Exhibit 99.1
|
FOR
IMMEDIATE RELEASE
|
|
Media:
|
|
Investor
Relations:
|
|
February 24,
2006
|
|
Don Olsen
|
|
John Heskett
|
|
The Woodlands,
TX
|
|
(281) 719-4175
|
|
(801) 584-5768
|
HUNTSMAN
RELEASES 2005 FOURTH QUARTER
AND FULL YEAR RESULTS
RESULTS IMPACTED BY U.S. GULF
COAST STORMS
Highlights
• Revenues for 2005 were a record $12,961.6 million, an
increase of 13% as compared to $11,426.4 million in 2004.
• Adjusted EBITDA for the fourth quarter of 2005 was $205.4 million,
as compared to $404.8 million for the same period in 2004. Fourth quarter 2005 Adjusted EBITDA was
negatively impacted by an estimated $140.0 million related to the U.S. Gulf
Coast storms or approximately $0.60 per diluted share.
• Fourth quarter 2005 net loss was $61.0 million or a $0.27 loss
per diluted share. Adjusted net income
from continuing operations which excludes the impact of losses on the early extinguishment
of debt, restructuring, impairment and plant closing costs and the cumulative
effect of changes in accounting principle was $33.3 million or $0.14 per
diluted share. This compares to adjusted
net income from continuing operations of $99.8 million or $0.43 per diluted share
in the same period in 2004.
• The Company continues to evaluate available options for
improving shareholder value. This may
include the sale of certain of the Company’s Base Chemicals and Polymers assets
and / or a spin-off of these segments.
The Woodlands, TX -Huntsman Corporation (NYSE:HUN) today
reported fourth quarter 2005 EBITDA of $103.5 million including $101.9 million
of charges related to the early extinguishment of debt, restructuring,
impairment and plant closing costs, discontinued operations, cumulative effect
of changes in accounting principle and other charges resulting in Adjusted
EBITDA of $205.4 million. This compares
to EBITDA in the fourth quarter of 2004 of $275.0 million including $129.8
million of charges related to the early extinguishment of debt, restructuring,
impairment and plant closing costs, discontinued operations, and other charges resulting
in Adjusted EBITDA of $404.8 million.
The company reported a net loss of $61.0 million for the fourth
quarter 2005 including a net of tax loss of $46.1 million for the early
extinguishment of debt, net of tax charge of $27.7 million for the cumulative
effect of changes in accounting principle, net of tax charges of $20.2 million for
restructuring, impairment and plant
closing costs, and $0.3 million in net of tax losses from
discontinued operations. Adjusted net income
from continuing operations excluding these items in the fourth quarter 2005 was
$33.3 million. This compares to net loss
of $1.2 million in the fourth quarter of 2004 including net of tax charges of
$74.0 million for restructuring, impairment and plant closing costs, a net of
tax loss for early extinguishment of debt of $23.7 million, and $3.3 million in
net of tax losses from discontinued operations.
Adjusted net income from continuing operations excluding these items in
the fourth quarter of 2004 was $99.8 million.
Peter R. Huntsman, President and CEO, stated, “The fourth quarter was extremely challenging from an
operating perspective as the hurricanes negatively impacted not only our
primary manufacturing facilities in the U.S. Gulf Coast but also the operations
of many of our customers and suppliers.
Hurricane Rita came ashore in Jefferson County, Texas which is where our
single largest manufacturing complex is located. However, we do not expect any
continued material impact from these storms in 2006. Our operations were further negatively
impacted by the prices for many of our raw materials and energy reaching record
levels during the quarter.
We are
optimistic about our outlook for 2006.
Demand in our differentiated businesses remains strong, raw material and
energy prices have recently declined, and capacity additions in most of our
commodity businesses appear to be limited over the next several years. However,
we expect that the margin weakness that we experienced in the latter half of
2005 in our European petrochemicals business to continue into early 2006.
We
continue to execute our business strategy.
We have prepaid approximately $550 million in debt and exceeded our cost
reduction targets. We continue to capitalize
on attractive opportunities to expand our differentiated segments, most
recently evidenced by our announcement that we intend to acquire Ciba Specialty
Chemicals’ Textile Effects business.
