Huntsman(HUN) - 2023 Q2 - Quarterly Report

Form 10-Q General Information - The document is a Quarterly Report (Form 10-Q) for the period ended June 30, 2023[2] - Huntsman Corporation is a Large Accelerated Filer, while Huntsman International LLC is a Non-accelerated Filer[6] - As of July 20, 2023, Huntsman Corporation had 177,895,240 shares of common stock outstanding, and Huntsman International LLC's membership interests are wholly-owned by Huntsman Corporation[7] Registrant Information | Registrant | File Number | State of Incorporation | I.R.S. Employer Identification No. | | :----------------------- | :---------- | :--------------------- | :--------------------------------- | | Huntsman Corporation | 001-32427 | Delaware | 42-1648585 | | Huntsman International LLC | 333-85141 | Delaware | 87-0630358 | Table of Contents - The report is structured into two main parts: PART I – FINANCIAL INFORMATION and PART II – OTHER INFORMATION[11] - PART I includes Condensed Consolidated Financial Statements (Unaudited) and Management's Discussion and Analysis of Financial Condition and Results of Operations[11] FORWARD-LOOKING STATEMENTS - The report contains forward-looking statements regarding financial projections, management's plans, market trends, and future events[12] - These statements are based on current expectations and assumptions, and actual results could differ materially due to risks outlined in the company's SEC filings[13][14] - The company undertakes no obligation to publicly update or revise forward-looking statements, except as required by law[13] PART I. FINANCIAL INFORMATION ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) This section presents the unaudited condensed consolidated financial statements for Huntsman Corporation and Huntsman International LLC Huntsman Corporation and Subsidiaries: Unaudited Condensed Consolidated Financial Statements - Net income attributable to Huntsman Corporation decreased significantly from $228 million in Q2 2022 to $19 million in Q2 2023, and from $451 million in H1 2022 to $172 million in H1 2023[20] - Cash received from the sale of businesses was $541 million for the six months ended June 30, 2023, significantly impacting investing activities[25] Huntsman Corporation - Condensed Consolidated Balance Sheets (In Millions) | Metric | June 30, 2023 | December 31, 2022 | | :--------------------------------- | :-------------- | :------------------ | | Total Assets | $7,553 | $8,220 | | Total Liabilities | $3,707 | $4,380 | | Total Equity | $3,846 | $3,840 | | Cash and cash equivalents | $502 | $654 | | Current assets held for sale | $— | $472 | Huntsman Corporation - Condensed Consolidated Statements of Operations (In Millions, Except Per Share Amounts) | Metric | Three months ended June 30, 2023 | Three months ended June 30, 2022 | Six months ended June 30, 2023 | Six months ended June 30, 2022 | | :----------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total Revenues | $1,596 | $2,170 | $3,202 | $4,362 | | Gross profit | $254 | $492 | $523 | $1,007 | | Operating income | $50 | $278 | $111 | $561 | | Income from continuing operations | $33 | $229 | $77 | $451 | | Net income attributable to Huntsman Corp. | $19 | $228 | $172 | $451 | | Basic income per share (Net income) | $0.11 | $1.11 | $0.95 | $2.16 | | Diluted income per share (Net income) | $0.11 | $1.10 | $0.94 | $2.14 | Huntsman Corporation - Condensed Consolidated Statements of Comprehensive (Loss) Income (In Millions) | Metric | Three months ended June 30, 2023 | Three months ended June 30, 2022 | Six months ended June 30, 2023 | Six months ended June 30, 2022 | | :-------------------------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income | $31 | $242 | $197 | $482 | | Other comprehensive (loss) income, net of tax | $(40) | $(105) | $87 | $(117) | | Comprehensive (loss) income attributable to Huntsman Corp. | $(13) | $130 | $265 | $342 | Huntsman Corporation - Condensed Consolidated Statements of Cash Flows (In Millions) | Metric | Six months ended June 30, 2023 | Six months ended June 30, 2022 | | :-------------------------------------------------------- | :----------------------------- | :----------------------------- | | Net cash (used in) provided by operating activities | $(118) | $316 | | Net cash provided by (used in) investing activities | $440 | $(129) | | Net cash used in financing activities | $(464) | $(609) | | Decrease in cash and cash equivalents | $(152) | $(433) | | Cash and cash equivalents at end of period | $502 | $608 | Huntsman International LLC and Subsidiaries: Unaudited