Exhibit
99.1
|
FOR IMMEDIATE RELEASE
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|
Media:
|
|
Investor Relations:
|
|
October 27, 2006
|
|
Russ Stolle
|
|
John Heskett
|
|
The Woodlands, TX
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|
(281) 719-6624
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(801) 584-5768
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|
NYSE: HUN
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|
|
|
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HUNTSMAN RELEASES THIRD QUARTER 2006 RESULTS
HUNTSMAN
TO SELL EUROPEAN PETROCHEMICALS BUSINESS TO SABIC;
MULTIPLE
BUYERS HAVE EXPRESSED INTEREST IN U.S. COMMODITY ASSETS;
COMPANY TO FOCUS STRICTLY ON DIFFERENTIATED CHEMICALS
Highlights
· Revenues for the third
quarter of 2006 were $2,686.0 million, as compared to $2,587.9 million in the
third quarter of 2005, an increase of $98.1 million or 4%.
· During the third quarter of
2006, we entered into a definitive agreement to sell our European
petrochemicals business to Saudi Basic Industries Corporation (SABIC) for $700
million in cash and the assumption of $126 million in pension liabilities. This transaction is expected to close by year
end.
· Third quarter 2006 net loss
was $83.3 million or $0.36 loss per diluted share, due primarily to charges related
to the sale of the European petrochemicals business. Excluding the impact of discontinued
operations and other charges, adjusted net income from continuing operations
was $87.3 million or $0.37 per diluted share.
Adjusted net income from discontinued operations was $16.5 million or
$0.07 per diluted share. The total of
adjusted net income from continuing operations and discontinued operations for
the three months ended September 30, 2006 was $103.8 million or $0.44 per
diluted share compared to $0.34 for the same period in 2005.
Summarized earnings are as follows:
|
|
|
Three months ended
|
|
|
|
|
September 30,
|
|
June 30,
|
|
|
|
|
2006
|
|
2005
|
|
2006
|
|
|
|
|
In millions, except per share amounts
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income
|
|
$
|
(83.3
|
)
|
$
|
(29.9
|
)
|
$
|
262.9
|
|
|
Adjusted net income
from continuing operations
|
|
$
|
87.3
|
|
$
|
89.7
|
|
$
|
104.8
|
|
|
Diluted (loss) income
per share
|
|
$
|
(0.36
|
)
|
$
|
(0.14
|
)
|
$
|
1.13
|
|
|
Adjusted diluted income
(loss) per share:
|
|
|
|
|
|
|
|
|
continuing
operations
|
|
$
|
0.37
|
|
$
|
0.38
|
|
$
|
0.45
|
|
|
discontinued
operations
|
|
$
|
0.07
|
|
$
|
(0.04
|
)
|
$
|
0.08
|
|
|
Adjusted EBITDA:
|
|
|
|
|
|
|
|
|
continuing
operations
|
|
$
|
260.0
|
|
$
|
318.8
|
|
$
|
320.8
|
|
|
discontinued operations
|
|
$
|
43.5
|
|
$
|
(0.2
|
)
|
$
|
41.3
|
|
See
end of press release for important explanations
· The total of Adjusted
EBITDA from continuing operations and discontinued operations for the three
months ended September 30, 2006 was $303.5 million. Adjusted EBITDA from
continuing operations does not include the operating results of the European
petrochemicals business which has been reflected as a discontinued
operation. For the three months ended
September 30, 2006, the Adjusted EBITDA from discontinued operations was $43.5
million.
· Third quarter 2006 Adjusted
EBITDA from continuing operations does not include an estimated $66 million in
lost margin due to business interruption related to the outage at our Port
Arthur, Texas olefins facility, all of which is subject to reimbursement by our
insurers in 2007.
· Following the completion of
the sale to SABIC, our net debt is expected to be less than $3.5 billion, a
reduction of more than 40% as compared to the debt level at the end of 2004.
Peter R. Huntsman,
President and CEO, stated, “In the third
quarter, we continued to experience strong demand for many of our product
offerings — including MDI, where our sales volumes were up 16%, Performance
Specialties, where our volumes were up 9% and Advanced Materials, where our
volumes were up 5%, each as compared to the third quarter of last year. We expect this growth to continue into 2007,
particularly in these and other products in our differentiated portfolio, where
we are projecting meaningful earnings growth in 2007 as compared to 2006. In addition, the recent declines that we
have seen in raw materials and energy prices, if sustained, will provide further
opportunities to expand our margins across most product lines.
