NOTICE: In conjunction with Feb. 26, 2007, announcement of a proposed sale of the inorganic chemicals business, Lyondell has determined that the carrying value of goodwill associated with that segment is impaired as of Dec. 31, 2006. Accordingly, Lyondell's net income for the fourth quarter 2006 has been reduced by $549 million to be a loss of $321 million, or $1.29 per share on a fully diluted basis. After this reduction, Lyondell's net income for the full year 2006 is $186 million, or 72 cents per share. For more information, please refer to our annual consolidated financial statements and Lyondell’s 2006 Form 10-K. The following news release issued on Jan. 25, 2007, is provided only for the discussion of business conditions at the time.
Highlights - Full Year * Net income - $735 million or $2.83 per share - $204 million year-to-year improvement * Acquisition of partner's share of Houston refinery * Debt repayment of $917 million brings total to more than $2.5 billion since September 2004 - Fourth Quarter 2006 * Net income - $228 million or 87 cents per share * Record refining results
HOUSTON, Jan. 25 /PRNewswire-FirstCall/ -- Lyondell Chemical Company (NYSE: LYO) today announced net income for the fourth quarter 2006 of $228 million, or 87 cents per share on a fully diluted basis. For the full year 2006, Lyondell had net income of $735 million, or $2.83 per share. Comparisons with prior quarter and 2005 are available in the following table.
Table 1 - Lyondell Earnings Summary (a)
Millions of dollars,
except per share amounts 4Q 4Q 3Q Full Year Full Year
2006 2005 2006 2006 2005
Sales and other operating
revenues $6,245 $5,000 $6,154 $22,228 $18,606
Net income 228 141 57 735 531
Basic earnings per share 0.92 0.57 0.23 2.97 2.16
Diluted earnings per
share (b) 0.87 0.54 0.22 2.83 2.04
Basic weighted average
shares outstanding
(millions) 248.4 246.7 247.7 247.6 245.9
Diluted weighted average
shares outstanding
(millions) (b) 261.4 260.3 260.5 260.3 259.9
(a) Results include the operations of Houston Refining LP ("Houston
Refining") prospectively from August 16, 2006. Prior to August 16,
2006, Lyondell's 58.75 percent interest in Houston Refining was
accounted for as an equity investment.
(b) Includes the dilutive effect of the convertible debentures, stock
options and warrants.
In 2006, business conditions and results continued to be strong in the ethylene, propylene oxide and refining segments. In addition, 2006 results benefited from Lyondell's full ownership of the Houston refinery and the new market-based crude supply contract that began in August.
Fourth-quarter financial results also benefited from a very strong performance in refining and solid results in the ethylene segment. Propylene oxide segment results declined primarily due to seasonally lower fuel product (MTBE/ETBE) margins and costs related to the U.S. MTBE conversion. Inorganic chemicals results were negatively impacted by production outages in the United States and Europe and slow sales related to reduced U.S. housing activity.
Additionally, results reflect the following:
Table 2 - Charges (Benefits) Included in Lyondell's Results
Millions of dollars 4Q 4Q 3Q Full Year Full Year
2006 2005 2006 2006 2005
Pretax charges (benefits):
Debt retirement charges $19 $17 $21 $40 $45
Mutual insurance consortia
losses, net (a) (4) 12 10 11 56
Refining segment contract
termination cost (b) --- --- 176 176 ---
Lake Charles ethylene
facility impairment (c) --- --- 106 106 ---
Lake Charles TDI plant
impairment (d) --- --- --- --- 195
Houston Refining LP -
related settlement (e) --- --- --- (70) ---
Hurricane (estimated
lost production) --- 75 --- --- 150 - 175
After-tax effect of net
(credits) charges (f) (16) 68 203 171 290 - 306
Effect on diluted earnings
per share (0.06) 0.26 0.78 0.66 1.11 - 1.18
(a) Includes a fourth quarter 2006 benefit recognized by Lyondell of $14
million representing insurance proceeds in partial resolution of
Houston Refining's outstanding claims.
(b) Represents Lyondell's 58.75 percent share of the $300 million cost to
terminate Houston Refining's previous crude supply agreement.
(c) Represents impairment of the net book value of the Lake Charles, La.,
ethylene facility, which is part of the Ethylene, Co-Products &
Derivatives segment.
(d) Represents impairment of the net book value of the Lake Charles, La.,
toluene diisocyanate (TDI) facility, which is part of the PO &
Related Products segment.
