SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM __________________ TO _______________
COMMISSION FILE NUMBER 333-85141
HUNTSMAN ICI CHEMICALS LLC
- ------------------------------------------------------------------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
DELAWARE 87-0630358
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
500 HUNTSMAN WAY
SALT LAKE CITY, UTAH 84108
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (801) 584-5700
INDICATE BY A CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL
REPORTS REQUIRED TO BE FILED BY SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER
PERIOD THAT THE REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS
BEEN SUBJECT TO SUCH FILING REQUIREMENTS FOR THE PAST 90 DAYS. YES |X| NO | |
APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
INDICATE BY CHECK MARK WHETHER THE REGISTRANT HAS FILED ALL
DOCUMENTS AND REPORTS REQUIRED TO BE FILED BY SECTION 12, 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934 SUBSEQUENT TO THE DISTRIBUTION OF
SECURITIES UNDER A PLAN CONFIRMED BY A COURT.
YES [ ] NO [ ]
AT AUGUST 11, 2000, 1000 MEMBER EQUITY UNITS OF HUNTSMAN ICI
CHEMICALS LLC WERE OUTSTANDING.
HUNTSMAN ICI CHEMICALS LLC AND SUBSIDIARIES
FORM 10-Q FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2000
TABLE OF CONTENTS
PAGE
Part I - Financial Information
Item 1. - Financial Statements
Consolidated Condensed Balance Sheets.......................2
Consolidated Statements of Operations
and Comprehensive Income..................................3
Consolidated Condensed Statements of Cash Flows.............5
Footnotes to Interim Financial Statements...................6
Item 2. - Management's Discussion and Analysis of Financial
Condition and Results of Operations........................15
Item 3. - Quantitive and Qualitative Disclosures
about Market Risk..........................................19
Part II - Other Information
Item 6. - Exhibits and Reports on Form 8-K.............................20
PART I
ITEM 1. FINANCIAL STATEMENTS
HUNTSMAN ICI CHEMICALS LLC AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(Millions of Dollars)
June 30, 2000 December 31, 1999
(Unaudited)
------------------- -----------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 122.2 $ 138.9
Accounts and notes receivable, net 682.4 629.4
Inventories 383.5 381.3
Other current assets 85.0 79.3
------------------- -----------------
TOTAL CURRENT ASSETS 1,273.1 1,228.9
Properties, plant and equipment, net 2,650.8 2,656.2
Other noncurrent assets 838.1 933.3
------------------- -----------------
TOTAL ASSETS $ 4,762.0 $ 4,818.4
=================== =================
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued liabilities $ 714.3 $ 676.4
Current portion of long-term debt 75.5 51.7
Other current liabilities 9.5 44.1
------------------- -----------------
TOTAL CURRENT LIABILITIES 799.3 772.2
Long-term debt 2,368.9 2,453.3
Other noncurrent liabilities 462.5 480.9
------------------- -----------------
TOTAL LIABILITIES 3,630.7 3,706.4
------------------- -----------------
MINORITY INTERESTS 9.0 8.0
------------------- -----------------
EQUITY:
Members' equity, 1,000 units 1,026.1 1,026.1
Retained earnings 180.9 80.6
Accumulated other comprehensive loss (84.7) (2.7)
------------------- -----------------
TOTAL EQUITY 1,122.3 1,104.0
------------------- -----------------
TOTAL LIABILITIES AND EQUITY $ 4,762.0 $ 4,818.4
=================== =================
SEE ACCOMPANYING NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
===================================================================================================
HUNTSMAN ICI CHEMICALS LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(Unaudited)
(Millions of Dollars)
HSCC PREDECESSOR HSCC PREDECESSOR
COMPANY COMPANY
--------------------- ---------------------
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
--------------------------------------- ---------------------------------------
2000 1999 2000 1999
------------------- ------------------- ------------------- -------------------
REVENUES:
Trade sales and services $ 1,025.6 $ 75.2 $ 1,957.3 $ 134.0
Related party sales 121.0 18.2 232.0 29.0
Tolling fees 8.1 15.2 20.3 29.0
------------------- ------------------- ------------------- -------------------
TOTAL REVENUES 1,154.7 108.6 2,209.6 192.0
COST OF GOODS SOLD 948.9 72.4 1,822.5 134.1
------------------- ------------------- ------------------- -------------------
GROSS PROFIT 205.8 36.2 387.1 57.9
EXPENSES:
Selling, general
and administrative 58.1 1.3 126.1 3.2
Research and development 17.9 1.2 35.8 2.1
------------------- ------------------- ------------------- -------------------
TOTAL EXPENSES 76.0 2.5 161.9 5.3
------------------- ------------------- ------------------- -------------------
OPERATING INCOME 129.8 33.7 225.2 52.6
INTEREST EXPENSE, NET 54.7 8.7 109.0 18.1
OTHER EXPENSE 1.3 - 1.7 -
------------------- ------------------- ------------------- -------------------
INCOME BEFORE INCOME TAXES 73.8 25.0 114.5 34.5
INCOME TAX EXPENSE 9.0 9.5 12.9 13.1
MINORITY INTERESTS IN SUBSIDIARIES 0.8 - 1.3 -
------------------- ------------------- ------------------- -------------------
NET INCOME 64.0 15.5 100.3 21.4
Preferred stock dividends - 1.1 - 2.2
Net income available to common
equity holders 64.0 14.4 100.3 19.2
Other comprehensive loss -
foreign currency
translation adjustments (37.1) - (82.0) -
------------------- ------------------- ------------------- -------------------
COMPREHENSIVE INCOME $ 26.9 $ 14.4 $ 18.3 $ 19.2
=================== =================== =================== ===================
SEE ACCOMPANYING NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
HUNTSMAN ICI CHEMICALS LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EQUITY
(Unaudited)
(Millions of Dollars)
ACCUMULATED
MEMBERS' EQUITY OTHER
------------------------- RETAINED COMPREHENSIVE
UNITS AMOUNT EARNINGS INCOME TOTAL
------------- ----------- ----------- --------------- ------------
Balance, January 1, 2000 1,000 $ 1,026.1 $ 80.6 $ (2.7) $ 1,104.0
Net income 100.3 100.3
Foreign currency
translation (82.0) (82.0)
adjustments
------------- ----------- ----------- --------------- ------------
Balance, June 30, 2000 1,000 $ 1,026.1 $ 180.9 $ (84.7) $ 1,122.3
============= =========== =========== =============== ============
======================================================================================================
SEE ACCOMPANYING NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
HUNTSMAN ICI CHEMICALS LLC AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
(Millions of Dollars)
HSCC PREDECESSOR
COMPANY
-------------------
SIX MONTHS ENDED JUNE 30,
--------------------------------------
