<PAGE>

================================================================================

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                  -----------

                                   Form 10-Q

(Mark One)

[X]    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
       EXCHANGE ACT OF 1934
       For the quarterly period ended June 30, 2001

                                       OR

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


                          Commission file number 1-9988


                          HUNTSMAN POLYMERS CORPORATION
            (Exact name of registrant as specified in its charter)


          Delaware                                         75-2104131
-------------------------------                        -------------------
(State or other jurisdiction of                        (I.R.S. Employer
incorporation or organization)                         Identification No.)


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

         (Address of principal executive offices and telephone number)


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.

Yes X No ___
   ---

                     APPLICABLE ONLY TO CORPORATE ISSUERS:

On August 14, 2001, 1,000 shares of the Common Stock, par value $0.01 per share,
of Huntsman Polymers Corporation were outstanding.

================================================================================
<PAGE>

                          HUNTSMAN POLYMERS CORPORATION
                       FORM 10-Q FOR THE QUARTERLY PERIOD
                              ENDED JUNE 30, 2001

                               TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                                   Page
                                                                                                                   ----
<S>                                                                                                                <C>
PART I.  FINANCIAL INFORMATION......................................................................................  3
         Item 1.   Financial Statements.............................................................................  3
                   Consolidated Balance Sheets as of June 30, 2001 (unaudited) and December 31, 2000................  3
                   Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2001 and 2000
                   (unaudited)......................................................................................  4
                   Consolidated Statements of Stockholder's Equity for the Six Months Ended June 30, 2001
                   (unaudited)......................................................................................  5
                   Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2001 and 2000
                   (unaudited)......................................................................................  6
                   Notes to Consolidated Financial Statements.......................................................  7
         Item 2.   Management's Discussion and Analysis of Financial Condition and Results of Operations............ 12
         Item 3.   Quantitative and Qualitative Disclosures About Market Risk....................................... 19
PART II - OTHER INFORMATION......................................................................................... 20
         Item 1.   Legal Proceedings................................................................................ 20
         Item 6.   Exhibits and Reports on Form 8-K................................................................. 20
</TABLE>
<PAGE>

                         PART I. FINANCIAL INFORMATION

Item 1.       Financial Statements

HUNTSMAN POLYMERS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Dollars In Thousands)
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                  June 30, 2001
                                                                   (Unaudited)          December 31, 2000
                                                                   -----------          -----------------
<S>                                                               <C>                       <C>
                              ASSETS
                              ------
         Current assets:
              Cash and cash equivalents                           $          -              $           -
              Accounts and notes receivable, net                        18,247                     30,787
              Accounts and advances receivable -
                  Affiliates                                            29,780                     44,245
              Inventories                                               81,897                     78,707
              Other current assets                                         333                      1,317
              Deferred income taxes                                     12,365                     10,261
                                                                  ------------              -------------
                  Total current assets                                 142,622                    165,317
         Properties, plant and equipment, net                          857,758                    895,355
         Intangible assets, net                                         43,038                     44,858
         Other noncurrent assets                                        30,346                     32,103
                                                                  ------------              -------------
                  Total assets                                    $  1,073,764              $   1,137,633
                                                                  ============              =============

                          LIABILITIES AND
                          ---------------
                       STOCKHOLDER'S EQUITY
                       --------------------
         Current liabilities:
              Accounts payable                                    $     63,819              $      94,274
              Accounts payable - Affiliates                                923                      2,030
              Accrued liabilities                                       25,245                     21,941
              Current portion of long-term debt - Affiliates           280,334                          -
                                                                  ------------              -------------
                  Total current liabilities                            370,321                    118,245
         Long-term debt:
              Affiliates                                                65,885                    304,164
              Other                                                    174,882                    174,882
         Deferred income taxes                                          45,087                     85,053
         Other noncurrent liabilities                                   33,118                     32,517
                                                                   -----------              -------------
                  Total liabilities                                    689,293                    714,861
                                                                   -----------              -------------

         Stockholder's equity:
              Common Stock, par value $0.01 per share; 1
              million shares authorized and 1,000 shares
              issued and outstanding in 2001 and 2000                        -                          -
              Additional paid-in capital                               559,500                    528,500
              Retained earnings (deficit)                             (175,029)                  (105,728)
                                                                   -----------              -------------
                  Total stockholder's equity                           384,471                    422,772
                                                                   -----------              -------------

                  Total liabilities and stockholder's equity       $ 1,073,764              $   1,137,633
                                                                   ===========              =============
</TABLE>

          See accompanying notes to consolidated financial statements

<PAGE>

HUNTSMAN POLYMERS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (Dollars In Thousands)
------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                             Three Months         Three Months         Six Months             Six Months
                                                 Ended               Ended               Ended                  Ended
                                             June 30, 2001       June 30, 2000        June 30, 2001         June 30, 2000
                                             -------------       -------------        -------------         -------------
<S>                                         <C>                  <C>                  <C>                   <C>
Revenues:
     Trade sales and services                $    34,386         $     47,409         $       82,815        $     98,154
     Affiliate sales                              90,908              115,933                187,249             232,478
                                             -----------         ------------         --------------        ------------
Total revenues                                   125,294              163,342                270,064             330,632
Cost of goods sold                               141,076              151,290                312,968             310,790
                                             -----------         ------------         --------------        ------------
Gross profit                                     (15,782)              12,052                (42,904)             19,842
Selling, general and administrative                6,769                6,373                 14,180              13,307
Plant closing/restructuring costs                 29,847                    -                 29,847                   -
                                             -----------         ------------         --------------        ------------
Operating income (loss)                          (52,398)               5,679                (86,931)              6,535
Interest expense, net:
     Affiliate interest                           (6,119)              (6,755)               (13,079)            (13,195)
     Other interest                               (5,263)              (5,199)               (10,525)            (10,469)
Other income (expense)                              (144)                   9                   (176)                (57)
                                             -----------         ------------         --------------        ------------
Net loss before income taxes                     (63,924)              (6,266)              (110,711)            (17,186)
Income tax benefit                               (24,291)              (2,683)               (41,410)             (6,832)
                                             -----------         ------------         --------------        ------------
Net loss                                     $   (39,633)        $     (3,583)        $      (69,301)       $    (10,354)
                                             ===========         ============         ==============        ============
</TABLE>