“The
announcement of our agreement with SABIC to sell our European Base Chemicals
and Polymers business marks a major milestone in our ongoing efforts to
separate our commodity petrochemicals businesses from our portfolio of
differentiated businesses. Following the
completion of this transaction, together with our recent acquisition of Ciba’s
Textile Effects division and the sale of certain U.S. MTBE and butadiene assets
to Texas Petrochemicals, our differentiated portfolio and is expected to comprise more than 70% of our
revenues and more than 80% of our Adjusted EBITDA. In addition, the sale to
SABIC will allow us to reduce our total debt to below $3.5 billion, which is
more than 40% lower than our debt level at the end of 2004.
“We
continue to make good progress as it relates to the disposition of our U.S.
Base Chemical and Polymers assets. We
are presently working with multiple parties with respect to a divestiture of
these assets and expect to be in a position to communicate additional details
in this regard in the coming months.”
2
Huntsman
Corporation
Operating Results
|
|
|
Three months ended September 30,
|
|
Nine months ended September 30,
|
|
|
|
|
2006
|
|
2005
|
|
2006
|
|
2005(1)
|
|
|
|
|
In millions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
2,686.0
|
|
$
|
2,587.9
|
|
$
|
8,087.7
|
|
$
|
8,121.0
|
|
|
Cost of goods sold
|
|
2,313.1
|
|
2,184.2
|
|
6,893.7
|
|
6,771.9
|
|
|
Gross profit
|
|
372.9
|
|
403.7
|
|
1,194.0
|
|
1,349.1
|
|
|
Operating expenses
|
|
216.4
|
|
191.4
|
|
521.6
|
|
601.4
|
|
|
Restructuring,
impairment and plant closing costs
|
|
3.5
|
|
66.6
|
|
20.0
|
|
91.6
|
|
|
Operating income
|
|
153.0
|
|
145.7
|
|
652.4
|
|
656.1
|
|
|
Interest expense, net
|
|
(83.4
|
)
|
(101.1
|
)
|
(264.8
|
)
|
(341.8
|
)
|
|
Loss on accounts
receivable securitization program
|
|
(4.0
|
)
|
(2.8
|
)
|
(10.8
|
)
|
(7.5
|
)
|
|
Equity in income of
unconsolidated affiliates
|
|
0.5
|
|
1.8
|
|
2.6
|
|
7.0
|
|
|
Other non-operating
(expense)
|
|
(13.2
|
)
|
(43.9
|
)
|
(13.1
|
)
|
(279.7
|
)
|
|
Income (loss) from continuing
operations before income taxes and minority interest
|
|
52.9
|
|
(0.3
|
)
|
366.3
|
|
34.1
|
|
|
Income tax benefit
(expense)
|
|
17.4
|
|
(13.5
|
)
|
(16.0
|
)
|
(36.9
|
)
|
|
Minority interests in
subsidiaries’ income
|
|
(0.4
|
)
|
(1.6
|
)
|
(1.1
|
)
|
(1.5
|
)
|
|
Income (loss) from continuing
operations
|
|
69.9
|
|
(15.4
|
)
|
349.2
|
|
(4.3
|
)
|
|
(Loss) income from
discontinued operations, net of tax(2)
|
|
(160.4
|
)
|
(14.5
|
)
|
(158.3
|
)
|
30.7
|
|
|
Extraordinary gain on
the acquisition of a business, net of tax(3)
|
|
7.2
|
|
—
|
|
57.7
|
|
—
|
|
|
Cumulative effect of
change in accounting principle, net of tax (4)
|
|
—
|
|
—
|
|
—
|
|
4.0
|
|
|
Net (loss) income
|
|
(83.3
|
)
|
(29.9
|
)
|
248.6
|
|
30.4
|
|
|
Preferred dividends(5)
|
|
—
|
|
—
|
|
—
|
|
(43.1
|
)
|
|
Net (loss) income available to
common stockholders
|
|
$
|
(83.3
|
)
|
$
|
(29.9
|
)
|
$
|
248.6
|
|
$
|
(12.7
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income
|
|
$
|
(83.3
|
)
|
$
|
(29.9
|
)
|
$
|
248.6
|
|
$
|
30.4
|
|
|
Interest expense, net
|
|
83.4
|
|
101.1
|
|
264.8
|
|
341.8
|
|
|
Income tax (benefit)
expense(4,8)
|
|
(17.4
|
)
|
13.5
|
|
16.0
|
|
38.8
|
|
|
Depreciation and
amortization
|
|
102.9
|
|
108.8
|
|
307.6
|
|
328.1
|
|
|
Income taxes, depreciation
and amortization, included in discontinued operations(6)
|
|
27.0
|
|
8.9
|
|
56.1
|
|
76.7
|
|
|
EBITDA(7)
|
|
112.6
|
|
202.4
|
|
893.1
|
|
815.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss on accounts
receivable securitization program
|
|
4.0
|
|
2.8
|
|
10.8
|
|
7.5
|
|
|
Legal and contract
settlements
|
|
—
|
|
—
|
|
(8.8
|
)
|
—
|
|
|
Loss on early
extinguishment of debt
|
|
14.5
|
|
41.4
|
|
14.5
|
|
276.4