As we
have indicated in the past, we are frustrated with the valuations that the
market appears to place on our differentiated businesses. We are evaluating all available opportunities
to unlock this value. We also are
continuing to selectively review certain of our commodity assets for potential
divestment, such as our butadiene business which we announced today we intend
to sell to Texas Petrochemicals LP for $275 million. This review may result in the decision to
divest additional Base Chemicals and Polymer assets and / or spin-off these
segments.”
2
Huntsman Corporation
Operating Results
|
|
|
Three months ended December 31,
|
|
Year ended December 31,
|
|
|
In Millions
|
|
2005
|
|
2004(1)
|
|
2005
|
|
2004(1)
|
|
|
Revenues
|
|
$
|
3,151.0
|
|
$
|
3,116.8
|
|
$
|
12,961.6
|
|
$
|
11,426.4
|
|
|
Cost of goods sold
|
|
2,890.1
|
|
2,720.1
|
|
11,209.5
|
|
10,048.0
|
|
|
Gross profit
|
|
260.9
|
|
396.7
|
|
1,752.1
|
|
1,378.4
|
|
|
Operating expenses
|
|
187.6
|
|
112.5
|
|
814.6
|
|
670.9
|
|
|
Restructuring, impairment and plant closing costs
|
|
23.1
|
|
96.9
|
|
123.6
|
|
299.3
|
|
|
Operating income
|
|
50.2
|
|
187.3
|
|
813.9
|
|
408.2
|
|
|
Interest expense, net
|
|
(84.8
|
)
|
(153.1
|
)
|
(426.6
|
)
|
(612.6
|
)
|
|
Loss on accounts receivable, securitization program
|
|
(1.8
|
)
|
(5.4
|
)
|
(10.7
|
)
|
(15.6
|
)
|
|
Equity in income of unconsolidated affiliates
|
|
1.2
|
|
1.0
|
|
8.2
|
|
4.0
|
|
|
Other non-operating expense
|
|
(42.9
|
)
|
(25.0
|
)
|
(322.6
|
)
|
(25.8
|
)
|
|
(Loss) income from continuing operations before
income taxes, minority interest and accounting changes
|
|
(78.1
|
)
|
4.8
|
|
62.2
|
|
(241.8
|
)
|
|
Income tax benefit (expense)
|
|
45.3
|
|
3.4
|
|
(23.5
|
)
|
29.1
|
|
|
Minority interests in subsidiaries’ income
|
|
(0.2
|
)
|
(6.1
|
)
|
(1.7
|
)
|
(7.2
|
)
|
|
(Loss) income from continuing operations before
accounting changes
|
|
(33.0
|
)
|
2.1
|
|
37.0
|
|
(219.9
|
)
|
|
Loss from discontinued operations, net of tax(2)
|
|
(0.3
|
)
|
(3.3
|
)
|
(43.9
|
)
|
(7.8
|
)
|
|
Cumulative effect of changes in accounting
principle, net of tax
(3)
|
|
(27.7
|
)
|
—
|
|
(27.7
|
)
|
—
|
|
|
Net loss
|
|
(61.0
|
)
|
(1.2
|
)
|
(34.6
|
)
|
(227.7
|
)
|
|
Preferred dividends(4)
|
|
—
|
|
(21.9
|
)
|
(43.1
|
)
|
(87.7
|
)
|
|
Net loss available to common stockholders
|
|
$
|
(61.0
|
)
|
$
|
(23.1
|
)
|
$
|
(77.7
|
)
|
$
|
(315.4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(61.0
|
)
|
$
|
(1.2
|
)
|
$
|
(34.6
|
)
|
$
|
(227.7
|
)
|
|
Interest expense, net
|
|
84.8
|
|
153.1
|
|
426.6
|
|
612.6
|
|
|
Income tax (benefit) expense(3)
|
|
(48.2
|
)
|
(3.4
|
)
|
20.6
|
|
(29.1
|
)
|
|
Depreciation and amortization
|
|
127.9
|
|
126.5
|
|
500.8
|
|
536.8
|
|
|
EBITDA(5)
|
|
103.5
|
|
275.0
|
|
913.4
|
|
892.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss on accounts receivable, securitization program
|
|
1.8
|
|
5.4
|
|
10.7
|
|
15.6
|
|
|
Legal and contract settlement expense net
|
|
—
|
|
0.5
|
|
—
|
|
6.6
|
|
|
Loss on early extinguishment of debt
|
|
46.1
|
|
23.7
|
|
322.5
|
|
25.6
|
|
|
Restructuring, impairment and plant closing costs
|
|
23.1
|
|
96.9
|
|
123.6
|
|
299.3
|
|
|
Loss from discontinued operations, net of tax(2)
|
|
0.3
|
|
3.3