          See accompanying notes to consolidated financial statements
<PAGE>

HUNTSMAN POLYMERS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY (Dollars and Shares In
----------------------------------------------------------------------
Thousands)
----------

<TABLE>
<CAPTION>
                                                                                      Retained
                                                Common Stock           Paid-in        Earnings
                                             Shares      Amount        Capital       (Deficit)           Total
                                             ------      ------        -------        -------           ------

     <S>                                     <C>          <C>        <C>             <C>               <C>
     Balance, January 1, 2001                     1          -       $  528,500      $ (105,728)       $  422,772

     Capital contribution from parent             -          -           31,000               -            31,000

     Net loss                                     -          -                -         (69,301)          (69,301)
                                           --------   --------         --------      ----------        ----------
     Balance, June 30, 2001                       1          -          559,500        (175,029)          384,471
</TABLE>

<PAGE>

HUNTSMAN POLYMERS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (Dollars In Thousands)
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                   Six Months              Six Months
                                                                      Ended                   Ended
                                                                  June 30, 2001           June 30, 2000
                                                                  -------------           -------------
<S>                                                             <C>                     <C>
         Operating Activities
         Net loss                                               $         (69,301)      $         (10,354)
         Reconciliation to net cash used in operations:
              Depreciation and amortization                                36,072                  36,486
              Deferred income taxes                                       (42,070)                 (6,832)
              Amortization of debt issuance costs                             434                     434
              Gain on sale of property                                          -                  (1,820)
              Retirement of fixed assets                                    8,989                       -
              Changes in operating working capital:
                  Receivables                                              27,005                   1,869
                  Inventories                                              (3,190)                (11,016)
                  Other current assets                                        984                   1,850
                  Accounts payable                                        (31,562)                  1,086
                  Other current liabilities                                 3,304                  (5,987)
                  Deferred charges and other noncurrent
                  assets                                                    1,757                  (1,620)
                  Deferred credits and other noncurrent
                  liabilities                                                 601                  (1,226)
                                                                -----------------       -----------------
         Net cash provided by (used in) operations                        (66,977)                  2,870

         Investing Activities
         Proceeds of sale of property                                         577                   4,000
         Capital expenditures                                              (6,655)                 (9,188)
                                                                -----------------       -----------------
         Net cash used in investing activities                             (6,078)                 (5,188)

         Financing Activities
         Intercompany borrowing from parent                                42,055                   2,318
         Proceeds of capital contribution by parent                        31,000                       -
                                                                -----------------       -----------------
         Net cash provided by financing activities                         73,055                   2,318

         Increase (Decrease) in Cash and Cash Equivalents
                                                                                -                       -
         Cash and Cash Equivalents at Beginning of Period
                                                                                -                       -
                                                                -----------------       -----------------
         Cash and Cash Equivalents at End of Period             $               -       $               -
                                                                =================       =================

         Supplemental Cash Flow Information
         Cash paid for interest                                 $          10,275       $          10,274
         Cash paid (refunded) for income taxes                  $               -       $            (430)
</TABLE>

          See accompanying notes to consolidated financial statements
<PAGE>

HUNTSMAN POLYMERS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
--------------------------------------------------------------------------------


1.     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

       Description of Business

       Huntsman Polymers Corporation and its subsidiaries (collectively, the
"Company") manufacture products used in a wide variety of industrial and
consumer-related applications. The Company's principal products are polyethylene
(including low density polyethylene ("LDPE") and linear low density polyethylene
("LLDPE")), polypropylene, amorphous polyalphaolefin ("APAO"), and, until April
23, 2001, styrene.

       Interim Financial Statements

       The interim consolidated financial statements of the Company are
unaudited, but include all adjustments which the Company deems necessary for a
fair presentation of its financial position and results of operations. All such
adjustments are of a normal recurring nature. Results of operations for interim
periods are not necessarily indicative of results to be expected for the full
year. All significant accounting policies conform to those previously set forth
in the Company's fiscal 2000 Annual Report on Form 10-K.

       Use of Estimates

       The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of 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.

       Principles of Consolidation

       The consolidated financial statements of the Company include its
wholly-owned subsidiaries. Intercompany transactions and balances are
eliminated.

       Cash and Cash Equivalents

       Highly liquid investments with a maturity of three months or less when
purchased are considered to be cash equivalents.

       Inventories

       Inventories are stated at the lower of average cost or market.

       Property, Plant and Equipment

       Property, plant and equipment are stated at cost. Depreciation is
provided utilizing the straight line method over the estimated useful lives of
the assets. Plant and equipment have useful lives ranging from 3 to 15 years,
and buildings have useful lives ranging from 15 to 20 years. Periodic
maintenance and repairs applicable to major units of manufacturing facilities
are accounted for on the prepaid basis by capitalizing the costs of the
turnaround and amortizing the costs over the estimated period until the next
turnaround. Normal maintenance and repairs of all other plant and equipment are
charged to expense as incurred. Renewals, betterments and major repairs that
materially extend the useful life of the assets are capitalized, and the assets
replaced, if any, are retired. Interest costs are capitalized as part of major
<PAGE>

construction projects. Upon disposal of assets, the cost and related accumulated
depreciation are removed from the accounts and the resulting gain or loss is
included in other income.

       Intangible Assets

       Debt issuance costs are amortized over the term of the related debt,
ranging from five to ten years. Goodwill is amortized over a period of 20 years.
Other intangible assets are amortized using the straight-line method over their
estimated useful lives of five to fifteen years or over the life of the related
agreement.

       Income Taxes

       Deferred income taxes are provided for temporary differences between
financial statement income and taxable income using the asset and liability
method in accordance with Statement of Financial Accounting Standards ("SFAS")
No. 109, "Accounting for Income Taxes."

       Environmental Expenditures

       Environmental related restoration and remediation costs and governmental
assessments are recorded as liabilities and expensed when site restoration and
environmental remediation, clean-up and assessment obligations are either known
or considered probable and the related costs can be reasonably estimated. Other
environmental expenditures, which are principally maintenance or preventative in
nature, are recorded when expended and are expensed or capitalized as
appropriate.

