HOUSTON, Oct. 23 /PRNewswire-FirstCall/ -- Lyondell Chemical Company (NYSE: LYO) today announced a net loss for the third quarter of $44 million or 27 cents per share. This compares to a net loss of $2 million or 2 cents per share for the third quarter of 2002, and a net loss of $68 million or 43 cents per share in the second quarter of 2003.
Table 1 - Lyondell Earnings Summary
1st 1st
Nine Nine
Millions of dollars except per 3Q2003 3Q2002 2Q2003 Months Months
share amounts 2003 2002
Sales and other operating revenues $ 954 $ 855 $ 913 $ 2,856 $ 2,372
Net loss (44) (2) (68) (225) (55)
Basic and diluted net loss per
share (A) (0.27) (0.02) (0.43) (1.40) (0.44)
Weighted average shares
outstanding (millions) (A) (B) 161.6 140.3 161.0 161.0 125.2
(A) Lyondell sold 8.28 million shares of common stock on July 1, 2002 in
a public offering and issued 34 million shares of Series B common
stock to Occidental Petroleum Corporation ("Occidental") on
August 22, 2002 in connection with the purchase of Occidental's 29.5%
interest in Equistar. Lyondell paid a dividend to Occidental on
September 29, 2003 by issuing 594,180 shares of Series B common stock
to Occidental in lieu of a dividend payment in cash.
(B) Subsequent to September 30, 2003, Lyondell sold 13.8 million shares
of common stock, including 2.7 million shares to Occidental.
Compared to the third quarter of last year, Lyondell's net loss increased primarily as a result of lower product margins at Equistar, lower toluene di-isocyanate (TDI) margins, and the impact of the expiration at the end of 2002 of a favorable methyl tertiary butyl ether (MTBE) contract with BP. Compared to the second quarter of this year, the third quarter 2003 improvement primarily reflects higher margins and sales volumes for propylene oxide and its derivatives together with higher MTBE margins. During the third quarter of 2003, the write-off of an Equistar polymer R&D facility increased Lyondell's net loss by $5 million or 3 cents per share. Lyondell's year-to- date 2003 net loss increased to $225 million or $1.40 per share compared to a net loss of $55 million or 44 cents per share for the prior year-to-date period, primarily as a result of lower MTBE performance and higher losses from the company's Equistar ownership.
Table 2 - Supplemental Financial Data - Lyondell and Proportionate Share of Ventures
1st 1st
Nine Nine
Millions of dollars 3Q2003 3Q2002 2Q2003 Months Months
2003 2002
Proportionate sales and other
operating revenues (A) $2,717 $2,189 $2,571 $8,128 $5,706
Proportionate EBITDA (B) 207 230 161 446 586
(A) See Table 6 for components of proportionate share of sales and other
operating revenues.
(B) See Table 7 for a reconciliation of net income (loss) to
proportionate EBITDA and Table 8 for Lyondell's income statement
information.
"Results during the quarter were generally as anticipated as volumes returned to more typical levels for our core ethylene- and propylene oxide- based products. Early in the quarter we experienced some product price decay, but this reversed late in the quarter when pricing of several key products such as polyethylene began to increase. Throughout the quarter, raw materials costs continued to be volatile," said Lyondell President and CEO Dan F. Smith. "MTBE margins improved throughout the quarter, demonstrating the product's economic value in the gasoline pool, and LCR's operations and cash distributions continued to be very strong. Finally, earlier this month, we took steps to further enhance our liquidity and issued 13.8 million shares of common stock, raising $171 million. Maintaining substantial liquidity through the trough has continued to be our financial focus."
OUTLOOK
There are signs of improvement in the global economy; however they are not yet sufficient to provide a clear trend line. In the near term, any improvements are being overshadowed by volatility in raw material and energy prices.
Seasonal weakness in MTBE margins is likely to be further compounded as the market begins to adjust to the completion of MTBE phase-outs in California, New York, and Connecticut. In addition, the fourth quarter is typically a slow quarter for chemicals; but to date, volumes and pricing have been consistent with late third-quarter levels. Equistar and Lyondell are currently benefiting from price increases in polyethylene and several of the propylene oxide derivatives; however, raw material and energy costs remain volatile and continue to pressure margins.