|
|
43.9
|
|
7.8
|
|
|
Cumulative effect of changes in accounting
principle(3)
|
|
30.6
|
|
—
|
|
30.6
|
|
—
|
|
|
Adjusted EBITDA(5)
|
|
$
|
205.4
|
|
$
|
404.8
|
|
$
|
1,444.7
|
|
$
|
1,247.5
|
|
See end
of press release for footnote explanations
3
The company computes Adjusted EBITDA to eliminate the impact
of losses on the sale of accounts receivable related to its securitization program,
non-recurring legal and contract settlement expenses and credits, losses on
early extinguishment of debt, restructuring, impairment and plant closing costs,
discontinued operations and the cumulative effect of changes in accounting
principle, in order to provide investors with a more meaningful measure of its operational
performance. The company computes adjusted
net income (loss) from continuing operations by eliminating the after tax impact
of preferred dividends, losses on the early extinguishment of debt,
restructuring, impairment and plant closing costs, discontinued operations and
the cumulative effect of changes in accounting principle. See footnote (5) at the end of this
press release for more information on EBITDA, Adjusted EBITDA and adjusted net
income (loss) from continuing operations.
Huntsman Corporation
Reconciliation
of Adjusted Net Income from Continuing Operations
|
|
|
Three months ended December 31,
|
|
Year ended December 31,
|
|
|
In Millions, Except Per Share
Amounts
|
|
2005
|
|
2004(1)
|
|
2005
|
|
2004(1)
|
|
|
Net loss available to common stockholders
|
|
$
|
(61.0
|
)
|
$
|
(23.1
|
)
|
$
|
(77.7
|
)
|
$
|
(315.4
|
)
|
|
Preferred dividends(4)
|
|
—
|
|
21.9
|
|
43.1
|
|
87.7
|
|
|
Net loss
|
|
(61.0
|
)
|
(1.2
|
)
|
(34.6
|
)
|
(227.7
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments net of tax:
|
|
|
|
|
|
|
|
|
|
|
Loss on early extinguishment of debt
|
|
46.1
|
|
23.7
|
|
322.5
|
|
25.6
|
|
|
Restructuring, impairment and plant closing costs
|
|
20.2
|
|
74.0
|
|
111.3
|
|
231.6
|
|
|
Loss from discontinued operations(2)
|
|
0.3
|
|
3.3
|
|
43.9
|
|
7.8
|
|
|
Cumulative effect of changes in accounting
principle(3)
|
|
27.7
|
|
—
|
|
27.7
|
|
—
|
|
|
Adjusted net income from continuing
operations(5)
|
|
$
|
33.3
|
|
$
|
99.8
|
|
$
|
470.8
|
|
$
|
37.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic loss per share
|
|
$
|
(0.27
|
)
|
$
|
(0.10
|
)
|
$
|
(0.35
|
)
|
$
|
(1.43
|
)
|
|
Diluted loss per share
|
|
$
|
(0.27
|
)
|
$
|
(0.10
|
)
|
$
|
(0.35
|
)
|
$
|
(1.43
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted diluted earnings (loss) per share from
continuing operations(5)
|
|
$
|
0.14
|
|
$
|
0.43
|
|
$
|
2.02
|
|
$
|
0.16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common share information(6):
|
|
|
|
|
|
|
|
|
|
|
Basic shares outstanding
|
|
220.5
|
|
220.5
|
|
220.5
|
|
220.5
|
|
|
Options
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
Conversion of preferred stock
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
Diluted shares
|
|
220.5
|
|
220.5
|
|
220.5
|
|
220.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted shares for Adjusted earnings (loss) per
share from continuing operations
|
|
233.0
|
|
233.0
|
|
233.0
|
|
233.0
|
|
See end
of press release for footnote explanations
Huntsman Corporation
