EXHIBIT 99.3
LYONDELL CHEMICAL COMPANY
CONSOLIDATED STATEMENTS OF INCOME
For the three months ended March 31, | ||||||||
Millions of dollars, except per share data | 2003 | 2002 | ||||||
Sales and other operating revenues | $ | 989 |
| $ | 674 |
| ||
Operating costs and expenses: | ||||||||
Cost of sales |
| 956 |
|
| 589 |
| ||
Selling, general and administrative expenses |
| 42 |
|
| 40 |
| ||
Research and development expense |
| 9 |
|
| 7 |
| ||
| 1,007 |
|
| 636 |
| |||
Operating income (loss) |
| (18 | ) |
| 38 |
| ||
Interest expense |
| (100 | ) |
| (93 | ) | ||
Interest income |
| 17 |
|
| 2 |
| ||
Other income, net |
| 16 |
|
| 1 |
| ||
Loss before equity investments and income taxes |
| (85 | ) |
| (52 | ) | ||
Income (loss) from equity investments: | ||||||||
Equistar Chemicals, LP |
| (100 | ) |
| (45 | ) | ||
LYONDELL-CITGO Refining LP |
| 19 |
|
| 27 |
| ||
Other |
| (2 | ) |
| (3 | ) | ||
| (83 | ) |
| (21 | ) | |||
Loss before income taxes |
| (168 | ) |
| (73 | ) | ||
Benefit from income taxes |
| (55 | ) |
| (18 | ) | ||
Net loss | $ | (113 | ) | $ | (55 | ) | ||
Basic and diluted loss per share | $ | (.70 | ) | $ | (.47 | ) | ||
See Notes to the Consolidated Financial Statements.
1
LYONDELL CHEMICAL COMPANY
CONSOLIDATED BALANCE SHEETS
Millions, except shares and par value data | March 31, 2003 | December 31, 2002 | ||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 331 |
| $ | 286 |
| ||
Other short-term investments |
| 53 |
|
| 44 |
| ||
Accounts receivable: | ||||||||
Trade, net |
| 358 |
|
| 340 |
| ||
Related parties |
| 54 |
|
| 56 |
| ||
Inventories |
| 352 |
|
| 344 |
| ||
Prepaid expenses and other current assets |
| 69 |
|
| 66 |
| ||
Deferred tax assets |
| 35 |
|
| 35 |
| ||
Total current assets |
| 1,252 |
|
| 1,171 |
| ||
Property, plant and equipment, net |
| 2,364 |
|
| 2,369 |
| ||
Investments and long-term receivables: | ||||||||
Investment in Equistar Chemicals, LP |
| 1,084 |
|
| 1,184 |
| ||
Investment in PO joint ventures |
| 796 |
|
| 770 |
| ||
Receivable from LYONDELL-CITGO Refining LP |
| 229 |
|
| 229 |
| ||
Investment in LYONDELL-CITGO Refining LP |
| 20 |
|
| 68 |
| ||
Other investments and long-term receivables |
| 87 |
|
| 98 |
| ||
Goodwill, net |
| 1,124 |
|
| 1,130 |
| ||
Other assets, net |
| 412 |
|
| 429 |
| ||
Total assets | $ | 7,368 |
| $ | 7,448 |
| ||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Current liabilities: | ||||||||
Accounts payable: | ||||||||
Trade | $ | 319 |
| $ | 260 |
| ||
Related parties |
| 65 |
|
| 84 |
| ||
Current maturities of long-term debt |
| 1 |
|
| 1 |
| ||
Accrued liabilities |
| 331 |
|
| 279 |
| ||
Total current liabilities |
| 716 |
|
| 624 |
| ||
Long-term debt |
| 3,926 |
|
| 3,926 |
| ||
Other liabilities |
| 663 |
|
| 673 |
| ||
Deferred income taxes |
| 824 |
|
| 881 |
| ||
Commitments and contingencies | ||||||||
Minority interest |
| 145 |
|
| 165 |
| ||
Stockholders’ equity: | ||||||||
Common stock, $1.00 par value, 340,000,000 shares authorized, 128,530,000 shares issued |
| 128 |
|
| 128 |
| ||
Series B common stock, $1.00 par value, 80,000,000 shares authorized, 35,172,845 and 34,568,224 shares issued, respectively |
| 35 |
|
| 35 |
| ||
Additional paid-in capital |
| 1,388 |
|
| 1,380 |
| ||
Retained deficit |
| (171 | ) |
| (18 | ) | ||
Accumulated other comprehensive loss |
| (219 | ) |
| (271 | ) | ||
Treasury stock, at cost, 2,394,655 and 2,685,080 shares, respectively |
| (67 | ) |
| (75 | ) | ||
Total stockholders’ equity |
| 1,094 |
|
| 1,179 |
| ||
Total liabilities and stockholders’ equity | $ | 7,368 |
| $ | 7,448 |
| ||
See Notes to the Consolidated Financial Statements.
2
LYONDELL CHEMICAL COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the three months ended March 31, | ||||||||
Millions of dollars | 2003 | 2002 | ||||||
Cash flows from operating activities: | ||||||||
Net loss | $ | (113 | ) | $ | (55 | ) | ||
Adjustments to reconcile net loss to net cash provided by operating activities: | ||||||||
Losses from equity investments |
| 102 |
|
| 48 |
| ||
Depreciation and amortization |
| 57 |
|
| 56 |
| ||
Deferred income taxes |
| (54 | ) |
| 7 |
| ||
Gain on sale of investment |
| (18 | ) |
| — |
| ||
Changes in assets and liabilities that provided (used) cash: | ||||||||
Accounts receivable |
| (48 | ) |
| 28 |
| ||
Inventories |
| (5 | ) |
| 13 |
| ||
Accounts payable |
| 36 |
|
| (42 | ) | ||
Prepaid expenses and other current assets |
| 39 |
|
| 71 |
| ||
Other assets and liabilities, net |
| 50 |
|
| 44 |
| ||
Cash provided by operating activities |
| 46 |
|
| 170 |
| ||
Cash flows from investing activities: | ||||||||
Distributions from affiliates in excess of earnings |
| 71 |
|
| — |
| ||
Contributions and advances to affiliates |
| (51 | ) |
| (38 | ) | ||
Proceeds from sale of investment |
| 28 |
|
| — |
| ||
Expenditures for property, plant and equipment |
| (9 | ) |
| (11 | ) | ||
Purchase of short-term investments |
| (9 | ) |
| — |
| ||
Cash provided by (used in) investing activities |
| 30 |
|
| (49 | ) | ||
Cash flows from financing activities: | ||||||||
Dividends paid |
| (28 | ) |
| (26 | ) | ||
Repayment of long-term debt |
| — |
|
| (13 | ) | ||
Other |
| (3 | ) |
| — |
| ||
Cash used in financing activities |
| (31 | ) |
| (39 | ) | ||
Increase in cash and cash equivalents |
| 45 |
|
| 82 |
| ||
Cash and cash equivalents at beginning of period |
| 286 |
|
| 146 |
| ||
Cash and cash equivalents at end of period | $ | 331 |
| $ | 228 |
| ||
See Notes to the Consolidated Financial Statements.