2000 1999
------------------ -------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 100.3 $ 21.4
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 107.3 15.6
Interest on subordinated note - 3.6
Other non-cash adjustments to net income 4.4 6.6
Net changes in operating assets and liabilities (80.4) (6.7)
------------------ -------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 131.6 40.5
------------------ -------------------
INVESTING ACTIVITIES:
Acquisition of assets (26.8)
Cash received from unconsolidated affiliates 5.2
Advances to unconsolidated affiliates (8.5)
Capital expenditures (73.8) (4.0)
------------------ -------------------
NET CASH USED IN INVESTING ACTIVITIES (103.9) (4.0)
------------------ -------------------
FINANCING ACTIVITIES:
Repayments of long-term debt (36.9) (35.0)
------------------ -------------------
NET CASH USED IN FINANCING ACTIVITIES (36.9) (35.0)
Effect of exchange rate changes on cash (7.5) -
------------------ -------------------
Increase (decrease) in cash and cash equivalents (16.7) 1.5
Cash and cash equivalents at beginning of period 138.9 2.6
------------------ -------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 122.2 $ 4.1
================== ===================
SEE ACCOMPANYING NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
HUNTSMAN ICI CHEMICALS LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
Effective June 30, 1999, pursuant to a contribution agreement and ancillary
agreements between Huntsman ICI Holdings LLC ("Holdings"), Huntsman
Specialty Chemicals Corporation ("HSCC"), Imperial Chemicals Industries PLC
("ICI") and Huntsman ICI Chemicals LLC ("Chemicals" or the "Company"), the
Company acquired assets and stock representing ICI's polyurethane
chemicals, selected petrochemicals (including ICI's 80% interest in the
Wilton olefins facility) and titanium dioxide businesses and HSCC's
propylene oxide business. In addition, the Company also acquired the
remaining 20% ownership interest in the Wilton olefins facility from BP
Chemicals, Limited ("BP Chemicals") (together, the "Transaction").
The Company manufactures products used in a wide variety of industrial and
consumer-related applications. The Company's principal products are
methylene diphenyl diiscocyanate ("MDI"), propylene oxide ("PO"), methyl
tertiary butyl ether ("MTBE"), ethylene, propylene, and titanium dioxide
("TiO2"). The Company is a wholly-owned subsidiary of Holdings.
The accompanying consolidated condensed financial statements of the Company
are unaudited. However, in management's opinion, all adjustments,
consisting only of normal recurring adjustments necessary for a fair
presentation of results of operations, financial position and cash flows
for the periods shown, have been made. Results for interim periods are not
necessarily indicative of those to be expected for the full year. These
financial statements should be read in conjunction with the audited
financial statements and notes to consolidated financial statements
included in the Company's 1999 annual report on form 10-K, filed with the
Securities and Exchange Commission on March 22, 2000.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
RECLASSIFICATIONS
Certain 1999 amounts have been reclassified to conform to the 2000
presentation.
3. INVENTORIES
Inventories consist of the following (in millions):
JUNE 30, 2000 DECEMBER 31, 1999
------------------------- ------------------------
Raw materials $ 102.1 $ 97.8
Work in progress 17.0 20.6
Finished goods 242.0 225.6
------------------------- ------------------------
SUBTOTAL 361.1 344.0
Materials and supplies 22.4 37.3
------------------------- ------------------------
TOTAL $ 383.5 $ 381.3
========================= ========================
4. COMMITMENTS AND CONTINGENCIES
The Company is involved in litigation from time to time in the ordinary
course of its business. In management's opinion, after consideration of
indemnifications, none of such litigation is material to the Company's
financial condition or results of operations. The Company has entered into
various purchase commitments for materials and supplies in the ordinary
course of business. These agreements extend from three to ten years and the
purchase price is generally based on market prices subject to certain
minimum price provisions.
5. ENVIRONMENTAL MATTERS
The operation of any chemical manufacturing plant, the distribution of
chemical products and the related production of by-products and wastes,
entail risk of adverse environmental effects. The Company is subject to
extensive federal, state, local and foreign laws, regulations, rules and
ordinances relating to pollution, the protection of the environment and the
generation, storage, handling, transportation, treatment, disposal and
remediation of hazardous substances and waste materials. In the ordinary
course of business, the Company is subject continually to environmental
inspections and monitoring by governmental enforcement authorities. The
Company may incur substantial costs, including fines, damages and criminal
or civil sanctions, or experience interruptions in our operations for
actual or alleged violations arising under any environmental laws. In
addition, production facilities require operating permits that are subject
to renewal, modification and, in some circumstances, revocation. Violations
of permit requirements can also result in restrictions or prohibitions on
plant operations, substantial fines and civil or criminal sanctions. The
Company's operations involve the generation, handling, transportation, use
and disposal of numerous hazardous substances. Changes in regulations
regarding the generation, handling, transportation, use and disposal of
hazardous substances could inhibit or interrupt operations and have a
material adverse effect on business. From time to time, these operations
may result in violations under environmental laws, including spills or
other releases of hazardous substances to the environment. In the event of
a catastrophic incident, the Company could incur material costs as a result
of addressing and implementing measures to prevent such incidents. Given
the nature of the Company's business, there can be no assurance that
violations of environmental laws will not result in restrictions imposed on
the Company's operating activities, substantial fines, penalties, damages
or other costs. In addition, potentially significant expenditures could be
necessary in order to comply with existing or future environmental laws. In
management's opinion, after consideration of indemnifications, there are no
environmental matters which are material to the company's financial
condition or results of operations.
