Chemtura Corp.
Chemtura CORP (Form: 10-K, Received: 03/08/2011 06:03:39)
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.  20549
 
FORM 10-K
(Mark One)
x
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2010
OR

¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from             to
Commission File No. 1-15339
 
Chemtura Corporation
(Exact name of registrant as specified in its charter)
 
Delaware
52-2183153
(State or other jurisdiction of incorporation or organization)  
(I.R.S. Employer Identification Number)
   
1818 Market Street, Suite 3700, Philadelphia, Pennsylvania
199 Benson Road, Middlebury, Connecticut
19103
06749
(Address of principal executive offices)  
(Zip Code)
 
Registrant's telephone number, including area code: (203) 573 - 2000
 
Securities registered pursuant to Section 12(b) of the Act:
 
Title of each class
Name of each exchange on which registered
   
Common Stock, $0.01 par value
NONE
 
Securities registered pursuant to Section 12(g) of the Act:  NONE
 
Indicate by check mark whether the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act Yes x    No ¨
 
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.  Yes ¨    No x
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes x    No ¨
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes ¨ No ¨
 
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  ¨
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company.  See definition of “accelerated filer,” “large accelerated file” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check off):
 
Large accelerated filer ¨
Accelerated filer x
Non-accelerated filer ¨
Smaller reporting company ¨
(Do not check if a smaller reporting company)
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨    No x
 
The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant, computed as of June 30, 2010, based on the value of the last sales price of these shares as quoted on Pink Sheets Electronic Quotation Service was $140,167,117.
 
The number of voting shares of Common Stock of the registrant outstanding as of January 31, 2011 was 95,647,827.
 
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes x    No ¨
 
DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Proxy Statement to be delivered to shareholders in connection with the Annual Meeting of Shareholders to be held on May 10, 2011 are incorporated by reference into Part III.
 
 
 

 
 
     
Page
PART I
     
Item 1.
 
Business
2
       
Item 1A.
 
Risk Factors
16
       
Item 1B.
 
Unresolved Staff Comments
26
       
Item 2.
 
Properties
26
       
Item 3.
 
Legal Proceedings
28
       
Item 4.
 
Reserved
28
       
PART II
     
Item 5.
 
Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
29
       
Item 6.
 
Selected Financial Data
31
       
Item 7.
 
Management's Discussion and Analysis of Financial Condition and Results of Operations
33
       
Item 7A.
 
Quantitative and Qualitative Disclosures About Market Risk
62
       
Item 8.
 
Financial Statements and Supplementary Data
63
       
Item 9.
 
Changes In and Disagreements with Accountants on Accounting and Financial Disclosure
127
       
Item 9A.
 
Controls and Procedures
127
       
Item 9B.
 
Other Information
128
       
PART III
     
Item 10.
 
Directors, Executive Officers and Corporate Governance
128
       
Item 11.
 
Executive Compensation
129
       
Item 12.
 
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
129
       
Item 13.
 
Certain Relationships and Related Transactions and Director Independence
129
       
Item 14.
 
Principal Accountant Fees and Services
129
       
PART IV
     
Item 15.
 
Exhibits and Financial Statement Schedules 
130
       
   
Signatures
133
       

 
1

 
 
Note About Forward-Looking Statements
 
Certain statements in this report, other than purely historical information, including estimates, projections, statements relating to our business plans, objectives and expected operating results, and the assumptions upon which those statements are based, are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements may appear throughout this report, including without limitation, the following sections: “Business”, “Management’s Discussion and Analysis”, and “Risk Factors.” These forward-looking statements generally are identified by the words “believe,” “project,” “expect,” “anticipate,” “estimate,” “intend,” “strategy,” “future,” “opportunity,” “plan,” “may,” “should,” “will,” “would,” “will be,” “will continue,” “will likely result,” and similar expressions. Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties which may cause actual results to differ materially from the forward-looking statements. A detailed discussion of risks and uncertainties that could cause actual results and events to differ materially from such forward-looking statements is included in the section entitled “Risk Factors” (See Part I, Item 1A of this Form 10-K). We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events, or otherwise.
 
PART I
 
Item 1.  Business

When we use the terms “Corporation,” “Company,” “Chemtura,” “Registrant,” “We,” “Us” and “Our,” unless otherwise indicated or the context otherwise requires, we are referring to Chemtura Corporation and our consolidated subsidiaries.
 
GENERAL
 
We are a leading diversified global developer, manufacturer and marketer of performance-driven engineered specialty chemicals. Most of our 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 through dealers and distributors to growers and others. Our pool, spa and household chemical products are sold through local dealers, large retailers, independent retailers and mass merchants to consumers for in-home and outdoor use. Our operations are located in North America, Latin America, Europe and Asia. In addition, we have important joint ventures primarily in the United States and the Middle East, but also in Asia and Europe. We are committed to global sustainability through “greener technology” and developing engineered chemical solutions that meet our customers’ evolving needs. For the year ended December 31, 2010, our global net sales were $2.8 billion. As of December 31, 2010, our global total assets were $2.9 billion.

We are the successor to Crompton & Knowles Corporation (“Crompton & Knowles”), which was incorporated in Massachusetts in 1900 and engaged in the manufacture and sale of specialty chemicals beginning in 1954. Crompton & Knowles traces its roots to Crompton Loom Works incorporated in the 1840s. We expanded our specialty chemical business through acquisitions in the United States and Europe, including the 1996 acquisition of Uniroyal Chemical Company, Inc., the 1999 merger with Witco Corporation and the 2005 acquisition of the Great Lakes Chemical Company, Inc. (“Great Lakes”).

Our principal executive offices are located at 1818 Market Street, Suite 3700, Philadelphia, Pennsylvania 19103 and at 199 Benson Road, Middlebury, Connecticut 06749. Our telephone number in Connecticut is (203) 573-2000.  Our internet website address is www.chemtura.com.  We make available free of charge on or through our internet website our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as soon as reasonably practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission.

Our Corporate Governance Principles, Code of Business Conduct and charters for our Audit, Compensation, Nominating & Governance, Finance & Pension and Environmental, Health & Safety Committees are available on our website and free of charge to any stockholder who requests them from the Corporate Secretary at Chemtura Corporation, 199 Benson Road, Middlebury, CT 06749.  The information contained on our website is not incorporated by reference into this Annual Report on Form 10-K and should not be considered a part of this Annual Report.

 
2

 
 
BANKRUPTCY EMERGENCE

The recent crisis in the credit markets compounded the liquidity challenges we faced in the fourth quarter of 2008 and the beginning of 2009.  Under normal market conditions, we believed we would have been able to refinance our $370 million notes maturing on July 15, 2009 (the “2009 Notes”) in the debt capital markets.  However, with the deterioration of the credit market in the late summer of 2008 combined with our then deteriorating financial performance, we did not believe we would be able to refinance the 2009 Notes on commercially reasonable terms, if at all.  Having carefully explored and exhausted all possibilities to gain near-term access to liquidity, we determined that debtor-in-possession (“DIP”) financing presented the best available alternative for us to meet our immediate and ongoing liquidity needs and preserve the value of our business.  As a result, having obtained the commitment of $400 million senior secured super priority DIP credit facility agreement (the “DIP Credit Facility”), Chemtura and 26 of our U.S. affiliates (collectively the “U.S. Debtors”) filed voluntary petitions for relief under Chapter 11 of Title 11 of the United States Code (the “Bankruptcy Code”) on March 18, 2009 (the “Petition Date”) 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 of the Bankruptcy Code.  On August 11, 2010 Chemtura Canada commenced ancillary recognition proceedings under Part IV of the Companies’ Creditors Arrangement Act (the “CCAA”) in the Ontario Superior Court of Justice, (the “Canadian Court” and such proceedings, the “Canadian Case”).  The U.S. Debtors along with Chemtura Canada (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 under lead case number 09-11233 (REG) and appoint Chemtura Canada as the “foreign representative” for the purposes of the Canadian Case.  Such orders were granted on August 9, 2010.  On August 11, 2010, the Canadian Court entered an order recognizing the Chapter 11 cases as a “foreign proceedings” under the CCAA.

On October 21, 2010, the Bankruptcy Court entered a bench decision approving confirmation of the Debtors’ joint plan of reorganization (as amended, supplemented or modified, the “Plan”), and on November 3, 2010, the Bankruptcy Court entered an order confirming 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.  Pursuant to the Plan, on the Effective Date: (i) our common stock, par value $0.01 per share, outstanding prior to effectiveness of the Plan was cancelled and all of our outstanding registered pre-petition indebtedness was settled, and (ii) shares of common stock, par value $0.01 per share (the “New Common Stock”) were issued for distribution in accordance with the Plan.  On November 8, 2010, the New York Stock Exchange (“NYSE”) approved for listing a total of 111 million shares of New Common Stock, as authorized under the Plan, comprising (i) approximately 95.5 million shares of New Common Stock to be issued under the Plan; (ii) approximately 4.5 million shares of New Common Stock reserved for future issuances under the Plan; and (iii) 11 million shares of New Common Stock reserved for issuance under our equity plans.  Our New Common Stock started “regular way” trading on the NYSE under the ticker symbol “CHMT” on November 11, 2010.

The Plan allowed for payment in full (including interest) on all allowed claims.  Holders of previously outstanding Chemtura stock (“Holders of Interests”) in our common stock received a pro-rata share of New Common Stock in accordance with the Plan as well.

 
3

 
 
OUR COMPETITIVE STRENGTHS
 
We believe our key competitive strengths are:
 
 
Our Key Businesses Have Industry Leading Positions: Many of our key businesses and products hold leading positions within the various industries they serve. We believe our scale and global reach in product development and marketing provide us with advantages over many of our smaller competitors.

Operating Segment
 
Business Component
 
Industry Position / Commentary
Consumer Products
 
Consumer Products
 
• One of the two largest global marketers and sellers of recreational water products used in pools and spas
         
Industrial Performance Products
 
Petroleum Additives
 
• Global manufacturer and marketer of high-performance lubricant additive components and synthetic lubricant base-stocks and synthetic finished fluids
 
• Global manufacturer and marketer of high performing calcium sulfonate specialty greases and phosphate ester based fluids
         
   
Urethanes
 
• A global leader in the development and production of hot cast elastomer pre-polymers
         
   
Antioxidants
 
• A global leader in the development and production of a broad range of additives for the polymer industry
         
Chemtura AgroSolutions™
 
Chemtura AgroSolutions™
 
• A leading niche developer and manufacturer of seed treatments, fungicides, miticides, insecticides, growth regulants and herbicides
         
Industrial Engineered Products
 
Great Lakes Solutions
 
• One of the three largest global developers and manufacturers of bromine and bromine-based products
         
 
 
Organometallics
 
• One of the three largest global developers and manufacturers of organometallic compounds, with applications in catalysts, surface treatment and pharmaceuticals
 
 
Broad Diversified Business:
 
 
Geographic diversity . Our worldwide manufacturing , sales and marketing network enables us to serve the needs of both local and global customers worldwide. As of December 31, 2010, we operated 31 manufacturing facilities in 13 countries.  For the year ended December 31, 2010, 47% of our revenue was generated from net sales in the United States and Canada, 29% from net sales in Europe and Africa, 19% from net sales in Asia/Pacific and 5% from net sales in Latin America. We market and sell our products in more than 100 countries, providing the opportunity to develop new markets for our products in higher-growth regions. We have built upon our historical strength in the United States and Europe to expand our business geographically, thereby diversifying our exposure to many different economies.

 
4

 
 
Geographic Information

 
 
 
Product and industry diversity. We are comprised of a number of distinct businesses, each of which is impacted by varied industry trends. Additionally, our business portfolio serves diverse industries and applications, thereby providing us with further diversification. For instance, despite the current general and industry-specific economic conditions, certain parts of our businesses have performed in line with historical norms through the recession:
 
 
In 2010, our Consumer Products segment increased its profitability over 2008 and 2009 despite the pressures on consumer spending due to the recession.
 
 
The lubricant additives used in transportation applications experienced customer inventory corrections at the outset of the recession, but recovered more quickly than the broader industrial sector because the number of miles driven, flown and sailed remained at pre-recession levels.
 
 
The demand for our products used in electronic applications has recovered much more quickly than demand from other industrial applications.
 
 
Diversified customer base. We have a large and diverse global customer base in a broad array of industries. No single customer comprises more than ten percent of our consolidated 2010 net sales.
 
 
Unique Industry Positions : We believe our businesses possess significant differentiation within their respective industry segments. Some of our businesses are vertically integrated into key feedstocks and others have strong brand recognition, long lead time product registrations or technical and formulatory know-how. We believe these attributes are difficult to replicate and allow us to attract customers looking for consistent performance, reliability and cost-effective results, and are distinct competitive advantages. Examples include:
 
 
Our Industrial Engineered Products segment has extensive brine fields in Arkansas from which we extract brine to produce bromine, which is used as a building block for products such as flame retardants.
 
 
Our Industrial Performance Products segment participates in a production joint venture that produces cost competitive alkylated diphenylamine, a building block for our Naugalube ® antioxidants used in lubricants. This segment also develops urethanes, the production of which is enhanced by our technical and formulatory know-how that permits us to engineer our products to meet specific customer needs and antioxidants, for which we are the only producer of such products in the Middle East, allowing us to offer superior service and security of supply to the region’s fast-growing polyolefin industry.
 
 
Our Consumer Products segment benefits from well-established brand names as well as registrations and certifications from government agencies and customers.
 
 
5

 
 
 
Our Chemtura AgroSolutions TM segment is well experienced in obtaining the required registrations for its products in each country in which they are sold. Once obtained, these registrations provide an exclusive right to use the active compound upon which the product is based for the specified crop in that country or region for a number of years.
 
 
Well Positioned to Grow in Emerging Markets: Our businesses’ product portfolios have positioned us to benefit from high growth emerging market regions in the future. We derived 24% of our revenues during 2010 from key emerging markets including Asia/Pacific and Latin America. We will continue to invest in emerging markets as their polymer production increases, their manufacturing of electronic products expands, their automotive industries build vehicles that meet emission standards such that they can be exported to western markets, and their growers seek to increase the exports of their produce. There are a limited number of suppliers that can supply the products or provide the technical support that customers in these regions require, giving us the opportunity to capture this growth in demand for our products. Additionally, we are strongly positioned to supply the polyolefin industry in the Middle East through our existing antioxidants joint venture in Saudi Arabia and our recently announced organometallics joint venture in Saudi Arabia which will produce components for polymerization catalysts in the region. We also participate in a joint venture within Asia that produces polymer antioxidants.
 
 
Emerged from Chapter 11 a Stronger and Leaner Company:
 
 
Significantly reduced indebtedness with improved liquidity. As of December 31, 2010, we have $751 million of total consolidated indebtedness, $201 million of cash and cash equivalents and approximately $275 million of lending commitments under our new five year senior secured revolving credit facility (the “ABL Facility”) with Bank of America, N.A., as administrative agent and the other lenders party thereto, which also permits us to enter into a foreign asset-based financing arrangement.  The $275 million of lending commitments was un-drawn other than to support the issuance of $12 million in letter of credit obligations.  For comparison, as of December 31, 2009, we had approximately $1.4 billion of total consolidated indebtedness.
 
 
Improved cost structure. We have significantly improved our cost structure over the past two years and reduced our cash fixed costs substantially compared to prior years.  From December 31, 2007 through the end of 2010, we reduced our workforce by approximately 900 employees, including the transfer of employees as part of the sale of the PVC additives business and a reduction of over 400 professional and administrative positions.  Since the end of 2007, we have significantly reduced underperforming assets by closing or selling 6 plants and moving to third-party warehousing in a number of our businesses.  These actions have eliminated underperforming assets and reduced fixed costs or made them variable.  We will continue to manage our costs and improve the efficiency of our operations in 2011 and beyond.
 
 
Reduced environmental and other liabilities. Following our emergence from Chapter 11, we discharged a significant amount of our environmental and contingent liability exposure.

 
Focused, Experienced Management Team: We are led by Craig A. Rogerson, who was elected Chairman, President and Chief Executive Officer in December 2008. Mr. Rogerson holds a chemical engineering degree from Michigan State University and has over 31 years of operating and leadership experience in the specialty chemicals industry. Mr. Rogerson is supported by a senior management team that has extensive operational and financial experience in the specialty chemicals industry.  Our senior management team is focused on creating a culture of performance and accountability that can leverage the global economic recovery and the long-term trends in the industries we serve to drive profitable revenue growth.  For more information on our executive officers, see Item 10. Directors, Executive Officers and Corporate Governance.

 
6

 
 
OUR STRATEGY

Our primary goal is to create value for our stakeholders by driving profitable revenue growth while continuing to manage our costs. We will develop and engineer new products and processes, exploit our global scale for regional growth and manage our portfolio of specialty chemical businesses. Our efforts are directed by the following key business strategies:

 
·
Technology-Driven Growth through Innovation .  As a specialty chemical developer and manufacturer, our competitive strength lies in our ability to continue to develop and engineer new products and processes that meet our customers’ changing needs.  We are investing in innovation to strengthen our new product pipelines and will license or acquire technologies to supplement these initiatives.  We focus on the development of products that are sustainable, meet ecological concerns and capitalize on growth trends in the industries we serve.
 
 
·
Regional Growth through Building Global Scale .  We are building our local presence in the rapidly expanding emerging markets through sales representation, technical development centers, joint ventures and local manufacturing.  We empower our regional teams to serve their growing customer base and will supplement these efforts through “bolt-on” acquisitions where increased demand makes it appropriate.  We exploit our global scale by sharing service functions and technologies that no one region or business could replicate on its own while utilizing our regional presence to lower raw material costs.
 
