Highlights
– | Income of $206 million or 78 cents per share |
– | High and increasing raw material costs pressure chemical segments but are offset by price increases |
– | Refining spreads decline from record summer levels ahead of normal Labor Day pattern |
– | Shareholder vote on sale to Basell scheduled for Nov. 20 |
HOUSTON (Oct 25, 2007) – 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)
Millions of dollars except per share amounts | | 3Q 2007 | | | 3Q 2006 | | | 2Q 2007 | | | 1st Nine Months 2007 | | | 1st Nine Months 2006 | |
| 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. |
| Lyondell Chemical Company |
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
Millions of dollars | | 3Q 2007 | | | 3Q 2006 | | | 2Q 2007 | | | 1st Nine Months 2007 | | | 1st Nine Months 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.
| Lyondell Chemical Company |
“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).
| Lyondell Chemical Company |
Table 3 – Ethylene, Co-Products & Derivatives Financial Overview (a)
Millions of dollars | | 3Q 2007 | | | 3Q 2006 | | | 2Q 2007 | | | 1st Nine Months 2007 | | | 1st Nine Months 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).
| Lyondell Chemical Company |
Table 4 – PO & Related Products Financial Overview (a)
Millions of dollars | | 3Q 2007 | | | 3Q 2006 | | | 2Q 2007 | | | 1st Nine Months 2007 | | | 1st Nine Months 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.
| Lyondell Chemical Company |
Table 5 - Refining Financial Overview – 100% Basis (a)
Millions of dollars | | 3Q 2007 | | | 3Q 2006 | | | 2Q 2007 | | | 1st Nine Months 2007 | | | 1st Nine Months 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 Petróleos 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, 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 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 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.
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SOURCE: Lyondell Chemical Company; Equistar Chemicals, LP; Millennium Chemicals Inc.
| Lyondell Chemical Company |
Table 6 - Selected Unaudited Financial Information | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | For the three months ended | | | For the nine 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 months ended | | | For the nine months ended | |
| | | | September 30, | | | June 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 and other | | | | | | Depreciation | | | | |
| | | | operating | | | Operating | | | and | | | Capital | |
| | (Millions of dollars) | | revenues | | | income (loss) | | | amortization | | | expenditures | |
| | | | | | | | | | | | | | |
| | 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 months ended | | | For the nine 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 months ended | | | For the nine 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 months ended | | | For the nine 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) | | | | | | |
| | | | | | | | |
| | | | September 30, | | | December 31, | |
| | (Millions of dollars, 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 months ended | | | For the nine 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 months ended | | | For the nine 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 months ended | | | For the nine 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 months ended | | | For the nine 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 | |
| | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
| 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. | | |
| 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 months ended | | | For the nine months 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. |
