 1 | 7 | 7 | 0 | |||||||||
Net cash used in investing activities from continuing operations |
|
| (692) |
|
| (279) |
|
| (113) | ||||||||||||
Net cash used in investing activities from discontinued operations |
|
| (296) |
|
| (159) |
|
| (83) | ||||||||||||
Net cash used in investing activities |
|
| (988) |
|
| (438) |
|
| (196) | ||||||||||||
Net cash provided by (used in) investing activities from continuing operations | 1,736 | (202 | ) | (630 | ) | ||||||||||||||||
Net cash provided by (used in) investing activities from discontinued operations | 1 | (59 | ) | (358 | ) | ||||||||||||||||
Net cash provided by (used in) investing activities | 1,737 | (261 | ) | (988 | ) | ||||||||||||||||
(continued)
F-14
HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(In Millions)
|
|
|
|
|
|
|
|
| |||||||||||||
|
| Year ended December 31, | Year ended December 31, | ||||||||||||||||||
|
| 2018 |
| 2017 |
| 2016 | 2020 | 2019 | 2018 | ||||||||||||
Financing Activities: |
|
|
|
|
|
|
|
| |||||||||||||
Net borrowings (repayments) under revolving loan facilities |
| $ | 125 |
| $ | (41) |
| $ | — | ||||||||||||
Net (repayments) borrowings on overdraft facilities |
|
| (1) |
|
| 1 |
|
| (1) | ||||||||||||
Net (repayments) borrowings on revolving loan facilities | $ | (203 | ) | $ | (89 | ) | $ | 125 | |||||||||||||
Repayments of long-term debt | (21 | ) | (676 | ) | (68 | ) | |||||||||||||||
Proceeds from issuance of long-term debt | 0 | 742 | 0 | ||||||||||||||||||
Repayments of short-term debt |
|
| (8) |
|
| (15) |
|
| (56) | (109 | ) | 0 | (8 | ) | |||||||
Borrowings on short-term debt |
|
| 6 |
|
| 8 |
|
| 10 | 0 | 102 | 6 | |||||||||
Repayments of long-term debt |
|
| (68) |
|
| (2,058) |
|
| (1,070) | ||||||||||||
Proceeds from long-term debt of Venator |
|
| — |
|
| 750 |
|
| — | ||||||||||||
Proceeds from issuance of long-term debt |
|
| — |
|
| 24 |
|
| 559 | ||||||||||||
Repayments of notes payable to affiliate |
|
| (255) |
|
| — |
|
| (1) | (380 | ) | (207 | ) | (255 | ) | ||||||
Proceeds from issuance of notes payable to affiliate |
|
| — |
|
| 47 |
|
| — | ||||||||||||
Repayments of notes payable |
|
| (29) |
|
| (27) |
|
| (33) | (32 | ) | (27 | ) | (29 | ) | ||||||
Borrowings on notes payable |
|
| 27 |
|
| 31 |
|
| 31 | 0 | 37 | 27 | |||||||||
Debt issuance costs paid |
|
| (4) |
|
| (21) |
|
| (9) | 0 | (8 | ) | (4 | ) | |||||||
Call premiums related to early extinguishment of debt |
|
| — |
|
| — |
|
| (1) | ||||||||||||
Costs of early extinguishment of debt | 0 | (21 | ) | 0 | |||||||||||||||||
Dividends paid to parent | (144 | ) | (148 | ) | (154 | ) | |||||||||||||||
Dividends paid to noncontrolling interests |
|
| (69) |
|
| (34) |
|
| (30) | (44 | ) | (41 | ) | (69 | ) | ||||||
Contribution from noncontrolling interests |
|
| — |
|
| 5 |
|
| — | ||||||||||||
Dividends paid to parent |
|
| (154) |
|
| (120) |
|
| (119) | ||||||||||||
Proceeds from the IPO of Venator |
|
| — |
|
| 1,012 |
|
| — | ||||||||||||
Cash paid for expenses of the IPO of Venator |
|
| — |
|
| (58) |
|
| — | ||||||||||||
Cash paid for noncontrolling interest | 0 | (101 | ) | 0 | |||||||||||||||||
Proceeds from the secondary offering of Venator |
|
| 44 |
| — |
|
| — | 0 | 0 | 44 | ||||||||||
Cash paid for expenses of the secondary offering of Venator |
|
| (2) |
|
| — |
|
| — | ||||||||||||
Other, net |
|
| (2) |
|
| 1 |
|
| (1) | ||||||||||||
Other | 0 | (1 | ) | (5 | ) | ||||||||||||||||
Net cash used in financing activities |
|
| (390) |
|
| (495) |
|
| (721) | (933 | ) | (438 | ) | (390 | ) | ||||||
Effect of exchange rate changes on cash |
|
| (35) |
|
| 18 |
|
| (6) | 7 | (2 | ) | (35 | ) | |||||||
(Decrease) increase in cash, cash equivalents and restricted cash |
|
| (223) |
|
| 293 |
|
| 155 | ||||||||||||
Increase (decrease) in cash, cash equivalents and restricted cash | 1,066 | 185 | (223 | ) | |||||||||||||||||
Cash, cash equivalents and restricted cash from continuing operations at beginning of period |
|
| 479 |
|
| 395 |
|
| 248 | 525 | 340 | 479 | |||||||||
Cash, cash equivalents and restricted cash from discontinued operations at beginning of period |
|
| 238 |
|
| 29 |
|
| 21 | 0 | 0 | 238 | |||||||||
Deconsolidation of cash, cash equivalents and restricted cash from Venator |
|
| (154) |
|
| — |
|
| — | ||||||||||||
Deconsolidation of cash, cash equivalents and restricted cash of Venator | 0 | 0 | (154 | ) | |||||||||||||||||
Cash, cash equivalents and restricted cash at end of period |
| $ | 340 |
| $ | 717 |
| $ | 424 | $ | 1,591 | $ | 525 | $ | 340 | ||||||
|
|
|
|
|
|
|
|
|
| ||||||||||||
Supplemental cash flow information: |
|
|
|
|
|
|
|
| |||||||||||||
Cash paid for interest |
| $ | 163 |
| $ | 175 |
| $ | 139 | $ | 90 | $ | 111 | $ | 163 | ||||||
Cash paid for income taxes |
|
| 179 |
|
| 25 |
|
| 40 | 316 | 100 | 179 | |||||||||
As of December 31, 2018, 20172020, 2019 and 2016,2018 the amount of capital expenditures in accounts payable was $74 million, $64 million and $66 million, $51 million and $61 million, respectively. DuringFor the yearsyear ended 2018, 2017 and 2016, Huntsman Corporation contributed $26 million, $35 million and $31 million, respectively, related to stock-based compensation for continuing operations. In addition, as of December 31, 2018,2019, the amount of cash interest and cash income taxes included in our supplemental cash flow information related to cash paid for interest and cash paid for income taxes that was paid by Venator was $46 million and $38 million, respectively. As ofFor the year ended December 31, 2017,2020, the amountamounts of cash interest and cash income taxes included in our supplemental cash flow information related to cash paid for interesttaxes in connection with the sale of the Chemical Intermediates Businesses and cash paid for income taxes that was paid by Venator after the IPO date was $6India-based DIY business were $231 million and $16$26 million, respectively.
See accompanying notes to consolidated financial statements.
HUNTSMAN CORPORATION AND SUBSIDIARIES
HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DefinitionsDefinitions
For convenience in this report, the terms “Company,” “our” or “we” may be used to refer to Huntsman Corporation and, unless the context otherwise requires, its subsidiaries and predecessors. Any references to the “Company” “we” “us” or “our” as of a date prior to October 19, 2004 (the date of our Company’s formation) are to Huntsman Holdings, LLC and its subsidiaries (including their respective predecessors). In this report, “Huntsman International” refers to Huntsman International LLC (our 100% ownedwholly-owned subsidiary) and, unless the context otherwise requires, its subsidiaries; “AAC” refers to Arabian Amines Company, our consolidated manufacturing joint venture with the Zamil Group; “HPS” refers to Huntsman Polyurethanes Shanghai Ltd. (our consolidated splitting joint venture with Shanghai Chlor-Alkali Chemical Company, Ltd); “Sasol-Huntsman” refers to Sasol-Huntsman GmbH and Co. KG (our consolidated joint venture with Sasol that owns and operates a maleic anhydride facility in Moers, Germany); and “SLIC” refers to Shanghai Liengheng Isocyanate Company (our unconsolidated manufacturing joint venture with BASF and three Chinese chemical companies).
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.
Description
Description of Business Business
We are a global manufacturer of differentiated organic chemical products. We operate in four segments: Polyurethanes, Performance Products, Advanced Materials and Textile Effects. 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‑durablenon-durable consumer products, digital inks, electronics, insulation, medical, packaging, coatings and construction, 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‑basedepoxy-based polymer formulations, textile chemicals and dyes.
Company
Company
Our Company, a Delaware corporation, was formed in 2004 to hold the Huntsman businesses, which were founded by Jon M. Huntsman. Mr. Huntsman founded the predecessor to our Company in 1970 as a small polystyrene plastics packaging company. Since then, we have grown through a series of significant acquisitions and now own a global portfolio of businesses. Jon M. Huntsman served as the Executive Chairman of our Company until December 31, 2017, at which time Peter Huntsman, our Chief Executive Officer, was appointed to the role of Chairman of the Board. Jon M. Huntsman served as Director and Chairman Emeritus until his passing on February 2, 2018.
Currently, we operate all of our businesses through Huntsman International, our 100% ownedwholly-owned subsidiary. Huntsman International is a Delaware limited liability company and was formed in 1999.
Recent Developments
SeparationRecent Developments
COVID-19 Update
The outbreak of the COVID-19 has spread from China to many other countries, including the U.S. In March 2020, the World Health Organization characterized COVID-19 as a pandemic. As of December 31, 2020, there have not been any significant interruptions in our ability to provide our products and Deconsolidationsupport to our customers. However, the COVID-19 pandemic has significantly impacted economic conditions throughout the U.S. and the world, including the markets in which we operate. Demand for our products declined at a rapid pace in the second quarter 2020, which led to a meaningful adverse impact on our revenues and financial results. Although we have experienced improved conditions in most of our core markets in the second half of 2020, there continues to be many uncertainties regarding the impact of the COVID-19 pandemic, including the scope of scientific and health issues, the anticipated duration of the pandemic and the extent of local, regional and worldwide economic, social and political disruption. Given such uncertainties, it is difficult to estimate the magnitude COVID-19may impact our future business, but we expect any adverse impact to continue for some time.
In response to the impact of COVID-19, we have implemented, and may continue to implement, cost saving initiatives, including:
● | suspended merit and general wage increases that customarily would have occurred at the end of the first quarter of 2020; |
● | implemented a temporary hiring freeze for all non-business critical positions; |
● | accelerated integration efforts related to the Icynene-Lapolla and CVC Thermoset Specialties acquisitions in order to more expeditiously capture related synergies; |
● | implemented restructuring programs in our Polyurethanes segment to reorganize our spray polyurethane foam business to better position this business for efficiencies and growth in coming years and to optimize our downstream footprint; |
● | implemented a restructuring program in our Performance Products segment, primarily related to workforce reductions, in response to the sale of our Chemical Intermediates Businesses to Indorama; |
● | implemented restructuring programs in our Advanced Materials segment, primarily related to workforce reductions in connection with the CVC Thermoset Specialties Acquisition and the alignment of the segment’s commercial organization and optimization of the segment’s manufacturing processes; and |
● | implemented restructuring programs in our Textile Effects segment to rationalize and realign structurally across various functions and certain locations within the segment. |
For more information regarding our 2020 restructuring activities, see “Note 13. Restructuring, Impairment and Plant Closing Costs (Credits).”
Redemption of the 2021 Senior Notes
On January 15, 2021, we redeemed in full €445 million (approximately $541 million) in aggregate principal amount of our 2021 Senior Notes at the redemption price equal to 100% of the principal amount of the notes, plus accrued and unpaid interest to, but not including, the redemption date.
Acquisition of Gabriel Performance Products
On January 15, 2021, we completed the acquisition of Gabriel, a North American specialty chemical manufacturer of specialty additives and epoxy curing agents for the coatings, adhesives, sealants and composite end-markets, from funds affiliated with Audax Private Equity in an all-cash transaction of approximately $250 million, subject to customary closing adjustments, funded from available liquidity. The acquired business will be integrated into our Advanced Materials segment.
