News Column

CHEMTURA CORP - 10-K - : Management's Discussion and Analysis of Financial Condition and Results of Operations

February 24, 2014

The following discussion and analysis should be read in conjunction with our Consolidated Financial Statements included in Item 8 of this Form 10-K.

This Management's Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements. See "Forward-Looking Statements" for a discussion of certain of the uncertainties, risks and assumptions associated with these statements.

OUR BUSINESS

We are a global, United States publicly traded specialty chemical company. We are dedicated to delivering innovative, application-focused specialty chemical solutions. Our principal executive offices are located in Philadelphia, Pennsylvania and Middlebury, Connecticut. We operate in a wide variety of end-use industries, including agriculture, automotive, building and construction, electronics, lubricants, packaging and transportation. The majority of our chemical products are sold to industrial manufacturing customers for use as additives, ingredients or intermediates that add value to their end products. Our agrochemical products are sold to dealers, distributors and major retailers. We are a leader in many of our key product lines and transact business in more than 100 countries. In December 2013, we completed a stock sale of our investment in legal entities dedicated to the Consumer Products business, including dedicated manufacturing plants in the U.S. and South Africa, to KIK Custom Products Inc. ("KIK"). In April 2013, we completed an asset sale of our antioxidant and UV Stabilizer (the "Antioxidant") business, including dedicated manufacturing plants in the U.S., France, and Germany, to SK Blue Holdings, Ltd. ("SK") and Addivant USA Holdings Corp. ("Addivant"). The underlying assets and liabilities of our investment in the Consumer Products legal entities and the assets and liabilities included in the sale of the Antioxidant business have been presented as assets and liabilities of discontinued operations in our prior years' presentations and earnings and direct costs associated with these businesses have been presented as earnings (loss) from discontinued operations, net of tax for the current and comparative periods. For further discussion, see Note 2-Acquisitions and Divestitures in our Notes to Consolidated Financial Statements. Additionally, in October 2013, our Board of Directors (the "Board") approved the exploration of a sale of our agrochemicals business, Chemtura AgroSolutions. The decision to explore a sale of Chemtura AgroSolutions is based on the belief that a sale may deliver substantially greater near-term value to our shareholders than retaining this segment in our portfolio. Should the sale occur, we will focus on the creation of additional value as a pure-play leader in the global development, marketing, manufacture and sale of industrial specialty chemicals based on our Industrial Engineered Products and Industrial Performance Products segments. There is no definitive timetable for the sale process and there can be no assurance that the process will result in a sale of the Chemtura AgroSolutions business. Therefore, as of December 31, 2013, we did not meet the criteria to report the assets and liabilities associated with this segment as assets held for sale and earnings and direct costs of this segment have been included as part of our continuing operations. The primary economic factors that influence the operations and sales of our Industrial Performance Products ("Industrial Performance") and Industrial Engineered Products ("Industrial Engineered") segments (collectively referred to as "Industrials") are industrial, electronic component and polymer production, residential and commercial construction, and transportation markets. In addition, our Chemtura AgroSolutions segment is influenced by worldwide weather, disease and pest infestation conditions. For additional factors that impact our performance, see Item 1A-Risk Factors. Other factors affecting our financial performance include industry capacity, customer demand, raw material and energy costs, and selling prices. Selling prices are influenced by the global demand and supply for the products we produce. We pursue selling prices that reflect the value our products deliver to our customers, while seeking to pass on higher costs for raw material and energy to preserve our profit margins.



OVERVIEW OF OUR PERFORMANCE

During 2013, we made significant progress in aligning our portfolio businesses with our stated long-term strategic and financial performance criteria. Through these portfolio actions, Chemtura will be a smaller company in 2014, but these actions are expected to progressively improve our operating margins and have a portfolio of strongly differentiated product lines based on proprietary chemical technologies that offer superior organic revenue growth and are positioned to exploit secular industry growth trends in all regions of the globe. Among the many accomplishments in 2013 were: 31



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Table of Contents Portfolio Management and Other Corporate Initiatives º • º We completed the sale of our Antioxidants business in April 2013 and Consumer Products business in December 2013. Throughout the year, we



eliminated stranded costs associated with the sale of the Antioxidant

business and developed and began the implementation of plans to eliminate stranded costs associated with the Consumer Products business. We anticipate seeing the benefit of these initiatives in 2014. º • º During the fourth quarter of 2013, we initiated restructuring actions to consolidate our Industrials business organizational structure to streamline their activities and gain efficiencies and cost savings.



Industrial Performance Products

º •

º We opened our new multi-purpose manufacturing facility in Nantong, China and commenced operation of its synthetic grease unit. In 2014, the synthetic lubricant facility will commence operation to be followed in 2015 by its urethanes unit. The facility provides a platform for our next phase of growth in the Asia-Pacific region. º •



º We commenced the start-up of our new European manufacturing plant in

Ankerweg, Amsterdam, The Netherlands for our Synton® high-viscosity

polyalphaolefin ("HVPAO") synthetic basestocks. This increased capacity will enable us to meet the increasing global demand for these products, locating production capacity in a region of significant demand growth, and enhancing the service levels to our customers. The



plant will produce our Synton® 40 and Synton® 100 HVPAO products.

Having now demonstrated the ability to produce these products, customers are undertaking qualification testing and we anticipate commencing commercial sales before the end of the first half of 2014.



Industrial Engineered Products

º • º In May 2013, we purchased the remaining 50% interest in DayStar L.L.C. ("DayStar") from our partner UP Chemical Co., Ltd. and DayStar became a consolidated entity. º • º We expanded our manufacturing facility in Bergkamen, Germany. º •



º We took actions to align our costs with the reduced market conditions

we experienced in 2013. Chemtura AgroSolutions º •



º We introduced 110 new product and registration combinations during the

year.

º •

º Our ISEM S.r.L. joint venture sold its two product lines in separate

transactions at net gains. They returned capital to the partners with

the proceeds from these sales. The joint venture will be dissolved in

2014. Refinancing and Share Repurchases º •



º We refinanced much of our debt capital structure to reduce interest

expense, extend maturities, provide for local borrowing in Europe and provide additional flexibility under our debt covenants. º • º In July 2013, we completed a tender offer for the purchase of $354 million of our 7.875% Senior Notes due 2018 (the "2018 Senior Notes") with the issuance of new $450 million 5.75% Senior Notes due 2021 (the "2021 Senior Notes"). Part of the proceeds together with cash on hand was used to repay $100 million of our senior secured term loan facility due 2016 (the "Term Loan"); º • º In October 2013, we entered into an amendment of our Term Loan; and º • º In December 2013, we amended and restated our existing senior secured revolving credit facility, which was available through 2015. The new senior secured revolving credit facility available through 2018 (the "2018 ABL Facility") provides for $175 million available to our domestic subsidiaries and €60 million available to Chemtura Sales Europe B.V., a Netherlands subsidiary, subject in each case to availability under the borrowing base, as well as a $125 million letter of credit sub-facility. 32



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º •

º During 2013, we repurchased 2.4 million shares of our common stock

under our share repurchase program at a cost of $54 million. In 2014, we will continue our progress, targeting to grow revenues, expand profitability margins and improve cash flows through our focus on growth from innovation and the faster growing regions as well as continuous improvement actions to reduce operating costs. We will quickly eliminate the stranded costs associated with the Consumer Products business. All will contribute to improving our return on invested capital. In the first half of 2014, we will determine whether we divest our Chemtura AgroSolutions business. All of these actions are designed to deliver value to our shareholders.



RESULTS OF OPERATIONS

(In millions, except per share data) 2013 2012 2011 Net Sales Industrial Performance Products $ 979$ 891$ 939 Industrial Engineered Products 803 896 869 Chemtura AgroSolutions 449 409 376 Net Sales $ 2,231$ 2,196$ 2,184 Operating Income Industrial Performance Products $ 109$ 102$ 116 Industrial Engineered Products 55 140 130 Chemtura AgroSolutions 88 65 30 Segment Operating Income 252 307 276 General corporate expense including amortization (112 ) (116 ) (127 ) Facility closures, severance and related costs (42 ) (11 ) (3 ) Gain on sale of businesses - - 27 Impairment charges - - (4 ) Changes in estimates related to expected allowable claims - (1 ) (3 ) Total Operating Income 98 179 166 Interest expense (60 ) (64 ) (63 ) Loss on early extinguishment of debt (50 ) (1 ) - Other income, net 9 20 1 Reorganization items, net (1 ) (5 ) (19 ) (Loss) earnings from continuing operations before income taxes (4 ) 129 85 Income tax expense (18 ) (26 ) (17 ) (Loss) earnings from continuing operations (22 ) 103 68 Earnings (loss) from discontinued operations, net of tax 25 (3 ) 52 Loss on sale of discontinued operations, net of tax (180 ) - - Net (loss) earnings (177 )



100 120 Less: net loss (earnings) attributable to non-controlling interests

-



1 (1 )

Net (loss) earnings attributable to Chemtura $ (177 )$ 101$ 119



(LOSS) EARNINGS PER SHARE-BASIC AND DILUTED-ATTRIBUTABLE TO CHEMTURA: (Loss) earnings from continuing operations

$ (0.23 )$ 1.04$ 0.68 Earnings (loss) from discontinued operations 0.26 (0.02 ) 0.51 Loss on sale of discontinued operations (1.84 )



- -

Net (loss) earnings attributable to Chemtura $ (1.81 )$ 1.02$ 1.19 Basic weighted-average shares outstanding 97.7 98.2 100.1 Diluted weighted-average shares outstanding 97.7 98.8 100.3 33



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RESULTS OF OPERATIONS

Our management discussion and analysis of our results of operations for the period 2011 to 2013 relates to our business from continuing operations. The sale of our Antioxidant and Consumer Products businesses are reported as discontinued operations in current and comparable periods and therefore are not included in continuing operations. Our management discussion and analysis of our financial condition relates to the Company as a whole.



2013 COMPARED TO 2012

Overview

Consolidated net sales were $2.2 billion in 2013 or $35 million higher than in 2012 driven by a $61 million increase in volume, offset by a $16 million overall decrease in selling prices and the unfavorable effect of foreign currency translation of $10 million. Our Industrial Performance segment reported a $76 million increase in sales volume primarily from our petroleum additives and certain synthetic products offset by slightly less volume for our urethane product sales due to weakness in the global mining and electronic markets. Chemtura AgroSolutions segment reported a $34 million increase in sales volume driven by strong sales in North and Latin Americas and strong selling prices driven by higher demand. Our Industrial Engineered segment experienced weak demand from insulated foam applications and an attendant reduction in selling prices. Demand from electronic application products remained weak in 2013. The result was a $49 million decline in sales volume and a $44 million decrease in overall selling prices. Gross profit for 2013 was $510 million, a decrease of $71 million compared with 2012. Gross profit as a percentage of net sales decreased to 23% for 2013 compared with 26% for 2012. Gross profit was impacted by a $21 million increase in an environmental reserve in 2013 for the costs to remediate a legacy non-operating site in France, a $16 million overall reduction in selling prices, $12 million from unfavorable product mix, $7 million from the unfavorable effect of foreign currency translation, a $10 million increase in our excess inventory reserves due to lower electronics demand for brominated products, $5 million of costs associated with our new facilities in Nantong, China and Ankerweg, The Netherlands, and lower manufacturing and Registration, Evaluation and Authorization of Chemicals ("REACh") costs which were offset by higher distribution costs. Selling, general and administrative ("SG&A") expense of $229 million was $16 million lower than 2012, primarily the result of lower staff count due to our initiatives to eliminate stranded costs arising from our divestitures, lower accruals related to employee incentive plans and other cost reductions as well as other restructuring initiatives in 2012 and 2013. Quantitatively, these reductions were a $7 million benefit related to the elimination of stranded costs associated with our Antioxidant business, $11 million of lower non-cash compensation expense due to our overall lower performance in 2013, a gain of $2 million related to an adjustment to a legacy pension plan, a gain of $2 million related to the sale of a non-operating site, a $2 million decrease in an accrual related to one of our U.K. pension plans and $5 million in lower pension expense primarily related to the transfer of pension obligations to Addivant in April 2013 in connection with the sale of our Antioxidant business. These reductions were offset by $6 million in expenses incurred to explore the sale of our Chemtura AgroSolutions segment, $2 million associated with the accelerated recognition of asset retirement obligations, the absence of a $2 million gain recorded in 2012 for a settlement related to a UK pension levy and a $3 million increase in workers compensation expense.



