Full-Year 2004 Highlights
HOUSTON, Feb 03, 2005 /PRNewswire-FirstCall via COMTEX/ -- Lyondell Chemical Company (NYSE: LYO) today announced net income for the fourth quarter 2004 of $16 million, or 8 cents per share. This compares to a net loss of $77 million, or 44 cents per share, for the fourth quarter 2003, and net income of $50 million, or 28 cents per share, for the third quarter 2004. Fourth-quarter 2004 results include a $64 million non-cash charge for purchased in-process research and development related to the acquisition of Millennium Chemicals as required by generally accepted accounting principles. Fourth-quarter 2004 results also include charges of $12 million related to the early retirement of Lyondell debt and $12 million reflecting a portion of future insurance premiums expected to be paid to industry mutual insurance consortia.
For the full year 2004, Lyondell had net income of $54 million, or 29 cents per share, compared to a 2003 net loss of $302 million, or $1.84 per share. These results include an $18 million charge related to the early retirement of $300 million of debt and $12 million reflecting a portion of future insurance premiums expected to be paid to industry mutual insurance consortia. Fourth-quarter and full-year results also were impacted by increased costs related to performance-based employee incentive plans.
Table 1 - Lyondell Earnings Summary (A) Millions of dollars except per share amounts 4Q 2004 4Q 2003 3Q 2004 Full Year Full Year 2004 2003 Sales and other operating revenues $2,395 $ 945 $1,307 $5,968 $3,801 Net income (loss) 16 (77) 50 54 (302) Basic and diluted earnings (loss) per share 0.08 (0.44) 0.28 0.29 (1.84) Basic weighted average shares outstanding (millions) 200.5 174.0 178.1 183.2 164.3 Diluted weighted average shares outstanding (millions) 207.7 174.0 179.9 186.0 164.3 (A) Results of operations include the operations of Equistar and Millennium for the month of December 2004, and eleven months of Equistar accounted for as an equity investment.
"During 2004, the industry experienced a greater cyclical turnaround than was anticipated just one year earlier," said Dan F. Smith, president and CEO of Lyondell Chemical Company. "At Lyondell, our timing has proved to be advantageous as our new European propylene oxide plant has operated at near full rates since its start-up in December 2003, and the Millennium acquisition has provided us access to an increased share of ethylene, co-product and derivative profitability as well as exposure to the strengthening inorganic chemicals market. In addition, during the trough, we completed turnarounds at all of our major liquid crackers. As a result of the improved conditions during the third quarter, we were able to resume our debt reduction plan. By year end, we had called $500 million of our debt, on our way to our target of repaying at least $3 billion of debt across the enterprise."
OUTLOOK
Business conditions continue to be positive for the majority of Lyondell's products and the company continues to benefit from particularly strong economics from its crude oil-based ethylene facilities. Through the spring, Lyondell expects that its gasoline-related products and titanium dioxide will benefit from a typical seasonal improvement.
"Supply/demand conditions for the majority of our products have strengthened, and we expect this strengthening to continue throughout 2005," said Smith. "Volatile and elevated energy prices and resultant raw material prices continue to be a concern, but the industry continues to adapt to this challenge. Looking forward, the primary issue created by the energy price situation is the impact that it may have on the broader global economy. Overall, we believe that 2005 will be characterized by additional tightening of supply/demand and continued strengthening margins. Operationally, our focus will be to continue taking advantage of these conditions through our emphasis on safe and reliable operations. Financially, our focus continues to be debt reduction and improvement of our balance sheet."
LYONDELL BUSINESS RESULTS DISCUSSION BY REPORTING SEGMENT
Lyondell's operations are reported in four segments: 1) Ethylene, co- products and derivatives; 2) Propylene oxide (PO) and related products; 3) Inorganic Chemicals; and 4) Refining, which consists of Lyondell's 58.75 percent ownership of LYONDELL-CITGO Refining (LCR), a joint venture with CITGO Petroleum Corp.
Ethylene, Co-products and Derivatives Segment -- The primary products of this segment are ethylene, ethylene co-products (propylene, butadiene, benzene and toluene) and derivatives of ethylene (polyethylene, ethylene oxygenates and acetyls, which includes vinyl acetate monomer [VAM], acetic acid and methanol).