Estimated Hurricane Impact(8)
|
|
|
Three months ended
December 31, 2005
|
|
|
|
|
|
|
Adjusted
|
|
Net Income
|
|
|
|
|
|
|
In Millions, Except Per Share Amounts
|
|
EBITDA Impact
|
|
(Loss) Impact
|
|
EPS Impact
|
|
|
|
|
Segment:
|
|
|
|
|
|
|
|
|
|
|
Polyurethanes
|
|
$
|
(25.9
|
)
|
$
|
(25.9
|
)
|
$
|
(0.11
|
)
|
|
|
|
Advanced Materials
|
|
(2.3
|
)
|
(2.3
|
)
|
(0.01
|
)
|
|
|
|
Performance Products
|
|
(44.3
|
)
|
(44.3
|
)
|
(0.19
|
)
|
|
|
|
Pigments
|
|
(2.2
|
)
|
(2.2
|
)
|
(0.01
|
)
|
|
|
|
Polymers
|
|
—
|
|
—
|
|
—
|
|
|
|
|
Base Chemicals
|
|
(65.3
|
)
|
(65.3
|
)
|
(0.28
|
)
|
|
|
|
Corporate and other
|
|
—
|
|
—
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
(140.0
|
)
|
$
|
(140.0
|
)
|
$
|
(0.60
|
)
|
|
|
See end
of press release for footnote explanations
4
Huntsman Corporation
Segment Results
|
|
|
Three months ended December 31,
|
|
Year ended December 31,
|
|
|
In Millions
|
|
2005
|
|
2004(1)
|
|
2005
|
|
2004(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment
Revenues:
|
|
|
|
|
|
|
|
|
|
|
Polyurethanes
|
|
$
|
786.4
|
|
$
|
748.7
|
|
$
|
3,396.3
|
|
$
|
2,818.0
|
|
|
Advanced Materials
|
|
273.8
|
|
296.0
|
|
1,185.3
|
|
1,162.4
|
|
|
Performance Products
|
|
443.5
|
|
528.1
|
|
1,960.9
|
|
1,927.8
|
|
|
Pigments
|
|
265.3
|
|
253.4
|
|
1,052.8
|
|
1,048.1
|
|
|
Polymers
|
|
452.7
|
|
432.2
|
|
1,702.0
|
|
1,451.8
|
|
|
Base Chemicals
|
|
1,117.7
|
|
1,103.2
|
|
4,462.1
|
|
3,859.0
|
|
|
Eliminations
|
|
(188.4
|
)
|
(244.8
|
)
|
(797.8
|
)
|
(840.7
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
3,151.0
|
|
$
|
3,116.8
|
|
$
|
12,961.6
|
|
$
|
11,426.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment EBITDA
(5):
|
|
|
|
|
|
|
|
|
|
|
Polyurethanes
|
|
$
|
141.3
|
|
$
|
93.3
|
|
$
|
676.3
|
|
$
|
364.0
|
|
|
Advanced Materials
|
|
18.6
|
|
31.6
|
|
154.1
|
|
151.0
|
|
|
Performance Products
|
|
(0.7
|
)
|
8.1
|
|
157.3
|
|
91.0
|
|
|
Pigments
|
|
28.8
|
|
23.6
|
|
115.3
|
|
(30.0
|
)
|
|
Polymers
|
|
31.1
|
|
32.0
|
|
102.7
|
|
77.6
|
|
|
Base Chemicals
|
|
12.3
|
|
71.4
|
|
264.3
|
|
276.2
|
|
|
Corporate and other
|
|
(127.9
|
)
|
15.0
|
|
(556.6
|
)
|
(37.2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
103.5
|
|
$
|
275.0
|
|
$
|
913.4
|
|
$
|
892.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment Adjusted
EBITDA(5) :
|
|
|
|
|
|
|
|
|
|
|
Polyurethanes
|
|
$
|
150.0
|
|
$
|
100.7
|
|
$
|
733.6
|
|
$
|
408.7
|
|
|
Advanced Materials
|
|
19.7
|
|
40.8
|
|
154.6
|
|
151.4
|
|
|
Performance Products
|
|
2.7
|
|
64.4
|
|
167.3
|
|
188.5
|
|
|
Pigments
|
|
32.0
|
|
35.4
|
|
145.4
|
|
108.4
|
|
|
Polymers
|
|
31.4
|
|
38.0
|
|
154.3
|
|
91.2
|
|
|
Base Chemicals
|
|
17.8
|
|
79.0
|
|
281.1
|
|
292.9
|
|
|
Corporate and other
|
|
(48.2
|
)
|
46.5
|
|
(191.6
|
)
|
6.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
205.4
|
|
$
|
404.8
|
|
$
|
1,444.7
|
|
$
|
1,247.5
|
|
Three Months Ended December 31,
2005 as Compared to Three Months Ended December 31, 2004
Revenues for the three
months ended December 31, 2005 increased to $3,151.0 million or 1%, from $3,116.8 million
during the same period in 2004. Revenues
increased in our Polyurethanes, Pigments, Polymers and Base Chemicals segments
due primarily to higher average selling prices.