3
LYONDELL CHEMICAL COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. Basis of Preparation
The accompanying consolidated financial statements are unaudited and have been prepared from the books and records of Lyondell Chemical Company (“Lyondell”) in accordance with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X for interim financial information. Accordingly, they do not include all of the information and notes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments, consisting only of normal recurring adjustments considered necessary for a fair presentation, have been included. For further information, refer to the consolidated financial statements and notes thereto for the year ended December 31, 2002 included in the Lyondell 2002 Annual Report on Form 10-K. Certain amounts from prior periods have been reclassified to conform to the current period presentation.
2. Accounting Changes
Lyondell is implementing three accounting changes in 2003, as discussed below.
Employee Stock Options—To better reflect the full cost of employee compensation, Lyondell has elected to adopt the “fair value” method of accounting for employee stock options, the preferred method as defined by Statement of Financial Accounting Standards (“SFAS”) No. 123,Accounting for Stock-Based Compensation. SFAS No. 148,Accounting for Stock-Based Compensation—Transition and Disclosure,issued by the Financial Accounting Standards Board (“FASB”) in December 2002, provides three alternative methods of transition for a voluntary change to the fair value method, and requires certain related disclosures. Lyondell adopted the fair value method in the first quarter of 2003, using the prospective transition method. Under this method, an estimate of the fair value of options granted to employees during 2003 and thereafter is charged to earnings over the related vesting periods. This change resulted in an after-tax charge of approximately $1 million for the three months ended March 31, 2003.
Prior to 2003, Lyondell accounted for employee stock options under the intrinsic value based method prescribed by Accounting Principles Board Opinion No. 25,Accounting for Stock Issued to Employees. Accordingly, no compensation cost was recognized in connection with stock options granted prior to 2003 under Lyondell’s plans. The pro forma effect on net income and earnings per share of measuring compensation expense for such grants in the manner prescribed in SFAS No. 123 is summarized in the table below:
For the three months ended March 31, | ||||||||
Millions of dollars, except per share data | 2003 | 2002 | ||||||
Reported net loss | $ | (113 | ) | $ | (55 | ) | ||
Add stock-based compensation expense included in net income, net of tax |
| 1 |
|
| — |
| ||
Deduct stock-based compensation expense using fair value method for all awards, net of tax |
| (2 | ) |
| (2 | ) | ||
Pro forma net loss | $ | (114 | ) | $ | (57 | ) | ||
Basic and diluted loss per share: | ||||||||
Reported | $ | (0.70 | ) | $ | (0.47 | ) | ||
Pro forma | $ | (0.71 | ) | $ | (0.49 | ) |
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Early Extinguishment of Debt—In April 2002, the FASB issued SFAS No. 145,Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections. The primary impact of the statement on Lyondell will be the classification of gains or losses that result from the early extinguishment of debt as an element of income before extraordinary items. Also, gains or losses that were originally reported as extraordinary items in prior periods will be reclassified. This change had no effect on the periods ending March 31, 2003 and 2002.
Variable Interest Entities—In January 2003, the FASB issued Interpretation No. 46 (“FIN No. 46”),Consolidation of Variable Interest Entities. FIN No. 46 addresses certain situations in which a company should include in its financial statements the assets, liabilities and activities of another entity. FIN No. 46 applies immediately to entities created after January 31, 2003 and, for Lyondell, will apply to existing entities beginning in the third quarter 2003.
Lyondell expects the application of FIN No. 46 to result in the consolidation of the entity from which it leases BDO-2, a butanediol plant in The Netherlands. The consolidation of this entity as of March 31, 2003, using exchange rates as of that date, would have resulted in a net increase in property, plant and equipment of approximately $185 million, a decrease in other liabilities of $12 million, a $204 million increase in debt and a $5 million after-tax charge, reported as the cumulative effect of the accounting change.
3. Equity Interest in Equistar Chemicals, LP
Lyondell’s operations in the petrochemicals and polymers segments are conducted through its joint venture ownership interest in Equistar Chemicals, LP (“Equistar”). Prior to August 22, 2002, Lyondell had a 41% interest in Equistar, while Millennium Chemicals Inc. (“Millennium”) and Occidental Petroleum Corporation (“Occidental”) each had a 29.5% interest. On August 22, 2002, Lyondell acquired Occidental’s 29.5% interest in Equistar.
Following the acquisition, Lyondell has a 70.5% interest in Equistar. Because the partners jointly control certain key management decisions, including approval of the strategic plan, capital expenditures and annual budget, issuance of additional debt and the appointment of executive management of the partnership, Lyondell accounts for its investment in Equistar using the equity method of accounting. As a partnership, Equistar is not subject to federal income taxes.
