Huntsman Corporation Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

OPERATING SEGMENT INFORMATION

OPERATING SEGMENT INFORMATION

3 Months Ended

Mar. 31, 2019

20. 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. 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 condensed 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 investment in Venator as an equity method investment using the fair value option post deconsolidation. 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, PO, polyols, PG, TPU, aniline and MTBE
Performance Products		Amines, surfactants, LAB, maleic anhydride, other performance chemicals, EG, olefins 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. Adjusted EBITDA is presented as a measure of the financial performance of our global business units and for reporting the results of our operating segments. 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):


	Three months
	ended
	March 31,
	2019		2018
Revenues:
Polyurethanes	$	1,067	$	1,222
Performance Products		540		603
Advanced Materials		272		279
Textile Effects		189		200
Corporate and eliminations		(34)		(9)
Total	$	2,034	$	2,295

Huntsman Corporation:
Segment adjusted EBITDA(1):
Polyurethanes	$	140	$	261
Performance Products		80		102
Advanced Materials		53		59
Textile Effects		22		26
Corporate and other(2)		(38)		(43)
Total		257		405
Reconciliation of adjusted EBITDA to net income:
Interest expense—continuing operations		(30)		(27)
Interest expense—discontinued operations		—		(9)
Income tax expense—continuing operations		(52)		(53)
Income tax benefit (expense)—discontinued operations		2		(20)
Depreciation and amortization—continuing operations		(90)		(82)
Net income attributable to noncontrolling interests		12		76
Other adjustments:
Business acquisition and integration expenses		(1)		(1)
EBITDA from discontinued operations		(1)		143
Noncontrolling interest of discontinued operations		—		(55)
Fair value adjustments to Venator investment		76		—
Loss on early extinguishment of debt		(23)		—
Certain legal settlements and related expenses		—		(7)
Amortization of pension and postretirement actuarial losses		(18)		(17)
Restructuring, impairment and plant closing and transition costs		(1)		(3)
Net income	$	131	$	350


	Three months
	ended
	March 31,
	2019		2018
Huntsman International:
Segment adjusted EBITDA(1):
Polyurethanes	$	140	$	261
Performance Products		80		102
Advanced Materials		53		59
Textile Effects		22		26
Corporate and other(2)		(36)		(40)
Total		259		408
Reconciliation of adjusted EBITDA to net income:
Interest expense—continuing operations		(35)		(32)
Interest expense—discontinued operations		—		(9)
Income tax expense—continuing operations		(51)		(52)
Income tax benefit (expense)—discontinued operations		2		(20)
Depreciation and amortization—continuing operations		(90)		(81)
Net income attributable to noncontrolling interests		12		76
Other adjustments:
Business acquisition and integration expenses		(1)		(1)
EBITDA from discontinued operations		(1)		143
Noncontrolling interest of discontinued operations		—		(55)
Fair value adjustments to Venator investment		76		—
Loss on early extinguishment of debt		(23)		—
Certain legal settlements and related expenses		—		(7)
Amortization of pension and postretirement actuarial losses		(19)		(20)
Restructuring, impairment and plant closing and transition costs		(1)		(3)
Net income	$	128	$	347

(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 the chief operating decision maker 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; (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 (loss) on sale of assets; (i) amortization of pension and postretirement actuarial losses; (j) plant incident remediation costs; (k) U.S. Tax Reform Act impact on noncontrolling interest; and (l) 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.