Revenues decreased in our Advanced Materials and Performance Products
segments primarily due to lower sales volumes resulting from business
interruption due to the U.S. Gulf Coast storms and product portfolio
re-alignment activities. Lower sales
volumes were partially offset by higher average selling prices in these
segments.
For the three months
ended December 31, 2005, the company generated EBITDA of $103.5 million,
which included $46.1 million in losses from the early extinguishment of debt, a
charge for $30.6 million for the cumulative effect of changes in accounting
principle, $23.1 million of restructuring, impairment and plant closing costs, $1.8 million
of loss on the sale of accounts receivable, and a net of tax loss from
discontinued operations of $0.3 million.
This compares to EBITDA for the three months ended December 31,
2004 of $275.0 million, which included $96.9 million of restructuring,
impairment and plant closing costs, $23.7 million of loss from the early
extinguishment of debt, $5.4 million of loss on the sale of accounts
receivable, net of tax loss from discontinued operations of $3.3 million, and
legal and contract settlement costs of $0.5 million.
5
Adjusted EBITDA for the three
months ended December 31, 2005 was $205.4 million, a decrease as
compared to $404.8 million for the same period in 2004. The decrease in Adjusted EBITDA resulted from
decreases in all segments except our Polyurethanes segment. Adjusted EBITDA in the fourth quarter 2005
included approximately $140.0 million of estimated direct impact due to the
U.S. Gulf Coast storms.
Polyurethanes
The increase in revenues
in the Polyurethanes segment for the three months ended December 31, 2005
as compared to the same period in 2004 was primarily due to higher average
selling prices for MDI. MDI average
selling prices increased by 8% as a result of the combination of strong growth
in higher value applications, and in response to higher raw material and energy
costs. MDI sales volumes increased 3% in
the fourth quarter of 2005 as compared to the same period in 2004. In addition, PO and co-product MTBE average
selling prices were higher, while volumes decreased due to a loss of production
related to the U.S. Gulf Coast storms.
The increase in EBITDA in
the Polyurethanes segment was primarily the result of higher margins as higher average
selling prices and increased volume more than offset increases in raw material
and energy costs and the impact of the U.S. Gulf Coast storms. We estimate the impact of the U.S. Gulf Coast
storms to be approximately $25.9 million in the fourth quarter of 2005 for the
Polyurethanes segment. During the three
months ended December 31, 2005 the Polyurethanes segment recorded
restructuring and plant closing charges of $8.4 million as compared to $4.1
million for the same period in 2004.
Advanced
Materials
The decrease in revenues
in the Advanced Materials segment for the three months ended December 31,
2005 as compared to the same period in 2004 was primarily the result of lower
sales volumes. Sales volumes decreased by approximately 8% as seasonality and the
ongoing portfolio re-alignment activities resulted in lower sales volumes,
primarily in our construction and electronics market groups. Average selling prices were relatively
unchanged.
The decrease in EBITDA in
the Advanced Materials segment was primarily the result of lower sales volumes,
higher raw material costs and higher manufacturing costs. During the three months ended December 31,
2005 the Advanced Materials segment recorded restructuring and plant closing
charges of $0.5 million as compared to $9.0 million for the same period in
2004.
Performance
Products
The
decrease in revenues in the Performance Products segment for the three months
ended December 31, 2005 as compared to the same period in 2004 was
primarily the result of lower sales volumes.
Sales volumes decreased 28% primarily due to lower production in the
U.S. attributable to the Gulf Coast storms and reduced sales of certain surfactants and glycols. Overall, average selling prices increased by
17% in response to higher raw material
and energy costs.
The
decrease in EBITDA in the Performance Products segment was due primarily
to the impact of the U.S. Gulf Coast storms which we estimate to be
approximately $44.3 million in the 2005 fourth quarter, as well as higher raw material costs,
partially offset by a reduction in operating expenses. During the three months ended December 31,
2005, the Performance Products segment recorded restructuring and plant closing
charges of $3.4 million as compared to $56.3 million for the same period as
2004.
