HOUSTON, Oct. 26 /PRNewswire-FirstCall/ -- Lyondell Chemical Company (NYSE: LYO) today announced net income for the third quarter 2006 of $57 million, or 22 cents per share on a fully diluted basis. These results include after-tax charges of $114 million related to an August 2006 refinery transaction and $69 million for the impairment of the net book value of the Lake Charles, La., ethylene facility. [See Table 2 below for additional charges.] These results compare with net income of $10 million, or 4 cents per share, for the third quarter 2005, and net income of $160 million, or 62 cents per share, for the second quarter 2006. For the first nine months of 2006, net income was $507 million, or $1.96 per share on a fully diluted basis, including the charges described above, compared with $390 million, or $1.50 per share, during the first nine months of 2005.
Table 1 - Lyondell Earnings Summary
Millions of dollars,
except per share amounts
1st Nine 1st Nine
3Q 3Q 2Q Months Months
2006 2005 2006 2006 2005
Sales and other
operating revenues $6,154 $4,790 $5,072 $15,983 $13,606
Net income 57 10 160 507 390
Basic earnings per share 0.23 0.04 0.65 2.05 1.59
Diluted earnings per share (a) 0.22 0.04 0.62 1.96 1.50
Basic weighted average shares
outstanding (millions) 247.7 246.5 247.4 247.3 245.6
Diluted weighted average shares
outstanding (millions) (a) 260.5 260.4 260.1 260.0 259.7
(a) Includes the dilutive effect of the convertible debentures, stock
options and warrants.
Table 2 - Charges (Benefits) Included in Lyondell's Results
Millions of dollars
1st Nine 1st Nine
3Q 3Q 2Q Months Months
2006 2005 2006 2006 2005
Pretax Charges (Benefits):
Lake Charles ethylene
facility impairment (a) $ 106 $ --- $ --- $ 106 $ ---
Lake Charles TDI plant
impairment (b) --- 195 --- --- 195
Refining segment contract
termination cost (c) 176 --- --- 176 ---
Houston Refining LP - related
settlement (d) --- --- --- (70) ---
Mutual insurance consortia losses 10 30 --- 15 44
Debt retirement charges 21 7 --- 21 28
Net after-tax effect 203 151 --- 161 174
Effect on diluted earnings
per share 0.78 0.58 --- 0.62 0.67
Need to add per share effect here
(a) Represents impairment of the carrying value of the Lake Charles,
La., ethylene facility and related assets, which is part of the
Ethylene, Co-Products & Derivatives segment.
(b) Represents impairment of the carrying value of the Lake Charles,
La., toluene diisocyanate (TDI) facility, which is part of the PO &
Related Products segment.
(c) Represents Lyondell's 58.75 percent share of the cost to terminate
Houston Refining LP's ("Houston Refining") previous crude supply
agreement.
(d) Represents the impact of the resolution of various matters among
Houston Refining, its owners and their affiliates.
Aside from the previously mentioned charges, third-quarter business results improved versus the second quarter 2006, with strength in both chemicals and refining. The ethylene segment benefited from increased prices, while propylene oxide (PO) and PO derivatives reported higher sales volumes and margins. Refining segment results improved, primarily as a result of increased ownership in the Houston refinery and the related change in the crude supply contract.
"In a period of continued volatility in the energy and chemical markets, our product mix and operating flexibility performed well, producing strong third-quarter results. In addition, the refinery continued to set new records and operate above stated capacity for the second quarter in a row," said Dan F. Smith, president and CEO of Lyondell Chemical Company. "Our strong results positioned us to call an additional $430 million of debt on Oct. 24. After completing this prepayment, debt repayment will approach $900 million for the year."
OUTLOOK
Through October, ethylene chain margins have remained strong despite price declines in response to energy prices. However, there are continued pressures as a result of inventory destocking, seasonal demand patterns and continued energy price volatility. PO and PO derivative product prices, margins and volumes are generally more stable. In fuel products, margins are following typical seasonal trends, as energy-price volatility is coupled with the expected slowdown between the summer driving and winter heating seasons.
"The fundamental economic and market conditions for our industry continue to be quite good, despite the increased turbulence caused by the energy markets. I believe that somewhat lower energy prices ultimately will serve as a positive stimulus to extend the chemical cycle," said Smith. "The new crude supply contract and 100 percent ownership of the refinery are expected to provide strong cash flow, in addition to further expanding the diversification of our portfolio. We appreciate the investment community's favorable response to the transaction."
LYONDELL BUSINESS RESULTS DISCUSSION BY REPORTING SEGMENT
Lyondell operates in four segments: 1) Ethylene, co-products and derivatives; 2) PO and related products; 3) Inorganic chemicals; and 4) Refining.
