* Lyondell reports net income of $10 million or 4 cents per share on a
fully diluted basis vs. $50 million or 28 cents per share a year ago
* Results reflect a pre-tax charge of $195 million or 49 cents per
share (after tax) related to the shutdown of Lake Charles, La.,
TDI facility
* Value of lost production caused by Hurricane Rita estimated to
be $75 million to $100 million (pre-tax)
* Strong margins in gasoline components, particularly MTBE, offset raw
material cost pressures in chemicals
* Debt reduced by $1.2 billion since September 2004; debt reduced by
$411 million in third quarter
HOUSTON, Oct. 27 /PRNewswire-FirstCall/ -- Lyondell Chemical Company (NYSE: LYO) today announced net income for the third quarter 2005 of $10 million, or 4 cents per share on a fully diluted basis, including third- quarter charges and hurricane impacts described below. This compares with net income of $50 million, or 28 cents per share, for the third quarter 2004, and net income of $126 million, or 48 cents per share, for the second quarter 2005. For the first nine months of 2005, net income was $390 million, or $1.50 per share on a fully diluted basis, compared with net income of $38 million, or 21 cents per share, during the first nine months of 2004.
Table 1 - Lyondell Earnings Summary (A)
Millions of 1st Nine 1st Nine
dollars except Months Months
per share amounts 3Q 2005 3Q 2004 2Q 2005 2005 2004
Sales and other
operating revenues $ 4,795 $ 1,307 $ 4,382 $ 13,623 $ 3,573
Net income 10 50 126 390 38
Basic earnings
per share 0.04 0.28 0.51 1.59 0.21
Diluted earnings
per share (B) 0.04 0.28 0.48 1.50 0.21
Basic weighted average
shares outstanding
(millions) 246.5 178.1 245.9 245.6 177.5
Diluted weighted
average shares
outstanding
(millions) (B) 260.4 179.9 259.0 259.7 178.7
(A) Results include the operations of Equistar and Millennium
prospectively from December 1, 2004. Prior to December 1, 2004,
Lyondell's 70.5% interest in Equistar was accounted for as an equity
investment.
(B) Includes the dilutive effect of the convertible debentures and
outstanding stock options and warrants.
The third quarter 2005 includes several pre-tax charges:
* $195 million for impairment of the carrying value of Lyondell's Lake
Charles, La., toluene diisocyanate (TDI) facility, which is part of the
Propylene Oxide and Related Products segment
* $30 million related to an industry mutual insurance consortium,
including the effects of both Hurricanes Katrina and Rita, which
impacts all segments
* $7 million related to the early retirement of debt
Also, net income in the third quarter 2005 reflects a benefit of $38 million due to a reduction in the estimated income tax rate for the year. This reflects primarily the finalization of income tax liabilities relating to prior years, partially offset by higher foreign earnings that are effectively taxed at higher rates.
The second quarter 2005 included pre-tax charges of $14 million related to a mutual insurance consortium and $9 million related to debt reduction. The third quarter 2004 included pre-tax charges of $6 million related to debt reduction.
Other effects of Hurricanes Katrina and Rita on third-quarter 2005 results include the following:
* Hurricane Katrina did not directly impact any assets, but did impact
several suppliers and logistics providers. While this did not manifest
itself in reduced production of ethylene, propylene oxide or titanium
dioxide at Lyondell, or reduced crude processing at LYONDELL-CITGO
Refining (LCR), it did impact some derivative production.
* Hurricane Rita's impact on both assets and production was more direct.
All of Lyondell's Gulf Coast sites were shut down for the storm, and
minor damage was sustained at several sites. In addition to shutdown
and start-up costs at these facilities, the company experienced lost
production during the down time. Compared with nameplate capacity,
estimated lost production for certain key products during the third
quarter was approximately:
-- Ethylene - 200 million pounds
-- Propylene oxide - 60 million pounds
-- LCR crude processing - 2.4 million barrels
* Based on August prices and variable costs as reported by industry
consultants, as well as internal estimates, the pre-tax value of
Lyondell's lost production in late September caused by Hurricane Rita
is estimated to be approximately $75 million to $100 million, or
19 cents to 25 cents per share (after tax). Approximately half of this
can be attributed to the Ethylene, Co-Products and Derivatives segment,
with the balance split between the Propylene Oxide and Related Products
segment and the Refining segment (Lyondell's share of LCR).