Summarized financial information for Equistar follows:
March 31, 2003 | December 31, 2002 | |||||
Millions of dollars | ||||||
BALANCE SHEETS | ||||||
Total current assets | $ | 1,180 | $ | 1,126 | ||
Property, plant and equipment, net |
| 3,469 |
| 3,565 | ||
Other assets |
| 394 |
| 361 | ||
Total assets | $ | 5,043 | $ | 5,052 | ||
Current maturities of long-term debt | $ | 332 | $ | 32 | ||
Other current liabilities |
| 652 |
| 682 | ||
Long-term debt |
| 1,896 |
| 2,196 | ||
Other liabilities and deferred revenues |
| 388 |
| 221 | ||
Partners’ capital |
| 1,775 |
| 1,921 | ||
Total liabilities and partners’ capital | $ | 5,043 | $ | 5,052 | ||
5
For the three months ended March 31, | ||||||||
2003 | 2002 | |||||||
STATEMENTS OF INCOME | ||||||||
Sales and other operating revenues | $ | 1,641 |
| $ | 1,136 |
| ||
Cost of sales |
| 1,676 |
|
| 1,162 |
| ||
Selling, general and administrative expenses |
| 40 |
|
| 40 |
| ||
Research and development expenses |
| 9 |
|
| 9 |
| ||
Loss on sale of asset |
| 12 |
|
| — |
| ||
Operating loss |
| (96 | ) |
| (75 | ) | ||
Interest expense, net |
| (49 | ) |
| (52 | ) | ||
Other income (expense), net |
| (1 | ) |
| 1 |
| ||
Loss before cumulative effect of accounting change |
| (146 | ) |
| (126 | ) | ||
Cumulative effect of accounting change |
| — |
|
| (1,053 | ) | ||
Net loss | $ | (146 | ) | $ | (1,179 | ) | ||
SELECTED ADDITIONAL INFORMATION | ||||||||
Depreciation and amortization | $ | 78 |
| $ | 73 |
| ||
Expenditures for property, plant and equipment |
| 13 |
|
| 15 |
|
As part of the implementation of SFAS No. 142,Goodwill and Other Intangible Assets, as of January 1, 2002, the entire unamortized balance of Equistar’s goodwill was determined to be impaired. Accordingly, Equistar’s earnings in the first quarter 2002 were reduced by a charge of $1.1 billion. Lyondell’s 41% share of the charge for impairment of Equistar’s goodwill was offset by a corresponding reduction in the difference between Lyondell’s investment in Equistar and its underlying equity in Equistar’s net assets.
Lyondell’s loss from its equity investment in Equistar consists of Lyondell’s share of Equistar’s loss before the cumulative effect of the accounting change and the accretion of the remaining difference between Lyondell’s underlying equity in Equistar’s net assets and its investment in Equistar. At March 31, 2003, Lyondell’s underlying equity in Equistar’s net assets exceeded its investment in Equistar by approximately $167 million. This difference is being recognized in income over the next 15 years.
4. Equity Interest in LYONDELL-CITGO Refining LP
Lyondell’s refining operations are conducted through its joint venture ownership interest in LYONDELL-CITGO Refining LP (“LCR”). Lyondell has a 58.75% interest in LCR, while CITGO Petroleum Corporation (“CITGO”) has a 41.25% interest. Because the partners jointly control certain key management decisions, including approval of the strategic plan, capital expenditures and annual budget, issuance of debt and the appointment of the executive management of the partnership, Lyondell accounts for its investment in LCR using the equity method of accounting. As a partnership, LCR is not subject to federal income taxes.
6
Summarized financial information for LCR follows:
March 31, 2003 | December 31, 2002 | |||||||
Millions of dollars | ||||||||
BALANCE SHEETS | ||||||||
Total current assets | $ | 271 |
| $ | 357 |
| ||
Property, plant and equipment, net |
| 1,275 |
|
| 1,312 |
| ||
Other assets |
| 90 |
|
| 88 |
| ||
Total assets | $ | 1,636 |
| $ | 1,757 |
| ||
Current liabilities | $ | 372 |
| $ | 514 |
| ||
Long-term debt |
| 450 |
|
| 450 |
| ||
Loans payable to partners |
| 264 |
|
| 264 |
| ||
Other liabilities |
| 127 |
|
| 126 |
| ||
Partners’ capital |
| 423 |
|
| 403 |
| ||
Total liabilities and partners’ capital | $ | 1,636 |
| $ | 1,757 |
| ||
For the three months ended March 31, | ||||||||
2003 | 2002 | |||||||
STATEMENTS OF INCOME | ||||||||
Sales and other operating revenues | $ | 1,183 |
| $ | 707 |
| ||
Cost of sales |
| 1,133 |
|
| 646 |
| ||
Selling, general and administrative expenses |
| 12 |
|
| 12 |
| ||
Operating income |
| 38 |
|
| 49 |
| ||
Interest expense, net |
| (10 | ) |
| (8 | ) | ||
Net income | $ | 28 |
| $ | 41 |
| ||
SELECTED ADDITIONAL INFORMATION | ||||||||
Depreciation and amortization | $ | 28 |
| $ | 29 |
| ||
Expenditures for property, plant and equipment |
| 15 |
|
| 22 |
|
Lyondell’s income from its equity investment in LCR consists of Lyondell’s share of LCR’s net income and the accretion of the difference between Lyondell’s underlying equity in LCR’s net assets and its investment in LCR. At March 31, 2003, Lyondell’s underlying equity in LCR’s net assets exceeded its investment in LCR by approximately $272 million. This difference is being recognized in income over the next 25 years.
5. Inventories
Inventories consisted of the following components:
March 31, 2003 | December 31, 2002 | |||||
Millions of dollars | ||||||
Finished goods | $ | 265 | $ | 271 | ||
Work-in-process |
| 10 |
| 7 | ||
Raw materials |
| 41 |
| 29 | ||
Materials and supplies |
| 36 |
| 37 | ||
Total inventories | $ | 352 | $ | 344 | ||
7
6. Property, Plant and Equipment, Net
The components of property, plant and equipment, at cost, and the related accumulated depreciation were as follows:
March 31, 2003 | December 31, 2002 | |||||
Millions of dollars | ||||||
Land | $ | 11 | $ | 11 | ||
Manufacturing facilities and equipment |
| 3,003 |
| 2,959 | ||
Construction in progress |
| 27 |
| 30 | ||
Total property, plant and equipment |
| 3,041 |
| 3,000 | ||
Less accumulated depreciation |
| 677 |
| 631 | ||
Property, plant and equipment, net | $ | 2,364 | $ | 2,369 | ||
Depreciation and amortization is summarized as follows:
March 31, 2003 | March 31, 2002 | |||||
Millions of dollars | ||||||
Property, plant and equipment | $ | 40 | $ | 31 | ||
Investment in PO joint venture |
| 8 |
| 8 | ||
Turnaround costs |
| 4 |
| 3 | ||
Software costs |
| 2 |
| 2 | ||
Other |
| 3 |
| 12 | ||
Total depreciation and amortization | $ | 57 | $ | 56 | ||
In addition, amortization of debt issuance costs of $4 million for each of the three month periods ended March 31, 2003 and 2002 is included in interest expense in the Consolidated Statements of Income.