Condensed Consolidated Financial Statements - Net income attributable to Huntsman International LLC decreased from $229 million in Q2 2022 to $19 million in Q2 2023, and from $455 million in H1 2022 to $174 million in H1 2023[30] - Net cash provided by investing activities was $236 million for H1 2023, a significant improvement from $(645) million used in the prior year, primarily due to cash from the sale of businesses[39] Huntsman International LLC - Condensed Consolidated Balance Sheets (In Millions) | Metric | June 30, 2023 | December 31, 2022 | | :--------------------------------- | :-------------- | :------------------ | | Total Assets | $7,553 | $8,226 | | Total Liabilities | $3,697 | $4,374 | | Total Equity | $3,856 | $3,852 | | Cash and cash equivalents | $502 | $654 | | Current assets held for sale | $— | $472 | Huntsman International LLC - Condensed Consolidated Statements of Operations (In Millions) | Metric | Three months ended June 30, 2023 | Three months ended June 30, 2022 | Six months ended June 30, 2023 | Six months ended June 30, 2022 | | :----------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total Revenues | $1,596 | $2,170 | $3,202 | $4,362 | | Gross profit | $254 | $492 | $523 | $1,007 | | Operating income | $50 | $280 | $113 | $566 | | Income from continuing operations | $33 | $230 | $79 | $455 | | Net income attributable to Huntsman Int. LLC | $19 | $229 | $174 | $455 | Huntsman International LLC - Condensed Consolidated Statements of Comprehensive (Loss) Income (In Millions) | Metric | Three months ended June 30, 2023 | Three months ended June 30, 2022 | Six months ended June 30, 2023 | Six months ended June 30, 2022 | | :-------------------------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income | $31 | $243 | $199 | $486 | | Other comprehensive (loss) income, net of tax | $(41) | $(106) | $87 | $(118) | | Comprehensive (loss) income attributable to Huntsman Int. LLC | $(14) | $130 | $267 | $345 | Huntsman International LLC - Condensed Consolidated Statements of Cash Flows (In Millions) | Metric | Six months ended June 30, 2023 | Six months ended June 30, 2022 | | :-------------------------------------------------------- | :----------------------------- | :----------------------------- | | Net cash (used in) provided by operating activities | $(116) | $319 | | Net cash provided by (used in) investing activities | $236 | $(645) | | Net cash used in financing activities | $(262) | $(94) | | Decrease in cash and cash equivalents | $(152) | $(431) | | Cash and cash equivalents at end of period | $502 | $608 | Notes to Unaudited Condensed Consolidated Financial Statements Note 1. GENERAL - Huntsman operates in three segments: Polyurethanes, Performance Products, and Advanced Materials, marketing diversified organic chemical products globally[44] - Huntsman International LLC is a wholly-owned subsidiary and the principal operating company[44] - The company announced a planned separation of its Shanghai Lianheng Isocyanate Co Ltd (SLIC) joint venture with BASF, expected to be effective in Q4 2023[49] Note 2. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS - No new accounting pronouncements were adopted during H1 2023, and recently issued pronouncements are not expected to have a material impact[51] Note 3. DISCONTINUED OPERATIONS - The sale of the Textile Effects Business to Archroma was completed on February 28, 2023, for $593 million, resulting in net proceeds of $530 million and a pre-tax gain of $153 million in Q1 2023[52] - Cash taxes of approximately $21 million were paid through Q2 2023, with an additional $20 million expected[52] Major Line Items Constituting Pretax (Loss) Income of Discontinued Operations (In Millions) | Metric | Six months ended June 30, 2023 | Six months ended June 30, 2022 | | :---------------------------------------------- | :----------------------------- | :----------------------------- | | Trade sales, services and fees, net | $88 | $389 | | Cost of goods sold | $69 | $293 | | Gain on sale of our Textile Effects Business | $153 | $— | | Net (loss) income attributable to discontinued operations | $120 | $31 | Note 4. INVENTORIES - Inventories are stated at the lower of cost or market, using average cost, LIFO, and FIFO methods[55] Inventories (In Millions) | Component | June 30, 2023 | December 31, 2022 | | :----------------------- | :------------ | :---------------- | | Raw materials and supplies | $234 | $241 | | Work in progress | $43 | $40 | | Finished goods | $776 | $758 | | Total | $1,053 | $1,039 | | LIFO reserves | $(41) | $(44) | | Net