6. INDUSTRY SEGMENT AND GEOGRAPHIC AREA INFORMATION
The Company derives its revenues, earnings and cash flows from the
manufacture and sale of a wide variety of specialty and commodity chemical
products. The Company manages its businesses in three segments, Specialty
Chemicals (the former ICI polyurethanes business and HSCC's propylene oxide
business); Petrochemicals (the petrochemicals businesses acquired from ICI
and BP Chemicals); and Tioxide (the titanium dioxide business acquired from
ICI).
The major products of each business group are as follows:
SEGMENT PRODUCTS
- -------------------- ----------------------------------------------------------
Specialty Chemicals MDI, toluene diisocyanate, polyols, aniline, PO and MTBE
Petrochemicals Ethylene, propylene, benzene, cyclohexane and paraxylene
Tioxide TiO2
Sales between segments are generally recognized at external market prices.
For the three and six months ended June 30, 2000, sales to ICI and its
affiliates accounted for approximately 8% of consolidated revenues.
HSCC HSCC
PREDECESSOR PREDECESSOR
COMPANY COMPANY
----------------- ------------------
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
--------------------------------- -----------------------------------
2000 1999 2000 1999
--------------- ----------------- ---------------- ------------------
NET SALES:
Specialty Chemicals $ 549.0 $ 108.6 $ 1,040.2 $ 192.0
Petrochemicals 376.0 721.3
Tioxide 255.7 497.2
Sales between segments,
Petrochemical sales
to Specialty Chemicals (26.0) (49.1)
--------------- ----------------- ---------------- ------------------
TOTAL $ 1,154.7 $ 108.6 $ 2,209.6 $ 192.0
=============== ================= ================ ==================
OPERATING INCOME:
Specialty Chemicals $ 67.1 $ 33.7 $ 129.0 $ 52.6
Petrochemicals 21.7 21.4
Tioxide 41.0 74.8
--------------- ----------------- ---------------- ------------------
TOTAL $ 129.8 $ 33.7 $ 225.2 $ 52.6
=============== ================= ================ ==================
EBITDA (1):
Specialty Chemicals $ 97.2 $ 41.4 $ 188.3 $ 68.2
Petrochemicals 33.5 44.8
Tioxide 51.8 97.7
--------------- ----------------- ---------------- ------------------
TOTAL EBITDA 182.5 41.4 330.8 68.2
Depreciation & amortization (54.0) (7.7) (107.3) (15.6)
Interest expense, net (54.7) (8.7) (109.0) (18.1)
--------------- ----------------- ---------------- ------------------
INCOME BEFORE INCOME TAXES $ 73.8 $ 25.0 $ 114.5 $ 34.5
=============== ================= ================ ==================
(1) EBITDA is defined as earnings from continuing operations before
interest expense, depreciation and amortization, and taxes.
7. CONSOLIDATING CONDENSED FINANCIAL STATEMENTS
The following are consolidating condensed financial statements which
present, in separate columns: Chemicals carrying its investment in
subsidiaries under the equity method; the Guarantors on a combined, or
where appropriate, consolidated basis, carrying its investment in the
Non-Guarantors under the equity method; and the Non-Guarantors on a
consolidated basis. Additional columns present eliminating adjustments and
consolidated totals as of June 30, 2000 and December 31,1999 and for the
three and six months ended June 30, 2000. There are no restrictions
limiting transfers of cash from guarantor and non-guarantor subsidiaries to
Chemicals. The Combined Guarantors are wholly owned subsidiaries of
Chemicals and have fully and unconditionally guaranteed the Senior
Subordinated Notes on a joint and several basis. The Company has not
presented seperate financial statements and other disclosures concerning
the Combined Guarantors because management has determined that such
information is not material to investors.
HUNTSMAN ICI CHEMICALS LLC
CONSOLIDATING CONDENSED BALANCE SHEETS
JUNE 30, 2000
(MILLIONS OF DOLLARS)
(UNAUDITED)
PARENT ONLY CONSOLIDATED
HUNTSMAN ICI NON- HUNTSMAN
CHEMICALS GUARANTORS GUARANTORS ELIMINATIONS ICI CHEMICALS
----------------- -------------- ---------------- -------------- ---------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 8.9 $ - $ 113.3 $ - $ 122.2
Accounts and notes
receivables, net 209.0 30.3 499.0 (55.9) 682.4
Inventories 69.1 19.6 294.8 - 383.5
Other current assets 24.4 77.7 75.0 (92.1) 85.0
----------------- -------------- ---------------- -------------- --------------
TOTAL CURRENT ASSETS 311.4 127.6 982.1 (148.0) 1,273.1
Properties, plant and equipment, net 925.1 0.4 1,725.3 - 2,650.8
Investment in unconsolidated
affiliates 2,189.6 752.5 1.3 (2,784.3) 159.1
Other noncurrent assets 408.7 1,354.9 271.6 (1,356.2) 679.0
----------------- -------------- ---------------- -------------- ---------------
TOTAL ASSETS $ 3,834.8 $ 2,235.4 $ 2,980.3 $ (4,288.5) $ 4,762.0
================= ============== ================ ============== ===============
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued
liabilities $ 192.5 $ 39.3 $ 575.5 $ (93.0) $ 714.3
Current portion of long-term
debt 59.4 - 16.1 - 75.5
Other current liabilities 44.8 6.9 12.8 (55.0) 9.5
----------------- -------------- ---------------- -------------- ---------------
TOTAL CURRENT LIABILITIES 296.7 46.2 604.4 (148.0) 799.3
Long-term debt 2,367.1 - 1,358.0 (1,356.2) 2,368.9
Other noncurrent liabilities 48.7 4.0 409.8 - 462.5