7. Long-Term Debt
Long-term debt consisted of the following:
March 31, 2003 | December 31, 2002 | |||||
Millions of dollars | ||||||
Bank credit facility: | ||||||
Revolving credit facility | $ | — | $ | — | ||
Term Loan E due 2006 |
| 103 |
| 103 | ||
Other debt obligations: | ||||||
Senior Secured Notes, Series A due 2007, 9.625% |
| 900 |
| 900 | ||
Senior Secured Notes, Series B due 2007, 9.875% |
| 1,000 |
| 1,000 | ||
Senior Secured Notes due 2008, 9.5% |
| 393 |
| 393 | ||
Senior Secured Notes due 2008, 9.5% |
| 330 |
| 330 | ||
Senior Secured Notes due 2012, 11.125% |
| 276 |
| 276 | ||
Senior Subordinated Notes due 2009, 10.875% |
| 500 |
| 500 | ||
Debentures due 2005, 9.375% |
| 100 |
| 100 | ||
Debentures due 2010, 10.25% |
| 100 |
| 100 | ||
Debentures due 2020, 9.8% |
| 224 |
| 224 | ||
Other |
| 1 |
| 1 | ||
Total long-term debt |
| 3,927 |
| 3,927 | ||
Less current maturities |
| 1 |
| 1 | ||
Long-term debt, net | $ | 3,926 | $ | 3,926 | ||
In March 2003, Lyondell obtained amendments to its credit facility to provide additional financial flexibility by easing certain financial ratio requirements.
8
8. Commitments and Contingencies
Capital Commitments—Lyondell has various commitments related to capital expenditures, all made in the normal course of business. At March 31, 2003, major capital commitments primarily consisted of Lyondell’s 50% share of those related to the construction of a world-scale PO/SM facility, known as PO-11, in The Netherlands. Lyondell’s share of the outstanding commitments relating to PO-11, which will be funded through contributions and advances to affiliates, totaled approximately $45 million as of March 31, 2003.
Crude Supply Agreement—Under a crude supply agreement (“Crude Supply Agreement” or “CSA”), PDVSA Petróleo, S.A. (“PDVSA Oil”) is required to sell, and LCR is required to purchase, 230,000 barrels per day of extra heavy crude oil, which constitutes approximately 86% of LCR’s refining capacity of 268,000 barrels per day of crude oil. Since April 1998, PDVSA Oil has, from time to time, declared itself in a force majeure situation and subsequently reduced deliveries of crude oil. Such reductions in deliveries were purportedly based on announced OPEC production cuts. PDVSA Oil informed LCR that the Venezuelan government, through the Ministry of Energy and Mines, had instructed that production of certain grades of crude oil be reduced. In certain circumstances, PDVSA Oil made payments to LCR under a different provision of the Crude Supply Agreement in partial compensation for such reductions.
In January 2002, PDVSA Oil again declared itself in a force majeure situation and stated that crude oil deliveries could be reduced by up to 20.3% beginning March 1, 2002. Beginning in March 2002, deliveries of crude oil to LCR were reduced to approximately 198,000 barrels per day, reaching a level of 190,000 barrels per day during the second quarter 2002. Crude oil deliveries to LCR under the Crude Supply Agreement increased to the contract level of 230,000 barrels per day during the third quarter 2002, averaging 212,000 barrels per day for the third quarter. Although deliveries increased to contract levels during the third quarter 2002, PDVSA Oil did not revoke its January 2002 force majeure declaration during 2002. A national strike in Venezuela began in early December 2002 and disrupted deliveries of crude oil to LCR under the Crude Supply Agreement. PDVSA Oil again declared a force majeure and reduced deliveries of crude oil to LCR. In March 2003, PDVSA Oil notified LCR that the force majeure had been lifted with respect to CSA crude oil.
LCR has consistently contested the validity of the reductions in deliveries by PDVSA Oil and Petróleos de Venezuela, S.A. (“PDVSA”) under the Crude Supply Agreement. The parties have different interpretations of the provisions of the contracts concerning the delivery of crude oil. The contracts do not contain dispute resolution procedures, and the parties have been unable to resolve their commercial dispute. As a result, on February 1, 2002, LCR filed a lawsuit against PDVSA and PDVSA Oil in connection with the force majeure declarations.
From time to time, Lyondell and PDVSA have had discussions covering both a restructuring of the Crude Supply Agreement and a broader restructuring of the LCR partnership. Lyondell is unable to predict whether changes in either arrangement will occur. Subject to the consent of the other partner and rights of first offer and first refusal, the partners each have a right to transfer their interests in LCR to unaffiliated third parties in certain circumstances. In the event that CITGO were to transfer its interest in LCR to an unaffiliated third party, PDVSA Oil would have an option to terminate the Crude Supply Agreement.
Depending on then-current market conditions, any breach or termination of the Crude Supply Agreement, or reduction in supply thereunder, would require LCR to purchase all or a portion of its crude oil in the merchant market, could subject LCR to significant volatility and price fluctuations and could adversely affect LCR and, therefore, Lyondell. There can be no assurance that alternative crude oil supplies with similar margins would be available for purchase by LCR.
Indemnification Arrangements Relating to Equistar—Lyondell, Millennium and Occidental and certain of their subsidiaries have each agreed to provide certain indemnifications to Equistar with respect to the petrochemicals and polymers businesses they each contributed. In addition, Equistar agreed to assume third party claims that are related to certain contingent liabilities arising prior to the contribution transactions that are asserted prior to December 1, 2004 as to Lyondell and Millennium, and May 15, 2005 as to Occidental, to the extent the aggregate thereof does not exceed $7 million for each entity, subject to certain terms of the respective asset contribution agreements. As of March 31, 2003, Equistar had incurred approximately $7 million with respect to the indemnification basket for the
9
business contributed by Lyondell. Lyondell, Millennium and Occidental each remain liable under these indemnification arrangements to the same extent as they were before Lyondell’s acquisition of Occidental’s interest in Equistar.
Environmental Remediation—As of March 31, 2003, Lyondell’s environmental liability for future remediation costs at its plant sites and a limited number of Superfund sites totaled $18 million. The liabilities range from less than $1 million to $4 million per site and are expected to be incurred primarily over the next ten years. In the opinion of management, there is currently no material estimable range of possible loss in excess of the liabilities recorded for environmental remediation. However, it is possible that new information about the sites for which the accrual has been established, new technology or future developments such as involvement in investigations by regulatory agencies, could require Lyondell to reassess its potential exposure related to environmental matters.
