- Equistar's raw material advantage boosts results.
- Customer inventory reductions weaken chemical and plastics demand while
crude oil and natural gas prices remain high.
- LCR achieves record crude processing rates.
- Lyondell and Equistar maintain significant liquidity.
HOUSTON, July 24 /PRNewswire-FirstCall/ -- Lyondell Chemical Company (NYSE: LYO) today announced a net loss for the second quarter of $68 million or 43 cents per share. This compares to net income of $2 million or 2 cents per share for the second quarter of 2002, and net loss of $113 million or 70 cents per share in the first quarter of 2003.
Lyondell Earnings Summary
1st Six 1st Six
Millions of dollars except per 2Q2003 2Q2002 1Q2003 Months Months
share amounts 2003 2002
Sales and other operating
revenues $913 $843 $989 $1,902 $1,517
Net income (loss) (68) 2 (113) (181) (53)
Basic and diluted net income
(loss) per share (A) (0.43) 0.02 (0.70) (1.13) (0.45)
Weighted average shares
outstanding (millions) (A) 161.0 117.6 160.4 160.7 117.6
(A) Lyondell sold 8.28 million shares of common stock on July 1, 2002 in a
public offering and issued 34 million shares of Series B common stock
to Occidental on August 22, 2002 in connection with the purchase of
Occidental's 29.5% interest in Equistar. Lyondell paid a dividend to
Occidental on June 30, 2003 by issuing 543,947 shares of Series B
common stock to Occidental in lieu of a dividend payment in cash.
Compared to the second quarter of last year, the net loss increased primarily as a result of reduced profitability of the Intermediate Chemicals and Derivatives (IC&D) segment, largely from a combination of the expiration of a significant MTBE contract at the end of 2002 and lower MTBE market margins. Compared to the first quarter of this year, the key factor that contributed to the improved results was higher Equistar ethylene margins, particularly for ethylene produced from liquid raw materials (see Note 1). This raw material advantage was largely responsible for an improvement of approximately $100 million in Equistar's net income. During the second quarter 2003, financings and restructuring costs reduced net income by $14 million or 9 cents per share. The year-to-date 2003 net loss increased to $181 million or $1.13 per share compared to a net loss of $53 million or 45 cents per share for the prior year-to-date period, primarily as a result of lower MTBE performance in IC&D and higher losses from the Company's Equistar ownership.
Supplemental Financial Data - Lyondell and Proportionate Share of Ventures
1st Six 1st Six
Millions of dollars 2Q2003 2Q2002 1Q2003 Months Months
2003 2002
Proportionate sales and other
operating revenues (A) $2,571 $1,942 $2,841 $5,412 $3,517
Proportionate EBITDA (B) 161 217 78 239 356
(A) Includes revenues from sales to affiliates. See page 8 for
components of proportionate share of sales and other operating
revenues.
(B) See reconciliation of net income (loss) to proportionate EBITDA on
page 9 and Lyondell's income statement information on page 10.
"Results during the quarter showed improvement when compared to the past two quarters, but were below the level that we anticipated when we entered the quarter," said Lyondell President and CEO Dan F. Smith. "Nonetheless, our continued focus on cash and liquidity allowed us to finish the second quarter with liquidity at Lyondell and Equistar at similar levels to those at the beginning of the year."
"Equistar's Gulf Coast olefin plants that can consume liquid raw materials demonstrated their differential cost advantage despite crude oil prices remaining stubbornly high, averaging close to $30 per barrel for the second quarter. This advantage was partially offset by depressed volumes in Equistar's products and across the chemical industry, caused by post-Iraq war inventory reductions, the impact of SARS, and generally poor economic conditions. In our 100%-owned IC&D segment, propylene oxide and derivatives performed as expected, realizing a series of price increases in April; but the MTBE business did not improve significantly. LYONDELL-CITGO Refining (LCR) continued to have excellent operating performance and strong cash distributions."
OUTLOOK
During the second quarter, product shipments in general demonstrated a slow but steady improvement, and thus far this trend has continued into the third quarter. The Company expects Equistar to continue to benefit from its liquid raw material advantage although to a somewhat reduced degree. IC&D has benefited from lower raw material costs thus far in the third quarter. The Company expects LCR's performance to continue to be strong, assuming sustained deliveries of contract crude oil volumes.
