* Income from continuing operations of $271 million or $1.02 per share
* Driven by strong refining and fuels results
* Announced pending sale of company to Basell for $48 per share
* All-cash transaction valued at approximately $19 billion
* Inorganic chemicals sold for $1.3 billion; $1.05 billion after tax
* Debt repayments of $1.3 billion
HOUSTON, July 26 /PRNewswire-FirstCall/ -- Lyondell Chemical Company (NYSE: LYO) today announced income from continuing operations for the second quarter 2007 of $271 million, or $1.02 per share on a fully diluted basis. For the first six months of 2007, net income from continuing operations was $277 million, or $1.05 per share on a fully diluted basis. Comparisons with the prior quarter, second quarter 2006 and first half of 2006 are available in the following table.
Table 1 - Lyondell Earnings Summary (a)
1st 1st
Six Six
Millions of 2Q 2Q 1Q Months Months
dollars except per 2007 2006 2007 2007 2006
share amounts
Sales and other
operating revenues $7,482 $4,715 $5,789 $13,271 $9,133
Income from
continuing
operations 271 129 6 277 415
Net income 176 160 19 195 450
Income from continuing
operations:
Basic earnings
per share 1.07 0.53 0.03 1.10 1.68
Diluted earnings
per share 1.02 0.50 0.02 1.05 1.61
Net income:
Basic earnings
per share 0.69 0.65 0.08 0.77 1.82
Diluted earnings
per share 0.66 0.62 0.07 0.74 1.74
Basic weighted
average shares
outstanding (millions) 252.9 247.4 251.1 252.0 247.1
Diluted weighted
average shares
outstanding
(millions) (b) 265.7 260.1 263.7 264.7 259.7
(a) Results include 100% of the operations of Houston Refining LP
("Houston Refining") prospectively from August 16, 2006. Prior to
August 16, 2006, Lyondell's 58.75% interest in Houston Refining was
accounted for as an equity investment.
(b) Includes the dilutive effect of the convertible debentures, stock
options and warrants.
Second-quarter 2007 results from continuing operations improved versus the first quarter 2007 primarily due to record refining segment results coupled with strong fuels (MTBE/ETBE) performance. Ethylene segment results continued to reflect good volumes and operating rates with modest margin improvement. In the propylene oxide segment, chemical product results declined primarily due to increased raw material costs; however, these were more than offset by the strength in fuels (MTBE/ETBE).
The inorganic chemicals business is accounted for as a discontinued operation as it was sold midway through the quarter for a total transaction value of approximately $1.3 billion. After-tax cash proceeds of approximately $1.05 billion were used to repay debt.
Additionally, results reflect the following:
Table 2 - Charges (Benefits) Included in Lyondell's Results from
Continuing Operations
1st 1st
Millions of dollars Six Six
2Q 2Q 1Q Months Months
2007 2006 2007 2007 2006
Pretax charges (benefits):
Net charges related to
commercial disputes (a) $10 $ - - $62 $72 $- -
Debt retirement charges 43 - - - - 43 - -
Houston Refining LP -
related settlement (b) - - - - - - - - (70)
Texas Margin Tax credit,
net of federal income tax (17) - - - - (17) - -
Other tax effects of
(charges) credits (19) - - (22) (40) 24
After-tax effect of net
charges (credits) 17 - - 40 58 (46)
Effect on diluted earnings
per share 0.06 - - 0.15 0.22 (0.18)
(a) Represents pretax charges related to commercial disputes, including
charges associated with the 2005 shutdown of the Lake Charles toluene
diisocyanate ("TDI") facility.
(b) Represents the net effect of the resolution of various matters among
Houston Refining, its owners and their affiliates.
"The strength in our refining operations was quite clear during the quarter and demonstrated the way in which the segment complements our chemical operations and provides balance within our portfolio. While our refining and fuel products benefited from the strong fuel markets, similar dynamics within the energy markets pressured our chemical products. In fact, ethylene segment raw material costs on average increased by approximately 20 percent. Consequently, despite a relatively strong market and several price increases, margin improvement in this segment was quite modest," said Dan F. Smith, chairman, president and CEO of Lyondell Chemical Company. "The strong refining results were complemented by the sale of our inorganics business, which enabled us to accelerate our debt repayment program providing additional value to our investors."
OUTLOOK
Thus far, third-quarter market conditions have been similar to the prior quarter. Refining and fuels have remained quite strong while elevated raw material costs continue to pressure the chemical products.
"Our outlook for our chemical and fuel businesses continues to be positive and thus far the summer season has been strong, meeting our expectations. The portfolio changes that we made over the past year, coupled with our operational focus, have positioned us to benefit in a growing global economy," said Smith.
