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Article by DailyStocks_admin    (12-22-08 07:07 AM)

Huntsman Corp. CEO Peter R Huntsman bought 429000 shares on 12-17-2008 at $3.1

BUSINESS OVERVIEW

Our Company, a Delaware corporation, was formed in 2004 to hold the Huntsman businesses. Jon M. Huntsman founded the predecessor to our Company in the early 1970s as a small packaging company. Since then, we have grown through a series of significant acquisitions and now own a global portfolio of businesses.

In February 2005, we completed an initial public offering of common stock and mandatory convertible preferred stock. In connection with this initial public offering, we completed a transaction in which our predecessor, Huntsman Holdings, LLC, became our wholly owned subsidiary, and the existing beneficial holders of the common and preferred members interests of Huntsman Holdings, LLC received shares of our common stock in exchange for their interests (the "Reorganization Transaction"). Also during 2005, we completed a series of transactions designed to simplify our consolidated group's financing and public reporting structure, to reduce our cost of financing and to facilitate other organizational efficiencies, including the following:

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On December 20, 2005, we agreed to pay $125.0 million to affiliates of SISU Capital Limited and other third parties to acquire the 9.7% of the equity of Huntsman Advanced Materials that we did not already own. We contributed all of these equity interests to Huntsman International.

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On August 16, 2005, we completed mergers (collectively, the "Affiliate Mergers") in which Huntsman LLC and Huntsman International Holdings merged into Huntsman International.

In addition, we have completed a series of transactions pursuant to which we have disposed of commodity chemicals businesses:

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On November 5, 2007, we completed the sale of our U.S. base chemicals business to Flint Hills Resources, a wholly owned subsidiary of Koch, (the "U.S. Base Chemicals Disposition"), and, on August 1, 2007, we closed on the sale of our North American polymers business assets to Flint Hills Resources (the "North American Polymers Disposition" and together with the U.S. Base Chemicals Disposition, the "U.S. Petrochemicals Disposition"). For more information, see "—Recent Developments—Sale of U.S. Base Chemicals and Polymers Business" below.

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On December 29, 2006, we sold all of the outstanding equity interests of Huntsman Petrochemicals (UK) Limited to SABIC (the "U.K. Petrochemicals Disposition"). For more information, see "Note 3. Discontinued Operations—European Base Chemicals and Polymers Business" to our consolidated financial statements included elsewhere in this report.

On July 12, 2007, we entered into an agreement and plan of merger (the "Merger Agreement") with Hexion and one of its subsidiaries (the "Merger Sub"). Hexion is owned by affiliates of Apollo. Under the Merger Agreement, Hexion has agreed to acquire all of our outstanding common stock in a merger under Delaware law, pursuant to which the Merger Sub will be merged with and into our Company and our Company will continue as a wholly-owned subsidiary of Hexion (the "Merger"). Under the terms of the Merger Agreement, each share of our common stock will be converted into the right to receive $28.00 in cash and, if the Merger is completed after April 5, 2008, the $28.00 per share cash price to be paid by Hexion will be increased at the rate of 8% per annum (inclusive of any dividends paid) beginning on April 5, 2008 through the closing date of the Merger. We cannot predict whether the Merger will be consummated or, if it is consummated, the exact timing of the effective time of the Merger. For more information, please see "—Recent Developments—Pending Sale of our Company" below and our Proxy Statement filed with the Securities and Exchange Commission on September 12, 2007. For information regarding certain risks associated with the Merger, please also see "Item 1A. Risk Factors" below.

We operate all of our businesses through Huntsman International, our 100% owned subsidiary. Huntsman International is a Delaware limited liability company and was formed in 1999. Substantially all of our debt obligations are obligations of Huntsman International and/or its subsidiaries.

Our principal executive offices are located at 500 Huntsman Way, Salt Lake City, Utah 84108, and our telephone number at that location is (801) 584-5700.

RECENT DEVELOPMENTS

Pending Sale of Our Company

On July 12, 2007, we entered into the Merger Agreement with Hexion pursuant to which Hexion has agreed to acquire all of our outstanding common stock for $28.00 per share in cash. Under the terms of the Merger Agreement, if the Merger is completed after April 5, 2008, the $28.00 per share cash price to be paid by Hexion will be increased at the rate of 8% per annum (inclusive of any dividends paid) beginning on April 5, 2008 through the closing date of the Merger. On October 16, 2007, our stockholders holding a majority of the shares entitled to vote thereon approved a proposal to adopted the Merger Agreement.

Notwithstanding stockholder approval, the Merger cannot be completed until each of the other closing conditions specified in the Merger Agreement has been satisfied or waived. The closing conditions include, among others, the expiration of waiting periods or grants of approvals under competition laws in the United States, European Union and certain other jurisdictions. On October 4, 2007, Hexion and our Company received a request for additional information (commonly known as a "second request") from the Federal Trade Commission (the "FTC") under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. Hexion and our Company have agreed with the FTC to allow the FTC additional time to review the Merger, such that the Merger is not expected to close before May 3, 2008. Both parties intend to cooperate fully with the FTC and continue to work closely with regulatory agencies in other jurisdictions, including the European Union.

The Merger Agreement provides that the Merger may be terminated by either party if it is not consummated by April 5, 2008, subject to certain extensions for approximately six months or more under certain circumstances. On January 26, 2008, we announced that we had received a notice from Hexion providing that Hexion will exercise its right under Section 7.1(b)(ii) of the Merger Agreement to extend the termination date of the Merger by 90 days from April 5, 2008 to July 4, 2008. Under certain circumstances, the termination date may be extended by an additional 90 days (or more in the event that Hexion's financing maturity period begins, but does not end by, the end of the additional 90 day extension). The entire time period allowable under the Merger Agreement may be required to satisfy all closing conditions and to complete the Merger.

For more information regarding the Merger, please see our Proxy Statement filed with the Securities and Exchange Commission on September 12, 2007. For information regarding certain risks associated with the Merger, please also see "Item 1A. Risk Factors" below.

Sale of U.S. Base Chemicals and Polymers Business

On February 15, 2007, we entered into an Asset Purchase Agreement (the "Original Agreement") pursuant to which Flint Hills Resources, a wholly owned subsidiary of Koch, agreed to acquire our North American base chemicals and polymers business assets for $456.0 million in cash, plus the value of inventory on the date of closing. The original agreement provided that we would retain other elements of working capital, including accounts receivable, accounts payable and certain accrued liabilities, which would then be liquidated for cash in the ordinary course of business. On June 22, 2007, we entered into an Amended and Restated Asset Purchase Agreement (the "Amended and Restated Agreement") with Flint Hills Resources amending certain terms of the Original Agreement to provide for, among other things, the closing of the North American Polymers Disposition on August 1, 2007 for $150.0 million plus the value of associated inventory on a lower of average actual cost or market basis and for the subsequent closing of the U.S. Base Chemicals Disposition for the remaining $306.0 million plus the value of associated inventory on a lower of average actual cost or market basis, following the re-start of our Port Arthur, Texas olefins manufacturing facility. On August 1, 2007, we closed the North American Polymers Disposition, and, on November 5, 2007, we closed on the U.S. Base Chemicals Disposition following the successful restart of our Port Arthur, Texas facility.

We received total consideration for the U.S. Petrochemicals Disposition of $769.2 million, which is subject to post-closing adjustments. The net proceeds from the U.S. Petrochemicals Disposition were used to repay borrowings under our Revolving Facility, repay other debt and reduce amounts under the A/R Securitization Program.

The closing of the U.S. Base Chemicals Disposition completes our efforts to dispose of our commodity chemicals business assets and represents the conclusion of a process that has resulted in the disposition of substantially all of the assets of our Polymers and Base Chemicals operating segments.

Declaration of Dividend

On February 8, 2008, our board of directors declared a $0.10 per share cash dividend, payable on March 31, 2008, to stockholders of record as of March 14, 2008.

Conversion of Mandatory Convertible Preferred Stock

On February 16, 2008, the 5,750,000 outstanding shares of our mandatory convertible preferred stock converted into 12,082,475 shares of our common stock in accordance with the terms of the mandatory convertible preferred stock.

OVERVIEW

We are a global manufacturer of differentiated chemical products; we also manufacture inorganic chemical products. We currently operate in four segments: Polyurethanes, Materials and Effects, Performance Products and Pigments. In a series of transactions completed in 2006 and 2007, we sold substantially all of our former Polymers and Base Chemicals operations. For more information, see "—Recent Developments—Sale of U.S. Base Chemicals and Polymers Business" above. We report the results from these discontinued operations in our Polymers and Base Chemicals segments. For more information, see "Note 3. Discontinued Operations" to our consolidated financial statements included elsewhere in this report.

Our products comprise a broad range of chemicals and formulations, which we market globally to a diversified group of consumer and industrial customers. Our products are used in a wide range of applications, including those in the adhesives, aerospace, automotive, construction products, durable and non-durable consumer products, electronics, 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, epoxy-based polymer formulations, textile chemicals, dyes, maleic anhydride and titanium dioxide. Our administrative, research and development and manufacturing operations are primarily conducted at the facilities listed in "—Item 2. Properties" below, which are located in 25 countries. We employ approximately 12,900 associates worldwide. We had revenues for the years ended December 31, 2007 and 2006 of $9,650.8 million and $8,730.9 million, respectively.