inventories | $1,012 | $995 | Note 5. VARIABLE INTEREST ENTITIES - Huntsman is the primary beneficiary of joint ventures including Rubicon LLC (50%-owned) and Arabian Amines Company (AAC, 50%-owned)[57][60] - Creditors of these variable interest entities have no recourse to Huntsman's general credit[58] Variable Interest Entities' Assets and Liabilities (In Millions) | Category | June 30, 2023 | December 31, 2022 | | :---------------- | :------------ | :---------------- | | Total Assets | $420 | $403 | | Total Liabilities | $180 | $214 | Variable Interest Entities' Financial Performance (Six Months Ended June 30, In Millions) | Metric | 2023 | 2022 | | :------------------------------------------------ | :--- | :--- | | Income from continuing operations before income taxes | $30 | $13 | | Net cash provided by operating activities | $48 | $35 | Note 6. RESTRUCTURING, IMPAIRMENT AND PLANT CLOSING COSTS - A new restructuring program initiated in Q4 2022 aims for $40 million in annualized cost savings by the end of 2023, with expected cash costs of $70 million through 2025[62][190] - The Corporate function's restructuring program resulted in a net restructuring credit of approximately $5 million for H1 2023 due to adjustments of reserves[63] Accrued Restructuring Costs (In Millions) | Category | January 1, 2023 | June 30, 2023 | | :------------------- | :-------------- | :------------ | | Workforce reductions | $76 | $39 | | Total | $76 | $39 | Restructuring, Impairment and Plant Closing Costs (Six Months Ended June 30, In Millions) | Type | 2023 | 2022 | | :-------------------------------------------- | :--- | :--- | | Cash charges | $— | $24 | | Noncash charges | $1 | $— | | Total restructuring, impairment and plant closing costs | $1 | $24 | Note 7. DEBT DIRECT AND SUBSIDIARY DEBT - Substantially all debt is incurred by subsidiaries, primarily Huntsman International, and Huntsman Corporation is not a guarantor[67] Debt Issuance Costs - Debt issuance costs, recorded as a reduction to debt liability, were $7 million as of June 30, 2023, and $8 million as of December 31, 2022[69] Revolving Credit Facility - Huntsman International entered into a new $1.2 billion senior unsecured revolving credit facility in May 2022, maturing in May 2027[71] - Borrowings bear interest rates tied to Term SOFR and are subject to adjustments based on sustainability target thresholds[71][73] - As of June 30, 2023, there was no principal outstanding under the 2022 Revolving Credit Facility[72] A/R Programs - As of June 30, 2023, $296 million of accounts receivable were pledged as collateral under the A/R Programs[76] A/R Programs Information (In Millions) | Facility | Maturity | Maximum funding availability | Amount outstanding | | :---------------- | :-------- | :--------------------------- | :----------------- | | U.S. A/R Program | July 2024 | $150 | $— | | EU A/R Program | July 2024 | €100 (approx. $109) | €50 (approx. $55) | Senior Notes Senior Notes (In Millions) | Notes | Maturity | Interest rate | Amount outstanding | | :-------------- | :----------- | :------------ | :----------------- | | 2025 Senior Notes | April 2025 | 4.25% | €300 (approx. $327) | | 2029 Senior Notes | February 2029 | 4.50% | $750 | | 2031 Senior Notes | June 2031 | 2.95% | $400 | Variable Interest Entity Debt - AAC, a consolidated 50%-owned joint venture, had $31 million outstanding under its loan commitments as of June 30, 2023[79] COMPLIANCE WITH COVENANTS - The company believes it is in compliance with the covenants of its material debt instruments[80] Note 8. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES - Huntsman uses derivative instruments to manage exposures to market risks such as interest rates, foreign exchange rates, and commodity prices[81][82][83] - As of June 30, 2023, the company had approximately $384 million in notional amount outstanding in forward foreign currency contracts[82] - Approximately €150 million of euro-denominated debt was designated as a hedge of net investment, resulting in a $6 million gain for H1 2023[84] Note 9. FAIR VALUE - The fair values of cash, accounts receivable, and accounts payable approximate their carrying amounts due to immediate or short-term maturity[85] - No instruments were measured at fair value using significant unobservable inputs (Level 3) during H1 2023[86] Fair Values of Financial Instruments (In Millions) | Instrument | June 30, 2023 (Carrying Value) | June 30, 2023 (Estimated Fair Value) | December 31, 2022 (Carrying Value) | December 31, 2022 (Estimated Fair