 
·
Performance-Driven Culture.   We believe we have outstanding people who can deliver superior performance under strong, experienced leaders who instill a culture of accountability.  We expect accountability on safety, environmental stewardship and reliability of orders.  Our performance is focused on understanding the needs of our customers and meeting such needs by efficiently executing their orders and delivering technology based solutions that meet their requirements in order to become their preferred supplier.  We measure our performance against benchmarks and metrics using statistical analysis.
 
 
·
Portfolio and Cost Management.   We will continue to actively manage our portfolio of specialty chemical businesses to maximize their value.  We seek to strengthen our businesses by building on our leading market positions and increasing differentiation of our products while pruning or exiting underperforming products and managing costs.
 
 
7

 
 
OUR BUSINESS AND SEGMENTS

Information as to the sales, operating profit, depreciation and amortization, assets, capital expenditures and earnings on investments carried on the equity method attributable to each of our business segments during each of our last three fiscal years is set forth in Note 20 - Business Segments in our Notes to Consolidated Financial Statements.

The table below illustrates each segment’s net sales for the year ended December 31, 2010 as well as each segment’s major products, end-use markets and brands.

 
 
Consumer
 
Industrial
 
Chemtura
 
Industrial
 
 
Products
 
Performance Products
 
AgroSolutions TM
 
Engineered Products
                 
2010 Net Sales
 
$458 million
 
$1,223 million
 
$351 million
 
$728 million
                 
Key Products
 
•Swimming Pool & Spa Chemicals
•Cleaning Products
 
•Petroleum Additives
•Urethanes
•Antioxidants
•UV Stabilizers
•Elastomer Additives
 
•Seed Treatment
•Fungicides
•Miticides
•Insecticides
•Growth Regulants
•Herbicides
 
•Brominated Performance Products
•Flame Retardants
•Fumigants
•Organometallics
 
                 
Major End-Use Markets
 
•Cleaners
•Pools and Spas
•Small Resorts
 
 
•Adhesives
•Automotive
•Building and Construction
•Coatings
•Consumer Products
•Engine and Gear Oils
•Industrial Oils and Greases
•Lubricants
•Packaging
•Sealants
 
 
•Agriculture
 
 
 
 
•Agriculture
•Automotive
•Building and Construction
•Coatings
•Consumer Durables
•Electronics
•Fine Chemical
•Oilfield
•Paints and Polymers
•Pharmaceuticals
•Plastics
•Power
•Solar
                 
Key Brands
 
Aqua Chem®
BAYROL®
BioGuard®
Cristal®
Greased Lightning®
Guardex®
Miami®
Mineral Springs®
Omni®
Pool Time®
Poolbrite®
ProGuard®
Spa Essentials®
SpaGuard®
SpaTime®
Sun®
The Works®
 
Adiprene Duracast®
Adiprene®
Anderol®
Anox®
Durad®
Fomrez®
Hatcol®
Hybase®
Lobase®
Lowilite®
Lowinox®
Naugalube®
Naugard®
Polybond®
Reolube®
Royaltuf®
Royco®
Synton®
Trixene®
Ultranox®
Vibrathane®
Weston®
Witcobond®
 
Acramite®
Adept®
Anchor®
Blizzard®
B-Nine®
Casoron®
Dimilin®
Enhance®
Firestorm®
Floramite®
Flupro®
Grain Guard®
Micromite®
Off-Shoot T®
Omite®
Pantera®
ProCure®
Rancona®
Rimon®
Royal MH-30®
Royaltac®
Temprano®
Terraguard®
Vitavax®
Viticure®
 
AXION®
Emerald®
Firemaster®
Fyrebloc®
GeoBrom®
Kronitex®
Pyrobloc®
Smokebloc®
Thermoguard®
Timonox®
 
 
 
8

 
 
Consumer Products

The Consumer Products segment develops, manufactures and sells performance chemicals to consumers for in-home and outdoor use.  These chemicals include recreational water purification products sold under a variety of branded labels through local dealers and large retailers to assist consumers in the maintenance of their swimming pools and spas and branded cleaners and degreasers sold primarily through mass merchants to consumers for home cleaning.

Our pool and spa product lines consist of sanitizers, algaecides, biocides, oxidizers, pH balancers, mineral balancers and other specialty chemicals and accessories. Our primary channels of distribution are pool and spa dealers and mass-market retailers throughout North America, Europe, Australia and South Africa. We hold leading positions in both the North American and European pool and spa chemical markets and we plan to strengthen our position by expanding our dealer channels and presence with leading mass market retailers.

We also operate in the specialty and multi-purpose cleaners business with branded non-abrasive bathroom cleaners, glass and surface cleaners, toilet bowl cleaners, drain openers and rust and calcium removers, as well as a family of multipurpose cleaners. Our primary channels of distribution for specialty and multi-purpose cleaning products are through major national and regional retailers in the do-it-yourself, hardware, mass market, club and discount sectors.

The Consumer Products segment had net sales of $458 million for 2010, $457 million for 2009 and $516 million for 2008.  This segment represented 17%, 20% and 16% of our total net sales in 2010, 2009 and 2008, respectively.

Industrial Performance Products

The Industrial Performance Products segment develops, manufactures and sells performance specialty chemicals.  Industrial performance products include:

 
·
petroleum additives that provide detergency, friction modification and corrosion protection in automotive and industrial lubricants and greases, synthetic finished lubricants, synthetic base-stocks and greases used in aviation, industrial and refrigeration applications;
 
·
castable urethane prepolymers engineered to provide superior abrasion resistance and durability in many industrial and recreational applications;
 
·
polyurethane dispersions and urethane prepolymers used in various types of coatings such as wood floor finishes, glass fiber coatings and textile treatments;
 
·
plastic antioxidants additives that inhibit the degradation of polymers caused by air and heat during manufacture and use;
 
·
UV stabilizers additives that protect materials against the harmful effects of UV light; and
 
·
elastomer additives products that protect elastomers and rubber compounds such as tires from cracking and deteriorating from exposure to ozone as well as providing resistance to oxygen and heat degradation.

These products are sold directly to manufacturers through distribution channels.

On July 30, 2010, we completed the sale of our natural sodium sulfonates and oxidized petrolatum product lines within our petroleum additives business to Sonneborn Inc., an affiliate of private investment firm Sun Capital Partners, Inc.

On February 29, 2008, we completed the acquisition of the remaining shares of Baxenden Chemicals Ltd (“Baxenden”).  Baxenden complements our existing Witcobond® dispersions and Fomrez® polyester polyols brand offerings.  The acquisition allowed us access to wider applications in the urethanes segment and strengthened our position in Europe.

The Industrial Performance Products segment had net sales of $1,223 million for 2010, $999 million for 2009 and $1,465 million for 2008.  This segment represented 44%, 43% and 46% of our total net sales in 2010, 2009 and 2008, respectively.  The major product offerings of this segment are described below.

 
9

 
 
Petroleum Additives

We are a global manufacturer and marketer of high-performance additive components used in transport and industrial lubricant applications including alkylated diphenylamines antioxidants (“ADPAs”), which are marketed as Naugalube® and used predominately in automotive lubricants.  These additives play a critical role in meeting rising regulatory mandated standards for engine performance and emissions as well as consumer demand for improved gas mileage and longer service intervals.  The component product line also includes overbased and neutral calcium sulfonates and overbased magnesium sulfonates used in motor oils and marine lubricants. These sulfonates, marketed as Hybase® and Lobase®, are oil-soluble surfactants whose properties include detergency and corrosion protection to help lubricants keep car, truck, and ship engines clean with minimal wear.  A special grade of overbased magnesium sulfonate has been developed as a heavy fuel additive.

We provide a variety of other highly specialized, high value products including our high-viscosity polyalphaolefins, marketed as Synton® , and our broad portfolio of esters marketed as Hatcol®.  These products are used in the production of synthetic lubricants for automotive, refrigeration, aviation, and industrial applications.  We also manufacture and sell high performing calcium sulfonate specialty greases and phosphate ester based fluids and additives for power generation fluids and for use in anti-wear agents in a variety of lubricants.

We are also a specialty supplier of high performance finished lubricants serving the aviation and industrial markets.  Our product line has extensive original equipment manufacturer approvals and is marketed under our Anderol® and Royco® brands as well as for private label customers.

Urethanes

We are a leading supplier of high-performance cast urethane polymers with more than 200 variations in our product offerings.  Our urethanes offer high abrasion resistance and durability in industrial and performance-specific applications.  These characteristics allow us to market our urethanes to niche manufacturers where such qualities are imperative, including for industrial and printing rolls, mining machinery and equipment, mechanical goods, solid industrial tires and wheels, and sporting and recreational goods, including skateboard and roller skate wheels.

Adiprene ® and Vibrathane® urethane prepolymers are sold by our direct sales force and through distribution partners in the United States, Canada, Australia, Europe, Latin America and the Far East, and are used in cast elastomer applications where durability and chemical resistance is required.  Our products are used in applications as diverse as polishing pads for the semiconductor industry to high performance screens for the mining industry.  Customers in each region are serviced by a dedicated technical staff whose support is a critical component of the product offering.  We believe the relatively low capital requirements of this business provide us with the ability to operate cost effectively.  Lastly, our development capabilities allow us to differentiate ourselves in these markets by tailoring our products to the specialized needs of each customer application, which sets us apart from our competitors.

Our urethane chemicals business provides products for a variety of end uses and applications.  The urethane chemicals business consists primarily of three product lines: Fomrez® saturated polyester polyols, Witcobond® polyurethane dispersions, and Trixene® blocked isocyanates.  Fomrez® polyester polyols are employed in industrial applications such as flexible foam for seating.  Our Witcobond® polyurethane dispersions are sold to a larger and more diverse customer base primarily for applications such as glass fiber sizing, wood floor coatings and ballistics protection applications.  Our Trixene® product offering includes blocked isocyanates and specialty polymer systems used in a wide range of coating, adhesive, sealant and elastomer applications.  Our focus on customer intimacy in the urethane chemicals business enables us to tailor specific product offerings to meet our customers’ most demanding application requirements.

 
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Antioxidants

Our antioxidants and UV stabilizer business is comprised of five product families which operate worldwide manufacturing facilities to meet the needs of the large global petrochemical producers as well as regional compounders.  We are one of the world’s largest suppliers of plastic antioxidants additives that inhibit the degradation of polymers caused by air and heat during manufacture and use.  Our UV stabilizers additives protect materials against the harmful effects of UV light. The elastomer additives products protect elastomers and rubber compounds such as tires from cracking and deteriorating from exposure to ozone as well as providing resistance to oxygen and heat degradation.  Our inhibitors prevent polymerization in production of certain monomers and the polymer modifier products are used as coupling agents and impact modifiers for polymers for use in engineering applications in markets such as automotive and building and construction.
 
Incorporating such additives into resin systems improves the durability and longevity of plastics used in packaging, consumer durables, automotive parts and electrical components.  Through our proprietary technology, we are able to offer “powder free” solutions so our customers can avoid the hazards of working with powders in a chemical environment.  At the same time, we are proficient in blending a variety of these materials into specialized formulations uniquely tailored to customer specific end-use requirements.
 
Chemtura AgroSolutions TM

The Chemtura AgroSolutions TM segment focuses on specific target applications in six major product lines which include seed treatments, fungicides, miticides, insecticides, growth regulants and herbicides.  We have developed our products for use primarily on high-value target crops such as tree and vine fruits, ornamentals and nuts and secondarily for commodity row crops such as soybeans, oilseed rape and corn. Our dedicated sales force works with growers and distributors to promote the use of our products throughout a crop’s growth cycle and to address selective regional, climate, and growth opportunities.  We expand our presence in worldwide targeted markets by developing or acquiring crop protection products and obtaining registrations for new uses and geographies where demand for our products and services has potential for growth.  Our expertise in registering our product offerings differentiates us from our competitors.  We develop and sell our own products and we also sell and register products manufactured by others on a license and/or resale basis.

Our seed treatments are used to coat seeds in order to protect the seed during germination and initial growth phases.  Seed treatment is an environmentally attractive form of crop protection involving localized use of agricultural chemicals at much lower use rates than other agrichemical treatments.  We anticipate growth in seed treatment resulting from the expanded use of higher value genetically modified seed.

Our fungicides are products that prevent the spread of fungi or plants in crops which can cause damage resulting in loss of yield and profit for growers. Our miticides (acaricides) are products that control a variety of mite pests on the crops.  Our insecticides are products used against insect pests at different stages of the life cycle from egg and larvae to nymph and adult.  They have both crop and public health applications.  Our plant growth regulators are products used for controlling or modifying plant growth processes without severe phytotoxicity.  Our herbicides are products used to control unwanted plants while leaving the crops they are targeted to treat relatively unharmed.

We work closely with our customers, distributors, research stations and individual growers as part of an on-the-ground coordinated effort.  We develop products in response to ongoing customer demands, drawing upon existing technologies and tailoring them to match immediate needs.  For example, a grower’s crops may require varying levels of treatment depending on weather conditions and the degree of infestation.  Our research and technology is therefore geared towards responding to threats to crops around the world as they emerge under a variety of conditions.
 
We benefit from nearly 50 years of experience in the field, along with over 2,100 product registrations in more than 100 countries.  Our experience with registering products is a valuable asset, as registration is a significant barrier to entry, particularly in developed countries. Registration of products is a complex process in which we have developed proficiency over time.  The breadth of our distribution network and the depth of our experience enable us to focus on profitable applications that have been less sensitive to competitive pricing pressures than broad commodity segments.  This position allows us to attract licensing and resale opportunities from partner companies providing us new products and technologies to accompany our own existing chemistries.
 
We sell our products in North America through a distribution network consisting of more than 500 distributor outlets that sell directly to end use customers.  Internationally, our direct sales force services over 1,500 distributors, dealers, cooperatives, seed companies and large growers.
 
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The Chemtura AgroSolutions TM segment had net sales of $351 million for 2010, $332 million for 2009 and $394 million for 2008.  This segment represented 13%, 14% and 12% of our total net sales in 2010, 2009 and 2008, respectively.
 
Industrial Engineered Products

We are a global leader in manufacturing and selling of engineered specialty chemicals utilized in the plastics, agriculture, fine chemicals, oil and gas, building and construction, electronics, solar energy, pharmaceutical and automotive industries.  Our products include flame retardant polymer additives based on bromine and phosphorous, antimony synergists, intermediates, catalyst components, fumigants, surface treatments and completion fluids for oil and gas extraction.  These products are sold across the entire value chain ranging from direct sales to monomer producers, polymer manufacturers, compounders and fabricators, fine chemical manufacturers and oilfield service companies to industry distributors.

The Industrial Engineered Products segment had net sales of $728 million for 2010, $512 million for 2009 and $779 million for 2008.  This segment represented 26%, 22% and 25% of our total net sales in 2010, 2009 and 2008, respectively.  The major product offerings of this segment are described below.

Great Lakes Solutions

Our Great Lakes Solutions business holds a leading global position with a comprehensive offering of bromine and phosphorus based flame retardants together with antimony synergists.  With increasing regulatory and fire safety performance demands, the use of these products continues to grow in electrical components, construction materials, automotive and furniture/furnishing applications.
 
We are backwardly integrated relative to brine, a primary source of bromine and have a well developed business in supplying other types of brominated performance products to a variety of industries including agricultural, electronics, fine chemicals, oil and gas production, pharmaceutical and power.

Part of our expertise in bromine-based material is the production and distribution of methyl bromide, a fumigant used to improve crop yields and protect grain in storage from pest infestation.  Such materials are regularly used to treat food processing plants, breweries, warehouses and grain elevators, as well as rail cars, truck trailers and intermodal containers.  While the use of methyl bromide has been restricted by regulations, it continues to play an important role in protecting the food chain.  Where effective alternatives are not available, our products continue to be employed at cargo ports where agricultural commodities need to be treated quickly and comprehensively to prevent transmission of infestation across international borders and as a pre-plant treatment to control weeds, diseases, insects and nematodes in high value food crops leading to increased yields and higher fresh produce quality.

On January 14, 2010, we announced a long-term strategic sourcing agreement with the global specialty chemicals company Albemarle Corporation.  The transaction represents a key milestone in our Great Lakes Solutions’ business strategic reorganization process.  The strategic agreement will allow us to consolidate operations at the most productive brine wells in our El Dorado, Arkansas facility (“El Dorado”).  In addition, this agreement will provide greater opportunities for us to reinvest in new, innovative flame retardants and brominated performance products designed as part of our “Greener is Better” program, which is focused on offering customers greener solutions without sacrificing safety or quality.

On January 25, 2010, our Board of Directors approved a restructuring plan involving the consolidation and idling of certain assets within the Great Lakes Solutions business operations in El Dorado, Arkansas.  The restructuring plan was approved by the Bankruptcy Court on February 23, 2010 and is expected to be substantially completed by the first half of 2012.  As a result of the restructuring plan, we recorded costs of approximately $33 million in 2010, consisting of approximately $27 million in accelerated depreciation of property, plant and equipment and approximately $6 million in other facility-related shutdown costs, which include accelerated recognition of asset retirement obligations, decommissioning of wells and pipelines and severance.  In addition to the aforementioned costs, we expect cash costs, including capital costs, to be approximately $37 million ($13 million incurred in 2010 and $18 million, $5 million and $1 million is expected to be incurred in 2011, 2012 and 2013, respectively) in order to execute the consolidation of operations into remaining facilities.

 
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Organometallics

Organometallics are a special group of metals containing organic chemicals which play a significant role in a variety of industrial applications.  Organometallics are essential components used to initiate the polymerization reactions that transform monomers into polymers.  They are also used as precursors in glass coatings, in the production of semiconductors and photovoltaic panels, as well as for the production of many pharmaceutical ingredients and as catalysts for curing certain paints and polymers.