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).
Table 3 - Ethylene, Co-Products & Derivatives Financial Overview (a) Millions of dollars 1st Nine 1st Nine 3Q 3Q 2Q Months Months 2006 2005 2006 2006 2005 Sales and other operating revenues $ 3,603 $ 2,988 $ 3,401 $ 10,156 $ 8,811 Operating income (b) 173 21 181 653 613 EBITDA (c) 372 116 279 1,048 896 (a) See Table 7 for additional segment information. (b) Operating income for the third quarter and first nine months of 2006 included an impairment charge of $106 million, which is excluded from EBITDA. (c) See Table 10 for a reconciliation of segment EBITDA to net income of Lyondell.
Third-quarter 2006 results include a pretax charge of $106 million related to the impairment of the net book value of the Lake Charles ethylene facility.
3Q06 v. 2Q06 - Ethylene and ethylene derivative product sales volumes decreased by approximately 95 million pounds (3 percent) versus the second quarter 2006. Quarterly average prices for ethylene, polyethylene and ethylene glycol each increased by approximately 4 cents per pound, compared with the second quarter 2006. The company's average cost-of-ethylene- production metric (COE) was relatively unchanged versus the second quarter as increases in the natural-gas-based raw material component of the metric were offset by declines in the crude-oil-based raw material component. Acetyls results were unchanged as margin increases were offset by lower sales volumes.
3Q06 v. 3Q05 - Ethylene and ethylene derivative product sales volumes were comparable to the third quarter 2005. The quarterly average prices for ethylene, polyethylene and ethylene glycol increased by approximately 9 cents per pound, 12 cents per pound and 5 cents per pound, respectively. The company's average COE metric increased by approximately 1 cent per pound, primarily due to increased natural-gas-based raw material costs. Acetyls results improved by approximately $10 million as increased product prices and margins more than offset the impact of reduced methanol sales volumes.
PO and Related Products Segment - The principal products of the PO and related products segment include PO, PO derivatives (propylene glycol, propylene glycol ethers, butanediol and butanediol derivatives), styrene, methyl tertiary butyl ether (MTBE) and toluene diisocyanate (TDI).
Table 4 - PO & Related Products Financial Overview (a) Millions of dollars 1st Nine 1st Nine 3Q 3Q 2Q Months Months 2006 2005 2006 2006 2005 Sales and other operating revenues $ 1,900 $ 1,843 $ 1,763 $ 5,307 $ 4,923 Operating income (b) 133 65 108 358 281 EBITDA (c) 195 321 170 540 653 (a) See Table 7 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 10 for a reconciliation of segment EBITDA to net income of Lyondell.
Third-quarter 2005 results included a $195 million charge related to the impairment of the Lake Charles TDI facility.
3Q06 v. 2Q06 - Overall results increased by approximately $25 million versus the second quarter 2006. PO and PO derivative results increased by approximately $25 million due to an approximate 50 million pound (7 percent) increase in sales volumes and increased margins. MTBE, styrene and TDI results were relatively unchanged.
3Q06 v. 3Q05 - MTBE results declined by approximately $170 million due to lower margins as raw material margins declined by approximately 95 cents per gallon from record performance in last year's hurricane-impacted quarter. TDI results increased by approximately $35 million (excluding the impairment) to roughly break even due to a combination of increased prices coupled with lower ongoing operating costs resulting from last year's shutdown of the Lake Charles TDI facility. PO and PO derivative results increased by approximately $10 million due to a combination of increased margins and sales volume. Styrene results were unchanged.
Inorganic Chemicals Segment - The principal product of the inorganic chemicals segment is titanium dioxide (TiO2).
Table 5 - Inorganic Chemicals Financial Overview (a) Millions of dollars 1st Nine 1st Nine 3Q 3Q 2Q Months Months 2006 2005 2006 2006 2005 Sales and other operating revenues $ 341 $ 345 $ 359 $ 1,042 $ 1,005 Operating income (5) (16) 5 20 21 EBITDA (b) 25 3 33 102 102 (a) See Table 7 for additional segment information. (b) See Table 10 for a reconciliation of segment EBITDA to net income of Lyondell.
3Q06 v. 2Q06 - Sales volumes declined by approximately 9,000 metric tons due to decreased U.S. industry demand and European production problems. Average sales prices declined by approximately $15 per metric ton.
3Q06 v. 3Q05 - Sales prices increased by approximately $50 per metric ton while operating costs declined, resulting in approximately a $25 million improvement in results. This was partially offset by a 10,000 metric ton reduction in sales volume.
Refining Segment - Lyondell owned a 58.75 percent interest in Houston Refining LP (formerly known as LYONDELL-CITGO Refining LP) prior to Aug. 16, 2006, at which time Lyondell purchased the remaining 41.25 percent interest from CITGO Petroleum Corporation.
