Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549

Form 10-Q

(Mark One)ý

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the quarterly period ended June 30, 2009ORo

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period
from                                to


Commission
File Number

Exact Name of Registrant as Specified in its Charter, Principal Office
Address and Telephone Number

State of Incorporation

I.R.S. Employer
Identification No.001-32427

Huntsman Corporation
500 Huntsman Way
Salt Lake City, Utah 84108
(801) 584-5700


Delaware


42-1648585333-85141

Huntsman International LLC
500 Huntsman Way
Salt Lake City, Utah 84108
(801) 584-5700


Delaware


87-0630358




Indicate
by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Huntsman Corporation


YES ý


NO oHuntsman International LLC


YES ý


NO o


Indicate
by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Huntsman Corporation


YES o


NO oHuntsman International LLC


YES o


NO o


Indicate
by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of
"accelerated filer and large accelerated filer" in Rule 12b-2 of the Exchange Act. (Check one):

Huntsman Corporation

Large accelerated filer ý

Accelerated filer o

Non-accelerated filer o

Smaller reporting company oHuntsman International LLC

Large accelerated filer o

Accelerated filer o

Non-accelerated filer ý

Smaller reporting company o


Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Huntsman Corporation


YES o


NO ýHuntsman International LLC


YES o


NO ý




On
July 31, 2009, 237,347,916 shares of common stock of Huntsman Corporation were outstanding and 2,728 units of membership interests of Huntsman International LLC
were outstanding. There is no established trading market for Huntsman International LLC's units of membership interests. All of Huntsman International LLC's units of membership interests
are held by Huntsman Corporation.



This
Quarterly Report on Form 10-Q presents information for two registrants: Huntsman Corporation and Huntsman International LLC. Huntsman
International LLC is a wholly owned subsidiary of Huntsman Corporation and is the principal operating company of Huntsman Corporation. The information reflected in this Quarterly Report on
Form 10-Q is equally applicable to both Huntsman Corporation and Huntsman International LLC, except where otherwise indicated. Huntsman International LLC meets the
conditions set forth in General Instructions H(1)(a) and (b) of Form 10-Q and, to the extent applicable, is therefore filing this form with a reduced disclosure
format.



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Table of Contents

HUNTSMAN CORPORATION AND SUBSIDIARIES        HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES        QUARTERLY REPORT ON FORM 10-Q FOR
THE QUARTERLY PERIOD        ENDED JUNE 30, 2009

TABLE OF CONTENTS



PagePART I

FINANCIAL INFORMATION

1ITEM 1.

Financial Statements:

1Huntsman Corporation and Subsidiaries:Condensed Consolidated Balance Sheets (Unaudited)

1Condensed Consolidated Statements of Operations and Comprehensive
Income (Unaudited)

2Condensed Consolidated Statements of Cash Flows (Unaudited)

4Condensed Consolidated Statements of Equity (Unaudited)

6Huntsman International LLC and Subsidiaries:Condensed Consolidated Balance Sheets (Unaudited)

8Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) (Unaudited)

9Condensed Consolidated Statements of Cash Flows (Unaudited)

10Condensed Consolidated Statements of Equity (Unaudited)

12Huntsman Corporation and Subsidiaries and Huntsman International LLC and Subsidiaries:Notes to Condensed Consolidated Financial Statements
(Unaudited)

14ITEM 2.

Management's Discussion and Analysis of Financial
Condition and Results of Operations

69ITEM 3.

Quantitative and Qualitative Disclosures About Market
Risk

94ITEM 4.

Controls and Procedures

95PART II

OTHER INFORMATION

96ITEM 1.

Legal Proceedings

96ITEM 1A.

Risk Factors

96ITEM 2.

Unregistered Sales of Equity Securities and Use of
Proceeds

96ITEM 6.

Exhibits

96


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Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1.    FINANCIAL STATEMENTS

HUNTSMAN CORPORATION AND SUBSIDIARIES        CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)        (In Millions, Except Share and Per Share Amounts)

June 30,
2009

December 31,
2008ASSETSCurrent assets:Cash and cash equivalents

$
2,295

$
657Restricted cash


6


5Accounts and notes receivables (net of allowance for doubtful accounts of $53 and $47, respectively)


941


905Accounts receivable from affiliates


5


8Inventories, net


1,162


1,500Prepaid expenses


26


45Deferred income taxes


18


21Other current assets


96


99Total current assets


4,549


3,240Property, plant and equipment, net


3,588


3,649Investment in unconsolidated affiliates


262


267Intangible assets, net


138


153Goodwill


94


92Deferred income taxes


161


284Notes receivable from affiliates


9


9Other noncurrent assets


352


364Total assets

$
9,153

$
8,058LIABILITIES AND EQUITYCurrent liabilities:Accounts payable

$
624

$
731Accounts payable to affiliates


12


16Accrued liabilities


558


580Income taxes payable


212


37Deferred income taxes


36


36Current portion of debt


691


205Total current liabilities


2,133


1,605Long-term debt


3,990


3,677Notes payable to affiliates


5


6Deferred income taxes


252


117Other noncurrent liabilities


1,019


1,021Total liabilities


7,399


6,426Commitments and contingencies (Notes 14 and 15)EquityHuntsman Corporation stockholders' equity:Common stock $0.01 par value, 1,200,000,000 shares authorized, 237,320,739 and 234,430,334 issued and 233,967,627 and 233,553,515 outstanding in 2009 and
2008, respectively


2


2Additional paid-in capital


3,152


3,141Unearned stock-based compensation


(15
)

(13
)Accumulated deficit


(962
)

(1,031
)Accumulated other comprehensive loss


(441
)

(489
)Total Huntsman Corporation stockholders' equity


1,736


1,610Noncontrolling interests in subsidiaries


18


22Total equity


1,754


1,632Total liabilities and equity

$
9,153

$
8,058


See accompanying notes to condensed consolidated financial statements (unaudited).

1

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Table of Contents

HUNTSMAN CORPORATION AND SUBSIDIARIES        CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND  COMPREHENSIVE INCOME (UNAUDITED)        (In Millions, Except Per
Share Amounts)

Three Months Ended
June 30,

Six Months Ended
June 30,2009

2008

2009

2008Revenues:Trade sales, services and fees

$
1,854

$
2,867

$
3,540

$
5,382Related party sales


12


29


19


54Total revenues


1,866


2,896


3,559


5,436Cost of goods sold


1,629


2,514


3,177


4,687Gross profit


237


382


382


749Operating expenses:Selling, general and administrative


200


234


397


461Research and development


36


40


72


79Other operating (income) expense


(1
)

3


(9
)

13Restructuring, impairment and plant closing costs


63


1


77


5Total operating expenses


298


278


537


558Operating (loss) income


(61
)

104


(155
)

191Interest expense, net


(58
)

(65
)

(113
)

(130
)Loss on accounts receivable securitization program


(6
)

(5
)

(10
)

(9
)Equity in income of unconsolidated affiliates


1


4


2


7Income (expenses) associated with the Terminated Merger and related litigation


844


(4
)

837


(9
)Income from continuing operations before income taxes


720


34


561


50Income tax expense


(311
)

(21
)

(449
)

(25
)Income from continuing operations


409


13


112


25(Loss) income from discontinued operations, net of tax


(3
)

5





4Income before extraordinary gain


406


18


112


29Extraordinary gain on the acquisition of a business, net of tax of nil





9





9Net income


406


27


112


38Less net (income) loss attributable to noncontrolling interests





(3
)

4


(7
)Net income attributable to Huntsman Corporation

$
406

$
24

$
116

$
31Net income

$
406

$
27

$
112

$
38Other comprehensive income (loss)


130


(13
)

48


117Comprehensive income


536


14


160


155Less comprehensive (income) loss attributableto noncontrolling interests





(1
)

4


(7
)Comprehensive income attributable to Huntsman Corporation

$
536

$
13

$
164

$
148


(continued)

2

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Table of Contents

HUNTSMAN CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND
COMPREHENSIVE INCOME (UNAUDITED) (Continued)

(In Millions, Except Per Share Amounts)

Three Months Ended
June 30,

Six Months Ended
June 30,2009

2008

2009

2008Basic income (loss) per share:Income from continuing operations attributable to Huntsman Corporation common stockholders

$
1.75

$
0.04

$
0.50

$
0.08(Loss) income from discontinued operations attributable to Huntsman Corporation common stockholders, net of tax


(0.01
)

0.02





0.01Extraordinary gain on the acquisition of a business, net of tax





0.04





0.04Net income attributable to Huntsman Corporation common stockholders

$
1.74

$
0.10

$
0.50

$
0.13Weighted average shares


234.0


233.5


233.8


230.3Diluted income (loss) per share:Income from continuing operations attributable to Huntsman Corporation common stockholders

$
1.53

$
0.04

$
0.47

$
0.08(Loss) income from discontinued operations attributable to Huntsman Corporation common stockholders, net of tax


(0.02
)

0.02





0.01Extraordinary gain on the acquisition of a business, net of tax





0.04





0.04Net income attributable to Huntsman Corporation common stockholders

$
1.51

$
0.10

$
0.47

$
0.13Weighted average shares


271.3


233.7


268.8


233.7Dividends per share

$
0.10

$
0.10

$
0.20

$
0.20Amounts attributable to Huntsman Corporation common stockholders:Income from continuing operations

$
409

$
10

$
116

$
18(Loss) income from discontinued operations, net of tax


(3
)

5





4Extraordinary gain on the acquisition of business, net of tax





9





9Net income

$
406

$
24

$
116

$
31


See
accompanying notes to condensed consolidated financial statements (unaudited).

3

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HUNTSMAN CORPORATION AND SUBSIDIARIES        CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)        (Dollars in Millions)

Six Months Ended June 30,2009

2008Operating Activities:Net income

$
112

$
38Adjustments to reconcile net income to net cash provided by operating activities:Extraordinary gain on the acquisition of a business, net of tax





(9
)Equity in income of unconsolidated affiliates


(2
)

(7
)Dividends received from unconsolidated affiliate





11Depreciation and amortization


226


192Provision for losses on accounts receivable


5


1(Gain) loss on disposal of assets


(1
)

4Noncash interest expense


5


2Noncash restructuring, impairment and plant closing costs


5


2Deferred income taxes


255


Net unrealized loss on foreign currency transactions





20Stock-based compensation


9


11Other, net


(1
)

(6
)Changes in operating assets and liabilities:Accounts and notes receivable


(26
)

(91
)Inventories, net


352


(45
)Prepaid expenses


20


11Other current assets


5


10Other noncurrent assets





(110
)Accounts payable


(81
)

42Accrued liabilities


(41
)

(27
)Income taxes payable


174


14Other noncurrent liabilities


(7
)

(43
)Net cash provided by operating activities


1,009


20Investing Activities:Capital expenditures


(100
)

(224
)Proceeds from sale of assets, net of adjustments


1


(26
)Acquisition of business


(24
)

Investment in unconsolidated affiliate





(41
)Other, net


3


Net cash used in investing activities


(120
)

(291
)


(continued)

4

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Table of Contents

HUNTSMAN CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (Continued)

(Dollars in Millions)

Six Months Ended June 30,2009

2008Financing Activities:Net (repayments) borrowings under revolving loan facilities

$
(8
)
$
332Net borrowings (repayments) of overdraft facilities


1


(8
)Repayments of short-term debt


(78
)

Proceeds from short-term debt


57


Repayments of long-term debt


(26
)

(5
)Proceeds from long-term debt


869


17Repayments of notes payable


(35
)

(29
)Proceeds from notes payable


18


5Dividends paid to common stockholders


(47
)

(47
)Dividends paid to preferred stockholders





(4
)Other, net


(4
)

(6
)Net cash provided by financing activities


747


255Effect of exchange rate changes on cash


2


3Increase (decrease) in cash and cash equivalents


1,638


(13
)Cash and cash equivalents at beginning of period


657


154Cash and cash equivalents at end of period

$
2,295

$
141Supplemental cash flow information:Cash paid for interest

$
101

$
134Cash paid for income taxes


16


10


The
value of share awards that vested during the six months ended June 30, 2009 and 2008 was $11 million and $13 million, respectively. In connection with the June
23, 2009 Baroda acquisition, $5 million of payables from us to Metrochem were forgiven.

See
accompanying notes to condensed consolidated financial statements (unaudited).

5

---





HUNTSMAN CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY (UNAUDITED)
(Dollars in Millions)

Common StockHuntsman Corporation StockholdersShares

Amount

Additional
paid-in
capital

Unearned
stock-based
compensation

Accumulated
deficit

Accumulated
other
comprehensive
loss

Noncontrolling
interests in
subsidiaries

Total
equityBalance, January 1, 2009


233,553,515

$
2

$
3,141

$
(13
)
$
(1,031
)
$
(489
)
$
22

$
1,632Net income (loss)














116





(4
)

112Other comprehensive income

















48





48Issuance of nonvested stock awards








8


(8
)










Vesting of stock awards


548,489




















Recognition of stock-based compensation








3


6











9Repurchase and cancellation of stock awards


(134,377
)



















Dividends declared on common stock














(47
)







(47
)Balance, June 30, 2009


233,967,627

$
2

$
3,152

$
(15
)
$
(962
)
$
(441
)
$
18

$
1,754


(continued)

6

---





HUNTSMAN CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY (UNAUDITED) (Continued)
(Dollars in Millions)

Huntsman Corporation StockholdersSharesCommon
Stock

Mandatory
convertible
preferred
stock

Common
Stock

Mandatory
convertible
preferred stock

Additional
paid-in
capital

Unearned
stock-based
compensation

Accumulated
deficit

Accumulated
other
comprehensive
income

Noncontrolling
interests in
subsidiaries

Total
equityBalance, January 1, 2008


221,036,190


5,750,000

$
2

$
288

$
2,831

$
(12
)
$
(1,540
)
$
257

$
27

$
1,853Net income




















31





7


38Other comprehensive income























117





117Issuance of nonvested stock awards














12


(12
)










Vesting of stock awards


593,796











1














1Recognition of stock-based compensation














5


6











11Preferred stock conversion


12,082,475


(5,750,000
)




(288
)

288














Repurchase and cancellation of stock awards


(159,644
)
















(4
)







(4
)Effect of adoption of SFAS No. 158, net of tax




















(3
)







(3
)Dividends declared on common stock




















(47
)







(47
)Balance, June 30, 2008


233,552,817




$
2

$


$
3,137

$
(18
)
$
(1,563
)
$
374

$
34

$
1,966


See
accompanying notes to condensed consolidated financial statements (unaudited).

7

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Table of Contents



HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES        CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)        (Dollars in Millions)

June 30,
2009

December 31,
2008ASSETSCurrent assets:Cash and cash equivalents

$
1,288

$
87Restricted cash


6


5Accounts and notes receivables (net of allowance for doubtful accounts of $53 and $47, respectively)


941


905Accounts receivable from affiliates


30


15Inventories, net


1,162


1,500Prepaid expenses


24


45Deferred income taxes


18


21Other current assets


109


99Total current assets


3,578


2,677Property, plant and equipment, net


3,417


3,466Investment in unconsolidated affiliates


262


267Intangible assets, net


141


157Goodwill


94


92Deferred income taxes


269


392Notes receivable from affiliates


9


9Other noncurrent assets


352


364Total assets

$
8,122

$
7,424LIABILITIES AND EQUITYCurrent liabilities:Accounts payable

$
611

$
728Accounts payable to affiliates


20


16Accrued liabilities


573


560Deferred income taxes


36


35Notes payable to affiliates


25


423Current portion of debt


690


205Total current liabilities


1,955


1,967Long-term debt


3,754


3,442Notes payable to affiliates


530


6Deferred income taxes


92


69Other noncurrent liabilities


1,017


1,021Total liabilities


7,348


6,505Commitments and contingencies (Notes 14 and 15)EquityHuntsman International LLC members' equity:Members' equity, 2,728 units issued and outstanding


3,106


2,865Accumulated deficit


(1,847
)

(1,414
)Accumulated other comprehensive loss


(503
)

(554
)Total Huntsman International LLC members' equity


756


897Noncontrolling interests in subsidiaries


18


22Total equity


774


919Total liabilities and equity

$
8,122

$
7,424


See accompanying notes to condensed consolidated financial statements (unaudited).

8

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Table of Contents



HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES        CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND  COMPREHENSIVE INCOME (LOSS) (UNAUDITED)    
(Dollars in Millions)

Three Months Ended
June 30,

Six Months Ended
June 30,2009

2008

2009

2008Revenues:Trade sales, services and fees

$
1,854

$
2,867

$
3,540

$
5,382Related party sales


12


29


19


54Total revenues


1,866


2,896


3,559


5,436Cost of goods sold


1,626


2,510


3,169


4,679Gross profit


240


386


390


757Operating expenses:Selling, general and administrative


197


233


389


462Research and development


36


40


72


79Other operating (income) expense


(1
)

3


(9
)

13Restructuring, impairment and plant closing costs


63


1


77


5Total operating expenses


295


277


529


559Operating (loss) income


(55
)

109


(139
)

198Interest expense, net


(58
)

(66
)

(113
)

(131
)Loss on accounts receivable securitization program


(6
)

(5
)

(10
)

(9
)Equity in income of unconsolidated affiliates


1


4


2


7(Loss) income from continuing operations before income taxes


(118
)

42


(260
)

65Income tax expense


(8
)

(22
)

(154
)

(28
)(Loss) income from continuing operations


(126
)

20


(414
)

37(Loss) income from discontinued operations, net of tax


(3
)

5





4(Loss) income before extraordinary gain


(129
)

25


(414
)

41Extraordinary gain on the acquisition of a business, net of tax of nil





9





9Net (loss) income


(129
)

34


(414
)

50Less net (income) loss attributable to noncontrolling interests





(3
)

4


(7
)Net (loss) income attributable to Huntsman International LLC

$
(129
)
$
31

$
(410
)
$
43Net (loss) income

$
(129
)
$
34

$
(414
)
$
50Other comprehensive income (loss)


130


(11
)

51


120Comprehensive income (loss)


1


23


(363
)

170Less comprehensive (income) loss attributable to noncontrolling interests





(1
)

4


(7
)Comprehensive income (loss) attributable to Huntsman International LLC

$
1

$
22

$
(359
)
$
163


See
accompanying notes to condensed consolidated financial statements (unaudited).

9

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Table of Contents



HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES        CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)        (Dollars in Millions)

Six Months Ended
June 30,2009

2008Operating Activities:Net (loss) income

$
(414
)
$
50Adjustments to reconcile net (loss) income to net cash provided by operating activities:Extraordinary gain on the acquisition of a business, net of tax





(9
)Equity in income of unconsolidated affiliates


(2
)

(7
)Dividends received from unconsolidated affiliates





11Depreciation and amortization


214


181Provision for losses on accounts receivable


5


1(Gain) loss on disposal of assets


(1
)

4Noncash interest expense


12


2Noncash restructuring, impairment and plant closing costs


5


2Deferred income taxes


143


4Net unrealized loss on foreign currency transactions





20Noncash compensation


5


11Other, net


(1
)

(5
)Changes in operating assets and liabilities:Accounts and notes receivable


(26
)

(91
)Inventories, net


352


(45
)Prepaid expenses


22


12Other current assets


(8
)

6Other noncurrent assets





(110
)Accounts payable


(98
)

42Accrued liabilities


(5
)

(10
)Other noncurrent liabilities


(4
)

(40
)Net cash provided by operating activities


199


29Investing Activities:Capital expenditures


(100
)

(224
)Proceeds from sale of assets, net of adjustments


1


(26
)Acquisition of business


(24
)

Investment in unconsolidated affiliates, net





(41
)Increase in receivable from affiliate


(11
)

(59
)Other, net


3


(4
)Net cash used in investing activities


(131
)

(354
)


(continued)

10

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Table of Contents

HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES        CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (Continued)        (Dollars in Millions)

Six Months Ended
June 30,2009

2008Financing Activities:Net (repayments) borrowings under revolving loan facilities

$
(8
)
$
332Net borrowings (repayments) of overdraft facilities


1


(8
)Repayments of short-term debt


(78
)

Proceeds from short-term debt


57


Repayments of long-term debt


(26
)

(5
)Proceeds from long-term debt


869


17Repayments of notes payable


(34
)

(29
)Proceeds from notes payable


15


5Repayments of note payable to affiliate


(403
)

Proceeds from note payable to affiliate


529


Dividends paid to parent


(23
)

Contribution from parent


236


Other, net


(4
)

(3
)Net cash provided by financing activities


1,131


309Effect of exchange rate changes on cash


2


3Increase (decrease) in cash and cash equivalents


1,201


(13
)Cash and cash equivalents at beginning of period


87


154Cash and cash equivalents at end of period

$
1,288

$
141Supplemental cash flow information:Cash paid for interest

$
102

$
134Cash paid for income taxes


16


10


During
the six months ended June 30, 2009 and 2008, Huntsman Corporation contributed $5 million and $11 million, respectively, to Huntsman International related to
stock-based compensation. In connection with the June 23, 2009 Baroda acquisition, $5 million of payables from us to Metrochem were forgiven.

See
accompanying notes to condensed consolidated financial statements (unaudited).

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HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES        CONDENSED CONSOLIDATED STATEMENTS OF EQUITY (UNAUDITED)        (Dollars in Millions)

Huntsman International LLC MembersMembers' equityAccumulated
deficit

Accumulated other
comprehensive loss

Noncontrolling
interests in
subsidiaries

Total
equityUnits

AmountBalance, January 1, 2009


2,728

$
2,865

$
(1,414
)
$
(554
)
$
22

$
919Net loss








(410
)




(4
)

(414
)Other comprehensive income











51





51Contribution from parent





241











241Dividends paid to parent








(23
)







(23
)Balance, June 30, 2009


2,728

$
3,106

$
(1,847
)
$
(503
)
$
18

$
774


(continued)

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HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY (UNAUDITED) (Continued)

(Dollars in Millions)

Huntsman International LLC MembersMembers' equityAccumulated
deficit

Accumulated other
comprehensive income

Noncontrolling
interests in
subsidiaries

Total
equityUnits

AmountBalance, January 1, 2008


2,728

$
2,845

$
(1,143
)
$
187

$
27

$
1,916Net income








43





7


50Other comprehensive income











120





120Contribution from parent





11











11Effect of adoption of SFAS

















No. 158, net of tax








(3
)







(3
)Balance, June 30, 2008


2,728

$
2,856

$
(1,103
)
$
307

$
34

$
2,094


See
accompanying notes to condensed consolidated financial statements (unaudited).

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HUNTSMAN CORPORATION AND SUBSIDIARIES        HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

1. GENERAL

CERTAIN DEFINITIONS

For convenience in this report, the terms "Company," "our," "us" or "we" may be used to refer to Huntsman Corporation and, unless the
context otherwise requires, its subsidiaries and predecessors. Any references to our "Company," "we," "us" or "our" as of a date prior to October 19, 2004 (the date of our formation) are to
Huntsman Holdings, LLC and its subsidiaries (including their respective predecessors). In this report, "Huntsman International" refers to Huntsman International LLC (our 100% owned
subsidiary) and, unless the context otherwise requires, its subsidiaries; "HPS" refers to Huntsman Polyurethanes Shanghai Ltd. (our consolidated splitting joint venture with Shanghai
Chlor-Alkali Chemical Company, Ltd); "SLIC" refers to Shanghai Liengheng Isocyanate Company (our unconsolidated manufacturing joint venture with BASF AG and three Chinese chemical companies).

In
this report, we occasionally use, without definition, the common names of competitors, other industry participants, and the common names or abbreviations for certain chemicals or
products.

INTERIM FINANCIAL STATEMENTS

Our interim condensed consolidated financial statements (unaudited) and Huntsman International's interim condensed consolidated
financial statements (unaudited) were prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP" or "U.S. GAAP") and in management's opinion,
reflect all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of results of operations, financial position and cash flows for the periods presented.
Results for interim periods are not necessarily indicative of those to be expected for the full year. These condensed consolidated financial statements (unaudited) should be read in conjunction with
the respective audited consolidated financial statements and notes thereto included in the Annual Report on Form 10-K for the year ended December 31, 2008 for our Company and
Huntsman International filed on February 26, 2009 and updated by our Form 8-K filed on July 30, 2009.

DESCRIPTION OF BUSINESS

We are a global manufacturer of chemical products. Our products comprise a broad range of chemicals and formulations, which we market
globally to a diversified group of consumer and industrial customers. Our products are used in a wide range of applications, including those in the adhesives, aerospace, automotive, construction
products, durable and non-durable consumer products, electronics, medical, packaging, paints and coatings, power generation, refining, synthetic fiber, textile chemicals and dye
industries. We are a leading global producer in many of our key product lines, including MDI, amines, surfactants, epoxy-based polymer formulations, textile chemicals, dyes, maleic anhydride and
titanium dioxide.

We
currently operate in five segments: Polyurethanes, Advanced Materials, Textile Effects, Performance Products and Pigments. Our Polyurethanes, Advanced Materials, Textile Effects and
Performance Products segments produce differentiated organic chemical products and our Pigments segment produces inorganic chemical products. In a series of transactions completed in 2006 and 2007, we
sold substantially all of our former Polymers and Base Chemicals operations. We report the results

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

1. GENERAL (Continued)

of
these businesses as discontinued operations. For more information, see "Note 20. Discontinued Operations."

COMPANY

Our Company, a Delaware corporation, was formed in 2004 to hold the Huntsman businesses. Jon M. Huntsman founded the predecessor
to our Company in the early 1970s as a small packaging company. Since then, we have grown through a series of acquisitions and now own a global portfolio of businesses.

We
operate all of our businesses through Huntsman International, our 100% owned subsidiary. Huntsman International is a Delaware limited liability company and was formed in 1999.

HUNTSMAN CORPORATION AND HUNTSMAN INTERNATIONAL FINANCIAL STATEMENTS

Except where otherwise indicated, these notes relate to the condensed consolidated financial statements (unaudited) for each of our
Company and Huntsman International. The differences between our financial statements and Huntsman International's financial statements relate primarily to the following:



PRINCIPLES OF CONSOLIDATION

Our condensed consolidated financial statements (unaudited) and Huntsman International's condensed consolidated financial statements
(unaudited) include the accounts of our wholly-owned and majority-owned and controlled subsidiaries and any variable interest entities for which we are the primary beneficiary. All intercompany
accounts and transactions have been eliminated.