----------------- -------------- ---------------- -------------- ---------------
TOTAL LIABILITIES 2,712.5 50.2 2,372.2 (1,504.2) 3,630.7
----------------- -------------- ---------------- -------------- ---------------
MINORITY INTERESTS - - 9.0 - 9.0
----------------- -------------- ---------------- -------------- ---------------
EQUITY:
Members' equity, 1,000 units 1,026.1 - - - 1,026.1
Subsidiary equity - 2,068.1 558.8 (2,626.9) -
Retained earnings (deficit) 180.9 238.8 84.6 (323.4) 180.9
Accumulated other comprehensive
income (loss) (84.7) (121.7) (44.3) 166.0 (84.7)
----------------- -------------- ---------------- -------------- ---------------
TOTAL EQUITY 1,122.3 2,185.2 599.1 (2,784.3) 1,122.3
----------------- -------------- ---------------- -------------- ---------------
TOTAL LIABILITIES AND
EQUITY $ 3,834.8 $ 2,235.4 $ 2,980.3 $ (4,288.5) $ 4,762.0
================= ============== ================ ============== ===============
HUNTSMAN ICI CHEMICALS LLC
CONSOLIDATING CONDENSED BALANCE SHEETS
DECEMBER 31, 1999
(MILLIONS OF DOLLARS)
PARENT ONLY CONSOLIDATED
HUNTSMAN ICI NON- HUNTSMAN
CHEMICALS GUARANTORS GUARANTORS ELIMINATIONS ICI CHEMICALS
----------------- -------------- ---------------- -------------- ---------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 9.0 $ 0.2 $ 129.7 $ - $ 138.9
Accounts and notes
receivables, net 189.9 33.0 406.5 - 629.4
Inventories 47.6 16.5 317.2 - 381.3
Other current assets 13.0 5.1 61.2 - 79.3
----------------- -------------- ---------------- -------------- ---------------
TOTAL CURRENT ASSETS 259.5 54.8 914.6 - 1,228.9
Properties, plant and equipment, net 828.6 0.3 1,827.3 - 2,656.2
Investment in unconsolidated
affiliates 2,239.2 720.0 0.9 (2,771.2) 188.9
Other noncurrent assets 502.4 1,470.6 263.0 (1,491.6) 744.4
----------------- -------------- ---------------- -------------- ---------------
TOTAL ASSETS $ 3,829.7 $ 2,245.7 $ 3,005.8 $ (4,262.8) $ 4,818.4
================= ============== ================ ============== ===============
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
================= ============== ================ ============== ===============
Accounts payable and accrued
liabilities $ 189.5 $ 18.8 $ 468.1 $ - $ 676.4
Current portion of long-term
debt 36.3 - 15.4 - 51.7
Other current liabilities - 12.5 31.6 - 44.1
----------------- -------------- ---------------- -------------- ---------------
TOTAL CURRENT LIABILITIES 225.8 31.3 515.1 - 772.2
Long-term debt 2,451.4 - 1,493.5 (1,491.6) 2,453.3
Other noncurrent liabilities 48.5 4.4 428.0 - 480.9
----------------- -------------- ---------------- -------------- ---------------
TOTAL LIABILITIES 2,725.7 35.7 2,436.6 (1,491.6) 3,706.4
----------------- -------------- ---------------- -------------- ---------------
MINORITY INTERESTS - - 8.0 - 8.0
----------------- -------------- ---------------- -------------- ---------------
EQUITY:
Members' equity, 1,000 units 1,026.1 - - - 1,026.1
Subsidiary equity - 2,126.8 553.6 (2,680.4) -
Retained earnings (deficit) 80.6 98.7 21.9 (120.6) 80.6
Accumulated other comprehensive
income (loss) (2.7) (15.5) (14.3) 29.8 (2.7)
----------------- -------------- ---------------- -------------- ---------------
TOTAL EQUITY 1,104.0 2,210.0 561.2 (2,771.2) 1,104.0
----------------- -------------- ---------------- -------------- ---------------
TOTAL LIABILITIES AND
EQUITY $ 3,829.7 $ 2,245.7 $ 3,005.8 $ (4,262.8) $ 4,818.4
================= ============== ================ ============== ===============
HUNTSMAN ICI CHEMICALS LLC
CONSOLIDATING CONDENSED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
THREE MONTHS ENDED JUNE 30,2000
(MILLIONS OF DOLLARS)
PARENT ONLY CONSOLIDATED
HUNTSMAN ICI HUNTSMAN ICI
CHEMICALS GUARANTORS NON-GUARANTORS ELIMINATIONS CHEMICALS
------------------- -------------- ---------------- ------------- ---------------
REVENUES:
Trade sales and services $ 294.9 $ 51.2 $ 679.5 $ - $ 1,025.6
Related party sales 47.0 11.8 121.0 (58.8) 121.0
Tolling fees 8.1 - - - 8.1
------------------- -------------- ---------------- ------------- ---------------
TOTAL REVENUE 350.0 63.0 800.5 (58.8) 1,154.7
COST OF GOODS SOLD 270.8 51.0 685.9 (58.8) 948.9
------------------- -------------- ---------------- ------------- ---------------
GROSS PROFIT 79.2 12.0 114.6 - 205.8
EXPENSES:
Selling, general and
administrative 25.8 4.8 27.5 - 58.1
Research and development 15.0 - 2.9 - 17.9
------------------- -------------- ---------------- ------------- ---------------
TOTAL EXPENSES 40.8 4.8 30.4 - 76.0
------------------- -------------- ---------------- ------------- ---------------
OPERATING INCOME 38.4 7.2 84.2 - 129.8
INTEREST EXPENSE (INCOME), NET 56.1 (32.7) 31.3 - 54.7
EQUITY IN EARNINGS OF
UNCONSOLIDATED AFFLILIATES 81.7 41.8 - (123.4) 0.1
OTHER EXPENSE - - 1.4 - 1.4
------------------- -------------- ---------------- ------------- ---------------
INCOME (LOSS) BEFORE INCOME TAXES 64.0 81.7 51.5 (123.4) 73.8
INCOME TAX EXPENSE (BENEFIT) - - 9.0 9.0
MINORITY INTERESTS IN SUBSIDIARIES - - 0.8 - 0.8
------------------- -------------- ---------------- ------------- ---------------
NET INCOME (LOSS) 64.0 81.7 41.7 (123.4) 64.0
Other comprehensive income (loss)
- foreign currency translation
