EDGAR 10-K Filing

Company CIK: 1307954
Filing Year: 2021
Filename: 1307954_10-K_2021_0001437749-21-002772.json

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ITEM 1. BUSINESS
ITEM 1. BUSINESS
General
We are a global manufacturer of differentiated organic chemical products. Our Company, a Delaware corporation, was formed in 2004 to hold the Huntsman businesses, which were founded by Jon M. Huntsman. Mr. Huntsman founded the predecessor to our Company in 1970 as a small polystyrene plastics 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 wholly-owned subsidiary. Huntsman International is a Delaware limited liability company and was formed in 1999.
Our principal executive offices are located at 10003 Woodloch Forest Drive, The Woodlands, Texas 77380, and our telephone number at that location is (281) 719-6000.
Recent Developments
COVID-19 Update
The outbreak of the coronavirus disease (“COVID-19”) has spread from China to many other countries, including the United States (“U.S.”). In March 2020, the World Health Organization characterized COVID-19 as a pandemic. As of December 31, 2020, there have not been any significant interruptions in our ability to provide our products and support to our customers. However, the COVID-19 pandemic has significantly impacted economic conditions throughout the U.S. and the world, including the markets in which we operate. Demand for our products declined at a rapid pace in the second quarter 2020, which led to a meaningful adverse impact on our revenues and financial results. Although we have experienced improved conditions in most of our core markets in the second half of 2020, there continues to be many uncertainties regarding the impact of the COVID-19 pandemic, including the scope of scientific and health issues, the anticipated duration of the pandemic and the extent of local, regional and worldwide economic, social and political disruption. Given such uncertainties, it is difficult to estimate the magnitude COVID-19 may impact our future business, but we expect any adverse impact to continue for some time.
In response to the impact of COVID-19, we have implemented, and may continue to implement, cost saving initiatives, including:
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suspended merit and general wage increases that customarily would have occurred at the end of the first quarter of 2020;
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implemented a temporary hiring freeze for all non-business critical positions;
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accelerated integration efforts related to the integration of Icynene-Lapolla and CVC Thermoset Specialties in order to more expeditiously capture related synergies;
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implemented restructuring programs in our Polyurethanes segment to reorganize our spray polyurethane foam business to better position this business for efficiencies and growth in coming years and to optimize our downstream footprint;
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implemented a restructuring program in our Performance Products segment, primarily related to workforce reductions, in response to the sale of our chemical intermediates businesses, which included PO/MTBE, and our surfactants businesses (collectively, "Chemical Intermediates Businesses" to Indorama Venture Holdings L.P. ("Indorama");
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implemented restructuring programs in our Advanced Materials segment, primarily related to workforce reductions in connection with our acquisition of CVC Thermoset Specialties and the alignment of the segment’s commercial organization and optimization of the segment’s manufacturing processes; and
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implemented restructuring programs in our Textile Effects segment to rationalize and realign structurally across various functions and certain locations within the segment.
For more information regarding our 2020 restructuring activities, see “Note 13. Restructuring, Impairment and Plant Closing Costs (Credits)” to our consolidated financial statements.
Redemption of the 2021 Senior Notes
On January 15, 2021, we redeemed in full €445 million (approximately $541 million) in aggregate principal amount of our 5.125% senior notes due 2021 ("2021 Senior Notes") at the redemption price equal to 100% of the principal amount of the notes, plus accrued and unpaid interest to, but not including, the redemption date. In connection with this redemption, we expect to incur an incremental cash tax liability of approximately $15 million in the first quarter of 2021 related to foreign currency exchange gains.
Acquisition of Gabriel Performance Products
On January 15, 2021, we completed the acquisition of Gabriel Performance Products ("Gabriel"), a North American specialty chemical manufacturer of specialty additives and epoxy curing agents for the coatings, adhesives, sealants and composite end-markets, from funds affiliated with Audax Private Equity in an all-cash transaction of approximately $250 million, subject to customary closing adjustments, funded from available liquidity. The acquired business will be integrated into our Advanced Materials segment.
Sale of Assets at our Basel, Switzerland Site
In November 2020, we entered into a sale and leaseback agreement to sell certain properties in Basel, Switzerland for approximately CHF 67 million (approximately $73 million) and to lease those properties back for five years. This transaction resulted in a pretax gain of approximately CHF 30 million (approximately $33 million).
Sale of India-Based Do-It-Yourself Consumer Adhesives Business
On November 3, 2020, we completed the sale of the India-based do-it-yourself consumer adhesives ("DIY") business, previously part of our Advanced Materials segment, to Pidilite Industries Ltd. and received cash of approximately $257 million. Under the terms of the agreement, we may receive up to approximately $28 million of additional cash under an earnout within 18 months if the business achieves certain sales revenue targets in line with the DIY business' 2019 performance. In connection with this sale, we recognized a pretax gain of $247 million in the fourth quarter of 2020, which was recorded in gain on sale of India-based DIY business in our consolidated statements of operations.
Sale of Venator Interest
On December 23, 2020, we completed the sale of approximately 42.4 million ordinary shares of Venator Materials PLC (“Venator”) to funds advised by SK Capital Partners, LP. We received approximately $99 million in cash, which included $8 million for a 30-month option described below. In addition to the cash proceeds received from the sale, we achieved immediate cash tax savings of approximately $150 million by offsetting the capital loss on the sale of Venator shares against the capital gain realized on the sale of our Chemical Intermediates Businesses. See “Note 4. Discontinued Operations and Business Dispositions-Separation and Deconsolidation of Venator” to our consolidated financial statements.
Concurrently with the sale of Venator ordinary shares, we entered into an option agreement, pursuant to which we granted an option to funds advised by SK Capital Partners, LP to purchase the remaining approximate 9.7 million ordinary shares we hold in Venator at $2.15 per share. The option will expire on June 23, 2023 and will not be exercisable so long as such exercise would result in a default or an "Event of Default" under Venator’s Term Loan Credit Agreement and Revolving Credit Agreement.
In connection with the 2017 initial public offering of Venator, we recorded a receivable of approximately $34 million related to certain income tax benefits that was reduced upon completion of the sale of Venator shares to SK Capital Partners, LP due to a change of control limitation on specific Venator tax attributes. Accordingly, we wrote off approximately $31 million of this receivable upon completion of the sale of the Venator ordinary shares in December 2020.
Other Significant Developments During 2020
Other significant developments that occurred during 2020 were as follows:
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In May 2020, we completed the acquisition of CVC Thermoset Specialties, a North American specialty chemical manufacturer serving the industrial composites, adhesives and coatings markets ("CVC Thermoset Specialties Acquisition".) CVC Thermoset Specialties operates two manufacturing facilities located in Akron, Ohio and Maple Shade, New Jersey. The acquired business was integrated into our Advanced Materials segment. For more information, see “Note 3. Business Combinations and Acquisitions-Acquisition of CVC Thermoset Specialties” to our consolidated financial statements.
● In February 2020, we completed our acquisition of Icynene-Lapolla, a leading North American manufacturer and distributor of spray polyurethane foam insulation systems for residential and commercial applications (“Icynene-Lapolla Acquisition”). The acquired business was integrated into our Polyurethanes segment. For more information, see “Note 3. Business Combinations and Acquisitions-Acquisition of Icynene-Lapolla” to our consolidated financial statements.
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In January 2020, we completed the sale of our Chemical Intermediates Businesses to Indorama Ventures Holdings L.P. (“Indorama”) in a transaction valued at approximately $2 billion, comprised of a cash purchase price of approximately $1.92 billion and the transfer of approximately $72 million in net underfunded pension and other post-employment benefit liabilities. For more information, see “Note 4. Discontinued Operations and Business Dispositions-Sale of Chemical Intermediates Businesses” to our consolidated financial statements.
Overview
We are a global manufacturer of differentiated organic 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, insulation, medical, packaging, coatings and construction, power generation, refining, synthetic fiber, textile chemicals and dyes industries. We are a leading global producer in many of our key product lines, including MDI, amines, maleic anhydride, epoxy-based polymer formulations, textile chemicals and dyes. Our revenues for the years ended December 31, 2020, 2019 and 2018 were $6,018 million, $6,797 million and $7,604 million, respectively.
We operate in four segments: Polyurethanes, Performance Products, Advanced Materials and Textile Effects. In August 2017, we separated our Titanium Dioxide and Performance Additives business (the “P&A Business”) through an initial public offering (“IPO”) of ordinary shares of Venator. In December 2020, we began to account for our remaining ownership of 9,688,761 Venator ordinary shares as an investment in equity securities that are marked to fair value with changes in fair value reported in earnings. For more information, see “Note 4. Discontinued Operations and Business Disposition-Separation and Deconsolidation of Venator” to our consolidated financial statements. On January 3, 2020, we completed the sale of our Chemical Intermediates Businesses to Indorama, and beginning in the third quarter of 2019, we reported the results of our Chemical Intermediates Businesses as discontinued operations. For more information, see “Note 4. Discontinued Operations and Business Dispositions-Sale of Chemical Intermediates Businesses” to our consolidated financial statements.
Our Products
All four of our segments produce differentiated organic chemical products. Growth in our differentiated products has been driven by the substitution of our products for other materials and by the level of global economic activity. Accordingly, the profitability of our differentiated products has been somewhat less influenced by the cyclicality that typically impacts the petrochemical industry.
(1)
Percentage allocations in this chart do not give effect to Corporate and other unallocated items and eliminations. For a reconciliation of adjusted EBITDA to net income attributable to Huntsman Corporation and cash provided by operating activities, see “Part II. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations-Results of Operations.”
The following table identifies the key products, principal end markets and applications, representative customers, raw materials and representative competitors of each of our business segments:
Product Line
End Markets / Applications
Representative Customers
Raw Materials
Representative Competitors
MDI
Polyurethane chemicals are used to produce rigid and flexible foams, as well as coatings, adhesives, sealants and elastomers. They are also used in refrigeration and appliance insulation, construction products, automotive, footwear, furniture, cushioning and specialized engineering applications.
Benzene =>Nitrobenzene and Aniline
Polyurethanes Polyols
Polyols are combined with MDI and other isocyanates to create a broad spectrum of polyurethane products, such as rigid foam, flexible foam and other non-foam applications.
BMW, Electrolux, Firestone, Haier, Henkel, Lear, Louisiana Pacific, Norbord and Recticel
PO, polyester polyols and EO
Wanhua Chemical Group, BASF,
Dow and Covestro
TPU
TPU is a high-quality, fully-formulated thermal plastic that can be tailored with unique qualities. It can be used in injection molding and small components for automotive and footwear. It is also extruded into films, wires and cables for use in the coatings, adhesives, sealants and elastomers markets.
Isocyanate (such as MDI) and a polyol
Performance Products
Amines
Amines are a family of intermediate chemicals that are valued for their properties as a reactive agent, emulsifier, dispersant, detergent, solvent or corrosion inhibitor. Amines are used in polyurethane foam, fuel and lubricant additives, paints and coatings, composites, gas treatment, construction materials and semiconductors.
Afton, Bayer, Chevron Oronite, DuPont, Evonik, Hexion, Infineum, Ingevity, Lubrizol, Olin, PPG, Sherwin-Williams and Quadra
EO, PO, glycols, ethylene dichloride, caustic soda, ammonia, hydrogen, methylamines and acrylonitrile
BASF, Delamine, Dow, Eastman, Evonik, Nouryon and Tosoh
Maleic anhydride
Maleic anhydride is an intermediate chemical used primarily to produce unsaturated polyester resins (UPRs). UPRs are mainly used in the production of fiberglass reinforced resins for marine, automotive and construction products. Maleic anhydride is also used in the production of lubricants, food additives and food acidulants.
Andercol, Chevron Oronite, Cranston, Dixie, Ingevity, Lubrizol, MFG Chemical, Polynt-Reichhold and Tate & Lyle
Normal butane
Lanxess, INEOS, Bartek and AOC
Advanced Materials
Technologically- advanced epoxy, acrylic and polyurethane and acrylonitrile-butadiene-based polymer formulations
Aerospace and industrial adhesives; composites for aerospace, automotive, oil and gas and wind power generation; electrical power transmission and electric vehicles; automotive industrial and consumer electronics; civil engineering.
Azelis, Bodo Moeller, Bosch, Freeman, Hilti, Schneider, Siemens, Speed Fair, Syngenta and Viasystems
BLR, epichlorohydrin, amines, polyols, isocyanates, acrylic materials, hardeners, fillers, butadiene and acrylonitrile
Henkel, Sika, 3M, DuPont, Hexion, Elantas, Olin, Xiongrum and Tayo
High performance thermoset resins and curing agents and toughening agents, and carbon nanotubes additives
High performance chemical building blocks sold to formulators who develop formulations for aerospace, automotive, oil and gas, coatings, construction, electronics and electrical insulation applications.
Cytec, Hexcel and Toray
Epichlorohydrin, amines, phenols, aminophenols, fatty acids, butadiene and acrylonitrile
Hexion, Olin, Sumitomo, Evonik, BASF, Cardolite, and Kaneka
Base liquid resins (BLR) and base solid resins
BLR is used internally and is the basic building block for many of our downstream products. Approximately 63% of what we produce is used internally and the rest is sold into the merchant market.
Akzo, Omya and Sherwin Williams
Epichlorohydrin, bisphenol A, BLR, MDA and phenol and aminophenols
Olin, Hexion, Kukdo and NanYa
Textile Effects
Chemicals and dyes
Textile dyes add color to textiles from cotton, polyester, wool, acrylic and nylon, while textile chemicals improve the performance characteristics of the textile. These are used in apparel, home and technical textiles. Apparel textiles includes performance apparel, casual wear, formal and intimate apparel. Home and institutional textiles include textiles that are used within the home or institutions such as hotels. Functional and technical textiles include automotive textiles, carpet, military fabrics protective wear, nonwoven and other technical fabrics.
Esquel Group, Fruit of the Loom, Guilford Mills, Hanesbrands, Kahatex, Nice Dyeing, Sage Automotive, Tencate, Toray Group, Welspun Group, Y.R.C. Textiles and Zaber and Zubair
Thousands of raw materials, with no one representing more than 5% of raw material costs
Dyes: Archroma, DyStar, Longsheng, Runtu and Jihua
Chemicals: Archroma, Nicca, Transfar/Tannatex, CHT and Rudolf
Polyurethanes
General
We are a leading global manufacturer and marketer of a broad range of polyurethane chemicals, including MDI products, polyols and TPU (each discussed in more detail below under “-Products and Markets”). Polyurethane chemicals are used to produce rigid and flexible foams, as well as coatings, adhesives, sealants and elastomers. We focus on the higher-margin, higher-growth markets for specialty MDI and MDI-based polyurethane systems. Volume growth in our Polyurethanes segment has been driven primarily by global economic activity and the continued substitution of MDI-based products for other materials across a broad range of applications. We operate three major polyurethane manufacturing facilities in the U.S., Europe and China. We also operate 30 strategically located downstream facilities, 26 of them are polyurethane formulation facilities, commonly referred to in the chemical industry as “systems houses,” located in close proximity to our customers worldwide, which enables us to focus on customer support, technical service and a differentiated product offering. We also operate two specialty polyester polyol manufacturing facilities focused on the insulation market and three downstream TPU manufacturing facilities in the U.S., Europe and China.
Our customers produce polyurethane products through the combination of an isocyanate, such as MDI, with polyols, which are derived largely from PO and EO. We are able to produce over 2,500 distinct MDI-based polyurethane products by modifying the MDI molecule through varying the proportion and type of polyol used and by introducing other chemical additives to our MDI formulations. As a result, polyurethane products, especially those derived from MDI, are continuing to replace traditional products in a wide range of end-use markets, including insulation in construction and appliances, cushioning for automotive and furniture, coatings, adhesives, wood binders for construction and furniture, footwear and other specialized engineering applications.
We operate a world-scale integrated polyurethane formulations facility and a world-scale research and development campus in China to service our customers in the critical Chinese market, the largest MDI market in the world, and we will support the long-term demand growth that we believe this region will continue to experience. Additionally, we entered into an agreement with Sinopec to form a joint venture to build and operate a world-scale PO/MTBE plant in Nanjing, China utilizing proprietary PO/MTBE manufacturing technology. We own a 49% interest in the joint venture and account for our interest in the joint venture as an equity method investment.
In May 2020, we rebranded our leading spray polyurethane foam (“SPF”) business as Huntsman Building Solutions (“HBS”). HBS was formed through our acquisitions of Icynene-Lapolla in 2020 and Demilec in 2018. Our SPF products offer significant environmental benefits, as our proprietary manufacturing process transforms low quality PET plastic bottles into highly effective energy-saving polyurethane insulation. HBS offers attractive growth potential as the business turns our lower margin polymeric MDI, the other key ingredient in SPF formulations, into higher margin specialized SPF products.
Products and Markets
MDI is used primarily in rigid foam applications and in a wide variety of customized, higher-value flexible foam as well as coatings, adhesives, sealants and elastomers. Polyols, including polyether and polyester polyols, are used in conjunction with MDI in rigid foam, flexible foam and other non-foam applications. The following chart illustrates the range of product types and end uses for polyurethane chemicals. We produce MDI, polyols and TPU products and do not produce TDI products.
Polyurethane chemicals are sold to customers who combine the chemicals to produce polyurethane products. Depending on their needs, customers will use either component polyurethane chemicals produced for mass sales or polyurethane systems tailored for their specific requirements. By varying the blend, additives and specifications of the polyurethane chemicals, manufacturers are able to develop and produce a breadth and variety of polyurethane products.
Our strategy is focused on growing our differentiated product offering (specialty MDI and polyols, formulated MDI systems and TPU), which requires a greater emphasis on formulating capability to help our downstream customers to meet the desired effect required in their applications. These differentiated products tend to require technical solutions, offer higher margins, lower volatility and are less dependent on industry utilization rates compared to sales of component MDI or component polyols.
MDI. MDI has grown substantially over the past three decades, increasing by a factor of 6% CAGR, well in excess of global GDP. MDI has a substantially larger market size and a higher growth rate than other polyurethane isocyanates. This is primarily because MDI can be used to make polyurethanes with a broader range of properties and can therefore be used in a wider range of applications. We believe that MDI and formulated MDI systems, which combine MDI and polyols, will continue to grow at approximately double the rate of global GDP driven by the mega trends of energy management, food preservation, demographics and urbanization/transportation. MDI offers key products benefits of energy efficiency, comfort and durability aligned with these megatrends. We believe that MDI and formulated MDI systems will continue to substitute for alternative materials such as fiberglass in insulation, phenol formaldehyde in wood binders and TDI in automotive and furniture. Specialty cushioning and insulation applications, thermoplastic polyurethanes and adhesives and coatings will further contribute to the continued growth of MDI. MDI experiences some seasonality in its sales reflecting its exposure to seasonal construction-related end markets such as insulation and composite wood products. Sales generally peak during the spring and summer months in the northern hemisphere, resulting in greater sales volumes during the second and third quarters of the year.
TPU. TPU is a high-quality, fully formulated thermal plastic derived from the reaction of MDI or an aliphatic isocyanate with polyols to produce unique qualities such as durability, flexibility, strength, abrasion-resistance, shock absorbency and chemical resistance. We can tailor the performance characteristics of TPU to help meet the specific requirements of our customers. TPU is used in injection molding and small components for the automotive and footwear industries. It is also extruded into films for apparel, wires and cables for industrial use and in a wide variety of applications in the coatings, adhesives, sealants and elastomers markets.
Polyols. Polyols are combined with MDI and other isocyanates to create a broad spectrum of formulated polyurethane systems. Demand for specialty polyols has been growing at approximately the same rate at which MDI consumption has grown.
Aniline. Aniline is an intermediate chemical used primarily to manufacture MDI. The majority of our aniline is consumed internally with some sold to third parties. We believe that the lack of a significant spot market for aniline means that in order to remain competitive, MDI manufacturers must either be integrated with an aniline manufacturing facility or have a long-term, cost-competitive aniline supply contract.
Our strategic focus is on growing our differentiated (specialty MDI and polyols, formulated MDI-based systems and TPU) product offerings and the diagram below provides an overview of that focus with an approximation of the number of grades, formulations, products and stock keeping units which we produce and sell.
Sales and Marketing
We market our polyurethane chemicals to over 7,000 customers in more than 90 countries. Our sales, marketing and technical resources are organized to support major regional markets and key end-use markets, some of which require a coordinated global approach, such as key accounts across the automotive sector. These key end-use markets include the commercial and residential insulation, appliance, automotive, footwear, furniture and coatings, adhesives, sealants and elastomers industries. We sell both directly and indirectly to customers, the latter via a network of distributors and agents who in turn sell our products to customers who cannot be served as cost effectively by our internal sales groups.
We provide a wide variety of polyurethane solutions as components (i.e., the isocyanate or the polyol) or in the form of “systems” in which we provide the total isocyanate and polyol formulation to our customers. Our ability to deliver a range of polyurethane solutions and technical support, which can be tailored for the needs of our customers, is critical to our long-term success. We have strategically located our downstream polyurethane systems houses close to our customers, enabling us to focus on customer support and technical service. We believe this customer support and technical service system contributes to customer retention and also provides opportunities for identifying further product and service needs of customers.
Our strategy is to grow the number and capability of our downstream facilities both organically and inorganically. As a result, we have made a number of “bolt-on” acquisitions in recent years to expand our downstream footprint and align with our strategic intent.
We believe that the extensive market knowledge and industry experience of our sales teams and technical experts, in combination with our strong emphasis on customer relationships, have facilitated our ability to establish and maintain long-term customer supply positions. Our sales strategy is to continue to increase sales to existing customers and to attract new customers by providing innovative solutions, quality products, reliable supply, competitive prices and superior customer service.
Manufacturing and Operations
Our world-scale MDI production facilities are located in Geismar, Louisiana; Rotterdam, The Netherlands; and through our joint ventures in Caojing, China. These facilities receive aniline, which is a primary material used in the production of MDI, from our facilities located in Geismar, Louisiana; Wilton, U.K.; and Caojing, China. We believe that this relative scale and product integration of our large facilities is necessary to provide cost competitiveness in MDI production. The following table sets forth the annual production capacity of polyurethane chemicals at select polyurethanes facilities:
MDI
Polyols
TPU
Aniline
Nitrobenzene
(millions of pounds)
Caojing, China
(1)
Geismar, Louisiana
1,060
(2)
1,000 (2)
Houston, Texas
Jinshan, China
Kuan Yin, Taiwan
Osnabrück, Germany
Ringwood, Illinois
Rotterdam, The Netherlands
1,036
Wilton, U.K.
1,045
Total
2,921
1,489
2,045
(1) Represents our share of capacity from SLIC.
(2) Represents our approximately 78% share of capacity under our consolidated Rubicon LLC manufacturing joint venture with Lanxess AG.
At our Geismar, Rotterdam and Caojing facilities we utilize sophisticated proprietary technology to produce MDI. This technology contributes to our position as a low-cost MDI producer.
Joint Ventures
Rubicon Joint Venture. Lanxess AG (“Lanxess”) is our joint venture partner in Rubicon LLC, which owns aniline, nitrobenzene and DPA manufacturing facilities in Geismar, Louisiana. We are entitled to approximately 78% of the nitrobenzene and aniline production capacity of Rubicon LLC, and Lanxess is entitled to 100% of the DPA production. In addition to operating the joint venture’s aniline, nitrobenzene and DPA facilities, Rubicon LLC operates our wholly-owned MDI, polyol and maleic anhydride facilities at Geismar and is responsible for providing other auxiliary services to the entire Geismar complex. As a result of this joint venture, we are able to achieve greater scale and lower costs for our products than we would otherwise have been able to obtain. Rubicon LLC is consolidated in our financial statements.
Chinese MDI Joint Ventures. We are involved in two related joint ventures which operate MDI production facilities in Caojing, China. SLIC, our manufacturing joint venture with BASF and three Chinese chemical companies, produces MNB, aniline and crude MDI. We effectively own 35% of SLIC and account for our investment under the equity method. HPS, our splitting joint venture with Shanghai Chlor-Alkali Chemical Company, Ltd, manufactures pure MDI, polymeric MDI, MDI variants and formulated MDI systems. We own 70% of HPS and it is consolidated in our financial statements. These projects have been funded by a combination of equity invested by the joint venture partners and borrowed funds. We completed capacity expansions of these facilities in the first quarter of 2018. The total production capacity of the SLIC facilities is 1,280 million pounds per year of MDI, of which HPS is entitled to 825 million pounds.
Chinese PO/MTBE Joint Venture. In November 2012, we entered into an agreement to form a joint venture with Sinopec. The joint venture involved the construction and operation of a PO/MTBE facility in China. Under the joint venture agreement, we hold a 49% interest in the joint venture and Sinopec holds a 51% interest. Beneficial commercial operations began during the second half of 2017.
Raw Materials
The primary raw materials for MDI-based polyurethane chemicals are benzene and PO. Benzene is a widely available commodity that is the primary feedstock for the production of MDI and aniline. Historically, benzene has been the largest component of our raw material costs. We purchase benzene from third parties to manufacture nitrobenzene and aniline, almost all of which we then use to produce MDI.
In connection with the sale of the Chemical Intermediates Businesses to Indorama, we entered into a strategic agreement for the supply of PO in North America. In China, the Chinese PO/MTBE joint venture supplies PO into our downstream China business. The strategic supply of PO gives us access to competitively priced PO and the opportunity to develop polyols that enhance our range of MDI products.
Competition
Our major competitors in the polyurethane chemicals market include BASF, Covestro, Dow and Wanhua Chemical Group. While these competitors and others produce various types and quantities of polyurethane chemicals, we focus on MDI and MDI-based formulated polyurethane systems. Our downstream business is fragmented with different competitors in various markets and regions. Our competitors in downstream markets include Kingspan, Carlisle and Coim. Our polyurethane chemicals business competes in two basic ways: (1) where price is the dominant element of competition, our polyurethane chemicals business differentiates itself by its high level of customer support, including cooperation on technical and safety matters; and (2) elsewhere, we compete on the basis of product performance, our ability to react quickly to changing customer needs and providing customers with innovative solutions to their needs.
Performance Products
General
Our Performance Products segment has leading global positions in the manufacture and sale of amines and maleic anhydride and serves a wide variety of consumer and industrial end markets. Our Performance Products segment is organized by region and product family: amines and maleic anhydride (including licensing).
We produce a wide range of amines, many of which are sold into specialty markets such as epoxy curing agents, oil exploration and production, agrochemicals, and fuel and lubricant additives. We believe we are the largest global producer of polyetheramines, one of the largest producers of 2-(2-amino ethoxy) ethanol, sold under our DGA™ brand, the largest global producer making the full range of ethyleneamines, the second largest producer of morpholine and a leading global producer of low emission polyurethane catalysts. We are the only producer and largest supplier of propylene carbonate and ethylene carbonate in North America. Many of the markets for these products have growth rates in excess of global GDP.
We believe we are the largest global producer of maleic anhydride, a highly versatile chemical intermediate that is used to produce UPRs, which are mainly used in the production of fiberglass reinforced resins for marine, automotive and construction products. Maleic anhydride is also used in the production of lubricants, food additives and artificial sweeteners. We are also the leading licensor of maleic anhydride manufacturing technology.
We produce a variety of products at 10 Performance Products manufacturing facilities in North America, Europe, the Middle East and Asia.
Products and Markets
Amines. Amines are a family of intermediate chemicals that are produced by reacting ammonia, or an alkylamine, with various ethylene and propylene derivatives. Generally, amines are valued for their properties as a reactive agent, emulsifier, dispersant, solvent or corrosion inhibitor. Growth in demand for amines is highly correlated with GDP growth. However, certain segments of the amines market, such as polyetheramines, have historically grown at rates in excess of GDP growth due to new product development, technical innovation and end-use substitution. As amines are generally sold based upon the performance characteristics that they provide to customer-specific end-use applications, pricing does not generally fluctuate directly with movements in underlying raw materials. Our amines business is organized around the following product groups:
Product Group
Applications
Polyetheramines
Epoxy composites, polyurethane foams and insulation, construction and flooring, paints and coatings, lubricant and fuel additives, adhesives, agrochemicals, oilfield chemicals, printing inks and pigment dispersion
Ethyleneamines
Chemical building block used in lubricant and fuel additives, epoxy hardeners, wet strength resins, chelating agents and fungicides
Specialty amines, including DGA™ Agent and JEFFCAT® catalysts
Gas treating, agricultural chemicals, personal care, lubricant and fuel additives, polyurethane foams, fabric softeners, paints and coatings, refinery processing and water treating
Polyetheramines are produced by reacting polyol with ammonia. They provide sophisticated performance characteristics as an additive in the manufacture of highly customized epoxy formulations, enabling customers to penetrate new markets and substitute for traditional curing materials.
Our ethyleneamines are manufactured by reacting EDC and caustic soda with ammonia to produce a range of various ethyleneamines homologues having different molecular weights. Most other producers utilize a reductive amination process, which yields a light slate of ethyleneamines. We believe our heavier slate of homologues allows access to a greater range of markets.
Our amines are used in a wide variety of mainly industrial applications, including composites, paints and coatings, polyurethane foam, fuel and lubricant additives, and solvents. Our key amines customers include Afton, Bayer, Chevron Oronite, DuPont, Evonik, Hexion, Infineum, Ingevity, Lubrizol, Olin, PPG, Sherwin-Williams and Quadra.
Maleic Anhydride (including licensing). Maleic anhydride is a highly versatile chemical intermediate that is used to produce UPRs, which are the main ingredient in fiberglass reinforced resins used for marine and automotive applications and commercial and residential construction products. Maleic anhydride is also used in the production of lubricants, food additives and artificial sweeteners.
Product Group
Applications
Maleic anhydride
Boat hulls, automotive, construction, lubricant and fuel additives, countertops, agrochemicals, paper and food additives
Maleic anhydride and other technology licensing
Maleic anhydride and 1-4 butanediol (BDO) and other process technologies
Maleic anhydride is produced by oxidizing either benzene or normal butane through the use of a catalyst. Our maleic anhydride technology is a proprietary fixed bed butane-based process with a solvent recovery and refining system. We believe that our process is superior in the areas of feedstock and energy efficiency and solvent recovery. The maleic anhydride-based route to BDO manufacture is currently the preferred process technology and is favored over the other routes, which utilize PO, butadiene or acetylene as feedstocks. As a result, the growth in demand for BDO supports growing demand for our maleic anhydride technology. Generally, changes in price have resulted from a combination of changes in industry capacity utilization and underlying raw material costs.
We license our maleic anhydride technology and other technologies worldwide. Revenue from licensing comes from new plant commissioning, as well as current plant retrofits. Our licensing group also licenses technology on behalf of other Performance Products businesses and other segments.
Our key maleic anhydride customers include Andercol, Chevron Oronite, Cranston, Dixie, Ingevity, Lubrizol, MFG Chemical, Polynt-Reichhold and Tate & Lyle.
Sales and Marketing
We sell approximately 350 products to over 900 customers globally through our Performance Products regional sales and marketing organizations, which have extensive market knowledge, considerable chemical industry experience and well-established customer relationships.
In more specialty products for certain markets (e.g., lubricants, coatings, construction, agrochemicals, oilfield, automotive, gas treating and insulation), our marketing efforts are focused on how our product offerings perform in certain customer applications. We believe that this approach enhances the value of our product offerings and creates opportunities for ongoing differentiation in our development activities with our customers.
We provide extensive pre- and post-sales technical service support to our customers where our technical service professionals work closely with our research and development functions to tailor our product offerings to meet our customers unique and changing requirements. These technical service professionals interact closely with our marketing managers and business leadership teams to help guide future offerings and market approach strategies. In addition to our focused direct sales efforts, we maintain an extensive global network of distributors and agents that also sell our products. These distributors and agents typically promote our products to smaller end-use customers who cannot be served cost effectively by our direct sales forces.
Manufacturing and Operations
Our Performance Products segment has the capacity to produce a variety of products at 10 manufacturing locations in North America, EAME, and Asia. These production capacities are as follows:
North
Product Area
America
EAME
APAC
Total
(millions of pounds)
Amines
(1)
1,039 (1)
Maleic anhydride
-
(1) Includes 70 million pounds from AAC, our consolidated 50%-owned joint venture, located in Jubail, Saudi Arabia.
Our amines facilities are located globally. These facilities have a competitive cost base and use modern manufacturing units that allow for flexibility in production capabilities and technical innovation.
A number of our facilities are located within large integrated petrochemical manufacturing complexes. We believe this results in greater scale and lower costs for our products than we would be able to obtain if these facilities were stand-alone operations. These include our maleic anhydride facilities in Pensacola, Florida, Geismar, Louisiana and Moers, Germany and our ethyleneamines facility in Freeport, Texas.
Joint Venture
We consolidate the results of AAC, our 50%-owned joint venture with the Zamil Group. AAC operates an ethyleneamines manufacturing plant in Jubail, Saudi Arabia. The plant has an approximate annual capacity of 70 million pounds. We purchase and sell all of the production from this joint venture.
Raw Materials
The main raw materials used in the production of our amines are EO, PO, glycols, EDC, caustic soda, ammonia, hydrogen, methylamines and acrylonitrile. The majority of these raw materials are available from multiple sources in the merchant market at competitive prices.
Maleic anhydride is produced by the reaction of normal butane with oxygen. The principal raw material is normal butane, which is purchased pursuant to long-term contracts and delivered to our Pensacola, Florida site by barge, to our facility in Geismar, Louisiana via pipeline and to our Moers, Germany site by railcar.
Competition
There are a small number of competitors for many of our amines due to the considerable customization of product formulations, the proprietary nature of many of our product applications and manufacturing processes and the relatively high research and development and technical costs involved. Our global competitors include BASF, Delamine, Dow, Evonik, Nouryon and Tosoh. We compete primarily on the basis of product performance, new product innovation and, to a lesser extent, on the basis of price.
