Huntsman Corporation Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

OPERATING SEGMENT INFORMATION

OPERATING SEGMENT INFORMATION

12 Months Ended

Dec. 31, 2019

27. OPERATING SEGMENT INFORMATION

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. Beginning in the third quarter of 2019, we reported the results of our Chemical Intermediates Businesses as discontinued operations and the related assets and liabilities as held for sale in our consolidated financial statements for all periods presented. See “Note 4. Discontinued Operations and Business Dispositions—Sale of Chemical Intermediates Businesses.” In addition, in connection with the Venator IPO in August 2017, we separated Venator and, beginning in the third quarter of 2017, we reported the results of operations of Venator as discontinued operations in our consolidated financial statements. On December 3, 2018, we further reduced our remaining investment in Venator by the sale of Venator ordinary shares which allowed us to deconsolidate Venator and account for our remaining interest in Venator as an equity method investment using the fair

value option post consolidation. See “Note 4. Discontinued Operations and Business Dispositions—Separation and Deconsolidation of Venator.”

The major products of each reportable operating segment are as follows:


Segment		Products
Polyurethanes		MDI, polyols, TPU and aniline
Performance Products		Specialty amines, ethyleneamines, maleic anhydride and technology licenses
Advanced Materials		Basic liquid and solid epoxy resins; specialty resin compounds; cross-linking, matting and curing agents; epoxy, acrylic and polyurethane-based formulations
Textile Effects		Textile chemicals, dyes and digital inks

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):


	Year ended December 31,
	2019		2018		2017
Revenues:
Polyurethanes	$	3,911	$	4,282	$	3,764
Performance Products		1,158		1,301		1,156
Advanced Materials		1,044		1,116		1,040
Textile Effects		763		824		776
Corporate and eliminations		(79)		81		109
Total	$	6,797	$	7,604	$	6,845

Huntsman Corporation:
Segment adjusted EBITDA(1):
Polyurethanes	$	548	$	809	$	776
Performance Products		168		197		155
Advanced Materials		201		225		219
Textile Effects		84		101		83
Corporate and other(2)		(155)		(171)		(193)
Total		846		1,161		1,040
Reconciliation of adjusted EBITDA to net income:
Interest expense—continuing operations		(111)		(115)		(165)
Interest expense—discontinued operations		—		(36)		(19)
Income tax benefit (expense)—continuing operations		38		(45)		(20)
Income tax expense—discontinued operations		(35)		(86)		(111)
Depreciation and amortization—continuing operations		(270)		(255)		(236)
Depreciation and amortization—discontinued operations		(61)		(88)		(151)
Net income attributable to noncontrolling interests		36		313		105
Other adjustments:
Business acquisition and integration expenses and purchase accounting inventory adjustments		(5)		(9)		(19)
Merger costs		—		(2)		(28)
EBITDA from discontinued operations		265		171		511
Noncontrolling interest of discontinued operations		—		(232)		(49)
Fair value adjustments to Venator investment		(18)		(62)		—
Loss on early extinguishment of debt		(23)		(3)		(54)
Certain legal settlements and related (expenses) income		(6)		(1)		11
(Loss) gain on sale of businesses/assets		(21)		—		9
Certain nonrecurring information technology project implementation costs		(4)		—		—
Amortization of pension and postretirement actuarial losses		(66)		(67)		(69)
Plant incident remediation costs		(8)		—		(1)
U.S. Tax Reform Act impact on noncontrolling interest		—		—		6
Restructuring, impairment and plant closing and transition credits (costs)		41		6		(19)
Net income	$	598	$	650	$	741


	Year ended December 31,
	2019		2018		2017
Depreciation and Amortization:
Polyurethanes	$	120	$	108	$	92
Performance Products		81		78		78
Advanced Materials		36		37		33
Textile Effects		16		16		14
Corporate and other		17		16		19
Total	$	270	$	255	$	236


	Year ended December 31,
	2019		2018		2017
Capital Expenditures:
Polyurethanes	$	185	$	153	$	158
Performance Products		32		48		35
Advanced Materials		24		20		21
Textile Effects		22		20		16
Corporate and other		11		10		4
Total	$	274	$	251	$	234


	December 31,
	2019		2018
Total Assets:
Polyurethanes	$	3,437	$	3,129
Performance Products		1,125		1,161
Advanced Materials		774		796
Textile Effects		511		571
Corporate and other		1,265		1,187
Total	$	7,112	$	6,844


	December 31,
	2019		2018
Goodwill:
Polyurethanes	$	177	$	173
Performance Products		16		16
Advanced Materials		83		86
Total	$	276	$	275


