Huntsman CORP (HUN) FY 2021 MD&A

Verbatim Item 7 Management's Discussion and Analysis from Huntsman CORP's 10-K for fiscal year 2021. Filing date: 2022-02-15. Report date: 2021-12-31. Accession: 0001437749-22-003430.

This page reproduces the company's own Item 7 MD&A text from the linked SEC filing. It is filer text, not grepcent analysis, scoring, or investment advice.

Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary. Confidence: high.

Company profile: HUN · All MD&A years: index · Next year: FY 2022

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Recent Developments

See “Part I. Item 1. Business—Recent Developments” for important updates that occurred in our businesses for the year ended December 31, 2021.

Outlook

We expect the following factors to impact our operating segments in the first quarter of 2022:

Polyurethanes:

	●	First quarter 2022 adjusted EBITDA estimated to be between $200 million and $220 million
	●	Positive trends in construction and energy efficiency demand
	●	Higher costs, specifically in Europe, remain a headwind
	●	Construction of new MDI splitter in Geismar, Louisiana is progressing and on track for completion in second quarter of 2022

Performance Products:

	●	First quarter 2022 adjusted EBITDA estimated to be between $115 million and $120 million
	●	Commercial initiatives and solid demand drive year-over-year improvement

Advanced Materials:

	●	First quarter 2022 adjusted EBITDA estimated to be between $58 million and $62 million
	●	Aerospace continues to recover
	●	Price increases offset higher raw material costs

Textile Effects:

	●	First quarter 2022 adjusted EBITDA estimated to be between $26 million and $28 million
	●	Favorable trends in sustainable solutions and strong order patterns

In 2021, our effective tax rate was 16% and our adjusted effective tax rate was 19%. For 2022, our adjusted effective tax rate is expected to be approximately 22% to 24%. For further information, see “—Non-GAAP Financial Measures” and “Note 19. Income Taxes” to our consolidated financial statements.

Refer to “Item 1A. Risk Factors” for a discussion of the factors that may impact our business, results of operations, financial condition or liquidity and “Forward-Looking Statements” for a discussion of our use of forward-looking statements.

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ReSULTS OF OPERATIONS

For each of our Company and Huntsman International, the following tables set forth our consolidated results of operations for the years ended December 31, 2021, 2020 and 2019 (dollars in millions, except per share amounts).

Huntsman Corporation

	December 31,			Percent Change
	2021			2020			2019		2021 vs 2020		2020 vs 2019
Revenues	$	8,453			$	6,018		$	6,797			40	%	(11	)%
Cost of goods sold		6,678				4,918			5,415			36	%	(9	)%
Gross profit		1,775				1,100			1,382			61	%	(20	)%
Operating expenses		940				618			954			52	%	(35	)%
Restructuring, impairment and plant closing costs (credits)		40				49			(41	)		(18	)%	NM
Operating income		795				433			469			84	%	(8	)%
Interest expense, net		(67	)			(86	)		(111	)		(22	)%	(23	)%
Equity in income of investment in unconsolidated affiliates		143				42			54			240	%	(22	)%
Fair value adjustments to Venator investment and related loss on disposal		(28	)			(88	)		(18	)		(68	)%	389	%
Loss on early extinguishment of debt		(27	)			—			(23	)		NM		(100	)%
Income associated with the Albemarle Settlement, net		465				—			—			NM		—
Other income, net		32				36			20			(11	)%	80	%
Income from continuing operations before income taxes		1,313				337			391			290	%	(14	)%
Income tax (expense) benefit		(209	)			(46	)		38			354	%	NM
Income from continuing operations		1,104				291			429			279	%	(32	)%
Income from discontinued operations, net of tax		—				775			169			(100	)%	359	%
Net income		1,104				1,066			598			4	%	78	%
Reconciliation of net income to adjusted EBITDA:
Net income attributable to noncontrolling interests		(59	)			(32	)		(36	)		84	%	(11	)%
Interest expense, net from continuing operations		67				86			111			(22	)%	(23	)%
Income tax expense (benefit) from continuing operations		209				46			(38	)		354	%	NM
Income tax expense from discontinued operations		3				242			35			(99	)%	591	%
Depreciation and amortization of continuing operations		296				283			270			5	%	5	%
Depreciation and amortization of discontinued operations		—				—			61			—		(100	)%
Other adjustments:
Business acquisition and integration expenses and purchase accounting inventory adjustments		22				31			5
EBITDA from discontinued operations(2)		(3	)			(1,017	)		(265	)
Fair value adjustments to Venator investment and related loss on disposal		28				88			18
Loss on early extinguishment of debt		27				—			23
Certain legal and other settlements and related expenses		13				5			6
Income associated with the Albemarle Settlement, net		(465	)			—			—
(Gain) loss on sale of businesses/assets		(30	)			(280	)		21
Income from transition services arrangements		(8	)			(7	)		—
Certain nonrecurring information technology project implementation costs		8				6			4
Amortization of pension and postretirement actuarial losses		86				76			66
Plant incident remediation costs		—				2			8
Restructuring, impairment and plant closing and transition costs (credits)(3)		45				52			(41	)
Adjusted EBITDA(1)	$	1,343			$	647		$	846			108	%	(24	)%
Net cash provided by operating activities from continuing operations	$	953			$	277		$	656			244	%	(58	)%
Net cash (used in) provided by investing activities from continuing operations		(524	)			1,462			(201	)		NM		NM
Net cash used in financing activities		(977	)			(655	)		(450	)		49	%	46	%
Capital expenditures from continuing operations		(342	)			(249	)		(274	)		37	%	(9	)%

