NEWS RELEASE
FOR IMMEDIATE RELEASE
| Contact: | | Mickey Foster |
| | | Vice President |
| | | Corporate and Investor Relations |
| | | (732) 933-5140 |
MILLENNIUM CHEMICALS REPORTS
THIRD QUARTER 2001 OPERATING RESULTS
--3Q01 TiO2EBITDA level with 2Q01 --
-- 3Q01 SD&A costs improved 39 percent over 3Q00 --
-- 3Q01 net debt declined $31 million from 2Q01 --
EPS loss of ($0.20) includes gains on interest rate hedges
London, England and Red Bank, New Jersey, October 30, 2001 -- Millennium Chemicals (NYSE-MCH) (“Millennium”) announced today a third quarter 2001 EPS loss of ($0.20), compared to EPS of $0.56 in the third quarter last year. Millennium reported third quarter 2001 pro forma EBITDA1 of $63 million compared to third quarter 2000 pro forma EBITDA of $134 million. Third quarter pro forma sales were $792 million compared to last year’s third quarter pro forma sales of $1.050 billion.
William M. Landuyt, Chairman and Chief Executive Officer of Millennium, said, “The third quarter was negatively impacted by weak demand and pricing for petrochemical products, including acetyls and Equistar’s principal products, ethylene and polyethylene. Selling, development and administrative costs in the third quarter declined 39 percent from last year’s third quarter due to wide-ranging cost-reduction programs initiated earlier this year. On another positive note, net debt declined by $31 million in the third quarter, mainly due to aggressive working capital management.”
In the third quarter of 2001, Millennium reported a net loss of ($12) million compared to net income of $35 million in the third quarter last year. Both basic and diluted EPS in the third quarter were a loss of ($0.20) compared to basic and diluted EPS of $0.56 and $0.55, respectively, in the comparable period last year. Included in the third quarter of 2001 are $3 million of after-tax gains, or $0.05 per share, related to the interest benefit recognized from interest rate swap agreements. These gains were subsequently realized early in the fourth quarter upon termination of the swap agreements.
Net debt (total debt less cash) at September 30, 2001 totaled $1.111 billion versus $1.142 billion at the end of the second quarter 2001. John E. Lushefski, Senior Vice President and Chief Financial Officer of Millennium, said, “Millennium lowered its net debt by $31 million in the third quarter by reducing working capital, aggressively improving its cost structure and lowering discretionary capital spending.”
Net interest expense was $18 million in third quarter 2001, down from $19 million in third quarter 2000 and $22 million in the second quarter 2001. Lushefski continued, “Net interest expense improved due to lower debt levels and the gains from interest rate swap agreements. We are very focused on our goal of reducing net debt, and progress is being made despite the extremely difficult global economic environment.”
Millennium has declared a quarterly dividend on its common stock of $0.135 per share. Shareholders are also entitled to a United Kingdom Notional Tax Credit of $0.015 per share. The dividend will be payable on December 19, 2001 to shareholders of record December 3, 2001. The ex-dividend date will be November 29, 2001.
TITANIUM DIOXIDE
TheTitanium Dioxide (TiO2) segment reported third quarter EBITDA of $42 million compared to $55 million in the third quarter last year and $40 million in the second quarter of 2001. EBITDA in the third quarter of 2001 was similar to the second quarter of 2001 with lower costs offsetting lower average selling prices on flat sales volumes.
In local currencies, average third quarter prices were down 4 percent from last year’s third quarter, and down 3 percent from the second quarter of 2001. In U.S. dollar terms, the worldwide average third quarter price was down 8 percent from the same quarter last year and down 3 percent from the second quarter of 2001. This decline was due primarily to competitive pricing.
Third quarter TiO2 sales volumes of 150,000 metric tons were down 13 percent from the record third quarter last year and flat with second quarter 2001 levels. Year-to-date sales volumes were down 10 percent from the same period last year.
