Exhibit 99.1
| | |
 | | NEWS RELEASE |
For information, contact:
Media – Susan Moore (713) 309-4645
Investors – Doug Pike (713) 309-7141
Lyondell Reports First-Quarter 2006 Results
Highlights
| • | | Lyondell reports quarterly net income of $290 million, or $1.12 per share |
| | • | | Strong results in all segments |
| • | | Repayment of $437 million principal amount of debt brings total debt reduction to $2.1 billion since September 2004 |
| • | | Announced plans to explore the sale of LYONDELL- CITGO Refining |
| | • | | Favorable LCR-related settlement |
HOUSTON (April 27, 2006) – Lyondell Chemical Company (NYSE: LYO) today announced net income for the first quarter 2006 of $290 million, or $1.12 per share on a fully diluted basis. This compares with net income of $254 million, or 98 cents per share, for the first quarter 2005, and net income of $141 million, or 54 cents per share, for the fourth quarter 2005.
Table 1 - Lyondell Earnings Summary
| | | | | | | | | |
Millions of dollars except per share amounts | | 1Q 2006 | | 1Q 2005 | | 4Q 2005 |
Sales and other operating revenues | | $ | 4,757 | | $ | 4,440 | | $ | 5,000 |
Net income | | | 290 | | | 254 | | | 141 |
Basic earnings per share | | | 1.18 | | | 1.04 | | | 0.57 |
Diluted earnings per share(a) | | | 1.12 | | | 0.98 | | | 0.54 |
Basic weighted average shares outstanding (millions) | | | 246.9 | | | 244.5 | | | 246.7 |
Diluted weighted average shares outstanding (millions)(a) | | | 259.3 | | | 259.8 | | | 260.3 |
| (a) | Includes the dilutive effect of the convertible debentures, stock options and warrants. |
First-quarter results, excluding a settlement related to LYONDELL-CITGO Refining (LCR), were comparable to the first quarter 2005, as improved refining and propylene oxide (PO) segment results and lower interest expense offset a decline in ethylene segment results. Improvement versus the fourth quarter 2005 is primarily attributed to strong results in the refining segment versus the hurricane-damage related downtime experienced in the fourth quarter 2005.
Quarterly results reflected the following:
| | | | | | | | | | | | |
Millions of dollars | | 1Q 2006 | | | 1Q 2005 | | | 4Q 2005 | |
LCR-related settlement(a) | | $ | 70 | | | $ | — | | | $ | — | |
Mutual insurance consortia losses | | | (5 | ) | | | — | | | | (12 | ) |
Debt prepayment premiums and charges | | | — | | | | (12 | ) | | | (17 | ) |
Hurricane (estimated lost production)(b) | | | — | | | | — | | | | (75 | ) |
Lake Charles TDI plant shutdown | | | — | | | | — | | | | (24 | ) |
| (a) | Represents the pre-tax impact of the resolution of various matters among LCR, its owners and their affiliates. |
| (b) | Represents Lyondell’s percentage of LCR’s estimated lost production of $130 million. |
“Business results have been solid thus far in 2006, and we are pleased to have resolved several open issues in our favor. First-quarter 2006 earnings were strong, and we continued to improve our balance sheet through the repayment of $437 million principal amount of debt,” said Dan F. Smith, president and CEO of Lyondell Chemical Company. “Unfortunately, during the quarter we believe the market overreacted to the verdict in the Rhode Island lead pigment trial. This matter is far from concluded, and we expect the financial impact, if any, will be far less than the initial reaction would indicate.”
OUTLOOK
The ethylene chain has largely adjusted to resumed production following planned and unplanned outages in the industry. While this is resulting in lower product prices in the ethylene chain, profitability over the course of the year is expected to reflect industry operating rates in the mid-90 percentiles. As the summer driving season begins, conditions for the refining industry are expected to remain very tight. Despite this, U.S. refiners are removing methyl tertiary butyl ether (MTBE) from their systems, and Lyondell has shifted its MTBE sales mix to reflect this situation by emphasizing exports from the United States. Globally, MTBE margins have followed typical seasonal trends thus far in 2006.
“Volatility and current high prices in the energy markets continue to present challenges, but strong business conditions ultimately should prevail, positioning Lyondell’s chemical products for another strong year,” added Smith. “Tightness in the refining industry creates an opportune situation for the sale of the LCR refinery at a time that should maximize its value and allow us to accelerate and expand our already successful debt-reduction efforts.”
In April 2006, Lyondell was granted an arbitration award related to a commercial dispute with Bayer. The award was not reflected in first-quarter earnings. It pertains to several issues
related to the companies’ U.S. PO and PO technology joint ventures and included declaratory judgment in Lyondell’s favor concerning interpretation of the contract provisions at issue. Lyondell was awarded approximately $121 million, plus interest of approximately $23 million, through June 30, 2005. Additional amounts subject to finalization could include pre-award and post-award interest and attorney fees, costs and expenses.
LYONDELL BUSINESS RESULTS DISCUSSION BY REPORTING SEGMENT
Lyondell operates in four segments: 1) Ethylene, co-products and derivatives; 2) PO and related products; 3) Inorganic chemicals; and 4) Refining, which includes Lyondell’s 58.75 percent ownership of LCR, a joint venture with CITGO Petroleum Corp.
Ethylene, Co-products and Derivatives Segment–The primary products of this segment are ethylene, ethylene co-products (propylene, butadiene and benzene), and derivatives of ethylene (polyethylene, ethylene oxygenates and vinyl acetate monomer or VAM).
