HOUSTON, Oct. 25 /PRNewswire-FirstCall/ -- Lyondell Chemical Company (NYSE: LYO) today announced income for the third quarter 2007 of $206 million, or 78 cents per share on a fully diluted basis. For the first nine months of 2007, income from continuing operations was $483 million, or $1.83 per share on a fully diluted basis. Comparisons with the prior quarter, third quarter 2006 and first nine months of 2006 are available in the following table.
Table 1 - Lyondell Earnings Summary (a)
1st Nine 1st Nine
Months Months
Millions of dollars 3Q 2007 3Q 2006 2Q 2007 2007 2006
except per share amounts
Sales and other operating
revenues $7,385 $5,815 $7,482 $20,656 $14,948
Income from continuing
operations 206 61 271 483 476
Net income 206 57 176 401 507
Income from continuing
operations:
Basic earnings per share 0.81 0.24 1.07 1.91 1.92
Diluted earnings per share 0.78 0.23 1.02 1.83 1.84
Net income:
Basic earnings per share 0.81 0.23 0.69 1.59 2.05
Diluted earnings per share 0.78 0.22 0.66 1.52 1.96
Basic weighted average
shares outstanding
(millions) 253.3 247.7 252.9 252.4 247.3
Diluted weighted average
shares outstanding
(millions) (b) 266.3 260.5 265.7 265.2 260.0
(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.
Third-quarter 2007 results from continuing operations declined versus the second quarter 2007 primarily due to lower refining segment results. Following a record second quarter, third-quarter refining results remained good; however, industry margins narrowed earlier than expected, ahead of the typical Labor Day pattern. Ethylene segment results were relatively unchanged as significant product price increases were only sufficient to offset raw material cost increases, which finished the quarter at record levels. In the propylene oxide segment, both chemical and fuel product (MTBE/ETBE) results were relatively unchanged versus the second quarter.
Additionally, results reflect the following:
Table 2 - Charges (Benefits) Included in Lyondell's Results from
Continuing Operations
1st Nine 1st Nine
Months Months
Millions of dollars 3Q 2007 3Q 2006 2Q 2007 2007 2006
Pretax charges (benefits):
Effect of stock price
increases on incentive
compensation expense (a) $42 $13 $43 $123 $6
Foreign exchange (gains)
losses on intercompany
loans (26) -- 1 (24) --
Insurance settlement (b) (30) -- -- (30) --
Merger-related expenses 11 -- -- 11 --
Net charges (benefits)
related to commercial
disputes (c) 5 -- 10 77 (70)
Debt retirement charges 4 21 43 47 21
Lake Charles ethylene
facility impairment (d) -- 106 -- -- 106
Refining segment contract
termination cost (e) -- 176 -- -- 176
Mutual insurance
consortia losses -- 10 -- -- 15
Texas Margin Tax credit,
net of federal income tax -- -- (17) (17) --
Other tax effects of
net charges (13) (114) (34) (83) (89)
After-tax effect of net
charges (benefits) (7) 212 46 104 165
Effect of net charges
(benefits)on diluted
earnings per share (0.03) 0.81 0.17 0.39 0.63
(a) Increases in the market price of Lyondell's common stock during the
periods resulted in recognition of incentive compensation
expense in excess of the amounts of expense that would have been
recognized if the market price had not increased.
(b) Lyondell's pro rata share of the proceeds from final settlement of
Houston Refining LP("Houston Refining") insurance claims related to
Hurricane Rita in 2005.
(c) Includes charges associated with the 2005 shutdown of the Lake
Charles toluene diisocyanate ("TDI") facility, the resolution of
various matters among Houston Refining, its owners and their
affiliates, and other disputes.
(d) Represents impairment of the carrying value of the Lake Charles,
Louisiana ethylene facility and related assets.
(e) Represents Lyondell's 58.75% share of the cost to terminate Houston
Refining's previous crude supply agreement.
"Results across our ethylene and propylene oxide segments were unchanged versus the second quarter as raw material cost increases offset the benefits of product price increases," said Dan F. Smith, chairman, president and CEO of Lyondell Chemical Company. "Entering the quarter, we and many others in the industry expected that crude oil and ethane costs would plateau at then- current levels; however, they continued to escalate. As a result, significant price increases were required just to offset the cost increases, and margins did not expand to levels that we believe reflect the supply/demand balance. Refining results, while solid, reflected the fact that industry spreads declined from very strong early-summer levels earlier than usual. This occurred despite record low gasoline and distillate inventories as measured by days of inventory.