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Huntsman International

	December 31,			Percent Change
	2021			2020			2019		2021 vs 2020		2020 vs 2019
Revenues	$	8,453			$	6,018		$	6,797			40	%	(11	)%
Cost of goods sold		6,678				4,918			5,415			36	%	(9	)%
Gross profit		1,775				1,100			1,382			61	%	(20	)%
Operating expenses		933				612			949			52	%	(36	)%
Restructuring, impairment and plant closing costs (credits)		40				49			(41	)		(18	)%	NM
Operating income		802				439			474			83	%	(7	)%
Interest expense, net		(67	)			(88	)		(126	)		(24	)%	(30	)%
Equity in income of investment in unconsolidated affiliates		143				42			54			240	%	(22	)%
Fair value adjustments to Venator investment and related loss on disposal		(28	)			(88	)		(18	)		(68	)%	389	%
Loss on early extinguishment of debt		(27	)			—			(23	)		NM		(100	)%
Income associated with the Albemarle Settlement, net		465				—			—			NM		—
Other income, net		29				33			16			(12	)%	106	%
Income from continuing operations before income taxes		1,317				338			377			290	%	(10	)%
Income tax (expense) benefit		(210	)			(46	)		41			357	%	NM
Income from continuing operations		1,107				292			418			279	%	(30	)%
Income from discontinued operations, net of tax		—				775			169			(100	)%	359	%
Net income		1,107				1,067			587			4	%	82	%
Reconciliation of net income to adjusted EBITDA:
Net income attributable to noncontrolling interests		(59	)			(32	)		(36	)		84	%	(11	)%
Interest expense, net from continuing operations		67				88			126			(24	)%	(30	)%
Income tax expense (benefit) from continuing operations		210				46			(41	)		357	%	NM
Income tax expense from discontinued operations		3				242			35			(99	)%	591	%
Depreciation and amortization of continuing operations		296				283			270			5	%	5	%
Depreciation and amortization of discontinued operations		—				—			61			—		(100	)%
Other adjustments:
Business acquisition and integration expenses and purchase accounting inventory adjustments		22				31			5
EBITDA from discontinued operations(2)		(3	)			(1,017	)		(265	)
Fair value adjustments to Venator investment and related loss on disposal		28				88			18
Loss on early extinguishment of debt		27				—			23
Certain legal and other settlements and related expenses		13				5			6
Income associated with the Albemarle Settlement, net		(465	)			—			—
(Gain) loss on sale of businesses/assets		(30	)			(280	)		21
Income from transition services arrangements		(8	)			(7	)		—
Certain nonrecurring information technology project implementation costs		8				6			4
Amortization of pension and postretirement actuarial losses		89				79			70
Plant incident remediation costs		—				2			8
Restructuring, impairment and plant closing and transition costs (credits)(3)		45				52			(41	)
Adjusted EBITDA(1)	$	1,350			$	653		$	851			107	%	(23	)%
Net cash provided by operating activities from continuing operations	$	956			$	279		$	645			243	%	(57	)%
Net cash (used in) provided by investing activities from continuing operations		(726	)			1,736			(202	)		NM		NM
Net cash used in financing activities		(778	)			(933	)		(438	)		(17	)%	113	%
Capital expenditures from continuing operations		(342	)			(249	)		(274	)		37	%	(9	)%

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Huntsman Corporation

	Year ended			Year ended			Year ended
	December 31, 2021			December 31, 2020			December 31, 2019
					Tax									Tax									Tax
	Gross			and other(4)			Net		Gross		and other(4)			Net			Gross		and other(4)		Net
Reconciliation of net income to adjusted net income
Net income								$	1,104									$	1,066								$	598
Net income attributable to noncontrolling interests									(59	)									(32	)								(36	)
Business acquisition and integration expenses and purchase accounting inventory adjustments	$	22			$	(6	)		16		$	31			$	(6	)		25		$	5		$	—			5
Income from discontinued operations(2)(6)		(3	)			3			—			(1,017	)			242			(775	)		(265	)		96			(169	)
Fair value adjustments to Venator investment and related loss on disposal		28				—			28			88				(9	)		79			18			—			18
Loss on early extinguishment of debt		27				(6	)		21			—				—			—			23			(5	)		18
Certain legal and other settlements and related expenses		13				(3	)		10			5				(1	)		4			6			(1	)		5
Income associated with the Albemarle Settlement, net		(465	)			55			(410	)		—				—			—			—			—			—
(Gain) loss on sale of businesses/assets		(30	)			3			(27	)		(280	)			31			(249	)		21			(5	)		16
Income from transition services arrangements		(8	)			2			(6	)		(7	)			2			(5	)		—			—			—
Certain nonrecurring information technology project implementation costs		8				(2	)		6			6				(1	)		5			4			(1	)		3
Amortization of pension and postretirement actuarial losses		86				(19	)		67			76				(17	)		59			66			(16	)		50
Significant activities related to deferred tax assets and liabilities(5)		—				—			—			—				—			—			—			(128	)		(128	)
U.S. Tax Reform Act impact on income tax expense		—				—			—			—				—			—			—			(1	)		(1	)
Plant incident remediation costs		—				—			—			2				—			2			8			(2	)		6
Restructuring, impairment and plant closing and transition costs (credits)(3)		45				(11	)		34			52				(13	)		39			(41	)		9			(32	)
Adjusted net income(1)								$	784									$	218								$	353
Weighted average shares-basic									219.2										220.6									228.9
Weighted average shares-diluted									221.4										221.9									230.6
Basic net income attributable to Huntsman Corporation per share:
Income from continuing operations								$	4.77									$	1.18								$	1.72
Income from discontinued operations									—										3.51									0.74
Net income								$	4.77									$	4.69								$	2.46
Diluted net income attributable to Huntsman Corporation per share:
Income from continuing operations								$	4.72									$	1.17								$	1.70
Income from discontinued operations									—										3.49									0.74
Net income								$	4.72									$	4.66								$	2.44
Other non-GAAP measures:
Diluted adjusted net income per share(1)								$	3.54									$	0.98								$	1.53
Net cash provided by operating activities from continuing operations								$	953									$	277								$	656
Capital expenditures from continuing operations									(342	)									(249	)								(274	)
Free cash flow from continuing operations(1)								$	611									$	28								$	382
Effective tax rate									16	%									14	%								(10	)%
Impact of non-GAAP adjustments									3	%									5	%								32	%
Adjusted effective tax rate(7)									19	%									19	%								22	%
Other cash flow measure:
Net cash proceeds from the Albemarle Settlement(8)								$	333									$	—								$	—
Taxes paid on sale of businesses(9)									(3	)									(257	)								—

NM—Not meaningful

Column 1	Column 2
(1)	See “—Non-GAAP Financial Measures.”