Table 2 – Ethylene, Co-Products & Derivatives Financial Overview(a)
| | | | | | | | | |
Millions of dollars | | 1Q 2006 | | 1Q 2005 | | 4Q 2005 |
Sales and other operating revenues | | $ | 3,152 | | $ | 2,974 | | $ | 3,380 |
Operating income | | | 299 | | | 392 | | | 337 |
EBITDA (b) | | | 397 | | | 486 | | | 438 |
| (a) | See Table 6 for additional segment information. |
| (b) | See Table 9 for reconciliations of segment EBITDA to net income of Lyondell. |
1Q06 v. 4Q05 –Ethylene and ethylene derivative product sales volumes increased by approximately 70 million pounds (3 percent) versus the fourth quarter 2005. Quarterly average prices for ethylene and polyethylene decreased by 9 cents and 4 cents per pound, respectively, compared with the fourth quarter 2005. The company’s cost-of-ethylene-production metric (COE) decreased by approximately 3 cents per pound versus the fourth quarter. Essentially all of this decrease is attributed to the lower price of natural-gas-based raw materials. Acetyls results improved by approximately $10 million, as margins increased due to lower raw material (natural gas and ethylene) costs.
1Q06 v. 1Q05 –Ethylene and ethylene derivative product sales volumes were relatively unchanged versus the first quarter 2005. The quarterly average prices for ethylene and polyethylene increased by 6 cents and 8 cents per pound, respectively, while the average
ethylene glycol price decreased by approximately 5 cents per pound compared with the first quarter 2005. The company’s COE metric increased by approximately 8 cents per pound as the cost of production from both crude oil- and natural-gas-based raw materials increased. Elevated raw material costs in the first quarter 2006 resulted in a $20 million decline in acetyls results.
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, MTBE and toluene diisocyanate (TDI).
Table 3 – PO & Related Products Financial Overview(a)
| | | | | | | | | |
Millions of dollars | | 1Q 2006 | | 1Q 2005 | | 4Q 2005 |
Sales and other operating revenues | | $ | 1,644 | | $ | 1,523 | | $ | 1,645 |
Operating income | | | 117 | | | 89 | | | 35 |
EBITDA(b) | | | 175 | | | 146 | | | 104 |
| (a) | See Table 6 for additional segment information. |
| (b) | See Table 9 for a reconciliation of segment EBITDA to net income of Lyondell. |
1Q06 v. 4Q05 –TDI results improved by approximately $40 million due to the absence of costs related to the shutdown of the Lake Charles TDI facility and higher margins. PO results improved by approximately $35 million primarily due to stronger margins. Styrene and MTBE results were relatively unchanged.
1Q06 v. 1Q05 –Versus the year-ago quarter, results improved by approximately $29 million primarily due to moderately stronger results in TDI, PO and PO derivatives, and MTBE. PO and PO derivative volumes declined primarily due to lower aircraft deicer sales volumes related to the warm winter weather compared with first quarter 2005.
Inorganic Chemicals Segment - The principal product of the inorganic chemicals segment is titanium dioxide (TiO2).
Table 4 – Inorganic Chemicals Financial Overview(a)
| | | | | | | | | | |
Millions of dollars | | 1Q 2006 | | 1Q 2005 | | 4Q 2005 | |
Sales and other operating revenues | | $ | 342 | | $ | 318 | | $ | 355 | |
Operating income (loss) | | | 20 | | | 21 | | | (3 | ) |
EBITDA(b) | | | 44 | | | 47 | | | 26 | |
| (a) | See Table 6 for additional segment information. |
| (b) | See Table 9 for a reconciliation of segment EBITDA to net income of Lyondell. |
1Q06 v. 4Q05 –A decline in sales volumes of approximately 11,000 metric tons versus the fourth quarter 2005 was largely offset by an increase in the average sales price (in U.S. dollars) of approximately $50 per metric ton. Strong operations and lower natural gas costs resulted in a $20 million decline in production costs.
1Q06 v. 1Q05 –Sales volumes were approximately 9,000 metric tons higher than the year-ago quarter, while average sales prices were approximately $20 per metric ton higher. North and South American price increases were partially offset by lower European prices. Production costs increased compared with the first quarter 2005 due to higher raw material and natural gas costs.
Refining Segment - Lyondell owns a 58.75 percent interest in LCR, a major refiner of heavy crude oil. This interest is accounted for by the equity method.
Table 5 - Refining Financial Overview – 100% Basis(a)
| | | | | | | | | | |
Millions of dollars | | 1Q 2006 | | 1Q 2005 | | 4Q 2005 | |
Sales and other operating revenues | | $ | 2,094 | | $ | 1,536 | | $ | 1,440 | |
Operating income (loss)(b) | | | 162 | | | 118 | | | (23 | ) |
EBITDA(b) (c) | | | 193 | | | 146 | | | 7 | |
| (a) | The Refining segment information presented above represents the operating results of LCR on a 100 percent basis. See Table 6 for additional segment information. |
| (b) | Includes an $8 million charge for the three months ended March 31, 2006, representing reimbursement to Lyondell of legal fees and expenses paid by Lyondell on behalf of LCR related to the settlement. |
| (c) | See Table 9 for a reconciliation of segment EBITDA to net income of LCR. |
1Q06 v. 4Q05 –Refinery crude processing rates increased by approximately 92,000 barrels per day versus the fourth quarter 2005, which was impacted by hurricane damage-related fluid catalytic cracking unit downtime. The total crude processing rate averaged 261,000 barrels per day while Venezuelan contract (CSA) crude volumes averaged 221,000 barrels per day during first quarter 2006. Increased spot crude volumes more than offset a reduction in spot crude margins. The refinery also benefited from lower natural gas costs and strong operations during the first quarter 2006.