Clean Air Act—The eight-county Houston/Galveston region has been designated a severe non-attainment area for ozone by the U.S. Environmental Protection Agency (“EPA”). Emission reduction controls for nitrogen oxides (“NOx”) must be installed at LCR’s refinery and each of Lyondell’s two facilities and Equistar’s six facilities in the Houston/Galveston region during the next several years. Recently adopted revisions by the regulatory agencies changed the required NOx reduction levels from 90% to 80%. Compliance with the previously proposed 90% reduction standards would have resulted in increased aggregate capital investment, estimated at between $400 million and $500 million for Lyondell, Equistar and LCR before the 2007 deadline. Under the revised 80% standard, Lyondell estimates that the incremental capital expenditures would decrease to between $250 million and $300 million for Lyondell, Equistar and LCR. However, the savings from this revision could be offset by the costs of stricter proposed controls over highly reactive, volatile organic compounds, or HRVOCs. Lyondell, Equistar and LCR are still assessing the impact of the proposed HRVOC revisions and there can be no guarantee as to the ultimate cost of implementing any final plan developed to ensure ozone attainment by the 2007 deadline.
The following table summarizes the range of projected capital expenditures for Lyondell and its joint ventures to comply with the 80% NOx emission reduction requirements:
Millions of dollars | From | To | ||||
NOx capital expenditure—100% basis: | ||||||
Lyondell | $ | 35 | $ | 45 | ||
Equistar |
| 165 |
| 200 | ||
LCR |
| 50 |
| 55 | ||
Total NOx capital expenditures | $ | 250 | $ | 300 | ||
NOx capital expenditures—Lyondell proportionate share: | ||||||
Lyondell—100% | $ | 35 | $ | 45 | ||
Equistar—70.5% |
| 115 |
| 140 | ||
LCR—58.75% |
| 30 |
| 35 | ||
Total Lyondell share NOx capital expenditures | $ | 180 | $ | 220 | ||
Of these amounts, Lyondell’s proportionate share of spending through March 31, 2003, totaled $32 million. The timing and amount of future expenditures are subject to regulatory and other uncertainties, as well as obtaining the necessary permits and approvals.
The Clean Air Act Amendments of 1990 set minimum levels for oxygenates, such as MTBE, in gasoline sold in areas not meeting specified air quality standards. However, the presence of MTBE in some water supplies in California and other states due to gasoline leaking from underground storage tanks and in surface water from recreational water craft has led to public concern about the use of MTBE. Certain U.S. federal and state governmental initiatives have sought either to rescind the oxygen requirement for reformulated gasoline or to restrict or ban the use of MTBE. Lyondell’s North American MTBE sales represented approximately 26% of its total 2002 revenues. The U.S. House of Representatives and the U.S. Senate each passed versions of an omnibus energy bill during 2001 and 2002, respectively. The Senate version of the energy bill would have resulted in a ban on the use of MTBE. The two energy bills were not reconciled during the conference process and an omnibus energy bill was not passed during 2002.
10
Both the U.S. House of Representatives and the U.S. Senate are pursuing an energy bill during the 2003/2004 legislative cycle. It is likely that fuel content, including MTBE use, will be a subject of legislative debate. Factors which could be considered in this debate include the impact on gasoline price and supply and the potential for degradation of air quality.
At the state level, a number of states have legislated future MTBE bans. Of these, several are mid-West states that use ethanol as the oxygenate of choice. Bans in these states should not have an impact on MTBE demand. However, Connecticut, California and New York have bans of MTBE in place effective October 1, 2003, January 1, 2004, and January 1, 2004, respectively. Lyondell estimates that California represents 34% of the U.S. MTBE industry demand and 20% of the worldwide MTBE industry demand, while Connecticut and New York combined represent 12% of the U.S. MTBE industry demand and 7% of the worldwide MTBE industry demand.
At this time, Lyondell cannot predict the impact that these initiatives will have on MTBE margins or volumes during 2003. However, several major oil companies have announced plans, beginning in 2003, to discontinue the use of MTBE in gasoline produced for California markets. Lyondell estimates that the California-market MTBE volumes of these companies currently account for an estimated 23% of U.S. MTBE industry demand and 13% of worldwide MTBE industry demand. Lyondell intends to continue marketing MTBE in the U.S. However, should it become necessary or desirable to significantly reduce MTBE production, Lyondell would need to make capital expenditures to add the flexibility to produce alternative gasoline blending components, such as iso-octane or ethyl tertiary butyl ether (“ETBE”), at its U.S.-based MTBE plant. The current estimated costs for converting Lyondell’s U.S.-based MTBE plant to iso-octane production range from $65 million to $75 million. The profit contribution for iso-octane is likely to be lower than that historically realized on MTBE. Alternatively, Lyondell is pursuing ETBE viability through legislative efforts. One key hurdle is equal access to the federal subsidy provided for ethanol blended into gasoline for the ethanol component of ETBE. Lyondell’s U.S.-based MTBE plant could be converted to ETBE production with minimal capital expenditure.
The Clean Air Act also specified certain emissions standards for vehicles and, in 1998, the EPA concluded that additional controls on gasoline and diesel fuel were necessary. New standards for gasoline were finalized in 1999 and will require refiners to produce a low sulfur gasoline by 2004, with final compliance by 2006. A new “on-road” diesel standard was adopted in January 2001 and will require refiners to produce ultra low sulfur diesel by June 2006, with some allowance for a conditional phase-in period that could extend final compliance until 2009. These standards will result in increased capital investment for LCR. In the first quarter 2003, LCR developed an alternative approach to complying with the low sulfur gasoline standard that will lead to a reduction in overall estimated capital expenditures for the project. As a result, LCR recognized impairment of value of $25 million of costs incurred to date for the project. The revised estimated incremental spending, excluding the $25 million charge, totaled between $100 million to $180 million for the new gasoline standards and remained between $250 million to $300 million for the new diesel standard, of which approximately $14 million, excluding the $25 million charge, has been incurred by LCR as of March 31, 2003. Lyondell’s 58.75% share of these incremental capital expenditures would be between $200 million and $280 million. In addition, these standards could result in higher operating costs for LCR. Equistar’s business may also be impacted if these standards increase the cost for processing fuel components.