|
|
|
Loss due to the Port
Arthur outage (write off of assets)
|
|
—
|
|
—
|
|
9.4
|
|
—
|
|
|
Other restructuring,
impairment and plant closing costs
|
|
3.5
|
|
66.6
|
|
10.6
|
|
91.6
|
|
|
Gain on dispositions of
assets(8)
|
|
(0.8
|
)
|
—
|
|
(93.2
|
)
|
—
|
|
|
Loss (income) from
discontinued operations, net of tax(2)
|
|
133.4
|
|
5.6
|
|
102.2
|
|
(107.4
|
)
|
|
Extraordinary gain on
the acquisition of a business, net of tax(3)
|
|
(7.2
|
)
|
—
|
|
(57.7
|
)
|
—
|
|
|
Cumulative effect of
change in accounting principle(4)
|
|
—
|
|
—
|
|
—
|
|
(5.9
|
)
|
|
Adjusted EBITDA - continuing
operations(7)
|
|
$
|
260.0
|
|
$
|
318.8
|
|
$
|
880.9
|
|
$
|
1,078.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income from
discontinued operations
|
|
$
|
(160.4
|
)
|
$
|
(14.5
|
)
|
$
|
(158.3
|
)
|
$
|
30.7
|
|
|
Income tax expense
(benefit)
|
|
11.2
|
|
(5.8
|
)
|
10.5
|
|
31.9
|
|
|
Depreciation and
amortization
|
|
15.8
|
|
14.7
|
|
45.6
|
|
44.8
|
|
|
Restructuring,
impairment and plant closing costs
|
|
176.2
|
|
4.9
|
|
176.7
|
|
45.4
|
|
|
Loss on accounts
receivable securitization
|
|
0.7
|
|
0.5
|
|
2.0
|
|
1.4
|
|
|
Adjusted EBITDA - discontinued
operations(7)
|
|
$
|
43.5
|
|
$
|
(0.2
|
)
|
$
|
76.5
|
|
$
|
154.2
|
|
See
end of press release for footnote explanations
3
We compute Adjusted EBITDA from continuing operations
to eliminate the impact of losses on the sale of accounts receivable related to
our securitization program, legal and contract settlements, losses on early
extinguishment of debt, loss due to the Port Arthur outage (write off of
assets), restructuring, impairment and plant closing costs (credits), gain on
dispositions of assets, discontinued operations, extraordinary gain on the
acquisition of a business, and the cumulative effect of changes in accounting
principle in order to provide investors with a more meaningful measure of our
operational performance. We compute
adjusted net income from continuing operations by eliminating the after tax
impact of preferred dividends, legal and contract settlements, losses on the
early extinguishment of debt, loss due to the Port Arthur outage,
restructuring, impairment and plant closing (credits) costs, gain on
dispositions of assets, discontinued operations, extraordinary gain on the
acquisition of business, and the cumulative effect of changes in accounting
principle. See footnote (7) at the end
of this press release for more information on EBITDA, Adjusted EBITDA and
adjusted net income.
Huntsman
Corporation
Reconciliation of Earnings Per Share
|
|
|
Three months ended September 30,
|
|
Nine months ended September 30,
|
|
|
|
|
2006
|
|
2005
|
|
2006
|
|
2005(1)
|
|
|
|
|
In millions, except per share amounts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income available to
common stockholders
|
|
$
|
(83.3
|
)
|
$
|
(29.9
|
)
|
$
|
248.6
|
|
$
|
(12.7
|
)
|
|
Preferred
dividends(5)
|
|
—
|
|
—
|
|
—
|
|
43.1
|
|
|
Net (loss) income
|
|
(83.3
|
)
|
(29.9
|
)
|
248.6
|
|
30.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments net of tax:
|
|
|
|
|
|
|
|
|
|
|
Legal and
contract settlements
|
|
—
|
|
—
|
|
(8.8
|
)
|
—
|
|
|
Loss on early
extinguishment of debt
|
|
14.2
|
|
41.4
|
|
14.2
|
|
276.4
|
|
|
Loss due to the
Port Arthur outage (write off of assets)
|
|
—
|
|
—
|
|
9.2
|
|
—
|
|
|
Other
restructuring, impairment and plant closing costs
|
|
2.9
|
|
63.7
|
|
9.4
|
|
82.2
|
|
|
Loss (gain) on
dispositions of assets(8)
|
|
0.3
|
|
—
|
|
(89.3
|
)
|
—
|
|
|
Loss (income)
from discontinued operations(2)
|
|
160.4
|
|
14.5
|
|
158.3
|
|
(30.7
|
)
|
|
Extraordinary
gain on the acquisition of a business(3)
|
|
(7.2
|
)
|
—
|
|
(57.7
|
)
|
—
|
|
|
Cumulative
effect of change in accounting principle(4)
|
|
—
|
|
—
|
|
—
|
|
(4.0
|
)
|
|
