Huntsman Announces First Quarter 2020 Earnings; A Strong Balance Sheet with Robust Liquidity

Three months ended

March 31,

In millions, except per share amounts

2020

2019

Revenues

$

1,593

$

1,669

Net income

$

708

$

131

Adjusted net income⁽¹⁾

$

65

$

85

Diluted income per share

$

3.16

$

0.51

Adjusted diluted income per share⁽¹⁾

$

0.29

$

0.36

Adjusted EBITDA⁽¹⁾

$

165

$

204

Net cash used in operating activities from continuing operations

$

(40)

$

(40)

Free cash flow from continuing operations⁽²⁾

$

(101)

$

(101)

See end of press release for footnote explanations and reconciliations of non-GAAP measures.

Participant dial-in numbers:

Domestic callers:

(877) 402-8037

International callers:

(201) 378-4913

Table 1 – Results of Operations

Three months ended

March 31,

In millions, except per share amounts

2020

2019

Revenues

$

1,593

$

1,669

Cost of goods sold

1,310

Gross profit

297

359

Operating expenses

240

243

Restructuring, impairment and plant closing costs

3

1

Operating income

54

115

Interest expense, net

(18)

(30)

Equity in income of investment in unconsolidated affiliates

2

10

Fair value adjustments to Venator investment

(110)

76

Loss on early extinguishment of debt

-

(23)

Other income, net

10

5

(Loss) income from continuing operations before income taxes

(62)

153

Income tax expense

(7)

(45)

(Loss) income from continuing operations

(69)

108

Income from discontinued operations, net of tax⁽³⁾

777

23

Net income

708

131

Net income attributable to noncontrolling interests, net of tax

(3)

(12)

Net income attributable to Huntsman Corporation

705

$

119

Adjusted EBITDA⁽¹⁾

$

165

$

204

Adjusted net income⁽¹⁾

$

65

$

85

Basic income per share

$

3.16

$

0.51

Diluted income per share

$

3.16

$

0.51

Adjusted diluted income per share⁽¹⁾

$

0.29

$

0.36

Common share information:

Basic weighted average shares

223

233

Diluted weighted average shares

223

235

See end of press release for footnote explanations.

Table 2 – Results of Operations by Segment

Three months ended

March 31,

Better /

In millions

2020

2019

(Worse)

Segment Revenues:

Polyurethanes

$

888

$

924

Performance Products

292

300

(3%)

Advanced Materials

241

272

(11%)

Textile Effects

180

189

(5%)

Corporate and Eliminations

(8)

(16)

n/m

Total

$

1,593

$

1,669

(5%)

Segment Adjusted EBITDA⁽¹⁾:

Polyurethanes

$

84

$

124

(32%)

Performance Products

58

45

29%

Advanced Materials

48

53

(9%)

Textile Effects

20

22

(9%)

Corporate, LIFO and other

(45)

(40)

(13%)

Total

$

165

$

204

(19%)

n/m = not meaningful

See end of press release for footnote explanations.

Table 3 – Factors Impacting Sales Revenue

Three months ended

March 31, 2020 vs. 2019

Average Selling Price^(a)

Local

Exchange

Sales Mix

Sales

Currency

Rate

& Other

Volume^(b)

Total

Polyurethanes

(6%)

(1%)

4%

(1%)

(4%)

Performance Products

(3%)

(1%)

4%

(3%)

(3%)

Advanced Materials

1%

(2%)

1%

(11%)

(11%)

Textile Effects

(3%)

(1%)

(2%)

1%

(5%)

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

(b) Excludes sales from by-products and raw materials.

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

 Income Tax 

Diluted Income 

 EBITDA 

Expense (Benefit)

 Net Income 

Per Share 

Three months ended

Three months ended

Three months ended

Three months ended

March 31,

March 31,

March 31,

March 31,

In millions, except per share amounts

2020

2019

2020

2019

2020

2019

2020

2019

Net income

$      708

$      131

$      708

$      131

$     3.17

$     0.56

Net income attributable to noncontrolling interests

(3)

(12)

(3)

(12)

(0.01)

(0.05)

Net income attributable to Huntsman Corporation

705

119

705

119

3.16

0.51

Interest expense, net from continuing operations

18

30

Income tax expense from continuing operations

7

45

$        (7)

$       (45)

Income tax expense from discontinued operations⁽³⁾

238

5

Depreciation and amortization from continuing operations

67

67

Depreciation and amortization from discontinued operations⁽³⁾

-

23

Business acquisition and integration expenses

  and purchase accounting inventory adjustments

13

1

(3)

-

10

1

0.04

0.00

EBITDA / Income from discontinued operations, net of tax⁽³⁾

(1,015)

(51)

 N/A 

 N/A 

(777)

(23)

(3.48)

(0.10)

Impact of Switzerland income tax rate change

-

-

-

32

-

32

-

0.14

Gain on sale of businesses/assets

(2)

-

-

-

(2)

-

(0.01)

-

Fair value adjustments to Venator Investment^(a)

110

(76)

-

-

110

(76)

0.49

(0.32)

Loss on early extinguishment of debt

-

23

-

(5)

-

18

-

0.08

Certain legal settlements and related expenses

2

-

-

-

2

-

0.01

-

Certain non-recurring information technology project implementation costs

1

-

-

-

1

-

0.00

-

Amortization of pension and postretirement actuarial losses

18

17

(4)

(4)

14

13

0.06

0.06

Restructuring, impairment and plant closing and transition costs

3

1

(1)

-

2

1

0.01

0.00

Adjusted⁽¹⁾

$      165

$      204

$       (15)

$       (22)

$        65

$        85

$     0.29

$     0.36

Adjusted income tax expense⁽¹⁾

$        15

$        22

Net income attributable to noncontrolling interests, net of tax

3

12

Adjusted pre-tax income⁽¹⁾

$        83

$      119

Adjusted effective tax rate⁽⁴⁾

18%

18%

Effective tax rate

(11%)

29%

(a) Represents the changes in market value in Huntsman's remaining interesting in Venator.

n/m = not meaningful;  n/a = not applicable

See end of press release for footnote explanations.