adjustments (37.1) (37.2) (8.4) 45.6 (37.1)
------------------- -------------- ---------------- ------------- ---------------
COMPREHENSIVE INCOME (LOSS) $ 26.9 $ 44.5 $ 33.3 $ (77.8) $ 26.9
=================== ============== ================ ============= ===============
HUNTSMAN ICI CHEMICALS LLC
CONSOLIDATING CONDENSED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
SIX MONTHS ENDED JUNE 30,2000
(MILLIONS OF DOLLARS)
PARENT ONLY CONSOLIDATED
HUNTSMAN ICI HUNTSMAN ICI
CHEMICALS GUARANTORS NON-GUARANTORS ELIMINATIONS CHEMICALS
------------------- -------------- ---------------- ------------- ---------------
REVENUES:
Trade sales and services $ 539.9 $ 97.8 $ 1,319.6 $ - $ 1,957.3
Related party sales 87.6 20.8 239.6 (116.0) 232.0
Tolling fees 20.3 - - - 20.3
------------------- -------------- ---------------- ------------- ---------------
TOTAL REVENUE 647.8 118.6 1,559.2 (116.0) 2,209.6
COST OF GOODS SOLD 494.2 98.3 1,346.0 (116.0) 1,822.5
------------------- -------------- ---------------- ------------- ---------------
GROSS PROFIT 153.6 20.3 213.2 - 387.1
EXPENSES:
Selling, general and
administrative 54.0 7.4 64.7 - 126.1
Research and development 28.1 - 7.7 - 35.8
------------------- -------------- ---------------- ------------- ---------------
TOTAL EXPENSES 82.1 7.4 72.4 - 161.9
------------------- -------------- ---------------- ------------- ---------------
OPERATING INCOME 71.5 12.9 140.8 - 225.2
INTEREST EXPENSE (INCOME), NET 111.4 (64.5) 62.1 - 109.0
EQUITY IN EARNINGS OF
UNCONSOLIDATED AFFLILIATES 140.2 62.8 - (202.9) 0.1
OTHER EXPENSE - - 1.8 - 1.8
------------------- -------------- ---------------- ------------- ---------------
INCOME (LOSS) BEFORE INCOME TAXES 100.3 140.2 76.9 (202.9) 114.5
INCOME TAX EXPENSE (BENEFIT) - - 12.9 - 12.9
MINORITY INTERESTS IN SUBSIDIARIES - - 1.3 - 1.3
------------------- -------------- ---------------- ------------- ---------------
NET INCOME (LOSS) 100.3 140.2 62.7 (202.9) 100.3
Other comprehensive income (loss)
- foreign currency
translation adjustments (82.0) (106.2) (30.0) 136.2 (82.0)
------------------- -------------- ---------------- ------------- ---------------
COMPREHENSIVE INCOME (LOSS) $ 18.3 $ 34.0 $ 32.7 $ (66.7) $ 18.3
=================== ============== ================ ============= ===============
- --------------------------------------------------------------------------------------------------------------------------------
HUNTSMAN ICI CHEMICALS LLC
CONSOLIDATING CONDENSED STATEMENTS OF CASH FLOW
SIX MONTHS ENDED JUNE 30, 2000
(MILLIONS OF DOLLARS)
- --------------------------------------------------------------------------------------------------------------------------------
CONSOLIDATED
PARENT ONLY HUNTSMAN HUNTSMAN ICI
ICI CHEMICALS GUARANTORS NON-GUARANTORS ELIMINATIONS CHEMICALS
-------------------- -------------- ----------------- --------------- -------------
NET CASH PROVIDED BY OPERATING ACTIVITIES $ (40.8) $ 68.2 $ 104.2 $ - $ 131.6
INVESTING ACTIVITIES:
Acquisition of assets (12.8) - (14.0) - (26.8)
Cash received from
unconsolidated affiliates - 5.2 - - 5.2
Advances to unconsolidated affiliates (8.5) - - - (8.5)
Capital expenditures (16.8) (0.2) (56.8) - (73.8)
---------- ---------- ------------ ---------- ----------
NET CASH USED IN INVESTING ACTIVITIES (38.1) 5.0 (70.8) - (103.9)
FINANCING ACTIVITIES:
Repayments of long-term debt (35.7) - (1.2) - (36.9)
Cash contributions by parent - 97.8 5.1 (102.9) -
Cash distributions from subsidiaries 156.4 - - (156.4) -
Cash distributions to parent - (156.4) - 156.4 -
Cash distributions to subsidiaries (97.8) (5.1) - 102.9 -
Intercompany advances - net of repayments 55.9 (9.7) (46.2) - -
---------- ---------- ------------ ---------- ----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 78.8 (73.4) (42.3) - (36.9)
Effect of exchange rate changes on cash - - (7.5) - (7.5)
---------- ---------- ------------ ---------- ----------
Increase (decrease) in cash and cash equivalents (0.1) (0.2) (16.4) - (16.7)
Cash and cash equivalents at beginning of period 9.0 0.2 129.7 - 138.9
---------- ---------- ------------ ---------- ----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 8.9 $ - $ 113.3 $ - $ 122.2
========== ========== ============ ========== ==========
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
CAUTIONARY STATEMENT FOR FORWARD LOOKING INFORMATION
Certain information set forth in this report contains "forward-looking
statements" within the meaning of federal securities laws. Forward-looking
statements include statements concerning our plans, objectives, goals,
strategies, future events, future revenues or performance, capital
expenditures, financing needs, plans or intentions relating to acquisitions
and other information that is not historical information. In some cases,
forward-looking statements can be identified by terminology such as
"believes," "expects," "may," "will," "should," or "anticipates", or the
negative of such terms or other comparable terminology, or by discussions
of strategy. We may also make additional forward-looking statements from
time to time. All such subsequent forward-looking statements, whether
written or oral, by us or on our behalf, are also expressly qualified by
these cautionary statements.