USE OF ESTIMATES

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

1. GENERAL (Continued)

contingent
assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those
estimates.

RECLASSIFICATIONS

Certain amounts in the consolidated financial statements for prior periods have been reclassified to conform with the current
presentation. During the first quarter of 2009, we reorganized our operating segments to divide our former Materials and Effects segment into two separate segmentsthe Advanced Materials
segment and the Textile Effects segment. All segment information for prior periods has been restated to reflect this change. In addition, we retroactively applied, and information in this report
reflects, the presentation and disclosure requirements of Statement of Financial Accounting Standards ("SFAS") No. 160,Noncontrolling Interests in Consolidated
Financial Statementsan amendment of ARB No. 51. For more information, see "Note 2. Recently Issued Accounting Pronouncements."

SUBSEQUENT EVENTS

We have evaluated material subsequent events through the time these financial statements were issued on August 6, 2009. For more
information, see "Note 2. Recently Issued Accounting Pronouncements."

RECENT DEVELOPMENTS

Texas Bank Litigation Settlement Agreement

On September 30, 2008, we filed suit in the 9th Judicial District Court in Montgomery County, Texas (the "Texas Bank
Litigation") against affiliates of Credit Suisse Securities (USA) LLC and Deutsche Bank Securities Inc. (collectively, the "Banks"). On June 23, 2009, we filed a Current Report on
Form 8-K with respect to our entering into an Agreement of Compromise and Settlement dated June 22, 2009 (the "Texas Bank Litigation Settlement Agreement") with the Banks.
Under the Texas Bank Litigation Settlement Agreement, upon full and final payment of all amounts due to us as described below, our Company and the Banks agreed to take all necessary and appropriate
action to obtain the dismissal of the Texas Bank Litigation with prejudice.

In
accordance with the Texas Bank Litigation Settlement Agreement, the Banks, among other things, did the following:



The
Texas Bank Litigation was dismissed with prejudice on June 23, 2009. See "Note 18. Income (Expenses) Associated with the Terminated Merger and Related Litigation."

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

1. GENERAL (Continued)

On
December 15, 2008, we disclosed that we had entered into a settlement agreement with Hexion, Apollo and certain of their affiliates. In connection with the Apollo Settlement
Agreement, we also disclosed our agreement with Apollo to grant Apollo a contingent interest in certain litigation proceeds. However, this contingent interest expired by its terms when trial commenced
in the Texas Bank Litigation, and, as a result, Apollo is not entitled to receive any portion of the proceeds that we received pursuant to the Texas Bank Litigation Settlement Agreement.

Consistent
with the terms of the Apollo Settlement Agreement, the Texas Bank Litigation Settlement Agreement requires that the Banks release any claims for indemnity or contribution
against the Apollo entities, other than claims for indemnification of attorneys' fees and litigation costs. We were not required to indemnify the Apollo entities for such matters under the Apollo
Settlement Agreement, and we were not required to (and therefore did not) obtain a release for Apollo or Hexion of the Banks' claim for indemnification of the Banks' own attorneys' fees and litigation
costs. In addition, under the Texas Bank Litigation Settlement Agreement, we will indemnify and hold harmless the Banks and the Banks will indemnify us and hold us harmless from the claims released
upon the effective date of the Texas Bank Litigation Settlement Agreement for any costs or expenses incurred in defending a claim asserted after the effective date of such agreement.

Note Purchase Agreement

Our June 23, 2009 Current Report on Form 8-K also disclosed that Huntsman International entered into a Note
Purchase Agreement dated June 22, 2009 (the "Note Purchase Agreement") with the Banks, pursuant to which the Banks purchased $600 million aggregate principal amount of 2016 Senior Notes
from Huntsman International. The 2016 Senior Notes are senior unsecured obligations of Huntsman International and are guaranteed by certain subsidiaries of Huntsman International named as guarantors.
The 2016 Senior Notes were issued in a transaction exempt from the registration requirements of the Securities Act of 1933.

The
2016 Senior Notes are governed by an indenture imposing certain limitations on the ability of Huntsman International and its subsidiaries to, among other things, incur additional
indebtedness, pay
dividends or make certain other restricted payments, enter into certain transactions with affiliates, create dividend or other payment restrictions affecting restricted subsidiaries and merge or
consolidate with any other person, sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of their assets or adopt a plan of liquidation.

The
2016 Senior Notes bear interest at the rate of 5.50% per year payable semi-annually on June 30 and December 31, beginning on December 31, 2009. The
2016 Senior Notes will mature on June 30, 2016. Huntsman International may redeem the 2016 Senior Notes in whole at any time or in part from time to time, upon not less than 30 nor more than
60 days' notice, at a redemption price equal to the principal amount thereof, plus accrued and unpaid interest thereon, if any, to the date of redemption.

Upon
the occurrence of certain change of control events, holders of the 2016 Senior Notes will have the right to require that Huntsman International purchase all or a portion (equal to
$2,000 or an integral multiple of $1,000 in excess thereof) of such holder's 2016 Senior Notes in cash pursuant to the

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

1. GENERAL (Continued)

offer
described by Huntsman International, at a purchase price equal to 101% of the principal amount thereof plus accrued and unpaid interest, if any, to the date of purchase.

Fourth Amendment to Credit Agreement

Our June 23, 2009 Current Report on Form 8-K also disclosed that Huntsman International entered into a Fourth
Amendment to Credit Agreement dated June 22, 2009 (the "Amendment") with Deutsche Bank AG New York Branch and Credit Suisse, Cayman Islands Branch, in their capacities as lenders (collectively,
the "Term Loan C Lenders"), and Deutsche Bank AG New York Branch, as Administrative Agent, amending certain terms of our existing senior secured credit facilities (as amended, "Senior Credit
Facilities"). The Amendment created a new tranche of dollar denominated term loans in an amount equal to $500 million that matures on June 30, 2016 ("Term Loan C").

Borrowings
under Term Loan C bear interest, at our option, at the prime rate plus 1.25% or LIBOR plus 2.25%. The Amendment did not create any additional financial covenants or other
restrictions with respect to Term Loan C, although the existing covenants and restrictions under our Senior Credit Facilities apply to Term Loan C.

Registration Rights Agreement

Our June 23, 2009 Current Report on Form 8-K also disclosed that, in connection with the issuance of the 2016
Senior Notes, Huntsman International, the subsidiary guarantors and the Banks entered into a Registration Rights Agreement dated June 23, 2009 (the "Registration Rights Agreement"). If the 2016
Senior Notes are not freely tradable on the 366th day following the date on which the indenture note was issued, Huntsman International and the subsidiary guarantors have agreed pursuant to the
Registration Rights Agreement to use their reasonable best efforts to cause an exchange registration statement to become effective and to conduct offers to exchange the 2016 Senior Notes for new notes
that are otherwise identical, except that the issuance of such notes shall have been registered under the Securities Act. If Huntsman International and the subsidiary guarantors fail to consummate
this exchange offer, they have agreed to use their reasonable best efforts to cause a shelf registration statement covering resales of the 2016 Senior Notes to become effective.

Voting Agreement

Our June 23, 2009 Current Report on Form 8-K also disclosed that Huntsman International and Term Loan C
Lenders entered into a Voting Agreement dated June 22, 2009 (the "Voting Agreement"), pursuant to which Term Loan C Lenders are required to vote their interests with respect to any proposed
amendment, modification, supplement, waiver, discharge, termination or other change to our Senior Credit Facilities on a proportionate basis in accordance with the vote of all other lenders. The
Voting Agreement provides for certain exceptions to Term Loan C Lenders' obligations, including votes with respect to matters that would change the maturities or principal amounts outstanding under
our Senior Credit Facilities.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

1. GENERAL (Continued)

Senior Credit Facilities Waiver

On April 16, 2009, Huntsman International obtained a waiver (the "Waiver") to the agreement (the "Credit Agreement") governing
our Senior Credit Facilities. Under the Waiver, a majority of the revolving lenders under our $650 million revolving facility (the "Revolving
Facility") agreed to conditionally waive Huntsman International's compliance with its sole financial covenant, a senior secured leverage ratio covenant calculated by dividing senior secured debt by
EBITDA as defined in the Credit Agreement (the "Leverage Covenant"). The Waiver is effective from April 16, 2009 through June 30, 2010. For more information, see "Note 7.
DebtTransactions Affecting our DebtSenior Credit Facilities."

2. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In June 2009, the Financial Accounting Standards Board ("FASB") issued SFAS No. 168,The FASB Accounting Standards Codification and the
Hierarchy of Generally Accepted Accounting Principlesa replacement of FASB Statement No. 162. SFAS No. 168 replaces SFAS No. 162, The Hierarchy of Generally Accepted Accounting
Principles, and establishes the FASB Accounting Standards Codification as the source of
authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in conformity with GAAP. Rules and interpretive releases
of the Securities and Exchange Commission ("SEC") under authority of federal securities laws are also considered sources of authoritative GAAP for SEC registrants as a result of this statement. This
statement is effective for interim and annual periods ending after September 15, 2009. We do not expect this statement to have a significant impact on our consolidated financial statements.

In
June 2009, the FASB issued SFAS No. 167,Amendments to FASB Interpretation No. 46(R). This statement amends FASB
Interpretation No. ("FIN") 46(R),Consolidation of Variable Interest Entities, to replace the quantitative-based risks and rewards calculation for
determining which enterprise has a controlling financial interest in a variable interest entity with a qualitative approach. This new approach focuses on identifying which enterprise has the power to
direct the activities of a variable interest entity that most significantly impact the entity's economic performance and (1) the obligation to absorb losses of the entity or (2) the
right to receive benefits from the entity. It also requires ongoing assessments of whether an enterprise is the primary beneficiary of a variable interest entity, and it requires additional
disclosures about an enterprise's involvement in variable interest entities. This statement is effective for the first annual reporting period beginning after November 15, 2009. We are
evaluating this statement to determine its impact on our consolidated financial statements.

In
June 2009, the FASB issued SFAS No. 166,Accounting for Transfers of Financial Assetsan amendment of FASB Statement
No. 140. This statement removes the concept of a qualifying special-purpose entity ("QSPE") from SFAS No. 140 and removes the exception from applying
FIN 46(R) to QSPEs. SFAS No. 166 modifies the derecognition provisions in SFAS No. 140 and requires that a transferor recognize and initially measure at fair value all assets
obtained (including a transferor's beneficial interest) and liabilities incurred as a result of a transfer of financial assets accounted for as a sale. It also requires additional disclosures
regarding the transferor's continuing involvement with transferred financial assets and the related risks retained. This statement is effective for the first annual reporting period beginning after
November 15, 2009. We are evaluating this statement, as well as SFAS

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

2. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS (Continued)

No. 167,
to determine its impact on our consolidated financial statements, including whether our accounts receivable securitization trust will be required to be consolidated. See
"Note 9. Securitization of Accounts Receivable."

We
adopted SFAS No. 165,Subsequent Events, as of June 30, 2009. This statement requires the disclosure of the date through
which an entity has evaluated subsequent events and whether that date represents the date the financial statement were issued or were available to be issued. We have evaluated subsequent events
through the date these financial statements were issued.

We
adopted FASB Staff Position ("FSP") No. FAS 157-4,Determining Fair Value When the Volume and Level of Activity for the Asset or Liability
Have Significantly Decreased and Identifying Transactions That Are Not Orderlyas of June 30, 2009. This FSP provides guidance for estimating the fair value of an asset
or liability when the volume and level of activity for the asset or liability have significantly decreased, as well as guidance on identifying circumstances that indicate a transaction is not orderly.
It also requires disclosure in interim and annual periods of the inputs and valuation techniques used to measure fair value and a discussion of changes in valuation techniques and related inputs, if
any, during the period. This statement did not have a significant impact on our consolidated financial statements.

We
adopted FSP No. FAS 107-1 and APB 28-1,Interim Disclosures about Fair Value of Financial
Instruments, as of June 30, 2009. This FSP amends SFAS No. 107,Disclosures about Fair Value of Financial
Instruments, to require disclosures about fair value of financial instruments for interim reporting periods as well as in annual financial statements. This FSP also requires
disclosure about the methods and significant assumptions used to estimate the fair value of financial instruments and changes in those methods and significant assumptions, if any, during the period.
See "Note 10. Fair Value."

We
adopted SFAS No. 141 (R),Business Combinations, which replaced SFAS No. 141,Business
Combinations,and SFAS No. 160 on January 1, 2009. These statements significantly change the accounting for business combinations and noncontrolling interests.
Among other things, these statements require more assets acquired and liabilities assumed to be measured at fair value as of the
acquisition date, liabilities related to contingent consideration to be remeasured to fair value each subsequent reporting period, an acquirer in preacquisition periods to expense all
acquisition-related costs, and noncontrolling interests in subsidiaries initially to be measured at fair value and to be presented separately in the financial statements. Upon adoption of this
standard, we recorded a charge of $1 million in the first quarter of 2009 to selling, general and administrative expenses to write off previously deferred acquisition costs related to our
Baroda acquisition. See "Note 3. Business Combinations." We retroactively applied the presentation and disclosure requirements of SFAS No. 160 to all prior periods presented.

We
adopted FSP No. FAS 141(R)-1,Accounting for Assets Acquired and Liabilities Assumed in a Business Combination that Arise from
Contingencies, on January 1, 2009. This FSP requires assets acquired and liabilities assumed in a business combination that arise from contingencies to be recognized at
fair value if fair value can be reasonably estimated. If fair value of such assets and liabilities cannot be reasonably estimated, the assets or liabilities would generally be recognized in accordance
with SFAS No. 5,Accounting for Contingencies, and FIN 14,Reasonable Estimation of the Amount of a
Loss. Further, this FSP requires contingent consideration arrangements of an acquiree

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

2. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS (Continued)

assumed
by the acquirer in a business combination to be initially recognized and subsequently measured at fair value in accordance with SFAS 141(R). The adoption of this FSP did not have a
significant impact on our consolidated financial statements.

We
adopted Emerging Issues Task Force ("EITF") Issue No. 08-6,Equity Method Investment Accounting Considerations, on
January 1, 2009. EITF 08-6 clarifies the accounting for certain transactions and impairment considerations involving equity method investments. The adoption of this standard
did not have a significant impact on our consolidated financial statements.

In
December 2008, the FASB issued FSP No. FAS 132(R)-1,Employers' Disclosures about Postretirement Benefit Plan
Assets. This FSP provides guidance on an employers' disclosures about plan assets of a defined benefit pension or other postretirement plan. The disclosures about plan assets
required by this FSP are to be provided for fiscal years ending after December 15, 2009. We are evaluating FSP No. FAS 132(R)-1 to determine its impact on our consolidated
financial statements.

We
adopted SFAS No. 161,Disclosures about Derivative Instruments and Hedging Activitiesan Amendment of FASB Statement
133on January 1, 2009. SFAS No. 161 requires enhanced disclosures regarding the effect of an entity's derivative instruments and related hedging activities on
its financial position, financial performance and cash flows. See "Note 8. Derivative Instruments and Hedging Activities."

3. BUSINESS COMBINATIONS

BARODA ACQUISITION

On June 23, 2009, we announced the acquisition of the Baroda Division ("Baroda") of Metrochem Industries Limited
("MCIL"), a manufacturing facility for the production of intermediates and specialty dyes for textiles, located in Baroda, India. Baroda had been a significant supplier to the Textile
Effects segment and this acquisition strengthens the Textile Effects segment's competitiveness and supports its development in Asia. The total acquisition cost, including working capital, was
approximately $35 million. Payment of the acquisition cost is phased in three tranches. The first tranche was paid during 2008; the second tranche was paid/settled at closing; and the third
tranche is expected to be paid in the third quarter of 2009. A majority of the purchase price was funded through local financing and from liquidity available from other Huntsman entities located in
India.

We
have accounted for the Baroda acquisition using the acquisition method. As such, we analyzed the fair value of tangible and intangible assets acquired and liabilities assumed. The
preliminary

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

3. BUSINESS COMBINATIONS (Continued)

allocation
of acquisition cost to the assets acquired and liabilities assumed is summarized as follows (dollars in millions):

Acquisition cost:Cash payment made in 2008

$
7Cash payment made in 2009


24Forgiveness of amounts payable from us to Metrochem


(5
)Amounts payable as of June 30, 2009


9Total acquisition cost

$
35Fair value of assets acquired and liabilities assumed:Accounts receivable

$
3Inventories


4Other current assets


2Property, plant and equipment


34Accounts payable


(3
)Accrued liabilities


(1
)Short-term debt


(3
)Deferred taxes


(1
)Total fair value of net assets acquired

$
35


The
total acquisition cost is preliminary pending finalization of the net working capital acquired. The acquisition cost allocation is also preliminary pending finalization of the
determination of the fair value of assets acquired and liabilities assumed, including final valuation of property, plant and equipment, intangible assets, estimates of asset retirement obligations and
determination of related deferred taxes. For purposes of this preliminary allocation of fair value, we have assigned any excess of acquisition cost over historical carrying values to property, plant
and equipment and no amounts have been allocated to goodwill. We expect that it is reasonably possible that changes to this allocation could occur, some of which could be significant.

TEXTILE EFFECTS ACQUISITION

On June 30, 2006, we acquired Ciba's textile effects business (the "Textile Effects Acquisition") and accounted for the Textile
Effects Acquisition using the purchase method. As such, we analyzed the fair value of tangible and intangible assets acquired and liabilities assumed and we determined the excess of fair value of net
assets over cost. Because the fair value of the acquired assets and liabilities assumed exceeded the acquisition price, the valuation of the long-lived assets acquired was reduced to zero.
Accordingly, no basis was assigned to property, plant and equipment or any other non-current nonfinancial assets and the remaining excess was recorded as an extraordinary gain, net of
taxes (which were not applicable because the gain was recorded in purchase accounting). During the three and six months ended June 30, 2008, we recorded additional extraordinary gain of
$9 million each related to the reversal of accruals for certain employee termination costs recorded in connection with the Textile Effects Acquisition and a reimbursement by Ciba of certain
restructuring costs associated with the acquisition.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

4. INVENTORIES

Inventories are stated at the lower of cost or market, with cost determined using last-in first-out ("LIFO"), first-in first-out, and
average costs methods for different components of inventory. Inventories consisted of the following (dollars in millions):

June 30,
2009

December 31,
2008Raw materials and supplies

$
266

$
282Work in progress


84


88Finished goods


850


1,192Total


1,200


1,562LIFO reserves


(38
)

(62
)Net

$
1,162

$
1,500


As
of June 30, 2009 and December 31, 2008, approximately 8% and 9%, respectively, of inventories were recorded using the LIFO cost method. For the three and six months
ended June 30, 2009, inventory quantities were reduced, resulting in a liquidation of certain LIFO inventory layers carried at costs that were higher than the cost of current purchases, the
effect of which increased cost of sales by approximately $2 million each.

In
the normal course of operations, we at times exchange raw materials and finished goods with other companies for the purpose of reducing transportation costs. The net
non-monetary open exchange positions are valued at cost. The amounts included in inventory under non-monetary open exchange agreements payable by us as of June 30, 2009
and December 31, 2008 were $10 million and $19 million, respectively. Other open exchanges are settled in cash and result in a net deferred profit margin. The amounts under these
types of open exchange agreements receivable by us at June 30, 2009 and December 31, 2008 were $1 million and $5 million, respectively.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

5. RESTRUCTURING, IMPAIRMENT AND PLANT CLOSING COSTS

As of June 30, 2009 and December 31, 2008, accrued restructuring costs by type of cost and initiative consisted of the following (dollars in millions):

Workforce
reductions(1)

Demolition and
decommissioning

Non-cancelable
lease costs

Other
restructuring
costs

Total(2)Accrued liabilities as of January 1, 2009

$
58

$
1

$
3

$
13

$
752009 charges for 2006 initiatives





1








12009 charges for 2008 initiatives


2











22009 charges for 2009 initiatives


53


6





13


72Reversal of reserves no longer required


(3
)










(3
)2009 payments for 2003 initiatives


(1
)










(1
)2009 payments for 2006 initiatives


(19
)

(1
)







(20
)2009 payments for 2008 initiatives


(8
)










(8
)2009 payments for 2009 initiatives


(5
)

(6
)




(11
)

(22
)Foreign currency effect on reserve balance


(1
)







(2
)

(3
)Accrued liabilities as of June 30, 2009

$
76

$
1

$
3

$
13

$
93


---

June 30,
2009

December 31,
20082003 initiatives & prior

$
8

$
92004 initiatives


5


62006 initiatives


7


262008 initiatives


16


242009 initiatives


50


Foreign currency effect on reserve balance


7


10Total

$
93

$
75


24

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HUNTSMAN CORPORATION AND SUBSIDIARIES

HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

5. RESTRUCTURING, IMPAIRMENT AND PLANT CLOSING COSTS (Continued)

Details
with respect to our reserves for restructuring and plant closing costs are provided below by segment and initiative (dollars in millions):

Polyurethanes

Advanced
Materials

Textile
Effects

Performance
Products

Pigments

Corporate &
Other

TotalAccrued liabilities as of January 1, 2009

$
3

$
1

$
63

$
1

$
7

$


$
752009 charges for 2006 initiatives








1











12009 charges for 2008 initiatives


1











1





22009 charges for 2009 initiatives





15


11





39


7


72Reversal of reserves no longer required








(2
)




(1
)




(3
)2009 payments for 2003 initiatives


(1
)
















(1
)2009 payments for 2006 initiatives








(20
)










(20
)2009 payments for 2008 initiatives








(6
)




(2
)




(8
)2009 payments for 2009 initiatives








(1
)




(19
)

(2
)

(22
)Foreign currency effect on reserve balance








(3
)










(3
)Accrued liabilities as of June 30, 2009

$
3

$
16

$
43

$
1

$
25


5

$
93Current portion of restructuring reserve

$
2

$
16

$
43

$
1

$
19

$
5

$
86Long-term portion of restructuring reserve


1











6





7Estimated additional future charges for current restructuring projectsEstimated additional charges within one year

$


$


$


$


$
11

$


$
11Estimated additional charges beyond one year














1





1


Details with respect to cash and non-cash restructuring, impairment and plant closing charges by initiative are provided below
(dollars in millions):

Three months
ended
June 30, 2009

Six months
ended
June 30, 2009Cash charges:2009 charges for 2006 initiatives

$
1

$
12009 charges for 2008 initiatives





22009 charges for 2009 initiatives


63


72Reversal of reserves no longer required


(2
)

(3
)Non-cash charges


1


5Total Restructuring, Impairment and Plant Closing Costs

$
63

$
77




Three months
ended
June 30, 2008

Six months
ended
June 30, 2008Cash charges:2008 charges for 2004 initiatives

$


$
12008 charges for 2008 initiatives





2Non-cash charges


1


2Total Restructuring, Impairment and Plant Closing Costs

$
1

$
5


25

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Table of Contents

HUNTSMAN CORPORATION AND SUBSIDIARIES

HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

5. RESTRUCTURING, IMPAIRMENT AND PLANT CLOSING COSTS (Continued)

During
the six months ended June 30, 2009, our Advanced Materials segment recorded charges of $15 million primarily related to workforce reductions in connection with a
reorganization towards a regional management structure.

During
the six months ended June 30, 2009, our Textile Effects segment recorded charges of $12 million primarily related to the restructuring of our production facility in
Langweid, Germany and reversed $2 million related to the streamlining of the textile effects business into two global strategic business units, apparel and home textiles and specialty textiles,
as announced during the fourth quarter of 2008. We also recorded a non-cash benefit of $1 million for pension curtailment associated with our workforce reduction.

During
the six months ended June 30, 2009, our Pigments segment recorded charges of $40 million, of which $25 million related to the closure of our
Grimsby U.K. plant and $14 million related to workforce reductions at our Huelva, Spain plant. Of the $25 million of charges for our Grimsby U.K. plant, $12 million
related to contract terminations, $8 million related to workforce reductions and $6 million related to decommissioning. We also recorded non-cash charges of $4 million
related to a provision against engineering spare parts at our Grimsby plant. We expect to incur additional charges of $12 million primarily related to the closure of our Grimsby, U.K. plant
through June 30, 2010.

During
the six months ended June 30, 2009, we recorded charges of $7 million in Corporate and Other, of which $5 million related to our 2009 fixed cost reduction
project announced in the fourth quarter of 2008 and $2 million related to our accounts payable outsourcing project announced in the second quarter of 2009. We also recorded a
non-cash impairment charge of $1 million primarily related to capital expenditures and turnaround costs associated with our Australian styrenics business. The long-lived
assets of our Australian styrenics business were previously determined to be impaired. Capital expenditures and turnaround costs in this business, which are necessary to maintain operations, are also
considered to be impaired immediately after they are incurred.

6. INVESTMENT IN UNCONSOLIDATED AFFILIATES

During 2008, we contributed $44 million as our 50% equity contribution to our ethyleneamines manufacturing joint venture in Jubail Industrial City, Saudi Arabia (the "Saudi Joint
Venture") with Zamil Group. This joint venture's funding requirements will be satisfied through a combination of debt and equity, with the equity already provided on a 50/50 basis by us and Zamil
Group. The joint venture obtained various loan commitments in the aggregate amount of approximately $195 million (U.S. dollar equivalents), of which $115 million was drawn and
outstanding as of June 30, 2009. We have provided certain guarantees of approximately $14 million for these commitments which will terminate upon completion of the project and
satisfaction of certain conditions. We have estimated that the fair value of these guarantees was nil as of the closing date of this transaction and, accordingly, no amounts have been recorded. This
joint venture is accounted for under the equity method.