"Third quarter performance will be largely dependent on the pace of global economic recovery," Smith said. "Under a scenario of moderate economic recovery and improved global stability, we would expect both Lyondell and Equistar to benefit from strengthening volumes and moderating raw material prices. However, industry operating rates remain depressed and, therefore, it will be difficult to achieve and sustain margin improvements in the near term. The potential for continued raw material cost volatility represents an uncertainty for Equistar, but we believe that the fundamentals will continue to favor Equistar's liquid-based olefins position."
LYONDELL AND JOINT VENTURES
Lyondell's operations comprise: Lyondell's IC&D segment; Equistar, a joint venture with Millennium Chemicals Inc.; and LCR, a joint venture with CITGO Petroleum Corp.
Lyondell's Intermediate Chemicals & Derivatives (IC&D) Segment -- The IC&D segment includes propylene oxide (PO) and derivatives, MTBE, methanol, styrene and toluene di-isocyanate (TDI).
IC&D Financial Overview
1st Six 1st Six
Millions of dollars 2Q2003 2Q2002 1Q2003 Months Months
2003 2002
Sales and other operating
revenues $913 $843 $989 $1,902 $1,517
Operating income (loss) (A) (6) 65 (18) (24) 103
EBITDA (A) 48 120 53 101 215
(A) See reconciliation of Lyondell net income (loss) to EBITDA on page 9
and Lyondell IC&D operating income (loss) and net income (loss) on
page 10.
For IC&D, the second quarter 2003 included costs of $5 million related to financing activities.
2Q03 vs. 2Q02 -- Reduced profitability of MTBE accounted for the majority of the decrease in operating income versus the second quarter of 2002. The lower MTBE profitability resulted from a combination of the expiration of a favorable contract with BP at the end of 2002, higher raw material and utility costs related to high U.S. natural gas prices, and weak MTBE market conditions partially related to reduced demand in California. IC&D operating income was also impacted by increased operating costs, largely due to the new BDO-2 plant. Overall volumes for PO and derivatives, as well as TDI, were relatively unchanged versus the year ago period. Styrene profitability was relatively unchanged.
2Q03 vs. 1Q03 -- Compared to the first quarter of 2003, IC&D's operating loss improved by $12 million based on improved business results. PO and derivatives realized higher prices and margins in the second quarter but, as expected, this was offset by lower volumes driven by a seasonal decline in deicers and temporary shifts in demand patterns resulting from April 2003 price increases. MTBE benefited from increased sales volumes and moderately increased European margins while U.S. margins continued to be soft. Styrene showed moderate margin improvements, which were partially offset by reduced export volumes. However, TDI experienced both lower global sales volumes and lower European prices. Lyondell net income and IC&D EBITDA in first quarter 2003 included an $18 million gain related to the restructuring of the Nihon Oxirane joint venture in Asia.
Equistar Chemicals, LP -- Lyondell owns a 70.5 percent interest in Equistar, which consists of the petrochemicals and polymers segments.
Equistar Financial Overview - 100% Basis
1st Six 1st Six
Millions of dollars 2Q2003 2Q2002 1Q2003 Months Months
2003 2002
Sales and other operating
revenues (A) $1,597 $1,462 $1,641 $3,238 $2,598
Operating income (loss) 24 22 (96) (72) (53)
Net loss (B) (49) (28) (146) (195) (1,207)
EBITDA (B) 80 96 (19) 61 95
(A) Includes revenues from sales to affiliates.
(B) See reconciliation of Equistar net loss to EBITDA on page 9.
Equistar's results in the second quarter 2003 included costs of $19 million related to financing activities.
2Q03 v. 2Q02 -- Compared to the second quarter of 2002, the current quarter was characterized by higher margins and lower volumes. The margin improvement primarily resulted from ethylene and polyethylene prices which were reported by Chemical Marketing Associates, Inc. (CMAI) to be an average 7 cents to 10 cents per pound higher than in the period a year ago. While purchased raw material prices were significantly higher for both liquid and natural gas-based raw materials in the second quarter of 2003, higher prices realized for Equistar's co-products produced from processing liquid raw materials offset most of the increase in liquid raw material prices. (See Note 2.)
CMAI, an industry consultant, estimates that the average cost of producing ethylene across the industry increased by approximately 3.5 cents per pound compared to the second quarter of 2002. However, as a result of Equistar's flexibility to process liquid raw materials, its equivalent costs only increased by approximately 2 cents per pound.
