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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

Form 10-Q

(Mark One)    

ý

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2016

OR

o

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                                    to                                   

 

Commission
File Number
  Exact Name of Registrant as Specified in its Charter,
Principal Office Address and Telephone Number
  State of Incorporation
or Organization
  I.R.S. Employer
Identification No.
 
001-32427   Huntsman Corporation     Delaware     42-1648585  
    10003 Woodloch Forest Drive
The Woodlands, Texas 77380
(281) 719-6000
             
333-85141   Huntsman International LLC     Delaware     87-0630358  
    10003 Woodloch Forest Drive
The Woodlands, Texas 77380
(281) 719-6000
             



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

Huntsman Corporation

    YES ý     NO o  

Huntsman International LLC

    YES ý     NO o  

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

Huntsman Corporation

    YES ý     NO o  

Huntsman International LLC

    YES ý     NO o  

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

Huntsman Corporation   Large accelerated filer ý   Accelerated filer o   Non-accelerated filer o
(Do not check if a
smaller reporting company)
  Smaller reporting company o
Huntsman International LLC   Large accelerated filer o   Accelerated filer o   Non-accelerated filer ý
(Do not check if a
smaller reporting company)
  Smaller reporting company o

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

Huntsman Corporation

    YES o     NO ý  

Huntsman International LLC

    YES o     NO ý  



          On July 19, 2016, 238,158,879 shares of common stock of Huntsman Corporation were outstanding and 2,728 units of membership interests of Huntsman International LLC were outstanding. There is no trading market for Huntsman International LLC's units of membership interests. All of Huntsman International LLC's units of membership interests are held by Huntsman Corporation.



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

   


Table of Contents

HUNTSMAN CORPORATION AND SUBSIDIARIES
HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES
QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTERLY PERIOD
ENDED JUNE 30, 2016

TABLE OF CONTENTS

 
   
  Page  

PART I

 

FINANCIAL INFORMATION

    3  

ITEM 1.

 

Condensed Consolidated Financial Statements (Unaudited):

    3  

 

Huntsman Corporation and Subsidiaries:

       

 

Condensed Consolidated Balance Sheets

    3  

 

Condensed Consolidated Statements of Operations

    4  

 

Condensed Consolidated Statements of Comprehensive Income (Loss)

    5  

 

Condensed Consolidated Statements of Equity

    6  

 

Condensed Consolidated Statements of Cash Flows

    7  

 

Huntsman International LLC and Subsidiaries:

       

 

Condensed Consolidated Balance Sheets

    9  

 

Condensed Consolidated Statements of Operations

    10  

 

Condensed Consolidated Statements of Comprehensive Income (Loss)

    11  

 

Condensed Consolidated Statements of Equity

    12  

 

Condensed Consolidated Statements of Cash Flows

    13  

 

Huntsman Corporation and Subsidiaries and Huntsman International LLC and Subsidiaries:

       

 

Notes to Condensed Consolidated Financial Statements

    15  

ITEM 2.

 

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

    63  

ITEM 3.

 

Quantitative and Qualitative Disclosures About Market Risk

    84  

ITEM 4.

 

Controls and Procedures

    86  

PART II

 

OTHER INFORMATION

    87  

ITEM 1.

 

Legal Proceedings

    87  

ITEM 1A.

 

Risk Factors

    87  

ITEM 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

    89  

ITEM 6.

 

Exhibits

    90  

2


Table of Contents


PART I. FINANCIAL INFORMATION

ITEM 1.    CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)


HUNTSMAN CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In Millions, Except Share and Per Share Amounts)

 
  June 30,
2016
  December 31,
2015
 

ASSETS

             

Current assets:

             

Cash and cash equivalents(a)

  $ 373   $ 257  

Restricted cash(a)

    10     12  

Accounts and notes receivable (net of allowance for doubtful accounts of $29 and $26, respectively), ($492 and $438 pledged as collateral, respectively)(a)

    1,532     1,420  

Accounts receivable from affiliates

    14     29  

Inventories(a)

    1,522     1,692  

Prepaid expenses

    55     112  

Other current assets(a)

    285     312  

Total current assets

    3,791     3,834  

Property, plant and equipment, net(a)

    4,377     4,446  

Investment in unconsolidated affiliates

    335     347  

Intangible assets, net(a)

    97     86  

Goodwill

    123     116  

Deferred income taxes

    407     418  

Other noncurrent assets(a)

    597     573  

Total assets

  $ 9,727   $ 9,820  

LIABILITIES AND EQUITY

             

Current liabilities:

             

Accounts payable(a)

  $ 963   $ 1,034  

Accounts payable to affiliates

    28     27  

Accrued liabilities(a)

    602     686  

Current portion of debt(a)

    96     170  

Total current liabilities

    1,689     1,917  

Long-term debt(a)

    4,653     4,625  

Notes payable to affiliates

    1     1  

Deferred income taxes

    466     422  

Other noncurrent liabilities(a)

    1,210     1,226  

Total liabilities

    8,019     8,191  

Commitments and contingencies (Notes 12 and 13)

             

Equity

             

Huntsman Corporation stockholders' equity:

             

Common stock $0.01 par value, 1,200,000,000 shares authorized, 250,764,279 and 249,483,541 shares issued and 236,298,003 and 237,080,026 shares outstanding, respectively

    3     3  

Additional paid-in capital

    3,443     3,407  

Treasury stock, 12,607,223 and 11,162,454 shares, respectively

    (150 )   (135 )

Unearned stock-based compensation

    (24 )   (17 )

Accumulated deficit

    (447 )   (528 )

Accumulated other comprehensive loss

    (1,296 )   (1,288 )

Total Huntsman Corporation stockholders' equity

    1,529     1,442  

Noncontrolling interests in subsidiaries

    179     187  

Total equity

    1,708     1,629  

Total liabilities and equity

  $ 9,727   $ 9,820  

(a)
At June 30, 2016 and December 31, 2015, respectively, $25 and $34 of cash and cash equivalents, $10 and $12 of restricted cash, $29 and $26 of accounts and notes receivable (net), $39 and $54 of inventories, $5 each of other current assets, $295 and $307 of property, plant and equipment (net), $34 and $36 of intangible assets (net), $43 and $38 of other noncurrent assets, $76 and $82 of accounts payable, $33 and $27 of accrued liabilities, $19 and $15 of current portion of debt, $123 and $137 of long-term debt, and $55 and $54 of other noncurrent liabilities from consolidated variable interest entities are included in the respective balance sheet captions above. See "Note 4. Variable Interest Entities."

   

See accompanying notes to condensed consolidated financial statements.

3


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HUNTSMAN CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In Millions, Except Per Share Amounts)

 
  Three months
ended June 30,
  Six months
ended June 30,
 
 
  2016   2015   2016   2015  

Revenues:

                         

Trade sales, services and fees, net

  $ 2,512   $ 2,697   $ 4,833   $ 5,257  

Related party sales

    32     43     66     72  

Total revenues

    2,544     2,740     4,899     5,329  

Cost of goods sold

    2,087     2,191     4,026     4,330  

Gross profit

    457     549     873     999  

Operating expenses:

                         

Selling, general and administrative

    234     249     457     495  

Research and development

    39     41     76     83  

Other operating income, net

    (21 )   (1 )   (16 )   (9 )

Restructuring, impairment and plant closing costs

    29     114     42     207  

Total expenses

    281     403     559     776  

Operating income

    176     146     314     223  

Interest expense, net

    (50 )   (53 )   (100 )   (109 )

Equity in income of investment in unconsolidated affiliates

    2     3     3     5  

Loss on early extinguishment of debt

    (2 )   (20 )   (2 )   (23 )

Other income (loss)

    1     (1 )   2     (2 )

Income from continuing operations before income taxes

    127     75     217     94  

Income tax expense

    (32 )   (34 )   (59 )   (36 )

Income from continuing operations

    95     41     158     58  

Loss from discontinued operations

    (1 )   (2 )   (2 )   (4 )

Net income

    94     39     156     54  

Net income attributable to noncontrolling interests

    (7 )   (10 )   (13 )   (20 )