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HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

7. DEBT

Outstanding debt consisted of the following (dollars in millions):

Huntsman Corporation

June 30,
2009

December 31,
2008Senior Credit Facilities:Term Loans

$
1,963

$
1,540Secured Notes


295


295Senior Notes


623


198Subordinated Notes


1,281


1,285Australian Credit Facilities


34


41HPS (China) debt


169


196Other


80


92Convertible Notes


236


235Total debt

$
4,681

$
3,882Current portion

$
691

$
205Long-term portion


3,990


3,677Total debt

$
4,681

$
3,882


Huntsman International

June 30,
2009

December 31,
2008Senior Credit Facilities:Term Loans

$
1,963

$
1,540Secured Notes


295


295Senior Notes


623


198Subordinated Notes


1,281


1,285Australian Credit Facilities


34


41HPS (China) debt


169


196Other


79


92Total debt

$
4,444

$
3,647Current portion

$
690

$
205Long-term portion


3,754


3,442Total debt-excluding affiliates

$
4,444

$
3,647Total debt-excluding affiliates

$
4,444

$
3,647Notes payable to affiliates


555


429Total debt

$
4,999

$
4,076


27

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Table of Contents

HUNTSMAN CORPORATION AND SUBSIDIARIES

HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

7. DEBT (Continued)

DIRECT AND SUBSIDIARY DEBT

Our direct debt and guarantee obligations consist of our Convertible Notes, our guarantees of certain debt of HPS and SLIC, our Chinese
MDI joint ventures, our Saudi Joint Venture, and certain indebtedness incurred from time to time to finance certain insurance premiums. Substantially all of our other debt has been incurred by our
subsidiaries (primarily Huntsman International); such subsidiary debt is nonrecourse to us and we have no contractual obligation to fund our subsidiaries' respective operations.

TRANSACTIONS AFFECTING OUR DEBT

Senior Credit Facilities

Pursuant to the Texas Bank Litigation Settlement Agreement, on June 22, 2009, Huntsman International entered into the Amendment,
which provides for Term Loan C in an amount equal to $500 million. Term Loan C matures on June 30, 2016.

As
of June 30, 2009, our Senior Credit Facilities consisted of (i) the $650 million Revolving Facility (ii) a $1,524 million term loan B facility
("Term Loan B"); and (iii) the $500 million (recorded at fair value of $439 million and an effective interest rate of 5.39%) Term Loan C (collectively with Term Loan B, the
"Dollar Term Loans"). As of June 30, 2009, we had no borrowings outstanding under our Revolving
Facility, and we had approximately $31 million (U.S. dollar equivalents) of letters of credit and bank guarantees issued and outstanding under our Revolving Facility. The Revolving Facility
matures in August 2010, Term Loan B matures in 2014 and Term Loan C matures in 2016; provided, however, that the maturities of the Revolving Facility and the Dollar Term Loans will accelerate if we do
not repay or refinance all but $100 million of our outstanding debt securities on or before three months prior to the maturity dates of such debt securities.

Our
Senior Credit Facilities are subject to a single financial covenant, the Leverage Covenant, which applies only to the Revolving Facility. The Leverage Covenant is applicable only if
borrowings, letters of credit or guarantees are outstanding under the Revolving Facility (cash collateralized letters of credit or guarantees are not deemed outstanding). On April 16, 2009,
Huntsman International entered into the Waiver with respect to the Leverage Covenant.

The
Leverage Covenant, as amended pursuant to the Waiver, requires that the maximum senior secured leverage ratio does not exceed 5.00 to 1.00. In addition, the Waiver modifies the
calculation used to determine compliance with the Leverage Covenant as follows:



The
Waiver is effective from April 16, 2009 through June 30, 2010.

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HUNTSMAN CORPORATION AND SUBSIDIARIES

HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

7. DEBT (Continued)

As
consideration for the Waiver, Huntsman International agreed to increase the interest paid on the Revolving Facility by 225 basis points from LIBOR plus 1.75% to LIBOR plus 4% and to
increase the
applicable unused fee by 25 basis points from 0.5% to 0.75%. In addition, during the Wavier period, Huntsman International agreed to not:



At
the present time, borrowings under the Revolving Facility, Term Loan B and Term Loan C bear interest at LIBOR plus 4%, LIBOR plus 1.75% and LIBOR plus 2.25%, respectively. However,
the applicable interest rate of Term Loan B is subject to a reduction to LIBOR plus 1.5% upon achieving certain secured leverage ratio thresholds.

During
the six months ended June 30, 2009, we paid the annual scheduled repayment of $16 million on our Term Loan B. Inclusive of this repayment, we made net borrowings on
our debt of approximately $798 million during the six months ended June 30, 2009, excluding our off-balance sheet accounts receivable securitization program (the "A/R
Securitization Program").

2016 Senior Notes

Pursuant to the Texas Bank Litigation Settlement Agreement, on June 22, 2009, Huntsman International entered into the Note
Purchase Agreement with the Banks, pursuant to which the Banks purchased the 2016 Senior Notes from Huntsman International. The 2016 Senior Notes are senior unsecured obligations of Huntsman
International and are guaranteed by certain subsidiaries named as guarantors. The 2016 Senior Notes were issued in a transaction exempt from the registration requirements of the Securities Act of
1933.

As
of June 30, 2009, we had outstanding $600 million (recorded at fair value of $425 million and an effective interest rate of 11.73%) of 2016 Senior Notes. The 2016
Senior Notes bear interest at the rate of 5.5% per year payable semi-annually on June 30 and December 31, beginning on December 31, 2009. The 2016 Senior Notes will
mature on June 30, 2016. Huntsman International may redeem the 2016 Senior Notes in whole at any time or in part from time to time, upon not less than 30 nor more than 60 days' notice,
at a redemption price equal to the principal amount thereof, plus accrued and unpaid interest thereon, if any, to the date of redemption. The 2016 Senior Notes are governed by an indenture imposing
certain limitations on the ability of Huntsman International and its subsidiaries to, among other things, incur additional indebtedness, pay dividends or make certain other restricted payments, enter
into certain transactions with affiliates, create dividend or other payment restrictions affecting restricted subsidiaries and merge or consolidate with any other person, sell, assign, transfer,

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HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

7. DEBT (Continued)

lease,
convey or otherwise dispose of all or substantially all of their assets or adopt a plan of liquidation.

Upon
the occurrence of certain change of control events, holders of the 2016 Senior Notes will have the right to require that Huntsman International purchase all or a portion (equal to
$2,000 or an integral multiple of $1,000 in excess thereof) of such holder's 2016 Senior Notes in cash pursuant to the offer described by Huntsman International, at a purchase price equal to 101% of
the principal amount thereof plus accrued and unpaid interest, if any, to the date of purchase.

Redemption Notices

On June 23, 2009, Huntsman International issued a notice of redemption to holders to redeem all of its 11.625% senior secured
notes due October 2010. This redemption was completed on July 23, 2009. The total redemption payment, excluding accrued interest was $305 million, which included principal of
$296 million and a call premium of $9 million. The principal amount of these notes is classified as current portion of debt as of June 30, 2009 on the accompanying condensed
consolidated balance sheets (unaudited).

On
July 3, 2009, Huntsman International issued a notice of redemption to holders to redeem all of its 11.5% senior notes due July 2012. This redemption was completed on
August 3, 2009. The total redemption payment, excluding accrued interest was $204 million, which included principal of $198 million and a call premium of $6 million. The
principal amount of these notes is classified as current portion of debt as of June 30, 2009 on the accompanying condensed consolidated balance sheets (unaudited).

Other Debt (India)

In connection with the acquisition of Baroda for approximately $35 million on June 23, 2009, a portion of the purchase
price was funded through local financing and from liquidity available from our subsidiaries located in India. As of June 30, 2009, our Indian entities had combined debt outstanding of
approximately $21 million (U.S. dollar equivalents). This debt is comprised of various facilities including approximately $16 million (U.S. dollar equivalents) in working capital
facilities that are callable on demand and a five year term loan facility of approximately $5 million (U.S. dollar equivalents). See "Note 3. Business Combinations."

Intercompany Note

As of June 30, 2009, under an existing promissory note (the "Intercompany Note"), we have loaned $550 million to our
subsidiary, Huntsman International. The Intercompany Note is unsecured and $25 million of the outstanding amount is classified as current as of June 30, 2009 on the accompanying
condensed consolidated balance sheets (unaudited). As of June 30, 2009, under the terms of the Intercompany Note, Huntsman International promises to pay us interest on the unpaid principal
amount at a rate per annum based on the previous monthly average borrowing rate obtained under our A/R Securitization Program for U.S. dollar outstandings, less 10 basis points (provided that the rate
shall not exceed an amount that is 25 basis points less than the monthly average borrowing rate obtained for the U.S. LIBOR-based borrowings under our Revolving Facility). Subject to the

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HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

7. DEBT (Continued)

conditions
of the Waiver, with our consent, the principal and accrued interest outstanding under the Intercompany Note may also be forgiven, capitalized or satisfied with any alternate form of
consideration.

COMPLIANCE WITH COVENANTS

We are in compliance with the financial covenants contained in the agreements governing our debt instruments, including our Senior
Credit Facilities, our A/R Securitization Program and the indentures governing our notes.

8. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

We are exposed to market risks, such as changes in interest rates, foreign exchange rates and commodity pricing risks. From time to time, we enter into transactions, including
transactions involving derivative instruments, to manage certain of these exposures.

All
derivatives, whether designated in hedging relationships or not, are recorded on our balance sheet at fair value. If the derivative is designated as a fair value hedge, the changes
in the fair value of the derivative and the hedged items are recognized in earnings. If the derivative is designated as a cash flow hedge, changes in the fair value of the derivative are recorded in
accumulated other comprehensive (loss) income, to the extent effective, and will be recognized in the income statement when the hedged item affects earnings. To the extent applicable, we perform
effectiveness assessments in order to use hedge accounting at each reporting period. For a derivative that does not qualify as a hedge, changes in fair value are recognized in earnings.

We
also hedge our net investment in certain European operations. Changes in the fair value of the hedge in the net investment of certain European operations are recorded in accumulated
other comprehensive income (loss).

Our
cash flows and earnings are subject to fluctuations due to exchange rate variation. Our revenues and expenses are denominated in various currencies. From time to time, we may enter
into foreign currency derivative instruments to minimize the short-term impact of movements in foreign currency rates. Where practicable, we generally net multicurrency cash balances among
our subsidiaries to help reduce exposure to foreign currency exchange rates. Certain other exposures may be managed from time to time through financial market transactions, principally through the
purchase of spot or forward foreign exchange contracts (generally with maturities of one year or less). We do not hedge our currency exposures in a manner that would eliminate the effect of changes in
exchange rates on our cash flows and earnings.

On
January 15, 2008, we entered into a series of forward foreign currency contracts in our Pigments segment to partially hedge the impact, for up to one year, of movements in
foreign currency rates associated with the purchases of raw materials and sales of pigment in non-functional currencies. During the first quarter, 2009, any remaining contracts matured and
the realized gains (losses) recorded in the accompanying condensed consolidated statements of operations (unaudited) were not considered significant. For the three months ended June 30, 2008,
the effective portion of the changes in the fair value totaling $1 million were recorded in other comprehensive income (loss), with ineffectiveness resulting in a credit of $1 million,
recorded in cost of sales and a foreign currency gain of $1 million.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

8. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES (Continued)

For
the six months ended June 30, 2008, the effective portion of the changes in the fair value of $3 million were recorded in other comprehensive income (loss), with ineffectiveness
amounting to a credit of $1 million recorded in cost of sales and a foreign currency gain of $1 million.

On
October 24, 2008, we unwound a cross currency interest rate swap pursuant to which we swapped $153 million of LIBOR floating rate debt payments for
€116 million of EURIBOR floating rate debt payments. This swap was not designated as a hedge for financial reporting purposes. For the three and six months ended June 30,
2008, we recorded a foreign currency loss on this swap of nil and $13 million, respectively, in the condensed consolidated statement of operations (unaudited).

On
October 24, 2008, we unwound a cross currency interest rate swap pursuant to which we had swapped $96 million of LIBOR floating rate debt payments for
€71 million of EURIBOR floating rate debt payments. This swap was designated as a hedge of a net investment for financial reporting purposes. We received a net cash benefit from
the unwind of $3 million in the fourth quarter of 2008. For the three and six months ended June 30, 2008, the effective portion of the changes in the fair value of $(1) million and
$7 million, respectively were recorded in other comprehensive income (loss).

As
of and for the six months ended June 30, 2009, the changes in fair value of the realized gains (losses) recorded in the accompanying condensed consolidated statements of
operations (unaudited) of our other outstanding foreign currency rate hedging contracts and derivatives were not considered significant.

A
significant portion of our debt is denominated in euros. We also finance certain of our non-U.S. subsidiaries with intercompany loans that are, in many cases, denominated
in currencies other than the entities' functional currency. We manage the net foreign currency exposure created by this debt through various means, including cross-currency swaps, the designation of
certain intercompany loans as permanent loans because they are not expected to be repaid in the foreseeable future ("permanent loans") and the designation of certain debt and swaps as net investment
hedges.

Foreign
currency transaction gains and losses on intercompany loans that are not designated as permanent loans are recorded in earnings. Foreign currency transaction gains and losses on
intercompany loans that are designated as permanent loans are recorded in other comprehensive income (loss). From time to time, we review such designation of intercompany loans.

From
time to time, we review our non-U.S. dollar denominated debt and swaps to determine the appropriate amounts designated as hedges. As of June 30, 2009, we have
designated approximately €225 million ($317 million) of euro-denominated debt as a hedge of our net investments. For the three and six months ended
June 30, 2009, the amount of loss recognized on the hedge of our net investments was $18 million and $3 million, respectively, and was recorded in other comprehensive income
(loss). As of June 30, 2009, we had approximately €935 million ($1,317 million) in net euro assets.

9. SECURITIZATION OF ACCOUNTS RECEIVABLE

Under our A/R Securitization Program, we grant an undivided interest in certain of our trade receivables to a qualified off-balance sheet entity (the "Receivables Trust") at
a discount. This undivided interest serves as security for the issuance by the Receivables Trust of commercial paper. The

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

9. SECURITIZATION OF ACCOUNTS RECEIVABLE (Continued)

A/R
Securitization Program currently provides for financing through various commercial paper conduit programs (in both U.S. dollars and euros). The A/R Securitization Program consists of commercial
paper conduit programs with a committed amount of approximately $575 million (U.S. dollar equivalents). Because of various factors such as market demand, lower pricing and changes in foreign
currency rates, the underlying effective capacity of the program has declined. As of June 30, 2009, the Receivables Trust had $363 million in U.S. dollar equivalents (comprised of
$125 million and approximately €169 million ($238 million)) in commercial paper outstanding.

The
A/R Securitization Program matures on November 12, 2009. We are in discussions to address the extension of this program beyond its current maturity. Although we can make no
assurances, we intend to extend the A/R Securitization Program beyond its stated term.

10. FAIR VALUE

The fair value of financial instruments as of June 30, 2009 and December 31, 2008 were as follows (dollars in millions):

Huntsman Corporation

June 30, 2009

December 31, 2008Carrying
Amount

Estimated
Fair Value

Carrying
Amount

Estimated
Fair ValueNon-qualifed employee benefit plan investments

$
12

$
12

$
10

$
10Long-term debt (including current portion)


4,681


4,202


3,882


2,537


Huntsman International

June 30, 2009

December 31, 2008Carrying
Amount

Estimated
Fair Value

Carrying
Amount

Estimated
Fair ValueNon-qualifed employee benefit plan investments

$
12

$
12

$
10

$
10Long-term debt (including current portion)


4,444


3,968


3,647


2,302


The
carrying amount reported in the balance sheets for cash and cash equivalents, accounts receivable and accounts payable approximates fair value because of the immediate or
short-term maturity of these financial instruments. The fair value of non-qualified employee benefit plan investments is estimated using prevailing market prices. The estimated
fair values of our long-term debt other than the Convertible Notes are based on quoted market prices or on the present value of estimated future cash flows calculated using interest rates
that are currently available to us for issuance of debt with similar terms and remaining maturities for debt issues not quoted on an exchange. The estimated fair value of our Convertible Notes is
based on the present value of estimated future cash flows, calculated using management's best estimates of key assumptions including relevant interest rates, expected share volatility, dividend yields
and the probabilities associated with the certain features of the Convertible Notes.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

10. FAIR VALUE (Continued)

The
fair value estimates presented herein are based on pertinent information available to management as of June 30, 2009 and December 31, 2008. Although management is not
aware of any factors that would significantly affect the estimated fair value amounts, such amounts have not been comprehensively revalued for purposes of these financial statements since
June 30, 2009, and current estimates of fair value may differ significantly from the amounts presented herein.

The
following assets and liabilities are measured at fair value on a recurring basis (dollars in millions):

Fair Value Amounts UsingDescription

June 30,
2009

Quoted prices in
active markets for
identical assets
(Level 1)

Significant other
observable inputs
(Level 2)

Significant
unobservable inputs
(Level 3)Assets:Available-for-sale securities(1)

$
12

$
12

$


$
Retained interest in securitized receivables(2)


162








162Total assets

$
174

$
12

$


$
162


---

Fair Value Measurements Using Level 3

Three months ended
June 30, 2009

Six months ended
June 30, 2009Balance at beginning of period

$
163

$
147Total net gains (losses) (realized/unrealized) included in earnings


1


(10
)Purchases, issuances, and settlements


(2
)

25Balance at end of period

$
162

$
162The amount of total losses for the period included in earnings attributable to the change in unrealized gains or (losses) relating to assets still held
at June 30, 2009

$
7

$



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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

10. FAIR VALUE (Continued)

Gains
and (losses) (realized and unrealized) included in earnings (or changes in net assets) for the three and six months ended June 30, 2009 are reported in loss on accounts
receivable securitization program and other operating income (expense) as follows (dollars in millions):

Loss on accounts receivable
securitization program

Other income (expense)Three months
ended

Six months
ended

Three months
ended

Six months
endedJune 30, 2009

June 30, 2009Total (losses) gains included in earnings

$
(7
)
$
(13
)
$
8

$
3Changes in unrealized (losses) gains relating to assetsstill held at June 30, 2009

$
(1
)
$
(3
)
$
8

$
3


The
following liabilities were measured at fair value upon initial recognition (dollars in millions):

Fair Value Amounts UsingDescription

June 30,
2009

Quoted prices in
active markets for
identical assets
(Level 1)

Significant other
observable inputs
(Level 2)

Significant
unobservable inputs
(Level 3)Liabilities:2016 Senior Notes(3)

$
425

$


$


$
425Term Loan C(3)


439








439Total liabilities

$
864

$


$


$
864


---

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

11. EMPLOYEE BENEFIT PLANS

Components of the net periodic benefit costs for the three and six months ended June 30, 2009 and 2008 were as follows (dollars in millions):

Huntsman Corporation

Defined
Benefit Plans

Other
Postretirement
Benefit PlansThree Months
Ended
June 30,

Three Months
Ended
June 30,2009

2008

2009

2008Service cost

$
17

$
19

$
1

$
1Interest cost


35


39


2


2Expected return on assets


(35
)

(49
)




Amortization of transition obligation





1





Amortization of prior service cost


(2
)

(1
)




Amortization of actuarial loss


8


1





Curtailment gain


(1
)







Net periodic benefit cost

$
22

$
10

$
3

$
3




Defined
Benefit Plans

Other
Postretirement
Benefit PlansSix Months
Ended
June 30,

Six Months
Ended
June 30,2009

2008

2009

2008Service cost

$
33

$
38

$
2

$
2Interest cost


70


78


4


4Expected return on assets


(70
)

(97
)




Amortization of transition obligation





1





Amortization of prior service cost


(3
)

(3
)

(1
)

(1
)Amortization of actuarial loss


17


2


1


1Special termination benefits


1








Curtailment gain


(1
)







Net periodic benefit cost

$
47

$
19

$
6

$
6


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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

11. EMPLOYEE BENEFIT PLANS (Continued)

Huntsman International

Defined
Benefit Plans

Other
Postretirement
Benefit PlansThree Months
Ended
June 30,

Three Months
Ended
June 30,2009

2008

2009

2008Service cost

$
17

$
19

$
1

$
1Interest cost


35


39


2


2Expected return on assets


(35
)

(49
)




Amortization of transition obligation





1





Amortization of prior service cost


(2
)

(1
)




Amortization of actuarial loss


10


2





Curtailment gain


(1
)







Net periodic benefit cost

$
24

$
11

$
3

$
3




Defined
Benefit Plans

Other
Postretirement
Benefit PlansSix Months
Ended
June 30,

Six Months
Ended
June 30,2009

2008

2009

2008Service cost

$
33

$
38

$
2

$
2Interest cost


70


78


4


4Expected return on assets


(70
)

(97
)




Amortization of transition obligation





1





Amortization of prior service cost


(3
)

(3
)

(1
)

(1
)Amortization of actuarial loss


20


5


1


1Special termination benefits


1








Curtailment gain


(1
)







Net periodic benefit cost

$
50

$
22

$
6

$
6


During
the six months ended June 30, 2009 and 2008, we made contributions to our pension and other postretirement benefit plans of $61 million and $58 million,
respectively. During the remainder of 2009, we expect to contribute an additional amount of $71 million to these plans.

12. HUNTSMAN CORPORATION STOCKHOLDERS' EQUITY

5% MANDATORY CONVERTIBLE PREFERRED STOCK

In connection with the initial public offering of our 5% mandatory convertible preferred stock on February 16, 2005, we declared
all dividends that will be payable on such preferred stock from the issuance through the mandatory conversion date, which was February 16, 2008. Accordingly, we

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

12. HUNTSMAN CORPORATION STOCKHOLDERS' EQUITY (Continued)

recorded
dividends payable of $43 million and a corresponding charge to net loss attributable to Huntsman Corporation common stockholders during the year ended December 31, 2005. We paid
the final dividend in cash on February 16, 2008. Also on February 16, 2008, the mandatory convertible preferred stock converted, pursuant to its terms, into 12,082,475 shares of our
common stock.

COMMON STOCK DIVIDENDS

On March 31, 2009 and June 30, 2009, we paid cash dividends of approximately $23 million each, or $0.10 per share
each, to common stockholders of record as of March 16, 2009 and June 15, 2009, respectively. On March 31, 2008 and June 30, 2008, we paid cash dividends of approximately
$23 million each, or $0.10 per share each, to common stockholders of record as of March 14, 2008 and June 16, 2008, respectively.

13. OTHER COMPREHENSIVE INCOME (LOSS)

The components of other comprehensive income (loss) were as follows (dollars in millions):

Huntsman Corporation

Accumulated other comprehensive income (loss)

Other comprehensive income (loss)Three Months Ended

Six Months EndedJune 30,
2009

December 31,
2008

June 30,
2009

June 30,
2008

June 30,
2009

June 30,
2008Foreign currency translation adjustments, net of tax of $14 and $16 as of June 30, 2009 and December 31, 2008, respectively

$
244

$
204

$
125

$
(13
)
$
40

$
118Pension and other postretirement benefits adjustments net of tax of $155 and $158 as of June 30, 2009 and December 31, 2008,
respectively


(702
)

(713
)

4





11


Other comprehensive income (loss) of unconsolidated affiliates


6


9








(3
)

Other, net


4


4


1








(1
)Total


(448
)

(496
)

130


(13
)

48


117Less amounts attributable to noncontrolling interests


7


7





2





Amounts attributable to Huntsman Corporation

$
(441
)
$
(489
)
$
130

$
(11
)
$
48

$
117


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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

13. OTHER COMPREHENSIVE INCOME (LOSS) (Continued)

Huntsman International

Accumulated other comprehensive income (loss)

Other comprehensive income (loss)Three Months Ended

Six Months EndedJune 30,
2009

December 31,
2008

June 30,
2009

June 30,
2008

June 30,
2009

June 30,
2008Foreign currency translation adjustments, net of tax of $1 and $3 as of June 30, 2009 and December 31, 2008, respectively

$
243

$
202

$
124

$
(12
)
$
41

$
119Pension and other postretirement benefits adjustments net of tax of $189 and $193 as of June 30, 2009 and December 31, 2008,
respectively


(758
)

(771
)

6


1


13


2Other comprehensive income (loss) of unconsolidated affiliates


6


9








(3
)

Other, net


(1
)

(1
)










(1
)Total


(510
)

(561
)

130


(11
)

51


120Less amounts attributable to noncontrolling interests


7


7





2





Amounts attributable to Huntsman International LLC

$
(503
)
$
(554
)
$
130

$
(9
)
$
51

$
120


Items
of other comprehensive income (loss) of our Company and our unconsolidated affiliates have been recorded net of tax, with the exception of the foreign currency translation
adjustments related to subsidiaries with earnings permanently reinvested. The tax effect is determined based upon the jurisdiction where the income or loss was recognized and is net of valuation
allowances that have been recorded.

14. COMMITMENTS AND CONTINGENCIES

Texas Bank Litigation

On September 30, 2008, we filed the Texas Bank Litigation in the 9th Judicial District Court in Montgomery County, Texas
alleging, among other things, fraud and tortious interference with our merger agreements with Basell and Hexion. On June 22, 2009, we entered into the Texas Bank Litigation Settlement
Agreement. For more information, see "Note 1. GeneralRecent DevelopmentsTexas Bank Litigation Settlement Agreement."

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

14. COMMITMENTS AND CONTINGENCIES (Continued)

Discoloration Claims

Certain claims have been filed against us relating to discoloration of unplasticized polyvinyl chloride products allegedly caused by
our titanium dioxide ("Discoloration Claims"). Substantially all of the titanium dioxide that is the subject of these claims was manufactured prior to our acquisition of the titanium dioxide business
from ICI in 1999. Net of amounts we have received from insurers and pursuant to contracts of indemnity, we have paid an aggregate of approximately $16 million in costs and settlement amounts
for Discoloration Claims through June 30, 2009.

During
each of the six months ended June 30, 2009 and June 30, 2008, we did not settle any Discoloration Claims. The two Discoloration Claims unresolved as of
June 30, 2009 asserted aggregate damages of €33 million (approximately $46 million). An appropriate liability has been accrued for these claims. Based on our
understanding of the merits of these claims and our rights under contracts of indemnity and insurance, we do not believe that the net impact on our financial condition, results of operations or
liquidity will be material.