1Q06 v. 1Q05 –Versus the first quarter 2005, operating efficiencies, premium product production and higher margins (CSA and spot crude) more than offset increased natural gas costs and lower aromatic margins. Total crude volumes were relatively unchanged.
Cash Distributions and Debt Reduction
LCR to Lyondell Chemical Company -During the first quarter 2006, LCR made a net distribution of $46 million to Lyondell Chemical Company.
Equistar to Lyondell Chemical Company and Millennium –During the first quarter 2006, Lyondell Chemical Company received $141 million of distributions from Equistar. Millennium received $59 million from Equistar during the first quarter 2006.
Millennium to Lyondell Chemical Company -There were no dividends paid by Millennium to Lyondell Chemical Company during the first quarter 2006.
Debt reduction -During the first quarter 2006, Lyondell repaid $437 million principal amount of debt, of which $237 million was Millennium debt, $150 million was Equistar debt and the $50 million balance was Lyondell parent company debt.
CONFERENCE CALL
Lyondell will host a conference call today, April 27, 2006, at 11:30 a.m. Eastern Time (ET). Participating on the call will be: Dan F. Smith, President and CEO; Morris Gelb, Executive Vice President and COO; T. Kevin DeNicola, Senior Vice President and CFO; and Doug Pike, Vice President of Investor Relations. The dial-in numbers are 888-391-2385 (U.S. – toll free) and 517-645-6239 (international). The passcode for each is Lyondell. The call will be broadcast live on the Investor Relations page of the company’s web site, www.lyondell.com/earnings.
A replay of the call will be available from 1:30 p.m. ET April 27 to 6 p.m. ET on May 4. The dial-in numbers are 888-567-0440 (U.S.) and 203-369-3442 (international). The passcode for each is 5549. Web replay will be available at 2:30 p.m. ET April 27, 2006, 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 April 27 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 major global manufacturer of basic chemicals and derivatives including ethylene, propylene, titanium dioxide, styrene, polyethylene, propylene oxide and acetyls. It also is a significant producer of gasoline-blending components. The company has a 58.75 percent interest in LYONDELL-CITGO Refining LP, a refiner of heavy, high-sulfur crude oil. As a result of Lyondell’s November 30, 2004, acquisition of Millennium Chemicals Inc., Millennium and Equistar Chemicals, LP are wholly owned subsidiaries of Lyondell. Lyondell is a global company operating on five continents and employs approximately 10,000 people worldwide.
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, availability, cost and price volatility of raw materials and utilities; supply/demand balances; industry production capacities and operating rates; cyclical nature of the chemical and refining industries; operating interruptions; uncertainties associated with the U.S. and worldwide economies; legal, tax and environmental proceedings; current and potential governmental regulatory actions; terrorist acts; international political unrest; competitive products and pricing; risks of doing business outside of the U.S.; access to capital markets; technological developments; Lyondell’s ability to implement its business strategies, including the timing of, and value received in connection with, any potential sale of the LCR refinery; 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, 2005, and the Lyondell, Equistar and Millennium Quarterly Reports on Form 10-Q for the quarter ended March 31, 2006, which will be filed with the SEC in May 2006.
###
SOURCE: Lyondell Chemical Company; Equistar Chemicals, LP; Millennium Chemicals Inc.
Table 6 - Selected Unaudited Segment Financial Information(a)
| | | | | | | | | | |
| | | For the three months ended | |
| | | March 31, | | December 31, 2005 | |
(Millions of dollars) | | 2006 | | 2005 | |
Sales and other operating revenues(b) | | | | | | | | | | |
Ethylene, Co-Products & Derivatives | | $ | 3,152 | | $ | 2,974 | | $ | 3,380 | |
PO & Related Products | | | 1,644 | | | 1,523 | | | 1,645 | |
Inorganic Chemicals | | | 342 | | | 318 | | | 355 | |
Refining | | | 2,094 | | | 1,536 | | | 1,440 | |
| | | |
Operating income (loss) | | | | | | | | | | |
Ethylene, Co-Products & Derivatives | | $ | 299 | | $ | 392 | | $ | 337 | |