Our Products

We produce differentiated chemical and inorganic chemical products. Our Polyurethanes, Materials and Effects and Performance Products segments produce differentiated products and our Pigments segment produces inorganic products. Our former Polymers and Base Chemicals operations, which have now been sold, produced commodity chemical products. For more information, see "Note 3. Discontinued Operations" to our consolidated financial statements included elsewhere in this report.

Polyurethanes

General

We are a leading global manufacturer and marketer of a broad range of polyurethane chemicals, including MDI products, PO, polyols, PG and TPU. Polyurethane chemicals are used to produce rigid and flexible foams, as well as coatings, adhesives, sealants and elastomers. We focus on the higher-margin, higher-growth markets for MDI and MDI-based polyurethane systems. Growth in our Polyurethanes segment has been driven primarily by the continued substitution of MDI-based products for other materials across a broad range of applications. We operate five primary Polyurethanes manufacturing facilities in the U.S., Europe and China. We also operate 12 Polyurethanes formulation facilities, which are located in close proximity to our customers worldwide.

Our customers produce polyurethane products through the combination of an isocyanate, such as MDI or TDI, with polyols, which are derived largely from PO and EO. While the range of TDI-based products is relatively limited, we are able to produce over 2,000 distinct MDI-based polyurethane products by varying the proportion and type of polyol used and by introducing other chemical additives to our MDI formulations. As a result, polyurethane products, especially those derived from MDI, are continuing to replace traditional products in a wide range of end-use markets, including insulation in construction and appliances, cushioning for automotive and furniture, adhesives, wood binders, footwear and other specialized engineering applications.

We are a leading North American producer of PO. We and some of our customers process PO into derivative products, such as polyols for polyurethane products, PG and various other chemical products. End uses for these derivative products include applications in the home furnishings, construction, appliance, packaging, automotive and transportation, food, paints and coatings and cleaning products industries. We also produce MTBE as a co-product of our PO manufacturing process. MTBE is an oxygenate that is blended with gasoline to reduce harmful vehicle emissions and to enhance the octane rating of gasoline. See "—Environmental, Health and Safety Matters—MTBE Developments" below and "Item 1A. Risk Factors" below for a discussion of legal and regulatory developments that have resulted in the curtailment and potential elimination of MTBE in gasoline in the U.S. and elsewhere. Also see, "—Manufacturing and Operations" below and "Part II. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" for a discussion of material changes concerning sales of MTBE. We sold our U.S. butadiene and MTBE business operated in our Base Chemicals segment in June 2006; however, the PO/MTBE operations in our Polyurethanes segment were not included in this transaction.

In 1992, we were the first global supplier of polyurethane chemicals to open a technical service center in China. We have since expanded this facility to include an integrated polyurethanes formulation facility. In January 2003, we entered into two related joint ventures to build MDI production and finishing facilities near Shanghai, China. Production at our MDI finishing plant near Shanghai, China operated by HPS, our consolidated subsidiary, was commissioned on June 30, 2006. Production at the MNB, aniline and crude MDI plants operated by SLIC, our unconsolidated joint venture, commenced on September 30, 2006. These world-scale facilities strengthen our ability to service our customers in the critical Chinese market and will support the significant demand growth that we believe this region will continue to experience.


CEO BACKGROUND

Jon M. Huntsman

Mr. Huntsman, age 71, has served as Chairman of the Board of Directors since October 2004. He has been Chairman of the Board of all Huntsman companies since he founded his first plastics company in 1970. Mr. Huntsman served as the Chief Executive Officer of our company and all of our affiliated companies from 1970 to 2000. Mr. Huntsman is currently a director or manager of Huntsman International LLC and certain of our other subsidiaries. In addition, Mr. Huntsman serves or has served as Chairman or as a member of numerous philanthropic and industry boards, including the American Red Cross, The Wharton School, University of Pennsylvania, Primary Children's Medical Center Foundation, the Chemical Manufacturers Association and the American Plastics Council. Mr. Huntsman was selected in 1994 as the chemical industry's top Chief Executive Officer for all businesses in Europe and North America and received the 2006 Chemical Industry Award. Mr. Huntsman formerly served as Special Assistant to the President of the United States and as Vice Chairman of the U.S. Chamber of Commerce. He is the Chairman and Founder of the Huntsman Cancer Institute. Mr. Huntsman is the father of our President, Chief Executive Officer and Director, Peter R. Huntsman.

Marsha J. Evans

Ms. Evans, age 61, has served as a Director since August 2005. Ms. Evans served as President and Chief Executive Officer of The American Red Cross from August 2002 until December 2005. Ms. Evans previously served as the National Executive Director of Girl Scouts of the USA from 1998 until July 2002. She served with the United States Navy for 29 years, where she was commissioned ensign in 1968 and attained the rank of rear admiral before retiring in 1998. Prior to retirement, she served as superintendent of the Naval Postgraduate School in Monterey, California, and as director of the George C. Marshall European Center for Security Studies. Ms. Evans also serves as a director of Weight Watchers International, Inc., Lehman Brothers Holdings Inc. and Office Depot, Inc.

Peter R. Huntsman

Mr. Huntsman, age 45, has served as a Director since October 2004. Mr. Huntsman also serves as President and Chief Executive Officer of our company. Prior to his appointment in July 2000 as Chief Executive Officer, Mr. Huntsman served as President and Chief Operating Officer since 1994. In 1987, Mr. Huntsman joined Huntsman Polypropylene Corporation as Vice President before serving as Senior Vice President and General Manager. Mr. Huntsman has also served as Senior Vice President of Huntsman Chemical Corporation and as Senior Vice President of Huntsman Packaging Corporation, a former subsidiary of our company. Mr. Huntsman is currently a director or manager of Huntsman International LLC and certain of our other subsidiaries. Mr. Huntsman is the son of our Chairman, Jon M. Huntsman.

Wayne A. Reaud

Mr. Reaud, age 61, has served as a Director and Chairman of the Compensation Committee since March 2005. Mr. Reaud is a trial lawyer and the founder of the law firm of Reaud, Morgan & Quinn. For over 30 years, he has represented clients in significant cases involving personal injury, product and premises liability, toxic torts and business litigation. Mr. Reaud has handled first impression mass tort litigation involving asbestos premises liability claims, including the largest asbestos product liability class action lawsuit in the history of Texas courts. He also represented the State of Texas in its landmark litigation against the tobacco industry. Mr. Reaud currently serves as Chairman of the Board of the Beaumont Foundation of America and is President and a Director of the Reaud Charitable Foundation. He is a Life Fellow of the Texas Bar Foundation and a Fellow of the International Society of Barristers. Mr. Reaud was chosen as the Most Distinguished Alumni of Texas Tech University Law School in 1998. He is listed in Best Lawyers in America.

Alvin V. Shoemaker

Mr. Shoemaker, age 70, has served as a Director since March 2005. Mr. Shoemaker has been a private investor since his retirement as Chairman of the Board of First Boston Corporation and First Boston, Inc. (now Credit Suisse First Boston) in 1989, a position he assumed in 1983. Mr. Shoemaker also serves as a director of Wynn Resorts, Limited.

Nolan D. Archibald

Mr. Archibald, age 65, has served as a Director since March 2005. Mr. Archibald has been President and Chief Executive Officer of The Black & Decker Corporation since 1986 and Chairman of the Board of The Black & Decker Corporation since 1987. Mr. Archibald also serves as a director of Lockheed Martin Corporation and Brunswick Corporation.

H. William Lichtenberger

Mr. Lichtenberger, age 72, has served as a Director and Chairman of the Nominating and Governance Committee since March 2005. Mr. Lichtenberger was the Chairman and Chief Executive Officer of Praxair, Inc. from 1992 until his retirement in 2000. From 1990 until 1992, he was President and Chief Operating Officer of Union Carbide Corporation. Mr. Lichtenberger also serves as a director of Ingersoll-Rand Company Limited.

Richard A. Michaelson

Mr. Michaelson, age 56, has served as a Director and Chairman of the Audit Committee since October 2004. Mr. Michaelson is the Chief Financial Officer of Life Sciences Research Inc., a contract research organization providing global outsourcing services to the pharmaceutical industry. Prior to his joining LSR in 1998, he was a partner in Focused Healthcare Partners, a healthcare investment company. Mr. Michaelson was the Chief Financial Officer of Unilab Corporation, California's largest provider of clinical laboratory services, from 1993 to 1997, and held a succession of senior management positions at MetPath (now Quest Diagnostics) between 1982 and 1993. Mr. Michaelson was a financial analyst at IBM from 1979 to 1982.

MANAGEMENT DISCUSSION FROM LATEST 10K

OVERVIEW

We are a global manufacturer of differentiated chemical products; we also manufacture 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, 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, epoxy-based polymer formulations, textile chemicals, dyes, maleic anhydride and titanium dioxide. Our administrative, research and development and manufacturing operations are primarily conducted at the facilities listed in "—Item 2. Properties" above, which are located in 25 countries. As of December 31, 2007, we employed approximately 12,900 associates worldwide.

Our business was organized around our six segments: Polyurethanes, Materials and Effects, Performance Products, Pigments, Polymers and Base Chemicals. Our Polyurethanes, Materials and Effects and Performance Products segments produce differentiated chemical products and our Pigments segment produces inorganic chemical products. Our Polymers and Base Chemicals segments produced commodity chemical products prior to the dispositions discussed in "Item 1. Business—General" above.

