Highlights - Demand improves but rising feedstock costs offset benefits. - Milestone reached with Occidental in transactions to acquire Equistar stake. - Lyondell's cash balance increases $82 million to $228 million.
HOUSTON, April 25 /PRNewswire-FirstCall/ -- For the first quarter 2002, Lyondell Chemical Company (NYSE: LYO) reported a net loss of $55 million, or $0.47 per share. This compares with a loss of $53 million, or $0.46 per share, for the fourth quarter 2001, and a loss of $34 million, or $0.29 per share, for the first quarter of 2001.
EBITDA (earnings before net interest, taxes, depreciation and amortization) for Lyondell and the proportionate share of its joint ventures was $139 million in the first quarter 2002. This compares with EBITDA, excluding unusual and extraordinary items, of $136 million in the fourth quarter 2001 and $174 million in the first quarter 2001.
Lyondell's estimated effective tax rate for 2002 is 25 percent, compared to the federal statutory rate of 35 percent. This difference increased Lyondell's reported net loss in the first quarter 2002 by $7 million, or $0.06 per share.
Compared to the fourth quarter 2001, the first quarter benefited from higher sales volumes in many of Lyondell's businesses, completion of scheduled maintenance in the refining business and seasonal improvement in the MTBE business. However, rapidly escalating raw material costs in the second half of the quarter more than offset the improvements, particularly in the petrochemicals and polymers businesses.
"The chemical industry and Lyondell continued to operate in trough conditions during the quarter," said Dan F. Smith, Lyondell's President and Chief Executive Officer. "While we were encouraged to see improved demand for many of our products, these gains were overwhelmed by continuing volatility in raw materials markets. Despite this difficult environment, Lyondell's cash balance increased $82 million during the quarter, including a $97 million tax refund.
"We also made further progress in improving our efficiency and cost position. As previously announced, we consolidated the business management, marketing and sales functions for Lyondell and Equistar under a single chief operating officer, further implementing the organization's shared services model.
"Additionally, we have completed certain key steps toward implementing our previously announced agreement in principle to purchase Occidental's 29.5 percent interest in Equistar, and to sell an equity interest in Lyondell to Occidental."
On April 19, the formal "right of first offer" process commenced in connection with a portion of the Occidental transactions. Under this process, Millennium Chemicals, the third partner in Equistar, has 45 days to decide whether to participate on a pro-rata basis in the acquisition of Occidental's Equistar interest. At the end of the process, Occidental, Lyondell and, if it elects to participate, Millennium are expected to sign definitive documentation. Closing of the transactions will be subject to certain conditions, including approval by Lyondell's shareholders.
OUTLOOK
"In the second quarter of 2002, we are seeing modest demand improvement for many of our products and seasonal improvement in our fuels businesses. In addition, we are implementing price increases in some product areas," Smith said. "This should result in improved financial performance, barring large upward movement in raw material costs. "
Lyondell Earnings Summary (A) Millions of dollars except per share amounts 1Q2002 4Q2001 1Q2001 Net Income (Loss) Before Unusual and Extraordinary Items (B) (C) $(55) $(58) $(28) Earnings (Loss) per Share Before Unusual and Extraordinary Items (B) (C) $(0.47) $(0.50) $(0.24) Net Income (Loss) As Reported $(55) $(53) $(34) Earnings (Loss) per Share As Reported $(0.47) $(0.46) $(0.29) EBITDA (Lyondell and proportionate share of ventures) (B) (C) $139 $136 $174 (A) See Consolidated Income Statements. (B) The fourth quarter 2001 excludes a $10 million after-tax benefit from reduction of the third quarter 2001 ADI (aliphatic diisocyanates) shutdown charge and an after-tax extraordinary charge of $5 million related to early debt retirement. (C) The first quarter 2001 excludes an after-tax charge of $6 million, consisting of Lyondell's share of Equistar's facility shutdown costs. IMPLEMENTATION OF FASB STATEMENT NO. 142
As a result of the implementation of FASB Statement No. 142 on accounting for goodwill and other intangible assets, Equistar wrote off its $1.1 billion of goodwill in the first quarter 2002. This write-off had no effect on Lyondell's financials, including the carrying value of Lyondell's investment in Equistar. The implementation of FASB Statement No. 142 for Lyondell results in the elimination of $30 million of annual amortization, but did not affect Lyondell's carrying value of goodwill.