PO & Related Products | | | 117 | | | 89 | | | 35 | |
Inorganic Chemicals | | | 20 | | | 21 | | | (3 | ) |
Refining(c) | | | 162 | | | 118 | | | (23 | ) |
| | | |
Depreciation and amortization | | | | | | | | | | |
Ethylene, Co-Products & Derivatives | | $ | 98 | | $ | 95 | | $ | 102 | |
PO & Related Products | | | 56 | | | 58 | | | 58 | |
Inorganic Chemicals | | | 24 | | | 24 | | | 22 | |
Refining | | | 31 | | | 28 | | | 30 | |
| | | |
EBITDA(d) | | | | | | | | | | |
Ethylene, Co-Products & Derivatives | | $ | 397 | | $ | 486 | | $ | 438 | |
PO & Related Products | | | 175 | | | 146 | | | 104 | |
Inorganic Chemicals | | | 44 | | | 47 | | | 26 | |
Refining(c) | | | 193 | | | 146 | | | 7 | |
| | | |
Capital expenditures | | | | | | | | | | |
Ethylene, Co-Products & Derivatives | | $ | 23 | | $ | 37 | | $ | 52 | |
PO & Related Products | | | 15 | | | 11 | | | 8 | |
Inorganic Chemicals | | | 10 | | | 5 | | | 21 | |
Refining | | | 60 | | | 34 | | | 55 | |
| (a) | See Table 8 for a reconciliation of segment information for the three months ended March 31, 2006 and 2005 and for the three months ended December 31, 2005 to consolidated Lyondell financial information. The Refining information presented above represents the operating results of LCR on a 100% basis. See Tables 20 through 22 for additional LCR financial information. |
| (b) | Sales include sales to affiliates and intersegment sales. |
| (c) | Includes an $8 million charge for the three months ended March 31, 2006 representing reimbursement to Lyondell of legal fees and expenses paid by Lyondell on behalf of LCR related to the settlement. |
| (d) | See Table 9 for reconciliation of segment EBITDA to net income. |
Table 7 - Selected Segment Sales Volumes(a) (b)
| | | | | | |
| | | For the three months ended |
| | | March 31, | | December 31, 2005 |
| | | 2006 | | 2005 | |
Ethylene, Co-Products and Derivatives(in millions) | | | | | | |
Ethylene and derivatives (pounds) | | 2,871 | | 2,908 | | 2,799 |
Polyethylene included above (pounds) | | 1,333 | | 1,337 | | 1,258 |
Co-products, nonaromatic (pounds) | | 1,966 | | 2,034 | | 1,953 |
Aromatics (gallons) | | 89 | | 102 | | 103 |
| | | |
PO and Related Products (in millions) | | | | | | |
PO and derivatives (pounds) | | 834 | | 884 | | 831 |
Co-products: | | | | | | |
Styrene monomer (pounds) | | 982 | | 982 | | 905 |
MTBE and other TBA derivatives (gallons) | | 297 | | 283 | | 300 |
| | | |
Inorganic Chemicals (thousand metric tons) | | | | | | |
TiO2 | | 151 | | 142 | | 162 |
| | | |
Refined products (thousand barrels per day) | | | | | | |
Gasoline | | 113 | | 117 | | 66 |
Diesel and heating oil | | 105 | | 88 | | 63 |
Jet fuel | | 10 | | 20 | | 8 |
Aromatics | | 8 | | 8 | | 8 |
Other refined products | | 114 | | 87 | | 90 |
| | | | | | |
Total refined products volumes | | 350 | | 320 | | 235 |
| | | | | | |
Refinery Runs | | | | | | |
Crude processing rates (thousand barrels per day) | | | | | | |
Crude Supply Agreement | | 221 | | 219 | | 146 |
Other crude oil | | 40 | | 43 | | 23 |
| | | | | | |
Total crude oil | | 261 | | 262 | | 169 |
| | | | | | |
| (a) | The Refining information presented above represents the operating results of LCR on a 100% basis. |
| (b) | Sales volumes include sales to affiliates and intersegment sales. |
Table 8 - Reconciliation of Segment Information to Consolidated Lyondell Financial Information
| | | | | | | | | | | | | | |
(Millions of dollars) | | Sales and
other
operating
revenues | | | Operating
income (loss) | | | Depreciation
and
amortization | | Capital
expenditures |
For the three months ended March 31, 2006: | | | | | | | | | | | | | | |
| | | | |
Segment Data | | | | | | | | | | | | | | |
Ethylene, Co-Products & Derivatives | | $ | 3,152 | | | $ | 299 | | | $ | 98 | | $ | 23 |
PO & Related Products | | | 1,644 | | | | 117 | | | | 56 | | | 15 |
Inorganic Chemicals | | | 342 | | | | 20 | | | | 24 | | | 10 |
Other (a) | | | (381 | ) | | | (4 | ) | | | 3 | | | — |
| | | | | | | | | | | | | | |
Total | | $ | 4,757 | | | $ | 432 | | | $ | 181 | | $ | 48 |
| | | | | | | | | | | | | | |
For the three months ended March 31, 2005: | | | | | | | | | | | | | | |
| | | | |
Segment Data | | | | | | | | | | | | | | |
Ethylene, Co-Products & Derivatives | | $ | 2,974 | | | $ | 392 | | | $ | 95 | | $ | 37 |
PO & Related Products | | | 1,523 | | | | 89 | | | | 58 | | | 11 |