"Unfortunately, crude oil and ethane prices have increased steadily throughout the year, and a certain amount of time is needed to pass increases of this magnitude through the chemical and polymer markets. As a consequence, year-to-date results have not fully reflected existing industry operating rates. Despite these industry trends, we have generated strong results."
OUTLOOK
Thus far in the fourth quarter, both crude oil and ethane price increases have accelerated, setting new highs. Quarter to date, our refining spreads are slightly less than the third-quarter average as our heavy crude advantage has partially offset declines in base refining margins. In the ethylene, co- products and derivatives segment, record high raw material costs are offsetting the benefit of recent price increases, necessitating further pricing initiatives. In our propylene oxide and related products segment, oxygenated fuel (MTBE/ETBE) margins have declined following typical seasonal patterns.
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 Nine 1st Nine
Months Months
Millions of dollars 3Q 2007 3Q 2006 2Q 2007 2007 2006
Sales and other
operating revenues $3,568 $3,586 $3,637 $10,173 $10,116
Operating income (b) 83 173 95 255 653
EBITDA (b)(c) 180 372 194 551 1,048
(a) See Table 6 for additional financial 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 9 for a reconciliation of segment EBITDA to income from
continuing operations.
3Q07 v. 2Q07 -- Ethylene and ethylene derivative product sales volumes decreased by approximately 140 million pounds (approximately 4.5 percent) versus the second quarter 2007 due to lower derivative sales. Compared with the second quarter, our quarterly average prices for ethylene, polyethylene and ethylene glycol increased by approximately 6 cents, 5 cents and 3 cents per pound, respectively. The company's average cost-of-ethylene-production metric (COE) increased by approximately 6 cents per pound versus the second quarter primarily due to increased production costs from crude oil-based raw materials. The cost of ethylene production from natural gas-based raw materials also increased; however, the impact was somewhat smaller within our portfolio. Acetyls results increased by approximately $10 million as a result of higher product prices.
3Q07 v. 3Q06 -- Ethylene and ethylene derivative product sales volumes increased by approximately 110 million pounds (approximately 4 percent) versus the third quarter 2006. The quarterly average prices for ethylene and polyethylene each decreased by approximately 1 cent per pound, while our ethylene glycol price increased by approximately 3 cents per pound. The company's average COE metric increased by approximately 6.5 cents per pound primarily due to increased costs from crude oil-based raw materials. Acetyls results improved by approximately $10 million as a result of increased acetic acid and vinyl acetate monomer prices. Higher incentive-related compensation costs reduced the segment's results by a total of approximately $25 million.
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 Nine 1st Nine
Months Months
Millions of dollars 3Q 2007 3Q 2006 2Q 2007 2007 2006
Sales and other
operating revenues $2,131 $1,900 $2,169 $6,058 $5,307
Operating income (b) 170 133 133 330 358
EBITDA (b)(c) 229 195 196 513 540
(a) See Table 6 for additional financial information.
(b) Includes pretax charges in the third quarter, second quarter and
first nine months of 2007 of $5 million, $10 million and $77 million,
respectively, related to commercial disputes, including charges
associated with the 2005 shutdown of the Lake Charles TDI facility.
(c) See Table 9 for a reconciliation of segment EBITDA to income from
continuing operations.
3Q07 v. 2Q07 -- Segment EBITDA increased by $33 million versus the second quarter 2007. Among the chemical products, PO and PO derivatives improved by approximately $10 million, and styrene results improved $5 million. TDI results improved by approximately $20 million primarily due to a combination of higher product margins and the absence of second-quarter maintenance turnaround impacts. A scheduled catalyst change at our Channelview facility contributed to a slight $5 million decline in fuel-products third-quarter results.
3Q07 v. 3Q06 -- Segment EBITDA increased by $34 million versus the third quarter 2006. Higher incentive-related compensation costs reduced the segment's results by a total of approximately $15 million, but were more than offset by the following net improvement in underlying operating results. Fuel product results increased by approximately $40 million due to higher margins. PO and PO derivative results decreased by approximately $10 million primarily due to increased operating costs, as price increases offset the impact of increased raw material costs. TDI results increased by approximately $20 million due to stronger margins, while styrene results improved $5 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 the purchase, 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 Nine 1st Nine
Months Months
Millions of dollars 3Q 2007 3Q 2006 2Q 2007 2007 2006
Sales and other
operating revenues $2,799 $2,288 $2,793 $7,476 $6,793
Operating income (loss) (b) 209 (98) 387 674 227
EBITDA (c) 275 (54) 451 859 333
(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 6 for additional financial information.