Net income attributable to Huntsman Corporation

  $ 87   $ 29   $ 143   $ 34  

Basic income (loss) per share:

                         

Income from continuing operations attributable to Huntsman Corporation common stockholders

  $ 0.37   $ 0.13   $ 0.62   $ 0.16  

Loss from discontinued operations attributable to Huntsman Corporation common stockholders, net of tax

        (0.01 )   (0.01 )   (0.02 )

Net income attributable to Huntsman Corporation common stockholders

  $ 0.37   $ 0.12   $ 0.61   $ 0.14  

Weighted average shares

    236.3     244.1     236.2     244.0  

Diluted income (loss) per share:

                         

Income from continuing operations attributable to Huntsman Corporation common stockholders

  $ 0.36   $ 0.13   $ 0.61   $ 0.16  

Loss from discontinued operations attributable to Huntsman Corporation common stockholders, net of tax

        (0.01 ) $ (0.01 )   (0.02 )

Net income attributable to Huntsman Corporation common stockholders

  $ 0.36   $ 0.12   $ 0.60   $ 0.14  

Weighted average shares

    239.5     247.5     238.3     247.3  

Amounts attributable to Huntsman Corporation common stockholders:

                         

Income from continuing operations

  $ 88   $ 31   $ 145   $ 38  

Loss from discontinued operations, net of tax

    (1 )   (2 )   (2 )   (4 )

Net income

  $ 87   $ 29   $ 143   $ 34  

Dividends per share

  $ 0.125   $ 0.125   $ 0.25   $ 0.25  

   

See accompanying notes to condensed consolidated financial statements.

4


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HUNTSMAN CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In Millions)

 
  Three months
ended
June 30,
  Six months
ended
June 30,
 
 
  2016   2015   2016   2015  

Net income

  $ 94   $ 39   $ 156   $ 54  

Other comprehensive (loss) income, net of tax:

                         

Foreign currency translations adjustments

    (53 )   40     (26 )   (142 )

Pension and other postretirement benefits adjustments

    11     9     24     22  

Other, net

    5     10     (6 )   9  

Other comprehensive (loss) income, net of tax

    (37 )   59     (8 )   (111 )

Comprehensive income (loss)

    57     98     148     (57 )

Comprehensive income attributable to noncontrolling interests

    (5 )   (12 )   (13 )   (15 )

Comprehensive income (loss) attributable to Huntsman Corporation

  $ 52   $ 86   $ 135   $ (72 )

   

See accompanying notes to condensed consolidated financial statements.

5


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HUNTSMAN CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

(In Millions, Except Share Amounts)

 
  Huntsman Corporation Stockholders' Equity    
   
 
 
  Shares    
   
   
   
   
   
   
   
 
 
   
   
   
   
   
  Accumulated
other
comprehensive
loss
   
   
 
 
  Common
stock
  Common
stock
  Additional
paid-in
capital
  Treasury
stock
  Unearned
stock-based
compensation
  Accumulated
deficit
  Noncontrolling
interests in
subsidiaries
  Total
equity
 

Balance, January 1, 2016

    237,080,026   $ 3   $ 3,407   $ (135 ) $ (17 ) $ (528 ) $ (1,288 ) $ 187   $ 1,629  

Net income

                        143         13     156  

Other comprehensive income

                            (8 )       (8 )

Issuance of nonvested stock awards

            17         (17 )                

Vesting of stock awards

    886,555         2                         2  

Recognition of stock-based compensation

            5         10                 15  

Repurchase and cancellation of stock awards

    (246,663 )                   (2 )           (2 )

Stock options exercised

    22,854                                  

Dividends paid to noncontrolling interests

                                (21 )   (21 )

Treasury stock repurchased

    (1,444,769 )       15     (15 )                    

Excess tax shortfall related to stock-based compensation

            (3 )                       (3 )

Dividends declared on common stock

                        (60 )           (60 )

Balance, June 30, 2016

    236,298,003   $ 3   $ 3,443   $ (150 ) $ (24 ) $ (447 ) $ (1,296 ) $ 179   $ 1,708  

Balance, January 1, 2015

    243,416,979   $ 3   $ 3,385   $ (50 ) $ (14 ) $ (493 ) $ (1,053 ) $ 173   $ 1,951  

Net income

                        34         20     54  

Other comprehensive loss

                            (106 )   (5 )   (111 )

Issuance of nonvested stock awards

            19         (19 )                

Vesting of stock awards

    1,006,871         5                         5  

Recognition of stock-based compensation

            5         9                 14  

Repurchase and cancellation of stock awards

    (304,079 )                   (7 )           (7 )

Stock options exercised

    48,572         1                         1  

Dividends paid to noncontrolling interests

                                (4 )   (4 )

Excess tax benefit related to stock-based compensation

            1                         1  

Dividends declared on common stock

                        (62 )           (62 )

Balance, June 30, 2015

    244,168,343   $ 3   $ 3,416   $ (50 ) $ (24 ) $ (528 ) $ (1,159 ) $ 184   $ 1,842  

See accompanying notes to condensed consolidated financial statements.

6


Table of Contents


HUNTSMAN CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Millions)

 
  Six months
ended
June 30,
 
 
  2016   2015  

Operating Activities:

             

Net income

  $ 156   $ 54  

Adjustments to reconcile net income to net cash provided by operating activities:

             

Equity in income of investment in unconsolidated affiliates

    (3 )   (5 )

Depreciation and amortization

    209     194  

Loss on disposal of businesses/assets, net

    2      

Loss on early extinguishment of debt

    2     23  

Noncash interest expense

    8     8  

Noncash restructuring and impairment charges

    9     85  

Deferred income taxes

    52     (59 )

Noncash gain on foreign currency transactions

        (4 )

Stock-based compensation

    17     17  

Portion of insurance proceeds representing cash provided by investing activities

    (8 )    

Other, net

    (1 )   4  

Changes in operating assets and liabilities, net of effects of acquisitions:

             

Accounts and notes receivable

    (90 )   (142 )

Inventories

    177     7  

Prepaid expenses

    14     14  

Other current assets

    22     62  

Other noncurrent assets

    (36 )   (99 )

Accounts payable

    (56 )   12  

Accrued liabilities

    (39 )   31  

Other noncurrent liabilities

    8     (21 )

Net cash provided by operating activities

    443     181  

Investing Activities:

             

Capital expenditures

    (189 )   (296 )

Insurance proceeds for recovery of property damage

    8      

Cash received from unconsolidated affiliates

    19     25  

Investment in unconsolidated affiliates

    (14 )   (32 )

Acquisition of business, net of cash acquired

        (15 )

Cash received from purchase price adjustment for business acquired

        18  

Proceeds from sale of businesses/assets

        1  

Cash received from termination of cross-currency interest rate contracts

        66  

Change in restricted cash

    2      

Net cash used in investing activities

    (174 )   (233 )

   

(Continued)

7


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HUNTSMAN CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

(In Millions)

 
  Six months
ended
June 30,
 
 
  2016   2015  

Financing Activities:

             

Net repayments on overdraft facilities

  $ (1 ) $ (2 )

Repayments of short-term debt

    (18 )   (17 )

Borrowings on short-term debt

    6      

Repayments of long-term debt

    (582 )   (388 )

Proceeds from issuance of long-term debt

    547     326  

Repayments of notes payable

    (16 )   (15 )

Borrowings on notes payable

    2     1  

Debt issuance costs paid

    (8 )   (5 )

Call premiums related to early extinguishment of debt

        (26 )

Contingent consideration paid for acquisition

        (4 )

Dividends paid to common stockholders

    (60 )   (62 )

Dividends paid to noncontrolling interests

    (21 )   (4 )

Repurchase and cancellation of stock awards

    (2 )   (7 )

Proceeds from issuance of common stock

        1  

Excess tax benefit related to stock-based compensation

        1  

Other, net

        (1 )

Net cash used in financing activities

    (153 )   (202 )

Effect of exchange rate changes on cash

        (7 )

Increase (decrease) in cash and cash equivalents

    116     (261 )

Cash and cash equivalents at beginning of period

    257     860  

Cash and cash equivalents at end of period

  $ 373   $ 599  

Supplemental cash flow information:

             

Cash paid for interest

  $ 103   $ 115  

Cash paid for income taxes

    21     30  

        As of June 30, 2016 and 2015, the amount of capital expenditures in accounts payable was $59 million and $55 million, respectively.