Growth in our Polyurethanes and Materials and Effects segments has been driven by the continued substitution of our products for other materials across a broad range of applications, as well as by the level of global economic activity. Historically, demand for many of these products has grown at rates in excess of GDP growth. In Polyurethanes, this growth, particularly in Asia, has recently resulted in improved demand and higher industry capacity utilization rates for many of our key products, including MDI.

In our Performance Products segment, demand for our performance specialties has generally continued to grow at rates in excess of GDP as overall demand is significantly influenced by new product and application development. Overall demand for most of our performance intermediates has generally been stable or improving, but excess surfactant manufacturing capacity and a decline in the use of LAB in new detergent formulations have continued to keep margins under pressure. Ethylene glycol industry operating rates and profitability declined from 2005 through 2006 due to additional capacity coming on stream but rebounded in 2007. Over time, demand for maleic anhydride has generally grown at rates that slightly exceed GDP growth. However, given its dependence on the UPR market, which is heavily influenced by construction end markets, maleic anhydride demand can be cyclical.

Historically, demand for titanium dioxide pigments has grown at rates approximately equal to global GDP growth. Pigment prices have historically reflected industry-wide operating rates but have typically lagged behind movements in these rates by up to twelve months due to the effects of product stocking and destocking by customers and producers, contract arrangements and seasonality. The industry experiences some seasonality in its sales because sales of paints, the largest end use for titanium dioxide, generally peak during the spring and summer months in the northern hemisphere. This results in greater sales volumes in the second and third quarters of the year.

During 2007, we completed the U.S. Petrochemicals Disposition pursuant to which we sold our North American polymers business and our U.S. base chemicals business. During 2006, we completed the U.K. Petrochemicals Disposition. In 2005, we sold our former TDI business. The results of operations of these businesses are classified as discontinued operations.

Year Ended December 31, 2007 Compared to Year Ended December 31, 2006

For the year ended December 31, 2007, we had a net loss of $172.1 million on revenues of $9,650.8 million, compared with net income of $229.8 million on revenues of $8,730.9 million for 2006. For the year ended December 31, 2007, Huntsman International had a net loss of $11.4 million on revenues of $9,650.8 million compared with net income of $233.6 million on revenues of $8,730.9 million for 2006. The decrease of $401.9 million in our net income and the decrease of $245.0 million in Huntsman International's net income was the result of the following items:

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Revenues for the year ended December 31, 2007 increased by $919.9 million as compared with 2006 due principally to the effects of the Textile Effects Acquisition on June 30, 2006, and to higher sales volumes in our Polyurethanes, Performance Products and Pigments segments and higher average selling prices in our Polyurethanes, Materials and Effects and Performance Products segments. Higher volumes and selling prices in the above segments were partially offset by a decrease in average selling prices in local currencies in our Pigments segment. For more information, see "—Segment Analysis" below.

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Our gross profit and the gross profit of Huntsman International for the year ended December 31, 2007 increased by $117.2 million and $116.3 million, respectively, or 8% in each case, as compared with 2006. Higher gross profit in our Materials and Effects segment resulting from the Textile Effects Acquisition on June 30, 2006 and higher gross profit in our Polyurethanes and Performance Products segments was offset somewhat by lower gross profit in our Pigments segment. For more information, see "—Segment Analysis" below.

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Our operating expenses and the operating expenses of Huntsman International for the year ended December 31, 2007 increased by $199.1 million and $199.2 million, respectively, or 26% in each case, as compared with 2006. Higher operating expenses due to the Textile Effects Acquisition on June 30, 2006 constituted $92.7 million of the increase. Operating expenses also increased as a result of higher foreign currency losses of $13.4 million ($13.9 million of losses in 2007 as compared with $0.5 million of losses in 2006), lower insurance recoveries of $24.3 million, higher corporate information technology costs of $23.9 million and higher overall selling, general and administrative and research and development costs resulting, in part, from the negative impacts of foreign currency fluctuations as the U.S. dollar weakened against relevant currencies. In addition, we sold our U.S. butadiene and MTBE business in June 2006 and recognized a pre tax gain of $90.3 million. In 2007, we received $70.0 million of additional proceeds related to this sale upon satisfaction of certain obligations and recognized an additional gain of $69.0 million.

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Restructuring, impairment and plant closing costs for the year ended December 31, 2007 increased to $41.9 million from $15.3 million in 2006. For more information concerning restructuring activities, see "Note 11. Restructuring, Impairment and Plant Closing Costs" to our consolidated financial statements included elsewhere in this report.

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Our net interest expense and the net interest expense of Huntsman International for the year ended December 31, 2007 decreased by $65.1 million and $68.3 million, or 19% in each case, as compared with 2006. This decrease was primarily due to lower average debt balances and lower interest rates.

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Expenses related to the Merger consisted primarily of Merger-related legal fees and the Basell Termination Fee. For further information regarding these Merger-related expenses, see "Note 20. Expenses Associated with the Merger" to our consolidated financial statements included elsewhere in this report.

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Our loss on early extinguishment of debt and the loss on early extinguishment of debt of Huntsman International decreased for the year ended December 31, 2007 by $24.9 million and $36.4 million, or 92% and 93%, respectively, as compared to 2006, resulting from higher repayment and refinancing of debt during 2006. For further information regarding the repayment of debt, see "Note 14. Debt" to our consolidated financial statements included elsewhere in this report.

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Our income tax benefit decreased by $38.2 million to a benefit of $12.1 million for the year ended December 31, 2007 as compared with a benefit of $50.3 million for the same period in 2006. Huntsman International's income tax expense increased by $72.1 million to an expense of $40.8 million for the year ended December 31, 2007 as compared with a benefit of $31.3 million for the same period in 2006. Our and Huntsman International's tax obligations are affected by the mix of income and losses in the tax jurisdictions in which we operate. Our tax benefit decreased while pre-tax income decreased largely due to non-tax-deductible expenses associated with the Merger, and the tax benefits associated with the prior year releases of tax contingencies and valuation allowances being greater than the current year benefits associated with the release of valuation allowances in the U.S. and Switzerland. In 2008, we believe it is reasonably possible that we will recognize tax benefits from reducing tax contingencies related to the settlement of tax audits. For further information concerning taxes, see "Note 19. Income Taxes" to our consolidated financial statements included elsewhere in this report.

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Our loss from discontinued operations and the loss from discontinued operations from Huntsman International for the year ended December 31, 2007 increased by $84.2 and $116.9 million, respectively, compared with 2006. The loss from discontinued operations represents the operating results and loss on disposal of our former North American polymers business, our former U.S. base chemicals business, our former European base chemicals and polymers business and our former TDI business. Our 2007 loss from discontinued operations and the 2007 loss from discontinued operations of Huntsman International included a loss on disposal of $339.0 million and $350.0 million, respectively, related to the U.S. Base Chemicals Disposition, the North American Polymers Disposition and the U.K. Petrochemicals Disposition. The loss from discontinued operations in 2006 included a loss on disposal related to the U.K. Petrochemicals Disposition of $301.8 million and $280.1 million for us and Huntsman International, respectively. For more information, see "Note 3. Discontinued Operations" to our consolidated financial statements included elsewhere in this report.

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The extraordinary (loss) gain on the acquisition of a business relates to the June 30, 2006 acquisition of our textile effects business. The extraordinary gain in 2006 represents the preliminary fair value of the net assets acquired in excess of the purchase price paid for the textile effects business, after the values of all long-lived assets were reduced to zero. The extraordinary loss in 2007 represents the finalization of the fair value of net assets acquired. For more information, see "Note 4. Business Dispositions and Combinations—Textile Effects Acquisition" to our consolidated financial statements included elsewhere in this report.

Segment Analysis

Effective January 1, 2007, the results of our APAO facility were reported in our Materials and Effects segment. These results were previously reported in our Polymers segment. Beginning in the second quarter of 2007, our Australian styrenics business was transferred from our Polymers segment to Corporate and other. Effective in the fourth quarter 2007, the results of our former U.S. butadiene and MTBE business were reported in Corporate and other. These results were previously reported in our Base Chemicals segment. All segment information for prior periods has been restated to reflect these transfers.

Polyurethanes

For the year ended December 31, 2007, Polyurethanes segment revenues increased by $355.4 million, or 10%, as compared with 2006. This increase was the result of both higher average selling prices and growth in overall sales volumes. MDI average selling prices in 2007 increased by 6% as compared with 2006 due to favorable foreign exchange movements, particularly for euro-denominated sales, and in response to higher raw material costs. MTBE average selling prices for 2007 increased by 20% as compared with 2006 mainly due to higher raw materials costs, strong export market demand and tight supply. Overall, polyurethanes sales volumes increased by 2% in 2007 as compared with 2006, driven primarily by higher MDI volumes due in particular to strong demand in insulation-related applications and in global emerging markets.

For the year ended December 31, 2007, Polyurethanes segment EBITDA increased by $9.2 million, or 2%, as compared with 2006. The increase in segment EBITDA was primarily due to higher PO/co-product MTBE and urethanes margins, with average selling prices increasing by more than raw material and energy costs, as well as an increase in sales volumes. The improvement in margins more than offset increased costs resulting from the delayed start up of our China MDI joint venture.