In our maleic anhydride market, we compete primarily on the basis of price, customer service, technical support and logistics management. Our competitors include Lanxess, INEOS, Bartek and AOC. In our maleic anhydride technology licensing market, our primary competitor is Conser. We compete primarily on the basis of technological performance and service.
Advanced Materials
General
Our Advanced Materials segment is a leading global manufacturer and marketer of technologically-advanced epoxy, acrylic and polyurethane and acrylonitrile butadiene-based polymer products. We focus on formulations and systems that are used to address customer-specific needs in a wide variety of industrial and consumer applications. Our products are used either as replacements for traditional materials or in applications where traditional materials do not meet demanding engineering specifications. For example, structural adhesives are used to replace metal rivets and advanced composites are used to replace traditional aluminum panels and other steel materials to lighten structures in aerospace, automotive and other transportation. Our Advanced Materials segment is characterized by the breadth of our product offering, our expertise in complex chemistry, our long-standing relationships with our customers, our ability to develop and adapt our technology and our applications expertise for new markets and new applications.
We operate synthesis, formulating and production facilities in North America, Europe, Asia and South America. We sell to over 2,000 customers in the following end markets: aerospace, automotive, oil and gas, liquid natural gas transport, coatings and construction, printed circuit boards, consumer, industrial and automotive electronics, consumer and industrial appliances, wind power generation, electrical power transmission and distribution, recreational sports equipment, medical appliances and food and beverage packaging.
Products and Markets
Aerospace. Our Advanced Materials segment is a leading global supplier of advanced, high-performance materials for the fabrication and repair of aircraft components. We supply leading aerospace companies with innovations in composites, adhesives, laminating and repair systems, alongside innovative carbon nanotube technologies.
We offer a wide range of materials to the aerospace market under the ARALDITE®, EPIBOND®, EPOCAST®, URALANE® and MIRALON® brands. Many of these products are qualified under the specification of major aerospace original equipment manufacturers (“OEM”), complying with appropriate regulations governing large civil aircraft.
Transportation and Industrial. We offer to the automotive, recreational sports equipment and industrial composite markets, including leading automotive OEM’s and Tier 1 suppliers, high end composite formulations, specialty resins and toughening agents. Lightweight, strength, flexibility, shorter cycle time and fatigue resistance are key requirements of our industrial partners. Our Advanced Materials segment had numerous awards from the JEC Composite Association for innovation in the composite industry.
ARALDITE® is an important brand in high-performance adhesive technologies. We offer formulation expertise in various chemistries, including epoxies, polyurethanes, methacrylates, phenolics and acrylonitrile butadiene based polymer products. Our materials address requirements such as long open times for large area applications, fast-curing adhesives for early removal and rapid through-put, resistance to high temperature, water and chemicals, thixotropy for gap-filling or vertical applications, and toughness, impact-resistance and elasticity to cope with different thermal expansions when bonding larger structures. Our adhesives are used in a large variety of industrial applications.
Electrical Engineering and Electronics. We are a leading global supplier of insulating materials for motors, generators, switchgears, distribution and instrument transformers, and insulators and bushings for utility and industrial applications. The products formulated by our Advanced Materials segment are designed to provide an extended service life and meet specific industry requirements for electrical insulation in indoor and outdoor environments.
In the field of electronics, our Advanced Materials segment has a long history delivering a wide range of solutions meeting stringent requirements for electronics applications, such as high temperature and chemical resistance, flame-retardancy and excellent mechanical and dielectric properties.
The strong global push for e-vehicles opens new opportunities in e-motor thermal management and battery performance enhancement with our innovative encapsulants, toughening agents and carbon materials.
Coatings and Construction. We offer expertise in curing and toughening technologies and a portfolio of specialized resins and additives to the manufacturers of paints and construction materials. Our specialty resins and additives, including epoxy hardeners, acrylonitrile butadiene reactive liquid polymers and high solid or water based components, enable customers to address challenging industry requirements such as resistance to aggressive chemicals and high temperature, adhesion to difficult substrates, excellent mechanical properties, high drying speed and easy re-coatability, low temperature and sub-zero cure. Our product technologies enhance performance and productivity at low VOC and environmental impact in several coatings and construction applications, like heavy duty protection, marine, transportation, food packaging, flooring and chemical anchoring.
Wind and Base Resins. Our products are used by leading wind blade manufacturers on a large range of applications from plugs to complete composite turbine blade production, as well as its assembly and repair. Our portfolio includes standard products as well as custom-made solutions formulated to meet specific customer requirements.
We also offer basic liquid and solid epoxy resins to the general formulators market.
Sales and Marketing
We maintain multiple routes to market to service our diverse and fragmented customer base throughout the world. These routes to market range from using our own direct sales force, technically-oriented distribution to mass distribution. Our direct sales force focuses on engineering solutions for our major customers who purchase significant amount of product. We use technically-oriented specialist distributors to augment our sales effort in niche markets and applications where we do not believe it is appropriate to develop direct sales resources. We use mass general distribution channels to sell our products into a wide range of general applications where technical expertise is less important, which reduces our overall selling expenses. We believe our use of multiple routes to market enables us to reach a broader customer base at an efficient cost.
We conduct sales activities through dedicated regional sales teams in EMEAI, Asia and the Americas. Our global customers are covered by key account managers who are familiar with the specific requirements of these customers. The management of long-standing customer relationships is critical to the sales and marketing process.
Manufacturing and Operations
We are a global business serving customers in three principal geographic regions: EAMEI, Asia and the Americas. To service our customers efficiently, we maintain manufacturing plants around the world with a strategy of global, regional and local manufacturing employed to optimize the level of service and minimize the cost to our customers. The following table summarizes the plants that we operate:
Description of Facility
Location
Synthesis
Formulations
Akron, Ohio ✓
Bad Säckingen, Germany
✓
Bergkamen, Germany
✓
Duxford, U.K.
✓
✓
East Lansing, Michigan
✓
Ho Chi Minh City, Vietnam
✓
Los Angeles, California
✓
McIntosh, Alabama
✓
✓
Maple Shade, New Jersey ✓
Monthey, Switzerland
✓
✓
Pamplona, Spain
✓
Panyu, China(1)
✓
✓
Taboão da Serra, Brazil
✓
(1) 95%-owned and consolidated manufacturing joint venture with Guangzhou Sheng’an Package Company Limited.
Raw Materials
The principal raw materials we purchase for the manufacture of basic and advanced epoxy resins are epichlorohydrin, bisphenol A, MDA, phenol and aminophenols. We also purchase amines, polyols, isocyanates, acrylic materials, hardeners and fillers for the production of our formulated polymer systems and complex chemicals and additives. Raw material costs constitute a sizeable percentage of the costs for certain applications. We have supply contracts with a number of suppliers. The terms of our supply contracts vary, but, in general, these contracts contain provisions that set forth the quantities of product to be supplied and purchased. Formula pricing is sometimes used if advantageous for the business.
Additionally, we produce large volumes of some of our most important raw materials, such as BLR and its basic derivatives, which are the basic building blocks of many of our products. Approximately 63% of the BLR we produce is consumed internally in our downstream products. The balance of our BLR is sold in the merchant market, allowing us to increase the utilization of our production plants and lower our overall BLR production cost.
We consume certain amines produced by our Performance Products segment and isocyanates produced by our Polyurethanes segment, which we use to formulate Advanced Materials products.
Competition
The markets in which our Advanced Materials segment competes are diverse and require an appropriate human capital and asset footprint to compete effectively. The competitive intensity, capital investment and development of proprietary technology and maintenance of product research and development are all market specific. We operate dedicated technology centers in Basel, Switzerland; The Woodlands, Texas; Merrimack, New Hampshire, and Shanghai, China in support of our product and technology development. Among our competitors are some of the world’s largest chemical companies with integrated raw material value chains to formulation companies that leverage intellectual and highly proprietary technology for problem solving.
Aerospace. Our leading market position is driven by our specialty resins, curing and toughening agents and formulations offerings backed by customer-specific certifications, quality and consistency. These products are value-added, and differentiated, backed by many years of reliable global supply and service. Our major competitors include Hexion, Sumitomo, Wakayama Seika, 3M, Henkel and Kaneka.
Transportation and Industrial. Our composite and adhesive markets are being driven by light weighting, cost effective production and assembling, and are serviced by our leading positions in systems formulations, curing and toughening technologies, backed by application and process manufacturing knowledge. Our product offering allows for reliable and competitive solutions, with a strong ARALDITE® brand reputation, a robust supply chain and a specialized distribution channel to fulfill customers’ expectant demand for service & quality. Our major competitors include DuPont, Hexion, Henkel, Sika, 3M and Kaneka.
Electrical Engineering and Electronics. Our competitive position in these diverse markets is primarily based on formulations expertise, product reliability and performance, process expertise and technical support. Our competitive strengths result from our focus on defined market segment needs, our long-standing customer relationships, product reliability and technical performance, and reputation and recognition as a quality supplier. Our major competitors in these markets are Hexion, Hitachi, Nagase, Xiongrun, Peters, Taiyo, Elantas, 3M and Lord.
Coatings and Construction. Our long-standing position in these markets is served by our specialty resins and additives. Our additives and specialty resins offerings, including epoxy hardeners, acrylonitrile butadiene reactive liquid polymers and high solid or water based components, are value-added products that allow our customers to differentiate their own products. Our major competitors include Evonik, Allnex, Hexion, BASF, EMS, Nissan, Kukdo and Kaneka.
Wind and Base Resins. The wind market for thermoset resins is being driven by light weighting and energy efficiency and our product offering with standard products and custom-made formulations allows for competitively priced solutions backed by an effective supply chain. The market for basic liquid and solid epoxy resins is driven by global supply-and-demand and industry consolidation and rationalization continues as a trend as macro-economic factors affect profitability and supply balance. Our major competitors in these markets include OLIN, Hexion, NanYa, Kukdo, Chang Chun and Adytia Birla.
Textile Effects
Our Textile Effects segment is a major global solutions provider in the wet processing of textiles across pretreatment, coloration, printing and finishing and provides a diverse portfolio of textile chemicals and dyes. Our textile solutions provide color and enhance the aesthetic, durability and performance of finished textiles, including functionality such as wrinkle resistance and water and stain repellence. Our Textile Effects segment is characterized by the breadth of our product offering and long-standing relationships with our customers and downstream brands and retailers and OEMs (e.g., in the automotive sector).
We market products to customers in multiple end-markets, including consumer fashion apparel, sportswear, career and uniform apparel, military, automotive, home and institutional textiles and furnishings, carpet and other functional textiles. Competition within these markets is generally fragmented with few competitors who can offer complete solutions for each market. We develop and adapt our technology and our applications expertise for new markets and new applications to improve our competitive offering. Increased environmental regulations, particularly in many parts of Asia, and consumer awareness about the environmental impact of the apparel industry has resulted in increased demand for sustainably produced textiles. We are at the forefront of developing sustainable textiles with advanced technology such as non-fluorinated durable water repellence, and eco-friendly digital printing. Our award-winning AVITERA® reactive dyeing technology meets global industry environmental standards and helps textile mills increase yield, improve productivity and reduce processing costs by significantly reducing water and energy consumption. We operate 11 synthesis and formulation production sites in Asia, Europe and the Americas.
Products and Markets
Textile Chemicals. Our product offering in textile chemicals covers process and effect chemicals for the entire wet processing of textiles, such as pretreatment, optical brightener, dyeing and printing processes and finishing effects such as UV-protection, flame-retardancy, wrinkle resistance, water and oil repellency, moisture management and enhanced textile comfort.
We own a portfolio of textile chemical brands such as PHOBOTEX®, which is used in the sportswear sector and for outdoor textiles for products that provide non-fluorinated durable water repellency, UVITEX®, which is used for products that provide lasting white in the apparel sector to T-shirts and formal shirts as well as in in the home textile sector for towels and bed sheeting, and PYROVATEX®, which is used for products that provide non-halogenated flame-retardancy to functional textiles like protective workwear and textile insulation material used in the automotive sector.
Dyes. We provide dyes for all major fibers, including cotton, polyester, wool, nylon, silk and acrylic, each of which requires different dye chemistry for optimum results. We develop and offer processes for technological applications of dyes that enable our customers to improve their production yield and reduce their water and energy consumption. We focus on high-quality specialty dyes, which sets us apart from our Asian competitors who are primarily focused on commodity dyes. Because we provide dyes for all major fibers, we are able to differentiate ourselves from industry competitors by providing solutions for a broad range of fiber blended fabrics.
We own a portfolio of dye brands such as AVITERA®, for dyes used in T-shirts, formal shirts and towels for achieving sustainability, NOVACRON®, for dyes used widely across casual wear and home textiles, LANASOL®, for dyes used in wool formal suits, TERASIL®, for dyes used in sportswear, outerwear, home textiles and furnishings, ERIOFAST®, for dyes used in high-end intimate apparel and lingerie, TERATOP®, for dyes used across the automotive industry and NOVASOL®, for dyes used across military, protective wear and other technical textiles.
Markets. Textiles generally involve a complex matrix of fibers, colors, effects and functionality, and the resulting products range from fashion apparel to bulletproof vests, home and institutional textiles to carpet, and upholstery to automotive interiors. Our broad range of dyes and chemicals enhance both the aesthetic appearance of these products and the functionality needed to ensure that they perform in their end-use markets. Since the requirements for these markets vary dramatically, our business strategy focuses on three major end markets-apparel, home and institutional furnishings, and functional and technical textiles. We work to provide the right balance of products and service to meet the technical and environmental challenges in each of these markets.
The apparel market focuses on products that provide an aesthetic effect through colors, as well as comfort and performance effects. Our solutions also extend to improving the processing efficiency within the textile mill. We offer a complete range of colors for cotton, polyester, wool and nylon that cover the range of shades needed for casualwear, sportswear, intimate apparel, and formal wear. Our dyes have been developed to ensure that they offer the highest levels of color durability currently available in the market. The Textile Effects segment’s AVITERA® dyes meet global industry environmental standards and helps textile mills increase yield, improve productivity and reduce processing costs by reducing water and energy consumption. Pretreatment and dyeing auxiliaries ensure that these fabrics are processed efficiently and effectively-cleaning the fabrics with fewer chemicals, less energy and less water and thereby minimizing the environmental footprint and reducing the processing costs. Silicone softeners may be used to enhance the feel of products. Textile Effects has developed advanced non-fluorinated durable water repellent technology that enhances the performance levels of sportswear and outdoor wear offering comfort and durability.
Home and institutional textiles include bed linen, towels, curtains, carpets, upholstery, mattress ticking and other textiles that are used within the home or institutions, such as hotels. Dyes and chemicals technology for these applications enhance color and shape durability, comfort, prevent color fading and enable limitless design possibilities for consumers. Optical brighteners and other pretreatment products provide “bright white” effects for towels and sheeting.
Functional and technical textiles include automotive textiles, carpet, military fabrics protective wear, nonwoven and other technical fabrics. Though the product groups may differ in their end uses, the articles must provide a high-level of functionality, durability and performance in their respective markets. High-lightfast dyes and UV absorbers are used in automotive interiors and outdoor furnishings to provide colors that do not fade when exposed to sunlight and heat. Powerful stain repellent and release technology imparts durable protection for upholstery, military and medical fabrics, without affecting the color, breathability or feel of the fabric. Specialized dyes and prints create unique camouflage patterns for military uniforms, backpacks and tarps that will not fade through wash and wear or during exposure to the elements.
Sales and Marketing
During 2020, approximately 62% of our sales were generated with approximately 1,400 direct customers through our global sales and technical services network and the remaining 38% is generated through our distribution partners. Our sales and technical services representatives work directly with our existing customers forming strong relationships and uncovering new opportunities. Demand for our products is subject to fabric trends and seasonal changes in connection with summer and winter fashion trends. Traditionally, sales generally peak in the second quarter of the year as textile mills prepare for the winter fashion trends which tend to use darker shades and heavier fabric, thereby using more of our products. However, in 2020, the seasonal tread was impacted by the COVID-19 pandemic when many countries around the world restricted people movement in the second quarter, resulting in the lowest sales quarter of the year.
In determining the markets on which we focus, we look at growth opportunity and value proposition. Consumption markets are primarily in developed economies, such as Europe and North America, while production markets are primarily in Asia, particularly China, India, Taiwan, Vietnam, Indonesia and Bangladesh. Our downstream marketing team engages with leading brands and retailers in developed economies while our sales force and manufacturing footprint are primarily in Asia, closer to the manufacturing and sourcing base for textiles. We believe that this set-up also enables us to take advantage of continuous demand growth due to demographic and lifestyle changes in emerging markets.
For our textile effects products, we focus on providing effect competence and process competence to our customers. Effect competence, which we define as delivering value-added effects to our customers’ products, enables us to capitalize on new and innovative technologies and to assist our customers in their efforts to differentiate themselves from competitors. Process competence, which we define as applying know-how and expertise to improve customers’ processes, allows us to utilize our technical service to reduce cost, enhance efficiency and offer recommendations to improve the ecological and environmental footprint in the wet processing of textiles.
We maintain strong customer relationships through the delivery of high levels of technical service and product innovation. There are 12 technical services laboratories in North America, South America, Europe and Asia that are close to our customers in these markets, which enables us to serve our customers with greater speed and flexibility.
Manufacturing and Operations
We are a global business serving customers in three principal geographic regions: EAME, the Americas and Asia. To service our customers efficiently, we maintain manufacturing plants around the world with a strategy of global, regional and local manufacturing employed to optimize the level of service and minimize the cost to our customers. The following table summarizes the capabilities of each of the plants that we operate:
Description of Facility
Textile Chemicals
Textile Dyes
Location
Synthesis
Formulation
Synthesis
Formulation
Atotonilquillo, Mexico
✓
✓
✓
✓
Baroda, India
✓
✓
✓
Bogota, Colombia
✓
Charlotte, North Carolina
✓
Fraijanes, Guatemala
✓
Gandaria, Jakarta, Indonesia
✓
✓
Hangzhou, China
✓
Langweid am Leich, Germany
✓
✓
Panyu, China(1)
✓
✓
Samutsakorn (Mahachai), Thailand
✓
✓
Taboão da Serra, Brazil
✓
(1)
95%-owned and consolidated manufacturing joint venture with Guangzhou Sheng’an Package Company Limited.
Raw Materials
The manufacture of textile effects products requires a wide selection of raw materials (approximately 1,000 different chemicals), including amines, ethoxylates, acrylics and sulfones. No one raw material represents greater than 5% of our textile effects raw material expenditures. Raw material costs constitute a sizeable percentage of sales for certain applications. We have tolling arrangements with several Chinese suppliers, but the majority of our raw materials are not purchased under long-term contracts. The terms of our supply contracts vary, but, in general, these contracts contain provisions that set forth the quantities of product to be supplied and purchased.
Competition
We are a major global solutions provider for textile chemicals and dyes in our chosen markets. Competition within the textile chemicals and dyes markets is generally fragmented with few competitors who can offer complete solutions for the entire textile markets. Key competitors within dyes include Archroma, Longsheng, Runtu, Jihua and DyStar. Key competitors within textile chemicals include Archroma, Nicca, Transfar/Tannatex, CHT and Rudolf.
We believe that our competitive strengths include our product offering, which is characterized by its broad and deep technology range, high quality, significant integration between products and service, reliable technical expertise, long-standing relationships with customers, and strong business infrastructure in Asia. We are a leader in environmentally sustainable chemistry with products that help customers enhance efficiency and reduce their environmental footprint. We believe that we have more customer service capability and account management capability than any of our competitors worldwide. In addition, we engage regularly with downstream brands and retailers on industry and sustainability issues.
RESEARCH AND DEVELOPMENT
We support our businesses with a major commitment to research and development, technical services and process engineering improvement. Our research and development centers are located in The Woodlands, Texas; Everberg, Belgium; and Shanghai, China. Other regional development/technical service centers are located in Auburn Hills, Michigan (polyurethanes for the automotive industry); Derry, New Hampshire, Shanghai, China, Deggendorf, Germany and Ternate, Italy (polyurethanes); Basel, Switzerland and Panyu, China (advanced materials and textile effects); and Mumbai, India (textile effects).
INTELLECTUAL PROPERTY RIGHTS
Proprietary protection of our processes, apparatuses and other technology and inventions is important to our businesses. We own approximately 2,960 unexpired patents and have approximately 1,040 patent applications (including provisionals) currently pending. While a presumption of validity exists with respect to issued U.S. patents, we cannot assure that any of our patents will not be challenged, invalidated, circumvented or rendered unenforceable. Furthermore, we cannot assure the issuance of any pending patent application, or that if patents do issue, that these patents will provide meaningful protection against competitors or against competitive technologies. Additionally, our competitors or other third parties may obtain patents that restrict or preclude our ability to lawfully produce or sell our products in a competitive manner.
We also rely upon unpatented proprietary know-how and continuing technological innovation and other trade secrets to develop and maintain our competitive position. There can be no assurance, however, that confidentiality and other agreements into which we enter and have entered will not be breached, that they will provide meaningful protection for our trade secrets or proprietary know-how, or that adequate remedies will be available in the event of an unauthorized use or disclosure of such trade secrets and know-how. In addition, there can be no assurance that others will not obtain knowledge of these trade secrets through independent development or other access by legal means.
In addition to our own patents and patent applications and proprietary trade secrets and know-how, we are a party to certain licensing arrangements and other agreements authorizing us to use trade secrets, know-how and related technology and/or operate within the scope of certain patents owned by other entities. We also have licensed or sub-licensed intellectual property rights to third parties.
We have associated brand names with a number of our products, and we have approximately 4,490 trademark registrations and 460 pending trademark applications globally. These registrations and applications include extensions of protection under the Madrid system for the international registration of marks. However, there can be no assurance that the trademark registrations will provide meaningful protection against the use of similar trademarks by competitors, or that the value of our trademarks will not be diluted.
Because of the breadth and nature of our intellectual property rights and our business, we do not believe that any single intellectual property right (other than certain trademarks for which we intend to maintain the applicable registrations) is material to our business. Moreover, we do not believe that the termination of intellectual property rights expected to occur over the next several years, either individually or in the aggregate, will materially adversely affect our business, financial condition or results of operations.
HUMAN CAPITAL MANAGEMENT
As of December 31, 2020, we employed approximately 9,000 associates in our operations around the world. Approximately 2,000 of these employees are located in the U.S., while approximately 7,000 are located in other countries.
We believe our employees are the foundation of our success. Our overall talent acquisition and retention strategy is designed to attract and retain diverse and qualified candidates to meet our performance goals on an ongoing basis and enable the success of our Company. Our key areas of focus include:
Health and Safety: Our global health and safety programs are designed around dedicated environmental, health and safety ("EHS") Standards and Procedures specifically tailored at the facility level to address the different jurisdictions and regulations, specific operating hazards and unique working environments. The Company’s objectives focus on regulatory compliance and protection of people and the environment. Compliance with the EHS Standards and Procedures are evaluated through site self-audits as well as regularly scheduled Corporate EHS audits. In addition, other management systems applicable to many of our sites include third party verification of Responsible Care® and ISO 14001. A key metric used to assess the safety performance of our operations is the OSHA Total Recordable Injury Rate (“TRIR”), which is based upon the number of recordable injuries per 100 employees. In the years ended December 31, 2020 and 2019, we had a TRIR of 0.28 and 0.49, respectively.
Ethics and Compliance: At Huntsman our commitment to our values of Honesty, Integrity, Respect and Responsibility unite us globally and fosters high ethical standards in our relationships with each other, with our customers and with all those we do business with. Our Business Conduct Guidelines, along with the policies and procedures referenced within the guidelines, provide guidance for all employees on topics such as anti-corruption and bribery, anti-trust and competition law, discrimination including our policy on harassment and retaliation, privacy, appropriate use of company assets, protecting confidential information and reporting concerns and violations. The guidelines are used to reinforce our commitment to operating in a fair, honest, responsible and ethical manner and to emphasize the importance of having an open and welcoming environment in which all employees feel empowered to do what is right. Should potential violations of the guidelines, policies, procedures or the law occur, employees are encouraged to voice concerns promptly and are reminded that we do not tolerate retaliation against anyone who reports a potential violation in good faith. All employees are required to complete the training on the Business Conduct Guidelines annually, and our Chief Compliance Officer reports matters related to the Business Conduct Guidelines to the Audit Committee of our Board of Directors on a quarterly basis.
Compensation and Benefits: Our policy is to competitively compensate our associates and to appropriately motivate associates to provide value to our shareholders. Our compensation philosophy is to align both short-term and long-term incentives with our strategic objectives and to take into account market forces, best practices, and the performance of our Company and the employee. We offer employees benefits that vary by country and are designed to meet or exceed local laws and to be competitive in the marketplace. Examples of benefits offered in the U.S. include a 401(k) plan with employer contributions; health benefits; business travel and life/disability insurance; supplemental voluntary insurance; and paid time off.
Training and Talent Development: We are committed to the continued development of our workforce. We provide technical and leadership training to our associates, customers and suppliers who work for or with our products and services. Training is provided in a number of formats to accommodate the learner’s style, pace, location, technological knowledge and access.
ENVIRONMENTAL, HEALTH AND SAFETY MATTERS
General
We are subject to extensive federal, state, local and international laws, regulations, rules and ordinances relating to occupational health and safety, process safety, pollution, protection of the environment and natural resources, product management and distribution, 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 or product distribution, substantial civil or criminal sanctions, or injunctions limiting or prohibiting our operations altogether. In addition, some environmental laws may impose liability on a strict, joint and several basis. Moreover, changes in environmental regulations could inhibit or interrupt our operations, or require us to modify our facilities or operations and make significant environmental compliance expenditures. Accordingly, environmental or regulatory matters may cause us to incur significant unanticipated losses, costs or liabilities. Information related to EHS matters may also be found in other areas of this report including “-Item 1A. Risk Factors,” “Note 2. Summary of Significant Accounting Policies-Environmental Expenditures” to our consolidated financial statements and “Note 22. Environmental Health and Safety Matters” to our consolidated financial statements.
Environmental, Health and Safety Systems
We are committed to achieving and maintaining compliance with all applicable 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, improve the safety of our employees, contractors, community neighbors and customers and minimize the production and emission of wastes and other pollutants. We cannot guarantee, however, that these policies and systems will always be effective or that we will be able to manage EHS legal requirements without incurring substantial costs. 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 reducing overall risk to us. For the years ended December 31, 2020, 2019 and 2018, our capital expenditures for EHS matters totaled $28 million, $42 million and $32 million, respectively, and our estimated capital expenditures for 2021 is expected to be $47 million.
Environmental Remediation
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 waste that was disposed of prior to the purchase of our businesses. Under some circumstances, the scope of our liabilities may extend to damages to natural resources.
In cases where our potential liabilities arise from historical contamination based on operations and other events occurring prior to our ownership of a business or specific facility, we frequently obtain 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 liabilities. We cannot assure you, however, that the liabilities for all such matters subject to indemnity will be honored by the prior owner 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 effect on our financial statements. However, if such indemnities are not honored or do not fully cover the costs of investigation and remediation or we are required to contribute to such costs, then such expenditures may have a material effect on our financial statements. At the current time, we are unable to estimate the total cost, exclusive of indemnification benefits, to remediate contaminated sites.
Regulatory Matters
Greenhouse Gas Regulation and Climate Change
Globally, our operations are increasingly subject to regulations that seek to reduce emissions of greenhouse gases (“GHGs”), such as carbon dioxide and methane, which may be contributing to changes in the earth’s climate. At the Durban negotiations of the Conference of the Parties to the Kyoto Protocol in 2012, a limited group of nations, including the European Union (the “EU”), agreed to a second commitment period for the Kyoto Protocol, an international treaty that provides for reductions in GHG emissions. More significantly, the EU GHG Emissions Trading System (“ETS”), established pursuant to the Kyoto Protocol to reduce GHG emissions in the EU, continues in its fourth phase. The EU parliament has used a process to formalize “backloading”-the withholding of GHG allowances during the trading period from 2014 to 2016 with additional allowances auctioned during 2019 to 2020-to prop up carbon prices. As backloading is only a temporary measure, a sustainable solution to the imbalance between supply and demand requires structural changes to the ETS. To that end, the European Commission established a market stability reserve to address the current surplus of allowances and improve the system’s resilience that started operating in 2019. In addition, the EU has set a binding target to reduce domestic GHG emissions by at least 40% below the 1990 level by 2030 and a binding target to increase the share of renewable energy to at least 32% of the EU’s energy consumption by 2030. The European Commission proposed to increase the greenhouse gas emission reduction target to at least 55% in September 2020, and expects to complete the associated legislative proposals by June 2021.
In addition, at the 2015 United Nations Framework Convention on Climate Change in Paris, the U.S. and nearly 200 other nations entered into an international climate agreement, which went into effect in November 2016 (the “Paris Agreement”). Although the agreement does not create any binding obligations for nations to limit their GHG emissions, it does include pledges to voluntarily limit or reduce future emissions. On June 1, 2017, President Trump announced that the U.S. would withdraw from the Paris Agreement, and the U.S. completed the process of withdrawing from the Paris Agreement on November 4, 2020. In response to the U.S.’s withdrawal announcement, various corporations, investors, and U.S. state and local governments publicly pledged to further the goals of the Paris Agreement. On January 20, 2021, President Biden issued written notification to the United Nations of the U.S.’s intention to rejoin the Paris Agreement, which will become effective in 30 days.
Domestic efforts to curb GHG emissions are being led by the U.S. Environmental Protection Agency’s (the “EPA”) GHG regulations and similar programs of certain states. To the extent that our domestic operations are subject to the EPA’s GHG regulations, we may face increased capital and operating costs associated with new or expanded facilities. Significant expansions of our existing facilities or construction of new facilities may be subject to the Clean Air Act’s (the “CAA”) requirements for pollutants regulated under the Prevention of Significant Deterioration and Title V programs. Some of our facilities are also subject to the EPA’s Mandatory Reporting of Greenhouse Gases rule, and any further regulation may increase our operational costs.
We are already managing and reporting GHG emissions, to varying degrees, as required by law for our sites in locations subject to U.S. federal and state requirements, Kyoto Protocol obligations and/or ETS requirements. Although these sites are subject to existing GHG legislation, few have experienced or anticipate significant cost increases as a result of these programs, although it is possible that GHG emission restrictions may increase over time. Potential consequences of such restrictions include capital requirements to modify assets to meet GHG emission restrictions 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.
Finally, it should be noted that most scientists have concluded that increasing concentrations of GHGs in the earth’s atmosphere may produce climate changes that have significant physical effects, such as increased frequency and severity of storms, droughts, and floods and other climatic events. If any of those effects were to occur, they could have an adverse effect on our assets and operations.
AVAILABLE INFORMATION
We maintain an internet website at http://www.huntsman.com. Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to these reports are available free of charge through our website as soon as reasonably practicable after we file these materials with the SEC. We also provide electronic or paper copies of our SEC filings free of charge upon request.
GLOSSARY OF CHEMICAL TERMS
BDO-butane diol
BLR-base liquid resin
DGA® Agent-DIGLYCOLAMINE® agent
DPA-diphenylamine
EDC-ethylene dichloride
EG-ethylene glycol
EO-ethylene oxide
MDA-methylene dioxy amphetamine
MDI-methyl diphenyl diisocyanate
MNB-mononitrobenzene
MTBE-methyl tertiary-butyl ether
PBT-polybutylene terephthalate
PO-propylene oxide
Polyols-a substance containing several hydroxyl groups. A diol, triol and tetrol contain two, three and four hydroxyl groups, respectively.
TDI-toluene diisocyanate
TPU-thermoplastic polyurethane
UPR-unsaturated polyester resin

