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

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

OUR BUSINESS

We are 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, 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 Performance Products ("Industrial Performance") and Industrial Engineered Products ("Industrial Engineered") segments (collectively referred to as, "Industrials") are industrial, electronic component and polymer production, residential and commercial construction. In addition, our Chemtura AgroSolutions 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.

OVERVIEW OF OUR PERFORMANCE

Despite a weak global economy in 2012, we were able to deliver improvements in earnings from continuing operations and cash flow, offer new and innovative products, expand current product offerings and invest in manufacturing capacity for market growth. Earnings from continuing operations were $1.35 per diluted share in 2012, an increase of $0.41 over 2011 and cash flow from operations increased by $36 million to $218 million compared to the prior year.

We ended 2011 with a significant number of growth opportunities and other strategic initiatives that provided a foundation upon which we were able to build upon in 2012. Focusing on innovation and growth, particularly in the faster growing regions of the world, we introduced new products, offered new and built on existing applications and invested in our businesses to serve our customers' growing needs. We internally reviewed our footprint and cost structure and implemented strategies to reduce costs and gain efficiencies. Among the many accomplishments in 2012 were:

º •
º Construction began on our new multi-purpose manufacturing facility in Nantong, China which will initially support growth in customer demand for petroleum additives and urethanes products in the Asian region.

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º Construction also began on the new European manufacturing capability for our Synton® high-viscosity polyalphaolefin ("HVPAO") synthetic basestocks. This increased capacity will support our ability to meet the increasing global demand for these products by locating production capacity in a region of significant demand growth, and will enhance our service levels to continue to meet our customer commitments. The project will enable production in 2013 of the Synton® 40 and Synton® 100 HVPAO products at our facility in Ankerweg, Amsterdam, The Netherlands.

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º In December 2012, we entered into a joint development agreement with Caterpillar Inc. for novel applications of Chemtura's Duracast® hot-cast urethane pre-polymer technology for construction and mining equipment.

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º We commercialized our new Emerald InnovationTM 1000 and 3000 products, built a solid sales base for our new GeoBrom® products used in mercury control and demonstrated strength in our overall bromine product sales despite weaker electronics demand.

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º In September 2012, we entered into a definitive agreement to acquire the bromine assets of Solaris ChemTech Industries Limited, India's leading manufacturer of bromine and bromine derivatives.

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º We added capacity for the production of trimethylaluminum and methylaluminoxane within our organometallics production facility in Germany. Trimethylaluminum is a building block for materials used in high brightness LEDs and is the base feedstock for methylaluminoxane used as an activator in the fast growing market for single site catalyst systems.

º •
º We developed and commercialized key new products including the patent-pending Angry Egg™ water treatment and the patent-pending Silky Swim™ Good-Bye Dry Water treatment products designed for chlorine and salt pools. These products will be sold into both the mass and independent retailer channels in 2013.

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º The segment delivered significant financial improvement in 2012 as a result of its investment in technology based portfolio extensions, improvements to its distribution channels and the cost restructuring actions undertaken in 2011.

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º We introduced over 100 new products and registration combinations during the year.

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º We centralized much of our finance functions into regional shared service centers in the United States, the United Kingdom, China and Brazil standardizing our operating procedures, controls and processes while improving the cost and scalability of the function.

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º In October 2012, we exercised the accordion feature under our senior secured term facility agreement due 2016 (the "Term Loan") adding an aggregate principal amount of $125 million to finance the pending Indian bromine acquisition.

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º In November 2012, we entered into an asset purchase agreement to sell substantially all of the assets of our Antioxidant business and the buyer agreed to assume certain liabilities. The agreement was amended and restated on January 25, 2013. The transaction is expected to be close in the first quarter of 2013.

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º During 2012, we repurchased 1.4 million shares of our common stock at a cost of $20 million.

As we look to 2013, we will continue to invest in people, capital expenditures and technology as we have since 2011 to further drive growth and improved profitability while exploring opportunities to optimize our business portfolio.

