Lyondell Reports Second Quarter 2000 Results - Strongest Quarterly Earnings Since First Quarter 1998
Highlights - Strong business performance at Lyondell and Equistar. - Net income of $65 million, or $0.55 per share, excluding an extraordinary charge, which is the highest quarterly net income since the first quarter of 1998. - Equistar EBITDA of $271 million - highest quarterly EBITDA since the joint venture was formed. HOUSTON, July 25 /PRNewswire/ -- Lyondell Chemical Company (NYSE: LYO) announced net income for the second quarter of 2000 of $65 million, or $0.55 per share, excluding an after-tax extraordinary charge of $19 million, or $0.16 per share. This represents the highest quarterly earnings -- excluding one-time gains -- since the first quarter 1998. The extraordinary charge in the second quarter is related to the early payment of more than $1 billion of bank debt during the quarter. "Lyondell's financial results improved significantly in the second quarter due to strong business performance at Lyondell and Equistar and lower interest expense that resulted from substantial debt reduction," said Lyondell President and Chief Executive Officer Dan F. Smith. "We achieved these results in spite of the impacts of a scheduled maintenance shutdown at our refinery joint venture and volatile feedstock costs. Driven by strong margins for ethylene, Equistar had the best quarterly results since its formation while Lyondell benefited from higher MTBE margins." Lyondell Earnings Summary (A) Millions of dollars except 2Q2000 1Q2000 2Q1999 1st Half 1st Half per share amounts 2000 1999 Net Income (Loss) Before Unusual Items (B) $65 $(15) $(11) $50 $(9) Earnings (Loss) per Share Before Unusual Items (B) $0.55 $(0.13) $(0.11) $0.42 $(0.10) Net Income (Loss) As Reported $46 $306 $(42) $352 $(40) Earnings (Loss) per Share As Reported $0.39 $2.60 $(0.42) $2.99 $(0.45) EBITDA (Lyondell and proportionate share of ventures) (B) $325 $272 $254 $597 $524 (A) See page 7 for Consolidated Income Statements. (B) The second quarter 2000 excludes the after-tax extraordinary charge of $19 million, or $0.16 per share, on debt retirement. The first quarter 2000 excludes the net after-tax benefit from unusual items of $321 million, or $2.73 per share, which consists of the gain on the sale of assets to Bayer less the extraordinary charge on debt retirement. The second quarter 1999 excludes an after-tax extraordinary charge of $31 million, or $0.31 per share, on debt retirement. The net income of $65 million, or $0.55 per share, in the second quarter 2000 compares to a first quarter net loss of $15 million, or $0.13 per share. The first quarter loss excludes a $332 million, or $2.82 per share, one-time, after-tax gain from the sale to Bayer of the Company's polyols business along with an interest in its U.S. propylene oxide (PO) business and an extraordinary charge related to the early payment of bank debt. Compared to the second quarter 1999, second quarter 2000 net income before extraordinary item increased $76 million. This increase reflects strong business performance resulting from margin growth at Lyondell and Equistar and the benefits from more than $2 billion in debt reduction since year-end 1999. For the first six months of 2000, Lyondell had net income of $50 million, or $0.42 per share, excluding the gain on the sale of assets in the first quarter and after-tax extraordinary charges in the first and second quarters. This compares to a net loss of $9 million, or $0.10 per share, excluding extraordinary items, for the first six months of 1999. EBITDA (earnings before net interest, taxes, depreciation and amortization), before unusual and extraordinary items, for Lyondell and the proportionate share of its joint ventures was $325 million in the second quarter 2000, a quarterly record. This compares to $272 million in the first quarter 2000 and $254 million in the second quarter 1999. DEBT AND CAPITAL STRUCTURE As previously announced, Lyondell further reduced its long-term debt by more than $1 billion in the second quarter 2000 with proceeds from the Bayer transaction. During the quarter the Company paid the $96 million balance of Term Loan A and the $149 million balance of Term Loan F and reduced the outstanding balance of Term Loan B by $810 million. In the first quarter, Lyondell reduced long-term debt by $999 