         New Accounting Standards

       On January 1, 2001, the Company adopted SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities." SFAS No. 133, as amended and
interpreted, establishes accounting and reporting standards for derivatives and
for hedging activities. It requires an entity to recognize all derivatives as
either assets or liabilities in the statement of financial position and measure
those instruments at fair value. The adoption of SFAS No. 133 did not have an
effect on the Company's financial position as the financial instruments and
other contracts held by and entered into by the Company either do not meet the
definition of a derivative or qualify for the normal purchases and sales
exemption.

       On July 20, 2001, the Financial Accounting Standards Board issued SFAS
No. 141, "Business Combinations," and SFAS No. 142, "Goodwill and Other
Intangible Assets." The statements will change the accounting for business
combinations and goodwill in two significant ways. SFAS No. 141 requires that
the purchase method of accounting be used for all business combinations
initiated after June 30, 2001. Use of the pooling-of-interests method will be
prohibited. SFAS No. 142 changes the accounting for goodwill from an
amortization method to an impairment-only approach. Thus, amortization of
goodwill, including goodwill recorded in past business combinations, will cease
upon adoption of that statement, which for the Company will be January 1, 2002.
The Company is currently evaluating the effects of adopting these
pronouncements.

       Income (Loss) per Share

       Income (loss) per share is not presented because it is not considered
meaningful information due to the Company's ownership by a single non-public
shareholder.
<PAGE>

2.     INVENTORIES

       Inventories consist of the following (in thousands):

<TABLE>
<CAPTION>
                                                                  June 30, 2001         December 31, 2000
                                                                  -------------         -----------------
<S>                                                             <C>                     <C>
         Raw materials                                          $          14,338       $          17,551
         Work in progress                                                  12,041                   8,249
         Finished goods                                                    55,518                  52,907
                                                               ------------------      ------------------
         Total                                                  $          81,897       $          78,707
                                                               ==================      ==================
</TABLE>

3.     PROPERTY, PLANT AND EQUIPMENT

       The cost and accumulated depreciation of property, plant and equipment
are as follows (in thousands):

<TABLE>
<CAPTION>
                                                                  June 30, 2001         December 31, 2000
                                                                  -------------         -----------------
<S>                                                             <C>                     <C>
         Land                                                   $           3,730       $           3,730
         Buildings                                                        172,953                 172,831
         Plant and equipment                                              886,093                 889,866
         Construction in progress                                           6,976                   7,270
                                                               ------------------      ------------------
                                                                        1,069,752               1,073,697
         Less accumulated depreciation                                   (211,994)               (178,342)
                                                               ------------------      ------------------
         Property, plant and equipment, net                     $         857,758       $         895,355
                                                               ==================      ==================
</TABLE>

4.     LONG-TERM DEBT

       Long-term debt consists of the following (in thousands):

<TABLE>
<CAPTION>
                                                                       June 30, 2001        December 31, 2000
                                                                       -------------        -----------------
<S>                                                                   <C>                   <C>
         Affiliates:
              Intercompany borrowings                                 $        280,334      $         240,329
              Capital lease - Affiliate                                         65,885                 63,835
                                                                     -----------------     ------------------
                  Total affiliates                                             346,219                304,164
              Less:  Current portion of long-term debt-Affiliate               280,334                      -
                                                                     -----------------     ------------------
                  Total long-term debt - Affiliate                              65,885                304,164
         Other - 11-3/4% Senior Notes due 2004                                 174,882                174,882
                                                                     -----------------     ------------------
              Total                                                   $        174,882      $         479,046
                                                                     =================     ==================
</TABLE>

       As of August 14, 2001, Huntsman Corporation, the parent of Huntsman
Polymers Holdings Corporation (the Company's sole shareholder), is not in
compliance with certain financial covenants contained in its senior secured
credit facilities (the "Credit Facilities"), and, as a result, is not able to
borrow under the Credit Facilities. Huntsman Corporation and its lenders are
currently discussing amendments to the credit documents governing the Credit
Facilities, which would modify the financial covenants in those credit
documents. Until such amendments are effected, Huntsman Corporation's lenders
could pursue their remedies including acceleration of the senior secured
borrowings, which would also cause an acceleration of the Company's obligations
under an intercompany loan agreement (the "Intercompany Loan Agreement") the
Company maintains with Huntsman Group Holdings Finance Corporation, a
wholly-owned subsidiary of Huntsman Corporation. This would constitute an event
of default under the Senior Notes. The Company could also be required to make
payment to Huntsman Corporation's lenders pursuant to the Company's guaranty of
the senior secured borrowings, and, as a result, the Company has reclassified
the Intercompany borrowings portion of Affiliate debt to a current liability.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources."
<PAGE>

5.     INTANGIBLE ASSETS

       Intangible assets, net of accumulated amortization, are (in thousands):

<TABLE>
<CAPTION>
                                                                  June 30, 2001         December 31, 2000
                                                                  -------------         -----------------
<S>                                                             <C>                     <C>
         Debt issuance costs                                    $           7,173       $           7,173
         Less accumulated amortization                                     (4,861)                 (4,427)
                                                               ------------------      ------------------
              Total debt issuance costs                                     2,312                   2,746
                                                               ------------------      ------------------

         Goodwill                                                          42,406                  42,406
         Less accumulated amortization                                     (8,090)                 (7,035)
                                                               ------------------      ------------------
              Total goodwill                                               34,316                  35,371
                                                               ------------------      ------------------

         Other intangible assets                                            7,973                   7,973
         Less accumulated amortization                                     (1,563)                 (1,232)
                                                               ------------------      ------------------
              Total other intangible assets                                 6,410                   6,741
                                                               ------------------      ------------------
         Intangible assets, net                                 $          43,038       $          44,858
                                                               ==================      ==================
</TABLE>

6.     CONTINGENCIES

       Environmental Regulation

       The Company and the industry in which it competes are subject to
extensive environmental laws and regulations concerning, among other things,
emissions to the air, discharges to surface and subsurface waters and the
generation, handling, storage, transportation, treatment and disposal of waste
and other materials. The Company believes that, in light of its historical
expenditures and expected future results of operations, it will have adequate
resources to conduct its operations in compliance with currently applicable
environmental and health and safety laws and regulations. However, in order to
comply with changing facility permitting and regulatory requirements, the
Company may be required to make additional significant site or operational
modifications that are not currently contemplated. Further, the Company has
incurred, and may in the future incur, liability to investigate and clean up
waste or contamination at its current or former facilities or facilities
operated by third parties at which it may have disposed of waste or other
materials.