(b) Operating income for the first nine months of 2007 includes $30
million of proceeds from final settlement of all Houston Refining
insurance claims related to Hurricane Rita in 2005 and for the first
nine months of 2006 includes a third quarter 2006 charge of $300
million for the termination of the previous crude supply agreement
with Petroleos de Venezuela, S.A. ("PDVSA") and a second quarter 2006
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 9 for a reconciliation of segment EBITDA to income from
continuing operations and, as appropriate, to net income of Houston
Refining.
3Q07 v. 2Q07 -- Segment EBITDA declined by $176 million primarily due to lower margins. Our refining spreads declined by approximately $8 per barrel of crude processed consistent with the decline in the reported industry Maya 2-1-1 spread. Crude volumes processed were essentially unchanged. As anticipated, segment results were negatively impacted by approximately $30 million due to catalyst changes at two critical hydrodesulfurization (HDS) units. Conversely, the third quarter benefited from strong fluid catalytic cracker operations while the previous quarter was negatively impacted by approximately $25 million associated with maintenance. Additionally, the third quarter benefited by $30 million as the result of final settlement of our 2005 insurance claim related to Hurricane Rita.
3Q07 v. 3Q06 -- Results increased by $329 million primarily due to the absence of the $300 million third-quarter 2006 charge related to cancelling the previous crude supply agreement with PDVSA. Operationally, quarter-to- quarter changes were minimal as both crude volumes and margins were relatively unchanged. Aromatic and lube oil results improved by a combined $15 million. The previously mentioned catalyst changes and insurance settlement approximately offset each other.
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 third quarter.
Debt Reduction -- During the third quarter, debt repayment, including scheduled amortization of term loans, totaled $512 million, all at LCC. LCC repaid the $500 million of debt called in July 2007.
Receivable Facilities Utilization -- As of Sept. 30, 2007, Lyondell's receivable facility was unutilized and Equistar's receivable facility was utilized by $40 million.
CONFERENCE CALL
Recorded comments by Doug Pike, Vice President of Investor Relations, will be available today, Oct. 25, 2007, beginning at 11:30 a.m. Eastern Time (ET). The dial-in numbers are 800-568-6276 (U.S. - toll free) and 402-344-6819 (international). The pass code for each is 5549. Web replay of the recorded comments will be available beginning at 11:30 a.m. ET 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. 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 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, Quarterly Reports on Form 10-Q for the quarter ended June 30, 2007 and Quarterly Reports on Form 10-Q for the quarter ended September 30, 2007 which will be filed with the SEC in November 2007.
Additional Information and Where to Find It
In connection with the solicitation of proxies by Lyondell Chemical Company (the "Company") with respect to the meeting of its stockholders regarding the proposed merger, the Company has filed a definitive proxy statement with the Securities and Exchange Commission (the "SEC"). A definitive proxy statement and a form of proxy have been mailed to the stockholders of Lyondell. STOCKHOLDERS OF THE COMPANY ARE ADVISED TO READ THE DEFINITIVE PROXY STATEMENT BECAUSE IT CONTAINS IMPORTANT INFORMATION. Stockholders may obtain a free-of-charge copy of the proxy statement and other relevant documents filed with the SEC from the SEC's web site at http://www.sec.gov/. Stockholders may also obtain a free-of-charge copy of the proxy statement and other relevant documents 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 the Company's web site at http://www.lyondell.com/.
The Company 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 the Company's definitive proxy statement and annual reports on Form 10-K (including any amendments thereto), previously filed with the SEC.
Table 6 - Selected Unaudited Financial Information
For the three For the nine
months ended months ended
September 30, June 30, September 30,
(Millions of dollars) 2007 2006 2007 2007 2006
Sales and other operating
revenues: (a)(b)
Ethylene, Co-Products &
Derivatives $3,568 $3,586 $3,637 $10,173 $10,116
PO & Related Products 2,131 1,900 2,169 6,058 5,307
Refining 2,799 2,288 2,793 7,476 6,793
Operating income (loss): (a)
Ethylene, Co-Products &
Derivatives (c) $83 $173 $95 $255 $653
PO & Related Products (d) 170 133 133 330 358
Refining (e) 209 (98) 387 674 227
Depreciation and
amortization: (a)
Ethylene, Co-Products &
Derivatives $96 $94 $96 $290 $288
PO & Related Products 59 57 59 177 172
Refining 66 44 64 185 106
EBITDA: (f)
Ethylene, Co-Products &
Derivatives $180 $372 $194 $551 $1,048
PO & Related Products (d) 229 195 196 513 540
Refining 275 (54) 451 859 333
Capital expenditures: (a)
Ethylene, Co-Products &
Derivatives $65 $44 $53 $159 $110
PO & Related Products 25 21 19 53 54
Refining 25 61 28 143 170
Discontinued Operations -
Inorganic Chemicals: (g)
Sales and other operating
revenues $- $339 $181 $514 $1,035
Income (loss) from discontinued
operations, net of tax - (4) (95) (82) 31
Capital expenditures - 19 7 15 42
(a) See Table 8 for a reconciliation of segment information for the three
and nine months ended September 30, 2007 and 2006 and the three
months ended June 30, 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
13 for additional Houston Refining financial information.
