Huntsman Announces Third Quarter Results and Filing of Initial Form 10 Registration Statement for Spin-off
FOR IMMEDIATE RELEASE
Oct. 28, 2016
The Woodlands, Texas
Third Quarter 2016 Highlights
- Net income was $64 million compared to $63 million in the prior year period and $94 million in the prior quarter.
- Adjusted EBITDA was $272 million compared to $311 million in the prior year period and $325 million in the prior quarter.
- Diluted income per share was $0.23 compared to $0.22 in the prior year period and $0.36 in the prior quarter.
- Adjusted diluted income per share was $0.38 compared to $0.47 in the prior year period and $0.53 in the prior quarter.
- Adjusted EBITDA and net income impact from weather related and other production outages of approximately $25 million and $16 million or approximately $0.07 per adjusted diluted share.
- Net cash provided by operating activities was $405 million. Free cash flow generation was $300 million; we made a $100 million early repayment of debt in July 2016 and another $100 million early repayment of debt in September 2016.
- On August 3, 2016, we announced that Innospec Inc. committed to purchase our European surfactants business at an enterprise value of $225 million. The business represents approximately $24 million of annual adjusted EBITDA. Closing is expected to occur by the end of the fourth quarter of 2016.
Form 10 Highlights
- On October 28, 2016, our subsidiary, temporarily named Huntsman Spin Corporation, filed an initial Form 10 registration statement with the U.S. Securities and Exchange Commission for the previously announced spin-off of our Pigments & Additives and Textile Effects businesses.
- Subject to market conditions, we plan to separate these businesses from Huntsman in the first half of 2017.
- The shares of the spin-off corporation that will be distributed to
Huntsman shareholders in the spin-off are expected to be listed and traded on the New York Stock Exchange.
- The Form 10 filed today includes a business overview, market information, company strengths and strategy, certain named executive management and historical carve-out financial statements. Additional information regarding the final company name, capitalization, additional pro forma information and other matters will be provided in subsequent amendments to the Form 10.
THE WOODLANDS, Texas – Huntsman Corporation (NYSE: HUN) today reported third quarter 2016 results with revenues of $2,363 million, net income of $64 million and adjusted EBITDA of $272 million.
Peter R. Huntsman, our President and CEO, commented:
“We have been intensely focused on improving our free cash flow generation, our results this quarter are reflective of this drive for value notwithstanding weather related and other production outages that impacted our earnings. In 2016 we planned to generate more than $350 million of free cash flow, this quarter we generated $300 million of free cash flow and year-to-date we have generated $569 million. Subsequently, we made $200 million of early repayments on our debt within the third quarter. Much of the improvement has come from increased discipline related to capital expenditures and working capital management.
“Earlier today, our temporarily named Huntsman Spin Corporation, filed an initial Form 10 registration statement with the U.S. Securities and Exchange Commission for the spin-off of our Pigments & Additives and Textile Effects businesses. This filing represents an important step in the progression towards a separation. Subject to market conditions we plan to separate in the first half of 2017.
“As I consider our operational performance in the quarter there were some key trends that standout. Our MDI business is growing sales volume and improving margins. Within Performance Products, margins for our key businesses, amines and maleic anhydride have stabilized. Advanced Materials and Textile Effects continue to operate at a steady and modestly improving pace. TiO2 prices are improving and with additional increases expected in the future, the timing of our spin-off should be well positioned. Poor refining markets continue to compress our MTBE margins.”
Segment Analysis for 3Q16 Compared to 3Q15
The decrease in revenues in our Polyurethanes division for the three months ended September 30, 2016 compared to the same period in 2015 was primarily due to lower average selling prices and lower MTBE sales volumes, partially offset by higher MDI sales volumes. MDI average selling prices decreased in response to lower raw material costs. MTBE average selling prices decreased primarily as a result of lower pricing for high octane gasoline. MDI sales volumes increased due to higher demand in the Americas and European regions. MTBE sales volumes decreased primarily due to the impact of weather related and other production outages. The decrease in adjusted EBITDA was primarily due to lower MTBE margins and the impact of weather related and other production outages estimated at approximately $15 million, partially offset by higher MDI margins and sales volumes.
The decrease in revenues in our Performance Products division for the three months ended September 30, 2016 compared to the same period in 2015 was due to lower average selling prices and lower sales volumes. Average selling prices decreased primarily in response to lower raw material costs and competitive market conditions. Sales volumes decreased primarily due to the impact
of weather related and other production outages, softer demand in China and oilfield applications as well as competitive market conditions. The decrease in adjusted EBITDA was primarily due to the impact of weather related and other production outages estimated at approximately $10 million as well as lower margins in our amines, maleic anhydride and upstream intermediates businesses.
The decrease in revenues in our Advanced Materials division for the three months ended September 30, 2016 compared to the same period in 2015 was due to lower sales volumes and lower average selling prices. Sales volumes decreased primarily due to soft demand for low value business in our coatings and construction and wind markets, partially offset by global growth in our aerospace and electronics markets. Average selling prices decreased in our Asia Pacific region primarily as a result of competitive pressure in our electrical, electronics and wind markets, partially offset by higher average selling prices in our European and Americas regions. Adjusted EBITDA was essentially flat as lower sales volumes and lower margins were mostly offset by lower selling, general and administrative costs.