Depreciation and amortization expense of $101 million was slightly higher than 2012.

Research and development ("R&D") expense of $40 million was slightly lower than 2012.

Facility closures, severance and related costs in 2013 was $42 million compared with $11 million for 2012. The expense related to the cost saving initiatives we announced in 2013 and 2012. The restructuring plans announced in 2013 related to both the elimination of stranded costs associated with our Antioxidant business as well as initiatives to reduce operating costs within our remaining businesses.



Changes in estimates related to expected allowable claims were $1 million for 2012 as we reduced the number of claims remaining in our Disputed Claim Reserve.

Interest expense of $60 million during 2013 was $4 million lower than 2012, primarily due to higher capitalized interest expense in 2013 and the absence of fees associated with the securitization program in 2012. The reduction in interest expense from our debt refinancing actions was offset by the net effect of higher average borrowings under the Term Loan in 2013 due to the $125 million increase in the fourth quarter of 2012 offset by the $100 million repayment in the third quarter of 2013. We will obtain the full benefit of our 2013 debt refinancing actions in 2014. 34



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Loss on the early extinguishment of debt of $50 million for 2013 included $42 million for the difference between the principal amount of the 2018 Senior Notes tendered and the sum of the tender offer consideration and consent payments and $8 million for the write-off of unamortized capitalized financing costs and original issuance discount with respect to the 2018 Senior Notes purchased due to the tender offer. Other income, net was $9 million for 2013 compared with $20 million for 2012. During 2013 and 2012, we recognized gains of $13 million and $21 million, respectively, related to the release of cumulative translation adjustments associated with the rationalization of certain European subsidiaries that are no longer required coupled with lower interest income and a less favorable effect of foreign currency translation in 2013. Reorganization items, net were $1 million and $5 million for 2013 and 2012, respectively. The expense in both periods primarily comprised professional fees directly associated with the Chapter 11 reorganization. The income tax expense in 2013 was $18 million compared with $26 million in 2012. The tax expense reported in 2013 and 2012 related to taxable income of certain of our international subsidiaries. In 2013 and 2012, we provided a full valuation allowance against the tax expense associated with our U.S. net operating loss.



Loss from continuing operations attributable to Chemtura for 2013 was $22 million, or $0.23 per share, as compared with earnings from continuing operations attributable to Chemtura of $103 million, or $1.04 per share, for 2012.

Earnings from discontinued operations, net of tax attributable to Chemtura for 2013, was $25 million, or $0.26 per share, as compared with a loss of $2 million, or $0.02 per share, for 2012. In 2013, we recorded an impairment charge of $7 million which included the impairment of property, plant and equipment related to the Consumer Products business. In 2012, we recorded an impairment charge of $47 million which included the impairment of property, plant and equipment of $35 million and intangible assets of $11 million related to the Antioxidant business. Discontinued operations compromise the Antioxidant and Consumer Products businesses. Loss on sale of discontinued operations, net of tax attributable to Chemtura for 2013, was $180 million, or $1.84, per share which represents a net loss of $155 million and $25 million associated with the Antioxidant and Consumer Products businesses, respectively.



The following is a discussion of the results of our segments for 2013 compared with 2012.

Industrial Performance Products

Our Industrial Performance segment reported higher net sales and operating income in 2013 compared with 2012. We experienced some recovery in the sales of our petroleum additive products across all regions as well as the benefit of a modest increase in selling prices. These gains were partially offset by weakness in mining and electronic applications which is affecting our urethanes products globally. Operating income benefited from the higher selling prices over the increase in raw material costs but we did not see the full impact of the volume improvements due to a greater percentage of lower margin products being sold coupled with costs associated with our new facilities in Nantong, China and Ankerweg, The Netherlands and increases in SG&A and R&D (collectively, "SGA&R") expenses. Net sales totaled $979 million in 2013, an increase of $88 million compared with last year. The increase reflected higher sales volume of $76 million, higher selling prices of $10 million and favorable foreign currency translation of $2 million. Operating income was $109 million in 2013, an increase of $7 million compared with 2012. Operating income benefited from the higher selling prices and $8 million in higher sales volume net of unfavorable product mix, offset by an increase in SGA&R costs of $4 million, accelerated recognition of asset retirement obligations of $2 million and $5 million related to the start-up costs of our Nantong, China and Ankerweg, The Netherlands facilities.



Industrial Engineered Products

Our Industrial Engineered segment reported lower net sales and operating income in 2013 compared with 2012. Demand from insulation foam applications for flame retardants sharply deteriorated in the first half of 2013 and selling prices fell significantly. While some recovery in volume was seen in demand in the second half of 2013, selling prices remained weak. As a result, there was a significant reduction in both volume and selling prices in these applications in 2013. Demand for flame retardants used in electronic applications remained weak during 2013 and there were periods of pressure on selling prices during the year. Additionally, due to capacity additions by a competitor, we saw lower volumes and reduced selling prices for our metal alkyl products used as components in polyolefin polymerization catalysts. We benefited from some increase in demand from furniture foam and oil and gas applications coupled with increased selling prices and higher demand during the second half of 2013 for our tin-based products. However, these were not significant enough to offset the impacts from 35



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insulation foam and electronic applications. The segment's operating income was further impacted by unfavorable manufacturing costs and variances and the increase in an excess inventory reserve due to the prolonged decline in demand for flame retardants for electronics applications.



Net sales decreased by $93 million to $803 million for 2013 reflecting a $49 million decrease in sales volumes and $44 million in lower selling prices.

Operating income of $55 million in 2013 decreased $85 million compared with last year. The decrease reflected the lower selling prices, $26 million from lower sales volume and unfavorable product mix, a $10 million increase in an excess inventory reserve, $5 million in higher raw material and distribution costs, $3 million from unfavorable foreign currency translation, partly offset by a $3 million net decrease in other costs.



Chemtura AgroSolutions

Our Chemtura AgroSolutions segment reported higher net sales and operating income for 2013 compared with 2012. Net sales increased over the prior year period as a result of improved sales volume in both North and Latin America for mitacide and seed treatment products coupled with the introduction of new products and higher selling prices. Operating income reflected the benefit of the increased sales volume and selling prices coupled with increased equity income associated with a gain on the sale of two product lines in our ISEM joint venture and continued focus on the reduction of general expenses.



Net sales increased by $40 million to $449 million for 2013 from $409 million in 2012. The increase reflected $34 million in higher sales volume and $18 million in higher selling prices partly offset by $12 million of unfavorable foreign currency translation, primarily related to Latin America.

Operating income increased $23 million to $88 million in 2013 compared with $65 million in 2012, reflecting the higher selling prices, $6 million from favorable sales volume and product mix changes, $5 million in lower raw material costs and $4 million of increased equity income of ISEM, offset in part by $6 million from unfavorable foreign currency translation, a $2 million increase in manufacturing and distribution costs and $2 million of other costs.



Corporate

Included in our general corporate expenses are costs of a general nature or managed on a corporate basis. These costs, net of allocations to the business segments, primarily represent corporate stewardship and administration activities together with costs associated with legacy activities and intangible asset amortization. Functional costs are allocated between the business segments and general corporate expense. Corporate expense was $112 million and $116 million in 2013 and 2012, respectively, which included amortization expense related to intangible assets and depreciation expense of $18 million and $19 million in 2013 and 2012 respectively. Included in corporate expense for 2013 was a charge of $21 million to increase an environmental reserve for the costs to remediate a legacy non-operating site in France. Following a detailed engineering study, we received estimates of the costs of a multi-year program to remediate the site to the standards required by the regulatory authorities. Additionally, included within 2013 corporate expense is $6 million in costs related to the exploration of the sale of our Chemtura AgroSolutions segment, a $3 million increase in workers compensation expense and the absence of a $2 million gain recorded in 2012 for a UK pension levy settlement, offset by a benefit of $11 million of lower non-cash compensation expense due to our overall lower performance in 2013 and the reduction in staff, $7 million related to the elimination of stranded costs associated with our Antioxidant business, a gain of $2 million related to an adjustment for a legacy pension plan, a gain of $2 million related to the sale of a non-operating site, a $2 million decrease in an accrual related to one of our U.K. pension plans, $7 million in reduced functional and other spending as a result of our restructuring programs and $5 million in lower pension expense primarily related to the transfer of pension obligations to Addivant in April 2013 in connection with the sale of our Antioxidant business. Certain functional and other expenses that are managed company-wide are allocated to our segments. The portion of such costs allocated to the Antioxidant and Consumer Products businesses have not transferred directly under the respective sale agreements. As such, in historic periods these costs are shown as part of continuing operations in the corporate segment and not included under earnings (loss) from discontinued operations, net of tax. Costs related to the Antioxidant business were $6 million and $13 million in 2013 and 2012, respectively. Costs related to the Consumer Products business were $14 million and $13 million in 2013 and 2012, respectively. Additionally, our Corporate segment included $8 million and $14 million in 2013 and 2012, respectively, of amortization expense related directly to our Antioxidants and Consumer Products businesses which has been included in earnings (loss) from discontinued operations, net of tax in our Consolidated Statement of Operations. 36



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Table of Contents 2012 COMPARED TO 2011 Overview We reported consolidated net sales of $2.2 billion in 2012, which represented a $12 million increase over our consolidated net sales in 2011. We realized $73 million from higher year-over-year selling prices as we continued to focus on investing in new products and manufacturing capacity as well as recovering increases in raw material and distribution costs, This benefit was offset by a $34 million reduction in sales volume and $27 million from the unfavorable effects of foreign exchange translation. Our Chemtura AgroSolutions and Industrial Engineered segments led the sales growth. Chemtura AgroSolutions benefited from an increase in volume resulting from dry weather and good growing seasons, particularly in the Americas, coupled with new product introductions and registrations and changes in distribution channels in Latin America. Industrial Engineered Products saw the greatest benefit from higher selling prices in 2012 that helped to recover raw material increases and supported the continued investment in manufacturing capacity to serve customers' growing demand. Our Industrial Performance segment contributed most of our volume decline as it was significantly affected by weak demand, particularly in Asia and Europe which began in the second half of 2011. Global economic conditions contributed to the unfavorable effect of foreign exchange translation which impacted all of our businesses. Our gross profit as a percentage of sales for 2012 remained constant at 26%. Gross profit for 2012 increased by $23 million over 2011 to $581 million. Gross profit reflected the higher year-on-year selling prices and a $2 million decrease in other costs, offset by unfavorable manufacturing variances and costs of $43 million, a decrease in volume and product mix of $5 million and the impact of unfavorable foreign currency translation of $4 million. SG&A expense of $245 million was $24 million lower than in 2011. The decrease represented the benefit of certain non-recurring costs we reported in 2011, including a $7 million reserve for accounts receivables, an $8 million charge related to a UK pension matter and lower overall costs due to restructuring programs in Chemtura AgroSolutions and our finance function offset by additional legal and other expenses associated with our strategic initiatives. Depreciation and amortization expense of $100 million was $3 million lower than the prior year, primarily due to accelerated depreciation related to restructuring activities of $2 million in 2011 within our Industrial Engineered and Chemtura AgroSolutions segments.