"The third quarter was shaped by Hurricanes Katrina and Rita, rapid increases in raw material costs and tight refined product markets," said Dan F. Smith, president and CEO of Lyondell Chemical Company. "While pricing trends were established in advance of the hurricanes, these changes accelerated and became far more pronounced as a result of the hurricane-related disruptions. Overall, I am happy to say that Lyondell's assets fared well through the storms. While third-quarter results were obviously reduced by the storms and impairment of our Lake Charles TDI plant, the breadth of our product portfolio served us well during the quarter."
OUTLOOK
Thus far in the fourth quarter, prices for most chemical products have increased rapidly in response to both increased costs and tight supply/demand balances. Within the ethylene segment, elevated natural gas costs and strong co-product markets favor liquid raw material economics. The propylene oxide segment has continued to benefit from global MTBE margins that, although seasonally lower than the third quarter, are much stronger than typical for this time of year, while the inorganics segment has benefited from hurricane-related outages at two competitor facilities. In refining, problems encountered during start-up after Hurricane Rita have continued and currently are expected to reduce refining rates to between 30 percent and 50 percent until late November.
"At this time, with the exception of LCR and previously scheduled maintenance turnaround activity at one propylene oxide plant, all of our major plants are operating at or near full capacity, and we believe our chemical businesses are well positioned to respond to post-hurricane supply/demand tightness. The pressures and uncertainties caused by extremely high and volatile raw material costs continue to be a concern, but are somewhat mitigated by our greater reliance on crude oil-based raw materials rather than natural gas," said Smith.
LYONDELL BUSINESS RESULTS DISCUSSION BY BUSINESS 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 and benzene) and derivatives of ethylene (polyethylene, ethylene oxygenates and vinyl acetate monomer or VAM). Lyondell acquired Millennium on November 30, 2004; Millennium's acetyls products are included in this segment.
Table 2 - Ethylene, Co-Products & Derivatives Financial Overview (A)
1st Nine 1st Nine
Millions Months Months
of dollars 3Q 2005 3Q 2004 2Q 2005 2005 2004
Sales and other
operating revenues $ 2,988 $ 2,439 $ 2,849 $ 8,811 $ 6,500
Operating income 22 129 201 618 289
EBITDA (B) 116 208 294 896 519
(A) For periods prior to January 1, 2005, the Ethylene, Co-Products and
Derivatives information represents the historical operating results
of Equistar on a 100% basis. See Table 6 for additional segment
information.
(B) See Table 9 for reconciliations of segment EBITDA to net income of
Lyondell and Equistar, respectively.
The following discussion addresses business results independent of ownership.
3Q05 v. 2Q05 -- Ethylene and ethylene derivative product sales volumes were relatively unchanged versus the second quarter 2005, while product margins declined. The quarterly average ethylene sales price increased by approximately 5 cents per pound, while quarterly average prices for the major ethylene derivatives (polyethylene and ethylene glycol) were relatively unchanged versus the second quarter.
Raw material costs increased for both crude oil-based and natural gas-based raw materials. Increases in fuel co-product prices, coupled with lower average chemical co-product prices, were insufficient to offset these cost increases, which led to an increase of approximately 7 cents per pound in our cost-of-ethylene-production metric (COE).
Acetyls results declined by approximately $20 million primarily due to lower margins related to significantly higher raw material costs.
3Q05 v. 3Q04 -- Excluding VAM, ethylene and ethylene derivative sales volumes were approximately 170 million pounds (or 6 percent) lower than strong third-quarter 2004 sales volumes. The quarterly average price of ethylene and polyethylene increased by approximately 7 cents per pound versus the year-ago quarter, while the average ethylene glycol price was relatively unchanged. Prices for performance derivatives such as ethylene oxide (EO), ethylene glycol ethers and vinyl acetate monomer (VAM) averaged 7 cents to 20 cents per pound higher than in the third quarter 2004. Significantly higher raw material costs were only partially offset by increased co-product prices, resulting in an increase of approximately 7 cents per pound in our cost-of-ethylene-production metric (COE).
Acetyls results declined by approximately $15 million due to lower margins primarily resulting from increased natural gas costs.