The decrease in revenues in our Textile Effects division for the three months ended September 30, 2016 compared to the same period in 2015 was due to lower average selling prices partially offset by higher sales volumes. Average selling prices decreased primarily due to lower raw material costs and the foreign currency exchange impact of a stronger U.S. dollar against major international currencies. Sales volumes increased in key target countries, mainly in South Asia. The increase in adjusted EBITDA was primarily due to higher margins from lower raw material costs as well as lower selling, general and administrative costs.
Pigments and Additives
The decrease in revenues in our Pigments a
nd Additives division for the three months ended September 30, 2016 compared to the same period in 2015 was due to lower average selling prices. Average selling prices decreased primarily as a result of competitive pressure, however they increased compared to the prior quarter. Sales volumes were unchanged as increased end use demand for our titanium dioxide products were offset by seasonally lower volumes for our additives products. The increase in adjusted EBITDA was primarily due to higher margins and lower fixed costs resulting from restructuring savings.
Corporate, LIFO and Other
Adjusted EBITDA from Corporate, LIFO and Other increased by $5 million to a loss of $45 million for the three months ended September 30, 2016 compared to a loss of $50 million for the same period in 2015. The increase in adjusted EBITDA was primarily the result of an increase in unallocated foreign currency exchange gains and an increase in income from benzene sales.
Liquidity, Capital Resources and Outstanding Debt
As of September 30, 2016, we had $1,247 million of combined cash and unused borrowing capacity compared to $1,023 million on December 31, 2015.
We made a $100 million early repayment of debt on July 22, 2016, followed by another $100 million early repayment of debt on September 30, 2016. Both of these early repayments were applied to our term loan B due 2019.
Total capital expenditures for the three months and nine months ended September 30, 2016 were $101 million and $290 million, respectively. During the nine months ended September 30, 2016 we have received capital reimbursements from business partners of $28 million. We expect to spend approximately $450 million on capital expenditures in 2016 and $400 million in 2017 before capital reimbursements from business partners which are expected to be approximately $30 million and $20 million, respectively.
We expect our depreciation and amortizat
ion to be approximately $435 million in 2016 and approximately $450 million in 2017.
During the three months and nine months ended September 30, 2016, we recorded an income tax benefit of $1 million and income tax expense of $58 million, respectively. During the three months and nine months ended September 30, 2016, we paid cash for income taxes of $8 million and $29 million, respectively.
Our MTBE earnings are taxed at the U.S. statutory rate of 35% and variability in our MTBE earnings has a meaningful impact on our adjusted effective tax rate. The combination of significantly lower MTBE earnings, the impact of weather related and other production outages in the U.S., and higher earnings in countries with valuation allowances, resulted in an unusually low adjusted effective tax rate of 14% in the third quarter of 2016.
We expect our 2016 and 2017 adjusted effective tax rate to be approximately 25 - 30%, with variability primarily conditioned on earnings within the U.S. We expect our long term adjusted effective tax rate to be approximately 30%.
Earnings Conference Call Information
We will hold a conference call to discuss our third quarter 2016 financial results on Friday, October 28, 2016 at 10 a.m. ET.
Call-in numbers for the conference call: U.S. participants: (888) 680 - 0890
International participants: (617) 213 - 4857
Passcode 928 629 27#
In order to facilitate the registration process, you may use the following link to pre-register for the conference call. Callers who pre-register will be given a unique PIN to gain immediate access to the call and bypass the live operator. You may pre-register at any time, including up to and after the call start time. To pre-register, please go to: https://www
The conference call will be available via webcast and can be accessed from the company’s website at ir.huntsman.com.
The conference call will be available for replay beginning October 28, 2016 and ending November 4, 2016.
Call-in numbers for the replay:
U.S. participants (888) 286 - 8010
International participants (617) 801 - 6888
Replay code 23056817
During the fourth quarter a member of management is expected to present at the Citi Basic Materials Conference on November 29, 2016 and the Bank of America Merrill Lynch Leveraged Finance Conference on November 30, 2016. A webcast of the presentation, if applicable, along with accompanying materials will be available at ir.huntsman.com.
For more information about Huntsman's third quarter 2016 results, click here.
Huntsman Corporation is a publicly traded global manufacturer and marketer of differentiated chemicals with 2015 revenues of approximately $10 billion. Our chemical products number in the thousands and are sold worldwide to manufacturers serving a broad and diverse range of consumer and indust
rial end markets. We operate more than 100 manufacturing and R&D facilities in approximately 30 countries and employ approximately 15,000 associates within our 5 distinct business divisions. For more information about Huntsman, please visit the company's website at www.huntsman.com.
Statements in this release that are not historical are forward-looking statements. These statements are based on management's current beliefs and expectations. The forward-looking statements in this release are subject to uncertainty and changes in circumstances and involve risks and uncertainties that may affect the company's operations, markets, products, services, prices and other factors as discussed in the Huntsman companies' filings with the U.S. Securities and Exchange Commission. Significant risks and uncertainties may relate to, but are not limited to, financial, economic, competitive, environmental, political, legal, regulatory and technological factors. The company assumes no obligation to provide revisions to any forward-looking statements should circumstances change, except as otherwise required by applicable laws.