Value) | | :---------------------------------------- | :------------------------------- | :----------------------------------- | :--------------------------------- | :----------------------------------- | | Non-qualified employee benefit plan investments | $15 | $15 | $15 | $15 | | Investment in Venator | $— | $— | $5 | $5 | | Long-term debt (including current portion) | $(1,573) | $(1,437) | $(1,737) | $(1,578) | Note 10. REVENUE RECOGNITION Revenues by Segment and Geographic Market (Three Months Ended June 30, 2023, In Millions) | Segment | U.S. and Canada | Europe | Asia Pacific | Rest of world | Total | | :------------------- | :-------------- | :----- | :----------- | :------------ | :---- | | Polyurethanes | $388 | $278 | $260 | $86 | $1,012 | | Performance Products | $140 | $68 | $74 | $25 | $307 | | Advanced Materials | $83 | $110 | $69 | $22 | $284 | | Total | $609 | $451 | $403 | $133 | $1,596 | Revenues by Segment and Product Grouping (Three Months Ended June 30, 2023, In Millions) | Segment | MDI urethanes | Differentiated | Specialty | Other | Eliminations | Total | | :------------------- | :------------ | :------------- | :-------- | :---- | :----------- | :---- | | Polyurethanes | $1,012 | $— | $— | $— | $— | $1,012 | | Performance Products | $— | $307 | $— | $— | $— | $307 | | Advanced Materials | $— | $— | $267 | $17 | $— | $284 | | Eliminations | $— | $— | $— | $— | $(7) | $(7) | | Total | $1,012 | $307 | $267 | $17 | $(7) | $1,596 | Revenues by Segment and Geographic Market (Six Months Ended June 30, 2023, In Millions) | Segment | U.S. and Canada | Europe | Asia Pacific | Rest of world | Total | | :------------------- | :-------------- | :----- | :----------- | :------------ | :---- | | Polyurethanes | $774 | $550 | $518 | $161 | $2,003 | | Performance Products | $297 | $142 | $153 | $49 | $641 | | Advanced Materials | $172 | $226 | $131 | $44 | $573 | | Total | $1,238 | $909 | $801 | $254 | $3,202 | Note 11. EMPLOYEE BENEFIT PLANS - Contributions to pension and other postretirement benefit plans totaled $20 million for H1 2023, with an additional $19 million expected for the remainder of 2023[92][190] Huntsman Corporation Net Periodic Benefit Cost (Six Months Ended June 30, In Millions) | Metric | Defined benefit plans | Other postretirement benefit plans | | :--------------------------- | :-------------------- | :--------------------------------- | | Service cost | $13 | $— | | Interest cost | $46 | $2 | | Expected return on assets | $(63) | $— | | Amortization of prior service benefit | $(2) | $(2) | | Amortization of actuarial loss | $16 | $— | | Net periodic benefit cost (credit) | $10 | $— | Note 12. HUNTSMAN CORPORATION STOCKHOLDERS' EQUITY SHARE REPURCHASE PROGRAM - The Board of Directors increased the share repurchase program authorization from $1 billion to $2 billion on March 25, 2022[93] - During H1 2023, 7,262,089 shares were repurchased for approximately $199 million[93] - An additional 441,881 shares were repurchased for approximately $12 million from July 1, 2023, through July 20, 2023[93] DIVIDENDS ON COMMON STOCK - Dividends of $0.2375 per share were declared for both Q2 2023 ($42 million) and Q1 2023 ($44 million)[94] Note 13. ACCUMULATED OTHER COMPREHENSIVE LOSS - Net current-period other comprehensive income for Huntsman Corporation was $93 million for H1 2023[95] - Reclassifications for H1 2023 included $67 million of pension settlement losses and $1 million of pension curtailment gains related to the sale of the Textile Effects Business[101][109] Huntsman Corporation Accumulated Other Comprehensive Loss (In Millions) | Component | January 1, 2023 | June 30, 2023 | | :---------------------------------------- | :-------------- | :------------ | | Foreign currency translation adjustments | $(648) | $(641) | | Pension and other postretirement benefits adjustments | $(652) | $(572) | | Total Huntsman Corporation stockholders' equity | $(1,268) | $(1,175) | Note 14. COMMITMENTS AND CONTINGENCIES LEGAL MATTERS - A New Orleans jury awarded Huntsman approximately $94 million in a lawsuit against Praxair/Linde on April 29, 2022, with expected damages exceeding $125 million after interest[110] - The award is subject to a pending appeal, and if affirmed, net proceeds of approximately $50 million to $60 million are expected[110] - The company does not believe other ongoing legal proceedings will have a material effect on its financial condition, results of operations, or liquidity[111] Note 15. ENVIRONMENTAL, HEALTH AND SAFETY MATTERS EHS CAPITAL EXPENDITURES - Capital expenditures for EHS matters from continuing operations