"We are looking forward to the completion and start-up of our propylene oxide/styrene monomer (POSM) plant in Rotterdam, expected in the fourth quarter," Smith said. "This is the fourth POSM facility in our system, and we expect that it will have a positive impact on 2004 performance."
LYONDELL AND JOINT VENTURES
Lyondell's operations comprise: Lyondell's IC&D segment; Equistar, a joint venture with Millennium Chemicals Inc.; and LCR, a joint venture with CITGO Petroleum Corp.
Lyondell's Intermediate Chemicals & Derivatives (IC&D) Segment -- The IC&D segment includes propylene oxide and derivatives, MTBE, methanol, styrene and TDI.
Table 3 -- IC&D Financial Overview
1st 1st
Nine Nine
Millions of dollars 3Q2003 3Q2002 2Q2003 Months Months
2003 2002
Sales and other operating
revenues $ 954 $ 855 $ 913 $ 2,856 $ 2,372
Operating income (loss) (A) 20 59 (6) (4) 162
EBITDA (A) 84 106 48 185 321
(A) See Table 7 for a reconciliation of Lyondell's net loss to EBITDA and
Table 8 for Lyondell's IC&D operating income (loss) and net loss.
3Q03 vs. 3Q02 -- Reduced profitability of MTBE and TDI more than offset improved results in propylene oxide and its derivatives. The lower MTBE profitability resulted from a combination of the expiration of a favorable contract with BP at the end of 2002, lower sales volumes, and higher U.S. natural gas costs. These factors were partially offset by higher raw material margins in the merchant MTBE market. TDI margins were significantly lower as increased raw material and energy costs have not been fully offset by increased prices. Margins in the propylene oxide and derivative product areas improved as product prices were slightly higher than last year while raw material (propylene) prices were lower. Styrene performance was unchanged.
3Q03 vs. 2Q03 - Compared to the second quarter of 2003, IC&D's operating income improved by $26 million based on higher margins and sales volumes for propylene oxide and its derivatives together with higher MTBE margins. Sales volumes for propylene oxide and its derivatives were 10 percent higher than in the second quarter of 2003. Margins in the third quarter benefited from lower propylene raw material prices while sales prices remained relatively stable. However, TDI continued to be negatively impacted by depressed prices coupled with increased raw material costs. Styrene performance was unchanged.
Equistar Chemicals, LP -- Lyondell owns a 70.5 percent interest in Equistar, which consists of the petrochemicals and polymers segments.
Table 4 - Equistar Financial Overview - 100% Basis
1st 1st
Nine Nine
Millions of dollars 3Q2003 3Q2002 2Q2003 Months Months
2003 2002
Sales and other operating
revenues $ 1,642 $ 1,508 $ 1,597 $ 4,880 $ 4,106
Operating income (loss) 12 71 24 (60) 18
Net income (loss) (A) (40) 22 (49) (235) (1,185)
EBITDA before cumulative effect
of accounting change(A) 87 147 80 148 242
(A) See Table 7 for a reconciliation of Equistar's net income (loss) to
EBITDA.
Equistar's results in the third quarter of 2003 included an $11 million charge for the write-off of a polymer R&D facility as the result of a refocusing of R&D efforts.
3Q03 v. 3Q02 -- Compared to the third quarter of 2002, the current quarter is principally characterized by higher costs which were only partially offset by higher sales prices. Costs were impacted primarily by higher prices for raw materials and energy, particularly natural gas.
Sales volumes of ethylene and derivative products (ethylene oxygenates and polyethylene) were approximately equal to year-ago levels. Polymer sales volumes were negatively impacted by approximately 80 million pounds of lower polypropylene sales as a result of the first quarter 2003 sale of the Bayport polypropylene unit.
3Q03 v. 2Q03 -- Compared to the second quarter of 2003, Equistar benefited from increased sales volumes of ethylene and derivative products, which were approximately 435 million pounds (21 percent) higher than in the second quarter of 2003. This volume improvement was generally offset by lower third quarter product margins. Product prices tended to erode early in the third quarter; however, this reversed partially as some product price increases began to take hold in September. Chemical Marketing Associates, Inc. (CMAI) reported that the cost of producing ethylene from liquid raw materials increased during the third quarter by approximately 4 cents per pound versus the second quarter. Despite this cost increase, CMAI reported that liquid- based olefin plants continued to be advantaged versus natural gas-based plants. (See Note 1.)