(b) Sales include 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, Louisiana ethylene facility.
(d) Includes net pretax charges of $5 million, $10 million and
$77 million, respectively, in the three months ended September 30,
2007, the three months ended June 30, 2007 and the nine months ended
September 30, 2007 related to commercial disputes, including charges
associated with the 2005 shutdown of the Lake Charles TDI facility.
(e) Includes a benefit for the three and nine months ended September 30,
2007 of $30 million for Lyondell's pro rata share of the proceeds
from final settlement of all Houston Refining insurance claims
related to Hurricane Rita in 2005, 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, a
charge for the three months ended June 30, 2006 and nine months ended
September 30, 2006 of $8 million representing reimbursement to
Lyondell of legal fees and expenses paid by Lyondell on behalf of
Houston Refining related to a settlement of commercial disputes.
(f) See Table 9 for a reconciliation of segment EBITDA to income from
continuing operations.
(g) On May 15, 2007, Lyondell completed the sale of its worldwide
inorganic chemicals business.
Table 7 - Selected Operating Information (a)
For the three For the nine
months ended months ended
June
September 30, 30, September 30,
2007 2006 2007 2007 2006
Selected Segment Sales Volumes:
Ethylene, Co-Products and
Derivatives (in millions)
Ethylene and derivatives
(pounds) 2,944 2,836 3,083 8,985 8,637
Polyethylene included
above (pounds) 1,421 1,353 1,502 4,402 4,175
Co-products, nonaromatic
(pounds) 1,951 2,171 2,009 5,985 6,291
Aromatics (gallons) 89 89 87 271 266
PO and Related Products (in
millions)
PO and derivatives (pounds) 783 813 794 2,445 2,410
Co-products:
Styrene monomer
(pounds) 971 1,208 991 2,949 3,221
Fuel products and
other TBA derivatives
(gallons) 368 321 374 1,042 908
Refined products (thousand
barrels per day) (b)
Gasoline 149 112 136 122 114
Diesel and heating oil 85 84 90 82 90
Jet fuel 17 22 22 20 14
Aromatics 7 7 8 7 7
Other refined products 118 112 121 127 115
Total refined products
volumes 376 337 377 358 340
Refining Metrics: (b)
Crude processing rates (thousand
barrels per day) 271 270 273 259 268
Throughput margin
($ per barrel) (c ) 17.01 25.44 19.28
Market margins ($ per barrel): (d)
WTI 2-1-1 12.41 21.67 14.46
WTI-Maya 12.00 10.00 11.58
Total 24.41 31.67 26.04
(a) Sales volumes include intersegment sales.
(b) The Refining information represents the operating results of Houston
Refining on a 100% basis.
(c) 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 13 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.
(d) Market margins are reported by Platts, a division of The McGraw-Hill
Companies.
Table 8 - Reconciliation of Segment Information to Consolidated Lyondell
Financial Information
Sales Depreciation
and other Operating and Capital
operating income amortiza- expendi-
(Millions of dollars) revenues (loss) tion tures
For the three months ended
September 30, 2007:
Segment Data:
Ethylene, Co-Products &
Derivatives $3,568 $83 $96 $65
PO & Related Products 2,131 170 59 25
Refining (a) 2,799 209 66 25
Other (b) (1,113) (19) 2 3
Continuing Operations $7,385 $443 $223 $118
For the three months ended
September 30, 2006:
Segment Data:
Ethylene, Co-Products &
Derivatives $3,586 $173 $94 $44
PO & Related Products 1,900 133 57 21
Refining (a) 1,083 81 28 29
Other (b) (754) 1 3 2
Continuing Operations $5,815 $388 $182 $96
For the three months ended
June 30, 2007:
Segment Data:
Ethylene, Co-Products &
Derivatives $3,637 $95 $96 $53
PO & Related Products 2,169 133 59 19
Refining (a) 2,793 387 64 28
Other (b) (1,117) (16) 7 1
Continuing Operations $7,482 $599 $226 $101
For the nine months ended
September 30, 2007:
Segment Data:
Ethylene, Co-Products &
Derivatives $10,173 $255 $290 $159
PO & Related Products 6,058 330 177 53
Refining (a) 7,476 674 185 143
Other (b) (3,051) (38) 10 5
Total $20,656 $1,221 $662 $360
For the nine months ended
September 30, 2006:
Segment Data:
Ethylene, Co-Products &
Derivatives $10,116 $653 $288 $110
PO & Related Products 5,307 358 172 54
Refining (a) 1,083 81 28 29
Other (b) (1,558) (1) 7 4
Total $14,948 $1,091 $495 $197
(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 items not allocated to segments or discontinued operations
and elimination of intersegment transactions between segments and
discontinued operations.
