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Huntsman Releases First Quarter 2005 Results

Published on 2005-05-04. Author : SpecialChem

SALT LAKE CITY -- Huntsman Corporation (NYSE: HUN - News) reported first quarter 2005 EBITDA of $241.2 million including $246.6 million of charges related to the early extinguishment of debt, restructuring and other charges resulting in Adjusted EBITDA of $487.8 million. This compares to EBITDA in the first quarter of 2004 of $207.8 million including restructuring and other charges of $15.9 million resulting in Adjusted EBITDA of $223.7 million. EBITDA for the fourth quarter of 2004 was $275.0 million including restructuring and other charges of $126.5 million resulting in Adjusted EBITDA of $401.5 million.

The Company reported a net loss available to common stockholders of $99.5 million for the first quarter 2005 including preferred dividends of $43.1 million (which represents all of the dividends that were declared and will become payable from the issuance of our 5% mandatory convertible preferred stock until the mandatory conversion date) and after tax charges of $233.0 million for early extinguishment of debt and $8.3 million of restructuring and plant closing costs. Net income as adjusted to exclude these items was $184.9 million. This compares to a net loss available to common stockholders of $106.7 million in the first quarter 2004 including preferred dividends of $21.9 million and after tax charges of $1.9 million related to the early extinguishment of debt and $7.2 million of restructuring and plant closing costs. Net loss as adjusted to exclude these items in the first quarter of 2004 was $75.7 million.

The proceeds from our initial public offering were used to reduce indebtedness throughout the second half of the first quarter, 2005. As a result our interest expense was higher than what it would have been if the IPO were completed at the beginning of the quarter.

Peter R. Huntsman, President and CEO, stated, "The first quarter results represent our seventh consecutive quarter of improved revenues and Adjusted EBITDA and were achieved despite continued volatile and high energy and feedstock costs. Our product portfolio remains well balanced, with our differentiated segments contributing more than half our Segment Adjusted EBITDA in the 2005 first quarter. We continue to improve the bottom line, having delivered two-thirds of our $200 million global cost reduction initiative. Our outlook for 2005 remains optimistic as the fundamentals of our business continue to show general improvements. During the quarter, our net IPO proceeds of $1.5 billion were used to reduce our debt levels. Since the IPO we have prepaid our term loans by $75 million and we remain committed to using surplus cash flow to reduce our debt further."

The Company computes Adjusted EBITDA to eliminate the impacts of restructuring and reorganization costs, losses on the sale of accounts receivable, losses from early extinguishment of debt and non-recurring legal and contract settlements expenses in order to provide investors with a more meaningful measure of our operational performance. The Company computes net income (loss) as adjusted to eliminate preferred dividends and the after tax impact of losses on the early extinguishment of debt and restructuring and plant closing costs.

Three Months Ended March 31, 2005 as Compared to Three Months Ended March 31, 2004

Revenues for the three months ended March 31, 2005 increased to $3,362.9 million, or 27%, from $2,638.8 million during the same period in 2004. Revenue increases were experienced in all segments, primarily due to higher average selling prices.

For the three months ended March 31, 2005, the Company generated EBITDA of $241.2 million, which included $233.0 million of expenses related to the early extinguishment of debt, $10.4 million of restructuring and plant closing costs and $3.2 million of loss on the sale of accounts receivable. This compares to first quarter 2004 EBITDA of $207.8 million, which included $1.9 million of losses from the early extinguishment of debt, $8.7 million of restructuring charges, $3.5 million of loss on the sale of accounts receivable and $1.8 million in legal and contract settlement expense.

Adjusted EBITDA for the first quarter of 2005 was $487.8 million, a 118% increase relative to the comparable period in 2004. The increase in Adjusted EBITDA resulted from increases in our Polyurethanes, Performance Products, Pigments, Polymers, and Base Chemicals segments. Fourth quarter 2004 EBITDA and Adjusted EBITDA were $275.0 million and $401.5 million, respectively.

Polyurethanes

The increase in revenues in the Polyurethanes segment for the three months ended March 31, 2005 as compared to the same period in 2004 was primarily due to higher average selling prices for MDI. MDI average selling prices increased by 45% as a result of the combination of strong growth in higher value applications, continued strong supply/demand fundamentals, the strength of major European currencies versus the U.S. dollar, and higher raw material and energy costs. MDI sales volumes were higher by 1%. In addition, PO and co-product MTBE average selling prices and volumes were also higher.

The increase in EBITDA in the Polyurethanes segment was the result of higher margins as average selling prices more than offset the increase of raw materials and energy costs. EBITDA also increased as a result of decreased administrative costs. EBITDA was negatively impacted by $1.9 million of restructuring charges recorded in the first quarter of 2005 compared to $4.8 million for the same period in 2004.

Advanced Materials

The increase in revenues in the Advanced Materials segment for the three months ended March 31, 2005 as compared to the same period in 2004 was primarily the result of a 8% increase in average selling prices, principally due to price increase initiatives in certain markets in response to improved demand and higher raw material costs and to offset the effects of the strength of the major European and Asian currencies versus the U.S. dollar. Sales volumes improved by approximately 1% as our ongoing portfolio re-alignment activities resulted in higher sales volumes in certain of our coatings, constructions and adhesives market group as well as our design and composite engineering market group which were largely offset by lower sales volumes of basic epoxy resins and electronic laminates products.

EBITDA in the Advanced Materials segment was relatively flat as higher average selling prices were partially offset by higher raw material costs and energy costs. The foreign exchange loss in the three months ended March 31, 2005 was $12.9 million as compared to $2.7 million in foreign exchange gains for the same period in 2004.