Sources of Raw Materials

Hydrocarbon-based and inorganic chemicals constitute the majority of the raw materials required to manufacture our products.  These materials are generally available from a number of sources, some of which are foreign.  We use significant amounts of chemicals derived from ethylene, propylene, benzene, iso-butane, palm and coconut oil, methanol, phosphorus and urea.  In addition, chlorine, caustic, other petrochemicals and tin represent the key materials used in our chemical manufacturing processes.  Major requirements for key raw materials are purchased typically pursuant to multi-year contracts.  Large increases in the cost of such key raw materials, as well as natural gas, which powers some key production facilities, could adversely affect our operating margins if we are not able to pass the higher costs on to our customers through higher selling prices.  While temporary shortages of raw materials we use may occur occasionally, key raw materials have generally been available.  However, there can be no assurance that unforeseen developments (including markets, political and regulatory conditions) will not affect our raw material supplies, their continuing availability and their cost.  For additional information related to these risks, see Item 1A. - Risk Factors.

Seasonal Business

With the exception of the Chemtura AgroSolutions TM segment and the pool and spa product line in our Consumer Products segment, no material portion of any segment of our business is significantly seasonal.  Our Chemtura AgroSolutions TM segment is seasonal in nature and corresponds to agricultural cycles within each respective region.  Similarly, in the Consumer Products segment, approximately 85% of net sales are generated from sales from our pool chemicals business serving the North American and European recreational water market.  These markets generally record higher sales in the second and third quarters of each year.

Employees

We had approximately 4,200 full time employees at December 31, 2010.

Backlog

We do not consider backlog to be a significant indicator of the level of future sales activity.  In general, we do not manufacture our products against a backlog of orders.  Production and inventory levels are based on the level of incoming orders as well as projections of future demand.  Therefore, we believe that backlog information is not material to understanding our overall business and should not be considered a reliable indicator of our ability to achieve any particular level of sales or financial performance.

Competitive Conditions

The breadth of our product offering provides multiple channels for growth and mitigates our dependence on any one market or end-use application.  We sell our products in more than 100 countries.  This worldwide presence reduces our exposure to any one country’s or region’s economy.

We have a broad customer base and believe that our products, many of which we customize for the specific needs of our customers, allow us to enhance customer loyalty and attract customers that value product innovation and reliable supply.

Product performance, quality, price, and technical and customer service are all important factors in competing in substantially all of our businesses.

 
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We face significant competition in many of the industries in which we operate due to the trends toward global expansion and consolidation by competitors.  Some of our existing competitors are larger than we are and may have more resources and better access to capital markets for continued expansion or new product development than we do.  Some of our competitors also have a greater product range, are more vertically integrated or have better distribution capability than we do for specific products or geographical areas.

Research and Development

All of our businesses conduct research and development activities to increase competitiveness.  Our businesses conduct research and development activities to develop new and to optimize existing production technologies, as well as to develop commercially viable new products and applications while also maintaining existing product registrations required by regulatory agencies around the world.  Our research and development expenditures totaled $42 million in 2010, $35 million in 2009 and $46 million in 2008.

Intellectual Property and Licenses

We attach great importance to patents, trademarks, copyrights and product designs in order to protect our investment in research and development, manufacturing and marketing.  Our policy is to seek wide protection for significant products and process developments on our major applications.  We also seek to register trademarks extensively as a means of protecting the brand names of our products.

We have approximately 2,900 United States and foreign granted patents and pending patent applications and approximately 4,500 United States and foreign registered and pending trademarks.  Patents, trademarks, trade secrets in the nature of know-how, formulations, and manufacturing techniques assist us in maintaining the competitive position of certain of our products.  Our intellectual property is of particular importance to a number of specialty chemicals we manufacture and sell.  However, we do business in countries where protection may be limited and difficult to enforce.  We are licensed to use certain patents and technology owned by other companies, including some foreign companies, to manufacture products complementary to our own products, for which we pay royalties in amounts not considered material, in the aggregate, to our consolidated results.  Products to which we have such rights include certain crop protection chemicals.

Neither our business as a whole nor any particular segment is materially dependant upon any one particular patent, trademark, copyright or trade secret.

Regulatory Matters

Chemical companies are subject to extensive environmental laws and regulations concerning, among other things, emissions to the air, discharges to land, surface, subsurface strata and water and the generation, handling, storage, transportation, treatment and disposal of waste and other materials.  Chemical companies are also subject to other federal, state, local and foreign laws and regulations regarding health and safety matters.

Environmental Health and Safety Regulation - We believe that our business, operations and facilities are being operated in substantial compliance, in all material respects, with applicable environmental, health and safety laws and regulations, many of which provide for substantial fines and criminal sanctions for violations.  The ongoing operations of chemical manufacturing plants, however, entail risks in these areas and there can be no assurance that material costs or liabilities will not be incurred.  In addition, future developments of environmental, health and safety laws and regulations and related enforcement policies, could bring into question the handling, manufacture, use, emission or disposal of substances or pollutants at facilities we own, use or control.  These developments could involve potential significant expenditures in our manufacture, use or disposal of certain products or wastes.  To meet changing permitting and regulatory standards, we may be required to make significant site or operational modifications, potentially involving substantial expenditures and reduction or suspension of certain operations.  We incurred $12 million of costs for capital projects and $64 million for operating and maintenance costs related to environmental health and safety programs at our facilities during 2010.  In 2011, we expect to incur approximately $19 million of costs for capital projects and $68 million for operating and maintenance costs related to environmental health and safety programs at our facilities.  During 2010, we paid $52 million (which included $42 million related to pre-petition liabilities) to remediate previously utilized waste disposal sites and current and past facilities.  We expect to spend approximately $18 million during 2011 to remediate such waste disposal sites and current and former facilities.

 
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Pesticide Regulation - Our Chemtura AgroSolutions TM segment is subject to regulations under various federal, state, and foreign laws and regulations relating to the manufacture, sale and use of pesticide products.

In August 1996, Congress enacted the Food Quality Protection Act of 1996 ("FQPA"), which made significant changes to the Federal Insecticide, Fungicide, and Rodenticide Act ("FIFRA"), governing U.S. sale and use of pesticide products and the Federal Food, Drug, and Cosmetic Act ("FFDCA"), which limits pesticide residues on food.  FQPA facilitated registrations and re-registrations of pesticides for special (so called "minor") uses under FIFRA and authorized collection of maintenance fees to support pesticide re-registrations. Coordination of regulations implementing FIFRA and FFDCA is now required.  Food safety provisions of FQPA establish a single standard of safety for pesticide residue on raw and processed foods, require that information be provided through large food retail stores to consumers about the health risks of pesticide residues and how to avoid them, preempt state and local food safety laws if they are based on concentrations of pesticide residues below recently established federal residue limits (called "tolerances"), and ensure that tolerances protect the health of infants and children.

FFDCA, as amended by FQPA, authorized the Environmental Protection Agency (“EPA”) to set a tolerance for a pesticide in or on food at a level which poses "a reasonable certainty of no harm" to consumers.  The EPA is required to review all tolerances for all pesticide products.  Most of our products have successfully completed review, others are currently under review and other products will be reviewed under this standard in the future.

The European Union Commission has established procedures whereby all existing crop protection active ingredient chemicals commercially available in the European Union (the “EU”) are to be reviewed.  Regulation 91/414 became effective in 1993 and the process was updated in 2007 and 2008.  The original list of existing chemicals was prioritized and divided into 4 parts.  We had four chemicals on the first list, three of which were successfully supported through the review, which results in inclusion onto Annex I of 91/414, while the fourth was withdrawn by us for commercial reasons and has since been re-submitted.  The remainder of our products will be reviewed in the future with the overall process expected to be completed by the end of 2011.  The process may lead to full registration in member states of the EU or may lead to some restrictions or cancellation of registrations if it is determined that a product poses an unacceptable risk.

Chemical Regulation - In December 2006, the EU signed the Registration, Evaluation and Authorization of Chemicals (“REACh”) legislation.  This legislation requires chemical manufacturers and importers in the EU to demonstrate the safety of the chemical substances contained in products.  The effective date of the legislation was June 1, 2007 and it required all covered substances to be pre-registered by November 30, 2008.  Since December 1, 2008, no product containing covered substances can be manufactured in or imported into the EU unless the substances therein have been pre-registered.  The full registration of REACh will be phased in over the next several years.  The registration deadlines are as follows: 2010 for chemical substances manufactured or imported in excess of 1,000 metric tons per year and for substances deemed to be particularly harmful to humans or the environment, 2013 for substances manufactured or imported in the EU between 100 and 1,000 metric tons per year and 2018 for substances manufactured or imported in the EU in quantities greater than 1 metric ton per year.  The registration process requires expenditures and resource commitments to compile and file comprehensive chemical dossiers on the use and attributes of each chemical substance and to perform chemical safety assessments.  In addition, each registration phase carries with it a registration fee, which ranges from €31,000 per substance for high-risk, high tonnage band substances to €1,600 for substances registered in the lowest tonnage band and risk.  In 2008, we pre-registered approximately 1,100 substances and submitted approximately 2,100 pre-registration dossiers covering multiple affiliated legal entities.  In 2009, our total REACh related costs, including registration fees, were approximately $1 million.  In 2010, we registered 125 substances and our total REACh related costs, including registration fees, were approximately $8 million.  We anticipate REACh-related costs of approximately $4 million in 2011, $9 million in 2012 and $6 million in 2013. The 2012 and 2013 costs are estimates and could vary based on data availability and cost.  The implementation of the REACh registration process may affect our ability to manufacture and sell certain products in the future.

 
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Item 1A.  Risk Factors

The most significant risks that could materially and adversely affect our financial condition, results of operations or cash flows   include, but are not limited to, the factors described below.  Except as otherwise indicated, these factors may or may not occur and we cannot predict the likelihood of any such factor occurring.

The cyclical nature of the chemicals industry causes significant fluctuations in our results of operations and cash flows.

Our historical operating results reflect the cyclical and volatile nature of the supply and demand balance of the chemicals industry.  The chemicals industry has experienced alternating periods of inadequate capacity and supply, allowing prices and profit margins to increase, followed by periods when substantial capacity is added, resulting in oversupply, overcapacity, corresponding declining utilization rates and, ultimately, declining prices and profit margins.  Some of the markets in which our customers participate, such as the automotive, electronics and building and construction industries, are cyclical in nature, thus posing a risk to us that is beyond our control.  These markets are highly competitive, are driven to a large extent by end-use markets and may experience overcapacity, all of which may affect demand for and pricing of our products and result in volatile operating results and cash flows over our business cycle.  Future growth in product demand may not be sufficient to utilize current or future capacity.  Excess industry capacity may continue to depress our volumes and margins on some products.  Our operating results, accordingly, may be volatile as a result of excess industry capacity, as well as from rising energy and raw materials costs.

Increases in the price of the raw materials or energy utilized for our products may have a material adverse effect on our operating results.

We purchase significant amounts of raw materials and energy for our businesses.  The cost of these raw materials and energy, in the aggregate, represents a substantial portion of our operating expenses.  The prices and availability of the raw materials we utilize vary with market conditions and may be highly volatile.  Over the past few years, we have experienced significant cost increases in purchases of petrochemicals, tin, soybean oil, other raw materials and, our primary energy source (natural gas) which has had a negative impact on our operating results.

Although we have attempted, and will continue to attempt, to match increases in the prices of raw materials or energy with corresponding increases in product prices, we may not be able to immediately raise product prices, if at all.  Ultimately, our ability to pass on increases in the cost of raw materials or energy to customers is highly dependent upon market conditions.  Specifically, there is a risk that raising prices charged to our customers could result in a loss of sales volume.  In the past, we have not always been able to pass on increases in the prices of raw materials and energy to our customers, in whole or in part, and there will likely be periods in the future when we will not be able to pass on these price increases.  Reactions by our customers and competitors to our price increases could cause us to reevaluate and possibly reverse such price increases, which would negatively affect operating results.

Any disruption in the availability of the raw materials or energy utilized for our products may have a material adverse effect on our operating results.

Across our businesses, there are a limited number of suppliers for some of our raw materials and utilities and, in some cases, the number of sources for and availability of raw materials and utilities is specific to the particular geographic region in which a facility is located. It is also common in the chemical industries for a facility to have a sole, dedicated source for its utilities, such as steam, electricity and gas. Having a sole or limited number of suppliers may result in our having limited negotiating power, particularly during times of rising raw material costs. Even where we have multiple suppliers for a raw material or utility, these suppliers may not make up for the loss of a major supplier. Moreover, any new supply agreements we enter into may not have terms as favorable as those contained in our current supply agreements. For some of our products, the facilities or distribution channels of raw material and utility suppliers and our production facilities form an integrated system, which limits our ability to negotiate favorable terms in supply agreements.
 
 
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In addition, as part of an increased trend towards vertical integration in the chemicals industry, other chemical companies are purchasing raw material suppliers.  This is further reducing the available suppliers for certain raw materials.
 
During 2009, Lyondell Chemical Company (“Lyondell”), a key service provider to our Lake Charles, Louisiana plant, filed to reorganize under Chapter 11 of the U.S. Bankruptcy Code.  We have entered into agreements with Lyondell for various services.  Lyondell may have the right to terminate the agreements by giving prior written notice to us.  If Lyondell terminates the agreements, or takes other adverse actions regarding the provisioning of services to us, and we are unable to arrange for alternative suppliers or perform such services ourselves, the outcome could have a material impact on the operating income of our Consumer Products segment.
 
If one or more of our significant raw material or utility suppliers were unable to meet its obligations under present supply arrangements, raw materials may become unavailable within the geographic area from which they are now sourced, or supplies may otherwise be constrained or disrupted, our businesses could be forced to incur increased costs for our raw materials or utilities, which would have a direct negative impact on plant operations and may adversely affect our results of operations and financial condition.

Decline in general economic conditions and other external factors may adversely impact our operations.

External factors, including domestic and global economic conditions, international events and circumstances, competitor actions and government regulation, are beyond our control and can cause fluctuations in demand and volatility in the prices of raw materials and other costs that can intensify the impact of economic cycles on our operations.  We produce a broad range of products that are used as additives and components in other products in a wide variety of end-use markets.  As a result, our products may be negatively impacted by supply and demand instability in other industries and the effects of that instability on supply chain participants.  Economic and political conditions in countries in which we operate may also adversely impact our operations.  For example, some countries in Central and Eastern Europe have been particularly adversely affected by the recent global financial crisis, rising government deficits and debt levels, protracted credit market tightness and other challenging European market conditions and could continue to negatively affect our businesses.  Although our diversified product portfolio and international presence lessens our dependence on a single market and exposure to economic conditions or political instability in any one country or region, our businesses are nonetheless sensitive to changes in economic conditions.  Accordingly, financial crises and economic downturns anywhere in the world could adversely affect our results of operations, cash flows and financial condition.

Competition may adversely impact our results of operations.

We face significant competition in many of the markets in which we operate due to the trend toward global expansion and consolidation by competitors.  Some of our existing competitors are larger than we are and may have more resources and better access to capital markets to facilitate continued expansion or new product development.  Additionally, some of our competitors have greater product range and distributional capability than we do for certain products and in specific regions.  We also expect that we will continue to face new competitive challenges as well as additional risks inherent in international operations in developing regions. We are susceptible to price competition in certain markets in which customers are sensitive to changes in price.  At the same time, we also face downward pressure on prices from industry overcapacity and lower cost structures in certain businesses.  The further use and introduction of generic and alternative products by our competitors may result in increased competition and could require us to reduce our prices and take other steps to compete effectively.  These measures could negatively affect our financial condition, results of operations and cash flows.  Alternatively, if we were to increase prices in response to this competition, the reactions of our competitors and customers to such price increases could cause us to reevaluate and possibly reverse such price increases or risk a loss in sales volumes.

Our inability to register our products in member states of the European Union under the REACh legislation may lead to some restrictions or cancellations of registrations, which could impact our ability to manufacture and sell certain products.

In December 2006, the European Union signed the REACh legislation.  This legislation requires chemical manufacturers and importers in the European Union to demonstrate the safety of the chemical substances contained in their products via a substance registration process.   The full REACh registration process will be phased in over the next several years.  The registration process will require capital and resource commitments to compile and file comprehensive chemical dossiers regarding the use and attributes of each chemical substance manufactured or imported by Chemtura and will require us to perform chemical safety assessments.  Successful registration under REACh will be a functional prerequisite to the continued sale of our products in the European Union market.  Thus, REACh presents a risk to the continued sale of our products in the European Union should we be unable or unwilling to complete the registration process or if the European Union seeks to ban or materially restrict the production or importation of the chemical substances used in our products.

 
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Adverse weather or economic conditions could materially affect our results of operations.
 
Sales volumes for the products in Chemtura AgroSolutions™ segment, like all agricultural products, are subject to the sector’s dependency on weather, disease and pest infestation conditions.  Adverse weather conditions in a particular region could materially adversely affect our Chemtura AgroSolutions™ segment.  Additionally, our Chemtura AgroSolutions™ segment products are typically sold pursuant to contracts with extended payment terms in Latin America and Europe.  Customary extended payment periods, which are tied to particular crop growing cycles, render our Chemtura AgroSolutions™ segment susceptible to losses from receivables during economic downturns and may adversely affect our results of operations and cash flows.

Our pool and spa products in our Consumer Products segment are primarily used in swimming pools and spas.  Demand for these products is influenced by a variety of factors, including seasonal weather patterns.  An adverse change in weather patterns, such as the unseasonably cold and wet summers in the United States in 2008 and 2009, could negatively affect the demand for, and profitability, of our pool and spa products.