Table 9 - Reconciliations
Segment EBITDA to Income from
Continuing Operations
For the three For the nine
months ended months ended
September 30, June 30, September 30,
(Millions of dollars) 2007 2006 2007 2007 2006
LYONDELL
Segment EBITDA:
Ethylene, Co-Products & Derivatives $180 $372 $194 $551 $1,048
PO & Related Products 229 195 196 513 540
Refining (a) 275 109 451 859 109
Other 10 5 (15) (7) 80
Add:
Income (loss) from equity
investment in Houston Refining (a) - (104) - - 73
Deduct:
Depreciation and amortization (223) (182) (226) (662) (495)
Interest expense, net (138) (156) (161) (473) (432)
Charges related to impairment
of assets - (106) - - (106)
Provision for income taxes (123) (51) (125) (251) (320)
Debt prepayment premiums and
charges (4) (21) (43) (47) (21)
Lyondell income from continuing
operations $206 $61 $271 $483 $476
Houston Refining EBITDA (b) $(54) $333
Deduct:
Depreciation and amortization (44) (106)
Interest expense, net (17) (40)
Income taxes 8 -
Houston Refining net income (loss) $(107) $187
(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) Represents operating results of Houston Refining on a 100% basis.
Table 10 - 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) 2007 2006 2007 2007 2006
Sales and other operating
revenues $7,385 $5,815 $7,482 $20,656 $14,948
Cost of sales (b) 6,736 5,172 6,675 18,853 13,321
Asset impairments (c) - 106 - - 106
Selling, general and
administrative expenses 188 132 189 527 376
Research and development
expenses 18 17 19 55 54
Operating income 443 388 599 1,221 1,091
Income (loss) from
equity investment
in Houston Refining (d) - (104) - - 73
Income from other equity
investments - 2 - 2 4
Interest expense, net (138) (156) (161) (473) (432)
Other income (expense), net (e) 24 (18) (42) (16) 60
Income from continuing
operations before income taxes 329 112 396 734 796
Provision for income taxes 123 51 125 251 320
Income from continuing
operations 206 61 271 483 476
Income (loss) from discontinued
operations, net of tax (f) - (4) (95) (82) 31
Net income $206 $57 $176 $401 $507
Income from continuing
operations:
Basic $0.81 $0.24 $1.07 $1.91 $1.92
Diluted $0.78 $0.23 $1.02 $1.83 $1.84
Net income:
Basic $0.81 $0.23 $0.69 $1.59 $2.05
Diluted $0.78 $0.22 $0.66 $1.52 $1.96
Weighted average shares
(in millions):
Basic 253.3 247.7 252.9 252.4 247.3
Diluted 266.3 260.5 265.7 265.2 260.0
(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 net pretax charges of $5 million, $10 million and $77
million, respectively, in the three months ended September 30, 2007,
the three months ended June 30, 2007 and the nine months ended
September 30, 2007 related to commercial disputes, including charges
associated with the 2005 shutdown of the Lake Charles TDI facility.
Also includes a benefit for the three and nine months ended September
30, 2007 of $30 million for Lyondell's pro rata share of the proceeds
from final settlement of all Houston Refining insurance claims
related to Hurricane Rita in 2005.
(c) Includes a $106 million pretax charge for the three and nine months
ended September 30, 2006 for the impairment of the carrying value of
the Lake Charles, Louisiana ethylene facility and related assets.
(d) Includes a charge for the three and nine months ended September 30,
2006 of $176 million, representing Lyondell's pro rata share of a
$300 million charge 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 $5 million, representing Lyondell's pro rata share of an $8
million reimbursement to Lyondell of legal fees and expenses paid by
Lyondell on behalf of Houston Refining related to the settlement.