   

See accompanying notes to condensed consolidated financial statements.

8


Table of Contents


HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In Millions)

 
  June 30,
2016
  December 31,
2015
 

ASSETS

             

Current assets:

             

Cash and cash equivalents(a)

  $ 373   $ 257  

Restricted cash(a)

    10     12  

Accounts and notes receivable (net of allowance for doubtful accounts of $29 and $26, respectively), ($492 and $438 pledged as collateral, respectively)(a)

    1,532     1,420  

Accounts receivable from affiliates

    329     340  

Inventories(a)

    1,522     1,692  

Prepaid expenses

    54     111  

Other current assets(a)

    279     306  

Total current assets

    4,099     4,138  

Property, plant and equipment, net(a)

    4,347     4,410  

Investment in unconsolidated affiliates

    335     347  

Intangible assets, net(a)

    98     86  

Goodwill

    123     116  

Deferred income taxes

    407     418  

Other noncurrent assets(a)

    596     573  

Total assets

  $ 10,005   $ 10,088  

LIABILITIES AND EQUITY

             

Current liabilities:

             

Accounts payable(a)

  $ 963   $ 1,034  

Accounts payable to affiliates

    57     52  

Accrued liabilities(a)

    599     683  

Notes payable to affiliates

    100     100  

Current portion of debt(a)

    96     170  

Total current liabilities

    1,815     2,039  

Long-term debt(a)

    4,653     4,625  

Notes payable to affiliates

    697     698  

Deferred income taxes

    462     418  

Other noncurrent liabilities(a)

    1,212     1,224  

Total liabilities

    8,839     9,004  

Commitments and contingencies (Notes 12 and 13)

             

Equity

             

Huntsman International LLC members' equity:

             

Members' equity, 2,728 units issued and outstanding

    3,209     3,196  

Accumulated deficit

    (901 )   (983 )

Accumulated other comprehensive loss

    (1,321 )   (1,316 )

Total Huntsman International LLC members' equity

    987     897  

Noncontrolling interests in subsidiaries

    179     187  

Total equity

    1,166     1,084  

Total liabilities and equity

  $ 10,005   $ 10,088  

(a)
At June 30, 2016 and December 31, 2015, respectively, $25 and $34 of cash and cash equivalents, $10 and $12 of restricted cash, $29 and $26 of accounts and notes receivable (net), $39 and $54 of inventories, $5 each of other current assets, $295 and $307 of property, plant and equipment (net), $34 and $36 of intangible assets (net), $43 and $38 of other noncurrent assets, $76 and $82 of accounts payable, $33 and $27 of accrued liabilities, $19 and $15 of current portion of debt, $123 and $137 of long-term debt, and $55 and $54 of other noncurrent liabilities from consolidated variable interest entities are included in the respective balance sheet captions above. See "Note 4. Variable Interest Entities."

   

See accompanying notes to condensed consolidated financial statements.

9


Table of Contents


HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In Millions)

 
  Three months
ended June 30,
  Six months
ended June 30,
 
 
  2016   2015   2016   2015  

Revenues:

                         

Trade sales, services and fees, net

  $ 2,512   $ 2,697   $ 4,833   $ 5,257  

Related party sales

    32     43     66     72  

Total revenues

    2,544     2,740     4,899     5,329  

Cost of goods sold

    2,086     2,191     4,024     4,328  

Gross profit

    458     549     875     1,001  

Operating expenses:

                         

Selling, general and administrative

    234     248     455     492  

Research and development

    39     41     76     83  

Other operating income, net

    (21 )   (2 )   (16 )   (9 )

Restructuring, impairment and plant closing costs

    29     114     42     207  

Total expenses

    281     401     557     773  

Operating income

    177     148     318     228  

Interest expense

    (53 )   (56 )   (106 )   (114 )

Equity in income of investment in unconsolidated affiliates

    2     3     3     5  

Loss on early extinguishment of debt

    (2 )   (20 )   (2 )   (23 )

Other income (loss)

    1         2     (1 )

Income from continuing operations before income taxes

    125     75     215     95  

Income tax expense

    (31 )   (34 )   (58 )   (37 )

Income from continuing operations

    94     41     157     58  

Loss from discontinued operations, net of tax

    (1 )   (2 )   (2 )   (4 )

Net income

    93     39     155     54  

Net income attributable to noncontrolling interests

    (7 )   (10 )   (13 )   (20 )

Net income attributable to Huntsman International LLC

  $ 86   $ 29   $ 142   $ 34  

   

See accompanying notes to condensed consolidated financial statements.

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HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In Millions)

 
  Three months
ended
June 30,
  Six months
ended
June 30,
 
 
  2016   2015   2016   2015  

Net income

  $ 93   $ 39   $ 155   $ 54  

Other comprehensive (loss) income, net of tax:

                         

Foreign currency translations adjustment

    (54 )   39     (26 )   (143 )

Pension and other postretirement benefits adjustments

    11     11     26     26  

Other, net

    6     10     (5 )   9  

Other comprehensive (loss) income, net of tax

    (37 )   60     (5 )   (108 )

Comprehensive income (loss)

    56     99     150     (54 )

Comprehensive income attributable to noncontrolling interests

    (5 )   (12 )   (13 )   (15 )

Comprehensive income (loss) attributable to Huntsman International LLC

  $ 51   $ 87   $ 137   $ (69 )

   

See accompanying notes to condensed consolidated financial statements.

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HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

(In Millions, Except Unit Amounts)

 
  Huntsman International LLC Members    
   
 
 
  Members' equity    
   
   
   
 
 
  Accumulated
deficit
  Accumulated other
comprehensive
loss
  Noncontrolling
interests in
subsidiaries
   
 
 
  Units   Amount   Total equity  

Balance, January 1, 2016

    2,728   $ 3,196   $ (983 ) $ (1,316 ) $ 187   $ 1,084  

Net income

            142         13     155  

Dividends paid to parent

            (60 )           (60 )

Other comprehensive income

                (5 )       (5 )

Contribution from parent

        16                 16  

Dividends paid to noncontrolling interests

                    (21 )   (21 )

Excess tax shortfall related to stock-based compensation

        (3 )               (3 )

Balance, June 30, 2016

    2,728   $ 3,209   $ (901 ) $ (1,321 ) $ 179   $ 1,166  

Balance, January 1, 2015

    2,728   $ 3,166   $ (956 ) $ (1,087 ) $ 173   $ 1,296  

Net income

            34         20     54  

Dividends paid to parent

            (61 )           (61 )

Other comprehensive loss

                (103 )   (5 )   (108 )

Contribution from parent

        16                 16  

Dividends paid to noncontrolling interests

                    (4 )   (4 )

Excess tax benefit related to stock-based compensation

        1                 1  

Balance, June 30, 2015

    2,728   $ 3,183   $ (983 ) $ (1,190 ) $ 184   $ 1,194  

   

See accompanying notes to condensed consolidated financial statements.