LYONDELL-CITGO Refining LP (LCR) -- Lyondell owns a 58.75 percent interest in LCR, a major refiner of heavy crude oil.
Table 5 - LCR Financial Overview - 100% Basis
1st 1st
Nine Nine
Millions of dollars 3Q2003 3Q2002 2Q2003 Months Months
2003 2002
Sales and other operating
revenues $ 1,030 $ 891 $905 3,118 2,436
Operating income 77 58 67 182 177
Net income (A) 69 50 58 155 154
EBITDA (A) 105 86 96 267 264
(A) See Table 7 for a reconciliation of LCR's net income to EBITDA.
3Q03 v. 3Q02 -- Compared to the third quarter of 2002, performance at LCR improved by $19 million. LCR's total crude processing rate was relatively unchanged averaging 265,000 barrels per day as compared to 263,000 barrels per day in the third quarter of 2002. The amount of Venezuelan crude oil processed by LCR under the Crude Supply Agreement (CSA) with PDVSA was 17,000 barrels per day higher than in the third quarter of 2002, averaging 229,000 barrels per day. Spot crude margins increased by approximately $1.15 per barrel versus last year.
3Q03 vs. 2Q03 -- Compared to the second quarter of 2003, LCR performance improved by $11 million. Total crude processing rates were slightly lower. Increased spot crude volumes of 8,000 barrels per day partially replaced lower CSA crude volumes of 17,000 barrels per day. The small improvement in performance is largely attributed to lower costs during the third quarter, including the absence of a $6 million second-quarter charge related to personnel reductions.
CONFERENCE CALL
Lyondell will host a conference call today, October 23, 2003, at 11:30 a.m. Eastern Time (ET). Participating on the call will be: Dan Smith, President and CEO; Morris Gelb, Executive Vice President and COO; Kevin DeNicola, Senior Vice President and CFO; and Doug Pike, Director of Investor Relations. The dial-in numbers are 888-385-9734 (U.S - toll free) and 212-547-0409 (international). The pass code is Lyondell. The call will be broadcast live on the Investor Relations page of the company's web site at www.lyondell.com/earnings .
A replay of the call will be available from 1:30 p.m. ET October 23 to 5 p.m. ET October 31. The dial-in numbers are 800-925-2380 (U.S) and 402-220-4107 (international). Pass code for each is 5549. Web replay will be available at 1:30 p.m. ET October 23 on the Investor Relations page of the company's web site at www.lyondell.com/earnings .
Reconciliations of non-GAAP financial measures to GAAP financial measures, together with any other applicable disclosures, including this earnings release, will be available at 11:30 a.m. ET at www.lyondell.com/earnings .
NOTE 1
"Liquid raw materials" include crude-oil-based liquids such as naphtha, condensates and gas oils. In contrast, "natural gas-based" raw materials include ethane, propane and butane which are sometimes referred to collectively as natural gas liquids (NGLs). Equistar's olefins facilities on the Texas Gulf Coast generally have the flexibility to use significant percentages of either liquid or natural gas-based raw materials for the production of ethylene.
ABOUT LYONDELL
Lyondell Chemical Company, (www.lyondell.com ), headquartered in Houston, Texas, is a leading producer of: propylene oxide (PO); PO derivatives, including toluene diisocyanate (TDI), propylene glycol (PG), butanediol (BDO) and propylene glycol ether (PGE); and styrene monomer and MTBE as co-products of PO production. Through its 70.5% interest in Equistar Chemicals, LP, Lyondell also is one of the largest producers of ethylene, propylene and polyethylene in North America and a leading producer of ethylene oxide, ethylene glycol, high value-added specialty polymers and polymeric powder. Through its 58.75% interest in LYONDELL-CITGO Refining LP, Lyondell is one of the largest refiners in the United States processing extra heavy Venezuelan crude oil to produce gasoline, low sulfur diesel and jet fuel.
FORWARD LOOKING STATEMENTS
The statements in this release relating to matters that are not historical facts are forward-looking statements that are subject to risks and uncertainties. Actual results could differ materially, based on factors including, but not limited to: the cyclical nature of the chemical and refining industries; availability, cost and volatility of raw materials and utilities; governmental regulatory actions and political unrest; global economic conditions; industry production capacity and operating rates; the supply/demand balance for Lyondell's and its joint ventures' products; competitive products and pricing pressures; access to capital markets; technological developments and other risk factors. For more detailed information about the factors that could cause actual results to differ materially, please refer to Lyondell's Annual Report on Form 10-K for the year ended December 31, 2002 and Lyondell's Quarterly Report on Form 10-Q for the quarter ended September 30, 2003 which will be filed in November 2003.