LYONDELL BUSINESS RESULTS DISCUSSION BY REPORTING SEGMENT
Lyondell operates in three segments: 1) Ethylene, co-products and derivatives; 2) Propylene oxide (PO) and related products; and 3) Refining. Inorganic chemicals is presented as a discontinued operation due to the May 15 sale of this business.
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)
1st 1st
Six Six
2Q 2Q 1Q Months Months
Millions of dollars 2007 2006 2007 2007 2006
Sales and other
operating revenues $3,665 $3,401 $2,991 $6,656 $6,553
Operating income 95 181 77 172 480
EBITDA (b) 194 279 177 371 676
(a) See Table 7 for additional financial information.
(b) See Table 10 for a reconciliation of segment EBITDA to income from
continuing operations.
2Q07 v. 1Q07 -- Ethylene and ethylene derivative product sales volumes increased by approximately 125 million pounds (approximately 4 percent) versus the first quarter 2007. Compared with the first quarter, our quarterly average prices for ethylene and polyethylene increased by approximately 4.5 cents and 5 cents per pound, respectively, while the ethylene glycol price increased by 1.5 cents per pound. The company's average cost-of-ethylene-production metric (COE) increased by approximately 2.5 cents per pound versus the first quarter primarily due to increases from natural gas liquid-based raw materials. Acetyls results declined by approximately $15 million as a result of higher costs and lower methanol prices.
2Q07 v. 2Q06 -- Ethylene and ethylene derivative product sales volumes were up approximately 150 million pounds versus the second quarter 2006. The quarterly average prices for ethylene and polyethylene decreased by approximately 2.5 cents and 2 cents per pound, respectively, and the ethylene glycol price increased by 4 cents per pound. The company's average COE metric increased by approximately 1 cent per pound. Acetyls results were unchanged.
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]), isobutylene and toluene diisocyanate (TDI).
Table 4 - PO & Related Products Financial Overview (a)
1st 1st
Six Six
2Q 2Q 1Q Months Months
Millions of dollars 2007 2006 2007 2007 2006
Sales and other
operating revenues $2,169 $1,763 $1,758 $3,927 $3,407
Operating income (b) 133 108 27 160 225
EBITDA (b) (c) 195 170 87 282 345
(a) See Table 7 for additional financial information.
(b) Includes pretax charges in the second and first quarters of 2007 of
$10 million and $62 million, respectively, and $72 million in the
first six months of 2007 related to commercial disputes, including
charges associated with the 2005 shutdown of the Lake Charles TDI
facility.
(c) See Table 10 for a reconciliation of segment EBITDA to income from
continuing operations.
2Q07 v. 1Q07 -- Segment EBITDA increased by $108 million versus the first quarter 2007 partially due to the absence of the $62 million first-quarter TDI charge. Fuel-product results increased by approximately $105 million primarily as a result of increased raw material margins (approximately 40 cents per gallon) and sales volumes. PO and PO derivative results decreased by approximately $45 million primarily due to increased propylene raw material costs, compensation expense and charges related to commercial disputes. Styrene results were relatively unchanged. Absent the first-quarter charge, TDI results decreased by approximately $10 million due to scheduled second-quarter maintenance.
2Q07 v. 2Q06 -- Segment EBITDA increased by $25 million versus the second quarter 2006 primarily due to increased fuel product margins. Fuel product results increased by approximately $45 million due to higher volumes and margins. PO and PO derivative results decreased by approximately $10 million primarily due to compensation expense and charges related to commercial disputes. Together, styrene and TDI results declined by approximately $10 million.
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 5 - Refining Financial Overview - 100% Basis (a)
1st 1st
Six Six
2Q 2Q 1Q Months Months
Millions of dollars 2007 2006 2007 2007 2006
Sales and other
operating revenues $2,793 $2,411 $1,884 $4,677 $4,505
Operating income 387 163 78 465 325
EBITDA (b) 451 194 133 584 387
(a) The Refining segment information presented above represents the
historical operating results of Houston Refining on a 100% basis, and
reflects purchase accounting adjustments from August 16, 2006. See
Table 7 for additional financial information.
(b) See Table 10 for a reconciliation of segment EBITDA to income from
continuing operations and, as appropriate, to net income of Houston
Refining.
2Q07 v. 1Q07 -- Segment EBITDA was $318 million higher than the prior quarter, which was negatively impacted by $140 million related to the planned maintenance turnaround and upgrade of the fluid catalytic cracking unit and related units. In addition to the absence of turnaround-related impacts, second-quarter results were positively impacted by approximately $160 million from increased margins versus the first quarter. Additionally, aromatics and lubes benefited by a combined $20 million as a result of strong operations.