(e) Represents the impact of the resolution of various matters among
Houston Refining, its owners and their affiliates.
(f) The estimated annual effective income tax rate was 39 percent for the
first nine months of 2006. For the full year 2006, the average
effective income tax rate was reduced to 36 percent, due primarily to
a reduction in the statutory income tax rate in the Netherlands,
reducing the provision for income taxes for the first
nine months of 2006 by $26 million, resulting in an income tax
benefit in the fourth quarter 2006.
"Lyondell had another good year in 2006, as the chemical cycle stayed strong and our key chemical businesses -- ethylene and propylene oxide -- continued to perform well. The year was highlighted by our acquisition of our partner's share of the Houston refinery and the implementation of the new market-based crude supply contract. The value of this transaction is evident in our fourth-quarter results," said Dan F. Smith, president and CEO of Lyondell Chemical Company. "We believe that continued strength in the chemical and refining cycles and our full ownership of the refinery position us well in 2007 and beyond."
OUTLOOK
Thus far in 2007, underlying business fundamentals continue to be sound. In the ethylene chain, prices that were under pressure during the fourth quarter have generally stabilized. In addition, raw material costs have declined and producer inventories have been reduced, all resulting in strengthening sales volumes and margins. Propylene oxide and PO derivatives remain quite strong, while fuel product margins are at typically low seasonal levels. Refining margins have followed a typical winter decline, and first- quarter results will be negatively impacted by planned maintenance. The inorganic chemicals segment should benefit from the correction of fourth- quarter operational issues.
"Looking ahead, fundamental supply and demand conditions across our product lines should be relatively unchanged from 2006, setting the stage for a third consecutive year of strong earnings and cash flow. We stand to benefit from a full year of refinery ownership, and I expect that decisions regarding the inorganics business will be made in the coming weeks," said Smith. "Our financial strategy has proven to be very successful. We have repaid more than $2.5 billion of debt over the past two-plus years, and I see no reason why we cannot continue at this pace or more rapidly during 2007."
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 4Q 4Q 3Q Full Year Full Year
2006 2005 2006 2006 2005
Sales and other operating
revenues $3,091 $3,380 $3,603 $13,247 $12,191
Operating income (b) 214 337 173 867 950
EBITDA (b) (c) 313 438 372 1,361 1,334
(a) See Table 7 for additional segment information.
(b) Operating income for the third quarter and full year 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.
4Q06 v. 3Q06 - Ethylene and ethylene derivative product sales volumes decreased by approximately 25 million pounds (approximately 1 percent) versus the third quarter 2006. Compared with the third quarter, our quarterly average prices for ethylene and polyethylene decreased by approximately 9 cents per pound and the ethylene glycol price decreased by approximately 1 cent per pound. The company's average cost-of-ethylene-production metric (COE) declined by approximately 4 cents per pound versus the third quarter. Acetyls results improved by approximately $15 million primarily due to increased margins.
4Q06 v. 4Q05 - Ethylene and ethylene derivative product sales volumes were comparable to the fourth quarter 2005. The quarterly average prices for ethylene and polyethylene decreased by approximately 15 cents per pound and the ethylene glycol price decreased by approximately 3 cents per pound. The company's average COE metric decreased by approximately 6 cents per pound. Acetyls results improved by approximately $35 million primarily due to increased margins as raw material costs declined while methanol sales prices increased.
2006 v. 2005 - Ethylene and ethylene derivative product sales volumes increased by approximately 60 million pounds (0.5 percent). The average price for ethylene and polyethylene increased by approximately 2 cents and 3 cents per pound, respectively, while the price of ethylene glycol declined by approximately 1 cent per pound. The company's average COE metric increased by approximately 2 cents per pound. Acetyls results improved by approximately $20 million due to increased margins.
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, fuel products (methyl tertiary butyl ether [MTBE] and ethyl tertiary butyl ether [ETBE]), and toluene diisocyanate (TDI).
Table 4 - PO & Related Products Financial Overview (a)
Millions of dollars 4Q 4Q 3Q Full Year Full Year
2006 2005 2006 2006 2005
Sales and other operating
revenues $1,712 $1,645 $1,900 $7,019 $6,568
Operating income (b) 45 35 133 403 316
EBITDA (b) (c) 105 104 195 645 757
(a) See Table 7 for additional segment information.
(b) Operating income for the third quarter and full year 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.