Table 6 - Unaudited Financial and Operating Information
Lyondell and
Proportionate
Lyondell Joint Ventures Share of
Chemical Equistar LCR Equity
(Millions of dollars) Company 100% 100% Investments(A)
Three months ended
September 30, 2003:
Sales and other operating
revenues (B) $954 $1,642 $1,030 $2,717
SG&A and R&D 43 57 14 91
EBITDA 84 87 105 207
Depreciation and amortization 66 76 28 134
Interest expense, net 106 51 8 147
Net loss (44) (C)
Capital expenditures 9 (D) 28 8 33
Cash dividends 28
Three months ended
September 30, 2002:
Sales and other operating
revenues (B) $855 $1,508 $891 $2,189
SG&A and R&D 47 51 13 82
EBITDA 106 147 86 230
Depreciation and amortization 62 74 28 116
Interest expense, net 95 51 8 127
Net loss (2) (C)
Capital expenditures 8 (D) 14 11 22
Cash dividends 28
Three months ended June 30, 2003:
Sales and other operating
revenues (B) $913 $1,597 $905 $2,571
SG&A and R&D 53 54 16 100
EBITDA 48 80 96 161
Depreciation and amortization 61 76 29 129
Interest expense, net 99 53 9 142
Net loss (68) (C)
Capital expenditures 229 (D)(E) 21 13 251
Cash dividends 29
(A) This column reflects Lyondell Chemical Company's ("Lyondell") 100%
owned operations and its pro rata share of each joint venture's
operations, which is not a presentation in accordance with generally
accepted accounting principles. Lyondell has a 58.75% interest in
LYONDELL-CITGO Refining LP ("LCR") and a 70.5% interest in Equistar
Chemicals, LP ("Equistar"). Prior to August 22, 2002, Lyondell
had a 41% interest in Equistar.
(B) Includes revenues from sales to affiliates.
(C) Includes income (loss) from equity investments in Equistar and LCR.
(D) In addition, Lyondell made cash contributions to the PO-11 joint
venture and the U.S. PO joint venture of $15 million, $14 million and
$22 million in the three-month periods ended September 30, 2003 and
2002 and June 30, 2003, respectively. These amounts included
$11 million, $14 million and $17 million, respectively, related to
funding for capital expenditures. Contributions and advances to
affiliates also include capitalized interest related to the PO-11
construction project of $6 million, $3 million and $5 million during
these periods.
(E) Capital expenditures of $229 million for the three months ended
June 30, 2003 include Lyondell's purchase of the BDO-2 facility from
the lessor.
Table 7 - Reconciliation of Net Income (Loss) to EBITDA
For the three For the nine
months ended months ended
Sept. 30, June 30, Sept. 30,
(Millions of dollars) 2003 2002 2003 2003 2002
LYONDELL
Net loss $(44) $(2) $(68) $(225) $(55)
Add:
Benefit from income taxes (27) (6) (39) (121) (24)
Interest expense, net 106 95 99 288 277
Depreciation and amortization 66 62 61 184 177
(Income) loss from equity
investment in Equistar 26 (11) 32 158 39
Income from equity investment in
LCR (43) (32) (37) (99) (98)
Loss from equity investment
in LMC (A) --- --- --- --- 5
IC&D EBITDA $84 $106 $48 $185 $321
EQUISTAR
Net income (loss) $(40) $22 $(49) $(235) $(1,185)
Add:
Depreciation and amortization 76 74 76 230 221
Interest expense, net 51 51 53 153 153
Cumulative effect of accounting
change --- --- --- --- 1,053
EBITDA $87 $147 $80 $148 $242
Lyondell Proportionate Share (B) $61 $74 $57 $104 $113
LCR
Net income $69 $50 $58 $155 $154
Add:
Depreciation and amortization 28 28 29 85 87
Interest expense 8 8 9 27 23
EBITDA $105 $86 $96 $267 $264
Lyondell Proportionate Share - 58.75% $62 $51 $56 $157 $155
EBITDA - Lyondell and Proportionate
Share of Equity Investments
Lyondell EBITDA $84 $106 $48 $185 $321
Lyondell share of Equistar EBITDA (B) 61 74 57 104 113
58.75% of LCR EBITDA 62 51 56 157 155
75% of LMC EBITDA through
April 30, 2002 (A) --- --- --- --- (3)
Lyondell and Proportionate Share of
Equity Investments $207 $231 $161 $446 $586
(A) Lyondell Methanol Company, L.P. ("LMC") is wholly owned by Lyondell
and its operations are included in the Intermediate Chemicals and
Derivatives ("IC&D") business segment prospectively from May 1, 2002.