RESULTS OF OPERATIONS

(In millions, except per share data)                          2012      2011      2010
Net Sales
Industrial Performance Products                              $   891   $   939   $   835
Industrial Engineered Products                                   896       869       728
Consumer Products                                                433       422       458
Chemtura AgroSolutions                                           409       376       351

Net Sales                                                    $ 2,629   $ 2,606   $ 2,372

Operating Income
Industrial Performance Products                              $   102   $   116   $   110
Industrial Engineered Products                                   140       130        25
Consumer Products                                                 30        26        67
Chemtura AgroSolutions                                            65        30        21

Segment Operating Income                                         337       302       223
General corporate expense including amortization                (113 )    (123 )    (111 )
Change in useful life of property, plant and equipment             -         -        (1 )
Facility closures, severance and related costs                   (12 )      (3 )      (1 )
Gain on sale of businesses                                         -        27         2
Impairment charges                                                 -        (4 )     (57 )
Changes in estimates related to expected allowable claims         (1 )      (3 )     (35 )

Total Operating Income                                           211       196        20
Interest expense                                                 (64 )     (63 )    (191 )
Loss on early extinguishment of debt                              (1 )       -       (88 )
Other income (expense), net                                       21         -        (6 )
Reorganization items, net                                         (5 )     (19 )    (303 )

Earnings (loss) from continuing operations before income
taxes                                                            162       114      (568 )
Income tax expense                                               (28 )     (20 )     (19 )

Earnings (loss) from continuing operations                       134        94      (587 )
(Loss) earnings from discontinued operations, net of tax         (34 )      26        14
Loss on sale of discontinued operations, net of tax                -         -       (12 )

Net earnings (loss)                                              100       120      (585 )
Less: net loss (earnings) attributable to non-controlling
interests                                                          1        (1 )      (1 )

Net earnings (loss) attributable to Chemtura                 $   101   $   119   $  (586 )

EARNINGS (LOSS) PER SHARE-BASIC AND DILUTED-ATTRIBUTABLE
TO CHEMTURA:
Earnings (loss) from continuing operations                   $  1.35   $  0.94   $ (2.64 )
(Loss) earnings from discontinued operations                   (0.33 )    0.25      0.06
Loss on sale of discontinued operations                            -         -     (0.05 )

Net earnings (loss) attributable to Chemtura                 $  1.02   $  1.19   $ (2.63 )

Basic weighted-average shares outstanding                       98.2     100.1     223.0

Diluted weighted-average shares outstanding                     98.8     100.3     223.0

2012 COMPARED TO 2011

Overview

We reported consolidated net sales of $2.6 billion for the year ended 2012, which represents a $23 million increase over our consolidated net sales in 2011. We realized $75 million from higher year-over-year selling prices as we continued to focus on investing in new products and manufacturing capacity as well as recovering increases in raw material and distribution costs, This benefit was offset by a $17 million reduction in sales volume and $35 million from the unfavorable effects of foreign exchange translation. Our Chemtura AgroSolutions and Industrial Engineered segments led the sales growth. Chemtura AgroSolutions benefited from an increase in volume resulting from dry weather and good growing seasons, particularly in the Americas, coupled with new product introductions and registrations and changes in distribution channels in Latin America. Industrial Engineered Products saw the greatest benefit from higher selling prices in 2012 that helped to recover raw material increases and supported the continued investment in manufacturing capacity to serve customers' growing demand. We experienced modest year-over-year improvement in net sale from our Consumer Products segment due to an increase in volume resulting from regaining a mass market customer for the 2012 pool season and a strong "Early Buy" program in the U.S. dealer channel. Our Industrial Performance segment contributed most of our volume decline as they were most significantly affected by weak demand, particularly in Asia and Europe which began in the second half of 2011. Global economic conditions contributed to the unfavorable effect of foreign exchange translation which significantly impacted all of our businesses.

Our gross profit as a percentage of sales for 2012 remained constant at 26%. Gross profit for 2012 increased by $24 million over 2011 to $691 million. Gross profit reflected the higher year-on-year selling prices and a $3 million decrease in other costs, offset by unfavorable manufacturing variances and costs of $37 million, increases in raw material costs of $6 million, a decrease in volume and product mix of $4 million and the impact of unfavorable foreign currency translation of $7 million.

Selling, general and administrative ("SG&A") expense of $299 million was $27 million lower than in 2011. The decrease represents the benefit of certain non-recurring costs we reported in 2011, including the $7 million reserve for accounts receivables, an $8 million charge related to a UK pension matter and lower overall costs due to restructuring programs in Chemtura AgroSolutions, Consumer Products and our finance function offset by additional legal and other expenses associated with our strategic initiatives.