INTERMEDIATE CHEMICALS & DERIVATIVES (IC&D)
The IC&D segment includes propylene oxide (PO) and derivatives, styrene monomer and MTBE. Excluding unusual and extraordinary items in prior quarters, EBITDA for the first quarter 2002 was $95 million, compared to $90 million in the fourth quarter 2001 and $97 million in the first quarter of 2001.
Higher margins for the gasoline additive MTBE contributed to the increased EBITDA in the first quarter 2002, as did greater PO and derivatives sales volumes, compared to the fourth quarter of 2001. PO and derivatives volumes increased six percent largely due to demand in the polyurethane end market. However, the benefits were offset by a decline in styrene margins. Lyondell's MTBE sales volumes also declined versus the fourth quarter 2001.
EQUISTAR CHEMICALS, LP
Equistar's EBITDA, excluding unusual items and the cumulative effect of accounting changes, was a negative $1 million in the first quarter 2002, compared to $39 million in the fourth quarter 2001 and $69 million in the first quarter 2001.
Equistar's Petrochemicals segment had EBITDA of $29 million in the first quarter 2002, compared to $101 million in the fourth quarter 2001 and $166 million in the first quarter of 2001. Compared to the fourth quarter 2001, sales volumes for petrochemicals increased 6.5 percent in the first quarter 2002 due to improved demand in the first quarter 2002 following aggressive industry inventory reductions that characterized the fourth quarter 2001.
However, the benefits of increased demand were offset by a significant reduction in ethylene margins. During the first quarter 2002, ethylene prices declined in an environment of rising feedstock and energy costs. In addition, certain fixed-price natural gas and natural gas liquids (NGL) supply contracts, which were entered into in early 2001, resulted in costs that were approximately $33 million higher than market-based contracts would have been for the same period. Most of these contracts expired at the end of the first quarter 2002.
Equistar's Polymers segment had EBITDA of negative $6 million in the first quarter 2002, compared to a negative $32 million in the fourth quarter 2001 and a negative $75 million in the first quarter of 2001. Compared to the fourth quarter of 2001, the Polymers segment benefited from improved margins, as falling ethylene prices more than offset lower polyethylene prices. The Polymers segment also benefited from volume improvements of three percent in the quarter.
LYONDELL-CITGO REFINING LP (LCR)
LCR had EBITDA of $78 million in the first quarter 2002, compared to EBITDA of $54 million in the fourth quarter 2001 and $86 million in the first quarter of 2001. Processed crude volumes increased as the refinery returned to routine operations following a major turnaround in the fourth quarter of 2001.
In the first quarter 2002, LCR processed 261,000 barrels a day, of which 229,000 barrels a day were Venezuelan crude supplied under the crude supply agreement (CSA). In the fourth quarter 2001, LCR processed 207,000 barrels a day, of which 196,000 barrels a day were CSA volumes. While LCR's operational reliability during the first quarter 2002 was very good, operating rates were reduced due to poor spot margins early in the quarter. As a result, total crude processing rates in the quarter were reduced. Petroleos de Venezuela S.A. (PDVSA), the national oil company of Venezuela, curtailed CSA crude deliveries to 198,000 barrels a day in March 2002 under declaration of force majeure. However, the curtailment was largely offset by CSA inventories built during the scheduled turnaround in the fourth quarter 2001.
Sales Revenues Millions of dollars 1Q2002 4Q2001 1Q2001 Reported Sales Revenues $674 $709 $849 Total sales revenues - all businesses in which Lyondell participates (A) $2,543 $2,510 $3,577 Lyondell's proportionate share of the sales revenues of businesses in which it participates (A) $1,575 $1,561 $2,143 (A) Includes revenues from sales to affiliates.
Lyondell Chemical Company, (www.lyondell.com ), headquartered in Houston, Texas, is the world's largest producer of propylene oxide (PO); the world's number three supplier of TDI (toluene diisocyanate); a leading producer of propylene glycol; a leading producer of other PO derivatives such as BDO (butanediol) and PGE (propylene glycol ether); and a producer of styrene monomer and MTBE as co-products of PO production. Through its 41% 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 polypropylene, 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. Lyondell is the third largest methanol producer in the U.S., through its 75% interest in Lyondell Methanol Company, L.P.