Lyondell had a 75% interest in LMC and applied the equity method of
accounting through April 30, 2002.
(B) Lyondell has a 70.5% interest in Equistar. Prior to August 22, 2002,
it had a 41% interest.
Table 8 - Lyondell Unaudited Income Statement Information
For the nine
For the three months ended months ended
September 30, June 30, September 30,
(Millions of dollars, 2003 2002 2003 2003 2002
except per share data)
Sales and other operating
revenues $954 $855 $913 $2,856 $2,372
Operating costs and expenses:
Cost of sales 891 749 866 2,713 2,062
Selling, general and
administrative expenses 34 40 45 121 126
Research and development 9 7 8 26 22
Operating income (loss) 20 59 (6) (4) 162
Income (loss) from equity
investment in
Equistar (A) (B) (26) 11 (32) (158) (39)
Income from equity
investment in LCR 43 32 37 99 98
Income (loss) from other
equity investments (4) 1 (4) (10) (4)
Interest expense, net (106) (95) (99) (288) (277)
Other income (expense), net 2 (16) (3) 15 (19)
Loss before income taxes (71) (8) (107) (346) (79)
Benefit from income taxes (27) (6) (39) (121) (24)
Net loss (A) $(44) $(2) $(68) $(225) $(55)
Basic and diluted loss per
share (A) $(0.27) $(0.02) $(0.43) $(1.40) $(0.44)
Basic and diluted shares
(in thousands) (C) (D) 161,574 140,258 161,023 161,009 125,212
(A) As of January 1, 2002, Lyondell's share of Equistar's $1.1 billion
charge for the write-off of goodwill, or $432 million, was offset by
Lyondell's write-off of a portion of the excess of its underlying
equity in Equistar's net assets over its investment in Equistar.
(B) Lyondell has a 70.5% interest in Equistar. Prior to August 22, 2002,
it had a 41% interest.
(C) Lyondell sold 8,280,000 shares of common stock on July 1, 2002 and
issued 34,000,000 shares of Series B common stock to Occidental on
August 22, 2002. Lyondell paid a dividend to Occidental on
September 29, 2003 by issuing 594,180 shares of Series B common stock
in lieu of a dividend payment in cash.
(D) Subsequent to September 30, 2003, Lyondell sold 13.8 million shares of
common stock, including 2.7 million shares to Occidental.
Table 9 - Lyondell Intermediate Chemicals and Derivatives Segment -
Operating Information
For the three For the nine
months ended months ended
Sept. 30, June 30, Sept. 30,
2003 2002 2003 2003 2002
Sales Volumes (in millions)
PO and derivatives (pounds) (A) 816 767 744 2,459 2,284
Co-products:
Styrene monomer (pounds) 865 783 780 2,514 2,433
MTBE and other TBA
derivatives (gallons) 292 311 322 871 906
EBITDA 84 106 48 185 321
(A) Includes propylene oxide ("PO"), PO derivatives and isocyanates.