(2)	Includes the gain on the sale of our Chemical Intermediates Businesses in 2020.
(3)	Includes costs associated with transition activities relating primarily to our Corporate program to optimize our global approach to leverage shared services capabilities as well as our 2020 acquisition of CVC Thermoset Specialties, a North American specialty chemical manufacturer serving the industrial composites, adhesives and coatings markets (“CVC Thermoset Specialties Acquisition”).

Column 1	Column 2
(4)	The income tax impacts, if any, are computed on the pre-tax adjustments using a with and without approach.

Column 1	Column 2
(5)	During the year ended December 31, 2019, we recorded $153 million of tax benefit relating to the outside basis difference in our investment in Venator, we recorded $18 million of tax benefit relating to realized tax losses on our remaining interest in Venator, we established $11 million of significant income tax valuation allowance in Australia and we recorded $32 million of deferred tax expense due to the reduction of tax rates in Switzerland.

Column 1

Column 2

(5)

During the year ended December 31, 2019, we recorded $153 million of tax benefit relating to the outside basis difference in our investment in Venator, we recorded $18 million of tax benefit relating to realized tax losses on our remaining interest in Venator, we established $11 million of significant income tax valuation allowance in Australia and we recorded $32 million of deferred tax expense due to the reduction of tax rates in Switzerland.

(6)	In addition to income tax impacts, this adjusting item is also impacted by depreciation and amortization expense and interest expense.
(7)	For details regarding the tax impacts of our non-GAAP adjustments, please see the reconciliation of our net income to adjusted net income noted above.
(8)	Represents net cash proceeds received in connection with the Albemarle Settlement. For more information, see “Part I. Item 1. Business—Recent Developments.”
(9)	Represents the taxes paid in connection with the sale of the Chemical Intermediates Businesses and the sale of the India-based DIY business. For more information, see “Note 4. Discontinued Operations and Business Dispositions” to our consolidated financial statements.

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Non-GAAP Financial Measures

Our consolidated financial statements are prepared in accordance with U.S. GAAP, which we supplement with certain non-GAAP financial information. These non-GAAP measures should not be considered in isolation or as a substitute for the related U.S. GAAP measures, and other companies may define such measures differently. We encourage investors to review our financial statements and the reconciliation of the non-GAAP financial measures to the most directly comparable U.S. GAAP financial measures in their entirety and not to rely on any single financial measure. These non-GAAP measures exclude the impact of certain income and expenses that we do not believe are indicative of our core operating results.

Adjusted EBITDA

Our management uses adjusted EBITDA to assess financial performance. 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) EBITDA from discontinued operations; (c) fair value adjustments to Venator investment and related loss on disposal; (d) loss on early extinguishment of debt; (e) certain legal and other settlements and related expenses; (f) income associated with the Albemarle Settlement, net; (g) (gain) loss on sale of businesses/assets; (h) income from transition services arrangements related to the sale of our Chemical Intermediates Businesses to Indorama; (i) certain nonrecurring information technology project implementation costs; (j) amortization of pension and postretirement actuarial losses; (k) plant incident remediation costs; and (l) restructuring, impairment and plant closing and transition costs (credits). Starting in the fourth quarter of 2021, we began to include income associated with the Albemarle Settlement, net, in our adjustments since such income represents a one-time legal settlement and does not reflect our ongoing financial performance. We believe that net income of Huntsman Corporation or Huntsman International, as appropriate, is the performance measure calculated and presented in accordance with U.S. GAAP that is most directly comparable to adjusted EBITDA.

We believe adjusted EBITDA is useful to investors in assessing the businesses’ ongoing financial performance and provides improved comparability between periods through the exclusion of certain items that management believes are not indicative of the businesses’ operational profitability and that may obscure underlying business results and trends. However, this measure should not be considered in isolation or viewed as a substitute for net income of Huntsman Corporation or Huntsman International, as appropriate, or other measures of performance determined in accordance with U.S. GAAP. Moreover, adjusted EBITDA as used herein is not necessarily comparable to other similarly titled measures of other companies due to potential inconsistencies in the methods of calculation. Our management believes this measure is useful to compare general operating performance from period to period and to make certain related management decisions. Adjusted 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.

Nevertheless, our management recognizes that there are material limitations associated with the use of adjusted EBITDA in the evaluation of our Company as compared to net income of Huntsman Corporation or Huntsman International, as appropriate, which reflects overall financial performance. For example, we have borrowed money in order to finance our operations and interest expense is a necessary element of our costs and ability to generate revenue. Our management compensates for the limitations of using adjusted EBITDA by using this measure to supplement U.S. GAAP results to provide a more complete understanding of the factors and trends affecting the business rather than U.S. GAAP results alone.