Materials and Effects

Materials and Effects segment revenues for the year ended December 31, 2007 increased by $626.9 million, or 35%, as compared with 2006. This increase was primarily due to the Textile Effects Acquisition on June 30, 2006. The textile effects business contributed $523.3 million to the increase in revenues for the year ended December 31, 2007, while advanced materials revenues for the same period increased by $103.6 million, or 8%, as compared to 2006. The increase in advanced materials revenues was attributable to a 12% increase in average selling prices, partially offset by a 4% decrease in sales volumes. Average selling prices increased mainly due to favorable impacts of currency fluctuations as the U.S. dollar weakened against the relevant European currencies, price increase initiatives across all regions and most of our major product markets. Sales volumes decreased mainly in Europe and the Americas as a result of lower demand in the coatings, construction, sport and electronics market groups. This was partially offset with sales volume growth in the adhesives and power market groups in Asia.

Materials and Effects segment EBITDA was $198.8 million for the year ended December 31, 2007 an increase of $44.7 million, or 29%, as compared to 2006. The textile effects business, which was acquired in June 2006, contributed $28.9 million to the increase in segment EBITDA for the year ended December 31, 2007 resulting primarily from a full year of EBITDA in 2007 as compared with six months in 2006, while advanced materials EBITDA for 2007 increased by $15.8 million, or 11%, as compared to 2006. Advanced materials segment EBITDA increased as a result of higher contribution margins on increased average selling prices, partially offset by higher manufacturing and selling, general and administrative costs which were negatively impacted by exchange rates as the U.S. dollar weakened against the relevant European currencies. During the year ended December 31, 2007, our Materials and Effects segment recorded restructuring, impairment and plant closing charges of $24.9 million as compared to $3.8 million in 2006. For further information concerning restructuring activities, see "Note 11. Restructuring, Impairment and Plant Closing Costs" to our consolidated financial statements included elsewhere in this report.


MANAGEMENT DISCUSSION FOR LATEST QUARTER

FORWARD-LOOKING STATEMENTS

Certain information set forth in this report contains "forward-looking statements" within the meaning of the 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," "should," "anticipates," or "intends" 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.

There are a number of risks and uncertainties that could cause our actual results to differ materially from the forward-looking statements contained in or contemplated by this report. Any forward-looking statements should be considered in light of the risks referenced in "Part II. Item 1A. Risk Factors" in this report and in "Part I. Item 1A. Risk Factors" included in our Annual Report on Form 10-K for the year ended December 31, 2007.

OVERVIEW

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, 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, epoxy-based polymer formulations, textile chemicals, dyes, maleic anhydride and titanium dioxide. We had revenues for the nine months ended September 30, 2008 and 2007 of $8,166.6 million and $7,146.9 million, respectively.

We currently report our operations in six segments: Polyurethanes, Materials and Effects, Performance Products, Pigments, Polymers and Base Chemicals. Our Polyurethanes, Materials and Effects and Performance Products segments produce organic differentiated chemical products and our Pigments segment produces inorganic chemical products. Our former Polymers and Base Chemicals segments produced commodity chemical products prior to the dispositions discussed in "Note 3. Discontinued Operations" to our condensed consolidated financial statements (unaudited) included elsewhere in this report.

RECENT DEVELOPMENTS

Merger Agreement and Related Litigation

On July 12, 2007, we entered into an Agreement and Plan of Merger (the "Merger Agreement") with Hexion and its subsidiary, Nimbus Merger Sub Inc. ("Nimbus"), pursuant to which Hexion agreed to acquire all of our outstanding common stock for $28.00 per share in cash (the "Merger"). Under the terms of the Merger Agreement, the $28.00 per share cash price to be paid by Hexion increases at the rate of 8% per annum (inclusive of any dividends paid) beginning April 6, 2008 and continuing through the closing date of the Merger. On October 16, 2007, stockholders holding a majority of shares of our common stock entitled to vote thereon approved a proposal to adopt the Merger Agreement.

On June 18, 2008, Hexion, its private equity sponsor Apollo Management, L.P. ("Apollo") and certain of their affiliates ("Plaintiffs") filed an action for declaratory judgment against us in Delaware Chancery Court. Through that action, Plaintiffs sought to avoid their obligations under the Merger Agreement. The action sought declarations from the court that:

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Hexion was not obligated to consummate the Merger if the combined company would be insolvent following the consummation of the Merger and that Hexion's liability for failure to consummate the Merger in such a circumstance would be limited to $325 million.

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Since execution of the Merger Agreement, our Company had suffered a material adverse effect in its business, and that, if the conditions to closing were measured at the time that Hexion filed its lawsuit, Hexion would have no obligation to make any payment to our Company in connection with the Merger.

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Neither Apollo nor any of its current or former partners, stockholders, managers, employees, representatives, members, affiliates or agents have any obligation or liability of any type whatsoever, whether in contract, tort or otherwise, to our Company under or in connection with the negotiation, execution or performance of the Merger Agreement or any of the transactions contemplated thereunder.

On June 23, 2008, we sued Apollo and its founding partners, Leon Black and Joshua Harris, in the District Court of Montgomery County, Texas, for tortiously interfering with our previously executed merger agreement (the "Basell Merger Agreement") with Basell AF ("Basell") and one of its subsidiaries. Our original petition alleges, among other things, that Apollo and Messrs. Black and Harris wrongfully caused us to terminate our agreement with Basell by offering a counterproposal at a purchase price that they never intended to pay. Our original petition seeks damages from Apollo equal to the difference between the price per share at which Basell had agreed to acquire us ($25.25 per share) less the decline in our stock price caused by Hexion's attempt to scuttle the Merger Agreement.

On July 4, 2008, we exercised our right under the Merger Agreement to extend the termination date of the Merger by 90 days from July 4, 2008 to October 2, 2008. Beginning on the termination date, if the Merger has not yet been consummated, the Merger Agreement may be terminated by either party at any time, unless such party's failure to fulfill any material covenant or agreement in the Merger Agreement has been the cause or resulted in the failure of the Merger to be consummated.

On September 8, 2008, trial began before Vice Chancellor Stephen P. Lamb in the Court of Chancery of the State of Delaware. At trial, the issues before the Court were limited to whether a material adverse effect had occurred; whether any damages that might later be awarded to us should be limited to the $325 million reverse termination fee stipulated in the Merger Agreement; and whether we had invalidly extended the Merger Agreement's termination date. Trial continued through September 16, 2008. Following trial, parties submitted post-trial briefs. The matter was fully briefed and before the Court on September 19, 2008. On September 29, 2008, Vice Chancellor Lamb issued an Opinion and an Order and Final Partial Judgment. A copy of the Opinion and Order are attached to our current report on Form 8-K filed on September 30, 2008.

Among other things, Vice Chancellor Lamb ruled that we had not suffered a material adverse effect in our business, that Hexion knowingly and intentionally breached numerous of its covenants under the Merger Agreement (as a result of which Hexion's damages for failing to consummate the Merger would not be limited to $325 million) and that we had properly extended the Merger Agreement. Vice Chancellor Lamb ordered Hexion to specifically perform its covenants under the Merger Agreement, including its covenants to (i) use reasonable best efforts to consummate the merger and financing provided under the commitment letter provided to Hexion (the "Commitment Letter") by affiliates of Credit Suisse and Deutsche Bank A.G. (the "Lenders"), (ii) refrain from taking any further action that could reasonably be expected to materially impair, delay, or prevent consummation of the financing contemplated by the Commitment Letter or any alternate financing (as that term is defined by the Merger Agreement), and (iii) take all actions necessary to obtain antitrust approval for the Merger by October 2, 2008. Vice Chancellor Lamb reserved ruling on the remaining issues in the parties' pleadings, including whether Plaintiffs' breaches have caused Huntsman damage in excess of the $325 million termination fee. On October 28, 2008, Hexion filed a notice of appeal of Vice Chancellor Lamb's judgment with the Delaware Supreme Court.

On September 30, 2008, we filed suit in the 9th Judicial District Court in Montgomery County, Texas against the Lenders alleging, among other things, that these institutions had conspired with Apollo to tortiously interfere with the Basell Merger Agreement. Trial is scheduled to begin on February 9, 2009.

During the Delaware trial, a group of our stockholders consisting of affiliates of D.E. Shaw, Citadel and MatlinPatterson, along with certain members of the Huntsman family and entities controlled by them, proposed to commit to providing us with cash payments contingent on and in connection with the closing of the Merger in an aggregate amount of approximately $416.5 million. These same stockholders had offered to purchase from Hexion contingent value rights ("CVRs") in the combined Hexion/Huntsman entity but Hexion rejected their offer. The cash payments offered by these stockholders and the Huntsman family stockholders were intended to "backstop" the CVR proposal in the event Hexion continued to reject the CVRs or other financing proposals. We accepted these "backstop commitments" on September 11, 2008. Subsequently, other shareholders made similar backstop commitments of $63.6 million in the aggregate. On October 9, 2008, Hexion issued a press release announcing that affiliates of Apollo had agreed to make a capital contribution of $540 million to Hexion to assist it in closing the Merger. Hexion also announced that Apollo had agreed to waive its transaction fee, estimated at approximately $100 million, in connection with the Merger and suspend for three years its ongoing monitoring fees from Hexion. Apollo's fee waivers and equity commitment were conditioned upon the consummation of the Merger.

On October 26, 2008, affiliates of D.E. Shaw, Citadel and MatlinPatterson agreed to amend their backstop commitments to increase the closing date cash payment by them by approximately $216.5 million, contingent on the consummation of the Merger and a further commitment by Apollo to increase its equity commitment from $540 million to $750 million. Hexion announced on October 27, 2008 that Apollo had agreed to increase its equity commitment to $750 million. All of the backstop commitments expired on November 2, 2008 in accordance with their terms because the Merger was not consummated.