2Q07 v. 2Q06 -- Results increased primarily due to increased margins, which are partially attributed to stronger market conditions and partially attributed to the cancellation of the previous PdVSA crude supply agreement during August 2006. Aromatics and lubes contributed an additional $20 million versus the second quarter 2006.
Discontinued Operations -- Inorganic Chemicals The principal product of inorganic chemicals is titanium dioxide (TiO2). In view of the May 15, 2007, sale, the inorganic chemicals business is reported as a discontinued operation including comparative periods. Second-quarter results for the discontinued operations include a $91 million loss on the sale due primarily to the impact of income taxes.
Table 6 - Discontinued Operations - Inorganic Chemicals Financial
Overview (a)
1st 1st
Six Six
Millions of dollars 2Q 2Q 1Q Months Months
2007 2006 2007 2007 2006
Sales and other operating revenues $181 $355 $333 $514 $695
Income (loss) from discontinued
operations, net of tax (b) (95) 31 13 (82) 35
(a) See Table 7 for additional financial information.
(b) Income (loss) from discontinued operations, net of tax, for the three
and six months ended June 30, 2007 includes a $21 million pretax loss
or $91 million after tax, related to the sale of the worldwide
inorganic chemicals business.
Cash Distributions and Debt Reduction
Equistar Chemicals, LP to Lyondell Chemical Company (LCC) and Millennium Chemicals Inc. -- There were no distributions during the quarter.
Millennium to Lyondell Chemical Company (LCC) -- There were no dividends paid by Millennium to LCC during the second quarter.
Debt Reduction -- During the second quarter, debt repayment, including scheduled amortization of term loans and debt of discontinued operations, totaled $1.3 billion. Millennium debt repayment was $436 million, Equistar repaid $600 million, and LCC repaid $274 million.
Receivable Facilities Utilization -- As of June 30, 2007, Lyondell's receivable facility was unutilized and Equistar's receivable facility was utilized by $155 million.
CONFERENCE CALL
Lyondell will host a conference call today, July 26, 2007, at 11:30 a.m. Eastern Time (ET). Participating on the call will be: Dan F. Smith, Chairman, 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 prepared remarks will be available from 1:30 p.m. ET July 26 to 6 p.m. ET on Aug. 3. The dial-in numbers are 866-513-9969 (U.S.) and 203-369-1996 (international). The pass code for each is 5549. Web replay of the prepared remarks will be available at 2:30 p.m. ET July 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 July 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 leading global manufacturer of chemicals and plastics, a refiner of heavy, high-sulfur crude oil and a significant producer of fuel products. Key products include ethylene, polyethylene, styrene, propylene, propylene oxide, gasoline, ultra low-sulfur diesel, MTBE and ETBE.
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, Lyondell's ability to implement its business strategies, including the ability of Lyondell and Basell to complete the proposed merger; 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; technological developments; risks of doing business outside of the U.S.; access to capital markets; 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, 2006 and Quarterly Reports on Form 10-Q for the quarter ended March 31, 2007, Quarterly Reports on Form 10-Q for the quarter ended June 30, 2007 which will be filed with the SEC in August 2007 and the Lyondell Current Report on Form 8-K filed on May 21, 2007.
Additional Information and Where to Find It
In connection with the solicitation of proxies by Lyondell with respect to the meeting of its stockholders to be called with respect to the proposed merger, Lyondell will file a proxy statement with the Securities and Exchange Commission (the "SEC"). STOCKHOLDERS OF LYONDELL ARE ADVISED TO READ THE PROXY STATEMENT WHEN IT IS FINALIZED AND DISTRIBUTED TO THE STOCKHOLDERS BECAUSE IT WILL CONTAIN IMPORTANT INFORMATION. Stockholders will be able to obtain a free-of-charge copy of the proxy statement (when available) and other relevant documents filed with the SEC from the SEC's web site at http://www.sec.gov/. Stockholders will also be able to obtain a free-of-charge copy of the proxy statement and other relevant documents (when available) by directing a request by mail to Lyondell Chemical Company, Investor Relations, 1221 McKinney Street, Suite 700, Houston, Texas 77010, telephone (713) 309-4590, or from Lyondell's website at http://www.lyondell.com/.
Lyondell and certain of its directors and executive officers may, under the rules of the SEC, be deemed to be "participants" in the solicitation of proxies from its stockholders in connection with the proposed merger. Information concerning the interests of the persons who may be "participants" in the solicitation is set forth in Lyondell's proxy statements and annual reports on Form 10-K (including any amendments thereto), previously filed with the SEC, and in the proxy statement relating to the merger and other relevant materials to be filed with the SEC when they become available.