totaled $11 million for H1 2023, down from $14 million in the prior year[112] ENVIRONMENTAL RESERVES - Accrued environmental liabilities were $4 million as of June 30, 2023, with $1 million classified as current and $3 million as noncurrent[113] ENVIRONMENTAL MATTERS - The company is subject to CERCLA and RCRA laws, with ongoing remediation requirements at some manufacturing sites[114][115] - Potential claims at approximately six former facilities or third-party sites are not expected to have a material impact on financial statements[114] North Maybe Canyon Mine Remediation - Huntsman is a CERCLA potentially responsible party for contamination at the North Maybe Canyon Mine site and cannot reasonably estimate potential liabilities[116] Note 16. STOCK-BASED COMPENSATION PLANS STOCK OPTIONS - Approximately 5 million shares remained available for grant under stock-based compensation plans as of June 30, 2023[117] - No stock options were granted during H1 2023 or H1 2022[120] - Total unrecognized compensation cost related to nonvested stock option arrangements was approximately $1 million as of June 30, 2023, expected to be recognized over approximately 0.7 years[121] NONVESTED SHARES - Nonvested shares include restricted stock and performance share unit awards (equity awards), and phantom stock (liability award)[123] - Total unrecognized compensation cost related to nonvested share arrangements was approximately $45 million as of June 30, 2023, expected to be recognized over approximately 2.1 years[127] Nonvested Shares Activity (Six Months Ended June 30, 2023, In Thousands) | Category | Equity awards (Shares) | Liability awards (Shares) | | :--------------------------- | :--------------------- | :------------------------ | | Nonvested at January 1, 2023 | 1,802 | 257 | | Granted | 945 | 114 | | Vested | (718) | (165) | | Forfeited | (83) | (13) | | Nonvested at June 30, 2023 | 1,946 | 193 | Note 17. INCOME TAXES - Income tax expense is significantly affected by the mix of income and losses in various tax jurisdictions and the presence of valuation allowances[129][130][170] Income Tax Expense from Continuing Operations (Six Months Ended June 30, In Millions) | Registrant | 2023 | 2022 | | :--------------------- | :--- | :--- | | Huntsman Corporation | $39 | $125 | | Huntsman International | $39 | $126 | Note 18. EARNINGS PER SHARE - Approximately 1.7 million weighted average equivalent shares were anti-dilutive and excluded from the diluted income per share computation for H1 2023[132] Basic and Diluted Income Per Share (Six Months Ended June 30, In Millions, Except Per Share Amounts) | Metric | 2023 | 2022 | | :----------------------------------------- | :---- | :---- | | Net income attributable to Huntsman Corp. | $172 | $451 | | Weighted average shares outstanding (Basic) | 180.9 | 209.0 | | Basic net income per share | $0.95 | $2.16 | | Weighted average shares (Diluted) | 182.3 | 211.2 | | Diluted net income per share | $0.94 | $2.14 | Note 19. OPERATING SEGMENT INFORMATION - Huntsman's three reportable operating segments are Polyurethanes, Performance Products, and Advanced Materials, with adjusted EBITDA used to measure performance[133][134][137] Revenues by Segment (Six Months Ended June 30, In Millions) | Segment | 2023 | 2022 | Change (%) | | :------------------- | :----- | :----- | :--------- | | Polyurethanes | $2,003 | $2,739 | (27)% | | Performance Products | $641 | $972 | (34)% | | Advanced Materials | $573 | $671 | (15)% | | Total | $3,217 | $4,382 | (27)% | Segment Adjusted EBITDA (Six Months Ended June 30, In Millions) | Segment | 2023 | 2022 | Change (%) | | :------------------- | :--- | :--- | :--------- | | Polyurethanes | $154 | $453 | (66)% | | Performance Products | $126 | $298 | (58)% | | Advanced Materials | $99 | $134 | (26)% | | Total | $379 | $885 | (57)% | ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This section analyzes the company's financial condition and results of operations for the three and six months ended June 30, 2023 RESULTS OF OPERATIONS Three Months Ended June 30, 2023 Compared with Three Months Ended June 30, 2022 Segment Analysis Polyurethanes - Revenues decreased by 25% due to lower sales volumes (down 10%), lower MDI average selling prices (down 10%), and negative foreign currency impact[158][162][164] - Segment adjusted EBITDA decreased by 62% primarily due to lower sales volumes, lower MDI margins, and negative foreign currency exchange rate movements[158][164] Performance Products - Revenues decreased by 38% due to lower sales volumes (down 31%) and reduced