       On the basis of reasonable investigation and analysis, management
believes that the approximately $6.1 million accrued in the June 30, 2001
balance sheet is adequate for the total potential environmental liability of the
Company with respect to contaminated sites. Extensive environmental
investigation of the groundwater, soils and solid waste management units has
been conducted at the Odessa, Texas facility, the Company's primary
manufacturing location (the "Odessa Facility"). Risk assessments have been
completed for a number of these units and corrective measures have been defined
and conducted. As of June 30, 2001, the Texas Natural Resource Conservation
Commission ("TNRCC") has approved closure for 55 of the plant's solid waste
management units.

       TNRCC Flare Investigation

       By letter dated January 28, 1999, the TNRCC notified the Company of
allegations that the Company's olefins plant may have violated its air permit by
emitting visible smoke from its process/emergency flare in late December 1998 or
early January 1999. During that period, the olefins plant was in the midst of
start up after extensive construction. As required by Texas law, the Company had
given prior notice to the TNRCC of the start up and that excess emissions might
result. The TNRCC investigated this matter after receiving numerous complaints
from residents of a subdivision near the Odessa Facility. A draft Agreed Order
with a proposed $15,000 penalty was sent by the TNRCC to the Company. Following
discussions with the Company, the TNRCC re-drafted the Agreed Order with a
proposed $7,500 penalty. The Company agreed to an Order stipulating that $1,500
of the $7,500 be deferred, a $3,000 fine paid and $3,000 offset with a
supplemental environmental project for a neighborhood monitoring program near
the facility. When the Agreed Order was presented to the TNRCC, Odessa residents
attending the hearing opposed its entry. The TNRCC remanded the
<PAGE>

matter back to its staff for further consideration. The staff has now informally
proposed a $154,000 penalty covering a series of upsets over the period from
1998 through 2000. The Company, in a written submission to the TNRCC, has taken
issue with the appropriateness, both factually and legally, of the proposed
penalty. Negotiations to resolve this matter are ongoing.

       As a result of the start-up flaring during late December 1998 and January
1999, certain complaining citizens have hired counsel to consider bringing legal
action to recover damages alleged to have been caused by that flaring. Six such
actions have been filed. Three of the cases, involving over 4,200 plaintiffs,
have been settled as of August 14, 2001; an amount was reserved for the
settlements in the third quarter of 2000. Although the Company lawyers believe
that the Company has strong defenses to the remaining suits, it is too early to
predict the outcome of such litigation.

       Other Matters

       As a result of a United States Environmental Protection Agency ("EPA")
inspection of the Odessa Facility in April 1997 and follow-up information
requests from EPA, an enforcement action alleging Clean Air Act violations has
been threatened by the U.S. Department of Justice and civil penalties in the
amount of $475,000 have been proposed by the government to resolve the matter.
The Company is continuing to negotiate with EPA and the Department of Justice in
an attempt to reach settlement.

       As a result of a third-party environmental audit of the Odessa operations
starting in November 2000, the Company has voluntarily disclosed to EPA and the
TNRCC certain potential violations of environmental law. EPA and the TNRCC are
presently evaluating those disclosures to determine whether the disclosures
qualify for penalty mitigation under federal policy and state law. It is
possible that civil penalties will be assessed by one or both of these agencies
as a result of the disclosures.

       In March 1999, in connection with a construction contract dispute, an
arbitration proceeding was initiated by S&B Engineers and Constructors, Ltd.
("S&B") against the Company. S&B sought approximately $22.3 million in unpaid
invoices and bonuses under the contract and the Company sought in excess of $20
million in contract damages against S&B. In August 2000, the arbitration panel
awarded S&B damages in the amount of $19.2 million plus pre-judgment interest,
attorneys' fees and costs, reserving decision on the amount of fees and costs.
In February 2001, the arbitration panel issued its final award, granting S&B
fees and costs in the amount of $3.7 million in addition to the damages
previously awarded. The Company is appealing the award in Texas state court,
seeking reversal or modification of the award on grounds that it was based in
part on erroneous conclusions of law. A hearing on the appeal was held on June
21, 2001, but no decision has been rendered. Settlement discussions are
continuing between the parties. The Company has accrued $22 million for the
arbitration award based in part on evaluations provided by its outside legal
counsel.

       The Company continually reviews its estimates of potential environmental
and other contingent liabilities. However, no assurance can be given that all
potential liabilities arising out of the Company's present or past operations
have been identified or fully assessed or that the amounts that might be
required to remediate such conditions will not be significant to the Company.

7.     PLANT CLOSING/RESTRUCTURING COSTS

       The Company incurred plant closing/restructuring costs of $29.8 million
during the three months ended June 30, 2001 resulting from the closure of its
styrene production unit and the concurrent cost restructuring and elimination
initiative, both of which were announced on April 23, 2001. Management
anticipates that the closure and restructuring program, which began in the
second quarter of 2001 and should be substantially completed in the third
quarter of 2001, together will result in the reduction of approximately 97
regular employees across all business functions and operating units. When the
program is fully implemented, the Company expects annualized pretax savings in
operating expenses of approximately $20.0 million. The Company expects to
complete implementation of the program by the end of 2001.
<PAGE>

8.     SUBSEQUENT EVENT

       On July 31, 2001, the Company announced the restructuring of its
maintenance and technical service functions. It is estimated that approximately
70 jobs will be eliminated. A one-time charge related to these efforts will be
recorded in the third quarter of this year. The cash component of the one-time
charge is expected to be approximately $4 million, which will be disbursed over
the remainder of the year and during the first quarter of 2002.

Item 2.   Management's Discussion and Analysis of Financial Condition and
          Results of Operations

General

       The Company manufactures certain chemical products used in a wide variety
of industrial and consumer-related applications. The Company's principal
products are polyethylene (including low density polyethylene ("LDPE") and
linear low density polyethylene ("LLDPE")), polypropylene, amorphous
polyalphaolefin ("APAO") and, until April 23, 2001, styrene.