6
Pigments
The increase in revenues
in the Pigments segment for the three months ended December 31, 2005 as
compared to the same period in 2004 was primarily due to an 8% increase in
sales volumes, partially offset by a 2% decrease in average selling prices. Volumes were higher primarily due to increased
customer demand and tighter industry supply.
Average selling prices decreased primarily in Europe due to strength of the
U.S. dollar versus European currencies.
The increase in EBITDA in
the Pigments segment was primarily the result of lower restructuring and plant
closing charges. During the three months
ended December 31, 2005, the Pigments segment recorded restructuring and
plant closing charges of $3.2 million as compared to $11.6 million for the
comparable period in 2004.
Polymers
The increase in revenues
in the Polymers segment for the three months ended December 31, 2005 as
compared to the same period in 2004 was primarily the result of a 17% increase
in average selling prices due to tighter market conditions and higher raw
material and energy costs. Sales volumes
decreased due to lower demand for polyethylene and polypropylene.
EBITDA in the Polymers
segment was essentially unchanged as compared to the same period in 2004 as
higher average selling prices were offset by lower sales volumes and higher raw
materials and energy costs. During the
three months ended December 31, 2005 the Polymers segment recorded
restructuring, impairment and plant closing charges of $0.3 million as compared
to $6.0 million for the comparable period in 2004.
Base
Chemicals
The increase in revenues
in the Base Chemicals segment for the three months ended December 31, 2005
as compared to the same period in 2004 was primarily the result of a 15%
increase in average selling prices in response to higher raw material and
energy costs and improved market conditions.
Sales volumes decreased by 12% in the 2005 period as compared to 2004
primarily as the result of lower production due primarily to unplanned outages
related to the U.S. Gulf Coast storms which impacted all of our U.S. Base
Chemicals manufacturing units.
The decrease in EBITDA in
the Base Chemicals segment was due primarily to the impact of the U.S. Gulf
Coast storms which we estimate to be approximately $65.3 million in the 2005
fourth quarter. During the three months
ended December 31, 2005, the Base Chemicals segment recorded restructuring,
impairment and plant closing charges of $5.5 million as compared to charges of $7.6
million for the comparable period in 2004.
Corporate
and Other
Corporate and other items
include unallocated corporate overhead, loss on the sale of the accounts
receivable, unallocated foreign exchange gains and losses, losses on the early
extinguishment of debt, other non-operating income and expense, minority
interest, and unallocated restructuring and reorganization costs. In the fourth quarter of 2005, the total of
these items increased by $142.9 million as compared to the 2004 period. The decrease in EBITDA primarily resulted
from $92.9 million lower unallocated foreign currency gains, $30.6 million for
the cumulative effect of changes in accounting principle, and $22.4 million
higher loss on early extinguishment of debt.
7
Liquidity, Capital Resources and
Outstanding Debt
As of December 31,
2005, we and our subsidiaries had approximately $812 million in combined cash
and unused borrowing capacity, as compared to $1,020 million at December 31,
2004.
For the twelve months ended
December 31, 2005, total capital expenditures were $339 million as
compared to $227 million for the same period in 2004. We expect to spend approximately $575 million
on capital expenditures during 2006, which includes approximately $200 million
for the Wilton, UK LDPE facility.
For 2006, we estimate
that our effective tax rate will be approximately 15 - 20%.
On December 20, 2005 we completed the
acquisition of substantially all the minority interests held by affiliates of
SISU Capital Limited and other third parties representing approximately 9.7% of
the equity in our subsidiary Huntsman Advanced Materials LLC (“AdMat”) for $125
million. As a result, AdMat is now a
100% owned subsidiary of the Company. During
the fourth quarter 2005, we recorded $46.1 million in losses on early
extinguishment of debt associated with the AdMat merger and related financing
and other repayments of debt.
Including off-balance
sheet financing from our accounts receivable securitization program we reduced
net debt by approximately $1.6 billion during 2005. Beginning with a repayment of debt on December 31,
2004 and excluding debt repaid from net proceeds received from our initial
public offering, we have voluntarily repaid approximately $550 million in debt.
During 2005 we had net interest
expense of approximately $427 million as compared with $613 million during
2004, a reduction of approximately $186 million. We estimate annual interest expense in 2006 to
be approximately $375 million, a reduction of approximately $238 million when
compared with 2004.