Sale of Assets at our Basel, Switzerland Site
In November 2020, we entered into a sale and leaseback agreement to sell certain properties in Basel, Switzerland for approximately CHF 67 million (approximately $73 million) and to lease those properties back for five years. This transaction resulted in a pretax gain of approximately CHF 30 million (approximately $33 million).
Sale of India-Based Do-It-Yourself Consumer Adhesives Business
On November 3, 2020, we completed the sale of the India-based DIY business, previously part of our Advanced Materials segment, to Pidilite Industries Ltd. and received cash of approximately $257 million. Under the terms of the agreement, we may receive up to approximately $28 million of additional cash under an earnout within 18 months if the business achieves certain sales revenue targets in line with the DIY business' 2019 performance. In connection with this sale, we recognized a pretax gain of $247 million in the fourth quarter of 2020, which was recorded in gain on sale of India-based DIY business in our consolidated statements of operations.
Sale of Venator Interest
In August 2017,
On December 23, 2020, we separatedcompleted the P&A Business and conducted an IPOsale of approximately 42.4 million ordinary shares of Venator formerlyto funds advised by SK Capital Partners, LP. We received approximately $99 million in cash, which included $8 million for a wholly-owned subsidiary30-month option as described below. In addition to the cash proceeds received from the sale, we achieved immediate cash tax savings of Huntsman. Additionally, in December 2017, we conducted a secondary offeringapproximately $150 million by offsetting the capital loss on the sale of Venator ordinary shares. All of such ordinary shares were sold by Huntsman, and Venator did not receive any proceeds fromagainst the offerings. Venator’s ordinary shares began trading on The New York Stock Exchange under the symbol “VNTR” on August 3, 2017. On January 3, 2018, the underwriters purchased an additional 1,948,955 Venator ordinary shares pursuant to their over-allotment option, which reduced Huntsman’s ownership interest in Venator to approximately 53%. Beginning in the third quarter of 2017, we reported the results of operations of Venator as discontinued operations.
F-16
HUNTSMAN CORPORATION AND SUBSIDIARIES
HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
During the third quarter of 2018, we recognized a net after tax valuation allowance of $270 million to adjust the carrying amount of the assets and liabilities held for sale and the amount of accumulated comprehensive income recorded in equity related to Venator to the lower of cost or estimated fair value, less cost to sell.
On December 3, 2018, we sold an aggregate of 4,334,389, or 4%, of Venator ordinary shares to Bank of America N.A. at a price to be determined basedcapital gain realized on the averagesale of the daily volume weighted average price of Venator ordinary shares over an agreed period. Over this agreed period, we received aggregate proceeds of $19 million, $16 million of which was received in the first quarter of 2019. This transaction allowed us to deconsolidate Venator beginning in December 2018. Following this transaction, we retained approximately 49% ownership in Venator. In connection with the deconsolidation of Venator, we recorded a pretax loss of $427 million in discontinued operations to record our remaining ownership interest in Venator at fair value. We elected the fair value option to account for our equity method investment in Venator post deconsolidation. Accordingly, at December 31, 2018, we recorded a pretax loss of $57 million to record our equity method investment in Venator at fair value. This loss was recorded in “Fair value adjustments to Venator investment” on our consolidated statements of operations. For more information, seeChemical Intermediates Businesses. See “Note 4. Discontinued Operations and Business Dispositions—Separation and Deconsolidation of Venator.”
UnsecuredConcurrently with the sale of Venator ordinary shares, we entered into an option agreement, pursuant to which we granted an option to funds advised by SK Capital Partners, LP to purchase the remaining approximate 9.7 million ordinary shares we hold in Venator at $2.15 per share. The option will expire on June 23, 2023 and will not be exercisable so long as such exercise would result in a default or an "Event of Default" under Venator’s Term Loan Credit Agreement and Revolving Credit FacilityAgreement.
On May 21, 2018, Huntsman International entered into the 2018 Revolving Credit Facility. Borrowings under the 2018 Revolving Credit Facility will bear interest at the rates specified in the credit agreement governing the 2018 Revolving Credit Facility, which will vary based on the type of loan and Huntsman International’s debt ratings. Unless earlier terminated, the 2018 Revolving Credit Facility will mature in May 2023. Huntsman International may increase the 2018 Revolving Credit Facility commitments up to an additional $500 million, subject to the satisfaction of certain conditions. See “Note 14. Debt—Direct and Subsidiary Debt—Credit Facility.”
In connection with entering into the 2018 Revolving Credit Facility, Huntsman International terminated all commitments and repaid all obligations under the Prior Credit Facility. In addition,2017 initial public offering of Venator, we recognizedrecorded a lossreceivable of early extinguishment of debt of $3 million. Upon the terminationapproximately $34 million related to certain income tax benefits that was reduced upon completion of the Prior Credit Facility, all guaranteessale of Venator shares to SK Capital Partners, LP due to a change of control limitation on specific Venator tax attributes. Accordingly, we wrote off approximately $31 million of this receivable upon completion of the obligations undersale of the Prior Credit Facility were terminated, and all liens granted under the Prior Credit Facility were released.
Share Repurchase Program
On February 7, 2018 and on May 3, 2018, our Board of Directors authorized us to repurchase up to an additional $950 millionVenator ordinary shares in shares of our common stock in addition to the $50 million remaining under our September 2015 share repurchase authorization. During the year ended December 31, 2018, we repurchased 10,405,457 shares of our common stock for approximately $276 million, excluding commissions, under the repurchase program. From January 1, 2019 through January 31, 2019, we repurchased an additional 537,018 shares of our common stock for approximately $11 million, excluding commissions.2020.
Demilec AcquisitionOther Significant Developments During 2020
On April 23, 2018, we acquired 100% of the outstanding equity interests of Demilec for approximately $353 million, including working capital adjustments, in an all-cash transaction which was funded from our Prior Credit FacilityOther significant developments that occurred during 2020 were as follows:
● | In May 2020, we completed the CVC Thermoset Specialties Acquisition. For more information, see “Note 3. Business Combinations and Acquisitions—Acquisition of CVC Thermoset Specialties." |
| ● | In February 2020, we completed the Icynene-Lapolla Acquisition. For more information, see “Note 3. Business Combinations and Acquisitions—Acquisition of Icynene-Lapolla.” |
● | In January 2020, we completed the sale of our Chemical Intermediates Businesses to Indorama in a transaction valued at approximately $2 billion, comprised of a cash purchase price of approximately $1.92 billion and the transfer of approximately $72 million in net underfunded pension and other post-employment benefit liabilities. For more information, see “Note 4. Discontinued Operations and Business Dispositions—Sale of Chemical Intermediates Businesses.” |
Huntsman Corporation and our U.S. A/R Program. Demilec is a leading North American manufacturer and distributor of spray polyurethane foam formulations for residential and commercial applications. The acquired business is being integrated into our Polyurethanes segment. See “Note 3. Business Combination.” Huntsman International Financial Statements
Huntsman Corporation and Huntsman International Financial Statements
Except where otherwise indicated, these notes relate to the consolidated financial statements for both our Company and Huntsman International. The differences between our consolidated financial statements and Huntsman International’s consolidated financial statements relate primarily to the following:
| ● | purchase accounting recorded at our Company for the 2003 |
F-17
HUNTSMAN CORPORATION AND SUBSIDIARIES
HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
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| ● | a note payable from Huntsman International to |
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Asset Retirement Obligations
We accrue for asset retirement obligations, which consist primarily of landfill capping, closure and post‑closure costs, asbestos abatement costs, demolition and removal costs and leasehold remediation costs, in the period in which the obligations are incurred. Asset retirement obligations are accrued at estimated fair value. When the liability is initially recorded, we capitalize the cost by increasing the carrying amount of the related long‑lived asset. Over time, the liability is accreted to its estimated settlement value and the capitalized cost is depreciated over the useful life of the related asset. Upon settlement of the liability, we will recognize a gain or loss for any difference between the settlement amount and the liability recorded. Asset retirement obligations were $11 million and $9 million at December 31, 2018 and 2017, respectively.
Carrying Value
Carrying Value of Long‑Lived Assets Long-Lived Assets
We review long‑livedlong-lived assets and all amortizable intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of these assets may not be recoverable. Recoverability is based upon current and anticipated undiscounted cash flows, and we recognize an impairment when such estimated cash flows are less than the carrying value of the asset. Measurement of the amount of impairment, if any, is based upon the difference between carrying value and fair value. Fair value is generally estimated by discounting estimated future cash flows using a discount rate commensurate with the risks involved or selling price of assets held for sale. See “Note 12. Restructuring, Impairment and Plant Closing Costs.”
Cash
Cash and Cash Equivalents Cash Equivalents
We consider cash in checking accounts and cash in short‑termshort-term highly liquid investments with remainingoriginal maturities of three months or less at the date of purchase, to be cash and cash equivalents. Cash flows from financing activities from discontinued operations are not presented separately in our consolidated statements of cash flows.
Cost
Cost of Goods Sold Goods Sold
We classify the costs of manufacturing and distributing our products as cost of goods sold. Manufacturing costs include variable costs, primarily raw materials and energy, and fixed expenses directly associated with production. Manufacturing costs also include, among other things, plant site operating costs and overhead (including depreciation), production planning and logistics costs, repair and maintenance costs, plant site purchasing costs, and engineering and technical support costs. Distribution, freight and warehousing costs are also included in cost of goods sold.
Derivatives
Derivatives and Hedging Activities Hedging Activities
All derivatives, whether designated in hedging relationships or not, are recorded on our balance sheetsheets 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. Changes in the fair value of the hedge in the net investment of certain international operations are recorded in other comprehensive income (loss), to the extent effective. The effectiveness of a cash flow hedging relationship is established at the inception of the hedge, and after inception we perform effectiveness assessments at least every three months. A derivative designated as a cash flow hedge is determined to be effective if the change in value of the hedge divided by the change in value of the hedged item is within a range of 80% to 125%. Hedge ineffectiveness in a cash flow hedge occurs only if the cumulative gain or loss on the
F-18
HUNTSMAN CORPORATION AND SUBSIDIARIES
HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
derivative hedging instrument exceeds the cumulative change in the expected future cash flows on the hedged transaction. For a derivative that does not qualify or has not been designated as a hedge, changes in fair value are recognized in earnings.
Environmental Expenditures
Environmental Expenditures
Environmental related restoration and remediation costs are recorded as liabilities when site restoration and environmental remediation and clean‑upclean-up obligations are either known or considered probable and the related costs can be reasonably estimated. Other environmental expenditures that are principally maintenance or preventative in nature are recorded when expended and incurred and are expensed or capitalized as appropriate. See “Note 20.22. Environmental, Health and Safety Matters.”
Equity Method Investments
Equity Method Investments
We account for our equity investments where we own a non-controlling interest, but exercise significant influence, under the equity method of accounting. Under the equity method of accounting, our original cost of the investment is adjusted for our share of equity in the earnings of the equity investee and reduced by dividends and distributions of capital received, unless the fair value option is elected, in which case the investment balance is marked to fair value each reporting period and the impact of changes in fair value of the equity investment are reported in earnings. We elected the fair value option to account for our equity method investment in Venator. For more information, see “Note 4. Discontinued Operations and Business Dispositions.” The change in the fair value related to our equity method investment in Venator is presented in “Fair value adjustments to Venator investment” on the consolidated statements of operations.
Foreign Currency Translation
Foreign Currency Translation
The accounts of our operating subsidiaries outside of the U.S., unless they are operating in highly inflationary economic environments, consider the functional currency to be the currency of the economic environment in which they operate. Accordingly, assets and liabilities are translated at rates prevailing at the balance sheet date. Revenues, expenses, gains and losses are translated at a weighted average rate for the period. Cumulative translation adjustments are recorded to equity as a component of accumulated other comprehensive loss.
If a subsidiary operates in an economic environment that is considered to be highly inflationary (100% cumulative inflation over a three-yearthree-year period), the U.S. dollar is considered to be the functional currency and gains and losses from remeasurement to the U.S. dollar from the local currency are included in the statement of operations. Where a subsidiary’s operations are effectively run, managed, financed and contracted in U.S. dollars, such as certain finance subsidiaries outside of the U.S., the U.S. dollar is considered to be the functional currency.