Offsetting the increased margins were reduced sales volumes of ethylene and derivative products (ethylene, ethylene oxygenates and polyethylene) which, when taken together, were 20 percent below year-ago levels. Polymer sales volumes also were negatively impacted by approximately 85 million pounds of lower polypropylene sales as a result of the first quarter 2003 sale of the Bayport polypropylene unit.
2Q03 v. 1Q03 -- Compared to the first quarter of 2003, Equistar's performance improvement was primarily a function of the lower cost of ethylene production at its Gulf Coast liquid-based olefin plants. This raw material advantage was largely responsible for an improvement of approximately $100 million in Equistar's net income. CMAI estimates that the average cost of producing ethylene across the industry decreased by approximately 5.4 cents per pound compared to the first quarter of 2003. However, as a result of Equistar's flexibility to process liquid raw materials, its equivalent costs decreased by nearly 8 cents per pound. Complementing this improvement, CMAI estimates that polymer pricing averaged 3 cents per pound higher than the first quarter average price. The positive impacts of the lower ethylene production costs and higher polymer prices were partially offset by significant volume reductions in ethylene and derivatives. Taken as a group, Equistar's ethylene and derivative products sales volumes were about 13 percent below first quarter 2003 sales levels. As noted above, Equistar's polymers sales volumes were impacted by the first quarter 2003 sale of the Bayport polypropylene unit.
LYONDELL-CITGO Refining LP (LCR) -- Lyondell owns a 58.75 percent interest in LCR, a major refiner of heavy crude oil.
LCR Financial Overview - 100% Basis
1st Six 1st Six
Millions of dollars 2Q2003 2Q2002 1Q2003 Months Months
2003 2002
Sales and other operating
revenues (A) $905 $838 $1,183 $2,088 $1,545
Operating income 67 70 38 105 119
Net income (B) 58 63 28 86 104
EBITDA (B) 96 100 66 162 178
(A) Includes revenues from sales to affiliates.
(B) See reconciliation of LCR net income to EBITDA on page 9.
LCR's second quarter results were reduced by a $6 million restructuring charge related to personnel reductions.
2Q03 v. 2Q02 -- Compared to the second quarter of 2002, performance at LCR was relatively unchanged. LCR's total crude processing rate increased by 15,000 barrels per day compared to the second quarter 2002, averaging 274,000 barrels per day. The amount of Venezuelan crude oil processed by LCR under the Crude Supply Agreement (CSA) with PDVSA was 45,000 barrels per day higher than in the second quarter of 2002, averaging 246,000 barrels per day. Offsetting these positives was the negative effect of higher gas costs and lower spot crude volumes.
2Q03 vs. 1Q03 -- In the first quarter of 2003, results were negatively impacted by a $25 million charge related to the restructuring of LCR's low sulfur gasoline project. Compared to the first quarter, total crude processing rates increased 28,000 barrels per day and CSA crude processing rates increased 52,000 barrels per day. Lower volumes and margins related to spot crude purchases partially offset the benefit of the higher CSA processing rates.
CONFERENCE CALL
Lyondell will host a conference call today, July 24, 2003, at 11:30 a.m. Eastern Time (ET). Participating on the call will be: Dan Smith, President and CEO; Morris Gelb, Executive Vice President and COO; Kevin DeNicola, Senior Vice President and CFO; and Doug Pike, Director of Investor Relations. The dial-in numbers are 888-385-9734 (U.S - toll free) and 212-547-0409 (international). The Pass code is Lyondell. The call will be broadcast live on the Investor Relations page of the company's web site at www.lyondell.com/earnings .
A replay of the call will be available from 1:30 p.m. ET July 24 to 5 p.m. ET August 1. The dial-in numbers are 800-925-2380 (U.S) and 402-220-4107 (international). Pass code for each is 5549. Web replay will be available at 1:30 p.m. ET July 24 on the Investor Relations page of the company's web site at www.lyondell.com/earnings .
Reconciliations of non-GAAP financial measures to GAAP financial measures and any other applicable disclosures, including this earnings release, will be available at 11:30 a.m. ET at www.lyondell.com/earnings .
NOTE 1
"Liquid raw materials" include crude-oil-based liquids such as naphtha, condensates and gas oils. In contrast, "natural gas-based" raw materials include ethane, propane and butane which are sometimes referred to collectively as natural gas liquids (NGL's). Equistar's olefins facilities on the Texas Gulf Coast generally have the flexibility to use significant percentages of either liquid or natural gas based raw materials for the production of ethylene.