Table 7 - Selected Unaudited Financial Information
For the three For the six
months ended months ended
June 30, March 31, June 30,
(Millions of dollars) 2007 2006 2007 2007 2006
Sales and other operating
revenues: (a) (b)
Ethylene, Co-Products &
Derivatives $3,665 $3,401 $2,991 $6,656 $6,553
PO & Related Products 2,169 1,763 1,758 3,927 3,407
Refining 2,793 2,411 1,884 4,677 4,505
Operating income: (a)
Ethylene, Co-Products &
Derivatives $95 $181 $77 $172 $480
PO & Related Products (c) 133 108 27 160 225
Refining 387 163 78 465 325
Depreciation and amortization: (a)
Ethylene, Co-Products &
Derivatives $96 $96 $98 $194 $194
PO & Related Products 59 59 59 118 115
Refining 64 31 55 119 62
EBITDA: (d)
Ethylene, Co-Products &
Derivatives $194 $279 $177 $371 $676
PO & Related Products (c) 195 170 87 282 345
Refining 451 194 133 584 387
Capital expenditures: (a)
Ethylene, Co-Products &
Derivatives $53 $43 $41 $94 $66
PO & Related Products 19 18 9 28 33
Refining 28 49 90 118 109
Discontinued Operations -
Inorganic Chemicals: (e)
Sales and other operating
revenues $181 $355 $333 $514 $695
Income (loss) from discontinued
operations, net of tax (95) 31 13 (82) 35
Capital expenditures 7 13 8 15 23
(a) See Table 9 for a reconciliation of segment information for the three
and six months ended June 30, 2007 and 2006 and the three months ended
March 31, 2007 to consolidated Lyondell financial information. The
Refining information presented above represents operating results of
Houston Refining on a 100% basis. Lyondell acquired the remaining
41.25% of Houston Refining on August 16, 2006. From August 16, 2006,
depreciation and amortization, as well as operating income, reflect
the effects of that acquisition. See Table 14 for additional Houston
Refining financial information.
(b) Sales include intersegment sales.
(c) Includes pretax charges in the three months ended June 30, 2007 and
March 31, 2007 of $10 million and $62 million, respectively, and
$72 million in the six months ended June 30, 2007 related to
commercial disputes, including charges associated with the 2005
shutdown of the Lake Charles TDI facility.
(d) See Table 10 for a reconciliation of segment EBITDA to income from
continuing operations.
(e) On May 15, 2007, Lyondell completed the sale of its worldwide
inorganic chemicals business.
Table 8 - Selected Operating Information (a)
For the three For the six
months ended months ended
June 30, March 31, June 30,
2007 2006 2007 2007 2006
Selected Segment Sales Volumes:
Ethylene, Co-Products and
Derivatives (in millions)
Ethylene and derivatives
(pounds) 3,083 2,930 2,958 6,041 5,801
Polyethylene included
above (pounds) 1,502 1,489 1,479 2,981 2,822
Co-products, nonaromatic
(pounds) 2,009 2,154 2,025 4,034 4,120
Aromatics (gallons) 87 88 95 182 177
PO and Related Products (in millions)
PO and derivatives (pounds) 794 763 868 1,662 1,597
Co-products:
Styrene monomer (pounds) 991 1,031 987 1,978 2,013
Fuel products and other TBA
derivatives (gallons) 374 290 300 674 587
Refined products (thousand barrels
per day) (b)
Gasoline 136 116 79 108 114
Diesel and heating oil 90 82 71 80 94
Jet fuel 22 11 19 21 10
Aromatics 8 7 6 7 7
Other refined products 121 118 145 133 117
Total refined products volumes 377 334 320 349 342
Discontinued Operations - Inorganic
Chemicals (thousand metric tons) (c)
TiO2 79 158 146 225 309
Refining Metrics: (b)
Crude processing rates (thousand
barrels per day) 273 271 221 247 266
Throughput margin ($ per
barrel) (d) 25.44 15.43 21.00
Market margins ($ per barrel): (e)
WTI 2-1-1 21.67 9.28 15.48
WTI-Maya 10.00 12.72 11.36
Total 31.67 22.00 26.84
(a) Sales volumes include intersegment sales.
(b) The Refining information represents the operating results of Houston
Refining on a 100% basis.
(c) On May 15, 2007, Lyondell completed the sale of its worldwide
inorganic chemicals business.
(d) As a result of Lyondell's acquisition of 100% of Houston Refining,
Lyondell is providing throughput margin per barrel information for the
refining segment. See Table 14 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 period to derive the margin per barrel.