Lyondell acquired Millennium Chemicals, which owns the remaining 29.5 percent interest in Equistar, on November 30, 2004; accordingly, acetyls results were included in the ethylene, co-products and derivatives segment for December 2004 only. Acetyls operating income of $10 million for December is in addition to the amounts discussed below.
Table 2 -- Ethylene, Co-Products & Derivatives Financial Overview -- 100% Basis (A) Millions of dollars 4Q 2004 4Q 2003 3Q 2004 Full Year Full Year 2004 2003 (C) Sales and other operating revenues $2,816 $1,665 $2,439 $9,316 $6,545 Operating income (loss) 213 (29) 129 502 (89) EBITDA (B) 290 27 208 809 175 (A) The Ethylene, Co-Products & Derivatives information presented above represents the historical operating results of Equistar on a 100% basis. See Table 5 for additional segment information. (B) See Table 8 for a reconciliation of segment EBITDA to net income (loss) of Equistar. (C) Full-year 2003 results include financing costs of $37 million and also include $33 million of charges for asset dispositions and employee severance.
4Q04 v. 3Q04 -- Ethylene and ethylene derivative product sales volumes increased slightly versus the third quarter 2004. Average prices of these products increased between 3 cents and 9 cents per pound, led by increases in ethylene glycol, polyethylene, ethylene, and ethylene oxide derivatives. The company's cost of ethylene production metric (COE) increased between 1.5 cents and 2 cents per pound versus the third quarter. Essentially all of this increase is attributed to the higher price of natural gas liquid-based raw materials. The market price of crude oil-based raw materials also increased, but these increases were offset by an approximately equal increase in the value of co-products.
4Q04 v. 4Q03 -- Ethylene and ethylene derivative sales volumes increased by approximately 170 million pounds, or 7 percent, compared to the fourth quarter 2003. The quarterly average price of these products increased between 12 cents and 18 cents per pound. Ethylene glycol and ethylene oxide derivative prices averaged 15 cents to 18 cents per pound higher, while ethylene and polyethylene increased an average of 12 cents to 13 cents per pound. The company's COE increased by approximately 2 cents per pound due almost entirely to increased costs for natural gas liquid-based raw materials. Increased co-product prices largely offset a $17 per barrel increase in crude oil-based raw material costs.
2004 v. 2003 -- For the full year, operating income increased by $591 million. Ethylene and ethylene derivative sales volumes increased by 1 billion pounds, or 10 percent. The average price for these products increased between 6 cents and 9 cents per pound, and the COE increased by 2 cents per pound. The cost of natural gas liquid-based raw materials accounted for the increase.
PO and Related Products Segment -- The principal products of the PO and related products segment include propylene oxide (PO), PO derivatives (propylene glycol, propylene glycol ethers, butanediol and butanediol derivatives), styrene, MTBE, and toluene diisocyanate (TDI).
Table 3 -- PO & Related Products Financial Overview (A) Millions of dollars Full Year Full Year 4Q 2004 4Q 2003 3Q 2004 2004 2003 (C) Sales and other operating revenues $1,433 $945 $1,307 $5,006 $3,801 Operating income (loss) (26) 3 49 66 (1) EBITDA (B) 25 60 100 293 245 (A) See Table 5 for additional segment information. (B) See Table 8 for a reconciliation of segment EBITDA to net income (loss) of Lyondell. (C) Full-year 2003 results include an $18 million gain on Lyondell's sale of a 10 percent interest in its Nihon Oxirane joint venture and financing costs of $6 million.
4Q04 v. 3Q04 -- Fourth-quarter 2004 operations were negatively impacted by an approximately $60 million reduction in MTBE profitability as margins fell by approximately 25 cents per gallon, following typical seasonal trends. PO and PO derivative product results improved by approximately $40 million. Margin expansion accounted for the improvement as prices increased between 4 cents and 10 cents per pound, led by propylene glycol. Styrene results were unchanged while TDI results fell by approximately $10 million as a result of increased costs and scheduled maintenance turnaround activity.