Foreign currency transaction gains and losses are recorded in other operating (income) expense, net in our consolidated statements of operations and were (losses) gains of $3$2 million, $5$(8) million and $2$3 million for the years ended December 31, 2018, 20172020, 2019 and 2016,2018, respectively.
Income Taxes
Income Taxes
We use the asset and liability method of accounting for income taxes. Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial and tax reporting purposes. We evaluate deferred tax assets to determine whether it is more likely than not that they will be realized. Valuation allowances are reviewed on a tax jurisdiction basis to analyze whether there is sufficient positive or negative evidence to support a change in judgment about the realizability of the related deferred tax assets for each jurisdiction. These conclusions require significant judgment. In evaluating the objective evidence that historical results provide, we consider the cyclicality of businesses and cumulative income or losses during the applicable period. Cumulative losses incurred over the period limits our ability to consider other subjective evidence such as our projections for the future. Changes in expected future income in applicable jurisdictions could affect the realization of deferred tax assets in those jurisdictions.
F-19
HUNTSMAN CORPORATION AND SUBSIDIARIES
HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
On December 22, 2017, the U.S. Tax Reform Act was signed into law. The U.S. Tax Reform Act significantly revised the U.S. corporate income tax regime by, among other things, lowering the U.S. corporate tax rate from 35% to 21%, effective (effective January 1, 2018, repealing2018), creation of the deduction for domestic production activities base erosion anti-abuse tax provision (“BEAT”) and a new provision designed to tax global intangible low-taxed income (“GILTI”) (effective January 1, 2018) and imposing a repatriation tax on deemed repatriated earnings of foreign subsidiaries.
As a result
In 2017, we booked provisional amounts for the remeasurements of the U.S. Tax Reform Act, the Company recorded net tax benefits of $135 million (a provisional tax benefit of $137 million in 2017 offset by a final tax expense of $2 million in 2018) due to a remeasurement of deferred U.S. tax assets and liabilities and net tax expense of $115 million (a provisional tax expense of $85 million in 2017, a $29 million final federal tax expense in 2018 and a $1 million state tax expense in 2018) due to the transitiontransitional tax on deemed repatriation of deferred foreign income.income related to the enactment of the U.S. Tax Reform Act. During the remeasurement period in 2018, we recorded a net tax expense of $32 million. We did not make the election to reclassify the income tax effects of the U.S. Tax Reform Act from accumulated other comprehensive income to retained earnings.
Accounting for uncertainty in income taxes prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The application of income tax law is inherently complex. We are required to determine if an income tax position meets the criteria of more‑likely‑than‑more-likely-than-not to be realized based on the merits of the position under tax law, in order to recognize an income tax benefit. This requires us to make significant judgments regarding the merits of income tax positions and the application of income tax law. Additionally, if a tax position meets the recognition criteria of more‑likely‑than‑more-likely-than-not we are required to make judgments and apply assumptions to measure the amount of the tax benefits to recognize. These judgments are based on the probability of the amount of tax benefits that would be realized if the tax position was challenged by the taxing authorities. Interpretations and guidance surrounding income tax laws and regulations change over time. As a consequence, changes in assumptions and judgments can materially affect amounts recognized in our consolidated financial statements. We have no need for, or change in, any unrecognized tax positions due to the U.S. Tax Reform Act. For further information concerning taxes, seeSee “Note 18.20. Income Taxes.”
Intangible Assets
Intangible Assets and Goodwill Goodwill
Intangible assets are stated at cost (fair value at the time of acquisition) and are amortized using the straight‑linestraight-line method over the estimated useful lives or the life of the related agreement as follows:
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Goodwill represents costs in excess of fair values assigned to the underlying net assets of acquired businesses. Goodwill is not subject to any method of amortization, but is tested for impairment annually (at the beginning of the third quarter) and when events and circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. When the fair value is less than the carrying value of the related reporting unit, we are required to reduce the amount of goodwill through a charge to earnings. Fair value is estimated using the market approach, as well as the income approach based on discounted cash flow projections. Goodwill has been assigned to reporting units for purposes of impairment testing.
The following table summarizesDuring 2020, goodwill increased by approximately $259 million due to the addition of our acquired businesses, partially offset by a net decrease of approximately $2 million due to changes in foreign currency exchange rates. See “Note 3. Business Combinations and Acquisitions.” During 2019, goodwill decreased by approximately $2 million due to the carrying amountfinalization of goodwill for year ended December 31, 2018 (dollarsthe valuation of the assets and liabilities of an acquisition, partially offset by a net increase of approximately $1 million due to changes in millions):
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| Polyurethanes |
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Balance as of January 1, 2018 |
| $ | 40 |
| $ | 17 |
| $ | 83 |
| $ | 140 |
Goodwill acquired during year(1) |
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| 142 |
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| 142 |
Foreign currency effect on balance |
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| 3 |
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Balance as of December 31, 2018 |
| $ | 173 |
| $ | 16 |
| $ | 86 |
| $ | 275 |
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F-20
HUNTSMAN CORPORATION AND SUBSIDIARIES
HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
foreign currency exchange rates.
Inventories
Inventories
Inventories are stated at the lower of cost or market, with cost determined using LIFO, first‑in first‑out,first-in first-out, and average costs methods for different components of inventory.
Legal Costs
Leases
On January 1, 2019, we adopted the new lease standard using the optional transition method provided under ASU No.2018-11, which allowed us to initially apply the amendments of the new lease standard at the adoption date. Upon adoption of the new lease standard, we elected the package of three practical expedient permitted under the transition guidance within the new lease standard, which among other things, allowed us to carry forward the historical lease classification on existing leases at adoption. In addition, we elected the practical expedient related to land easements, which allowed us to carry forward our accounting treatment for land easements on existing agreements. We also elected the hindsight practical expedient to determine the lease term for existing leases.
The determination of whether a contract is or contains a lease is performed at the lease inception date. Lease right-of-use assets and lease liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term, using incremental borrowing rates as the implicit rates are not readily determinable for our leases. The incremental borrowing rates are determined on a collateralized basis and vary from lease to lease depending on the country where the leased asset exists and the term of the lease arrangement. We combine lease components with non-lease components and account for them as a single lease component for all classes of underlying assets, except for leases of manufacturing and research facilities and administrative offices. For these assets, non-lease components are separated from lease components and accounted for as normal operating expenses. See “Note 9. Leases.”
Legal Costs
We expense legal costs, including those legal costs incurred in connection with a loss contingency, as incurred.
Net Income Per Share Attributable
Net Income Per Share Attributable to Huntsman Corporation Huntsman Corporation
Basic income per share excludes dilution and is computed by dividing net income attributable to Huntsman Corporation common stockholders by the weighted average number of shares outstanding during the period. Diluted income per share reflects all potential dilutive common shares outstanding during the period and is computed by dividing net income available to Huntsman Corporation common stockholders by the weighted average number of shares outstanding during the period increased by the number of additional shares that would have been outstanding as dilutive securities.
Basic and diluted income per share is determined using the following information (in millions):
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Basic and diluted income from continuing operations: |
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Income from continuing operations attributable to Huntsman Corporation |
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| $ | 764 |
| $ | 478 |
| $ | 334 |
Basic and diluted net income: |
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Net income attributable to Huntsman Corporation |
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| $ | 337 |
| $ | 636 |
| $ | 326 |
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Weighted average shares outstanding |
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| 238.1 |
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Dilutive shares: |
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Stock-based awards |
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Total weighted average shares outstanding, including dilutive shares |
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Year ended December 31, | ||||||||||||
2020 | 2019 | 2018 | ||||||||||
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Basic and diluted income from continuing operations: | ||||||||||||
Income from continuing operations attributable to Huntsman Corporation | $ | 259 | $ | 393 | $ | 608 | ||||||
Basic and diluted net income: | ||||||||||||
Net income attributable to Huntsman Corporation | $ | 1,034 | $ | 562 | $ | 337 | ||||||
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Weighted average shares outstanding | 220.6 | 228.9 | 238.1 | |||||||||
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Stock-based awards | 1.3 | 1.7 | 3.5 | |||||||||
Total weighted average shares outstanding, including dilutive shares | 221.9 | 230.6 | 241.6 | |||||||||
Additional stock‑basedstock-based awards of 0.84.3 million, 0.83.0 million and 5.70.8 million weighted average equivalent shares of stock were outstanding during the years ended December 31, 2018, 20172020, 2019 and 2016,2018, respectively. However, these stock‑basedstock-based awards were not included in the computation of diluted earnings per share for the respective periods mentioned because the effect would be anti‑dilutive.anti-dilutive.
Other Noncurrent Assets
Other Noncurrent Assets
Periodic maintenance and repairs applicable to major units of manufacturing facilities (a “turnaround”) are accounted for on the deferral basis by capitalizing the costs of the turnaround and amortizing the costs over the estimated period until the next turnaround.
Principles
Principles of Consolidation Consolidation
Our consolidated financial statements include the accounts of our wholly owned and majority owned subsidiaries and any variable interest entities for which we are the primary beneficiary. All intercompany accounts and transactions have been eliminated.
F-21
HUNTSMAN CORPORATION AND SUBSIDIARIES
HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Property, Plant
Property, Plant and Equipment Equipment
Property, plant and equipment is stated at cost less accumulated depreciation. Depreciation is computed using the straight‑linestraight-line method over the estimated useful lives or lease term as follows:
Interest expense capitalized as part of plant and equipment was $7 million, $4 million Normal maintenance and repairs of plant and equipment are charged to expense as incurred. Renewals, betterments and major repairs that materially extend the useful life of the assets are capitalized, and the assets replaced, if any, are retired.
We generate substantially all of our revenue through product sales in which revenue is recognized at a point in time. We recognize revenue when control of the promised goods is transferred to our customers. Control of goods usually passes to the customer at the time shipment is made. Revenue is measured as the amount that reflects the consideration that we expect to be entitled to in exchange for those goods.
We generate substantially all of our revenues through sales in the open market and
F- 22 Table of Contents
Substantially all of our revenue is generated through product sales in which revenue is recognized at a point in time. At contract inception, we assess the goods and services, if any, promised in our contracts and identify a performance obligation for each promise to transfer to the customer a good or service that is distinct. In substantially all cases, a contract has a single performance obligation to deliver a promised good to the customer. Revenue is recognized when control of the product is transferred to the customer (i.e., when our performance obligation is satisfied), which typically occurs at shipment. Further, in determining whether control has transferred, we consider if there is a present right to payment and legal title, along with risks and rewards of ownership having transferred to the customer.