4Q06 v. 3Q06 - Overall segment results declined by $90 million versus the third quarter 2006. Fuel product results declined by approximately $70 million due to a combination of seasonally lower margins, which declined by approximately 35 cents per gallon, and the planned and unplanned downtime of the U.S. MTBE unit (approximately $35 million). PO and PO derivative results declined by approximately $20 million primarily due to planned maintenance and lower volumes. TDI results improved by approximately $15 million primarily due to increased margins. Styrene results were comparable.
4Q06 v. 4Q05 - Overall segment results were relatively unchanged versus the fourth quarter 2005. TDI results increased by approximately $55 million due to lower ongoing operating costs resulting from last year's shutdown of the Lake Charles TDI facility as well as increased prices. Fuel product results declined by approximately $20 million primarily due to costs related to modifications to the U.S. MTBE unit. PO and PO derivative results were comparable. Styrene results declined by approximately $20 million.
2006 v. 2005 - Overall segment results declined by $112 million versus 2005. The decline was primarily attributed to the unusual strength of MTBE margins during the third quarter of 2005. Fuel product results during 2006 declined by $200 million versus 2005. Although still poor, TDI results improved by approximately $135 million (excluding 2005 impairment charges) due to lower operating costs related to the 2005 shutdown of the Lake Charles TDI plant as well as increased prices. PO and PO derivative results were relatively unchanged versus 2005 while lower styrene margins resulted in a $40 million decline in results.
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 4Q 4Q 3Q Full Year Full Year
2006 2005 2006 2006 2005
Sales and other operating
revenues $312 $355 $341 $1,354 $1,360
Operating income (loss) (35) (3) (5) (15) 18
EBITDA (b) (10) 26 25 92 128
(a) See Table 7 for additional segment information.
(b) See Table 10 for a reconciliation of segment EBITDA to net income of
Lyondell.
4Q06 v. 3Q06 - Sales volumes declined by approximately 13,000 metric tons versus the third quarter due to operating issues at two facilities and lower U.S. demand reflecting normal seasonal trends and lower housing demand. Average sales prices were unchanged, as European and Asian price increases were offset by declines in the United States. Increased costs primarily related to the operating issues reduced quarterly results by approximately $20 million.
4Q06 v. 4Q05 - Sales volumes declined by approximately 26,000 metric tons versus the fourth quarter of 2005 due to operating issues and lower U.S. demand, reducing results by approximately $20 million. Two primary factors contributed to a decline in U.S. sales volumes: unusually strong demand in 2005 following hurricane damage to a competitor's facility and lower U.S. housing activity in 2006. Average sales prices increased by approximately $45 per ton as European and Asian prices increased while North and South American prices declined.
2006 v. 2005 - Sales volumes declined by 24,000 metric tons versus 2005 primarily due to the fourth-quarter issues described above. Sales prices increased by approximately $34 per ton; however, this was only sufficient to offset increased raw material, distribution and utility costs.
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. 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. The following review is on a 100-percent basis.
Table 6 - Refining Financial Overview - 100% Basis (a)
Millions of dollars 4Q 4Q 3Q Full Year Full Year
2006 2005 2006 2006 2005
Sales and other operating
revenues $2,065 $1,440 $2,288 $8,858 $6,741
Operating income
(loss) (b) 302 (23) (98) 529 232
EBITDA (b) (c) 357 7 (54) 690 348
(a) The Refining segment information presented above represents the
historical operating results of Houston Refining on a 100 percent
basis, and reflects purchase accounting adjustments from August 16,
2006. See Table 7 for additional segment information.
(b) Operating income and EBITDA for the full year 2006 include a third
quarter 2006 charge of $300 million for the termination of the
previous crude supply agreement.
(c) See Table 10 for a reconciliation of segment EBITDA to net income of
Houston Refining.
4Q06 v. 3Q06 - Compared with the third quarter, the refinery benefited from operating a full quarter under the new contract, the timing of purchases and sales, and a favorable mix of Venezuelan crude. Additionally, refining results benefited by approximately $25 million due to strong operations and premium product margins as the refinery processed an additional 5,000 barrels per day of crude versus the third quarter. A partial resolution of insurance claims benefited the fourth quarter by $14 million.
4Q06 v. 4Q05 - Results improved substantially as compared to the fourth quarter of 2005 when an operating upset severely impacted operations.