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, future global economic conditions, further increases in raw material and/or energy costs, access to capital markets, industry production capacity and operating rates, the supply/demand balance for Lyondell's and its joint ventures' products, competitive products and pricing pressures, technological developments, changes in governmental regulations 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, 2001, filed with the Securities and Exchange Commission in March 2002, Lyondell's Quarterly Report on Form 10-Q for the quarter ended March 31, 2002, which will be filed in May 2002, and the proxy statement that Lyondell will file with the Securities and Exchange Commission with respect to its Special Meeting of Shareholders relating to the transactions with Occidental.
LYONDELL CHEMICAL COMPANY
SELECTED FINANCIAL AND OPERATING INFORMATION (UNAUDITED)
(Millions of dollars)
Lyondell Lyondell
Chemical and
Company Proportionate
(Excluding Joint Ventures Share of
Equity Equistar LCR LMC Equity
Investments) Investments
(A) 100% 100% 100% (B)
Three months ended
March 31, 2002:
Sales and
other operating
revenues (C) $674 $1,136 $707 $26 $1,575
SG&A and R&D 47 49 12 2 76
EBITDA before
cumulative effect
of accounting change 95 (1) 78 (2) 139
Depreciation and
amortization 60 (D) 75 (F) 29 2 106
Net interest expense 91 (D) 52 (F) 8 --- 117
Capital expenditures 11 (E) 15 22 --- 30
Dividends 26 26
Three months ended
December 31, 2001:
Sales and other
operating revenues (C) $709 $1,185 $592 $24 $1,561
SG&A and R&D 48 60 17 2 84
EBITDA before unusual
and extraordinary
charges 90 39 54 (3) 136
Depreciation and
amortization 70 (D) 82 (F) 27 3 119
Net interest expense 92 (D) 52 (F) 10 --- 119
Capital expenditures 16 (E) 25 50 --- 56
Dividends 27 27
Three months ended
March 31, 2001:
Sales and other
operating revenues (C) $849 $1,773 $910 $45 2,143
SG&A and R&D 49 56 14 1 81
EBITDA before unusual
charges 97 69 86 (2) 174
Depreciation and
amortization 65 (D) 78 28 3 113
Net interest expense 92 (D) 46 16 --- 120
Capital expenditures 11 24 11 --- 27
Dividends 27 27
(A) Consists of the operations of the Intermediate Chemicals and
Derivatives business segment.
(B) This column reflects Lyondell's 100% owned operations and its pro
rata share of each joint venture's operations and is not a
presentation in accordance with generally accepted accounting
principles. Lyondell owns a 41% interest in Equistar Chemicals, LP
("Equistar"), a 58.75% interest in LYONDELL-CITGO Refining LP
("LCR") and a 75% interest in Lyondell Methanol Company ("LMC").
(C) Includes revenues from sales to affiliates.
(D) "Depreciation and amortization" and "net interest expense" both
include approximately $4 million of noncash amortization of debt
issuance costs in each of the three-month periods ended
March 31, 2002 and December 31, 2001 and $3 million for
March 31, 2001. Goodwill amortization ceased effective
January 1, 2002.
(E) Excludes contributions to PO-11 joint venture and U.S. PO joint
venture of $13 million, $45 million and $15 million in the three-
month periods ended March 31, 2002, December 31, 2001 and
March 31, 2001, respectively.
(F) "Depreciation and amortization" and "net interest expense" both
include approximately $2 million and $1 million of noncash
amortization of debt issuance costs in each of the three-month
periods ended March 31, 2002 and December 31, 2001, respectively.
Goodwill amortization ceased effective January 1, 2002.
LYONDELL CHEMICAL COMPANY
SELECTED FINANCIAL AND OPERATING INFORMATION (UNAUDITED)
For the three months
INCOME STATEMENTS March 31,
(Millions of dollars, except
per share data) 2002 2001
Sales and other operating revenues $674 $849
Operating costs and expenses:
Cost of sales 589 761
Selling, general and
administrative expenses 40 41
Research and development 7 8
Amortization of goodwill --- 8
Operating income 38 31
Loss from equity investment in
Equistar (A) (45) (22)
Income from equity investment in LCR 27 27
Loss from other equity investments (3) (3)
Interest expense, net (91) (92)
Other income (expense), net 1 3
Loss before income taxes (73) (56)
Benefit from income taxes (18) (22)
Net loss (A) $(55) $(34)
Basic and diluted earnings per
share:
Net loss (A) $(0.47) $(0.29)
Weighted average shares
outstanding (in thousands) 117,565 117,562
INTERMEDIATE CHEMICALS AND
DERIVATIVES SEGMENT
SELECTED FINANCIAL AND
OPERATING INFORMATION
(Millions of dollars)
Sales and other operating revenues $674 $849
Operating income 38 31
EBITDA 95 97
Sales Volumes (millions)
PO and derivatives (pounds) (B) 785 722
Co-products:
Styrene monomer (pounds) 786 789
TBA and derivatives (gallons) 267 245
(A) Lyondell's 41% share of Equistar's $1.1 billion charge for the
write-off of goodwill, or $432 million, was offset by a credit
resulting from Lyondell's write-off of the difference between its
investment in Equistar and its 41% share of Equistar's partners'
capital.