Demand for Chemtura AgroSolutions™ products is affected by governmental policies.

Demand for our Chemtura AgroSolutions™ segment products is also influenced by the agricultural policies of governments and regulatory authorities, particularly in developing countries in Asia and Latin America, where we conduct business.  Moreover, changes in governmental policies or product registration requirements could have an adverse impact on our ability to market and sell our products.

Current and future litigation, governmental investigations, prosecutions and administrative claims, including antitrust-related governmental investigations and lawsuits, could harm our financial condition, results of operations and cash flows.

We have been involved in several significant lawsuits and claims relating to environmental and chemical exposure matters, and may in the future be involved in similar litigation.  Additionally, we are routinely subject to other civil claims, litigation and arbitration and regulatory investigations arising in the ordinary course of our business as well as with respect to our divested businesses.  Some of these claims and lawsuits relate to product liability claims, including claims related to current and former products and asbestos-related claims concerning the premises and historic products of us and our predecessors.  We could become subject to additional claims.  An adverse outcome of these claims could have a materially adverse effect on our business, financial conditions, results of operations and cash flows.

We have also been involved in a number of governmental investigations, prosecutions and administrative claims in the past, including antitrust-related governmental investigations and civil lawsuits, and may in the future be subject to similar claims.  Additionally, we have incurred and could again incur expenses in connection with antitrust-related matters, including expenses related to our cooperation with governmental authorities and defense-related civil lawsuits.

Environmental, health and safety regulation matters could have a negative impact on our results of operations and cash flows.

We are subject to extensive federal, state, local and foreign environmental, health and safety laws and regulations concerning, among other things, emissions in the air, discharges to land and water and the generation, handling, treatment and disposal of hazardous waste and other materials.  Our operations entail the risk of violations of those laws and sanctions for violations such as clean-up and removal costs, long-term monitoring and maintenance costs, costs of waste disposal, natural resource damages and payments for property damage and personal injury.  Although it is our policy to comply with such laws and regulations, it is possible that we have not been or may not be at all times in compliance with all of these requirements.
 
Additionally, these requirements, and enforcement of these requirements, may become more stringent in the future.  The ultimate additional cost of compliance with any such requirements could be material.  Non-compliance could subject us to material liabilities such as government fines or orders, criminal sanctions, third-party lawsuits, remediations and settlements, the suspension, modification or revocation of necessary permits and licenses, or the suspension of non-compliant operations.  We may also be required to make significant site or operational modifications at substantial cost.  Future regulatory or other developments could also restrict or eliminate the use of, or require us to make modifications to, our products, packaging, manufacturing processes and technology, which could have a significant adverse impact on our financial condition, results of operations and cash flows.

 
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At any given time, we may be involved in claims, litigation, administrative proceedings, settlements and investigations of various types in a number of jurisdictions involving potential environmental liabilities, including clean-up costs associated with hazardous waste disposal sites, natural resource damages, property damage, personal injury and regulatory compliance or non-compliance.  The resolution of these environmental matters could have a material adverse effect on our results of operations and cash flows.

Recent federal regulations aimed at increasing security at certain chemical production plants and similar legislation that may be proposed in the future could require us to enhance plant security and to alter or discontinue our production of certain chemical products, thereby increasing our operating costs and causing an adverse effect on our results of operations.

Regulations have recently been issued by the U.S. Department of Homeland Security (“DHS”) aimed at decreasing the risk, and effects, of potential terrorist attacks on chemical plants located within the United States. Pursuant to these regulations, these goals would be accomplished in part through the requirement that certain high-priority facilities develop a prevention, preparedness, and response plan after conducting a vulnerability assessment. In addition, companies may be required to evaluate the possibility of using less dangerous chemicals and technologies as part of their vulnerability assessments and prevention plans and implementing feasible safer technologies in order to minimize potential damage to their facilities from a terrorist attack. Certain of our sites are subject to these regulations and we cannot state at this time with certainty the costs associated with any security plans that the DHS may require. These regulations may be revised further and additional legislation may be proposed in the future on this topic. It is possible that such future legislation could contain terms that are more restrictive than what has recently been passed and which would be more costly to us. We cannot predict the final form of currently pending legislation or other related legislation that may be passed and we can provide no assurance that such legislation will not have an adverse effect on our results of operations in a future reporting period.  In addition, we may incur liabilities for subsequent damages in the event that we fail to comply with these regulations.

We operate on an international scale and are exposed to risks in the countries in which we have significant operations or interests.  Changes in foreign laws and regulatory requirements, export controls or international tax treaties could adversely affect our results of operations and cash flows.

We are dependent, in large part, on the economies of the countries in which we manufacture and market our products.   Of our 2010 net sales, 47% were to customers in the United States and Canada, 29% to Europe and Africa, 19% to the Asia/Pacific region and 5% to Latin America.  As of December 31, 2010, our net property, plant and equipment were located in various regions including 64% in the United States and Canada, 28% in Europe and Africa, 5% in the Asia/Pacific region and 3% in Latin America.

The economies of the countries within these areas are in different stages of socioeconomic development.  Consequently, we are exposed to risks from changes in foreign currency exchange rates, interest rates, inflation, governmental spending, social instability and other political, economic or social developments that may materially adversely affect our financial condition, results of operations and cash flows.

We may also face difficulties managing and administering an internationally dispersed business.  In particular, the management of our personnel across several countries can present logistical and managerial challenges.  Additionally, international operations present challenges related to operating under different business cultures and languages.  We may have to comply with unexpected changes in foreign laws and regulatory requirements, which could negatively impact our operations and ability to manage our global financial resources.  Export controls or other regulatory restrictions could prevent us from shipping our products into and from some markets.  Moreover, we may not be able to adequately protect our trademarks and other intellectual property overseas due to uncertainty of laws and enforcement in a number of countries relating to the protection of intellectual property rights.  Changes in tax regulation and international tax treaties could significantly reduce the financial performance of our foreign operations or the magnitude of their contributions to our overall financial performance.

 
19

 
 
If we fail to establish and maintain adequate internal controls over financial reporting, we may not be able to report our financial results in a timely and reliable manner, which could harm our business and impact the value of our securities.

We depend on our ability to produce accurate and timely financial statements in order to run our business. If we fail to do so, our business could be negatively affected and our independent registered public accounting firm may be unable to attest to the fair presentation of our Consolidated Financial Statements in accordance with U.S. generally accepted accounting principles (“GAAP”) and the effectiveness of our internal controls over financial reporting, as required by Section 404 of the Sarbanes-Oxley Act.  Effective internal controls are necessary for us to provide reliable financial reports and to effectively prevent fraud. If we cannot provide reliable financial reports and effectively prevent fraud, our reputation and operating results could be harmed.  Even effective internal controls have inherent limitations including the possibility of human error, the circumvention or overriding of controls, or fraud.  Therefore, even effective internal controls can provide only reasonable assurance with respect to the preparation and fair presentation of financial statements. In addition, projections of any evaluation of effectiveness of internal control over financial reporting in future periods are subject to the risk that the control may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.

We have in the past discovered, and may in the future discover, areas of our internal controls that need improvement, including with respect to income tax accounts and international customer incentive, commission and promotional payment practices.  We have completed the previously disclosed review of various customer incentive, commission and promotional payment practices of the Chemtura AgroSolutions™ segment in its Europe, Middle East and Africa region (the “EMEA Region”).  The review was conducted under the oversight of the Audit Committee of the Board of Directors and with the assistance of outside counsel and forensic accounting consultants.  As disclosed previously, the review found evidence of various suspicious payments made to persons in certain Central Asian countries and of activity intended to conceal the nature of those payments. The amounts of these payments were reflected in our books and records but were not recorded appropriately. In addition, the review found evidence of payments that were not recorded in a transparent manner, including payments that were redirected to persons other than the customer, distributor or agent in the particular transaction. None of these payments were subject to adequate internal control. We have strengthened our worldwide internal controls relating to customer incentives and sales agent commissions and enhanced our global policy prohibiting improper payments which contemplates, among other things, that we monitor our international operations.  Such monitoring may require that we investigate allegations of possible improprieties relating to transactions and the way in which such transactions are recorded.  We have severed our relationship with all of the sales agents and the employees responsible for the suspicious payments.  We cannot reasonably estimate the nature or amount of monetary or other sanctions, if any, that might be imposed as a result of the review.

If we fail to maintain adequate internal controls, including any failure to implement new or improved controls, or if we experience difficulties in their implementation, we could fail to meet our reporting obligations, and there could be a material adverse effect on our business and financial results.  In the event that our current control practices deteriorate, we may be unable to accurately report our financial results or prevent fraud, and investor confidence and the market price of our securities may be adversely affected.

Our results of operations are subject to exchange rate and other currency risks.  A significant movement in exchange rates could adversely impact our results of operations.

Significant portions of our businesses are conducted in currencies other than the U.S. dollar.  Accordingly, foreign currency exchange rates affect our operating results.  Effects of exchange rate fluctuations upon our future operating results cannot be predicted because of the number of currencies involved, the variability of currency exposure and the potential volatility of currency exchange rates.  We face risks arising from the imposition of exchange controls and currency devaluations.  Exchange controls may limit our ability to convert foreign currencies into U.S. dollars or to remit dividends and other payments by our foreign subsidiaries or businesses located in or conducted within a country imposing controls.  In certain foreign countries, some components of our cost structure are denominated in U.S. dollars while our revenues are denominated in the local currency. In those cases, currency devaluation could adversely impact our operating margins.

 
20

 
 
We are dependent upon a trained, dedicated sales force, the loss of which could materially affect our operations.

Many of our products are sold and supported through dedicated staff and specifically trained personnel.  The loss of this sales force due to market or other conditions could affect our ability to sell and support our products effectively, which could have an adverse effect on our results of operations.

Our Great Lakes Solutions business could be adversely impacted by recent regulations related to deep-water exploratory drilling.

As has been widely reported, on April 20, 2010, a fire and explosion occurred onboard the semisubmersible drilling rig Deepwater Horizon in the Gulf of Mexico, leading to the largest offshore oil spill in U.S. history. In response to this incident, the Minerals Management Service (now known as the Bureau of Ocean Energy Management, Regulation and Enforcement, or "BOE") of the U.S. Department of the Interior issued a notice on May 30, 2010 implementing a six-month moratorium on certain drilling activities in the U.S. Gulf of Mexico. Implementation of the moratorium was blocked by a U.S. district court, which was subsequently affirmed on appeal, but on July 12, 2010, the BOE issued a new moratorium that applies to deep-water drilling operations that use subsea blowout preventers or surface blowout preventers on floating facilities. The moratorium was lifted on October 12, 2010, but imposed new safety regulations related to deep-water exploratory drilling. It remains unclear what drilling companies must demonstrate to satisfy the new regulations or what additional restrictions or limitations may be imposed in the future.

Our Great Lakes Solutions business produces products which are used in drilling rigs in the Gulf of Mexico.  While this business had already experienced decreased demand for products used in deep-water drilling for oil and gas for some time, due to reduced rig count in the Gulf of Mexico resulting from high natural gas inventories, to the extent that decreased drilling in the Gulf of Mexico lingers, any recovery in demand for these products will likely be delayed.

Production facilities are subject to operating risks that may adversely affect our financial condition, results of operations and cash flows.

We are dependent on the continued operation of our production facilities.  Such production facilities are subject to hazards associated with the manufacturing, handling, storage and transportation of chemical materials and products, including pipeline leaks and ruptures, explosions, fires, inclement weather and natural disasters, terrorist attacks, mechanical failure, unscheduled downtime, labor difficulties, transportation interruptions, remediation complications, chemical spills, discharges or releases of toxic or hazardous gases, storage tank leaks and other environmental risks.  These hazards can cause personal injury and loss of life, severe damage to, or destruction of, property and equipment and environmental damage, fines, civil or criminal penalties and liabilities.  The occurrence of these events may disrupt production which could have an adverse effect on the production and profitability of a particular manufacturing facility and on our financial condition, results of operations and cash flows.

Our businesses depend upon many proprietary technologies, including patents, licenses and trademarks.  Our competitive position could be adversely affected if we fail to protect our patents or other intellectual property rights or if we become subject to claims that we are infringing upon the rights of others.

Our intellectual property is of particular importance for a number of the specialty chemicals that we manufacture and sell.  The trademarks and patents that we own may be challenged, and because of such challenges, we could eventually lose our exclusive rights to use and enforce such proprietary technologies and marks, which would adversely affect our competitive position and results of operations.  We are licensed to use certain patents and technology owned by other companies, including foreign companies, to manufacture products complementary to our own products.  We pay royalties for these licenses in amounts not considered material, in the aggregate, to our consolidated results.  We cannot be assured that such licensors will adequately maintain or protect or enforce such licensed technology, or that such licenses will continue to be available on current terms, which may impair our ability to offer certain products and may require us to seek licenses on less favorable terms.

 
21

 
 
In connection with our introduction and development of the Chemtura AgroSolutions™ brand, we have filed applications to register the Chemtura AgroSolutions™ trademark.  In April 2010, a third party filed an opposition to one such filing in the United States for the registration of the Chemtura AgroSolutions™ mark in connection with agricultural herbicides and pesticides.  If such opposition is successful, we may be unable to prevent competitors from using marks similar to Chemtura AgroSolutions™ in the United States, and may be subject to further challenges which may prevent us from using the Chemtura AgroSolutions™ mark in the United States.

We also rely on unpatented proprietary know-how and continuing technological innovation and other trade secrets to develop and maintain our competitive position.  Although it is our policy to enter into confidentiality agreements with our employees and third parties to restrict the use and disclosure of trade secrets and proprietary know-how, those confidentiality agreements may be breached.  Additionally, adequate remedies may not be available in the event of an unauthorized use or disclosure of such trade secrets and know-how, and others could obtain knowledge of such trade secrets through independent development or other access by legal means.  The failure of our patents, trademarks or confidentiality agreements to protect our processes, apparatuses, technology, trade secrets or proprietary know-how and the brands under which we market and sell our products could have a material adverse effect on our business, financial condition, results of operations and cash flows.

We cannot be assured that our products or methods do not infringe on the patents or other intellectual property rights of others.  Infringement and other intellectual claims or proceedings brought against us, whether successful or not, could result in substantial costs and harm our reputation. Such claims and proceedings can also distract and divert management and key personnel from other tasks important to the success of our business.  In addition, intellectual property litigation or claims could force us to do one or more of the following:

 
·
cease selling products that contain asserted intellectual property;
 
·
pay substantial damages for past use of the asserted intellectual property;
 
·
obtain a license from the holder of the asserted intellectual property, which may not be available on reasonable terms; and
 
·
redesign or rename, in the case of trademark claims, our products to avoid infringing the rights of third parties.

Such requirements could adversely affect our revenue, increase costs, and harm our financial condition.

Our patents may not provide full protection against competing manufacturers outside of the United States, the European Union countries and certain other developed countries.  Weaker protection may adversely impact our sales and results of operations.

In some of the countries in which we operate, such as China, the laws protecting patent holders are significantly weaker than in the United States, countries in the European Union and certain other developed countries.  Weaker protection may assist competing manufacturers in becoming more competitive in markets in which they might not have otherwise been able to introduce competing products for a number of years.  As a result, we tend to rely more heavily upon trade secret and know-how protection in these regions, as applicable, rather than patents.  Additionally, for our Chemtura AgroSolutions™ segment products sold in China, we rely on regulatory protection of intellectual property provided by regulatory agencies, which may not provide us with complete protection against competitors.

An inability to remain technologically innovative and to offer improved products and services in a cost-effective manner could adversely impact our operating results.

Our operating results are influenced in part by our ability to introduce new products and services that offer distinct value to our customers.  For example, both our Chemtura AgroSolutions™ segment and our organometallic specialties business seek to provide tailored products for our customers’ often unique problems, which require an ongoing level of innovation.  In many of the markets where we sell our products, the products are subject to a traditional product life cycle.  Even where we devote significant human and financial resources to develop new technologically advanced products and services, we may not be successful in these efforts.

 
22

 
 
Joint venture investments that we enter into could be adversely affected by our lack of sole decision-making authority, our reliance on joint venture partners’ financial condition and disputes between us and our joint venture partners.

A portion of our operations is conducted through certain ventures in which we share control with third parties. In these situations, we are not in a position to exercise sole decision-making authority regarding the facility, partnership, joint venture or other entity. Investments through partnerships, joint ventures, or other entities may, under certain circumstances, involve risks not present were a third party not involved, including the possibility that joint venture partners might become bankrupt, fail to fund their share of required capital contributions, make poor business decisions or block or delay necessary decisions. Joint venture partners may have economic or other business interests or goals which are inconsistent with our business interests or goals, and may be in a position to take actions contrary to our policies or objectives. Such investments may also have the potential risk of impasses on decisions, such as a sale, because neither we nor our joint venture partners would have full control over the partnership or joint venture. Disputes between us and our joint venture partners may result in litigation or arbitration that would increase our expenses and prevent the members of our management team from focusing their time and effort on our business. Consequently, action by, or disputes with, our joint venture partners might result in subjecting the facilities owned by the partnership or joint venture to additional risk. In addition, we may in certain circumstances be liable for the actions of our joint venture partners.  Our joint ventures’ unfunded and underfunded pension plans and post-retirement health care plans could adversely impact our financial condition, results of operations and cash flows.

Our unfunded and underfunded defined benefit pension plans and post-retirement welfare benefit plans could adversely impact our financial condition, results of operations and cash flows.