       The markets in which the Company competes are generally cyclical markets
that are sensitive to relative changes in supply and demand as well as general
economic conditions. Historically, these products have experienced alternating
periods of tight supply, rising prices and increased profits followed by periods
of large capacity additions resulting in oversupply, lower selling prices and
lower profits. Certain of the Company's products, such as APAO, are generally
less sensitive to economic cycles. In addition, the Company's polyethylene and
polypropylene businesses are geared toward higher value-added, specialty grades,
which are less sensitive to cyclical swings experienced by commodity grades.

       Principal raw materials purchased by the Company consist of ethane and
propane extracted from natural gas liquids ("NGLs"), propylene and benzene (all
four of which are referred to as "feedstocks") for the polyethylene,
polypropylene and styrene businesses. Management believes the feedstock supplies
available in Odessa, Texas are currently adequate for the Company's
requirements.

Subsequent Event

         On July 31, 2001, the Company announced the restructuring of its
maintenance and technical service functions. It is estimated that approximately
70 jobs will be eliminated. A one-time charge related to these efforts will be
recorded in the third quarter of this year. The cash component of the one-time
charge is expected to be approximately $4 million, which will be disbursed over
the remainder of the year and during the first quarter of 2002.

Results of Operations

Three Months Ended June 30, 2001 Compared to Three Months Ended June 30, 2000

       Revenues

       The Company's revenues decreased $38.0 million to $125.3 million for the
three months ended June 30, 2001 from $163.3 million for the same period in
2000. The major factors contributing to the decrease in revenues were lower
sales prices and volumes in essentially all the Company's product lines. The
lower sales volumes and prices were the outcome of weak economic conditions,
both domestically and in Asia, combined with excess capacity in the industry as
well as high inventories both at producers' levels and in terms of finished
goods. Styrene sales revenue decreased $13.7 million to $14.5 million due to the
permanent closure of the styrene plant and the liquidation of the existing
inventory. Polyethylene sales revenue decreased $19.6 million to $59.5 million
due to weak domestic demand and high customer inventory levels. Average
polyethylene selling prices decreased 11.4%, and volumes decreased by 15.1%,
affected by low demand combined with excess supply and falling raw material
costs. Polypropylene sales
<PAGE>

revenue decreased $4.3 million to $18.4 million due to 5.9% lower sales volumes
and a 13.8% decrease in the average sales price resulting mainly from lower
sales prices in the export market.

       Gross Profit (Loss)

       The Company's gross profit decreased $27.9 million to a loss of $15.8
million for the three months ended June 30, 2001 from profit of $12.1 for the
same period in 2000. The decrease in gross profit was due to higher raw material
costs, which the Company was not able to completely pass on to customers, as
well as higher per-unit manufacturing costs; the latter resulted from the
lowering of production rates in an effort to keep inventory levels in check due
to poor demand as well as factors described above.

       Selling, General and Administrative

       The Company's selling, general and administrative expenses remained
relatively consistent for the three months ended June 30, 2001 as compared to
the same period in 2000, which reflects the relatively fixed nature of these
costs.

       Plant Closing/Restructuring Costs

       The Company incurred a charge of $29.8 million during the three months
ended June 30, 2001 resulting from the closure of its styrene production unit
and the concurrent cost restructuring and elimination initiative, both of which
were announced on April 23, 2001. The closure and restructuring program will be
utilized by the Company to prioritize its initiatives around high-growth areas
of its business, focus on profit contribution, reduce expenses and improve
efficiency in light of macroeconomic and capital spending issues affecting the
petrochemical industry. The restructuring program includes a workforce reduction
at the Odessa Facility, consolidation of excess facilities and restructuring of
certain business functions.

       When the restructuring program is fully implemented, the Company expects
pretax savings in operating expenses will approximate $20.0 million on an
annualized basis. The following paragraphs provide detailed information relating
to the restructuring costs and other special charges and provisions for
inventory which were recorded in the second quarter of 2001.

       Management anticipates that the restructuring program will result in the
reduction of approximately 97 regular employees across all business functions
and operating units. The workforce reductions started in the second quarter of
2001 and will be substantially completed in the third quarter of 2001. The
Company recorded a workforce reduction charge of approximately $5.7 million
relating primarily to severance and fringe benefits. In addition, the number of
temporary and contract workers employed by the Company will also be reduced.

       The Company recorded a charge of $3.6 million relating to the
decommissioning of the styrene production unit and other special charges. The
decommissioning includes the isolation, dismantling and demolition of styrene
unit structures. The Company also recorded a restructuring charge of
approximately $5.4 million for non-cancelable lease costs relating to styrene
railcar rental and cleaning. Property and equipment that was disposed of or
removed from operations resulted in a charge of $9.3 million and consisted
primarily of production equipment. A provision for miscellaneous raw material,
chemical and supply inventories (inventories that became unusable upon closure
of the styrene facility) of $5.3 million was recorded. The Company also recorded
other restructuring costs and special charges of $0.6 million.
<PAGE>

       The restructuring cost and other special charges are recorded on the
balance sheet in accrued liabilities. A summary of the these costs is outlined
as follows (dollars in thousands):

<TABLE>
<CAPTION>
                                                                                              Restructuring
                                            Total           Non-Cash           Cash           Liabilities at
                                           Charge            Charges         Payments         June 30, 2001
                                         ------------     --------------    ------------     -----------------
<S>                                      <C>              <C>               <C>              <C>
Work force reduction                      $    5,681       $        --       $    4,361           $     1,320
Styrene unit decommissioning                   3,601                --              --                  3,601
Non-cancelable lease costs                     5,409                --              399                 5,010
Property and equipment                         9,297              8,989             --                    308
Provision for liquidation of inventory         5,299              2,779           1,635                   885
Other charges                                    560                --              504                    56
                                         -----------      -------------     -----------      ----------------
Total restructuring costs                 $   29,847       $     11,768      $    6,899           $    11,180
</TABLE>

Remaining cash expenditures relating to workforce reductions and completion of
sales agreements will be substantially paid in the third quarter of 2001. The
Company expects to complete implementation of its restructuring program by the
end of 2001.