2006 v. 2005 - Crude processing rates during 2006 averaged 269,000 barrels per day versus 217,000 barrels per day in 2005. The absence of planned and unplanned downtime as experienced in 2005, improved 2006 margins, and the impact of operating under the new market-based contract for five months of 2006 each contributed to record results in the refining segment.
Cash Distributions and Debt Reduction
Equistar Chemicals, LP to Lyondell Chemical Company and Millennium Chemicals Inc. - Lyondell Chemical Company received $141 million of distributions from Equistar during the fourth quarter 2006 and $405 million for the full year 2006. Millennium received $59 million from Equistar during the fourth quarter 2006 and $170 million for the full year 2006.
Houston Refining LP to Lyondell Chemical Company - Prior to Lyondell's August acquisition of the remaining share of Houston Refining, net distributions to Lyondell totaled $126 million. All results are consolidated after the acquisition.
Millennium to Lyondell Chemical Company - There were no dividends paid by Millennium to Lyondell Chemical Company during 2006.
Debt Reduction - During the fourth quarter, Lyondell repaid $465 million of debt, including $435 million at the Lyondell parent company and $30 million at Millennium. For the full year 2006, Lyondell repaid $917 million of debt, including $486 million at the Lyondell parent company, $150 million at Equistar and $281 million at Millennium.
Receivable Facilities Utilization - As of Dec. 31, 2006, Lyondell's receivable facility was utilized by $100 million and Equistar's receivable facility was unutilized.
CONFERENCE CALL
Lyondell will host a conference call today, Jan. 25, 2007, 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 Jan. 25 to 6 p.m. ET on Feb. 2. The dial-in numbers are 866-465-1303 (U.S.) and 203-369-1420 (international). The pass code for each is 5549. Web replay will be available at 2:30 p.m. ET Jan. 25 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 Jan. 25 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, Quarterly Reports on Form 10-Q for the quarter ended September 30, 2006 and Annual Reports on Form 10-K for the year ended December 31, 2006 which will be filed with the SEC by March 1, 2007.
Table 7 - Selected Unaudited Segment Financial Information (a)
For the three For the twelve
months ended months ended
December 31, September 30, December 31,
(Millions of dollars) 2006 2005 2006 2006 2005
Sales and other operating
revenues: (b)
Ethylene, Co-Products &
Derivatives $3,091 $3,380 $3,603 $13,247 $12,191
PO & Related Products 1,712 1,645 1,900 7,019 6,568
Inorganic Chemicals 312 355 341 1,354 1,360
Refining 2,065 1,440 2,288 8,858 6,741
Operating income (loss):
Ethylene, Co-Products &
Derivatives (c) $214 $337 $173 $867 $950
PO & Related Products (d) 45 35 133 403 316
Inorganic Chemicals (35) (3) (5) (15) 18
Refining (e) 302 (23) (98) 529 232
Depreciation and amortization:
Ethylene, Co-Products &
Derivatives $98 $102 $94 $386 $388
PO & Related Products 62 58 57 234 235
Inorganic Chemicals 22 22 24 95 98
Refining 55 30 44 161 116
EBITDA: (f)
Ethylene, Co-Products &
Derivatives $313 $438 $372 $1,361 $1,334
PO & Related Products 105 104 195 645 757
Inorganic Chemicals (10) 26 25 92 128
Refining (e) 357 7 (54) 690 348
Capital expenditures:
Ethylene, Co-Products &
Derivatives $65 $52 $44 $175 $155
PO & Related Products 14 8 21 68 36
Inorganic Chemicals 12 21 19 54 53
Refining 69 55 61 238 176
(a) See Table 9 for a reconciliation of segment information for the three
months and twelve months ended December 31, 2006 and 2005 and for the
three months ended September 30, 2006 to consolidated Lyondell
financial information. The Refining information presented above
represents operating results of 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 Table 15 for
additional Houston Refining financial information.
(b) Sales include sales to affiliates and intersegment sales.
(c) Includes a $106 million charge for the three months ended
September 30, 2006 and twelve months ended December 31, 2006 for the
impairment of the net book value of the Lake Charles, La., ethylene
facility.
(d) Includes a $195 million charge for the twelve months ended
December 31, 2005 for the impairment of the net book value of the
Lake Charles, La., TDI facility.
(e) Includes a $300 million charge for the three months ended September
30, 2006 and twelve months ended December 31, 2006 for the
termination of Houston Refining's previous crude supply agreement.
(f) See Table 10 for reconciliation of segment EBITDA to net income.