Adjusted Net Income

Adjusted net income is computed by eliminating the after tax amounts related to the following from net income attributable to Huntsman Corporation: (a) business acquisition and integration expenses and purchase accounting inventory adjustments; (b) income from discontinued operations; (c) fair value adjustments to Venator investment and related loss on disposal; (d) loss on early extinguishment of debt; (e) certain legal and other settlements and related expenses; (f) income associated with the Albemarle Settlement, net; (g) (gain) loss on sale of businesses/assets; (h) income from transition services arrangements associated with the sale of our Chemical Intermediates Businesses to Indorama; (i) certain nonrecurring information technology project implementation costs; (j) amortization of pension and postretirement actuarial losses; (k) significant activities related to deferred tax assets and liabilities; (l) U.S. Tax Reform Act impact on income tax expense; (m) plant incident remediation costs; and (n) restructuring, impairment and plant closing and transition costs (credits). Basic adjusted net income per share excludes dilution and is computed by dividing adjusted net income by the weighted average number of shares outstanding during the period. Adjusted diluted net income per share reflects all potential dilutive common shares outstanding during the period and is computed by dividing adjusted net income by the weighted average number of shares outstanding during the period increased by the number of additional shares that would have been outstanding as dilutive securities. Adjusted net income and adjusted net income per share amounts are presented solely as supplemental information.

We believe adjusted net income is useful to investors in assessing the businesses’ ongoing financial performance and provides improved comparability between periods through the exclusion of certain items that management believes are not indicative of the businesses’ operational profitability and that may obscure underlying business results and trends.

Free Cash Flow

We believe free cash flow is an important indicator of our liquidity as it measures the amount of cash we generate. Management internally uses a free cash flow measure: (a) to evaluate our liquidity, (b) evaluate strategic investments, (c) plan stock buyback and dividend levels and (d) evaluate our ability to incur and service debt.

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Adjusted Effective Tax Rate

We believe that the effective tax rate of Huntsman Corporation or Huntsman International, as appropriate, is the performance measure calculated and presented in accordance with U.S. GAAP that is most directly comparable to adjusted effective tax rate. We believe our adjusted effective tax rate provides improved comparability between periods through the exclusion of certain items, such as, business acquisition and integration expenses and purchase accounting inventory adjustments, certain legal and other settlements and related expenses, gains on sale of businesses/assets and certain tax only items, including tax law changes not yet enacted, that we believe are not indicative of the businesses’ operational profitability and that may obscure underlying business results and trends.

Our forward-looking adjusted effective tax rate is calculated based on our forecast effective tax rate, and the range of our forward-looking adjusted effective tax rate equals the range of our forecast effective tax rate. We disclose forward-looking adjusted effective tax rate because we cannot adequately forecast certain items and events that may or may not impact us in the near future, such as business acquisition and integration expenses and purchase accounting inventory adjustments, certain legal and other settlements and related expenses, gains on sale of businesses/assets and certain tax only items, including tax law changes not yet enacted. Each of such adjustment has not yet occurred, is out of our control and/or cannot be reasonably predicted. In our view, our forward-looking adjusted effective tax rate represents the forecast effective tax rate on our underlying business operations but does not reflect any adjustments related to the items noted above that may occur and can cause our effective tax rate to differ.

Year Ended December 31, 2021 Compared with Year Ended December 31, 2020

For the year ended December 31, 2021, income from continuing operations attributable to Huntsman Corporation was $1,045 million compared with income from continuing operations attributable to Huntsman Corporation of $259 million in the 2020 period. For the year ended December 31, 2021, income from continuing operations attributable to Huntsman International was $1,048 million compared with income from continuing operations attributable to Huntsman International of $260 million in the 2020 period. The increase of $786 million in income from continuing operations attributable to Huntsman Corporation and the increase of $788 million in income from continuing operations attributable to Huntsman International was the result of the following items:

Column 1	Column 2	Column 3
	●	Revenues for the year ended December 31, 2021 increased by $2,435 million or 40%, as compared with the 2020 period. The increase was primarily due to higher average selling prices as well as higher sales volumes in all our segments. See “—Segment Analysis” below.

Column 1	Column 2	Column 3
	●	Gross profit for the year ended December 31, 2021 increased by $675 million, or 61%, as compared with the 2020 period. The increase resulted from higher gross profits in all our segments. See “—Segment Analysis” below.

Column 1	Column 2	Column 3
	●	Our operating expenses and the operating expenses of Huntsman International for the year ended December 31, 2021 increased by $322 million and $321 million, respectively, or 52% for both, as compared with the 2020 period, primarily related to higher selling, general and administrative costs and the gain on sale of our India-based DIY business in 2020. See “Note 4. Discontinued Operations and Business Dispositions—Sale of India-Based-Do-It-Yourself Consumer Adhesives Business” to our consolidated financial statements.

Column 1	Column 2	Column 3
	●	Restructuring, impairment and plant closing costs (credits) for the year ended December 31, 2021 decreased by $9 million, or 18%, as compared with the 2020 period. For more information on restructuring activities, see “Note 12. Restructuring, Impairment and Plant Closing Costs (Credits)” to our consolidated financial statements.

Column 1	Column 2	Column 3
	●	Our interest expense, net and the interest expense, net of Huntsman International for the year ended December 31, 2021 decreased by $19 million and $21 million, respectively, or 22% and 24%, respectively, as compared with the 2020 period, primarily related to the redemption in full of our 2021 Senior Notes in the first quarter of 2021.

Column 1	Column 2	Column 3
	●	Equity in income of investment in unconsolidated affiliates for the year ended December 31, 2020 increased to $143 million from $42 million in the 2020 period. The increase was primarily attributable to an increase in income at our PO/MTBE joint venture in China, in which we hold a 49% interest.

Column 1	Column 2	Column 3
	●	We recorded a loss of $28 million in fair value adjustments to our investment in Venator and related loss on disposal for the year ended December 31, 2021 compared to a loss of $88 million in the 2020 period. For more information, see “Note 4. Discontinued Operations and Business Dispositions—Separation and Deconsolidation of Venator” to our consolidated financial statements.