NOTE 2
The use of liquid raw materials results in the production of co-products such as propylene, butadiene, benzene and toluene. The use of natural gas- based raw materials does not produce significant volumes of these co-product materials.
ABOUT LYONDELL
Lyondell Chemical Company, (www.lyondell.com ), headquartered in Houston, Texas, is a leading producer of: propylene oxide (PO); PO derivatives, including toluene diisocyanate (TDI), propylene glycol (PG), butanediol (BDO) and propylene glycol ether (PGE); and styrene monomer and MTBE as co-products of PO production. Through its 70.5% interest in Equistar Chemicals, LP, Lyondell also is one of the largest producers of ethylene, propylene and polyethylene in North America and a leading producer of ethylene oxide, ethylene glycol, high value-added specialty polymers and polymeric powder. Through its 58.75% interest in LYONDELL-CITGO Refining LP, Lyondell is one of the largest refiners in the United States processing extra heavy Venezuelan crude oil to produce gasoline, low sulfur diesel and jet fuel.
FORWARD LOOKING STATEMENTS
The statements in this release relating to matters that are not historical facts are forward-looking statements that are subject to risks and uncertainties. Actual results could differ materially, based on factors including, but not limited to: the cyclical nature of the chemical and refining industries; availability, cost and volatility of raw materials and utilities; governmental regulatory actions and political unrest; global economic conditions; industry production capacity and operating rates; the supply/demand balance for Lyondell's and its joint ventures' products; competitive products and pricing pressures; access to capital markets; technological developments and other risk factors. For more detailed information about the factors that could cause actual results to differ materially, please refer to Lyondell's Annual Report on Form 10-K for the year ended December 31, 2002 and Lyondell's Quarterly Report on Form 10-Q for the quarter ended June 30, 2003 which will be filed in August 2003.
LYONDELL CHEMICAL COMPANY
PAGE 8
SELECTED FINANCIAL AND OPERATING INFORMATION (UNAUDITED)
(Millions of dollars)
Lyondell and
Proportionate
Lyondell Joint Ventures Share of
Chemical Equistar LCR LMC Equity
Company 100% 100% 100% Investments (A)
Three months ended
June 30, 2003:
Sales and other
operating revenues (B) $913 $1,597 $905 $--- $2,571
SG&A and R&D 53 54 16 --- 100
EBITDA 48 80 96 --- 161
Depreciation and
amortization 61 76 29 --- 129
Interest expense, net 99 53 9 --- 142
Net loss (68) (C)
Capital expenditures 229 (D)(E) 21 13 --- 251
Cash dividends 29
Three months ended
June 30, 2002:
Sales and other
operating revenues (B) $843 $1,462 $838 $10 $1,942
SG&A and R&D 54 50 14 1 83
EBITDA 120 96 100 (2) 217
Depreciation and
amortization 59 74 30 1 108
Interest expense, net 91 50 7 --- 116
Net income 2 (C)
Capital expenditures 1 (D) 14 20 --- 18
Cash dividends 27
Three months ended
March 31, 2003:
Sales and other operating
revenues (B) $989 $1,641 $1,183 $--- $2,841
SG&A and R&D 51 49 12 --- 93
EBITDA 53 (19) 66 --- 78
Depreciation and
amortization 57 78 28 --- 126
Interest expense, net 83 49 10 --- 123
Net loss (113) (C)
Capital expenditures 9 (D) 13 15 --- 27
Cash dividends 28
(A) 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 had a 41% interest in Equistar Chemicals, LP
("Equistar") through August 22, 2002 and 70.5% thereafter, a 58.75%
interest in LYONDELL-CITGO Refining LP ("LCR") and, through
April 30, 2002, a 75% interest in LMC. As of May 1, 2002, Lyondell
Methanol Company, L.P. ("LMC") is wholly owned by Lyondell and its
operations are included in the IC&D business segment.
(B) Includes revenues from sales to affiliates.
(C) Includes income (loss) in the joint ventures.
(D) In addition, Lyondell made contributions to the PO-11 joint venture
and the U.S. PO joint venture of $27 million, $10 million and
$30 million in the three-month periods ended June 30, 2003,
June 30, 2002 and March 31, 2003, respectively.
(E) Capital expenditures of $229 million for the three months ended
June 30, 2003 include Lyondell's purchase of the BDO-2 facility from
the lessor.