4Q04 v. 4Q03 -- Versus the year-ago quarter, PO and PO derivative product results improved by approximately $35 million primarily as a result of increased sales volumes. Margins also contributed to the improvement as price increases more than offset a 15 cents-per-pound increase in raw material (propylene) prices. Styrene and MTBE results were relatively unchanged versus the prior-year quarter. TDI results were down $20 million due to higher operating costs and scheduled maintenance activity.
2004 v. 2003 -- PO and PO derivative product results improved by approximately $100 million in 2004. The improvement is attributed to a 480 million pound increase in sales volume, as well as increased prices, which more than offset increased raw material (propylene) costs. Higher margins led to an approximately $40 million increase in MTBE results. Styrene results fell by approximately $20 million as the pace of price increases lagged significant raw material (benzene) cost increases. TDI performance fell by approximately $30 million as average prices were unchanged while raw material and operating costs increased.
Inorganic Chemicals Segment -- The principal product of the inorganic chemicals segment is titanium dioxide (TiO2).
Lyondell acquired Millennium Chemicals on November 30, 2004; accordingly, results for the inorganic chemicals segment reflect December 2004 only. December operating income was $5 million, and sales volume of TiO2 was approximately 45,000 metric tons during this seasonally slow month.
Refining Segment -- Lyondell owns a 58.75 percent interest in LCR, a major refiner of heavy crude oil. This investment is accounted for using the equity method.
Table 4 -- Refining Financial Overview -- 100% Basis (A) Millions of dollars Full Year Full Year 4Q 2004 4Q 2003 3Q 2004 2004 (C) 2003 (D) Sales and other operating revenues $1,564 $1,044 $1,546 $5,603 $4,162 Operating income 165 82 139 516 264 EBITDA (B) 193 110 182 645 377 (A) The Refining segment information presented above represents the historical operating results of LCR on a 100% basis. See Table 5 for additional segment information. (B) See Table 8 for a reconciliation of segment EBITDA to net income (loss) of LCR. (C) Full-year 2004 results include a cash receipt of $14 million related to a third-party contract settlement which is partially offset by a non-cash charge of $9 million for the write-off of obsolete equipment. (D) Full-year 2003 results include a $25 million charge related to the redesign of a low-sulfur gasoline project and a $6 million charge related to personnel reductions.
4Q04 v. 3Q04 -- Results continued to be strong in the fourth quarter. Venezuelan contract (CSA) crude volumes (235,000 barrels per day) and total crude volumes (268,000 barrels per day) were slightly reduced from the third quarter while spot crude margins increased by more than $4 per barrel.
4Q04 v. 4Q03 -- Volumes of heavy crude processed under the CSA contract increased by 8,000 barrels per day versus the same quarter in 2003. Margins on both CSA and spot crude were stronger than during the fourth quarter 2003.
2004 v. 2003 -- LCR had record earnings in 2004, driven primarily by strong operating performance, increased production rates, and increased spot crude and aromatics margins. For 2004, total crude volumes averaged 272,000 barrels per day while CSA volumes averaged 237,000 barrels per day.
Cash Distributions and Debt Reduction
LCR to Lyondell -- During the fourth quarter 2004, net distributions received by Lyondell from LCR were $61 million. During 2004, Lyondell received net distributions of $341 million versus $223 million in 2003.
Equistar to Lyondell and Millennium -- During the fourth quarter 2004, Lyondell received $151 million of distributions from Equistar and, for the full year 2004, Lyondell received $222 million. There were no distributions to Lyondell or Millennium during 2003. Millennium received $63 million from Equistar during the fourth quarter and $93 million during 2004.
Millennium to Lyondell -- There were no dividends from Millennium to Lyondell during 2004.
Debt reduction -- For the year, Lyondell called $500 million of debt and paid $300 million toward early debt reduction. The remaining $200 million was paid in January 2005.
CONFERENCE CALL
Lyondell will host a conference call today, Feb. 3, 2005, at 11:30 a.m. Eastern Time (ET). Participating on the call will be: Dan F. Smith, President and CEO, Morris Gelb, Executive Vice President and COO, T. Kevin DeNicola, Senior Vice President and CFO; and Doug Pike, Vice President of Investor Relations. The dial-in numbers are 888-391-2385 (U.S. - toll free) and 484-644-0641 (international). Pass code for each is Lyondell. The call will be broadcast live on the Investor Relations page of the company's web site, http://www.lyondell.com/earnings .