(e) Includes pretax charges related to the prepayment of debt of
$4 million, $43 million and $47 million, respectively, in the three
months ended September 30, 2007 and June 30, 2007 and nine months
ended September 30, 2007 and $21 million in the three and nine months
ended September 30, 2006. Also includes foreign exchange gains of
$26 million and $24 million, respectively, in the three and nine
months ended September 30, 2007 and a loss of $1 million in the three
months ended June 30, 2007 related to intercompany loans. The nine
months ended September 30, 2006 also include a benefit from net
payments of $74 million related to the resolution of commercial
disputes.
(f) Includes a $91 million after-tax loss in the three months ended
June 30, 2007 and nine months ended September 30, 2007 related to the
May 15, 2007 sale of the worldwide inorganic chemicals business.
Table 11 - Lyondell Unaudited Cash Flow Information (a)
For the three For the nine
months ended months ended
September 30, September 30,
(Millions of dollars) 2007 2006 2007 2006
Net income $206 $57 $401 $507
Loss (income) from discontinued
operations, net of tax - 4 82 (31)
Adjustments:
Depreciation and amortization 223 182 662 495
Asset Impairments - 106 - 106
Equity investments -
Amounts included in net
income - 102 (2) (77)
Distributions of earnings - (49) 1 73
Deferred income taxes 44 9 184 115
Debt prepayment premiums and
charges 4 21 47 21
Changes in assets and liabilities:
Accounts receivable (139) (9) (489) (210)
Inventories 1 (122) (12) (175)
Accounts payable 20 (260) 396 (120)
Other, net (117) 83 (424) (123)
Cash provided by operating
activities - continuing
operations 242 124 846 581
Cash provided by (used in)
operating activities -
discontinued operations - 57 (113) 38
Cash provided by
operating activities 242 181 733 619
Expenditures for property, plant
and equipment (118) (96) (360) (197)
Payments and distributions from
(to) discontinued operations - 19 (97) (12)
Acquisition of Houston Refining LP
and related parties - (2,413) (94) (2,413)
Contributions and advances to
affiliates (8) (25) (34) (82)
Distributions from affiliates in
excess of earnings - 117 2 117
Other 1 - 12 6
Cash used in investing
activities - continuing
operations (125) (2,398) (571) (2,581)
Net proceeds from sale of
discontinued operations - - 990 -
Cash provided by (used in)
investing activities -
discontinued operations - (38) 82 (30)
Cash provided by (used
in) investing activities (125) (2,436) 501 (2,611)
Repayment of long-term debt (b) (512) (1,652) (1,831) (2,095)
Issuance of long-term debt - 4,356 510 4,356
Dividends paid (57) (56) (171) (167)
Proceeds from and tax benefits of
stock option exercises 4 6 81 18
Other, net (13) - 7 (3)
Cash provided by (used in)
financing activities -
continuing operations (578) 2,654 (1,404) 2,109
Cash provided by (used in)
financing activities -
discontinued operations - (18) 23 (13)
Cash provided by (used
in) financing
activities (578) 2,636 (1,381) 2,096
Effect of exchange rate changes
on cash 2 - 4 4
Increase (decrease) in cash and
cash equivalents $(459) $381 $(143) $108
(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 nine months ended
September 30, 2007 and $18 million and $27 million, respectively, in
the three and nine months ended September 20, 2006.
Table 12 - Lyondell Unaudited Balance Sheet Information (a)
(Millions of dollars, September 30, December 31,
except share data) 2007 2006
Cash and cash equivalents $303 $401
Accounts receivable, net 2,485 1,932
Inventories 1,906 1,877
Prepaid expenses and other current
assets 155 147
Deferred tax assets 50 102
Current assets held for sale - 687
Total current assets 4,899 5,146
Property, plant and equipment, net 8,491 8,542
Investments and long-term
receivables:
Investment in PO joint ventures 799 778
Other 100 115
Goodwill, net 1,373 1,332
Other assets, net 878 864
Long-term assets held for sale - 1,069
Total assets $16,540 $17,846
Current maturities of long-term debt $423 $18
Accounts payable 2,339 1,868
Accrued liabilities 965 980
Current liabilities associated with
assets held for sale - 341
Total current liabilities 3,727 3,207
Long-term debt 6,226 7,936
Other liabilities 1,258 1,453
Deferred income taxes 1,678 1,537
Long-term liabilities associated
with assets held for sale - 391
Minority interests 121 134
Stockholders' equity (253,615,364
and 248,970,570 shares outstanding
at September 30, 2007 and December 31,
2006, respectively) 3,530 3,188
Total liabilities and
stockholders' equity $16,540 $17,846
(a) On May 15, 2007, Lyondell completed the sale of its worldwide
inorganic chemicals business.