Propylene Oxide and Related Products Segment -- The principal products of the propylene oxide 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)
1st Nine 1st Nine
Millions Months Months
of dollars 3Q 2005 3Q 2004 2Q 2005 2005 2004
Sales and other
operating revenues $ 1,848 $ 1,307 $ 1,562 $ 4,939 $ 3,573
Operating income (B) 70 49 134 300 92
EBITDA (C) 321 106 186 653 274
(A) See Table 6 for additional segment information.
(B) Operating income for the third quarter and first nine months of 2005
included an impairment charge of $195 million, which is excluded from
EBITDA.
(C) See Table 9 for a reconciliation of segment EBITDA to net income of
Lyondell.
Operating income in the third quarter 2005 includes a charge of $195 million for impairment of the carrying value of Lyondell's Lake Charles, La., toluene diisocyanate (TDI) facility.
3Q05 v. 2Q05 -- PO and PO derivative product results declined slightly based on moderately lower margins, which were partially offset by increased sales volumes. MTBE margins increased significantly, contributing approximately $160 million to profit improvement. Styrene and TDI results both declined slightly primarily due to higher costs.
3Q05 v. 3Q04 -- Versus the year-ago quarter, increased PO and PO derivative product margins contributed to an approximate $45 million improvement in segment results. MTBE results improved by approximately $210 million as a result of higher raw material margins. Lower styrene margins resulted in a slight decline in profitability, while lower TDI margins led to a $20 million decline in results.
Inorganic Chemicals Segment -- The principal product of the inorganic chemicals segment is titanium dioxide (TiO2). Lyondell acquired Millennium, including this business, on November 30, 2004.
Table 4 - Inorganic Chemicals Financial Overview (A)
1st Nine 1st Nine
Millions Months Months
of dollars 3Q 2005 3Q 2004 2Q 2005 2005 2004
Sales and other
operating revenues $ 345 --- $ 342 $ 1,005 ---
Operating income
(loss) (B) (16) --- 16 21 ---
EBITDA (C) 3 --- 52 102 ---
(A) Includes the Inorganic Chemicals segment prospectively from
December 1, 2004. See Table 6 for additional segment information.
(B) Operating income (loss) included impairment charges of $3 million for
each of the third and second quarters of 2005 and $8 million for the
first nine months of 2005 that are excluded from EBITDA.
(C) See Table 9 for a reconciliation of segment EBITDA to net income of
Lyondell.
The following discussion addresses the inorganics business independent of ownership.
3Q05 v. 2Q05 -- Sales volumes increased by approximately 6,000 metric tons to 160,000 metric tons while the average sales price decreased by approximately $50 per metric ton. Approximately half of the U.S. dollar reduction in prices was due to foreign exchange rates. Together, the price and volume changes had an approximately $10 million negative impact on results. Lower production rates related to inventory management early in the third quarter reduced results by approximately $20 million, and finished product inventories were reduced by approximately 30,000 metric tons during the third quarter.
3Q05 v. 3Q04 -- Sales volumes were approximately 10,000 metric tons less than the year-ago quarter. Conversely, third-quarter 2005 prices were approximately $165 per metric ton higher than during the third quarter 2004. Reduced production rates related to inventory management lowered results by approximately $20 million.
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 5 - Refining Financial Overview - 100% Basis (A)
1st Nine 1st Nine
Millions Months Months
of dollars 3Q 2005 3Q 2004 2Q 2005 2005 2004
Sales and other
operating revenues $ 2,202 $ 1,546 $ 1,563 $ 5,301 $ 4,039
Operating income 100 139 37 255 351
EBITDA (B) 130 182 65 341 452
(A) The Refining segment information presented above represents the
historical operating results of LCR on a 100% basis. See Table 6 for
additional segment information.
(B) See Table 9 for a reconciliation of segment EBITDA to net income of
LCR.
3Q05 v. 2Q05 -- Total crude processing rates were approximately 52,000 barrels per day higher than second-quarter rates as the refinery processed 212,000 barrels per day under the Venezuelan crude supply contract and 33,000 barrels per day of spot crude. Second-quarter rates were lower than normal due to a combination of planned and unplanned outages while third-quarter rates were impacted by Hurricane Rita. Higher natural gas prices and lower aromatic margins negatively impacted results.