All forward-looking statements, including without limitation, management's
examination of historical operating trends, are based upon our current
expectations and various assumptions. Our expectations, beliefs and
projections are expressed in good faith and we believe there is a
reasonable basis for them, but, there can be no assurance that management's
expectations, beliefs and projections will result or be achieved. All
forward-looking statements apply only as of the date made. We undertake no
obligation to publicly update or revise forward-looking statements which
may be made to reflect events or circumstances after the date made or to
reflect the occurrence of unanticipated events.
THREE AND SIX MONTHS ENDED JUNE 30, 2000 COMPARED TO THREE
AND SIX MONTHS ENDED JUNE 30, 1999 (PRO FORMA)
In order to present data which is useful for comparative purposes, the
following tabular data for 2000 and pro forma 1999 and related discussion,
have been prepared as if the Transaction (excluding the acquisition of 20%
of the Wilton olefins facility in June 1999 from BP Chemicals) had taken
place in January 1999. These results do not necessarily reflect the results
which would have been obtained if the Transaction actually occurred on the
date indicated, or the results which may be expected in the future.
(MILLIONS OF DOLLARS)
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
2000 1999 2000 1999
(PRO FORMA) (PRO FORMA)
--------------- -------------- ------------- -------------
Specialty Chemicals sales $ 549 $ 478 $ 1,040 $ 897
Petrochemical sales 350 273 673 494
Tioxide sales 256 264 497 494
--------------- -------------- ------------- -------------
Total revenues 1,155 1,015 2,210 1,885
Cost of goods sold 949 796 1,823 1,504
--------------- -------------- ------------- -------------
Gross profit 206 219 387 381
Expenses of selling, general, administrative, research
and development 76 108 162 212
--------------- -------------- ------------- -------------
Operating income 130 111 225 169
Interest expense, net 55 57 109 113
Other expense 1 - 1 -
--------------- -------------- ------------- -------------
Net income before income taxes and minority interest 74 54 115 56
Income tax expense 9 7 13 10
Minority interests in subsidiaries 1 - 2 -
--------------- -------------- ------------- -------------
Net income $ 64 $ 47 $ 100 $ 46
=============== ============== ============= =============
Depreciation and amortization $ 54 $ 45 $ 107 $ 90
=============== ============== ============= =============
EBITDA (1) $ 183 $ 156 $ 331 $ 259
Net reduction in corporate overhead allocation and
insurance - 5 - 11
expenses
Rationalization of TiO2 operations - 3 - 5
--------------- -------------- ------------- -------------
Adjusted EBITDA $ 183 $ 164 $ 331 $ 275
=============== ============== ============= =============
(1) EBITDA is defined as earnings from continuing operations before interest expense, depreciation and
amortization, and taxes. EBITDA is included in this report because it is a basis on which we assess our
financial performance and debt service capabilities, and because certain covenants in our borrowing
arrangements are tied to similar measures. However, EBITDA should not be considered in isolation or viewed as
a substitute for cash flow from operations, net income or other measures of performance as defined by GAAP or
as a measure of a company's profitability or liquidity. We understand that while EBITDA is frequently used by
security analysts, lenders and others in their evaluation of companies, EBITDA as used herein is not
necessarily comparable to other similarly titled captions of other companies due to potential inconsistencies
in the method of calculation.
RESULTS OF OPERATIONS
FOR THE THREE MONTHS ENDED JUNE 30, 2000 COMPARED TO THE THREE MONTHS ENDED
JUNE 30, 1999 (PRO FORMA)
REVENUES. Revenues for the business in the three months ended June 30, 2000
increased by $140 million, or 14%, to $1,155 million from $1,015 million
during the same period in 1999.
Specialty Chemicals - Total MDI sales volumes increased by 15% from the
1999 period. A strong recovery in the Asian economies led to an increase in
sales volumes of 17%, while in Europe sales volumes grew by 17%. In the
Americas, sales volumes grew by 13% following the completion of the MDI
expansion project at our Geismar, Louisiana facility. Polyol sales volumes
grew by 18% with the increase attributable to the European region. PO sales
volumes increased 11% as a result of higher sales to polyol customers.
Average sales prices of MTBE increased by 77% compared to the 1999 period
due largely to higher gasoline prices. These gains were partially offset by
an 8% decrease in average selling prices for MDI and a 15% decrease in the
price of polyols compared to the same period in 1999, a substantial portion
of which was due to a weakening in the value of the Euro versus the U.S.
dollar.
Petrochemicals - Sales volumes of ethylene and propylene increased by 63%
and 46% respectively. In addition to the volume attributable to the 20% of
the olefins facility acquired from BP Chemicals on June 30, 1999, increases
were attributable to increased customer demand. In aromatics, paraxylene
and cyclohexane sales volumes fell by 6% and 6% respectively. Sales volumes
of cumene increased reflecting the resolution of production problems
encountered in 1999. Ethylene prices rose 94%, propylene 107%, cyclohexane
54% and paraxylene 66% due to higher feedstock prices and improved market
conditions. Revenues for the three months ended June 30, 1999 included $96
million relating to crude oil trading. This activity was discontinued
following the consummation of the Transaction.
Tioxide - Sales volume remained relatively unchanged in 2000 compared to
the 1999 period. Western European volumes grew by 7%, but were offset by an
11% decrease in Asia. Overall average selling prices decreased by 2%. While
local selling prices rose in the North American, Asian, South African and
European markets, these increases were more than offset by the Euro's
continued weakening against the U.S. dollar.
GROSS PROFIT. Gross profit for the business in the three months ended June
30, 2000 decreased by $13 million, or 6%, to $206 million from $219 million
during the same period in 1999.