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HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Millions)

 
  Six months
ended June 30,
 
 
  2016   2015  

Operating Activities:

             

Net income

  $ 155   $ 54  

Adjustments to reconcile net income to net cash provided by operating activities:

             

Equity in income of investment in unconsolidated affiliates

    (3 )   (5 )

Depreciation and amortization

    203     187  

Loss on disposal of businesses/assets, net

    2      

Loss on early extinguishment of debt

    2     23  

Noncash interest expense

    13     12  

Noncash restructuring and impairment charges

    9     85  

Deferred income taxes

    53     (59 )

Noncash gain on foreign currency transactions

        (4 )

Noncash compensation

    16     16  

Portion of insurance proceeds representing cash provided by investing activities

    (8 )    

Other, net

    (1 )   6  

Changes in operating assets and liabilities, net of effects of acquisitions:

             

Accounts and notes receivable

    (90 )   (142 )

Inventories

    177     7  

Prepaid expenses

    15     15  

Other current assets

    22     55  

Other noncurrent assets

    (36 )   (99 )

Accounts payable

    (62 )   8  

Accrued liabilities

    (38 )   39  

Other noncurrent liabilities

    12     (17 )

Net cash provided by operating activities

    441     181  

Investing Activities:

             

Capital expenditures

    (189 )   (296 )

Insurance proceeds for recovery of property damage

    8      

Cash received from unconsolidated affiliates

    19     25  

Investment in unconsolidated affiliates

    (14 )   (32 )

Acquisition of business, net of cash acquired

        (15 )

Cash received from purchase price adjustment for business acquired

        18  

Proceeds from sale of businesses/assets

        1  

Increase in receivable from affiliate

        (4 )

Cash received from termination of cross-currency interest rate contracts

        66  

Change in restricted cash

    2      

Net cash used in investing activities

    (174 )   (237 )

   

(Continued)

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HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

(In Millions)

 
  Six months
ended June 30,
 
 
  2016   2015  

Financing Activities:

             

Net repayments on overdraft facilities

  $ (1 ) $ (2 )

Repayments of short-term debt

    (18 )   (17 )

Borrowings on short-term debt

    6      

Repayments of long-term debt

    (582 )   (388 )

Proceeds from issuance of long-term debt

    547     326  

Repayments of notes payable to affiliate

    (1 )   (50 )

Proceeds from issuance of notes payable from affiliate

        195  

Repayments of notes payable

    (16 )   (15 )

Borrowings on notes payable

    2     1  

Debt issuance costs paid

    (8 )   (5 )

Call premiums related to early extinguishment of debt

        (26 )

Contingent consideration paid for acquisition

        (4 )

Dividends paid to noncontrolling interests

    (21 )   (4 )

Dividends paid to parent

    (60 )   (61 )

Excess tax benefit related to stock-based compensation

        1  

Other, net

    1     (1 )

Net cash used in financing activities

    (151 )   (50 )

Effect of exchange rate changes on cash

        (7 )

Increase (decrease) in cash and cash equivalents

    116     (113 )

Cash and cash equivalents at beginning of period

    257     710  

Cash and cash equivalents at end of period

  $ 373   $ 597  

Supplemental cash flow information:

             

Cash paid for interest

  $ 103   $ 115  

Cash paid for income taxes

    21     30  

        As of June 30, 2016 and 2015, the amount of capital expenditures in accounts payable was $59 million and $55 million, respectively. During each of the six months ended June 30, 2016 and 2015, Huntsman Corporation contributed $16 million, related to stock-based compensation.

   

See accompanying notes to condensed consolidated financial statements.

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HUNTSMAN CORPORATION AND SUBSIDIARIES

HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. GENERAL

CERTAIN DEFINITIONS

        For convenience in this report, the terms "Company," "our," "us" or "we" may be used to refer to Huntsman Corporation and, unless the context otherwise requires, its subsidiaries and predecessors. In this report, "Huntsman International" refers to Huntsman International LLC (our wholly-owned subsidiary) and, unless the context otherwise requires, its subsidiaries.

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

INTERIM FINANCIAL STATEMENTS

        Our unaudited interim condensed consolidated financial statements and Huntsman International's unaudited interim condensed consolidated financial statements were prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP" or "U.S. GAAP") and in management's opinion reflect all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of results of operations, comprehensive income, financial position and cash flows for the periods presented. Results for interim periods are not necessarily indicative of those to be expected for the full year. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes to consolidated financial statements included in the Annual Report on Form 10-K for the year ended December 31, 2015 for our Company and Huntsman International.

DESCRIPTION OF BUSINESS

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

        We operate in five segments: Polyurethanes, Performance Products, Advanced Materials, Textile Effects, and Pigments and Additives. Our Polyurethanes, Performance Products, Advanced Materials and Textile Effects segments produce differentiated organic chemical products and our Pigments and Additives segment produces inorganic chemical products. In a series of transactions beginning in 2006, we sold or shutdown substantially all of our Australian styrenics operations and our North American polymers and base chemicals operations. We report the results of these businesses as discontinued operations.

COMPANY

        Our Company, a Delaware corporation, was formed in 2004 to hold the Huntsman businesses. Jon M. Huntsman founded the predecessor to our Company in 1970 as a small packaging company.

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HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

1. GENERAL (Continued)

Since then, we have grown through a series of acquisitions and now own a global portfolio of businesses.

        Currently, 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.

HUNTSMAN CORPORATION AND HUNTSMAN INTERNATIONAL FINANCIAL STATEMENTS

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

PRINCIPLES OF CONSOLIDATION

        Our condensed consolidated financial statements include the accounts of our wholly-owned and majority-owned subsidiaries and any variable interest entities for which we are the primary beneficiary. Intercompany accounts and transactions have been eliminated.

RECENT DEVELOPMENTS

Prepayment of Debt

        On July 22, 2016, Huntsman International prepaid $100 million of the 2015 extended term loan B facility due 2019 ("2015 Extended Term Loan B"). For more information, see "Note 6. Debt—Direct and Subsidiary Debt."

Sale of European Surfactants Manufacturing Facilities

        On July 29, 2016, Huntsman Investments (Netherlands) BV ("HIBV"), a wholly-owned subsidiary of Huntsman Corporation, entered into an Exclusivity and Put Option Agreement (the "Put Option Agreement") with Innospec International LTD ("Innospec"), a wholly-owned subsidiary of Innospec Inc. The Put Option Agreement, together with a Share and Asset Purchase Agreement in an agreed form and attached thereto as an exhibit (the "Purchase Agreement," and together with the Put Option Agreement, the "Acquisition Agreements"), set forth the terms of a commitment from Innospec to purchase HIBV's European surfactants manufacturing facilities and related assets for an enterprise value of $225 million. Pursuant to the terms of the Acquisition Agreements, HIBV would retain its accounts receivable and certain trade payables. The purchase price would also be subject to additional working capital and other adjustments (the "Transaction"). Pursuant to the terms of the Acquisition Agreements, Innospec, upon exercise of the Put Option Agreement by HIBV and following satisfaction of closing conditions referred to below, would acquire HIBV's manufacturing facilities located in

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

1. GENERAL (Continued)

Saint-Mihiel, France; Castiglione delle Stiviere, Italy; and Barcelona, Spain and HIBV would enter into supply and long-term tolling arrangements with Innospec to continue supplying certain surfactants and other key products globally.

        The Acquisition Agreements contain customary representations, warranties, and covenants and provide for indemnification rights with respect to a breach of a representation, warranty or covenant by either party, as well as for other specified matters.

        The Transaction is subject to the satisfaction or waiver of customary closing conditions, including, among others: (i) the representative bodies consultation processes required by French legislation, (ii) clearance by any applicable competition law authorities, and (iii) the absence of a change that has had or is reasonably likely to have a material adverse effect on the business. The Acquisition Agreements also contain certain customary termination rights for each of HIBV and Innospec.

        The foregoing description of the terms of the Acquisition Agreements is qualified in its entirety by reference to such Agreements, which will be filed subsequently with the Securities and Exchange Commission.

        The Acquisition Agreements will be included to provide investors and security holders with information regarding its terms. It is not intended to provide any other factual information about HIBV. The representations, warranties and covenants contained in the Acquisition Agreements were made only for purposes of such Agreements and as of specific dates, were solely for the benefit of the parties to such Agreements, and may be subject to limitations agreed upon by the contracting parties, including being qualified by confidential disclosures exchanged between the parties in connection with the execution of the Acquisition Agreements. The representations and warranties may have been made for the purposes of allocating contractual risk between the parties to the Acquisition Agreements instead of establishing these matters as facts, and may be subject to standards of materiality applicable to the contracting parties that differ from those applicable to investors.