       Affiliate Interest

       The Company's affiliate interest for the three-month period ended June
30, 2001 was $6.1 million as compared to $6.8 million for the same period in
2000. The average amount outstanding was $65.4 million and $262.4 million for
the affiliate capital lease and intercompany borrowing, respectively, for the
2001 period. The average amount outstanding was $61.3 million and $247.7 million
for the affiliate capital lease and intercompany borrowing, respectively, for
the 2000 period. The average interest rate was 7.83% and 8.33% for the affiliate
capital lease and intercompany borrowing, respectively, for this 2001 period.
The average interest rate was 10.08% for both the affiliate capital lease and
intercompany borrowing for this 2000 period.

       Income Tax Benefit

       The Company's income tax benefit increased $21.6 million to $24.3 million
for the three months ended June 30, 2001 from $2.7 million in the same period in
2000, due to decreased operating results for the reasons stated above.

       Net Loss

       The Company's net loss increased $36.0 million to $39.6 million for the
three months ended June 30, 2001 from $3.6 million for the same period in 2000.
The increase is a result of the reasons stated above.

Six Months Ended June 30, 2001 Compared to Six Months Ended June 30, 2000

       Revenues

       The Company's revenues decreased $60.5 million to $270.1 million for the
six months ended June 30, 2001 from $330.6 million for the same period in 2000,
primarily due to decreases in sales prices and volumes. Polyethylene sales
revenue decreased $31.3 million to $125.6 million, due to a 3.4 cents per pound
decrease in the average sales price and a decrease in sales volume of 14.1% as
polyethylene demand remained weak and industry operating rates were reported
running in the low 90% level. Styrene sales decreased $24.7 million to $31.7
million due to a decrease in sales volume of 49.4% resulting from the closure of
the styrene plant. Polypropylene sales decreased $8.1 million to $37.8 million
due to a decrease in the average sales price of 4.0 cents and a decrease in
sales volume of 10.1%. Olefin sales increased $7.9 million to $60.8 million,
primarily due to an increase in volume of feedstock sales.
<PAGE>

       Gross Profit

       The Company's gross profit decreased $62.7 million to a loss of $42.9
million for the six months ended June 30, 2001 from profit of $19.8 million for
the same period in 2000. The decrease in gross profit was due to higher raw
material costs, which the Company was not able to completely pass on to
customers, as well as higher per-unit manufacturing costs; the latter resulted
from the lowering of production rates in an effort to keep inventory levels in
check due to poor demand as well as factors described above.

       Selling, General and Administrative

       The Company's selling, general and administrative expenses remained
relatively consistent for the six months ended June 30, 2001 as compared to the
same period in 2000, which reflects the relatively fixed nature of these costs.

       Plant Closing/Restructuring Costs

       The Company incurred a charge of $29.8 million during the six months
ended June 30, 2001 resulting from the closure of its styrene production unit
and the concurrent cost restructuring and elimination initiative described in
the Plant Closing/Restructuring Costs paragraph of the Three Months comparison
above.

       Affiliate Interest

       The Company's affiliate interest remained relatively consistent for the
six months ended June 30, 2001 as compared to the same period in 2000. The
average amount outstanding was $64.9 million and $260.3 million for the
affiliate capital lease and intercompany borrowing, respectively, for the 2001
period. The average amount outstanding was $60.8 million and $250.5 million for
the affiliate capital lease and intercompany borrowing, respectively, for the
2000 period. The average interest rate was 8.54% and 9.04% for the affiliate
capital lease and intercompany borrowing, respectively, for this 2001 period.
The average interest rate was 9.79% for both the affiliate capital lease and
intercompany borrowing for this 2000 period.

        Net Loss

       The Company's net loss increased $58.9 million to $69.3 million for the
six months ended June 30, 2001 from $10.4 million for the same period in 2000.
The increase is a result of the reasons stated above.

Liquidity and Capital Resources

       Net cash used in operating activities for the six months ended June 30,
2001 was $67.0 million, as compared to $2.9 million provided by operating
activities in the same period in 2000. This increase was attributable to a
larger net loss which occurred during the 2001 period, partially offset by
non-cash charges related to the retirement of fixed assets and a reduction in
cash used in working capital. The decrease in cash used in working capital was
primarily due to a $25.1 million increase in cash provided by receivables and a
$11.2 million decrease in cash used in inventories and other noncurrent assets,
partially offset by a $23.4 million increase in cash used for accounts payable
and other current liabilities.

       Net cash used in investing activities for the six months ended June 30,
2001 was $6.1 million, as compared to $5.2 million for the same period in 2000.
This increase was attributable to a decrease in the proceeds from the sale of
property, partially offset by a decrease in capital expenditures.

       Net cash provided by financing activities for the six months ended June
30, 2001 was $73.1 million, as compared to $2.3 million for the same period in
2000. The increase was primarily attributable to a net increase in the level of
intercompany borrowings and capital contributions from the Company's parent
during the 2001 period, as compared to the 2000 period.
<PAGE>

       Capital expenditures for the six months ended June 30, 2001 were $6.7
million, a decrease of $2.5 million as compared to the same period in 2000. The
Company expects to spend approximately $6 million during the balance of 2001 on
capital projects.

       A number of potential environmental liabilities exist which relate to
certain contaminated property. In addition, a number of potential environmental
costs relate to pending or proposed environmental regulations. No assurance can
be given that all of the potential liabilities arising out of the Company's
present or past operations have been identified or that the amounts that might
be required to investigate and remediate such sites or comply with pending or
proposed environmental regulations can be accurately estimated. The Company has
approximately $6.1 million accrued in the June 30, 2001 balance sheet as an
estimate of its total potential environmental liability with respect to
investigating and remediating known and assessed site contamination. Extensive
environmental investigation of the groundwater, soil and solid waste management
units has been conducted at the Odessa Facility. Risk assessments have been
completed for a number of these units and corrective measures have been defined
and conducted. If, however, additional liabilities with respect to environmental
contamination are identified, there is no assurance that additional amounts that
might be required to investigate and remediate such potential sites would not
have a material adverse effect on the financial position, results of operations
or cash flows of the Company. In addition, future regulatory developments could
restrict or possibly prohibit existing methods of environmental compliance. At
this time, the Company is unable to determine the potential consequences such
possible future regulatory developments would have on its financial condition.
Management continually reviews its estimates of potential environmental
liabilities. The Company carries Pollution Legal Liability insurance to address
many of the potential environmental liabilities, subject to its terms, limits,
exclusions and deductibles, on both a sudden and accidental basis and on a
gradual basis for occurrences commencing after July 1, 1997 on its operations.
The Company also carries Pollution Legal Liability and Closure and Post Closure
insurance on certain facilities at the Odessa manufacturing location which are
regulated by the TNRCC. This insurance satisfies requirements of the TNRCC
governing operations at this location.