average selling prices (down 8%)[158][162][165] - Sales volumes decreased primarily due to slowing construction activity and reduced demand in industrial markets[165] - Segment adjusted EBITDA decreased by 64% primarily due to decreased sales volumes and lower average selling prices[158][165] Advanced Materials - Revenues decreased by 15% primarily due to lower sales volumes (down 19%), partially offset by higher average selling prices (up 1%)[158][162][166] - Segment adjusted EBITDA decreased by 24% primarily due to lower sales volumes[158][166] Corporate and other - Adjusted EBITDA from Corporate and other for Huntsman Corporation remained a loss of $38 million[167] - For Huntsman International, adjusted EBITDA from Corporate and other was a loss of $38 million, compared to a loss of $36 million in the prior year[167] Six Months Ended June 30, 2023 Compared with Six Months Ended June 30, 2022 Segment Analysis Polyurethanes - Revenues decreased by 27% due to lower sales volumes (down 16%), lower MDI average selling prices (down 6%), and negative foreign currency impact[169][173][175] - Sales volumes decreased primarily due to lower demand in Europe and the Americas[175] - Segment adjusted EBITDA decreased by 66% primarily due to lower sales volumes, lower MDI margins, and negative foreign currency exchange rate movements[169][175] Performance Products - Revenues decreased by 34% due to lower sales volumes (down 31%) and reduced average selling prices (down 4%)[169][173][176] - Sales volumes decreased primarily due to slowing construction activity and reduced demand in industrial markets[176] - Segment adjusted EBITDA decreased by 58% primarily due to decreased sales volumes and lower average selling prices[169][176] Advanced Materials - Revenues decreased by 15% primarily due to lower sales volumes (down 20%), partially offset by higher average selling prices (up 3%)[169][173][177] - Average selling prices increased largely in response to higher raw material, energy, and logistics costs as well as improved sales mix[177] - Segment adjusted EBITDA decreased by 26% primarily due to lower sales volumes[169][177] Corporate and other - Adjusted EBITDA from Corporate and other for Huntsman Corporation was a loss of $87 million, relatively flat compared to the prior year[178] - For Huntsman International, adjusted EBITDA from Corporate and other was a loss of $85 million, compared to a loss of $83 million in the prior year[178] Non-GAAP Financial Measures Adjusted EBITDA - Adjusted EBITDA is defined as net income before interest, income tax, depreciation and amortization, and other specified adjustments[148] - It is used to assess ongoing financial performance and provides improved comparability by excluding items not indicative of operational profitability[149][150] Adjusted Net Income - Adjusted net income is computed by eliminating after-tax amounts of specific non-recurring or non-operational items from net income[152] - It is presented as supplemental information to provide improved comparability of ongoing financial performance[153] Free Cash Flow - Free cash flow is an important indicator of liquidity, used by management to evaluate strategic investments, shareholder returns, and debt servicing ability[154] Adjusted Effective Tax Rate - The adjusted effective tax rate provides improved comparability by excluding the impact of certain non-operational or non-recurring items[155] - The forward-looking adjusted effective tax rate is based on the forecast effective tax rate, as certain future adjustments cannot be reasonably predicted[156] LIQUIDITY AND CAPITAL RESOURCES Cash Flows for the Six Months Ended June 30, 2023 Compared with the Six Months Ended June 30, 2022 - Net cash used in operating activities from continuing operations was $(82) million for H1 2023, a significant decrease from $310 million provided in H1 2022, primarily due to decreased operating income[180] - Net cash provided by investing activities from continuing operations was $444 million for H1 2023, compared to $(120) million used in H1 2022, largely driven by $541 million from the sale of businesses[181] - Free cash flow from continuing operations was a use of cash of $(179) million for H1 2023, compared to proceeds of $181 million in H1 2022[183] Changes in Financial Condition - The decrease in working capital was primarily due to a $152 million decrease in cash and cash equivalents and a $216 million decrease in accounts payable[187] - The sale of the Textile Effects Business resulted in a $472 million decrease in current assets held for sale and