A replay of the call will be available from 1:30 p.m. ET Feb. 3 to 5 p.m. ET Feb. 11. The dial-in numbers are 800-216-3058 (U.S.) and 402-220-3764 (international). Pass code for each is 5549. Web replay will be available at 2:30 p.m. ET Feb. 3 on the Investor Relations page of the company's web site, http://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 Feb. 3 at http://www.lyondell.com/earnings .
ABOUT LYONDELL
Lyondell Chemical Company, headquartered in Houston, Texas, is North America's third-largest independent, publicly traded chemical company. Lyondell is a major global manufacturer of basic chemicals and derivatives including ethylene, propylene, titanium dioxide, styrene, polyethylene, propylene oxide and acetyls. It also is a significant producer of gasoline blending components. The company has a 58.75 percent interest in LYONDELL- CITGO Refining LP, a refiner of heavy, high-sulfur crude oil. As a result of Lyondell's November 30, 2004 acquisition of Millennium Chemicals Inc., Millennium and Equistar Chemicals, LP are wholly owned subsidiaries of Lyondell. Lyondell is a global company operating on five continents and employs approximately 10,000 people worldwide.
FORWARD-LOOKING STATEMENTS
The statements in this release and the related teleconference relating to matters that are not historical facts are forward-looking statements, including, but not limited to, Lyondell's earnings guidance, preliminary financial information, and the information regarding the restatement of Millennium's financial statements for prior periods and the impact thereof. Forward-looking statements are subject to risks and uncertainties. Actual results could differ materially based on factors including, but not limited to, the timing and nature of the final resolution of the accounting matters discussed in this release and the related teleconference. Until the restatement of Millennium's financial statements for prior periods has been completed, no assurance can be given with respect to the financial statement adjustments, the impacts resulting from such adjustments or the periods affected by such adjustments. Other factors that may affect actual results include the following: availability, cost and price volatility of raw materials and utilities; uncertainties associated with the U.S. and worldwide economies; current and potential governmental regulatory actions; terrorist acts; international political unrest; operating interruptions; legal, tax and environmental proceedings; cyclical nature of the chemical and refining industries; competitive products and pricing; industry production capacities and operating rates; supply/demand balances; risks of doing business outside of the U.S.; access to capital markets; technological developments; and other risk factors. All of such forward-looking statements are based upon the current beliefs and expectations of management, and are subject to significant risks and uncertainties. Additional factors that could cause results to differ materially from those described in the forward-looking statements can be found in the Lyondell and Millennium Annual Reports on Form 10-K for the year ended December 31, 2003 (in the case of Millennium, as amended), the Lyondell and Millennium Quarterly Reports on Form 10-Q for the quarter ended September 30, 2004, and the Lyondell and Millennium Annual Reports on Form 10- K for the year ended December 31, 2004, which will be filed with the SEC in March 2005.