Table 8 - Selected Segment Operating Information (a) (b)
For the three For the twelve
months ended months ended
December September December
31, 30, 31,
2006 2005 2006 2006 2005
Selected Segment Sales Volumes:
Ethylene, Co-Products and
Derivatives (in millions)
Ethylene and derivatives (pounds) 2,810 2,799 2,836 11,447 11,389
Polyethylene included
above (pounds) 1,371 1,258 1,353 5,546 5,345
Co-products, nonaromatic (pounds) 1,956 1,954 2,171 8,247 7,749
Aromatics (gallons) 92 103 89 358 412
PO and Related Products
(in millions)
PO and derivatives (pounds) 783 831 813 3,193 3,236
Co-products:
Styrene monomer (pounds) 1,027 905 1,208 4,248 3,885
MTBE and other TBA
derivatives (gallons) 280 300 321 1,188 1,178
Inorganic Chemicals (thousand
metric tons)
TiO2 136 162 149 594 618
Refined products (thousand barrels
per day)
Gasoline 110 66 112 113 104
Diesel and heating oil 90 63 84 90 80
Jet fuel 21 8 22 16 13
Aromatics 8 8 7 7 8
Other refined products 124 90 112 117 86
Total refined products volumes 353 235 337 343 291
Refining Metrics:
Crude processing rates
(thousand barrels per day) 275 169 270 270 217
Throughput margin
($ per barrel) (c) 20.16
Market margins
($ per barrel): (d)
WTI 2-1-1 7.52
WTI-Maya 13.02
Total 20.54
(a) The Refining information presented above represents the operating
results of Houston Refining on a 100 percent basis.
(b) Sales volumes include sales to affiliates and intersegment sales.
(c) As a result of Lyondell's acquisition of 100 percent of Houston
Refining, beginning with the fourth quarter 2006, Lyondell is
providing throughput margin per barrel information for the refining
segment. Throughput margin per barrel is a statistic that is commonly
reported by independent refiners, and management believes that it
provides useful information to help investors, financial analysts and
the public analyze and evaluate refining segment performance compared
to other refiners and to industry benchmarks. Lyondell's presentation
of throughput margins for the refining segment should not be
considered as an alternative to GAAP measures such as refining
segment revenues and operating income. See Table 15 for calculation
of throughput margin and reconciliation to Refining segment operating
income. The throughput margin is divided by the number of barrels of
crude oil processed in the quarter to derive the margin per barrel.
(d) Market margins are reported by Platts, a division of The McGraw-Hill
Companies.
Table 9 - Reconciliation of Segment Information to Consolidated
Lyondell Financial Information
Sales and Depreciation
other Operating and Capital
operating income amorti- expendi-
(Millions of dollars) revenues (loss) zation tures
For the three months ended
December 31, 2006:
Segment Data
Ethylene, Co-Products &
Derivatives $3,091 $214 $98 $65
PO & Related Products 1,712 45 62 14
Inorganic Chemicals 312 (35) 22 12
Refining (a) 2,065 302 55 69
Other (b) (935) (12) 1 1
Total $6,245 $514 $238 $161
For the three months ended
December 31, 2005:
Segment Data
Ethylene, Co-Products &
Derivatives $3,380 $337 $102 $52
PO & Related Products 1,645 35 58 8
Inorganic Chemicals 355 (3) 22 21
Other (b) (380) (6) 2 3
Total $5,000 $363 $184 $84
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 twelve months ended
December 31, 2006:
Segment Data
Ethylene, Co-Products &
Derivatives $13,247 $867 $386 $175
PO & Related Products 7,019 403 234 68
Inorganic Chemicals 1,354 (15) 95 54
Refining (a) 3,148 383 83 98
Other (b) (2,540) (17) 7 5
Total $22,228 $1,621 $805 $400
For the twelve months ended
December 31, 2005:
Segment Data
Ethylene, Co-Products &
Derivatives $12,191 $950 $388 $155
PO & Related Products 6,568 316 235 36
Inorganic Chemicals 1,360 18 98 53
Other (b) (1,513) (16) 8 5
Total $18,606 $1,268 $729 $249
(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 twelve
months ended months ended
December September December
31, 30, 31,
(Millions of dollars) 2006 2005 2006 2006 2005
LYONDELL
Segment EBITDA:
Ethylene, Co-Products & Derivatives $313 $438 $372 $1,361 $1,334
PO & Related Products 105 104 195 645 757
Inorganic Chemicals (10) 26 25 92 128
Refining (a) 357 - 109 466 -
Other (12) (3) 4 64 (5)
Add:
Income (loss) from equity
investment in Houston Refining
(a) - (16) (104) 73 123
Deduct:
Depreciation and amortization (238) (184) (205) (805) (729)
Interest expense, net (179) (141) (158) (590) (603)