Column 1	Column 2	Column 3
	●	Loss on early extinguishment of debt for the year ended December 31, 2021 was $27 million compared to nil in the 2020 period, primarily due to the redemption in full of our 2022 Senior Notes in the second quarter of 2021. See “Note. 14. Debt—Notes” to our consolidated financial statements.

Column 1	Column 2	Column 3
	●	Income associated with the Albemarle Settlement, net was $465 million for the year ended December 31, 2021 related to our arbitration award against Albemarle Corporation for fraud and breach of contract. On November 4, 2021, Albemarle agreed to waive any appeal and pay $665 million to us. For more information, see “Part I. Item I. Business—Recent Developments—Albemarle Settlement.”

Column 1	Column 2	Column 3
	●	Our income tax expense for the year ended December 31, 2021 increased to $209 million from $46 million in the 2020 period. The income tax expense of Huntsman International for the year ended December 31, 2021 increased to $210 million from $46 million in the 2020 period. The increase in income tax expense was primarily due to an increase in income from continuing operations before income taxes. Our income tax expense is significantly affected by the mix of income and losses in the tax jurisdictions in which we operate, along with the impact of valuation allowances in certain tax jurisdictions. For further information concerning income taxes, see “Note 19. Income Taxes” to our consolidated financial statements.

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Segment Analysis

Year Ended December 31, 2021 Compared with Year Ended December 31, 2020

								Percent
								Change
	Year ended December 31,			Favorable
(Dollars in millions)	2021			2020			(Unfavorable)
Revenues
Polyurethanes	$	5,019			$	3,584			40	%
Performance Products		1,485				1,023			45	%
Advanced Materials		1,198				839			43	%
Textile Effects		783				597			31	%
Total reportable segments’ revenues		8,485				6,043			40	%
Intersegment eliminations		(32	)			(25	)		NM
Total	$	8,453			$	6,018			40	%
Huntsman Corporation
Adjusted EBITDA(1)
Polyurethanes	$	879			$	472			86	%
Performance Products		359				164			119	%
Advanced Materials		204				130			57	%
Textile Effects		97				42			131	%
Total reportable segments’ adjusted EBITDA		1,539				808			90	%
Corporate and other		(196	)			(161	)		(22	)%
Total	$	1,343			$	647			108	%
Huntsman International
Adjusted EBITDA(1)
Polyurethanes	$	879			$	472			86	%
Performance Products		359				164			119	%
Advanced Materials		204				130			57	%
Textile Effects		97				42			131	%
Total reportable segments’ adjusted EBITDA		1,539				808			90	%
Corporate and other		(189	)			(155	)		(22	)%
Total	$	1,350			$	653			107	%

NM—Not meaningful
(1)	For more information, including reconciliation of total reportable segments’ adjusted EBITDA to income from continuing operations before income taxes of Huntsman Corporation or Huntsman International, as appropriate, see “Note 26. Operating Segment Information” to our consolidated financial statements.

	Year ended December 31, 2021 vs 2020
	Average Selling Prices(1)
	Local			Foreign Currency		Mix &	Sales
	Currency			Translation Impact		Other	Volumes(2)
Period-Over-Period (Decrease) Increase
Polyurethanes		30	%		2	%	4	%	4	%
Performance Products		35	%		3	%	(4	)%	11	%
Advanced Materials		13	%		3	%	17	%	10	%
Textile Effects		5	%		3	%	3	%	20	%

	Fourth Quarter 2021 vs Third Quarter 2021
	Average Selling Prices(1)
	Local			Foreign Currency		Mix &	Sales
	Currency			Translation Impact		Other	Volumes(2)
Period-Over-Period (Decrease) Increase
Polyurethanes		6	%		(1	)%	(3	)%	(3	)%
Performance Products		8	%		(1	)%	—		(4	)%
Advanced Materials		10	%		(1	)%	(4	)%	(1	)%
Textile Effects		6	%		(1	)%	3	%	(4	)%

Column 1	Column 2
(1)	Excludes revenues from tolling arrangements, byproducts and raw materials.

Column 1	Column 2
(2)	Excludes sales volumes of byproducts and raw materials.

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Polyurethanes

The increase in revenues in our Polyurethanes segment for 2021 compared to 2020 was due to higher MDI average selling prices and higher sales volumes. MDI average selling prices increased mostly in China and Europe with increases in our Americas region occurring during the second half of 2021. Sales volumes increased primarily due to stronger demand in relation to the ongoing recovery from the global economic slowdown, partially offset by some unplanned downtime resulting from the U.S. Gulf Coast Winter Storm Uri that occurred in the first quarter of 2021, the scheduled turnaround at our Rotterdam, Netherlands facility during the second quarter of 2021 and the impact of Hurricane Ida at our Geismar, Louisiana facility that occurred in the third quarter of 2021. The increase in segment adjusted EBITDA was primarily due to higher MDI margins resulting from higher MDI pricing and higher sales volumes as well as stronger earnings from our PO/MTBE joint venture in China, partially offset by higher raw material costs

Performance Products

The increase in revenues in our Performance Products segment for 2021 compared to 2020 was due to higher average selling prices and higher sales volumes. Average selling prices increased primarily due to stronger demand in relation to the ongoing recovery from the global economic slowdown as well as in response to an increase in raw material costs. Sales volumes also increased primarily due to stronger demand. The increase in segment adjusted EBITDA was primarily due to increased revenue and margins, partially offset by increased fixed costs.

Advanced Materials

The increase in revenues in our Advanced Materials segment for 2021 compared to 2020 was due to higher sales volumes, higher average selling prices and the favorable net impact of the CVC Thermoset Specialties Acquisition, the Gabriel Acquisition and the sale of the India-based DIY business. See “Note 3. Business Combinations and Acquisitions” and “Note 4. Discontinued Operations and Business Dispositions” to our consolidated financial statements. Excluding our recent acquisitions and divestiture, sales volumes increased across our specialty markets, primarily in relation to the ongoing recovery from the global economic slowdown. Average selling prices increased largely in response to higher raw material costs and due to the impact of a weaker U.S. dollar against major international currencies. The increase in segment adjusted EBITDA was primarily due to higher sales volumes and the benefit from our recent acquisitions.