R&D expense of $41 million was $5 million higher than the prior year as we invested to drive innovation to support growth.

Facility closures, severance and related costs were $11 million in 2012 as compared with $3 million in 2011. The 2012 charges related to initiatives to improve the operating effectiveness of certain global corporate functions. The 2011 charges primarily related to severance costs of a restructuring plan to increase the effectiveness of our Chemtura AgroSolutions segment.



Gain on sale of business of $27 million for 2011 related to the sale of our 50% interest in Tetrabrom Technologies Ltd.

We recorded impairment charges of $4 million in 2011 comprising the impairment of intangible assets of our Chemtura AgroSolutions segment and property, plant and equipment related to our El Dorado, Arkansas facility.

Changes in estimates related to expected allowable claims were $1 million for 2012 compared with $3 million for 2011, as we reduced the number of claims remaining in our Disputed Claim Reserve. Other income, net in 2012 was $20 million compared with $1 million for the same period of 2011. During the fourth quarter of 2012, we recognized gains of $21 million related to the release of cumulative translation adjustments associated with the rationalization of certain European subsidiaries that are no longer required.



Reorganization items, net of $5 million in 2012 was $14 million lower than in 2011. The expense in both periods comprised professional fees directly associated with the Chapter 11 reorganization and the impact of negotiated claims settlement for which Bankruptcy Court approval had been requested or obtained.

The income tax expense from continuing operations in 2012 was $26 million compared with $17 million in 2011. The tax expense reported for 2012 and 2011 related to taxable income of certain of our international subsidiaries. The tax expense reported in 2011 included a decrease in deferred foreign income taxes of approximately $17 million that had been recorded in an international jurisdiction in prior years and an increase in foreign income taxes of approximately $5 million relating to a foreign tax matter dating back to the 1990s. The $17 million tax benefit was recorded after receiving approval from the international jurisdiction to change our filing position. In 2012 and 2011, we provided a full valuation allowance against the tax expense associated with our U.S. net operating loss. 37



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Net earnings from continuing operations attributable to Chemtura for 2012 was $103 million, or $1.04 per share, as compared with $68 million, or $0.68 per share, for 2011. The loss from discontinued operations, net of tax attributable to Chemtura for 2012 was $2 million, or $0.02 per share, as compared with earnings from discontinued operations, net of tax attributable to Chemtura of $51 million, or $0.51 per share, for 2011. In 2012, we recorded an impairment charge of $47 million which included the impairment of property, plant and equipment of $35 million and intangible assets of $11 million related to the Antioxidant business. Earnings (loss) from discontinued operations represented the Antioxidant and Consumer Products businesses.



The following is a discussion of the results of our segments for 2012 compared with 2011.

Industrial Performance Products

Our Industrial Performance segment reported lower net sales and operating income in 2012 compared with the prior year. These results continued to reflect the weak global economic conditions which first showed their effect in the second half of 2011 and deteriorated progressively through 2012, particularly in Asia. Although we were able to implement some year-over-year price increases, overall our mix of product sales deteriorated which continued to put pressure on margins as raw material costs increased. Reduced demand contributed to unfavorable manufacturing absorption variances which further impacted operating profit. Increases in SGA&R were offset by decreases in other costs. Net sales totaled $891 million in 2012, a decrease of $48 million compared with last year. The lower results reflected the negative impact of reduced sales volume totaling $62 million coupled with the impact of unfavorable foreign currency translation of $5 million, partially offset by higher selling prices of $19 million.



Operating income totaled $102 million in 2012, a decrease of $14 million compared with last year. Price increases only partly offset a $22 million decrease in volume and unfavorable product mix, $6 million in increased raw materials, $4 million in unfavorable manufacturing costs and absorption variances and a $1 million increase in other costs.

On October 29, 2012, Hurricane Sandy caused wide-spread flooding and wind damage across the mid-Atlantic region in the U.S. which resulted in prolonged power outages, disruption of public transportation and gasoline shortages from Virginia to New Hampshire. Although several of our plants lost power, there was minimal financial impact from the storm.



Industrial Engineered Products

Our Industrial Engineered segment delivered improvements in net sales and operating income over 2011, mainly due to year-over-year increases in selling prices. We realized the full benefit in 2012 of the increases in selling prices that we implemented throughout 2011. The increases in selling prices helped to cover escalating raw material costs later in the year and other manufacturing and distribution costs as well as to support the required capacity reinvestments for sustainable and reliable supply of products to our customers. We saw further softening in demand from our traditional electronic applications and a decline in the sales of tin-based organometallic products and components for polyolefin polymerization catalysts. However, we were able to mitigate these volume declines through sales growth from insulation foam, mercury removal, agriculture, healthcare and certain other industrial applications markets. This growth reflected the benefit of the investment in new product and application development, permitting us to diversify the application markets we serve. We brought on new capacity for our Emerald Innovation™ product lines and invested in expanding our organometallics production capacity. Net sales increased by $27 million to $896 million for 2012 reflecting the benefit of $46 million in increased selling prices partially offset by $7 million in lower sales volume and $12 million from the impact of unfavorable foreign currency translation. Operating income increased $10 million to $140 million in 2012 compared with $130 million in 2011. The increase reflected the favorable selling price increases, $6 million in favorable product mix and $5 million from lower raw material costs, which were offset in part by $41 million in unfavorable manufacturing costs including start up costs for new products and absorption variances and a $6 million increase in other costs.



Chemtura AgroSolutions

Our Chemtura AgroSolutions segment reported higher net sales and operating income for 2012 compared with 2011. This segment benefited from an increase in sales volume resulting from dry weather and strong growing seasons, particularly in the Americas coupled with new product introductions and registrations and changes in distribution channels in Latin America. Increased selling prices were offset entirely by unfavorable foreign currency translation due to the weakening of a number of 38



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currencies against the U.S. dollar throughout the year. Operating income reflected the benefit of higher sales volumes, reductions in bad debt expense compared to 2011 and reductions in costs as a result of the restructuring program that was implemented in the latter part of 2011.

Net sales increased by $33 million to $409 million for 2012 from $376 million in 2011 reflecting $35 million in higher sales volume and $8 million in higher selling prices offset by $10 million of unfavorable foreign currency translation.

Operating income increased $35 million to $65 million in 2012 compared with $30 million in 2011. Operating income reflected the increase in selling prices, an $11 million benefit from increased sales volume and favorable product mix, a decrease in SGA&R of $14 million which reflected the benefit of the restructuring actions taken in 2011 and a reduction of bad debt expense of $7 million, and $4 million in lower manufacturing, distribution and other costs, partly offset by $2 million of unfavorable foreign currency translation.



General Corporate

Included in our general corporate expenses are costs of a general nature or managed on a corporate basis. These costs, net of allocations to the business segments, primarily represent corporate stewardship and administration activities together with costs associated with legacy activities and intangible asset amortization. Functional costs are allocated between the business segments and general corporate expense. Corporate expense was $116 million in 2012, which included amortization expense related to intangible assets and depreciation expense of $19 million. Corporate expense was $127 million in 2011, which included amortization expense related to intangible assets and depreciation expense of $25 million. Certain functional and other expenses that are managed company-wide are allocated to our segments. The portion of such costs allocated to the Antioxidant and Consumer Products businesses have not or will not transfer directly under the respective sale agreements. As such, in historic periods these costs are shown as part of continuing operations in the corporate segment and not included under earnings (loss) from discontinued operations, net of tax. Costs related to the Antioxidant business were $13 million and $15 million for 2012 and 2011, respectively. Costs related to the Consumer Products business were $13 million and $15 million for 2012 and 2011, respectively. Additionally, our Corporate segment included $14 million and $16 million for 2012 and 2011, respectively, of amortization expense related directly to our Antioxidants and Consumer Products businesses which has been included in earnings (loss) from discontinued operations, net of tax in our Consolidated Statement of Operations.



Adjusted EBITDA

Adjusted EBITDA is a financial measure that is not calculated or presented in accordance with generally accepted accounting principles ("GAAP"). While we believe that such measures are useful in evaluating our performance, investors should not consider them to be a substitute for financial measures prepared in accordance with GAAP. In addition, the financial measures may differ from similarly titled financial measures used by other companies and do not provide a comparable view of our performance relative to other companies in similar industries. Adjusted EBITDA for 2013, 2012 and 2011 is calculated as follows: 39



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(In millions) 2013 2012 2011 Net (loss) earnings attributable to Chemtura $ (177 )$ 101$ 119 Plus: Interest expense 60 64 63 Plus: Loss on early extinguishment of debt 50 1 - Plus: Other income, net (9 ) (20 ) (1 ) Plus: Reorganization items, net 1 5 19 Plus: Income tax expense 18 26 17 Plus: (Earnings) loss from discontinued operations, net of tax (25 ) 3 (52 ) Plus: Loss on sale of discontinued operations, net of tax 180 - - Plus: Net (loss) earnings attributable to non-controlling interests - (1 ) 1 Operating income 98 179 166 Plus: Depreciation and amortization 101



100 103 Plus: Operational facility closures, severance and related costs

42 11 3 Less: Gain on sale of business - - (27 ) Plus: Impairment charges - - 4 Plus: Changes in estimates related to expected allowable claims - 1 3 Plus: Non-cash stock-based compensation 13 22 24 Plus: Environmental reserves 21 - - Plus: UK pension benefit matter (2 ) - 8 Plus: Other adjustments 2 - 1 Adjusted EBITDA $ 275$ 313$ 285



Adjusted EBITDA in 2013 is net of $6 million of expenses related to our exploration of a sale of our Chemtura AgroSolutions segment.

LIQUIDITY AND CAPITAL RESOURCES

We believe that our cash flow from operations, borrowing capacity under our U.S. and international credit facilities and our current cash and cash equivalents provide sufficient liquidity to maintain our current operations and capital expenditure requirements, repurchase shares, service our debt and pursue other strategic initiatives which will bring shareholder value. During 2013, we refinanced much of our debt capital structure to reduce interest expense, provide for local borrowings in Europe and to provide additional operating flexibility under our debt convents. We sold our Antioxidant and Consumer Products businesses providing additional cash to pay down $100 million of our Term Loan in 2013 and an additional $110 million in January 2014. We anticipate using the remaining proceeds to return capital to shareholders and continue to make important investments to strengthen and enable the continued growth of the remaining businesses. We have announced and are implementing restructuring programs to eliminate stranded costs associated with our Antioxidant and Consumer Products businesses as well as reduce costs in our remaining businesses. The following is a discussion on significant factors affecting our liquidity and use of capital resources.