Adjusted net income from
continuing operations(7)
|
|
$
|
87.3
|
|
$
|
89.7
|
|
$
|
283.9
|
|
$
|
354.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA - discontinued
operations(7)
|
|
$
|
43.5
|
|
$
|
(0.2
|
)
|
$
|
76.5
|
|
$
|
154.2
|
|
|
Income tax
expense (benefit)
|
|
(11.2
|
)
|
5.8
|
|
(10.5
|
)
|
(31.9
|
)
|
|
Depreciation and
amortization
|
|
(15.8
|
)
|
(14.7
|
)
|
(45.6
|
)
|
(44.8
|
)
|
|
Adjusted net income -
discontinued operations(7)
|
|
$
|
16.5
|
|
$
|
(9.1
|
)
|
$
|
20.4
|
|
$
|
77.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic (loss) income per share
|
|
$
|
(0.38
|
)
|
$
|
(0.14
|
)
|
$
|
1.13
|
|
$
|
(0.06
|
)
|
|
Diluted (loss) income per share
|
|
$
|
(0.36
|
)
|
$
|
(0.14
|
)
|
$
|
1.07
|
|
$
|
(0.06
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted diluted income per
share from continuing operations(7)
|
|
$
|
0.37
|
|
$
|
0.38
|
|
$
|
1.22
|
|
$
|
1.52
|
|
|
Adjusted diluted income per
share from discontinued operations(7)
|
|
$
|
0.07
|
|
$
|
(0.04
|
)
|
$
|
0.09
|
|
$
|
0.33
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common share information(9):
|
|
|
|
|
|
|
|
|
|
|
Basic shares
outstanding
|
|
220.6
|
|
220.5
|
|
220.6
|
|
220.5
|
|
|
Diluted shares
|
|
233.2
|
|
220.5
|
|
233.1
|
|
220.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted shares for adjusted income per share from continuing and
discontinued operations
|
|
233.2
|
|
233.0
|
|
233.1
|
|
233.0
|
|
See end
of press release for footnote explanations
4
Huntsman
Corporation
Segment Results
|
|
|
Three months ended September 30,
|
|
Nine months ended September 30,
|
|
|
|
|
2006
|
|
2005
|
|
2006
|
|
2005(1)
|
|
|
|
|
In millions
|
|
|
Segment Revenues:
|
|
|
|
|
|
|
|
|
|
|
Polyurethanes
|
|
$
|
885.4
|
|
$
|
835.3
|
|
$
|
2,619.6
|
|
$
|
2,609.9
|
|
|
Materials and
Effects
|
|
551.1
|
|
289.5
|
|
1,179.0
|
|
911.5
|
|
|
Performance
Products
|
|
468.6
|
|
462.4
|
|
1,479.0
|
|
1,517.4
|
|
|
Pigments
|
|
278.3
|
|
256.6
|
|
813.1
|
|
787.5
|
|
|
Polymers
|
|
456.5
|
|
427.5
|
|
1,349.7
|
|
1,249.3
|
|
|
Base Chemicals
|
|
150.7
|
|
458.8
|
|
1,062.4
|
|
1,478.9
|
|
|
Eliminations
|
|
(104.6
|
)
|
(142.2
|
)
|
(415.1
|
)
|
(433.5
|
)
|
|
Total
|
|
$
|
2,686.0
|
|
$
|
2,587.9
|
|
$
|
8,087.7
|
|
$
|
8,121.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment EBITDA(7):
|
|
|
|
|
|
|
|
|
|
|
Polyurethanes
|
|
$
|
134.9
|
|
$
|
193.7
|
|
$
|
474.6
|
|
$
|
535.0
|
|
|
Materials and
Effects
|
|
45.5
|
|
41.3
|
|
114.3
|
|
135.5
|
|
|
Performance
Products
|
|
35.7
|
|
25.5
|
|
155.0
|
|
158.0
|
|
|
Pigments
|
|
26.3
|
|
22.6
|
|
91.4
|
|
86.5
|
|
|
Polymers
|
|
32.1
|
|
(5.8
|
)
|
99.0
|
|
71.6
|
|
|
Base Chemicals
|
|
(114.9
|
)
|
8.9
|
|
47.1
|
|
252.0
|
|
|
Corporate and
other
|
|
(47.0
|
)
|
(83.8
|
)
|
(88.3
|
)
|
(422.8
|
)
|
|
Total
|
|
$
|
112.6
|
|
$
|
202.4
|
|
$
|
893.1
|
|
$
|
815.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment Adjusted EBITDA(7) :
|
|
|
|
|
|
|
|
|
|
|
Polyurethanes
|
|
$
|
135.8
|
|
$
|
195.2
|
|
$
|
465.3
|
|
$
|
583.6
|
|
|
Materials and
Effects
|
|
46.9
|
|
41.3
|
|
117.7
|
|
134.9
|
|
|
Performance
Products
|
|
36.8
|
|
30.8
|
|
154.2
|
|
164.6
|
|
|
Pigments
|
|
26.1
|
|
32.2
|
|
93.8
|
|
113.4
|
|
|
Polymers
|
|
33.4
|
|
42.6
|
|
105.8
|
|
122.9
|
|
|
Base Chemicals
|
|
(1.9
|
)
|
15.6
|
|
44.4
|
|
95.9
|
|
|
Corporate and
other
|
|
(17.1
|
)
|
(38.9
|
)
|
(100.3
|
)
|
(137.3
|
)
|
|
Total from
continuing operations
|
|
$
|
260.0
|
|
$
|
318.8
|
|
$
|
880.9
|
|
$
|
1,078.0
|
|
|
Discontinued operations
|
|
43.5
|
|
(0.2
|
)
|
76.5
|
|
154.2
|
|
|
Total
|
|
$
|
303.5
|
|
$
|
318.6
|
|
$
|
957.4
|
|
$
|
1,232.2
|
|
Three Months Ended September 30,
2006 as Compared to Three Months Ended September 30, 2005
Revenues for the three months ended September 30, 2006, increased to