(e) 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 amortization expenditures
(Millions of dollars) revenues (loss)
For the three months
ended June 30, 2007:
Segment Data:
Ethylene, Co-Products &
Derivatives $3,665 $95 $96 $53
PO & Related Products (a) 2,169 133 59 19
Refining (b) 2,793 387 64 28
Other (c) (1,145) (16) 7 1
Continuing Operations $7,482 $599 $226 $101
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
Other (c) (449) 2 2 2
Continuing Operations $4,715 $291 $157 $63
For the three months
ended March 31, 2007:
Segment Data:
Ethylene, Co-Products &
Derivatives $2,991 $77 $98 $41
PO & Related Products (a) 1,758 27 59 9
Refining (b) 1,884 78 55 90
Other (c) (844) (3) 1 1
Continuing Operations $5,789 $179 $213 $141
For the six months
ended June 30, 2007:
Segment Data:
Ethylene, Co-Products &
Derivatives $6,656 $172 $194 $94
PO & Related Products (a) 3,927 160 118 28
Refining (b) 4,677 465 119 118
Other (c) (1,989) (19) 8 2
Continuing Operations $13,271 $778 $439 $242
For the six months
ended June 30, 2006:
Segment Data:
Ethylene, Co-Products &
Derivatives $6,553 $480 $194 $66
PO & Related Products 3,407 225 115 33
Other (c) (827) (2) 4 2
Continuing Operations $9,133 $703 $313 $101
(a) Includes pretax charges in the three months ended June 30, 2007 and
March 31, 2007 of $10 million and $62 million, respectively, and
$72 million in the six months ended June 30, 2007 related to
commercial disputes, including charges associated with the 2005
shutdown of the Lake Charles TDI facility.
(b) 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.
(c) Includes items not allocated to segments or discontinued operations
and elimination of intersegment transactions between segments and
discontinued operations.
Table 10 - Reconciliations
Segment EBITDA to Income from Continuing Operations
For the three For the six
months ended months ended
June 30, March 31, June 30,
(Millions of dollars) 2007 2006 2007 2007 2006
LYONDELL
Segment EBITDA:
Ethylene, Co-Products & Derivatives $194 $279 $177 $371 $676
PO & Related Products 195 170 87 282 345
Refining (a) 451 - 133 584 -
Other (14) 3 (1) (15) 75
Add:
Income from equity investment
in Houston Refining (a) - 86 - - 177
Deduct:
Depreciation and amortization (226) (157) (213) (439) (313)
Interest expense, net (161) (151) (174) (335) (276)
Provision for income taxes (125) (101) (3) (128) (269)
Debt prepayment premiums and
charges (43) - - (43) -
Lyondell income from continuing
operations $271 $129 $6 $277 $415
Refining EBITDA (b) $194 $387
Deduct:
Depreciation and amortization (31) (62)
Interest expense, net (12) (23)
Provision for income taxes (8) (8)
Houston Refining net income $143 $294
(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 represents operating results of Houston
Refining on a 100% basis.
Table 11 - Lyondell Unaudited Income Statement Information (a)
For the three For the six
months ended months ended
(Millions of dollars, except June 30, March 31, June 30,
per share data) 2007 2006 2007 2007 2006
Sales and other operating
revenues $7,482 $4,715 $5,789 $13,271 $9,133
Cost of sales (b) 6,675 4,268 5,442 12,117 8,149
Selling, general and
administrative expenses 189 137 150 339 244
Research and development
expenses 19 19 18 37 37
Operating income 599 291 179 778 703
Income from equity investment
in Houston Refining - 86 - - 177
Income from other equity
investments - 3 2 2 2
Interest expense, net (161) (151) (174) (335) (276)
Other income (expense), net (c) (42) 1 2 (40) 78
Income from continuing
operations before income
taxes 396 230 9 405 684
Provision for income taxes 125 101 3 128 269
Income from continuing
operations 271 129 6 277 415
Income (loss) from discontinued
operations, net of tax (d) (95) 31 13 (82) 35
Net income $176 $160 $19 $195 $450
Income from continuing
operations:
Basic $1.07 $0.53 $0.03 $1.10 $1.68
Diluted $1.02 $0.50 $0.02 $1.05 $1.61
Net income:
Basic $0.69 $0.65 $0.08 $0.77 $1.82
Diluted $0.66 $0.62 $0.07 $0.74 $1.74
Weighted average shares
(in millions):
Basic 252.9 247.4 251.1 252.0 247.1
Diluted 265.7 260.1 263.7 264.7 259.7
(a) On May 15, 2007, Lyondell completed the sale of its worldwide
inorganic chemicals business. 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 pretax charges in the three months ended June 30, 2007 and
March 31, 2007 of $10 million and $62 million, respectively, and
$72 million in the six months ended June 30, 2007 related to
commercial disputes, including charges associated with the 2005
shutdown of the Lake Charles TDI facility.