Tender Offer & New Bond Offering

On June 10, 2013, we launched a cash tender offer and consent solicitation with respect to any and all of our outstanding $455 million aggregate principal amount of 7.875% Senior Notes due 2018 (the "2018 Senior Notes") pursuant to our Offer to Purchase and Consent Solicitation Statement (the "Offer to Purchase"). The requisite consent solicitation was required to adopt proposed amendments to the indenture governing the 2018 Senior Notes (the "2018 Indenture") that would eliminate substantially all of the restrictive covenants, certain events of default and related provisions contained in the 2018 Indenture. Subject to the terms and conditions set forth in the Offer to Purchase, holders who validly tendered their notes on or prior to June 21, 2013 (the "Consent Date") received total consideration of $1,117.50 per $1,000 principal amount of the 2018 Senior Notes accepted for purchase, which included a consent payment of $30 per $1,000 principal amount of the notes. As of July 5, 2013, holders of $348 million or approximately 76.56% of the 2018 Senior Notes, had tendered such 2018 Senior Notes and consented to the proposed amendments to the 2018 Indenture. On July 8, 2013, we amended the terms of the Offer to Purchase to extend the expiration date to July 19, 2013 to meet the terms of the Financing Condition (as defined in the Offer to Purchase). Holders who validly tendered their 2018 Senior Notes after the Consent Date but on or prior to July 19, 2013, received the tender offer consideration of $1,087.50 per $1,000 principal amount of the 2018 Senior Notes accepted for purchase but were not entitled to the consent payment. As of July 19, 2013, 40



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additional holders of $6 million or approximately 1.33% of the 2018 Senior Notes, had tendered such 2018 Senior Notes and consented to the proposed amendments to the 2018 Indenture.

On July 18, 2013, we undertook a registered public offering of $450 million of 5.75% Senior Notes due 2021 ("2021 Senior Notes"), for the purposes of funding the purchase under the terms of the Offer to Purchase all of the 2018 Senior Notes tendered, expenses related to the offering and a prepayment of our senior secured term loan facility due 2016 (the "Term Loan"). On July 23, 2013, the 2021 Senior Notes offering closed and the majority of the proceeds were used to complete the purchase of the 2018 Senior Notes tendered in response to the Offer to Purchase. With the purchase of the tendered 2018 Senior Notes complete, the amendments to the 2018 Indenture that eliminated substantially all of the restrictive covenants, certain events of default and related provisions became effective. In the third quarter of 2013, we recorded a loss on the early extinguishment of debt of $50 million. The loss included $42 million for the difference between the principal amount of the 2018 Senior Notes tendered and the sum of the tender offer consideration and consent payments. The loss also included $8 million for the write-off of unamortized capitalized financing costs and original issuance discount with respect to the 2018 Senior Notes purchased under the tender. On July 23, 2013, we used the balance of the proceeds from the offering of the 2021 Senior Notes, after completing the purchase of the 2018 Senior Notes tendered and paying transaction costs, of approximately $45 million and approximately $5 million of cash on hand to prepay $50 million of principal of our Term Loan. On July 31, 2013, we prepaid an additional $50 million of Term Loan principal with cash on hand. Our 2021 Senior Notes contain covenants that limit our ability to enter into certain transactions, such as incurring secured debt and subsidiary debt and entering into sale and lease-back transactions.



Financing Facilities

In August 2010, we completed a $455 million private placement offering under Securities and Exchange Commission ("SEC") Rule 144A for the 2018 Senior Notes at an issue price of 99.269% in reliance on an exemption pursuant to Section 4(2) of the Securities Act of 1933. In July 2013, we purchased $354 million of the $455 million outstanding balance with proceeds from the 2021 Senior Notes offering. In August 2010, we also entered into the Term Loan with Bank of America, N.A., as administrative agent, and other lenders party thereto for an aggregate principal amount of $295 million with an original issue discount of 1%. The Term Loan permitted us to increase the size of the facility with an accordion feature by up to $125 million. On October 31, 2012, we exercised the accordion feature of our Term Loan and borrowed the additional $125 million for the purpose of funding potential investment opportunities and for general corporate purposes. During 2013, we repaid $102 million of the Term Loan with proceeds from the 2021 Senior Notes offering and cash on hand. In January 2014, we repaid an additional $110 million of the Term Loan with proceeds from the sale of the Consumer Products business. In light of this transaction, we classified the $110 million as short-term borrowings in our Consolidated Balance Sheet as of December 31, 2013. In October 2013, we entered into an amendment of our Term Loan. The amendment to the Term Loan (the "Amendment"), among other things, (i) reduces the interest rate and LIBOR floor on the term loans outstanding under the Term Loan agreement (the "term loans"), (ii) provides for a 1% prepayment premium if the term loans are refinanced with certain specified refinancing debt within 6 months, (iii) introduces scheduled quarterly amortization of the term loans in the amount of 1% annually, and (iv) permits additional flexibility under certain of our operating covenants (including but not limited to additional flexibility for debt, investments, restricted payments and dispositions) in the Term Loan agreement. The Amendment became effective on October 30, 2013. The amendment reduced annual interest expense going forward by approximately $6 million on the then outstanding balance.



In November 2010, we entered into a five-year senior secured revolving credit facility available through 2015 (the "ABL Facility") for an amount up to $275 million, subject to availability under a borrowing base (with a $125 million letter of credit sub-facility).

In December 2013, we amended and restated the ABL Facility. The new senior secured revolving credit facility available through 2018 (the "2018 ABL Facility") provides for $175 million available to our domestic subsidiaries and €60 million available to Chemtura Sales Europe B.V., a Netherlands subsidiary, subject in each case to availability under the borrowing base (with a $125 million letter of credit sub-facility). At December 31, 2013, we had no borrowings under the 2018 ABL Facility. However, we had $14 million of outstanding letters of credit (primarily related to insurance obligations, environmental obligations and banking credit facilities) which utilized available capacity under the facility. At December 31, 2013, we had approximately $237 million of undrawn availability under the 2018 ABL Facility. 41



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These financing facilities contain covenants that limit, among other things, our ability to enter into certain transactions, such as creating liens, incurring additional indebtedness or repaying certain indebtedness, making investments, paying dividends, and entering into acquisitions, dispositions and joint ventures. The Term Loan requires that we meet certain quarterly financial maintenance covenants including a maximum Secured Leverage Ratio (as defined in the agreement, measured net of unrestricted cash) of 2.5:1.0 and a minimum Consolidated Interest Coverage Ratio (as defined in the agreement) of 3.0:1.0. Additionally, the Term Loan contains a covenant related to the repayment of excess cash flow (as defined in the agreement). The 2018 ABL Facility contains a springing financial covenant requiring a minimum trailing four quarter fixed charge coverage ratio of 1.0 to 1.0 at all times during any period from the date when (A) the amount available for borrowings under the 2018 ABL Facility falls below the greater of (i) $25 million and (ii) 10% of the aggregate commitments until such date such available amount has been equal to or greater than the greater of (i) $25 million and (ii) 10% of the aggregate commitments for 30 consecutive days or (B) the amount available for borrowings under the domestic portion of the 2018 ABL Facility falls below the greater of (i) $18 million and (ii) 10% of the aggregate commitments for the domestic portion of the 2018 ABL Facility until such date such available amount has been equal to or greater than the greater of (i) $18 million and (ii) 10% of such aggregate domestic commitments for 30 consecutive days. As of December 31, 2013, we were in compliance with the covenant requirements of these financing facilities. In March 2013, we entered into a promissory note in the principal sum of $7 million with a term of six years bearing interest at a rate of 5.29% per annum to finance the cost of certain information technology software licenses. The principal of note is to be repaid in equal monthly installments over its term. In December 2012, we entered into a CNY 250 million (approximately $40 million) 5 year secured credit facility available through December 2017 (the "China Bank Facility") with Agricultural Bank of China, Nantong Branch ("ABC Bank"). The China Bank Facility will be used for funding construction of our manufacturing facility in Nantong, China. The China Bank Facility is secured by land, property and machinery of our subsidiary Chemtura Advanced Materials (Nantong) Co., Ltd. At December 31, 2013, we had borrowings of $17 million under the China Bank Facility. Repayments of principal will be made in semi-annual installments from December 2014 through December 2017.



For further discussion of the financing facilities, see Note 7-Debt in the Notes to our Consolidated Financial Statements.

Share Repurchase Program

On May 9, 2013, the Board authorized an increase in our share repurchase program from $100 million to up to $141 million and extended the program to March 31, 2014. On November 12, 2013, the Board authorized a further increase in the share repurchase program by $50 million (up to $191 million in the aggregate when combined with the May 9, 2013 authorization). The Board also authorized an additional $100 million under the share repurchase program upon the closing of the previously announced sale of the Consumer Products business (up to $291 million in the aggregate when combined with the May 9, 2013 and November 12, 2013 authorizations). The Board also extended the authorizations under the share repurchase program through and including November 9, 2014. The shares are expected to be repurchased from time to time through open market purchases. The program, which does not obligate us to repurchase any particular amount of common stock, may be modified or suspended at any time at the Board's discretion. The manner, price, number and timing of such repurchases, if any, will be subject to a variety of factors, including market conditions and the applicable rules and regulations of the Securities and Exchange Commission ("SEC"). During the year ended December 31, 2013, we purchased 2.4 million shares for $54 million. As of December 31, 2013, we had purchased 5.8 million shares for $95 million since inception of our share repurchase program.



Consumer Products Divestiture

In October 2013, we entered into a stock purchase agreement to sell our investment in the dedicated legal entities that constituted our Consumer Products business, including dedicated manufacturing plants in the U.S. and South Africa, to KIK Customer Products Inc. ("KIK") for $315 million in cash at closing. On December 31, 2013, we entered into an amendment to the stock purchase agreement, among other matters, to reduce the purchase price by $15 million reflecting the resolution of certain pre-closing matters, and completed the sale of the Consumer Products business for an adjusted purchase price of $300 million and the assumption by KIK of pension and other liabilities totaling approximately $8 million. The purchase price is subject to customary post-closing adjustments, primarily for working capital and assumed pension liabilities. The agreement specified a value of working capital based upon a twelve-month average against which working capital would be measured. To the extent working capital at closing was lower than this value, KIK would be compensated for the difference. If working capital was higher, we would be compensated. The impact of some of these adjustments was estimated in the cash paid at closing and a final reconciliation will occur in the first half of 2014.



The underlying assets and liabilities of our investment in the dedicated legal entities sold have been presented as assets and liabilities of discontinued operations as of December 31, 2012. Additionally, earnings and direct costs associated with the

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Consumer Products business for the periods prior to the date of the sale have been presented as earnings (loss) from discontinued operations, net of tax for the current and comparative periods. All applicable disclosures included in the accompanying footnotes have been updated to reflect the Consumer Products business as a discontinued operation. We recognized a pre-tax loss of $24 million ($25 million after-tax loss), which included a $39 million non-cash gain related to the release of accumulated other comprehensive loss ("AOCL") associated with the release of cumulative translation adjustments of the entities sold and the pension obligations transferred. In connection with the sale we entered into a transition service agreement and supply contact with KIK to supply products from our Adrian, MI facility. Under the terms of the supply contract, KIK has the option, exercisable for a period of six-months following the closing date to purchase the net assets of the Adrian facility at a price that is below the carrying value of the net assets. Accordingly, we concluded the net assets of the Adrian facility met the criteria to be classified as assets held for sale and we recorded an impairment charge in December 2013 of $7 million to write-down the property, plant and equipment to its fair value less costs to sell.