LYONDELL CHEMICAL COMPANY
PAGE 9
SELECTED FINANCIAL AND OPERATING INFORMATION (UNAUDITED)
(Millions of dollars)
RECONCILIATION OF NET INCOME (LOSS) TO EBITDA
For the three For the six
months ended months ended
June 30, March 31, June 30,
2003 2002 2003 2003 2002
LYONDELL
Net income (loss) $(68) $2 $(113) $(181) $(53)
Add:
Benefit from
income taxes (39) --- (55) (94) (18)
Interest expense,
net 99 91 83 182 182
Depreciation and
amortization 61 59 57 118 115
Loss from equity
investment in Equistar 32 5 100 132 50
Income from equity
investment in LCR (37) (39) (19) (56) (66)
Loss from equity
investment in LMC --- 2 --- --- 5
IC&D EBITDA $48 $120 $53 $101 $215
EQUISTAR
Net loss $(49) $(28) $(146) $(195) $(1,207)
Add:
Depreciation and
amortization 76 74 78 154 147
Interest expense,
net 53 50 49 102 102
Cumulative effect
of accounting change --- --- --- --- 1,053
EBITDA $80 $96 $(19) $61 $95
Lyondell Proportionate
Share (A) $57 $39 $(13) $43 $39
LCR
Net income $58 $63 $28 $86 $104
Add:
Depreciation and
amortization 29 30 28 57 59
Interest expense 9 7 10 19 15
EBITDA $96 $100 $66 $162 $178
Lyondell Proportionate
Share - 58.75% $56 $59 $39 $95 $105
EBITDA - Lyondell and
Proportionate Share of
Equity Investments
IC&D EBITDA $48 $120 $53 $101 $215
Lyondell share of
Equistar EBITDA (A) 57 39 (13) 43 39
Lyondell 58.75% share of
LCR EBITDA 56 59 39 95 105
Lyondell share of LMC
EBITDA through April 30, 2002 --- (1) --- --- (3)
Lyondell and Proportionate
Share of Equity Investments $161 $217 $78 $239 $356
(A) Lyondell has a 70.5% interest in Equistar. Prior to August 22, 2002,
it had a 41% interest.
LYONDELL CHEMICAL COMPANY
PAGE 10
SELECTED FINANCIAL AND OPERATING INFORMATION (UNAUDITED)
For the For the
three months ended six months ended
INCOME STATEMENT INFORMATION June 30, March 31, June 30,
(Millions of dollars,
except per share data) 2003 2002 2003 2003 2002
Sales and other operating
revenues $913 $843 $989 $1,902 $1,517
Operating costs and
expenses:
Cost of sales 866 724 956 1,822 1,313
Selling, general and
administrative
expenses 45 46 42 87 86
Research and
development 8 8 9 17 15
Operating income
(loss) (6) 65 (18) (24) 103
Loss from equity
investment in Equistar
(A) (B) (32) (5) (100) (132) (50)
Income from equity
investment in LCR 37 39 19 56 66
Loss from other equity
investments (4) (2) (2) (6) (5)
Interest expense, net (99) (91) (83) (182) (182)
Other income (expense),
net (3) (4) 16 13 (3)
Income (loss) before
income taxes (107) 2 (168) (275) (71)
Benefit from income taxes (39) --- (55) (94) (18)
Net income (loss) (A) $(68) $2 $(113) $(181) $(53)
Basic and diluted income
(loss) per share:
Net income
(loss) (A) $(0.43) $0.02 $(0.70) $(1.13) $(0.45)
Shares (in thousands) (C):
Basic 161,023 117,565 160,419 160,722 117,565
Diluted 161,023 118,329 160,419 160,722 117,565
INTERMEDIATE CHEMICALS AND
DERIVATIVES SEGMENT
SELECTED OPERATING
INFORMATION
Sales Volumes (millions)
PO and derivatives
(pounds) (D) 744 732 899 1,643 1,517
Co-products:
Styrene monomer (pounds) 780 864 869 1,649 1,650
MTBE and other TBA
derivatives (gallons) 322 329 257 579 596
(A) As of January 1, 2002, Lyondell's 41% share of Equistar's
$1.1 billion charge for the write-off of goodwill, or
$432 million, was offset by Lyondell's write-off of a portion of the
excess of its underlying equity in Equistar's net assets over its
investment in Equistar.