While
additional Discoloration Claims may be made in the future, we cannot reasonably estimate the amount of loss related to such claims. Although we may incur additional costs as a
result of future claims (including settlement costs), based on our history with Discoloration Claims to date, the fact that substantially all of the titanium dioxide that has been the subject of these
Discoloration Claims was manufactured and sold more than nine years ago, and the fact that we have rights under contract to indemnity, including from ICI, we do not believe that any unasserted
Discoloration Claims will have a material impact on our financial condition, results of operations or liquidity. Based on this conclusion
and our inability to reasonably estimate our expected costs with respect to these unasserted claims, we have made no accruals in our financial statements as of June 30, 2009 for costs
associated with unasserted Discoloration Claims.

Asbestos Litigation

We have been named as a "premises defendant" in a number of asbestos exposure cases, typically claims by non-employees of
exposure to asbestos while at a facility. In the past, these cases typically have involved multiple plaintiffs bringing actions against multiple defendants, and the complaints have not indicated which
plaintiffs were making claims against which defendants, where or how the alleged injuries occurred or what injuries each plaintiff claimed. These facts, which would be central to any estimate of
probable loss, generally have been learned only through discovery.

Where
a claimant's alleged exposure occurred prior to our ownership of the relevant "premises," the prior owners generally have contractually agreed to retain liability for, and to
indemnify us against, asbestos exposure claims. This indemnification is not subject to any time or dollar amount limitations. Upon service of a complaint in one of these cases, we tender it to the
prior owner. None of the complaints in these cases state the amount of damages being sought. The prior owner accepts responsibility for the conduct of the defense of the cases and payment of any
amounts due to the claimants. In our nearly fourteen-year experience with tendering these cases, we have not made any payment with respect to any tendered asbestos cases. We believe that
the prior owners have the intention and ability to continue to honor their indemnity obligations, although we cannot assure you that they will continue to do so or that we will not be liable for these
cases if they do not.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

14. COMMITMENTS AND CONTINGENCIES (Continued)

The
following table presents for the periods indicated certain information about cases for which service has been received that we have tendered to the prior owner, all of which have
been accepted.

Six months
ended June 30,2009

2008Unresolved at beginning of period


1,140


1,192Tendered during period


6


10Resolved during period(1)


11


59Unresolved at end of period


1,135


1,143


---

We
have never made any payments with respect to these cases. As of June 30, 2009, we had an accrued liability of $16 million relating to these cases and a corresponding
receivable of $16 million relating to our indemnity protection with respect to these cases. We cannot assure you that our liability will not exceed our accruals or that our liability associated
with these cases would not be material to our financial condition, results of operations or liquidity; however, we are not able to estimate the amount or range of loss in excess of our accruals.
Additional asbestos exposure claims may be made against us in the future, and such claims could be material. However, because we are not able to estimate the amount or range of losses associated with
such claims, we have made no accruals with respect to unasserted asbestos exposure claims as of June 30, 2009.

Certain
cases in which we are a "premises defendant" are not subject to indemnification by prior owners or operators. The following table presents for the periods indicated certain
information about these cases. Cases include all cases for which service has been received by us, other than a number of cases that were erroneously filed against us due to a clerical error. The cases
filed in error have been dismissed.

Six months
ended
June 30,2009

2008Unresolved at beginning of period


43


39Filed during period


1


2Resolved during period


2


1Unresolved at end of period


42


40


We
did not pay any settlement costs for asbestos exposure cases that are not subject to indemnification during the six months ended June 30, 2009 and 2008. As of June 30,
2009, we had an

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

14. COMMITMENTS AND CONTINGENCIES (Continued)

accrued
liability of $225,000 relating to these cases. We cannot assure you that our liability will not exceed our accruals or that our liability associated with these cases would not be material to
our financial condition, results of operations or liquidity; however, we are not able to estimate the amount or range of loss in excess of our accruals. Additional asbestos exposure claims may be made
against us in the future, and such claims could be material. However, because we are not able to estimate the amount or range of losses associated with such claims, we have made no accruals with
respect to unasserted asbestos exposure claims as of June 30, 2009.

Antitrust Matters

We have been named as a defendant in civil antitrust suits alleging that between 1999 and 2004 we conspired with Bayer, BASF, Dow, and
Lyondell to fix the prices of MDI, TDI, polyether polyols, and related systems ("polyether polyol products") sold in the U.S. in violation of the federal Sherman Act. These cases are consolidated as
the "Polyether Polyols" cases in multidistrict litigation known as In re Urethane Antitrust Litigation, MDL No. 1616, Civil
No. 2:04-md-01616-JWL-DJW, pending in the United States District Court, District of Kansas. The Kansas court has ruled that plaintiffs may
prosecute the Polyether Polyols cases on behalf of a class of all direct purchasers of polyether polyol products in the U.S. Bayer has entered into a settlement with the plaintiffs' class and has been
dismissed as a defendant. Merits discovery is underway, and trial has been set for May 3, 2011.

We
and the other Polyether Polyol defendants (excluding Bayer) have also been named as defendants in two civil antitrust suits brought by certain direct purchasers of polyether polyol
products that opted out of the class certified in MDL No. 1616. These cases have been brought by 12 groups of affiliated companies, 73 plaintiffs in all, who allege that between 1994 and 2006
inclusive the Polyether Polyol defendants conspired to fix the prices of polyether polyol products sold in the U.S. and abroad in violation of the Sherman Act, similar laws of several U.S. states, and
the laws of the European Union and certain of its member states. We and the other defendants have moved to dismiss the opt-out complaints.

We,
along with the other Polyether Polyols defendants and Rhodia, have also been named as defendants in civil antitrust suits alleging a conspiracy to fix the prices of polyether polyol
products sold in Canada in violation of Canadian competition law. These cases, filed in the Superior Court of Justice, Ontario, Canada on May 5, 2006 and in Superior Court, Quebec, Canada on
May 17, 2006, purport to be brought on behalf of various classes of Canadian direct purchasers of polyether polyol products. There has been little activity in these cases since they were filed.

Along
with Flexsys, Crompton (now Chemtura), Uniroyal, Rhein Chemie Rheinau and the other Polyether Polyol defendants, we also have been named as a defendant in a civil antitrust suit
pending in the Superior Court of California, County of San Francisco, filed on February 15, 2005, that alleges that between 1994 and 2004 the defendants conspired to fix the prices of certain
rubber and urethane products sold in California in violation of antitrust and unfair competition laws of California. This case purports to be brought on behalf of a class of all California purchasers
of products containing rubber and urethanes products. By agreement of the parties this case has been stayed pending the resolution of MDL No. 1616.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

14. COMMITMENTS AND CONTINGENCIES (Continued)

Along
with Dow, BASF, and Lyondell, we have also been named as a defendant in a third amended complaint proposed for filing in an existing civil antitrust suit pending against Bayer and
Chemtura in federal district court in Massachusetts. The proposed amended complaint alleges that beginning around 1990 we and the other defendants conspired to fix the prices of MDI, TDI, polyether
polyols, and polyester polyols sold throughout the U.S. in violation of the federal Sherman Act and the laws of various states. The proposed amended complaint seeks to sue on behalf of all indirect
purchasers of such products in the U.S. The Massachusetts action has been stayed pending plaintiffs' settlement of the previously asserted claims against Bayer and Chemtura. We have filed papers
opposing the motion for leave to file the proposed amended complaint adding us as a defendant in that action.

The
plaintiffs' pleadings in these various antitrust suits provide few specifics about any alleged illegal conduct on our part, and we are not aware of any illegal conduct by us or any
of our employees. For these reasons, we cannot estimate the possibility of loss or range of loss relating to these claims, and therefore we have not accrued a liability for these claims. Nevertheless,
we could incur losses due to these claims in the future and such losses could be material.

In
addition, on February 16, 2006, the Antitrust Division of the U.S. Department of Justice served us with a grand jury subpoena requesting production of documents relating to our
sale of polyether polyol products. The other defendants in the Polyether Polyols cases have confirmed that they were also served with subpoenas in this matter. We cooperated fully with the
investigation, and by letter dated
December 16, 2007, the U.S. Department of Justice notified us that its investigation of possible antitrust violations by manufacturers of polyether polyol products has been closed.

MTBE Litigation

We are named as a defendant in 17 lawsuits pending in litigation filed between March 23, 2007 and June 30, 2009 in New
York federal and state courts alleging liability related to MTBE contamination in groundwater. Numerous other companies, including refiners, manufacturers and sellers of gasoline, as well as
manufacturers of MTBE, were named as defendants in these and many other cases that were pending in U.S. courts. The plaintiffs in the 17 cases in which we are named are municipal water districts, a
regional water supply authority, and municipal corporations that claim that defendants' conduct has caused MTBE contamination of their groundwater. Four cases are pending in the U.S. District court
for the Southern District of New York and 13 are pending in the Supreme Court of the state of New York, nine in the county of Nassau and four in the county of Suffolk. The three most recent cases were
filed on June 24, 2009. The plaintiffs seek injunctive relief, such as monitoring and abatement, compensatory damages, punitive damages and attorney fees. Together with other defendants, we
have filed motions to dismiss 10 of the state court cases. At this time, we have insufficient information to meaningfully assess our potential exposure in these cases and therefore we have not accrued
a liability for these claims. We believe that our liability in these cases, if any, would likely be covered, at least in part, by insurance and/or by indemnity agreements with prior owners.

Shareholder Litigation

From July 5 to July 13, 2007, four putative shareholder class action complaints were filed against our Company and our
directors alleging breaches of fiduciary duty in connection with our

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

14. COMMITMENTS AND CONTINGENCIES (Continued)

then-proposed
sale to Basell and the receipt of a superior proposal from Hexion. Three actions were filed in Delaware: Cohen v. Archibald, et al., No. 3070, in the Court of Chancery
for the State of Delaware (filed July 5, 2007); Augenstein v. Archibald, et al., No. 3076, in the Court of Chancery for the State of Delaware (filed July 9, 2007); and Murphy v.
Huntsman, et al., No. 3094, in the Court of Chancery for the State of Delaware (filed July 13, 2007). Another action was filed in Texas Schwoegler v. Huntsman Corporation, et al., Cause
No. 07-07-06993-CV, in the 9th Judicial District Court of Montgomery County, Texas (filed July 6, 2007). As subsequently amended, these
lawsuits together allege that we and our directors breached fiduciary duties to the stockholders by, among other things, engaging in an unfair sales process, approving an unfair price per share for
the Hexion Merger, and
making inadequate disclosures to stockholders, and that Basell, Hexion and MatlinPatterson entities aided and abetted these breaches of fiduciary duty. The lawsuits sought to enjoin the stockholder
vote on the Hexion Merger.

On
September 20, 2007, we entered into a Memorandum of Understanding with plaintiffs' counsel in the Delaware and Texas actions to settle these four lawsuits. As part of the
proposed settlement, the defendants denied all allegations of wrongdoing, but we agreed to make certain additional disclosures in the final proxy statement that was mailed to our stockholders on or
about September 14, 2007. In connection with the settlement, the parties also reached an agreement with respect to any application that the plaintiffs' counsel would have made for an award of
customary attorneys' fees and expenses to be paid following the completion of the Hexion Merger.

The
Memorandum of Understanding is now null and void and of no force and effect because the Hexion Merger was not consummated. The Texas action has been voluntarily dismissed, but there
have been no further developments in the Delaware actions at this time.

Port Arthur Plant Fire Insurance Litigation

On August 31, 2007, an action was brought against our Company and International Risk Insurance Company ("IRIC"), our captive
insurer, in the United States District Court for the Southern District of Texas, by seventeen reinsurance companies (the "Reinsurers") that reinsure risks under the property insurance policy issued by
IRIC to our Company (the "Policy") for the period covering the April 29, 2006 fire at our manufacturing facility in Port Arthur, Texas. The action sought to compel our Company and IRIC to
arbitrate with the Reinsurers to resolve disputes related to the claim for losses caused by the fire or, in the alternative, to declare judgment in favor of the Reinsurers. On September 26,
2008, the court denied motions to dismiss filed by our Company and IRIC, ordering the parties to engage in a short period of discovery on the issue of arbitrability. In a second and related action
filed by our Company against IRIC in state court in Jefferson County, Texas, IRIC filed a third party petition against the Reinsurers, who then removed that action to the United States District Court
for the Eastern District of Texas. Some of the Reinsurers filed answers and motions to compel arbitration, to stay these proceedings, and to change venue to the United States District Court for the
Southern District of Texas in order to consolidate the two actions. We filed a motion to remand that action to the state court and opposition to the Reinsurers' motions in that action. On
April 23, 2008, the United States District Court for the Eastern District of Texas transferred the case to the United States District Court for the Southern District of Texas. On
September 26, 2008, the court denied our motion to remand that suit to the state court in which it was filed.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

14. COMMITMENTS AND CONTINGENCIES (Continued)

Pursuant
to a December 29, 2008 agreement among the parties to the actions referenced above: (1) a mediation was scheduled for February 24-25, 2009,
(2) if the disputes were not fully resolved in mediation, the parties would submit all coverage and quantum issues to a three-arbitrator panel in the second half of 2009, with a binding award
to be entered by September 30, 2009, (3) the Reinsurers paid an additional $40 million on our claim on December 29, 2008 and agreed that all monies paid by the
participating Reinsurers on the claim to date are nonrefundable, (4) we waived our noncontractual claims against the Reinsurers, (5) the first action referenced above is stayed pending
final resolution and entry of judgment, and (6) the second action referenced above has been dismissed. Because the non-binding mediation was not successful, we and the Reinsurers
have now agreed to participate in binding arbitration which is expected to occur in November of 2009. Reinsurers responsible for a small percentage of our remaining claim were not parties to the two
lawsuits and are not parties to the agreement; thus we may need to pursue actions against them separately for their pro rata shares of the unpaid claim. We have paid our deductible on the claim of
$60 million and have been paid $365 million to date by the Reinsurers. As of June 30, 2009, we have claimed an additional approximately $243 million plus interest as
presently due and owing and unpaid under the Policy for losses caused by the fire. For more information, see "Note 17. Casualty Losses and Insurance RecoveriesPort Arthur, Texas
Plant Fire."

Other Proceedings

We are a party to various other proceedings instituted by private plaintiffs, governmental authorities and others arising under
provisions of applicable laws, including various environmental, products liability and other laws. Except as otherwise disclosed in this report, we do not believe that the outcome of any of these
matters will have a material adverse effect on our financial condition, results of operations or liquidity.

15. ENVIRONMENTAL, HEALTH AND SAFETY MATTERS

GENERAL

We are subject to extensive federal, state, local and foreign laws, regulations, rules and ordinances relating to safety, pollution,
protection of the environment and the generation, storage, handling, transportation, treatment, disposal and remediation of hazardous substances and waste materials. In the ordinary course of
business, we are subject to frequent environmental inspections and monitoring and occasional investigations by governmental enforcement authorities. In addition, our production facilities require
operating permits that are subject to renewal, modification and, in certain circumstances, revocation. Actual or alleged violations of safety laws, environmental laws or permit requirements could
result in restrictions or prohibitions on plant operations, substantial civil or criminal sanctions, as well as, under some environmental laws, the assessment of strict liability and/or joint and
several liability. Moreover, changes in environmental regulations could inhibit or interrupt our operations, or require us to modify our facilities or operations. Accordingly, environmental or
regulatory matters may cause us to incur significant unanticipated losses, costs or liabilities.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

15. ENVIRONMENTAL, HEALTH AND SAFETY MATTERS (Continued)

EHS SYSTEMS

We are committed to achieving and maintaining compliance with all applicable environmental health and safety ("EHS") legal
requirements, and we have developed policies and management systems that are intended to identify the multitude of EHS legal requirements applicable to our operations, enhance compliance with
applicable legal requirements, ensure the safety of our employees, contractors, community neighbors and customers and minimize the production and emission of wastes and other pollutants. Although EHS
legal requirements are constantly changing and are frequently difficult to comply with, these EHS management systems are designed to assist us in our compliance goals while also fostering efficiency
and improvement and minimizing overall risk to us.

EHS CAPITAL EXPENDITURES

We may incur future costs for capital improvements and general compliance under EHS laws, including costs to acquire, maintain and
repair pollution control equipment. For the six months ended June 30, 2009 and 2008, our capital expenditures for EHS matters totaled $17 million and $27 million, respectively.
Since capital expenditures for these matters are subject to evolving regulatory requirements and depend, in part, on the timing, promulgation and enforcement of specific requirements, we cannot
provide assurance that our recent expenditures will be indicative of future amounts required under EHS laws.

REMEDIATION LIABILITIES

We have incurred, and we may in the future incur, liabilities to investigate and clean up waste or contamination at our current or
former facilities or facilities operated by third parties at which we may have disposed of waste or other materials. Similarly, we may incur costs for the cleanup of wastes that were disposed of prior
to the purchase of our businesses. Under some circumstances, the scope of our liability may extend to damages to natural resources.

Under
the U.S. Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended ("CERCLA"), and similar state laws, a current or former owner or operator of real
property
may be liable for remediation costs regardless of whether the release or disposal of hazardous substances was in compliance with law at the time it occurred, and a current owner or operator may be
liable regardless of whether it owned or operated the facility at the time of the release. We have been notified by third parties of claims against us for cleanup liabilities at approximately 10
former facilities or third party sites, including, but not limited to, sites listed under CERCLA. Based on current information and past experiences at other CERCLA sites, we do not expect any of these
third party claims to result in material liability to us.

In
addition, under the U.S. Resource Conservation and Recovery Act of 1976, as amended ("RCRA"), and similar state laws, we may be required to remediate contamination originating from
our properties as a condition to our hazardous waste permit. Some of our manufacturing sites have an extended history of industrial chemical manufacturing and use, including on-site waste
disposal. We are aware of soil, groundwater or surface contamination from past operations at some of our sites, and we may find contamination at other sites in the future. For example, our Port
Neches, Texas, and Geismar, Louisiana, facilities are the subject of ongoing remediation requirements under RCRA authority.

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15. ENVIRONMENTAL, HEALTH AND SAFETY MATTERS (Continued)

In
June of 2006, an agreement was reached between the local regulatory authorities and our advanced materials site in Pamplona, Spain to relocate our manufacturing operations in order to
facilitate new urban development desired by the city. Subsequently, as required by the authorities, soil and groundwater sampling was performed and followed by a quantitative risk assessment. Although
unresolved at this time, some level of remediation of site contamination may be required in the future, but the estimated cost is unknown because the remediation approach and timing has not been
determined.

By
letter dated March 7, 2006, our Base Chemicals and Polymers facility in West Footscray, Australia, was issued a clean-up notice by the Australian (Victorian) EPA
due to concerns about soil and groundwater contamination emanating from the site. The agency revoked the original clean-up notice on September 4, 2007 and issued a revised
clean-up notice due to "the complexity of contamination issues" at the site. On March 31, 2009, we submitted the required Site Remediation Action Plan to the agency which proposed
additional investigation and remediation method trials. We can provide no assurance that the EPA will agree with our proposed plan, will not seek to institute additional requirements for the site or
that costs associated with the clean up will not be material.

In
many cases, our potential liability arising from historical contamination is based on operations and other events occurring prior to our ownership of a business or specific facility.
In these situations, we frequently obtained an indemnity agreement from the prior owner addressing remediation liabilities arising from pre-closing conditions. We have successfully
exercised our rights under
these contractual covenants for a number of sites and, where applicable, mitigated our ultimate remediation liability. We cannot assure, however, that all of such matters will be subject to indemnity,
that the prior owner will honor its indemnity or that our existing indemnities will be sufficient to cover our liabilities for such matters.

Based
on available information and the indemnification rights we believe are likely to be available, we believe that the costs to investigate and remediate known contamination will not
have a material adverse effect on our financial condition, results of operations or cash flows. However, if such indemnities are unavailable or do not fully cover the costs of investigation and
remediation or we are required to contribute to such costs, and if such costs are material, then such expenditures may have a material adverse effect on our financial condition, results of operations
or cash flows. At the current time, we are unable to estimate the full cost, exclusive of indemnification benefits, to remediate any of the known contamination sites.

Environmental Reserves

We have accrued liabilities relating to anticipated environmental cleanup obligations, site reclamation and closure costs and known
penalties. Liabilities are recorded when potential liabilities are either known or considered probable and can be reasonably estimated. Our liability estimates are based upon requirements placed upon
the company by regulators, available facts, existing technology and past experience. The environmental liabilities do not include amounts recorded as asset retirement obligations. We had accrued
$9 million and $7 million for environmental liabilities as of June 30, 2009 and December 31, 2008, respectively. Of these amounts, $6 million and $4 million
were classified as accrued liabilities in our condensed consolidated balance sheets (unaudited) as of June 30, 2009 and December 31, 2008, respectively, and $3 million each were
classified as other noncurrent liabilities in

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15. ENVIRONMENTAL, HEALTH AND SAFETY MATTERS (Continued)

our
condensed consolidated balance sheets (unaudited) as of June 30, 2009 and December 31, 2008. In certain cases, our remediation liabilities may be payable over periods of up to
30 years. We may incur losses for environmental remediation in excess of the amounts accrued; however, we are not able to estimate the amount or range of such potential excess.

REGULATORY DEVELOPMENTS

In December 2006, the EU parliament and EU council approved a new EU regulatory framework for chemicals called "REACH" (Registration,
Evaluation and Authorisation
of Chemicals). REACH took effect on June 1, 2007, and the program it establishes will be phased in over 11 years. Under the regulation, companies that manufacture in or import into the
European Economic Area (EEA) more than one metric tonne of a chemical substance per year will be required to register such chemical substances and isolated intermediates in a central database. Use
authorizations will be granted for a specific chemical if the applicants can show that the risks in using the chemical are adequately controlled; and for chemicals where there are no suitable
alternatives substances or technologies available and the applicant can demonstrate that the social and economic benefits of using the chemical outweigh the risks. In addition, specified uses of some
hazardous substances may be restricted. Furthermore, all applicants will have to study the availability of alternative chemicals. If an alternative is available, an applicant will have to submit a
"substitution" plan to the regulatory agency. The regulatory agency will only authorize persistent bio-accumulative and toxic substances if an alternative chemical is not available. The
registration, evaluation and authorization phases of the program will require expenditures and resource commitments in order to, for example, participate in mandatory data-sharing forums;
acquire, generate and evaluate data; prepare and submit dossiers for substance registration; obtain legal advice and reformulate products, if necessary. We have established a cross-business European
REACH team that is working closely with our businesses to identify and list all substances purchased or manufactured in or imported into the EEA. Our pre-registration REACH compliance
began on June 1, 2008, utilizing internal resources at nominal expense, and we met all chemical pre-registration requirements by the November 30, 2008 regulatory deadline. We
are currently proceeding with the registration of the high-volume and high-priority chemicals under the program, which are due for registration by November 30, 2010.
Although the total long-term cost for REACH compliance is not estimable at this time, we spent approximately $2 million and $3 million during the years ended
December 31, 2008 and 2007, respectively, on REACH compliance.

GREENHOUSE GAS REGULATION

In the EU and other jurisdictions committed to compliance with the Kyoto Protocol to the United Nations Framework Convention on Climate
Change, there is an increasing likelihood that our manufacturing sites will be affected in some way over the next few years by regulation or taxation of greenhouse gas ("GHG") emissions. For example,
Australia recently proposed its Carbon Pollution Reduction Scheme, which may impact our Australian operations and program implementation is currently scheduled for 2011. In addition, although the U.S.
is not a signatory to the Convention, several states are implementing their own GHG regulatory programs, and a federal program in the U.S. is likely for the future. Draft U.S. Federal legislation and
the recent U.S. EPA Clean Air Act endangerment findings for carbon dioxide have focused corporate attention on the eventuality of measuring and reporting of GHG emissions for operations in the U.S.
The U.S. EPA has also recently

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15. ENVIRONMENTAL, HEALTH AND SAFETY MATTERS (Continued)

proposed
mandatory GHG reporting requirements for U.S. sources in excess of 25,000 tons. Final details of a comprehensive U.S. GHG management approach is, as yet, uncertain. Nevertheless, we are
already managing and reporting GHG emissions, to varying degrees, as required by law for our sites in locations subject to Kyoto obligations and/or EU emissions trading scheme requirements. Although
these sites are subject to existing GHG legislation, few have experienced or anticipate significant cost increases as a result, although it is likely that GHG emission restrictions will increase over
time. Potential consequences of such restrictions include capital requirements to modify assets used to meet GHG restriction and/or increases in energy costs above the level of general inflation, as
well as direct compliance costs. Currently, however, it is not possible to estimate the likely financial impact of potential future regulation on any of our sites.

CHEMICAL SECURITY

The Department of Homeland Security ("DHS") issued the final rule of their "Chemical Facility Anti-Terrorism Standard" in
2007. The initial phase of the rule required all chemical facilities in the U.S. to evaluate their facilities against the DHS Appendix A list of "Chemicals of Interest." Facilities which have
specified chemicals in designated quantities on the Appendix A list were required to submit a "Top Screen" to DHS in 2008. A Top Screen is a questionnaire completed by a facility having
Chemicals of Interest in designated threshold quantities. In early 2008, we submitted Top Screens for several of our facilities. After reviewing the Top Screens, DHS determined that some of our sites
were "High Risk" facilities. As a result, we were required to perform Security Vulnerability Assessments ("SVAs") at the High Risk sites. The SVAs were completed and sent to DHS during the fourth
quarter of 2008. We are currently awaiting the final risk ranking from the DHS, based on their assessment of the SVAs. Any of the sites which are still considered High Risk after the DHS assessment
will be required to develop site security plans based on a list of DHS risk-based performance standards. We are unable to determine the cost of security enhancements at our High Risk sites
until the site security plans are developed. We anticipate this phase of the rule to be completed by year-end 2009. Additionally, on November 26, 2008, the Transportation Safety
Administration of the DHS published a final rule regarding "rail security sensitive materials" that are received at or shipped from facilities. We have two sites that are subject to this new rule, but
at this time do not anticipate that the costs to comply will be material.