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ITEM 1A. RISK FACTORS
ITEM 1A. RISK FACTORS
Any of the following risks could materially and adversely affect our business, results of operations, financial condition and liquidity.
RISKS RELATED TO OUR BUSINESS AND OPERATIONS
Our results of operations and financial condition have been and, we believe, will in the future be adversely impacted by the COVID-19 pandemic, and the duration and extent of such impact remains uncertain.
The outbreak of the coronavirus disease (COVID-19) has adversely affected the global economies and financial markets. Throughout 2020, the global economic downturn caused by COVID-19 significantly impacted the demand for our products and contributed to volatile supply and demand conditions affecting volumes for our products. In particular, demand for our products deteriorated at a rapid pace in the second quarter 2020, which had a meaningful adverse impact on our revenues and financial results for the quarter. Although we have experienced improved conditions in most of our core markets in the third and fourth quarters of 2020, there continues to be many uncertainties regarding the impact of the COVID-19 pandemic. Additionally, several of our key end markets, including aerospace and consumer textile, have been disproportionally impacted by the effects of COVID-19 and have experienced relatively slow recoveries.
In the first quarter of 2021, the number of known COVID-19 cases in the U.S. and certain key parts of Europe remains elevated. Additionally, multiple variants of the virus that causes COVID-19 have begun circulating globally, and there is evidence that these variants appear to spread more easily and quickly, which may lead to more cases of COVID-19. It is not currently known what the effect of these variants will have on the effectiveness of existing and future therapies and vaccines.
The extent to which COVID-19 may continue to adversely impact our business depends on future developments, which are highly uncertain and unpredictable, including:
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the duration, scope, severity and geographic spread of the outbreak;
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governmental, business and individual actions that have been and continue to be taken in response to the outbreak, including social distancing, work-at-home, stay-at-home and shelter-in-place orders and shutdowns, travel restrictions and quarantines;
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the effect of the outbreak on our customers, suppliers, supply chain and other business partners;
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our ability during the outbreak to provide our products and protect the health and well-being of our employees;
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business disruptions caused by actual or potential plant, workplace and office closures, and an increased reliance on employees working from home, disruptions to or delays in ongoing product development, operations, staffing shortages, travel limitations, employee health issues, cyber security and data accessibility, or communication or mass transit disruptions, any of which could adversely impact our business operations or delay necessary interactions with local regulators, manufacturing sites and other important agencies and contractors;
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the risk that we could be exposed to liability, negative publicity or reputational harm related to any incidents of actual or perceived transmission of COVID-19 among employees at our facilities;
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the ability of our customers to pay for our products during and following the outbreak;
● the ability of our suppliers to provide raw materials;
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the impact of the outbreak on the financial markets and economic activity generally;
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our ability to access usual sources of liquidity on reasonable terms; and
● our ability to comply with the financial covenants in our debt agreements if a material and prolonged economic downturn results in increased indebtedness or substantially lower adjusted EBITDA.
Our industry is affected by global economic factors, including risks associated with volatile economic conditions.
Our financial results are substantially dependent on overall economic conditions in the U.S., Europe and Asia. Declining economic conditions in all or any of these locations-or negative perceptions about economic conditions-could result in a substantial decrease in demand for our products and could adversely affect our business. The timing and extent of any changes to currently prevailing market conditions is uncertain, and supply and demand may be unbalanced at any time. Uncertain economic conditions and market instability make it particularly difficult for us to forecast demand trends. As a consequence, we may not be able to accurately predict future economic conditions or the effect of such conditions on our financial condition or results of operations. We can give no assurances as to the timing, extent or duration of the current or future economic cycles impacting the industries in which we operate.
Disruptions in production at our manufacturing facilities may have a material adverse impact on our business, results of operations and/or financial condition.
Manufacturing facilities in our industry are subject to planned and unplanned production shutdowns, turnarounds, outages and other disruptions. Any serious disruption at any of our facilities could impair our ability to use our facilities and have a material adverse impact on our revenues and increase our costs and expenses. Alternative facilities with sufficient capacity may not be available, may cost substantially more or may take a significant time to increase production or qualify with our customers, any of which could negatively impact our business, results of operations and/or financial condition. Long-term production disruptions may cause our customers to seek alternative supply which could further adversely affect our profitability.
Unplanned production disruptions may occur for external reasons including natural disasters, weather, disease, strikes, transportation interruption, government regulation, political unrest or terrorism, or internal reasons, such as fire, unplanned maintenance or other manufacturing problems. Any significant production disruption could have a material impact on our operations, operating results and financial condition.
In addition, we rely on a number of vendors, suppliers, and in some cases sole-source suppliers, service providers, toll manufacturers and collaborations with other industry participants to provide us with chemicals, feedstocks and other raw materials, along with energy sources and, in certain cases, facilities that we need to operate our business. If the business of these third parties is disrupted, some of these companies could be forced to reduce their output, shut down their operations or file for bankruptcy protection. If this were to occur, it could adversely affect their ability to provide us with the raw materials, energy sources or facilities that we need, which could materially disrupt our operations, including the production of certain of our products. Moreover, it could be difficult to find replacements for certain of our business partners without incurring significant delays or cost increases. All of these risks could have a material adverse effect on our business, results of operations, financial condition and liquidity.
While we maintain business recovery plans that are intended to allow us to recover from natural disasters or other events that could disrupt our business, we cannot provide assurances that our plans would fully protect us from the effects of all such disasters or from events that might increase in frequency or intensity due to climate change. In addition, insurance may not adequately compensate us for any losses incurred as a result of natural or other disasters. In areas prone to frequent natural or other disasters, insurance may become increasingly expensive or not available at all. Furthermore, some potential climate-driven losses, particularly inundation due to sea-level rise, may pose long-term risks to our physical facilities such that operations cannot be restored in their current locations.
The markets for many of our products are cyclical and volatile, and we may experience depressed market conditions for such products.
The cyclicality that the markets for many of our products experience occurs as a result of alternating periods of tight supply, causing prices and margins to increase, followed by periods of lower capacity utilization, resulting in oversupply and declining prices and margins. The volatility these markets experience occurs as a result of changes in the demand for products as a consequence of global economic activity, changes in energy prices and changes in customers’ requirements. For example, demand for our products depends in part on aerospace, housing and construction industries, which are cyclical in nature and have historically been impacted by downturns in the economy. The supply-demand balance is also impacted by capacity additions or reductions that result in changes in utilization rates. The cyclicality and volatility of our industry results in significant fluctuations in profits and cash flow from period to period and over the business cycle.
Our results of operations may be adversely affected by international business risks, including fluctuations in currency exchange rates, legal restrictions and taxes.
We conduct a majority of our business operations outside the U.S., and these operations are subject to risks normally associated with international operations. These risks include the need to convert currencies that may be received for our products into currencies in which we purchase raw materials or pay for services, which could result in a gain or loss depending on fluctuations in exchange rates. We transact business in many foreign currencies, including euros, Swiss francs, Chinese renminbi, Indian rupees, Brazilian reals and Thai bahts. We translate our local currency financial results into U.S. dollars based on average exchange rates prevailing during the reporting period or the exchange rate at the end of that period. During times of a strengthening U.S. dollar, our reported international sales and earnings may be reduced because the local currency may translate into fewer U.S. dollars. Because we currently have significant operations located outside the U.S., we are exposed to fluctuations in global currency rates which may result in gains or losses on our financial statements.
Other risks of international operations include trade barriers, tariffs, exchange controls, cash repatriation restrictions, national and regional labor strikes, social and political risks, general economic risks and required compliance with a variety of U.S. and foreign laws, including monetary policies, tax laws, the Foreign Corrupt Practices Act (and foreign equivalents), export controls and regulations administered by the Office of Foreign Assets Control. Any changes in tariffs or trade barriers could make our products less competitive compared to other producers not subject to the same tariffs or trade barriers. Any decision to repatriate cash as dividends could subject us to foreign and U.S. federal and state income taxes without any offsetting foreign tax credit relief. Although we maintain an anti-corruption compliance program throughout our company, violations of our compliance program may result in criminal or civil sanctions, including material monetary fines, penalties and other costs against us or our employees, and may have a material adverse effect on our business. Furthermore, in foreign jurisdictions where legal processes may vary from country to country, we may experience difficulty in enforcing agreements. In jurisdictions where bankruptcy laws and practices vary, we may experience difficulty collecting foreign receivables through foreign legal systems. The occurrence of these risks, among others, could disrupt the businesses of our international subsidiaries, which could significantly affect their ability to make distributions to us.
We operate in a significant number of jurisdictions, which contributes to the volatility of our effective tax rate. Changes in tax laws or the interpretation of tax laws in the jurisdictions in which we operate may affect our effective tax rate. In addition, generally accepted accounting principles in the U.S. (“GAAP” or “U.S. GAAP”) have required us to place valuation allowances against our net operating losses and other deferred tax assets in certain tax jurisdictions. These valuation allowances result from analysis of positive and negative evidence supporting the realization of tax benefits. Negative evidence includes a cumulative history of pre-tax operating losses in specific tax jurisdictions. Changes in valuation allowances have resulted in material fluctuations in our effective tax rate. Economic conditions or changes in tax laws may dictate the continued imposition of current valuation allowances and, potentially, the establishment of new valuation allowances. While significant valuation allowances remain, our effective tax rate will likely continue to experience significant fluctuations. Furthermore, certain foreign jurisdictions may take actions to delay our ability to collect value-added tax refunds.
Significant price volatility or interruptions in supply of our raw materials may result in increased costs that we may be unable to pass on to our customers, which could reduce our profitability.
We purchase a substantial portion of our raw materials from third-party suppliers and the cost of these raw materials represents a substantial portion of our operating expenses. The prices for a number of these raw materials generally follow price trends of, and vary with market conditions for, crude oil and natural gas feedstocks, which are highly volatile and cyclical. For example, the market for crude oil and natural gas feedstocks experienced depressed pricing throughout 2020, leading to favorable prices for the raw materials that we purchase from third parties. Lower raw material prices, however, can lead to downward pressure on selling prices for certain of our products leading to reduced revenue. Our supply agreements typically provide for market-based pricing and provide us only limited protection against price volatility. While we attempt to match cost increases with corresponding product price increases, we are not always able to raise product prices immediately or at all. Timing differences between raw material prices, which may change daily, and contract product prices, which in many cases are negotiated only monthly or less often, have had and may continue to have a negative effect on our cash flow. Any cost increase that we are not able to pass on to our customers could have a material adverse effect on our business, results of operations, financial condition and liquidity.
In general, the feedstocks and other raw materials we consume are organic chemical commodity products that are readily available at market prices. There are, however, several raw materials for which there are only a limited number of suppliers or a single supplier. To mitigate potential supply constraints, we frequently enter into supply agreements with particular suppliers, evaluate alternative sources of supply and evaluate alternative technologies to avoid reliance on limited or sole-source suppliers. In addition, where supply relationships are concentrated, particular attention is paid by the parties to ensure strategic intentions are aligned to facilitate long-term planning. If certain of our suppliers are unable to meet their obligations under present supply agreements, we may be forced to pay higher prices to obtain the necessary raw materials from other sources and we may not be able to increase prices for our finished products to recoup the higher raw materials costs. Any interruption in the supply of raw materials could increase our costs or decrease our revenues, which could reduce our cash flow. The inability of a supplier to meet our raw material needs could have a material adverse effect on our financial statements and results of operations.
The number of sources for and availability of certain raw materials is also specific to the particular geographical region in which a facility is located. Political and economic instability in the countries from which we purchase our raw material supplies could adversely affect their availability. In addition, if raw materials become unavailable within a geographic area from which they are now sourced, then we may not be able to obtain suitable or cost-effective substitutes. We may also experience higher operating costs such as energy costs, which could affect our profitability. We may not always be able to increase our selling prices to offset the impact of any higher production costs or reduced production levels, which could reduce our earnings and decrease our liquidity.
Our efforts to grow and transform our businesses may require significant investments; if our strategies are unsuccessful, our business, results of operations and/or financial condition may be materially adversely affected.
We continuously evaluate opportunities for growth and change. These initiatives may involve making acquisitions, entering into partnerships and joint ventures, divesting assets, restructuring our existing operations and assets, creating new financial structures and building new facilities-any of which could require a significant investment and subject us to new kinds of risks. We have incurred indebtedness to finance these opportunities, and we may incur additional indebtedness to finance future initiatives. If our strategies for growth and change are not successful, we could face increased financial pressure, such as increased cash flow demands, reduced liquidity and diminished access to financial markets, and the equity value of our businesses could be diluted.
The implementation of strategies for growth and change may create additional risks, including:
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diversion of management time and attention away from existing operations;
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requiring capital investment that could otherwise be used for the operation and growth of our existing businesses;
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disruptions to important business relationships;
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increased operating costs;
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limitations imposed by various governmental entities; and
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difficulties due to lack of or limited prior experience in any new markets we may enter.
Our inability to mitigate these risks or other problems encountered in connection with our strategies for growth and change could have a material adverse effect on our business, results of operations and financial condition. In addition, we may fail to fully achieve the savings or growth projected for current or future initiatives notwithstanding the expenditure of substantial resources in pursuit thereof.
We may have difficulties integrating acquired businesses and as a result, our business, results of operations and/or financial condition may be materially adversely affected.
We have completed a number of acquisitions and we will continue to acquire additional businesses and enter into joint ventures as part of our business strategy. Growth through acquisitions and joint ventures involves risks, including:
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inability to efficiently operate new businesses or to integrate acquired businesses and products;
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inability to accurately predict delays in realizing the costs and benefits of acquisitions, partnerships, or joint ventures;
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unexpected losses of customers or suppliers of an acquired or existing business;
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difficulties in retaining key employees of acquired businesses;
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difficulties in realizing projected synergies;
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inability to efficiently operate new businesses or to integrate acquired businesses and products;
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inability to accurately predict delays in realizing the costs and benefits of acquisitions, partnerships, or joint ventures;
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unexpected losses of customers or suppliers of an acquired or existing business;
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difficulties in retaining key employees of acquired businesses;
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difficulties in realizing projected synergies; and
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exposure to unanticipated liabilities, including unexpected environmental exposures, product liability or illegal activities conducted by an acquired company or a joint venture partner.
Our inability to address these risks could cause us to fail to realize the anticipated benefits of such acquisitions or joint ventures and could have a material adverse effect on our business, results of operations and financial condition.
The industries in which we compete are highly competitive, and we may not be able to compete effectively with our competitors that have greater financial resources, which could have a material adverse effect on our business, results of operations and financial condition.
The industries in which we operate are highly competitive. Among our competitors are some of the world’s largest chemical companies and major integrated petroleum companies that have their own raw material resources. Changes in the competitive landscape could make it difficult for us to retain our competitive position in various products and markets throughout the world. Some of the companies with whom we compete may be able to produce products more economically than we can. Furthermore, some of our competitors have greater financial resources, which may enable them to invest significant capital into their businesses, including expenditures for research and development.
While we are engaged in a range of research and development programs to develop new products and processes, to improve and refine existing products and processes, and to develop new applications for existing products, the failure to develop new products, processes or applications could make us less competitive. Moreover, if any of our current or future competitors develops proprietary technology that enables them to produce products at a significantly lower cost, our technology could be rendered uneconomical or obsolete.
Further, it is possible that we could abandon certain products, processes, or applications due to potential infringement of third party intellectual property rights or that we could be named in future litigation for the infringement or misappropriation of a competitor’s or other third party’s intellectual property rights, which could include a claim for injunctive relief and damages, and, if so, such adverse results could have a material adverse effect on our business, results of operations and financial position. In addition, certain of our competitors in various countries in which we do business, including China, may be owned by or affiliated with members of local governments and political entities.
These competitors may get special treatment with respect to regulatory compliance and product registration, while certain of our products, including those based on new technologies, may be delayed or even prevented from entering into the local market.
Certain of our businesses use technology that is widely available. Accordingly, barriers to entry, apart from capital availability, may be low in certain product segments of our business. The entrance of new competitors into any of our businesses may reduce our ability to maintain margins or capture improving margins in circumstances where capacity utilization in the industry is increasing. Further, petroleum-rich countries have become more significant participants in the petrochemical industry and may expand their roles significantly in the future. Increased competition in any of our businesses could compel us to reduce the prices of our products, which could result in reduced margins and loss of market share and have a material adverse effect on our business, results of operations, financial condition and liquidity.
We are subject to risks relating to our information technology systems, and any technology disruption or cybersecurity incident could negatively affect our operations.
We rely on information technology systems across our operations, including for management, supply chain and financial information and various other processes and transactions. Our ability to effectively manage our business depends on the security, reliability and capacity of these systems. Our technology systems or the technology systems of third parties on which we rely, are vulnerable to disruption from circumstances beyond our control including fire, natural disasters, power outages, system failures, security breaches, espionage, cyber-attacks, viruses, theft and inadvertent release of information. Any such disruption to these Information technology systems could disrupt our operations or result in the disclosure of proprietary information about our business or confidential information concerning our customers or employees which could result in negative publicity/brand damage, violation of privacy laws, potential liability, including litigation/investigation/remediation or other legal actions against us or the imposition of penalties, fines, fees or liabilities, which may not be covered by our insurance policies. Any or all the above would potentially cause delays or cancellations of customer orders or impede the manufacture or shipment of products, processing of transactions or reporting of financial results.
While we have invested and will continue to invest in technology security initiatives and disaster recovery plans, we may not be able to implement measures that will protect against all the significant risks to our information technology systems. We have put in place security measures designed to protect against the misappropriation or corruption of our systems, intentional or unintentional disclosure of confidential information, or disruption of our operations. Current employees have, and former employees may have, access to a significant amount of information regarding our operations which could be disclosed to our competitors or otherwise used to harm us. Moreover, our operations in certain locations, such as China, may be particularly vulnerable to security attacks or other problems. Any breach of our security measures could result in unauthorized access to and misappropriation of our information, corruption of data or disruption of operations or transactions, any of which could have a material adverse effect on our business. In addition, we could be required to expend significant additional efforts to respond to information technology issues or to protect against threatened or actual security breaches.
Finally, data privacy is subject to frequently changing rules and regulations in countries where we do business. For example, the EU adopted a new regulation that became effective in May 2018, the General Data Protection Regulation (“GDPR”), which requires companies to meet new regulations regarding the handling of personal data. Our failure to successfully implement or comply with appropriate processes to adhere to the GDPR requirements could result in substantial fines or penalties and legal liability which could tarnish our reputation.
Our operations involve risks that may increase our operating costs, which could reduce our profitability.
Although we take precautions to enhance the safety of our operations and minimize the risk of disruptions, our operations are subject to hazards inherent in the manufacturing and marketing of chemical and other products. These hazards include: chemical spills, pipeline leaks and ruptures, storage tank leaks, discharges or releases of toxic or hazardous substances or gases and other hazards incident to the manufacturing, processing, handling, transportation and storage of dangerous chemicals. We are also potentially subject to other hazards, including natural disasters and severe weather; explosions and fires; transportation problems, including interruptions, spills and leaks; mechanical failures; unscheduled downtimes; labor difficulties; remediation complications; and other risks. In addition, some equipment and operations at our facilities are owned or controlled by third parties who may not be fully integrated into our safety programs and over whom we are able to exercise limited control. Many potential hazards can cause bodily injury and loss of life, severe damage to or destruction of property and equipment and environmental damage, and may result in suspension of operations and the imposition of civil or criminal penalties and liabilities. Furthermore, we are subject to present and future claims with respect to workplace exposure, exposure of contractors on our premises as well as other persons located nearby, workers’ compensation and other matters.
We maintain property, business interruption, products liability and casualty insurance policies which we believe are in accordance with customary industry practices, as well as insurance policies covering other types of risks, including pollution legal liability insurance, but we are not fully insured against all potential hazards and risks incident to our business. Each of these insurance policies is subject to customary exclusions, deductibles and coverage limits, in accordance with industry standards and practices. As a result of market conditions, premiums and deductibles for certain insurance policies can increase substantially and, in some instances, certain insurance may become unavailable or available only for reduced amounts of coverage. If we were to incur a significant liability for which we were not fully insured, it could have a material adverse effect on our business, results of operations, financial condition and liquidity.
In addition, we are subject to various claims and litigation in the ordinary course of business. We are a party to various pending lawsuits and proceedings. For more information, see “-Item 3. Legal Proceedings” below.
Our results of operations and investment in Venator may fluctuate significantly depending upon the changes in market value of Venator shares.
We account for our remaining ownership of 9,686,761 Venator ordinary shares as an investment in equities securities that are marked to fair value with changes in fair value reported in earnings. Under this approach, our results of operations and investment in Venator could fluctuate significantly depending upon the changes in market value of Venator common stock. Specifically, the market price for Venator’s ordinary shares has been highly volatile, and the market from time to time has experienced significant price fluctuations. For example, during the year ended December 31, 2020, Venator’s stock price ranged from a low of $1.12 to high of $3.98. As result, the cyclicality and volatility of Venator’s stock price can result in significant fluctuations in our results of operations and investment in Venator from quarter to quarter.
Our operations, financial condition and liquidity could be adversely affected by legal claims against us, including antitrust claims.
We face risks arising from various legal actions, including matters relating to antitrust, product liability, intellectual property and environmental claims. It is possible that judgments could be rendered against us in these cases or others for which we could be uninsured or not covered by indemnity, or which may be beyond the amounts that we currently have reserved or anticipate incurring for such matters. Over the past few years, antitrust claims have been made against chemical companies. In this type of litigation, the plaintiffs generally seek injunctive relief, treble damages or the maximum damages allowed by state law, costs of suit and attorneys’ fees, which may result in significant liabilities. An adverse outcome in any antitrust claim could be material and significantly impact our operations, financial condition, liquidity and business reputation.
Our business is exposed to risks associated with the creditworthiness of our suppliers, customers and business partners and the industries in which our suppliers, customers and business partners participate are cyclical in nature, both of which may adversely affect our business and results of operations.
Our business is exposed to risks associated with the creditworthiness of our key suppliers, customers and business partners and reductions in demand for our customers’ products. During periods of economic disruption, more of our customers than normal may experience financial difficulties, including bankruptcies, restructurings and liquidations, which could affect our business by reducing sales, increasing our risk in extending trade credit to customers and reducing our profitability. A significant adverse change in a customer relationship or in a customer’s financial position could cause us to limit or discontinue business with that customer, require us to assume more credit risk relating to that customer’s receivables or limit our ability to collect accounts receivable from that customer.
Our business is dependent on our intellectual property. If our intellectual property rights cannot be enforced or our trade secrets become known to our competitors, our ability to compete may be adversely affected.
Proprietary protection of our processes, apparatuses and other technology is important to our business. While a presumption of validity exists with respect to patents issued to us in the U.S., there can be no assurance that any of our patents will not be challenged, invalidated, circumvented or rendered unenforceable. Furthermore, if any pending patent application filed by us does not result in an issued patent, or if patents are issued to us, but such patents do not provide meaningful protection of our intellectual property, then our ability to compete may be adversely affected. Additionally, our competitors or other third parties may obtain patents that restrict or preclude our ability to lawfully produce or sell our products in a competitive manner, which could have a material adverse effect on our business, results of operations, financial condition and liquidity.
We also rely upon unpatented proprietary know-how and continuing technological innovation and other trade secrets to develop and maintain our competitive position. While it is our policy to enter into agreements imposing confidentiality obligations upon our employees and third parties to protect our intellectual property, these confidentiality obligations may be breached, may not provide meaningful protection for our trade secrets or proprietary know-how, or adequate remedies may not be available in the event of an unauthorized access, use or disclosure of our trade secrets and know-how. In addition, others could obtain knowledge of our trade secrets through independent development or other access by legal means.
We may have to rely on judicial enforcement of our patents and other proprietary rights. We may not be able to effectively protect our intellectual property rights from misappropriation or infringement in countries where effective patent, trademark, trade secret and other intellectual property laws and judicial systems may be unavailable, or may not protect our proprietary rights to the same extent as U.S. law.
The failure of our patents or confidentiality agreements to protect our processes, apparatuses, technology, trade secrets or proprietary know-how or the failure of adequate legal remedies for related actions could have a material adverse effect on our business, results of operations, financial condition and liquidity.
Conflicts, military actions, terrorist attacks, political events and general instability, along with increased security regulations related to our industry, could adversely affect our business.
Conflicts, military actions, terrorist attacks and political events have precipitated economic instability and turmoil in international commerce and the global economy. The uncertainty and economic disruption resulting from hostilities, military action or acts of terrorism may impact any or all of our facilities and operations or those of our suppliers or customers. Accordingly, any conflict, military action or terrorist attack that impacts us or any of our suppliers or customers, could have a material adverse effect on our business, results of operations, financial condition and liquidity. Furthermore, instability and turmoil, particularly in energy-producing nations, may result in raw material cost increases.
Changes in social, political, regulatory and economic conditions or in laws and policies governing foreign trade, manufacturing, development and investment in the territories and countries where we currently develop and sell products, could adversely affect our business. For example, a number of governments have instituted regulations attempting to increase the security of chemical plants and the transportation of hazardous chemicals, which could result in higher operating costs and could have a material adverse effect on our financial condition and liquidity.
Our pension and postretirement benefit plan obligations are currently underfunded, and under certain circumstances we may have to significantly increase the level of cash funding to some or all of these plans, which would reduce the cash available for our business.
We have unfunded and underfunded obligations under some of our domestic and foreign pension and postretirement benefit plans. The funded status of our pension plans is dependent upon many factors, including returns on invested assets, the level of certain market interest rates and the discount rates used to determine pension obligations. Unfavorable returns on the plan assets or unfavorable changes in applicable laws or regulations could materially change the timing and amount of required plan funding, which would reduce the cash available for our business. In addition, a decrease in the discount rate used to determine pension obligations could result in an increase in the valuation of pension obligations, which could affect the reported funding status of our pension plans and future contributions, as well as the periodic pension cost in subsequent fiscal years.
With respect to our domestic pension and postretirement benefit plans, the Pension Benefit Guaranty Corporation (“PBGC”) has the authority to terminate an underfunded tax-qualified pension plan under limited circumstances in accordance with the Employee Retirement Income Security Act of 1974, as amended. In the event our tax-qualified pension plans are terminated by the PBGC, we could be liable to the PBGC for the entire amount of the underfunding and, under certain circumstances, the liability could be senior to our notes. With respect to our foreign pension and postretirement benefit plans, the effects of underfunding depend on the country in which the pension and postretirement benefit plan is established. For example, in the U.K. and Germany semi-public pension protection programs have the authority in certain circumstances to assume responsibility for underfunded pension schemes, including the right to recover the amount of the underfunding from us.
RISKS RELATED TO REGULATION AND ENVIRONMENTAL ACTION
We are subject to many EHS regulations that may result in unanticipated costs or liabilities, which could reduce our profitability.
We are subject to extensive federal, state, local and foreign laws, regulations, rules and ordinances relating to pollution, protection of the environment and human health and safety, and the generation, storage, handling, transportation, treatment, disposal and remediation of hazardous substances and waste materials. Actual or alleged violations of EHS laws or permit requirements could result in restrictions or prohibitions on plant operations and substantial civil or criminal sanctions, as well as, under some EHS laws, the assessment of strict liability and/or joint and several liability.
Many of our products and operations are subject to the chemical control laws of the countries in which they are located. These laws include the regulation of chemical substances and inventories under the Toxic Substances Control Act (“TSCA”) in the U.S. and the Registration, Evaluation and Authorization of Chemicals (“REACH”) and the Classification, Labeling and Packaging of substances and mixtures (“CLP”) regulations in Europe. Analogous regimes exist in other parts of the world, including China, South Korea, and Taiwan. In addition, a number of countries where we operate, including the U.K., have adopted rules to conform chemical labeling in accordance with the globally harmonized system. Many of these foreign regulatory regimes are in the process of a multi-year implementation period for these rules.
Additional new laws and regulations may be enacted or adopted by various regulatory agencies globally. For example, in the U.S., the EPA finalized revisions to its Risk Management Program in January 2017. The revisions include new requirements for certain facilities to perform hazard analyses, third-party auditing, incident investigations and root cause analyses, emergency response exercises, and to publicly share chemical and process information. The EPA proposed to delay the rule’s effect until February 2019; however, a ruling by the U.S. Court of Appeals for the D.C. Circuit on September 21, 2018 made the Risk Management Program rule amendment effective immediately. The EPA finalized a reconsideration rule on November 20, 2019 that rescinded several of the 2017 revisions to the Risk Management Program rule. Environmental organizations and attorneys general of fourteen states and the District of Columbia challenged the reconsideration rule in the D.C. Circuit. That litigation is pending and implementation of the reconsideration rule is unclear at this time. The U.S. Occupational Safety and Health Administration had previously announced that it was considering changes to its Process Safety Management standards that parallel EPA’s Risk Management Program; but additional action appears unlikely at this time. In addition, TSCA reform legislation was enacted in June 2016, and the EPA has begun the process of issuing new chemical control regulations. EPA issued several final rules in 2017 and 2018 under the revised TSCA related to existing chemicals, including the following: (i) a rule to establish EPA’s process and criteria for identifying chemicals for risk evaluation; (ii) a rule to establish EPA’s process for evaluating high priority chemicals and their uses to determine whether or not they present an unreasonable risk to health or the environment; and (iii) a rule to require industry reporting of chemicals manufactured or processed in the U.S. over the past 10 years. In April 2020, EPA finalized revisions to its Chemical Data Reporting rule under TSCA, which changes reporting requirements. The EPA has also released its framework for approving new chemicals and new uses of existing chemicals. Under the framework, a new chemical or use presents an unreasonable risk if it exceeds set standards. Such a finding could result in either the issuance of rules restricting the use of the chemical being evaluated or in the need for additional testing. The costs of compliance with any new laws or regulations cannot be estimated until the manner in which they will be implemented has been more precisely defined.
Furthermore, governmental, regulatory and societal demands for increasing levels of product safety and environmental protection could result in increased pressure for more stringent regulatory control with respect to the chemical industry. In addition, these concerns could influence public perceptions regarding our products and operations, the viability of certain products, our reputation, the cost to comply with regulations, and the ability to attract and retain employees. Moreover, changes in EHS 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, which could reduce our profitability. For example, several of our products are being evaluated under REACH and CLP regulations and actions thereunder could negatively impact sales.
We could incur significant expenditures in order to comply with existing or future EHS laws. Capital expenditures and costs relating to EHS matters will be subject to evolving regulatory requirements and will depend on the timing of the promulgation and enforcement of specific standards which impose requirements on our operations. Capital expenditures and costs beyond those currently anticipated may therefore be required under existing or future EHS laws.
Furthermore, we may be liable for the costs of investigating and cleaning up environmental contamination on or from our properties or at off-site locations where we disposed of or arranged for the disposal or treatment of hazardous materials, or from disposal activities that pre-dated our purchase of our businesses. We may therefore incur additional costs and expenditures beyond those currently anticipated to address all such known and unknown situations under existing and future EHS laws.
Regulatory requirements to reduce GHG emissions could have an adverse effect on our results of operations.
Our operations are increasingly subject to regulations that seek to reduce emissions of GHGs, such as carbon dioxide and methane, which may be contributing to changes in the Earth’s climate. There are existing efforts to address GHG emissions at the international, national, and regional levels. For example, the Paris Agreement, which entered into force in November 2016, resulted in voluntary commitments by numerous countries to reduce their GHG emissions. On June 1, 2017, President Trump announced that the U.S. would withdraw from the Paris Agreement, and the U.S. completed the process of withdrawing on November 4, 2020. On January 20, 2021, President Biden issued written notification to the United Nations of the U.S.’s intention to rejoin the Paris Agreement, which will become effective in 30 days. The EU also regulates GHGs under the EU ETS and China has established its own country-wide GHG cap and trade program. Domestically, the EPA issued its final Clean Power Plan rule in 2015 that established carbon pollution standards for power plants, called CO2 emission performance rates. This rule has been repealed and the litigation challenging the rule has been dismissed. On July 8, 2019, the EPA replaced the Clean Power Plan with the Affordable Clean Energy (“ACE”) rule, which established emission guidelines for states to develop plans to address GHG emissions from existing coal-fired power plants. The ACE rule was challenged by a coalition of states and environmental groups. On January 19, 2021, the D.C. Circuit struck down the ACE Rule and remanded it to the EPA; therefore, the regulation of GHG emissions is uncertain at this time. Such rules and agreements may affect the long-term price and supply of electricity and natural gas and demand for products that contribute to energy efficiency and renewable energy. These various regulations and agreements may result in increased costs to purchased energy, additional capital costs for installation or modification of GHG emitting equipment, and additional costs associated directly with GHG emissions (such as cap and trade systems or carbon taxes), which are primarily related to energy use. Compliance with these regulations and any more stringent restrictions in the future may increase our operational costs.
In addition, most scientists have concluded that increasing concentrations of GHGs in the Earth’s atmosphere may produce climate changes, such as increased frequency and severity of storms, droughts, floods and other climatic events. If any such effects were to occur in areas where we or our clients operate, they could have an adverse effect on our assets and operations.
We could incur significant expenditures in order to comply with existing or future EHS laws. Capital expenditures and costs relating to EHS matters will be subject to evolving regulatory requirements and will depend on the timing of the promulgation and enforcement of specific standards which impose requirements on our operations. Capital expenditures and costs beyond those currently anticipated may therefore be required under existing or future EHS laws.
Furthermore, we may be liable for the costs of investigating and cleaning up environmental contamination on or from our properties or at off-site locations where we disposed of or arranged for the disposal or treatment of hazardous materials or from disposal activities that pre-dated our purchase of our businesses. We may therefore incur additional costs and expenditures beyond those currently anticipated to address all such known and unknown situations under existing and future EHS laws.
Changes in U.S. trade policies and other factors beyond our control may adversely impact our business, financial condition and results of operations.
Tariffs, retaliatory tariffs or other trade restrictions on products and materials that our customers export, including among others, textile, automotive and consumer products, could cause the prices of our customers’ products to increase which could reduce demand for such products, or reduce our customer margins, and adversely impact their revenues, financial results and ability to service debt; which, in turn, could adversely affect our financial condition and results of operations. Additionally, our products may become directly subject to future tariffs, which would in turn raise the cost to our customers and could adversely affect the demand for our products. Direct or unforeseen consequences of tariffs, retaliatory tariffs or other trade restrictions may also alter the competitive landscape of our products in one or more regions of the world.
It remains unclear how the U.S. Administration or foreign governments will act with respect to tariffs, international trade agreements and policies. For example, any future withdrawal or renegotiation of trade agreements, or the failure to reach agreement over trade agreements, or the imposition of new or increased tariffs, or the more aggressive prosecution of trade disputes with countries like China, may increase costs or reduce profitability, or adversely affect our ability to operate our business and execute our growth strategy. As result, a trade war or other governmental action related to tariffs or international trade agreements or policies has the potential to negatively impact ours and/or our customers' costs, demand for our customers’ products, and/or the global economy or certain sectors thereof and, thus, adversely impact our business, financial condition and results of operations.
RISKS RELATED TO INDEBTEDNESS
Our debt level, a portion of which is subject to variable interest rates, makes us vulnerable to downturns and may limit our ability to respond to market conditions, to obtain additional financing or to refinance our debt.
As of December 31, 2020, our total consolidated outstanding debt was $2,121 million (including current portion of debt); our debt to total capitalization ratio was approximately 37%; our combined outstanding variable rate borrowings were approximately $17 million; and our current portion of debt totaled $593 million. Additionally, future borrowings under our $1.2 billion senior unsecured revolving credit facility will be subject to variable interest rates. Our debt level and the fact that a portion of our cash flow is required to make payments on our debt could have important consequences for our business, including but not limited to the following:
●
we may be more vulnerable to business, industry or economic downturns, making it more difficult to respond to market conditions;
●
cash flow available for other purposes, including the growth of our business, may be reduced;
●
our ability to refinance or obtain additional financing may be constrained, particularly during periods when the capital markets are unsettled;
●
our competitors with lower debt levels may have a competitive advantage relative to us; and
●
part of our debt is subject to variable interest rates, which makes us more vulnerable to increases in interest rates.
Our debt level also impacts our credit ratings. Any decision by credit rating agencies to downgrade our debt ratings could restrict our ability to obtain additional financing and could result in increased interest and other costs.
Agreements governing our debt may restrict our ability to engage in certain business activities or to obtain additional financing.
The agreements governing our debt arrangements contain certain restrictive covenants. These covenants may limit or prohibit our ability to among other things, incur additional indebtedness; make investments; create liens; enter into transactions with affiliates; enter into sale and leaseback transactions; merge or consolidate; and transfer or sell assets. Some of our strategies may necessitate receiving consents or waivers under our debt arrangements, which could be withheld.
Our failure to comply with any of our debt covenants, or our failure to make payments of principal or interest on our debt, could result in a default, or trigger cross-default or acceleration provisions, under our debt agreements. An event of default could result in our debt obligations becoming immediately due and payable, cause our creditors to terminate their lending commitments. Any of the foregoing occurrences could have a material adverse effect on our business, results of operations and financial condition. For more information regarding our debt covenants, see “Note 15. Debt-Compliance with Covenants” to our consolidated financial statements.
If our subsidiaries do not make sufficient distributions to us, then we will not be able to make payment on our debts.
Our debt is generally the exclusive obligation of Huntsman International. Our subsidiaries are separate legal entities and have no obligation, contingent or otherwise, to pay any amounts due on our debt or to make any funds available for those amounts, whether by dividends, loans, distributions or other payments, and do not guarantee the payment of interest on, or principal of, our debt. Any right that we have to receive any assets of any of our subsidiaries upon the liquidation or reorganization of any such subsidiary, and the consequent right of holders of notes to realize proceeds from the sale of their assets, will be structurally subordinated to the claims of that subsidiary’s creditors, including trade creditors and holders of debt issued by that subsidiary.
GENERAL RISK FACTORS
Certain provisions contained in our certificate of incorporation and bylaws could discourage a takeover attempt, which may reduce or eliminate the likelihood of a change of control transaction and, therefore, limit your ability to sell our common stock at a price higher than the current market value.
Certain provisions contained in our certificate of incorporation and bylaws, as well as certain provisions of Delaware law, could make it more difficult for a third party to acquire control of our Company, even if some of our stockholders were to consider such a change of control to be beneficial. Our certificate of incorporation also authorizes our Board of Directors to issue preferred stock without stockholder approval. Therefore, our Board of Directors could elect to issue preferred stock that has special voting or other rights that could make it even more difficult for a third party to acquire us, which may reduce or eliminate your ability to sell our common stock at a price higher than the current market value.
We have purchased, and may continue to purchase, a portion of our equity and debt securities, which could impact the market for our equity and debt securities and likely would negatively affect our liquidity.
Consistent with past practices, we may from time to time seek to repurchase or redeem our equity and debt securities in open market purchases, accelerated repurchase programs, privately negotiated transactions, tender offers, partial or full calls for redemption or otherwise. Any such repurchases or redemptions and the timing and amount thereof would depend on prevailing market conditions, liquidity requirements, contractual restrictions and other factors. Such transactions could negatively affect our liquidity.