Table 6 - Refining Financial Overview - 100% Basis (a) Millions of dollars 1st Nine 1st Nine 3Q 3Q 2Q Months Months 2006 2005 2006 2006 2005 Sales and other operating revenues $ 2,288 $ 2,202 $ 2,411 $ 6,793 $ 5,301 Operating income (b) (98) 100 163 227 255 EBITDA (b) (c) (54) 130 194 333 341 (a) The Refining segment information presented above represents the historical operating results of Houston Refining on a 100 percent basis, and does not reflect purchase accounting adjustments. See Table 7 for additional segment information. (b) Operating income for the first nine months of 2006 includes third quarter 2006 charges of $300 million for the termination of the previous crude supply contract with PDVSA and a second quarter charge of $8 million representing reimbursement to Lyondell of legal fees and expenses paid by Lyondell on behalf of Houston Refining related to a settlement. (c) See Table 10 for a reconciliation of segment EBITDA to net income of Houston Refining.
Prior to Aug. 16, Lyondell's interest was accounted for by the equity method. As a result of the acquisition, Houston Refining's operations are consolidated from Aug. 16.
Third-quarter Houston Refining results included a $300 million charge related to the cancellation of the previous crude supply contract with Petroleos de Venezuela S.A. (PDVSA). The refining results summarized in Table 6 reflect the full charge; however, only 58.75 percent, or $176 million, of the charge is included in Lyondell's results of operations. The remaining $124 million is included in the purchase price.
The following review is on a 100 percent basis.
3Q06 v. 2Q06 - Crude processing rates averaged 270,000 barrels per day, unchanged versus the second quarter 2006. Margins increased by approximately $50 million due to a combination of improved Venezuelan crude contract margins and the absence of negative impacts related to second-quarter catalyst changes and property tax changes. Lower spot crude margins offset a portion of the margin improvement.
3Q06 v. 3Q05 - Crude processing rates increased by 25,000 barrels per day to 270,000 barrels per day versus the hurricane-impacted third quarter of 2005. Spreads on non-Venezuelan crude were relatively unchanged versus last year, while the spread on Venezuelan crude increased by several dollars per barrel.
Cash Distributions and Debt Reduction
Equistar Chemicals, LP to Lyondell Chemical Company and Millennium Chemicals Inc. - During the third quarter 2006, Lyondell Chemical Company received $53 million of distributions from Equistar. Millennium received $22 million from Equistar during the third quarter 2006.
Millennium to Lyondell Chemical Company - There were no dividends paid by Millennium to Lyondell Chemical Company during the third quarter 2006.
Debt Reduction - During the third quarter, Millennium prepaid $10 million of debt.
Receivable Facilities Utilization - As of Sept. 30, 2006, Lyondell's receivable facility was unutilized and Equistar's receivable facility was utilized at $90 million.
Third-Quarter Financing Activity - Lyondell completed several financing activities related to the refinery transaction during the quarter, ultimately leading to:
-- Issuance of $1.775 billion in new 7-year term loans -- Issuance of a new $1.06 billion 5-year revolving credit facility -- Issuance of $875 million of new 8 percent, 8-year unsecured bonds -- Issuance of $900 million of new 8 1/4 percent, 10-year unsecured bonds -- Elimination of Lyondell Chemical Company's previous revolving credit facility -- Elimination of Houston Refining's previous term loans and revolving credit facility -- Repayment of $760 million of the 9 5/8 percent bonds due 2007 Subsequent Financing Activity - -- On Oct. 6, Lyondell called for repayment the remaining $87 million of the 9 5/8 percent bonds due in 2007. -- On Oct. 24, Lyondell called for repayment the remaining $430 million of its 9 1/2 percent bonds due in 2008. CONFERENCE CALL
Lyondell will host a conference call today, Oct. 26, 2006, 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 pass code for each is Lyondell. The call will be broadcast live on the Investor Relations page of the company's web site, http://www.lyondell.com/earnings .
A replay of the call will be available from 1:30 p.m. ET Oct. 26 to 6 p.m. ET on Nov. 3. The dial-in numbers are 888-562-0231 (U.S.) and 203-369-3168 (international). The pass code for each is 5549. Web replay will be available at 2:30 p.m. ET Oct. 26 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 Oct. 26 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 refiner of heavy, high-sulfur crude oil and a significant producer of gasoline-blending components. Lyondell is a global company operating on five continents and employs approximately 11,000 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, availability, cost and price volatility of raw materials and utilities; supply/demand balances; industry production capacities and operating rates; uncertainties associated with the U.S. and worldwide economies; legal, tax and environmental proceedings; cyclical nature of the chemical and refining industries; operating interruptions; current and potential governmental regulatory actions; terrorist acts; international political unrest; competitive products and pricing; Lyondell's ability to implement its business strategies, including whether the expected benefits of Lyondell's acquisition of Houston Refining are achieved to the extent and in the time period anticipated; 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, 2005 and Quarterly Reports on Form 10-Q for the quarter ended September 30, 2006, which will be filed with the SEC in November 2006, and Lyondell's Current Report on Form 8-K filed on September 7, 2006.