Provision for income taxes (86) (59) (48) (410) (219)
Charges related to impairment of
assets (3) (7) (112) (121) (210)
Debt prepayment premiums and
charges (19) (17) (21) (40) (45)
Lyondell net income $228 $141 $57 $735 $531
Refining EBITDA (b) $7 $(54) $690 $348
Deduct:
Depreciation and amortization (30) (44) (161) (116)
Interest expense, net (12) (17) (56) (38)
Income taxes - 8 - -
Houston Refining net income (loss) $(35) $(107) $473 $194
Lyondell's income from equity
investment in Houston Refining (c) $(104) $73
Less: Accretion of Lyondell's
investment in Houston Refining (d) (1) (5)
Lyondell's 58.75% share of Houston
Refining net income (105) 68
Partner's 41.25% share of Houston
Refining net income (74) 47
Houston Refining net income - pre
acquisition, 100% basis (179) 115
Add (deduct):
Interest expense, net - pre
acquisition 8 31
Income taxes - pre acquisition (8) -
Houston Refining operating income -
pre acquisition (179) 146
Houston Refining operating income -
post acquisition (e) 81 383
Houston Refining operating income -
100% basis (98) 529
Interest expense, net (17) (56)
Income taxes 8 -
Houston Refining net income $(107) $473
(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. The effects of the August
2006 Acquisition are included prospectively from the date of
acquisition.
(c) See Table 11 for Lyondell's income from equity investment in Houston
Refining.
(d) Lyondell's income from its investment in Houston Refining consisted of
Lyondell's share of Houston Refining net income and accretion of
Lyondell's investment in Houston Refining up to its underlying equity
in Houston Refining's assets.
(e) See Table 9 for reconciliation of Houston Refining or Refining segment
operating income to consolidated Lyondell operating income.
Table 11 - Lyondell Unaudited Income Statement Information (a)
For the three For the twelve
months ended months ended
December September December
(Millions of dollars, except 31, 30, 31,
per share data) 2006 2005 2006 2006 2005
Sales and other operating
revenues $6,245 $5,000 $6,154 $22,228 $18,606
Cost of sales 5,540 4,486 5,481 19,772 16,494
Asset impairments 3 7 112 121 210
Selling, general and
administrative expenses 164 121 156 620 543
Research and development
expenses 24 23 23 94 91
Operating income 514 363 382 1,621 1,268
Income (loss) from equity
investment in Houston
Refining (b) --- (16) (104) 73 123
Income (loss) from other
equity investments 1 (1) 2 5 1
Interest expense, net (179) (141) (158) (590) (603)
Other income (expense), net (22) (5) (17) 36 (39)
Income before income taxes 314 200 105 1,145 750
Provision for income taxes 86 59 48 410 219
Net income $228 $141 $57 $735 $531
Basic earnings per share $0.92 $0.57 $0.23 $2.97 $2.16
Diluted earnings per share $0.87 $0.54 $0.22 $2.83 $2.04
Weighted average shares (in
millions):
Basic 248.4 246.7 247.7 247.6 245.9
Diluted 261.4 260.3 260.5 260.3 259.9
(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 months ended
September 30, 2006 and twelve months ended December 31, 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 twelve months ended
December 31,
(Millions of dollars) 2006 2005
Net income $735 $531
Adjustments:
Depreciation and amortization 805 729
Asset impairments 121 210
Equity investments -
Amounts included in net income (78) (124)
Distributions of earnings 73 123
Deferred income taxes 42 142
Debt prepayment premiums and charges 40 45
Changes in assets and liabilities:
Accounts receivable 60 (156)
Inventories (237) (94)
Accounts payable (215) 292
Other, net (124) (104)
Cash provided by operating activities 1,222 1,594
Acquisition of Houston Refining, net of
cash acquired (2,505) ---
Contributions and advances to affiliates (86) (148)
Expenditures for property, plant
and equipment (400) (249)
Distributions from affiliates in
excess of earnings 117 183
Other 6 3
Cash used in investing activities (2,868) (211)
Issuance of long-term debt 4,357 100
Repayment of long-term debt (b) (2,677) (1,512)
Dividends paid (223) (222)
Proceeds from stock option exercises 27 48
Other 7 6
Cash provided by (used in)
financing activities 1,491 (1,580)
Effect of exchange rate changes on cash 8 (14)
Decrease in cash and cash equivalents $(147) $(211)
(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 twelve months ended December 31,
2006 and 2005 of $39 million and $46 million, respectively.