3Q05 v. 3Q04 -- Total crude processing rates were approximately 27,000 barrels per day lower than third-quarter 2004 rates. The shortfall was primarily related to Hurricane Rita. Higher natural gas prices and lower aromatic margins negatively impacted results while spot crude oil margins increased.
Cash Distributions and Debt Reduction
During the third quarter 2005, net distributions from LCR to Lyondell were $97 million. (Distributions from LCR totaled $127 million and contributions to LCR totaled $30 million.) Lyondell Chemical Company paid $200 million toward early debt reduction, while Millennium Chemicals reduced debt by a net $211 million through the combination of purchasing $311 million of debt and issuing $100 million of debt at its Australian subsidiary.
CONFERENCE CALL
Lyondell will host a conference call today, October 27, 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 517-645-6239 (international). The passcode 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 October 27 to 5 p.m. ET on November 4. The dial-in numbers are 866-435-1326 (U.S.) and 203-369-1022 (international). The passcode for each is 5549. Web replay will be available at 2:30 p.m. ET October 27 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 October 27 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. These forward-looking statements are based upon the current beliefs and expectations of management, and are subject to significant risks and uncertainties. Actual results could differ materially based on factors including, but not limited to, costs associated with changes in plant status and related matters; availability, cost and price volatility of raw materials and utilities; supply/demand balances; industry production capacities and operating rates; operating interruptions; uncertainties associated with the U.S. and worldwide economies; current and potential governmental regulatory actions; terrorist acts; international political unrest; legal, tax and environmental proceedings; cyclical nature of the chemical and refining industries; competitive products and pricing; risks of doing business outside of the U.S.; access to capital markets; technological developments; and other risk factors. Additional factors that could cause results to differ materially from those described in the forward-looking statements can be found in the Lyondell, Equistar and Millennium Annual Reports on Form 10-K for the year ended December 31, 2004, and the Lyondell, Equistar and Millennium Quarterly Reports on Form 10-Q for the quarter ended September 30, 2005 which will be filed with the SEC in November 2005.
Table 6 - Selected Unaudited Segment Financial Information (A)
For the three For the nine
months ended months ended
September 30, June 30, September 30,
(Millions of dollars) 2005 2004 2005 2005 2004
Sales and other operating
revenues (B)
Ethylene, Co-Products &
Derivatives $2,988 $2,439 $2,849 $8,811 $6,500
PO & Related Products 1,848 1,307 1,562 4,939 3,573
Inorganic Chemicals 345 --- 342 1,005 ---
Refining 2,202 1,546 1,563 5,301 4,039
Operating income (loss)
Ethylene, Co-Products &
Derivatives $22 $129 $201 $618 $289
PO & Related Products (C) 70 49 134 300 92
Inorganic Chemicals (D) (16) --- 16 21 ---
Refining 100 139 37 255 351
Depreciation and amortization
Ethylene, Co-Products &
Derivatives $95 $81 $96 $286 $234
PO & Related Products 59 59 60 177 186
Inorganic Chemicals 26 --- 26 76 ---
Refining 30 29 28 86 87
EBITDA (E)
Ethylene, Co-Products &
Derivatives $116 $208 $294 $896 $519
PO & Related Products (C) 321 106 186 653 274
Inorganic Chemicals (D) 3 --- 52 102 ---
Refining 130 182 65 341 452
Capital expenditures
Ethylene, Co-Products &
Derivatives $34 $28 $32 $103 $69
PO & Related Products 11 16 16 41 43
Inorganic Chemicals 13 --- 14 32 ---
Refining 38 13 49 121 42
(A) The EC&D data for periods prior to January 1, 2005 represents
Equistar results on a 100% basis. Prior to December 1, 2004,
Equistar was accounted for as an equity investment. See Table 13 for
additional Equistar financial information. See Table 8 for a
reconciliation of segment information for the three months and nine
months ended September 30, 2005 and for the three months ended
June 30, 2005 to consolidated Lyondell financial information. See
Table 10 for PO and Related Products data for the three and nine
months ended September 30, 2004. The Refining information presented
above represents the historical operating results of LCR on a 100%
basis. See Table 19 for additional LCR financial information. The
Inorganic Chemicals segment is presented prospectively from
December 1, 2004.
(B) Sales include sales to affiliates and intersegment sales.