(c) Includes pretax charges of $43 million in the three and six months
ended June 30, 2007 related to the prepayment of debt, and a
$70 million net benefit in the six months ended June 30, 2006 for
resolution of various matters among Houston Refining, its owners and
affiliates.
(d) Includes a $91 million after-tax loss in the three and six months
ended June 30, 2007 related to the May 15, 2007 sale of the worldwide
inorganic chemicals business.
Table 12 - Lyondell Unaudited Cash Flow Information (a)
For the three For the six
months ended months ended
June 30, June 30,
(Millions of dollars) 2007 2006 2007 2006
Net income $176 $160 $195 $450
Loss (income) from discontinued
operations, net of tax 95 (31) 82 (35)
Adjustments:
Depreciation and amortization 226 157 439 313
Equity investments -
Amounts included in net
income - (89) (2) (179)
Distributions of earnings 1 52 1 122
Deferred income taxes 215 30 140 106
Debt prepayment premiums and
charges 43 - 43 -
Changes in assets and liabilities:
Accounts receivable (296) (260) (350) (201)
Inventories 124 126 (13) (53)
Accounts payable 153 164 376 140
Other, net (134) (146) (404) (237)
Cash provided by operating
activities - continuing operations 603 163 507 426
Cash provided by (used in)
operating activities -
discontinued operations (3) 12 (16) 12
Cash provided by
operating activities 600 175 491 438
Expenditures for property, plant
and equipment (101) (63) (242) (101)
Acquisition of Houston Refining LP
and related payments - - (94) -
Contributions and advances to
affiliates (14) (20) (26) (57)
Other 13 6 13 6
Cash used in investing
activities - continuing operations (102) (77) (349) (152)
Net proceeds from sale of
discontinued operations 990 - 990 -
Cash used in investing
activities - discontinued
operations (7) (13) (15) (23)
Cash provided by (used in)
investing activities 881 (90) 626 (175)
Repayment of long-term debt (b) (1,311) - (1,319) (443)
Issuance of long-term debt 510 - 510 -
Net repayments on revolving credit
facility (145) - - -
Dividends paid (57) (55) (114) (111)
Proceeds from and tax benefits of
stock option exercises 14 7 77 9
Other, net 12 (1) 20 -
Cash used in financing
activities - continuing operations (977) (49) (826) (545)
Cash provided by (used in)
financing activities -
discontinued operations (1) 7 23 5
Cash used in financing
activities (978) (42) (803) (540)
Effect of exchange rate changes on
cash - 2 2 4
Increase (decrease) in cash and
cash equivalents $503 $45 $316 $(273)
(a) On May 15, 2007, Lyondell completed the sale of its worldwide
inorganic chemicals business. 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 of $63 million in the three and six
months ended June 30, 2007 and $9 million in the six months ended
June 30, 2006.
Table 13 - Lyondell Unaudited Balance Sheet Information (a)
June 30, December 31,
(Millions of dollars) 2007 2006
Cash and cash equivalents $762 $401
Accounts receivable, net 2,301 1,932
Inventories 1,895 1,877
Prepaid expenses and other current assets 176 147
Deferred tax assets 53 102
Current assets held for sale - 687
Total current assets 5,187 5,146
Property, plant and equipment, net 8,475 8,542
Investments and long-term receivables:
Investment in PO joint ventures 787 778
Other 103 115
Goodwill, net 1,373 1,332
Other assets, net 867 864
Long-term assets held for sale - 1,069
Total assets $16,792 $17,846
Current maturities of long-term debt $518 $18
Accounts payable 2,292 1,868
Accrued liabilities 996 980
Current liabilities associated with assets
held for sale - 341
Total current liabilities 3,806 3,207
Long-term debt 6,647 7,936
Other liabilities 1,270 1,453
Deferred income taxes 1,619 1,537
Long-term liabilities associated with
assets held for sale - 391
Minority interests 117 134
Stockholders' equity (253,448,132
and 248,970,570 shares outstanding
at June 30, 2007 and December 31, 2006,
respectively) 3,333 3,188
Total liabilities and stockholders'
equity $16,792 $17,846
(a) On May 15, 2007, Lyondell completed the sale of its worldwide
inorganic chemicals business.