General—Lyondell is involved in various lawsuits and proceedings. Subject to the uncertainty inherent in all litigation, management believes the resolution of these proceedings will not have a material effect on the financial position, liquidity or results of operations of Lyondell.
In the opinion of management, any liability arising from the matters discussed in this note is not expected to have a material adverse effect on the financial position or liquidity of Lyondell. However, the adverse resolution in any reporting period of one or more of these matters discussed in this note could have a material impact on Lyondell’s results of operations for that period, which may be mitigated by contribution or indemnification obligations of co-defendants or others, or by any insurance coverage that may be available to offset the effects of any such award.
11
9. Per Share Data
Basic earnings per share for the periods presented are computed based upon the weighted average number of shares of original common stock and Series B common stock outstanding during the periods. Diluted earnings per share also include the effect of stock options issued under the 1999 Long-Term Incentive Plan and the Executive Long-Term Incentive Plan as well as outstanding warrants. These stock options and warrants were antidilutive for the periods presented.
Earnings per share data and dividends declared per share of common stock were as follows:
For the three months ended March 31, | ||||||||
2003 | 2002 | |||||||
Weighted average shares, in thousands |
| 160,419 |
|
| 117,565 |
| ||
Basic and diluted loss per share | $ | (.70 | ) | $ | (.47 | ) | ||
Dividends declared per share of common stock | $ | .225 |
| $ | .225 |
|
10. Comprehensive Loss
The components of the comprehensive loss were as follows:
For the three months ended March 31, | ||||||||
2003 | 2002 | |||||||
Net loss | $ | (113 | ) | $ | (55 | ) | ||
Other comprehensive gain (loss): | ||||||||
Foreign currency translation gain (loss) |
| 52 |
|
| (17 | ) | ||
Net losses on derivative instruments |
| — |
|
| (1 | ) | ||
Minimum pension liability adjustment |
| — |
|
| 4 |
| ||
Total other comprehensive gain (loss) |
| 52 |
|
| (14 | ) | ||
Comprehensive loss | $ | (61 | ) | $ | (69 | ) | ||
11. Segment and Related Information
Lyondell operates in four reportable segments:
• | Intermediate chemicals and derivatives (“IC&D”), including propylene oxide, propylene glycol, propylene glycol ethers, butanediol, toluene diisocyanate, styrene monomer, and tertiary butyl alcohol and its derivative, MTBE; |
• | Petrochemicals, including ethylene, ethylene glycol, ethylene oxide and derivatives, propylene, butadiene and aromatics; |
• | Polymers, primarily polyethylene; and |
• | Refining of crude oil. |
Lyondell’s entire $1.1 billion balance of goodwill is allocated to the IC&D segment.
12
Summarized financial information concerning reportable segments is shown in the following table:
Millions of dollars | IC&D | Petrochemicals | Polymers | Refining | Other | Total | |||||||||||||||||
For the three months ended March 31, 2003: | |||||||||||||||||||||||
Sales and other operating revenues | $ | 989 |
| $ | — |
| $ | — |
| $ | — | $ | — |
| $ | 989 |
| ||||||
Operating loss |
| (18 | ) |
| — |
|
| — |
|
| — |
| — |
|
| (18 | ) | ||||||
Interest expense |
| — |
|
| — |
|
| — |
|
| — |
| (100 | ) |
| (100 | ) | ||||||
Interest income |
| — |
|
| — |
|
| — |
|
| — |
| 17 |
|
| 17 |
| ||||||
Other income, net |
| 16 |
|
| — |
|
| — |
|
| — |
| — |
|
| 16 |
| ||||||
Income (loss) from equity investments |
| (2 | ) |
| (22 | ) |
| (25 | ) |
| 19 |
| (53 | ) |
| (83 | ) | ||||||
Loss before income taxes |
| — |
|
| — |
|
| — |
|
| — |
| — |
|
| (168 | ) | ||||||
For the three months ended March 31, 2002: | |||||||||||||||||||||||
Sales and other operating revenues | $ | 674 |
| $ | — |
| $ | — |
| $ | — | $ | — |
| $ | 674 |
| ||||||
Operating income |
| 38 |
|
| — |
|
| 38 |
| ||||||||||||||
Interest expense |
| — |
|
| — |
|
| — |
|
| — |
| (93 | ) |
| (93 | ) | ||||||
Interest income |
| — |
|
| — |
|
| — |
|
| — |
| 2 |
|
| 2 |
| ||||||
Other income, net |
| — |
|
| — |
|
| — |
|
| — |
| 1 |
|
| 1 |
| ||||||
Income (loss) from equity investments | �� |
| — |
|
| (10 | ) |
| (9 | ) |
| 27 |
| (29 | ) |
| (21 | ) | |||||
Loss before income taxes |
| — |
|
| — |
|
| — |
|
| — |
| — |
|
| (73 | ) |
The following table presents the details of “Income (loss) from equity investments” as presented above in the “Other” column for the periods indicated:
For the three months ended March 31, | ||||||||
Millions of dollars | 2003 | 2002 | ||||||
Equistar items not allocated to segments: | ||||||||
Principally general and administrative expenses and interest expense, net | $ | (53 | ) | $ | (26 | ) | ||
Other |
| — |
|
| (3 | ) | ||
Total | $ | (53 | ) | $ | (29 | ) | ||
12. Supplemental Guarantor Information
ARCO Chemical Technology Inc. (“ACTI”), ARCO Chemical Technology L.P. (“ACTLP”) and Lyondell Chemical Nederland, Ltd. (“LCNL”) are guarantors, jointly and severally, (collectively “Guarantors”) of the $337 million senior secured notes issued in December 2002, the $278 million senior secured notes issued in July 2002, the $393 million senior secured notes issued in December 2001 and the $500 million senior subordinated notes and $1.9 billion senior secured notes issued in May 1999 (see Note 7). LCNL, a Delaware corporation, is a wholly owned subsidiary of Lyondell, which owns a Dutch subsidiary that operates a chemical production facility near Rotterdam, The Netherlands. ACTI is a Delaware corporation, which holds the investment in ACTLP. ACTLP is a Delaware limited partnership, which holds and licenses technology to other Lyondell affiliates and to third parties. Separate financial statements of the Guarantors are not considered to be material to the holders of the senior subordinated notes and senior secured notes. The following condensed consolidating financial information present supplemental information for the Guarantors as of March 31, 2003 and December 31, 2002 and for the three-month periods ended March 31, 2003 and 2002.