(C) PO&RP operating income for the third quarter and first nine months of
2005 included an impairment charge of $195 million, which is excluded
from EBITDA.
(D) Inorganic Chemicals operating income (loss) included impairment
charges of $3 million in each of the third and second quarters of
2005 and $8 million in the first nine months of 2005 that are
excluded from EBITDA.
(E) See Table 9 for reconciliation of segment EBITDA to net income.
Table 7 - Selected Segment Sales Volumes (A) (B)
For the three months For the nine
ended months ended
September 30, June 30, September 30,
2005 2004 2005 2005 2004
Ethylene, Co-Products and
Derivatives (in millions)
Ethylene and derivatives
(pounds) 2,834 2,836 2,848 8,590 8,315
Polyethylene included above
(pounds) 1,409 1,467 1,341 4,087 4,243
Co-products, nonaromatic
(pounds) 1,899 2,038 1,862 5,795 5,914
Aromatics (gallons) 100 99 107 309 272
PO and Related Products
(in millions)
PO and derivatives (pounds) 790 794 731 2,405 2,445
Co-products:
Styrene monomer (pounds) 953 962 1,045 2,980 2,723
MTBE and other TBA
derivatives (gallons) 298 269 297 878 825
Inorganic Chemicals (thousand
metric tons)
TiO2 160 --- 154 456 ---
Refined products (thousand
barrels per day)
Gasoline 125 117 110 117 118
Diesel and heating oil 85 99 85 86 96
Jet fuel 16 20 8 15 17
Aromatics 7 9 10 8 9
Other refined products 92 99 70 83 92
Total refined products
volumes 325 344 283 309 332
Refinery Runs
Crude processing rates (thousand
barrels per day)
Crude Supply Agreement 212 243 165 199 238
Other crude oil 33 29 28 34 29
Total crude oil 245 272 193 233 267
(A) The EC&D data for periods prior to January 1, 2005 represent Equistar
results on a 100% basis. Prior to December 1, 2004, Equistar was
accounted for as an equity investment. The Refining information
presented above represents the historical operating results of LCR
on a 100% basis.
(B) Sales volumes include sales to affiliates and intersegment sales.
Table 8 - Reconciliation of Segment Information to Consolidated Lyondell
Financial Information
Sales and
other Operating Depreciation
operating income and Capital
(Millions of dollars) revenues (loss) amortization expenditures
For the three months ended
September 30, 2005:
Segment Data
Ethylene, Co-Products &
Derivatives $2,988 $22 $95 $34
PO & Related Products 1,848 70 59 11
Inorganic Chemicals 345 (16) 26 13
Other (A) (386) (4) 2 ---
Total $4,795 $72 $182 $58
For the nine months ended
September 30, 2005:
Segment Data
Ethylene, Co-Products &
Derivatives $8,811 $618 $286 $103
PO & Related Products 4,939 300 177 41
Inorganic Chemicals 1,005 21 76 32
Other (A) (1,132) (9) 6 2
Total $13,623 $930 $545 $178
For the three months ended
June 30, 2005:
Segment Data
Ethylene, Co-Products &
Derivatives $2,849 $201 $96 $32
PO & Related Products 1,562 134 60 16
Inorganic Chemicals 342 16 26 14
Other (A) (371) (3) 3 ---
Total $4,382 $348 $185 $62
(A) Includes elimination of intersegment transactions and items not
allocated to segments.
Table 9 - Reconciliation of Segment EBITDA to Net Income
For the three months For the nine
ended months ended
September 30, June 30, September 30,
(Millions of dollars) 2005 2004 2005 2005 2004
LYONDELL
Segment EBITDA:
Ethylene, Co-Products &
Derivatives (A) $116 $--- $294 $896 $---
PO & Related Products 321 106 186 653 274
Inorganic Chemicals (B) 3 --- 52 102 ---
Other (1) --- (2) (2) ---
Add:
Income from equity investment
in Equistar --- 54 --- --- 93
Income from equity investment
in LCR 53 89 19 139 208
Deduct:
Depreciation and amortization (182) (59) (185) (545) (186)
Interest expense, net (149) (108) (155) (462) (325)
Benefit from (provision for)
income taxes 54 (26) (71) (160) (20)
Asset impairment charges (198) --- (3) (203) ---
Debt prepayment premiums and
charges (7) (6) (9) (28) (6)
Lyondell net income $10 $50 $126 $390 $38
Equistar EBITDA (C) $208 $519
Deduct:
Depreciation and amortization (81) (234)
Interest expense, net (55) (165)
Equistar net income $72 $120
Refining EBITDA (D) $130 $182 $65 $341 $452
Deduct:
Depreciation and amortization (30) (29) (28) (86) (87)
Interest expense, net (9) (6) (9) (26) (24)
LCR net income $91 $147 $28 $229 $341
(A) The EC&D segment information reflects the consolidation of Millennium
and Equistar prospectively from December 1, 2004. For periods prior
to December 1, 2004, Equistar was accounted for as an equity
investment. See Tables 13 and 16 for additional Equistar and
Millennium financial information, respectively.