Inorganic Chemicals | | | 318 | | | | 21 | | | | 24 | | | 5 |
Other (a) | | | (375 | ) | | | (1 | ) | | | 1 | | | 2 |
| | | | | | | | | | | | | | |
Total | | $ | 4,440 | | | $ | 501 | | | $ | 178 | | $ | 55 |
| | | | | | | | | | | | | | |
For the three months ended December 31, 2005: | | | | | | | | | | | | | | |
| | | | |
Segment Data | | | | | | | | | | | | | | |
Ethylene, Co-Products & Derivatives | | $ | 3,380 | | | $ | 337 | | | $ | 102 | | $ | 52 |
PO & Related Products | | | 1,645 | | | | 35 | | | | 58 | | | 8 |
Inorganic Chemicals | | | 355 | | | | (3 | ) | | | 22 | | | 21 |
Other (a) | | | (380 | ) | | | (6 | ) | | | 2 | | | 3 |
| | | | | | | | | | | | | | |
Total | | $ | 5,000 | | | $ | 363 | | | $ | 184 | | $ | 84 |
| | | | | | | | | | | | | | |
| (a) | Includes elimination of intersegment sales and items not allocated to segments. |
Table 9 - Reconciliation of Segment EBITDA to Net Income
| | | | | | | | | | | | |
| | | For the three months ended | |
| | | March 31, | | | December 31,
2005 | |
(Millions of dollars) | | 2006 | | | 2005 | | |
LYONDELL | | | | | | | | | | | | |
Segment EBITDA: | | | | | | | | | | | | |
Ethylene, Co-Products & Derivatives | | $ | 397 | | | $ | 486 | | | $ | 438 | |
PO & Related Products | | | 175 | | | | 146 | | | | 104 | |
Inorganic Chemicals | | | 44 | | | | 47 | | | | 26 | |
Other(b) | | | 72 | | | | (11 | ) | | | (20 | ) |
Add: | | | | | | | | | | | | |
Income (loss) from equity investment in LCR | | | 91 | | | | 67 | | | | (16 | ) |
Deduct: | | | | | | | | | | | | |
Depreciation and amortization | | | (181 | ) | | | (178 | ) | | | (184 | ) |
Charges related to impairment of assets | | | (2 | ) | | | (2 | ) | | | (7 | ) |
Interest expense, net | | | (128 | ) | | | (158 | ) | | | (141 | ) |
Provision for income taxes | | | (178 | ) | | | (143 | ) | | | (59 | ) |
| | | | | | | | | | | | |
Lyondell net income | | $ | 290 | | | $ | 254 | | | $ | 141 | |
| | | | | | | | | | | | |
Refining EBITDA (a) | | $ | 193 | | | $ | 146 | | | $ | 7 | |
Deduct: | | | | | | | | | | | | |
Depreciation and amortization | | | (31 | ) | | | (28 | ) | | | (30 | ) |
Interest expense, net | | | (11 | ) | | | (8 | ) | | | (12 | ) |
| | | | | | | | | | | | |
LCR net income (loss) | | $ | 151 | | | $ | 110 | | | $ | (35 | ) |
| | | | | | | | | | | | |
| (a) | The Refining information presented represents the operating results of LCR on a 100% basis. See Tables 20 through 22 for additional LCR financial information. |
| (b) | Includes $74 million representing the net payments received by Lyondell in resolution of various matters among Lyondell, CITGO and Petroleos de Venezuela, S.A. and their respective affiliates for the three months ended March 31, 2006. |
Table 10 - Lyondell Unaudited Income Statement Information
| | | | | | | | | | | | |
| | | For the three months ended | |
| | | March 31, | | | December 31, 2005 | |
(Millions of dollars, except per share data) | | 2006 | | | 2005 | | |
Sales and other operating revenues | | $ | 4,757 | | | $ | 4,440 | | | $ | 5,000 | |
Cost of sales | | | 4,171 | | | | 3,784 | | | | 4,469 | |
Charges related to toluene diisocyanate plant | | | — | | | | — | | | | 24 | |
Selling, general and administrative expenses | | | 131 | | | | 132 | | | | 121 | |
Research and development expenses | | | 23 | | | | 23 | | | | 23 | |
| | | | | | | | | | | | |
Operating income | | | 432 | | | | 501 | | | | 363 | |
Income (loss) from equity investment in LCR | | | 91 | | | | 67 | | | | (16 | ) |
Income (loss) from other equity investments | | | (1 | ) | | | 1 | | | | (1 | ) |
Interest expense, net | | | (128 | ) | | | (158 | ) | | | (141 | ) |
Other income (expense), net | | | 74 | | | | (14 | ) | | | (5 | ) |
| | | | | | | | | | | | |
Income before income taxes | | | 468 | | | | 397 | | | | 200 | |
Provision for income taxes | | | 178 | | | | 143 | | | | 59 | |
| | | | | | | | | | | | |
Net income | | $ | 290 | | | $ | 254 | | | $ | 141 | |
| | | | | | | | | | | | |
Basic earnings per share: | | $ | 1.18 | | | $ | 1.04 | | | $ | 0.57 | |
| | | | | | | | | | | | |
Diluted earnings per share: | | $ | 1.12 | | | $ | 0.98 | | | $ | 0.54 | |
| | | | | | | | | | | | |
Weighted average shares (in millions): | | | | | | | | | | | | |
Basic | | | 246.9 | | | | 244.5 | | | | 246.7 | |
| | | | | | | | | | | | |
Diluted | | | 259.3 | | | | 259.8 | | | | 260.3 | |
| | | | | | | | | | | | |