On October 8, 2008, Hexion announced that Nimbus is offering to purchase for cash any and all outstanding notes of Huntsman International on the terms and subject to the conditions set forth in the Offer to Purchase and Consent Solicitation Statement dated October 8, 2008 and the accompanying Letter of Transmittal and Consent (the "Nimbus Offering Documents"). Nimbus is also seeking consents to eliminate most of the restrictive covenants and liens in the indentures under which the notes were issued. The tender offers are subject to a number of customary conditions set forth in the Nimbus Offering Documents, including the consummation of the Merger and the receipt of requisite consents. The tender offers were originally set to expire on November 5, 2008, but have been extended by Nimbus until November 17, 2008. Nimbus may further extend or early terminate the tender offers in its sole discretion. This report is not an offer to purchase, a solicitation of an offer to sell or a solicitation of consents with respect to the notes.

Following the Delaware action, Hexion and our Company agreed to schedule the closing of the Merger Agreement for October 28, 2008.

The Commitment Letter requires that the Lenders be provided, at closing, with either (i) a solvency opinion of a reputable valuation firm, (ii) a solvency certificate signed by the chief financial officer of Hexion or (iii) a solvency certificate signed by our chief financial officer. This closing condition could be satisfied if any one of the opinions/certificates described in the preceding sentence was delivered and was in a form customary for transactions involving portfolio companies of Apollo.

On September 12, 2008, we announced that we had engaged a reputable valuation firm, American Appraisal Associates, Inc. ("American Appraisal"), to provide an opinion that the combined Hexion/Huntsman entity was solvent based on traditional solvency tests. On October 23, 2008, five days prior to the anticipated closing, American Appraisal provided us with a solvency opinion that the combined entity was solvent. On October 28, 2008, American Appraisal issued an additional opinion that the combined entity was solvent, and our chief financial officer, J. Kimo Esplin, executed a certificate, in his capacity as our chief financial officer, that the combined entity was solvent. However, very late on the evening of October 27, 2008, the Lenders sent a letter to Hexion stating that the Lenders did not believe that the solvency opinion and certificate proposed to be provided met the condition of the Commitment Letter and effectively said that, as a result, the Lenders would not fund the proposed closing of the Merger scheduled for October 28, 2008.

Hexion sent the Lenders a reply letter disputing the Lenders' position and noting that both the American Appraisal opinion and the certificate of our chief financial officer were in forms customary for transactions involving Apollo portfolio companies. Because the Lenders continued to refuse to fund, Hexion brought suit against the Lenders in the Supreme Court of the State of New York, New York County on October 29, 2008 seeking specific performance of the Lenders' commitment under the Commitment Letter. Hexion also sought an order temporarily restraining the Lenders from terminating the Commitment Letter. On October 31, 2008, the court refused to grant Hexion a preliminary injunction preventing termination of the Commitment Letter. A trial is scheduled for January 8, 2009 to determine whether the Lenders will be required to specifically perform their obligations under the Commitment Letter.

We intend to continue to zealously pursue our multi-billion dollar actions against Hexion and Apollo in Delaware and against Apollo, Leon Black, Josh Harris and the Lenders in Texas.

Three Months Ended September 30, 2008 Compared with Three Months Ended September 30, 2007

For the three months ended September 30, 2008, we had a net loss of $20.2 million on revenues of $2,730.5 million, compared with a net loss of $150.0 million on revenues of $2,423.8 million for the 2007 period. For the three months ended September 30, 2008, Huntsman International had net income of $9.5 million on revenues of $2,730.5 million compared with net income of $47.8 million on revenues of $2,423.8 million for the 2007 period. The decrease of $129.8 million in our net loss and the decrease of $38.3 million in Huntsman International's net income was the result of the following items:

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Revenues for the three months ended September 30, 2008 increased by $306.7 million, or 13%, as compared with the 2007 period due principally to higher average selling prices in all of our segments and higher sales volumes in our Polyurethanes segment, partially offset by lower sales volumes in our Materials and Effects, Performance Products and Pigments segments. For more information, see "—Segment Analysis" below.

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Our gross profit and the gross profit of Huntsman International for the three months ended September 30, 2008 decreased by $49.9 million and $49.8 million, respectively, or 12% each, as compared with the 2007 period. Lower gross profit in our Polyurethanes segment, was offset somewhat by higher gross profit in our Materials and Effects, Performance Products and Pigments segments. For more information, see "—Segment Analysis" below.

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Our operating expenses and the operating expenses of Huntsman International for the three months ended September 30, 2008 decreased by $5.2 million and $5.9 million, respectively, or 2% each, as compared with the 2007 period. The decrease resulted primarily from a $19.8 million increase in foreign exchange gains ($12.2 million of gains in the 2008 period as compared with $7.6 million of losses in the 2007 period), partially offset by a $3.4 million increase in research and development costs and higher overall selling, general and administrative costs, which largely resulted from the weakening of the U.S. dollar versus relevant currencies.

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Restructuring, impairment and plant closing costs for the three months ended September 30, 2008 decreased to $3.6 million from $9.1 million in the 2007 period. For more information concerning restructuring activities, see "Note 6. Restructuring, Impairment and Plant Closing Costs" to our condensed consolidated financial statements (unaudited) included elsewhere in this report.

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Our net interest expense and the net interest expense of Huntsman International for the three months ended September 30, 2008 decreased by $3.3 million and $3.5 million, respectively, or 5% each, as compared with the 2007 period. This decrease was primarily due to lower average interest rates on borrowings.

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Expenses associated with the Merger consisted primarily of Merger-related professional fees. For more information regarding these Merger-related expenses, see "Note 15. Expenses Associated with the Merger" to our condensed consolidated financial statements (unaudited) included elsewhere in this report.

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Our income tax expense and Huntsman International's tax expense increased by $30.8 million and $20.7 million, respectively, as compared with the same period in 2007. Our and Huntsman International's tax obligations are affected by the mix of income and losses in the tax jurisdictions in which we operate. For further information concerning taxes, see "Note 20. Income Taxes" to our condensed consolidated financial statements (unaudited) included elsewhere in this report

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The income (loss) from discontinued operations represents the operating results and impairment and gain (loss) on disposal with respect to each of our U.S. base chemicals business, our North American polymers business, our European base chemicals and polymers business and our TDI business. For more information, see "Note 3. Discontinued Operations" to our condensed consolidated financial statements (unaudited) included elsewhere in this report.

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The extraordinary gain on the acquisition of a business relates to the June 30, 2006 acquisition of our textile effects business. During the three months ended September 30, 2008, we recorded an extraordinary gain on the acquisition of $1.6 million related to the reversal of accruals for certain employee termination costs recorded in connection with the Textile Effects Acquisition that were no longer deemed necessary.

Polyurethanes

For the three months ended September 30, 2008, Polyurethanes segment revenues increased as a result of both higher average selling prices and increased sales volumes. MDI average selling prices increased by 6% primarily due to global price increase initiatives and, in Europe, primarily due to the strength of other relevant currencies versus the U.S. dollar. Average selling prices for MTBE increased by 28% due to improved market demand as well as in response to higher raw material costs. The increase in Polyurethanes segment sales volumes was primarily driven by continued growth in Europe and was partially offset by lower sales volumes in the Americas, resulting from slower construction-related demand and production outages caused by the recent U.S. Gulf Coast storms, and by lower sales volumes in Asia, resulting from Olympics-related production restrictions. Segment EBITDA decreased principally on lower margins, as sharply higher raw material and energy costs and effects of the recent U.S. Gulf Coast storms more than offset improved average selling prices and sales volumes.

Materials and Effects

For the three months ended September 30, 2008, Materials and Effects segment revenues increased primarily as a result of higher average selling prices. Average selling prices increased as a result of price increase initiatives in certain markets and regions and foreign exchange movements as the U.S. dollar weakened against other relevant currencies. Sales volumes were lower for the three months ended September 30, 2008 as compared to the same period of 2007. In our advanced materials products, sales volumes decreased by 4% primarily as a result of lower demand in Europe (whereas demand in the U.S. remained consistent). Sales volumes in our textile effects products decreased by 18% primarily as a result of lower demand for dyes and chemicals in all regions as well as Olympics-related production restrictions in China. Segment EBITDA decreased primarily due to higher raw material and energy costs. Segment EBITDA from our advanced materials products increased by $2.6 million, as higher manufacturing and energy costs were more than offset by lower selling, general and administrative expenses. Segment EBITDA from our textile effects products decreased by $5.0 million due to higher fixed costs and increased selling, general and administrative costs that resulted primarily from the strength of other relevant currencies relative to the U.S. dollar. During the three months ended September 30, 2008 and 2007, our Materials and Effects segment recorded restructuring and plant closing charges of $1.5 million and $4.2 million, respectively. For more information concerning restructuring activities, see "Note 6. Restructuring, Impairment and Plant Closing Costs" to our condensed consolidated financial statements (unaudited) included elsewhere in this report.