USE OF ESTIMATES

        The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

2. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

Accounting Pronouncements Adopted During 2016

        In January 2015, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2015-01, Income Statement—Extraordinary and Unusual Items (Subtopic 225-20): Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items, eliminating from U.S. GAAP the concept of extraordinary items. Reporting entities will no longer have to assess whether a particular event or transaction event is extraordinary. The amendments in this ASU are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. We adopted the amendments in this ASU effective January 1, 2016, and the initial adoption of

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS (Continued)

the amendments in this ASU did not have a significant impact on our condensed consolidated financial statements.

        In February 2015, the FASB issued ASU No. 2015-02, Consolidation (Topic 810): Amendments to the Consolidation Analysis. The amendments in this ASU change the analysis that a reporting entity must perform to determine whether it should consolidate certain types of legal entities by placing more emphasis on risk of loss when determining a controlling financial interest. These amendments affect areas specific to limited partnerships and similar legal entities, evaluating fees paid to a decision maker or service provider as a variable interest, the effects of both fee arrangements and related parties on the primary beneficiary determination and certain investment funds. The amendments in this ASU are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. We adopted the amendments in this ASU effective January 1, 2016, and the initial adoption of the amendments in this ASU did not have a significant impact on our condensed consolidated financial statements.

        In April 2015, the FASB issued ASU No. 2015-05, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer's Accounting for Fees Paid in a Cloud Computing Arrangement. The amendments in this ASU provide guidance that will help entities evaluate the accounting for fees paid by a customer in a cloud computing arrangement, including whether a cloud computing arrangement includes a software license. If a cloud computing arrangement includes a software license, then the customer should account for the software license consistent with the acquisition of other software licenses; otherwise, the customer should account for the arrangement as a service contract. The amendments in this ASU are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. We adopted the amendments in this ASU effective January 1, 2016, and the initial adoption of the amendments in this ASU did not have a significant impact on our condensed consolidated financial statements.

Accounting Pronouncements Pending Adoption in Future Periods

        In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), outlining a single comprehensive model for entities to use in accounting for revenues arising from contracts with customers and supersedes most current revenue recognition guidance. In August 2015, the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date, deferring the effective date of ASU No. 2014-09 for all entities by one year. Further, in March 2016, the FASB issued ASU No. 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net), clarifying the implementation guidance on principal versus agent considerations, in April 2016, the FASB issued ASU No. 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing, clarifying the implementation guidance on identifying performance obligations in a contract and determining whether an entity's promise to grant a license provides a customer with either a right to use the entity's intellectual property (which is satisfied at a point in time) or a right to access the entity's intellectual property (which is satisfied over time), and in May 2016, the FASB issued ASU No. 2016-12, Revenue from Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients, providing clarifications and practical expedients for certain narrow aspects in Topic 606. The amendments in these ASUs are effective for annual reporting periods

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS (Continued)

beginning after December 15, 2017, including interim periods within that reporting period. The amendments in ASU No. 2014-09, ASU No. 2016-08, ASU No. 2016-10 and ASU No. 2016-12 should be applied retrospectively, and early application is permitted. We are currently evaluating the impact of the adoption of the amendments in ASU No. 2014-09, ASU No. 2016-08, ASU No. 2016-10 and ASU No. 2016-12 on our condensed consolidated financial statements.

        In July 2015, the FASB issued ASU No. 2015-11, Inventory (Topic 330): Simplifying the Measurement of Inventory. The amendments in this ASU do not apply to inventory that is measured using last-in first-out ("LIFO") or the retail inventory method, but rather does apply to all other inventory, which includes inventory that is measured using first-in first-out or average cost. An entity should measure in scope inventory at the lower of cost and net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. Subsequent measurement is unchanged for inventory measured using LIFO or the retail inventory method. The amendments in this ASU are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016. The amendments in this ASU should be applied prospectively with earlier application permitted as of the beginning of an interim or annual reporting period. We do not expect the adoption of the amendments in this ASU to have a significant impact on our condensed consolidated financial statements.

        In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). The amendments in this ASU will increase transparency and comparability among entities by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. The amendments in this ASU will require lessees to recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. The amendments in this ASU are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Early application of the amendments in this ASU is permitted for all entities. Reporting entities are required to recognize and measure leases under these amendments at the beginning of the earliest period presented using a modified retrospective approach. We are currently evaluating the impact of the adoption of the amendments in this ASU on our condensed consolidated financial statements.

        In March 2016, the FASB issued ASU No. 2016-09, Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. The amendments in this ASU simplify several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The amendments in this ASU are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016. Early adoption of the amendments in this ASU is permitted in any interim or annual period. We do not expect the adoption of the amendments in this ASU to have a significant impact on our condensed consolidated financial statements.

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HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

3. INVENTORIES

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

 
  June 30,
2016
  December 31,
2015
 

Raw materials and supplies

  $ 353   $ 389  

Work in progress

    110     125  

Finished goods

    1,101     1,221  

Total

    1,564     1,735  

LIFO reserves

    (42 )   (43 )

Net inventories

  $ 1,522   $ 1,692  

        For both June 30, 2016 and December 31, 2015, approximately 9% of inventories were recorded using the LIFO cost method.

4. VARIABLE INTEREST ENTITIES

        We evaluate our investments and transactions to identify variable interest entities for which we are the primary beneficiary. We hold a variable interest in the following joint ventures for which we are the primary beneficiary:

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HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

4. VARIABLE INTEREST ENTITIES (Continued)

        Creditors of these entities have no recourse to our general credit. See "Note 6. Debt—Direct and Subsidiary Debt." As the primary beneficiary of these variable interest entities at June 30, 2016, the joint ventures' assets, liabilities and results of operations are included in our condensed consolidated financial statements.

        The following table summarizes the carrying amount of our variable interest entities' assets and liabilities included in our condensed consolidated balance sheets, before intercompany eliminations, as of June 30, 2016 and our consolidated balance sheets as of December 31, 2015 (dollars in millions):

 
  June 30,
2016
  December 31,
2015
 

Current assets

  $ 91   $ 121  

Property, plant and equipment, net

    295     307  

Other noncurrent assets

    112     95  

Deferred income taxes

    35     35  

Intangible assets

    34     36  

Goodwill

    13     13  

Total assets

  $ 580   $ 607  

Current liabilities

  $ 155   $ 159  

Long-term debt

    125     140  

Deferred income taxes

    11     11  

Other noncurrent liabilities

    55     54  

Total liabilities

  $ 346   $ 364  

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

5. RESTRUCTURING, IMPAIRMENT AND PLANT CLOSING COSTS

        As of June 30, 2016 and December 31, 2015, accrued restructuring costs by type of cost and initiative consisted of the following (dollars in millions):

 
  Workforce
reductions(1)
  Demolition and
decommissioning
  Non-cancelable
lease and contract
termination costs
  Other
restructuring
costs
  Total(2)  

Accrued liabilities as of January 1, 2016

  $ 109   $ 16   $ 38   $ 5   $ 168  

2016 charges for 2015 and prior initiatives

    4     1     1     22     28  

2016 charges for 2016 initiatives

    4             2     6  

Reversal of reserves no longer required

    (1 )               (1 )

Distribution of prefunded restructuring costs

    (39 )   (2 )       (1 )   (42 )

2016 payments for 2015 and prior initiatives

    (27 )   (3 )   (2 )   (22 )   (54 )

2016 payments for 2016 initiatives

                (2 )   (2 )

Foreign currency effect on liability balance

            1         1  

Accrued liabilities as of June 30, 2016

  $ 50   $ 12   $ 38   $ 4   $ 104  

(1)
The workforce reduction reserves relate to the termination of 545 positions, of which 485 positions had not been terminated as of June 30, 2016.