13
CONDENSED CONSOLIDATING FINANCIAL INFORMATION (UNAUDITED)
BALANCE SHEET
As of March 31, 2003
Millions of dollars | Lyondell | Guarantors | Non- Guarantors | Eliminations | Consolidated Lyondell | |||||||||||||
Total current assets | $ | 675 | $ | 184 |
| $ | 393 |
| $ | — |
| $ | 1,252 | |||||
Property, plant and equipment, net |
| 858 |
| 593 |
|
| 913 |
|
| — |
|
| 2,364 | |||||
Investments and long-term receivables |
| 7,391 |
| 536 |
|
| 2,032 |
|
| (7,743 | ) |
| 2,216 | |||||
Goodwill, net |
| 441 |
| 447 |
|
| 236 |
|
| — |
|
| 1,124 | |||||
Other assets |
| 300 |
| 81 |
|
| 31 |
|
| — |
|
| 412 | |||||
Total assets | $ | 9,665 | $ | 1,841 |
| $ | 3,605 |
| $ | (7,743 | ) | $ | 7,368 | |||||
Current maturities of long-term debt | $ | 1 | $ | — |
| $ | — |
| $ | — |
| $ | 1 | |||||
Other current liabilities |
| 469 |
| 90 |
|
| 156 |
|
| — |
|
| 715 | |||||
Long-term debt |
| 3,924 |
| — |
|
| 2 |
|
| — |
|
| 3,926 | |||||
Other liabilities |
| 593 |
| 50 |
|
| 20 |
|
| — |
|
| 663 | |||||
Deferred income taxes |
| 569 |
| 178 |
|
| 77 |
|
| — |
|
| 824 | |||||
Intercompany liabilities (assets) |
| 3,015 |
| (1,224 | ) |
| (1,791 | ) |
| — |
|
| — | |||||
Minority interest |
| — |
| — |
|
| 145 |
|
| — |
|
| 145 | |||||
Stockholders’ equity |
| 1,094 |
| 2,747 |
|
| 4,996 |
|
| (7,743 | ) |
| 1,094 | |||||
Total liabilities and stockholders’ equity | $ | 9,665 | $ | 1,841 |
| $ | 3,605 |
| $ | (7,743 | ) | $ | 7,368 | |||||
BALANCE SHEET
As of December 31, 2002
Millions of dollars | Lyondell | Guarantors | Non- Guarantors | Eliminations | Consolidated Lyondell | |||||||||||||
Total current assets | $ | 674 | $ | 173 |
| $ | 324 |
| $ | — |
| $ | 1,171 | |||||
Property, plant and equipment, net |
| 872 |
| 581 |
|
| 916 |
|
| — |
|
| 2,369 | |||||
Investments and long-term receivables |
| 7,335 |
| 504 |
|
| 2,196 |
|
| (7,686 | ) |
| 2,349 | |||||
Goodwill, net |
| 453 |
| 437 |
|
| 240 |
|
| — |
|
| 1,130 | |||||
Other assets |
| 313 |
| 83 |
|
| 33 |
|
| — |
|
| 429 | |||||
Total assets | $ | 9,647 | $ | 1,778 |
| $ | 3,709 |
| $ | (7,686 | ) | $ | 7,448 | |||||
Current maturities of long-term debt | $ | 1 | $ | — |
| $ | -— |
| $ | — |
| $ | 1 | |||||
Other current liabilities |
| 431 |
| 90 |
|
| 102 |
|
| — |
|
| 623 | |||||
Long-term debt |
| 3,924 |
| — |
|
| 2 |
|
| — |
|
| 3,926 | |||||
Other liabilities |
| 602 |
| 48 |
|
| 23 |
|
| — |
|
| 673 | |||||
Deferred income taxes |
| 637 |
| 172 |
|
| 72 |
|
| — |
|
| 881 | |||||
Intercompany liabilities (assets) |
| 2,873 |
| (1,223 | ) |
| (1,650 | ) |
| — |
|
| — | |||||
Minority interest |
| — |
| — |
|
| 165 |
|
| — |
|
| 165 | |||||
Stockholders’ equity |
| 1,179 |
| 2,691 |
|
| 4,995 |
|
| (7,686 | ) |
| 1,179 | |||||
Total liabilities and stockholders’ equity | $ | 9,647 | $ | 1,778 |
| $ | 3,709 |
| $ | (7,686 | ) | $ | 7,448 | |||||
14
CONDENSED CONSOLIDATING FINANCIAL INFORMATION (UNAUDITED)—(Continued)
STATEMENT OF INCOME
For the Three Months Ended March 31, 2003
Millions of dollars | Lyondell | Guarantors | Non-Guarantors | Eliminations | Consolidated Lyondell | |||||||||||||||
Sales and other operating revenues | $ | 622 |
| $ | 260 |
| $ | 555 |
| $ | (448 | ) | $ | 989 |
| |||||
Cost of sales |
| 644 |
|
| 246 |
|
| 514 |
|
| (448 | ) |
| 956 |
| |||||
Selling, general and administrative expenses |
| 22 |
|
| 6 |
|
| 14 |
|
| — |
|
| 42 |
| |||||
Research and development expense |
| 9 |
|
| — |
|
| — |
|
| — |
|
| 9 |
| |||||
Operating income (loss) |
| (53 | ) |
| 8 |
|
| 27 |
|
| — |
|
| (18 | ) | |||||
Interest income (expense), net |
| (88 | ) |
| 4 |
|
| 1 |
|
| — |
|
| (83 | ) | |||||
Other income (expense), net |
| (18 | ) |
| — |
|
| 34 |
|
| — |
|
| 16 |
| |||||
Income (loss) from equity investments |
| 14 |
|
| (2 | ) |
| (81 | ) |
| (14 | ) |
| (83 | ) | |||||
Intercompany income |
| 27 |
|
| 10 |
|
| 21 |
|
| (58 | ) |
| — |
| |||||
(Benefit from) provision for income taxes |
| (39 | ) |
| 7 |
|
| 1 |
|
| (24 | ) |
| (55 | ) | |||||
Net income (loss) | $ | (79 | ) | $ | 13 |
| $ | 1 |
| $ | (48 | ) | $ | (113 | ) | |||||
STATEMENT OF INCOME
For the Three Months Ended March 31, 2002
Millions of dollars | Lyondell | Guarantors | Non-Guarantors | Eliminations | Consolidated Lyondell | ||||||||||||||