(B) The Inorganic Chemicals segment information reflects the
consolidation of Millennium prospectively from December 1, 2004.
(C) The Equistar information presented represents the historical
operating results of Equistar on a 100% basis. See Table 13 for
additional Equistar financial information.
(D) The Refining information presented represents the historical
operating results of LCR on a 100% basis. See Table 19 for
additional LCR financial information.
Table 10 - Lyondell Unaudited Income Statement Information (A)
For the three For the nine
months ended months ended
September 30, June 30, September 30,
(Millions of dollars, except
per share data) 2005 2004 2005 2005 2004
Sales and other operating
revenues $4,795 $1,307 $4,382 $13,623 $3,573
Cost of sales 4,350 1,195 3,876 12,008 3,308
Asset impairments 198 --- 3 203 ---
Selling, general and
administrative expenses 152 55 133 414 149
Research and development
expenses 23 8 22 68 24
Operating income 72 49 348 930 92
Income from equity investment
in Equistar --- 54 --- --- 93
Income from equity investment
in LCR 53 89 19 139 208
Income (loss) from other equity
investments 2 1 (1) 2 3
Interest expense, net (149) (108) (155) (462) (325)
Other expense, net (22) (9) (14) (59) (13)
Income (loss) before income
taxes (44) 76 197 550 58
Provision for (benefit from)
income taxes (54) 26 71 160 20
Net income $10 $50 $126 $390 $38
Basic earnings per share: $0.04 $0.28 $0.51 $1.59 $0.21
Diluted earnings per share: $0.04 $0.28 $0.48 $1.50 $0.21
Weighted average shares
(in millions):
Basic 246.5 178.1 245.9 245.6 177.5
Diluted 260.4 179.9 259.0 259.7 178.7
(A) Results of operations include the operations of Equistar and
Millennium prospectively from December 1, 2004. Prior to
December 1, 2004, Equistar was accounted for as an equity investment.
Table 11 - Lyondell Unaudited Cash Flow Information (A)
For the nine months ended
September 30,
(Millions of dollars) 2005 2004
Net income $390 $38
Adjustments:
Depreciation and amortization 545 186
Asset impairments 203 ---
Income from equity investments (141) (304)
Distributions of earnings from
affiliates 140 281
Deferred income taxes 112 16
Debt prepayment charges and
premiums 28 6
Changes in assets and liabilities:
Accounts receivable (358) (98)
Inventories (142) (24)
Accounts payable 323 47
Accrued interest 42 74
Other, net (51) 34
Cash provided by operating
activities 1,091 256
Expenditures for property, plant and
equipment (178) (43)
Distributions from affiliates in
excess of earnings 123 105
Contributions and advances to
affiliates (90) (32)
Other 3 ---
Cash provided by (used in)
investing activities (142) 30
Repayment of long-term debt (1,072) (105)
Issuance of long-term debt 99 ---
Dividends paid (166) (95)
Exercise of stock options 46 9
Other 3 (1)
Cash used in financing
activities (1,090) (192)
Effect of exchange rate changes on
cash (11) (1)
Increase (decrease) in cash and cash
equivalents $(152) $93
(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 12 - Lyondell Unaudited Balance Sheet Information
September 30, December 31,
(Millions of dollars) 2005 2004
Cash and cash equivalents $652 $804
Accounts receivable, net 1,869 1,569
Inventories 1,713 1,619
Prepaid expenses and other current
assets 150 189
Deferred tax assets 416 276
Total current assets 4,800 4,457
Property, plant and equipment, net 6,619 7,215
Investments and long-term
receivables:
Investment in PO joint ventures 788 838
Investment in and receivable
from LCR 143 192
Other investments and long-term
receivables 160 160
Goodwill, net 2,219 2,175
Other assets, net 844 924
Total assets $15,573 $15,961
Accounts payable $1,472 $1,202
Current maturities of long-term debt 256 308
Accrued liabilities 801 785
Total current liabilities 2,529 2,295
Long-term debt 6,617 7,555
Other liabilities 1,791 1,780
Deferred income taxes 1,671 1,477
Minority interest 182 181
Stockholders' equity (246,918,784
and 243,684,998 shares outstanding at
September 30, 2005 and December 31,
2004, respectively) 2,783 2,673
Total liabilities and stockholders'
equity $15,573 $15,961
Tables 13 through 21 represent additional financial information
on a 100% basis for Equistar, Millennium and LCR.