MTBE DEVELOPMENTS

We produce MTBE, an oxygenate that is blended with gasoline to reduce vehicle air emissions and to enhance the octane rating of
gasoline. Litigation or legislative initiatives restricting the use of MTBE in gasoline may subject us or our products to environmental liability or materially adversely affect our sales and costs.
Because MTBE has contaminated some water supplies, its use has become controversial in the U.S. and elsewhere, and its use has been effectively eliminated in the U.S. market. We currently market MTBE,
either directly or through third parties, to gasoline additive customers located outside the U.S., although there are additional costs associated with such outside-U.S. sales which may
result in decreased profitability compared to historical sales in the U.S. We may also elect to use all or a portion of our precursor tertiary butyl alcohol to produce saleable products other than
MTBE. If we opt to produce products other than MTBE, necessary modifications to our facilities will

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15. ENVIRONMENTAL, HEALTH AND SAFETY MATTERS (Continued)

require
significant capital expenditures and the sale of such other products may produce a lower level of cash flow than that historically produced from the sale of MTBE.

Numerous
companies, including refiners, manufacturers and sellers of gasoline, as well as manufacturers of MTBE, have been named as defendants in more than 150 cases in U.S. courts that
allege MTBE contamination in groundwater. Many of these cases were settled after the parties engaged in mediation supervised by a court-appointed special settlement master. Beginning in March 2007 and
continuing through June 30, 2009, we have been named as a defendant in 17 of these lawsuits. For more information, see "Note 14. Commitment and ContingenciesLegal
MattersMTBE Litigation." The plaintiffs in the MTBE groundwater contamination cases generally seek compensatory damages, punitive damages, injunctive relief, such as monitoring and
abatement, and attorney fees. We currently have insufficient information to meaningfully assess our potential exposure in these cases. We believe that some of our liability in these cases, if any, is
likely covered by insurance and/or indemnity agreements with prior owners. It is possible that we could be named as a defendant in additional existing or future MTBE contamination cases. We cannot
provide assurances that adverse results against us in existing or future MTBE contamination cases will not have a material adverse effect on our business, results of operations and financial position.

16. STOCK-BASED COMPENSATION PLANS

Under the Huntsman Stock Incentive Plan (the "Stock Incentive Plan"), a plan approved by stockholders, we may grant non-qualified stock options, incentive stock options,
stock appreciation rights, restricted stock, phantom stock, performance awards and other stock-based awards to our employees and directors and to employees and directors of our subsidiaries, provided
that incentive stock options may be granted solely to employees. The terms of the grants are fixed at the grant date. We were authorized to grant up to 21.6 million shares under the Stock
Incentive Plan. As of June 30, 2009, we had 2.3 million shares remaining under the Stock Incentive Plan available for grant. Option awards have a maximum contractual term of
10 years and generally must have an exercise price at least equal to the market price of our common stock on the date the option award is granted. Stock-based awards generally vest over a
three-year period.

The
compensation cost under the Stock Incentive Plan for our company and Huntsman International were as follows (dollars in millions):

Three months
ended
June 30,

Six months
ended
June 30,2009

2008

2009

2008Huntsman CorporationCompensation cost

$
4

$
5

$
9

$
11Huntsman InternationalCompensation cost

$
4

$
5

$
5

$
11


The
total income tax benefit recognized in the statements of operations for us and Huntsman International for stock-based compensation arrangements was $3 million and
$4 million, respectively, for the six months ended June 30, 2009 and 2008.

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16. STOCK-BASED COMPENSATION PLANS (Continued)

STOCK OPTIONS

The fair value of each stock option award is estimated on the date of grant using the Black-Scholes valuation model that uses the
assumptions noted in the following table. Expected volatilities are based on the historical volatility of our common stock through the grant date. The expected term of options granted was estimated
based on the contractual term of the instruments and employees' expected exercise and post-vesting employment termination behavior. The risk-free rate for periods within the
contractual life of the option was based on the U.S. Treasury yield curve in effect at the time of grant.

Three months
ended
June 30,

Six months
ended
June 30,2009

2008

2009

2008Dividend yield

NA

NA


15.4
%
NAExpected volatility

NA

NA


70.4
%
NARisk-free interest rate

NA

NA


2.5
%
NAExpected life of stock options granted during the period

NA

NA


6.6 years

NA


During
the three months ended June 30, 2009 and the three and six months ended June 30, 2008, no stock options were granted.

A
summary of our stock option activity under the Stock Incentive Plan as of June 30, 2009 and changes during the six months then ended is presented below:

Option Awards

Shares

Weighted Average
Exercise Price

Weighted Average
Remaining
Contractual
Term

Aggregate
Intrinsic
Value(in thousands)



(years)

(in millions)Outstanding at January 1, 2009


6,135

$
21.33Granted


6,510


2.59Exercised





Forfeited


(352
)

10.20Outstanding at June 30, 2009


12,293


11.72


8.2

$
15Exercisable at June 30, 2009


5,347


21.43


6.5





The
weighted-average grant-date fair value of stock options granted during the six months ended June 30, 2009 was $0.49 per option. As of June 30, 2009, there
was $5 million of total unrecognized compensation cost related to nonvested stock option arrangements granted under the Stock Incentive Plan. That cost is expected to be recognized over a
weighted-average period of approximately 2.2 years.

During
the six months ended June 30, 2009 and 2008 no stock options were exercised.

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16. STOCK-BASED COMPENSATION PLANS (Continued)

NONVESTED SHARES

Nonvested shares granted under the Stock Incentive Plan consist of restricted stock, which is accounted for as an equity award, and
phantom stock, which is accounted for as a liability award because it can be settled in either stock or cash. A summary of our nonvested shares activity as of June 30, 2009 and changes during
the six months then ended is presented below:

Equity Awards

Liability AwardsShares

Weighted Average
Grant-Date
Fair Value

Shares

Weighted Average
Grant-Date
Fair Value(in thousands)



(in thousands)Nonvested at January 1, 2009


930

$
22.62


171

$
22.82Granted


3,317


2.59


1,842


2.59Vested


(475
)(1)

20.09


(73
)

22.31Forfeited


(134
)

9.10





Nonvested at June 30, 2009


3,638
(1)

5.18


1,940


3.63


---

As
of June 30, 2009, there was $24 million of total unrecognized compensation cost related to nonvested share compensation arrangements granted under the Stock Incentive
Plan. That cost is expected to be recognized over a weighted-average period of approximately 2.6 years. The value of share awards that vested during the six months ended June 30, 2009
and 2008 was $11 million and $13 million, respectively.

17. CASUALTY LOSSES AND INSURANCE RECOVERIES

PORT ARTHUR, TEXAS PLANT FIRE

On April 29, 2006, our Port Arthur, Texas olefins manufacturing plant (which we sold in November 2007) experienced a major fire.
With the exception of cyclohexane operations at the site, which were restarted in June 2006, the operations at the site were shutdown until the fourth quarter of 2007. The Port Arthur manufacturing
plant is covered by property damage and business interruption insurance. With respect to coverage for this outage, the deductible for property damage is $10 million and business interruption
coverage does not apply for the first 60 days, subject to a combined deductible for property damage and business interruption of $60 million.

Through
June 30, 2009, we received partial recovery advances on this loss totaling $365 million. We have claimed an additional approximately $243 million plus
interest as of June 30, 2009 as presently due and owing and unpaid under the insurance policy for losses caused by the fire. On December 29, 2008, we reached a partial settlement with
certain of the Reinsurers whereby we received a partial claim reimbursement of $40 million (which is included in the total partial recovery advances of

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17. CASUALTY LOSSES AND INSURANCE RECOVERIES (Continued)

$365 million)
and we and the Reinsurers agreed to dismiss all legal suits arising from this insured loss and to participate in non-binding mediation in February 2009. Because the
non-binding mediation was not successful, we and the Reinsurers have agreed to participate in binding arbitration targeted to occur in November of 2009. Future collections on this insured
loss, if any, will represent additional income for us upon final settlement and will be used to repay secured debt in accordance with relevant provisions of our debt agreements. For more information,
see "Note 14. Commitments and ContingenciesPort Arthur Plant Fire Insurance Litigation."

18. INCOME (EXPENSES) ASSOCIATED WITH THE TERMINATED MERGER AND RELATED LITIGATION

On July 12, 2007, we entered into an Agreement and Plan of Merger with Hexion and one of its subsidiaries (the "Hexion Merger Agreement"). On June 18, 2008, Hexion, Apollo
and certain of their affiliates filed an action in Delaware Chancery Court seeking to terminate the Hexion Merger. We countersued Hexion and Apollo in the Delaware Chancery Court and filed a separate
action against Apollo and certain of its affiliates in the District Court of Montgomery County, Texas. On December 13, 2008, we terminated the Hexion Merger Agreement and, on
December 14, 2008, we entered into the Apollo Settlement Agreement with Hexion. Pursuant to the Apollo Settlement Agreement, Hexion and certain Apollo affiliates have paid us an aggregate
amount of $1 billion. For more information regarding the Apollo Settlement Agreement, see "Note 1. GeneralRecent DevelopmentsTexas Bank Litigation Settlement
Agreement."

On
June 22, 2009, we entered into the Texas Bank Litigation Settlement Agreement. In accordance with this agreement, the Banks paid us a cash payment of $632 million,
purchased the 2016 Senior Notes in the aggregate principal amount of $600 million, and provided us with Term Loan C in the principal amount of $500 million. The 2016 Senior Notes and
Term Loan C were recorded at a combined fair value of $864 million. Accordingly, we recognized a gain of $868 million in connection with the Texas Bank Litigation Settlement Agreement.

Income
associated with the Terminated Merger and related litigation incurred during the three and six months ended June 30, 2009 were $844 million and $837 million,
respectively, related principally to the gain recognized in connection with the Texas Bank Litigation Settlement Agreement, offset in part by legal fees and employee retention bonuses. During the
three and six months ended June 30, 2008, we incurred $4 million and $9 million, respectively, of expenses associated with the Terminated Merger related primarily to professional
fees and board of directors fees. For more information regarding the Texas Bank Litigation Settlement Agreement, see "Note 1. GeneralRecent DevelopmentsTexas Bank
Litigation Settlement Agreement" and "Note 14. Commitments and ContingenciesTexas Bank Litigation Settlement Agreement."

19. INCOME TAXES

We use the asset and liability method of accounting for income taxes. Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of 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 reviewed
each period on a tax jurisdictional basis to analyze whether there is sufficient positive or negative evidence

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19. INCOME TAXES (Continued)

to
support a change in judgment about the realizability of the related deferred tax assets for each jurisdiction. During the first quarter of 2009, we established a valuation allowance of
$146 million on our U.K. net deferred tax assets, primarily as a result of a recent history of operating losses that became a cumulative loss in the first quarter of 2009.

On
April 12, 2007, we received a Revenue Agent Report from the Internal Revenue Service ("IRS") related to the examination of our federal income tax returns for the years 2002
through 2004. The IRS initially proposed a decrease to our net operating losses of approximately $387 million related to transactions completed in 2002. However, on January 5, 2008, we
were notified by the IRS that no adjustment would be made to our net operating loss for this disputed item. As a result of the settlement of this audit cycle and the effective settlement of two
uncertain tax positions in other countries, during the six months ended June 30, 2008, we recorded a decrease in unrecognized tax benefits with a corresponding income tax benefit of
approximately $18 million.

HUNTSMAN CORPORATION

We recorded discrete tax expense of $310 million for the six months ended June 30, 2009 related to the net
$837 million of income related to the Terminated Merger and related litigation, and we recorded a valuation allowance of $146 million in the first quarter of 2009 against the net
deferred tax assets in the U.K. We recorded a discrete tax benefit of $18 million in the first quarter of 2008 due to a decrease in unrecognized tax benefits for the effective settlement of
examinations. Excluding these items, we recorded an income tax benefit of $7 million for the six months ended June 30, 2009 and income tax expense of $43 million for the six
months ended June 30, 2008. The decrease in income tax expense, exclusive of these items, was primarily due to a decrease in pre-tax operating earnings, including amounts in
jurisdictions where we do not record a tax benefit due to valuation allowances.

HUNTSMAN INTERNATIONAL

Huntsman International recorded a valuation allowance of $156 million in the first quarter of 2009 due to the establishment of a
valuation allowance against the net deferred tax assets in the U.K. Huntsman International recorded a discrete tax benefit of $18 million in the first quarter of 2008 due to a decrease in
unrecognized tax benefits for the effective settlement of examinations. Excluding these items, Huntsman International recorded an income tax benefit of $2 million for the six months ended
June 30, 2009 and income tax expense of $46 million for the six months ended June 30, 2008. The decrease in income tax expense, exclusive of these items, was primarily due to a
decrease in pre-tax operating earnings including amounts in jurisdictions where we do not record a tax benefit due to valuation allowances.

20. DISCONTINUED OPERATIONS

On November 5, 2007, we completed the sale of our former U.S. base chemicals business (the "U.S. Base Chemicals Disposition"). This disposition included our former olefins
manufacturing assets located at Port Arthur, Texas. The captive ethylene unit at the retained Port Neches, Texas site of our Performance Products segment operations was not included in the sale. This
asset, along with a long-term post-closing arrangement for the supply of ethylene and propylene from Flint Hills Resources to us, will continue to provide feedstock for our
downstream derivative units. The EBITDA of the

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20. DISCONTINUED OPERATIONS (Continued)

former
U.S. base chemicals business was reported in our former Base Chemicals segment and has been presented as discontinued operations in the accompanying condensed consolidated statements of
operations (unaudited).

On
August 1, 2007 we completed the sale of our former North American polymers business assets (the "North American Polymers Disposition"). The disposition included our former
polymers manufacturing assets located at four U.S. sites: Odessa and Longview, Texas; Peru, Illinois; and Marysville, Michigan. In accordance with the amended and restated asset purchase agreement
with Flint Hills Resources, we also shut down our Mansonville, Quebec expandable polystyrene manufacturing facility in June 2007. The EBITDA of the North American polymers business was reported in our
former Polymers segment and has been presented as discontinued operations in the accompanying condensed consolidated statements of operations (unaudited).

On
December 29, 2006, we completed the sale of our European base chemicals business. This transaction involved the sale of the outstanding equity interests of Huntsman
Petrochemicals (UK) Limited. The EBITDA of our former European base chemicals business was reported in our former Base Chemicals segment and has been presented as discontinued operations in the
accompanying condensed consolidated statements of operations (unaudited).

During
the three months ended June 30, 2009, we recorded an after tax loss from discontinued operations of $3 million related primarily to the revaluation of outstanding
product exchange liabilities associated with our former base chemicals business. During the three months ended June 30, 2008, we recorded after tax income from discontinued operations of
$5 million related principally to sales and use tax settlements and post-closing adjustments associated with our former base chemicals and polymers businesses. During the six months
ended June 30, 2008, we recorded after tax income from discontinued operations of $4 million related primarily to sales tax settlements associated with our former base chemicals
business.

21. NET INCOME (LOSS) PER SHARE

Basic income (loss) per share excludes dilution and is computed by dividing net income (loss) attributable to Huntsman Corporation common stockholders by the weighted average number of
shares outstanding during the period. Diluted income per share reflects potential dilution and is computed by dividing net income available to common stockholders by the weighted average number of
shares outstanding during the period, increased by the number of additional shares that would have been outstanding if the potential dilutive units had been exercised or converted. On
December 23, 2008, we issued the Convertible Notes in an aggregate principal amount of $250 million that are convertible into common stock at a conversion price of $7.857 per share,
subject to certain anti-dilution adjustments. On February 16, 2008, our previously outstanding mandatory convertible preferred stock converted into 12,082,475 shares of our common
stock.

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21. NET INCOME (LOSS) PER SHARE (Continued)

Basic
and diluted income per share is determined using the following information (in millions):

Three Months
Ended
June 30,

Six Months
Ended
June 30,2009

2008

2009

2008Numerator:Basic and diluted income from continuing operations:Income from continuing operations attributable to Huntsman Corporation

$
409

$
10

$
116

$
18Convertible notes interest expense, net of tax


5





9


Income from continuing operations attributable to Huntsman Corporation and assumed conversion

$
414

$
10

$
125

$
18Basic and diluted net income:Net income attributable to Huntsman Corporation

$
406

$
24

$
116

$
31Convertible notes interest expense, net of tax


5





9


Net income attributable to Huntsman Corporation and assumed conversion

$
411

$
24

$
125

$
31Shares (denominator):Weighted average shares outstanding


234.0


233.5


233.8


230.3Dilutive securities:Stock-based awards


5.5


0.2


3.2


0.3Convertible notes conversion


31.8





31.8


Preferred stock conversion











3.1Total dilutive shares outstanding assuming conversion


271.3


233.7


268.8


233.7


Additional
stock-based awards of 6.4 million and 6.5 million weighted average equivalent shares of stock were outstanding during the three months ended June 30, 2009
and 2008, respectively, and additional stock-based awards of 6.6 million and 6.4 million weighted average equivalent shares of stock were outstanding during the six months ended
June 30, 2009 and 2008. However, these stock-based awards were not included in the computation of diluted earnings per share because the effect would be anti-dilutive.

22. 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. During the first quarter of 2009, we
reorganized our operating segments to divide our former Materials and Effects segment into two separate segmentsour Advanced Materials segment and our Textile Effects segment. All segment
information for prior periods has been restated to reflect this change. We have reported our operations through five segments: Polyurethanes, Advanced Materials, Textile Effects, Performance Products
and Pigments. In a series of transactions completed in 2006 and 2007, we sold substantially all of our Polymers and Base Chemicals operations and have reported the results from these businesses on
discontinued operations.

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HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

22. OPERATING SEGMENT INFORMATION (Continued)

For
more information, see "Note 20. Discontinued Operations." We have organized our business and derived our operating segments around differences in product lines.

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

Segment

ProductsPolyurethanes

MDI, PO, polyols, PG, TPU, aniline and MTBEAdvanced Materials

epoxy and other resin compounds and formulations; cross-linking, matting and curing agents; epoxy, acrylic and polyurethane-based adhesives and tooling resin formulationsTextile Effects

textile chemicals and dyesPerformance Products

amines, surfactants, LAB, maleic anhydride, other performance chemicals, EG, olefins and technology licensesPigments

titanium dioxideCorporate and Other

styrene


Sales
between segments are transacted at amounts intended to reflect external market prices and are eliminated in consolidation. We use EBITDA to measure the financial performance of our
global business units and for reporting the results of our operating segments. This measure includes all operating items relating to the businesses. The EBITDA of operating segments excludes items
that

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

22. OPERATING SEGMENT INFORMATION (Continued)

principally
apply to our Company as a whole. The revenues and EBITDA for each of our reportable operating segments are as follows (in millions):

Three Months
Ended
June 30,

Six Months
Ended
June 30,2009

2008

2009

2008Net Sales:Polyurethanes

$
695

$
1,161

$
1,295

$
2,163Advanced Materials


255


427


512


806Textile Effects


179


262


331


505Performance Products


482


725


982


1,356Pigments


254


321


450


606Corporate and Other


20


43


34


83Eliminations


(19
)

(43
)

(45
)

(83
)Total

$
1,866

$
2,896

$
3,559

$
5,436Huntsman Corporation:Segment EBITDA(1):Polyurethanes

$
86

$
148

$
112

$
280Advanced Materials


(1
)

46


9


86Textile Effects


(20
)

4


(31
)

3Performance Products


37


51


118


104Pigments


(26
)

8


(55
)

18Corporate and Other(2)


802


(54
)

751


(117
)Subtotal


878


203


904


374Discontinued Operations(3)


(4
)

7





6Total


874


210


904


380Interest expense, net


(58
)

(65
)

(113
)

(130
)Income tax expensecontinuing operations


(311
)

(21
)

(449
)

(25
)Income tax benefit (expense)discontinued operations


1


(2
)




(2
)Depreciation and amortization


(100
)

(98
)

(226
)

(192
)Net (loss) income attributable to Huntsman Corporation

$
406

$
24

$
116

$
31




Total Assets:

June 30, 2009

December 31, 2008Polyurethanes

$
4,389

$
4,442Advanced Materials


1,426


1,308Textile Effects


728


750Performance Products


2,409


2,313Pigments


1,328


1,474Corporate and Other(2)


(1,127
)

(2,229
)Total

$
9,153

$
8,058


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HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

22. OPERATING SEGMENT INFORMATION (Continued)



Three Months
Ended
June 30,

Six Months
Ended
June 30,Huntsman International:

2009

2008

2009

2008Segment EBITDA(1):Polyurethanes

$
86

$
148

$
112

$
280Advanced Materials


(1
)

46


9


86Textile Effects


(20
)

4


(31
)

3Performance Products


37


51


118


104Pigments


(26
)

8


(55
)

18Corporate and Other(2)


(42
)

(51
)

(82
)

(112
)Subtotal


34


206


71


379Discontinued Operations(3)


(4
)

7





6Total


30


213


71


385Interest expense, net


(58
)

(66
)

(113
)

(131
)Income tax expensecontinuing operations


(8
)

(22
)

(154
)

(28
)Income tax benefit (expense)discontinued operations


1


(2
)




(2
)Depreciation and amortization


(94
)

(92
)

(214
)

(181
)Net (loss) income attributable toHuntsman International LLC

$
(129
)
$
31

$
(410
)
$
43




Total Assets:

June 30, 2009

December 31, 2008Polyurethanes

$
4,389

$
4,442Advanced Materials


1,426


1,308Textile Effects


728


750Performance Products


2,409


2,313Pigments


1,328


1,474Corporate and Other(2)


(2,158
)

(2,863
)Total

$
8,122

$
7,424


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HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

22. OPERATING SEGMENT INFORMATION (Continued)



23. CONDENSED CONSOLIDATING FINANCIAL INFORMATION OF HUNTSMAN INTERNATIONAL LLC (UNAUDITED)

The following condensed consolidating financial information (unaudited) of Huntsman International presents, in separate columns, financial information for the following: Huntsman
International (on a parent only basis), with its investment in subsidiaries recorded under the equity method; the guarantors of Huntsman International's debt on a combined, and where appropriate,
consolidated basis; and non-guarantor subsidiaries on a combined, and where appropriate, consolidated basis. Additional columns present eliminating adjustments and consolidated totals as
of June 30, 2009 and December 31, 2008 and for the three and six months ended June 30, 2009 and 2008. There are no contractual restrictions limiting transfers of cash from
Huntsman International's guarantors to Huntsman International. Each Huntsman International guarantor is 100% owned by Huntsman International and has fully and unconditionally guaranteed Huntsman
International's debt on a joint and several basis.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

23. CONDENSED CONSOLIDATING FINANCIAL INFORMATION OF HUNTSMAN INTERNATIONAL LLC (UNAUDITED) (Continued)

HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES        CONDENSED CONSOLIDATING BALANCE SHEETS (UNAUDITED)        AS OF JUNE 30, 2009        (Dollars in
Millions)

Parent
Company

Guarantors

Non-guarantors

Eliminations

Consolidated
Huntsman
International
LLCASSETSCurrent assets:Cash and cash equivalents

$
1,124

$
2

$
162

$


$
1,288Restrictred cash








6





6Accounts and notes receivables, net


15


118


808





941Accounts receivable from affiliates


418


1,988


54


(2,430
)

30Inventories, net


53


172


944


(7
)

1,162Prepaid expenses


3


1


20





24Deferred income taxes


9





18


(9
)

18Other current assets


113


3


99


(106
)

109Total current assets


1,735


2,284


2,111


(2,552
)

3,578Property, plant and equipment, net


457


921


2,037


2


3,417Investment in affiliates


4,678


1,178


113


(5,707
)

262Intangible assets, net


117


3


21





141Goodwill


(18
)

84


32


(4
)

94Deferred income taxes


185


8


133


(57
)

269Notes receivables from affiliates


330


1,464


9


(1,794
)

9Other noncurrent assets


49


136


167





352Total assets

$
7,533

$
6,078

$
4,623

$
(10,112
)
$
8,122LIABILITIES AND MEMBERS' EQUITYCurrent liabilities:Accounts payable

$
23

$
119

$
469

$


$
611Accounts payable to affiliates


1,726


303


421


(2,430
)

20Accrued liabilities


93


161


425


(106
)

573Deferred income tax





36


10


(10
)

36Note payable to affiliate


25











25Current portion of debt


514





176





690Total current liabilities


2,381


619


1,501


(2,546
)

1,955Long-term debt


3,649


12


93





3,754Notes payable to affiliates


525


290


1,510


(1,795
)

530Deferred income taxes


18


18


56





92Other noncurrent liabilities


204


175


639


(1
)

1,017Total liabilities


6,777


1,114


3,799


(4,342
)

7,348Huntsman International LLC members' equity:Members' equity


3,106


4,769


1,833


(6,602
)

3,106Subsidiary preferred stock





1


1


(2
)

(Accumulated deficit) retained earnings


(1,847
)

277


(552
)

275


(1,847
)Accumulated other comprehensive loss


(503
)

(83
)

(471
)

554


(503
)Total Huntsman International LLC members' equity


756


4,964


811


(5,775
)

756Noncontrolling interests in subsidiaires








13


5


18Total equity


756


4,964


824


(5,770
)

774Total liabilities and equity

$
7,533

$
6,078

$
4,623

$
(10,112
)
$
8,122


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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

23. CONDENSED CONSOLIDATING FINANCIAL INFORMATION OF HUNTSMAN INTERNATIONAL LLC (UNAUDITED) (Continued)

HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES        CONDENSED CONSOLIDATING BALANCE SHEETS (UNAUDITED)        AS OF DECEMBER 31, 2008        (Dollars in
Millions)

Parent
Company

Guarantors

Non- guarantors

Eliminations

Consolidated
Huntsman
International
LLCASSETSCurrent assets:Cash and cash equivalents

$


$
3

$
84

$


$
87Restricted cash








5





5Accounts and notes receivables, net


19


114


772





905Accounts receivable from affiliates


350


1,819


38


(2,192
)

15Inventories, net


103


198


1,207


(8
)

1,500Prepaid expenses


14


29


21


(19
)