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ITEM 1B. UNRESOLVED STAFF COMMENTS
ITEM 1B. UNRESOLVED STAFF COMMENTS
As of the date of this filing, we did not have any unresolved comments from the staff of the SEC.

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ITEM 2. PROPERTIES
ITEM 2. PROPERTIES
We own or lease chemical manufacturing and research facilities in the locations indicated in the list below, which we believe are adequate for our short-term and anticipated long-term needs. We own or lease office space and storage facilities throughout the U.S. and in many foreign countries. Our principal executive offices are located at 10003 Woodloch Forest Drive, The Woodlands, Texas 77380. The following is a list of our principal physical properties where manufacturing, research and main office facilities are located.
Location
Business Segment
Description of Facility
The Woodlands, Texas(1)
Various
Executive Offices, Operating Headquarters, Global Technology Center and Shared Services Center
Kuala Lumpur, Malaysia(1)
Various
Shared Services Center
Mumbai, India(1)
Various
Technology Center, Administrative Offices, Labs and Shared Services Center
Sao Paulo, Brazil(1)
Various
Administrative Offices and Accounting Shared Services Center
Geismar, Louisiana(2)
Polyurethanes and Performance Products
MDI, Nitrobenzene(2), Aniline(2), Polyols and Maleic Anhydride Manufacturing Facilities, Polyurethane Systems House
Rotterdam, The Netherlands(1)
Polyurethanes and other various
MDI Manufacturing Facility, Polyols Manufacturing Facilities, Polyurethane Systems House and Accounting Shared Services Center
Caojing, China
Polyurethanes
MDI Finishing Facilities
Caojing, China(3)
Polyurethanes
Precursor MDI Manufacturing Facility
Jinshan, China(1)
Polyurethanes
TPU Manufacturing Facility
Deer Park, Australia(1)
Polyurethanes
Polyurethane Systems House
Cartagena, Colombia
Polyurethanes
Polyurethane Systems House
Deggendorf, Germany
Polyurethanes
Polyurethane Systems House and Technology Center
Ternate, Italy
Polyurethanes
Polyurethane Systems House and Technology Center
Shanghai, China(1)
Polyurethanes, Performance Products and Advanced Materials
Polyurethane Systems House, Global Technology Center, Performance Products Regional Headquarters and Shared Services Center
Azeglio, Italy
Polyurethanes
Polyurethane Systems House
Pune, India(1)
Polyurethanes
Polyurethane Systems House
Buenos Aires, Argentina(1)
Polyurethanes
Polyurethane Systems House
Samutprakarn, Thailand(1)
Polyurethanes
Polyurethane Systems House
Istanbul, Turkey(8)
Polyurethanes
Polyurethane Systems House
Kuan Yin, Taiwan
Polyurethanes
Polyurethane Systems House
Tlalnepantla, Mexico
Polyurethanes
Polyurethane Systems House
Mississauga, Canada
Polyurethanes
Polyurethane Systems House
Obninsk, Russia
Polyurethanes
Polyurethane Systems House
Dammam, Saudi Arabia(4)
Polyurethanes
Polyurethane Systems House
Georgsmarienhütte, Germany
Polyurethanes
Polyurethane Systems House
Castelfranco Emilia, Italy
Polyurethanes
Polyurethane Systems House
Dubai, United Arab Emirates
Polyurethanes
Polyurethane Systems House
Arlington, Texas
Polyurethanes
Polyurethane Systems House
Boisbriand, Canada
Polyurethanes
Polyurethane Systems House
King’s Lynn, U.K.(1)
Polyurethanes
Polyurethane Systems House
Ho Chi Minh City, Vietnam(1)
Polyurethanes and Advanced Materials
Polyurethane Systems House and Formulating Facility
Auburn Hills, Michigan(1)
Polyurethanes
Polyurethane Research Facility
Everberg, Belgium
Polyurethanes and Performance Products
Polyurethane and Performance Products Regional Headquarters, Global Technology Center and Shared Service Center
Houston, Texas(1)
Polyurethanes
Polyols Manufacturing Facility
Derry, New Hampshire(1)
Polyurethanes
TPU Research Facility
Ringwood, Illinois(1)
Polyurethanes
TPU Manufacturing Facility
Osnabrück, Germany
Polyurethanes
TPU Manufacturing Facility
Wilton, U.K.
Polyurethanes and other various
Aniline and Nitrobenzene Manufacturing Facilities
Nanjing, China(5)
Polyurethanes
PO and MTBE Manufacturing Facilities
Tianjin, China(1)
Polyurethanes
Polyurethane Systems House
Port Neches, Texas
Performance Products
Amines Manufacturing Facility
Conroe, Texas
Performance Products
Amines Manufacturing Facility
Petfurdo, Hungary
Performance Products
Amines Manufacturing Facility
Llanelli, U.K.
Performance Products
Amines Manufacturing Facility
Freeport, Texas(1)
Performance Products
Amines Manufacturing Facility
Jurong Island, Singapore(1)
Performance Products
Amines Manufacturing Facility
Jubail, Saudi Arabia(6)
Performance Products
Amines Manufacturing Facility
Pensacola, Florida(1)
Performance Products
Maleic Anhydride Manufacturing Facility
Moers, Germany(1)
Performance Products
Maleic Anhydride Manufacturing Facility
Akron, Ohio
Advanced Materials
Synthesis Facility
Bergkamen, Germany
Advanced Materials
Synthesis Facility
Monthey, Switzerland
Advanced Materials
Formulating and Synthesis Facility
Pamplona, Spain
Advanced Materials
Synthesis Facility
McIntosh, Alabama
Advanced Materials
Formulating and Synthesis Facility
Maple Shade, New Jersey
Advanced Materials
Synthesis Facility
Bad Saeckingen, Germany
Advanced Materials
Formulating Facility
Duxford, U.K.
Advanced Materials
Formulating and Synthesis Facility
Taboão da Serra, Brazil
Advanced Materials, Polyurethanes and Textile Effects
Formulating Facility, Labs, Polyurethane Systems House and Chemicals Formulations Facility
Panyu, China(7)
Advanced Materials and Textile Effects
Formulating and Synthesis Facility, Technology Center and Shared Services Center
East Lansing, Michigan
Advanced Materials
Formulating Facility
Los Angeles, California
Advanced Materials
Formulating Facility
Merrimack, New Hampshire(1)
Advanced Materials
Research Facility
Basel, Switzerland(1)
Advanced Materials and Textile Effects
Advanced Materials Regional Headquarters, Technology Center
Langweid am Leich, Germany
Textile Effects
Chemicals Synthesis and Formulations Facility
Charlotte, North Carolina
Textile Effects
Chemicals Formulations Facility
Samutsakorn (Mahachai), Thailand
Textile Effects
Textiles Dyes Synthesis and Formulations Facility
Atotonilquillo, Mexico
Textile Effects
Textile Dyes and Chemicals Synthesis and Formulations Facility
Baroda, India
Textile Effects
Textile Dyes Synthesis and Dyes and Chemicals Formulations Facility
Gandaria, Jakarta, Indonesia
Textile Effects and Polyurethanes
Textile Dyes and Chemicals Formulations Facility and Polyurethane Systems House
Fraijanes, Guatemala
Textile Effects
Chemicals Formulations Facility
Bogota, Colombia
Textile Effects
Chemicals Formulations Facility
Hangzhou, China(1)
Textile Effects
Chemicals Formulations Facility
Singapore(1)
Textile Effects and other various
Textile Effects Headquarters and Administrative Offices
Wynyard, U.K.(1)
Various
Administrative Offices
(1)
Leased land and/or building.
(2)
The ownership of the Geismar facility is as follows: we own 100% of the MDI, polyol and maleic anhydride facilities, and Rubicon LLC, a consolidated manufacturing joint venture with Lanxess in which we own a 50% interest, owns the aniline and nitrobenzene facilities. Rubicon LLC is a separate legal entity that operates both the assets that we own jointly with Lanxess and our wholly owned assets at Geismar.
(3)
35% interest in SLIC, our unconsolidated manufacturing joint venture with BASF and three Chinese chemical companies.
(4)
51%-owned consolidated manufacturing joint venture with Basic Chemicals Industries Ltd.
(5)
49% interest in Nanjing Jinling Huntsman New Material Co., Ltd., our unconsolidated manufacturing joint venture with Sinopec. Beneficial commercial operations began during the second half of 2017.
(6)
50% interest in AAC, our consolidated manufacturing joint venture with the Zamil Group.
(7)
95%-owned consolidated manufacturing joint venture with Guangzhou Sheng’an Package Company Limited.
(8) On September 18, 2019, we experienced a fire at our polyurethane systems house in Istanbul, Turkey, and it is currently not operational.

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ITEM 3. LEGAL PROCEEDINGS
ITEM 3. LEGAL PROCEEDINGS
Rockwood Litigation
On February 6, 2017, we filed a lawsuit in New York state court against Rockwood Holdings, Inc. (“Rockwood”), Albemarle Corporation (as Rockwood’s successor) and certain former Rockwood executives to recover damage for fraud and breach of contract. During the commissioning of a new Venator production facility in Augusta, Georgia (the “Augusta Facility”) for the synthesis of iron oxide pigments, the Augusta Facility experienced delays producing products at the expected specifications and quantities, raising questions regarding the capabilities of the technology we acquired from Rockwood in October 2014. In May 2018, Venator implemented a plan to cease using certain portions of the Augusta Facility and incurred significant restructuring expenses. The case is currently in arbitration, with the evidentiary hearing scheduled for May 2021, and we are seeking various forms of legal remedy, including compensatory damages, punitive damages, expectation damages, consequential damages and restitution. Venator is not party to the suit.