For further discussion of the Consumer Products sale, see Note 2-Acquisitions and Divestitures in our Notes to Consolidated Financial Statements.

Antioxidant Divestiture

In April 2013, we completed the sale of our Antioxidant business to SK and Addivant for consideration of $97 million, $9 million in preferred stock issued by Addivant, a seller note in the amount of $1 million issued by an affiliate of Addivant and the assumption by SK and Addivant of pension, environmental and other liabilities totaling approximately $91 million. At closing, the cash consideration was subject to the retention of certain assets, the finalization of pension assets and liabilities and the change in certain working capital components through the closing date. The impact of these adjustments was estimated in the cash paid at closing. During the third quarter of 2013, the net pension liability transferred to Addivant was finalized and the seller note was extinguished by these adjustments. Additionally, we paid $2 million in cash considerations as part of the adjustment. The final working capital adjustment remains to be agreed between the parties. Included as part of the consideration, we received 9.2 million shares of Series A Preferred Stock of Addivant with a face value of $9 million. These shares accrue dividends at escalating rates beginning at 7% in the first year and up to 11% in the third year and beyond which are payable upon declaration. We recognized a pre-tax loss of $164 million ($155 million after-tax), which included $121 million of non-cash charges related to the release of AOCL associated with the pension obligations transferred, the release of cumulative translation adjustments and the release of our non-controlling interest in a Korean joint venture. In connection with the sale, we entered into several ancillary agreements, including supply agreements, a distribution agreement, and a transition service agreement. As a result of entering into this transaction, we determined that discontinued operations treatment applied. Assets and liabilities included in the Antioxidant Sale have been presented as assets and liabilities of discontinued operations as of December 31, 2012. Additionally, earnings and direct costs associated with the Antioxidant business for the periods prior to the date of the sale have been presented as earnings (loss) from discontinued operations, net of tax for the current and comparative periods. All applicable disclosures included in the accompanying footnotes have been updated to reflect the Antioxidant business as a discontinued operation.



For further discussion of the Antioxidant sale, see Note 2-Acquisitions and Divestitures in our Notes to Consolidated Financial Statements.

Solaris Acquisition

On September 26, 2012, we announced that we entered into a Business Transfer Agreement ("BTA") with Solaris ChemTech Industries Limited ("Solaris ChemTech"), an Indian Company, and Avantha Holdings Limited, an Indian Company and the parent company of Solaris ChemTech (collectively, "Solaris"). As provided in the BTA, we have agreed to purchase from Solaris certain assets used in the manufacture and distribution of bromine and bromine chemicals for cash consideration of $142 million and the assumption of certain liabilities. The purchase price is subject to a post-closing net working capital adjustment. The transaction is subject to, among other things, receiving governmental approval for the transfer of rights to the brine resources from which bromine is extracted and is expected to close upon receipt of those approvals, the date of which is not yet known. The parties continue to explore whether there may be an alternative transaction structure to permit a closing of the transaction. However as of this date the parties have not yet developed an approach that they can implement. 43



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Restructuring Initiatives

In February 2013, our Board approved a restructuring plan providing for, among other things, actions to reduce stranded costs related to divestitures. This plan is expected to preserve pre-divestiture operating margins following our portfolio changes. On October 9, 2013, the Board approved additional restructuring actions to consolidate our business' organizational structure in an effort to streamline the organization and gain efficiencies and additional cost savings. In December 2013, we substantially completed employee communications and the consultation process regarding the closure of our Droitwich, UK facility and consolidation of those operations into our Perth Amboy, NJ facility, in order to improve our competitiveness in the current economic environment. We recorded a pre-tax charge of $44 million in the year ended December 31, 2013, which included $27 million for severance and related costs, $15 million for professional fees, $1 million for accelerated depreciation of property, plant and equipment, and $1 million for accelerated asset retirement obligations. We expect to incur approximately $7 million to $10 million in 2014 primarily for accelerated depreciation and decommissioning costs. In April 2012, our Board approved a restructuring plan providing for, among other things, the closure of our Antioxidant business manufacturing facility in Pedrengo, Italy. The Board also approved actions to improve the operating effectiveness of certain global corporate functions. This plan is intended to achieve significant gains in efficiency and costs. The total cost of the restructuring plan is estimated to be approximately $40 million of which approximately $6 million will consist of non-cash charges. During 2012, we recorded pre-tax charges of $33 million which included $4 million for accelerated depreciation of property, plant and equipment included in depreciation and amortization, $2 million for accelerated asset retirement obligations included in cost of goods sold ("COGS"), $12 million for severance and professional fees related to corporate initiatives, $5 million for severance and other obligations related to the Pedrengo closure and $10 million reflecting the write-off of a receivable for which collection is no longer probable as a result of the restructuring actions. We recorded an additional pre-tax charge of $1 million in 2013, primarily for accelerated depreciation and relocation costs related to the Pedrengo closure. All charges related to the Pedrengo closure have been included in loss from discontinued operations, net of tax, as this plant formed part of our Antioxidants business. The Pedrengo plant ceased operations on March 31, 2013 and asset retirement work has been completed. We have retained this property under the terms of the sale of the Antioxidants business and anticipate selling it after all remediation work is completed.



Cash Flows from Operating Activities

Net cash provided by operating activities was $79 million in 2013, $218 million in 2012 and $182 million in 2011. Changes in key accounts are summarized below:

Favorable (unfavorable)

(In millions) 2013 2012 2011 Accounts receivable $ (20 )$ (8 )$ 13 Inventories (13 ) (1 ) (24 ) Accounts payable 20 30 (11 )



Pension and post-retirement health care liabilities (59 ) (79 )

(82 )

Liabilities subject to compromise - -



(8 )

During 2013, accounts receivable increased by $20 million over 2012 primarily driven by Industrial Performance segment. Our Industrial Performance segment showed some increase in accounts receivable driven primarily by the sales increases this segment experienced in the past several months. Inventory increased by $13 million over 2012 primarily driven by our Industrial Performance segment which reported an increase in inventory to support increased demand while our Industrial Engineered segment increased due to the acquisition of the remaining 50% of our Daystar joint venture. Accounts payable increased by $20 million during 2013 primarily relating to our Industrial Performance segment as a result of the inventory increase resulting from higher demand. Pension and post-retirement health care liabilities decreased $59 million primarily due to the funding of benefit obligations. Pension and post-retirement contributions amounted to $57 million during 2013 which included $32 million for domestic plans and $25 million for international plans. Cash flows from operating activities in 2013 were adjusted by the impact of certain non-cash and other charges, which primarily included loss on sale of discontinued operations of $180 million, depreciation and amortization expense of $123 million, loss on early extinguishment of debt of $50 million, stock-based compensation expense of $14 million and impairment charges for long-lived assets of $7 million offset by a gain of $13 million recorded for the release of cumulative translation adjustment associated with the liquidation of certain wholly-owned subsidiaries. During 2012, accounts receivable increased by $8 million driven by higher sales in the fourth quarter of 2012 compared to the fourth quarter of 2011 particularly for our Chemtura AgroSolutions and Industrial Engineered segments. Overall we experienced improvement in our days sales outstanding. Inventory increased by $1 million during 2012. Accounts payable 44



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increased by $30 million during 2012, as we continued to focus on rebuilding trade credit following our Chapter 11 proceedings. Pension and post-retirement health care liabilities decreased due to the funding of benefit obligations. Contributions to our pension plans amounted to $91 million in 2012, including $54 million for domestic plans and $37 million for the international plans. Cash flows from operating activities in 2012 were adjusted by the impact of certain non-cash and other charges, which primarily included depreciation and amortization expense of $139 million, impairment charges for long-lived assets of $47 million and stock-based compensation expense of $24 million offset by a gain of $21 million recorded for the release of cumulative translation adjustment associated with the liquidation of certain wholly-owned subsidiaries. During 2011, accounts receivable decreased by $13 million driven by lower sales in the fourth quarter of 2011 compared to the fourth quarter of 2010 primarily for the Chemtura AgroSolutions segment. There was an overall improvement in the days sales outstanding. Inventory increased $24 million during 2011 reflecting increased cost of raw materials, lower sales volumes and the overall decrease in the reserves reflecting the efforts to reduce slow moving and obsolete goods. Accounts payable decreased by $11 million during 2011 primarily due to the payment of approximately $23 million of Chapter 11 related legal and professional fees accrued in 2010. There was a slight increase in the days payable outstanding. Pension and post-retirement health care liabilities decreased due to the funding of benefit obligations. Contributions to our pension plans amounted to $96 million in 2011, including $34 million for domestic plans and $62 million for international plans. Liabilities subject to compromise related to operating activities decreased by $8 million in 2011, primarily due to the payment in cash of certain pre-petition liabilities in accordance with the Plan. Cash flows from operating activities in 2011 were adjusted by the impact of certain non-cash and other charges, which primarily included depreciation and amortization expense of $140 million, a gain on the sale of a business of $27 million, stock-based compensation expense of $26 million, provision for doubtful accounts of $7 million and impairment charges of $4 million.



Cash Flows from Investing and Financing Activities

Investing Activities

Net cash provided by investing activities was $184 million for 2013. Investing included capital expenditures of $170 million for U.S. and international facilities, environmental and other compliance requirements along with $3 million for the acquisition of the remaining interest in our Daystar joint venture. Investing activities also included proceeds, net of transaction costs and cash transferred of $78 million and $249 million from the sale of our Antioxidant and Consumer Products businesses, respectively, $20 million return of capital from our ISEM joint venture and $10 million from the collection on a receivable from the sale of our 50% interest in Tetrabrom Technologies Ltd in 2011. Net cash used in investing activities was $140 million for 2012. Investing activities were primarily related to $149 million in capital expenditures for U.S. and international facilities, environmental and other compliance requirements, partially offset by $9 million in proceeds from a payment on a note related to the sale of our 50% interest in Tetrabrom Technologies Ltd. Net cash used in investing activities was $181 million for 2011. Investing activities were primarily related to $154 million in capital expenditures for U.S. and international facilities, environmental and other compliance requirements, as well as payments related to the formation of joint ventures of $35 million, which included $29 million for ISEM S.r.l. and $6 million for DayStar Materials, LLC, partially offset by $8 million received from the divestment of the oleochemical business in 2008.



Financing Activities

Net cash used in financing activities was $80 million for 2013. Financing activities primarily included the repurchase of $354 million of the 2018 Senior Notes, payment of the related tender premium and consent fees of $42 million and repayment of $102 million in principal of the Term Loan using the proceeds from the issuance of the $450 million of 2021 Senior Notes and cash on hand. Cash on hand was also used to repurchase $54 million of our common stock under our share repurchase program and $12 million of debt issuance costs related to the 2021 Senior Notes financing and amendments to the Term Loan and ABL Facility. Other financing sources in the period were borrowings for capital improvements related to our new facility in Nantong, China of $17 million, a promissory note for information technology software licenses of $7 million and proceeds from the exercise of stock options of $8 million. Net cash provided by financing activities was $105 million for 2012, which included additional borrowings under our Term Loan of $125 million and the proceeds from the exercise of stock options of $5 million partly offset by shares acquired under our share repurchase program of $20 million, payments on short term borrowings of $3 million and cash costs related to the additional borrowing under the Term Loan of $2 million.