Specialty Chemicals - MDI and polyols benefited from increased sales
volumes, however, this benefit was more than offset by a substantial
increase in prices for the major raw materials for MDI, namely benzene and
chlorine. The decreased gross profit in PO was attributable to an increase
in the cost of PO's major raw material, propylene. This increase in the
cost of PO's raw materials more than offset the increase in PO's selling
price. In addition, changes in the PO sales mix, along with higher utility
costs associated with higher natural gas prices resulted in lower gross
profit.
Petrochemicals - Gross profit improved over the same period in 1999, due to
the effect of higher sales volumes. In addition, higher sales prices were
only partially offset by higher feedstock prices.
Tioxide -Gross profit improved over the same period in 1999 due mainly to
reductions in production costs resulting from Tioxide's ongoing
manufacturing excellence program. The adverse impact of exchange rates on
selling prices has been partially offset by a favorable impact on local
currency costs.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES (INCLUDING RESEARCH AND
DEVELOPMENT EXPENSES). Selling, general and administrative expenses
(including research and development expenses) ("SG&A") in the three months
ended June 30, 2000 decreased by $32 million, or 30%, to $76 million from
$108 million for the same period in 1999. The decrease was primarily a
result of one-time expenses relating to restructuring and pension costs
incurred in the three months ended June 30, 1999. SG&A expenses also
decreased as a result of ongoing restructuring activities and lower
corporate overhead allocations following the Transaction.
INTEREST EXPENSE. Net interest expense in the three months ended June 30,
2000 was relatively unchanged from the same period in 1999.
INCOME TAXES. The effective income tax rate declined in the three months
ended June 30, 2000 from the same period in 1999 due to a greater share of
the income being earned in the U.S., which income is not subject to U.S.
federal income tax at the company level.
NET INCOME. Net income in the three months ended June 30, 2000 increased by
$17 million to $64 million from $47 million during the same period in 1999
as a result of the factors discussed above.
FOR THE SIX MONTHS ENDED JUNE 30, 2000 COMPARED TO THE SIX MONTHS ENDED
JUNE 30, 1999 (PRO FORMA)
REVENUES. Revenues for the business in the six months ended June 30, 2000
increased by $325 million, or 17%, to $2,210 million from $1,885 million
during the same period in 1999.
Specialty Chemicals - Total MDI sales volumes increased by 18% from the
1999 period. A strong recovery in the Asian economies led to an increase in
sales volumes of 29%, while in Europe sales volumes grew by 20%. In the
Americas, sales volumes grew by 14% following the completion of the MDI
expansion project at our Geismar, Louisiana facility. Polyol sales volumes
grew by 22% with the increase attributable to the European and U.S.
regions. PO sales volumes increased 17% as a result of higher production
rates. Average sales prices of MTBE in the six months ended June 30, 2000
increased by 85% compared to the 1999 period due largely to higher gasoline
prices. These gains were partially offset by a 9% decrease in average
selling prices for MDI and a 14% decrease in the price of polyols compared
to the same period in 1999, a substantial portion of which was due to a
weakening in the value of the Euro versus the U.S. dollar.
Petrochemicals - Sales volumes of ethylene and propylene increased by 58%
and 38% respectively. In addition to the volume attributable to the 20% of
the olefins facility acquired from BP Chemicals on June 30, 1999, increases
were attributable to increased customer demand. In aromatics, paraxylene
and cyclohexane sales volumes rose by 9% and 2% respectively. Sales volumes
of cumene increased reflecting the resolution of production problems
encountered in 1999. Ethylene prices rose 80%, propylene 95%, cyclohexane
51% and paraxylene 61% due to higher feedstock prices and improved market
conditions. Revenues for six months ended June 30, 1999 included $160
million relating to crude oil trading. This activity was discontinued
following the consummation of the Transaction.
Tioxide - Sales volume increased by 4% in 2000 compared to the 1999 period
with demand strong worldwide. Western European and North American volumes
grew by 9% and 1% respectively, while the strengthening of the Asian
economy impacted positively on volumes and prices in that region. Overall
the benefits of increased volume were partially offset by a 3% decline in
average selling prices. While local selling prices rose in the North
American, Asian and South African markets, these increases were more than
offset by a decline in European prices resulting from the Euro's continued
weakening against the U.S. dollar.
GROSS PROFIT. Gross profit for the business in the six months ended June
30, 2000 increased by $6 million, or 2%, to $387 million from $381 million
during the same period in 1999.
Specialty Chemicals - MDI and polyols benefited from increased sales
volumes, however, this benefit was more than offset by an increase in
prices for the major raw materials for MDI, namely benzene and chlorine.
The increased gross profit in PO was attributable to higher PO production
rates and increased MTBE selling prices compared to the same period in
1999. These increases were partially offset by an increase in the cost of
PO's major raw materials: isobutane, methanol and propylene.
Petrochemicals - Gross profit improved over the same period in 1999, due to
the effect of higher sales volumes. In addition, higher sales prices were
only partially offset by higher feedstock prices.
Tioxide - Increased volume led to improved gross profit in 2000 compared to
the 1999 period. The adverse impact of exchange rates on gross profit was
more than offset by the general increase in local selling prices and fixed
production cost savings as a result of Tioxide's ongoing manufacturing
excellence program.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES (INCLUDING RESEARCH AND
DEVELOPMENT EXPENSES). Selling, general and administrative expenses
(including research and development expenses) ("SG&A") in the six months
ended June 30, 2000 decreased by $50 million, or 24%, to $162 million from
$212 million for the same period in 1999. The decrease was primarily a
result of one-time expenses relating to restructuring and pension costs
incurred in the six months ended June 30, 1999. SG&A expenses also
decreased as a result of ongoing restructuring activities and lower
corporate overhead allocations following the Transaction.
INTEREST EXPENSE. Net interest expense in the six months ended June 30,
2000 was relatively unchanged from the same period in 1999.
INCOME TAXES. The effective income tax rate declined in the six months
ended June 30, 2000 from the same period in 1999 due to a greater share of
the income being earned in the U.S., Which income is not subject to U.S.
federal income tax at the company level.