Table 14 - Refining Segment Throughput Margin and Reconciliation to
Unaudited Refining Segment Operating Income
For the three For the six
months ended months ended
June 30, March 31, June 30,
(Millions of dollars) 2007 2007 2007
Refining Throughput Margin:
Sales and other operating revenues (a) $2,793 $1,884 $4,677
Crude oil and feedstock costs 2,161 1,577 3,738
Throughput margin 632 307 939
Operating expenses 238 225 463
Selling, general and administrative
expense 7 4 11
Refining operating income (a) $387 $78 $465
(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 15 through 20 represent additional financial information for Equistar
Chemicals, LP (together with its consolidated subsidiaries, "Equistar") and
Millennium Chemicals Inc. (together with its consolidated subsidiaries,
"Millennium").
Table 15 - Equistar Unaudited Income Statement Information (a)
For the three For the six
months ended months ended
June 30, March 31, June 30,
(Millions of dollars) 2007 2006 2007 2007 2006
Sales and other operating
revenues (b) $3,534 $3,278 $2,869 $6,403 $6,314
Cost of sales 3,362 3,028 2,738 6,100 5,698
Selling, general and
administrative expenses 72 61 59 131 109
Research and development expenses 9 9 9 18 17
Operating income 91 180 63 154 490
Interest expense, net (50) (52) (53) (103) (105)
Other income (expense) (c) (33) - 1 (32) (1)
Net income (d) $8 $128 $11 $19 $384
(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) Includes $34 million of charges in the three and six month periods
ended June 30, 2007 related to the prepayment of debt.
(d) As a partnership, Equistar is not subject to federal income taxes.
Table 16 - Equistar Unaudited Balance Sheet Information (a)
June 30, December 31,
(Millions of dollars) 2007 2006
Cash and cash equivalents $10 $133
Accounts receivable, net 1,327 1,167
Inventories 704 809
Prepaid expenses and other current assets 70 49
Total current assets 2,111 2,158
Property, plant and equipment, net 2,812 2,846
Investments 51 59
Other assets, net 270 296
Total assets $5,244 $5,359
Accounts payable $1,035 $905
Accrued liabilities 248 312
Notes payable - Millennium (b) 500 -
Total current liabilities 1,783 1,217
Long-term debt 1,553 2,160
Other liabilities and deferred revenues 384 378
Partners' capital 1,524 1,604
Total liabilities and partners' capital $5,244 $5,359
(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) In June 2007, Equistar issued promissory notes to Millennium and
received proceeds of $500 million, which was used to repay debt.
Table 17 - Equistar Unaudited Cash Flow Information (a)
For the three For the six
months ended months ended
June 30, June 30,
(Millions of dollars) 2007 2006 2007 2006
Net income $8 $128 $19 $384
Adjustments:
Depreciation and amortization 81 82 162 164
Debt prepayment charges and
premiums 34 - 34 -
Changes in assets and liabilities:
Accounts receivable (118) (267) (160) (232)
Inventories 51 88 105 (56)
Accounts payable 93 158 130 204
Other, net 19 49 (99) (37)
Cash provided by
operating activities 168 238 191 427
Expenditures for property, plant
and equipment (52) (41) (90) (63)
Other 8 2 8 2
Cash used in investing
activities (44) (39) (82) (61)
Repayment of long-term debt (b) (632) - (632) (150)
Proceeds from notes payable to
Millennium (c) 500 - 500 -
Distributions to owners - (100) (100) (300)
Other (9) - - 1
Cash used in financing
activities (141) (100) (232) (449)
Increase (decrease) in cash and
cash equivalents $(17) $99 $(123) $(83)
(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) Includes prepayment premiums of $32 million in the three and six
months ended June 30, 2007.
(c) In June 2007, Equistar issued promissory notes to Millennium and
received proceeds of $500 million, which was used to repay debt.
Table 18 - Millennium Unaudited Income Statement Information (a) (b)
For the three For the six
months ended months ended
June 30, March 31, June 30,
(Millions of dollars) 2007 2006 2007 2007 2006
Sales and other operating
revenues (c) $161 $153 $152 $313 $297
Cost of sales 142 134 122 264 280
Selling, general and administrative
expenses 22 11 12 34 22
Research and development expenses 1 1 1 2 2
Operating income (loss) (4) 7 17 13 (7)
Interest expense, net (13) (18) (18) (31) (29)
Other income (expense), net (d) (16) 20 - (16) (5)
Income (loss) from continuing
operations before equity
investment and income taxes (33) 9 (1) (34) (41)
Income from equity investment in
Equistar 3 38 3 6 113
Income (loss) from continuing
operations before income taxes (30) 47 2 (28) 72
Provision for (benefit from) income
taxes (13) 2 1 (12) (5)
Income (loss) from continuing
operations (17) 45 1 (16) 77
Income from discontinued
operations, net of tax (e) 232 69 14 246 70
Net income $215 $114 $15 $230 $147
(a) Represents information for Millennium on the basis reflected in
Millennium's financial statements as filed in its Current Report on
Form 8-K dated May 29, 2007.