(2)
Accrued liabilities by initiatives were as follows (dollars in millions):

 
  June 30,
2016
  December 31,
2015
 

2014 and prior initiatives

    86     143  

2015 initiatives

    14     25  

2016 initiatives

    4      

Total

  $ 104   $ 168  

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

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

 
  Polyurethanes   Performance
Products
  Advanced
Materials
  Textile
Effects
  Pigments   Discontinued
Operations
  Corporate
and Other
  Total  

Accrued liabilities as of January 1, 2016

  $ 5   $ 9   $ 4   $ 55   $ 90   $ 1   $ 4   $ 168  

2016 charges for 2015 and prior initiatives

        10         4     12         2     28  

2016 charges for 2016 initiatives

    2             1     3             6  

Reversal of reserves no longer required

                (1 )               (1 )

Distribution of prefunded restructuring costs

        (4 )       (2 )   (36 )           (42 )

2016 payments for 2015 and prior initiatives

    (1 )   (12 )       (6 )   (33 )       (2 )   (54 )

2016 payments for 2016 initiatives

    (2 )                           (2 )

Foreign currency effect on liability balance

                1     1         (1 )   1  

Accrued liabilities as of June 30, 2016

  $ 4   $ 3   $ 4   $ 52   $ 37   $ 1   $ 3   $ 104  

Current portion of restructuring reserves

  $ 3   $ 3   $ 2   $ 12   $ 31   $ 1   $ 3   $ 55  

Long-term portion of restructuring reserves

    1         2     40     6             49  

        Details with respect to cash and noncash restructuring charges for the three and six months ended June 30, 2016 and 2015 by initiative are provided below (dollars in millions):

 
  Three months
ended
June 30, 2016
  Six months
ended
June 30, 2016
 

Cash charges:

             

2016 charges for 2015 and prior initiatives

  $ 19   $ 28  

2016 charges for 2016 initiatives

    6     6  

Reversal of reserves no longer required

        (1 )

Accelerated depreciation

    3     7  

Other non-cash charges

    1     2  

Total 2016 Restructuring, Impairment and Plant Closing Costs

  $ 29   $ 42  

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HUNTSMAN CORPORATION AND SUBSIDIARIES

HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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


 
  Three months
ended
June 30, 2015
  Six months
ended
June 30, 2015
 

Cash charges:

             

2015 charges for 2014 and prior initiatives

  $ 34   $ 76  

2015 charges for 2015 initiatives

    20     44  

Pension related charges

    3     3  

Reversal of reserves no longer required

        (1 )

Accelerated depreciation

    47     75  

Other non-cash charges

    10     10  

Total 2015 Restructuring, Impairment and Plant Closing Costs

  $ 114   $ 207  

2016 RESTRUCTURING ACTIVITIES

        In December 2015, our Performance Products segment announced plans for a reorganization of its commercial and technical functions and a refocused divisional business strategy to better position the segment for growth in coming years. In addition, a program was launched to capture growth opportunities, improve manufacturing cost efficiency and reduce inventories. In connection with this restructuring program, we recorded restructuring expense of $10 million in the six months ended June 30, 2016.

        On September 27, 2011, we announced plans to implement a significant restructuring of our Textile Effects segment, including the closure of our production facilities and business support offices in Basel, Switzerland, as part of an ongoing strategic program aimed at improving the Textile Effects segment's long-term global competitiveness. In connection with this plan, during the six months ended June 30, 2016, our Textile Effects segment recorded charges of $1 million for non-cancelable long-term contract termination costs, $1 million for decommissioning and $2 million in other restructuring costs associated with this initiative.

        On December 1, 2014, we announced a comprehensive restructuring program to improve the global competitiveness of our Pigments and Additives segment. As part of the program, we are reducing our workforce by approximately 900 positions. In connection with this restructuring program, we recorded restructuring expense of $4 million in the six months ended June 30, 2016.

        On March 4, 2015, we announced plans to restructure our color pigments business, another step in our comprehensive restructuring program in our Pigments and Additives segment, and recorded restructuring expense of approximately $8 million in the six months ended June 30, 2016.

        On July 6, 2016, we announced plans to close our Pigments and Additives segment's South African titanium dioxide manufacturing facility. As part of the program, we recorded restructuring expense of approximately $3 million in the six months ended June 30, 2016. Additionally, we recorded an impairment charge of $1 million during the second quarter of 2016. The majority of the long-lived assets associated with this manufacturing facility were impaired in the fourth quarter of 2015.

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HUNTSMAN CORPORATION AND SUBSIDIARIES

HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

        In connection with planned restructuring activities, our Pigments and Additives segment recorded accelerated depreciation as restructuring expense of $7 million during the six months ended June 30, 2016.

2015 RESTRUCTURING ACTIVITIES

        In June 2015, our Polyurethanes segment announced a restructuring program in Europe. In connection with this restructuring program, we recorded restructuring expense of $13 million in the six months ended June 30, 2015 related primarily to workforce reductions.

        In June 2015, our Advanced Materials segment initiated a restructuring program in Europe. In connection with this restructuring program, we recorded restructuring expense of $6 million in the six months ended June 30, 2015 related primarily to workforce reductions and accelerated depreciation recorded as restructuring, impairment and plant closing costs.

        On September 27, 2011, we announced plans to implement a significant restructuring of our Textile Effects segment, including the closure of our production facilities and business support offices in Basel, Switzerland, as part of an ongoing strategic program aimed at improving the Textile Effects segment's long-term global competitiveness. In connection with this plan, during the six months ended June 30, 2015, our Textile Effects segment recorded charges of $5 million for non-cancelable long-term contract termination costs, $3 million for decommissioning and $2 million in other restructuring costs associated with this initiative.

        On December 1, 2014, we announced that we are taking significant action to improve the global competitiveness of our Pigments and Additives segment. As part of a comprehensive restructuring program, we plan to reduce our workforce by approximately 900 positions. In connection with this restructuring program, during the six months ended June 30, 2015, our Pigments and Additives segment recorded charges of $50 million for workforce reductions, $3 million for pension related charges and $7 million in other restructuring costs associated with this initiative.

        On February 12, 2015, we announced a plan to close the 'black end' manufacturing operations and ancillary activities at our Calais, France site, which will reduce our titanium dioxide capacity by approximately 100 kilotons, or 13% of our European titanium dioxide capacity. In connection with this announcement, we began to accelerate depreciation on the affected assets and recorded accelerated depreciation in the six months ended June 30, 2015 of $73 million as restructuring, impairment and plant closing costs. In addition, during the six months ended June 30, 2015, we recorded charges of $23 million for workforce reductions and non-cash charges of $10 million.

        On March 4, 2015, we announced plans to restructure our color pigments business, another step in our previously announced plan to significantly restructure our global Pigments and Additives segment, and recorded restructuring expense of approximately $4 million in the six months ended June 30, 2015 related to workforce reductions.

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HUNTSMAN CORPORATION AND SUBSIDIARIES

HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

6. DEBT

        Outstanding debt, net of debt issuance costs, consisted of the following (dollars in millions):

Huntsman Corporation

 
  June 30,
2016
  December 31,
2015
 

Senior Credit Facilities:

             

Term loans

  $ 2,435   $ 2,454  

Amounts outstanding under A/R programs

    216     215  

Senior notes

    1,862     1,850  

Variable interest entities

    142     151  

Other

    94     125  

Total debt—excluding debt to affiliates

  $ 4,749   $ 4,795  

Total current portion of debt

  $ 96   $ 170  

Long-term portion

    4,653     4,625  

Total debt—excluding debt to affiliates

  $ 4,749   $ 4,795  

Total debt—excluding debt to affiliates

  $ 4,749   $ 4,795  

Notes payable to affiliates-noncurrent

    1     1  

Total debt

  $ 4,750   $ 4,796  

Huntsman International

 
  June 30,
2016
  December 31,
2015
 

Senior Credit Facilities:

             

Term loans

  $ 2,435   $ 2,454  

Amounts outstanding under A/R programs

    216     215  

Senior notes

    1,862     1,850  

Variable interest entities

    142     151  

Other

    94     125  

Total debt—excluding debt to affiliates

  $ 4,749   $ 4,795  

Total current portion of debt

  $ 96   $ 170  

Long-term portion

    4,653     4,625  

Total debt—excluding debt to affiliates

  $ 4,749   $ 4,795  

Total debt—excluding debt to affiliates

  $ 4,749   $ 4,795  

Notes payable to affiliates-current

    100     100  

Notes payable to affiliates-noncurrent

    697     698  

Total debt

  $ 5,546   $ 5,593  

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HUNTSMAN CORPORATION AND SUBSIDIARIES

HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

6. DEBT (Continued)

DIRECT AND SUBSIDIARY DEBT

        Huntsman Corporation's direct debt and guarantee obligations consist of a guarantee of certain indebtedness incurred from time to time to finance certain insurance premiums. Substantially all of our other debt, including the facilities described below, has been incurred by our subsidiaries (primarily Huntsman International). Huntsman Corporation is not a guarantor of such subsidiary debt.