Below
is the Company’s outstanding debt as of December 31, 2005 and December 31,
2004:
|
|
|
As of December 31,(7)
|
|
|
In
Millions
|
|
2005
|
|
2004
|
|
|
|
|
|
|
|
|
|
Debt:
|
|
|
|
|
|
|
Senior Secured Credit Facilities
|
|
$
|
2,099.3
|
|
$
|
2,154.1
|
|
|
Secured Notes
|
|
293.6
|
|
799.7
|
|
|
Unsecured Notes
|
|
752.7
|
|
856.0
|
|
|
Subordinated Notes
|
|
1,145.2
|
|
1,402.5
|
|
|
Discount Notes
|
|
—
|
|
957.1
|
|
|
Other Debt
|
|
167.1
|
|
130.1
|
|
|
Total Debt
|
|
$
|
4,457.9
|
|
$
|
6,299.5
|
|
|
|
|
|
|
|
|
|
Total Cash and
Restricted Cash
|
|
$
|
142.8
|
|
$
|
252.1
|
|
|
|
|
|
|
|
|
|
Net Debt
|
|
$
|
4,315.1
|
|
$
|
6,047.4
|
|
8
Conference Call Information
We
will hold a telephone conference to discuss our fourth quarter 2005 results on Friday,
February 24, 2006 at 11:00 a.m. EST.
|
Call-in number for U.S. participants:
|
|
(866) 362 – 4820
|
|
Call-in number for international participants:
|
|
(617) 597 – 5345
|
|
Participant access code:
|
|
12382110
|
The conference call will
be available via webcast and can be accessed from the investor relations
portion of the company’s website at http://www.huntsman.com.
The conference call will
be available for replay beginning February 24, 2006 and ending March 3,
2006.
Call-in numbers for the replay:
|
Within
the U.S.:
|
|
(888) 286 – 8010
|
|
International:
|
|
(617)
801 – 6888
|
|
Access
code for replay:
|
|
21472374
|
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 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. In addition, completion of transactions of
the type described in this release is subject to a number of uncertainties and
to negotiation and execution of definitive agreements among the parties and
closing will be subject to approvals and other customary conditions.
Accordingly, there can be no assurance that the transactions will be completed
or that the company’s expectations will be realized. The company assumes
no obligation to provide revisions to any forward-looking statements should
circumstances change, except as otherwise required by securities and other
applicable laws.
9
(1) The 2004 financial data presents the data of our predecessor Huntsman
Holdings, LLC which became our wholly-owned subsidiary on February 16,
2005 in connection with our initial public offering.
(2) On July 6, 2005 we completed the sale of our toluene di-isocyanate
(TDI) business to BASF. We recognized net of tax losses from
discontinued operations of $0.3 million for the three months ended December 31,
2005. For the twelve months ended December 31,
2005, the three months ended December 31, 2004, and the twelve months
ended December 31, 2004 we incurred net of tax losses from discontinued
operations of $43.9 million, $3.3 million and $7.8 million respectively.
(3) We adopted FIN 47, “Accounting for Conditional Asset Retirement
Obligations” on December 31, 2005.
We recorded a charge for the cumulative effect of changes in accounting principle,
net of tax, of $31.7 million. The tax benefit associated with this charge was $4.8
million. Effective in the fourth quarter
2005, we accelerated the date for actuarial measurement of our pension and
postretirement benefit obligations from December 31st to November 30th. We believe the one-month acceleration will
improve internal control procedures by allowing more time for review. The
effect of this change resulted in a cumulative change in accounting principle
credit, net of tax, of $4.0 million. The tax expense associated with this
credit was $1.9 million.
(4) For the year ended December 31, 2005, preferred dividends
represents all of the dividends that were declared and will become payable from
the issuance of our 5% mandatory convertible preferred stock until the
mandatory conversion date. For the three
months and year ended December 31, 2004, preferred dividends represents
the return on the redeemable preferred member’s interest of our predecessor,
Huntsman Holdings, LLC. The redeemable
preferred member’s interest was exchanged for our common stock at the time of
our initial public offering.