Table 11 - Lyondell Unaudited Cash Flow Information
| | | | | | | | |
| | | For the three months ended March 31, | |
(Millions of dollars) | | 2006 | | | 2005 | |
Net income | | $ | 290 | | | $ | 254 | |
Adjustments: | | | | | | | | |
Depreciation and amortization | | | 181 | | | | 178 | |
Income from equity investments | | | (90 | ) | | | (68 | ) |
Distributions of earnings from affiliates | | | 70 | | | | 67 | |
Deferred income taxes | | | 77 | | | | 115 | |
Debt prepayment charges and premiums | | | — | | | | 12 | |
Changes in assets and liabilities: | | | | | | | | |
Accounts receivable | | | 46 | | | | (332 | ) |
Inventories | | | (187 | ) | | | (136 | ) |
Accounts payable | | | (47 | ) | | | 130 | |
Other, net | | | (77 | ) | | | (59 | ) |
| | | | | | | | |
Cash provided by operating activities | | | 263 | | | | 161 | |
| | | | | | | | |
Expenditures for property, plant and equipment | | | (48 | ) | | | (55 | ) |
Distributions from affiliates in excess of earnings | | | — | | | | 35 | |
Contributions and advances to affiliates | | | (37 | ) | | | (30 | ) |
Other | | | — | | | | 3 | |
| | | | | | | | |
Cash used in investing activities | | | (85 | ) | | | (47 | ) |
| | | | | | | | |
Repayment of long-term debt(a) | | | (446 | ) | | | (211 | ) |
Dividends paid | | | (56 | ) | | | (55 | ) |
Proceeds from stock option exercises | | | 2 | | | | 34 | |
Other | | | 2 | | | | (2 | ) |
| | | | | | | | |
Cash used in financing activities | | | (498 | ) | | | (234 | ) |
| | | | | | | | |
Effect of exchange rate changes on cash | | | 2 | | | | 5 | |
| | | | | | | | |
Decrease in cash and cash equivalents | | $ | (318 | ) | | $ | (115 | ) |
| | | | | | | | |
| (a) | Includes prepayment premiums in the three months ended March 31, 2006 and 2005 of $9 million and $10 million, respectively. |
Table 12 - Lyondell Unaudited Balance Sheet Information
| | | | | | |
(Millions of dollars) | | March 31,
2006 | | December 31,
2005 |
Cash and cash equivalents | | $ | 275 | | $ | 593 |
Accounts receivable, net | | | 1,656 | | | 1,677 |
Inventories | | | 1,865 | | | 1,657 |
Prepaid expenses and other current assets | | | 131 | | | 176 |
Deferred tax assets | | | 346 | | | 198 |
| | | | | | |
Total current assets | | | 4,273 | | | 4,301 |
Property, plant and equipment, net | | | 6,494 | | | 6,530 |
Investments and long-term receivables: | | | | | | |
Investment in PO joint ventures | | | 786 | | | 776 |
Investment in and receivable from LCR | | | 233 | | | 186 |
Other investments and long-term receivables | | | 110 | | | 114 |
Goodwill, net | | | 2,230 | | | 2,245 |
Other assets, net | | | 802 | | | 828 |
| | | | | | |
Total assets | | $ | 14,928 | | $ | 14,980 |
| | | | | | |
Current maturities of long-term debt | | $ | 21 | | $ | 319 |
Accounts payable | | | 1,426 | | | 1,453 |
Accrued liabilities | | | 753 | | | 797 |
| | | | | | |
Total current liabilities | | | 2,200 | | | 2,569 |
Long-term debt | | | 5,814 | | | 5,974 |
Other liabilities | | | 1,836 | | | 1,786 |
Deferred income taxes | | | 1,618 | | | 1,463 |
Minority interest | | | 163 | | | 180 |
Stockholders’ equity (247,313,692 and 247,050,234 shares outstanding at March 31, 2006 and December 31, 2005, respectively) | | | 3,297 | | | 3,008 |
| | | | | | |
Total liabilities and stockholders’ equity | | $ | 14,928 | | $ | 14,980 |
| | | | | | |
| Table | 13 - Lyondell Selected Equity Investment Activity |
| | | | | | | | |
(Millions of dollars) | | For the three
months ended
March 31,
2006 | | | For the twelve
months ended
December 31,
2005 | |
Investment in LCR, beginning of period | | $ | (90 | ) | | $ | (37 | ) |
Lyondell’s share of LCR net income | | | 91 | | | | 123 | |
Cash distributions from LCR | | | (70 | ) | | | (303 | ) |
Cash contributions to LCR | | | 23 | | | | 128 | |
Other | | | — | | | | (1 | ) |
| | | | | | | | |
Investment in LCR, end of period | | $ | (46 | ) | | $ | (90 | ) |
| | | | | | | | |
| | |
| | | March 31,
2006 | | | December 31,
2005 | |
Investment in and receivable from LCR | | | | | | | | |
Investment in LCR | | $ | (46 | ) | | $ | (90 | ) |
Note receivable from LCR | | | 229 | | | | 229 | |
Interest receivable on Note | | | 50 | | | | 47 | |
| | | | | | | | |
Total | | $ | 233 | | | $ | 186 | |
| | | | | | | | |
Tables 14 through 22 represent additional financial information
on a 100% basis for Equistar, Millennium and LCR.