Table 5 – Selected Balance Sheet Items

March 31,

December 31,

In millions

2020

2019

Cash

$

1,594

$

525

Accounts and notes receivable, net

1,027

953

Inventories

1,008

914

Other current assets

145

155

Current assets held for sale

-

1,208

Property, plant and equipment, net

2,357

2,383

Other noncurrent assets

2,327

2,182

Total assets

$

8,458

$

8,320

Accounts payable

$

856

$

822

Other current liabilities

784

462

Current portion of debt

134

212

Current liabilities held for sale

-

512

Long-term debt

2,049

2,177

Other noncurrent liabilities

1,252

1,311

Huntsman Corporation stockholders' equity

3,243

2,687

Noncontrolling interests in subsidiaries

140

137

Total liabilities and equity

$

8,458

$

8,320

Table 6 – Outstanding Debt

March 31,

December 31,

In millions

2020

2019

Debt:

Revolving credit facility

$

-

$

40

Accounts receivable programs

55

167

Term loan

101

103

Senior notes

1,950

1,963

Variable interest entities

58

65

Other debt

19

51

Total debt - excluding affiliates

2,183

2,389

Total cash

1,594

525

Net debt - excluding affiliates⁽⁵⁾

$

589

$

1,864

See end of press release for footnote explanations.

Table 7 – Summarized Statement of Cash Flows

Three months ended

March 31,

In millions

2020

2019

Total cash at beginning of period

$

525

$

340

Net cash used in operating activities from continuing operations

(40)

(40)

Net cash (used in) provided by operating activities from discontinued operations⁽³⁾

(35)

9

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

1,511

(45)

Net cash used in investing activities from discontinued operations⁽³⁾

-

(9)

Net cash (used in) provided by financing activities

(354)

183

Effect of exchange rate changes on cash

(13)

6

Total cash at end of period

$

1,594

$

444

Free cash flow from continuing operations⁽²⁾:

Net cash used in operating activities

$

(40)

$

(40)

Capital expenditures

(61)

(61)

Free cash flow from continuing operations

$

(101)

$

(101)

Supplemental cash flow information:

Cash paid for interest

$

(5)

$

(26)

Cash paid for income taxes

(36)

(14)

Cash paid for restructuring

(5)

(9)

Cash paid for pensions

(20)

(21)

Depreciation and amortization

67

67

Change in primary working capital:

Accounts and notes receivable

$

(34)

$

(15)

Inventories

(92)

(82)

Accounts payable

61

(10)

Total change in primary working capital

$

(65)

$

(107)

Footnotes

(1)

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

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

Adjusted EBITDA is computed by eliminating the following from net income (loss):  (a) net income attributable to noncontrolling interests, net of tax; (b) interest; (c) income taxes; (d) depreciation and amortization (e) amortization of pension and postretirement actuarial losses (gains); (f) restructuring, impairment and plant closing costs (credits); and further adjusted for certain other items set forth in reconciliation of adjusted EBITDA to net income (loss) in Table 4 above. 

Adjusted net income (loss) and adjusted diluted income (loss) per share are computed by eliminating the after tax impact of the following items from net income (loss): (a) net income attributable to noncontrolling interest; (b) amortization of pension and postretirement actuarial losses (gains); (c) restructuring, impairment and plant closing costs (credits); and further adjusted for certain other items set forth in reconciliation of adjusted EBITDA to net income (loss) in Table 4 above.  The income tax impacts, if any, of each adjusting item represent a ratable allocation of the total difference between the unadjusted tax expense and the total adjusted tax expense, computed without consideration of any adjusting items using a with and without approach.

We do not provide reconciliations for adjusted EBITDA, adjusted net income (loss) or adjusted diluted income (loss) per share 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 amount of certain items, such as, but not limited to, (a) business acquisition and integration expenses and purchase accounting adjustments, (b) merger costs, and (c) certain legal and other settlements and related costs. Each of such adjustments has not yet occurred, are out of our control and/or cannot be reasonably predicted. For the same reasons, we are unable to address the probable significance of the unavailable information. 

(2)

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. Using our updated definition, our free cash flow for the years ended December 31, 2019, 2018, and 2017 were $382 million, $453 million, and $438 million, respectively. 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.

(3)

During the third quarter 2019, we entered into an agreement to sell our Chemical Intermediates and Surfactants businesses. Results from these businesses, including the associated gain on sale, are treated as discontinued operations until the completion of the sale on January 3, 2020.

(4)

We believe 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. In our view, effective tax rate is the performance measure calculated and presented in accordance with U.S. GAAP that is most directly comparable to adjusted effective tax rate.

The reconciliation of historical adjusted effective tax rate and effective tax rate is set forth in Table 4 above. 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 amount of certain items, such as, but not limited to, (a) business acquisition and integration expenses, (b) merger costs, and (c) certain legal and other settlements and related costs. Each of such adjustments has not yet occurred, are out of our control and/or cannot be reasonably predicted. For the same reasons, we are unable to address the probable significance of the unavailable information. 

(5)

Net debt is a measure we use to monitor how much debt we have after taking into account our total cash. We use it as an indicator of our overall financial position, and calculate it by taking our total debt, including the current portion, and subtracting total cash.