45Deferred income taxes


9





21


(9
)

21Other current assets


61


2


92


(56
)

99Total current assets


556


2,165


2,240


(2,284
)

2,677Property, plant and equipment, net


477


924


2,062


3


3,466Investment in affiliates


4,883


1,367


118


(6,101
)

267Intangible assets, net


103





54





157Goodwill





87


9


(4
)

92Deferred income taxes


168


9


273


(58
)

392Notes receivable from affiliates


319


1,470


9


(1,789
)

9Other noncurrent assets


47


145


172





364Total assets

$
6,553

$
6,167

$
4,937

$
(10,233
)
$
7,424LIABILITIES AND EQUITYCurrent liabilities:Accounts payable

$
20

$
175

$
533

$


$
728Accounts payable to affiliates


1,567


265


375


(2,191
)

16Accrued liabilities


91


155


389


(75
)

560Deferred income tax





35


10


(10
)

35Note payable to affiliate


423











423Current portion of debt


39





166





205Total current liabilities


2,140


630


1,473


(2,276
)

1,967Long-term debt


3,303


12


127





3,442Notes payable to affiliates





282


1,513


(1,789
)

6Deferred income taxes


2


2


65





69Other noncurrent liabilities


211


175


635





1,021Total liabilities


5,656


1,101


3,813


(4,065
)

6,505Huntsman International LLC members' equity:Members' equity


2,865


4,685


1,716


(6,401
)

2,865Subsidiary preferred stock





1


1


(2
)

(Accumulated deficit) retained earnings


(1,414
)

499


(111
)

(388
)

(1,414
)Accumulated other comprehensive loss


(554
)

(119
)

(499
)

618


(554
)Total Huntsman International LLC members' equity


897


5,066


1,107


(6,173
)

897Noncontrolling interests in subsidiaries








17


5


22Total equity


897


5,066


1,124


(6,168
)

919Total liabilities and equity

$
6,553

$
6,167

$
4,937

$
(10,233
)
$
7,424


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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

23. CONDENSED CONSOLIDATING FINANCIAL INFORMATION OF HUNTSMAN INTERNATIONAL LLC (UNAUDITED) (Continued)

HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES        CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS (UNAUDITED)        THREE MONTHS ENDED JUNE 30, 2009        (Dollars in Millions)

Parent
Company

Guarantors

Non-guarantors

Eliminations

Consolidated
Huntsman
International
LLCRevenues:Trade sales, services and fees

$
156

$
489

$
1,209

$


$
1,854Related party sales


47


89


130


(254
)

12Total revenues


203


578


1,339


(254
)

1,866Cost of goods sold


174


456


1,229


(233
)

1,626Gross profit


29


122


110


(21
)

240Selling, general and administrative


24


34


139





197Research and development


13


8


15





36Other operating (income) expense


(5
)

(27
)

31





(1
)Restructuring, impairment and plant closing costs


5


2


56





63Operating (loss) income


(8
)

105


(131
)

(21
)

(55
)Interest (expense) income, net


(51
)

9


(16
)




(58
)Loss on accounts receivable securitization program


(1
)

(2
)

(3
)




(6
)Equity in (loss) income of investment in affiliates and subsidiaries


(70
)

(100
)




171


1Other expense


(21
)







21


(Loss) income from continuing operations before income taxes


(151
)

12


(150
)

171


(118
)Income tax benefit (expense)


22


(38
)

8





(8
)Loss from continuing operations


(129
)

(26
)

(142
)

171


(126
)Loss from discontinued operations, net of tax





(3
)







(3
)Net loss


(129
)

(29
)

(142
)

171


(129
)Less net income attributable to noncontrolling interest














Net loss attributable to Huntsman International LLC

$
(129
)
$
(29
)
$
(142
)
$
171

$
(129
)


63

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

23. CONDENSED CONSOLIDATING FINANCIAL INFORMATION OF HUNTSMAN INTERNATIONAL LLC (UNAUDITED) (Continued)

HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES        CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS (UNAUDITED)        THREE MONTHS ENDED JUNE 30, 2008        (Dollars in Millions)

Parent
Company

Guarantors

Non-guarantors

Eliminations

Consolidated
Huntsman
International LLCRevenues:Trade sales, services and fees

$
239

$
778

$
1,850

$


$
2,867Related party sales


97


117


303


(488
)

29Total revenues


336


895


2,153


(488
)

2,896Cost of goods sold


273


804


1,914


(481
)

2,510Gross profit


63


91


239


(7
)

386Selling, general and administrative


28


35


170





233Research and development


13


8


19





40Other operating (income) expense


(6
)




9





3Restructuring, impairment and plant closing costs








1





1Operating income


28


48


40


(7
)

109Interest (expense) income, net


(61
)

30


(35
)




(66
)Gain (loss) on accounts receivable securitization program


1


(3
)

(3
)




(5
)Equity in income of investment in affiliates and subsidiaries


56





4


(56
)

4Other expense


(6
)







6


Income from continuing operations before income taxes


18


75


6


(57
)

42Income tax benefit (expense)


12


(29
)

(5
)




(22
)Income from continuing operations


30


46


1


(57
)

20Income from discontinued operations, net of tax


1


3


1





5Income before extraordinary gain


31


49


2


(57
)

25Extraordinary gain on the acquisition of a business, net of tax








9





9Net income


31


49


11


(57
)

34Less net income attributable to noncontrolling interest








(3
)




(3
)Net income attributable to Huntsman International LLC

$
31

$
49

$
8

$
(57
)
$
31


64

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Table of Contents

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HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

23. CONDENSED CONSOLIDATING FINANCIAL INFORMATION OF HUNTSMAN INTERNATIONAL LLC (UNAUDITED) (Continued)

HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES        CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS (UNAUDITED)        SIX MONTHS ENDED JUNE 30, 2009    
  (Dollars in Millions)

Parent
Company

Guarantors

Non-guarantors

Eliminations

Consolidated
Huntsman
International LLCRevenues:Trade sales, services and fees

$
292

$
978

$
2,270

$


$
3,540Related party sales


80


163


255


(479
)

19Total revenues


372


1,141


2,525


(479
)

3,559Cost of goods sold


332


913


2,382


(458
)

3,169Gross profit


40


228


143


(21
)

390Selling, general and administrative


56


65


268





389Research and development


25


15


32





72Other operating (income) expense


(27
)

(15
)

33





(9
)Restructuring, impairment and plant closing costs


6


2


69





77Operating (loss) income


(20
)

161


(259
)

(21
)

(139
)Interest (expense) income, net


(98
)

20


(35
)




(113
)Loss on accounts receivable securitization program


(3
)

(3
)

(4
)




(10
)Equity in (loss) income of investment in affiliates and subsidiaries


(314
)

(348
)

3


661


2Other expense


(21
)







21


Loss from continuing operations before income taxes


(456
)

(170
)

(295
)

661


(260
)Income tax benefit (expense)


46


(61
)

(139
)




(154
)Loss from continuing operations


(410
)

(231
)

(434
)

661


(414
)(Loss) income from discontinued operations, net of tax





(1
)

1





Net loss


(410
)

(232
)

(433
)

661


(414
)Less net loss attributable to noncontrolling interest








4





4Net loss attributable to Huntsman International LLC

$
(410
)
$
(232
)
$
(429
)
$
661

$
(410
)


65

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Table of Contents

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HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

23. CONDENSED CONSOLIDATING FINANCIAL INFORMATION OF HUNTSMAN INTERNATIONAL LLC (UNAUDITED) (Continued)

HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES        CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS (UNAUDITED)        SIX MONTHS ENDED JUNE 30, 2008    
  (Dollars in Millions)

Parent
Company

Guarantors

Non-guarantors

Eliminations

Consolidated
Huntsman
International
LLCRevenues:Trade sales, services and fees

$
450

$
1,425

$
3,507

$


$
5,382Related party sales


216


216


579


(957
)

54Total revenues


666


1,641


4,086


(957
)

5,436Cost of goods sold


537


1,473


3,618


(949
)

4,679Gross profit


129


168


468


(8
)

757Selling, general and administrative


43


68


351





462Research and development


26


15


38





79Other operating expense (income)


26


(32
)

19





13Restructuring, impairment and plant closing costs








5





5Operating income


34


117


55


(8
)

198Interest (expense) income, net


(117
)

54


(68
)




(131
)Gain (loss) on accounts receivable securitization program


4


(6
)

(7
)




(9
)Equity in income (loss) of investment in affiliates and subsidiaries


79


(5
)

7


(74
)

7Other expense


(6
)







6


(Loss) income from continuing operations before income taxes


(6
)

160


(13
)

(76
)

65Income tax benefit (expense)


48


(63
)

(13
)




(28
)Income (loss) from continuing operations


42


97


(26
)

(76
)

37Income (loss) from discontinued operations, net of tax


1


4


(1
)




4Income (loss) before extraordinary gain


43


101


(27
)

(76
)

41Extraordinary gain on the acquisition of a business, net of tax








9





9Net income (loss)


43


101


(18
)

(76
)

50Less net income attributable to noncontrolling interest








(7
)




(7
)Net income (loss) attributable to Huntsman International LLC

$
43

$
101

$
(25
)
$
(76
)
$
43


66

---





Table of Contents

HUNTSMAN CORPORATION AND SUBSIDIARIES

HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

23. CONDENSED CONSOLIDATING FINANCIAL INFORMATION OF HUNTSMAN INTERNATIONAL LLC (UNAUDITED) (Continued)

HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES        CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS (UNAUDITED)        SIX MONTHS ENDED JUNE 30, 2009    
  (Dollars in Millions)

Parent
Company

Guarantors

Non-Guarantors

Eliminations

Consolidated
Huntsman
International
LLCNet cash provided by operating activities

$
30

$
73

$
96

$


$
199Investing activities:Capital expenditures


(4
)

(43
)

(53
)




(100
)Proceeds from sale of assets, net of adjustments





(1
)

2





1Acquisition of business








(24
)




(24
)Investment in affiliates, net


(58
)

(71
)




129


Increase in receivable from affiliate


(11
)










(11
)Other, net





5


(2
)




3Net cash used in investing activities


(73
)

(110
)

(77
)

129


(131
)Financing activities:Net repayments under revolving loan facilities








(8
)




(8
)Net borrowings of overdraft facilities








1





1Repayments of short-term debt








(78
)




(78
)Proceeds from short-term debt








57





57Repayments of long-term debt


(16
)




(10
)




(26
)Proceeds from long-term debt


864





5





869Intercompany borrowings








(47
)

47


Repayments of notes payable


(20
)




(14
)




(34
)Proceeds from notes payable








15





15Repayments of note payable to affiliate


(403
)










(403
)Proceeds from note payable to affiliate


529











529Dividends paid to parent


(23
)










(23
)Contribution from parent, net


236


40


136


(176
)

236Other, net





(4
)







(4
)Net cash provided by financing activities


1,167


36


57


(129
)

1,131Effect of exchange rate changes on cash








2





2Increase (decrease) in cash and cash equivalents


1,124


(1
)

78





1,201Cash and cash equivalents at beginning of period





3


84





87Cash and cash equivalents at end of period

$
1,124

$
2

$
162

$


$
1,288


67

---





Table of Contents

HUNTSMAN CORPORATION AND SUBSIDIARIES

HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

23. CONDENSED CONSOLIDATING FINANCIAL INFORMATION OF HUNTSMAN INTERNATIONAL LLC (UNAUDITED) (Continued)

HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES        CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS (UNAUDITED)        SIX MONTHS ENDED JUNE 30, 2008    
  (Dollars in Millions)

Parent
Company

Guarantors

Non-Guarantors

Eliminations

Consolidated
Huntsman
International
LLCNet cash (used in) provided by operating activities

$
(68
)
$
307

$
(210
)
$


$
29Investing activities:Capital expenditures


(24
)

(82
)

(118
)




(224
)Proceeds from sale of assets, net of adjustments





(28
)

2





(26
)Investment in affiliates, net


(150
)

(41
)




150


(41
)Increase in receivable from affiliates


(59
)

(271
)




271


(59
)Other, net








(4
)




(4
)Net cash used in investing activities


(233
)

(422
)

(120
)

421


(354
)Financing activities:Net borrowings under revolving loan facilities


325





7





332Net repayments of overdraft facilities








(8
)




(8
)Repayments of long-term debt








(5
)




(5
)Proceeds from long-term debt








17





17Intercompany borrowings








271


(271
)

Repayments of notes payable


(26
)




(3
)




(29
)Proceeds from notes payable








5





5Contribution from parent, net





115


35


(150
)

Other, net


(3
)










(3
)Net cash provided by financing activities


296


115


319


(421
)

309Effect of exchange rate changes on cash








3





3Decrease in cash and cash equivalents


(5
)




(8
)




(13
)Cash and cash equivalents at beginning of period


11


6


137





154Cash and cash equivalents at end of period

$
6

$
6

$
129

$


$
141


68

---





Table of Contents

ITEM 2.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

FORWARD-LOOKING STATEMENTS

Certain information set forth in this report contains "forward-looking statements" within the meaning of the federal securities laws.
Forward-looking statements include statements concerning our plans, objectives, goals, strategies, future events, future revenues or performance, capital expenditures, financing needs, plans or
intentions relating to acquisitions and other information that is not historical information. In some cases, forward-looking statements can be identified by terminology such as "believes," "expects,"
"may," "should," "anticipates," or "intends" or the negative of such terms or other comparable terminology, or by discussions of strategy. We may also
make additional forward-looking statements from time to time. All such subsequent forward-looking statements, whether written or oral, by us or on our behalf, are also expressly qualified by these
cautionary statements.

All
forward-looking statements, including without limitation management's examination of historical operating trends, are based upon our current expectations and various assumptions. Our
expectations, beliefs and projections are expressed in good faith and we believe there is a reasonable basis for them, but, there can be no assurance that management's expectations, beliefs and
projections will result or be achieved. All forward-looking statements apply only as of the date made. We undertake no obligation to publicly update or revise forward-looking statements which may be
made to reflect events or circumstances after the date made or to reflect the occurrence of unanticipated events.

There
are a number of risks and uncertainties that could cause our actual results to differ materially from the forward-looking statements contained in or contemplated by this report.
Any forward-looking statements should be considered in light of the risks referenced in "Part I. Item 1A. Risk Factors" in our Annual Report on Form 10-K for the year
ended December 31, 2008.

OVERVIEW

Business

We are a global manufacturer of differentiated organic chemical products and of inorganic chemical products. Our products comprise a
broad range of chemicals and formulations, which we market globally to a diversified group of consumer and industrial customers. Our products are used in a wide range of applications, including those
in the adhesives, aerospace, automotive, construction products, durable and non-durable consumer products, electronics, medical, packaging, paints and coatings, power generation, refining,
synthetic fiber, textile chemicals and dye industries. We are a leading global producer in many of our key product lines, including MDI, amines, surfactants, epoxy-based polymer formulations, textile
chemicals, dyes, maleic anhydride and titanium dioxide. We had revenues for the six months ended June 30, 2009 and 2008 of $3,559 million and $5,436 million, respectively.

We
currently operate in five segments: Polyurethanes, Advanced Materials, Textile Effects, Performance Products and Pigments. Our Polyurethanes, Advanced Materials, Textile Effects and
Performance Products segments produce differentiated organic chemical products and our Pigments segment
produces inorganic chemical products. In a series of transactions completed in 2006 and 2007, we sold substantially all of our former Polymers and Base Chemicals operations. We report the results from
these businesses as discontinued operations. For more information, see "Note 20. Discontinued Operations" to our condensed consolidated financial statements (unaudited) included elsewhere in
this report.

69

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Table of Contents

Outlook

Our industry continued to operate in difficult conditions during the first half of 2009, and we believe that industry conditions likely
will continue to present challenges through the second half of 2009. Accordingly, we will exercise ongoing vigilance in our response to these economic conditionsin terms of both our
pricing strategies and our production volume decisions. We also believe that sound financial discipline, as we attempt to reduce costs and strengthen our enviable liquidity position, will be critical.

While
our second quarter 2009 sales volumes and selling prices compared to the second quarter of 2008 are down in all segments of our businessdue primarily to the global
economic slowdown, our second quarter 2009 compared to first quarter 2009 sales volumes increased in all our segments. Second quarter 2009 average selling prices when compared with first quarter 2009
are mixed, with our Polyurethanes and Textile Effects segments being up, Advanced Materials segment being flat and Performance Products and Pigments segments being down. For more information, see
"Results of Operations" below.

Our
liquidity significantly improved in the three months ended June 30, 2009 as a result of the Texas Bank Litigation settlement and our ongoing efforts to manage working capital.
Our previously announced program to reduce fixed costs by more than $150 million by the end of 2009 is progressing on target. For more information, see "Liquidity and Capital
Resources" below.

RECENT DEVELOPMENTS

Texas Bank Litigation Settlement Agreement

On June 22, 2009, we entered into the Texas Bank Litigation Settlement Agreement. In accordance with the Texas Bank Litigation
Settlement Agreement, the Banks paid us a cash payment of $632 million, purchased from Huntsman International the 2016 Senior Notes in the aggregate principal amount of $600 million, and
provided Huntsman International with Term Loan C in the principal amount of $500 million. The 2016 Senior Notes and Term Loan C were recorded at a combined fair value of $864 million.
Accordingly, we recognized a gain of $868 million in connection with the Texas Bank Litigation Settlement Agreement. For more information, see "Note 1. GeneralRecent
Developments" and "Note 18. Income (Expenses) Associated with the Terminated Merger and Related Litigation," to our condensed consolidated financial statements (unaudited) included elsewhere in this
report.

2009 Cost Reduction Initiatives

On January 22, 2009, we announced a company-wide initiative to reduce costs across all of our divisions and
functions. Including steps taken during the fourth quarter of 2008, we expect to reduce our full-time employees by approximately 1,250 positions or 10% by year-end 2009. The
number of full-time contractors working in our businesses are expected to be reduced by an additional 490 positions. Together, we expect these reductions to result in operating cost
savings of approximately $150 million.

As
part of this initiative, our Board of Directors approved and, on January 22, 2009, we announced plans to close our titanium dioxide plant located in Grimsby, U.K. The Grimsby
plant is our pigment segment's oldest and least efficient manufacturing plant and has an annual production capacity of 40,000 tons of titanium dioxide. The plant, which had a net book value of
approximately $32 million at December 31, 2008, ceased pigment production during the first quarter of 2009. Approximately 200 full-time employees and contractors worked at
the plant. Annual operating cost savings resulting from the plant's closure is expected to be approximately $28 million.

70

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Table of Contents

Redemption Notices

On June 23, 2009, Huntsman International issued a notice of redemption to holders to redeem all of its 11.625% senior secured
notes due October 2010. This redemption was completed on July 23, 2009. The total redemption payment, excluding accrued interest, was $305 million (including principal of
$296 million and a call premium of $9 million). The principal amount of these notes is classified as Current portion of debt as of June 30, 2009 on the condensed consolidated
balance sheets (unaudited) included elsewhere in this report.

On
July 3, 2009, Huntsman International issued a notice of redemption to holders to redeem all of its 11.5% senior notes due July 2012. This redemption was completed on
August 3, 2009. The total redemption payment, excluding accrued interest, was $204 million (including principal of $198 million and call premium of $6 million). The
principal amount of these notes is classified as current portion of debt as of June 30, 2009 on the condensed consolidated balance sheets (unaudited) included elsewhere in this report.

71

---



Table of Contents

RESULTS OF OPERATIONS

For each of our Company and Huntsman International, the following tables set forth the unaudited condensed consolidated results of
operations (dollars in millions):

Huntsman Corporation

Three Months
Ended June 30,



Six Months
Ended June 30,Percent
Change

Percent
Change2009

2008

2009

2008Revenues

$
1,866

$
2,896


(36
)%
$
3,559

$
5,436


(35
)%Cost of goods sold


1,629


2,514


(35
)%

3,177


4,687


(32
)%Gross profit


237


382


(38
)%

382


749


(49
)%Operating expenses


235


277


(15
)%

460


553


(17
)%Restructuring, impairment and plant closing costs


63


1


NM


77


5


NMOperating (loss) income


(61
)

104


NM


(155
)

191


NMInterest expense, net


(58
)

(65
)

(11
)%

(113
)

(130
)

(13
)%Loss on accounts receivable securitization program


(6
)

(5
)

20
%

(10
)

(9
)

11
%Equity in income of unconsolidated affiliates


1


4


(75
)%

2


7


(71
)%Income (expenses) associated with the Terminated Merger and related litigation


844


(4
)

NM


837


(9
)

NMIncome from continuing operations before income taxes


720


34


NM


561


50


NMIncome tax expense


(311
)

(21
)

NM


(449
)

(25
)

NMIncome from continuing operations


409


13


NM


112


25


348
%(Loss) income from discontinued operations, net of tax


(3
)

5


NM





4


NMExtraordinary gain on the acquisition of a business, net of tax





9


NM





9


NMNet income


406


27


NM


112


38


195
%Less net (income) loss attributable to noncontrolling interests





(3
)

NM


4


(7
)

NMNet income attributable to Huntsman Corporation


406


24


NM


116


31


274
%Interest expense, net


58


65


(11
)%

113


130


(13
)%Income tax expense from continuing operations


311


21


NM


449


25


NMIncome tax (benefit) expense from discontinued operations


(1
)

2


NM





2


NMDepreciation and amortization


100


98


2
%

226


192


18
%EBITDA(1)

$
874

$
210


316
%
$
904

$
380


138
%Net cash provided by operating activities










$
1,009

$
20


NMNet cash used in investing activities











(120
)

(291
)

(59
)%Net cash provided by financing activities











747


255


193
%


72

---



Table of Contents

Huntsman International

Three Months
Ended June 30,



Six Months
Ended June 30,Percent
Change

Percent
Change2009

2008

2009

2008Revenues

$
1,866

$
2,896


(36
)%
$
3,559

$
5,436


(35
)%Cost of goods sold


1,626


2,510


(35
)%

3,169


4,679


(32
)%Gross profit


240


386


(38
)%

390


757


(48
)%Operating expenses


232


276


(16
)%

452


554


(18
)%Restructuring, impairment and plant closing costs


63


1


NM


77


5


NMOperating (loss) income


(55
)

109


NM


(139
)

198


NMInterest expense, net


(58
)

(66
)

(12
)%

(113
)

(131
)

(14
)%Loss on accounts receivable securitization program


(6
)

(5
)

20
%

(10
)

(9
)

11
%Equity in income of investment in unconsolidated affiliates


1


4


(75
)%

2


7


(71
)%(Loss) income from continuing operations before income taxes


(118
)

42


NM


(260
)

65


NMIncome tax expense


(8
)

(22
)

(64
)%

(154
)

(28
)

450
%(Loss) income from continuing operations


(126
)

20


NM


(414
)

37


NM(Loss) income from discontinued operations, net of tax


(3
)

5


NM





4


NMExtraordinary gain on the acquisition of a business, net of tax





9


NM





9


NMNet (loss) income


(129
)

34


NM


(414
)

50


NMLess net (income) loss attributable to noncontrolling interests





(3
)

NM


4


(7
)

NMNet (loss) income attributable to Huntsman International


(129
)

31


NM


(410
)

43


NMInterest expense, net


58


66


(12
)%

113


131


(14
)%Income tax expense from continuing operations


8


22


NM


154


28


450
%Income tax (benefit) expense from discontinued operations


(1
)

2


NM





2


NMDepreciation and amortization


94


92


2
%

214


181


18
%EBITDA(1)

$
30

$
213


(86
)%
$
71

$
385


(82
)%Net cash provided by operating activities










$
199

$
29


586
%Net cash used in investing activities











(131
)

(354
)

(63
)%Net cash provided by financing activities











1,131


309


266
%


---

NMNot
Meaningful

73

---



Table of Contents

For
each of our Company and Huntsman International, the following tables set forth certain items of income (expense) included in EBITDA (dollars in millions):

Huntsman Corporation

Three Months
Ended
June 30,

Six Months
Ended
June 30,2009

2008

2009

2008Foreign exchange gains (losses)unallocated

$
7

$
(6
)
$
9

$
(10
)Loss on accounts receivable securitization program


(6
)

(5
)

(10
)

(9
)Amounts included in discontinued operations


(4
)

7





6Acquisition expenses








(1
)

Income (expenses) associated with the Terminated Merger and related litigation


844


(4
)

837


(9
)Extraordinary gain on the acquisition of a business





9





9Restructuring, impairment and plant closing costs:Polyurethanes


(1
)




(2
)

Advanced Materials


(15
)




(15
)

Textile Effects


(10
)




(9
)

(1
)Performance Products











Pigments


(30
)




(43
)

(1
)Corporate and other


(7
)

(1
)

(8
)

(3
)Total restructuring, impairment and plant closing costs


(63
)

(1
)

(77
)

(5
)Total

$
778

$


$
758

$
(18
)


Huntsman International

Three Months
Ended
June 30,

Six Months
Ended
June 30,2009

2008

2009

2008Foreign exchange gains (losses)unallocated

$
7

$
(6
)
$
9

$
(10
)Loss on accounts receivable securitization program


(6
)

(5
)

(10
)

(9
)Amounts included in discontinued operations


(4
)

7





6Acquisition expenses








(1
)

Extraordinary gain on the acquisition of a business





9





9Restructuring, impairment and plant closing costs:Polyurethanes


(1
)




(2
)

Advanced Materials


(15
)




(15
)

Textile Effects


(10
)




(9
)

(1
)Performance Products











Pigments


(30
)




(43
)

(1
)Corporate and other


(7
)

(1
)

(8
)

(3
)Total restructuring, impairment and plant closing costs


(63
)

(1
)

(77
)

(5
)Total

$
(66
)
$
4

$
(79
)
$
(9
)


---

74

---



Table of Contents



We
believe that net income (loss) is the performance measure calculated and presented in accordance with GAAP that is most directly comparable to EBITDA and that cash provided by
operating activities is the liquidity measure calculated and presented in accordance with GAAP that is most directly comparable to EBITDA.