The cost of our defined benefit pension and post-retirement welfare benefit plans is recognized through operations over extended periods of time and involves many uncertainties during those periods of time.  Our funding policy for defined benefit pension plans is to accumulate plan assets that, over the long run, will approximate the present value of projected benefit obligations.  Our pension cost is materially affected by the discount rate used to measure pension obligations, the level of plan assets available to fund those obligations at the measurement date and the expected long-term rate of return on plan assets.  Significant changes in investment performance or a change in the portfolio mix of invested assets can result in corresponding increases and decreases in the valuation of plan assets or in a change of the expected rate of return on plan assets.  Similarly, our post-retirement welfare benefit cost is materially affected by the discount rate used to measure these obligations, as well as by changes in the actual cost of providing these medical and other welfare benefits.

We have underfunded obligations under our U.S. tax-qualified defined benefit pension plans totaling approximately $234 million on a projected benefit obligation basis as of December 31, 2010.  We also have underfunded obligations under our U.K. defined benefit plans totaling approximately $58 million as of December 31, 2010.  Further declines in the value of the plan investments or unfavorable changes in law or regulations that govern pension plan funding could materially change the timing and amount of required funding.  Additionally, we sponsor other foreign and non-qualified U.S. pension plans under which there are substantial unfunded liabilities totaling approximately $118 million on a projected benefit obligation basis as of December 31, 2010.  Foreign regulatory authorities may seek to have Chemtura and/or certain of our non-sponsoring subsidiaries take responsibility for some portion of these obligations.  Mandatory funding contributions with respect to these obligations and potential unfunded benefit liability claims could have a material adverse effect on our financial condition, results of operations or future cash flows.  In addition, our actual costs with respect to our post-retirement welfare benefit plans could exceed our current actuarial projections.

We may be required to increase the funding for the pension plan of our U.K. subsidiary, which would have an adverse effect on our cash flows from operations.

Certain of our subsidiaries and affiliates sponsor pension plans in their respective countries that may be underfunded.  Chemtura Manufacturing U.K. Limited (“CMUK”), is the principal employer of the Great Lakes U.K. Limited Pension Plan (the “UK Pension Plan”), an occupational pension scheme that was established in the U.K. in order to provide pensions and other benefits for its employees.  Under the UK Pension Plan, certain employees and former employees become entitled to pension benefits, most of which are defined benefits in nature, based on pensionable salary.  The UK Pension Plan has approximately 580 pensioners and 690 members entitled to deferred benefits under the defined benefit section.  The estimated funding deficit as of December 31, 2008, as measured in accordance with section 75 of the Pension Act of 1995 (U.K.), is approximately £95 million.

 
23

 
 
We disclosed previously that the Trustees of the UK Pension Plan (the “UK Pension Trustees”) filed 27 contingent, unliquidated Proofs of Claim against each of the Debtors, other than Chemtura Canada in the Chapter 11 cases which, by agreement with the UK Pension Trustees, were disallowed on the condition that no party may later assert that the Chapter 11 cases operate as a bar to the UK Pension Trustees asserting claims against any of the Debtors in an appropriate non-bankruptcy forum. We also disclosed the risk that the applicable regulatory authority, in this case the UK Pensions Regulator (the “Regulator”), may assert claims against CMUK and against other Chemtura affiliates who are not sponsors of the U.K. Pension Plan. In fact, on December 22, 2010, the Regulator issued a “warning notice” to CMUK and five other Chemtura affiliates, including Chemtura Corporation, stating their intent to request authority to issue a “financial support direction” against each of them for the support of the benefit obligations under the UK Pension Plan. At the same time, CMUK has continued to engage in negotiations with the UK Pension Trustees over the terms of a “recovery plan” to reduce the underfunded deficit in the UK Pension Plan and the parties have exchanged proposals in an effort to reach agreement. The most recent proposal from CMUK to the UK Pension Trustees provides among other matters for the contribution of £60 million in cash to the UK Pension Plan over a four year period.

We are subject to risks associated with possible climate change legislation, regulation and international accords.

Greenhouse gas emissions have increasingly become the subject of a large amount of international, national, regional, state and local attention. Cap and trade initiatives to limit greenhouse gas emissions have been introduced in the European Union. Similarly, numerous bills related to climate change have been introduced in the U.S. Congress, which could adversely impact all industries. In addition, future regulation of greenhouse gas could occur pursuant to future international treaty obligations, statutory or regulatory changes, including under the Clean Air Act or new climate change legislation.

While not all are likely to become law, this is a strong indication that additional climate change related mandates will be forthcoming, and may adversely impact our costs by increasing energy costs and raw material prices and establishing costly emissions trading schemes and requiring modification of equipment.

A step toward potential federal restriction on greenhouse gas emissions was taken on December 7, 2009 when the Environmental Protection Agency (“EPA”) issued its Endangerment Finding in response to a decision of the Supreme Court of the United States. The EPA found that the emission of six greenhouse gases, including carbon dioxide (which is emitted from the combustion of fossil fuels), may reasonably be anticipated to endanger public health and welfare. Based on this finding, the EPA defined the mix of these six greenhouse gases to be “air pollution” subject to regulation under the Clean Air Act. Although the EPA has stated a preference that greenhouse gas regulation be based on new federal legislation rather than the existing Clean Air Act, many sources of greenhouse gas emissions may be regulated without the need for further legislation.

The U.S. Congress is considering legislation that would create an economy-wide “cap-and-trade” system that would establish a limit (or cap) on overall greenhouse gas emissions and create a market for the purchase and sale of emissions permits or “allowances.” Under the leading cap-and-trade proposals before Congress, the chemical industry likely would be affected due to anticipated increases in energy costs as fuel providers pass on the cost of the emissions allowances, which they would be required to obtain, to cover the emissions from fuel production and the eventual use of fuel by us or our energy suppliers. In addition, cap-and-trade proposals would likely increase the cost of energy, including purchases of steam and electricity, and certain raw materials used by us. Other countries are also considering or have implemented “cap-and-trade” systems. Future environmental regulatory developments related to climate change are possible, which could materially increase operating costs in the chemical industry and thereby increase our manufacturing and delivery costs.

In addition, it is presently unclear what effects, if any, changes in regional or global climate will have on our operations or results.

If our goodwill or intangible assets become impaired, we may be required to record a significant charge to earnings.

Under U.S. GAAP, we review our intangible assets for impairment when events or changes in circumstances indicate the carrying value may not be recoverable. Goodwill is tested for impairment on July 31 of each year. Factors that may be considered a change in circumstances, indicating that the carrying value of our goodwill or amortizable intangible assets may not be recoverable, include, but are not limited to, a decline in stock price and market capitalization, reduced future cash flow estimates, and slower growth rates in our industry. We may be required to record a significant charge in our financial statements during the period in which any impairment of our goodwill or intangible assets is determined, negatively impacting our results of operations.

 
24

 
 
Restrictive covenants in our credit facilities and senior notes may limit our ability to engage in certain transactions.

Our credit facilities and senior notes contain various covenants that limit our ability to engage in specified types of transactions.  The covenants limit our ability to, among other things, incur additional indebtedness or repaying certain indebtedness, creating liens, pay dividends on or make other distributions on or repurchase capital stock or make other restricted payments, make investments, and entering into acquisitions, dispositions and joint ventures.  Such restrictions in our credit facilities and senior notes could result in us having to obtain the consent of our lenders in order to take certain actions.  Recent disruptions in credit markets may prevent us from or make it more difficult or more costly for us to obtain such consents from our lenders.  Our ability to expand our business or to address declines in our business may be limited if we are unable to obtain such consents.
 
A breach of any of these covenants could result in a default under credit facilities and senior notes.  Upon the occurrence of an event of default, the lenders could elect to declare all amounts outstanding under our credit facilities and senior notes immediately due and payable and terminate all commitments to extend further credit.  If we were unable to repay those amounts, the lenders could proceed against the collateral granted to them to secure our indebtedness.  Our subsidiaries have pledged a significant portion of our assets as collateral under our credit facilities.  If the lenders under credit facilities accelerate the repayment of borrowings, we may not have sufficient assets to repay amounts borrowed under the credit facilities which could have a material adverse effect on the value of our stock.

If we issue additional shares of common stock in the future, it will result in the dilution of our existing stockholders.

Our certificate of incorporation authorizes the issuance of 500 million shares of common stock, of which 95.6 million shares were issued and outstanding as of December 31, 2010.  Our board of directors has the authority to issue additional shares of common stock up to the authorized capital stated in the certificate of incorporation. Our board of directors may choose to issue some or all of such shares of common stock to acquire one or more businesses or to provide additional financing in the future.  The issuance of any such shares of common stock will result in a reduction of the book value or market price of the outstanding shares of our common stock.  Additionally, we have an incentive plan that allows for the issuance of up to 11 million shares (currently 9.8 million shares remain available for future grants), equal to eleven percent of Chemtura’s new shares of common stock issued on the Effective Date. We also have approximately 4.5 million shares available for issuance after the Effective Date to holders of Allowed Claims and Interests (as defined in the Plan).  If we do issue any additional shares of common stock, including pursuant to our incentive plan, such issuance also will cause a reduction in the proportionate ownership and voting power of all other stockholders.

 
25

 
 
Item 1B.  Unresolved Staff Comments

None.

Item 2.  Properties
 
The following table sets forth information regarding our principal operating properties and other significant properties as of December 31, 2010.  All of the following properties are owned except where otherwise indicated.  In general, our operating properties are well maintained, suitably equipped and in good operating condition.
Location
 
Facility
 
Reporting Segment
         
UNITED STATES
       
Alabama
       
     Bay Minette
 
Plant
 
Industrial Performance Products
         
Arkansas
       
     El Dorado
 
Plant
 
Industrial Engineered Products
         
California
       
     McFarland
 
Repackaging Warehouse
 
Industrial Engineered Products
         
Connecticut
       
     Middlebury*
 
Executive Offices, Research Center
 
Corporate Offices
     Naugatuck
 
Research Center
 
Industrial Performance Products
         
Georgia
       
     Conyers
 
Plant
 
Consumer Products
     Lawrenceville*
 
Office, Research Center
 
Consumer Products, Chemtura AgroSolutions™
         
Illinois
       
     Mapleton
 
Plant
 
Industrial Engineered Products
     Pekin*
 
Plant
 
Chemtura AgroSolutions™
         
Indiana
       
     West Lafayette
 
Office, Research Center
 
Industrial Engineered Products
         
Louisiana
       
     Lake Charles
 
Plant
 
Consumer Products
     Westlake
 
Land
 
Consumer Products
         
Michigan
       
     Adrian
 
Plant
 
Consumer Products
         
New Jersey
       
     East Hanover
 
Plant
 
Industrial Performance Products
     Fords
 
Plant
 
Industrial Performance Products
     Perth Amboy
 
Plant
 
Industrial Performance Products
         
North Carolina
       
     Gastonia
 
Plant
 
Industrial Performance Products, Chemtura AgroSolutions™
         
Pennsylvania
       
     Philadelphia*
 
Executive Offices
 
Corporate Offices
         
West Virginia
       
     Morgantown
 
Plant, Research Center
 
Industrial Performance Products

 
26

 
 
Location
 
Facility
 
Reporting Segment
         
INTERNATIONAL
       
Australia
       
     Sydney
 
Office
 
Corporate Office
         
Brazil
       
     Rio Claro
 
Plant
 
Industrial Engineered Products, Industrial Performance Products,
       
Chemtura AgroSolutions™
     Sao Paulo*
 
Office
 
Industrial Engineered Products, Industrial Performance Products,
       
Chemtura AgroSolutions™
         
Canada
       
     Elmira
 
Plant
 
Industrial Performance Products, Chemtura AgroSolutions™,
       
Industrial Engineered Products
     Guelph
 
Research Center
 
Chemtura AgroSolutions™
     West Hill
 
Plant
 
Consumer Products, Industrial Performance Products
         
France
       
     Catenoy
 
Plant
 
Industrial Performance Products
     Dardilly*
 
Office
 
Consumer Products
         
Germany
       
     Bergkamen*
 
Plant, Research Center
 
Industrial Engineered Products
     Waldkraiburg
 
Plant
 
Industrial Performance Products
     Planegg*
 
Office
 
Consumer Products
         
Israel
       
     Beer Sheva 1
 
Plant
 
Industrial Engineered Products
         
Italy
       
     Latina
 
Plant
 
Industrial Performance Products, Chemtura AgroSolutions™
     Milan 2
 
Office
 
Industrial Performance Products
     Pedrengo
 
Plant
 
Industrial Performance Products
         
Mexico
       
     Altamira
 
Plant
 
Industrial Engineered Products, Industrial Performance Products
     Cuautitlan
 
Plant
 
Industrial Engineered Products, Industrial Performance Products
     Reynosa
 
Plant
 
Industrial Engineered Products
         
The Netherlands
       
      Amsterdam
 
Plant
 
Chemtura AgroSolutions™
 
27

 
 
Location
 
Facility
 
Reporting Segment
         
Republic of China
       
     Nanjing
 
Plant, Research Center
 
Industrial Performance Products
     Shanghai*
 
Office
 
Corporate
         
Saudi Arabia
       
     Madinat Al-Jubail 3
 
Plant
 
Industrial Performance Products
         
South Africa
       
     Atlantis
 
Plant
 
Consumer Products
     Boksburg
 
Office
 
Chemtura AgroSolutions™
     Kylami
 
Office
 
Industrial Performance Products
         
South Korea
       
     Pyongtaek 4
 
Plant
 
Industrial Performance Products
         
Switzerland
       
     Frauenfeld*
 
Office
 
Industrial Engineered Products, Corporate, Chemtura AgroSolutions™
         
Taiwan
       
     Kaohsiung
 
Plant
 
Industrial Engineered Products, Industrial Performance Products
         
United Kingdom
       
     Accrington
 
Plant
 
Industrial Performance Products
     Cheltenham
 
Office/Tech Center
 
Consumer Products
     Droitwich
 
Plant
 
Industrial Performance Products
     Evesham
 
Research Center
 
Chemtura AgroSolutions™
     Langley*
 
Office
 
Chemtura AgroSolutions™, Corporate
     Trafford Park
 
Plant, Office
 
Industrial Engineered Products,  Industrial Performance Products, Corporate
_______________________
*   Leased property.
1   Facility owned by Tetrabrom Technologies Ltd. which is 50% owned by us.
2   Facility leased by Anderol Italia S.r.l, which is 51% owned by us.
3   Facility owned by Gulf Stabilizers Industries, Ltd. which is 49% owned by us.
4   Facility owned by Asia Stabilizers Co. Ltd. which is 65% owned by us.

Item 3.  Legal Proceedings
 
For a description of our legal proceedings, see Note 19 – Legal Proceedings and Contingencies in our Notes to Consolidated Financial Statements.

Item 4.  Reserved

 
28

 
 
PART II.

Item 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
 
On November 10, 2010, pursuant to our Plan, our previously outstanding common stock (including treasury stock) was cancelled and we authorized and began issuance of 100 million shares of our New Common Stock.  As of December 31, 2010, 95.6 million shares were issued and outstanding and 4.5 million shares have been reserved for future issuances under the terms of the Plan.  The New Common Stock was approved for listing on the NYSE on November 8, 2010 and started “regular way” trading on the exchange under the ticker symbol “CHMT” on November 11, 2010.

Our previously outstanding common stock was traded on the NYSE under the symbol “CEM” until trading was halted after our Chapter 11 bankruptcy filing on March 18, 2009.  Effective March 18, 2009, the NYSE suspended trading of our common stock and delisted the stock on April 16, 2009.  From April 16, 2009 through November 10, 2010, this previously outstanding common stock was traded over the counter as quoted on the Pink Sheet Electronic Quotation Service (“Pink Sheets”) under the symbol “CEMJQ”.
 
We have no current plans to pay any cash dividends on our common stock and instead may retain earnings, if any, for future operation and expansion and debt repayment.  Any decision to declare and pay dividends in the future will be made at the discretion of our Board of Directors and will depend on, among other things, our results of operations, cash requirements, financial condition, contractual restrictions and other factors that our Board of Directors may deem relevant. In addition, our ABL Facility and our Term Loan each contain a covenant restricting the payment of dividends by us and each of our subsidiaries that are party to such facilities, which is subject to a number of specific exceptions.
 
The following table summarizes the range of market prices for our previously outstanding common stock and New Common Stock as reported by the Pink Sheets or the NYSE, as applicable, and the amount of dividends per share by quarter during the past two years:
 
   
2010
 
   
First
   
Second
   
Third
   
Fourth
 
Dividends per common share (a)
  $ -     $ -     $ -     $ -  
Market price per common share:
                               
High
  $ 1.71     $ 1.78     $ 0.68     $ 16.10  
Low
  $ 1.00     $ 0.55     $ 0.29     $ 0.28  
   
2009
 
   
First
   
Second
   
Third
   
Fourth
 
Dividends per common share (a)
  $ -     $ -     $ -     $ -  
Market price per common share:
                               
High
  $ 1.55     $ 0.48     $ 1.14     $ 1.48  
Low
  $ 0.03     $ 0.04     $ 0.02     $ 0.47  
 
 
(a)
On October 30, 2008, we suspended the payment of dividends.

The number of holders of record of our common stock on January 31, 2011 was approximately 3,900.  See Item 1A. – Risk Factors for a discussion of risks related to our common stock.

 
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PERFORMANCE GRAPH

The following graph compares the cumulative total return on our common stock for the period November 11, 2010 through December 31, 2010 with the returns of the Standard & Poor’s 500 Stock Index and the S&P 500 Specialty Chemicals Index, assuming an investment of $100 on November 11, 2010 and the reinvestment of all dividends.  Since our old common stock was cancelled when we emerged from Chapter 11 and our new common stock began “regular way” trading on the NYSE on November 11, 2010, stock performance prior to November 11, 2010 does not provide meaningful comparison and has not been provided.