Table 5 -- Selected Unaudited Segment Financial Information (A) For the three For the twelve months ended months ended Dec. 31, Sept. 30, Dec. 31, (Millions of dollars) 2004 2003 2004 2004 2003 Sales and other operating revenues (B) Ethylene, Co-Products & Derivatives $2,816 $1,665 $2,439 $9,316 $6,545 PO & Related Products 1,433 945 1,307 5,006 3,801 Refining 1,564 1,044 1,546 5,603 4,162 Operating income (loss) Ethylene, Co-Products & Derivatives $213 $(29) $129 $502 $(89) PO & Related Products (26) 3 49 66 (1) Refining 165 82 139 516 264 Depreciation and amortization Ethylene, Co-Products & Derivatives $79 $77 $81 $313 $307 PO & Related Products 64 66 59 250 250 Refining 28 28 29 115 113 EBITDA (C) Ethylene, Co-Products & Derivatives $290 $27 $208 $809 $175 PO & Related Products 25 60 100 293 245 Refining 193 110 182 645 377 CAPITAL EXPENDITURES Ethylene, Co-Products & Derivatives $32 $44 $28 $101 $106 PO & Related Products 19 21 16 62 268 Refining 29 10 13 71 46 (A) The information presented above includes operating results of LCR and Equistar on a 100% basis. See Tables 13 and 16 for additional Equistar and LCR financial information. See Table 7 for reconciliation of PO and related products segment information to consolidated Lyondell financial information for the three months and twelve months ended December 31, 2004 and Table 9 for PO and related products segment information for all other periods presented. (B) Sales include sales to affiliates and intersegment sales. (C) See Table 8 for reconciliation of segment EBITDA to company net income (loss). Table 6 -- Selected Segment Sales Volumes (A) (B) For the three For the twelve months ended months ended Dec. 31, Sept. 30, Dec. 31, (In millions) 2004 2003 2004 2004 2003 Ethylene, co-products and derivatives Ethylene and derivatives (pounds) 2,881 2,713 2,836 11,194 10,175 Other olefins (pounds) 2,029 2,030 2,037 7,942 7,092 Aromatics (gallons) 105 96 99 377 384 PO and related products PO and derivatives (pounds) 885 794 736 3,330 2,844 Co-products: Styrene monomer (pounds) 997 953 962 3,720 3,467 MTBE and other TBA derivatives (gallons) 289 271 269 1,114 1,142 Refined products (thousand barrels per day): Gasoline 119 121 117 118 119 Diesel and heating oil 92 93 99 95 85 Jet fuel 17 20 20 17 19 Aromatics 7 8 9 8 8 Other refined products 105 94 99 96 91 Total refined products volumes 340 336 344 334 322 Refinery Runs Crude processing rates (thousand barrels per day): Crude Supply Agreement 235 227 243 237 224 Other crude oil 33 44 35 35 40 Total crude oil 268 271 278 272 264 (A) The information presented above includes operating results of LCR and Equistar on a 100% basis. (B) Sales volumes include sales to affiliates and intersegment sales. Table 7 -- Reconciliation of Segment Information to Consolidated Financial Information Sales and other Depreciation operating Operating and Capital (Millions of dollars) revenues income amortization expenditures For the three months ended December 31, 2004: Segment Data PO & Related Products $1,433 $(26) $64 $19 Add: December 2004 Equistar operations 945 88 30 16 December 2004 Millennium operations 148 (49) 11 7 Other (A) (131) --- --- --- Lyondell (consolidated) $2,395 $13 $105 $42 For the twelve months ended December 31, 2004: Segment Data PO & Related Products $5,006 $66 $250 $62 Add: December 2004 Equistar operations 945 88 30 16 December 2004 Millennium operations 148 (49) 11 7 Other (A) (131) --- --- --- Lyondell (consolidated) $5,968 $105 $291 $85 (A) Represents elimination of December 2004 intersegment transactions. Table 8 -- Reconciliation of Segment EBITDA to Net Income (Loss) For the three For the twelve months ended months ended Dec. 31, Sept. 30, Dec. 31, (Millions of dollars) 2004 2003 2004 2004 2003 LYONDELL PO & Related Products EBITDA $25 $60 $100 $293 $245 Add: December 2004 Equistar net income 90 --- --- 90 --- December 2004 Millennium net income 5 --- --- 5 --- Income from equity investment in Equistar (A) 48 (70) 54 141 (228) Income from equity investment in LCR 95 45 89 303 144 Deduct: Depreciation and amortization (105) (66) (59) (291) (250) Interest expense, net (124) (104) (108) (449) (392) Provision for income