75

---



Table of Contents

For
each of our Company and Huntsman International, the following tables reconcile EBITDA to net income (loss) attributable to Huntsman Corporation or Huntsman International LLC,
as appropriate, and to net cash provided by operations (dollars in millions):

Huntsman Corporation

Six Months
Ended June 30,Percent
Change2009

2008EBITDA

$
904

$
380


138
%Depreciation and amortization


(226
)

(192
)

18
%Interest expense, net


(113
)

(130
)

(13
)%Income tax expense from continuing operations


(449
)

(25
)

NMIncome tax expense from discontinued operations





(2
)

NMNet income attributable to Huntsman Corporation


116


31


274
%Net (loss) income attributable to noncontrolling interests


(4
)

7


NMNet income


112


38


195
%Extraordinary gain on the acquisition of a business, net of tax





(9
)

NMEquity in income of investment in unconsolidated affiliates


(2
)

(7
)

(71
)%Dividends received from unconsolidated affiliates





11


NMDepreciation and amortization


226


192


18
%(Gain) loss on disposal of assets


(1
)

4


NMNoncash restructuring, impairment and plant closing costs


5


2


150
%Noncash interest expense


5


2


150
%Deferred income taxes


255





NMUnrealized loss on foreign currency transactions





20


NMOther, net


13


6


117
%Changes in operating assets and liabilities


396


(239
)

NMNet cash provided by operating activities

$
1,009

$
20


NM


76

---



Table of Contents

Huntsman International

Six Months
Ended June 30,Percent
Change2009

2008EBITDA

$
71

$
385


(82
)%Depreciation and amortization


(214
)

(181
)

18
%Interest expense, net


(113
)

(131
)

(14
)%Income tax expense from continuing operations


(154
)

(28
)

450
%Income tax expense from discontinued operations





(2
)

NMNet (loss) income attributable to Huntsman International


(410
)

43


NMNet (loss) income attributable to noncontrolling interests


(4
)

7


NMNet (loss) income


(414
)

50


NMExtraordinary gain on the acquisition of a business, net of tax





(9
)

NMEquity in income of investment in unconsolidated affiliates


(2
)

(7
)

(71
)%Dividends received from unconsolidated affiliates





11


NMDepreciation and amortization


214


181


18
%(Gain) loss on disposal of assets


(1
)

4


NMNoncash restructuring, impairment and plant closing costs


5


2


150
%Noncash interest expense


12


2


500
%Deferred income taxes


143


4


NMUnrealized loss on foreign currency transactions





20


NMOther, net


9


7


29
%Changes in operating assets and liabilities


233


(236
)

NMNet cash provided by operating activities

$
199

$
29


586
%






Three Months Ended June 30, 2009 Compared with Three Months Ended June 30, 2008

For the three months ended June 30, 2009, net income attributable to Huntsman Corporation was $406 million on revenues of
$1,866 million, compared with net income attributable to Huntsman Corporation of $24 million on revenues of $2,896 million for the 2008 period. For the three months ended
June 30, 2009, the net loss attributable to Huntsman International LLC was $129 million on revenues of $1,866 million, compared with net income attributable to Huntsman
International LLC of $31 million on revenues of $2,896 million for the 2008 period. The increase of $382 million in net income attributable to Huntsman Corporation and the
decrease of $160 million in net income attributable to Huntsman International LLC was the result of the following items:



77

---



Table of Contents



78

---



Table of Contents



Segment Analysis

Three Months Ended
June 30,Percent Change2009

2008RevenuesPolyurethanes

$
695

$
1,161


(40
)%Advanced Materials


255


427


(40
)%Textile Effects


179


262


(32
)%Performance Products


482


725


(34
)%Pigments


254


321


(21
)%Corporate and Other


20


43


(53
)%Eliminations


(19
)

(43
)

(56
)%Total

$
1,866

$
2,896


(36
)%Huntsman CorporationSegment EBITDAPolyurethanes

$
86

$
148


(42
)%Advanced Materials


(1
)

46


NMTextile Effects


(20
)

4


NMPerformance Products


37


51


(27
)%Pigments


(26
)

8


NMCorporate and Other


802


(54
)

NMSubtotal


878


203


333
%Discontinued operations


(4
)

7


NMTotal

$
874

$
210


316
%Huntsman InternationalSegment EBITDAPolyurethanes

$
86

$
148


(42
)%Advanced Materials


(1
)

46


NMTextile Effects


(20
)

4


NMPerformance Products


37


51


(27
)%Pigments


(26
)

8


NMCorporate and Other


(42
)

(51
)

(18
)%Subtotal


34


206


(83
)%Discontinued operations


(4
)

7


NMTotal

$
30

$
213


(86
)%




Average
Selling
Price

Sales
VolumesCurrent Year-Over-Prior Year DecreasePolyurethanes


(27
)%

(18
)%Advanced Materials


(10
)%

(34
)%Textile Effects


(7
)%

(27
)%Performance Products(1)


(24
)%

(13
)%Pigments


(7
)%

(15
)%




79

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Average
Selling
Price

Sales
VolumesCurrent Quarter-Over-Prior Quarter Increase (Decrease)Polyurethanes


2
%

14
%Advanced Materials





Textile Effects


3
%

14
%Performance Products(1)


(6
)%

2
%Pigments


(3
)%

33
%


---

NMNot
meaningful

Polyurethanes

The decrease in revenues in the Polyurethanes segment for the three months ended June 30, 2009 as compared to the same period in
2008 was primarily due to lower MDI sales volumes and overall lower average selling prices. MDI sales volumes decreased primarily due to lower demand in Europe and Americas but showed
year-on-year improvement in Asia. Effects of the worldwide economic slowdown continue to affect global demand. MDI average selling prices decreased primarily due to competitive
pressures, lower raw material costs and effects of the U.S. dollar against the Euro. PO and MTBE sales volumes decreased as a result of the worldwide economic slowdown, and average selling prices
decreased with lower raw material costs. The decrease in EBITDA in the Polyurethanes segment was primarily the result of lower MDI sales volumes, partially offset by higher MTBE margins.

Advanced Materials

The decrease in revenues in the Advanced Materials segment for the three months ended June 30, 2009 compared to the same period
in 2008 was due to a decrease in both sales volumes and average selling prices. Sales volumes decreased across all regions and all major markets due to the worldwide economic slowdown. Average selling
prices in our base resins market decreased in response to lower raw material costs while average selling prices in our formulations and specialty components markets decreased primarily as a result of
the strength of the U.S. dollar against major European currencies. The decrease in EBITDA was primarily due to lower sales volumes and higher restructuring costs, partially offset by lower raw
material and operating costs. During the three months ended June 30, 2009 and 2008, our Advanced Materials segment recorded restructuring and plant closing charges of $15 million and
nil, respectively. For more information concerning restructuring activities, see "Note 5. Restructuring, Impairment and Plant Closing Costs" to our condensed consolidated financial statements
(unaudited) included elsewhere in this report.

Textile Effects

The decrease in revenues in the Textile Effects segment for the three months ended June 30, 2009 compared to the same period in
2008 was due to lower sales volumes and lower average selling prices. Sales volumes decreased primarily due to lower demand for apparel and home textile products, as well as specialty textiles
products, in all regions as a result of the worldwide economic slowdown. Average selling prices decreased primarily as a result of the strength of the U.S. dollar against major European currencies,
the Indian rupee and Brazilian real, as local currency selling prices were higher in Asia and the Americas. The decrease in EBITDA was primarily due to lower sales volumes and higher restructuring
costs, partially offset by lower raw material and fixed costs. During the three months ended June 30, 2009 and 2008, our Textile Effects segment recorded restructuring and plant closing charges
of $10 million and nil, respectively. For more information concerning restructuring activities,

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see
"Note 5. Restructuring, Impairment and Plant Closing Costs" to our condensed consolidated financial statements (unaudited) included elsewhere in this report.

Performance Products

The decrease in revenues in the Performance Products segment for the three months ended June 30, 2009 compared to the same
period in 2008 was due to lower average selling prices and lower sales volumes. The decrease in average selling prices was driven principally by lower raw material costs but also by the strengthening
of the US dollar against major European currencies and the Australian dollar. Sales volumes decreased primarily from lower demand for all product lines as a result of the worldwide economic slowdown.
EBITDA decreased due to the effect of lower sales volumes, partially offset by higher margins as raw material costs fell faster than selling prices.

Pigments

The decrease in revenues in the Pigments segment for the three months ended June 30, 2009 compared to the same period in 2008
was due to lower sales volumes and lower average selling prices. Sales volumes decreased primarily due to lower demand in all regions as a result of the worldwide economic slowdown. Average selling
prices decreased primarily as a result of the strength of the U.S. dollar against major European currencies. The decrease in EBITDA in the Pigments segment was primarily due to lower sales volumes and
higher restructuring and plant closing costs, partially offset by lower operating costs. During the three months ended June 30, 2009 and 2008, our Pigments segment recorded restructuring and
plant closing charges of $30 million and nil, respectively. For more information concerning restructuring activities, see "Note 5. Restructuring, Impairment and Plant Closing Costs" to
our condensed consolidated financial statements (unaudited) included elsewhere in this report.

Corporate and OtherHuntsman Corporation

Corporate and Other includes the results of our Australia styrenics business, unallocated foreign exchange gains and losses,
unallocated corporate overhead, loss on accounts receivable securitization program, income (expenses) associated with the Terminated Merger and related litigation, income (loss) attributable to
noncontrolling interests, unallocated restructuring costs, extraordinary gain on the acquisition of a business and non-operating income and expense. For the three months ended
June 30, 2009, the total of these items was earnings of $802 million compared to a loss of $54 million in the 2008 period. The increase in EBITDA from Corporate and Other for the
three months ended June 30, 2009 resulted primarily from a $848 million increase in income (expense) associated with the Terminated Merger and related litigation ($844 million
income in the 2009 period compared to $4 million expense in the 2008 period). For more information regarding income (expense) associated with the Terminated Merger and related litigation, see
"Note 1. GeneralRecent DevelopmentsTexas Bank Litigation Settlement Agreement" and "Note 18. Income (Expenses) Associated with the Terminated Merger and Related
Litigation" to our condensed consolidated financial statements (unaudited) included elsewhere in this report. Additionally, EBITDA increased from a $3 million increase in income attributable to
noncontrolling interests, a $13 million increase in unallocated foreign exchange gains ($7 million in gains in the 2009 period versus $6 million in losses in the 2008 period), and
a $6 million increase in EBITDA from the Australia styrenics business ($2 million earnings in the 2009 period versus a $4 million loss in the 2008 period). These increases to
EBITDA were partially offset by a $6 million increase in restructuring charges during the 2009 period and a $9 million gain on the Textile Effects Acquisition in the 2008 period. For
more information concerning restructuring activities, see "Note 5. Restructuring, Impairment and Plant Closing Costs" to our condensed consolidated financial statements (unaudited) included
elsewhere in this report. For more information regarding extraordinary gain associated with the Textile Effects Acquisition, see "Note 3. Business

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CombinationsTextile
Effects Acquisition" to our condensed consolidated financial statements (unaudited) included elsewhere in this report.

Corporate and OtherHuntsman International

Corporate and Other includes the results of our Australia styrenics business, unallocated foreign exchange gains and losses,
unallocated corporate overhead, loss on accounts receivable securitization program, income (loss) attributable to noncontrolling interests, unallocated restructuring costs, extraordinary gain on the
acquisition of a business and non-operating income and expense. For the three months ended June 30, 2009, the total of these items was a loss of $42 million compared to a
loss of $51 million in the 2008 period. The increase in EBITDA from Corporate and Other for the three months ended June 30, 2009 resulted primarily from an $3 million increase in
income attributable to noncontrolling interests, a $13 million
increase in unallocated foreign exchange gains ($7 million in gains in the 2009 period versus $6 million in losses in the 2008 period), and a $6 million increase in EBITDA from
the Australia styrenics business ($2 million income in the 2009 period versus $4 million in losses in the 2008 period). These increases to EBITDA were partially offset by a
$6 million increase in restructuring charges during the 2009 period and a $9 million gain on the Textile Effects Acquisition in the 2008 period. For more information concerning
restructuring activities, see "Note 5. Restructuring, Impairment and Plant Closing Costs" to our condensed consolidated financial statements (unaudited) included elsewhere in this report. For
more information regarding extraordinary gain associated with the Textile Effects Acquisition, see "Note 3. Business CombinationsTextile Effects Acquisition" to our condensed
consolidated financial statements (unaudited) included elsewhere in this report.

Six Months Ended June 30, 2009 Compared with Six Months Ended June 30, 2008

For the six months ended June 30, 2009, net income attributable to Huntsman Corporation was $116 million on revenues of
$3,559 million, compared with net income attributable to Huntsman Corporation of $31 million on revenues of $5,436 million for the 2008 period. For the six months ended
June 30, 2009, the net loss attributable to Huntsman International LLC was $410 million on revenues of $3,559 million, compared with net income attributable to Huntsman
International LLC of $43 million on revenues of $5,436 million for the 2008 period. The increase of $85 million in net income attributable to Huntsman Corporation and the
decrease of $453 million in net income attributable to Huntsman International LLC was the result of the following items:



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83

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Segment Analysis

Six Months Ended June 30,Percent
Change2009

2008RevenuesPolyurethanes

$
1,295

$
2,163


(40
)%Advanced Materials


512


806


(36
)%Textile Effects


331


505


(34
)%Performance Products


982


1,356


(28
)%Pigments


450


606


(26
)%Corporate and Other


34


83


(59
)%Eliminations


(45
)

(83
)

(46
)%Total

$
3,559

$
5,436


(35
)%Huntsman CorporationSegment EBITDAPolyurethanes

$
112

$
280


(60
)%Advanced Materials


9


86


(90
)%Textile Effects


(31
)

3


NMPerformance Products


118


104


13
%Pigments


(55
)

18


NMCorporate and Other


751


(117
)

NMSubtotal


904


374


142
%Discontinued operations





6


NMTotal

$
904

$
380


138
%Huntsman InternationalSegment EBITDAPolyurethanes

$
112

$
280


(60
)%Advanced Materials


9


86


(90
)%Textile Effects


(31
)

3


NMPerformance Products


118


104


13
%Pigments


(55
)

18


NMCorporate and Other


(82
)

(112
)

(27
)%Subtotal


71


379


(81
)%Discontinued operations





6


NMTotal

$
71

$
385


(82
)%




Average
Selling
Price

Sales
VolumesCurrent Year-Over-Prior Year DecreasePolyurethanes


(27
)%

(18
)%Advanced Materials


(9
)%

(30
)%Textile Effects


(6
)%

(30
)%Performance Products(1)


(19
)%

(12
)%Pigments


(5
)%

(22
)%


---

NMNot
meaningful

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---



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Polyurethanes

The decrease in revenues in the Polyurethanes segment for the six months ended June 30, 2009 as compared to the same period in
2008 was primarily due to lower MDI sales volumes and overall lower average selling prices. MDI sales volumes decreased due to lower demand in all regions and across all major markets as a result of
the worldwide economic slowdown. MDI average selling prices decreased primarily due to competitive pressures, lower raw material costs and the effects of the U.S. dollar against the Euro. PO and MTBE
sales volumes decreased as a result of the worldwide economic slowdown, and average selling prices decreased with lower raw material costs. The decrease in EBITDA in the Polyurethanes segment was
primarily the result of lower MDI sales volumes and margins, partially offset by higher MTBE margins.

Advanced Materials

The decrease in revenues in the Advanced Materials segment for the six months ended June 30, 2009 compared to the same period in
2008 was due to a decrease in both sales volumes and average selling prices. Sales volumes decreased across all regions and all major markets due to the worldwide economic slowdown. Average selling
prices in our base resins market decreased in response to lower raw material costs while average selling prices in our formulations and specialty components markets decreased primarily as a result of
the strength of the U.S. dollar against major European currencies. The decrease in EBITDA was primarily due to lower sales volumes and higher restructuring costs, partially offset by lower raw
material and operating costs. During the six months ended June 30, 2009 and 2008, our Advanced Materials segment recorded restructuring and plant closing charges of $15 million and nil,
respectively. For more information concerning restructuring activities, see "Note 5. Restructuring, Impairment and Plant Closing Costs" to our condensed consolidated financial statements
(unaudited) included elsewhere in this report.

Textile Effects

The decrease in revenues in the Textile Effects segment for the six months ended June 30, 2009 compared to the same period in
2008 was due to lower sales volumes and lower average selling prices. Sales volumes decreased primarily due to lower demand for apparel and home textile products, as well as specialty textiles
products, in all regions as a result of the worldwide economic slowdown. Average selling prices decreased primarily as a result of the strength of the U.S. dollar against major European currencies,
the Indian rupee and Brazilian real, as local currency selling prices were higher in Asia and the Americas. The decrease in EBITDA was primarily due to lower sales volumes and higher restructuring
costs, partially offset by lower raw material and fixed costs. During the six months ended June 30, 2009 and 2008, our Textile Effects segment recorded restructuring and plant closing charges
of $9 million and $1 million, respectively. For more information concerning restructuring activities, see "Note 5. Restructuring, Impairment and Plant Closing Costs" to our
condensed consolidated financial statements (unaudited) included elsewhere in this report.

Performance Products

The decrease in revenues in the Performance Products segment for the six months ended June 30, 2009 compared to the same period
in 2008 was due to lower average selling prices and lower sales volumes. The decrease in average selling prices was driven principally by lower raw material costs and the strengthening of the US
dollar against major European currencies and the Australian dollar. Sales volumes decreased primarily from lower demand for all product lines as a result of the worldwide economic slowdown. EBITDA
increased due to higher margins as raw material costs fell faster than selling prices, partially offset by the effect of lower sales volumes.

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Pigments

The decrease in revenues in the Pigments segment for the six months ended June 30, 2009 compared to the same period in 2008 was
due to lower sales volumes and lower average selling prices. Sales volumes decreased primarily due to lower demand in all regions as a result of the worldwide economic slowdown. Average selling prices
decreased primarily as a result of the
strength of the U.S. dollar against major European currencies, as local currency selling prices in Asia and North America were higher. The decrease in EBITDA in the Pigments segment was primarily due
to lower sales volumes and higher restructuring and plant closing costs. During the six months ended June 30, 2009 and 2008, our Pigments segment recorded restructuring and plant closing
charges of $43 million and $1 million, respectively. For more information concerning restructuring activities, see "Note 5. Restructuring, Impairment and Plant Closing Costs" to
our condensed consolidated financial statements (unaudited) included elsewhere in this report.

Corporate and OtherHuntsman Corporation

Corporate and Other includes the results of our Australia styrenics business, unallocated foreign exchange gains and losses,
unallocated corporate overhead, loss on accounts receivable securitization program, income (expenses) associated with the Terminated Merger and related litigation, income (loss) attributable to
noncontrolling interests, unallocated restructuring costs, extraordinary gain on the acquisition of a business and non-operating income and expense. For the six months ended
June 30, 2009, the total of these items was earnings of $751 million compared to a loss of $117 million in the 2008 period. The increase in EBITDA from Corporate and Other for the
six months ended June 30, 2009 resulted primarily from a $846 million increase in income (expenses) associated with the Terminated Merger and related litigation ($837 million
income in the 2009 period compared to $9 million expense in the 2008 period). For more information regarding income (expenses) associated with the Terminated Merger and related litigation, see
"Note 1. GeneralRecent DevelopmentsTexas Bank Litigation Settlement Agreement" and "Note 18. Income (Expenses) Associated with the Terminated Merger and Related
Litigation" to our condensed consolidated financial statements (unaudited) included elsewhere in this report. Additionally, the increase was due to an $11 million increase in income
attributable to noncontrolling interests, a $19 million increase in unallocated foreign exchange gains ($9 million in gains in the 2009 period versus $10 million in losses in the
2008 period), and a $4 million increase in EBITDA from the Australia styrenics business ($5 million loss in the 2009 period versus $9 million in losses in the 2008 period). These
increases to EBITDA were partially offset by a $5 million increase in restructuring charges during the 2009 period and a $9 million gain on the Textile Effects Acquisition in the 2008
period. For more information concerning restructuring activities, see "Note 5. Restructuring, Impairment and Plant Closing Costs" to our condensed consolidated financial statements (unaudited)
included elsewhere in this report. For more information regarding extraordinary gain associated with the Textile Effects Acquisition, see "Note 3. Business CombinationsTextile
Effects Acquisition" to our condensed consolidated financial statements (unaudited) included elsewhere in this report.

Corporate and OtherHuntsman International

Corporate and Other includes the results of our Australia styrenics business, unallocated foreign exchange gains and losses,
unallocated corporate overhead, loss on accounts receivable securitization program, income (loss) attributable to noncontrolling interests, unallocated restructuring costs, extraordinary gain on the
acquisition of a business and non-operating income and expense. For the six months ended June 30, 2009, the total of these items was a loss of $82 million compared to a loss
of $112 million in the 2008 period. The increase in EBITDA from Corporate and Other for the six months ended June 30, 2009 resulted primarily from an $11 million increase in
income attributable to noncontrolling interests and a $19 million increase in unallocated foreign exchange gains ($9 million in

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gains
in the 2009 period versus $10 million in losses in the 2008 period) and a $4 million increase in EBITDA from the Australia styrenics business ($5 million loss in the 2009
period versus $9 million in losses in the 2008 period). Additionally, the increase is due to lower administrative fees from Huntsman Corporation to Huntsman International of $7 million.
These increases to EBITDA were partially offset by a $5 million increase in restructuring charges during the 2009 period and a $9 million gain on the Textile Effects Acquisition in the
2008 period. For more information concerning restructuring activities, see "Note 5. Restructuring, Impairment and Plant Closing Costs" to our condensed consolidated financial statements
(unaudited) included elsewhere in this report. For more information regarding extraordinary gain associated with the Textile Effects Acquisition, see "Note 3. Business
CombinationsTextile Effects Acquisition" to our condensed consolidated financial statements (unaudited) included.

LIQUIDITY AND CAPITAL RESOURCES

The following is a discussion of our liquidity and capital resources and does not include separate information with respect to Huntsman
International in accordance with General Instructions H(1)(a) and (b) of Form 10-Q.

Cash

Net cash provided by operating activities for the six months ended June 30, 2009 and 2008 was $1,009 million and
$20 million, respectively. The increase in cash provided by
operating activities was primarily attributable to settlement proceeds received in connection with the Texas Bank Litigation Settlement Agreement and by a $635 million favorable variance in
operating assets and liabilities changes for the six months ended June 30, 2009 as compared with the same period in 2008. These increases to cash provided by operating activities were offset in
part by a decrease in operating income as described in "Results of Operations" above.

Net
cash used in investing activities for the six months ended June 30, 2009 and 2008 was $120 million and $291 million, respectively. During the six months ended
June 30, 2009 and 2008, we paid $100 million and $224 million, respectively, for capital expenditures. This reduction in capital expenditures was largely attributable to higher
2008 spending on various projects, including the maleic anhydride expansion at our Geismar, Louisiana site, as well as the expansion at our Greatham, U.K. titanium dioxide facility. During the six
months ended June 30, 2009, we paid $24 million for the Baroda acquisition. For more information, see "Note 3. Business CombinationsBaroda Acquisition" to our
condensed consolidated financial statements included elsewhere in this report. During the six months ended June 30, 2009 and 2008, we received $1 million and $2 million,
respectively, from the sale of assets. During the six months ended June 30, 2008, we made payments of $28 million related to certain expenditures for the rebuild of our former Port
Arthur, Texas facility, resulting in an adjustment to the sales proceeds. See "Note 20. Discontinued Operations" to our condensed consolidated financial statements (unaudited) included
elsewhere in this report. During the six months ended June 30, 2008, we contributed $44 million to our ethyleneamines joint venture in Saudi Arabia.

Net
cash provided by financing activities for the six months ended June 30, 2009 was $747 million as compared with $255 million of net cash provided by financing
activities in the 2008 period. This increase in net cash provided by financing activities was primarily due to the 2016 Senior Notes and Term Loan C issued in connection with the Texas Bank Litigation
Settlement Agreement.

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Changes in Financial Condition

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

June 30,
2009

December 31,
2008

Increase
(Decrease)

Percent
ChangeCash and cash equivalents

$
2,295

$
657

$
1,638


249
%Restricted cash


6


5


1


20
%Accounts receivable, net


946


913


33


4
%Inventories, net


1,162


1,500


(338
)

(23
)%Prepaid expenses


26


45


(19
)

(42
)%Deferred income taxes


18


21


(3
)

(14
)%Other current assets


96


99


(3
)

(3
)%Total current assets


4,549


3,240


1,309


40
%Accounts payable


636


747


(111
)

(15
)%Accrued liabilities


558


580


(22
)

(4
)%Income taxes payable


212


37


175


473
%Deferred income taxes


36


36





Current portion of debt


691


205


486


237
%Total current liabilities


2,133


1,605


528


33
%Working capital

$
2,416

$
1,635

$
781


48
%


Our
working capital increased by $781 million as a result of the net impact of the following significant changes:



Direct and Subsidiary Debt

Our direct debt and guarantee obligations consist of our Convertible Notes, guarantees of certain debt of HPS and SLIC, our Chinese MDI
joint ventures, guarantees of certain debt of our Saudi Joint Venture and certain indebtedness incurred from time to time to finance certain insurance premiums. We have no other direct debt or
guarantee obligations, and all of the additional debt discussed below has been incurred by our subsidiaries (primarily Huntsman International); such subsidiary debt is nonrecourse to us and we have no
contractual obligation to fund our subsidiaries' respective operations.

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Transactions Affecting our Senior Credit Facilities

Pursuant to the Texas Bank Litigation Settlement Agreement, on June 22, 2009 Huntsman International entered into the Amendment,
which provides for Term Loan C in an amount equal to $500 million. Term Loan C matures on June 30, 2016.