million. At the end of the second quarter 2000, Lyondell's debt, net of cash, totaled $3.8 billion, a $2.2 billion reduction from year-end 1999. INTERMEDIATE CHEMICALS AND DERIVATIVES (IC&D) The IC&D segment includes PO and derivatives, TDI, styrene monomer and MTBE. EBITDA for the second quarter 2000 was $198 million, a quarterly record since this business was acquired in the third quarter 1998. This compares to first quarter EBITDA of $163 million and second quarter 1999 EBITDA of $188 million. Compared to the first quarter 2000, EBITDA increased by 21% as higher profitability for MTBE more than offset the first quarter 2000 contribution of the polyols business that was sold, the seasonal decline of propylene glycol sales into aircraft deicers and higher propylene costs. The profitability from MTBE, a valuable gasoline blending component, increased primarily due to strong demand resulting from tight gasoline markets. The first quarter 2000 results of IC&D included the polyols business sold to Bayer. This business had approximately $30 million of EBITDA in the first quarter of 2000. EQUISTAR CHEMICALS, LP Equistar's EBITDA for the second quarter 2000 was $271 million, an increase of more than 50% from the first quarter and a quarterly record since the joint venture was formed. EBITDA in the second quarter 1999 was $160 million, including a one-time gain from an asset sale. Equistar's results in the second quarter 2000 benefited from higher olefins and polymers prices, which more than offset lower sales volumes partly resulting from a planned turnaround at Morris, Illinois, a major petrochemical and polymers facility. Equistar's petrochemicals segment had EBITDA of $316 million in the second quarter of 2000, compared to EBITDA of $223 million in the first quarter. The increase in ethylene margins primarily resulted from higher product prices, especially ethylene and propylene. This more than offset the impact of lower sales volumes and the increase in feedstock costs since the beginning of the year. Second quarter 2000 EBITDA for polymers was a negative $10 million, compared to a negative $19 million in the first quarter. Operating results improved as polymer prices increased more than the cost of raw materials, primarily ethylene and propylene. Polymer sales volumes also declined compared to the first quarter partly due to the impact of the Morris plant turnaround. LYONDELL-CITGO REFINING LP (LCR) LCR had EBITDA of $24 million in the second quarter of 2000, compared with $60 million in the first quarter and a negative $1 million in the second quarter 1999. LCR's results in the second quarter were impacted by a major planned turnaround. As a result, crude oil processing rates averaged 193,000 barrels per day, a 20% decline compared to the first quarter. Following resumption of normal operations in late June, the refinery began processing larger volumes of heavy Venezuelan crude oil, drawing on volumes inventoried during the turnaround as well as increased shipments as a result of OPEC production increases. In the third quarter, the Company expects total crude processing rates to average approximately 260,000 barrels per day, including approximately 240,000 barrels of higher margin, extra heavy Venezuelan crude. OUTLOOK "We are optimistic about the outlook for Lyondell in the second half of 2000 for several reasons," Smith said. "We anticipate significantly better results from LCR due to higher processing rates for Venezuelan heavy crude oil and continuing profitability for PO co-products in the near-term. In addition, if OPEC production quotas are increased, we may see further reductions in crude oil prices, which in turn would lead to lower feedstock costs as well as provide support for continued growth in U.S. and world economies." Sales Revenues Millions of dollars 2Q2000 1Q2000 2Q1999 1st Half 1st Half 2000 1999 Reported sales revenues $ 976 $1,136 $ 854 $2,112 $1,709 Total sales revenues - all businesses in which Lyondell participates (A) $3,774 $3,831 $2,570 $7,605 $4,972 Lyondell's proportionate share of the sales revenues of businesses in which it participates (A) $2,296 $2,402 $1,651 $4,698 $3,221 (A) Includes revenues from sales to affiliates. Lyondell Chemical Company (www.lyondell.com), with headquarters in Houston, Texas, is the world's largest producer of propylene oxide (PO); the