The amount of consideration we receive and revenue we recognize is based upon the terms stated in the sales contract, which may contain variable consideration such as discounts or rebates. We allocate the transaction price to each distinct product based on their relative standalone selling price. The product price as specified on the purchase order or in the sales contract is considered the standalone selling price as it is an observable input that depicts the price as if sold to a similar customer in similar circumstances. In order to estimate the applicable variable consideration, we use historical and current trend information to estimate the amount of discounts or rebates to which customers are likely to be entitled. Historically, actual discount or rebate adjustments relative to those estimated and included when determining the transaction price have not materially differed. Payment terms vary but are generally less than one year. As our standard payment terms are less than one year, we have elected to not assess whether a contract has a significant financing component. In the normal course of business, we do not accept product returns unless the item is defective as manufactured. We establish provisions for estimated returns based on an analysis of historical experience. See “Note 18. Revenue Recognition.” Securitization of Accounts Receivable Under our A/R Programs, we grant an undivided interest in certain of our trade receivables to the special purpose entities (“SPE”) in the U.S. and EU. This undivided interest serves as security for the issuance of debt. The A/R Programs provide for financing in both U.S. dollars and euros. The amounts outstanding under our A/R Programs are accounted for as secured borrowings. See “Note 15. Debt—Direct and Subsidiary Debt—A/R Programs.” Stock-Based Compensation We measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award. That cost, net of estimated forfeitures, will be recognized over the period during which the employee is required to provide services in exchange for the award. See “Note 24. Stock-Based Compensation Plan.” Use of Estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Accounting Pronouncements Adopted During2020 We adopted the following accounting pronouncements during 2020, which did not have a significant impact on our consolidated financial statements:
Accounting Pronouncements PENDING AdoptION in Future PEriods The following accounting pronouncement becomes effective subsequent to fiscal year 2020, and we do not expect it to have a significant impact on our consolidated financial statements upon adoption:
3. BUSINESS COMBINATIONS AND Acquisition of CVC Thermoset Specialties On May 18, 2020, we completed the CVC Thermoset Specialties Acquisition, a North American specialty chemical manufacturer serving the industrial composites, adhesives and coatings markets. We acquired the business for $304 million from Emerald Performance Materials LLC, We have accounted for the CVC Thermoset Specialties Acquisition using the acquisition method. As such, we analyzed the fair value of tangible and intangible assets acquired and liabilities assumed. The preliminary allocation of acquisition cost to the assets acquired and liabilities assumed is summarized as follows (dollars in millions):
The acquisition cost allocation is preliminary pending final determination of the fair value of assets acquired and liabilities assumed, primarily relating to the final valuation of intangible assets and deferred taxes. As a result of this preliminary valuation of the assets and liabilities, reallocations were made in certain inventory, property, plant and equipment, intangible asset, goodwill and deferred tax balances during the fourth quarter of 2020. Intangible assets acquired included in this preliminary allocation consist primarily of trademarks, trade secrets and customer relationships, which are predominantly being amortized over a period of 20 years. For purposes of this preliminary allocation of fair value, we have assigned any excess of the acquisition cost over the estimated preliminary fair value to goodwill. The estimated goodwill recognized is attributable primarily to projected future profitable growth in our Advanced Materials specialty portfolio and synergies. We expect that none of the estimated goodwill arising from the acquisition will be deductible for income tax purposes. It is possible that material changes to this preliminary allocation of acquisition cost could occur. The acquired business had revenues and net loss of $43 million and $6 million, respectively, for the period from the date of acquisition to December 31, 2020. Acquisition of Icynene-Lapolla On February 20, 2020, we completed the Icynene-Lapolla Acquisition. We acquired the business from an affiliate of FFL Partners, LLC for $353 million in an all-cash transaction funded from available liquidity. The acquired business was integrated into our Polyurethanes segment. Transaction costs related to this acquisition were approximately $14 million for the year ended December 31, 2020, and were recorded in other operating (income) expense, net in our consolidated statements of operations. We have accounted for the Icynene-Lapolla Acquisition using the acquisition method. As such, we analyzed the fair value of tangible and intangible assets acquired and liabilities assumed. The preliminary allocation of acquisition cost to the assets acquired and liabilities assumed is summarized as follows (dollars in millions):
The acquisition cost allocation is preliminary pending final determination of the fair value of assets acquired and liabilities assumed, including final valuation of certain liabilities, property, plant and equipment, intangible assets, leases and deferred taxes. Intangible assets acquired included in this preliminary allocation consist primarily of trademarks, trade secrets and customer relationships. The applicable amortization periods are still being assessed. For purposes of this preliminary allocation of fair value, we have assigned any excess of the acquisition cost over the estimated preliminary fair value to goodwill. The estimated goodwill recognized is attributable primarily to projected future profitable growth, penetration into downstream markets and synergies. We expect that none of the estimated goodwill arising from the acquisition will be deductible for income tax purposes. It is possible that material changes to this preliminary allocation of acquisition cost could occur.
The acquired business had revenues and net income of $199 million and $12 million, respectively, for the period from the date of acquisition to December 31, 2020. PRO FORMA INFORMATION FOR ACQUISITIONS OCCURRING IN2020 If the CVC Thermoset Specialties Acquisition and the Icynene-Lapolla Acquisition were to have occurred on January 1, 2019, the following estimated pro forma revenues, net income and net income attributable to Huntsman Corporation and Huntsman International would have been reported (dollars in millions):
Acquisition of Remaining Interest in Sasol-Huntsman Joint Venture On September 30, 2019, we acquired from Sasol, our former joint venture partner, the 50% noncontrolling interest that we did not own in the Sasol-Huntsman maleic anhydride joint venture. We paid Sasol $101 million, which included acquired cash, net of any debt. The purchase price was funded from the 2019 Term Loan. See “Note 15. Debt—Direct and Subsidiary Debt—Term Loan Credit Facility.” In connection with this acquisition, we recorded an adjustment to additional paid-in capital, net of tax, of $11 million. Prior to acquiring the 50% noncontrolling interest that we did not own, we accounted for Sasol-Huntsman as a variable interest entity. See “Note 8. Variable Interest Entities.” The effects of changes in our ownership interest in Sasol-Huntsman on the equity attributable to Huntsman Corporation and Huntsman International are as follows (dollars in millions):
Acquisition of Demilec On April 23, 2018, we acquired 100% of the outstanding equity interests of Demilec (USA) Inc. and Demilec Inc. (collectively, "Demilec") for approximately $353 million, including working capital adjustments, in an all-cash transaction ("Demilec Acquisition"), which was funded from our Prior Credit Facility and our U.S. A/R Program. Demilec is a leading North American manufacturer and distributor of spray polyurethane foam formulations for residential and commercial applications. The acquired business was integrated into our Polyurethanes segment. Transaction costs charged to expense related to this acquisition were approximately $5 million in 2018 and were recorded in other operating (income) expense, net in our consolidated statements of operations. The Demilec Acquisition was aligned with our stated strategy to grow our downstream polyurethanes business and leverage our global platform to expand Demilec’s portfolio of spray polyurethane foam formulations into international markets. We have accounted for the Demilec Acquisition using the acquisition method. As such, we determined the fair value of tangible and intangible assets acquired and liabilities assumed. The allocation of acquisition cost to the assets acquired and liabilities assumed is summarized as follows (dollars in millions):
Intangible assets acquired consist primarily of trademarks, trade secrets and customer relationships, all of which are being amortized over 15 years. We have assigned any excess of the acquisition cost of the fair values to goodwill. During the third quarter of 2018, we received $4 million related to the settlement of certain purchase price adjustments. The goodwill recognized is attributable primarily to projected future profitable growth, penetration into downstream markets and synergies. The acquired business had revenues and net income of $142 million and $5 million, respectively, for the period from the date of acquisition to December 31, 2018. If this acquisition were to have occurred on January 1, 2018, the following estimated pro forma revenues, net income, net income attributable to Huntsman Corporation and Huntsman International and income per share for Huntsman Corporation would have been reported (dollars in millions):
4. DISCONTINUED OPERATIONS AND BUSINESS DISPOSITIONS Sale of Chemical Intermediates Businesses On January 3, 2020, we completed the sale of our Chemical Intermediates Businesses to Indorama in a transaction valued at approximately $2 billion, comprised of a cash purchase price of approximately $1.92 billion and the transfer of approximately $72 million in net underfunded pension and other post-employment benefit liabilities. In connection with this sale, we received proceeds of approximately $1.92 billion and recognized a net after-tax gain of $748 million in 2020. Additionally, in connection with this sale, we entered into long-term supply agreements with Indorama for certain raw materials at market prices supplied by our former Chemical Intermediates Businesses. In connection with this sale, we recognized approximately $19 million of income as a result of a liquidation of LIFO inventory. During the year ended December 31, 2020, we paid $231 million of income taxes with respect to the gain on the sale of our Chemical Intermediates Businesses. With the sale of approximately 42.4 million ordinary shares we held in Venator to SK Capital Partners, LP completed on December 23, 2020, we offset the capital loss on the sale of the Venator shares against the capital gain realized on the sale of our Chemical Intermediates Businesses. For more information on the sale of ordinary shares we hold in Venator to SK Capital Partners, LP, see “Note 1. Recent Developments – Sale of Venator Interest.” The following table reconciles the carrying amounts of major classes of assets and liabilities of discontinued operations to total assets and liabilities of discontinued operations that were classified as held for sale in our consolidated balance sheets (dollars in millions):
The following table reconciles major line items constituting pretax income of discontinued operations to after-tax income (loss) of discontinued operations as presented in our consolidated statements of operations (dollars in millions):
Separation and Deconsolidation of Venator In August 2017, we separated our Titanium Dioxide and Performance Additives business and conducted an initial public offering of ordinary shares of Venator. Beginning in December 2018, following a series of public offerings and sales of Venator ordinary shares, our ownership in Venator decreased to approximately 49%, and we began accounting for our remaining interest in Venator as an equity method investment using the fair value option. On December 23, 2020, we completed the sale of approximately 42.4 million ordinary shares of Venator and received approximately $99 million in cash. See “Note 1. General—Recent Developments—Sale of Venator Interest.” Subsequent to this sale of ordinary shares of Venator, we no longer account for our current remaining ownership interest in Venator as an equity method investment, but rather as an investment in equity securities that are marked to fair value with changes in fair value reported in earnings. For the years ended December, 2020, 2019 and 2018, we recorded a loss of $55 million, $19 million and $62 million, respectively. The loss of $88 million for the year ended December 31, 2020 primarily includes the marked to fair value adjustment of $43 million for the Venator ordinary shares we hold, a loss of $12 million related to the sale of approximately 42.4 million Venator ordinary shares and a loss of $31 million on the write off of a receivable related to certain income tax benefits that were reduced upon the completion of the sale of Venator shares to SK Capital Partners, LP. These gains and losses were recorded in “Fair value adjustments to Venator investment and related loss on disposal” on our consolidated statements of operations. Sale of India-Based Do-It-Yourself Consumer Adhesives Business On November 3, 2020, we completed the sale of the India-based DIY business, previously part of our Advanced Materials segment, to Pidilite Industries Ltd. and received cash of approximately $257 million. Under the terms of the agreement, we may receive up to approximately $28 million of additional cash under an earnout within 18 months if the business achieves certain sales revenue targets in line with the DIY business' 2019 performance. In connection with this sale, we recognized a pretax gain of $247 million in the fourth quarter of 2020, which was recorded in gain on sale of India-based DIY business in our consolidated statements of operations. 5. INVENTORIES Inventories consisted of the following (dollars in millions):
For December 31, 2020 and 2019, approximately 7% and 9% of inventories were recorded using the LIFO cost method, respectively. 6. PROPERTY, PLANT AND EQUIPMENT The cost and accumulated depreciation of property, plant and equipment were as follows (dollars in millions): Huntsman Corporation
Depreciation expense for Huntsman Corporation for 2020, 2019 and 2018 was $242 million, $245 million and $239 million, respectively. Huntsman International
Depreciation expense for Huntsman International for 2020, 2019 and 2018 was $242 million, $245 million and $236 million, respectively. 7. INVESTMENT IN UNCONSOLIDATED AFFILIATES Our ownership percentage and investment in unconsolidated affiliates were as follows (dollars in millions):
Summarized Financial Information of Unconsolidated Affiliates Summarized financial information of our unconsolidated affiliates as of December 31, 2020 and 2019 and for the years ended December 31, 2020, 2019 and 2018 is as follows (dollars in millions):
8. 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:
Sasol-Huntsman was our 50%-owned joint venture with Sasol that owned and operated a maleic anhydride facility in Moers, Germany. On September 30, 2019, we acquired the 50% noncontrolling interest that we did not own in the Sasol-Huntsman. As such, as of September 30, 2019, Sasol-Huntsman became our wholly-owned subsidiary and was no longer accounted for as a variable interest entity. During the year ended December 31, 2020, there were no changes in our variable interest entities. Creditors of our variable interest entities have no recourse to our general credit. See “Note 15. Debt—Direct and Subsidiary Debt.” As the primary beneficiary of these variable interest entities at December 31,2020, the joint ventures’ assets, liabilities and results of operations are included in our consolidated financial statements. The following table summarizes the carrying amount of our variable interest entities’ assets and liabilities included in our consolidated balance sheets as of December 31, 2020 and 2019 (dollars in millions):
The revenues, income from continuing operations before income taxes and net cash provided by operating activities for our variable interest entities are as follows (dollars in millions):
9. LEASES We primarily lease manufacturing and research facilities, administrative offices, land, tanks, railcars and equipment. Leases with an initial term of 12 months or less are not recognized on the balance sheets; we recognize lease expense for these leases on a straight-line basis over the lease term. Our variable lease cost was approximately nil for each of the years ended December 31, 2020 and 2019, respectively. Our leases have remaining lives from one month to 37 years. Certain lease agreements include one or more options to renew, at our discretion, with renewal terms that can extend the lease term by approximately one year to 30 years or more. Renewal and termination options that we are reasonably certain to exercise have been included in the calculation of the lease right-of-use assets and lease liabilities. None of our lease agreements contain material residual value guarantees or material restrictions or covenants. The components of operating lease expense, cash flows and supplemental noncash information from continuing operations are as follows (dollars in millions):
The weighted-average lease term and discount rate for our operating leases from continuing operations are as follows:
The undiscounted future cash flows of operating lease liabilities from continuing operations as of December 31, 2020 are as follows (dollars in millions):
As of December 31, 2020, we have additional leases, primarily for leases of office and manufacturing facilities and rail cars, that have not yet commenced of approximately $9 million. These leases will commence in 2021 with lease terms of up to seven years. During November 2020, we entered into a sale and leaseback agreement to sell certain properties in Basel, Switzerland for approximately CHF 67 million (approximately $73 million) and to lease those properties back for five years. This transaction resulted in a gain of approximately CHF 30 million (approximately $33 million). 10. INTANGIBLE ASSETS The gross carrying amount and accumulated amortization of intangible assets were as follows (dollars in millions): Huntsman Corporation
Amortization expense was $33 million, $16 million and $6 million for the years ended December 31, 2020, 2019 and 2018, respectively. Huntsman International
Amortization expense was $33 million, $16 million and $6 million for the years ended December 31, 2020, 2019 and 2018, respectively.