Table 13 - Refining Segment Throughput Margin and Reconciliation to
Unaudited Refining Segment Operating Income
For the three For the nine
months ended months ended
September 30, June 30, September 30,
(Millions of dollars) 2007 2007 2007
Refining Throughput Margin:
Sales and other operating revenues (a) $2,799 $2,793 $7,476
Crude oil and feedstock costs 2,375 2,161 6,113
Throughput margin 424 632 1,363
Operating expenses 209 238 672
Selling, general and administrative
expense 6 7 17
Refining operating income (a) $209 $387 $674
(a) See Table 8 for reconciliation of Refining segment sales and other
operating revenues and operating income to Lyondell sales and other
operating revenues and operating income.
Tables 14 through 19 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 14 - 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) 2007 2006 2007 2007 2006
Sales and other operating
revenues (b) $3,464 $3,480 $3,534 $9,867 $9,794
Cost of sales 3,314 3,151 3,362 9,414 8,849
Asset impairment (c) - 135 - - 135
Selling, general and
administrative expenses 71 54 72 202 163
Research and development
expenses 10 8 9 28 25
Operating income 69 132 91 223 622
Interest expense, net (47) (55) (50) (150) (160)
Other income (expense), net (d) - 1 (33) (32) -
Net income (e) $22 $78 $8 $41 $462
(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 a $135 million charge in the three and nine months ended
September 30, 2006 for impairment of the carrying value of the Lake
Charles, Louisiana ethylene facility and related assets.
(d) Includes $34 million of charges in the three month period ended
June 30, 2007 and nine month period ended September 30, 2007 related
to the prepayment of debt.
(e) As a partnership, Equistar is not subject to federal income taxes.
Table 15 - Equistar Unaudited Balance Sheet Information (a)
September 30, December 31,
(Millions of dollars) 2007 2006
Cash and cash equivalents $25 $133
Accounts receivable, net 1,438 1,167
Inventories 679 809
Prepaid expenses and other
current assets 38 49
Total current assets 2,180 2,158
Property, plant and equipment,
net 2,814 2,846
Investments 51 59
Other assets, net 273 296
Total assets $5,318 $5,359
Current maturities of long-term
debt $400 $-
Accounts payable 1,080 905
Accrued liabilities 252 312
Notes payable - Millennium (b) 515 -
Total current liabilities 2,247 1,217
Long-term debt 1,153 2,160
Other liabilities and deferred
revenues 371 378
Partners' capital 1,547 1,604
Total liabilities and
partners' capital $5,318 $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) During the first nine months of 2007, Equistar issued promissory
notes to Millennium and received proceeds of $515 million, which were
primarily used to repay debt.
Table 16 - Equistar Unaudited Cash Flow Information (a)
For the three For the nine
months ended months ended
September 30, September 30,
(Millions of dollars) 2007 2006 2007 2006
Net income $22 $78 $41 $462
Adjustments:
Depreciation and amortization 81 79 243 243
Asset Impairment - 135 - 135
Debt prepayment charges and
premiums - - 34 -
Changes in assets and liabilities:
Accounts receivable (111) (109) (271) (341)
Inventories 25 (82) 130 (138)
Accounts payable 45 (62) 175 142
Other, net - (16) (99) (53)
Cash provided by
operating activities 62 23 253 450
Expenditures for property, plant
and equipment (62) (42) (152) (105)
Other - - 8 2
Cash used in investing
activities (62) (42) (144) (103)
Repayment of long-term debt (b) - - (632) (150)
Proceeds from notes payable to
Millennium (c) 15 - 515 -
Distributions to owners - (75) (100) (375)
Other - - - 1
Cash provided by (used
in) financing
activities 15 (75) (217) (524)
Increase (decrease) in cash and
cash equivalents $15 $(94) $(108) $(177)
(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 nine months ended
September 30, 2007 related to the prepayment of debt.
(c) During the nine months ended September 30, 2007, Equistar issued
promissory notes to Millennium and received proceeds of
$515 million, which were primarily used to repay debt.