world's number two 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, including, but not limited to, future global economic conditions, industry production capacity and operating rates, the supply/demand balance for the Company's products, competitive products and pricing pressures, further increases in raw material costs, changes in governmental regulations and other risks and uncertainties detailed in the Securities and Exchange Commission filings of Lyondell. LYONDELL CHEMICAL COMPANY SELECTED FINANCIAL AND OPERATING INFORMATION (UNAUDITED) (Millions of dollars) Lyondell Chemical Lyondell and Company Joint Ventures Proportionate (Excluding Equity Equistar LCR LMC Share of Equity Investments)(A) 100% 100% 100% Investments(B) Three months ended June 30, 2000: Sales and other operating revenues (C) $ 976 $ 1,859 $ 901 $ 38 $ 2,296 SG&A and R&D 40 59 14 3 75 EBITDA before unusual charges and extraordinary item 198 271 24 3 325 Depreciation and amortization 58 (D) 75 30 3 106 Net interest expense 103 (D) 44 16 --- 130 Capital expenditures 12 28 18 --- 34 Dividends 26 26 Three months ended March 31, 2000: Sales and other operating revenues (C) $ 1,136 $ 1,807 $ 859 $ 29 $ 2,402 SG&A and R&D 69 53 14 2 100 EBITDA before unusual charges and extraordinary item 163 178 60 1 272 Depreciation and amortization 84 (D) 77 26 3 130 Net interest expense 157 (D) 45 12 --- 183 Capital expenditures 19 20 17 --- 37 Dividends 26 26 Three months ended June 30, 1999: Sales and other operating revenues (c) $ 854 $ 1,210 $ 482 $ 24 $ 1,651 SG&A and R&D 80 66 15 2 117 EBITDA before unusual charges and extraordinary item 188 160 (E) (1) 2 254 Depreciation and amortization 79 (D) 74 27 3 124 Net interest expense 140 (D) 45 10 --- 164 Capital expenditures 43 30 16 4 68 Dividends 26 26 (A) Consists of the operations of the Intermediate Chemicals and Derivatives business segment. (B) This column reflects a combined total of Lyondell's 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 currently 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, L.P. ("LMC"). (C) Includes revenues from sales to affiliates. (D) "Depreciation and amortization" and "net interest expense" both include approximately $5 million, $6 million and $8 million of non-cash amortization of debt issuance costs in the three-month periods ended June 30, 2000, March 31, 2000, and June, 30, 1999, respectively. (E) Includes a one-time gain from Equistar asset sales. Excluding the gain, Equistar EBITDA would be $118 million for the three months ended June 30, 1999. LYONDELL CHEMICAL COMPANY SELECTED FINANCIAL AND OPERATING INFORMATION (UNAUDITED) For the three months For the six months INCOME STATEMENTS ended June 30, ended June 30, (Millions of dollars, except 2000 1999 2000 1999 per share data) Sales and other operating revenues $ 976 $ 854 $ 2,112 $ 1,709 Operating costs and expenses: Cost of sales 769 651 1,721 1,281 Selling, general and administrative expenses 33 66 88 123 Research and development 7 14 21 29 Amortization of goodwill and other intangibles 25 23 53 47 Operating income 142 100 229 229 Income from equity investment in Equistar (incl. unusual charges) 72 26 105 39 Income (loss) from equity investment in LCR (10) (20) 6 (9) Income (loss) from other equity investments 4 2 5 (1) Interest expense, net (103) (140) (260) (280) Other income (expense), net (1) 14 (6) 7 Gain on sale of assets --- --- 544 --- Income (loss) before income taxes and extraordinary item 104 (18) 623 (15) Provision (benefit) for income taxes 39 (7) 241 (6) Income (loss) before extraordinary item 65 (11) 382 (9) Extraordinary loss, net of income taxes (19) (31) (30) (31) Net income (loss) $ 46 $ (42) $ 352 $ (40) Basic earnings per share: Income (loss) before extraordinary item $ 0.55 $ (0.11) $ 3.25 $ (0.10) Net income (loss) $ 0.39 $ (0.42) $ 3.00 $ (0.45) Weighted average shares outstanding (in thousands) (A) 117,549 99,648 117,556 88,419 Diluted earnings per share: Income (loss) before extraordinary item $ 0.55 $ (0.11) $ 3.25 $ (0.10) Net income (loss) $ 0.39 $ (0.42) $ 2.99 $ (0.45) Weighted average shares outstanding (in thousands) (A) 118,154 99,648 117,800 88,419 INTERMEDIATE CHEMICALS AND DERIVATIVES SEGMENT SELECTED FINANCIAL AND OPERATING INFORMATION (Millions of dollars) Sales and other operating revenues $976 $854 $2,112 $1,709 Operating income 142 100 229 