Table 10 - Lyondell Unaudited Cash Flow Information
For the nine months ended
September 30,
(Millions of dollars) 2003 2002
Net loss $(225) $(55)
Adjustments to reconcile net loss to
cash provided by operating activities:
Depreciation and amortization 184 177
(Income) loss from equity investments 170 43
Deferred income taxes (122) 1
Gain on sale of equity interest (18) ---
Debt refinancing charge 5 7
Changes in assets and liabilities
that provided (used) cash:
Accounts receivable 3 36
Inventories 12 (22)
Accounts payable (5) (10)
Accrued interest 79 75
Income taxes refundable (payable), net 36 82
Other assets and liabilities, net 17 10
Cash provided by operating activities 136 344
Purchase of equity investment in Equistar --- (440)
Expenditures for property, plant and
equipment (A) (247) (20)
Distributions from affiliates
in excess of earnings 118 16
Contributions and advances to affiliates (B) (102) (85)
Proceeds from sale of equity interest 28 ---
Maturity of other short-term investments 44 ---
Other --- (3)
Cash used in investing activities (159) (532)
Issuance of Series B common stock,
warrants and right --- 440
Issuance of common stock --- 110
Issuance of long-term debt 318 268
Repayment of long-term debt (103) (221)
Dividends paid (85) (81)
Other (3) (13)
Cash provided by financing
activities 127 503
Effect of exchange rate changes on cash 3 2
Increase in cash and cash equivalents $107 $317
(A) Includes the May 2003 purchase of the BDO-2 facility for
$218 million, which Lyondell previously leased.
(B) Includes cash contributions to the PO-11 joint venture and the U.S.
PO joint venture of $63 million and $33 million in the nine-month
periods ended September 30, 2003 and 2002, respectively. These
amounts included $51 million and $30 million, respectively, related to
funding for capital expenditures. Contributions and advances to
affiliates also include capitalized interest related to the PO-11
construction project of $15 million and $7 million during these
periods.
Table 11 - Lyondell Unaudited Balance Sheet Information
September 30, December 31,
(Millions of dollars) 2003 2002
Cash and cash equivalents $393 $286
Other short-term investments --- 44
Accounts receivable, net 380 396
Inventories 342 344
Prepaid expenses and other current assets 62 66
Deferred tax assets 45 35
Total current assets 1,222 1,171
Property, plant and equipment, net 2,568 2,369
Investments and long-term receivables:
Investment in Equistar 1,022 1,184
Investment in PO joint ventures 835 770
Investment in and receivable from LCR 215 297
Other investments and long-term
receivables 79 98
Goodwill, net 1,137 1,130
Other assets, net 408 429
Total assets $7,486 $7,448
Accounts payable $354 $344
Current maturities of long-term debt --- 1
Other accrued liabilities 331 279
Total current liabilities 685 624
Long-term debt 4,151 3,926
Other liabilities 695 673
Deferred income taxes 787 881
Minority interest 151 165
Stockholders' equity (162,477,848
and 160,413,144 shares outstanding
respectively, at September 30, 2003
and December 31, 2002) 1,017 1,179
Total liabilities and
stockholders' equity $7,486 $7,448
Table 12 - Lyondell Equity Investment Activity
For the three For the nine
months ended months ended
September 30, September 30,
(Millions of dollars) 2003 2003
Investment in Equistar, beginning
of period $1,052 $1,184
Lyondell's share of Equistar net loss (26) (158)
Other (4) (4)
Investment in Equistar, end of period $1,022 $1,022
Investment in LCR, beginning of period $1 $68
Lyondell's share of LCR net income 43 99
Cash distributions from LCR (58) (215)
Cash contributions to LCR 3 24
Conversion of interest receivable
from LCR to equity investment --- 10
Other (3) ---
Investment in LCR, end of period (14) (14)
Receivable from LCR, beginning and
end of period 229 229
Investment and receivable from
LCR, end of period $215 $215
Table 13 - Equistar Unaudited Income Statement Information
For the three months For the nine
ended months ended
September 30, June 30, September 30,
(Millions of dollars) 2003 2002 2003 2003 2002
Sales and other operating
revenues (A) $1,642 $1,508 $1,597 $4,880 $4,106
Operating costs and expenses:
Cost of sales 1,561 1,386 1,517 4,754 3,938
Selling, general and
administrative expenses 47 41 44 131 122
Research and development
expense 10 10 10 29 28
Write-off and loss on sales
of assets 12 --- 2 26 ---
Operating income (loss) 12 71 24 (60) 18
Interest expense, net (51) (51) (53) (153) (153)
Other income (expense), net (1) 2 (20) (22) 3
Income (loss) before cumulative
effect of accounting change (40) 22 (49) (235) (132)
Cumulative effect of accounting
change (B) --- --- --- --- (1,053)
Net income (loss) (C) $(40) $22 $(49) $(235) $(1,185)
(A) Sales and other operating revenues include sales to affiliates.
(B) Concurrent with the adoption of SFAS No. 142, Equistar reviewed
goodwill for impairment and concluded that the entire balance was
impaired, resulting in the $1.1 billion charge.