The third quarter’s TiO2 operating rate of 86 percent of annual nameplate capacity of 712,000 metric tons was similar to that in the second quarter, and compared to 98 percent in last year’s third quarter. Millennium idled its high-cost sulfate-process plant in Baltimore, Maryland in September, as previously announced. Millennium’s nameplate capacity is now 690,000 metric tons per year. Millennium is currently restricting production rates to match demand and manage inventory levels.
Manufacturing costs per metric ton in the third quarter 2001 decreased 4 percent from second quarter 2001 primarilydue to the success of programs put in place to aggressively lower controllable fixed costs.
Outlook
Sales volumes for the fourth quarter are expected to decline seasonally from third quarter levels. Millennium will continue throttling back its plants to match market demand with supply. These anticipated production cutbacks and resulting lower plant operating rates will decrease our fixed cost absorption, and negatively impact profits in the fourth quarter. Sales volumes and pricing remain low due to the weak global economy. However, these negatives are being partially offset by good progress on controllable cost reduction efforts.
ACETYLS
TheAcetyls segment reported third quarter EBITDA of $4 million compared to $19 million in the third quarter last year and $10 million in second quarter 2001. As previously announced, the third quarter results were negatively impacted by $8 million due to unfavorable fixed-price natural gas purchase positions, which were put in place in the first quarter of 2001. These forward positions are expected to continue to adversely affect margins through March 2002.
VAM prices in the third quarter decreased 13 percent from prices in the third quarter of last year and decreased 14 percent from second quarter 2001. Acetic acid prices in the third quarter decreased 11 percent from the comparable period last year and were down 10 percent from second quarter 2001. VAM volumes in the third quarter of 2001 improved 4 percent over the second quarter.
Outlook
Fourth quarter earnings are expected to be significantly lower than the third quarter due to lower VAM and acetic acid prices resulting from weak global demand.
FRAGRANCE & FLAVOR CHEMICALS
TheFragrance & Flavor Chemicals segment reported third quarter EBITDA of $5 million compared to $7 million in the third quarter last year and $6 million in second quarter 2001. Sales volumes were flat with last year’s third quarter and down 4 percent from second quarter 2001.
Average selling prices declined 8 percent compared to last year’s third quarter and remained flat with the second quarter 2001. The price of crude sulfate turpentine, the key raw material, remained virtually unchanged from last year’s third quarter and second quarter 2001.
Outlook
The market for fragrance chemicals remains competitive and volumes may be affected by the weakening global economy. We expect this difficult market climate to continue for the remainder of the year.
EQUISTAR
Millennium’s 29.5 percent stake inEquistar resulted in a third quarter post-interest equity loss of ($26) million compared to $16 million of equity income in the third quarter last year and a ($10) million equity loss in second quarter 2001.
Ethylene prices decreased 20 percent in the third quarter compared to the second quarter of 2001. Polyethylene prices decreased 17 percent while polyethylene volumes increased 12 percent in the third quarter compared to the second quarter 2001. The cost of ethylene decreased on lower natural gas liquid costs and lower heavy feedstock costs, partially offset by lower coproduct prices. Natural gas liquid prices declined 22 percent in the third quarter versus the second quarter of 2001, while heavy liquid feedstocks decreased 16 percent.
Millennium’s share of Equistar’s underlying third quarter sales was $399 million; of operating loss, ($12) million; and, of EBITDA, $12 million. Equistar did not distribute any cash to Millennium in the third quarter, and distributions are not expected until profit levels improve.
Outlook
Petrochemicals demand remains soft and pricing continues under pressure. Trough conditions experienced in the third quarter are expected to continue through the fourth quarter of 2001. A recovery in U.S. demand will be necessary before any substantial improvement in Equistar’s results takes place.
1 EBITDA represents income from operations before interest, taxes, depreciation and amortization, other income items and equity earnings. Pro forma EBITDA, presented for comparative purposes, includes the Company’s share of Equistar’s EBITDA, adjusted for an allocation of corporate costs incurred by Millennium.
Millennium Chemicals (website: www.millenniumchem.com) is a major international chemicals company, with leading market positions in a broad range of commodity, industrial, performance and specialty chemicals.