Table 13 - Lyondell Unaudited Balance Sheet Information (a)
December 31, December 31,
(Millions of dollars) 2006 2005
Cash and cash equivalents $446 $593
Accounts receivable, net 2,168 1,677
Inventories 2,259 1,657
Prepaid expenses and other current assets 164 176
Deferred tax assets 148 198
Total current assets 5,185 4,301
Property, plant and equipment, net 9,147 6,530
Investments and long-term receivables:
Investment in PO joint ventures 778 776
Investment in and receivable from
Houston Refining --- 186
Other investments and long-term
receivables 118 114
Goodwill, net 2,193 2,245
Other assets, net 938 828
Total assets $18,359 $14,980
Current maturities of long-term debt $22 $319
Accounts payable 2,096 1,453
Accrued liabilities 1,082 797
Total current liabilities 3,200 2,569
Long-term debt 8,018 5,974
Other liabilities 1,661 1,786
Deferred income taxes 1,568 1,463
Minority interest 174 180
Stockholders' equity (248,970,570
and 247,050,234 shares outstanding
at December 31, 2006 and
December 31, 2005, respectively) 3,738 3,008
Total liabilities and stockholders'
equity $18,359 $14,980
(a) Reflects Lyondell and its consolidated subsidiaries including Houston
Refining at December 31, 2006. Prior to August 16, 2006, Lyondell's
investment in Houston Refining was accounted for on an equity basis.
Table 14 - Lyondell Selected Equity Investment Activity
For the twelve For the twelve
months ended months ended
December 31, 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)
Investment in and receivable from
Houston Refining
December 31, December 31,
2006 2005
Investment in Houston Refining $--- $(90)
Houston Refining note receivable --- 229
Houston Refining interest receivable --- 47
Total $--- $186
Table 15 - Refining Segment Throughput Margin and Reconciliation to
Unaudited Refining Segment Operating Income
For the three
months ended
December 31,
(Millions of dollars) 2006
Refining Throughput Margin:
Sales and other operating revenues (a) $2,065
Crude oil and feedstock costs 1,555
Throughput margin 510
Operating expenses 201
Selling, general and administrative expense 7
Refining operating income (a) $302
(a) See Table 9 for reconciliation of Refining segment sales and other
operating revenues and operating income to Lyondell sales and other
operating revenues and operating income.
Tables 16 through 21 represent additional financial information
on a 100% basis for Equistar and Millennium
Table 16 - Equistar Unaudited Income Statement Information (a)
For the three For the twelve
months ended months ended
December September December
31, 30, 31,
(Millions of dollars) 2006 2005 2006 2006 2005
Sales and other operating
revenues (b) $2,971 $3,258 $3,480 $12,765 $11,686
Cost of sales 2,713 2,847 3,151 11,562 10,487
Asset impairment --- --- 135 135 ---
Selling, general and
administrative expenses 47 47 54 210 198
Research and development
expenses 9 8 8 34 33
Operating income 202 356 132 824 968
Interest expense, net (50) (54) (55) (210) (218)
Other income (expense) --- --- 1 --- (2)
Net income (c) $152 $302 $78 $614 $748
(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 17 - Equistar Unaudited Balance Sheet Information (a)
December 31, December 31,
(Millions of dollars) 2006 2005
Cash and cash equivalents $133 $215
Accounts receivable, net 1,167 924
Inventories 809 657
Prepaid expenses and other current assets 49 53
Total current assets 2,158 1,849
Property, plant and equipment, net 2,846 3,063
Investments 59 58
Other assets, net 296 350
Total assets $5,359 $5,320
Current maturities of long-term debt $--- $150
Accounts payable 905 735
Accrued liabilities 312 275
Total current liabilities 1,217 1,160
Long-term debt 2,160 2,161
Other liabilities and deferred revenues 378 416
Partners' capital 1,604 1,583
Total liabilities and partners'
capital $5,359 $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 18 - Equistar Unaudited Cash Flow Information (a)
For the twelve months ended
December 31,
(Millions of dollars) 2006 2005
Net income $614 $748
Adjustments:
Depreciation and amortization 324 322