$2,686.0 million, from $2,587.9 million during the same period in
2005. Revenues increased in our Polyurethanes,
Performance Products, Pigments, and Polymers segments due primarily to higher
average selling prices. Revenues
increased in our Materials and Effects segment primarily due to the addition of
the recently acquired Textile Effects business.
Revenues decreased in our Base Chemicals segment primarily due to lower
sales volumes resulting from the outage at our Port Arthur, Texas olefins
manufacturing facility and the divestiture of certain of our U.S. butadiene and
MTBE business assets.
For the three
months ended September 30, 2006, we generated EBITDA of $112.6 million,
which compares to EBITDA for the three months ended September 30, 2005, of
$202.4 million. Adjusted EBITDA from continuing operations for the three months ended
September 30, 2006 was $260.0 million, a decrease compared to $318.8
million for the same period in 2005.
5
Polyurethanes
The
increase in revenues in the Polyurethanes segment for the three months ended
September 30, 2006 compared to the same period in 2005 was primarily due to
higher MDI sales volumes, partially offset by lower average selling prices. MDI sales volumes increased 16% as a result
of continued strong demand in all geographic markets, particularly in Asia,
partially offset by a 3% decrease in MDI average selling prices due to new
industry capacity. MTBE selling prices
decreased sharply due to changes in U.S. legislation and reduced U.S. demand.
The decrease in EBITDA in the Polyurethanes segment was primarily the
result of lower MTBE margins and lower margins due to higher raw material
costs. During the three months ended
September 30, 2006 the Polyurethanes segment recorded restructuring and plant
closing costs of nil compared to $0.9 million for the comparable period in
2005.
Materials and Effects
The
increase in revenues in the Materials and Effects segment for the three months
ended September 30, 2006 compared to the same period in 2005 was primarily due
to the acquisition of the textile effects business on June 30, 2006. The textile effects business contributed
$227.6 million in revenue for the three months ended September 30, 2006, while
the advanced materials business revenues for the same period increased by $34.0
million or 12%. The increase in advanced
materials revenues was primarily the result of a 5% increase in sales volumes
due to stronger demand in our coatings, construction and adhesives business
unit and in our power and electronics business unit.
The increase in EBITDA in the Materials and Effects segment was
primarily due to the acquisition of the textile effects business on June 30,
2006. The textile effects business
contributed $6.8 million in EBITDA for the three months ended September 30,
2006, while the advanced materials business EBITDA decreased $2.6 million
compared to the same period in 2005. The
decrease in EBITDA in the advanced materials business was primarily due to
higher SG&A and other business support costs. During the three months ended September 30,
2006 the Materials and Effects segment recorded restructuring and plant closing
credits of $1.4 million compared to nil for the comparable period in 2005.
Performance Products
The increase in revenues in the Performance Products segment for the
three months ended September 30, 2006 compared to the same period in 2005 was
primarily the result of a 16% increase in average selling prices, partially
offset by a 13% decrease in sales volumes.
Average selling prices increased in response to higher raw material and
energy costs and strong market conditions for our performance specialties
products. Sales volumes decreased
primarily due to reduced sales of ethylene glycols and certain surfactants.