Table 14 - Equistar Unaudited Income Statement Information (a)
| | | | | | | | |
| | | For the three months ended
March 31, | |
(Millions of dollars) | | 2006 | | | 2005 | |
Sales and other operating revenues(b) | | $ | 3,036 | | | $ | 2,861 | |
Cost of sales | | | 2,670 | | | | 2,417 | |
Selling, general and administrative expenses | | | 48 | | | | 50 | |
Research and development expenses | | | 8 | | | | 8 | |
| | | | | | | | |
Operating income | | | 310 | | | | 386 | |
Interest expense, net | | | (53 | ) | | | (54 | ) |
Other expense, net | | | (1 | ) | | | — | |
| | | | | | | | |
Net income(c) | | $ | 256 | | | $ | 332 | |
| | | | | | | | |
| (a) | Represents information for Equistar on a stand-alone basis and does not reflect purchase accounting adjustments. |
| (b) | Sales and other operating revenues include sales to affiliates. |
| (c) | As a partnership, Equistar is not subject to federal income taxes. |
Table 15 - Equistar Unaudited Balance Sheet Information(a)
| | | | | | |
(Millions of dollars) | | March 31,
2006 | | December 31,
2005 |
Cash and cash equivalents | | $ | 33 | | $ | 215 |
Accounts receivable, net | | | 892 | | | 924 |
Inventories | | | 801 | | | 657 |
Prepaid expenses and other current assets | | | 43 | | | 53 |
| | | | | | |
Total current assets | | | 1,769 | | | 1,849 |
Property, plant and equipment, net | | | 3,022 | | | 3,063 |
Investments | | | 57 | | | 58 |
Other assets, net | | | 334 | | | 350 |
| | | | | | |
Total assets | | $ | 5,182 | | $ | 5,320 |
| | | | | | |
Current maturities of long-term debt | | $ | — | | $ | 150 |
Accounts payable | | | 782 | | | 735 |
Accrued liabilities | | | 182 | | | 275 |
| | | | | | |
Total current liabilities | | | 964 | | | 1,160 |
Long-term debt | | | 2,160 | | | 2,161 |
Other liabilities and deferred revenues | | | 419 | | | 416 |
Partners’ capital | | | 1,639 | | | 1,583 |
| | | | | | |
Total liabilities and partners’ capital | | $ | 5,182 | | $ | 5,320 |
| | | | | | |
| (a) | Represents information for Equistar on a stand-alone basis and does not reflect purchase accounting adjustments. |
Table 16 - Equistar Unaudited Cash Flow Information (a)
| | | | | | | | |
| | | For the three months ended
March 31, | |
(Millions of dollars) | | 2006 | | | 2005 | |
Net income | | $ | 256 | | | $ | 332 | |
Adjustments: | | | | | | | | |
Depreciation and amortization | | | 82 | | | | 79 | |
Changes in assets and liabilities: | | | | | | | | |
Accounts receivable | | | 35 | | | | (268 | ) |
Inventories | | | (144 | ) | | | (71 | ) |
Accounts payable | | | 46 | | | | 149 | |
Other, net | | | (86 | ) | | | (87 | ) |
| | | | | | | | |
Cash provided by operating activities | | | 189 | | | | 134 | |
| | | | | | | | |
Expenditures for property, plant and equipment | | | (22 | ) | | | (35 | ) |
Proceeds from sales of assets | | | — | | | | 3 | |
| | | | | | | | |
Cash used in investing activities | | | (22 | ) | | | (32 | ) |
| | | | | | | | |
Repayment of long-term debt | | | (150 | ) | | | (1 | ) |
Distributions to owners | | | (200 | ) | | | — | |
Other | | | 1 | | | | — | |
| | | | | | | | |
Cash used in financing activities | | | (349 | ) | | | (1 | ) |
| | | | | | | | |
Increase (decrease) in cash and cash equivalents | | $ | (182 | ) | | $ | 101 | |
| | | | | | | | |
| (a) | Represents information for Equistar on a stand-alone basis and does not reflect purchase accounting adjustments. |
Table 17 - Millennium Unaudited Income Statement Information (a)
| | | | | | | | |
| | | For the three months ended | |
(Millions of dollars) | | March 31,
2006 | | | March 31,
2005 | |
Sales and other operating revenues(b) | | $ | 484 | | | $ | 453 | |
Cost of sales | | | 438 | | | | 365 | |
Selling, general and administrative expenses | | | 36 | | | | 43 | |
Research and development expenses | | | 6 | | | | 6 | |
Asset impairments | | | 2 | | | | 2 | |
| | | | | | | | |
Operating income (loss) | | | 2 | | | | 37 | |
Interest expense, net | | | (32 | ) | | | (24 | ) |
Other income (expense), net | | | (9 | ) | | | (9 | ) |
| | | | | | | | |
Income (loss) before equity investment, minority interest and income taxes | | | (39 | ) | | | 4 | |
Income from equity investment in Equistar | | | 75 | | | | 98 | |
| | | | | | | | |
Income before income taxes and minority interest | | | 36 | | | | 102 | |
Provision for income taxes | | | 2 | | | | 37 | |
| | | | | | | | |
Income (loss) before minority interest | | | 34 | | | | 65 | |
Minority interest | | | (1 | ) | | | (1 | ) |
| | | | | | | | |
Net income (loss) | | $ | 33 | | | $ | 64 | |
| | | | | | | | |
| (a) | Represents information for Millennium on a stand-alone basis and does not reflect purchase accounting adjustments. |
| (b) | Sales and other operating revenues include sales to affiliates. |
Table 18 - Millennium Unaudited Balance Sheet Information(a)
| | | | | | | |
(Millions of dollars) | | March 31,
2006 | | December 31,