(C) As a partnership, Equistar is not subject to federal income taxes.
Table 14 - Equistar Unaudited Segment Financial and Operating Information
For the three For the nine
months ended months ended
September 30, June 30, September 30,
(Millions of dollars) 2003 2002 2003 2003 2002
Sales and other operating
revenues (A)
Petrochemicals segment $1,491 $1,362 $1,481 $4,508 $3,673
Polymers segment 517 503 445 1,476 1,393
Intersegment eliminations (366) (357) (329) (1,104) (960)
Total $1,642 $1,508 $1,597 $4,880 $4,106
Operating income (loss)
Petrochemicals segment $66 $96 $85 $119 $151
Polymers segment (19) 6 (27) (81) (41)
Unallocated (35) (31) (34) (98) (92)
Total $12 $71 $24 $(60) $18
Depreciation and amortization:
Petrochemicals segment $58 $56 $56 $171 $162
Polymers segment 13 13 14 43 42
Other 5 5 6 16 17
Total depreciation and
amortization $76 $74 $76 $230 $221
EBITDA before cumulative
effect of accounting change $87 $147 $80 $148 $242
Sales Volumes (including
intersegment sales)
(millions) (A)
Selected petrochemical products:
Ethylene, propylene and
other olefins (pounds) 3,976 4,259 3,723 11,620 12,789
Aromatics (gallons) 96 92 98 288 282
Polymers products (pounds) 1,405 1,527 1,143 3,945 4,628
(A) Sales and other operating revenues include sales to affiliates.
Sales volumes include sales volumes from sales to affiliates as well
as intersegment sales volumes.
Table 15 - Equistar Unaudited Balance Sheet Information
September 30, December 31,
(Millions of dollars) 2003 2002
Cash and cash equivalents $128 $27
Accounts receivable, net 569 625
Inventories 448 424
Prepaid expenses and other current assets 51 50
Total current assets 1,196 1,126
Property, plant and equipment, net 3,346 3,565
Investments 63 65
Other assets, net 340 296
Total assets $4,945 $5,052
Accounts payable $451 $459
Current maturities of long-term debt 2 32
Accrued liabilities 172 223
Total current liabilities 625 714
Long-term debt 2,252 2,196
Other liabilities and deferred revenues 382 221
Partners' capital 1,686 1,921
Total liabilities and partners' capital $4,945 $5,052
Table 16 - Equistar Unaudited Cash Flow Information
For the nine months ended
September 30,
(Millions of dollars) 2003 2002
Net loss $(235) $(1,185)
Adjustments to reconcile net loss
to cash provided by (used in)
operating activities:
Cumulative effect of accounting change --- 1,053
Depreciation and amortization 230 221
Debt refinancing charge 19 ---
Write-off and loss on sales of assets 26 ---
Changes in assets and liabilities
that provided (used) cash:
Accounts receivable (A) 56 (139)
Inventories (36) (59)
Accounts payable (8) 78
Accrued interest (29) (44)
Deferred revenues 151 ---
Other assets and liabilities, net (76) (43)
Cash provided by (used in) operating
activities (A) 98 (118)
Proceeds from sales of assets 69 ---
Expenditures for property, plant
and equipment (62) (43)
Contributions to affiliates --- (6)
Cash provided by (used in) investing
activities 7 (49)
Issuance of long-term debt 439 ---
Repayment of long-term debt (469) (103)
Net borrowing under lines of credit 29 89
Other (3) (2)
Cash used in financing activities (4) (16)
Increase (decrease) in cash and
cash equivalents $101 $(183)
(A) In consideration of discounts offered to certain customers for early
payment for product delivered in September 2003, some receivable
amounts were collected in September 2003 that otherwise would
have been expected to be collected in October 2003, including
$33 million from Occidental.
Table 17 - LCR Unaudited Income Statement Information
For the three For the nine
months ended June months ended
September 30, 30, September 30,
(Millions of dollars) 2003 2002 2003 2003 2002
Sales and other operating
revenues (A) $1,030 $891 $905 $3,118 $2,436
Operating costs and expenses:
Cost of sales 939 820 822 2,894 2,220
Selling, general and
administrative expenses 14 13 16 42 39
Operating income 77 58 67 182 177
Interest expense, net (8) (8) (9) (27) (23)
Net income (B) $69 $50 $58 $155 $154
EBITDA $105 $86 $96 $267 $264
(A) Includes revenues from sales to affiliates.