a $194 million decrease in current liabilities held for sale[185] Working Capital Position (In Millions) | Metric | June 30, 2023 | December 31, 2022 | Increase (decrease) | Percent change | | :------------------------ | :------------ | :---------------- | :------------------ | :------------- | | Total current assets | $2,520 | $3,145 | $(625) | (20)% | | Total current liabilities | $1,176 | $1,701 | $(525) | (31)% | | Working capital | $1,344 | $1,444 | $(100) | (7)% | SHORT-TERM LIQUIDITY - As of June 30, 2023, Huntsman had $1,866 million in combined cash and unused borrowing capacity[188] - Expected capital expenditures for 2023 are $230 million to $250 million, with an additional $19 million in pension contributions for the remainder of 2023[190] - The company expects to repurchase approximately $200 million of common stock during the second half of 2023[190] - Net proceeds of $530 million were received from the sale of the Textile Effects Business, with an additional $20 million in cash taxes expected to be paid[190] - The company expects to achieve significant annualized cost savings from various restructuring programs by the end of 2023[190] LONG-TERM LIQUIDITY - As of June 30, 2023, the current portion of debt was $11 million, which the company intends to renew, repay, or extend[190] - Approximately $417 million of cash and cash equivalents are held by foreign subsidiaries, intended for local operations[192] ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK This item states that Huntsman is exposed to market risks and uses derivative instruments and hedging activities to manage these exposures - Huntsman is exposed to market risks, including changes in interest rates, foreign exchange rates, and commodity prices[194] - The company uses derivative instruments and hedging activities to manage these exposures, including hedging its net investment in certain European operations[194] ITEM 4. CONTROLS AND PROCEDURES Management concluded that disclosure controls and procedures were effective as of June 30, 2023, with no material changes to internal controls - Management concluded that disclosure controls and procedures were effective as of June 30, 2023[195] - No changes to internal control over financial reporting occurred during the quarter that materially affected or are reasonably likely to materially affect internal control[196] PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS This item states there have been no material developments regarding legal proceedings previously referenced in the Annual Report on Form 10-K - There have been no material developments with respect to the legal proceedings referenced in the Annual Report on Form 10-K for the year ended December 31, 2022[198] ITEM 1A. RISK FACTORS This item refers readers to the 'Risk Factors' section in the company's Annual Report on Form 10-K for information regarding potential risks - For information regarding risk factors, refer to 'Part I Item 1A Risk Factors' in the Annual Report on Form 10-K for the year ended December 31, 2022[199] ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS This item provides information on shares repurchased under the company's share repurchase program during the three months ended June 30, 2023 - During Q2 2023, 3,790,069 shares of common stock were repurchased for approximately $98 million under the $2 billion share repurchase program[202] - Approximately $698 million remained authorized under the share repurchase program as of June 30, 2023[201] Share Repurchase Activity (Three Months Ended June 30, 2023) | Period | Total number of shares purchased | Average price paid per share | Total number of shares purchased as part of publicly announced plans or programs | | :---------------- | :------------------------------- | :--------------------------- | :------------------------------------------------------------------------------- | | April 1 - April 30 | 704,748 | $26.76 | 704,748 | | May 1 - May 31 | 2,100,381 | $25.46 | 2,100,381 | | June 1 - June 30 | 986,545 | $25.68 | 984,940 | | Total | 3,791,674 | $25.76 | 3,790,069 | ITEM 6. EXHIBITS This item lists all exhibits filed with the Quarterly Report on Form 10-Q, including organizational documents, certifications, and XBRL-related documents - Exhibits include Amended and Restated Certificate of Incorporation, Bylaws, CEO/CFO Certifications (Sarbanes-Oxley Act), and various Inline XBRL documents[206] SIGNATURES - The report was signed on August 1, 2023, by the Executive Vice President and Chief Financial Officer, and the Vice President and Controller[208]