Table 7 - 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) 2006 2005 2006 2006 2005
Sales and other operating
revenues: (b)
Ethylene, Co-Products &
Derivatives $3,603 $2,988 $3,401 $10,156 $8,811
PO & Related Products 1,900 1,843 1,763 5,307 4,923
Inorganic Chemicals 341 345 359 1,042 1,005
Refining 2,288 2,202 2,411 6,793 5,301
Operating income:
Ethylene, Co-Products &
Derivatives (c) $173 $21 $181 $653 $613
PO & Related Products (d) 133 65 108 358 281
Inorganic Chemicals (5) (16) 5 20 21
Refining (e) (98) 100 163 227 255
Depreciation and amortization:
Ethylene, Co-Products &
Derivatives $94 $95 $96 $288 $286
PO & Related Products 57 59 59 172 177
Inorganic Chemicals 24 26 25 73 76
Refining 44 30 31 106 86
EBITDA: (f)
Ethylene, Co-Products &
Derivatives $372 $116 $279 $1,048 $896
PO & Related Products 195 321 170 540 653
Inorganic Chemicals 25 3 33 102 102
Refining (e) (54) 130 194 333 341
Capital expenditures:
Ethylene, Co-Products &
Derivatives $44 $34 $43 $110 $103
PO & Related Products 21 6 18 54 28
Inorganic Chemicals 19 13 13 42 32
Refining 61 38 49 170 121
(a) See Table 9 for a reconciliation of segment information for the three
months and nine months ended September 30, 2006 and 2005 and for the
three months ended June 30, 2006 to consolidated Lyondell financial
information. The Refining information presented above represents
operating results of Houston Refining LP ("Houston Refining") on a
100 percent basis. Lyondell acquired the remaining 41.25 percent of
Houston Refining on August 16, 2006 (the "August 2006 Acquisition").
From August 16, 2006, depreciation and amortization, as well as
operating income, reflect the effects of that acquisition. See
Tables 21 through 23 for additional Houston Refining financial
information.
(b) Sales include sales to affiliates and intersegment sales.
(c) Includes a $106 million charge for the three and nine months ended
September 30, 2006 for the impairment of the carrying value of the
Lake Charles, La., ethylene facility.
(d) Includes a $195 million charge for the three and nine months ended
September 30, 2005 for the impairment of the carrying value of the
Lake Charles, La., TDI facility.
(e) Includes a charge for the three and nine months ended
September 30, 2006 of $300 million for the termination of Houston
Refining's previous crude supply agreement with PDVSA and a charge
for the three months ended June 30, 2006 and the nine months ended
September 30, 2006 of $8 million representing reimbursement to
Lyondell of legal fees and expenses paid by Lyondell on behalf of
Houston Refining related to the settlement.
(f) See Table 10 for reconciliation of segment EBITDA to net income.
Table 8 - Selected Segment Sales Volumes (a) (b)
For the three months For the nine
ended months ended
June
September 30, 30, September 30,
2006 2005 2006 2006 2005
Ethylene, Co-Products and
Derivatives (in millions)
Ethylene and derivatives (pounds) 2,836 2,834 2,930 8,637 8,590
Polyethylene included above
(pounds) 1,353 1,409 1,489 4,175 4,087
Co-products, nonaromatic (pounds) 2,171 1,899 2,154 6,291 5,795
Aromatics (gallons) 89 100 88 266 309
PO and Related Products (in millions)
PO and derivatives (pounds) 813 790 763 2,410 2,405
Co-products:
Styrene monomer (pounds) 1,208 953 1,031 3,221 2,980
MTBE and other TBA
derivatives (gallons) 321 298 290 908 878
Inorganic Chemicals (thousand
metric tons)
TiO2 149 160 158 458 456
Refined products (thousand
barrels per day)
Gasoline 112 125 116 114 117
Diesel and heating oil 84 85 82 90 86
Jet fuel 22 16 11 14 15
Aromatics 7 7 7 7 8
Other refined products 112 92 118 115 83
Total refined products volumes 337 325 334 340 309
Refinery Runs
Crude processing rates (thousand
barrels per day)
Crude oil contract 214 212 227 221 199
Other crude oil 56 33 44 47 34
Total crude oil 270 245 271 268 233
(a) The Refining information presented above represents the historical
operating results of Houston Refining on a 100 percent basis.