 
COMPARISON OF CUMULATIVE TOTAL RETURN AMONG CHEMTURA CORPORATION,
S&P 500 AND S&P 500 SPECIALTY CHEMICALS

 
 
 
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Item 6.  Selected Financial Data

The following reflects our selected financial data for each of our last five fiscal years.  The information below should be read in conjunction with Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations and Item 8 - Financial Statements and Supplementary Data of this Annual Report.  The financial information presented may not be indicative of future performance.

(In millions of dollars, except per share data)
 
2010
   
2009
   
2008
   
2007
   
2006
 
Summary of Operations
                             
Net sales
  $ 2,760     $ 2,300     $ 3,154     $ 3,370     $ 3,182  
Gross profit
    657       579       717       819       787  
Selling, general and administrative
    315       289       323       362       355  
Depreciation and amortization
    175       162       221       254       191  
Research and development
    42       35       46       57       57  
Facility closures, severance and related costs
    1       3       23       34       5  
Antitrust costs
    -       10       12       35       90  
Merger costs (a)
    -       -       -       -       17  
(Gain) loss on sale of business (b)
    (2 )     -       25       15       11  
Impairment charges (c)
    57       39       986       19       80  
Changes in estimates related to expected allowable claims (d)
    35       73       -       -       -  
Equity income
    (4 )     -       (4 )     (3 )     (4 )
Operating profit (loss)
    38       (32 )     (915 )     46       (15 )
Interest expense (e)
    (191 )     (70 )     (78 )     (87 )     (102 )
Loss on early extinguishment of debt
    (88 )     -       -       -       (44 )
Other (expense) income, net
    (6 )     (17 )     9       (5 )     (5 )
Reorganization items, net (f)
    (303 )     (97 )     -       -       -  
                                         
Loss from continuing operations before
                                       
   income taxes
    (550 )     (216 )     (984 )     (46 )     (166 )
Income tax (provision) benefit
    (22 )     (10 )     29       -       (119 )
Loss from continuing operations
    (572 )     (226 )     (955 )     (46 )     (285 )
(Loss) earnings from discontinued operations, net of tax
    (1 )     (63 )     (16 )     27       33  
(Loss) gain on sale of discontinued operations, net of tax
    (12 )     (3 )     -       24       47  
Net (loss) earnings
    (585 )     (292 )     (971 )     5       (205 )
Less: net earnings attributable to non-controlling interests
    (1 )     (1 )     (2 )     (8 )     (1 )
Net loss attributable to Chemtura Corporation
  $ (586 )   $ (293 )   $ (973 )   $ (3 )   $ (206 )
                                         
Amounts attribuable to Chemtura Corporation common stockholders:
 
Loss from continuing operations, net of tax
  $ (573 )   $ (227 )   $ (957 )   $ (54 )   $ (286 )
(Loss) earnings from discontinued operations, net of tax
    (1 )     (63 )     (16 )     27       33  
(Loss) gain on sale of discontinued operations, net of tax
    (12 )     (3 )     -       24       47  
Net loss attributable to Chemtura Corporation
  $ (586 )   $ (293 )   $ (973 )   $ (3 )   $ (206 )
 
 
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(In millions, except per share data)
 
2010
   
2009
   
2008
   
2007
   
2006
 
Per Share Statistics
                             
                               
Loss from continuing operations, net of tax
  $ (2.58 )   $ (0.93 )   $ (3.94 )   $ (0.22 )   $ (1.19 )
(Loss) earnings from discontinued operations, net of tax
    -       (0.26 )     (0.07 )     0.11       0.14  
(Loss) gain on sale of discontinued operations, net of tax
    (0.05 )     (0.01 )     -       0.10       0.20  
Net loss attributable to Chemtura Corporation
  $ (2.63 )   $ (1.20 )   $ (4.01 )   $ (0.01 )   $ (0.85 )
Dividends
  $ -     $ -     $ 0.15     $ 0.20     $ 0.20  
Book value
  $ 10.16     $ 0.71     $ 2.01     $ 7.84     $ 7.14  
Common stock trading range:    High (g)
  $ 16.10     $ 1.55     $ 8.81     $ 12.33     $ 13.53  
                                                    Low (g)
  $ 0.28     $ 0.02     $ 1.02     $ 6.95     $ 7.75  
Average shares outstanding - Basic and Diluted (g)
    223.0       242.9       242.3       241.6       240.5  
                                         
Financial Position
                                       
Working capital (deficiency) (h)
  $ 932     $ 881     $ (558 )   $ 700     $ 497  
Current ratio (h)
    2.9       2.5       0.7       2.0       1.6  
Total assets
  $ 2,913     $ 3,118     $ 3,057     $ 4,416     $ 4,399  
Total debt, including short-term borrowings (h)
  $ 751     $ 255     $ 1,204     $ 1,063     $ 1,111  
Stockholders' equity
  $ 971     $ 172     $ 488     $ 1,899     $ 1,719  
Total capital employed (h)
  $ 1,722     $ 427     $ 1,692     $ 2,962     $ 2,830  
Debt to total capital % (h)
    43.6       59.7       71.2       35.9       39.3  
                                         
(In millions of dollars, except for number of employees)
                                       
Other Statistics
                                       
Net cash provided by (used in) operations (i)
  $ (204 )   $ 49     $ (11 )   $ 149     $ 251  
Capital spending from continuing operations
  $ 124     $ 53     $ 116     $ 107     $ 114  
Depreciation from continuing operations
  $ 138     $ 124     $ 177     $ 216     $ 152  
Amortization from continuing operations
  $ 37     $ 38     $ 44     $ 38     $ 39  
Approximate number of employees at end of year
    4,200       4,400       4,700       5,100       6,200  
 
(a)
Merger costs are non-capitalized costs associated with our merger with Great Lakes.
(b)
(Gain) loss on sale of business primarily included a $2 million gain relating to the sale of the natural sodium sulfonates and oxidized petrolatum product lines in 2010, a $26 million loss relating to the sale of the oleochemicals business in 2008, a $15 million loss on the sale of assets relating to the sale of the Celogen® product line in 2007 and a $12 million loss on the sale of the IWA business in 2006.
(c)
The 2010 charge included the impairment of goodwill of $57 million within the Chemtura AgroSolutions™ segment.  The 2009 charge included the impairment of goodwill of $37 million and the impairment of intangible assets of $2 million within the Consumer Products segment.   The 2008 charge primarily included a $985 million impairment of goodwill associated with the Consumer Products, Industrial Performance Products and Industrial Engineered Products segments.  The 2007 charge primarily included a $9 million reduction in the value of assets relating to the closure and sale of the Ravenna, Italy facility and a $4 million write-off of construction in progress associated with certain facilities affected by the 2007 restructuring programs.  The 2006 charge primarily included a $52 million impairment of the fluorine business as a result of our annual impairment review and a $22 million impairment of non-current assets of the fluorine business due to a loss of a significant customer.
(d)
Changes in estimates related to expected allowable claims of $35 million and $73 million for 2010 and 2009, respectively, relate to adjustments to liabilities subject to compromise (primarily legal and environmental reserves) as a result of our Chapter 11 proofs of claim evaluation process.
(e)
Interest expense in 2010 includes $137 million of contractual interest expense recorded, relating to interest obligations on unsecured claims for the period from March 18, 2009 through the Effective Date that were paid based on the Plan (included in this amount is contractual interest expense of $63 million for 2009).
(f)
Reorganization items, net of $303 million and $97 million for 2010 and 2009, respectively, represent professional fees; the write-off of debt discounts, premiums and debt issuance costs; the write-off of deferred financing expenses related to the termination of the U.S. accounts receivable facility; impacts from rejections or terminations of executory contracts and real property leases; impacts from the settlement of claims; and charges for reorganization initiatives.
(g)
Upon the effectiveness of our Plan all previously outstanding shares of common stock were cancelled and pursuant to the Plan approximately 96 million shares of New Common Stock were issued.  The weighted average shares for 2010 was based upon 243 million of old shares outstanding for approximately 10 months and approximately 100 million of new shares outstanding for approximately 2 months.  As a result, the average shares outstanding and price of our New Common Stock may not be comparable to prior periods.
(h)
The 2009 amounts exclude liabilities subject to compromise which are included separately on the balance sheet.
(i)
The 2010 net cash used in operations included $195 million related to cash settlements of claims in connection with the Chapter 11 cases and $50 million of pension contributions in accordance with the Plan.
 
 
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Item 7.  Management’s Discussion and Analysis of Financial Condition and Results of Operations

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.
 
EMERGENCE FROM CHAPTER 11 AND IMPLEMENTATION OF PLAN OF REORGANIZATION

The recent crisis in the credit markets compounded the liquidity challenges we faced in the fourth quarter of 2008 and the beginning of 2009.  Under normal market conditions, we believed we would have been able to refinance our $370 million notes maturing on July 15, 2009 (the “2009 Notes”) in the debt capital markets.  However, with the deterioration of the credit market in the late summer of 2008 combined with our then deteriorating financial performance, we did not believe we would be able to refinance the 2009 Notes on commercially reasonable terms, if at all.  Having carefully explored and exhausted all possibilities to gain near-term access to liquidity, we determined that debtor-in-possession (“DIP”) financing presented the best available alternative for us to meet our immediate and ongoing liquidity needs and preserve the value of our business.  As a result, having obtained the commitment of $400 million senior secured super priority DIP credit facility agreement (the “DIP Credit Facility”), Chemtura and 26 of our U.S. affiliates (collectively the “U.S. Debtors”) filed voluntary petitions for relief under Chapter 11 of Title 11 of the United States Code (the “Bankruptcy Code”) on March 18, 2009 (the “Petition Date”) 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 of the Bankruptcy Code and on August 11, 2010 Chemtura Canada commenced ancillary recognition proceedings under Part IV of the Companies’ Creditors Arrangement Act (the “CCAA”) in the Ontario Superior Court of Justice, located in Ontario, Canada (the “Canadian Court” and such proceedings, the “Canadian Case”).  The U.S. Debtors along with Chemtura Canada (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 under lead case number 09-11233 (REG) and appoint Chemtura Canada as the “foreign representative” for the purposes of the Canadian Case.  Such orders were granted on August 9, 2010.  On August 11, 2010 the Canadian Court entered an order recognizing the Chapter 11 cases as a “foreign proceedings” under the CCAA.

On June 17, 2010, the U.S. Debtors filed the initial version of the joint plan of reorganization (as amended, supplemented or modified, the “Plan”) and related disclosure statement (as amended, modified or supplemented, the “Disclosure Statement”) with the Bankruptcy Court and on July 9, 2010, July 20, 2010, August 5, 2010, September 14, 2010 and September 20, 2010, the Debtors filed revised versions of the Plan and Disclosure Statement with the Bankruptcy Court.  The final version of the Plan was filed with the Bankruptcy Court on October 29, 2010.  The Plan organized claims against the Debtors into classes according to their relative priority and certain other criteria.  For each class, the Plan described (a) the type of claim or interest, (b) the recovery available to the holders of claims or interests in that class under the Plan, (c) whether the class was “impaired” under the Plan, meaning that each holder would receive less than the full value on account of its claim or interest or that the rights of holders under law will be altered in some way (such as receiving stock instead of holding a claim) and (d) the form of consideration (e.g., cash, stock or a combination thereof), if any, that such holders were to receive on account of their respective claims or interests.  Distributions to creditors under the Plan generally included one of, or a combination of common shares in the capital of the reorganized Company authorized pursuant to the Plan (“New Common Stock”), cash, reinstatement or such other treatment as agreed between the Debtors and the applicable creditor.  Certain creditors were eligible to elect, when voting on the Plan, to receive their recovery in the form of the maximum available amount of cash or the maximum available amount of New Common Stock.  Holders of previously outstanding Chemtura stock (“Holders of Interests”), based upon their vote as a class to reject the Plan, received their pro rata share of value available for distribution, after all allowed claims have been paid in full and certain disputed claims reserves required by the Plan had been established in accordance with the terms of the Plan.  Holders of Interests may also be entitled to supplemental distributions if amounts reserved on account of disputed claims exceed the value of claims that are ultimately allowed.

On October 21, 2010, the Bankruptcy Court entered a bench decision approving confirmation of the Debtors’ Plan and on November 3, 2010, the Bankruptcy Court entered an order confirming 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.  Pursuant to the Plan, on the Effective Date: (i) our common stock, par value $0.01 per share, outstanding prior to effectiveness of the Plan was cancelled and all of our outstanding publicly registered pre-petition indebtedness was settled, and (ii) shares of the New Common Stock, par value $0.01 per share were issued for distribution in accordance with the Plan.  On November 8, 2010, the New York Stock Exchange (“NYSE”) approved for listing 111 million shares of New Common Stock, as authorized under the plan, comprising (i) approximately 95.5 million shares of New Common Stock to be issued under the Plan; (ii) approximately 4.5 million shares of New Common Stock reserved for future issuances under the Plan as disputed claims are settled; and (iii) 11 million shares of New Common Stock reserved for issuance under our equity plans.  Our New Common Stock started “regular way” trading on the exchange under the ticker symbol “CHMT” on November 11, 2010.
 
 
33

 
 
The Plan allowed for payment in full (including interest) on all allowed claims.   Holders of Interests in our common stock received a pro-rata share of New Common Stock in accordance with the Plan as well.

At the Effective Date, we determined that we did not meet the requirements under Accounting Standards Codification (“ASC”) Section 852-10-45, Reorganizations – Other Presentation Matters (“ASC 852-10-45”) to adopt fresh start accounting because the reorganized value of our assets exceeded the carrying value of our liabilities.  Fresh start accounting would have required us to record assets and liabilities at fair value as of the Effective Date.

In connection with our emergence from Chapter 11, the provisions of the Plan were accounted for as of the Effective Date or will be accounted for as further settlements occur.  These adjustments included the release of the exit financing proceeds from escrow, the distribution of approximately $891 million in cash and the issuance of 95.5 million shares of New Common Stock, primarily for the discharge of liabilities subject to compromise, the repayment of the Amended and Restated Senior Secured Super-Priority Debtor-in-Possession Credit Agreement (the “Amended DIP Credit Facility”), pension contributions and various other administrative claims.  As a result, our equity increased by approximately $1.4 billion as of the Effective Date.

For further discussion of the Chapter 11 cases, see Note 2 – Bankruptcy Proceedings and Emergence from Chapter 11 in our Notes to Consolidated Financial Statements.
 
EXECUTIVE OVERVIEW
 
In 2010, we emerged from Chapter 11, improved our financial health by reorganizing our capital structure and met or exceeded our financial objectives while continuing to focus on our businesses and customers.
 
Our emergence from Chapter 11 resulted in a stronger and leaner company enabled by the following:

 
·
Significantly reduced indebtedness with improved liquidity . As of December 31, 2010, we had $751 million of total consolidated indebtedness, $201 million of cash and cash equivalents and approximately $275 million of lending commitments under our new five-year senior secured revolving credit facility (the “ABL Facility”) with Bank of America, N.A., as administrative agent and the other lenders party thereto which permit us to enter into a foreign asset-based financing arrangement.  The $275 million of lending commitments was un-drawn other than to support the issuance of $12 million in letter of credit obligations.  For comparison, as of December 31, 2009, we had over $1.4 billion of total consolidated indebtedness.
 
 
·
Improved cost structure . We have significantly improved our cost structure over the past three years and substantially reduced our cash fixed costs compared to prior years.  From December 31, 2007 through the end of 2010, we reduced our workforce by approximately 900 employees, including the transfer of employees as part of the sale of the PVC additives business and a reduction of over 400 professional and administrative positions.  Since the end of 2007, we have significantly reduced our underperforming assets by closing or selling 6 plants and moving to third-party warehousing in a number of our businesses.  These actions have reduced fixed costs or made them variable.  We will continue to manage our costs and improve the efficiency of our operations in 2011 and beyond.
 
 
·
Reduced environmental and other liabilities . We discharged a significant amount of our U.S. environmental and tort liabilities exposures in our Chapter 11 proceedings.

 
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At the same time, we continued to invest in our segments to drive growth and expand operating margins:
 
 
·
With our strategy of driving growth through innovation, our segments invested in the development of technology, new products and product certifications and registrations.  Within our Industrial Performance Products segment, we are in the process of obtaining food grade certifications for our Weston® 705 products so that they may be used in food packaging film applications and continued to expand the applications for our new Duracast® castable elastomers.  In our Industrial Engineered Products segment, we launched new flame retardant products under the Emerald® brand, continued to find new customers for our Geobrom™ products (used to remove mercury from emissions of coal-fired power plants) and identified exciting new applications for an organometallic product in the production of LED lighting.  Our Chemtura AgroSolutions TM segment saw sales of its new Rancona® product grow rapidly in its first full year of commercial sales and an existing product proved effective in combating the grasshopper infestation in certain parts of the United States.  Our Consumer Products segment introduced new innovative packaging forms that aid customer use of its products and improve store management for our retailers;
 
 
·
The strategic focus on driving growth in revenues from higher growth regions in the world saw sales in the Asia Pacific region increase from approximately 15% of net sales in 2009 to approximately 19% in 2010 – a 52% increase in net sales in this region;
 
 
·
Our Industrial Engineered Products segment is driving significant improvements in operating efficiency and cost control with the benefit of its new sourcing agreement permitting the rationalization of older, lower yielding brine wells and the reconfiguration of its manufacturing assets;
 
 
·
Our Consumer Products segment saw a record year for operating earnings with the benefit of exceptionally good weather during the 2010 pool season and the benefit of operating cost reductions during the last two years.  The favorable business conditions in 2010 provide a challenge to repeat the same performance in 2011;
 
 
·
We continued to invest in our regional operations, opening a new development center in Nanjing, China and establishing  a shared service center in Trafford Park, England;
 
 
·
Despite the Chapter 11 proceedings, we were successful in attracting new managers and new employees at all levels of our organization to help spearhead the implementation of our business strategies and strengthen our performance culture; and
 
 
·
We continue our systems development initiatives which have brought us benefits such as our enterprise resource planning (“ERP”) initiatives that have enabled the activities related to over 90 percent of net sales now being managed on a single global instance of SAP and offering simplified and standardized business processes.
 