taxes (3) 58 (26) (23) 179 Less: December amounts for Equistar and Millennium 64 --- --- 64 --- Intercompany profit elimination (15) --- --- (15) --- Purchased in process R&D (64) --- --- (64) --- Lyondell net income (loss) $16 $(77) $50 $54 $(302) EC&D EBITDA $290 $27 $208 $809 $175 Deduct: Depreciation and amortization (79) (77) (81) (313) (307) Interest expense, net (55) (54) (55) (220) (207) Equistar net income (loss) $156 $(104) $72 $276 $(339) Refining EBITDA $193 $110 $182 $645 $377 Deduct: Depreciation and amortization (28) (28) (29) (115) (113) Interest expense, net (6) (9) (6) (30) (36) LCR net income $159 $73 $147 $500 $228 (A) Represents income from equity investment in Equistar prior to December 1, 2004. Table 9 -- Lyondell Unaudited Income Statement Information (A) For the three For the twelve months ended months ended (Millions of dollars, except Dec. 31, Sept. 30, Dec. 31, per share data) 2004 2003 2004 2004 2003 Sales and other operating revenues $2,395 $945 $1,307 $5,968 $3,801 Cost of sales 2,167 886 1,195 5,475 3,599 Selling, general and administrative expenses 134 45 55 283 166 Research and development expenses 81 11 8 105 37 Operating income (loss) 13 3 49 105 (1) Income (loss) from equity investment in Equistar 48 (70) 54 141 (228) Income from equity investment in LCR 95 45 89 303 144 Income (loss) from other equity investments 4 (9) 1 7 (19) Interest expense, net (124) (104) (108) (449) (392) Other income (expense), net (17) --- (9) (30) 15 Income (loss) before income taxes 19 (135) 76 77 (481) Provision for (benefit from) income taxes 3 (58) 26 23 (179) Net income (loss) $16 $(77) $50 $54 $(302) Basic and diluted earnings (loss) per share: $0.08 $(0.44) $0.28 $0.29 $(1.84) Weighted average shares (in millions): Basic 200.5 174.0 178.1 183.2 164.3 Diluted 207.7 174.0 179.9 186.0 164.3 (A) Results of operations include the operations of Equistar and Millennium for the month of December 2004, and eleven months of Equistar accounted for as an equity investment. Table 10 -- Lyondell Unaudited Cash Flow Information (A) For the twelve months ended December 31, (Millions of dollars) 2004 2003 Net income (loss) $54 $(302) Adjustments: Depreciation and amortization 291 250 (Income) loss from equity investments (451) 103 Distributions of earnings from affiliates 446 146 Deferred income taxes 141 (172) Gain on sale of equity interest --- (18) Changes in assets and liabilities: Accounts receivable 190 (54) Inventories (125) 14 Accounts payable (159) 61 Accrued interest 64 1 Income taxes refundable, net of payable 9 27 Other assets and liabilities, net (66) 47 Cash provided by operating activities 394 103 Expenditures for property, plant and equipment (85) (268) Distributions from affiliates in excess of earnings 74 111 Contributions and advances to affiliates (53) (137) Maturity of other short-term investments --- 44 Cash received in acquisition of Equistar 85 --- Cash received in acquisition of Millennium 367 --- Proceeds from sale of equity interest --- 28 Cash (used in) provided by investing activities 388 (222) Issuance of long-term debt 4 318 Repayment of long-term debt (319) (103) Dividends paid (127) (116) Other 24 167 Cash provided by (used in) financing activities (418) 266 Effect of exchange rate changes on cash 2 5 Increase in cash and cash equivalents $366 $152 (A) Equistar and Millennium became wholly owned subsidiaries as of December 1, 2004. Prior to December 1, 2004, Lyondell's investment in Equistar was accounted for on an equity basis. Table 11 -- Lyondell Unaudited Balance Sheet Information (A) (B) Dec. 31, Dec. 31, (Millions of dollars) 2004 2003 Cash and cash equivalents $804 $438 Accounts receivable, net 1,569 449 Inventories 1,619 347 Prepaid expenses and other current assets 208 82 Deferred tax assets 236 43 Total current assets 4,436 1,359 Property, plant and equipment, net 7,230 2,640 Investments and long-term receivables: Investment in Equistar --- 965 Investment in PO joint ventures 838 866 Investment in and receivable from LCR 192 232 Other investments and long-term receivables 160 85 Goodwill, net 2,216 1,080 Other assets, net 858 406 Total assets $15,930 $7,633 Accounts payable $1,197 $431 