Millennium Chemicals Inc. is:
- The second-largest producer of TiO2 in the world and a leading producer of titanium tetrachloride, and other products, including cadmium/selenium pigments and silica gel;
- The second-largest producer of acetic acid and vinyl acetate monomer in North America;
- A leading producer of fragrance chemicals; and,
- Through its partnership interest in Equistar Chemicals, LP, a partner in the third-largest producer of ethylene, and the third-largest producer of polyethylene, in North America and a leading producer of ethylene oxide and its derivatives and high value-added specialty polymers.
The statements in this press release that are not historical facts are or may be deemed to be “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995. Some of these statements can be identified by the use of forward-looking terminology such as “outlook,” “believes,” “estimates,” “intends,” “may,” “will,” “should,” “anticipates,” “expects” or “plans,” or the negative or other variation of these or similar words, or by discussion of strategy or risks and uncertainties. These statements are only present expectations. Actual events or results may differ materially. Factors that could cause such a difference include: the cyclicality and volatility of the segments of the chemical industry in which the Company and Equistar operate, particularly fluctuations in the demand for ethylene, its derivatives and acetyls and the sensitivity of these industry segments to capacity additions; general economic conditions in the geographic regions where the Company and Equistar generate sales, and the impact of government regulation and other external factors; the ability of Equistar to distribute cash to its partners and uncertainties arising from the shared control of Equistar and the Company's future capital commitments for Equistar; changes in the cost of energy and raw materials; the ability of raw material suppliers to fulfill their commitments; the ability of the Company and Equistar to achieve their productivity improvement and cost reduction targets; the occurrence of operating problems at manufacturing facilities of the Company or Equistar; fluctuations in currency exchange rates and other risks of doing business abroad; the cost of compliance with the extensive environmental regulations affecting the chemical industry and exposure to liabilities for environmental remediation and other environmental matters; pricing and other competitive pressures; exposure to legal proceedings relating to present and former operations (including proceedings based on exposure to lead pigments, asbestos and other materials) and other claims; and tax and indemnification liabilities arising from the Company's dual tax residence in the United States and the United Kingdom. A further description of these risks, uncertainties and other matters can be found in the Company's Current Report on Form 8-K dated July 26, 2001.
The Company disclaims any obligation to update or revise publicly any forward-looking statement, whether as a result of new information, future events or otherwise.
(Tables follow)
Listen in live to Millennium's 2001 third quarter earnings discussion on Tuesday,
October 30 at 10:00 am EDT via webcast athttp://www.millenniumchem.com and click
on the Investor Relations icon.
The teleconference number is 706-679-7718
Replay will be available until Friday, November 2 at 706-645-9291, reservation #1929180.
MILLENNIUM CHEMICALS
Consolidated Statements of Income
(in millions, except per share data)
TABLE I
Three months ended Nine months ended
September 30, September 30,
--------------------- -----------------------
2001 2000 2001 2000
---- ---- ---- ----
Net sales $ 393 $ 473 $1,256 $1,359
Operating costs and expenses
Cost of products sold 307 335 978 970
Selling, development and
administrative expenses 35 57 113 153
------ ------ ------ ------
EBITDA 51 81 165 236
Depreciation and amortization 28 27 83 83
------ ------ ------ ------
Operating income before reorganization
and plant closure charges 23 54 82 153