OUR BUSINESS

We are among the larger publicly traded specialty chemical companies in the United States.  We are dedicated to delivering innovative, application-focused specialty chemical solutions and consumer products.  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, plastics for durable and non-durable goods, pool and spa chemicals 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 and consumer 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.

The primary economic factors that influence the operations and sales of our Industrial Engineered Products and Industrial Performance Products segments are industrial production, residential and commercial construction, electronic component production and polymer production.  In addition, our Chemtura AgroSolutions TM segment is influenced by worldwide weather, disease and pest infestation conditions.  Our Consumer Products segment is also influenced by general economic conditions impacting consumer spending and weather 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.

 
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LIQUIDITY AND CAPITAL RESOURCES

Exit Financing Facilities

In order to fund our Plan, emerge from Chapter 11 and provide for future capital needs, we obtained approximately $1 billion in financing in 2010.  On August 27, 2010, we completed a private placement offering under Rule 144A of $455 million aggregate principal amount of 7.875% senior notes due 2018 (the “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.  We also entered into a senior secured term facility credit agreement due 2016 (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 permits us to increase the size of the facility by up to $125 million.  On the Effective Date, we entered into a five-year 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).  The ABL Facility permits us to increase the size of the facility by up to $125 million subject to obtaining lender commitments to provide such increase.

Senior Notes

At any time prior to September 1, 2014, we may redeem some or all of the Senior Notes at a redemption price equal to 100% of the principal amount thereof plus a make-whole premium (as defined in the indenture) and accrued and unpaid interest up to, but excluding, the redemption date.  We may also redeem some or all of the Senior Notes at any time on or after September 1, 2014, with the redemption prices being, prior to September 1, 2015, 103.938% of the principal amount, on or after September 1, 2015 and prior to September 1, 2016, 101.969% of the principal amount and thereafter 100% plus any accrued and unpaid interest to the redemption date.  In addition, prior to September 1, 2013, we may redeem up to 35% of the Senior Notes from the proceeds of certain equity offerings.  If we experience specific kinds of changes in control, we must offer to repurchase all of the Senior Notes.  The redemption price (subject to limitations as described in the indenture) is equal to accrued and unpaid interest on the date of redemption plus the redemption price as set forth above.

Our Senior Notes contain covenants that limit our ability to enter into certain transactions, such as incurring additional indebtedness, creating liens, paying dividends, and entering into acquisitions, dispositions and joint ventures.  As of December 31, 2010, we were in compliance with the covenant requirements of the Senior Notes.

Our Senior Notes are subject to certain events of default, including, among others, breach of other agreements in the Indenture; any guarantee of a significant subsidiary ceasing to be in full force and effect; a default by us or our restricted subsidiaries under any bonds, debentures, notes or other evidences of indebtedness of a certain amount, resulting in its acceleration; the rendering of judgments to pay certain amounts of money against us or our significant subsidiaries which remains outstanding for 60 days; and certain events of bankruptcy or insolvency.

In connection with the Senior Notes, we also entered into a Registration Rights Agreement whereby we agreed to use commercially reasonable efforts (i) to file, as soon as reasonably practicable after the filing of our Form 10-K for the year ended December 31, 2010, an exchange offer registration statement with the SEC; (ii) to cause such exchange offer registration statement to become effective, (iii) to consummate a registered offer to exchange the Senior Notes for new exchange notes having terms substantially identical in all material respects to the Senior Notes (except that the new exchange notes will not contain terms with respect to additional interest or transfer restrictions) pursuant to such exchange offer registration statement on or prior to the date that is 365 days after the Escrow Release date and (iv) under certain circumstances, to file a shelf registration statement with respect to resales of the Senior Notes.  If we do not consummate the exchange offer (or the shelf registration statement ceases to be effective or usable, if applicable) as provided in the Registration Rights Agreement, we will be required to pay additional interest with respect to the Senior Notes, in an amount beginning at 0.25% per annum and increasing at 90-day intervals up to a maximum amount of 1.00%, until all registration defaults have been cured.  We intend to consummate this exchange offer as provided in the Registration Rights Agreement.

 
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Term Loan

Borrowings under the Term Loan (due in 2016) bear interest at a rate per annum equal to, at our election, (i) 3.0% plus the Base Rate (defined as the higher of (a) the Federal Funds rate plus 0.5%; (b) Bank of America’s published prime rate; and (c) the Eurodollar Rate plus 1%) or (ii) 4.0% plus the Eurodollar Rate (defined as the higher of (a) 1.5% and (b) the current LIBOR adjusted for reserve requirements).

The Term Loan is secured by a first priority lien on substantially all of our U.S. tangible and intangible assets (excluding accounts receivable, inventory, deposit accounts and certain other related assets), including, without limitation, real property, equipment and intellectual property, together with a pledge of the equity interests of our first tier subsidiaries and the guarantors of the Term Loan, and a second priority lien on substantially all of our U.S. accounts receivable and inventory.

We may, at our option, prepay the outstanding aggregate principal amount on the Term Loan advances in whole or ratably in part along with accrued and unpaid interest on the date of the prepayment.  If the prepayment is made prior to the first anniversary of the closing date of the Term Loan agreement, we will pay an additional premium of 1% of the aggregate principal amount of prepaid advances.

Our obligations as borrower under the Term Loan are guaranteed by certain of our U.S. subsidiaries.

The Term Loan contains covenants that limit 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.

Additionally, the Term Loan requires that we meet certain quarterly financial maintenance covenants including a maximum Secured Leverage Ratio (as defined in the agreement) of 2.5:1.0 and a minimum Consolidated Interest Coverage Ratio (as defined in the agreement) of 3.0:1.0.  As of December 31, 2010, we were in compliance with the covenant requirements of the Term Loan.
 
The Term Loan is subject to certain events of default   applicable to Chemtura, the guarantors and their respective subsidiaries, including, nonpayment of principal, interest, fees or other amounts, violation of covenants, material inaccuracy of representations and warranties (including the existence of a material adverse event as defined in the agreement), cross-default to material indebtedness, certain events of bankruptcy and insolvency, material judgments, certain ERISA events, a change in control, and actual or asserted invalidity of liens or guarantees or any collateral document, in certain cases subject to the threshold amounts and grace periods set forth in the Term Loan agreement.

On September 27, 2010, we entered into Amendment No. 1 to the Term Loan which deleted the requirement that intercompany loans be subordinated, as the requirement was inconsistent with the provisions for prepayment of other debt which expressly permitted prepayments of intra-group debt.  The amendment also clarified, among other things, language permitting payments and dispositions made pursuant to the Plan.

 
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ABL Facility

The revolving loans under the ABL Facility (available through 2015) bear interest at a rate per annum which, at our option, can be either: (a) a base rate (the highest of (i) Bank of America, N.A.’s “prime rate,” (ii) the Federal Funds Effective Rate plus 0.5% and (iii) the one-month LIBOR plus 1.00%) plus a margin of between 2.25% and 1.75% based on the average excess availability under the ABL Facility for the preceding quarter; or (b) the current reserve adjusted LIBOR plus a margin of between 3.25% and 2.75% based on the average excess availability under the ABL Facility for the preceding quarter.

Our obligations (and the obligations of the other borrowing subsidiaries) under the ABL Facility are guaranteed on a secured basis by all the guarantors (as defined in the agreement) that are not borrowers, and by certain of our future direct and indirect domestic subsidiaries.  The obligations and guarantees under the ABL Facility are secured by (i) a first-priority security interest in the borrowers’ and the guarantors’ existing and future inventory and accounts receivable, together with general intangibles relating to inventory and accounts receivable, contract rights under agreements relating to inventory and accounts receivable, documents relating to inventory, supporting obligations and letter-of-credit rights relating to inventory and accounts receivable, instruments evidencing payment for inventory and accounts receivable; money, cash, cash equivalents, securities and other property held by the administrative agent or any lender under the ABL Facility; deposit accounts, credits and balances with any financial institution with which any borrower or any guarantor maintains deposits and which contain proceeds of, or collections on, inventory and accounts receivable; books, records and other property related to or referring to any of the foregoing and proceeds of any of the foregoing (the “Senior Asset Based Priority Collateral”); and (ii) a second-priority security interest in substantially all of the borrowers’ and the guarantors’ other assets, including (x) 100% of the capital stock of borrowers’ and the guarantors’ direct domestic subsidiaries held by the borrowers and the guarantors and 100% of the non-voting capital stock of the borrowers’ and the guarantors’ direct foreign subsidiaries held by the borrowers and the guarantors, and (y) 65% of the voting capital stock of the borrowers’ and the guarantors’ direct foreign subsidiaries (to the extent held by the borrowers and the guarantors), in each case subject to certain exceptions set forth in the ABL Facility agreement and the related loan documentation.

Mandatory prepayments of the loans under the ABL Facility (and cash collateralization of outstanding letters of credit) are required (i) to the extent the usage of the ABL Facility exceeds the lesser of (x) the borrowing base and (y) the then effective commitments and (ii) subject to exceptions, thresholds and reinvestment rights, with the proceeds of certain sales or casualty events of assets on which the ABL Facility has a first priority security interest.

If, at the end of any business day, the amount of unrestricted cash and cash equivalents held by the borrowers and guarantors (excluding amounts in certain exempt accounts) exceeds $20 million in the aggregate, mandatory prepayments of the loans under the ABL Facility (and cash collateralization of outstanding letters of credit) are required on the following business day in an amount necessary to eliminate such excess (net of our known cash uses on the date of such prepayment and for the 2 business days thereafter).

The ABL Facility agreement contains certain affirmative and negative covenants (applicable to us, the other borrowing subsidiaries, the guarantors and their respective subsidiaries), including, without limitation, covenants requiring financial reporting and notices of certain events, and covenants imposing limitations on incurrence of indebtedness and guarantees; liens; loans and investments; asset dispositions; dividends, redemptions, and repurchases of stock and prepayments, redemptions and repurchases of certain indebtedness; mergers, consolidations, acquisitions, joint ventures or creation of subsidiaries; material changes in business; transactions with affiliates; restrictions on distributions from subsidiaries and granting of negative pledges; changes in accounting and reporting; sale leasebacks; and speculative transactions, and a springing financial covenant requiring a minimum trailing 12-month fixed charge coverage ratio of 1.1 to 1.0 at all times during any period from the date when the amount available for borrowings under the ABL Facility falls below the greater of (i) $34 million and (ii) 12.5% of the aggregate commitments to the date such available amount has been equal to or greater than the greater of (i) $34 million and (ii) 12.5% of the aggregate commitments for 45 consecutive days.  As of December 31, 2010, we were in compliance with the covenant requirements of the ABL Facility.

The ABL Facility agreement contains certain events of default (applicable to us, the other borrowing subsidiaries, the guarantors and their respective subsidiaries), including nonpayment of principal, interest, fees or other amounts, violation of covenants, material inaccuracy of representations and warranties (including the existence of a material adverse event as defined in the agreement), cross-default to material indebtedness, certain events of bankruptcy and insolvency, material judgments, certain ERISA events, a change in control, and actual or asserted invalidity of liens or guarantees or any collateral document, in certain cases subject to the threshold amounts and grace periods set forth in the ABL Facility agreement.

 
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At December 31, 2010, we had no borrowings under the ABL Facility, but we had $12 million of outstanding letters of credit (primarily related to liabilities for insurance obligations and vendor deposits) which utilizes available capacity under the facility.  At December 31, 2010 we had approximately $185 million of undrawn availability under the ABL Facility.

Debtor-in-Possession Credit Facility

On March 18, 2009, in connection with our Chapter 11 filing, we entered into a $400 million senior secured debtor-in-possession credit facility agreement (the “DIP Credit Facility”) arranged by Citigroup Global Markets Inc. with Citibank, N.A. as Administrative Agent, subject to approval by the Bankruptcy Court.  On March 20, 2009, the Bankruptcy Court entered an interim order approving the Debtors access to $190 million of the DIP Credit Facility in the form of a $165 million term loan and a $25 million revolving credit facility.  The DIP Credit Facility closed on March 23, 2009 with the drawing of the $165 million term loan.  The initial proceeds were used to fund the termination of the U.S. accounts receivable facility, pay fees and expenses associated with the transaction and fund business operations.

The DIP Credit Facility was comprised of the following: (i) a $250 million non-amortizing term loan; (ii) a $64 million revolving credit facility; and (iii) an $86 million revolving credit facility representing the “roll-up” of certain outstanding secured amounts owed to lenders under the prior Amended and Restated Credit Agreement, dated as of July 31, 2007 (the “2007 Credit Facility”) who have commitments under the DIP Credit Facility.  In addition, a sub-facility for letters of credit in an aggregate amount of $50 million was available under the unused commitments of the revolving credit facilities.  At December 31, 2009, we had $52 million of outstanding letters of credit primarily related to liabilities for environmental remediation, vendor deposits, insurance obligations and European value added tax obligations.  The outstanding letters of credit included $33 million issued under the 2007 Credit Facility that were pre-petition liabilities and $19 million issued under the DIP Credit Facility.

The Bankruptcy Court entered a final order providing full access to the $400 million DIP Credit Facility on April 29, 2009.  On May 4, 2009, we used $85 million of the $250 million term loan and used the proceeds together with cash on hand to fund the $86 million “roll up” of certain outstanding secured amounts owed to certain lenders under the 2007 Credit Facility as approved by the final order.

On February 9, 2010, the Bankruptcy Court gave interim approval of the Amended and Restated Senior Secured Super-Priority Debtor-in-Possession Credit Agreement (the “Amended DIP Credit Facility”) by and among the Debtors, Citibank N.A. and the other lenders party thereto (collectively the “Loan Syndicate”).  The Amended DIP Credit Facility replaced the DIP Credit Facility.  The Amended DIP Credit Facility provided for a first priority and priming secured revolving and term loan credit commitment of up to an aggregate of $450 million comprising a $300 million term loan and a $150 million revolving credit facility.  The Amended DIP Credit Facility was scheduled to mature on the earliest of 364 days after the closing, the effective date of a plan of reorganization or the date of termination in whole of the Commitments (as defined in the credit agreement governing the Amended DIP Credit Facility).  The proceeds of the term loan under the Amended DIP Credit Facility were used to, among other things, refinance the obligations outstanding under the previous DIP Credit Facility and provide working capital for general corporate purposes.  The Amended DIP Credit Facility provided a reduction in our financing costs through reductions in interest spread and avoidance of the extension fees payable under the DIP Credit Facility in February and May 2010.  The Amended DIP Credit Facility closed on February 12, 2010 with the drawing of the $300 million term loan.  On February 9, 2010, the Bankruptcy Court entered an order approving full access to the Amended DIP Credit Facility, which order became final by its terms on February 18, 2010.

The Amended DIP Credit Facility resulted in a substantial modification for certain lenders within the Loan Syndicate given the reduction in their commitments as compared to the DIP Credit Facility.  Accordingly, we recognized a $13 million charge for the year ended December 31, 2010 for the early extinguishment of debt resulting from the write-off of deferred financing costs and the incurrence of fees payable to lenders under the DIP Credit Facility.  We also incurred $5 million of debt issuance costs related to the Amended DIP Credit Facility for the year ended December 31, 2010.

 
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Borrowings under the DIP Credit Facility term loans and the $64 million revolving credit facility bore interest at a rate per annum equal to, at our election, (i) 6.5% plus the Base Rate (defined as the higher of (a) 4%; (b) Citibank N.A.’s published rate; or (c) the Federal Funds rate plus 0.5%) or (ii) 7.5% plus the Eurodollar Rate (defined as the higher of (a) 3% or (b) the current LIBOR rate adjusted for reserve requirements).  Borrowings under the DIP Credit Facility $86 million revolving credit facility representing the “roll-up” of certain outstanding secured amounts owed to lenders under the prior 2007 Credit Facility bore interest at a rate per annum equal to, at our election, (i) 2.5% plus the Base Rate or (ii) 3.5% plus the Eurodollar Rate.  Additionally, we were obligated to pay an unused commitment fee of 1.5% per annum on the average daily unused portion of the revolving credit facilities and a letter of credit fee on the average daily balance of the maximum daily amount available to be drawn under Letters of Credit equal to the applicable margin above the Eurodollar Rate applicable for borrowings under the applicable revolving credit facility.  Certain fees were payable to the lenders upon the reduction or termination of the commitment and upon the substantial consummation of a plan of reorganization as described more fully in the DIP Credit Facility including an exit fee payable to the Lenders of 2% of “roll-up” commitments and 3% of all other commitments.  These fees, which amounted to $11 million, were paid upon the funding of the term loan under the Amended DIP Credit Facility.

Borrowings under the Amended DIP Credit Facility term loan bore interest at a rate per annum equal to, at our election, (i) 3.0% plus the Base Rate (defined as the higher of (a) 3%; (b) Citibank N.A.’s published rate; and (c) the Federal Funds rate plus 0.5%) or (ii) 4.0% plus the Eurodollar Rate (defined as the higher of (a) 2% and (b) the current LIBOR rate adjusted for reserve requirements).  Borrowings under the Amended DIP Credit Facility’s $150 million revolving credit facility bore interest at a rate per annum equal to, at our election, (i) 3.25% plus the Base Rate or (ii) 4.25% plus the Eurodollar Rate.  Additionally, we paid an unused commitment fee of 1.0% per annum on the average daily unused portion of the revolving credit facilities and a letter of credit fee on the average daily balance of the maximum daily amount available to be drawn under letters of credit equal to the applicable margin above the Eurodollar Rate applicable for borrowings under the revolving credit facility.