(B) Includes propylene oxide ("PO"), PO derivatives and isocyanates.
LYONDELL CHEMICAL COMPANY
SELECTED FINANCIAL INFORMATION (UNAUDITED)
(Millions of dollars)
For the three months
ended March 31,
2002 2001
STATEMENTS OF CASH FLOWS
Net loss $(55) $(34)
Adjustments to reconcile net loss
to net cash provided (used) by
operating activities:
Depreciation and amortization 60 65
Losses from equity investments 48 22
Accounts receivable 28 68
Inventories 13 (92)
Accounts payable (42) (17)
Changes in other working capital
and other, net 118 (57)
Net cash provided (used) by
operating activities 170 (45)
Expenditures for property, plant and
equipment (11) (11)
Contributions and advances to
affiliates (A) (38) (20)
Distributions from affiliates in
excess of earnings --- 11
Net cash used in investing activities (49) (20)
Repayments of long-term debt (13) (2)
Dividends paid (26) (27)
Other --- (3)
Net cash used in financing activities (39) (32)
Effect of exchange rate changes on cash --- (1)
Increase (decrease) in cash and cash
equivalents $82 $(98)
(A) Includes contributions to PO-11 joint venture and U.S. PO joint
venture of $13 million and $15 million in the three-month periods
ended March 31, 2002 and 2001, respectively.
LYONDELL CHEMICAL COMPANY
SELECTED FINANCIAL INFORMATION (UNAUDITED)
(Millions of dollars)
March 31, December 31,
2002 2001
BALANCE SHEET
Cash and cash equivalents $228 $146
Accounts receivable, net 320 352
Inventories 303 316
Prepaid expenses and other current assets 45 116
Deferred tax assets 61 277
Total current assets 957 1,207
Property, plant and equipment, net 2,265 2,293
Investments and long-term receivables:
Investment in PO joint ventures 722 717
Investment in Equistar 477 522
Receivable from LCR 229 229
Investment in LCR 54 29
Investment in LMC 35 36
Other investments and long-term
receivables 83 86
Goodwill, net 1,100 1,102
Other assets 453 482
Total assets $6,375 $6,703
Accounts payable $275 $319
Current maturities of long-term debt 7 7
Other accrued liabilities 282 233
Total current liabilities 564 559
Long-term debt 3,833 3,846
Other liabilities 589 583
Deferred income taxes 580 790
Minority interest 155 176
Stockholders' equity (117,564,920 and
117,562,920 shares outstanding
respectively at March 31, 2002
and December 31, 2001) 654 749
Total liabilities and
stockholders' equity $6,375 $6,703
Investment in Equistar, January 1, 2002 $522
Lyondell's share of Equistar net loss (45)
Investment in Equistar, March 31, 2002 $477
Investment in LCR, January 1, 2002 $29
Lyondell's share of LCR net income 27
Cash distributions from LCR (24)
Cash contributions to LCR 22
Investment in LCR, March 31, 2002 $54
Investment in LMC, January 1, 2002 $36
Lyondell's share of LMC net loss (3)
Cash contributions to LMC 3
Other (1)
Investment in LMC, March 31, 2002 $35
LYONDELL CHEMICAL COMPANY
EQUISTAR CHEMICALS, LP
SELECTED FINANCIAL AND OPERATING INFORMATION (UNAUDITED)
For the three months
ended March 31,
2002 2001
INCOME STATEMENTS
(Millions of dollars)
Sales and other operating revenues (A) $1,136 $1,773
Operating costs and expenses:
Cost of sales 1,162 1,723
Selling, general and
administrative expenses 40 46
Research and development 9 10
Amortization of goodwill --- 8
Unusual charges --- 22
Operating loss (75) (36)
Interest expense, net (52) (46)
Other income, net 1 5
Loss before cumulative effect of
accounting change (126) (77)
Cumulative effect of
accounting change (B) (1,053) ---
Net loss (C) $(1,179) $(77)
SELECTED FINANCIAL AND OPERATING
INFORMATION
(Millions of dollars)
Sales and other operating revenues (A)
Petrochemicals segment $993 $1,689
Polymers segment 410 542
Intersegment eliminations (267) (458)
Total $1,136 $1,773
Other operating expenses (D)
Petrochemicals segment $2 $6
Polymers segment 17 18
Unallocated 30 32
Total $49 $56
Operating income (loss)
Petrochemicals segment $(24) $115
Polymers segment (21) (89)
Unallocated (30) (62)
Total $(75) $(36)
EBITDA before accounting change
Petrochemicals segment $29 $166
Polymers segment (6) (75)
Unallocated (24) (44)
Total $(1) $47
EBITDA before accounting change
and unusual charges $(1) $69
Sales Volumes (A)
Selected petrochemical products (millions):
Ethylene, propylene and other
olefins (pounds) 4,137 4,241
Aromatics (gallons) 86 90
Polymers products (millions of pounds) 1,508 1,441
(A) Includes revenues/volumes from sales to affiliates.