Table 17 - Millennium Unaudited Income Statement Information (a) (b)
For the three For the nine
months ended months ended
September 30, June 30, September 30,
(Millions of dollars) 2007 2006 2007 2007 2006
Sales and other operating revenues
(c) $162 $157 $161 $475 $454
Cost of sales 136 138 142 400 418
Selling, general and administrative
expenses 15 10 22 49 32
Research and development expenses 1 - 1 3 2
Operating income (loss) 10 9 (4) 23 2
Interest income (expense), net 5 (16) (13) (26) (45)
Other income (expense), net (d) 1 - (16) (15) (5)
Income (loss) from continuing
operations before equity
investment and income taxes 16 (7) (33) (18) (48)
Income from equity investment in
Equistar 6 23 3 12 136
Income (loss) from continuing
operations before income taxes 22 16 (30) (6) 88
Provision for (benefit from) income
taxes 13 6 (13) 1 1
Income (loss) from continuing
operations 9 10 (17) (7) 87
Income from discontinued
operations, net of tax (e) - 7 283 297 77
Net income $9 $17 $266 $290 $164
(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 $14 million in the three months ended June 30, 2007 and
the nine months ended September 30, 2007 and $7 million in the nine
months ended September 30, 2006.
(e) Income from discontinued operations, net of tax, for the three months
ended June 30, 2007 and nine months ended September 30, 2007 included
a $289 million after-tax gain related to the sale of Millennium's
worldwide inorganic chemicals business.
Table 18 - Millennium Unaudited Balance Sheet Information (a) (b)
September 30, December 31,
(Millions of dollars) 2007 2006
Cash and cash equivalents $29 $76
Accounts receivable, net 114 111
Inventories 88 87
Prepaid expenses and other current
assets 27 13
Deferred tax assets 53 62
Notes receivable - Equistar (c) 515 -
Current assets held for sale - 661
Total current assets 826 1,010
Property, plant and equipment, net 123 129
Investments in Equistar 453 470
Goodwill, net 49 49
Other assets, net 74 62
Long-term assets held for sale - 694
Total assets $1,525 $2,414
Accounts payable $93 $102
Accrued liabilities 179 72
Current liabilities associated with
assets held for sale - 335
Total current liabilities 272 509
Long-term debt 391 767
Other liabilities 242 381
Deferred income taxes 266 248
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 September 30, 2007 and
December 31, 2006) 349 143
Total liabilities and
stockholder's equity $1,525 $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) During the first nine months of 2007, Millennium received promissory
notes from and advanced $515 million to Equistar.
Table 19 - Millennium Unaudited Cash Flow Information (a) (b)
For the three For the nine months
months ended ended
September 30, September 30,
(Millions of dollars) 2007 2006 2007 2006
Net income $9 $17 $290 $164
Income from discontinued
operations - (7) (297) (77)
Adjustments:
Depreciation and amortization 6 6 23 19
Equity investment in Equistar -
Amounts included in net income (6) (23) (12) (136)
Distributions of earnings 6 22 12 111
Debt prepayment charges and
premiums - - 14 7
Deferred income taxes (15) 9 23 (39)
Changes in assets and liabilities:
Accounts receivable 14 (13) (3) (1)
Inventories 4 4 (1) 24
Accounts payable (9) (47) (10) (36)
Other, net 14 66 (115) 101
Cash provided by (used in)
operating activities -
continuing operations 23 34 (76) 137
Cash provided by (used in)
operating activities -
discontinued operations - 58 (120) 38
Cash provided by (used in)
operating activities 23 92 (196) 175
Expenditures for property, plant
and equipment (6) (4) (12) (9)
Payments and distributions from
(to) discontinued operations - 20 (104) (12)
Distributions from Equistar in
excess of earnings (6) - 18 -
Advances under loan agreements to
Equistar (c) (15) - (515) -
Other - - 3 1
Cash provided by (used in)
investing activities -
continuing operations (27) 16 (610) (20)
Net proceeds from sale of
discontinued operations - - 990 -
Cash provided by (used in)
investing activities -
discontinued operations - (39) 89 (30)
Cash provided by (used in)
investing activities (27) (23) 469 (50)
Repayment of long-term debt (d) - - (390) (241)
Other - (1) 1 (2)
Cash used in financing
activities - continuing
operations - (1) (389) (243)
Cash provided by (used in)
financing activities -
discontinued operations - (18) 23 (13)
Cash used in financing
activities - (19) (366) (256)
Effect of exchange rate changes
on cash - - 1 2
Increase (decrease) in cash and
cash equivalents $(4) $50 $(92) $(129)
(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) During the first nine months of 2007, Millennium received promissory
notes from and advanced $515 million to Equistar.
(d) Includes prepayment premiums of $13 million and $7 million,
respectively, in the nine months ended September 30, 2007 and 2006
related to the prepayment of debt.
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/