Table 13 - Equistar Unaudited Income Statement Information (A)
For the three For the nine
months ended months ended
September 30, June 30, September 30,
(Millions of dollars) 2005 2004 2005 2005 2004
Sales and other operating
revenues (B) $2,867 $2,439 $2,700 $8,428 $6,500
Cost of sales 2,776 2,255 2,447 7,640 6,063
Selling, general and
administrative expenses 52 47 47 146 129
Research and development
expenses 8 8 9 25 23
Gain on asset dispositions --- --- --- --- (4)
Operating income 31 129 197 617 289
Interest expense, net (56) (55) (54) (164) (165)
Other expense, net (3) (2) (1) (7) (4)
Net (loss) income (C) $(28) $72 $142 $446 $120
(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)
September 30, December 31,
(Millions of dollars) 2005 2004
Cash and cash equivalents $132 $39
Accounts receivable, net 1,017 826
Inventories 682 582
Prepaid expenses and other
current assets 49 43
Total current assets 1,880 1,490
Property, plant and equipment, net 3,079 3,167
Investments 59 60
Other assets, net 364 357
Total assets $5,382 $5,074
Accounts payable $879 $532
Current maturities of long-term debt 150 1
Accrued liabilities 254 273
Total current liabilities 1,283 806
Long-term debt 2,161 2,312
Other liabilities and deferred revenues 408 395
Partners' capital 1,530 1,561
Total liabilities and partners' capital $5,382 $5,074
(A) Represents information for Equistar on a stand-alone basis and does
not reflect purchase accounting adjustments.
Table 15 - Equistar Unaudited Cash Flow Information (A)
For the nine months ended
September 30,
(Millions of dollars) 2005 2004
Net income $446 $120
Adjustments:
Depreciation and amortization 238 234
Deferred maintenance
turnaround expenditures (51) (55)
Gain on asset dispositions --- (4)
Changes in assets and liabilities:
Accounts receivable (B) (191) (205)
Inventories (94) (89)
Accounts payable 340 80
Accrued interest (17) (16)
Other, net (9) 11
Cash provided by operating activities 662 76
Expenditures for property, plant
and equipment (103) (69)
Proceeds from sales of assets 3 41
Cash used in investing activities (100) (28)
Distributions to owners (475) (100)
Repayment of long-term debt (1) ---
Other 7 ---
Cash used in financing activities (469) (100)
Increase (decrease) in cash and cash
equivalents $93 $(52)
(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
September 2005 and 2004 that otherwise would have been expected to be
collected in October of the respective years. This included
$55 million and $51 million from Occidental Chemical Corporation in
September 2005 and 2004, respectively.
Table 16 - Millennium Unaudited Income Statement Information (A) (C)
For the three For the nine
months ended months ended
September 30, June 30, September 30,
(Millions of dollars) 2005 2005 2005
Sales and other operating
revenues (B) $489 $515 $1,457
Cost of sales 448 424 1,237
Selling, general and
administrative expenses 77 45 165
Research and development expenses 5 6 17
Asset impairments 3 3 8
Combination costs 2 --- 2
Operating income (loss) (46) 37 28
Interest expense, net (24) (25) (73)
Other expense, net (18) 5 (22)
Income (loss) before equity
investment, minority interest
and income taxes (88) 17 (67)
Income (loss) from equity
investment in Equistar (8) 42 132
Income (loss) before income
taxes and minority interest (96) 59 65
Provision for (benefit from) income
taxes (26) 20 31
Income before minority interest (70) 39 34
Minority interest (2) (1) (4)
Net income (loss) $(72) $38 $30
(A) Represents information for Millennium on a stand-alone basis and does
not reflect purchase accounting adjustments.