(b) Sales volumes include sales to affiliates and intersegment sales.
Table 9 - 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, 2006:
Segment Data
Ethylene, Co-Products
& Derivatives $3,603 $173 $94 $44
PO & Related Products 1,900 133 57 21
Inorganic Chemicals 341 (5) 24 19
Refining (a) 1,083 81 28 29
Other (b) (773) --- 2 2
Total $6,154 $382 $205 $115
For the three months ended
September 30, 2005:
Segment Data
Ethylene, Co-Products
& Derivatives $2,988 $21 $95 $34
PO & Related Products 1,843 65 59 6
Inorganic Chemicals 345 (16) 26 13
Other (b) (386) (5) 2 ---
Total $4,790 $65 $182 $53
For the three months ended
June 30, 2006:
Segment Data
Ethylene, Co-Products
& Derivatives $3,401 $181 $96 $43
PO & Related Products 1,763 108 59 18
Inorganic Chemicals 359 5 25 13
Other (b) (451) (1) 1 2
Total $5,072 $293 $181 $76
For the nine months ended
September 30, 2006:
Segment Data
Ethylene, Co-Products
& Derivatives $10,156 $653 $288 $110
PO & Related Products 5,307 358 172 54
Inorganic Chemicals 1,042 20 73 42
Refining (a) 1,083 81 28 29
Other (b) (1,605) (5) 6 4
Total $15,983 $1,107 $567 $239
For the nine months ended
September 30, 2005:
Segment Data
Ethylene, Co-Products
& Derivatives $8,811 $613 $286 $103
PO & Related Products 4,923 281 177 28
Inorganic Chemicals 1,005 21 76 32
Other (b) (1,133) (10) 6 2
Total $13,606 $905 $545 $165
(a) The Refining segment information reflects the consolidation of Houston
Refining prospectively from August 16, 2006. For periods prior to
August 16, 2006, Houston Refining was accounted for as an equity
investment.
(b) Includes elimination of intersegment transactions and items not
allocated to segments.
Table 10 - Reconciliation of Segment EBITDA to Net Income
For the three For the nine
months ended months ended
Sept. 30, June 30, Sept. 30,
(Millions of dollars) 2006 2005 2006 2006 2005
LYONDELL
Segment EBITDA:
Ethylene, Co-Products & Derivatives $372 $116 $279 $1,048 $896
PO & Related Products 195 321 170 540 653
Inorganic Chemicals 25 3 33 102 102
Refining (a) 109 --- --- 109 ---
Other 4 (1) --- 76 (2)
Add:
Income (loss) from equity
investment in Houston Refining(a) (104) 53 86 73 139
Deduct:
Depreciation and amortization (205) (182) (181) (567) (545)
Interest expense, net (158) (149) (125) (411) (462)
Benefit from (provision for)
income taxes (48) 54 (98) (324) (160)
Charges related to impairment
of assets (112) (198) (4) (118) (203)
Debt prepayment premiums
and charges (21) (7) --- (21) (28)
Lyondell net income $57 $10 $160 $507 $390
Refining EBITDA (b) $(54) $130 $194 $333 $341
Deduct:
Depreciation and amortization (44) (30) (31) (106) (86)
Interest expense, net (17) (9) (12) (40) (26)
Income taxes 8 --- (8) --- ---
Houston Refining net income $(107) $91 $143 $187 $229
(a) The Refining segment information reflects the consolidation of
Houston Refining prospectively from August 16, 2006. For periods
prior to August 16, 2006, Houston Refining was accounted for as an
equity investment.
(b) The Refining information presented represents operating results of
Houston Refining on a 100 percent basis.
Table 11 - 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) 2006 2005 2006 2006 2005
Sales and other operating
revenues $6,154 $4,790 $5,072 $15,983 $13,606
Cost of sales 5,593 4,548 4,586 14,350 12,211
Selling, general and
administrative expenses 156 154 169 456 422
Research and development
expenses 23 23 24 70 68
Operating income 382 65 293 1,107 905
Income (loss) from equity
investment in Houston
Refining (b) (104) 53 86 73 139
Income from other equity
investments 2 2 3 4 2
Interest expense, net (158) (149) (125) (411) (462)
Other income (expense), net (17) (15) 1 58 (34)
Income (loss) before
income taxes 105 (44) 258 831 550
Provision for (benefit from)
income taxes 48 (54) 98 324 160
Net income $57 $10 $160 $507 $390
Basic earnings per share $0.23 $0.04 $0.65 $2.05 $1.59
Diluted earnings per share $0.22 $0.04 $0.62 $1.96 $1.50
Weighted average shares (in
millions):
Basic 247.7 246.5 247.4 247.3 245.6
Diluted 260.5 260.4 260.1 260.0 259.7
(a) Results of operations reflect the consolidation of Houston Refining
prospectively from August 16, 2006. For periods prior to
August 16, 2006, Houston Refining was accounted for as an equity
investment.