Net cash used in financing activities was $18 million for 2011, which included shares acquired under our share repurchase program of $22 million offset by proceeds from short term borrowings of $3 million and proceeds from the exercise of stock options of $1 million.

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Settlements of Liabilities Subject to Compromise and Disputed Claims

On March 18, 2009 (the "Petition Date") Chemtura and 26 of our U.S. affiliates (collectively the "U.S. Debtors" or the "Debtors" when used in relation to matters before August 8, 2010) filed voluntary petitions for relief under Chapter 11 of Title 11 of the United States Code ("Chapter 11") in the United States Bankruptcy Court for the Southern District of New York (the "Bankruptcy Court"). On August 8, 2010, our Canadian subsidiary, Chemtura Canada Co/Cie ("Chemtura Canada"), filed a voluntary petition for relief under Chapter 11. The U.S. Debtors along with Chemtura Canada after it filed for Chapter 11 (collectively the "Debtors") requested the Bankruptcy Court to enter an order jointly administering Chemtura Canada's Chapter 11 case with the previously filed Chapter 11 cases and appoint Chemtura Canada as the "foreign representative" for the purposes of the Canadian Case. Such orders were granted on August 9, 2010. On November 3, 2010, the Bankruptcy Court entered an order confirming the Debtors' plan of reorganization (the "Plan"). On November 10, 2010 (the "Effective Date"), the Debtors substantially consummated their reorganization through a series of transactions contemplated by the Plan and the Plan became effective. As of December 31, 2013, the Bankruptcy Court has entered orders granting final decrees closing all of the Debtors' Chapter 11 cases except the Chapter 11 case of Chemtura Corporation.



At December 31, 2012, there were no remaining undisbursed amounts in the Disputed Claims Reserve.

In 2012, we distributed approximately $5 million of restricted cash associated with our Chapter 11 cases. These settlements were comprised of a $3 million supplemental distribution to holders of the former Chemtura common stock ("Holders of Interests") and $2 million for general unsecured claims. Additionally, we issued approximately $26 million of common stock which included supplemental distributions totaling $23 million to Holders of Interests and $3 million for general unsecured claims. In 2011, we settled approximately $41 million of disputed claims asserted in our Chapter 11 cases in $33 million of restricted cash and $8 million of cash. These settlements were comprised of $27 million for environmental liabilities, $10 million for general unsecured claims, $2 million for disputed cure claims and $2 million for general unsecured claims subject to segregated reserves. Additionally we issued approximately $33 million of New Common Stock for the settlement of certain other disputed claims in accordance with the Plan.



Contractual Obligations and Other Cash Requirements

We have obligations to make future cash payments under contracts and commitments, including long-term debt agreements, lease obligations, environmental liabilities, post-retirement health care liabilities, facility closures, severance and related costs, and other long-term liabilities.

The following table summarizes our significant contractual obligations and other cash commitments as of December 31, 2013.

Payments Due by Period (In millions) 2019 and Contractual Obligations* Total 2014 2015 2016 2017 2018 Thereafter Total debt (including capital leases) $ 898$ 118$ 11$ 213$ 2$ 103$ 451 (a) Operating leases 47 10 8 6 5 4 14 (b) Facility closures, severance and related cost liabilities 15 15 - - - - - (c) Capital expenditures 24 24 - - - - - (d) Interest payments 276 44 43 40 35 35 79 (e) Unconditional purchase obligations 5 3 1 1 - - - (f)



Subtotal-Contractual Obligations 1,265 214 63 260 42

142 544 Environmental liabilities 93 21 24 15 6 5 22 (g) Post-retirement health care liabilities 97 9 9 8 8 8 55 (h) Unrecognized tax benefits 75 19 3 3 2 2 46 (i) Other long-term liabilities (excluding pension liabilities) 25 3 3 1 1 2 15 Total cash requirements $ 1,555$ 266$ 102$ 287$ 59$ 159$ 682



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º *

º Additional information is provided in various footnotes (including Debt,

Leases, Legal Proceedings and Contingencies, Pension and Other Post-Retirement Plans, Restructuring and Asset Impairment Activities, and Income Taxes) in our Notes to Consolidated Financial Statements. 46



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º (a)

º Our debt agreements include various notes and bank loans for which payments

will be payable through 2021. The future minimum lease payments under capital leases at December 31, 2013 were not significant. Obligations by period reflect stated contractual due dates.



º (b)

º Represents operating lease obligations primarily related to buildings, land

and equipment. Such obligations are net of future sublease income and will

be expensed over the life of the applicable lease contracts.

º (c)

º Represents estimated payments from accruals related to our restructuring

programs.

º (d)

º Represents capital commitments for various open projects. Each year we

spend in the range of $50 million-$65 million in capital spending to

sustain existing operations including maintaining our plants, ensuring that

they operate safely and generating efficiency improvements that support our

other critical business and functional infrastructure.

º (e)

º Represents interest payments and fees related to our 2021Senior Notes, 2018

Senior Notes, Term Loan, 2018 ABL Facility and other debt obligations

outstanding at December 31, 2013. Assumed interest rates are based upon

rates in effect at December 31, 2013.

º (f)

º Primarily represents unconditional purchase commitments to purchase raw

materials and tolling arrangements with outside vendors. º (g) º We have ongoing environmental liabilities for future remediation and operating and maintenance costs directly related to remediation. We estimate that the ongoing environmental liability could range up to $107 million. We have recorded a liability for ongoing environmental remediation of $93 million at December 31, 2013. º (h)



º We have post-retirement health care plans that provide health and life

insurance benefits to certain retired and active employees and their

beneficiaries. These plans are generally not pre-funded and expenses are

paid by us as incurred, with the exception of certain inactive government

related plans that are paid from plan assets.

º (i)

º We have recorded a liability for unrecognized tax benefits of $75 million

at December 31, 2013 which do not reflect competent authority offsets of

$31 million, which are reflected as assets in our balance of unrecognized

tax benefits.

During 2013, we made payments of $23 million and $2 million for operating leases and unconditional purchase obligations, respectively.

We fund our defined benefit pension plans based on the minimum amounts required by law plus additional voluntary contribution amounts we deem appropriate. Estimated future funding requirements are highly dependent on factors that are not readily determinable. These include changes in legislation, returns earned on pension investments, labor negotiations and other factors related to assumptions regarding future liabilities. In 2013, we made contributions of $47 million to our domestic and international pension plans and $10 million to our post-retirement benefit plans (including payments made by us directly to plan participants). See "Critical Accounting Estimates" below for details regarding current pension assumptions. To the extent that current assumptions are not realized, actual funding requirements may be significantly different from those described below. The following table summarizes the estimated future funding requirements for defined benefit pension plans under current assumptions: Funding Requirements by Period(a) (In millions) 2014 2015 2016 2017 2018 Qualified domestic pension plans $ - $ - $ - $ - $ - International and non-qualified pension plans 26 12 13 13 13 Total pension plans $ 26$ 12$ 13$ 13$ 13



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º (a)

º Represents minimum amounts required by law or contractual obligations. We

may elect to make additional discretionary contributions as deemed

appropriate consistent with our past practice.

In 2011, Chemtura Manufacturing UK Limited ("CMUK") entered into definitive agreements with the Trustees for the Great Lakes UK Limited Pension Plan (the "UK Pension Plan") which provide, among other things, for CMUK to make cash contributions of £60 million (approximately $95 million) in just over a three year period, with the initial contribution of £30 million ($49 million) made in the second quarter of 2011, the second contribution of £15 million ($24 million) made in the second quarter of 2012 and the third contribution of £8 million ($11 million) made in the second quarter of 2013. The final contribution of £8 million ($11 million) is expected to be made in the second quarter of 2014. The agreements also provided for the granting of both a security interest and a guarantee to support certain of the liabilities under the UK Pension Plan. There is also an evaluation being undertaken as to whether additional benefit obligations exist in connection with the equalization of certain benefits under the UK Pension Plan that occurred in the early 1990s. Based on the results of the evaluation in 2011, $8 million of expense was recorded in the fourth quarter of 2011, which may be subject to adjustment as further information is gathered as part of the evaluation. Additional information was gathered and evaluated during 2013 and resulted in a reduction of the estimated liability from that originally estimated. Accordingly we recorded $2 million of income to SG&A in the second quarter of 2013. When we reach final agreement with the trustees of the UK Pension Plan as to what additional benefit obligations exist, our UK subsidiary is required to make additional cash contributions to the UK Pension Plan.



We have substantial U.S. net operating losses ("NOLs") as described in Note 9-Income Taxes to our Consolidated Financial Statements. While our utilization of these NOLs is subject to annual federal NOL limitations under Internal Revenue Code

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("IRC") Section 382, we expect they will substantially reduce the amount of U.S. cash tax payments we are required to make in the foreseeable future.

Other Sources and Uses of Cash

We expect to finance our continuing operations and capital spending requirements for 2014 with cash flows provided by operating activities, available cash and cash equivalents, the 2018 ABL Facility and China Bank Facility. We anticipate that a substantial portion of the proceeds from the sale of Consumer Products and potential sale of the Chemtura AgroSolutions business would be used to return capital to shareholders and continue to make important investments to strengthen and enable the continuing growth of the remaining businesses, as well as pay down debt to maintain pro-forma leverage. Our long-term stated total leverage target remains approximately 2X Adjusted EBITDA. Cash and cash equivalents as of December 31, 2013 were $549 million, of which $317 million was held by Chemtura and our U.S. subsidiaries and $232 million was held by our direct or indirect foreign subsidiaries and consolidated joint ventures. The cash and cash equivalents of our foreign subsidiaries are used to fund seasonal working capital requirements, make cash contributions to various pension plans, fund capital expenditures, and make cash contributions to our foreign joint ventures, as warranted. In light of these cash requirements, we consider undistributed earnings of certain foreign subsidiaries to be indefinitely invested in their operations. As of December 31, 2013, such undistributed earnings of our foreign subsidiaries totaled $756 million. Repatriation of cash held by our foreign subsidiaries could be subject to adverse tax consequences given the potentially higher U.S. effective tax rates and withholding tax requirements in the source country. Estimating the range of tax liabilities that could arise from the repatriation of undistributed earnings of our foreign subsidiaries is not practicable at this time.