(B) Lyondell has a 70.5% interest in Equistar. Prior to August 22, 2002,
it had a 41% interest.
(C) Lyondell sold 8,280,000 shares of common stock on July 1, 2002 and
issued 34,000,000 shares of Series B common stock to Occidental on
August 22, 2002. Lyondell paid a dividend to Occidental on
June 30, 2003 by issuing 543,947 shares of Series B common stock in
lieu of a dividend payment in cash.
(D) Includes propylene oxide ("PO"), PO derivatives and isocyanates.
LYONDELL CHEMICAL COMPANY
PAGE 11
SELECTED FINANCIAL INFORMATION (UNAUDITED)
(Millions of dollars)
For the six months ended
June 30,
CASH FLOW INFORMATION 2003 2002
Net loss $(181) $(53)
Adjustments:
Depreciation and amortization 118 115
Loss from equity investments 138 55
Distributions from affiliates
less than earnings --- (15)
Gain on sale of investment (18) ---
Deferred income taxes (92) 16
Accounts receivable (4) 23
Inventories (14) 11
Accounts payable 34 (2)
Other assets and liabilities, net 47 55
Net cash provided by
operating activities 28 205
Expenditures for property, plant and
equipment (238) (12)
Distributions from affiliates in
excess of earnings 102 ---
Contributions and advances to
affiliates (A) (78) (54)
Proceeds from sale of investment 28 ---
Maturity of other short-term
investments 25 ---
Other --- (3)
Net cash used in investing
activities (161) (69)
Issuance of long-term debt 318 ---
Repayment of long-term debt (103) (16)
Dividends paid (57) (53)
Other (4) ---
Net cash provided by (used
in) financing activities 154 (69)
Effect of exchange rate changes on
cash 1 2
Increase in cash and cash equivalents $22 $69
(A) Includes contributions to PO-11 joint venture and U.S. PO joint
venture of $57 million and $23 million in the six-month periods
ended June 30, 2003 and 2002, respectively.
LYONDELL CHEMICAL COMPANY
PAGE 12
SELECTED FINANCIAL INFORMATION (UNAUDITED)
(Millions of dollars)
June 30, December 31,
BALANCE SHEET INFORMATION 2003 2002
Cash and cash equivalents $308 $286
Other short-term investments 19 44
Accounts receivable, net 381 396
Inventories 366 344
Prepaid expenses and other current
assets 65 66
Deferred tax assets 35 35
Total current assets 1,174 1,171
Property, plant and equipment, net 2,596 2,369
Investments and long-term
receivables:
Investment in Equistar 1,052 1,184
Investment in PO joint ventures 825 770
Receivable from LCR 229 229
Investment in LCR 1 68
Other investments and long-term
receivables 78 98
Goodwill, net 1,135 1,130
Other assets, net 392 429
Total assets $7,482 $7,448
Accounts payable $396 $344
Current maturities of long-term debt --- 1
Other accrued liabilities 256 279
Total current liabilities 652 624
Long-term debt 4,150 3,926
Other liabilities 660 673
Deferred income taxes 807 881
Minority interest 148 165
Stockholders' equity (161,867,168
and 160,413,144 shares outstanding
respectively at June 30, 2003 and
December 31, 2002) 1,065 1,179
Total liabilities and
stockholders' equity $7,482 $7,448
For the three For the six
months ended months ended
June 30, 2003 June 30, 2003
Investment in Equistar, beginning
of period $1,084 $1,184
Lyondell's share of Equistar net
loss (32) (132)
Investment in Equistar, end of
period $1,052 $1,052
Investment in LCR, beginning of
period $20 $68
Lyondell's share of LCR net income 37 56
Cash distributions from LCR (68) (156)
Cash contributions to LCR --- 21
Contribution payable to LCR 2 2
Conversion of interest receivable
from LCR to equity investment 10 10
Investment in LCR, end of period $1 $1
LYONDELL CHEMICAL COMPANY
PAGE 13
EQUISTAR CHEMICALS, LP
SELECTED FINANCIAL AND OPERATING INFORMATION (UNAUDITED)
For the For the
three month ended six months ended