2005 | |
Cash and cash equivalents | | $ | 99 | | $ | 279 | |
Accounts receivable, net | | | 366 | | | 361 | |
Inventories | | | 427 | | | 429 | |
Prepaid expenses and other current assets | | | 107 | | | 79 | |
| | | | | | | |
Total current assets | | | 999 | | | 1,148 | |
Property, plant and equipment, net | | | 649 | | | 647 | |
Investments in Equistar | | | 480 | | | 464 | |
Goodwill | | | 104 | | | 104 | |
Other assets, net | | | 105 | | | 110 | |
| | | | | | | |
Total assets | | $ | 2,337 | | $ | 2,473 | |
| | | | | | | |
Current maturities of long-term debt | | $ | 21 | | $ | 169 | |
Accounts payable | | | 342 | | | 367 | |
Accrued liabilities | | | 169 | | | 156 | |
| | | | | | | |
Total current liabilities | | | 532 | | | 692 | |
Long-term debt | | | 873 | | | 966 | |
Other liabilities | | | 647 | | | 644 | |
Deferred income taxes | | | 229 | | | 167 | |
Minority interest | | | 46 | | | 42 | |
Stockholder’s equity (deficit) (100,000,000 shares authorized; 66,135,186 shares outstanding at March 31, 2006 and December 31, 2005) | | | 10 | | | (38 | ) |
| | | | | | | |
Total liabilities and stockholders’ equity | | $ | 2,337 | | $ | 2,473 | |
| | | | | | | |
| (a) | Represents information for Millennium on a stand-alone basis and does not reflect purchase accounting adjustments. |
Table 19 - Millennium Unaudited Cash Flow Information (a)
| | | | | | | | |
| | | For the three months ended
March 31, | |
(Millions of dollars) | | 2006 | | | 2005 | |
Net income | | $ | 33 | | | $ | 64 | |
Adjustments: | | | | | | | | |
Asset impairments | | | 2 | | | | 2 | |
Depreciation and amortization | | | 27 | | | | 26 | |
Debt prepayment charges and premiums | | | 7 | | | | — | |
Deferred income taxes | | | — | | | | 9 | |
Income from equity investment in Equistar | | | (75 | ) | | | (98 | ) |
Distributions of earnings from Equistar | | | 59 | | | | — | |
Changes in assets and liabilities: | | | | | | | | |
Accounts receivable | | | (2 | ) | | | (14 | ) |
Inventories | | | 7 | | | | (64 | ) |
Accounts payable | | | (30 | ) | | | 24 | |
Other, net | | | 44 | | | | 21 | |
| | | | | | | | |
Cash provided by (used in) operating activities | | | 72 | | | | (30 | ) |
| | | | | | | | |
Expenditures for property, plant and equipment | | | (11 | ) | | | (9 | ) |
| | | | | | | | |
Cash used in investing activities | | | (11 | ) | | | (9 | ) |
| | | | | | | | |
Repayment of long-term debt | | | (244 | ) | | | — | |
Contribution from Lyondell | | | — | | | | 6 | |
Other | | | 2 | | | | — | |
| | | | | | | | |
Cash provided by (used in) financing activities | | | (242 | ) | | | 6 | |
| | | | | | | | |
Effect of exchange rate changes on cash | | | 1 | | | | (2 | ) |
| | | | | | | | |
Decrease in cash and cash equivalents | | $ | (180 | ) | | $ | (35 | ) |
| | | | | | | | |
| (a) | Represents information for Millennium on a stand-alone basis and does not reflect purchase accounting adjustments. |
Table 20 - LCR Unaudited Income Statement Information
| | | | | | | | | | | | |
| | | For the three months ended | |
| | | March 31, | | | December 31, 2005 | |
(Millions of dollars) | | 2006 | | | 2005 | | |
Sales and other operating revenues(a) | | $ | 2,094 | | | $ | 1,536 | | | $ | 1,440 | |
Cost of sales | | | 1,915 | | | | 1,406 | | | | 1,446 | |
Selling, general and administrative expenses | | | 17 | | | | 12 | | | | 17 | |
| | | | | | | | | | | | |
Operating income (loss) | | | 162 | | | | 118 | | | | (23 | ) |
Interest expense, net | | | (11 | ) | | | (8 | ) | | | (12 | ) |
| | | | | | | | | | | | |
Net income (loss)(b) | | $ | 151 | | | $ | 110 | | | $ | (35 | ) |
| | | | | | | | | | | | |
EBITDA(c) | | $ | 193 | | | $ | 146 | | | $ | 7 | |
| (a) | Sales and other operating revenues include sales to affiliates. |
| (b) | As a partnership, LCR is not subject to federal income taxes. |
| (c) | See Table 9 for reconciliation of LCR’s net income to EBITDA. |
Table 21 - LCR Unaudited Balance Sheet Information
| | | | | | |
(Millions of dollars) | | March 31,
2006 | | December 31,
2005 |
Total current assets | | $ | 458 | | $ | 418 |
Property, plant and equipment, net | | | 1,359 | | | 1,328 |
Other assets, net | | | 81 | | | 86 |
| | | | | | |
Total assets | | $ | 1,898 | | $ | 1,832 |
| | | | | | |
Current maturities of long-term debt | | $ | 5 | | $ | 5 |
Other current liabilities | | | 860 | | | 800 |
Long-term debt | | | 438 | | | 439 |
Loans payable to partners | | | 264 | | | 264 |
Other liabilities | | | 115 | | | 113 |
Partners’ capital | | | 216 | | | 211 |
| | | | | | |
Total liabilities and partners’ capital | | $ | 1,898 | | $ | 1,832 |
| | | | | | |
Table 22 - LCR Unaudited Cash Flow Information
| | | | | | |
| | | For the three months ended March 31, |
(Millions of dollars) | | 2006 | | 2005 |
Cash flow from operations | | $ | 192 | | $ | 240 |
Capital expenditures | | | 60 | | | 34 |
Depreciation and amortization | | | 31 | | | 28 |