Strategic Initiatives

We continually review each of our businesses, individually and as part of our portfolio, to determine whether to continue in, consolidate, reorganize, exit or expand our businesses, operations or product lines. We have established strategic and financial criteria against which we assess whether to invest in the expansion of a business, operation or product line, as well as to determine which portfolio businesses may, at an appropriate time, be monetized. As part of these assessments, we also review our manufacturing and facility footprints to determine if we should consolidate or close facilities to optimize customer supply and reduce our unit product costs. Our review process also involves expanding businesses, investing in innovation and regional growth, expanding existing product lines and bringing new products to market or changing the way we do business. In 2013, we divested our Antioxidants and Consumer Products businesses. These were the two businesses in our portfolio that, in our judgment, were unlikely to meet the financial and strategic performance criteria we had set for our Company. These divestitures are expected to improve percentage margins, sales growth rates and increase focus on our chosen markets and regions. On October 10, 2013, we announced that our Board approved our exploration of a sale of our agrochemicals business, Chemtura AgroSolutions. The decision to explore a sale of Chemtura AgroSolutions is based on the belief that a sale may deliver substantially greater near-term value to our shareholders than retaining this segment in our portfolio. Should the sale occur, we will focus on creating additional value as a "pure-play" leader in the global development, marketing, manufacture and sale of industrial specialty chemicals based on our Industrial Engineered Products and Industrial Performance Products segments. There is no definitive timetable for the sale process and there can be no assurance that the process will result in a sale of the Chemtura AgroSolutions business. We are conducting an ongoing review of our manufacturing and facility footprint to determine if we should consolidate or close facilities to optimize customer supply and reduce our unit product costs. In December 2013, we substantially completed employee communications and the consultation process regarding the closure of our Droitwich, UK facility and consolidation of those operations into our Perth Amboy, NJ facility. It is anticipated that additional plant closures may be announced in the future as part of this footprint review process. Guarantees In addition to the letters of credit of $14 million outstanding at December 31, 2013 and 2012, we have guarantees that have been provided to various financial institutions. At December 31, 2013 and 2012, we had $12 million in guarantees. The letters of credit and guarantees were primarily related to liabilities for insurance obligations, environmental obligations, banking and credit facilities, vendor deposits and European value added tax ("VAT") obligations. We also had $2 million and $3 million of third party guarantees at December 31, 2013 and 2012, respectively, for which we have reserved less than $1 million at December 31, 2013 and 2012, which represented the fair value of these guarantees. 48



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In addition, we have a financing agreement with a bank in Brazil for certain customers under which we receive funds from the bank at invoice date, and in turn, the customer agrees to pay the bank on the due date. We provide a full recourse guarantee to the bank in the event of customer non-payment.



CRITICAL ACCOUNTING ESTIMATES

Our Consolidated Financial Statements have been prepared in conformity with GAAP, which require us to make estimates and assumptions that affect the amounts and disclosures reported in our Consolidated Financial Statements and accompanying notes. Accounting estimates and assumptions described in this section are those we consider to be the most critical to an understanding of our financial statements because they inherently involve significant judgments and uncertainties. For all of these estimates, we note that future events rarely develop exactly as forecasted, and the best estimates routinely require adjustment. Actual results could differ from such estimates. The following discussion summarizes our critical accounting estimates. Significant accounting policies used in the preparation of our Consolidated Financial Statements are discussed in our Notes to Consolidated Financial Statements.



Carrying Value of Goodwill and Long-Lived Assets

We have elected to perform our annual goodwill impairment procedures for all of our reporting units in accordance with ASC Subtopic 350-20, Intangibles-Goodwill and Other-Goodwill ("ASC 350-20") as of July 31, or sooner, if events occur or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value. We estimate the fair value of our reporting units utilizing income and market approaches through the application of discounted cash flow and market comparable methods (Level 3 inputs as described in Note 15-Financial Instruments and Fair Value Measurements). The assessment is required to be performed in two steps: step one to test for a potential impairment of goodwill and, if potential impairments are identified, step two to measure the impairment loss through a full fair value allocation of the assets and liabilities of the reporting unit utilizing the acquisition method of accounting. We continually monitor and evaluate business and competitive conditions that affect our operations and reflect the impact of these factors in our financial projections. If permanent or sustained changes in business or competitive conditions occur, they can lead to revised projections that could potentially give rise to impairment charges. We recorded asset impairment charges of $7 million and $47 million in 2013 and 2012, respectively to earnings (loss) from discontinued operations, net of tax and $4 million in 2011 to impairment charges in our Consolidated Statements of Operations. See Note-3 Restructuring and Asset Impairment Activities in our Notes to Consolidated Financial Statements.



Environmental Matters

We are involved in environmental matters of various types in a number of jurisdictions. A number of such matters involve claims for material amounts of damages and relate to or allege environmental liabilities, including cleanup costs associated with hazardous waste disposal sites and natural resource damages. Each quarter, we evaluate and review estimates for future remediation, operation and management costs directly related to remediation, to determine appropriate environmental reserve amounts. For each site where the cost of remediation is probable and reasonably estimable, we determine the specific measures that are believed to be required to remediate the site, the estimated total cost to carry out the remediation plan, the portion of the total remediation costs to be borne by us and the anticipated time frame over which payments toward the remediation plan will occur. At sites where we expect to incur ongoing operation and maintenance expenditures, we accrue on an undiscounted basis for a period of generally 10 years, those costs which are probable and reasonably estimable. As of December 31, 2013, our reserve for ongoing environmental remediation activities totaled $93 million. We estimate that ongoing environmental liabilities could range up to $107 million at December 31, 2013. Our ongoing reserves include estimates for determinable clean-up costs. At a number of these sites, the extent of contamination has not yet been fully investigated or the final scope of remediation is not yet determinable.



In addition, it is possible that our estimates for environmental remediation liabilities may change in the future should additional sites be identified, further remediation measures be required or undertaken, current laws and regulations be modified or additional environmental laws and regulations be enacted.

We intend to assert all meritorious legal defenses and will pursue other equitable factors that are available with respect to these matters. The resolution of environmental matters asserted against us could require us to pay remedial costs or damages, which are not currently determinable, that could exceed our present estimates, and as a result could have, either individually or in the aggregate, a material adverse effect on our financial condition, results of operations or cash flows. 49



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Pension and Other Post-Retirement Benefits Expense

Our calculation of pension and other post-retirement benefits expense is dependent on a number of assumptions. These assumptions include discount rates, health care cost trend rates, expected long-term rates of return on plan assets, mortality rates, expected salary and wage increases, and other relevant factors. Components of pension and other post-retirement benefits expense include interest and service costs on the pension and other post-retirement benefit plans, expected return on plan assets and amortization of certain unrecognized costs and obligations. Actual results that differ from the assumptions utilized are accumulated and amortized over future periods and, therefore, generally affect recognized expense and the recorded obligation in future periods. While we believe that the assumptions used are appropriate, differences in actual experience or significant changes in assumptions would affect our pension and other post-retirement benefits costs and obligations. See Note 13-Pension and Other Post-Retirement Plans in our Notes to Consolidated Financial Statements.



Pension Plans

Pension liabilities are measured on a discounted basis and the assumed discount rate is a significant assumption. At each measurement date, the discount rate is based on interest rates for high-quality, long-term corporate debt securities with maturities comparable to our liabilities. At December 31, 2013, we utilized a discount rate of 4.60% for our domestic qualified pension plan compared to 3.80% at December 31, 2012. For the international and non-qualified plans, a weighted average discount rate of 4.18% was used at December 31, 2013, compared to 4.03% used at December 31, 2012. As a sensitivity measure, a 25 basis point reduction in the discount rate for all plans would result in less than a million dollar decrease in pre-tax earnings for 2014. Domestic discount rates adopted at December 31, 2013 utilized an interest rate yield curve to determine the discount rate pursuant to guidance codified under ASC Topic 715, Defined Benefit Plans ("ASC 715"). The yield curve is comprised of AA bonds with maturities between zero and thirty years. We discounted the annual cash flows of our domestic pension plans using this yield curve and developed a single-point discount rate matching the respective plan's payout structure. A similar approach was used to determine the appropriate discount rates for the international plans. The actual method used varies from country to country depending on the amount of available information on bond yields to be able to estimate a single-point discount rate to match the respective plan's benefit disbursements. Our weighted average estimated rate of compensation increase was 2.96% for applicable domestic and international pension plans combined at December 31, 2013. As a sensitivity measure, an increase of 25 basis points in the estimated rate of compensation increase would decrease pre-tax earnings for 2014 by an immaterial amount. The expected return on pension plan assets is based on our investment strategy, historical experience, and expectations for long-term rates of return. We determine the expected rate of return on plan assets for the domestic and international pension plans by applying the expected returns on various asset classes to our target asset allocation.



We utilized a weighted average expected long-term rate of return of 7.50% on all domestic plan assets and a weighted average rate of 6.53% for the international plan assets for 2013.

Asset-class return expectations are set using a combination of historical and forward-looking analyses. Historical returns are evaluated based on an arithmetic average of annual returns derived from recognized passive indices, such as the S&P 500, for the major asset classes. We looked at the arithmetic averages of annual investment returns from passive indices, assuming a portfolio of investments that follow the current target asset allocation for the domestic plans over several business cycles, to obtain an indication of the long-term historical market performance. The historical return estimates that result for each asset class are reviewed and combined with a qualitative assessment of long-term relationships between asset classes before a return estimate is finalized. The qualitative analysis is targeted towards removing the effect of unsustainable short-term valuations or trends, or capturing structural changes that are not yet reflected in the historical data. The resulting capital market assumptions are meant to reflect return levels and behavior that are likely to prevail over longer time periods. The geometric return over the past 18 years, the maximum available period of time for the applicable indices, was 8.26%, and over the past 10 years it was 8.84%. Both of these values exceeded the 7.50% domestic expected return on assets for 2013. The actual annualized return on plan assets for the domestic plans for the 12 months ended December 31, 2013 was approximately 8.7% (net of investment expenses), which was above the expected return on asset assumption for the year. The international plans realized a weighted average return of approximately 8.4% in local currency terms and approximately 9.0% in U.S. dollar terms. Changes in exchange rates resulted in currency gains of approximately $3 million on plan assets, which were partially offset by currency losses of approximately $9 million on benefit obligations for the international pension arrangements. 50



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Our target asset allocation for the domestic pension plans is based on investing 32% of plan assets in equity instruments, 58% of plan assets in fixed income investments and 10% in all other types of investments. At December 31, 2013, 24% of the portfolio was invested in equities, 60% in fixed income investments and 16% in real estate and other investments. We have unrecognized actuarial losses relating to our pension plans which have been included in our Consolidated Balance Sheet, but not in our Consolidated Statements of Operations. The extent to which these unrecognized actuarial losses will impact future pre-tax earnings depends on whether the unrecognized actuarial losses are deferred through the asset-smoothing mechanism (the market related value as defined by ASC Topic 715-30, Defined Benefit Plans-Pensions ("ASC 715-30")), or through amortization in pre-tax earnings to the extent that they exceed a 10% amortization corridor, as defined by ASC 715-30, which provides for amortization over the average remaining participant career or life. The amortization of unrecognized net losses existing as of December 31, 2013 will result in a $14 million decrease to pre-tax earnings for 2014 ($10 million for the qualified domestic plans and $4 million for the international and non-qualified plans). Since future gains and losses beyond 2013 are a result of various factors described herein, it is not possible to predict with certainty to what extent the combination of current and future losses may exceed the 10 percent amortization corridor and thereby be subject to further amortization. At the end of 2013, unrecognized net losses amounted to $219 million for the qualified domestic plans and $120 million for the international and non-qualified plans. Of these amounts, $27 million of unrecognized gains for the domestic plans and $12 million of unrecognized losses for the international plans are deferred through the asset smoothing mechanism as required by ASC 715. The pre-tax pension expense for all pension plans was $5 million in 2013, which included $1 million related to loss from discontinued operations. Pension (income) expense is calculated based upon certain assumptions including discount rate, expected long-term rate of return on plan assets, mortality rates and expected salary and wage increases. Actual results that differ from the current assumptions utilized are accumulated and amortized over future periods and will affect pension expense in future periods. In addition to the pre-tax pension expense noted above, we recorded a $40 million settlement loss related to the divestiture of our Antioxidants business in April 2013 and a $2 million settlement gain related to the divestiture of our Consumer Products business in December 2013, which were included in loss on sale of discontinued operations. In the second quarter of 2013 we also recorded a gain related to an adjustment for a legacy pension plan of $2 million to SG&A and $4 million to loss from discontinued operations on our Consolidated Statement of Operations. The following table estimates the future pension expense, based upon current assumptions: Pension Expense (Income) By Year (In millions) 2014 2015 2016 2017 2018 Qualified domestic pension plans $ (3 )$ (6 )$ (8 )$ (10 )$ (11 ) International and non-qualified pension plans 1 (1 ) (2 ) (4 ) (6 ) Total pension plans $ (2 )$ (7 )$ (10 )$ (14 )$ (17 )



The following tables show the impact of a 100 basis point change in the actual return on assets on the pension (income) expense.