Performance Products

The increase in revenues in the Performance Products segment for the three months ended March 31, 2005 as compared to the same period in 2004 was primarily the result of higher average selling prices for all major product lines partially offset by a 5% decrease in sales volumes. Average selling prices increased by 20% in response to higher raw material and energy costs and improved market conditions. Sales volume decreases were primarily the result of lower sales of certain surfactants products and LAB.

The increase in EBITDA in the Performance Products segment principally resulted from higher margins as average selling prices increased more than raw material and energy costs. EBITDA was negatively impacted by a $1.0 million restructuring charge for the first quarter 2005.

Pigments

The increase in revenues in the Pigments segment for the three months ended March 31, 2005 as compared to the same period in 2004 was primarily due to a 12% increase in average selling prices, partially offset by 9% lower sales volumes. Average selling prices benefited from the strengthening of the major European currencies versus the U.S. dollar and price increase initiatives implemented during 2004 and first quarter of 2005. Volumes were lower primarily due to the rationalization of manufacturing capacity and lower demand.

The increase in EBITDA in the Pigments segment was primarily the result of higher margins resulting from the increase in average selling prices and lower manufacturing costs and SG&A. EBITDA was negatively impacted by $2.9 million of restructuring charges recorded in the first quarter of 2005 as compared to $3.9 million in the comparable 2004 period.

Polymers

The increase in revenues in the Polymers segment for the three months ended March 31, 2005 as compared to the same period in 2004 was primarily the result of a 41% increase in average selling prices due to tighter market conditions and higher raw materials and energy costs. Sales volumes decreased by 6% primarily resulting from lower production and reduced demand.

The increase in EBITDA in the Polymers segment was due primarily from higher margins as average selling prices increased more than raw material and energy costs. EBITDA was negatively impacted by a $1.9 million restructuring charge for the first quarter of 2005.

Base Chemicals

The increase in revenues in the Base Chemicals segment for the three months ended March 31, 2005 as compared to the same period in 2004 was primarily the result of a 41% increase in average selling prices in response to improved market conditions and higher raw material and energy costs. Sales volumes increased 1% in the 2005 period as compared to 2004.

The increase in EBITDA in the Base Chemicals segment was primarily the result of higher margins as average selling prices increased more than raw material and energy costs. EBITDA was negatively impacted by a restructuring charge for the first quarter of 2005 of $2.7 million.

Corporate and Other

Corporate and other items include unallocated corporate overhead, loss on the sale of our accounts receivable, unallocated foreign exchange gains and losses, loss on the early extinguishment of debt, other non-operating income and expense, minority interest, and unallocated restructuring and reorganization costs. In the first quarter of 2005, the total of these items increased as compared to the comparable 2004 period primarily due to the charge on early extinguishment of debt of $233.0 million as compared to $1.9 million for the same period in 2004. Also, in the 2005 first quarter period the Company recorded unallocated foreign exchange losses as compared to unallocated foreign exchange gains for the comparable 2004 period.

As of March 31, 2005, we and our subsidiaries had $1,031 million in combined cash and unused borrowing capacity, as compared to $1,020 million at December 31, 2004.

For the three months ended March 31, 2005, total capital expenditures were $59.8 million as compared to $55.8 million for the same period in 2004. During 2005 we expect to spend approximately $400 million on capital expenditures, including approximately $80 million on the LDPE facility being constructed at Wilton, UK. Our consolidated polyurethanes Chinese joint venture expects to spend an additional $51 million on capital projects in 2005 of which Huntsman has funded approximately $8 million and the remainder will be funded by our joint venture partners and local borrowings.

On February 16, 2005, we completed an initial public offering of (i) 55,681,819 shares of our common stock sold by us and 13,579,546 shares of our common stock sold by a selling stockholder, in each case at a price to the public of $23 per share, and (ii) 5,750,000 shares of our 5% mandatory convertible preferred stock sold by us at a price to the public of $50 per share. The net proceeds to the Company from the offering were approximately $1,500 million, substantially all of which were used to repay outstanding indebtedness of certain of our subsidiaries, including HMP Equity Holdings Corporation, Huntsman LLC and Huntsman International Holdings LLC.

On February 16, 2005, we utilized approximately $42 million of the net proceeds from the offering to redeem, in full, certain indebtedness of Huntsman LLC. On February 28, 2005, we utilized approximately $1,217 million of the net proceeds together with $35 million in available cash to redeem all of the outstanding HMP Equity Holdings Corporation senior secured discount notes due 2008, approximately $452 million of the outstanding Huntsman International Holdings LLC senior discount notes due 2009, and $159 million of the Huntsman LLC senior secured notes due 2010. On March 14, 2005, we used $151.7 million of the net proceeds from the offering to redeem the remaining outstanding Huntsman International Holdings LLC senior discount notes due 2009 and $78 million of the Huntsman LLC senior notes due 2012. On March 17, 2005 we used approximately $27 million of net proceeds from the offering to redeem an additional $24 million of Huntsman LLC senior notes due 2012.

On March 24, 2005 we made a voluntary prepayment in the amount of $75 million on our Huntsman International LLC senior credit facilities and during the first quarter reduced outstandings under our Huntsman LLC revolving credit facility by approximately $63 million.

Statements in this release that are not historical are forward-looking statements. These statements are based on management's current beliefs and expectations. The forward-looking statements in this release are subject to uncertainty and changes in circumstances and involve risks and uncertainties that may affect the company's operations, markets, products, services, prices and other factors as discussed in the Huntsman companies' filings with the Securities and Exchange Commission. Significant risks and uncertainties may relate to, but are not limited to, financial, economic, competitive, environmental, political, legal, regulatory and technological factors. Accordingly, there can be no assurance that the company's expectations will be realized. The company assumes no obligation to provide revisions to any forward-looking statements should circumstances change, except as otherwise required by securities and other applicable laws.

Source: Huntsman Corporation


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