(b) On May 15, 2007, Millennium completed the sale of its worldwide
inorganic chemicals business.
(c) Sales and other operating revenues include sales to affiliates.
(d) Other income (expense), net, included charges related to debt
prepayment of $17 million in each of the three and six months ended
June 30, 2007 and $7 million in the six months ended June 30, 2006,
and for the three months ended June 30, 2006, included a $19 million
benefit related to resolution of prior years' income tax issues.
(e) Income from discontinued operations, net of tax, for the three and
six months ended June 30, 2007 included a $216 million after-tax gain
related to the sale of Millennium's worldwide inorganic chemicals
business.
Table 19 - Millennium Unaudited Balance Sheet Information (a) (b)
June 30, December 31,
(Millions of dollars) 2007 2006
Cash and cash equivalents $33 $76
Accounts receivable, net 128 111
Inventories 92 87
Prepaid expenses and other current assets 27 13
Deferred tax assets 38 62
Notes receivable - Equistar (c) 500 -
Current assets held for sale - 661
Total current assets 818 1,010
Property, plant and equipment, net 121 129
Investments in Equistar 446 470
Goodwill, net 49 49
Other assets, net 71 62
Long-term assets held for sale - 694
Total assets $1,505 $2,414
Accounts payable $102 $102
Accrued liabilities 152 72
Current liabilities associated with
assets held for sale - 335
Total current liabilities 254 509
Long-term debt 391 767
Other liabilities 255 381
Deferred income taxes 261 248
Long-term liabilities associated
with assets held for sale - 361
Minority interest 5 5
Stockholder's equity
(1,000 shares authorized; 661 shares
issued at June 30, 2007 and
December 31, 2006) 339 143
Total liabilities and stockholder's
equity $1,505 $2,414
(a) Represents information for Millennium on the basis reflected in
Millennium's financial statements as filed in its Current Report on
Form 8-K dated May 29, 2007.
(b) On May 15, 2007, Millennium completed the sale of its worldwide
inorganic chemicals business.
(c) In June 2007, Millennium received promissory notes from and advanced
$500 million to Equistar.
Table 20 - Millennium Unaudited Cash Flow Information (a) (b)
For the three For the six
months ended months ended
June 30, June 30,
(Millions of dollars) 2007 2006 2007 2006
Net income $215 $114 $230 $147
Income from discontinued
operations, net of tax (232) (69) (246) (70)
Adjustments:
Depreciation and amortization 11 6 17 13
Equity investment in Equistar -
Amounts included in net
income (3) (38) (6) (113)
Distributions of earnings 3 30 6 89
Debt prepayment charges and
premiums 14 - 14 7
Deferred income taxes 44 (49) 38 (48)
Changes in assets and liabilities:
Accounts receivable (30) (3) (17) 12
Inventories 2 5 (5) 20
Accounts payable 15 18 (1) 11
Other, net (206) (15) (233) 3
Cash provided by (used in)
operating activities -
continuing operations (167) (1) (203) 71
Cash provided by (used in)
operating activities -
discontinued operations (3) 12 (16) 12
Cash provided by (used in)
operating activities (170) 11 (219) 83
Expenditures for property, plant
and equipment (2) (4) (6) (5)
Distributions from Equistar
in excess of earnings (3) - 24 -
Advances under loan agreements to
Equistar (c) (500) - (500) -
Other 3 1 3 1
Cash used in investing
activities - continuing
operations (502) (3) (479) (4)
Net proceeds from sale of
discontinued operations 990 - 990 -
Cash used in investing
activities - discontinued
operations (7) (13) (15) (23)
Cash provided by (used in)
investing activities 481 (16) 496 (27)
Repayment of long-term debt (d) (386) - (390) (241)
Other - (2) 1 (1)
Cash used in financing
activities - continuing
operations (386) (2) (389) (242)
Cash provided by (used in)
financing activities -
discontinued operations (1) 7 23 5
Cash provided by (used in)
financing activities (387) 5 (366) (237)
Effect of exchange rate changes on
cash - 1 1 2
Increase (decrease) in cash and
cash equivalents $(76) $1 $(88) $(179)
(a) Represents information for Millennium on the basis reflected in
Millennium's financial statements as filed in its Current Report on
Form 8-K dated May 29, 2007.
(b) On May 15, 2007, Millennium completed the sale of its worldwide
inorganic chemicals business.
(c) In June 2007, Millennium received promissory notes from and advanced
$500 million to Equistar.
(d) Includes prepayment premiums of $13 million in the three and six
months ended June 30, 2007 and $7 million in the six months ended
June 30, 2006.
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/