(5) EBITDA is defined as net income (loss) before interest, income taxes, and
depreciation and amortization. We believe that EBITDA enhances an investor’s
understanding of our financial performance and our ability to satisfy principal
and interest obligations with respect to our indebtedness. However, EBITDA
should not be considered in isolation or viewed as a substitute for net income,
cash flow from operations or other measures of performance as defined by generally
accepted accounting principles in the U.S. (“GAAP”). Moreover, EBITDA as used herein is not
necessarily comparable to other similarly titled measures of other companies
due to potential inconsistencies in the method of calculation. Our management
uses EBITDA to assess financial performance and debt service capabilities. In
assessing financial performance, our management reviews EBITDA as a general
indicator of economic performance compared to prior periods. Because EBITDA
excludes interest, income taxes, depreciation and amortization, EBITDA provides
an indicator of general economic performance that is not affected by debt
restructurings, fluctuations in interest rates or effective tax rates, or
levels of depreciation and amortization.
Accordingly, our management believes this type of measurement is useful
for comparing general operating performance from period to period and making
certain related management decisions. EBITDA is also used by securities
analysts, lenders and others in their evaluation of different companies because
it excludes certain items that can vary widely across different industries or
among companies within the same industry.
For example, interest expense can be highly dependent on a company’s
capital structure, debt levels and credit ratings. Therefore, the impact of interest expense on
earnings can vary significantly among companies. In addition, the tax positions of companies
can vary because of their differing abilities to take advantage of tax benefits
and because of the tax policies of the various jurisdictions in which they
operate. As a result, effective tax rates and tax expense can vary considerably
among companies. Finally, companies employ productive assets of different ages
and utilize different methods of acquiring and depreciating such assets. This can result in considerable variability
in the relative costs of productive assets and the depreciation and
amortization expense among companies.
Our management also believes that our investors use EBITDA as a measure
of our ability to service indebtedness as well as to fund capital expenditures
and working capital requirements. Nevertheless, our management recognizes that
there are material limitations associated with the use of EBITDA in the
evaluation of our company as compared to net income, which reflects overall
financial performance, including the effects of interest, income taxes,
depreciation and amortization. EBITDA
excludes interest expense. Because we
have borrowed money in order to finance our operations, interest expense is a
necessary element of our costs and ability to generate revenue. Therefore, any measure that excludes interest
expense has material limitations. EBITDA
also excludes taxes. Because the payment of taxes is a necessary element of our
operations, any measure that excludes tax expense has material limitations.
Finally, EBITDA excludes depreciation and amortization expense. Because we use capital assets, depreciation
and amortization expense is a necessary element of our costs and ability to
generate revenue. Therefore, any measure
that excludes depreciation and amortization expense has material
limitations. Our management compensates
for the limitations of EBITDA by using it to supplement GAAP results to provide
a more complete understanding of the factors and trends affecting the business
than GAAP results alone. Our management also uses other metrics to evaluate
capital structure, tax planning and capital investment decisions. For example, our management uses credit
ratings and net debt ratios to evaluate capital structure, effective tax rate
by jurisdiction to evaluate tax planning, and payback period and internal rate
of return to evaluate capital investments.
Our management also uses trade working capital to evaluate its investment
in receivables and inventory, net of payables.
Adjusted EBITDA is computed by eliminating from EBITDA gains and losses
from discontinued operations, all restructuring, impairment and reorganization
costs, losses on the sale of accounts receivable to our securitization program,
losses from early extinguishment of debt, legal and contract settlement
expense, net, and cumulative effect of changes in accounting principle and is
used to provide a more meaningful measure of operational performance. Adjusted net income (loss) from continuing
operation is computed by eliminating losses from discontinued operations, the preferred
dividends and after tax impact of restructuring, impairment and plant closing
costs, losses on the early extinguishment of debt, and cumulative effect of
changes in accounting principle. We
believe that net income (loss) is the performance measure calculated and
presented in accordance with GAAP that is most directly comparable to EBITDA,
Adjusted EBITDA and adjusted net income (loss) from continuing operations.
(6) Year ended 2005 and 2004 shares outstanding have been restated to
reflect the company’s reorganization transaction and initial public offering as
if it occurred at the beginning of each period presented.
(7) Excludes $302.3 million and $208.4 million of off-balance sheet
financing obtained under the accounts receivable securitization program as of December 2005,
and 2004, respectively.
(8) We have included the following items in our estimate of Hurricane
damages: lost volume and margin of approximately $83 million; physical damage
and start-up costs of approximately $57 million.
10