The increase in EBITDA in the Performance Products segment was primarily due to the receipt of $6.0 million
in the 2006 period of insurance proceeds related to property damage incurred as
a result of the U.S. Gulf Coast storms of 2005, and lower restructuring
expenses. During the three months ended September 30,
2006 the Performance Products segment recorded restructuring and plant closing
costs of $1.1 million compared to $5.3 million for the comparable period in 2005.
6
Pigments
The
increase in revenues in the Pigments segment for the three months ended
September 30, 2006 compared to the same period in 2005 was primarily due to a
3% increase in average selling prices and a 5% increase in sales volumes. Average selling prices increased primarily in
Europe and the Asia Pacific regions due to stronger demand and higher industry
utilization rates. Sales volumes
increased primarily due to stronger demand in Europe.
The increase in EBITDA in the Pigments segment was primarily the result
of a decrease in restructuring, impairment and plant closing costs, partially
offset by higher raw material and manufacturing costs. During the three months ended September 30,
2006, the Pigments segment recorded restructuring and plant closing credits of
$0.2 million compared to charges of $9.6 million for the comparable period in
2005.
Polymers
The
increase in revenues in the Polymers segment for the three months ended
September 30, 2006 compared to the same period in 2005 was primarily the result
of a 14% increase in average selling prices in response to higher raw material
and energy costs. Sales volumes
decreased 6% primarily due to reduced customer demand for polyethylene and
polypropylene.
The increase in EBITDA in the Polymers segment was primarily the result
of a decrease in restructuring, impairment and plant closing costs. In addition, margins were lower in
polypropylene and expandable polystyrene as raw material price increases
outpaced increases in average selling prices.
During the three months ended September 30, 2006 the Polymers segment
recorded restructuring, impairment and plant closing charges of $0.7 million
compared to $48.4 million for the comparable period in 2005.
Base
Chemicals
The
decrease in revenues in the Base Chemicals segment for the three months ended
September 30, 2006 compared to the same period in 2005 was primarily the result
of lower sales volumes resulting from the outage at our Port Arthur, Texas
olefins manufacturing facility and the divestiture of certain of our U.S.
butadiene and MTBE assets.
The decrease in EBITDA in the Base Chemicals segment was primarily the
result of the $161.2 million asset impairment recorded in discontinued
operations related to the pending sale of our European Base Chemicals
and Polymers business and an estimated $66
million in lost margin due to business interruption related to the
outage at the Port Arthur, Texas olefins facility. During the
three months ended September 30, 2006, the Base Chemicals segment recorded
restructuring, impairment and plant closing credits of $4.7 million compared to
charges of $2.4 million for the comparable period in 2005.
7
Corporate
and Other
Corporate
and other items include unallocated corporate overhead, loss on the sale of
accounts receivable, unallocated foreign exchange gains and losses, losses on
the early extinguishment of debt, other non-operating income and expense,
minority interest, unallocated restructuring and reorganization costs,
extraordinary gain on the acquisition of a business, and the cumulative effect
of change in accounting principle. In
the third quarter of 2006, the total of these items improved by $36.8 million
compared to the 2005 period. The
improvement primarily resulted from a decrease in expenses of $26.9 million
related to the loss on early extinguishment of debt, an increase of $16.8
million in unallocated foreign currency gains, and an extraordinary gain of
$7.2 million related to the acquisition of our textile effects business,
partially offset by a charge of $20.0 million for the impairment of assets in
connection with the announced sale of our European Base Chemicals and
Polymers business.
Liquidity, Capital Resources and
Outstanding Debt
During the third quarter we redeemed all of our $100
million outstanding senior floating rate notes due 2011 with borrowings under
the expanded term loan B portion of our credit facilities. In addition we repurchased and redeemed $200
million of our 9.875% senior notes due 2009 and repaid $50 million of our term
loan B loans using available liquidity including from cash, borrowings under
our revolving facility and issuance of commercial paper under our off balance
sheet accounts receivable securitization program.
We expect to complete the sale of our European Base
Chemicals and Polymers business during the fourth quarter of 2006 conditioned
upon receipt of necessary regulatory approvals and other customary closing
conditions. We intend to use net
proceeds from the sale to redeem in full the remaining $250 million outstanding
principal amount of our 9.875% notes due 2009 and to repay a portion of our
credit facilities.
As of September 30, 2006,
we and our subsidiaries had approximately $809 million in combined cash and
unused borrowing capacity.
For the nine months ended
September 30, 2006, total capital expenditures were approximately $327 million
compared to $202 million for the same period in 2005. The increase in capital spending is primarily
attributable to capital expenditures on our Wilton, U.K. LDPE facility of
approximately $130 million compared to approximately $17 million for the same
period in 2005. Excluding capital
expenditures that will be required to repair our Port Arthur, Texas olefins
facility, we expect to spend approximately $500 million on capital projects in
2006, including approximately $200 million in capital expenditures on our LDPE
facility at Wilton, U.K.