Asset impairment 135 ---
Deferred maintenance turnaround expenditures (12) (51)
Changes in assets and liabilities:
Accounts receivable (243) (96)
Inventories (156) (69)
Accounts payable 168 197
Other, net (23) (4)
Cash provided by operating activities 807 1,047
Expenditures for property, plant
and equipment (168) (153)
Other 2 3
Cash used in investing activities (166) (150)
Distributions to owners (575) (725)
Repayment of long-term debt (150) (1)
Other 2 5
Cash used in financing activities (723) (721)
Increase (decrease) in cash and
cash equivalents $(82) $176
(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 19 - Millennium Unaudited Income Statement Information (a)
For the three For the twelve
months ended months ended
December September December
31, 30, 31,
(Millions of dollars) 2006 2005 2006 2006 2005
Sales and other operating
revenues (b) $459 $502 $496 $1,948 $1,959
Cost of sales 415 478 434 1,732 1,715
Selling, general and
administrative expenses 47 29 33 160 196
Research and development
expenses 7 6 6 26 23
Asset impairments 3 7 6 15 15
Operating income (loss) (13) (18) 17 15 10
Interest expense, net (19) (39) (19) (71) (112)
Other income (expense), net (c) --- 3 2 23 (19)
Loss before equity
investment, minority
interest and income taxes (32) (54) --- (33) (121)
Income from equity investment
in Equistar 45 89 23 181 221
Income before income taxes
and minority interest 13 35 23 148 100
Provision for (benefit from)
income taxes 14 36 6 (17) 67
Income (loss) before
minority interest (1) (1) 17 165 33
Minority interest --- (1) --- (2) (5)
Net income (loss) $(1) $(2) $17 $163 $28
(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 twelve months ended December
31, 2006 included net credits of $30 million related to resolution
of prior years' income tax issues.
Table 20 - Millennium Unaudited Balance Sheet Information (a)
December 31, December 31,
(Millions of dollars) 2006 2005
Cash and cash equivalents $121 $279
Accounts receivable, net 347 361
Inventories 440 429
Prepaid expenses and other current assets 31 64
Deferred tax assets 69 15
Total current assets 1,008 1,148
Property, plant and equipment, net 651 647
Investments in Equistar 470 464
Goodwill 104 104
Other assets, net 101 110
Total assets $2,334 $2,473
Current maturities of long-term debt $4 $169
Accounts payable 330 367
Accrued liabilities 174 156
Total current liabilities 508 692
Long-term debt 849 966
Other liabilities 621 644
Deferred income taxes 163 167
Minority interest 45 42
Stockholder's equity (deficit)
(1,000 shares authorized; 661 shares issued
at December 31, 2006 and 2005) 148 (38)
Total liabilities and
stockholder's equity $2,334 $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 21 - Millennium Unaudited Cash Flow Information (a)
For the twelve months ended
December 31,
(Millions of dollars) 2006 2005
Net income $163 $28
Adjustments:
Asset impairments 15 15
Depreciation and amortization 101 107
Debt prepayment charges and premiums 7 11
Deferred income taxes (48) (4)
Equity investment in Equistar -
Amounts included in net income (181) (221)
Distributions of earnings 170 214
Changes in assets and liabilities:
Accounts receivable 28 (28)
Inventories 5 (20)
Accounts payable (50) 77
Other, net (17) 96
Cash provided by operating activities 193 275
Expenditures for property, plant and equipment (66) (60)
Other 1 ---
Cash used in investing activities (65) (60)
Repayment of long-term debt (289) (374)
Issuance of long-term debt 1 100
Distributions to minority interests (1) (6)
Other (1) 8
Cash used in financing activities (290) (272)
Effect of exchange rate changes on cash 4 (8)
Decrease in cash and cash equivalents $(158) $(65)
(a) Represents information for Millennium on the basis reflected in
Millennium's financial statements as filed in its Annual Report on
Form 10-K.
SOURCE: Lyondell Chemical Company; Equistar Chemicals, LP; Millennium
CONTACT: media, Susan Moore, +1-713-309-4645, or investors, Doug Pike,
+1-713-309-4590, both of Lyondell Chemical Company
Web site: http://www.lyondell.com/
http://www.lyondell.com/earnings