Current maturities of long-term debt 308 --- Accrued liabilities 677 268 Total current liabilities 2,182 699 Long-term debt 7,556 4,151 Other liabilities 1,806 680 Deferred income taxes 1,545 792 Minority interest 181 155 Stockholders' equity (244,541,913 and 176,792,587 shares outstanding at December 31, 2004 and December 31, 2003, respectively) 2,660 1,156 Total liabilities and stockholders' equity $15,930 $7,633 (A) Reflects Lyondell and its consolidated subsidiaries, including Equistar and Millennium at December 31, 2004. Prior to December 1, 2004, Lyondell's investment in Equistar was accounted for on an equity basis. (B) The purchase price allocation and other information related to Millennium used in the preparation of this financial data are preliminary. Lyondell is seeking additional information related to the fair value of certain assets acquired and liabilities assumed. The finalization of these matters is not expected to have a material effect on the purchase price allocation. Table 12 -- Lyondell Selected Equity Investment Activity For the three For the twelve months ended months ended Dec. 31, Dec. 31, (Millions of dollars) 2004 2004 Investment in Equistar, beginning of period $985 $965 Lyondell's share of Equistar net income, prior to December 1, 2004 48 141 Cash distributions from Equistar, prior to December 1, 2004 (49) (120) Lyondell's share of Equistar other comprehensive loss, prior to December 1, 2004 --- (2) Acquisition of Millennium's 29.5% interest, as of December 1, 2004 1,262 1,262 Consolidation of Equistar, as of December 1, 2004 (2,246) (2,246) Investment in Equistar, end of period $--- $--- Investment in LCR, beginning of period $(68) $3 Lyondell's share of LCR net income 95 303 Cash distributions from LCR (77) (385) Cash contributions to LCR 16 44 Other (3) (2) Investment in LCR, end of period (37) (37) LCR receivable, beginning and end of period 229 229 Investment in and receivable from LCR, end of period $192 $192 Tables 13 through 19 represent additional financial information on a 100% basis for Equistar and LCR. Table 13 -- Equistar Unaudited Income Statement Information (A) For the three For the twelve months ended months ended Dec. 31, Sept. 30, Dec. 31, (Millions of dollars) 2004 2003 2004 2004 2003 Sales and other operating revenues (B) $2,816 $1,665 $2,439 $9,316 $6,545 Cost of sales 2,524 1,633 2,255 8,587 6,387 Selling, general and administrative expenses 68 51 47 197 182 Research and development expenses 11 9 8 34 38 (Gain) loss on asset dispositions --- 1 --- (4) 27 Operating income (loss) 213 (29) 129 502 (89) Interest expense, net (55) (54) (55) (220) (207) Other expense, net (2) (21) (2) (6) (43) Net income (loss) (C) $156 $(104) $72 $276 $(339) (A) Represents information for Equistar on a stand-alone basis and does not reflect purchase accounting adjustments. (B) Sales and other operating revenues include sales to affiliates. (C) As a partnership, Equistar is not subject to federal income taxes. Table 14 -- Equistar Unaudited Balance Sheet Information (A) December 31, December 31, (Millions of dollars) 2004 2003 Cash and cash equivalents $39 $199 Accounts receivable, net (B) 818 608 Inventories 582 408 Prepaid expenses and other current assets 43 46 Total current assets 1,482 1,261 Property, plant and equipment, net 3,167 3,334 Investments 60 60 Other assets, net 365 373 Total assets $5,074 $5,028 Accounts payable $532 $513 Current maturities of long-term debt 1 --- Accrued liabilities 244 241 Total current liabilities 777 754 Long-term debt 2,312 2,314 Other liabilities and deferred revenues 424 359 Partners' capital 1,561 1,601 Total liabilities and partners' capital $5,074 $5,028 (A) Represents information for Equistar on a stand-alone basis and does not reflect purchase accounting adjustments. (B) See Table 19 for accounts receivable sold. Table 15 -- Equistar Unaudited Cash Flow Information (A) For the twelve months ended December 31, (Millions of dollars) 2004 2003 Net income (loss) $276 $(339) Adjustments: Depreciation and amortization 313 307 Deferred maintenance turnaround expenditures (55) (97) Deferred revenues --- 147 Debt prepayment charges and premiums --- 30 (Gain) loss