(b) Includes a $176 million charge for the three and nine months ended
September 30, 2006 representing Lyondell's 58.75 percent share of
the $300 million cost to terminate Houston Refining's previous
crude supply agreement.
Table 12 - Lyondell Unaudited Cash Flow Information (a)
For the nine months ended
September 30,
(Millions of dollars) 2006 2005
Net income $507 $390
Adjustments:
Depreciation and amortization 567 545
Asset impairments 118 203
Equity investments -
Amounts included in net income (77) (141)
Distributions of earnings 73 140
Deferred income taxes 108 112
Debt prepayment premiums and charges 21 28
Changes in assets and liabilities:
Accounts receivable (185) (345)
Inventories (163) (142)
Accounts payable (144) 322
Other, net (206) (34)
Cash provided by
operating activities 619 1,078
Acquisition of Houston Refining
and related payments, net of
cash acquired (2,413) ---
Contributions and advances to affiliates (82) (90)
Expenditures for property, plant
and equipment (239) (165)
Distributions from affiliates in
excess of earnings 117 123
Other 6 3
Cash used in investing activities (2,611) (129)
Issuance of long-term debt 4,357 99
Repayment of long-term debt (b) (2,114) (1,072)
Net borrowings on revolving credit
facility 6 ---
Dividends paid (167) (167)
Proceeds from stock option exercises 14 46
Other --- 4
Cash provided by (used in)
financing activities 2,096 (1,090)
Effect of exchange rate changes on cash 4 (11)
Increase (decrease) in cash and
cash equivalents $108 $(152)
(a) Houston Refining became a wholly-owned subsidiary as of
August 16, 2006. Prior to August 16, 2006, Lyondell's investment in
Houston Refining was accounted for on an equity basis.
(b) Includes prepayment premiums in the nine months ended
September 30, 2006 and 2005 of $27 million and $31 million,
respectively.
Table 13 - Lyondell Unaudited Balance Sheet Information (a) (b)
September 30, December 31,
(Millions of dollars) 2006 2005
Cash and cash equivalents $701 $593
Accounts receivable, net 2,370 1,677
Inventories 2,183 1,657
Prepaid expenses and other current assets 109 176
Deferred tax assets 233 198
Total current assets 5,596 4,301
Property, plant and equipment, net 9,104 6,530
Investments and long-term receivables:
Investment in PO joint ventures 777 776
Investment in and receivable
from Houston Refining --- 186
Other investments and long-term
receivables 124 114
Goodwill, net 2,134 2,245
Other assets, net 948 828
Total assets $18,683 $14,980
Current maturities of long-term debt $109 $319
Accounts payable 2,119 1,453
Accrued liabilities 1,028 797
Total current liabilities 3,256 2,569
Long-term debt 8,494 5,974
Other liabilities 1,726 1,786
Deferred income taxes 1,562 1,463
Minority interest 171 180
Stockholders' equity (248,479,864 and
247,050,234 shares outstanding
at September 30, 2006 and
December 31, 2005, respectively) 3,474 3,008
Total liabilities and
stockholders' equity $18,683 $14,980
(a) Reflects Lyondell and its consolidated subsidiaries including Houston
Refining at September 30, 2006. Prior to August 16, 2006, Lyondell's
investment in Houston Refining was accounted for on an equity basis.
(b) The purchase price allocation and other information related to
Houston Refining used in the preparation of this financial data are
preliminary. Lyondell is seeking additional information related to
the fair value of certain assets acquired and liabilities assumed.
The finalization of these matters is not expected to have a material
effect on the purchase price allocation.
Table 14 - Lyondell Selected Equity Investment Activity
For the nine For the twelve
months ended months ended
September 30, December 31,
(Millions of dollars) 2006 2005
Investment in Houston Refining,
beginning of period $(90) $(37)
Lyondell's share of Houston
Refining net income 73 123
Cash distributions from Houston Refining (190) (303)
Cash contributions to Houston Refining 64 128
Consolidation of Houston Refining 143 ---
Other --- (1)
Investment in Houston
Refining, end of period $--- $(90)
September 30, December 31,
2006 2005
Investment in and receivable from
Houston Refining
Investment in Houston Refining $--- $(90)
Houston Refining note receivable --- 229
Houston Refining interest receivable --- 47
Total $--- $186
Tables 15 through 23 represent additional financial information
on a 100% basis for Equistar, Millennium and Houston Refining LP.