Below is our outstanding
debt:
|
|
|
September 30, 2006
|
|
December 31, 2005
|
|
|
|
|
In millions
|
|
|
Debt:(10)
|
|
|
|
|
|
|
Senior Secured Credit Facilities
|
|
$
|
2,176.4
|
|
$
|
2,099.3
|
|
|
Secured Notes
|
|
293.9
|
|
293.6
|
|
|
Unsecured Notes
|
|
450.3
|
|
752.7
|
|
|
Subordinated Notes
|
|
1,188.6
|
|
1,145.2
|
|
|
Other Debt
|
|
216.7
|
|
167.1
|
|
|
Total Debt
|
|
4,325.9
|
|
4,457.9
|
|
|
Total Cash and
Restricted Cash
|
|
245.8
|
|
142.8
|
|
|
Net Debt
|
|
$
|
4,080.1
|
|
$
|
4,315.1
|
|
8
Conference Call Information
We will hold a telephone conference to discuss our
third quarter 2006 results on Friday, October 27, 2006 at 11:00 a.m. ET.
|
Call-in number for U.S. participants:
|
|
(866) 356 - 3095
|
|
Call-in
number for international participants:
|
|
(617) 597 - 5391
|
|
Participant
access code:
|
|
15730401
|
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 October 27, 2006 and ending
November 3, 2006.
|
Call-in numbers for the replay:
|
|
Within the U.S.:
|
|
(888) 286 - 8010
|
|
International:
|
|
(617) 801 - 6888
|
|
Access
code for replay:
|
|
58090373
|
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.
Accordingly, there can
be no assurance 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) Includes 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 September 27, 2006 we entered into a
Sale and Purchase Agreement with SABIC for the sale of our European base
chemicals and polymers business. 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 $160.4 million and $14.5 million for the three
months ended September 30, 2006 and 2005 respectively.
(3) On June 30, 2006, we acquired the global
textile effects business of Ciba Specialty Chemicals Inc. for approximately
$172.1 million. Because the fair value
of acquired current assets less liabilities assumed exceeded the acquisition
price and planned restructuring costs the excess was recorded as an
extraordinary gain on the acquisition of a business. The extraordinary gain recorded for the nine
months ended September 30, 2006 was $57.7 million of which taxes were not
applicable because the gain was recorded in purchase accounting.
(4) In 2005, we accelerated the date for
actuarial measurement of our pension and postretirement benefit obligations
from December 31 to November 30. We
believe the one-month acceleration improves internal control procedures by
allowing more time for review. The effect of this change resulted in a
cumulative effect of change in accounting principle credit, net of tax, of $4.0
million for the nine months ended September 30, 2005. The income tax expense
associated with this change for the 2005 period was $1.9 million.
(5) For the nine months ended September 30,
2005, preferred dividends represent 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.
(6) Excluded from EBITDA are the following
items related to discontinued operations:
|
|
|
Three months ended September 30,
|
|
Nine months ended September 30,
|
|
|
|
|
2006
|
|
2005
|
|
2006
|
|
2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense
(benefit)
|
|
$
|
11.2
|
|
$
|
(5.8
|
)
|
$
|
10.5
|
|
$
|
31.9
|
|
|
Depreciation and
amortization
|
|
15.8
|
|
14.7
|
|
45.6
|
|
44.8
|
|
|
|
|
$
|
27.0
|
|
$
|
8.9
|
|
$
|
56.1
|
|
$
|
76.7
|
|
(7) EBITDA is defined as net income 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 the 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 our
investment in receivables and inventory, net of payables. Adjusted EBITDA from continuing operations is
computed by eliminating from EBITDA loss due to the Port Arthur outage, gains
and losses from discontinued operations, restructuring, impairment and
reorganization (credits) costs, losses on the sale of accounts receivable to
our securitization program, legal and contract settlements, losses from early
extinguishment of debt, extraordinary gain on the acquisition of a business,
cumulative effect of changes in accounting principle, and gain on dispositions
of assets and is used to provide a more meaningful measure of operational
performance. Adjusted EBITDA from
discontinued operations is computed by eliminating from (loss) income from
discontinued operations income taxes, depreciation and amortization, impairment
of assets, losses on the sale of accounts receivable to our securitization
program, and restructuring. Adjusted net
income from continuing operations is computed by eliminating the after tax
impact of losses from discontinued operations, preferred dividends, loss due to
the Port Arthur outage, legal and contract settlements, restructuring,