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ITEM 4. MINE SAFETY DISCLOSURE
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
INFORMATION ABOUT OUR EXECUTIVE OFFICERS
The following is information concerning our executive officers and significant employees as of the date of this report.
Peter R. Huntsman, age 57, is Chairman of the Board, President and Chief Executive Officer of our Company. Peter R. Huntsman has served as Chairman of the Board since January 2018 and as a director of our company and affiliated companies since 1994. Prior to his appointment in July 2000 as Chief Executive Officer, Mr. Huntsman had served as President and Chief Operating Officer since 1994. In 1987, Mr. Huntsman joined Huntsman Polypropylene Corporation as Vice President before serving as Senior Vice President and General Manager. Mr. Huntsman has also served as President of Olympus Oil, as Senior Vice President of Huntsman Chemical Corporation and as a Senior Vice President of Huntsman Packaging Corporation, a former subsidiary of our Company. Mr. Huntsman is a director or manager, as applicable, of Huntsman International and certain of our other subsidiaries. Mr. Huntsman currently serves as a director of Venator Materials PLC, which separated from our Company in 2017.
Sean Douglas, age 56, is Executive Vice President and Chief Financial Officer. Mr. Douglas was appointed to this position in January 2017. Mr. Douglas was previously Vice President, Corporate Development and Treasurer from July 2015 to July 2016. Mr. Douglas left the Company in July 2012 to perform charitable services and rejoined the Company in July 2015. He previously served as our Vice President, Corporate Development from December 2009 until July 2012. Mr. Douglas served as Vice President and Treasurer from 2002 to December 2009, Vice President, Finance from July 2001 to 2002 and Vice President, Administration from January 1997 to July 2001. Prior to joining Huntsman in 1990, Mr. Douglas worked for the accounting firm of PricewaterhouseCoopers.
David Stryker, age 62, is Executive Vice President, General Counsel and Secretary. Mr. Stryker was appointed to this position in June 2013. Prior to joining Huntsman, Mr. Stryker served as Senior Vice President, General Counsel, Secretary and Chief Compliance Officer of the BASF Corporation since 2004. Previously, he was Associate General Counsel and Chief Compliance Officer at Siemens Corporation and, prior to that, a partner at the law firm of Kirkland & Ellis. Mr. Stryker started his legal career as a judicial clerk to the Honorable Robert H. Bork on the U.S. Court of Appeals for the D.C. Circuit.
Anthony P. Hankins, age 63, is Division President, Polyurethanes and Chief Executive Officer, Asia-Pacific. Mr. Hankins was appointed to these positions in March 2004 and February 2011, respectively. From May 2003 to February 2004, Mr. Hankins served as President, Performance Products, from January 2002 to April 2003, he served as Global Vice President, Rigids Division for our Polyurethanes segment, from October 2000 to December 2001, he served as Vice President-Americas for our Polyurethanes segment, and from March 1998 to September 2000, he served as Vice President-Asia-Pacific for our Polyurethanes segment. Mr. Hankins worked for ICI from 1980 to February 1998, when he joined our Company. At ICI, Mr. Hankins held numerous management positions in the plastics, fibers and polyurethanes businesses. He has extensive international experience, having held senior management positions in Europe, Asia and the U.S.
Rohit Aggarwal, age 53, is Division President, Textile Effects. Mr. Aggarwal was appointed to this position in July 2016. Mr. Aggarwal was previously Vice President and Managing Director of Indian Subcontinent for Huntsman from July 2015 to July 2016 and served in various positions within Huntsman’s Advanced Materials and Textile Effects segments from 2005 to 2013. In 2013, Mr. Aggarwal left Huntsman to join Louis Dreyfus Commodities B.V. as Chief Executive Officer of Asia Region, a position he held until his return to our Company in 2015.
Chuck Hirsch, age 53, is Senior Vice President, Performance Products. Prior to his appointment to this position in July 2020, Mr. Hirsch served as Vice President-Commercial, Textile Effects based in Singapore since April 2014. Mr. Hirsch joined Huntsman in July 2009 and has served in multiple roles of increasing responsibility in the Textile Effects division. Prior to joining Huntsman, Mr. Hirsch held numerous positions with International Textile Group, Ciba Specialty Chemicals and Milliken & Company.
Scott J. Wright, age 49, is Division President, Advanced Materials. Mr. Wright was appointed to this position in June 2016. Prior to that time, Mr. Wright served as Vice President of Huntsman Advanced Materials-Europe, Middle East & Africa since 2011. Before joining Huntsman’s Advanced Materials segment, Mr. Wright spent 15 years in Huntsman’s former P&A Business in a number of roles of increasing responsibility including product development, business planning, marketing and sales. Prior to joining Huntsman in July 1999, Mr. Wright worked with ICI.
Brittany Benko, age 46, is Senior Vice President, Environmental, Health & Safety and Manufacturing Excellence. Prior to joining Huntsman in August 2020, Ms. Benko served as Vice President, Health, Safety, Environment and Regulatory at Southwestern Energy Company. Previously, Ms. Benko served in a variety of EHS roles with increasing responsibility at several companies including Anadarko Petroleum Corporation, Chesapeake Energy Corporation and BP.
R. Wade Rogers, age 55, is Senior Vice President, Global Human Resources and Chief Compliance Officer. Mr. Rogers has held the position of Senior Vice President, Global Human Resources since August 2009. From May 2004 to August 2009, Mr. Rogers served as Vice President, Global Human Resources, from October 2003 to May 2004, Mr. Rogers served as Director, Human Resources-Americas and from August 2000 to October 2003, he served as Director, Human Resources for our Polymers and Base Chemicals businesses. From the time he joined Huntsman in 1994 to August 2000, Mr. Rogers served as Area Manager, Human Resources-Jefferson County Operations. Prior to joining Huntsman, Mr. Rogers held a variety of positions with Texaco Chemical Company.
Randy W. Wright, age 62, is Vice President and Controller. Prior to his appointment to this position in February 2012, Mr. Wright served as Assistant Controller and Director of Financial Reporting since July 2004. Prior to joining Huntsman in 2004, Mr. Wright held various positions with Georgia-Pacific Corporation, Riverwood International, Johns Manville and PricewaterhouseCoopers. Mr. Wright is a Certified Public Accountant.
Twila Day, age 59, is Vice President and Chief Information Officer. Ms. Day was appointed to this position upon joining Huntsman in November 2018. Prior to joining Huntsman, Ms. Day was Managing Director, National Practice Lead for Technology Services, and a member of the executive committee at Alvarez & Marsal. Previously, Ms. Day served at SYSCO Corporation for more than 20 years in a variety of positions, culminating in her appointment as Senior Vice President Information Technology and Chief Information Officer.
Kevin C. Hardman, age 57, is Vice President, Tax. Mr. Hardman served as Chief Tax Officer from 1999 until he was appointed to his current position in 2002. Prior to joining Huntsman in 1999, Mr. Hardman was a tax Senior Manager with the accounting firm of Deloitte & Touche LLP, where he worked for 10 years. Mr. Hardman is a Certified Public Accountant and holds a master’s degree in tax accounting.
Phil Lister, age 48, is Vice President, Corporate Development. Mr. Lister was appointed to this position effective May 2019. From April 2011, Mr. Lister served in Huntsman’s Polyurethanes division as Vice President, Global Finance and Controller, a role including divisional leadership of strategic planning as well as mergers and acquisitions. Prior to that, Mr. Lister served in numerous financial and business roles in Polyurethanes both in Europe and in the United States. Mr. Lister joined Huntsman in July 1999 with the ICI acquisition. Mr. Lister is a U.K. Chartered Management Accountant.
Ivan Marcuse, age 44, is Vice President, Investor Relations. Prior to joining Huntsman in April 2017, Mr. Marcuse served as Director, Equity Research, Specialty Chemicals for KeyBanc Capital Markets Inc. from August 2011 to February 2017. Previously, he was Vice President, Equity Research, Building Products and Materials, for Northcoast Research. Mr. Marcuse is a CFA charterholder and holds a master’s degree in business administration.
Claire Mei, age 46, is Vice President and Treasurer. Ms. Mei was appointed to this role upon joining Huntsman in August of 2018. Prior to joining Huntsman, Ms. Mei served as Vice President and Treasurer at Chobani Global Holdings since November 2016. Previously, Ms. Mei served in a variety of treasury and financial roles with increasing responsibility at several companies including Kraft Foods, PepsiCo, and Hyatt Corporation. Ms. Mei was also a management consultant with McKinsey & Company in Shanghai, China. Ms. Mei holds a master’s degree in business administration.
Pierre Poukens, age 58, is Vice President, Internal Audit, a position he has held since February 2012. Mr. Poukens was Director of Internal Audit from April 2005 to January 2012 and joined Huntsman as Internal Audit Manager in January 2000. Prior to joining Huntsman, Mr. Poukens held various accounting and auditing positions with European companies in Belgium. Mr. Poukens is a Certified Internal Auditor.
Nooshin Vaughn, age 46, is Vice President, Financial Planning and Analysis. Ms. Vaughn was appointed to this position effective June 2018. Ms. Vaughn previously served as Director, Investor Relations. Prior to that, Ms. Vaughn held numerous roles in finance, accounting and information technology. Prior to joining Huntsman in 1997, Ms. Vaughn worked for the accounting firm of Deloitte & Touche LLP. Ms. Vaughn is a Certified Public Accountant.
PART II

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ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Market Information And Holders
Our common stock is listed on the New York Stock Exchange under the symbol “HUN.” As of February 1, 2021, there were approximately 76 stockholders of record and the closing price of our common stock on the New York Stock Exchange was $27.08 per share.
Dividends
The payment of dividends is a business decision made by our Board of Directors from time to time based on our earnings, financial position and prospects, and such other considerations as our Board of Directors considers relevant. Accordingly, while management currently expects that the Company will continue to pay the quarterly cash dividend, its dividend practice may change at any time.
Securities Authorized For Issuance Under Equity Compensation Plans
See “Part III. Item 11. Executive Compensation” for information relating to our equity compensation plans.
Purchases Of Equity Securities By The Company
The following table provides information with respect to shares of our common stock that we repurchased as part of our share repurchase program and shares of restricted stock granted under our stock incentive plans that we withheld upon vesting to satisfy our tax withholding obligations during the three months ended December 31, 2020.
Maximum number
Total number of
(or approximate
shares purchased
dollar value) of
Total number
Average
as part of publicly
shares that may yet
of shares
price paid
announced plans
be purchased under
purchased
per share(1)
or programs(2)
the plans or programs(2)
October
-
$ -
-
$ 420,000,000
November
24.29
-
420,000,000
December
25.14
-
420,000,000
Total
1,469
24.84
-
(1)
Represents net purchase price per share, exclusive of any fees or commissions.
(2)
On February 7, 2018 and on May 3, 2018, our Board of Directors authorized our Company to repurchase up to an additional $950 million in shares of our common stock in addition to the $50 million remaining under our September 2015 share repurchase authorization. The share repurchase program will be supported by our free cash flow generation. Repurchases may be made in the open market, including through accelerated share repurchase programs, or in privately negotiated transactions, and repurchases may be commenced or suspended from time to time without prior notice. Shares of common stock acquired through the repurchase program are held in treasury at cost. During the first quarter of 2020, we repurchased 5,364,519 shares of our common stock for approximately $96 million, excluding commissions, under the repurchase program. Subsequent to the end of the first quarter of 2020, we suspended share repurchases under our existing share repurchase program in order to enhance our liquidity position in response to COVID-19.

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ITEM 6. SELECTED FINANCIAL DATA
ITEM 6. SELECTED FINANCIAL DATA
Not applicable.