Depreciation and amortization expense from continuing operations of $120 million was $3 million lower than the prior year, primarily due to accelerated depreciation related to restructuring activities of $2 million in 2011 within our Industrial Engineered and Chemtura AgroSolutions segments.

Research and development ("R&D") expense of $44 million was $6 million higher than the prior year as we invested to drive innovation to support growth.

Facility closures, severance and related costs were $12 million in 2012 as compared with $3 million in 2011. The 2012 charges related to initiatives to improve the operating effectiveness of certain global corporate functions. The 2011 charges primarily related to severance costs of a restructuring plan to increase the effectiveness of our Chemtura AgroSolutions segment.

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

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

Changes in estimates related to expected allowable claims were $1 million for 2012 compared with $3 million for 2011, as we reduced the number of claims remaining in our Disputed Claim Reserve.

Other income, net in 2012 was $21 million compared with less than $1 million for the same period of 2011. During the fourth quarter of 2012, we liquidated several of our European subsidiaries as part of our legal entity rationalization program. These actions resulted in a $21 million gain related to the release of the cumulative translation adjustment associated with these entities.

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

The income tax expense from continuing operations in 2012 was $28 million compared with $20 million in 2011. The tax expense reported for 2012 reflects fluctuations in jurisdictional profitability. The tax expense reported in 2011 included a decrease in deferred foreign income taxes of approximately $17 million that had been recorded in an international jurisdiction in prior years and an increase in foreign income taxes of approximately $5 million relating to a foreign tax matter dating back to the 1990s. The $17 million tax benefit was recorded after receiving approval from the international jurisdiction to change our filing position. In 2012 and 2011, we provided a full valuation allowance against the tax expense associated with our U.S. net operating loss.

Net earnings from continuing operations attributable to Chemtura for 2012 was $134 million, or $1.35 per share, as compared with $94 million, or $0.94 per share, for 2011.

The loss from discontinued operations, net of tax attributable to Chemtura for 2012 was $33 million, or $0.33 per share, as compared with earnings from discontinued operations, net of tax attributable to Chemtura of $25 million, or $0.25 per share, for 2011. In 2012, we recorded an impairment charge of $47 million which included the impairment of property, plant and equipment of $35 million and intangible assets of $11 million. (Loss) earnings from discontinued operations represents the Antioxidant business.

As previously disclosed, the U.S. regulatory approvals of our new liquid antioxidant product within our Antioxidant business, Weston® 705, are progressing slower than we anticipated. While the U.S. food and drug administration (the "FDA") previously approved use of the product for aqueous and acidic uses, in the second quarter of 2012, the FDA advised us that we needed to submit additional test data in order for it to determine if the product can be approved for fatty food uses. In the fourth quarter of 2012, we requested approval of market volume limits on fatty food uses of Weston® 705 antioxidant and to commence additional testing for unlimited fatty food use. We anticipate submitting test results to the FDA in the fourth quarter of 2013.

The following is a discussion of the results of our segments.

Industrial Performance Products

Our Industrial Performance segment reported lower net sales and operating income in 2012 compared with the prior year. These results continue to reflect the weak global economic conditions which first showed their effect in the second half of 2011 and deteriorated progressively through 2012, particularly in Asia. Although we were able to implement some year-over-year price increases, overall our mix of product sales deteriorated which continued to put pressure on margins as raw material costs increased. Reduced demand contributed to unfavorable manufacturing absorption variances which further impacted operating profit. Increases in SG&A and R&D (collectively "SGA&R") were offset by decreases in other costs.

Net sales totaled $891 million in 2012, a decrease of $48 million compared with last year. The lower results reflected the negative impact of reduced sales volume totaling $62 million coupled with the impact of unfavorable foreign currency translation of $5 million, partially offset by higher selling prices of $19 million.

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

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

Industrial Engineered Products

Our Industrial Engineered segment delivered improvements in net sales and operating income over 2011, mainly as the result of increases in year-over-year selling prices. We realized the full benefit in 2012 of the increases in selling prices that we implemented throughout 2011. The increases in selling prices helped to cover escalating raw material costs later in the year and other manufacturing and distribution costs as well as to support the required capacity reinvestments for sustainable and reliable supply of products to our customers. We saw further softening in demand from our traditional electronic applications and a decline in the sales of tin-based organometallic products and components for polyolefin polymerization catalysts. However, we were able to mitigate these volume declines through sales growth from insulation foam, mercury removal, agriculture, healthcare and certain other industrial applications markets. This growth reflected the benefit of the investment in new product and application development, permitting us to diversify the application markets we serve. We brought on new capacity for our Emerald Innovation™ product lines and invested in expanding our organometallics production capacity.