       As of June 30, 2001, the Company owed $280.3 million under the
Intercompany Loan Agreement. Subject to certain terms and conditions and at the
sole discretion of Huntsman Corporation, the Company may in the future borrow
additional amounts under the Intercompany Loan Agreement. Availability of
further advances under the Intercompany Loan Agreement is highly dependent upon
Huntsman Corporation's continued access to the Credit Facilities as well as
Huntsman Corporation's cash flow from operations, capital expenditure
requirements and debt service obligations and is subject to the limitations
imposed by the indenture (the "Indenture") governing the Company's 11-3/4%
Senior Notes (the "Senior Notes"). In addition, also subject to the limitations
imposed by the Indenture, the Company has guaranteed on a secured basis Huntsman
Corporation's senior secured borrowings on a pari passu basis with substantially
all of Huntsman Corporation's domestic subsidiaries.

       As of August 14, 2001, Huntsman Corporation is not in compliance with
certain financial covenants contained in its Credit Facilities, and as a result,
does not have access to the Credit Facilities. Huntsman Corporation and its
lenders are currently discussing amendments to the credit documents governing
the Credit Facilities, which would modify the financial covenants in those
credit documents. Until such amendments are effected, Huntsman Corporation's
lenders could pursue their remedies including acceleration of the senior secured
borrowings, which would cause an acceleration of the Company's obligations under
the Intercompany Loan Agreement. Such acceleration would constitute an event of
default under the Senior Notes. The Company could also be required to make
payment to Huntsman Corporation's lenders pursuant to the Company's guaranty of
the senior secured borrowings. As a result of these considerations, the Company
has reclassified the Intercompany borrowings portion of Affiliate debt to a
current liability.
<PAGE>

       While there can be no assurance that approval of the amendments will be
obtained, the Company believes that the amendments will be approved by Huntsman
Corporation's lenders. If the requisite amendments are effected, the Company
believes that its available sources of liquidity will be adequate to make
scheduled payments of interest on the Senior Notes, to permit anticipated
capital expenditures, to make other payments, including the arbitration award in
the S&B lawsuit discussed in Part II, Item 1 below, and to fund working capital
requirements. However, the ability of the Company to satisfy these obligations
depends on a number of significant assumptions, including but not limited to,
the demand for the Company's products, raw material costs and continued
availability of debt or equity financing under the Intercompany Loan Agreement
or otherwise. If Huntsman Corporation does not secure the anticipated amendments
to the Credit Facilities or if the amendments are not effected within the
desired time, there could result a material adverse effect on the Company's
financial position, liquidity and results of operation.

Changes in Financial Condition

<TABLE>
<CAPTION>
Selected Cash Flow Information (Dollars in
------------------------------
Thousands)                                              June 30, 2001        December 31, 2000        Difference
                                                        -------------        -----------------        ----------
<S>                                                     <C>                  <C>                      <C>
Cash and cash equivalents                               $           -        $               -        $        -
Accounts and notes receivable, net                             18,247                   30,787           (12,540)
Accounts and advances receivable - Affiliates                  29,780                   44,245           (14,465)
Inventories                                                    81,897                   78,707             3,190
Other current assets                                              333                    1,317              (984)
Deferred income taxes                                          12,365                   10,261             2,104
                                                        -------------        -----------------        ----------
    Total current assets                                      142,622                  165,317           (22,695)

Accounts payable                                        $      63,819        $          94,274        $  (30,455)
Accounts payable - Affiliates                                     923                    2,030            (1,107)
Accrued liabilities                                            25,245                   21,941             3,304
Current portion of long-term debt - Affiliate                 280,334                        -           280,334
                                                        -------------        -----------------        ----------
    Total current liabilities                                 370,321                  118,245           252,076

Working capital                                         $    (227,699)       $          47,072        $ (274,771)

Affiliate borrowings                                    $      65,885        $         304,164        $ (238,279)
Other - 11-3/4% Senior Notes due 2004                         174,882                  174,882                 -
                                                        -------------        -----------------        ----------
Total long-term debt                                    $     240,767        $         479,046        $ (238,279)
</TABLE>

       At June 30, 2001, the Company's net working capital position was a
negative $228 million, compared to a positive $47 million at December 31, 2000,
resulting in a decrease of $275 million. The decrease is the result of the
following items: a decrease in trade accounts receivable of $27 million due to
decreasing sales prices and volumes in the polyethylene product line; a decrease
in accounts payable of $31 million due to lower raw material and normal trade
payables; an increase of $3 million in accrued liabilities resulting from the
accrual for plant closure and reorganization costs, partially offset by the
payment of the year 2000 property taxes and lower 2001 property tax accruals;
and the reclassification of Intercompany borrowings of $280 million to Current
portion of long-term debt - Affiliate as discussed in the Liquidity and Capital
Resources paragraph above. The Company believes that it will be able to
reclassify as long-term debt its obligations under the Intercompany Loan
Agreement at such time as Huntsman Corporation secures the amendments to its
credit documents discussed above; however, there can be no assurance that such
amendments will be agreed upon, or if agreed upon, when that will occur.

       For the period from December 31, 2000 to June 30, 2001, total long-term
debt decreased by $238 million. This was the net result of cash used in
operations of $67 million and capital expenditures of $7 million, offset by a
capital contribution of $31 million and the reclassification of Intercompany
borrowings of $280 million.


New Accounting Standards

       On January 1, 2001, the Company adopted SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities." SFAS No. 133, as amended and
interpreted, establishes accounting and
<PAGE>

reporting standards for derivatives and for hedging activities. It requires an
entity to recognize all derivatives as either assets or liabilities in the
statement of financial position and measure those instruments at fair value. The
adoption of SFAS No. 133 did not have an effect on the Company's financial
position as the financial instruments and other contracts held by and entered
into by the Company either do not meet the definition of a derivative or qualify
for the normal purchases and sales exemption.