(B) Concurrent with the adoption of FASB Statement No. 142, Goodwill and
Other Intangible Assets, 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.
(D) Other operating expenses include SG&A and R&D.
LYONDELL CHEMICAL COMPANY
EQUISTAR CHEMICALS, LP
SELECTED FINANCIAL INFORMATION (UNAUDITED)
(Millions of dollars)
March 31, December 31,
2002 2001
BALANCE SHEETS
Cash and cash equivalents $15 $202
Accounts receivable, net 580 540
Inventories 421 448
Prepaid expenses and other
current assets 31 36
Total current assets 1,047 1,226
Property, plant and equipment, net 3,660 3,705
Goodwill, net --- 1,053
Other assets 341 324
Total assets $5,048 $6,308
Accounts payable $412 $360
Current maturities of long-term debt 4 104
Other accrued liabilities 111 197
Total current liabilities 527 661
Long-term debt 2,282 2,233
Other liabilities 181 177
Partners' capital 2,058 3,237
Total liabilities and partners'
capital $5,048 $6,308
For the three months
ended March 31,
2002 2001
SELECTED CASH FLOW INFORMATION
Depreciation and amortization $75 $78
Cash flow from operations (119) (154)
Capital expenditures 15 24
LYONDELL CHEMICAL COMPANY
LYONDELL-CITGO REFINING LP
SELECTED FINANCIAL AND OPERATING INFORMATION (UNAUDITED)
March 31, December 31,
2002 2001
CONDENSED BALANCE SHEETS
(Millions of dollars)
Total current assets $258 $230
Property, plant and equipment, net 1,338 1,343
Deferred charges and other assets 97 97
Total assets $1,693 $1,670
Notes payable $16 $50
Current maturities of long-term debt 450 ---
Other current liabilities 374 335
Long-term debt --- 450
Loans payable to partners 264 264
Other liabilities and deferred credits 80 79
Partners' capital 509 492
Total liabilities and partners'
capital $1,693 $1,670
For the three months
ended March 31,
2002 2001
INCOME STATEMENTS
(Millions of dollars)
Sales and other operating revenues (A) $707 $910
Operating costs and expenses:
Cost of sales 646 838
Selling, general and
administrative expenses 12 14
Operating income 49 58
Interest expense, net (8) (16)
Net income (B) $41 $42
SELECTED CASH FLOW INFORMATION
(Millions of dollars)
Depreciation and amortization $29 $28
Cash flow from operations 61 37
Capital expenditures 22 11
EBITDA $78 $86
SELECTED OPERATING INFORMATION
Sales Volumes (including
intersegment sales) (A)
Refined products (thousand barrels
per day):
Gasoline 105 106
Diesel and heating oil 80 71
Jet fuel 22 20
Aromatics 8 10
Other refinery products 115 104
Total refined products volumes 330 311
Refinery Runs
Crude processing rates (thousand
barrels per day):
Crude Supply Agreement - coked 229 231
Other heavy crude oil - coked 6 23
Other crude oil 26 5
Total crude oil 261 259
(A) Includes revenues/volumes from sales to affiliates.
(B) As a partnership, LCR is not subject to federal income taxes.
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