Textile Effects

The increase in revenues in our Textile Effects segment for 2021 compared to 2020 was due to higher sales volumes and higher average selling prices. Sales volumes increased primarily due to increased demand resulting from the ongoing recovery from the global economic slowdown. Average selling prices increased mainly in response to higher raw material and logistics costs and due to the impact of a weaker U.S. dollar against major international currencies. The increase in segment adjusted EBITDA was primarily due to higher sales revenues, partially offset by higher fixed costs.

Corporate and other

Corporate and other, net includes unallocated corporate overhead, unallocated foreign currency exchange gains and losses, LIFO inventory valuation reserve adjustments, loss on early extinguishment of debt, unallocated restructuring, impairment and plant closing costs, nonoperating income and expense and gains and losses on the disposition of corporate assets. For 2021, adjusted EBITDA from Corporate and other for Huntsman Corporation decreased by $35 million to a loss of $196 million from a loss of $161 million for 2020. For 2021, adjusted EBITDA from Corporate and other for Huntsman International decreased by $34 million to a loss of $189 million from a loss of $155 million for 2020. The decrease in adjusted EBITDA from Corporate and other resulted primarily from a charge from a LIFO inventory reserve adjustment and an increase in corporate overhead costs, partially offset by an increase in unallocated foreign currency exchange gains.

Year Ended December 31, 2020 Compared with Year Ended December 31, 2019

For a comparison of our results of operations for the fiscal years ended December 31, 2020 and 2019, see “Part II. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2020 filed with the SEC on February 12, 2021.

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Liquidity and Capital Resources

The following is a discussion of our liquidity and capital resources and generally does not include separate information with respect to Huntsman International in accordance with General Instruction I of Form 10-K.

Cash Flows For Year Ended December 31, 2021 Compared with Year Ended December 31, 2020

Net cash provided by operating activities from continuing operations for 2021 and 2020 was $953 million and $277 million, respectively. The increase in net cash provided by operating activities from continuing operations during 2021 compared with 2020 was primarily attributable to increased operating income as described in “—Results of Operations” above, including $332.5 million in proceeds associated with the Albemarle Settlement, partially offset by a net cash outflow of $103 million related to changes in operating assets and liabilities for 2021 as compared with 2020.

Net cash (used in) provided by investing activities from continuing operations for 2021 and 2020 was $(524) million and $1,462 million, respectively. During 2021 and 2020, we paid $342 million and $249 million, respectively, for capital expenditures, including $100 million and $54 million during 2021 and 2020, respectively, on a new MDI splitter in Geismar, Louisiana. During 2021, we received $43 million for the sale of businesses, primarily due to the receipt of $28 million pursuant to an earnout provision in connection with the sale of our India-based DIY business. In January 2020, we received approximately $1.92 billion for the sale of our Chemical Intermediates Businesses, and in November 2020, we received approximately $257 million for the sale of the India-based DIY business. See “Note 4. Discontinued Operations and Business Dispositions—Sale of Chemical Intermediates Businesses” and “Note 4. Discontinued Operations and Business Dispositions—Sale of India-Based Do-It-Yourself Consumer Adhesives Business” to our consolidated financial statements. During 2021, we paid $245 million for the acquisition of businesses, primarily related to approximately $242 million paid for the Gabriel Acquisition, net of cash acquired. During 2020, we paid approximately $650 million in connection with the Icynene-Lapolla Acquisition and the CVC Thermoset Specialties Acquisition, net of cash acquired. See “Note 3. Business Combinations and Acquisitions” to our consolidated financial statements. In December 2020, we completed the sale of approximately 42.4 million ordinary shares of Venator and received approximately $99 million. See “Note 4. Discontinued Operations and Business Dispositions—Separation and Deconsolidation of Venator” to our consolidated financial statements. During the year ended December 31, 2020, we entered into a sale and leaseback agreement to sell certain properties in Basel, Switzerland, for which we received approximately $73 million in proceeds from the sale of assets.

Net cash used in financing activities for 2021 and 2020 was $977 million and $655 million, respectively. The increase in net cash used in financing activities was primarily due to the redemption in full of €445 million (approximately $541 million) in aggregate principal amount of our 2021 Senior Notes and the redemption in full of $400 million in aggregate principal amount of our 2022 Senior Notes during 2021. Additionally, our repurchases of common stock increased by $104 million during 2021 compared with 2020. During 2021, we issued $400 million in aggregate principal amount of our 2031 Senior Notes and received borrowings of approximately 177 million SAR (approximately $47 million) related to funding on a new term loan facility of our consolidated 50%-owned joint venture, AAC. See “Note 14. Debt—Direct and Subsidiary Debt—Variable Interest Entity Debt” to our consolidated financial statements. During 2020 we repaid a total of $203 million on our Revolving Credit Facility and repaid in full $109 million on our 364-day term loan facility (the “2019 Term Loan”).

Free cash flow from continuing operations for 2021 and 2020 were proceeds of cash of $611 million and $28 million, respectively. The increase in free cash flow was primarily attributable to the increase in cash provided by operating activities from continuing operations, partially offset by an increase in cash used for capital expenditures during 2021 as compared with 2020.

Cash Flows For Year Ended December 31, 2020 Compared with Year Ended December 31, 2019

For a comparison of our cash flows for the fiscal years ended December 31, 2020 and 2019, see “Part II. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2020 filed with the SEC on February 12, 2021.