Our and Huntsman International’s estimated future amortization expense for intangible assets over the next five years is as follows (dollars in millions):
11. OTHER NONCURRENT ASSETS Other noncurrent assets consisted of the following (dollars in millions):
Amortization expense of catalyst assets for the years ended December 31, 2020, 2019 and 2018 was $8 million, $9 million and $10 million, respectively. 12. ACCRUED LIABILITIES Accrued liabilities consisted of the following (dollars in millions): Huntsman Corporation
Huntsman International
13. RESTRUCTURING, IMPAIRMENT AND PLANT CLOSING COSTS (CREDITS) As of December 31, 2020, 2019 and 2018, accrued restructuring costs by type of cost and initiative consisted of the following (dollars in millions):
Details with respect to our reserves for restructuring, impairment and plant closing costs are provided below by segment and initiative (dollars in millions):
Details with respect to cash and noncash restructuring charges for the years ended December 31, 2020, 2019 and 2018 by initiative are provided below (dollars in millions):
2020Restructuring Activities Beginning in the second quarter of 2020, our Polyurethanes segment implemented a restructuring program to reorganize its spray polyurethane foam business to better position this business for efficiencies and growth in coming years. In connection with this restructuring program, we recorded restructuring expense of approximately $9 million for the year ended December 31, 2020, primarily related to workforce reductions and accelerated depreciation recorded as restructuring, impairment and plant closing costs. We expect to record additional restructuring expenses of approximately $4 million through 2021. Beginning in the third quarter of 2020, our Polyurethanes segment implemented a restructuring program to optimize its downstream footprint. In connection with this restructuring program, we recorded restructuring expense of approximately $12 million for the year ended December 31, 2020, and we expect to record further restructuring expenses of between approximately $15 million and $20 million through 2021. Beginning in the second quarter of 2020, our Performance Products segment implemented a restructuring program, primarily related to workforce reductions, in response to the sale of our Chemical Intermediates Businesses to Indorama. In connection with this restructuring program, we recorded restructuring expense of approximately $4 million for the year ended December 21, 2020. Beginning in the second quarter of 2020, our Advanced Materials segment implemented restructuring programs, primarily related to workforce reductions and accelerated depreciation in connection with the CVC Thermoset Specialties Acquisition, the alignment of the segment’s commercial organization and optimization of the segment’s manufacturing processes. In connection with these restructuring programs, we recorded restructuring expense of approximately $10 million for the year ended December 31, 2020. During 2020, our Textile Effects segment implemented restructuring programs to rationalize and realign structurally across various functions and certain locations within the segment. In connection with these restructuring programs, we recorded restructuring expense of approximately $7 million for the year ended December 31, 2020 related primarily to workforce reductions. 2019Restructuring Activities In September 2011, we initiated a restructuring program in our Textile Effects segment to close its production facilities and business support offices in Basel, Switzerland. In July 2019, we sold the production and business support offices in Basel. Accordingly, during the third quarter of 2019, we received proceeds of $49 million related to this sale and recognized a corresponding gain on disposal of assets of $49 million. This gain was recorded as a credit to restructuring, impairment and plant closing costs during the third quarter of 2019. 2018Restructuring Activities In 2011, we implemented a significant restructuring of our Textile Effects segment (the “Textile Effects Restructuring Plan”), including the closure of our production facilities and business support offices in Basel, Switzerland. In connection with this plan, we recorded restructuring reserves covering, among other things, a non-cancelable long-term service agreement. In the fourth quarter of 2018, we settled this agreement in exchange for the payment of $10 million, $8 million of which was paid in 2019 and $2 million will be paid in 2023. In connection with this settlement, we reversed the related restructuring reserve and recorded a net credit of $29 million in the fourth quarter of 2018. In addition, during 2018, we recorded a credit of $4 million primarily related to a gain on the sale of land at the Basel, Switzerland site. Our Corporate and other segment recorded restructuring expense of $15 million in 2018 related to corporate initiatives. 14. OTHER NONCURRENT LIABILITIES Other noncurrent liabilities consisted of the following (dollars in millions): Huntsman Corporation
Huntsman International
F- 35 15. DEBT Outstanding debt, net of debt issuance costs, of consolidated entities consisted of the following (dollars in millions): Huntsman Corporation
Huntsman International
Direct and Subsidiary Debt Substantially all of our 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 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. Debt Issuance Costs We record debt issuance costs related to a debt liability on the balance sheets as a reduction in the face amount of that debt liability. As of December 31, 2020 and 2019, the amount of debt issuance costs directly reducing the debt liability was $9 million and $11 million, respectively. We record the amortization of debt issuance costs as interest expense. Revolving Credit Facility On May 21, 2018, Huntsman International entered into the Revolving Credit Facility. Borrowings under the Revolving Credit Facility will bear interest at the rates specified in the credit agreement governing the Revolving Credit Facility, which will vary based on the type of loan and Huntsman International’s debt ratings. Unless earlier terminated, the Revolving Credit Facility will mature in May 2023. Huntsman International may increase the Revolving Credit Facility commitments up to an additional $500 million, subject to the satisfaction of certain conditions. In connection with entering into the Revolving Credit Facility, Huntsman International terminated all commitments and repaid all obligations under our previous $650 million senior secured revolving credit facility. In addition, we recognized a loss of early extinguishment of debt of $3 million. As of December 31, 2020, our Revolving Credit Facility was as follows (dollars in millions):
Term Loan Credit Facility On September 24, 2019, Huntsman International entered into the 2019 Term Loan, pursuant to which Huntsman International borrowed an aggregate principal amount of €92 million (or $101 million equivalent). We used the net proceeds from the 2019 Term Loan to finance our acquisition of the 50% noncontrolling interest that we did not own in the Sasol-Huntsman maleic anhydride joint venture. On September 22, 2020 we repaid the 2019 Term Loan in full at maturity. A/R Programs Our 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 by the U.S. SPE and the EU SPE. In April 2019, we entered into amendments to the EU A/R Program (the “European Amendment”) and the U.S. A/R Program (the “U.S. Amendment”). The European Amendment, among other things, extended the scheduled commitment termination date of the loan facility to April 2022, reduced the facility maximum funding availability from €150 million to €100 million and made certain other amendments. The U.S. Amendment, among other things, extended the scheduled commitment termination date of the loan facility to April 2022 and made certain other amendments. In December 2019, we entered into amendments to the U.S. A/R Program and the EU A/R Program. The European amendment allowed the removal of pledged obligors related to the Chemical Intermediates Businesses sold to Indorama. The U.S. amendment allowed the removal of pledged obligors related to the Chemical Intermediates Businesses sold to Indorama as well as reduced the maximum funding capacity from $250 million to $150 million upon completion of the sale on January 3, 2020. In October 2020, we entered into an amendment to the U.S. A/R Program to account for certain internal reorganization activities related to CVC Thermoset Specialties Acquisition. Information regarding our A/R Programs as of December 31, 2020 was as follows (monetary amounts in millions):
As of December 31, 2020 and December 31, 2019, $198 million and $221 million, respectively, of accounts receivable were pledged as collateral under our A/R Programs. Notes As of December 31,2020, we had outstanding the following notes (monetary amounts in millions):
The 2021,2022,2025 and 2029 Senior Notes are general unsecured senior obligations of Huntsman International. The indentures impose certain limitations on the ability of Huntsman International and its subsidiaries to, among other things, incur additional indebtedness secured by any principal properties, incur indebtedness of nonguarantor subsidiaries, enter into sale and leaseback transactions with respect to any principal properties and consolidate or merge with or into any other person or lease, sell or transfer all or substantially all of its properties and assets. Upon the occurrence of certain change of control events, holders of the 2021,2022,2025 and 2029 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. On March 13, 2019, Huntsman International completed a $750 million offering of its 4.50% senior notes due 2029 (“2029 Senior Notes”). On March 27, 2019, Huntsman International applied the net proceeds of the offering of the 2029 Senior Notes to redeem in full $650 million in aggregate principal amount of its 4.875% senior notes due 2020 (“2020 Senior Notes”) and also paid associated costs and accrued interest of $21 million and $12 million, respectively. In addition, we recognized a loss on early extinguishment of debt of $23 million. The 2029 Senior Notes bear interest at 4.50% per year, payable semi-annually on May 1 and November 1, and will mature on May 1, 2029. Huntsman International may redeem the 2029 Senior Notes in whole or in part at any time prior to February 1,2029 at a price equal to 100% of the principal amount thereof plus a “make-whole” premium and accrued and unpaid interest. Huntsman International may redeem the 2029 Senior Notes at any time, in whole or from time to time in part, on or after February 1, 2029 at a redemption price equal to 100% of the principal amount of the notes to be redeemed, plus accrued and unpaid interest. Redemption of the 2021 Senior Notes On January 15, 2021, we redeemed in full €445 million (approximately $541 million) in aggregate principal amount of our 2021 Senior Notes at the redemption price equal to 100% of the principal amount of the notes, plus accrued and unpaid interest to, but not including, the redemption date. Variable Interest Entity Debt As of December 31, 2020, AAC, our consolidated 50%-owned joint venture, had $50 million outstanding under its loan commitments and debt financing arrangements. As of December 31, 2020, we have $47 million classified as current debt and $3 million as long-term debt on our consolidated balance sheets. We do not guarantee these loan commitments, and AAC is not a guarantor of any of our other debt obligations. Note Payable from Huntsman International to Huntsman Corporation During the first quarter of 2020, our loan of $380 million to our subsidiary Huntsman International was repaid to us in full. Compliance With Covenants Our Revolving Credit Facility contains a financial covenant regarding the leverage ratio of Huntsman International and its subsidiaries. The Revolving Credit Facility also contains other customary covenants and events of default for credit facilities of this type. Upon an event of default that is not cured or waived within any applicable cure periods, in addition to other remedies that may be available to the lenders, the obligations under the Revolving Credit Facility may be accelerated. The agreements governing our A/R Programs also contain certain receivable performance metrics. Any material failure to meet the applicable A/R Programs’ metrics 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 Revolving Credit Facility, which could require us to pay off the balance of the Revolving Credit Facility in full and could result in the loss of our Revolving Credit Facility. We believe that we are in compliance with the covenants governing our material debt instruments, including our Revolving Credit Facility, our A/R Programs and our notes. Maturities The scheduled maturities of our debt (excluding debt to affiliates) by year as of December 31,2020 are as follows (dollars in millions):
16. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES We are exposed to market risks, such as changes in interest rates, foreign exchange rates and commodity prices. From time to time, we enter into transactions, including transactions involving derivative instruments, to manage certain of these exposures. We also hedge our net investment in certain European operations. Changes in the fair value of the hedge in the net investment of certain European operations are recorded in accumulated other comprehensive loss. Interest Rate Risks Through our borrowing activities, we are exposed to interest rate risk. Such risk arises due to the structure of our debt portfolio, including the mix of fixed and floating interest rates. Actions taken to reduce interest rate risk include managing the mix and rate characteristics of various interest-bearing liabilities, as well as entering into interest rate derivative instruments. F- 38 From time to time, we may purchase interest rate swaps and/or other derivative instruments to reduce the impact of changes in interest rates on our floating-rate exposures. Under interest rate swaps, we agree with other parties to exchange, at specified intervals, the difference between fixed-rate and floating-rate interest amounts calculated by reference to an agreed notional principal amount. On January 9, 2019, we entered into a six-year $17 million notional value interest rate hedge with a fixed rate of 2.66%. This swap was designated as a cash flow hedge and the effective portion of the changes in the fair value of the swap was recorded in other comprehensive (loss) income. In November 2019, we terminated this swap and paid $1 million to our counterparties. This $1 million settlement will be amortized from accumulated other comprehensive loss to earnings. During 2020, there were no other reclassifications from accumulated other comprehensive loss to earnings. The actual amount that will be reclassified to earnings over the next twelve months may vary from this amount due to changing market conditions. We would be exposed to credit losses in the event of nonperformance by a counterparty to our derivative financial instruments. We anticipate, however, that the counterparties will be able to fully satisfy their obligations under the contracts. Market risk arises from changes in interest rates. Foreign Exchange Rate Risk Our cash flows and earnings are subject to fluctuations due to exchange rate variation. Our revenues and expenses are denominated in various currencies. We 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 three months or less). We do not hedge our currency exposures in a manner that would eliminate the effect of changes in exchange rates on our cash flows and earnings. As of December 31, 2020 and 2019, we had approximately $145 million and $135 million, respectively, notional amount (in U.S. dollar equivalents) outstanding in foreign currency contracts with a term of approximately one month. A portion of our debt is denominated in euros. We also finance certain of our non-U.S. subsidiaries with intercompany loans that are, in many cases, denominated in currencies other than the entities’ functional currency. We manage the net foreign currency exposure created by this debt through various means, including cross-currency swaps, the designation of certain intercompany loans as permanent loans because they are not expected to be repaid in the foreseeable future and the designation of certain debt and swaps as net investment hedges. Foreign currency transaction gains and losses on intercompany loans that are not designated as permanent loans are recorded in earnings. Foreign currency transaction gains and losses on intercompany loans that are designated as permanent loans are recorded in other comprehensive income (loss). From time to time, we review such designation of intercompany loans. We review our non-U.S. dollar denominated debt and derivative instruments to determine the appropriate amounts designated as hedges. As of December 31,2020, we have designated approximately €523 million (approximately $641 million) of euro-denominated debt as a hedge of our net investment. For the years ended December 31, 2020, 2019 and 2018, the amounts recognized on the hedge of our net investment were a loss of $66 million, a gain of $14 million and a gain of $35 million, respectively, and were recorded in other comprehensive (loss) income. Commodity Prices Risk Inherent in our business is exposure to price changes for several commodities. However, our exposure to changing commodity prices is somewhat limited since the majority of our raw materials are acquired at posted or market related prices, and sales prices for many of our finished products are at market related prices which are largely set on a monthly or quarterly basis in line with industry practice. Consequently, we do not generally hedge our commodity exposures. 17. FAIR VALUE The fair values of our financial instruments were as follows (dollars in millions):
The carrying amounts reported in the balance sheets of cash and cash equivalents, accounts receivable and accounts payable approximate fair value because of the immediate or short-term maturity of these financial instruments. Our investment in Venator is marked to fair value, which is obtained through market observable pricing using prevailing market prices (Level 1). Additionally, the estimated fair value of the option agreement related to the remaining ordinary shares we hold in Venator is based on a valuation technique using market observable inputs (Level 2). See “Note 4. Discontinued Operations and Business Dispositions—Separation and Deconsolidation of Venator.” The fair values of non-qualified employee benefit plan investments are obtained through market observable pricing using prevailing market prices (Level 1). The estimated fair values of our long-term debt are based on quoted market prices for the identical liability when traded in an active market (Level 1). The fair value estimates presented herein are based on pertinent information available to management as of December 31, 2020 and 2019. Although management is not aware of any factors that would significantly affect the estimated fair value amounts, such amounts have not been comprehensively revalued for purposes of these financial statements since December 31,2020, and current estimates of fair value may differ significantly from the amounts presented herein. During the years ended December 31, 2020 and 2019, there were 0 instruments measured at fair value on a recurring basis using significant unobservable inputs (Level 3), and there were 0 gains or losses (realized or unrealized) included in earnings for instruments categorized as Level 3 within the fair value hierarchy. F- 39 18. REVENUE RECOGNITION The following table disaggregates our revenue by major source for the years ended December 31, 2020, 2019 and 2018 (dollars in millions):
F- 40 19. EMPLOYEE BENEFIT PLANS Defined Benefit and Other Postretirement Benefit We provide a trusteed, non contributory defined benefit pension plan (the “Plan”) that covers the majority of our U.S. employees. Effective July 1, 2004, the Plan formula for employees not covered by a collective bargaining agreement was converted to a cash balance design. For represented employees, participation in the cash balance design was subject to the terms of negotiated contracts. For participating employees, benefits accrued under the prior formula were converted to opening cash balance accounts. The cash balance benefit formula provides annual pay credits from 6% to 12% of eligible pay, depending on age and service, plus accrued interest. The conversion to the cash balance plan did not have a significant impact on the accrued benefit liability, the funded status or ongoing pension expense. Beginning July 1, 2014, the Huntsman Defined Benefit Pension Plan was closed to new non-union entrants and as of April 1, 2015, it was closed to new union entrants. In addition, as of January 1, 2015, Rubicon LLC closed its defined benefit plan to new entrants. Following the closure of these plans, new hires have been provided with a defined contribution plan with a non-discretionary employer contribution of 6% of pay and a company match of up to 4% of pay, for a total company contribution of up to 10% of pay. We also sponsor unfunded postretirement benefit plans other than pensions, which provide medical and life insurance benefits. Effective August 1, 2015, the post retirement benefit plans were closed to new entrants. Our postretirement benefit plans provide access to two fully insured Medicare Part D plans including prescription drug benefits affected by the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (the “Act”). We cannot determine whether the medical benefits provided by our postretirement benefit plans are actuarially equivalent to those provided by the Act. We do not collect a subsidy and our net periodic postretirement benefits cost, and related benefit obligation, do not reflect an amount associated with the subsidy. We do not subsidize the premium cost of these plans; the premiums are entirely paid by the retirees. We sponsor defined benefit plans in a number of countries outside of the U.S. The availability of these plans, and their specific design provisions, are consistent with local competitive practices and regulations. The following table sets forth the funded status of the plans for us and Huntsman International and the amounts recognized in our consolidated balance sheets at December 31, 2020 and 2019 (dollars in millions):
F- 41 Huntsman Corporation
Huntsman International
During 2020, the overall increases in our U.S. pension and other postretirement benefit plan obligations were primarily due to decreases in discount rates. The overall increase in our non-U.S. pension plan obligation was primarily due to decreases in discount rates in Switzerland, Germany, The Netherlands and the U.K., as well as foreign currency exchange rate changes in Switzerland, The Netherlands, Germany and Belgium. During 2019, the overall increases in our U.S. pension and other postretirement benefit plan obligations were primarily due to decreases in discount rates. The overall increase in our non-U.S. pension plan obligation was primarily due to decreases in discount rates in Switzerland, Germany, The Netherlands and the U.K. Components of net periodic benefit costs of continuing operations for the years ended December 31, 2020, 2019 and 2018 were as follows (dollars in millions): Huntsman Corporation
F- 42 Huntsman International
The amounts recognized in net periodic benefit cost and other comprehensive income (loss) as of December 31, 2020, 2019 and 2018 were as follows (dollars in millions): Huntsman Corporation
F- 43 Huntsman International
The following weighted-average assumptions were used to determine the projected benefit obligation at the measurement date and the net periodic pension cost for the year:
F- 44 The projected benefit obligation and fair value of plan assets for the defined benefit plans with projected benefit obligations in excess of plan assets as of December 31, 2020 and 2019 were as follows (dollars in millions):
The projected benefit obligation, accumulated benefit obligation and fair value of plan assets for the defined benefit plans with an accumulated benefit obligation in excess of plan assets as of December 31, 2020 and 2019 were as follows (dollars in millions):
Expected future contributions and benefit payments related to continuing operations are as follows (dollars in millions):
Our investment strategy with respect to pension assets is to pursue an investment plan that, over the long term, is expected to protect the funded status of the plan, enhance the real purchasing power of plan assets, and not threaten the plan’s ability to meet currently committed obligations. Additionally, our investment strategy is to achieve returns on plan assets, subject to a prudent level of portfolio risk. Plan assets are invested in a broad range of investments. These investments are diversified in terms of domestic and international equities, both growth and value funds, including small, mid and large capitalization equities; short-term and long-term debt securities; real estate; and cash and cash equivalents. The investments are further diversified within each asset category. The portfolio diversification provides protection against a single investment or asset category having a disproportionate impact on the aggregate performance of the plan assets. F- 45 Our pension plan assets are managed by outside investment managers. The investment managers value our plan assets using quoted market prices, other observable inputs or unobservable inputs. For certain assets, the investment managers obtain third-party appraisals at least annually, which use valuation techniques and inputs specific to the applicable property, market, or geographic location. During 2020, there was a transfer into Level 3 assets of approximately $11 million due to a change in the significance of unobservable inputs for one investment, which is immaterial. This investment is included within the real estate/other category. We have established target allocations for each asset category. Our pension plan assets are periodically rebalanced based upon our target allocations. The fair value of plan assets for the pension plans was $3.1 billion and $2.8 billion at December 31, 2020 and 2019, respectively. The following plan assets are measured at fair value on a recurring basis (dollars in millions):
F- 46 The following table reconciles the beginning and ending balances of plan assets measured at fair value using unobservable inputs (Level 3) (dollars in millions):
Based upon historical returns, the expectations of our investment committee and outside advisors, the expected long-term rate of return on the pension assets is estimated to be between 5.68% and 7.53%. The asset allocation for our pension plans at December 31, 2020 and 2019 and the target allocation for 2021, by asset category are as follows:
Equity securities in our pension plans did not include any direct investments in equity securities of our Company or our affiliates at the end of 2020. Defined Contribution Plans—U.S. We had a money purchase pension plan that covered substantially all of our domestic employees who were hired prior to January 1, 2004. Employer contributions were made based on a percentage of employees’ earnings (ranging up to 8%). During 2014, we closed this plan to non-union participants, and in 2015, we closed this plan to union associates. We continue to provide equivalent benefits to those who were covered under this plan into their salary deferral account. We have a salary deferral plan covering substantially all U.S. employees. Plan participants may elect to make voluntary contributions to this plan up to a specified amount of their compensation. We contribute an amount equal to the participant’s contribution, not to exceed 4 % of the participant’s compensation. For new hires who are not eligible for the cash balance plan, and associates who were covered by the money purchase pension plan prior to its closure, we contribute an additional amount into their salary deferral accounts, not to exceed 6% of the participant’s compensation. Our total combined expense for the above defined contribution plans for each of the years ended December 31, 2020, 2019 and 2018 was $17 million, $17 million and $16 million, respectively. F- 47 DefinedContribution Plans—Non-U.S We have defined contribution plans in a variety of non-U.S. locations. All UK associates are eligible to participate in the Huntsman UK Pension Plan, a contract-based arrangement with a third party. Company contributions vary by business during a five-year transition period. Plan participants elect to make voluntary contributions to this plan up to a specified amount of their compensation. We contribute a matching amount not to exceed 12% of the participant’s salary for new hires and 15% of the participant’s salary for all other participants. Our total combined expense for these defined contribution plans for the years ended December 31, 2020, 2019 and 2018 was $3 million, $4 million and $4 million, respectively, primarily related to the Huntsman UK Pension Plan. Supplemental Salary Deferral Plan and Supplemental Executive Retirement Plan The Huntsman Supplemental Savings Plan (the “SSP”) is a non-qualified plan covering key management employees and allows participants to defer amounts that would otherwise be paid as compensation. The participant can defer up to 75% of their salary and bonus each year. This plan also provides benefits that would be provided under the Huntsman Salary Deferral Plan if that plan were not subject to legal limits on the amount of contributions that can be allocated to an individual in a single year. The SSP was amended and restated effective as of January 1, 2005 to allow eligible executive employees to comply with Section 409A of the Internal Revenue Code of 1986. The Huntsman Supplemental Executive Retirement Plan (the “SERP”) is an unfunded non-qualified pension plan established to provide certain executive employees with benefits that could not be provided, due to legal limitations, under the Huntsman Defined Benefit Pension Plan, a qualified defined benefit pension plan, and the Huntsman Money Purchase Pension Plan, a qualified money purchase pension plan. Assets of these plans are included in other noncurrent assets and as of December 31, 2020 and 2019 were $44 million and $39 million, respectively. During each of the years ended December 31, 2020, 2019 and 2018, we expensed a total of $1 million as contributions to the SSP and the SERP. Stock-Based Incentive Plan On May 5, 2016, our stockholders approved a new Huntsman Corporation 2016 Stock Incentive Plan (the “2016 Stock Incentive Plan”), which reserved 8.2 million shares for issuance. The Huntsman Corporation Stock Incentive Plan, as amended and restated (the “Prior Plan”), remains in effect for outstanding awards granted pursuant to the Prior Plan, but no further awards may be granted under the Prior Plan. Under the 2016 Stock Incentive Plan, we may grant nonqualified stock options, incentive stock options, stock appreciation rights, restricted stock, phantom stock, performance share units and other stock-based awards to our employees, directors and consultants and to employees and consultants of our subsidiaries, provided that incentive stock options may be granted solely to employees. The terms of the grants under both the 2016 Stock Incentive Plan and the Prior Plan are fixed at the grant date. As of December 31, 2020, we had approximately 7 million shares remaining under the 2016 Stock Incentive Plan available for grant. See “Note 24. Stock-Based Compensation Plan.” International Plans International employees are covered by various post-employment arrangements consistent with local practices and regulations. Such obligations are included in other long-term liabilities in our consolidated balance sheets. 20. INCOME TAXES The following is a summary of U.S. and non-U.S. provisions for current and deferred income taxes (dollars in millions): Huntsman Corporation
Huntsman International
The following schedule reconciles the differences between the U.S. federal income taxes at the U.S. statutory rate to our provision for income taxes (dollars in millions): Huntsman Corporation
F- 49 Huntsman International
During 2020,2019 and 2018, the average statutory rate for countries with pre-tax income (in 2020, primarily our operations in China (25% statutory rate), the Netherlands (25% statutory rate), India (25% statutory rate) and Luxembourg (25% statutory rate), was higher than the average statutory rate for countries with pre-tax losses, resulting in a net expense of $16 million, $9 million and $27 million, respectively, as compared to the 21% U.S. statutory rate reflected in the reconciliation above. In certain non-U.S. tax jurisdictions, our U.S. GAAP functional currency is different than the local tax currency. As a result, foreign exchange gains and losses will impact our effective tax rate. For 2020,2019 and 2018, this resulted in tax benefits of nil, a $5 million and $10 million, respectively. In 2019, we recorded $199 million of deferred tax assets in connection with our tax basis in our Venator investment being greater than our book basis, which deferred tax asset was partially offset by a valuation allowance of $46 million (for a net tax benefit of $153 million), as further discussed below. Effective January 1, 2019, Switzerland reduced certain conditional income tax rates resulting in a decrease in our net deferred tax assets and a corresponding noncash income tax expense of $32 million for the year ended December 31, 2019. Under the U.S. Tax Reform Act’s global intangible low-taxed income (“GILTI”) provision, our non-U.S. operations are generally subject to U.S. tax. We have elected to treat the GILTI as a current-period expense when incurred. The stated purpose of the GILTI rules is to generate additional U.S. tax related to income in non-U.S. jurisdictions which incur less than a blended 13.125% non-U.S. tax rate. Our non-U.S. income is subject to a blended rate greater than 13.125%; however, in practice, the GILTI regulations result in additional tax liability as a result of expense allocations which limit our ability to utilize foreign tax credits against the GILTI inclusion. For 2020,2019 and 2018 we have incurred $7 million, $7 million and $16 million, respectively, of tax expense resulting from these expense allocations. In 2017, we booked provisional amounts for the remeasurements of U.S. deferred tax assets and liabilities and the transitional tax on deemed repatriation of deferred foreign income related to the enactment of the U.S. Tax Reform Act. During the remeasurement period in 2018, we recorded a net tax expense of $32 million. We did not make the election to reclassify the income tax effects of the U.S. Tax Reform Act from accumulated other comprehensive income to retained earnings. The 2020 sale of the India-based DIY business created a global taxable gain different than the gain for U.S. GAAP purposes. Because this transaction was the disposition of a legal entity in India, we paid only India capital gains tax on the transaction. The difference in the global taxation of this transaction and the U.S. GAAP gain at the U.S. statutory tax rate was $35 million. F- 50 The components of income (loss) from continuing operations before income taxes were as follows (dollars in millions): Huntsman Corporation
Huntsman International
Components of deferred income tax assets and liabilities were as follows (dollars in millions): Huntsman Corporation
F- 51 Huntsman International
We evaluate deferred tax assets to determine whether it is more likely than not that they will be realized. Valuation allowances are reviewed each period on a tax jurisdiction by jurisdiction basis to analyze whether there is sufficient positive or negative evidence to support a change in judgment about the realizability of the related deferred tax assets. These conclusions require significant judgment. In evaluating the objective evidence that historical results provide, we consider the cyclicality of businesses and cumulative income or losses during the applicable period. Cumulative losses incurred over the period limits our ability to consider other subjective evidence such as our projections for the future. Our judgments regarding valuation allowances are also influenced by factors outside of business results, including the costs and risks associated with any tax planning idea associated with utilizing a deferred tax asset. We have gross net operating losses (“NOLs”) of $1,037 million ($240 million tax-effected) in various non-U.S. jurisdictions. While the majority of the non-U.S. NOLs have no expiration date, $119 million ($20 million tax-effected) have a limited life (of which $60 million ($9 million tax-effected) are subject to a valuation allowance) and $57 million ($8 million tax-effected) are scheduled to expire in 2021, all of which are subject to a valuation allowance). We had $107 million ($17 million tax-effected) and $111 million ($16 million tax-effected) of NOLs expire unused in 2020 and 2019, respectively, all of which were subject to a valuation allowance. We have gross U.S. federal NOLs of $71 million ($15 million tax-effected), which were primarily acquired through acquisitions subject to tax change of control limitations. We expect to be able to utilize the all of these NOLs, and therefore they are not subject to a valuation allowance. Included in the $1,037 million of gross non-U.S. NOLs is $472 million ($118 million tax-effected) attributable to our Luxembourg entities. As of December 31,2020, due to the uncertainty surrounding the realization of the benefits of these losses, there is a valuation allowance of $63 million against these net tax-effected NOLs of $118 million. We have $30 million tax-effected U.S. capital loss carryovers generated in 2020. Capital loss carryovers may only be utilized against capital gains and have a 5-year carryforward period. We have placed a full valuation allowance against all of these capital loss carryovers. During 2019, based on our expectation that our remaining interest in Venator would be sold on or before December 31, 2023, we recorded $153 million of deferred tax benefit relating to the portion of the $199 million tax basis greater than book basis in our Venator investment. We expected to be able to utilize such future capital losses on our Venator investment against capital gains anticipated on the sale of our Chemical Intermediates Businesses. We established a valuation allowance of $46 million on the excess unrealizable built-in capital loss deferred tax asset. We also recognized $18 million of tax benefit relating to realized tax losses on our Venator investment. During 2020, we sold approximately 42.4 million ordinary shares of our remaining interest in Venator, which allowed us to utilize the expected portion of the losses against the gains on the sale of the Chemical Intermediates Businesses. Incremental changes to the deferred tax assets relating to the excess capital loss carryover and excess built-in capital loss in our remaining interest in Venator, as a result of the U.S. GAAP fair value adjustments to the Venator investment and related loss on disposal, are offset by a full valuation allowance. F- 52 During 2019, we also established $11 million of valuation allowances on the remaining Australia NOLs that are no longer more-likely-than-not realizable following the sale of the Australia portion of our Chemical Intermediates Businesses. During 2018, we released valuation allowances of $132 million. We released significant valuation allowances on certain net deferred tax assets in Switzerland based upon the increased and sustained profitability in our Advanced Materials and Textile Effects businesses. Given Switzerland’s limited seven-year carryover of NOLs, we expect that some of our NOLs will expire unused. Therefore, we recorded a partial release of the valuation allowance of $80 million in the second quarter of 2018. In addition, based upon the separation of Venator from our U.K. combined group and the increased and sustained profitability in our Polyurethanes business in the U.K., we released significant valuation allowances on certain net deferred tax assets in the U.K. Because the U.K. places limitations on the utilization of certain NOLs and limitations on other deferred tax assets, we recorded a partial valuation allowance release of $15 million in the second quarter of 2018. We also released $24 million of valuation allowances on certain net deferred tax assets in Luxembourg in the third quarter of 2018 as a result of changes in estimated future taxable income resulting from increased intercompany receivables and, therefore, increased income in Luxembourg, our primary treasury center outside of the U.S. Uncertainties regarding expected future income in certain jurisdictions could affect the realization of deferred tax assets in those jurisdictions and result in additional valuation allowances in future periods, or, in the case of unexpected pre-tax earnings, the release of valuation allowances in future periods. The following is a summary of changes in the valuation allowance (dollars in millions): Huntsman Corporation
Huntsman International
The following is a reconciliation of our unrecognized tax benefits (dollars in millions):
F- 53 As of December 31, 2020 and 2019, the amount of unrecognized tax benefits (not including interest and penalty expense) which, if recognized, would affect the effective tax rate is $16 million and $15 million, respectively. During 2020, we concluded and settled tax examinations in the U.S. (various states), Thailand and Korea. During 2019, we concluded and settled tax examinations in the U.S. (federal and various states). During 2018, we concluded and settled tax examinations in various jurisdictions, including but not limited to, Egypt and the U.S. (federal and various states). During 2020, for unrecognized tax benefits that impact tax expense, we recorded a net increase in unrecognized tax benefits with a corresponding income tax expenses (not including interest and penalty expense) of $1 million. During 2019, for unrecognized tax benefits that impacted tax expense, we recorded a net decrease in unrecognized tax benefits with a corresponding income tax benefit (not including interest and penalty expense) of $10 million. During 2018, for unrecognized tax benefits that impact tax expense, we recorded a net increase in unrecognized tax benefits with a corresponding income tax expenses (not including interest and penalty expense) of $5 million. In accordance with our accounting policy, we continue to recognize interest and penalties accrued related to unrecognized tax benefits in income tax expense.