Change in Pension Expense (Income) By Year Increase (decrease) 2014 2015 2016 2017 2018 100 Basis Point Increase in Investment Returns Qualified domestic pension plans $ - $ - $ - $ (1 )$ (1 ) International and non-qualified pension plans - - (1 ) (1 ) (2 ) Total pension plans $ - $ - $ (1 )$ (2 )$ (3 ) 100 Basis Point Decrease in Investment Returns Qualified domestic pension plans $ - $ - $ - $ 1$ 1 International and non-qualified pension plans - - 1 1 2 Total pension plans $ - $ - $ 1$ 2$ 3 Other Post-Retirement Benefits We provide post-retirement health and life insurance benefits for current retired and active employees and their beneficiaries and covered dependents for certain domestic and international employee groups. 51



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The discount rates we adopted for the valuation of the post-retirement health care plans were determined using the same methodology as for the pension plans. At December 31, 2013, we utilized a weighted average discount rate of 4.35% for post-retirement health care plans, compared to 3.56% at December 31, 2012. As a sensitivity measure, a 25 basis point reduction in the discount rate would result in an immaterial change in pre-tax earnings for 2014. Assumed health care cost trend rates are based on past and current health care cost trends, considering such factors as health care inflation, changes in health care utilization or delivery patterns, technological advances, and the overall health of plan participants. We use health care trend cost rates starting with a weighted average initial level of 6.00% for the domestic arrangements and grading down to an ultimate level of 5%. For the international arrangements, the weighted average initial rate is 7.50%, grading down to 5%. The pre-tax post-retirement healthcare expense was $1 million in 2013. The following table summarizes projected post-retirement benefit expense based upon the various assumptions discussed above. Pre-Tax Expense by Year (In millions) 2014 2015 2016 2017 2018 Domestic and international post-retirement benefit plans $ 1$ 1$ 1$ 1$ 1 Income Taxes

Income taxes payable reflect our current tax provision and management's best estimate of the current tax liability relating to the outcome of uncertain tax positions. If the actual outcome of uncertain tax positions differs from our best estimates, an adjustment to income taxes payable could be required, which may result in additional income tax expense or benefit. We record deferred tax assets and liabilities based on differences between the book and tax basis of assets and liabilities using the enacted tax rates expected to apply to taxable income in the periods in which the deferred tax liability or asset is expected to be settled or realized. We also record deferred tax assets for the expected future tax benefits of net operating losses and income tax credit carryforwards. Valuation allowances are established when we determine that it is more likely than not that the results of future operations will not generate sufficient taxable income to realize our deferred tax assets. We consider the scheduled reversal of deferred tax assets and liabilities, projected future taxable income, and tax planning strategies in making this assessment. Thus, changes in future results of operations could result in adjustments to our valuation allowances. We anticipate that we will repatriate the undistributed earnings of certain foreign subsidiaries. For the year ended December 31, 2013, we increased by $18 million, the amount of the net deferred tax liability we provide for the U.S. tax consequences of these repatriations. In 2013, this increase has been offset by an equal increase to our foreign tax credits, and, as such, had no effect on tax expense recognized in our Consolidated Statements of Operations. We consider undistributed earnings of all other foreign subsidiaries to be indefinitely invested in their operations. At December 31, 2013, such undistributed earnings deemed to be indefinitely reinvested in foreign operations amounted to $756 million. Repatriation of undistributed earnings, currently deemed indefinitely reinvested, would require us to accrue and pay taxes in the future. Estimating the tax liability that would arise if these earnings were repatriated is not practicable at this time. We file income tax returns in the U.S (including federal and state) and foreign jurisdictions. The income tax returns for our entities taxable in the U.S. and significant foreign jurisdictions are open for examination and adjustment. We assess our income tax positions and record a liability for all years open to examination based upon our evaluation of the facts, circumstances and information available at the reporting date. The economic benefit associated with a tax position will only be recognized if it is more likely than not that a tax position ultimately will be sustained. We adjust these liabilities, if necessary, upon the completion of tax audits or changes in tax law.



We have a liability for unrecognized tax benefits of $44 million and $41 million at December 31, 2013 and 2012, respectively. This increase is primarily related to settlements of tax audits in various foreign jurisdictions.

ACCOUNTING DEVELOPMENTS

For information on accounting developments, see Note 1-Nature of Operations and Summary of Significant Accounting Policies in our Notes to Consolidated Financial Statements.

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OUTLOOK

In 2014, we target to grow revenues, expand profitability margins and improve cash flows through our focus on growth from innovation and the faster growing regions as well as continuous improvement actions to reduce operating costs. We will quickly eliminate the stranded costs associated with the Consumer Products business. All of these actions are designed to deliver value to our shareholders and contribute to improving our return on invested capital. In the first half of 2014, we expect to determine whether we shall divest our Chemtura AgroSolutions business. We are targeting 8%-10% growth in net sales from continuing operations in 2014. Profitability is expected to grow more quickly, benefiting from margin improvement actions, cost reductions and the elimination of stranded costs associated with our Consumer Products business (excluding the impact of any project expenses incurred in the process of exploring the sale of Chemtura AgroSolutions or facility closure or severance expenses).



º •

º Our Industrial Performance Products segment is anticipated to continue to deliver revenue and operating income growth from the increased sales of petroleum additives and certain synthetic lubricant base-stocks. This segment is anticipated to progressively benefit as sales of synthetic grease products from our Nantong, China facility start to build in the region and as our Ankerweg, The Netherlands facility enters into commercial production of its HVPAO products towards the end of the first half of 2014. º •



º Industrial Engineered Products is expected to lead our profitability

improvement as a result of gradual recovery in electronics and insulation foam applications, the continuing adoption of Emerald InnovationTM products and the benefits of cost reductions. This segment also anticipates seeing the full year benefit of volume and margin improvement in our tin-based organometallic products and growth from metal vapor deposition products in electronic applications. However, we do not currently expect that its profitability will fully return to 2012 levels in 2014. º •



º Chemtura AgroSolutions anticipates continuing its path of delivering

year-over-year growth from new product introductions and registrations

and improved distribution channel performance.

º •

º We also anticipate a reduction in our corporate expenses as we see the

benefit of the elimination of the stranded costs and pension expense

associated with the Antioxidants and Consumer Products businesses.

Despite our divestitures in 2013, cash provided by operations is expected to increase as a result of profitability improvement and lower interest expense due to the refinancing actions in 2013 and the $110 million repayment in January 2014 of the Term Loan with proceeds from the divestiture of our Consumer Products business. Capital spending in 2014 will reduce to an amount between $115 million and $125 million compared to the $159 million invested in continuing operations in 2013. We expect to use the remaining net cash proceeds from the divestiture of our Consumer Products business to finance the stock repurchase activities approved by our Board of Directors.



Forward-Looking Statements

In addition to historical information, this Report contains "forward-looking statements" within the meaning of Section 27(a) of the Securities Act of 1933, as amended and Section 21(e) of the Exchange Act of 1934 as amended. We use words such as "anticipate," "believe," "intend," "estimate," "expect," "continue," "should," "could," "may," "plan," "project," "predict," "will" and similar expressions to identify forward-looking statements. Such statements include, among others, those concerning our expected financial performance and strategic and operational plans, as well as all assumptions, expectations, predictions, intentions or beliefs about future events. You are cautioned that any such forward-looking statements are not guarantees of future performance and that a number of risks and uncertainties could cause actual results to differ materially from those anticipated in the forward-looking statements. Such risks and uncertainties include, but are not limited to: º • º The cyclical nature of the global chemicals industry; º •



º Increases in the price of raw materials or energy and our ability to

recover cost increases through increased selling prices for our products; º • º Disruptions in the availability of raw materials or energy; º •



º Our ability to implement our growth strategies in rapidly growing

markets and faster growing regions;

º •

º Our ability to execute timely upon our portfolio management strategies

and mid and long range business plans; º • º Our ability to identify one or more potential purchasers of the



Chemtura AgroSolutions business who are willing to pay a price for the

business that we are willing to accept, and to reach a definitive

agreement on a mutually acceptable transaction with such purchaser;

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Table of Contents º • º Declines in general economic conditions; º • º The ability to comply with product registration requirements of regulatory authorities, including the U.S. food and drug administration (the "FDA") and European Union REACh legislation; º • º The effect of adverse weather conditions; º •



º Demand for Chemtura AgroSolutions segment products being affected by

governmental policies; º • º Current and future litigation, governmental investigations, prosecutions and administrative claims; º • º Environmental, health and safety regulation matters; º •



º Federal regulations aimed at increasing security at certain chemical

production plants; º • º Significant international operations and interests; º •



º Our ability to maintain adequate internal controls over financial

reporting; º • º Exchange rate and other currency risks; º • º Our dependence upon a trained, dedicated sales force; º • º Operating risks at our production facilities; º •



º Our ability to protect our patents or other intellectual property

rights;

º •

º Whether our patents may provide full protection against competing

manufacturers;

º •

º Our ability to remain technologically innovative and to offer improved

products and services in a cost-effective manner;

º •

º The risks to our joint venture investments resulting from lack of sole

decision making authority; º • º Our unfunded and underfunded defined benefit pension plans and post-retirement welfare benefit plans; º • º Risks associated with strategic acquisitions and divestitures; º •



º Risks associated with possible climate change legislation, regulation

and international accords; º • º The ability to support the carrying value of the goodwill and long-lived assets related to our businesses; º • º Whether we repurchase any additional shares of our common stock that

our Board of Directors have authorized us to purchase and the terms on which any such repurchases are made; and º • º Other risks and uncertainties detailed in Item 1A. Risk Factors in our filings with the Securities and Exchange Commission. These statements are based on our estimates and assumptions and on currently available information. The forward-looking statements include information concerning our possible or assumed future results of operations, and our actual results may differ significantly from the results discussed. Forward-looking information is intended to reflect opinions as of the date this Form 10-K was filed. We undertake no duty to update any forward-looking statements to conform the statements to actual results or changes in our operations. 54



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