Net interest expense (18) (19) (60) (56)
Equity earnings of Equistar - operating (12) 30 (14) 113
- interest (14) (14) (41) (40)
- plant closure - - (6) -
Reorganization and plant closure charges - - (36) -
Net other income 2 8 1 13
------ ------ ------ ------
(Loss) income before provision for income
taxes and minority interest (19) 59 (74) 183
Benefit (provision) for income taxes 8 (23) 26 (70)
------ ------ ------ ------
(Loss) income before minority interest (11) 36 (48) 113
Minority interest (1) (1) (3) (5)
------ ------ ------ ------
Net (loss) income $ (12) $ 35 $ (51) $ 108
====== ====== ====== ======
Basic EPS ($/share) $(0.20) $ 0.56 $(0.80) $ 1.68
====== ====== ====== ======
Weighted average number of shares
used to compute basic EPS 63.518 63.245 63.514 64.585
Diluted EPS ($/share) $(0.20) $ 0.55 $(0.80) $ 1.66
====== ====== ====== ======
Weighted average number of shares
used to compute diluted EPS 63.518 63.864 63.514 65.226
MILLENNIUM CHEMICALS
Segment Information
($ Millions)
TABLE II
2000 2001
---------------------------------------- ---------------------
1Q 2Q 3Q 4Q FY 1Q 2Q 3Q
---------------------------------------- ---------------------
EBITDA2
Titanium dioxide 53 60 55 60 228 50 40 42
Acetyls 11 14 19 25 69 2 10 4
Fragrance & Flavor 9 8 7 5 29 6 6 5
---------------------------------------- ---------------------
REPORTED 73 82 81 90 326 58 56 51
Equistar 51 77 53 4 185 19 27 12
---------------------------------------- ---------------------
PRO FORMA TOTAL 124 159 134 94 511 77 83 63
DEPRECIATION AND AMORTIZATION
Titanium dioxide 21 22 20 22 85 21 20 21
Acetyls 4 5 5 6 20 5 5 5
Fragrance & Flavor 2 2 2 2 8 2 2 2
---------------------------------------- ---------------------
REPORTED 27 29 27 30 113 28 27 28
Equistar 23 22 23 24 92 23 24 24
---------------------------------------- ---------------------
PRO FORMA TOTAL 50 51 50 54 205 51 51 52
OPERATING INCOME2
Titanium dioxide 32 38 35 38 143 29 20 21
Acetyls 7 9 14 19 49 (3) 5 (1)
Fragrance & Flavor 7 6 5 3 21 4 4 3
---------------------------------------- ---------------------
REPORTED 46 53 54 60 213 30 29 23
Equistar 28 55 30 (20) 93 (4) 3 (12)
---------------------------------------- ---------------------
PRO FORMA TOTAL 74 108 84 40 306 26 32 11
NET SALES
Titanium dioxide 323 353 361 318 1,355 319 298 286
Acetyls 69 80 95 93 337 99 98 85
Fragrance & Flavor 31 30 17 23 101 26 23 22
--------------------------------------- ----------------------
REPORTED 423 463 473 434 1,793 444 419 393
Equistar 548 560 577 526 2,211 523 472 399
--------------------------------------- ----------------------
PRO FORMA TOTAL 971 1,023 1,050 960 4,004 967 891 792
CAPITAL SPENDING
Titanium dioxide 16 26 18 33 93 23 26 23
Acetyls 2 1 1 3 7 2 3 -
Fragrance & Flavor 3 2 1 1 7 1 1 1
Corporate - - - - - 2 3 -
--------------------------------------- ----------------------
TOTAL 21 29 20 37 107 28 33 24
2EBITDA and operating income for purposes of this presentation excludes reorganization and plant closure charges recorded in the first and second quarter of 2001.
MILLENNIUM CHEMICALS
Consolidated Balance Sheets
(in Millions)
TABLE III
September 30, December 31,
2001 2000
---- ----
ASSETS
Current Assets:
Cash and cash equivalents $ 81 $ 107
Trade receivables, net 261 306
Inventories 326 373
Other current assets 95 101
------ ------
Total Current Assets 763 887
Property, plant and equipment, net 915 957
Investment in Equistar 705 760
Other assets 274 225
Goodwill 382 391
------ ------
Total Assets $3,039 $3,220
====== ======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Notes payable $ 4 $ 39
Current maturities of long-term debt 1 391
Trade accounts payable 156 165
Accrued expenses and other liabilities 196 188
------ ------
Total Current Liabilities 357 783
Long-term debt 1,187 767
Deferred income taxes -- 19
Other liabilities 606 646
------ ------
Total Liabilities 2,150 2,215
------ ------
Minority interest 19 22
Shareholders' equity 870 983
------ ------
Total Liabilities and Shareholders' Equity $3,039 $3,220
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