	Year ended December 31,
	2019		2018		2017
Huntsman International:
Segment adjusted EBITDA(1):
Polyurethanes	$	548	$	809	$	776
Performance Products		168		197		155
Advanced Materials		201		225		219
Textile Effects		84		101		83
Corporate and other(2)		(150)		(167)		(189)
Total		851		1,165		1,044
Reconciliation of adjusted EBITDA to net income:
Interest expense—continuing operations		(126)		(136)		(181)
Interest expense—discontinued operations		—		(36)		(19)
Income tax benefit (expense)—continuing operations		41		(41)		(17)
Income tax expense—discontinued operations		(35)		(86)		(111)
Depreciation and amortization—continuing operations		(270)		(252)		(228)
Depreciation and amortization—discontinued operations		(61)		(88)		(151)
Net income attributable to noncontrolling interests		36		313		105
Other adjustments:
Business acquisition and integration expenses and purchase accounting inventory adjustments		(5)		(9)		(23)
Merger costs		—		(2)		(28)
EBITDA from discontinued operations		265		171		511
Noncontrolling interest of discontinued operations		—		(232)		(49)
Fair value adjustments to Venator investment		(18)		(62)		—
Loss on early extinguishment of debt		(23)		(3)		(54)
Certain legal settlements and related (expenses) income		(6)		(1)		11
(Loss) gain on sale of businesses/assets		(21)		—		10
Certain nonrecurring information technology project implementation costs		(4)		—		—
Amortization of pension and postretirement actuarial losses		(70)		(71)		(72)
Plant incident remediation costs		(8)		—		(1)
U.S. Tax Reform Act impact on noncontrolling interest		—		—		6
Restructuring, impairment and plant closing and transition credits (costs)		41		6		(19)
Net income	$	587	$	636	$	734


	Year ended December 31,
	2019		2018		2017
Depreciation and Amortization:
Polyurethanes	$	120	$	108	$	92
Performance Products		81		78		78
Advanced Materials		36		37		33
Textile Effects		16		16		14
Corporate and other		17		13		11
Total	$	270	$	252	$	228


	Year ended December 31,
	2019		2018		2017
Capital Expenditures:
Polyurethanes	$	185	$	153	$	158
Performance Products		32		48		35
Advanced Materials		24		20		21
Textile Effects		22		20		16
Corporate and other		11		10		4
Total	$	274	$	251	$	234


	December 31,
	2019		2018
Total Assets:
Polyurethanes	$	3,437	$	3,129
Performance Products		1,125		1,161
Advanced Materials		774		796
Textile Effects		511		571
Corporate and other		1,668		1,569
Total	$	7,515	$	7,226


	December 31,
	2019		2018
Goodwill:
Polyurethanes	$	177	$	173
Performance Products		16		16
Advanced Materials		83		86
Total	$	276	$	275

(1) We use segment adjusted EBITDA as the measure of each segment’s profit or loss. We believe that segment adjusted EBITDA more accurately reflects what management uses to make decisions about resources to be allocated to the segments and assess their financial performance. Segment 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 expenses and purchase accounting inventory adjustments; (b) merger costs; (c) EBITDA from discontinued operations; (d) noncontrolling interest of discontinued operations; (e) fair value adjustments to Venator investment; (f) loss on early extinguishment of debt; (g) certain legal settlements and related income (expenses); (h) gain on sale of businesses/assets; (i) certain nonrecurring information technology project implementation costs; (j) amortization of pension and postretirement actuarial losses; (k) plant incident remediation costs; (l) U.S. Tax Reform Act impact on noncontrolling interest; and (m) restructuring, impairment, plant closing and transition credits (costs).

(2) Corporate and other includes unallocated corporate overhead, unallocated foreign exchange gains and losses, LIFO inventory valuation reserve adjustments, nonoperating income and expense, benzene sales and gains and losses on the disposition of corporate assets.


	Year ended December 31,
	2019		2018		2017
Revenues by geographic area(1):
United States	$	2,025	$	2,136	$	1,828
China		1,076		1,260		1,122
Germany		541		537		507
India		319		352		336
Other nations		2,836		3,319		3,052
Total	$	6,797	$	7,604	$	6,845


	December 31,
	2019		2018
Long-lived assets(2):
United States	$	970	$	944
The Netherlands		334		331
China		247		247
Saudi Arabia		154		161
Germany		137		143
Switzerland		106		108
Singapore		94		96
Other nations		341		323
Total	$	2,383	$	2,353

(1) Geographic information for revenues is based upon countries into which product is sold.

(2) Long-lived assets consist of property, plant and equipment, net.