on asset dispositions (4) 27 Changes in assets and liabilities: Accounts receivable (B) (C) (208) 26 Inventories (174) 4 Accounts payable 30 40 Accrued interest 1 (2) Other assets and liabilities, net 36 21 Cash provided by operating activities 215 164 Expenditures for property, plant and equipment (101) (106) Proceeds from sales of assets 41 69 Cash used in investing activities (60) (37) Issuance of long-term debt --- 695 Repayment of long-term debt --- (642) Distributions to owners (315) --- Other --- (8) Cash provided by (used in) financing activities (315) 45 Increase (decrease) in cash and cash equivalents $(160) $172 Distributions to owners: Lyondell $222 $--- Millennium 93 --- Total $315 $--- (A) Represents information for Equistar on a stand-alone basis and does not reflect purchase accounting adjustments. (B) In consideration of discounts offered to certain customers for early payment for product, some receivable amounts were collected in December 2004 and 2003 that otherwise would have been expected to be collected in January of the subsequent year. This included $66 million and $41 million from Occidental Chemical Holding Corporation in December 2004 and 2003, respectively. (C) See Table 19 for accounts receivable sold. Table 16 -- LCR Unaudited Income Statement Information For the three For the twelve months ended months ended Dec. 31, Sept. 30, Dec. 31, (Millions of dollars) 2004 2003 2004 2004 2003 Sales and other operating revenues (A) $1,564 $1,044 $1,546 $5,603 $4,162 Cost of sales 1,385 948 1,393 5,028 3,842 Selling, general and administrative expenses 14 14 14 59 56 Operating income 165 82 139 516 264 Interest expense, net (6) (9) (6) (30) (36) Other income --- --- 14 14 --- Net income (B) $159 $73 $147 $500 $228 EBITDA (C) $193 $110 $182 $645 $377 (A) Sales and other operating revenues include sales to affiliates. (B) As a partnership, LCR is not subject to federal income taxes. (C) See Table 8 for reconciliation of LCR's net income to EBITDA. Table 17 -- LCR Unaudited Balance Sheet Information December 31, December 31, (Millions of dollars) 2004 2003 Total current assets $359 $320 Property, plant and equipment, net 1,227 1,240 Other assets, net 61 77 Total assets $1,647 $1,637 Current maturities of long-term debt $5 $--- Other current liabilities 583 386 Long-term debt 443 450 Loans payable to partners 264 264 Other liabilities 112 114 Partners' capital 240 423 Total liabilities and partners' capital $1,647 $1,637 Table 18 -- LCR Unaudited Cash Flow Information For the twelve months ended December 31, (Millions of dollars) 2004 2003 Cash flow from operations $667 $374 Capital expenditures 71 46 Depreciation and amortization 115 113 Table 19 -- Reconciliation of Equistar's Days of Working Capital Dec. 31, Sept. 30, Dec. 31, (Millions of dollars) 2004 2004 2003 Working Capital: (A) Accounts receivable (B) $818 $813 $608 Inventories 582 497 408 Accounts payable (532) (581) (513) Total 868 729 503 Add: Accounts receivable sold (C) 200 120 102 Adjusted working capital $1,068 $849 $605 Days of Working Capital: Sales and other operating revenues for the three months ended $2,816 $2,439 $1,665 Number of days in quarter 92 92 92 Sales per day $30.6 $26.5 $18.1 Days of working capital (B) (D) 35 32 33 (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 December 2004, some receivable amounts were collected in December 2004 that otherwise would have been expected to be collected in January 2005, including $66 million from OCHC. Similarly, in September 2004 and December 2003, $51 million and $41 million, respectively, was received from OCHC. Had these early payments not been received, days of working capital would have been 37 days, 34 days and 36 days at December and September 30, 2004 and December 31, 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 receivables as they would have been if no receivables had been sold. (D) Days of working capital are calculated as adjusted working capital divided by sales per day.
SOURCE: Lyondell Chemical Company; Equistar Chemicals, LP; Millennium Chemicals Inc.
media, Susan Moore, +1-713-309-4645, or investors, Doug Pike, +1-713-309-7141, both of Lyondell Chemical Company