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Recent Developments
See "Part I. Item 1. Business-Recent Developments” for important updates that occurred in our businesses for the year ended December 31, 2020.
Outlook
We expect the following factors to impact our operating segments:
Polyurethanes:
●
First quarter 2021 adjusted EBITDA projected to be slightly more than double first quarter 2020 results, including turnaround-related headwinds
●
Positive trends in construction (including spray polyurethane foam), automotive and elastomer markets
●
Continued strength in China, but lower margins in China component MDI and polymeric systems for first quarter 2021 compared to fourth quarter 2020
Performance Products:
●
First quarter 2021 adjusted EBITDA to be up approximately 10%-15% compared to first quarter 2020
●
Improving volumes in the Americas and Asia regions in first quarter 2021 compared to first quarter 2020
● Positive volume trends across the portfolio from fourth quarter 2020 to first quarter 2021
Advanced Materials:
●
First quarter 2021 adjusted EBITDA to be up approximately 40% compared to fourth quarter 2020
●
Improving trends from fourth quarter 2020 to first quarter 2021 across all markets, including aerospace
●
Synergy capture from acquisitions on track
Textile Effects:
●
First quarter 2021 adjusted EBITDA to be up slightly compared to first quarter 2020
●
Favorable trends in sustainable solutions
● First quarter 2021 orders returning to 2019 levels
In 2020, our adjusted effective tax rate was 19%. For 2021, our adjusted effective tax rate is expected to be approximately 22% to 24%. For further information, see “-Non-GAAP Financial Measures” and “Note 20. Income Taxes” to our consolidated financial statements.
Higher Insurance Costs in 2021
During 2020, we saw a deterioration in insurance markets in which we participate, particularly for property and excess/umbrella liability insurance. Rates increased significantly for these coverages, terms and conditions were restricted and some insurers either reduced their available capital or stopped underwriting accounts in the chemical sector. As a result, our annual insurance expense will increase from $32 million in 2020 to $52 million in 2021. We customarily prepay our insurance expense and, accordingly, we prepaid our 2021 insurance expense in December 2020. This prepaid expense will be recognized ratably in our statements of operations in 2021.
Refer to “Item 1A. Risk Factors” for a discussion of the factors that may impact our business, results of operations, financial condition or liquidity and “Forward-Looking Statements” for a discussion of our use of forward-looking statements.
ReSULTS OF OPERATIONS
For each of our Company and Huntsman International, the following tables set forth our consolidated results of operations for the years ended December 31, 2020, 2019 and 2018 (dollars in millions, except per share amounts).
Huntsman Corporation
December 31,
Percent Change
2020 vs 2019
2019 vs 2018
Revenues
$ 6,018
$ 6,797
$ 7,604
(11 )%
(11 )%
Cost of goods sold
4,918
5,415
5,840
(9 )%
(7 )%
Gross profit
1,100
1,382
1,764
(20 )%
(22 )%
Operating expenses
(35 )%
%
Restructuring, impairment and plant closing costs (credits)
(41 )
(7 )
NM
%
Merger costs
-
-
-
(100 )%
Operating income
(8 )%
(43 )%
Interest expense, net
(86 )
(111 )
(115 )
(23 )%
(3 )%
Equity in income of investment in unconsolidated affiliates
(22 )%
(2 )%
Fair value adjustments to Venator investment and related loss on disposal
(88 )
(18 )
(62 )
%
(71 )%
Loss on early extinguishment of debt
-
(23 )
(3 )
(100 )%
%
Other income, net
%
(38 )%
Income from continuing operations before income taxes
(14 )%
(47 )%
Income tax (expense) benefit
(46 )
(45 )
NM
NM
Income from continuing operations
(32 )%
(38 )%
Income (loss) from discontinued operations, net of tax
(39 )
%
NM
Net income
1,066
%
(8 )%
Reconciliation of net income to adjusted EBITDA:
Net income attributable to noncontrolling interests
(32 )
(36 )
(313 )
(11 )%
(88 )%
Interest expense, net from continuing operations
(23 )%
(3 )%
Interest expense, net from discontinued operations
-
-
-
(100 )%
Income tax expense (benefit) from continuing operations
(38 )
NM
NM
Income tax expense from discontinued operations
%
(59 )%
Depreciation and amortization of continuing operations
%
%
Depreciation and amortization of discontinued operations
-
(100 )%
(31 )%
Other adjustments:
Business acquisition and integration expenses and purchase accounting inventory adjustments
Merger costs
-
-
EBITDA from discontinued operations(2)
(1,017 )
(265 )
(171 )
Noncontrolling interest of discontinued operations
-
-
Fair value adjustments to Venator investment and related loss on disposal
Loss on early extinguishment of debt
-
Certain legal and other settlements and related expenses
(Gain) loss on sale of businesses/assets
(280 )
-
Income from transition services arrangements
(7 )
-
-
Certain nonrecurring information technology project implementation costs
-
Amortization of pension and postretirement actuarial losses
Plant incident remediation costs
-
Restructuring, impairment and plant closing and transition costs (credits)(3)
(41 )
(6 )
Adjusted EBITDA(1)
$
$
$ 1,161
(24 )%
(27 )%
Net cash provided by operating activities from continuing operations
$
$
$
(58 )%
(7 )%
Net cash provided by (used in) investing activities from continuing operations
1,462
(201 )
(615 )
NM
(67 )%
Net cash used in financing activities
(655 )
(450 )
(424 )
%
%
Capital expenditures from continuing operations
(249 )
(274 )
(251 )
(9 )%
%
Huntsman International
December 31,
Percent Change
2020 vs 2019
2019 vs 2018
Revenues
$ 6,018
$ 6,797
$ 7,604
(11 )%
(11 )%
Cost of goods sold
4,918
5,415
5,837
(9 )%
(7 )%
Gross profit
1,100
1,382
1,767
(20 )%
(22 )%
Operating expenses
(36 )%
%
Restructuring, impairment and plant closing costs (credits)
(41 )
(7 )
NM
%
Merger costs
-
-
-
(100 )%
Operating income
(7 )%
(43 )%
Interest expense, net
(88 )
(126 )
(136 )
(30 )%
(7 )%
Equity in income of investment in unconsolidated affiliates
(22 )%
(2 )%
Fair value adjustments to Venator investment and related loss on disposal
(88 )
(18 )
(62 )
%
(71 )%
Loss on early extinguishment of debt
-
(23 )
(3 )
(100 )%
%
Other income, net
%
(41 )%
Income from continuing operations before income taxes
(10 )%
(47 )%
Income tax (expense) benefit
(46 )
(41 )
NM
NM
Income from continuing operations
(30 )%
(38 )%
Income (loss) from discontinued operations, net of tax
(39 )
%
NM
Net income
1,067
%
(8 )%
Reconciliation of net income to adjusted EBITDA:
Net income attributable to noncontrolling interests
(32 )
(36 )
(313 )
(11 )%
(88 )%
Interest expense, net from continuing operations
(30 )%
(7 )%
Interest expense, net from discontinued operations
-
-
-
(100 )%
Income tax expense (benefit) from continuing operations
(41 )
NM
NM
Income tax expense from discontinued operations
%
(59 )%
Depreciation and amortization of continuing operations
%
%
Depreciation and amortization of discontinued operations
-
(100 )%
(31 )%
Other adjustments:
Business acquisition and integration expenses and purchase accounting inventory adjustments
Merger costs
-
-
EBITDA from discontinued operations(2)
(1,017 )
(265 )
(171 )
Noncontrolling interest of discontinued operations
-
-
Fair value adjustments to Venator investment and related loss on disposal
Loss on early extinguishment of debt
-
Certain legal and other settlements and related expenses
(Gain) loss on sale of businesses/assets
(280 )
-
Income from transition services arrangements
(7 )
-
-
Certain nonrecurring information technology project implementation costs
-
Amortization of pension and postretirement actuarial losses
Plant incident remediation costs
-
Restructuring, impairment and plant closing and transition costs (credits)(3)
(41 )
(6 )
Adjusted EBITDA(1)
$
$
$ 1,165
(23 )%
(27 )%
Net cash provided by operating activities from continuing operations
$
$
$
(57 )%
(6 )%
Net cash provided by (used in) investing activities from continuing operations
1,736
(202 )
(630 )
NM
(68 )%
Net cash used in financing activities
(933 )
(438 )
(390 )
%
%
Capital expenditures from continuing operations
(249 )
(274 )
(251 )
(9 )%
%
Huntsman Corporation
Year ended
Year ended
Year ended
December 31, 2020
December 31, 2019
December 31, 2018
Tax
Tax
Tax
Gross
and other(4)
Net
Gross
and other(4)
Net
Gross
and other(4)
Net
Reconciliation of net income to adjusted net income
Net income
$ 1,066
$
$
Net income attributable to noncontrolling interests
(32 )
(36 )
(313 )
Business acquisition and integration expenses and purchase accounting inventory adjustments
$
$ (6 )
$
$ -
$
$ (3 )
Merger costs
-
-
-
-
-
-
-
Income from discontinued operations(2)(6)
(1,017 )
(775 )
(265 )
(169 )
(171 )
Noncontrolling interest of discontinued operations
-
-
-
-
-
-
-
Fair value adjustments to Venator investment and related loss on disposal
(9 )
-
-
Loss on early extinguishment of debt
-
-
-
(5 )
(1 )
Certain legal and other settlements and related expenses
(1 )
(1 )
(1 )
-
(Gain) loss on sale of businesses/assets
(280 )
(249 )
(5 )
-
-
-
Income from transition services arrangements
(7 )
(5 )
-
-
-
-
-
-
Certain nonrecurring information technology project implementation costs
(1 )
(1 )
-
-
-
Amortization of pension and postretirement actuarial losses
(17 )
(16 )
(13 )
Significant activities related to deferred tax assets and liabilities(5)
-
-
-
-
(128 )
(128 )
-
(119 )
(119 )
U.S. Tax Reform Act impact on income tax expense
-
-
-
-
(1 )
(1 )
-
Plant incident remediation costs
-
(2 )
-
-
-
Restructuring, impairment and plant closing and transition costs (credits)(3)
(13 )
(41 )
(32 )
(6 )
(5 )
Adjusted net income(1)
$
$
$
Weighted average shares-basic
220.6
228.9
238.1
Weighted average shares-diluted
221.9
230.6
241.6
Basic net income (loss) attributable to Huntsman Corporation per share:
Income from continuing operations
$ 1.18
$ 1.72
$ 2.55
Income (loss) from discontinued operations
3.51
0.74
(1.13 )
Net income
$ 4.69
$ 2.46
$ 1.42
Diluted net income (loss) attributable to Huntsman Corporation per share:
Income from continuing operations
$ 1.17
$ 1.70
$ 2.52
Income (loss) from discontinued operations
3.49
0.74
(1.13 )
Net income
$ 4.66
$ 2.44
$ 1.39
Other non-GAAP measures:
Diluted adjusted net income per share(1)
$ 0.98
$ 1.53
$ 2.66
Net cash provided by operating activities from continuing operations
$
$
$
Capital expenditures from continuing operations
(249 )
(274 )
(251 )
Free cash flow from continuing operations(1)
$
$
$
Other cash flow measure:
Taxes paid on sale of businesses(7)
$
$ -
$ -
NM-Not meaningful
(1)
See “-Non-GAAP Financial Measures.”
(2) Includes the gain on the sale of our Chemical Intermediates Businesses in 2020.
(3)
Includes costs associated with transition activities relating to the acquisition of CVC Thermoset Specialties in 2020 and transition activities in 2018 relating to the transition of our Textile Effects segment’s production from Basel, Switzerland to a tolling facility. These transition costs were included in either selling, general and administrative expenses or cost of sales on our consolidated statements of operations.
(4)
The income tax impacts, if any, of each adjusting item represent a ratable allocation of the total difference between the unadjusted tax expense and the total adjusted tax expense, computed without consideration of any adjusting items using a with and without approach.
(5)
During the year ended December 31, 2019, we recorded $153 million of tax benefit relating to the outside basis difference in our investment in Venator, we recorded $18 million of tax benefit relating to realized tax losses on our remaining interest in Venator, we established $11 million of significant income tax valuation allowance in Australia and we recorded $32 million of deferred tax expense due to the reduction of tax rates in Switzerland. During the year ended December 31, 2018, we released $119 million of significant income tax valuation allowances in Switzerland, the U.K. and Luxembourg. We eliminated the effect of these significant changes in tax valuation allowances and deferred tax assets and liabilities from our presentation of adjusted net income to allow investors to better compare our ongoing financial performance from period to period.
(6)
In addition to income tax impacts, this adjusting item is also impacted by depreciation and amortization expense and interest expense.
(7) Represents the taxes paid in connection with the sale of the Chemical Intermediates Businesses and the sale of the India-based DIY business. For more information, see “Note 4. Discontinued Operations and Business Disposition” to our consolidated financial statements.
Non-GAAP Financial Measures
Our consolidated financial statements are prepared in accordance with U.S. GAAP, which we supplement with certain non-GAAP financial information. These non-GAAP measures should not be considered in isolation or as a substitute for the related U.S. GAAP measures, and other companies may define such measures differently. We encourage investors to review our financial statements and the reconciliation of the non-GAAP financial measures to the most directly comparable U.S. GAAP financial measures in their entirety and not to rely on any single financial measure. These non-GAAP measures exclude the impact of certain expenses that we do not believe are indicative of our core operating results.
Adjusted EBITDA
Our management uses adjusted EBITDA to assess financial performance. Adjusted EBITDA is defined as net income of Huntsman Corporation or Huntsman International, as appropriate, before interest, income tax, depreciation and amortization, net income attributable to noncontrolling interests and certain Corporate and other items, as well as eliminating the following adjustments: (a) business acquisition and integration expenses and purchase accounting inventory adjustments; (b) merger costs; (c) EBITDA from discontinued operations; (d) noncontrolling interest of discontinued operations; (e) fair value adjustments to Venator investment and related loss on disposal; (f) loss on early extinguishment of debt; (g) certain legal and other settlements and related expenses; (h) (gain) loss on sale of businesses/assets; (i) income from transition services arrangements related to the sale of our Chemical Intermediates Businesses to Indorama; (j) certain nonrecurring information technology project implementation costs; (k) amortization of pension and postretirement actuarial losses; (l) plant incident remediation costs; and (m) restructuring, impairment and plant closing and transition costs (credits). We believe that net income of Huntsman Corporation or Huntsman International, as appropriate, is the performance measure calculated and presented in accordance with U.S. GAAP that is most directly comparable to adjusted EBITDA.
We believe adjusted EBITDA is useful to investors in assessing the businesses’ ongoing financial performance and provides improved comparability between periods through the exclusion of certain items that management believes are not indicative of the businesses’ operational profitability and that may obscure underlying business results and trends. However, this measure should not be considered in isolation or viewed as a substitute for net income of Huntsman Corporation or Huntsman International, as appropriate, or other measures of performance determined in accordance with U.S. GAAP. Moreover, adjusted EBITDA as used herein is not necessarily comparable to other similarly titled measures of other companies due to potential inconsistencies in the methods of calculation. Our management believes this measure is useful to compare general operating performance from period to period and to make certain related management decisions. Adjusted EBITDA is also used by securities analysts, lenders and others in their evaluation of different companies because it excludes certain items that can vary widely across different industries or among companies within the same industry. For example, interest expense can be highly dependent on a company’s capital structure, debt levels and credit ratings. Therefore, the impact of interest expense on earnings can vary significantly among companies. In addition, the tax positions of companies can vary because of their differing abilities to take advantage of tax benefits and because of the tax policies of the various jurisdictions in which they operate. As a result, effective tax rates and tax expense can vary considerably among companies. Finally, companies employ productive assets of different ages and utilize different methods of acquiring and depreciating such assets. This can result in considerable variability in the relative costs of productive assets and the depreciation and amortization expense among companies.
Nevertheless, our management recognizes that there are material limitations associated with the use of adjusted EBITDA in the evaluation of our Company as compared to net income of Huntsman Corporation or Huntsman International, as appropriate, which reflects overall financial performance. For example, we have borrowed money in order to finance our operations and interest expense is a necessary element of our costs and ability to generate revenue. Our management compensates for the limitations of using adjusted EBITDA by using this measure to supplement U.S. GAAP results to provide a more complete understanding of the factors and trends affecting the business rather than U.S. GAAP results alone.
Adjusted Net Income
Adjusted net income is computed by eliminating the after tax amounts related to the following from net income attributable to Huntsman Corporation: (a) business acquisition and integration expenses and purchase accounting inventory adjustments; (b) merger costs; (c) loss (income) from discontinued operations; (d) noncontrolling interest of discontinued operations; (e) fair value adjustments to Venator investment and related loss on disposal; (f) loss on early extinguishment of debt; (g) certain legal and other settlements and related expenses; (h) gain on sale of businesses/assets; (i) income from transition services arrangements related to the sale of our Chemical Intermediates Businesses to Indorama; (j) certain nonrecurring information technology project implementation costs; (k) amortization of pension and postretirement actuarial losses; (l) significant activities related to deferred tax assets and liabilities; (m) U.S. Tax Reform Act impact on income tax expense; (n) plant incident remediation costs; and (o) restructuring, impairment and plant closing and transition costs (credits). Basic adjusted net income per share excludes dilution and is computed by dividing adjusted net income by the weighted average number of shares outstanding during the period. Adjusted diluted net income per share reflects all potential dilutive common shares outstanding during the period and is computed by dividing adjusted net income by the weighted average number of shares outstanding during the period increased by the number of additional shares that would have been outstanding as dilutive securities. Adjusted net income and adjusted net income per share amounts are presented solely as supplemental information.
We believe adjusted net income is useful to investors in assessing the businesses’ ongoing financial performance and provides improved comparability between periods through the exclusion of certain items that management believes are not indicative of the businesses’ operational profitability and that may obscure underlying business results and trends.
Free Cash Flow
We believe free cash flow is an important indicator of our liquidity as it measures the amount of cash we generate. Management internally uses a free cash flow measure: (a) to evaluate our liquidity, (b) evaluate strategic investments, (c) plan stock buyback and dividend levels and (d) evaluate our ability to incur and service debt. We have historically defined free cash flow as cash flows provided by operating activities and used in investing activities, excluding acquisition/disposition activities and including non-recurring separation costs. Starting with the quarter ended March 31, 2020, we updated our definition of free cash flow to a presentation more consistent with today’s market standard of net cash provided by operating activities less capital expenditures. Free cash flow is not a defined term under U.S. GAAP, and it should not be inferred that the entire free cash flow amount is available for discretionary expenditures.
Adjusted Effective Tax Rate
We believe that the effective tax rate of Huntsman Corporation or Huntsman International, as appropriate, is the performance measure calculated and presented in accordance with U.S. GAAP that is most directly comparable to adjusted effective tax rate. We believe our adjusted effective tax rate provides improved comparability between periods through the exclusion of certain items that management believes are not indicative of the businesses’ operational profitability and that may obscure underlying business results and trends. We do not provide reconciliations for adjusted effective tax rate on a forward-looking basis because we are unable to provide a meaningful or accurate calculation or estimation of reconciling items and the information is not available without unreasonable effort. This is due to the inherent difficulty of forecasting the timing and amounts of certain items, such as business acquisition and integration expenses and purchase accounting inventory adjustments, merger costs, certain legal and other settlements and related expenses, gains on sale of businesses/assets and amortization of pension and postretirement actuarial losses. Each of such adjustments have not yet occurred, is out of our control and/or cannot be reasonably predicted. For the same reasons, we are unable to address the probable significance of the unavailable information.
Year Ended December 31, 2020 Compared with Year Ended December 31, 2019
As discussed in “Note 4. Discontinued Operations and Business Dispositions-Sale of Chemical Intermediates Businesses” and “Note 4. Discontinued Operations and Business Dispositions-Separation and Deconsolidation of Venator” to our consolidated financial statements, the results from continuing operations presented exclude primarily the results of our Chemical Intermediates Businesses for all periods presented and the results of Venator for 2018. The decrease of $134 million in net income attributable to Huntsman Corporation and the decrease of $122 million in net income attributable to Huntsman International from continuing operations was the result of the following items:
●
Revenues for the year ended December 31, 2020 decreased by $779, or 11%, as compared with the 2019 period. The decrease was primarily due to lower sales volumes in all our segments and lower average selling prices in all our segments, except for our Advanced Materials segment. See “-Segment Analysis” below.
●
Gross profit for the year ended December 31, 2020 decreased by $282 million, or 20%, as compared with the 2019 period. The decrease resulted from lower gross profits in all our segments. See “-Segment Analysis” below.
●
Our operating expenses and the operating expenses of Huntsman International for the year ended December 31, 2020 decreased by $336 million and $337 million, respectively, or 35% and 36%, respectively, as compared with the 2019 period, primarily related to lower selling, general and administrative costs resulting from cost suppression measures and actions taken to address the economic impacts of COVID-19 as well as gains related to the sale of the India-based DIY business and the sale of assets at our Basel, Switzerland site, partially offset by an increase in selling, general and administrative costs incurred in our newly acquired businesses of Icynene-Lapolla and CVC Thermoset Specialties.
●
Restructuring, impairment and plant closing costs (credits) for the year ended December 31, 2020 was a cost of $49 million compared to a credit of $41 million in the 2019 period. For more information on restructuring activities, see “Note 13. Restructuring, Impairment and Plant Closing Costs (Credits)” to our consolidated financial statements.
● Our interest expense, net and the interest expense, net of Huntsman International for the year ended December 31, 2020 decreased by $25 million and $38 million, respectively, or 23% and 30%, respectively, as compared with the 2019 period, primarily related to repayments of outstanding borrowings on our $1.2 billion senior revolving credit facility ("Revolving Credit Facility") and other prepayable debt.
● Equity in income of investment in unconsolidated affiliates for the year ended December 31, 2020 decreased to $42 million from $54 million in the 2019 period. The decrease was primarily attributable to a decrease in income at our PO/MTBE joint venture with Sinopec, of which we hold a 49% interest.
●
We recorded a loss of $88 million in fair value adjustments to our investment in Venator and related loss on disposal for the year ended December 31, 2020 compared to a loss of $18 million in the 2019 period. For more information, see “Note 4. Discontinued Operations and Business Dispositions-Separation and Deconsolidation of Venator” to our consolidated financial statements.
●
Loss on early extinguishment of debt for the year ended December 31, 2020 was nil compared to $23 million in the 2019 period due to the early repayment in full of our 2020 Senior Notes in the first quarter of 2019. See “Note. 15. Debt-Notes” to our consolidated financial statements.
●