Table 15 - 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) 2006 2005 2006 2006 2005
Sales and other operating
revenues (b) $3,480 $2,867 $3,278 $9,794 $8,428
Cost of sales 3,151 2,776 3,028 8,849 7,640
Impairment charge 135 --- --- 135 ---
Selling, general and
administrative expenses 54 53 61 163 151
Research and development expenses 8 8 9 25 25
Operating income 132 30 180 622 612
Interest expense, net (55) (56) (52) (160) (164)
Other income (expense) 1 (2) --- --- (2)
Net income (c) $78 $(28) $128 $462 $446
(a) Represents information for Equistar on the basis reflected in
Equistar's financial statements as filed in its Annual Report on
Form 10-K.
(b) Sales and other operating revenues include sales to affiliates.
(c) As a partnership, Equistar is not subject to federal income taxes.
Table 16 - Equistar Unaudited Balance Sheet Information (a)
September 30, December 31,
(Millions of dollars) 2006 2005
Cash and cash equivalents $38 $215
Accounts receivable, net 1,265 924
Inventories 791 657
Prepaid expenses and other current assets 37 53
Total current assets 2,131 1,849
Property, plant and equipment, net 2,847 3,063
Investments 65 58
Other assets, net 310 350
Total assets $5,353 $5,320
Current maturities of long-term debt $--- $150
Accounts payable 878 735
Accrued liabilities 247 275
Total current liabilities 1,125 1,160
Long-term debt 2,160 2,161
Other liabilities and deferred revenues 398 416
Partners' capital 1,670 1,583
Total liabilities and partners' capital $5,353 $5,320
(a) Represents information for Equistar on the basis reflected in
Equistar's financial statements as filed in its Annual Report
on Form 10-K.
Table 17 - Equistar Unaudited Cash Flow Information (a)
For the nine months ended
September 30,
(Millions of dollars) 2006 2005
Net income $462 $446
Adjustments:
Depreciation and amortization 243 238
Asset impairment 135 ---
Deferred maintenance turnaround expenditures (11) (51)
Changes in assets and liabilities:
Accounts receivable (341) (191)
Inventories (138) (94)
Accounts payable 142 340
Other, net (42) (26)
Cash provided by operating activities 450 662
Expenditures for property, plant and equipment (105) (103)
Other 2 3
Cash used in investing activities (103) (100)
Distributions to owners (375) (475)
Repayment of long-term debt (150) (1)
Other 1 7
Cash used in financing activities (524) (469)
Increase (decrease) in cash and cash equivalents $(177) $93
(a) Represents information for Equistar on the basis reflected in
Equistar's financial statements as filed in its Annual Report
on Form 10-K.
Table 18 - Millennium Unaudited Income Statement Information (a)
For the three For the nine
months ended months ended
Sept. 30, June 30, Sept. 30,
(Millions of dollars) 2006 2005 2006 2006 2005
Sales and other operating
revenues (b) $496 $489 $509 $1,489 $1,457
Cost of sales 434 448 445 1,317 1,237
Selling, general and administrative
expenses 33 77 44 112 165
Research and development expenses 6 5 7 19 17
Asset impairments 6 3 4 12 8
Other --- 2 --- 1 2
Operating income (loss) 17 (46) 9 28 28
Interest expense, net (19) (24) (20) (52) (73)
Other income (expense), net (c) 2 (18) 49 23 (22)
Income (loss) before equity
investment, minority interest
and income taxes --- (88) 38 (1) (67)
Income (loss) from equity
investment in Equistar 23 (8) 38 136 132
Income (loss) before income
taxes and minority interest 23 (96) 76 135 65
Provision for (benefit from) income
taxes 6 (26) (39) (31) 31
Income (loss) before minority
interest 17 (70) 115 166 34
Minority interest --- (2) (1) (2) (4)
Net income (loss) $17 $(72) $114 $164 $30
(a) Represents information for Millennium on the basis reflected in
Millennium's financial statements as filed in its Annual Report on
Form 10-K.
(b) Sales and other operating revenues include sales to affiliates.
(c) Other income (expense), net, for the three months ended June 30,
2006 and nine months ended September 30, 2006 included net credits
of $49 million and $31 million, respectively, related to prior
years' income tax issues.