        Certain of our subsidiaries are designated as nonguarantor subsidiaries ("Nonguarantors") and have third-party debt agreements. These debt agreements contain certain restrictions with regard to dividends, distributions, loans or advances. In certain circumstances, the consent of a third party would be required prior to the transfer of any cash or assets from these subsidiaries to us.

Debt Issuance Costs

        We record debt issuance costs related to a debt liability on the balance sheet as a reduction in the face amount of that debt liability. As of June 30, 2016 and December 31, 2015, the amount of debt issuance costs directly reducing the debt liability was $64 million and $67 million, respectively. We record the amortization of debt issuance costs as interest expense.

Senior Credit Facilities

        As of June 30, 2016, our senior credit facilities ("Senior Credit Facilities") consisted of our revolving credit facility ("Revolving Facility"), our 2015 Extended Term Loan B, our 2014 term loan B facility due 2021 ("2014 Term Loan B"), and our 2016 term loan B facility due 2023 ("2016 Term Loan B") (dollars in millions):

Facility
  Committed
Amount
  Principal
Outstanding
  Unamortized
Discounts and
Debt Issuance
Costs
  Carrying
Value
  Interest Rate(3)   Maturity

Revolving Facility(1)

  $ 650   $   $   $   USD LIBOR plus 3.00%   2021

2015 Extended Term Loan B

    N/A     766     (4 )   762   USD LIBOR plus 3.00%   2019

2014 Term Loan B

    N/A     1,182     (50 )   1,132   USD LIBOR plus 3.00%(2)   2021

2016 Term Loan B

    N/A     549     (8 )   541   USD LIBOR plus 3.50%(2)   2023

(1)
We had no borrowings outstanding under our Revolving Facility; we had approximately $16 million (U.S. dollar equivalents) of letters of credit and bank guarantees issued and outstanding under our Revolving Facility.

(2)
The 2014 Term Loan B and the 2016 Term Loan B are subject to a 0.75% LIBOR floor.

(3)
The applicable interest rate of the Senior Credit Facilities is subject to certain secured leverage ratio thresholds. As of June 30, 2016, the weighted average interest rate on our outstanding balances under the Senior Credit Facilities was approximately 4%.

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HUNTSMAN CORPORATION AND SUBSIDIARIES

HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

6. DEBT (Continued)

        Our obligations under the Senior Credit Facilities are guaranteed by substantially all of our domestic subsidiaries and certain of our foreign subsidiaries (collectively, the "Guarantors"), and are secured by a first priority lien on substantially all of our domestic property, plant and equipment, the stock of all of our material domestic subsidiaries and certain foreign subsidiaries, and pledges of intercompany notes between certain of our subsidiaries.

        On July 22, 2016, Huntsman International prepaid $100 million of the 2015 Extended Term Loan B.

Amendment to the Credit Agreement

        On April 1, 2016, Huntsman International entered into a fifteenth amendment to the agreement governing the Senior Credit Facilities (the "Credit Agreement"). The amendment provides for a new term loan facility, the 2016 Term Loan B, to refinance existing term loans pursuant to the Credit Agreement in an aggregate principal amount of $550 million. The net proceeds of the 2016 Term Loan B were used to repay in full Huntsman International's extended term loan B due 2017, our extended term loan B—series 2 due 2017 and our term loan C due 2016 ("Term Loan C"). In connection with these repayments, we recorded a loss on early extinguishment of debt of approximately $2 million in the second quarter of 2016.

        The 2016 Term Loan B matures on April 1, 2023, provided that the maturity date will accelerate if we do not repay, refinance or have a minimum level of liquidity available to enable us to repay certain of our senior notes upon maturity. The 2016 Term Loan B is subject to the same terms and conditions as our existing senior secured term loan facilities.

        The 2016 Term Loan B bears interest at an interest rate margin of LIBOR plus 3.50% (subject to a 0.75% floor) and amortizes in annual amounts equal to 1% of the principal amount of the 2016 Term Loan B, payable quarterly commencing on June 30, 2016.

        The amendment also extends the stated termination date of our Revolving Facility from March 20, 2017 to March 20, 2021, provided that the maturity date will accelerate if we do not repay, refinance or have a minimum level of liquidity available to enable us to repay our 2015 Term Loan B due 2019 or our senior notes upon their maturity. The amendment further increased the committed amount of our Revolving Facility by $25 million (from $625 million to $650 million). Borrowings under the Revolving Facility bear interest at the same rate as the existing revolving commitments. As of June 30, 2016 we had no borrowings under our Revolving Facility.

A/R Programs

        Our U.S. accounts receivable securitization program ("U.S. A/R Program") and our European accounts receivable securitization program ("EU A/R Program" and collectively with the U.S. A/R Program, "A/R Programs") are structured so that we transfer certain of our trade receivables to the U.S. special purpose entity ("U.S. SPE") and the European special purpose entity ("EU SPE") in transactions intended to be true sales or true contributions. The receivables collateralize debt

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HUNTSMAN CORPORATION AND SUBSIDIARIES

HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

6. DEBT (Continued)

incurred by the U.S. SPE and the EU SPE. Information regarding our A/R Programs as of June 30, 2016 was as follows (monetary amounts in millions):

Facility
  Maturity   Maximum Funding
Availability(1)
  Amount
Outstanding
  Interest Rate(2)

U.S. A/R Program

  March 2018   $250   $90(3)   Applicable rate plus 0.95%

EU A/R Program

  March 2018   €225   €114   Applicable rate plus 1.10%

      (approximately $249)   (approximately $126)    

(1)
The amount of actual availability under our A/R Programs may be lower based on the level of eligible receivables sold, changes in the credit ratings of our customers, customer concentration levels and certain characteristics of the accounts receivable being transferred, as defined in the applicable agreements.

(2)
The applicable rate for our U.S. A/R Program is defined by the lender as either USD LIBOR or CP rate. The applicable rate for our EU A/R Program is either GBP LIBOR, USD LIBOR or EURIBOR. In addition, the U.S. SPE and the EU SPE are obligated to pay unused commitment fees to the lenders based on the amount of each lender's commitment.

(3)
As of June 30, 2016, we had approximately $7 million (U.S. dollar equivalents) of letters of credit issued and outstanding under our U.S. A/R Program.

        As of June 30, 2016 and December 31, 2015, $492 million and $438 million, respectively, of accounts receivable were pledged as collateral under our A/R Programs.

Redemption of Notes and Loss on Early Extinguishment of Debt

        During the six months ended June 30, 2015, we redeemed or repurchased the following notes (dollars in millions):

Date of Redemption
  Notes   Principal
Amount of
Notes
Redeemed
  Amount Paid
(Excluding
Accrued Interest)
  Loss on Early
Extinguishment
of Debt
 

April 2015

  2021 Senior Subordinated Notes   $ 289   $ 311   $ 20  

January 2015

  2021 Senior Subordinated Notes     37     40     3  

Note Payable from Huntsman International to Huntsman Corporation

        As of June 30, 2016, we had a loan of $796 million to our subsidiary, Huntsman International (the "Intercompany Note"). The Intercompany Note is unsecured and $100 million of the outstanding amount is classified as current as of June 30, 2016 on our condensed consolidated balance sheets. As of June 30, 2016, under the terms of the Intercompany Note, Huntsman International promises to pay us interest on the unpaid principal amount at a rate per annum based on the previous monthly average borrowing rate obtained under our U.S. A/R Program, less 10 basis points (provided that the rate shall not exceed an amount that is 25 basis points less than the monthly average borrowing rate obtained for the U.S. LIBOR-based borrowings under our Revolving Facility).

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HUNTSMAN CORPORATION AND SUBSIDIARIES

HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

6. DEBT (Continued)

COMPLIANCE WITH COVENANTS

        We believe that we are in compliance with the covenants contained in the agreements governing our material debt instruments, including our Senior Credit Facilities, our A/R Programs and our notes.