Our income tax expense for the year ended December 31, 2020 increased to $46 million from an income tax benefit of $38 million in the 2019 period. The income tax expense of Huntsman International for the year ended December 31, 2020 increased to $46 million from an income tax benefit of $41 million in the 2019 period. The increase in income tax expense was primarily due to fewer discrete benefit items in 2020 than in 2019. In 2020, discrete items include tax benefits related to the sale of the India-based DIY business, partially offset by foreign withholding tax on repatriated earnings. In 2019, discrete items include tax benefits related to built-in capital losses and realized tax losses both on our remaining interest in Venator, partially offset by tax expense related to the establishment of valuation allowances in Australia and the change in tax rate in Switzerland. Our income tax expense is significantly affected by the mix of income and losses in the tax jurisdictions in which we operate, as impacted by the presence of valuation allowances in certain tax jurisdictions. For further information concerning income taxes, see “Note 20. Income Taxes” to our consolidated financial statements.
Segment Analysis
Year Ended December 31, 2020 Compared with Year Ended December 31, 2019
Percent
Change
Year ended December 31,
Favorable
(Dollars in millions)
(Unfavorable)
Revenues
Polyurethanes
$ 3,584
$ 3,911
(8 )%
Performance Products
1,023
1,158
(12 )%
Advanced Materials
1,044
(20 )%
Textile Effects
(22 )%
Corporate and eliminations
(25 )
(79 )
NM
Total
$ 6,018
$ 6,797
(11 )%
Huntsman Corporation
Segment adjusted EBITDA(1)
Polyurethanes
$
$
(14 )%
Performance Products
(2 )%
Advanced Materials
(35 )%
Textile Effects
(50 )%
Corporate and other
(161 )
(155 )
(4 )%
Total
$
$
(24 )%
Huntsman International
Segment adjusted EBITDA(1)
Polyurethanes
$
$
(14 )%
Performance Products
(2 )%
Advanced Materials
(35 )%
Textile Effects
(50 )%
Corporate and other
(155 )
(150 )
(3 )%
Total
$
$
(23 )%
NM-Not meaningful
(1) For more information, including reconciliation of segment adjusted EBITDA to net income of Huntsman Corporation or Huntsman International, as appropriate, see “Note 27. Operating Segment Information” to our consolidated financial statements.
Year ended December 31, 2020 vs 2019
Average Selling Prices(1)
Local
Foreign Currency
Mix &
Sales
Currency
Translation Impact
Other
Volumes(2)
Period-Over-Period (Decrease) Increase
Polyurethanes
(3 )%
-
-
(5 )%
Performance Products
(4 )%
-
%
(11 )%
Advanced Materials
%
(1 )%
(2 )%
(19 )%
Textile Effects
(3 )%
(1 )%
(2 )%
(16 )%
Fourth Quarter 2020 vs Third Quarter 2020
Average Selling Prices(1)
Local
Foreign Currency
Mix &
Sales
Currency
Translation Impact
Other
Volumes(2)
Period-Over-Period (Decrease) Increase
Polyurethanes
%
%
%
(3 )%
Performance Products
%
%
(8 )%
%
Advanced Materials
%
%
%
%
Textile Effects
%
%
-
%
(1)
Excludes revenues from tolling arrangements, byproducts and raw materials.
(2)
Excludes sales volumes of byproducts and raw materials.
Polyurethanes
The decrease in revenues in our Polyurethanes segment for 2020 compared to 2019 was due to lower MDI average selling prices and lower overall polyurethanes sales volumes. MDI average selling prices decreased across most major markets in relation to the global economic slowdown resulting from the COVID-19 pandemic. Overall polyurethanes sales volumes decreased primarily in relation to the global economic slowdown and the resulting decrease in demand across most major markets, partially offset by additional sales volumes in connection with the Icynene-Lapolla Acquisition. The decrease in segment adjusted EBITDA was primarily due to lower component and polymeric systems margins largely driven by lower MDI pricing and lower polyurethanes sales volumes, partially offset by lower raw material costs and lower fixed costs.
Performance Products
The decrease in revenues in our Performance Products segment for 2020 compared to 2019 was due to lower sales volumes and lower average selling prices. Sales volumes decreased primarily in relation to the global economic slowdown resulting from the COVID-19 pandemic. Average selling prices decreased primarily related to lower raw material costs. The decrease in segment adjusted EBITDA was primarily due to lower sales volumes, mostly offset by lower fixed costs.
Advanced Materials
The decrease in revenues in our Advanced Materials segment for 2020 compared to 2019 was due to lower sales volumes, slightly offset by higher average selling prices. Sales volumes decreased significantly across all markets, except in our global power market, primarily in relation to the global economic slowdown resulting from the COVID-19 pandemic, partially offset by additional sales volumes related to the CVC Thermoset Specialties Acquisition. Average selling prices increased in response to cost increases, partially offset by the impact of a stronger U.S. dollar against major international currencies. The decrease in segment adjusted EBITDA was primarily due to lower sales volumes, partially offset by lower fixed costs.
Textile Effects
The decrease in revenues in our Textile Effects segment for 2020 compared to 2019 was due to lower average selling prices and lower sales volumes. Average selling prices decreased as a result of product mix change, competitive market pressures and the impact of a stronger U.S. dollar against major international currencies. Sales volumes decreased primarily due to significantly weaker demand in relation to the global economic slowdown resulting from the COVID-19 pandemic. The decrease in segment adjusted EBITDA was primarily due to lower sales revenues and lower capitalization of indirect costs because of reduced production, partially offset by lower raw material costs and lower fixed costs.
Corporate and other
Corporate and other includes unallocated corporate overhead, unallocated foreign currency exchange gains and losses, LIFO inventory valuation reserve adjustments, loss on early extinguishment of debt, unallocated restructuring, impairment and plant closing costs, nonoperating income and expense and gains and losses on the disposition of corporate assets. For 2020, adjusted EBITDA from Corporate and other for Huntsman Corporation decreased by $6 million to a loss of $161 million from a loss of $155 million for 2019. For 2020, adjusted EBITDA from Corporate and other for Huntsman International decreased by $5 million to a loss of $155 million from a loss of $150 million for 2019. The decrease in adjusted EBITDA from Corporate and other resulted primarily from a charge from a LIFO inventory reserve adjustment, partially offset by an increase in unallocated foreign currency exchange gains.
Year Ended December 31, 2019 Compared with Year Ended December 31, 2018
For a comparison of our results of operations for the fiscal years ended December 31, 2019 and 2018, see "Part II. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations" of our Annual Report on Form 10-K for the fiscal year ended December 31, 2019 filed with the SEC on February 13, 2020.
Liquidity and Capital Resources
The following is a discussion of our liquidity and capital resources and generally does not include separate information with respect to Huntsman International in accordance with General Instruction I of Form 10-K.
Cash Flows For Year Ended December 31, 2020 Compared with Year Ended December 31, 2019
Net cash provided by operating activities from continuing operations for 2020 and 2019 was $277 million and $656 million, respectively. The decrease in net cash provided by operating activities from continuing operations during 2020 compared with 2019 was primarily attributable to decreased operating income as described in “-Results of Operations” above, including $257 million of cash paid for taxes in connection with the sale of the Chemical Intermediates Businesses and the sale of the India-based DIY business, partially offset by a $338 million unfavorable variance in operating assets and liabilities for 2020 as compared with 2019.
Net cash provided by (used in) investing activities from continuing operations for 2020 and 2019 was $1,462 million and $(201) million, respectively. During 2020 and 2019, we paid $249 million and $274 million, respectively, for capital expenditures, including $54 million and $13 million during 2020 and 2019, respectively, on a new MDI splitter in Geismar, Louisiana. In January 2020, we received approximately $1.92 billion for the sale of our Chemical Intermediates Businesses. Additionally, in November 2020, we received approximately $257 million for the sale of the India-based DIY business. See "Note 4. Discontinued Operations and Business Dispositions-Sale of Chemical Intermediates Businesses" and "Note 4. Discontinued Operations and Business Dispositions-Sale of India-Based Do-It-Yourself Consumer Adhesives Business" to our consolidated financial statements. In December 2020, we completed the sale of approximately 42.4 million ordinary shares of Venator and received approximately $99 million. See "Note 4. Discontinued operations and Business Dispositions-Separation and Deconsolidation of Venator" to our consolidated financial statements. During 2020, we paid approximately $650 million for the acquisition of businesses, net of cash acquired. See "Note 3. Business Combinations and Acquisitions" to our consolidated financial statements. During the year ended December 31, 2020, we entered into a sale and leaseback agreement to sell certain properties in Basel, Switzerland, for which we received approximately $73 million in proceeds from the sale of assets. During the year ended December 31, 2019, we received approximately $49 million in proceeds from the sale of assets in connection with the closure of certain Textile Effects facilities and offices in Basel, Switzerland. During 2019, we received $16 million in proceeds from the settlement of the December 3, 2018 sale of Venator ordinary shares to Bank of America N.A.
Net cash used in financing activities for 2020 and 2019 was $655 million and $450 million, respectively. The increase in net cash used in financing activities was primarily due to the increase in repayments on our Revolving Credit Facility during 2020 as compared with 2019, the repayment in full of our 364-day term loan facility ("2019 Term Loan") in the third quarter of 2020 and the proceeds from the issuance of our 2029 Senior Notes in the first quarter of 2019, partially offset by a decrease in repurchases of common stock during 2020 as compared with 2019 and cash paid in the third quarter of 2019 to acquire the 50% noncontrolling interest that we did not own in the Sasol-Huntsman joint venture.
Free cash flow from continuing operations for 2020 and 2019 were proceeds of cash of $28 million and $382 million, respectively. The reduction in free cash flow was primarily attributable to the decrease in cash provided by operating activities from continuing operations, partially offset by a decrease in cash used for capital expenditures during 2020 as compared with 2019.
Cash Flows For Year Ended December 31, 2019 Compared with Year Ended December 31, 2018
For a comparison of our cash flows for the fiscal years ended December 31, 2019 and 2018, see "Part II. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations" of our Annual Report on Form 10-K for the fiscal year ended December 31, 2019 filed with the SEC on February 13, 2020.
Changes in Financial Condition
The following information summarizes our working capital (dollars in millions):
December 31,
Less
December 31,
Increase
Percent
Acquisitions(1)
Subtotal
(Decrease)
Change
Cash and cash equivalents
$ 1,593
$ (7 )
$ 1,586
$
$ 1,061
%
Accounts and notes receivable, net
(48 )
(91 )
(10 )%
Inventories
(69 )
(135 )
(15 )%
Other current assets
(1 )
%
Current assets held for sale(2)
-
-
-
1,208
(1,208 )
(100 )%
Total current assets
3,568
(125 )
3,443
3,755
(312 )
(8 )%
Accounts payable
(20 )
%
Accrued liabilities
(11 )
%
Current portion of debt
-
%
Current operating lease liabilities
-
%
Current liabilities held for sale(2)
-
-
-
(512 )
(100 )%
Total current liabilities
1,979
(31 )
1,948
2,008
(60 )
(3 )%
Working capital
$ 1,589
$ (94 )
$ 1,495
$ 1,747
$ (252 )
(14 )%
(1)
Represents combined amounts related to the Icynene-Lapolla Acquisition and the CVC Thermoset Specialties Acquisition. For more information, see “Note 3. Business Combinations and Acquisitions” to our consolidated financial statements.
(2) Represents amounts related to the sale of our Chemical Intermediates Businesses. The assets and liabilities held for sale were classified as current as of December 31, 2019 because we completed the sale of our Chemical Intermediates Businesses on January 3, 2020. For more information, see “Note 4. Discontinued Operations and Business Dispositions-Sale of Chemical Intermediates Businesses” to our consolidated financial statements.
Our working capital decreased by $252 million as a result of the net impact of the following significant changes:
●
The increase in cash and cash equivalents of $1,061 million resulted from the matters identified on our consolidated statements of cash flows. See also “-Cash Flows Year Ended December 31, 2020 Compared with Year Ended December 31, 2019.”
●
Accounts and notes receivable decreased by $91 million primarily due to improved days sales outstanding and reduction of overdue accounts receivable year-over-year, despite slightly higher revenues in the fourth quarter of 2020 compared to the fourth quarter of 2019.
●
Inventories decreased by $135 million primarily due to lower inventory costs and volumes.
●
Other current assets increased by $61 million primarily due to an increase in current income tax receivable and in prepaid insurance.
●
Accounts payable increased by $34 million primarily due to an increase in days payable outstanding year-over-year and higher capital expenditures in the fourth quarter of 2020 compared to the fourth quarter of 2019.
●
Current portion of debt increased by $381 million primarily due to the current classification of our 2021 Senior Notes, offset in part by our repayment of the 2019 Term Loan in full at maturity.
Direct and Subsidiary Debt
See “Note 15. Debt-Direct and Subsidiary Debt” to our consolidated financial statements.
Debt Issuance Costs
See “Note 15. Debt-Direct and Subsidiary Debt-Debt Issuance Costs” to our consolidated financial statements.
Revolving Credit Facility
See “Note 15. Debt-Direct and Subsidiary Debt-Revolving Credit Facility” to our consolidated financial statements.
Term Loan Credit Facility
See “Note 15. Debt-Direct and Subsidiary Debt-Term Loan Credit Facility” to our consolidated financial statements.
A/R Programs
See “Note 15. Debt-Direct and Subsidiary Debt-A/R Programs” to our consolidated financial statements.
Notes
See “Note 15. Debt-Direct and Subsidiary Debt-Notes” to our consolidated financial statements.
Variable Interest Entity Debt
See “Note 15. Debt-Direct and Subsidiary Debt-Variable Interest Entity Debt” to our consolidated financial statements.
Note Payable from Huntsman International to Huntsman Corporation
See “Note 15. Debt-Direct and Subsidiary Debt-Note Payable from Huntsman International to Huntsman Corporation” to our consolidated financial statements.
Compliance With Covenants
See “Note 15. Debt-Compliance with Covenants” to our consolidated financial statements.
Maturities
See “Note 15. Debt-Maturities” to our consolidated financial statements.
Short-Term Liquidity
We depend upon our cash, Revolving Credit Facility, U.S. accounts receivable securitization program (“U.S. A/R Program”) and European accounts receivable securitization program (“EU A/R Program” and collectively with the U.S. A/R Program, “A/R Programs”) and other debt instruments to provide liquidity for our operations and working capital needs. As of December 31, 2020, we had $2,952 million of combined cash and unused borrowing capacity, consisting of $1,593 million in cash, $1,194 million in availability under our Revolving Credit Facility and $165 million in availability under our A/R Programs. Our liquidity can be significantly impacted by various factors. The following matters had, or are expected to have, a significant impact on our liquidity:
●
Cash proceeds from our accounts receivable and inventory, net of accounts payable, were approximately $277 million for 2020, as reflected in our consolidated statements of cash flows. We expect volatility in our working capital components to continue.
●
During 2021, we expect to spend between approximately $320 million to $330 million on capital expenditures, including spending of approximately $80 million on a new MDI splitter in Geismar, Louisiana. We expect to fund spending on all capital expenditures with cash provided by operations, including proceeds received from the sale of the Basel, Switzerland properties. See "Note 1. General-Recent Developments-Sale of Assets at our Basel, Switzerland Site" to our consolidated financial statements.
●
During 2020, we made contributions to our pension and postretirement benefit plans of $101 million. During 2021, we expect to contribute an additional amount of approximately $60 million to these plans.
●
On February 7, 2018 and on May 3, 2018, our Board of Directors authorized our Company to repurchase up to an additional $950 million in shares of our common stock in addition to the $50 million remaining under our September 2015 share repurchase authorization. Repurchases may be made through the open market, including through accelerated share repurchase programs, or in privately negotiated transactions, and repurchases may be commenced or suspended from time to time without prior notice. Shares of common stock acquired through the repurchase program are held in treasury at cost. During the first quarter of 2020, we repurchased 5,364,519 shares of our common stock for approximately $96 million, excluding commissions, under the repurchase program. Subsequent to the end of the first quarter of 2020, we suspended share repurchases under our existing share repurchase program in order to enhance our liquidity position in response to COVID-19.
● During 2020, management implemented cost realignment and synergy plans. In connection with these plans, we expect to achieve annualized cost savings and synergy benefits of more than $120 million by the end of 2023 with associated net cash restructuring and integration costs of approximately $100 million. See "Note 13. Restructuring, Impairment and Plant Closing Costs (Credits)" to our consolidated financial statements.
● In November 2020, we entered into a sale and leaseback agreement to sell certain properties in Basel, Switzerland for approximately CHF 67 (approximately $73 million) and to lease those properties back for five years.
● On November 3, 2020, we completed the sale of the India-based DIY business, part of the Advanced Materials segment, to Pidilite Industries Ltd. and received cash of approximately $257 million. Under the terms of the agreement, we may receive up to approximately $28 million of additional cash under an earnout within 18 months if the business achieves certain sales revenue targets in line with the DIY business' 2019 performance.
●
On December 23, 2020, we completed the sale of approximately 42.4 million ordinary shares of Venator and received approximately $99 million in cash, which includes $8 million for a 30-month option for the sale of the remaining approximate 9.7 million ordinary shares we hold in Venator at $2.15 per share. See “Part I. Item 1. Business-Recent Developments-Sale of Venator Interest.”
● On January 15, 2021, we redeemed in full €445 million (approximately $541 million) in aggregate principal amount of our 2021 Senior Notes at the redemption price equal to 100% of the principal amount of the notes, plus accrued and unpaid interest to, but not including, the redemption date. Upon the redemption of the 2021 Senior Notes, we expect to incur an incremental cash tax liability of approximately $15 million in the first quarter of 2021 due to the U.S. tax foreign currency exchange gains recognized at redemption of the notes.
● On January 15, 2021, we completed the acquisition of Gabriel, a North American specialty chemical manufacturer of specialty additives and epoxy curing agents for the coatings, adhesives, sealants and composite end-markets, from funds affiliated with Audax Private Equity in an all-cash transaction of approximately $250 million, subject to customary closing adjustments, funded from available liquidity. The acquired business will be integrated into our Advanced Materials segment.
Long-Term Liquidity
●
We have deferred a portion of capital spending on a new MDI splitter in Geismar, Louisiana leaving approximately $115 million in 2021 and 2022. We expect to fund spending on all capital expenditures with cash provided by operations.
As of December 31, 2020, we had $593 million classified as current portion of debt, including $545 million on our 2021 Senior Notes, which we redeemed in full on January 15, 2021, debt at our variable interest entities of $47 million and certain other short-term facilities and scheduled amortization payments totaling $1 million. We intend to renew, repay or extend the majority of these short-term facilities in the next twelve months.
As of December 31, 2020, we had approximately $491 million of cash and cash equivalents, including restricted cash, held by our foreign subsidiaries, including our variable interest entities. With the exception of certain amounts that we expect to repatriate in the foreseeable future, we intend to use cash held in our foreign subsidiaries to fund our local operations. Nevertheless, we could repatriate additional cash as dividends and the repatriation of cash as a dividend would generally not be subject to U.S. taxation. However, such repatriation may potentially be subject to limited foreign withholding taxes.
Restructuring, Impairment and Plant Closing Costs
For a discussion of restructuring plans and the costs involved, see “Note 13. Restructuring, Impairment and Plant Closing Costs” to our consolidated financial statements.
Recently Issued Accounting Pronouncements
For a discussion of recently issued accounting pronouncements, see “Note 2. Summary of Significant Accounting Policies" to our consolidated financial statements.
Critical Accounting Estimates
This discussion and analysis of financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of financial statements requires us to make judgments, estimates and assumptions that involve a significant level of estimation and uncertainty and are reasonably likely to have a material impact on our financial condition and/or results of operations. Summarized below are our critical accounting estimates.
Income Taxes
Deferred income taxes reflect the net effects of temporary differences between assets and liabilities for financial and tax reporting purposes. We evaluate deferred tax assets to determine whether it is more likely than not that they will be realized; valuation allowances are recorded to offset deferred tax assets unlikely to be realized. Valuation allowances are reviewed on a tax jurisdiction basis to analyze whether there is sufficient positive or negative evidence to support a change in judgment about the realizability of the related deferred tax assets. These conclusions require significant judgments. In evaluating the objective evidence that historical results provide, we consider the cyclicality of businesses and cumulative income or losses. Cumulative historical losses incurred over periods of time limit our ability to consider more subjective projections of future taxable income. Changes in expected future taxable income and tax planning strategies in applicable jurisdictions affect our assessment of the realization of deferred tax assets. Our judgments regarding valuation allowances are also influenced by factors outside of business results that could impact our ability to utilize a deferred tax asset. As of December 31, 2020, we had total valuation allowances of $206 million, which represents a decrease of $25 million from the prior year, and we have recognized net deferred tax assets of $76 million. See “Note 20. Income Taxes” to our consolidated financial statements for more information regarding our deferred tax assets and valuation allowances.
Employee Benefit Programs
We sponsor several contributory and non-contributory defined benefit plans, covering employees primarily in the U.S., the U.K., The Netherlands, Belgium and Switzerland, but also covering employees in a number of other countries. We fund the material plans through trust arrangements (or local equivalents) where the assets are held separately from us. We also sponsor unfunded postretirement plans which provide medical and, in some cases, life insurance benefits covering certain employees in the U.S. and Canada. Amounts recorded in our consolidated financial statements are recorded based upon actuarial valuations performed by various independent actuaries. Inherent in these valuations are numerous assumptions regarding expected long-term rates of return on plan assets, discount rates, compensation increases, mortality rates and health care cost trends. Each of these critical estimates are subject to uncertainty and are assessed by us using historical data, as well as projections of future conditions. These assumptions and changes during the period are described in “Note 19. Employee Benefit Plans” to our consolidated financial statements.
We retain third party actuaries to assist us with judgments necessary to make assumptions on which our employee pension and postretirement benefit plan obligations and expenses are based. The effect of a 1% change in three key assumptions is summarized as follows (dollars in millions):
Statement of
Balance Sheet
Assumptions
Operations(1)
Impact(2)
Discount rate
-1% increase
$ (36 )
$ (545 )
-1% decrease
Expected long-term rates of return on plan assets
-1% increase
(21 )
-
-1% decrease
-
Rate of compensation increase
-1% increase
-1% decrease
(6 )
(61 )
(1)
Estimated (decrease) increase on 2020 net periodic benefit cost
(2)
Estimated (decrease) increase on December 31, 2020 pension and postretirement liabilities and accumulated other comprehensive loss