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Changes in Financial Condition

The following information summarizes our working capital (dollars in millions):

	December 31,		Less							Increase		Percent
	2021		Acquisition(1)			Subtotal		2020	(Decrease)		Change
Cash and cash equivalents	$	1,041		$	(9	)	$	1,032	$	1,593		$	(561	)	(35	)%
Accounts and notes receivable, net		1,186			(13	)		1,173		910			263		29	%
Inventories		1,201			(23	)		1,178		848			330		39	%
Receivable associated with the Albemarle Settlement		333			—			333		—			333		NM
Other current assets		167			—			167		217			(50	)	(23	)%
Total current assets		3,928			(45	)		3,883		3,568			315		9	%
Accounts payable		1,208			(7	)		1,201		876			325		37	%
Accrued liabilities		780			(3	)		777		458			319		70	%
Current portion of debt		12			—			12		593			(581	)	(98	)%
Current operating lease liabilities		51			—			51		52			(1	)	(2	)%
Total current liabilities		2,051			(10	)		2,041		1,979			62		3	%
Working capital	$	1,877		$	(35	)	$	1,842	$	1,589		$	253		16	%

Column 1	Column 2
(1)	Represents amounts related to the Gabriel Acquisition. For more information, see “Note 3. Business Combinations and Acquisitions —Acquisition of Gabriel Performance Products” to our consolidated financial statements.

Our working capital increased by $253 million as a result of the net impact of the following significant changes:

Column 1	Column 2	Column 3
	●	The decrease in cash and cash equivalents of $561 million resulted from the matters identified on our consolidated statements of cash flows. See also “—Cash Flows Year Ended December 31, 2021 Compared with Year Ended December 31, 2020.”

Column 1	Column 2	Column 3
	●	Accounts and notes receivable increased by $263 million primarily due to higher revenues in the fourth quarter of 2021 compared to the fourth quarter of 2020.

Column 1	Column 2	Column 3
	●	Inventories increased by $330 million primarily due to higher inventory costs and volumes.

Column 1	Column 2	Column 3
	●	Receivable associated with the Albemarle Settlement for $665 million, of which we received $332.5 million on December 2, 2021 and expect to receive a final payment of $332.5 million by early May 2022. For more information, see “Part I. Item I. Business—Recent Developments—Albemarle Settlement.”

Column 1	Column 2	Column 3
	●	Accounts payable increased by $325 million primarily due to higher inventory purchases.

Column 1	Column 2	Column 3
	●	Accrued liabilities increased by $319 primarily related to higher accrued compensation, current income taxes and approximately $200 million of legal fees associated with the Albemarle Settlement.

Column 1	Column 2	Column 3
	●	Current portion of debt decreased by $581 million primarily due to the redemption of our 2021 Senior Notes in the first half of 2021.

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Direct and Subsidiary Debt

See “Note 14. Debt—Direct and Subsidiary Debt” to our consolidated financial statements.

Debt Issuance Costs

See “Note 14. Debt—Direct and Subsidiary Debt—Debt Issuance Costs” to our consolidated financial statements.

Revolving Credit Facility

See “Note 14. Debt—Direct and Subsidiary Debt—Revolving Credit Facility” to our consolidated financial statements.

Term Loan Credit Facility

See “Note 14. Debt—Direct and Subsidiary Debt—Term Loan Credit Facility” to our consolidated financial statements.

A/R Programs

See “Note 14. Debt—Direct and Subsidiary Debt—A/R Programs” to our consolidated financial statements.

Senior Notes

See “Note 14. Debt—Direct and Subsidiary Debt—Senior Notes” to our consolidated financial statements.

Variable Interest Entity Debt

See “Note 14. Debt—Direct and Subsidiary Debt—Variable Interest Entity Debt” to our consolidated financial statements.

Note Payable from Huntsman International to Huntsman Corporation

See “Note 14. Debt—Direct and Subsidiary Debt—Note Payable from Huntsman International to Huntsman Corporation” to our consolidated financial statements.

Compliance With Covenants

See “Note 14. Debt—Compliance with Covenants” to our consolidated financial statements.

Maturities

See “Note 14. Debt—Maturities” to our consolidated financial statements.

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Short-Term Liquidity

We depend upon our cash, Revolving Credit Facility, A/R Programs and other debt instruments to provide liquidity for our operations and working capital needs. As of December 31, 2021, we had $2,482 million of combined cash and unused borrowing capacity, consisting of $1,041 million in cash, $1,197 million in availability under our Revolving Credit Facility and $244 million in availability under our A/R Programs. Our liquidity can be significantly impacted by various factors. The following matters had, or are expected to have, a significant impact on our liquidity:

Column 1	Column 2	Column 3
	●	Cash invested in our accounts receivable and inventory, net of accounts payable, were approximately $340 million for 2021, as reflected in our consolidated statements of cash flows. We expect volatility in our working capital components to continue.

Column 1	Column 2	Column 3
	●	During 2022, we expect to spend approximately $300 million on capital expenditures. We expect to fund spending on all capital expenditures with cash provided by operations.

Column 1	Column 2	Column 3
	●	During 2021, we made contributions to our pension and postretirement benefit plans of $59 million. During 2022, we expect to contribute an additional amount of approximately $49 million to these plans.

Column 1	Column 2	Column 3
	●	On October 28, 2021, we won an arbitration award in excess of $600 million against Albemarle for fraud and breach of contract. On November 4, 2021, Albemarle agreed to waive any appeal and pay $665 million, of which we received $332.5 million on December 2, 2021 and expect to receive a final payment of $332.5 million by early May 2022. We agreed to terminate all proceedings relating to the dispute after receipt of the final payment. We expect to receive, on a pretax basis, a total of approximately $465 million after related legal fees.