Table 19 - Millennium Unaudited Balance Sheet Information (a)
Sept. 30, Dec. 31,
(Millions of dollars) 2006 2005
Cash and cash equivalents $150 $279
Accounts receivable, net 348 361
Inventories 403 429
Prepaid expenses and other current assets 32 64
Deferred tax assets 65 15
Total current assets 998 1,148
Property, plant and equipment, net 646 647
Investments in Equistar 489 464
Goodwill 104 104
Other assets, net 104 110
Total assets $2,341 $2,473
Current maturities of long-term debt $20 $169
Accounts payable 311 367
Accrued liabilities 162 156
Total current liabilities 493 692
Long-term debt 868 966
Other liabilities 612 644
Deferred income taxes 173 167
Minority interest 46 42
Stockholder's equity (deficit)
(1,000 shares authorized; 661 shares issued
at September 30, 2006 and December 31, 2005) 149 (38)
Total liabilities and stockholder's equity $2,341 $2,473
(a) Represents information for Millennium on the basis reflected in
Millennium's financial statements as filed in its Annual Report on
Form 10-K.
Table 20 - Millennium Unaudited Cash Flow Information (a)
For the nine months ended
September 30,
(Millions of dollars) 2006 2005
Net income $164 $30
Adjustments:
Asset impairments 12 8
Depreciation and amortization 77 82
Debt prepayment charges and premiums 7 10
Deferred income taxes (37) (18)
Equity investment in Equistar -
Amounts included in net income (136) (132)
Distributions of earnings 111 132
Changes in assets and liabilities:
Accounts receivable 22 (10)
Inventories 36 (19)
Accounts payable (60) (26)
Other, net (21) 59
Cash provided by operating activities 175 116
Expenditures for property, plant
and equipment (51) (34)
Distributions from Equistar in
excess of earnings --- 8
Other 1 ---
Cash used in investing activities (50) (26)
Repayment of long-term debt (259) (349)
Issuance of long-term debt 1 99
Net borrowings on revolving credit
facility 6 ---
Contribution from Lyondell --- 6
Distributions to minority interests --- (5)
Other (4) (1)
Cash used in financing activities (256) (250)
Effect of exchange rate changes on cash 2 (6)
Decrease in cash and cash equivalents $(129) $(166)
(a) Represents information for Millennium on the basis reflected in
Millennium's financial statements as filed in its Annual Report on
Form 10-K.
Table 21 - Houston Refining Unaudited Income Statement Information (a)
For the three For the nine
months ended months ended
September 30, June 30, September 30,
(Millions of dollars) 2006 2005 2006 2006 2005
Sales and other operating
revenues (b) $2,288 $2,202 $2,411 $6,793 $5,301
Cost of sales 2,072 2,091 2,232 6,219 5,012
Termination of Crude Supply
Agreement 300 --- --- 300 ---
Selling, general and
administrative expenses 14 11 16 47 34
Operating income (loss) (98) 100 163 227 255
Interest expense, net (17) (9) (12) (40) (26)
Income (loss) before
income taxes (115) 91 151 187 229
Provision for (benefit from)
income taxes (c) (8) --- 8 --- ---
Net income (loss) $(107) $91 $143 $187 $229
EBITDA (d) $(54) $130 $194 $333 $341
(a) The Refining information presented represents operating results of
Houston Refining on a 100 percent basis. The effects of the August
2006 Acquisition are included prospectively from the date of
acquisition.
(b) Sales and other operating revenues include sales to affiliates.
(c) Amounts reflected represent Texas state income tax. As a
partnership, Houston Refining is not subject to federal income
taxes.
(d) See Table 10 for reconciliation of Houston Refining's net income to
EBITDA.
Table 22 - Houston Refining Unaudited Balance Sheet Information (a)
Sept. 30, Dec. 31,
(Millions of dollars) 2006 2005
Total current assets $792 $418
Property, plant and equipment, net 2,775 1,328
Other assets, net 101 86
Total assets $3,668 $1,832
Current maturities of long-term debt $--- $5
Other current liabilities 756 800
Long-term debt --- 439
Note payable to Lyondell Chemical Company 785 ---
Loans payable to partners 229 264
Other liabilities 102 113
Partners' capital 1,796 211
Total liabilities and partners' capital $3,668 $1,832
(a) Represents information for Houston Refining on a 100 percent basis.
The September 30, 2006 balances reflect the effects of the August
2006 Acquisition.
Table 23 - Houston Refining Unaudited Cash Flow Information (a)
For the nine months ended
September 30,
(Millions of dollars) 2006 2005
Cash flow from operations $185 $440
Capital expenditures 170 121
Depreciation and amortization 106 86
(a) The Refining information presented represents operating results of
Houston Refining on a 100 percent basis. The effects of the August
2006 Acquisition are included prospectively from the date of
acquisition.
SOURCE: Lyondell Chemical Company; Equistar Chemicals, LP; Millennium
CONTACT: media, Susan Moore, +1-713-309-4645, or investors, Doug Pike,
+1-713-309-7141, both of Lyondell Chemical Company
Web site: http://www.lyondell.com/
http://www.lyondell.com/earnings