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to market risks, such as changes in interest rates, foreign exchange rates and commodity prices. From time to time, we enter into transactions, including transactions involving derivative instruments, to manage certain of these exposures. 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 loss.
Interest Rate Risks
See “Note 16. Derivative Instruments and Hedging Activities-Interest Rate Risk” to our consolidated financial statements.
Foreign Exchange Rate Risk
See “Note 16. Derivative Instruments and Hedging Activities-Foreign Exchange Rate Risk” to our consolidated financial statements.
Commodity Prices Risk
See “Note 16. Derivative Instruments and Hedging Activities-Commodity Prices Risk” to our consolidated financial statements.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Our consolidated financial statements required by this item are included on the pages immediately following the Index to Consolidated Financial Statements appearing on page.

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
There have been no changes in our independent accountants, Deloitte & Touche LLP, or disagreements with them on matters of accounting or financial disclosure.

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ITEM 9A. CONTROLS AND PROCEDURES
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure 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 Exchange Act) as of December 31, 2020. Based on this evaluation, our chief executive officer and chief financial officer have concluded that, as of December 31, 2020, 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 SEC’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.
Changes in Internal Control Over Financial Reporting
No changes to our internal control over financial reporting occurred during the quarter ended December 31, 2020 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).
Management’s Report on Internal Control Over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control framework and processes for our Company and Huntsman International are designed to provide reasonable assurance to management, Huntsman International’s Board of Managers and our Board of Directors regarding the reliability of financial reporting and the preparation of our consolidated financial statements in accordance with accounting principles generally accepted in the United States of America.
Our internal control over financial reporting for our Company and Huntsman International includes those policies and procedures that:
●
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of our Company and Huntsman International;
●
provide reasonable assurance that transactions are recorded properly to allow for the preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of our Company and Huntsman International are being made only in accordance with authorizations of management and Directors of our Company and Huntsman International;
●
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our consolidated financial statements; and
●
provide reasonable assurance as to the detection of fraud.
Because of its inherent limitations, a system of internal control over financial reporting can provide only reasonable assurance and may not prevent or detect misstatements. Further, because of changing conditions, effectiveness of internal control over financial reporting may vary over time.
Our management assessed the effectiveness of our internal control over financial reporting for our Company and Huntsman International and concluded that, as of December 31, 2020, such internal control is effective. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control-Integrated Framework (2013).
Our independent registered public accounting firm, Deloitte & Touche LLP, with direct access to our Board of Directors through our Audit Committee, have audited our consolidated financial statements prepared by our Company and have issued attestation reports on internal control over financial reporting for our Company.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and Board of Directors of Huntsman Corporation
Opinion on Internal Control over Financial Reporting
We have audited the internal control over financial reporting of Huntsman Corporation and subsidiaries (the “Company”) as of December 31, 2020, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control - Integrated Framework (2013) issued by COSO.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended December 31, 2020, of the Company and our report dated February 12, 2021, expressed an unqualified opinion on those financial statements.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ DELOITTE & TOUCHE LLP
Houston, Texas
February 12, 2021

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ITEM 9B. OTHER INFORMATION
ITEM 9B. OTHER INFORMATION
None.
PART III

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ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Information relating to our Directors (including identification of our Audit Committee’s financial expert(s)) and executive officers will be disclosed in the definitive Proxy Statement for our Annual Meeting of Stockholders and is incorporated herein by reference. See also the information regarding executive officers of the registrant set forth in Part I under the caption “Executive Officers of the Registrant” in reliance on General Instruction G to Form 10-K.
Code of Ethics
We have adopted a code of ethics, as defined by Item 406(b) of Regulation S-K under the Exchange Act, that applies to our principal executive officer, principal financial officer and principal accounting officer or controller. A copy of the code of ethics is posted on our website, at www.huntsman.com. We intend to disclose any amendments to, or waivers from, our code of ethics on our website.

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ITEM 11. EXECUTIVE COMPENSATION
ITEM 11. EXECUTIVE COMPENSATION
Information relating to executive compensation and our equity compensation plans will be disclosed in the definitive Proxy Statement for our Annual Meeting of Stockholders and is incorporated herein by reference.

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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
Information with respect to beneficial ownership of our common stock by each Director and all Directors and officers of our Company as a group will be disclosed in the definitive Proxy Statement for our Annual Meeting of Stockholders and is incorporated herein by reference.
Information relating to any person who beneficially owns in excess of five percent of the total outstanding shares of our common stock will be disclosed in the definitive Proxy Statement for our Annual Meeting of Stockholders and is incorporated herein by reference.
Information with respect to compensation plans under which equity securities are authorized for issuance will be disclosed in the definitive Proxy Statement for our Annual Meeting of Stockholders and is incorporated herein by reference.

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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Information with respect to certain relationships and related transactions will be disclosed in the definitive Proxy Statement for our Annual Meeting of Stockholders and is incorporated herein by reference.

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ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Information with respect to principal accountant fees and services, and the disclosure of the Audit Committee’s pre-approval policies and procedures are contained in the definitive Proxy Statement for our Annual Meeting of Stockholders and are incorporated herein by reference.
PART IV

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ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a)
Documents filed with this report.
1.
Consolidated Financial Statements:
See Index to Consolidated Financial Statements on page
2.
Financial Statement Schedules:
Other than as stated on the Index to Consolidated Financial Statements on page with respect to Schedule I, financial statement schedules are omitted because they are not required or are not applicable or the required information is shown in the consolidated financial statements or notes thereto.
3.
Exhibits:
The exhibits to this report are listed on the Exhibit Index below.
(b)
Description of exhibits.
EXHIBIT INDEX
Incorporated by Reference
Number
Description
Form
Exhibit
Filing Date
3.1
Amended and Restated Certificate of Incorporation of Huntsman Corporation
8-K
3.1
May 12, 2014
3.2*
Sixth Amended and Restated Bylaws of Huntsman Corporation dated as of June 16, 2020 (as amended by Amendment to Sixth Amended and Restated Bylaws of Huntsman Corporation, effective as of October 28, 2020)
4.2
Form of stock certificate of Huntsman Corporation
S-1
4.68
February 8, 2005
4.3
Form of Restricted Stock Unit Agreement for Outside Directors, effective for grants prior to February 6, 2008
S-8
4.8
February 10, 2006
4.4
Form of Restricted Stock Unit Agreement for Outside Directors, effective for grants from February 6, 2008 to September 21, 2010
10-K
4.32
February 22, 2008
4.5
Indenture, dated as of November 13, 2014, by and among Huntsman International LLC, the guarantors named therein, and Wilmington Trust, National Association, as trustee
8-K
4.1
November 17, 2014
4.6
Form of 5.125% Senior Note (included as Exhibit A to Exhibit 4.11)
8-K
4.1
November 17, 2014
4.7
Indenture, dated as of March 31, 2015, by and among Huntsman International LLC, the guarantors named therein, Citibank, N.A., London Branch, as paying agent, transfer agent, registrar and authenticating agent, and Wilmington Trust, National Association, as trustee
8-K
4.1
April 2, 2015
4.8
Form of 4.25% Senior Notes due 2025 (included as Exhibit A to Exhibit 4.14)
8-K
4.2
April 2, 2015
4.9
Indenture, dated as of March 13, 2019, by and between Huntsman International LLC and Wilmington Trust, National Association, as trustee.
8-K
4.1
March 13, 2019
4.10
First Supplemental Indenture, dated as of March 13, 2019, by and between Huntsman International LLC and Wilmington Trust, National Association, as trustee.
8-K
4.2
March 13, 2019
4.11
Form of 4.500% Senior Notes due 2029 (included as Exhibit A to Exhibit 4.12)
8-K
4.3
March 13, 2019
4.12
Description of Securities
10-K
4.14
February 13, 2020
10.1
Employment Agreement with Anthony Hankins
S-1/A
10.27
January 28, 2005
10.2
Form of Indemnification Agreement
S-1/A
10.25
February 8, 2005
10.3
Amended and Restated Huntsman Supplemental Executive Retirement Plan (File No. 001-32427)
8-K
10.1
December 30, 2005
10.4
Huntsman Supplemental Executive MPP Plan (File No. 001-32427)
8-K
10.2
December 30, 2005
10.5
Amended and Restated Huntsman Supplemental Savings Plan (File No. 001-32427)
8-K
10.3
December 30, 2005
10.6
Huntsman Outside Directors Elective Deferral Plan (File No. 001-32427)
8-K
10.4
December 30, 2005
10.7
Form of Form of Restricted Stock Unit Agreement for Outside Directors, effective for grants prior to February 6, 2008
S-8
4.8
February 10, 2006
10.8
Form of Restricted Stock Unit Agreement for Outside Directors, effective for grants from February 6, 2008 to September 21, 2010
10-K
4.32
February 22, 2008
10.9
First Amendment to Huntsman Supplemental Executive Retirement Plan (File No. 001-32427)
10-K
10.32
February 22, 2008
10.10
First Amendment to Huntsman Supplemental Executive MPP Plan (File No. 001-32427)
10-K
10.33
February 22, 2008
10.11
First Amendment to Huntsman Supplemental Savings Plan (File No. 001-32427)
10-K
10.34
February 22, 2008
10.12
Second Amendment to Huntsman Supplemental Savings Plan (File No. 001-32427)
10-K
10.35
February 22, 2008
10.13
First Amendment to Huntsman Outside Directors Elective Deferral Plan (File No. 001-32427)
10-K
10.36
February 22, 2008
10.14
U.S. Receivables Loan Agreement dated as of October 16, 2009 (File No. 001-32427)
8-K
10.1
October 22, 2009
10.15
U.S. Contribution Agreement dated as of October 16, 2009 between Huntsman International LLC and Huntsman Receivables Finance II LLC (File No. 001-32427)
8-K
10.2
October 22, 2009
10.16
Second Amendment to Huntsman Supplemental Executive Retirement Plan (File No. 001-32427)
10-K
10.38
February 17, 2011
10.17
Third Amendment to Huntsman Supplemental Executive Retirement Plan (File No. 001-32427)
10-K
10.39
February 17, 2011
10.18
Form of Nonqualified Stock Option Agreement effective for grants from February 2, 2011 to May 5, 2016 (File No. 001-32427)
10-K
10.42
February 17, 2011
10.19
Form of Restricted Stock Unit Agreement for Outside Directors effective for grants from February 2, 2011 to May 5, 2016 (File No. 001-32427)
10-K
10.43
February 17, 2011
10.20
Master Amendment No. 2 to the U.S. Receivables Loan Agreement, U.S. Servicing Agreement and Transaction Documents dated as of April 18, 2011 (File No. 001-32427)
8-K
10.1
April 20, 2011
10.21
Second Amendment to Huntsman Outside Directors Elective Deferral Plan (File No. 001-32427)
10-Q
10.5
May 5, 2011
10.22
Third Amendment to Huntsman Outside Directors Elective Deferral Plan (File No. 001-32427)
10-Q
10.6
May 5, 2011
10.23
Huntsman Corporation Stock Incentive Plan (amended and restated) (File No. 001-32427)
S-8
4.1
May 10, 2011
10.24
First Amendment to the Huntsman Corporation Stock Incentive Plan (as amended and restated) (File No. 001-32427)
10-K
10.56
February 12, 2013
10.25
Master Amendment No. 3 to the U.S. Receivables Loan Agreement, U.S. Servicing Agreement and Transaction Documents dated as of April 29, 2013
8-K
10.1
May 2, 2013
10.26
Huntsman Corporation Stock Incentive Plan (amended and restated)
8-K
10.1
May 12, 2014
10.27
Amendment to the Huntsman Corporation Stock Incentive Plan Nonqualified Stock Option Agreement effective for grants through May 5, 2016
10-K
10.66
February 18, 2015
10.28
Master Amendment No. 4 to the U.S. Receivables Loan Agreement, U.S. Servicing Agreement and Transaction Documents and Waiver, dated as of March 30, 2015
8-K
10.2
April 2, 2015
10.29
Huntsman Corporation 2016 Stock Incentive Plan
8-K
10.1
May 11, 2016
10.30
Form of Nonqualified Stock Option Agreement effective for grants from May 5, 2016 to January 31, 2017
S-8
99.1
May 31, 2016
10.31
Form of Phantom Share Agreement
10-K
10.66
February 15, 2017
10.32
Form of Performance Share Unit Award Agreement
10-K
10.67
February 15, 2017
10.33
Form of Nonqualified Stock Option Agreement
10-K
10.68
February 15, 2017
10.34
Form of Restricted Stock Agreement
10-K
10.69
February 15, 2017
10.35
Form of Stock Unit Agreement for Outside Directors
10-K
10.70
February 15, 2017
10.36
Form of Notice of Award of Common Stock
10-K
10.71
February 15, 2017
10.37
Master Amendment No. 6 to the U.S. Receivables Loan Agreement, U.S. Servicing Agreement, U.S Receivables Purchase Agreement and Transaction Documents dated as of April 21, 2017
10-Q
10.2
April 26, 2017
10.38
Credit Agreement, dated May 21, 2018, between Huntsman International LLC, JPMorgan Chase Bank, N.A., as administrative agent, Bank of America, N.A. and Citibank, N.A. as co-syndication agents, and Goldman Sachs Bank USA and PNC Bank, National Association, as co-documentation agents, and the lenders thereto.
8-K
10.1
May 23, 2018
10.39
Master Amendment No. 7 to the U.S. Receivables Loan Agreement, U.S. Servicing Agreement, U.S. Receivables Purchase Agreement and Transaction Documents, dated as of April 18, 2019
8-K
10.1
April 24, 2019
10.40
Amended and Restated European Receivables Loan Agreement, dated as of April 18, 2019
8-K
10.2
April 24, 2019
10.41*
Amended and Restated European Contribution Agreement, dated as of April 18, 2019
10.42
Master Amendment No. 8 to the U.S. Receivables Loan Agreement, U.S. Servicing Agreement, U.S. Receivables Purchase Agreement and Transaction Documents, dated as of December 3, 2019
10-K
10.52
February 13, 2020
10.43
Huntsman Executive Severance Plan (as amended and restated effective February 19, 2020)
8-K
10.1
February 19, 2020
10.44
Second Amended and Restated Severance Agreement dated February 19, 2020, between Huntsman Corporation and Peter R. Huntsman
8-K
10.2
February 19, 2020
10.45*
Master Amendment No. 9 to the U.S. Receivables Loan Agreement, U.S. Servicing Agreement, U.S. Receivables Purchase Agreement and Transaction Documents and Waiver, dated as of October 30, 2020
21.1*
Subsidiaries of Huntsman Corporation
23.1*
Consent of Independent Registered Public Accounting Firm
23.2*
Consent of Independent Registered Public Accounting Firm
31.1*
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2*
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1*
Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2*
Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS*
XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH*
Inline XBRL Taxonomy Extension Schema
101.CAL*
Inline XBRL Taxonomy Extension Calculation Linkbase
101.LAB*
Inline XBRL Taxonomy Extension Label Linkbase
101.PRE*
Inline XBRL Taxonomy Extension Presentation Linkbase
101.DEF*
Inline XBRL Taxonomy Extension Definition Linkbase
104*
The cover page from this Annual Report on Form 10-K, formatted in Inline XBRL and contained in Exhibit 101
* Filed herewith.