        Our material financing arrangements contain certain covenants with which we must comply. A failure to comply with a covenant could result in a default under a financing arrangement unless we obtained an appropriate waiver or forbearance (as to which we can provide no assurance). A default under these material financing arrangements generally allows debt holders the option to declare the underlying debt obligations immediately due and payable. Furthermore, certain of our material financing arrangements contain cross-default and cross-acceleration provisions under which a failure to comply with the covenants in one financing arrangement may result in an event of default under another financing arrangement.

        Our Senior Credit Facilities are subject to a single financial covenant (the "Leverage Covenant"), which applies only to the Revolving Facility and is calculated at the Huntsman International level. The Leverage Covenant is applicable only if borrowings, letters of credit or guarantees are outstanding under the Revolving Facility (cash collateralized letters of credit or guarantees are not deemed outstanding). The Leverage Covenant is a net senior secured leverage ratio covenant, which requires that Huntsman International's ratio of senior secured debt to EBITDA (as defined in the applicable agreement) is not more than 3.75 to 1.

        If in the future Huntsman International fails to comply with the Leverage Covenant, then we may not have access to liquidity under our Revolving Facility. If Huntsman International failed to comply with the Leverage Covenant at a time when we had uncollateralized loans or letters of credit outstanding under the Revolving Facility, Huntsman International would be in default under the Senior Credit Facilities, and, unless Huntsman International obtained a waiver or forbearance with respect to such default (as to which we can provide no assurance), Huntsman International could be required to pay off the balance of the Senior Credit Facilities in full, and we may not have further access to such facilities.

        The agreements governing our A/R Programs also contain certain receivable performance metrics. Any material failure to meet the applicable A/R Programs' metrics in the future could lead to an early termination event under the A/R Programs, which could require us to cease our use of such facilities, prohibiting us from additional borrowings against our receivables or, at the discretion of the lenders, requiring that we repay the A/R Programs in full. An early termination event under the A/R Programs would also constitute an event of default under our Senior Credit Facilities, which could require us to pay off the balance of the Senior Credit Facilities in full and could result in the loss of our Senior Credit Facilities.

7. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

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

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HUNTSMAN CORPORATION AND SUBSIDIARIES

HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

7. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES (Continued)

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

        We also hedge our net investment in certain European operations. Changes in the fair value of the hedge in the net investment of certain European operations are recorded as an unrealized currency translation adjustment in accumulated other comprehensive loss.

        Our revenues and expenses are denominated in various foreign currencies, and our cash flows and earnings are thus subject to fluctuations due to exchange rate variations. From time to time, we may enter into foreign currency derivative instruments to minimize the short-term impact of movements in foreign currency rates. Where practicable, we generally net multicurrency cash balances among our subsidiaries to help reduce exposure to foreign currency exchange rates. Certain other exposures may be managed from time to time through financial market transactions, principally through the purchase of spot or forward foreign exchange contracts (generally with maturities of one year or less). We do not hedge our foreign currency exposures in a manner that would eliminate the effect of changes in exchange rates on our cash flows and earnings. As of June 30, 2016, we had approximately $168 million in notional amount (in U.S. dollar equivalents) outstanding in forward foreign currency contracts.

        Huntsman International has entered into two interest rate contracts to hedge the variability caused by monthly changes in cash flow due to associated changes in LIBOR under our Senior Credit Facilities. These swaps are designated as cash flow hedges and the effective portion of the changes in the fair value of the swaps are recorded in other comprehensive income (loss) (dollars in millions):

June 30, 2016
Notional
Value
  Effective Date   Maturity   Fixed
Rate
  Fair Value
$ 50   December 2014   April 2017     2.5 % $1 current liability
  50   January 2015   April 2017     2.5 % 1 current liability

        Beginning in 2009, Arabian Amines Company entered into a 12-year floating to fixed interest rate contract providing for a receipt of LIBOR interest payments for a fixed payment of 5.02%. In connection with the consolidation of Arabian Amines Company as of July 1, 2010, the interest rate contract is now included in our consolidated results. See "Note 4. Variable Interest Entities." The notional amount of the swap as of June 30, 2016 was $22 million, and the interest rate contract is not designated as a cash flow hedge. As of June 30, 2016, the fair value of the swap was $2 million and was recorded in noncurrent liabilities on our condensed consolidated balance sheets. For each of the three and six months ended June 30, 2016, we recorded a reduction of interest expense of nil due to changes in fair value of the swap.

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HUNTSMAN CORPORATION AND SUBSIDIARIES

HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

7. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES (Continued)

        In November 2014, we entered into two five year cross-currency interest rate contracts and one eight year cross-currency interest rate contract to swap an aggregate notional $200 million for an aggregate notional €161 million. This swap is designated as a hedge of net investment for financial reporting purposes. Under the cross-currency interest rate contract, we will receive fixed U.S. dollar payments of $5 million semiannually on May 15 and November 15 (equivalent to an annual rate of 5.125%) and make interest payments of approximately €3 million (equivalent to an annual rate of approximately 3.6%). As of June 30, 2016, the fair value of this swap was $26 million and was recorded in noncurrent assets on our condensed consolidated balance sheets.

        In March 2010, we entered into three five year cross-currency interest rate contracts to swap an aggregate notional $350 million for an aggregate notional €255 million. This swap was designated as a hedge of net investment for financial reporting purposes. During the six months ended June 30, 2015, we terminated these cross-currency interest rate contracts and received $66 million in payments from the counterparties.

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

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

        We review our non-U.S. dollar denominated debt and derivative instruments to determine the appropriate amounts designated as hedges. As of June 30, 2016, we have designated approximately €651 million (approximately $721 million) of euro-denominated debt and cross-currency interest rate contracts as a hedge of our net investment. For the three and six months ended June 30, 2016, the amount of gain (loss) recognized on the hedge of our net investment was $14 million and $(7) million, respectively, and was recorded in other comprehensive (loss) income on our condensed consolidated statements of comprehensive income (loss).

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HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

8. FAIR VALUE

        The fair values of financial instruments were as follows (dollars in millions):

 
  June 30, 2016   December 31, 2015  
 
  Carrying
Value
  Estimated
Fair Value
  Carrying
Value
  Estimated
Fair Value
 

Non-qualified employee benefit plan investments

  $ 27   $ 27   $ 26   $ 26  

Investments in equity securities

    18     18     18     18  

Cross-currency interest rate contracts

    26     26     28     28  

Interest rate contracts

    (4 )   (4 )   (4 )   (4 )

Long-term debt (including current portion)

    (4,749 )   (4,789 )   (4,795 )   (4,647 )

        The carrying amounts reported in our condensed consolidated balance sheets of cash and cash equivalents, accounts receivable and accounts payable approximate fair value because of the immediate or short-term maturity of these financial instruments. The fair values of non-qualified employee benefit plan investments and investments in equity securities are obtained through market observable pricing using prevailing market prices. The estimated fair values of our long-term debt are based on quoted market prices for the identical liability when traded as an asset in an active market (Level 1).

        The fair value estimates presented herein are based on pertinent information available to management as of June 30, 2016 and December 31, 2015. The estimated fair value amounts have not been comprehensively revalued for purposes of these financial statements since June 30, 2016 and current estimates of fair value may differ significantly from the amounts presented herein.

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

 
   
  Fair Value Amounts Using  
Description
  June 30,
2016
  Quoted prices
in active
markets for
identical
assets
(Level 1)(4)
  Significant
other
observable
inputs
(Level 2)(4)
  Significant
unobservable
inputs
(Level 3)
 

Assets:

                         

Available-for sale equity securities:

                         

Equity mutual funds

  $ 27   $ 27   $   $  

Investments in equity securities(1)

    18     18          

Derivatives:

                         

Cross-currency interest rate contracts(2)              

    26             26  

Total assets

  $ 71   $ 45   $   $ 26  

Liabilities:

                         

Derivatives:

                         

Interest rate contracts(3)

  $ (4 ) $   $ (4 ) $  

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