INCOME STATEMENT INFORMATION June 30, March 31, June 30,
(Millions of dollars) 2003 2002 2003 2003 2002
Sales and other operating
revenues (A) $1,597 $1,462 $1,641 $3,238 $2,598
Operating costs and expenses:
Cost of sales 1,519 1,390 1,688 3,207 2,552
Selling, general and
administrative expenses 44 41 40 84 81
Research and development 10 9 9 19 18
Operating income
(loss) 24 22 (96) (72) (53)
Interest expense, net (53) (50) (49) (102) (102)
Other income (expense), net (20) --- (1) (21) 1
Loss before cumulative
effect of accounting
change (49) (28) (146) (195) (154)
Cumulative effect of
accounting change (B) --- --- --- --- (1,053)
Net loss (C) $(49) $(28) $(146) $(195) $(1,207)
SELECTED FINANCIAL AND
OPERATING INFORMATION
(Millions of dollars)
Sales and other operating
revenues (A)
Petrochemicals segment $1,481 $1,318 $1,536 $3,017 $2,311
Polymers segment 445 479 513 958 889
Intersegment eliminations (329) (335) (408) (737) (602)
Total $1,597 $1,462 $1,641 $3,238 $2,598
Operating income (loss)
Petrochemicals segment $85 $79 $(32) $53 $55
Polymers segment (27) (26) (35) (62) (47)
Unallocated (34) (31) (29) (63) (61)
Total $24 $22 $(96) $(72) $(53)
EBITDA before cumulative
effect of accounting change $80 $96 $(19) $61 $95
Sales Volumes (including
intersegment sales)
(millions) (A)
Selected petrochemical
products:
Ethylene, propylene and
other olefins (pounds) 3,723 4,393 3,921 7,644 8,530
Aromatics (gallons) 98 103 94 192 189
Polymers products (pounds) 1,143 1,593 1,397 2,540 3,101
(A) Sales and other operating revenues include sales to affiliates.
Sales volumes include sales volumes from sales to affiliates as well
as intersegment sales volumes.
(B) Concurrent with the adoption of SFAS No. 142, Equistar reviewed
goodwill for impairment and concluded that the entire balance was
impaired, resulting in the $1.1 billion charge.
(C) As a partnership, Equistar is not subject to federal income taxes.
LYONDELL CHEMICAL COMPANY
PAGE 14
EQUISTAR CHEMICALS, LP
SELECTED FINANCIAL INFORMATION (UNAUDITED)
(Millions of dollars)
June 30, December 31,
BALANCE SHEET INFORMATION 2003 2002
Cash and cash equivalents $143 $27
Accounts receivable, net (A) 559 625
Inventories 478 424
Prepaid expenses and other current
assets 36 50
Total current assets 1,216 1,126
Property, plant and equipment, net 3,405 3,565
Investments 65 65
Other assets, net 343 296
Total assets $5,029 $5,052
Accounts payable $482 $459
Current maturities of long-term debt 31 32
Other accrued liabilities 176 223
Total current liabilities 689 714
Long-term debt 2,223 2,196
Other liabilities 391 221
Partners' capital 1,726 1,921
Total liabilities and partners'
capital $5,029 $5,052
For the For the
three months ended six months ended
June 30, March 31, June 30,
OTHER INFORMATION 2003 2002 2003 2003 2002
Cash flow from operations (A) (B) $32 $(20) $67 $99 $(139)
Capital expenditures 21 14 13 34 29
Depreciation and amortization:
Petrochemicals segment $56 $53 $57 $113 $106
Polymers segment 14 15 16 30 29
Other 6 6 5 11 12
Total depreciation and
amortization $76 $74 $78 $154 $147
(A) In consideration of discounts offered to certain customers for early
payment for product delivered in June 2003, some receivable amounts
were collected in June 2003 that otherwise would have been expected
to be collected in July 2003, including $32 million from Occidental.
(B) In consideration of discounts offered to certain customers for early
payment for product delivered in March 2003, some receivable amounts
were collected in March 2003 that otherwise would have been expected
to be collected in April 2003, including $23 million from Lyondell
and $46 million from Occidental.
