Huntsman(HUN) - 2022 Q2 - Quarterly Report

PART I FINANCIAL INFORMATION ITEM 1. Condensed Consolidated Financial Statements (Unaudited) This section presents the unaudited condensed consolidated financial statements for Huntsman Corporation and its principal operating subsidiary, Huntsman International LLC, for the quarterly period ended June 30, 2022 It includes balance sheets, statements of operations, comprehensive income, equity, and cash flows, along with detailed notes explaining the accounting policies and financial details Huntsman Corporation and Subsidiaries: Unaudited Condensed Consolidated Financial Statements For the six months ended June 30, 2022, Huntsman Corporation reported total revenues of $4,751 million, a 23% increase year-over-year, and a net income of $482 million, up from $272 million in the prior year period Diluted EPS from continuing operations was $2.13 The balance sheet shows total assets of $8,721 million as of June 30, 2022 Net cash provided by operating activities was $316 million Huntsman Corporation - Key Financials (Six Months Ended June 30, 2022) | Financial Metric | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :--- | :--- | :--- | | Total Revenues | $4,751 million | $3,861 million | | Gross Profit | $1,103 million | $823 million | | Operating Income | $597 million | $335 million | | Net Income | $482 million | $272 million | | Diluted EPS (Continuing Operations) | $2.13 | $1.06 | | Net Cash from Operating Activities | $316 million | $(24) million | Huntsman Corporation - Balance Sheet Summary | Balance Sheet Item | June 30, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Total Current Assets | $3,437 million | $3,928 million | | Total Assets | $8,721 million | $9,392 million | | Total Current Liabilities | $1,622 million | $2,051 million | | Total Liabilities | $4,370 million | $4,833 million | | Total Equity | $4,351 million | $4,559 million | Huntsman International LLC and Subsidiaries: Unaudited Condensed Consolidated Financial Statements As the principal operating company, Huntsman International LLC's financial results are nearly identical to the consolidated parent For the six months ended June 30, 2022, it reported total revenues of $4,751 million and net income of $486 million Total assets stood at $9,479 million The primary differences in financial statements relate to intercompany transactions and capital structure Huntsman International LLC - Key Financials (Six Months Ended June 30, 2022) | Financial Metric | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :--- | :--- | :--- | | Total Revenues | $4,751 million | $3,861 million | | Operating Income | $602 million | $340 million | | Net Income | $486 million | $275 million | | Net Cash from Operating Activities | $319 million | $(24) million | - Huntsman International LLC is the principal operating company, and its financial information is largely applicable to Huntsman Corporation, with differences primarily in capital structure and certain intercompany accounts[8][9][46] Notes to Unaudited Condensed Consolidated Financial Statements The notes provide detailed disclosures on accounting policies and specific financial items Key highlights include the finalization of the Gabriel Performance Products acquisition valuation, details on the sale of the Venator interest, a new $1.2 billion revolving credit facility established in May 2022, a $2 billion share repurchase program with significant activity in Q2, and segment performance breakdowns - On May 20, 2022, Huntsman International entered into a new $1.2 billion senior unsecured revolving credit facility maturing in May 2027 This facility includes sustainability-linked adjustments to interest rates and fees[47][69] - The company's Board of Directors increased the share repurchase program authorization to $2 billion During the six months ended June 30, 2022, the company repurchased 13.9 million shares for approximately $501 million[93] - In Q2 2021, the company received a $28 million payment from an earnout provision related to the 2020 sale of its India-based DIY business, recognizing a pretax gain[55] - A jury awarded the company approximately $94 million in a litigation against Praxair/Linde Including interest, the total award is expected to exceed $125 million, but it is subject to appeal and has not been recognized in the financial statements[48] ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the financial results for the second quarter and first half of 2022 Revenue grew 17% in Q2 and 23% in H1 2022 year-over-year, driven by higher average selling prices across all segments Adjusted EBITDA also saw significant growth The outlook for Q3 2022 is provided for each segment, anticipating some headwinds from weaker demand in Europe and seasonality The discussion also covers liquidity, highlighting a strong position with over $2 billion in combined cash and unused borrowing capacity, and details on capital allocation, including share repurchases and cost-saving initiatives Results of Operations For Q2 2022 vs Q2 2021, revenues increased 17% to $2,362 million and adjusted EBITDA rose 29% to $432 million The growth was driven by higher MDI margins in Polyurethanes and strong performance in Performance Products For H1 2022 vs H1 2021, revenues increased 23% to $4,751 million and adjusted EBITDA grew 36% to $847 million Higher average selling prices were the primary driver, though sales volumes were impacted by lockdowns in China and strategic deselection of lower-margin business Huntsman Corporation - Overall Performance vs. Prior Year | Metric | Q2 2022 vs Q2 2021 | H1 2022 vs H1 2021 | | :--- | :--- | :--- | | Revenues | +17% | +23% | | Gross