impairment and plant closing (credits) costs, losses on the early
extinguishment of debt, extraordinary gain on the acquisition of a business,
cumulative effect of changes in accounting principle, and gain on dispositions
of assets. Adjusted net income from
discontinued operations is computed by eliminating from Adjusted EBITDA from
discontinued operations the applicable income taxes and depreciation and
amortization. We believe that net income
is the performance measure calculated and presented in accordance with GAAP
that is most directly comparable to EBITDA, Adjusted EBITDA from continuing
operations and adjusted net income from continuing operations. We believe that income from discontinued
operations is the performance measure calculated and presented in accordance
with GAAP that is most directly comparable to Adjusted EBITDA from discontinued
operations and adjusted net income from discontinued operations. A reconciliation of our second quarter 2006
results follows:
10
|
|
|
Three months ended
|
|
|
|
|
June 30, 2006
|
|
|
|
|
In Millions
|
|
|
Net income
|
|
$
|
262.9
|
|
|
Interest
expense, net
|
|
94.6
|
|
|
Income tax
expense
|
|
16.7
|
|
|
Depreciation and
amortization
|
|
102.4
|
|
|
Income tax
expense, depreciation and amortization, included in discontinued operations
|
|
22.7
|
|
|
EBITDA
|
|
499.3
|
|
|
|
|
|
|
|
Loss on accounts
receivable securitization program
|
|
4.5
|
|
|
Legal and
contract settlements
|
|
(8.8
|
)
|
|
Loss due to the
Port Arthur outage (write off of impaired assets)
|
|
9.4
|
|
|
Other
restructuring, impairment and plant closing (credits) costs
|
|
(0.6
|
)
|
|
Gain on
dispositions of assets
|
|
(92.4
|
)
|
|
Income from
discontinued operations
|
|
(40.1
|
)
|
|
Extraordinary
gain on the acquisition of a business, net of tax
|
|
(50.5
|
)
|
|
Adjusted EBITDA - continuing
operations
|
|
$
|
320.8
|
|
|
|
|
|
|
|
(Loss) income
from discontinued operations
|
|
17.4
|
|
|
Income tax
expense (benefit)
|
|
7.6
|
|
|
Depreciation and
amortization
|
|
15.1
|
|
|
Restructuring,
impairment and plant closing costs
|
|
0.4
|
|
|
Loss on accounts
receivable securitization
|
|
0.8
|
|
|
Adjusted EBITDA - discontinued
operations
|
|
$
|
41.3
|
|
|
|
|
|
|
|
Net income
|
|
$
|
262.9
|
|
|
Adjustments net of tax:
|
|
|
|
|
Legal and
contract settlements
|
|
(8.8
|
)
|
|
Loss due to the
Port Arthur outage (write off of impaired assets)
|
|
9.2
|
|
|
Other
restructuring, impairment and plant closing (credits) costs
|
|
(0.5
|
)
|
|
Gain on
dispositions of assets
|
|
(90.1
|
)
|
|
Loss from
discontinued operations
|
|
(17.4
|
)
|
|
Extraordinary
gain on the acquisition of a business, net of tax
|
|
(50.5
|
)
|
|
Adjusted net income from
continuing operations
|
|
$
|
104.8
|
|
|
|
|
|
|
|
Adjusted EBITDA - discontinued
operations
|
|
41.3
|
|
|
Income tax
expense (benefit)
|
|
(7.6
|
)
|
|
Depreciation and
amortization
|
|
(15.1
|
)
|
|
Adjusted net income -
discontinued operations
|
|
$
|
18.6
|
|
|
|
|
|
|
|
Diluted income per share
|
|
$
|
1.13
|
|
|
Adjusted diluted earnings per
share from continuing operations
|
|
$
|
0.45
|
|
|
Adjusted diluted income per
share from discontinued operations
|
|
$
|
0.08
|
|
|
|
|
|
|
|
Diluted shares for
adjusted earnings per share from continuing and discontinued operations
|
|
233.2
|
|
(8) On June 27, 2006 we sold the assets comprising certain of our U.S.
butadiene and MTBE business. During the
third quarter 2006 we recognized a tax liability of $1.1 million, the net gain
on disposition of assets for the nine months ended September 30, 2006 was $88.5 million, the income tax impact
of which was $3.9 million. We expect to
recognize an additional pre tax gain of $70 million which is contingent upon
the restart of our Port Arthur, Texas olefins manufacturing facility and the
related resumption of crude butadiene supply to the sold facility; provided
that we achieve certain intermediate steps toward restarting the plant and that
the restart occurs within 30 months of closing the asset sale. The final purchase price also remains subject
to a customary post-closing working capital adjustment.
(9) For the nine months ended September 30, 2005 shares outstanding reflect
the company’s reorganization transaction and initial public offering in
February 2005 as if it occurred at the beginning of the period.
(10) Excludes $493.5 million and $302.3 million of off-balance sheet
financing obtained under our accounts receivable securitization program as of
September 30, 2006, and December 31, 2005, respectively.
11