LYONDELL CHEMICAL COMPANY
PAGE 15
LYONDELL-CITGO REFINING LP
SELECTED FINANCIAL AND OPERATING INFORMATION (UNAUDITED)
BALANCE SHEET INFORMATION June 30, December 31,
(Millions of dollars) 2003 2002
Total current assets $259 $357
Property, plant and equipment, net 1,269 1,312
Deferred charges and other assets, net 85 88
Total assets $1,613 $1,757
Current maturities of long-term debt $450 $---
Other current liabilities 363 514
Long-term debt --- 450
Loans payable to partners 264 264
Other liabilities and deferred credits 113 126
Partners' capital 423 403
Total liabilities and
partners' capital $1,613 $1,757
For the For the
three months ended six months ended
INCOME STATEMENT INFORMATION June 30, March 31, June 30,
(Millions of dollars) 2003 2002 2003 2003 2002
Sales and other operating
revenues (A) $905 $838 $1,183 $2,088 $1,545
Operating costs and expenses:
Cost of sales 822 754 1,133 1,955 1,400
Selling, general and
administrative expenses 16 14 12 28 26
Operating income 67 70 38 105 119
Interest expense, net (9) (7) (10) (19) (15)
Net income (B) $58 $63 $28 $86 $104
OTHER INFORMATION
(Millions of dollars)
Cash flow from operations $111 $67 $58 $169 $128
Capital expenditures 13 20 15 28 42
Depreciation and amortization 29 30 28 57 59
EBITDA $96 $100 $66 $162 $178
SELECTED OPERATING INFORMATION
Sales Volumes (including
intersegment sales) (A)
Refined products
(thousand barrels per day):
Gasoline 113 120 113 113 113
Diesel and heating oil 86 83 78 82 82
Jet fuel 16 14 21 19 18
Aromatics 7 9 9 8 9
Other refinery products 99 100 83 90 105
Total refined products
volumes 321 326 304 312 327
Refinery Runs
Crude processing rates
(thousand barrels per day):
Crude Supply Agreement 246 201 194 220 215
Other crude oil 28 58 52 40 45
Total crude oil 274 259 246 260 260
(A) Includes revenues and volumes from sales to affiliates.
(B) As a partnership, LCR is not subject to federal income taxes.
LYONDELL CHEMICAL COMPANY
PAGE 16
SELECTED FINANCIAL AND OPERATING INFORMATION (UNAUDITED)
(Millions of dollars)
DAYS OF WORKING CAPITAL
Lyondell June 30, March 31, December 31,
2003 2003 2002
Working Capital: (A)
Accounts receivable $381 $412 $396
Inventories 366 352 344
Accounts payable (B) (396) (384) (344)
Total 351 380 396
Add: Accounts receivable sold 81 81 65
Adjusted working capital $432 $461 $461
Days of Working Capital:
Sales and other operating
revenues for the three months
ended $913 $989 $890
Number of days in quarter 91 90 92
Sales per day $10.0 $11.0 $9.7
Days of working capital (B) (C) 43 42 48
Equistar
Working Capital: (A)
Accounts receivable (D) (E) $559 $563 $625
Inventories 478 461 424
Accounts payable (482) (519) (459)
Total 555 505 590
Add: Accounts receivable sold 100 96 81
Adjusted working capital $655 $601 $671
Days of Working Capital:
Quarterly sales revenue for the
three months ended $1,597 $1,641 $1,431
Number of days in quarter 91 90 92
Sales per day $17.5 $18.2 $15.6
Days of working capital (C) (D) (E) 37 33 43
(A) Defined as the major controllable components of working capital --
receivables, inventories and payables. Receivables sold are added
back for consistency as such amounts are included in sales and in the
sales per day calculation. Management believes that this provides
useful information to investors because it reflects Lyondell's and
Equistar's responsibility for administration and collection of said
amounts.
(B) In March 2003, in consideration of discounts offered by Equistar for
early payment, Lyondell paid certain Equistar product invoices
totaling $23 million for product delivered in March 2003. Such
amounts otherwise would have been expected to be paid in April 2003
and would have reduced days of working capital as of March 31, 2003 to
40 days.
(C) Days of working capital are calculated as adjusted working capital
divided by sales per day.
(D) In consideration of discounts offered to certain customers for early
payment for product delivered in June 2003, some receivable amounts
were collected in June 2003 that otherwise would have been expected to
be collected in July 2003, including $32 million from Occidental. Had
such amounts been collected in July 2003, days of working capital as
of June 30, 2003 would have been 39 days.
(E) In consideration of discounts offered to certain customers for early
payment for product delivered in March 2003, some receivable amounts
were collected in March 2003 that otherwise would have been expected
to be collected in April 2003, including $23 million from Lyondell and
$46 million from Occidental. Had such amounts been collected in
April 2003, days of working capital as of March 31, 2003 would have
been 37 days.
SOURCE Lyondell Chemical Company