(B) As a partnership, LCR is not subject to federal income taxes.
Table 18 - LCR Operating Information
For the three For the nine
months ended months ended
Sept. 30, June 30, Sept. 30,
2003 2002 2003 2003 2002
Sales Volumes (including
intersegment sales) (A)
Refined products (thousand barrels
per day):
Gasoline 127 118 113 118 114
Diesel and heating oil 84 83 86 83 82
Jet fuel 18 20 16 18 19
Aromatics 7 9 7 8 9
Other refinery products 91 91 99 90 102
Total refined products
volumes 327 321 321 317 326
Refinery Runs
Crude processing rates (thousand
barrels per day):
Crude Supply Agreement 229 212 246 223 214
Other crude oil 36 51 28 39 47
Total crude oil 265 263 274 262 261
(A) Includes volumes from sales to affiliates.
Table 19 - LCR Unaudited Balance Sheet Information
Sept. 30, Dec. 31,
(Millions of dollars) 2003 2002
Total current assets $243 $357
Property, plant and equipment, net 1,253 1,312
Deferred charges and other assets, net 79 88
Total assets $1,575 $1,757
Current maturities of long-term debt $450 $ ---
Other current liabilities 323 514
Long-term debt --- 450
Loans payable to partners 264 264
Other liabilities and deferred credits 115 126
Partners' capital 423 403
Total liabilities and partners' capital $1,575 $1,757
Table 20 - LCR Unaudited Cash Flow Information
For the nine months ended
September 30,
(Millions of dollars) 2003 2002
Cash flow from operations $279 $217
Capital expenditures 36 53
Depreciation and amortization 85 87
Table 21 - Reconciliation of Lyondell's Days of Working Capital
Sept. 30, June 30, Dec. 31,
(Millions of dollars) 2003 2003 2002
Working Capital: (A)
Accounts receivable $380 $381 $396
Inventories 342 366 344
Accounts payable (354) (396) (344)
Total 368 351 396
Add: Accounts receivable sold (B) 67 81 65
Adjusted working capital $435 $432 $461
Days of Working Capital:
Sales and other operating revenues
for the three months ended $954 $913 $890
Number of days in quarter 92 91 92
Sales per day $10.4 $10.0 $9.7
Days of working capital (C) 42 43 48
(A) Defined as the major controllable components of working capital -
receivables, inventories and payables.
(B) Receivables sold are added back for consistency as such amounts are
included in sales and in the sales per day calculation.
Management believes that this provides useful information to
investors because it reflects Lyondell's responsibility for
administration and collection of said amounts.
(C) Days of working capital are calculated as adjusted working capital
divided by sales per day.
Table 22 - Reconciliation of Equistar's Days of Working Capital
Sept. 30, June 30, Dec. 31,
(Millions of dollars) 2003 2003 2002
Working Capital: (A)
Accounts receivable (B) $569 $559 $625
Inventories 448 478 424
Accounts payable (451) (482) (459)
Total 566 555 590
Add: Accounts receivable sold (C) 77 100 81
Adjusted working capital $643 $655 $671
Days of Working Capital:
Quarterly sales revenue for the
three months ended $1,642 $1,597 $1,431
Number of days in quarter 92 91 92
Sales per day $17.8 $17.5 $15.6
Days of working capital (B) (D) 36 37 43
(A) Defined as the major controllable components of working capital -
receivables, inventories and payables.
(B) In consideration of discounts offered to certain customers for early
payment for product delivered in September 2003, some receivable
amounts were collected in September 2003 that otherwise would have
been expected to be collected in October 2003, including $33 million
from Occidental. Similarly, in June 2003, $32 million was received
from Occidental that otherwise would have been expected to be
collected in July 2003. Had such amounts been collected in
October 2003 and July 2003, respectively, days of working capital
would have been 38 days and 39 days at September 30 and June 30, 2003,
respectively.
(C) Receivables sold are added back for consistency as such amounts are
included in sales and in the sales per day calculation. Management
believes that this provides useful information to investors because it
reflects Equistar's responsibility for administration and collection
of said amounts.
(D) Days of working capital are calculated as adjusted working capital
divided by sales per day.
SOURCE Lyondell Chemical Company