We conduct business globally and, as a result, we file income tax returns in U.S. federal, various U.S. state and various non-U.S. jurisdictions. The following table summarizes the tax years that remain subject to examination by major tax jurisdictions:
Certain of our U.S. and non-U.S. income tax returns are currently under various stages of audit by applicable tax authorities and the amounts ultimately agreed upon in resolution of the issues raised may differ materially from the amounts accrued. We estimate that it is reasonably possible that certain of our non-U.S. unrecognized tax benefits could change within 12 months of the reporting date with a resulting decrease in the unrecognized tax benefits within a reasonably possible range of $0 million to $2 million. For the 12-month period from the reporting date, we would expect that a decrease in our unrecognized tax benefits would result in a corresponding benefit to our income tax expense. In connection with the provisions of U.S. Tax Reform, all non-U.S. earnings have generally been subject to U.S. tax and may be repatriated without incurring additional U.S. tax liability. Such repatriation may potentially be subject to limited foreign withholding taxes. We intend to continue to invest most of these earnings indefinitely within the local countries and do not expect to incur any significant additional taxes. There are certain countries where we do intend to repatriate some of our earnings, and we have accrued all withholding taxes for such amounts. F- 54 21. COMMITMENTS AND CONTINGENCIES Purchase Commitments We have various purchase commitments extending through 2039 for materials, supplies and services entered into in the ordinary course of business. Included in the purchase commitments table below are contracts which require minimum volume purchases that extend beyond one year or are renewable annually and have been renewed for 2020. Certain contracts allow for changes in minimum required purchase volumes in the event of a temporary or permanent shutdown of a facility. To the extent the contract requires a minimum notice period, such notice period has been included in the table below. The contractual purchase prices for substantially all of these contracts are variable based upon market prices, subject to annual negotiations. We have estimated our contractual obligations by using the terms of our current pricing for each contract. We also have a limited number of contracts which require a minimum payment even if no volume is purchased. We believe that all of our purchase obligations will be utilized in our normal operations. We made minimum payments of $2 million, $1 million and nil for the years ended December 31, 2020, 2019 and 2018, respectively, under such take or pay contracts without taking the product. Total purchase commitments as of December 31, 2020 are as follows (dollars in millions):
Legal Matters We are a party to various proceedings instituted by private plaintiffs, governmental authorities and others arising under provisions of applicable laws, including various environmental, products liability and other laws. Except as otherwise disclosed in this report, we do not believe that the outcome of any of these matters will have a material effect on our financial condition, results of operations or liquidity. 22. ENVIRONMENTAL, HEALTH AND SAFETY MATTERS EHS Capital Expenditures We may incur future costs for capital improvements and general compliance under EHS laws, including costs to acquire, maintain and repair pollution control equipment. For the years ended December 31, 2020, 2019 and 2018, our capital expenditures for EHS matters totaled $28 million, $42 million and $32 million, respectively. Because capital expenditures for these matters are subject to evolving regulatory requirements and depend, in part, on the timing, promulgation and enforcement of specific requirements, our capital expenditures for EHS matters have varied significantly from year to year and we cannot provide assurance that our recent expenditures are indicative of future amounts we may spend related to EHS and other applicable laws. Environmental Reserves We have accrued liabilities relating to anticipated environmental cleanup obligations, site reclamation and closure costs and known penalties. Liabilities are recorded when potential liabilities are either known or considered probable and can be reasonably estimated. Our liability estimates are calculated using present value techniques as appropriate and are based upon requirements placed upon us by regulators, available facts, existing technology and past experience. The environmental liabilities do not include amounts recorded as asset retirement obligations. We had accrued $4 million for environmental liabilities for both December 31, 2020 and 2019. Of these amounts, $1 million was classified as accrued liabilities in our consolidated balance sheets for both December 31, 2020 and 2019, and $3 million were classified as other noncurrent liabilities in our consolidated balance sheets for both December 31, 2020 and 2019. In certain cases, our remediation liabilities may be payable over periods of up to 30 years. We may incur losses for environmental remediation in excess of the amounts accrued; however, we are not able to estimate the amount or range of such potential excess. F- 55 Environmental Matters Under the Comprehensive Environmental Response, Compensation, and Liability Act (“CERCLA”) and similar state laws, a current or former owner or operator of real property in the U.S. may be liable for remediation costs regardless of whether the release or disposal of hazardous substances was in compliance with law at the time it occurred, and a current owner or operator may be liable regardless of whether it owned or operated the facility at the time of the release. Outside the U.S., analogous contaminated property laws, such as those in effect in France and Australia, can hold past owners and/or operators liable for remediation at former facilities. Currently, there are approximately 6 former facilities or third-party sites in the U.S. for which we have been notified of potential claims against us for cleanup liabilities, including, but not limited to, sites listed under CERCLA. Based on current information and past experiences at other CERCLA sites, we do not expect these third-party claims to have a material impact on our consolidated financial statements. Under the Resource Conservation and Recovery Act (“RCRA”) in the U.S. and similar state laws, we may be required to remediate contamination originating from our properties as a condition to our hazardous waste permit. Some of our manufacturing sites have an extended history of industrial chemical manufacturing and use, including on-site waste disposal. We are aware of soil, groundwater or surface contamination from past operations at some of our sites, and we may find contamination at other sites in the future. For example, our Geismar, Louisiana facility is the subject of ongoing remediation requirements imposed under RCRA. Similar laws exist in a number of locations in which we currently operate, or previously operated, manufacturing facilities, such as Australia, India, France, Hungary and Italy. North Maybe Canyon Mine Remediation The North Maybe Canyon Mine site is a CERCLA site and involves a former phosphorous mine near Soda Springs, Idaho, which is believed to have been operated by several companies, including a predecessor company to us. In 2004, the U.S. Forest Service notified us that we are a CERCLA potentially responsible party (“PRP”) for contamination originating from the site. In February 2010, we and Wells Cargo (another PRP) agreed to conduct a Remedial Investigation/Feasibility Study of a portion of the site and are currently engaged in that process. At this time, we are unable to reasonably estimate our potential liabilities at this site. 23. HUNTSMAN CORPORATION STOCKHOLDERS’ EQUITY Share Repurchase Program On February 7, 2018 and on May 3, 2018, our Board of Directors authorized us to repurchase up to an additional $950 million in shares of our common stock in addition to the $50 million remaining under our September 2015 share repurchase authorization. The share repurchase program will be supported by our free cash flow generation. Repurchases may be made through the open market, including through accelerated share repurchase programs, or in privately negotiated transactions, and repurchases may be commenced or suspended from time to time without prior notice. Shares of common stock acquired through the repurchase program are held in treasury at cost. During the first quarter of 2020, we repurchased 5,364,519 shares of our common stock for approximately $96 million, excluding commissions, under the repurchase program. Subsequent to the end of the first quarter of 2020, we suspended share repurchases under our existing share repurchase program in order to enhance our liquidity position in response to COVID-19. Dividends on Common Stock The following tables represent dividends on common stock for our Company for the years ended December 31, 2020 and 2019 (dollars in millions, except per share payment amounts):
F- 56 24. STOCK-BASED COMPENSATION PLAN Under the 2016 Stock Incentive Plan, we may grant nonqualified stock options, incentive stock options, stock appreciation rights, restricted stock, phantom stock, performance share units and other stock-based awards to our employees, directors and consultants and to employees and consultants of our subsidiaries, provided that incentive stock options may be granted solely to employees. The terms of the grants under both the 2016 Stock Incentive Plan and the Prior Plan are fixed at the grant date. Initially, there were approximately 8.2 million shares available for issuance under the 2016 Stock Incentive Plan. However, the number of shares available for issuance may be adjusted to include any shares surrendered, exchanged, forfeited or settled in cash pursuant to the Prior Plan. As of December 31, 2020, we had approximately 7 million shares remaining under the 2016 Stock Incentive Plan available for grant. Option awards have a maximum contractual term of 10 years and generally must have an exercise price at least equal to the market price of our common stock on the date the option award is granted. Outstanding stock-based awards generally vest over a three-year period. The compensation cost under the 2016 Stock Incentive Plan and the Prior Plan for our Company and Huntsman International were as follows (dollars in millions):
The total income tax benefit recognized in the statement of operations for stock-based compensation arrangements was $4 million, $8 million and $18 million for the years ended December 31, 2020, 2019 and 2018, respectively. Stock Options The fair value of each stock option award is estimated on the date of grant using the Black-Scholes valuation model that uses the assumptions noted in the following table. Expected volatilities are based on the historical volatility of our common stock through the grant date. The expected term of options granted was estimated based on the contractual term of the instruments and employees’ expected exercise and post-vesting employment termination behavior. The risk-free rate for periods within the contractual life of the option was based on the U.S. Treasury yield curve in effect at the time of grant. The assumptions noted below represent the weighted averages of the assumptions utilized for all stock options granted during the year.
F- 57 A summary of stock option activity under the 2016 Stock Incentive Plan and the Prior Plan as of December 31, 2020 and changes during the year then ended is presented below:
The weighted-average grant-date fair value of stock options granted during 2020, 2019 and 2018 was $8.25, $9.27 and $15.20 per option, respectively. As of December 31, 2020, there was $7 million of total unrecognized compensation cost related to nonvested stock option arrangements granted under the 2016 Stock Incentive Plan and the Prior Plan. That cost is expected to be recognized over a weighted-average period of approximately 1.8 years. During the years ended December 31, 2020, 2019 and 2018, the total intrinsic value of stock options exercised was approximately $9 million, $4 million and $78 million, respectively. Cash received from stock options exercised during the years ended December 31, 2020, 2019 and 2018 was approximately $3 million, $2 million and $17 million, respectively. The cash tax benefit from stock options exercised during the years ended December 31, 2020, 2019 and 2018 was approximately $2 million, $1 million, and $17 million, respectively. Nonvested Shares Nonvested shares granted under the 2016 Stock Incentive Plan and the Prior Plan consist of restricted stock and performance share unit awards, which are accounted for as equity awards, and phantom stock, which is accounted for as a liability award because it can be settled in either stock or cash. The fair value of each performance share unit award is estimated using a Monte Carlo simulation model that uses various assumptions, including an expected volatility rate and a risk-free interest rate. For the years ended December 31, 2020, 2019 and 2018, the weighted-average expected volatility rate was 34.0%, 34.6% and 44.3%, respectively, and the weighted average risk-free interest rate was 1.4%, 2.5% and 2.3%, respectively. For the performance share unit awards granted during the years ended December 31, 2020, 2019 and 2018, the number of shares earned varies based upon the Company achieving certain performance criteria over a three-year performance period. The performance criteria are total stockholder return of our common stock relative to the total stockholder return of a specified industry peer group for the three-year performance periods. A summary of the status of our nonvested shares as of December 31, 2020 and changes during the year then ended is presented below:
As of December 31,2020, there was $23 million of total unrecognized compensation cost related to nonvested share compensation arrangements granted under the Stock Incentive Plan and the Prior Plan. That cost is expected to be recognized over a weighted-average period of approximately 1.8 years. The value of share awards that vested during each of the years ended December 31, 2020, 2019 and 2018 was $24 million. F- 58 25. OTHER COMPREHENSIVE (LOSS)INCOME Other comprehensive loss consisted of the following (dollars in millions): Huntsman Corporation
F- 59 Huntsman International
Items of other comprehensive income (loss) of our Company and our consolidated affiliates have been recorded net of tax, with the exception of the foreign currency translation adjustments related to subsidiaries with earnings permanently reinvested. The tax effect is determined based upon the jurisdiction where the income or loss was recognized and is net of valuation allowances.
F- 60 26. RELATED PARTY TRANSACTIONS Our consolidated financial statements include the following transactions with our affiliates not otherwise disclosed (dollars in millions):
We derive our revenues, earnings and cash flows from the manufacture and sale of a wide variety of differentiated and commodity chemical products. We have four operating segments, which are also our reportable segments: Polyurethanes, Performance Products, Advanced Materials and Textile Effects. We have organized our business and derived our operating segments around differences in product lines.
The major products of each reportable operating segment are as follows:
Sales between segments are generally recognized at external market prices and are eliminated in consolidation. We use adjusted EBITDA to measure the financial performance of our global business units and for reporting the results of our operating segments. This measure includes all operating items relating to the businesses. The adjusted EBITDA of operating segments excludes items that principally apply to our Company as a whole. The revenues and adjusted EBITDA for each of our reportable operating segments are as follows (dollars in millions):
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HUNTSMAN CORPORATION (PARENT ONLY) Schedule I—Condensed Financial Information of Registrant HUNTSMAN CORPORATION (Parent Only) BALANCE SHEETS (In Millions, Except Share and Per Share Amounts)
This statement should be read in conjunction with the notes to the consolidated financial statements.
F- 65 HUNTSMAN CORPORATION (Parent Only) STATEMENTS OF OPERATIONS (In Millions)
This statement should be read in conjunction with the notes to the consolidated financial statements.
F- 66 HUNTSMAN CORPORATION (Parent Only) STATEMENTS OF COMPREHENSIVE INCOME (In Millions)
This statement should be read in conjunction with the notes to the consolidated financial statements.
F- 67 HUNTSMAN CORPORATION (Parent Only) STATEMENTS OF STOCKHOLDERS’ EQUITY (In Millions, Except Share Amounts)
This statement should be read in conjunction with the notes to the consolidated financial statements. F- 68 HUNTSMAN CORPORATION (Parent Only) STATEMENTS OF CASH FLOWS (In Millions)
This statement should be read in conjunction with the notes to the consolidated financial statements.
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