Profit | +25% | +34% | | Operating Income | +40% | +78% | | Adjusted EBITDA | +29% | +36% | Segment Adjusted EBITDA (Q2 2022 vs Q2 2021) | Segment | Q2 2022 Adj. EBITDA | Q2 2021 Adj. EBITDA | % Change | | :--- | :--- | :--- | :--- | | Polyurethanes | $229 million | $208 million | +10% | | Performance Products | $152 million | $88 million | +73% | | Advanced Materials | $67 million | $58 million | +16% | | Textile Effects | $22 million | $28 million | (21)% | - The Polyurethanes segment's EBITDA increase was driven by higher MDI margins, partially offset by lower volumes due to Shanghai lockdowns and negative currency impacts[175] - The Performance Products segment saw a significant EBITDA increase due to higher average selling prices from commercial excellence programs and response to rising raw material costs[176] Outlook The company provides adjusted EBITDA estimates for Q3 2022 Polyurethanes are projected at $170-$200 million, impacted by weaker European demand Performance Products are estimated at $130-$140 million, driven by the Americas but facing seasonality Advanced Materials are expected at $58-$63 million, with stable industrial markets Textile Effects are projected at $20-$22 million, similar to the prior year The full-year 2022 adjusted effective tax rate is expected to be 22% to 24% Q3 2022 Adjusted EBITDA Outlook | Segment | Estimated Q3 2022 Adj. EBITDA | | :--- | :--- | | Polyurethanes | $170 million - $200 million | | Performance Products | $130 million - $140 million | | Advanced Materials | $58 million - $63 million | | Textile Effects | $20 million - $22 million | - The company expects its full-year 2022 adjusted effective tax rate to be between 22% and 24%[146] Liquidity and Capital Resources As of June 30, 2022, Huntsman had $2,052 million of liquidity, comprising $608 million in cash and $1,444 million in unused borrowing capacity Working capital decreased slightly to $1,815 million Key cash flow activities in H1 2022 included $316 million provided by operations, $138 million in capital expenditures, and $504 million used for share repurchases The company also received the final $332.5 million payment from the Albemarle settlement - As of June 30, 2022, the company had $2,052 million of combined cash and unused borrowing capacity[206] - Net cash from operating activities increased to $316 million for H1 2022 from a use of $23 million in H1 2021, driven by higher operating income[193] - Key uses of cash in H1 2022 included $504 million for share repurchases and $138 million for capital expenditures[194][195] - The company received the final arbitration award payment of $332.5 million from Albemarle in Q2 2022 and paid related legal fees and taxes of approximately $255 million[198][209] ITEM 3. Quantitative and Qualitative Disclosures About Market Risk The company is exposed to market risks including changes in interest rates, foreign exchange rates, and commodity prices It uses derivative instruments from time to time to manage some of these exposures and also hedges its net investment in certain European operations - The company is exposed to market risks from interest rates, foreign exchange rates, and commodity prices[212] - Derivative instruments are used periodically to manage these exposures, and the company hedges its net investment in some European operations[80][212] ITEM 4. Controls and Procedures Management, including the CEO and CFO, evaluated the company's disclosure controls and procedures and concluded they were effective as of June 30, 2022 There were no material changes to internal control over financial reporting during the quarter - Management concluded that as of June 30, 2022, the company's disclosure controls and procedures were effective[213] - No material changes were made to the internal control over financial reporting during the quarter ended June 30, 2022[214] PART II OTHER INFORMATION Legal Proceedings This section states that there have been no material developments regarding the legal proceedings that were previously disclosed in the company's Annual Report on Form 10-K for the year ended December 31, 2021 - There were no material developments in legal proceedings since the last Annual Report on Form 10-K[216] Risk Factors This section refers the reader to the detailed discussion of risk factors in the company's Annual Report on Form 10-K for the year ended December 31, 2021, indicating no material changes or additions to those risks - The company refers to the Risk Factors section of its 2021 Annual Report on Form 10-K for information on risk factors[217] Unregistered Sales of Equity Securities and Use of Proceeds During the second quarter of 2022, Huntsman repurchased 8,371,423 shares of its common stock for approximately $291 million under its publicly announced share repurchase program The board had previously increased the program's authorization to $2 billion Share Repurchases (Q2 2022) | Period | Total Shares Purchased | Average Price Paid | Shares Purchased Under Program | | :--- | :--- | :--- | :--- | | April 2022 | 1,727,274 | $34.80 | 1,704,834 | | May 2022 | 5,765,097 | $34.82 | 5,765,001 | | June 2022 | 902,011 | $34.26 | 901,588 | | Total Q2 | 8,394,382 | $34.76 | 8,371,423 | - The Board of Directors increased the share repurchase program authorization from $1 billion to $2 billion on March 25, 2022[220] Exhibits This section lists the exhibits filed with the Form 10-Q Notable exhibits include the new Credit Agreement dated May 20, 2022, and certifications from the CEO and CFO as required by the Sarbanes-Oxley Act - Key exhibits filed include the new Credit Agreement from May 2022, CEO/CFO certifications, and XBRL data files[224]