(B) Sales and other operating revenues include sales to affiliates.
(C) The third quarter and first nine months of 2005 included $39 million
and $45 million, respectively, of charges representing revisions to
Lyondell's previous estimates of expected future environmental
remediation spending.
Table 17 - Millennium Unaudited Balance Sheet Information (A)
September 30, December 31,
(Millions of dollars) 2005 2004
Cash and cash equivalents $178 $344
Accounts receivable, net 339 318
Inventories 425 414
Prepaid expenses and other current assets 88 79
Total current assets 1,030 1,155
Property, plant and equipment, net 659 707
Investments 448 457
Goodwill 104 104
Other assets, net 94 107
Total assets $2,335 $2,530
Accounts payable $256 $291
Current maturities of long-term debt 6 7
Accrued liabilities 125 156
Total current liabilities 387 454
Long-term debt 1,156 1,398
Other liabilities 621 536
Deferred income taxes 171 164
Minority interest 46 33
Stockholders' deficit
(100,000,000 shares authorized;
66,135,816 shares issued) (46) (55)
Total liabilities and stockholders'
equity $2,335 $2,530
(A) Represents information for Millennium on a stand-alone basis and does
not reflect purchase accounting adjustments.
Table 18 - Millennium Unaudited Cash Flow Information (A)
For the nine months ended
September 30, 2005
(Millions of dollars)
Net income $30
Adjustments:
Asset impairments 8
Depreciation and amortization 82
Debt prepayment charges and premiums 10
Deferred income taxes (18)
Income from equity investment in Equistar (132)
Distributions of earnings from Equistar 132
Changes in assets and liabilities:
Accounts receivable (23)
Inventories (19)
Accounts payable (25)
Other, net 71
Cash provided by operating activities 116
Expenditures for property, plant and equipment (34)
Distributions from Equistar in excess
of earnings 8
Cash used in investing activities (26)
Repayment of long-term debt (349)
Issuance of long-term debt 99
Contribution from Lyondell 6
Distributions to minority interests (5)
Other (1)
Cash used in financing activities (250)
Effect of exchange rate changes on cash (6)
Decrease in cash and cash equivalents $(166)
(A) Represents information for Millennium on a stand-alone basis and does
not reflect purchase accounting adjustments.
Table 19 - LCR Unaudited Income Statement Information
For the three For the nine
months ended months ended
September 30, June 30, September 30,
(Millions of dollars) 2005 2004 2005 2005 2004
Sales and other operating
revenues (A) $2,202 $1,546 $1,563 $5,301 $4,039
Cost of sales 2,091 1,393 1,515 5,012 3,643
Selling, general and
administrative expenses 11 14 11 34 45
Operating income 100 139 37 255 351
Interest expense, net (9) (6) (9) (26) (24)
Other income --- 14 --- --- 14
Net income (B) $91 $147 $28 $229 $341
EBITDA (C) $130 $182 $65 $341 $452
(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 9 for reconciliation of LCR's net income to EBITDA.
Table 20 - LCR Unaudited Balance Sheet Information
September 30, December 31,
(Millions of dollars) 2005 2004
Total current assets $487 $359
Property, plant and equipment, net 1,289 1,227
Other assets, net 83 61
Total assets $1,859 $1,647
Current maturities of long-term debt $5 $5
Other current liabilities 883 583
Long-term debt 440 443
Loans payable to partners 264 264
Other liabilities 107 112
Partners' capital 160 240
Total liabilities and partners' capital $1,859 $1,647
Table 21 - LCR Unaudited Cash Flow Information
For the nine months ended
September 30,
(Millions of dollars) 2005 2004
Cash flow from operations $440 $522
Capital expenditures 121 42
Depreciation and amortization 86 87
SOURCE Lyondell Chemical Company; Equistar Chemicals, LP; Millennium
Chemicals Inc.
CONTACT: media, Susan P. Moore, +1-713-309-4645, or investors, Douglas J. Pike, +1-713-309-7141, both of Lyondell Chemical Company