Performance Products

For the three months ended September 30, 2008, Performance Products segment revenues increased primarily due to a rise in selling prices and higher toll manufacturing revenues, offset by lower sales volumes. Average selling prices rose in response to higher raw material costs and as a result of foreign exchange movements as the U.S. dollar weakened against other relevant currencies. The reduction in sales volumes was primarily due to the conversion of most of our ethylene glycol business to a toll manufacturing operation in 2008 and lower surfactant sales that more than offset volume increases in other product groups. Segment EBITDA increased principally on increased volumes of higher margin products and expanded margins as higher average selling prices more than offset increases in raw material, energy and fixed costs.

Pigments

For the three months ended September 30, 2008, Pigments segment revenues increased primarily as a result of higher average selling prices partially offset by a decrease in sales volumes. Average selling prices increased primarily due to price increase initiatives and the strength of relevant currencies relative to the U.S. dollar, as local currency selling prices were higher in all global markets. Sales volumes were lower primarily due to lower demand in Europe. Segment EBITDA increased principally due to higher margins as higher local currency average selling prices more than offset increases in raw material and energy costs.

Corporate and Other—Huntsman Corporation

Corporate and Other includes unallocated corporate overhead, foreign exchange gains and losses, loss on accounts receivable securitization program, loss on the early extinguishment of debt, other non-operating income and expense, minority interest in subsidiaries' (income) loss, extraordinary gain (loss) on acquisition of a business, Merger-related expenses and the operating results of our Australian styrenics business. The increase in EBITDA from Corporate and Other for the three months ended September 30, 2008 resulted primarily from a $179.2 million decrease in expenses associated with the Merger ($25.8 million recorded in the 2008 period compared to $205.0 million in the 2007 period). For more information regarding these Merger-related expenses, see "Note 15. Expenses Associated with the Merger" to our condensed consolidated financial statements (unaudited) included elsewhere in this report. Additionally, EBITDA was higher for the the three months ended September 30, 2008 due to a $7.7 million increase in foreign exchange gains ($3.8 million in gains for the 2008 period compared to losses of $3.9 million during the 2007 period). These increases to EBITDA were offset somewhat by a $3.4 million decrease in minority interests in subsidiaries' loss.

Corporate and Other—Huntsman International

Corporate and Other includes unallocated corporate overhead, foreign exchange gains and losses, loss on accounts receivable securitization program, loss on the early extinguishment of debt, other non-operating income and expense, minority interest in subsidiaries' (income) loss, extraordinary gain (loss) on acquisition of a business, and the operating results of our Australian styrenics business. The increase in EBITDA from Corporate and Other for the three months ended September 30, 2008 resulted primarily from a $7.7 million increase in foreign exchange gains ($3.8 million in gains for the 2008 period compared to losses of $3.9 million during the 2007 period). This increase to EBITDA was offset somewhat by a $3.4 million decrease in minority interests in subsidiaries' loss.

Polymers

The operating results of our North American polymers business are classified as discontinued operations, and, accordingly, the revenues of this business are excluded from the Polymers segment revenues for all periods presented. The EBITDA of our North American polymers business is included in the Polymers segment EBITDA for all periods presented.

The EBITDA in the 2007 period resulted from post-closing adjustments related to the North American Polymers Disposition. For more information, see "Note 3. Discontinued Operations—North American Polymers Business" to our condensed consolidated financial statements (unaudited) included elsewhere in this report.

Base Chemicals

The operating results of our base chemicals business are classified as discontinued operations, and, accordingly, the revenues of this business are excluded from the Base Chemicals segment revenues for all periods presented. The EBITDA of our base chemicals business is included in the Base Chemicals segment EBITDA for all periods presented.

For the three months ended September 30, 2008, Base Chemicals segment EBITDA increased to $1.3 million, as compared with a loss of $14.4 million in the 2007 period. This increase in Base Chemicals segment EBITDA resulted from adjustments to the losses recorded in connection with the U.S. Base Chemicals Disposition and the U.K. Petrochemicals Disposition. For more information, see "Note 3. Discontinued Operations—U.S. Base Chemicals Business" and "Note 3. Discontinued Operations—European Base Chemicals and Polymers Business" to our condensed consolidated financial statements (unaudited) included elsewhere in this report.

Nine Months Ended September 30, 2008 Compared with Nine Months Ended September 30, 2007

For the nine months ended September 30, 2008, we had net income of $10.8 million on revenues of $8,166.6 million, compared with a net loss of $174.3 million on revenues of $7,146.9 million for the 2007 period. For the nine months ended September 30, 2008, Huntsman International had net income of $53.1 million on revenues of $8,166.6 million compared with a net loss of $7.0 million on revenues of $7,146.9 million for the 2007 period. The increase of $185.1 million in our net income and the increase of $60.1 million in Huntsman International's net income was the result of the following items:

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Revenues for the nine months ended September 30, 2008 increased by $1,019.7 million, or 14%, as compared with the 2007 period due principally to higher average selling prices in all of our segments and higher sales volumes in our Polyurethanes, partially offset by lower sales volumes in our and Materials and Effects, Performance Products and Pigments segments. For more information, see "—Segment Analysis" below.

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Our gross profit and the gross profit of Huntsman International for the nine months ended September 30, 2008 decreased by $80.1 million and $79.7 million, respectively, or 7% each, as compared with the 2007 period. Gross profit was lower in all of our segments except Performance Products. For more information, see "—Segment Analysis" below.

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Our operating expenses and the operating expenses of Huntsman International for the nine months ended September 30, 2008 increased by $44.2 million and $44.6 million, respectively, or 6% each, as compared with the 2007 period. The increase resulted primarily from a $13.4 million increase in research and development costs and higher overall selling, general and administrative costs, which largely resulted from the weakening of the U.S. dollar versus other relevant currencies. These increased expenses were partially offset by an $11.3 million increase in foreign exchange gains ($0.1 million of gains in the 2008 period as compared with $11.2 million of losses in the 2007 period),

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Restructuring, impairment and plant closing costs for the nine months ended September 30, 2008 decreased to $8.6 million from $33.5 million in the 2007 period. For more information concerning restructuring activities, see "Note 6 Restructuring, Impairment and Plant Closing Costs" to our condensed consolidated financial statements (unaudited) included elsewhere in this report.

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Our net interest expense and the net interest expense of Huntsman International for the nine months ended September 30, 2008 decreased by $16.8 million and $17.4 million, respectively, or 8% each, as compared with the 2007 period. This decrease was primarily due to lower average interest rates on borrowings.

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Expenses associated with the Merger for the nine months ended September 30, 2008 consisted primarily of Merger-related professional fees and board of directors fees. For the nine months ended September 30, 2007, the expenses consisted primarily of Merger-related legal fees and the Basell Termination Fee. For more information regarding these Merger-related expenses, see "Note 15. Expenses Associated with the Merger" to our condensed consolidated financial statements (unaudited) included elsewhere in this report.

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Our income tax expense and Huntsman International's tax expense increased by $51.0 million and $6.8 million, respectively, as compared with the same period in 2007. Our and Huntsman International's tax obligations are affected by the mix of income and losses in the tax jurisdictions in which we operate. On April 12, 2007, we received a Revenue Agent Report from the IRS related to the examination of our federal income tax returns for the years 2002 through 2004. The IRS initially proposed a decrease to our net operating losses of approximately $387 million related to transactions completed in 2002. However, on January 5, 2008, we were notified by the IRS that no adjustment would be made to our net operating loss for this disputed item. As a result of the settlement of this audit cycle and the effective settlement of two uncertain tax positions in other countries, during the nine months ended September 30, 2008, we recorded a decrease in unrecognized tax benefits and a corresponding income tax benefit of $18.4 million. For further information concerning taxes, see "Note 20. Income Taxes" to our condensed consolidated financial statements (unaudited) included elsewhere in this report.

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The income (loss) from discontinued operations represents the operating results and impairment and gain (loss) on disposal with respect to each of our U.S. base chemicals business, our North American polymers business, our European base chemicals and polymers business and our TDI business. For more information, see "Note 3. Discontinued Operations" to our condensed consolidated financial statements (unaudited) included elsewhere in this report.

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The extraordinary gain (loss) on the acquisition of a business relates to the June 30, 2006 acquisition of our textile effects business. During the nine months ended September 30, 2008, we recorded an extraordinary gain on the acquisition of $10.4 million related to the reversal of accruals for certain employee termination costs recorded in connection with the Textile Effects Acquisition that were no longer deemed necessary and a reimbursement by Ciba of certain restructuring costs associated with the acquisition. During the nine months ended September 30, 2007, we adjusted the preliminary purchase price allocation and finalized post-closing working capital adjustments, resulting in our recording an extraordinary loss on the acquisition of $6.5 million.

CONF CALL

Kurt Ogden - Investor Relations

Thank you, operator, and good morning everyone. My name is Kurt Ogden from Huntsman Corporation's Investor Relations. Welcome to Huntsman's investor conference call for the third quarter of 2008. Joining us on the call today, are, John Huntsman, the Founder and Chairman of our company, Peter Huntsman, our President and CEO, and Kimo Esplin our Executive Vice President and CFO.

A recorded playback of this call will be available until midnight, November 13, 2008. The recorded playback may be accessed from the US by dialing 1-888-286-8010 and from outside the US by dialing 1-617-801-6888. The access code for both dial-in numbers is 83791974. A recording of this call may also be accessed through our website. Before we begin our discussion of our earnings, I would like to say a few words about forward-looking statements.