Net sales increased by $27 million to $896 million for 2012 reflecting the benefit of $46 million in increased selling prices partially offset by $7 million in lower sales volume and $12 million from the impact of unfavorable foreign currency translation.

Operating income increased $10 million to $140 million in 2012 compared with $130 million in 2011. The increase reflected the favorable selling price increases, $6 million in favorable product mix and $5 million from lower raw material costs, which were offset in part by $41 million in unfavorable manufacturing costs including start up costs for new products and absorption variances and a $6 million increase in other costs.

Consumer Products

Our Consumer Products segment reported higher net sales and operating income for 2012 compared with the 2011. Net sales benefited from an increase in volume due to regaining a mass market customer for our 2012 season, the introduction of new opening price point products and a strong "Early Buy" program in the U.S. dealer channel, all of which offset some volume declines in Europe due to colder and wetter weather conditions than in recent years. Improvements to the production line at our Conyers, Georgia facility, increases in volume and lower SGA&R due to a restructuring program, favorably improved operating income and mitigated some of the erosion in dollar revenues from the weakening Euro.

Net sales increased by $11 million to $433 million in 2012. This increase reflected $17 million of higher sales volume and $2 million in higher selling prices, offset by $8 million from the impact of unfavorable foreign currency translation.

Operating income increased $4 million to $30 million in 2012 compared with $26 million in 2011. Lower manufacturing costs and variances of $6 million, lower SGA&R costs of $4 million and selling price increases were partially offset by a $5 million increase in raw material costs and $3 million in unfavorable foreign currency translation.

Chemtura AgroSolutions

Our Chemtura AgroSolutions segment reported higher net sales and operating income for 2012 compared with 2011. This segment benefited from an increase in volume resulting from dry weather and strong growing seasons, particularly in the Americas coupled with new product introductions and registrations and changes in distribution channels in Latin America. Increased selling prices were offset entirely by unfavorable foreign currency translation due to the weakening of a number of currencies against the U.S. dollar throughout the year. Operating income reflected the benefit of higher sales volumes, reductions in bad debt expense compared to 2011 and reductions in costs as a result of the restructuring program that was implemented in the latter part of 2011.

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

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

General Corporate

Included in our general corporate expenses are costs of a general nature or managed on a corporate basis. These costs (net of allocations to the business segments) primarily represent corporate stewardship and administration activities together with costs associated with legacy activities and intangible asset amortization. Functional costs are allocated between the business segments and general corporate expense.

Corporate expense was $113 million in 2012, which included $26 million of amortization expense related to intangible assets. In comparison, corporate expense was $123 million in 2011, which included $33 million of amortization expense related to intangible assets.

Certain functional and other expenses that are managed company-wide are allocated to our segments. The portion of such costs allocated to the Antioxidant business do not transfer directly under the Antioxidant Sale and are anticipated to be eliminated in 2013. As such, in historic periods these costs are shown as part of continuing operations in the corporate segment and not included under (loss) earnings from discontinued operations, net of tax. These costs approximate $13 million and $15 million for 2012 and 2011, respectively.

2011 COMPARED TO 2010

Overview

We reported consolidated net sales of $2.6 billion for the year ended 2011, which represents a $234 million increase over our consolidated net sales for 2010. We realized $187 million from higher selling prices, reflecting the requirements to reinvest in and support growing customer demand in our Industrial segments and to recover increases in raw material costs. Despite increased economic uncertainty and weaker electronics demand in the second half of the year, net sales volumes increased by $32 million year-on-year. Sales volume growth was generated by our Industrial Performance and Chemtura AgroSolutions segments, with sales volume decreases in our Industrial Engineered and Consumer Products segments. The volume decline in our Consumer Products segment reflected the loss of a mass market customer for the 2011 season. Additionally, we benefited from $28 million in favorable foreign currency translation, primarily due to the strength of the Euro in the first half of the year. These increases were offset by a $13 million reduction in sales as a . . .