229 EBITDA before unusual charges 198 188 361 381 Sales Volumes (millions) PO and derivatives (pounds) (B) 693 1,062 1,880 2,142 Co-products: Styrene monomer (pounds) 888 676 1,788 1,458 TBA and derivatives (gallons) 308 268 592 533 (A) In May 1999, Lyondell issued 40.25 million shares of common stock in a public offering. (B) Includes propylene oxide ("PO"), PO derivatives and isocyanates. The polyols business sold to Bayer on March 31, 2000 is included through the date of sale. LYONDELL CHEMICAL COMPANY SELECTED FINANCIAL INFORMATION (UNAUDITED) (Millions of dollars) For the six months ended June 30, STATEMENTS OF CASH FLOWS 2000 1999 Net income (loss) $ 352 $ (40) Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities: Gain on sale of assets (544) --- Depreciation and amortization 142 164 Extraordinary loss 30 31 Accounts receivable (103) (89) Inventories 16 31 Accounts payable (15) 3 Changes in other working capital and other, net (6) 45 Net cash (used in) provided by operating activities (128) 145 Proceeds from sale of assets, net of cash sold 2,424 --- Expenditures for property, plant and equipment (31) (75) Contributions and advances to affiliates (18) (38) Distributions from affiliates in excess of earnings 31 55 Other (32) --- Net cash provided by (used in) investing activities 2,374 (58) Issuance of long-term debt, net --- 3,293 Repayments of long-term debt (2,061) (4,111) Issuance of common stock --- 736 Dividends paid (52) (43) Other (18) 5 Net cash used in financing activities (2,131) (120) Effect of exchange rate changes on cash (2) 4 Increase (decrease) in cash and cash equivalents $ 113 $ (29) LYONDELL CHEMICAL COMPANY SELECTED FINANCIAL INFORMATION (UNAUDITED) (Millions of dollars) June 30, December 31, BALANCE SHEET 2000 1999 Cash and cash equivalents $ 420 $ 307 Accounts receivable, net 480 566 Inventories 379 519 Prepaid expenses and other current assets 119 114 Deferred tax assets 108 380 Total current assets 1,506 1,886 Property, plant and equipment, net 2,468 4,291 Investments and long-term receivables: Investment in PO joint ventures (A) 656 --- Investment in Equistar 622 607 Receivable from LCR 223 219 Investment in LCR 32 52 Investment in LMC 52 63 Other investments and long-term receivables 62 74 Goodwill, net 1,167 1,545 Deferred charges and other assets 606 761 Total assets $ 7,394 $ 9,498 Accounts payable $ 319 $ 350 Current maturities of long-term debt 212 225 Other accrued liabilities 601 446 Total current liabilities 1,132 1,021 Long-term debt, less current maturities 3,998 6,046 Other liabilities and deferred credits 388 331 Deferred income taxes 533 891 Minority interest 175 202 Stockholders' equity (117,548,879 shares outstanding at June 30, 2000) 1,168 1,007 Total liabilities and stockholders' equity $ 7,394 $ 9,498 Investment in Equistar, December 31, 1999 $ 607 Lyondell's share of Equistar net income 104 Cash distributions from Equistar (94) Transfer of shared service organization liability from Equistar 5 Investment in Equistar, June 30, 2000 $ 622 Investment in LCR, December 31, 1999 $ 52 Lyondell's share of LCR net income 6 Cash distributions from LCR (33) Cash contributions to LCR 7 Investment in LCR, June 30, 2000 $ 32 Investment in LMC, December 31, 1999 $ 63 Lyondell's share of LMC net income --- Cash distributions from LMC (11) Investment in LMC, June 30, 2000 $ 52 (A) Lyondell has entered into joint ventures with Bayer in conjunction with the March 31, 2000 asset sale. LYONDELL CHEMICAL COMPANY EQUISTAR CHEMICALS, LP SELECTED FINANCIAL AND OPERATING INFORMATION (UNAUDITED) For the three months For the six months INCOME STATEMENTS ended June 30, ended June 30, (Millions of dollars) 2000 1999 2000 1999 Sales and other operating revenues (A) $ 1,859 $ 1,210 $ 3,666 $ 2,312 Operating costs and expenses: Cost of sales 1,594 1,096 3,241 2,072 Selling, general and administrative expenses 49 56 93 117 Research and development 10 10 19 20 Amortization of goodwill and other intangibles 8 8 16 16 Operating income 198 40 297 87 Interest expense, net (44) (45) (89) (84) Other income (expense), net (2) 46 --- 46 Net income (B) $ 152 $ 41 $ 208 $ 49 SELECTED FINANCIAL AND OPERATING INFORMATION (Millions of dollars) Sales and Other Operating Revenues (A) Petrochemicals segment $ 1,761 $ 1,045 $ 3,466 $ 1,950 Polymers segment 564 477 1,140 932 Intersegment