Statements made during this conference call, that are not historical facts are forward-looking statements. Such statements are to be considered predictions or expectations that are subject to a number of risks and uncertainties. Our actual results could differ materially based on a number of factors, including but not limited to the consumption timing of our proposed merger with Hexion, the impact of the ongoing litigation related to the merger, future global economic conditions, changes in the prices of our raw materials and the energy we consume in our production processes, access to capital markets, industry production capacity and operating rates, the supply demand balance for our products and that of competing products, pricing pressures, technological developments, changes in governmental regulations, geopolitical events and other risk factors.

Please refer to our most recent 10-K, 10-Q and our other public filings for a more complete discussion of the risk factors applicable to our company and our announced plan to merge with Hexion.

Before I walk through a summary of our earnings, I would like to outline the format for today's call. I will summarize the earnings and then turn the call over to Kimo Esplin, who will address the impact of hurricanes Gustav and Ike, provide and update on capital spending and liquidity and discuss the current status of the merger with Hexion.

Finally, Peter Huntsman will review the performance of our business and each of the divisions in the quarter. Unfortunately given the pending merger with Hexion and litigation relating to this merger, we will not be able to take any of your questions following the conclusion of Peter's remarks.

I know that many of you had questions in this regard and we expect that additional details related to these issue and others will be made public by either Huntsman or Hexion in the coming weeks and months, however, at this time we are not in a position to provide any information beyond that which has been provided in our recent public filings.

Turning to earnings, I would like to point our that as I summarize earnings, I will be referring to adjusted EBITDA from continuing operations which is EBITDA adjusted to exclude the impact of discontinued operations, restructuring impairment and plant closing costs, merger associated expenses, the sale of accounts receivable, unallocated foreign exchange gains and losses and extraordinary gains and losses related to the purchase of the business.

In the third quarter of 2008, we recorded a net cost of $28.9 million related to such costs and expenses of which $25.8 million were related to merger in the third quarter of 2007. We recorded aggregate net cost of $232.3 million related to such costs and expenses of which $205 million were related to the merger.

We focus on adjusted EBITDA from a management's standpoint as we believe it is the best measure of the underlying performance of operations, and we have received feedback that we incurred $49 million of costs and lost profit margin that impacted our adjusted EBITDA in the third quarter of 2008 due to hurricanes Gustav and Ike.

Excluding the impact of the merger, the third quarter 2008 adjusted EBITDA would have exceeded the third quarter 2007 and second quarter 2008 results.

Net loss available to common stockholders for the third quarter of 2008 was $20.2 million or $0.09 per diluted share. This compares to net income available to common stockholders for the second quarter of 2008 of $23.7 million or $0.10 per diluted share and net loss of $150 million or a loss of $0.68 per share in the third quarter of 2007. Excluding the after tax impact relating to merger associated expenses, losses due to restructuring cost, the impact of discontinued operations, extraordinary gains on the acquisition of a business and unallocated foreign exchange gains and losses, adjusted net loss from continuing operations was 1.9 million or $0.1 per diluted share. Including an approximate $0.14 per share related to the hurricanes. This compares to 19.9 million of adjusted net income from continuing operations or $0.9 per diluted share for the second quarter of 2008 and 80 million or $0.34 per share in the third quarter of 2007.

On an adjusted basis, including the hurricane impact of 49 million, third quarter results decreased as compared to the previous year as stronger results in our performance products and pigments divisions were more than offset by lower results in our polyurethane and materials in effect division.

Corporate and unallocated expenses were also higher in the 2008 period compared to 2007, primarily due to higher minority interest in certain of our subsidiaries income. On a sequential basis including the hurricane impact of 49 million, adjusted EBITDA decreased by 15.9 million, as stronger results in performance products and pigments were more than offset by lower results in polyurethanes materials in effects and higher corporate and other charges. With that I will turn the call over to Kimo Esplin, our CFO.

J. Kimo Esplin - Executive Vice President and Chief Financial Officer

Thanks Kurt. I will begin my remarks with some comments on the financial impact caused by Hurricanes, Gustav and Ike. These hurricanes hit the US Gulf coast in September this year. In preparation for those hurricanes, certain facilities were shutdown in an orderly process to minimize the storm effects.

Fortunately all of our associates were safe and the damage was minimized. Although the circumstances surrounding each facility were different and unique, the facilities remained inoperable for a number of days and in certain cases weeks.

During the third quarter the impact of unabsorbed fixed costs, as well as repairs, was approximately $21 million. Additionally we incurred lost profit margin of an additional $28 million for a total third quarter hurricane adjusted EBITDA impact of $49 million. The effects of the hurricane in the fourth quarter are estimated to be $18 million.

All of the impacted plants are now back up and running, while all our operations are insured against physical damage and business interruptions, in neither case did we exceed our deductibles.

Our capital expenditures in the third quarter were $101 million. Consistent with our prior guidance we expect to spend between 440 and 450 million this year. Our annual required maintenance capital expenditures including environmental health and safety is approximately a 100 to a 150 million for the entire company.

All discretionary spending is allocated through a very disciplined process, based on a risk adjusted return threshold. We expect capital spending in 2009 to be considerably below depreciation which runs approximately $400 million annually.

From a liquidity perspective we had approximately $536 million of cash and unused borrowing capacity at the end of the third quarter. At September 30, our total debt… our total net debt, including our off balance sheet AR securitization program stood at approximately 4.3 billion, which was slightly lower than at June 30, 2008.

During the third quarter net change in accounts receivable, inventory, and payables, including receivables sold into our off balance sheet AR securitization program was flat. Receivables in general were lower as a result of the impact from the hurricanes, while inventories were modestly higher, as raw material prices decline from previous high commodity price environment, we expect that net working capital levels will reduce. We are in the process of amending and extending our AR securitization facility that currently matures in April of 2009, and expect to complete this in the next several weeks. The AR securitization facility will be extended 364 days from the date of amendment.

I would like to take a moment on our ongoing litigation with Hexion, Apollo and the banks related to the merger. At the end of September we won a decisive legal victory in the Delaware Court of Chancery, Vice Chancellor Lamb denied all declarations sought by Apollo and Hexion in their suit in which they asked that the Chancery Court excuse Hexion from its obligation to consummate the merger.

The court soundly rejected Hexion's allegations that Huntsman had suffered a material adverse affect and that a solvency certificate or opinion could not be provided for the combined Hexion, Huntsman entity at the closing, and ordered Hexion to specifically perform it covenants under the merger agreement, including using its reasonable best efforts to take all actions necessary and proper to consummate the merger.

The Delaware Court also held that Hexion knowingly and intentionally breached numerous covenants under the merger agreement and as a result of this we may seek uncapped damages from Hexion if the merger is not consummated. Apollo and Hexion have appealed the court's decision, following the Delaware decision Huntsman and Hexion agreed to schedule the closing of the merger for October 28.

On September 30, the day after the Delaware decision we filed a suit in Texas against Credit Suisse and Deutsche Bank, the lenders who had signed the commitment letter to finance the merger, alleging fraud, tortuous interference and conspiracy with Apollo to interfere with the merger agreement we had entered in to with Basel in June 2007.

The Texas Court set a jury trial date for February 9, 2009, and imposed a temporary injunction in joining the banks from filing any lawsuit, seeking to declare the combined Hexion-Huntsman entity would be insolvent. The temporary injunction was unanimously affirmed by the Texas Court of Appeals and later expired on November 1st.

On October 23rd American Appraisal, a leading valuation firm provided us with a written solvency opinion concluding that the combined Hexion and Huntsman entity would be solvent under all the solvency tests commonly used in this type of transaction.

At the time of closing, ISE issued a signed solvency certificate in my capacity as CFO of Huntsman Corporation in a form similar to those used by other Apollo portfolio companies in past transactions. Despite this, late in the evening of October 27, Hexion informed us that they had received a letter from the banks stating that the banks did not believe the solvency certificate and opinion provided by American Appraisal met the condition of their commitment letter, effectively saying that as a result, the banks would not fund the proposed closing of the merger on October 28th.

On October 29th, Hexion filed suit against the banks in New York asking for the court to order the banks to perform their commitment under the commitment letter and fund the merger closing and for the court to issue a temporary injunction, preventing the banks from terminating the commitment letter.

On October 31st, the court denied Hexion's request for temporary injunction. Hexion did not appeal. A trial in New York has been set forth January 8, 2009 to determine whether the banks will be required to specifically perform under the commitment letter that expired on November 1st, 2008.

We intend to continue to zealously pursue our multi-billion dollar actions against Hexion and Apollo in Delaware and against Apollo, Leon Black, Josh Harris, Credit Suisse and Deutsche Bank in Texas.

In the meantime, our priorities will remain unchanged to operate our facilities in a safe manner to continue to serve the needs of our customers and to continue to execute on our various growth and efficiency initiatives.

With that, I will turn the call over to Peter.

Peter R. Huntsman - President and Chief Executive Officer

Kimo, thank you very much, and thank you all for taking the time to join us this morning. Excluding the approximate $49 million impact of Hurricane Gustav and Ike, our third quarter results were very solid.

The third quarter adjusted EBITDA from continuing operations excluding the hurricane impact was approximately $243 million. In line with the prior year's results of $240 million is significantly greater than the second quarter of $210 million.

These solid results were achieved despite the continued significant headwind in the form of higher raw material and energy cost measured on sequential and year-over-year basis. By way the example, the two key benchmarks, crude oil and natural gas were up 56% and 70%, respectively, compared to the third quarter of 2007, which had the effect of pushing of direct cost of $360 million.