As
of June 30, 2009, our Senior Credit Facilities consisted of (i) the $650 million Revolving Facility (ii) the $1,524 million term loan B facility
("Term Loan B"); and (iii) the $500 million (recorded at $439 million fair value) Term Loan C (collectively with Term Loan B, the "Dollar Term Loans"). As of June 30, 2009,
we had no borrowings outstanding under our Revolving Facility, and we had approximately $31 million (U.S. dollar equivalents) of letters of credit and bank guarantees issued and outstanding
under our Revolving Facility. The Revolving Facility matures in August 2010, Term Loan B matures in 2014 and Term Loan C matures in 2016; provided, however, that the maturities of the Revolving
Facility and the Dollar Term Loans will accelerate if we do not repay or refinance all but $100 million of our outstanding debt securities on or before three months prior to the maturity dates
of such debt securities.

Our
Senior Credit Facilities are subject to a single financial covenant, the Leverage Covenant, which applies only to the Revolving Facility. The Leverage Covenant is applicable only if
borrowings, letters of credit or guarantees are outstanding under the Revolving Facility (cash collateralized letters of credit or guarantees are not deemed outstanding). On April 16, 2009,
Huntsman International entered into the Waiver with respect to the Leverage Covenant.

The
Leverage Covenant, as amended pursuant to the Waiver, requires that the maximum senior secured leverage ratio does not exceed 5.00 to 1.00. In addition, the Waiver modifies the
calculation used to determine compliance with the Leverage Covenant as follows:



The
Waiver is effective from April 16, 2009 through June 30, 2010.

As
consideration for the Waiver, Huntsman International agreed to increase the interest paid on the Revolving Facility by 225 basis points from LIBOR plus 1.75% to LIBOR plus 4% and to
increase the applicable unused fee by 25 basis points from 0.5% to 0.75%. In addition, during the Wavier period, Huntsman International agreed to not:



At
the present time, borrowings under the Revolving Facility, Term Loan B and Term Loan C bear interest at LIBOR plus 4%, LIBOR plus 1.75% and LIBOR plus 2.25%, respectively. However,
the

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applicable
interest rate of Term Loan B is subject to a reduction to LIBOR plus 1.5% upon achieving certain secured leverage ratio thresholds.

During
the six months ended June 30, 2009, we paid the annual scheduled repayment of $16 million on our Term Loan B. Inclusive of this repayment, we made net borrowings on
our debt of approximately $798 million during the six months ended June 30, 2009, excluding our off-balance sheet accounts receivable securitization program (the "A/R
Securitization Program").

2016 Senior Notes

Pursuant to the Texas Bank Litigation Settlement Agreement, on June 22, 2009, Huntsman International entered into the Note
Purchase Agreement with the Banks, pursuant to which the Banks purchased the 2016 Senior Notes from Huntsman International. The 2016 Senior Notes are senior unsecured obligations of Huntsman
International and are guaranteed by certain subsidiaries named as guarantors. The 2016 Senior Notes were issued in a transaction exempt from the registration requirements of the Securities Act of
1933.

As
of June 30, 2009 we had outstanding $600 million (recorded at $425 million fair value) of 2016 Senior Notes. The 2016 Senior Notes bear interest at the rate of
5.5% per annum payable semi-annually on June 30 and December 31, beginning on December 31, 2009. The 2016 Senior Notes will mature on June 30, 2016. Huntsman
International may redeem the 2016 Senior Notes in whole at any time or in part from time to time, upon not less than 30 nor more than 60 days' notice, at a redemption price equal to the
principal amount thereof, plus accrued and unpaid interest thereon, if any, to the date of redemption. The 2016 Senior Notes are governed by an indenture imposing certain limitations on the ability of
Huntsman International and its subsidiaries to, among other things, incur additional indebtedness, pay dividends or make certain other restricted payments, enter into certain transactions with
affiliates, create dividend or other payment restrictions affecting restricted
subsidiaries and merge or consolidate with any other person, sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of their assets or adopt a plan of liquidation.

Upon
the occurrence of certain change of control events, holders of the 2016 Senior Notes will have the right to require that Huntsman International purchase all or a portion (equal to
$2,000 or an integral multiple of $1,000 in excess thereof) of such holder's 2016 Senior Notes in cash pursuant to the offer described by Huntsman International, at a purchase price equal to 101% of
the principal amount thereof plus accrued and unpaid interest, if any, to the date of purchase.

Redemption Notices

On June 23, 2009, Huntsman International issued a notice of redemption to holders to redeem all of its 11.625% senior secured
notes due October 2010. This redemption was completed on July 23, 2009. The total redemption payment, excluding accrued interest was $305 million, which included principal of
$296 million and a call premium of $9 million. The principal amount of these notes is classified as current portion of debt as of June 30, 2009 on the accompanying condensed
consolidated balance sheets (unaudited).

On
July 3, 2009, Huntsman International issued a notice of redemption to holders to redeem all of its 11.5% senior notes due July 2012. This redemption was completed on
August 3, 2009. The total redemption payment, excluding accrued interest was $204 million, which included principal of $198 million and a call premium of $6 million. The
principal amount of these notes is classified as current portion of debt as of June 30, 2009 on the accompanying condensed consolidated balance sheets (unaudited).

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Other Debt (India)

In connection with the acquisition of Baroda for approximately $35 million on June 23, 2009, a portion of the purchase
price was funded through local financing and from liquidity available from our subsidiaries located in India. As of June 30, 2009, our Indian entities had combined debt outstanding of
$21 million U.S. dollar equivalents. This debt is comprised of various facilities
including approximately $16 million (U.S. dollar equivalents) in working capital facilities that are callable on demand and a five year term loan facility of approximately $5 million
(U.S. dollar equivalents). See "Note 3. Business Combinations."

COMPLIANCE WITH COVENANTS

We are in compliance with the financial covenants contained in the agreements governing our debt instruments, including our Senior
Credit Facilities, our A/R Securitization Program and the indentures governing our notes. Our Revolving Facility under our Senior Credit Facilities contains one financial maintenance covenant for net
secured leverage to EBITDA each as defined in the agreement. As of June 30, 2009, Huntsman International maintained an adequate cushion for this maximum net secured leverage ratio test that
requires that net secured leverage be no more than five times. Huntsman International also maintained adequate headroom under the financial covenants in its A/R Securitization Program.

Short-Term and Long-Term Liquidity

We depend upon our cash, credit facilities and other debt instruments to provide liquidity for our operations and working capital
needs. As of June 30, 2009, we had $2,957 million of combined cash and unused borrowing capacity, consisting of $2,301 million in cash and restricted cash, $619 million in
availability under our Revolving Facility, $21 million attributable to our European overdraft facility and $16 million in availability under our A/R Securitization Program.

During
the second quarter of 2009, we received settlement proceeds pursuant to the Texas Bank Litigation Settlement Agreement including $632 million of cash that includes
reimbursement of $12 million of our litigation costs. In addition, Huntsman International received $600 million of 2016 Senior Notes and $500 million of Term Loan C financing.
Subsequent to the quarter ended June 30, 2009 we issued notices of redemption to: i) holders of our 11.625% senior secured notes due October 2010 that was completed on July 23,
2009 and ii) holders of our 11.5% senior notes due July 2012 that was completed on August 3, 2009. The total redemption payments, excluding accrued interest, were a combined total of
$509 million, including principal of $494 million and a call premium of $15 million. We further anticipate to pay taxes associated with the Texas Bank Litigation Settlement
Agreement of approximately $185 million. Had these redemption and tax payments been made on June 30, 2009, combined cash and unused borrowing capacity would have been $2,263 million as
of June 30, 2009.

Excluding
the notes classified as current portion of debt for which redemptions have occurred subsequent to June 30, 2009, we currently have $198 million classified as
current portion of debt. As of June 30, 2009, current portion of debt includes various short term facilities including but not limited to
our HPS draft discounting facility in China that had amounts outstanding of $53 million, our Australian credit facilities of $34 million and certain other short term facilities totaling
$42 million, the majority of which, although we cannot provide assurances, we intend to renew or extend in the current period.

Our
liquidity can be significantly impacted by various factors. Concerning changes in working capital components, for the six months ended June 30, 2009, our accounts receivable
and inventory, net of accounts payable, decreased by approximately $245 million, as reflected in our condensed consolidated statement of cash flows (unaudited) included elsewhere in this
report. In addition, during the six months ended June 30, 2009, amounts outstanding under our A/R Securitization Program decreased by $83 million (from $446 million as of
December 31, 2008 to $363 million as of June 30,

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2009).
These changes in working capital components and the A/R Securitization Program were a result of various factors such as market demand, changes in foreign currencies, seasonality, global
economic weakness, and the effects of such factors on sales prices and inventory costs.

We
expect volatility in our working capital components to continue in 2009. We have implemented, and plan to implement, various restructuring programs under which we expect to spend
approximately $125 million through 2009. During the six months ended June 30, 2009, we spent $51 million related to current restructuring initiatives. For a discussion of
restructuring, impairment and plant closing costs, see "Note 5. Restructuring, Impairment and Plant Closing Costs" to our condensed consolidated financial statements (unaudited) included
elsewhere in this report.

On
April 29, 2006, we experienced fire damage at our Port Arthur, Texas facility. This facility has been subsequently rebuilt and sold. In connection with this fire damage, we
have received partial insurance proceeds to date of $365 million. We have claimed an additional approximately $243 million plus interest as of June 30, 2009 as presently due and
owing and unpaid under our insurance policy. Binding arbitration to settle this claim is now targeted to occur in November of 2009. Collections on this insured loss, if any, will represent additional
income for us upon final settlement, and will be used to repay secured debt in accordance with relevant provisions of our debt agreements. See "Note 14. Commitments and
ContingenciesPort Arthur Plant Fire Insurance Litigation" and "Note 17. Casualty Losses and Insurance RecoveriesPort Arthur, Texas Plant Fire" to our condensed
consolidated financial statements (unaudited) included elsewhere in this report.

As
of June 30, 2009, the amount outstanding under our A/R Securitization Program was $363 million compared with $446 million at December 31, 2008. Because of
various factors such as market demand, lower pricing and changes in foreign currency rates, the underlying effective capacity of the program has declined. This facility fluctuates in capacity
depending on the program's eligible receivables base which is influenced by such factors as market demand, pricing and foreign currency rates. Although we can make no assurances, we are in discussions
to extend the A/R Securitization Program beyond its stated maturity of November 12, 2009. See "Note 9. Securitization of Accounts Receivable" to our condensed consolidated financial
statements (unaudited) included elsewhere in this report.

During
the six months ended June 30, 2009, we made contributions to our pension and postretirement benefit plans of $61 million. During the remainder of 2009, we expect to
contribute an additional amount of $71 million to these plans.

Capital Expenditures

We incurred capital expenditures of $100 million for the six months ended June 30, 2009 as compared with
$224 million in the 2008 period. This decrease of $124 million is largely attributable to higher 2008 spending on various projects including the new maleic anhydride facility at our
Geismar, Louisiana site, as well as the expansion at our Greatham, U.K. titanium dioxide facility.

We
expect to finance our capital expenditure commitments through a combination of cash flows from operations and financing arrangements. We expect to spend, in total, approximately
$215 million on capital projects in 2009.

Off-Balance Sheet Arrangements

Receivables Securitization

For a discussion of our A/R Securitization Program, see "Note 9. Securitization of Accounts Receivable" to our condensed
consolidated financial statements (unaudited) included elsewhere in this report. As a result of recent accounting guidance, the Receivables Trust may be required to be

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consolidated
as of January 1, 2010. See "Note 2. Recently Issued Accounting Pronouncements" to our condensed consolidated financial statements (unaudited) included elsewhere in this
report.

Guarantees

On September 19, 2003, SLIC obtained secured financing for the construction of production facilities. SLIC obtained various
committed loans in the aggregate amount of approximately $230 million (U.S. dollar equivalents). As of June 30, 2009, there were $61 million and RMB 759 million
(approximately $111 million) in outstanding borrowings under these facilities. The interest rate on these facilities is LIBOR plus 0.48% for U.S. dollar borrowings and 90% of the Peoples Bank
of China rate for RMB borrowings. The loans are secured by substantially all the assets of SLIC and will be paid in 16 semiannual installments (of which 11 installments remain), which began on
June 30, 2007. We unconditionally guarantee 35% of any amounts due and unpaid by SLIC under the loans described above (except for the VAT facility which is not guaranteed). Our guarantee
remains in effect until SLIC has met certain conditions. The conditions outstanding include completion of the building and equipment mortgage registrations, which are progressing as planned, and
maintaining a debt service coverage ratio of at least 1:1 at the time such registrations are completed. We have estimated that the fair value of this guarantee is nil as of the closing of the
transaction and, accordingly, no amounts have been recorded.

Our
unconsolidated Saudi Joint Venture obtained various loan commitments in the aggregate amount of approximately $195 million (U.S. dollar equivalents) of which
$115 million was drawn and outstanding as of June 30, 2009. We have provided certain guarantees of approximately $14 million for these commitments, and our guarantees will
terminate upon completion of the project and satisfaction of certain other conditions. We have estimated that the fair value of such guarantees was nil as of the closing date of this transaction and,
accordingly, no amounts have been recorded.

Restructuring, Impairment and Plant Closing Costs

For a discussion of restructuring, impairment and plant closing costs, see "Note 5. Restructuring, Impairment and Plant Closing
Costs" to our condensed consolidated financial statements (unaudited) included elsewhere in this report.

Legal Proceedings

For a discussion of legal proceedings, see "Note 14. Commitments and ContingenciesLegal Matters" to our condensed
consolidated financial statements (unaudited) included elsewhere in this report.

Environmental, Health and Safety Matters

For a discussion of environmental, health and safety matters, see "Note 15. Environmental, Health and Safety Matters" to our
condensed consolidated financial statements (unaudited) included elsewhere in this report.

Recently Issued Accounting Pronouncements

For a discussion of recently issued accounting pronouncements, see "Note 2. Recently Issued Accounting Pronouncements" to our
condensed consolidated financial statements (unaudited) included elsewhere in this report.

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Critical Accounting Policies

Our critical accounting policies are presented in Management's Discussion and Analysis of Financial Condition and Results of Operations
included in our Annual Report on Form 10-K for the year ended December 31, 2008 filed on February 26, 2009 and updated by our Form 8-K filed on
July 30, 2009.

ITEM 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to market risks, such as changes in interest rates, foreign exchange rates and commodity pricing risks. From time to
time, we enter into transactions, including transactions involving derivative instruments, to manage certain of these exposures.

All
derivatives, whether designated in hedging relationships or not, are recorded on our balance sheet at fair value. If the derivative is designated as a fair value hedge, the changes
in the fair value of the derivative and the hedged items are recognized in earnings. If the derivative is designated as a cash flow hedge, changes in the fair value of the derivative are recorded in
accumulated other comprehensive (loss) income, to the extent effective, and will be recognized in the income statement when the hedged item affects earnings. To the extent applicable, we perform
effectiveness assessments in order to use hedge accounting at each reporting period. For a derivative that does not qualify as a hedge, changes in fair value are recognized in earnings.

We
also hedge our net investment in certain European operations. Changes in the fair value of the hedge in the net investment of certain European operations are recorded in accumulated
other comprehensive income (loss).

Our
cash flows and earnings are subject to fluctuations due to exchange rate variation. Our revenues and expenses are denominated in various currencies. From time to time, we may enter
into foreign currency derivative instruments to minimize the short-term impact of movements in foreign currency rates. Where practicable, we generally net multicurrency cash balances among
our subsidiaries to help reduce exposure to foreign currency exchange rates. Certain other exposures may be managed from time to time through financial market transactions, principally through the
purchase of spot or forward foreign exchange contracts (generally with maturities of one year or less). We do not hedge our currency exposures in a manner that would eliminate the effect of changes in
exchange rates on our cash flows and earnings.

On
January 15, 2008, we entered into a series of forward foreign currency contracts in our Pigments segment to partially hedge the impact, for up to one year, of movements in
foreign currency rates associated with the purchases of raw materials and sales of pigment in non-functional currencies. During the first quarter, 2009, any remaining contracts matured and
the realized gains (losses) recorded in the accompanying condensed consolidated statements of operations (unaudited) were not considered significant. For the three months ended June 30, 2008,
the effective portion of the changes in the fair value totaling $1 million were recorded in other comprehensive income (loss), with ineffectiveness resulting in a credit of $1 million,
recorded in cost of sales and a foreign currency gain of $1 million. For the six months ended June 30, 2008, the effective portion of the changes in the fair value of $3 million
were recorded in other comprehensive income (loss), with ineffectiveness amounting to a credit of $1 million recorded in cost of sales and a foreign currency gain of $1 million.

On
October 24, 2008, we unwound a cross currency interest rate swap pursuant to which we swapped $153 million of LIBOR floating rate debt payments for
€116 million of EURIBOR floating rate debt payments. This swap was not designated as a hedge for financial reporting purposes. For the three and six months ended June 30,
2008, we recorded a foreign currency loss on this swap of nil and $13 million, respectively, in the condensed consolidated statement of operations (unaudited).

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On
October 24, 2008, we unwound a cross currency interest rate swap pursuant to which we had swapped $96 million of LIBOR floating rate debt payments for
€71 million of EURIBOR floating rate debt payments. This swap was designated as a hedge of a net investment for financial reporting purposes. We received a net cash benefit from
the unwind of $3 million in the fourth quarter of 2008. For the three and six months ended June 30, 2008, the effective portion of the changes in the fair value of $(1) million and
$7 million, respectively were recorded in other comprehensive income (loss).

As
of and for the six months ended June 30, 2009, the changes in fair value of the realized gains (losses) recorded in the accompanying condensed consolidated statements of
operations (unaudited) of our other outstanding foreign currency rate hedging contracts and derivatives were not considered significant.

A
significant portion of our debt is denominated in euros. We also finance certain of our non-U.S. subsidiaries with intercompany loans that are, in many cases, denominated
in currencies other than the entities' functional currency. We manage the net foreign currency exposure created by this debt through various means, including cross-currency swaps, the designation of
certain intercompany loans as permanent loans because they are not expected to be repaid in the foreseeable future ("permanent loans") and the designation of certain debt and swaps as net investment
hedges.

Foreign
currency transaction gains and losses on intercompany loans that are not designated as permanent loans are recorded in earnings. Foreign currency transaction gains and losses on
intercompany loans that are designated as permanent loans are recorded in other comprehensive income (loss). From time to time, we review such designation of intercompany loans.

From
time to time, we review our non-U.S. dollar denominated debt and swaps to determine the appropriate amounts designated as hedges. As of June 30, 2009, we have
designated approximately €225 million ($317 million) of euro-denominated debt as a hedge of our net investments. For the three and six months ended
June 30, 2009, the amount of loss recognized on the hedge of our net investments was $18 million and $3 million, respectively, and was recorded in other comprehensive income
(loss). As of June 30, 2009, we had approximately €935 million ($1,317 million) in net euro assets.

ITEM 4.    CONTROLS AND PROCEDURES

Our management, with the participation of our chief executive officer and chief financial officer, has evaluated the effectiveness of
our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the "Exchange Act")) as of June 30,
2009. Based on this evaluation, our chief executive officer and chief financial officer have concluded that, as of June 30, 2009, our disclosure controls and procedures were effective, in that
they ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is (1) recorded, processed, summarized and reported within the time
periods specified in the Commission's rules and forms, and (2) accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate
to allow timely decisions regarding required disclosure.

No
changes to our internal control over financial reporting occurred during the six months ended June 30, 2009 that have materially affected, or are reasonably likely to
materially affect, our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act). However, we can only give
reasonable assurance that our internal controls over financial reporting will prevent or detect material misstatements on a timely basis. Ineffective internal controls over financial reporting could
cause investors to lose confidence in our reported financial information and could result in a lower trading price for our securities.

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PART II. OTHER INFORMATION

ITEM 1.    LEGAL PROCEEDINGS

On occasion, we receive notices of violation, enforcement or other complaints from regulatory agencies alleging
non-compliance with applicable EHS laws. Based on currently available information and our past experience, we do not believe that the resolution of any pending or threatened environmental
enforcement proceedings will have a material impact on our financial condition, results of operations or cash flows.

In
May 2007, our operation in Wilton, U.K., allegedly caused a discharge of wastewater effluent to be made to Northumbrian Water's Bran Sands treatment facility that contained elevated
levels of nitrobenzene. Northumbrian Water alleges that this discharge caused a disruption of its treatment facility which, in turn, exceeded its discharge consent from the U.K. Environmental
Agency. The Environmental Agency is investigating a possible prosecution against Northumbrian Water and/or us for the breach. Northumbrian Water has threatened to prosecute our subsidiary in the U.K.
To date, however, no charges have been filed.

OTHER LEGAL PROCEEDINGS

For a discussion of other legal proceedings, see "Note 14. Commitments and ContingenciesLegal Matters" and
"Note 15. Environmental, Health and Safety MattersRemediation Liabilities" to our condensed consolidated financial statements (unaudited) included elsewhere in this report.

ITEM 1A.    RISK FACTORS

For information regarding risk factors, see "Part I. Item 1A. Risk Factors," in our Annual Report on
Form 10-K for the year ended December 31, 2008.

ITEM 2.    UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

ISSUER PURCHASES OF EQUITY SECURITIES

The following table presents shares of restricted stock granted under our Stock Incentive Plan that we withheld upon vesting to satisfy
our tax withholding obligations during the three months ended June 30, 2009. We have no publicly announced plans or programs to repurchase our common stock.

Period

Total Number
of Shares
Purchased

Average Price
Paid per Share

Total Number
of Shares
Purchased as Part of
Publicly Announced
Plans or Programs

Maximum Number
(or Approximate Dollar
Value) of Shares that
May Yet Be Purchased
Under the Plans or
ProgramsApril




$






May


1,672


5.29





June











Total


1,672

$
5.29








ITEM 6.    EXHIBITS

10.1

Waiver to Credit Agreement dated April 16, 2009 among Huntsman International LLC and the Revolving Lenders party thereto (incorporated by reference to Exhibit 10.1 to our current report on Form 8-K
filed on April 17, 2009).10.2

Letter Agreement, dated June 15, 2009, among Huntsman Polyurethanes (UK) Ltd. and Paul G. Hulme (incorporated by reference to Exhibit 10.1 to our current report on Form 8-K filed on June 17,
2009).


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10.3

Agreement of Compromise and Settlement, dated as of June 22, 2009, by and among Huntsman Corporation and Credit Suisse Securities (USA) LLC and Deutsche Bank Securities Inc. (incorporated by reference to
Exhibit 10.1 to our current report on Form 8-K filed on June 23, 2009).10.4

Form of Note Purchase Agreement, dated as of June 22, 2009, by and among Huntsman International LLC and Credit Suisse Securities (USA) LLC and Deutsche Bank Securities Inc. (incorporated by reference
to Exhibit 10.2 to our current report on Form 8-K filed on June 23, 2009).10.5

Fourth Amendment to Credit Agreement, dated as of June 22, 2009, by and among Huntsman International LLC and Credit Suisse Securities (USA) LLC and Deutsche Bank Securities Inc. (incorporated by
reference to Exhibit 10.3 to our current report on Form 8-K filed on June 23, 2009).10.6

Form of Registration Rights Agreement dated as of June 23, 2009, by and among Huntsman International LLC, the subsidiary guarantors party thereto and Credit Suisse Securities (USA) LLC and Deutsche Bank
Securities Inc. (incorporated by reference to Exhibit 10.4 to our current report on Form 8-K filed on June 23, 2009).10.7

Voting Agreement, dated as of June 22, 2009, by and among Huntsman International LLC, Deutsche Bank AG New York Branch and Credit Suisse, Cayman Islands Branch (incorporated by reference to Exhibit 10.5 to
our current report on Form 8-K filed on June 23, 2009).31.1

Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 200231.2

Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 200232.1

Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 200232.2

Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002


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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrants have duly caused this report to be signed on their
behalf by the undersigned thereunto duly authorized.

Dated:
August 6, 2009

HUNTSMAN CORPORATION
HUNTSMAN INTERNATIONAL LLCBy:

/s/ J. KIMO ESPLIN J. Kimo Esplin Executive Vice President and Chief Financial Officer
(Authorized Signatory and Principal Financial Officer)By:

/s/ L. RUSSELL HEALY L. Russell Healy Vice President and Controller
(Authorized Signatory and Principal Accounting Officer)


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EXHIBIT INDEX

10.1

Waiver to Credit Agreement dated April 16, 2009 among Huntsman International LLC and the Revolving Lenders party thereto (incorporated by reference to Exhibit 10.1 to our current report on Form 8-K
filed on April 17, 2009).10.2

Letter Agreement, dated June 15, 2009, among Huntsman Polyurethanes (UK) Ltd. and Paul G. Hulme (incorporated by reference to Exhibit 10.1 to our current report on Form 8-K filed on June 17,
2009).10.3

Agreement of Compromise and Settlement, dated as of June 22, 2009, by and among Huntsman Corporation and Credit Suisse Securities (USA) LLC and Deutsche Bank Securities Inc. (incorporated by reference
to Exhibit 10.1 to our current report on Form 8-K filed on June 23, 2009).10.4

Form of Note Purchase Agreement, dated as of June 22, 2009, by and among Huntsman International LLC and Credit Suisse Securities (USA) LLC and Deutsche Bank Securities Inc. (incorporated by
reference to Exhibit 10.2 to our current report on Form 8-K filed on June 23, 2009).10.5

Fourth Amendment to Credit Agreement, dated as of June 22, 2009, by and among Huntsman International LLC and Credit Suisse Securities (USA) LLC and Deutsche Bank Securities Inc. (incorporated by
reference to Exhibit 10.3 to our current report on Form 8-K filed on June 23, 2009).10.6

Form of Registration Rights Agreement dated as of June 23, 2009, by and among Huntsman International LLC, the subsidiary guarantors party thereto and Credit Suisse Securities (USA) LLC and Deutsche Bank
Securities Inc. (incorporated by reference to Exhibit 10.4 to our current report on Form 8-K filed on June 23, 2009).10.7

Voting Agreement, dated as of June 22, 2009, by and among Huntsman International LLC, Deutsche Bank AG New York Branch and Credit Suisse, Cayman Islands Branch (incorporated by reference to Exhibit 10.5
to our current report on Form 8-K filed on June 23, 2009).31.1

Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 200231.2

Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 200232.1

Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 200232.2

Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002


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