The Amended DIP Credit Facility was paid in full and terminated on the Effective Date.

Cash Flows from Operating Activities

Net cash used in operating activities was $204 million in 2010, net cash provided by operating activities was $49 million in 2009 and net cash used in operating activities was $11 million in 2008.  Changes in key accounts are summarized below:

Favorable (unfavorable)
                 
(In millions)
 
2010
   
2009
   
2008
 
Accounts receivable
  $ (77 )   $ 36     $ 89  
Impact of accounts receivable facilities
    -       (103 )     (136 )
Inventories
    (36 )     85       (12 )
Restricted cash
    (38 )     -       -  
Accounts payable
    70       16       (25 )
Pension and post-retirement health care liabilities
    (61 )     (26 )     (46 )
Liabilities subject to compromise
    (195 )     (31 )     -  
 
During 2010, accounts receivable increased by $77 million.  The increase in accounts receivable was driven by increased volume principally within the Industrial Performance Products and Industrial Engineered Products segments as the industries we supply in these segments were most severely affected by the economic slow down in 2009 as demand declined sharply and customers undertook de-stocking in light of the changes in the economy.  With available liquidity in 2010, we were able to resume our historic practice of building inventory ahead of the higher seasonal demand for some of our products and, as such, inventory increased $36 million during 2010.  Accounts payable increased by $70 million in 2010 primarily a result of growth in raw material and capital purchases, improved vendor credit terms and timing of professional fee payments.  Pension and post-retirement health care liabilities decreased by $61 million primarily due to the funding of benefit obligations.  Contributions amounted to $83 million in 2010, which included $69 million for domestic plans (includes a $50 million contribution in accordance with the Plan) and $14 million for international plans.  Liabilities subject to compromise related to operating activities decreased by $195 million in 2010 (excluding pre-petition debt settlements), primarily due to the payment in cash of certain pre-petition liabilities as part of the consummation of the Plan.

 
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Cash flows from operating activities in 2010 were adjusted by the impact of certain non-cash and other charges, which primarily included reorganization items, net of $186 million, depreciation and amortization expense of $175 million, contractual post-petition interest expense of $113 million, a loss on early extinguishment of debt of $88 million (which included the settlement of certain “make-whole” and “no-call” claims), impairment charges of $60 million, change in estimates related to expected allowable claims of $35 million, a deferred tax provision of $34 million, a loss on sale of discontinued operations of $12 million and stock-based compensation expense of $10 million.

During 2009, we generated net cash from operating activities of $49 million.  The cash provided was a combination of our net loss of $293 million, adjusted for non-cash amounts during the period including depreciation and amortization of $173 million, impairment charges of $104 million, changes in estimates related to expected allowable claims of $73 million and reorganization items of $35 million.  In addition, inventory decreased $85 million due to lower raw material and energy costs as well as the execution of inventory reduction initiatives and lower demand, accounts receivable decreased $36 million driven by reduced sales and the benefit of our collection efforts and accounts payable increased $16 million primarily due to the timing of vendor payments.  Offsetting these net inflows of cash was a decrease in proceeds from the sale of accounts receivables under our accounts receivable financing facilities of $103 million (due to the termination of the U.S. accounts receivable facility and restricted availability and access to our European accounts receivable financing facility), liabilities subject to compromise were affected by payments of $31 million against prepetition liabilities and pension and post-retirement healthcare liabilities decreased by $26 million, primarily due to contributions.

During 2008, we reported net cash used in operating activities of $11 million. The cash used was a combination of our net loss of $973 million, adjusted for non-cash amounts during the period including an impairment charge of $986 million and depreciation and amortization of $237 million. In addition, proceeds from the sale of accounts receivables under our accounts receivable financing facilities decreased $136 million due to reduced sales and changes in terms of the facilities, pension and post-retirement healthcare liabilities decreased by $46 million, primarily due to contributions, accounts payable decreased $25 million primarily due to timing of vendor payments and inventory increased $12 million primarily due to the impact of higher raw material and packaging costs. Offsetting these net outflows of cash was a decrease in accounts receivable of $89 million driven by reduced sales and the benefit of our collection efforts.

Cash Flows from Investing and Financing Activities

Investing Activities

Net cash used in investing activities was $81 million for 2010.  Investing activities were primarily related to capital expenditures of $124 million for U.S. and foreign facilities, including environmental and other compliance requirements, partially offset by proceeds of $43 million from the sale of the PVC additives business and the sale of the natural sodium sulfonates and oxidized petrolatum product lines.

Net cash used in investing activities was $58 million for 2009, which reflected net proceeds from prior year divestments of the oleochemicals and fluorine chemicals businesses of $3 million offset by $5 million of net cash paid as deferred consideration for a prior year acquisition.  Additionally, capital expenditures for 2009 amounted to $56 million primarily related to U.S. and foreign facilities, the ERP initiatives, and environmental and other compliance requirements.

Net cash used in investing activities was $98 million for 2008, which reflects $64 million net proceeds from divestures of the oleochemicals and fluorine chemicals businesses offset by net cash paid for the Baxenden, GLCC Laurel and other miscellaneous acquisitions of $41 million.  Additionally, capital expenditures for 2008 amounted to $121 million related to the upgrades and expansion of domestic and foreign facilities, our project to move the ERP systems to a single instance of SAP 6.0, and environmental and other compliance requirements.

Financing Activities

Net cash provided by financing activities was $251 million for 2010, which included proceeds from the Senior Notes of $452 million and proceeds from the Term Loan of $292 million as part of the Chapter 11 exit financing.  These items were offset by the net repayments on the Amended DIP Credit Facility and DIP Credit facility of $251 million during 2010 which were paid in full; the cash repayment of pre-petition debt of $192 million; debt issuance and refinancing costs of $40 million; and cash payments for the settlement of certain “make-whole” and “no-call” claims of $10 million.

 
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Net cash provided by financing activities was $173 million for 2009, which included proceeds from the DIP Credit Facility of $250 million, partially offset by payments of debt issuance costs on the DIP Credit Facility of $30 million, net repayments on the 2007 Credit Facility of $28 million, and net payments on other borrowings of $19 million.

Net cash provided by financing activities was $114 million for 2008, which included net proceeds from borrowings of $180 million under the 2007 Credit Facility and other financing activities of $1 million, partially offset by dividend payments of $36 million and payments on long-term borrowings of $31 million.  On October 30, 2008, we announced that we would suspend the payment of dividends to conserve cash and expand liquidity in a period of economic uncertainty.

Non-Cash Investing and Financing Activities

In addition to settling approximately $373 million of liabilities subject to compromise in cash upon our bankruptcy emergence, we issued approximately $1.4 billion of New Common Stock for the settlement of liabilities subject to compromise 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, 2010.  Payments associated with bankruptcy claims not yet allowed in the Chapter 11 cases as of the Effective Date (referred to as disputed claims) have been excluded from the table below given the inherent uncertainties associated with these claims.

( In millions )
   
Payments Due by Period
 
                                         
2016 and
 
Contractual Obligations*
   
Total
   
2011
   
2012
   
2013
   
2014
   
2015
   
Thereafter
 
Total debt (including capital leases)
(a)
  $ 754     $ 3     $ -     $ -     $ 1     $ -     $ 750  
Operating leases
(b)
    72       13       10       8       7       6       28  
Facility closures, severance
                                                         
and related cost liabilities
(c)
    1       1       -       -       -       -       -  
Capital expenditures
(d)
    24       24       -       -       -       -       -  
Interest payments
(e)
    387       54       54       54       54       54       117  
Unconditional purchase obligations
(f)
    7       2       2       1       1       1       -  
Subtotal - Contractual Obligations
      1,245       97       66       63       63       61       895  
Environmental liabilities
(g)
    96       18       16       13       13       7       29  
Post-retirement health care liabilities
(h)
    104       11       10       9       9       8       57  
Unrecognized tax benefits
(i)
    65       14       1       -       -       50       -  
Other long-term liabilities
                                                         
(excluding pension liabilities)
      25       1       3       1       2       4       14  
Total cash requirements
    $ 1,535     $ 141     $ 96     $ 86     $ 87     $ 130     $ 995  

* 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.
 
(a)
Our debt agreements include various notes and bank loans for which payments will be payable through 2018.  The future minimum lease payments under capital leases at December 31, 2010 were not significant.  Obligations by period reflect stated contractual due dates.
 
(b)
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.
 
(c)
Represents estimated payments from accruals related to our cost reduction programs.
 
(d)
Represents capital commitments for various open projects.
 
(e)
Represents interest payments and fees related to o ur Senior Notes, Term Loan, ABL Facility and other debt obligations outstanding at December 31, 2010. Assumed interest rates are based upon rates in effect at December 31, 2010.
 
(f)
Primarily represents unconditional purchase commitments to purchase raw materials and tolling arrangements with outside vendors.
 
 
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(g)
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 $114 million.  We have recorded a liability for ongoing environmental remediation of $92 million at December 31, 2010, which excludes $27 million of reserves related to disputed claims not yet allowed in the Chapter 11 cases.
 
(h)
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.
 
(i)
We have recorded a liability for unrecognized tax benefits of $65 million at December 31, 2010   which do not reflect competent authority offsets of $24 million, which are reflected as assets in our balance of unrecognized tax benefits.
 
During 2010, we made payments of $24 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.  We made contributions of $83 million in 2010 to our domestic and international pension and 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.  Applying the provisions of the Pension Protection Act of 2006, we were not required to contribute to the domestic qualified pension plans in 2010 but made a voluntary contribution of $50 million under the terms of the Plan.  The following table summarizes the estimated future funding requirements for defined benefit pension plans under current assumptions:

   
Funding Requirements by Period
 
(In millions)
 
2011
   
2012
   
2013
   
2014
   
2015
 
Qualified domestic pension plans
  $ 18     $ 41     $ 38     $ 33     $ 29  
International and non-qualified pension plans
    15       16       16       17       15  
    Total pension plans
  $ 33     $ 57     $ 54     $ 50     $ 44  
 
One of our U.K. subsidiaries is negotiating the terms of additional cash contributions to be made to its defined benefit pension plan.  While the final terms have not yet been agreed, these cash contributions could be up to £60 million (approximately $95 million U.S.) over a four year period starting in 2011.  Approximately £ 8 million (or $12 million U.S.) of such additional contributions are reflected in the funding table above.

Other Sources and Uses of Cash

We expect to finance our continuing operations and capital spending requirements for 2011 with cash flows provided by operating activities, available cash and cash equivalents, borrowings under our ABL Facility and other sources.  Cash and cash equivalents as of December 31, 2010 were $201 million.

Restructuring

In 2009, we initiated a comprehensive review process to strengthen our core businesses and improve our financial health, a process that continued throughout 2010.  As part of this process, we reviewed each of our businesses, individually and as part of our portfolio.  The review included a determination of whether to continue in, consolidate, reorganize, exit or expand our businesses, operations and product lines.  In each case, we determined whether, on a short-term or long-term basis, the business, operation or product line constituted a strategic fit with our products, contributed to our financial health and will achieve our business objectives.  If it does not, we will implement initiatives which may include, among other things, limiting or exiting the business, operation or product line, consolidating operations or facilities or selling or otherwise disposing of the business or asset.   Our review process also involved expanding businesses and product lines and bringing new products to market with significant growth opportunities.  Our goal was to reshape into a stronger and leaner global enterprise focused on growth.

 
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As a result of our review process, we identified certain assets for potential sale.  In other cases, we determined investing in innovative and regional growth, restructuring or consolidating our operations or changing the way we do business or bring our products to market would further our business goals.

On April 30, 2010, we completed the sale of our PVC additives business to Galata Chemicals LLC for net proceeds of $38 million.  The net assets sold consisted of accounts receivable of $47 million, inventory of $42 million, other current assets of $6 million, other assets of $1 million, pension and other post-retirement health care liabilities of $25 million, accounts payable of $3 million and other accrued liabilities of $1 million.  A pre-tax loss of approximately $13 million was recorded on the sale after the elimination of $16 million of accumulated other comprehensive income (“AOCI”) resulting from the liquidation of a foreign subsidiary as part of the transaction.

The PVC additives business, which was formerly a reporting unit within the Industrial Engineered Products segment, is reported as a discontinued operation in our accompanying Consolidated Financial Statements as we will not have significant continuing cash flows or continuing involvement in the operations of the disposed business.  The results of operations for this business have been removed from the results of continuing operations for all periods presented.  The assets and liabilities of discontinued operations have been reclassified and are segregated in our Consolidated Balance Sheets.  The assets of discontinued operations as of December 31, 2009 included accounts receivable of $29 million, inventory of $51 million, other current assets of $3 million and other assets of $2 million.  The liabilities of discontinued operations as of December 31, 2009 included accounts payable of $2 million, accrued expenses of $6 million, pension and post-retirement health care liabilities of $28 million and other liabilities of $1 million.

On July 30, 2010, we completed the sale of our natural sodium sulfonates and oxidized petrolatum product lines to Sonneborn Holding, LLC for net proceeds of $5 million.  The sale included certain assets, our 50% interest in a European joint venture, the assumption of certain liabilities and the mutual release of obligations between the parties.  The net assets sold consisted of accounts receivable of $3 million, other current assets of $7 million, property, plant and equipment, net of $2 million, environmental liabilities of $3 million and other liabilities of $6 million.  A pre-tax gain of approximately $2 million was recorded on the sale.

As we implement these initiatives, we also focused on growth opportunities such as the following:

 
·
We plan to expand capacity at Gulf Stabilizer Industries, our joint venture facility in Al Jubail, Saudi Arabia and advance towards a new joint venture in Saudi Arabia involving our German subsidiary, Chemtura Organometallics GmbH to build a world-scale metal alkyls manufacturing facility in Jubail Industrial City, Saudi Arabia;
 
 
·
We announced a strategic research and development alliance with Isagro S.p.A. which will give access to two already commercialized products and accelerate the development and commercialization of new active ingredients and molecules related to our Chemtura AgroSolutions TM segment;
 
 
·
We announced the formation of Day Star Materials, LLC, a joint venture with UP Chemical Co. Lta. that will manufacture and sell high purity metal organic precursors for the rapidly growing LED market.  The joint venture will begin supplying high parity metal organic precursors in the second quarter of 2011; and
 
 
·
We have also brought to market new and innovative product offerings (See Management’s Discussion and Analysis: Executive Overview).

Reorganization Items

We have incurred substantial expenses resulting from our Chapter 11 cases.  We will continue to incur reorganization related expenses in 2011, but at a much reduced amount.  Reorganization items, net presented in our Consolidated Statements of Operations represent the direct and incremental costs related to our Chapter 11 cases such as professional fees, impacts related to the settlement of claims in the Chapter 11 cases and rejections or terminations of executory contracts and real property leases.  During 2010, we recorded $303 million of reorganization items, net.  For additional information on reorganization items, net, see Note 2 - Bankruptcy Proceedings and Emergence from Chapter 11 in our Notes to Consolidated Financial Statements.

 
44

 
 
Guarantees

In addition to the letters of credit of $12 million and $52 million outstanding at December 31, 2010 and 2009, respectively, we have guarantees that have been provided to various financial institutions.  At December 31, 2010 and 2009, we had $6 million and $12 million, respectively, of outstanding guarantees primarily related to vendor deposits.  The letters of credit and guarantees were primarily related to liabilities for insurance obligations, vendor deposits and European value added tax (“VAT”) obligations.  We also had $15 million and $17 million of third party guarantees at December 31, 2010 and 2009, respectively, for which we have reserved $2 million at December 31, 2010 and 2009, which represents the probability weighted fair value of these guarantees.

RESULTS OF OPERATIONS
                 
(In millions, except per share data)
                 
   
2010
   
2009
   
2008
 
Net Sales
                 
  Consumer Products
  $ 458     $ 457     $ 516  
  Industrial Performance Products
    1,223       999       1,465  
  Chemtura AgroSolutions™
    351       332       394  
  Industrial Engineered Products
    728       512       779  
Net Sales
  $ 2,760     $ 2,300     $ 3,154  
                         
Operating Profit (Loss)
                       
  Consumer Products
  $ 67     $ 63     $ 50  
  Industrial Performance Products
    119       91       105  
  Chemtura AgroSolutions™
    21       42       78  
  Industrial Engineered Products
    25       3       43  
Segment Operating Profit
    232       199       276  
                         
General corporate expense including amortization
    (102 )     (106 )     (113 )
Change in useful life of property, plant and equipment
    (1 )     -       (32 )
Facility closures, severance and related costs
    (1 )     (3 )     (23 )
Antitrust costs
    -       (10 )     (12 )
Gain (loss) on sale of businesses
    2       -       (25 )
Impairment charges
    (57 )     (39 )     (986 )
Changes in estimates related to expected allowable claims
    (35 )     (73 )     -  
Total Operating Profit (Loss)
    38       (32 )     (915 )
                         
Interest expense
    (191 )     (70 )     (78 )
Loss on early extinguishment of debt
    (88 )     -       -  
Other (expense) income, net
    (6 )     (17 )     9  
Reorganization items, net
    (303 )     (97 )     -  
                         
Loss from continuing operations before income taxes
    (550 )     (216 )     (984 )
Income tax (provision) benefit
    (22 )     (10 )     29  
                         
Loss from continuing operations
    (572 )     (226 )     (955 )
Loss from discontinued operations, net of tax
    (1 )     (63 )     (16 )
Loss on sale of discontinued operations, net of tax
    (12 )     (3 )     -  
Net loss
    (585 )     (292