eliminations (466) (312) (940) (570) Total $ 1,859 $ 1,210 $ 3,666 $ 2,312 Other Operating Expenses (C) Petrochemicals segment $ 2 $ 3 $ 4 $ 6 Polymers segment 19 19 36 39 Unallocated 46 52 88 108 Total $ 67 $ 74 $ 128 $ 153 Operating Income Petrochemicals segment $ 267 $ 83 $ 439 $ 175 Polymers segment (23) 9 (54) 20 Unallocated (46) (52) (88) (108) Total $ 198 $ 40 $ 297 $ 87 EBITDA Petrochemicals segment $ 316 $ 130 $ 539 $ 269 Polymers segment (10) 22 (29) 46 Unallocated (35) 8 (61) (36) Total (D) $ 271 $ 160 $ 449 $ 279 EBITDA before unusual charges (D) $ 271 $ 160 $ 449 $ 279 Sales Volumes (A) Selected petrochemical products (millions): Ethylene, propylene and other olefins (pounds) 4,606 4,508 9,508 9,035 Aromatics (gallons) 109 91 211 176 Polymers products (millions of pounds) 1,474 1,611 3,141 3,263 Lyondell has a 41% ownership interest in Equistar while Millennium Chemicals, Inc. and Occidential Chemical Corporation each have a 29.5% ownership interest. (A) Includes revenues/volumes from sales to affiliates. (B) As a partnership, Equistar is not subject to federal income taxes. (C) Other Operating Expenses include SG&A, R&D and amortization of goodwill and other intangibles. (D) Second quarter 1999, includes a one-time gain from Equistar asset sales. Excluding the gain, Equistar EBITDA would be $118 million for the three months ended June 30, 1999. LYONDELL CHEMICAL COMPANY EQUISTAR CHEMICALS, LP SELECTED FINANCIAL INFORMATION (UNAUDITED) (Millions of dollars) June 30, Dec. 31, BALANCE SHEETS 2000 1999 Cash and cash equivalents $ 70 $ 108 Accounts receivable, net 781 700 Inventories 563 520 Prepaid expenses and other current assets 23 32 Total current assets 1,437 1,360 Property, plant and equipment, net 3,856 3,926 Goodwill, net 1,103 1,119 Deferred charges and other assets 323 331 Total assets $ 6,719 $ 6,736 Accounts payable $ 557 $ 459 Current maturities of long-term debt 70 92 Other accrued liabilities 141 233 Total current liabilities 768 784 Long-term debt, less current maturities 2,169 2,169 Other liabilities and deferred credits 138 121 Partners' capital 3,644 3,662 Total liabilities and partners' capital $ 6,719 $ 6,736 For the three months For the six months ended June 30, ended June 30, SELECTED CASH FLOW INFORMATION 2000 1999 2000 1999 Depreciation and amortization $ 75 $ 74 $ 152 $ 147 Cash flow from operations 282 147 274 168 Capital expenditures 28 30 48 76 LYONDELL CHEMICAL COMPANY LYONDELL-CITGO REFINING LP SELECTED FINANCIAL AND OPERATING INFORMATION (UNAUDITED) CONDENSED BALANCE SHEETS June 30, Dec. 31, (Millions of dollars) 2000 1999 Total current assets $ 343 $ 219 Property, plant and equipment, net 1,335 1,350 Deferred charges and other assets 73 60 Total assets $ 1,751 $ 1,629 Current maturities of long-term debt $ --- $ 450 Other current liabilities 858 307 Long-term debt, less current maturities 276 247 Other liabilities and deferred credits 76 69 Partners' capital 541 556 Total liabilities and partners' capital $ 1,751 $ 1,629 For the three months For the six months INCOME STATEMENTS ended June 30, ended June 30, (Millions of dollars) 2000 1999 2000 1999 Sales and other operating revenues (A) $ 901 $ 482 $ 1,760 $ 914 Operating costs and expenses: Cost of sales 893 495 1,704 884 Selling, general and administrative expenses 14 15 28 34 Operating income (loss) (6) (28) 28 (4) Interest expense, net (16) (10) (28) (20) State income tax benefit --- --- --- 1 Net loss (B) $ (22) $ (38) $ --- $ (23) SELECTED CASH FLOW INFORMATION (Millions of dollars) Depreciation and amortization $ 30 $ 27 $ 56 $ 52 Cash flow from operations 2 (37) 27 11 Capital expenditures 18 16 35 32 EBITDA before unusual charges $ 24 $ (1) $ 84 $ 48 SELECTED OPERATING INFORMATION Sales Volumes (including intersegment sales) (A) Refined products (thousand barrels per day): Gasoline 122 104 114 110 Diesel and heating oil 60 57 63 61 Jet fuel 12 15 14 16 Aromatics 11 10 10 9 Other refinery products 81 85 99 103 Total refined products volumes 286 271 300 299 Refinery Runs Crude processing rates (thousand barrels per day): Crude Supply Agreement - coked 138 149 159 177 Other heavy crude oil - coked 0 14 20 11 Other crude oil 55 39 38 40 Total crude oil 193 202 217 228 (A) Includes revenues/volumes from sales to affiliates. (B) LCR is not subject to federal income taxes. SOURCE Lyondell Chemical Company |