Long-Term Liquidity

	●	On May 26, 2021, Huntsman International completed a $400 million offering of its 2031 Senior Notes. On June 23, 2021, Huntsman International applied the net proceeds from the offering, along with cash on hand, to redeem in full the $400 million in aggregate principal amount of its 2022 Senior Notes. For additional information, see “Note 14. Debt—Direct and Subsidiary Debt—Senior Notes” to our consolidated financial statements.
	●	On July 1, 2021, we entered into amendments to our A/R Programs that, among other things, extended the scheduled termination dates of our A/R Programs from April 2022 to July 2024.
	●	During 2020, management implemented cost realignment and synergy plans. In connection with these plans, we currently expect to achieve annualized cost savings and synergy benefits of approximately $140 million during 2023, of which we have achieved approximately $100 million to date. Associated with these plans, we expect net cash restructuring and integration costs, including capital expenditures, of approximately $115 million, of which we have spent approximately $80 million to date.
	●	During 2021, management announced additional cost realignment plans. In connection with these plans, we currently expect to achieve annualized cost savings of approximately $100 million by the end of 2023.
	●	On October 26, 2021, our Board of Directors approved a new share repurchase program of $1 billion. In conjunction with the inception of this plan, we retired our prior share repurchase program. During the fourth quarter of 2021, we repurchased 3,082,614 shares of our common stock for approximately $101 million, excluding commissions, under this share repurchase program. Prior to the fourth quarter during 2021, we repurchased 3,971,784 shares of our common stock for approximately $102 million, excluding commissions, under the prior share repurchase program. From January 1, 2022 through January 31, 2022, we repurchased an additional 851,000 shares of our common stock for approximately $31 million, excluding commissions.
	●	On February 14, 2022, our Board of Directors declared a $0.2125 per share cash dividend on our common stock. This represents a 13% increase from the previous dividend.

As of December 31, 2021, we had $12 million classified as current portion of debt, including debt at our variable interest entities of $10 million and certain other short-term facilities and scheduled amortization payments totaling $2 million. We intend to renew, repay or extend the majority of these short-term facilities in the next twelve months.

As of December 31, 2021, we had approximately $477 million of cash and cash equivalents, including restricted cash, held by our foreign subsidiaries, including our variable interest entities. With the exception of certain amounts that we expect to repatriate in the foreseeable future, we intend to use cash held in our foreign subsidiaries to fund our local operations. Nevertheless, we could repatriate additional cash as dividends and the repatriation of cash as a dividend would generally not be subject to U.S. taxation. However, such repatriation may potentially be subject to limited foreign withholding taxes.

Restructuring, Impairment and Plant Closing Costs

For a discussion of restructuring plans and the costs involved, see “Note 12. Restructuring, Impairment and Plant Closing Costs (Credits)” to our consolidated financial statements.

Recently Issued Accounting Pronouncements

For a discussion of recently issued accounting pronouncements, see “Note 2. Summary of Significant Accounting Policies" to our consolidated financial statements.

Critical Accounting Estimates

This discussion and analysis of financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of financial statements requires us to make judgments, estimates and assumptions that involve a significant level of estimation and uncertainty and are reasonably likely to have a material impact on our financial condition and/or results of operations. Summarized below are our critical accounting estimates.

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Income Taxes

Deferred income taxes reflect the net effects of temporary differences between assets and liabilities for financial and tax reporting purposes. We evaluate deferred tax assets to determine whether it is more likely than not that they will be realized; valuation allowances are recorded to offset deferred tax assets unlikely to be realized. Valuation allowances are reviewed on a tax jurisdiction basis to analyze whether there is sufficient positive or negative evidence to support a change in judgment about the realizability of the related deferred tax assets. These conclusions require significant judgments. In evaluating the objective evidence that historical results provide, we consider the cyclicality of businesses and cumulative income or losses. Cumulative historical losses incurred over periods of time limit our ability to consider more subjective projections of future taxable income. Changes in expected future taxable income and tax planning strategies in applicable jurisdictions affect our assessment of the realization of deferred tax assets. Our judgments regarding valuation allowances are also influenced by factors outside of business results that could impact our ability to utilize a deferred tax asset. As of December 31, 2021, we had total valuation allowances of $131 million, which represents a decrease of $75 million from the prior year, and we have recognized net deferred tax assets of $45 million. See “Note 19. Income Taxes” to our consolidated financial statements for more information regarding our deferred tax assets and valuation allowances.

Employee Benefit Programs

We sponsor several contributory and non-contributory defined benefit plans, covering employees primarily in the U.S., the U.K., The Netherlands, Belgium and Switzerland, but also covering employees in a number of other countries. We fund the material plans through trust arrangements (or local equivalents) where the assets are held separately from us. We also sponsor unfunded postretirement plans which provide medical and, in some cases, life insurance benefits covering certain employees in the U.S. and Canada. Amounts recorded in our consolidated financial statements are recorded based upon actuarial valuations performed by various independent actuaries. Inherent in these valuations are numerous assumptions regarding expected long-term rates of return on plan assets, discount rates, compensation increases, mortality rates and health care cost trends. Each of these critical estimates are subject to uncertainty and are assessed by us using historical data, as well as projections of future conditions. These assumptions and changes during the period are described in “Note 18. Employee Benefit Plans” to our consolidated financial statements.

We retain third party actuaries to assist us with judgments necessary to make assumptions on which our employee pension and postretirement benefit plan obligations and expenses are based. The effect of a 1% change in three key assumptions is summarized as follows (dollars in millions):

	Statement of			Balance Sheet
Assumptions	Operations(1)			Impact(2)
Discount rate
—1% increase	$	(40	)		$	(481	)
—1% decrease		46				556
Expected long-term rates of return on plan assets
—1% increase		(30	)			—
—1% decrease		30				—
Rate of compensation increase
—1% increase		11				51
—1% decrease		(7	)			(46	)

Column 1	Column 2
(1)	Estimated (decrease) increase on 2021 net periodic benefit cost

Column 1	Column 2
(2)	Estimated (decrease) increase on December 31, 2021 pension and postretirement liabilities and accumulated other comprehensive loss

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