NET INCOME. Net income in the six months ended June 30, 2000 increased by
$54 million to $100 million from $46 million during the same period in 1999
as a result of the factors discussed above.
LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 2000, we had no outstanding borrowings under our $400
million revolving credit facility and had approximately $122 million in
cash balances. We also maintain $80 million of short-term overdraft
facilities, of which $80 million was available on June 30, 2000. We
anticipate that borrowings under the credit facilities and cash flow from
operations will be sufficient for us to make required payments of principal
and interest on our debt when due, as well as to fund capital expenditures.
RECENTLY ISSUED FINANCIAL ACCOUNTING STANDARDS
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
Accounting for Derivative Instruments and Hedging Activities. SFAS No.133
established accounting and reporting standards for derivative instruments
and hedging activities. It requires that an entity recognize all
derivatives as assets or liabilities in the balance sheet and measure those
instruments at fair value. SFAS No.133 is effective for financial
statements for the year ending December 31, 2001. The Company is currently
evaluating the effects of SFAS No.133 on its financial statements.
SUBSEQUENT EVENT
On July 20, 2000, we announced our intent to acquire the assets which
comprise the Rohm and Haas Company global thermoplastic polyurethanes
business for a total purchase price of approximately $120 million. The
business operates manufacturing facilities located in Osnabruck, Germany
and Ringwood, Illinois and generated net sales of approximately $79 million
during the fiscal year ended June 30, 2000.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
We are exposed to market risk, including changes in interest rates,
currency exchange rates, and certain commodity prices. Our exposure to
foreign currency market risk is limited since sales prices are typically
denominated in Euros or U.S. dollars. To the extent we have material
foreign currency exposure on known transactions, hedges are put in place
monthly to mitigate such market risk. Our exposure to changing commodity
prices is also limited (on an annual basis) since the majority of raw
material is acquired at posted or market related prices, and sales prices
for finished products are generally at market related prices which are set
on a quarterly basis in line with industry practice. To manage the
volatility relating to these exposures, we enter into various derivative
transactions. We hold and issue derivative financial instruments for
economic hedging purposes only.
Our cash flows and earnings are subject to fluctuations due to exchange
rate variation. Historically, the businesses transferred to us by ICI have
managed the majority of their foreign currency exposures by entering into
short-term forward foreign exchange contracts with ICI. In addition,
short-term exposures to changing foreign currency exchange rates at certain
of our foreign subsidiaries were managed, and will continue to be managed,
through financial market transactions, principally through the purchase of
forward foreign exchange contracts (with maturities of six months or less)
with various financial institutions. While the overall extent of our
currency hedging activities has not changed significantly, we have altered
the scope of our currency hedging activities to reflect the currency
denomination of our cash flows. In addition, we are now conducting our
currency hedging activities for our exposures arising in connection with
the businesses transferred to us by ICI with various financial
institutions. We do not hedge our currency exposures in a manner that would
entirely eliminate the effect of changes in exchange rates on our cash
flows and earnings. As of June 30, 2000, we have outstanding in the
notional amount of approximately $65 million equivalent of foreign exchange
forward contracts with third party banks with final settlement of not more
than 45 days. Predominantly, our hedging activity is to sell forward the
majority of our surplus non-U.S. dollar receivables for U.S. dollars. Using
sensitivity analysis, the foreign exchange loss due to these derivative
instruments from an assumed 10% unfavorable change in year-end rates, when
considering the effects of the underlying hedged firm commitment, is not
material.
Historically, Huntsman Specialty used interest rate swaps, caps and collar
transactions entered into with various financial institutions to hedge
against the movements in market interest rates associated with its floating
rate debt obligations. We do not hedge our interest rate exposure in a
manner that would entirely eliminate the effects of changes in market
interest rates on our cash flow and earnings. Under the terms of our senior
secured credit facilities, we are required to hedge a significant portion
of our floating rate debt. As a result, we have entered into approximately
$700 million notional amount of interest rate swap, cap and collar
transactions, approximately $650 million of which have terms ranging from
approximately three years to five years. The majority of these transactions
hedge against movements in U.S. dollar interest rates. The U.S. dollar swap
transactions obligate us to pay fixed amounts ranging from approximately
5.50% to approximately 7.00%. The U.S. dollar collar transactions carry
floors ranging from 5.00% to 6.00% and caps ranging from 6.60% to 7.50%. We
have also entered into a Euro-denominated swap transaction that obligates
us to pay a fixed rate of approximately 4.3%. Assuming a 1% (100 basis
point) increase in U.S. dollar interest rates, the effect on the annual
interest expense would be an increase of approximately $16 million. This
increase would be reduced by approximately $4 million as a result of the
effects of the interest rate swap, cap and collar transactions described
above.
In order to reduce our overall raw material costs, our petrochemical
business enters into various commodity contracts to hedge its purchase of
commodity products. We do not hedge our commodity exposure in a manner that
would entirely eliminate the effects of changes in commodity prices on our
cash flows and earnings. At June 30, 2000, the Company had forward purchase
and sales contracts for 191,000 and 115,000 tons (naphtha and other
hydrocarbons), respectively, which do not qualify for hedge accounting.
Assuming a 10% increase and a 10% decrease in the price per ton of naphtha,
the change would result in gains and losses of approximately $2 million,
respectively.
PART II
ITEM 6.
A) Exhibit 27 - Financial Data Schedule
B) The Company filed no reports on Form 8-K for the quarter
ended June 30, 2000.
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934, HUNTSMAN ICI CHEMICALS LLC HAS DULY CAUSED THIS
REPORT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY
AUTHORIZED, IN THE CITY OF EVERBERG, COUNTRY OF BELGIUM, ON THE 11TH DAY OF
AUGUST, 2000.
HUNTSMAN ICI CHEMICALS LLC
By: /s/L. Russell Healy
________________________________________
L. Russell Healy
Senior Vice President and
Finance Director
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