The good news is that the price for these benchmarks have come off their peaks. While we saw material costs fall during the later part of the third quarter, we experienced a $170 million increase in our direct cost as we work through our inventories.

During the fourth quarter, we are seeing the cost of our inventory decrease. On a historical basis, generally about… generally for every $10 change in crude oil, our three largest raw materials, butane, benzene, and ethane will change annually by approximately $140 million. For every $1 movement in natural gas, our cost will change approximately $24 million annually.

Our ability to capture this extra margin depends on how well we are able to maintain prices with our finished products. In response to the rising raw material costs, we initiated swift and sustained price increases with our customers earlier this year across every division. These obviously differed in amount by product and region but selling prices are higher around the world.

Depending on market conditions and contractual price protection, the effects of the announced price movement, generally take two to three months to work their way into our P&L. During the third quarter, we realized an uplift in price of approximately $300 million compared to previous year and $40 million compared to the second quarter of this year.

Our polyurethanes business was impacted by the previously mentioned hurricane by approximately $39 million, more than any of our other division. We have done everything possible to work with and fulfill our customers' needs; in fact, we've gone as far as airship product to certain of our customers in order to keep them going during the hurricane outage. It is a credit to our polyurethanes team that we did not lose a single customer during this time period.

Third quarter earnings were impacted further by raw material cost increases and softer demand. We continue to experience higher manufacturing cost more specifically due to higher benzene, natural gas, propylene, ammonia and caustic soda. In fact this year, our cost to produce MDI is up well over 20%, versus the end of last year. More specifically, during the third quarter, benzene cost rose 10% compared to the second quarter. Global MDI demand has slowed down a bit, although as an industry, we estimate at this time the global MDI growth this year will still be up about 6% over 2007. As expected, our MDI volumes decreased compared to the second quarter as we felt the impact of the Chinese Olympics and a slow August, as Europe take vacation during this time period.

Looking at demand on a regional basis, Asia demand was softer due to the Chinese government imposed manufacturing restriction leading up to the Olympics, and then a slower than expected post Olympic recovery. During the later part o the third quarter, moving into the fourth quarter, we are seeing a slow down in Chinese demand and through out the rest of Asia. This is particularly true for chemicals that service export oriented markets.

Approximately 60% of our MDI sold in china is for domestic consumption. While we are experiencing a slowing in demand, I think we are well positioned in this particular market that we will recover sooner than export oriented applications.

In Europe, which is currently our largest market, we saw solid growth during the quarter fueled somewhat by eastern European emerging markets and demand in the Middle East. In the Americas, the Hurricane outage negatively impacted volumes and in addition construction related demand was softer as credit tightened and housing starts decreased further.

On a pricing side, the average for MDI was up about 1% as compared to the second quarter despite the strengthening of the dollar versus the euro. The good news here is that we put in place series of price increase initiatives across a range of products, which took effect in the third quarter in both Europe and Americas. With record high raw material costs, we expect to hold on to these increases even after raw material prices recede as we work through our higher valued inventories.

As a point of reference, benzene costs in the third quarter 2007, were $3.55 per gallon, in the second quarter of 2008 it was $4.36 per gallon, currently it is approximately $1.62 per gallon. Keep in mind that significant number of customers have mechanisms build into their contracts that allow for a pass through, both up and down, of certain key raw material costs. Propylene oxide and co-product MTBE business enjoyed healthy margins during the quarter. Unfortunately the outages caused by the hurricanes limited our volumes and subsequent profitability of this business.

During the fourth quarter we will completed installation of an MDI process technology upgrade at our Geismar, Louisiana facility, which will provide an increased differentiated product slate, as well as significant cost and environment benefits. We believe this project will deliver an internal rate of return in excess of 40% and a payback on our investment of just over one, based on current raw material costs.

Our advanced materials and textile effects results in the third quarter decreased slightly from the second quarter. The adjusted EBITDA decreased in our advanced material business, but improved in the textile effects. In advanced materials we benefited from a 5% increase in average selling prices. As expected demand dropped from our second quarter, as we experienced the Chinese Olympics and seasonal slowdown in August in our European markets.

Moving into the second quarter we are seeing a slowdown in certain end use applications, while demand in aerospace and power infrastructure continues to remain consistent.

In textile effects, adjusted EBITDA improved, compared to the second quarter, but down compared to a year ago. While prices where up, we continue to experience a week demand environment for our textile chemical and dyes business, as volumes decreased. The softer demand was felt particularly in our western European and Asian markets, whereas the Americas held up a little bit better in the quarter.

China's exports of textiles and garments fell 11% in the first half of 2008, compared to the prior year. European textiles and garment production is down 10% in the same period, as consumer demand has fallen. To counter these conditions we increased prices, particularly, in the Americas and Asia, as we worked to offset the higher costs of raw materials. We have been successful in raising our average selling price 18% compared to the prior year.

In our performance products division, our adjusted EBITDA improved compared to last year and the second quarter. Results for the third quarter of this year represented an all time record of $81 million despite the hurricane impact of approximately $9 million. Key to the success this quarter was the efficiency of our manufacturing facilities, which are operating very well until mid-September when hurricane Ike hit and forced the closure of five out of six of our US facilities in this division.

Clearly the maintenance work that we undertook in this business early in the year is paying off with much better operating reliability. Compared to the second quarter average selling prices were up about 7% as we implemented continued price increase initiatives to recover higher raw material costs, and more than offset the 5% decrease in volumes. Over the last 12 months, average selling prices have increased by 34% in the performance products business. Our core performance specialty business performed very well. We continue to enjoy strong demands for these products, especially amines. Market demand held steady during the third quarter for most of our intermediates business. Our intermediate business is structured, so that approximately 50% of our volume are cost plus contracts, and therefore should enjoy relative stability in margins in software economic periods.

Further, we expect margins in our surfactants business to benefit from lower ethylene prices, as it generally runs counter cyclical to the ethylene cycle.

To keep up with customer demands around the world and to improve our cost structure, we have a number of projects that will continue to expand this division. We are near completion of our new 100 million pound maleic anhydride facility at our Geismar, Louisiana site, which we expect to start up early in the second quarter of 2009. Our total investment will be approximately $170 million of which half will be spent this year. This facility will be among the lowest and most efficient maleic facilities in the world.

We are moving forward with the expansion of our existing maleics facility in Moers, Germany, where we have a 50-50 joint venture with Sasol. We intend to expand capacity 100 million pounds to approximately 230 million pounds, which we believe will make this facility the lowest cost and one of the largest maleic facilities in all of Europe. We expect to complete this expansion in the first part of 2011. Maleic anhydride is one of our most profitable businesses with EBITDA margins greater than 20%. So we expect this additional capacity to have a meaningful improvement on our business in our performance products' profitability beginning in 2009.

The construction of our ethyleneamines manufacturing joint venture in Jubail, Saudi Arabia, with the Al-Zamil Group as the 50% partner continues and is on track. Our equity contribution of $43.5 million was completed in the second quarter of 2008 and the plant is expected to come on line in early 2010 with an annual capacity of 60 million tons.

In our TiO2 pigments division, I am pleased to see that our pricing effects are improving our results. Our earnings increased compared to the second quarter and a year ago. We realized positive price movements in all regions of the world despite the strengthening of the US dollar versus the euro in the third quarter compared to the second quarter.

Although we continued to see strong demand in Asia, elsewhere demand were softer during the quarter and sales decreased in our core European market, in North America and other regions of the world.

Additionally, higher raw material costs in ores, acid, energy and freight has continued to put pressure on margins and result in challenging market conditions. In fact, we have seen roughly a $100 per ton increase to our direct costs in each of the three quarters thus far this year, which has offset price increases for the same period. We are starting to see relief during the fourth quarter as some of the raw material costs have started to drop. We will continue to explore ways to cut costs and improve efficiencies in our pigments division.

Our 50,000 ton expansion at our Greatham, United Kingdom, chloride-titanium dioxide plant was completed in September of this year and is operating today at near full capacity of 150,000 metric tons. This is an investment of approximately $110 million, of which $30 million will be in 2008. We believe this will make Greatham the lowest cost TiO2 facility in all of Europe.

In conclusion, similar to all of our competitors we are seeing slowing demand in many parts of the world. I believe that some of this is due to customers wanting to empty inventories as commodity prices fall and most of this is due to a global economic slowdown.

In spite of this, one, we are experiencing drops in raw material costs in most of our divisions. We are seeing capital, which was tied up in inventory, start to be released. We take satisfaction having sold our commodity assets this past year and focus on our differentiated products and we did. We believe that our global reach, strong market presence, and diversified portfolio will allow us to take advantage of the best economic opportunities, be they in Asia, Europe or the Americas.

We are controlling our expenses and continuously working towards improving our operating cost position. With the talents of over 13,000 professionals around the world, I feel confident about our direction and opportunity.

As Kimo mentioned in his remarks, we have won court cases in Delaware and Texas against Hexion, Credit Suisse and Deutsche Bank. Should we not complete the transaction, we are an ideal position to vigorously pursue multiple billions dollars in damages against Hexion, Apollo, Leon Black, Josh Harris, Credit Suisse and Deutsche bank. Notwithstanding the condition of global markets, I believe our company is in a unique position to create shareholder value and capitalize on this fast changing times.

With that I will turn the remainder of the call back over to Kurt Ogden.

Kurt Ogden - Investor Relations

Thank you, Peter. Operator, that concludes our call for today. Thank you everyone for joining us.

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