       On July 20, 2001, the Financial Accounting Standards Board issued SFAS
No. 141, "Business Combinations," and SFAS No. 142, "Goodwill and Other
Intangible Assets." The statements will change the accounting for business
combinations and goodwill in two significant ways. SFAS No. 141 requires that
the purchase method of accounting be used for all business combinations
initiated after June 30, 2001. Use of the pooling-of-interests method will be
prohibited. SFAS No. 142 changes the accounting for goodwill from an
amortization method to an impairment-only approach. Thus, amortization of
goodwill, including goodwill recorded in past business combinations, will cease
upon adoption of that statement, which for the Company will be January 1, 2002.
The Company is currently evaluating the effects of adopting these
pronouncements.

Cautionary Statement for Forward Looking Information

       Certain information set forth in this report contains "forward-looking
statements" within the meaning of federal securities laws. Forward-looking
statements include statements concerning the Company's 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," or "anticipates," or the negative of such terms or other
comparable terminology, or by discussions of strategy. The Company may also make
additional forward-looking statements from time to time. All such subsequent
forward-looking statements, whether written or oral, by the Company or on its
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 its
current expectations and various assumptions. The Company's expectations,
beliefs and projections are expressed in good faith and the Company believes
there is a reasonable basis for them, but there can be no assurance that the
Company's expectations, beliefs and projections will result or be achieved. All
forward-looking statements apply only as of the date made. Except as otherwise
required by law, the Company undertakes no obligation to publicly update or
revise forward-looking statements that 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 the
Company's actual results to differ materially from the forward-looking
statements contained in or contemplated by this report. The following are among
the factors that could cause actual results to differ materially from the
forward-looking statements. There may be other factors, including those
discussed elsewhere in this report, that may cause the Company's actual results
to differ materially from the forward-looking statements. Any forward-looking
statements should be considered in light of these factors.

       .      Inability of Huntsman Corporation to continue to provide liquidity
              to the Company under the Intercompany Loan Agreement or otherwise

       .      Occurrences affecting the Company's ability to obtain funds from
              operations or from debt or equity sources necessary to finance the
              Company's working capital, capital expenditures and other
              investments

       .      The cyclical nature of the Company's business

       .      Changes in the availability and/or price of feedstocks
<PAGE>

       .      Environmental and safety requirements, including permitting,
              enforcement activities and the possibility of related litigation

       .      Changes in product mix and utilization of production facilities

       .      Unavailability of, and substantial delays in, transportation of
              raw materials and products

       .      Inability to obtain new customers or retain existing ones

       .      Significant changes in competitive factors affecting the Company

       .      Significant changes from expectations in actual capital
              expenditures and operating expenses and unanticipated project
              delays

       .      Significant changes in the Company's relationship with its
              employees and the potential adverse effects if labor disputes or
              grievances were to occur

       .      Significant changes in tax rates or policies or in rates of
              inflation or interest

       .      Changes in economic conditions

       .      Changes in management or control of the Company

       .      Changes in accounting principles and/or the application of such
              principles to the Company


Item 3.       Quantitative and Qualitative Disclosures About Market Risk

       The Company has interest and market risk with respect to certain
intercompany debt, which bears interest at floating rates. The Company's
remaining long-term debt bears interest at fixed rates.

       The Company's exposure to foreign currency market risk is minimal because
sales prices for the Company's products are typically denominated in U.S.
dollars.

       The Company is exposed to commodity price market risk. The Company's
exposure to changing commodity prices is limited by the fact that substantially
all raw materials are acquired at posted or market related prices, and,
generally, sales prices for the Company's finished products are at market prices
which reflect changes in underlying commodity prices. The Company typically does
not enter into fixed-price long-term contracts. The Company also typically does
not hedge against commodity price market risk.

       The following table summarizes the Company's fixed and variable rate debt
obligations by contractual maturity date as of June 30, 2001:

<TABLE>
<CAPTION>
Debt (Dollars in Thousands)                   2002           2004         Thereafter        Total        Fair Value
---------------------------                   ----           ----         ----------        -----        ----------
<S>                                         <C>           <C>             <C>             <C>            <C>
Fixed Rate.............................          -        174,882                  -      174,882           156,519
     Average interest rate.............          -          11.75%                 -        11.75%
Variable Rate..........................     65,885              -            280,334      346,219           346,219
     Average interest rate (Prime rate
     plus 0.5% to 2.0%)................       7.50%             -               8.00%        7.90%
</TABLE>
<PAGE>

                           PART II - OTHER INFORMATION

Item 1.  Legal Proceedings

     In March 1999, in connection with a construction contract dispute, an
arbitration proceeding was initiated by S&B Engineers and Constructors, Ltd.
("S&B") against the Company. S&B sought approximately $22.3 million in unpaid
invoices and bonuses under the contract and the Company sought in excess of $20
million in contract damages against S&B. In August 2000, the arbitration panel
awarded S&B damages in the amount of $19.2 million plus pre-judgment interest,
attorneys' fees and costs, reserving decision on the amount of fees and costs.
In February 2001, the arbitration panel issued its final award, granting S&B
fees and costs in the amount of $3.7 million in addition to the damages
previously awarded. The Company is appealing the award in state court in Texas,
seeking reversal or modification of the award on grounds that it was based in
part on erroneous conclusions of law. A hearing on the appeal was held on June
21, 2001, but no decision has been rendered. Settlement discussions are
continuing between the parties. The Company has accrued $22 million for the
arbitration award based in part on evaluations provided by its outside legal
counsel.

     The Company is a party to various other lawsuits arising in the ordinary
course of business and does not believe that the outcome of any of these
lawsuits will have a material adverse effect on the Company's financial
position, results of operations or cash flows.


Item 6.  Exhibits and Reports on Form 8-K

     (a) Exhibits

         N/A

     (b) Reports Submitted on Form 8-K:

         There were no reports submitted on Form 8-K during the second
quarter of 2001.
<PAGE>

                                    SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.


                                          HUNTSMAN POLYMERS CORPORATION



                                          /s/ J. Kimo Esplin
                                          ------------------------------------
                                          J. KIMO ESPLIN
                                          Senior Vice President and
                                          Chief Financial Officer
                                          (Authorized Signatory and Principal
                                          Financial and Accounting Officer)


Date:  August 14, 2001