Sales and other operating revenues | $ | 469 |
| $ | 165 | $ | 351 |
| $ | (311 | ) | $ | 674 |
| |||||
Cost of sales |
| 460 |
|
| 148 |
| 292 |
|
| (311 | ) |
| 589 |
| |||||
Selling, general and administrative expenses |
| 26 |
|
| 3 |
| 11 |
|
| — |
|
| 40 |
| |||||
Research and development expense |
| 7 |
|
| — |
| — |
|
| — |
|
| 7 |
| |||||
Operating income (loss) |
| (24 | ) |
| 14 |
| 48 |
|
| — |
|
| 38 |
| |||||
Interest income (expense), net |
| (95 | ) |
| 2 |
| 2 |
|
| — |
|
| (91 | ) | |||||
Other income (expense), net |
| (10 | ) |
| 4 |
| 7 |
|
| — |
|
| 1 |
| |||||
Income (loss) from equity investments |
| 65 |
|
| — |
| (21 | ) |
| (65 | ) |
| (21 | ) | |||||
Intercompany income |
| 8 |
|
| 12 |
| 18 |
|
| (38 | ) |
| — |
| |||||
(Benefit from) provision for income taxes |
| (14 | ) |
| 8 |
| 13 |
|
| (25 | ) |
| (18 | ) | |||||
Net income (loss) | $ | (42 | ) | $ | 24 | $ | 41 |
| $ | (78 | ) | $ | (55 | ) | |||||
15
CONDENSED CONSOLIDATING FINANCIAL INFORMATION (UNAUDITED)—(Continued)
STATEMENT OF CASH FLOWS
For the Three Months Ended March 31, 2003
Millions of dollars | Lyondell | Guarantors | Non-Guarantors | Eliminations | Consolidated Lyondell | |||||||||||||||
Net income (loss) | $ | (79 | ) | $ | 13 |
| $ | 1 |
| $ | (48 | ) | $ | (113 | ) | |||||
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | ||||||||||||||||||||
Depreciation and amortization |
| 18 |
|
| 12 |
|
| 27 |
|
| — |
|
| 57 |
| |||||
Gain on sale of investment |
| — |
|
| — |
|
| (18 | ) |
| — |
|
| (18 | ) | |||||
Deferred income taxes |
| (68 | ) |
| — |
|
| 14 |
|
| — |
|
| (54 | ) | |||||
Net changes in working capital and other |
| 208 |
|
| 9 |
|
| (34 | ) |
| (9 | ) |
| 174 |
| |||||
Net cash provided by (used in) operating activities |
| 79 |
|
| 34 |
|
| (10 | ) |
| (57 | ) |
| 46 |
| |||||
Distributions from affiliates in excess of earnings |
| — |
|
| — |
|
| 71 |
|
| — |
|
| 71 |
| |||||
Contributions and advances to affiliates |
| — |
|
| (27 | ) |
| (24 | ) |
| — |
|
| (51 | ) | |||||
Proceeds from sale of investment |
| — |
|
| — |
|
| 28 |
|
| — |
|
| 28 |
| |||||
Expenditures for property, plant and equipment |
| (6 | ) |
| (1 | ) |
| (2 | ) |
| — |
|
| (9 | ) | |||||
Purchase of short-term investments |
| (9 | ) |
| — |
|
| — |
|
| — |
|
| (9 | ) | |||||
Net cash provided by (used in) investing activities |
| (15 | ) |
| (28 | ) |
| 73 |
|
| — |
|
| 30 |
| |||||
Dividends paid |
| (28 | ) |
| — |
|
| (57 | ) |
| 57 |
|
| (28 | ) | |||||
Other |
| (3 | ) |
| — |
|
| — |
|
| — |
|
| (3 | ) | |||||
Net cash used in financing activities |
| (31 | ) |
| — |
|
| (57 | ) |
| 57 |
|
| (31 | ) | |||||
Increase in cash and cash equivalents | $ | 33 |
| $ | 6 |
| $ | 6 |
| $ | — |
| $ | 45 |
| |||||
16
CONDENSED CONSOLIDATING FINANCIAL INFORMATION (UNAUDITED)—(Continued)
STATEMENT OF CASH FLOWS—(Continued)
For the Three Months Ended March 31, 2002
Millions of dollars | Lyondell | Guarantors | Non- Guarantors | Eliminations | Consolidated Lyondell | |||||||||||||||
Net income (loss) | $ | (42 | ) | $ | 24 |
| $ | 41 |
| $ | (78 | ) | $ | (55 | ) | |||||
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | ||||||||||||||||||||
Depreciation and amortization |
| 29 |
|
| 9 |
|
| 22 |
|
| — |
|
| 60 |
| |||||
Deferred income taxes |
| 4 |
|
| (2 | ) |
| 5 |
|
| — |
|
| 7 |
| |||||
Net changes in working capital and other |
| 147 |
|
| (27 | ) |
| (2 | ) |
| 40 |
|
| 158 |
| |||||
Net cash provided by operating activities |
| 138 |
|
| 4 |
|
| 66 |
|
| (38 | ) |
| 170 |
| |||||
Expenditures for property, plant and equipment |
| (8 | ) |
| (1 | ) |
| (2 | ) |
| — |
|
| (11 | ) | |||||
Contributions and advances to affiliates |
| — |
|
| — |
|
| (38 | ) |
| — |
|
| (38 | ) | |||||
Net cash used in investing activities |
| (8 | ) |
| (1 | ) |
| (40 | ) |
| — |
|
| (49 | ) | |||||
Dividends paid |
| (26 | ) |
| — |
|
| (38 | ) |
| 38 |
|
| (26 | ) | |||||
Repayment of long-term debt |
| (13 | ) |
| — |
|
| — |
|
| — |
|
| (13 | ) | |||||
Net cash used in financing activities |
| (39 | ) |
| — |
|
| (38 | ) |
| 38 |
|
| (39 | ) | |||||
Effect of exchange rate changes on cash |
| — |
|
| 1 |
|
| (1 | ) |
| — |
|
| — |
| |||||
Increase (decrease) in cash and cash equivalents | $ | 91 |
| $ | 4 |
| $ | (13 | ) | $ | — |
| $ | 82 |
| |||||
17