Exhibit 99.1
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Millennium Chemicals Logo
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NEWS RELEASE
FOR IMMEDIATE RELEASE
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Contact: Mickey Foster
Vice President
Corporate and Investor Relations
(732) 933-5140
MILLENNIUM CHEMICALS REPORTS IMPROVED RESULTS
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-- 2Q02 pro forma EBITDA $74 million --
-- 2Q02 net debt down from 1Q02 --
Red Bank, New Jersey, July 31, 2002 -- Millennium Chemicals (NYSE-MCH)
("Millennium") announced today second quarter 2002 EPS of $0.01 compared to a
loss of ($0.37) per share in the second quarter last year. Millennium reported
second quarter 2002 pro forma EBITDA1 of $74 million compared to the second
quarter 2001 pro forma EBITDA of $83 million and first quarter 2002 pro forma
EBITDA of $34 million. Second quarter pro forma sales were $836 million, down 6
percent from last year's second quarter of $891 million and up 22 percent from
the first quarter of 2002.
William M. Landuyt, Chairman and CEO of Millennium, said, "Second quarter
earnings per share improved both sequentially and over the same quarter last
year due to improving global business conditions, stronger global demand in many
of our businesses and cost savings. Even allowing for an approximately $5
million pretax benefit from settling certain legacy claims, selling, development
and administrative costs in the second quarter declined significantly from last
year's second quarter and were down substantially in the first half of 2002
versus the same period in 2001. Solid demand for Millennium's products in most
markets is supporting price increases and continued improvement in operating
results is expected for Millennium's wholly owned businesses in the second half
of 2002."
In the second quarter of 2002, Millennium reported net income of $1 million
compared to a net loss of ($23) million in the second quarter last year. Basic
and diluted EPS in the second quarter of 2002 were $0.01 compared to basic and
diluted loss per share of ($0.37) in the comparable period last year.
An after-tax profit of $3 million, or $0.05 per share, related to the resolution
of certain legacy claims was recorded as a one-time item in the second quarter
of 2002. Excluding this unusual item, second quarter 2002 results would have
been a loss of ($2) million or ($0.04) per share. Included in the second quarter
of 2001 was a ($20) million after-tax charge, or ($0.31) per share, related to
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1 EBITDA represents income from operations before interest, taxes, depreciation
and amortization, other income items, equity earnings, reorganization charges
and the cumulative effect of accounting changes. Pro forma EBITDA, presented for
comparative purposes, includes the Company's underlying interest in Equistar's
results, including an allocation of costs incurred by the Company. Pro forma
sales includes the Company's underlying interest in Equistar's sales.
Millennium idling its high-cost sulfate-process titanium dioxide facility at
Hawkins Point, Maryland and reducing its worldwide workforce. Excluding these
unusual items, second quarter 2001 results would have been a loss of ($3)
million or ($0.06) per share.
Goodwill amortization, which was eliminated due to the adoption of SFAS No. 142
on January 1, 2002, was a charge to income of $11 million for the six months
ending June 30, 2001, including the Company's share of Equistar's goodwill
amortization.
Net debt (total debt less cash) at June 30, 2002 declined to $1.094 billion
versus $1.122 billion at the end of the first quarter of 2002. John E.
Lushefski, Senior Vice President and Chief Financial Officer of Millennium,
said, "Net debt declined $28 million during the quarter as Millennium's
businesses generated cash and we received a tax refund of $15 million.
Millennium completed a refinancing during the quarter and repaid all outstanding
borrowings under its $175 million revolving credit facility."
Net interest expense of $21 million in the second quarter of 2002 was flat with
the second quarter last year. Year-to-date capital spending was $25 million
compared to $61 million during the first six months of 2001. Depreciation and
amortization was $50 million for Millennium's wholly owned businesses in the
first six months of 2002. Full year capital spending is expected to approximate
$65 to $70 million in 2002, while depreciation and amortization should total
about $100 million.
Dividends
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Millennium declared a quarterly dividend on its common stock of $0.135 per
share. The dividend will be payable on September 30, 2002 to shareholders of
record on September 12, 2002. The ex-dividend date will be September 10, 2002.
TITANIUM DIOXIDE
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The Titanium Dioxide (TiO2) segment reported second quarter EBITDA of $34
million, compared to $40 million in the second quarter last year and $31 million
in this year's first quarter. EBITDA improved in the second quarter of 2002 over
the first quarter due to higher prices and increased sales volume.
In local currencies, average second quarter prices were 12 percent lower than
last year's second quarter and 1 percent higher than the prior quarter. In U.S.
dollar terms, the worldwide average second quarter price was 11 percent lower
than the same quarter last year and 2 percent higher than the first quarter of
2002. Millennium and most major producers announced two global price increases,
which cumulatively total about 15 percent, during the first six months of 2002.
A majority of the first price increase is being realized in the third quarter of
2002. The success and timing of these price increases will depend upon the
continuation of the patterns of increases in downstream customer demand
experienced in the first six months.
Second quarter TiO2 sales volume of 168,000 metric tons was up 12 percent from
both the second quarter of last year and this year's first quarter. Volume was
up in the second quarter of 2002 due to strong demand from the coatings season
and improving global business conditions.
2
The second quarter's TiO2 operating rate was 88 percent of annual nameplate
capacity of 690,000 metric tons compared to 85 percent of annual nameplate
capacity of 712,000 metric tons in last year's second quarter, and 80 percent of
annual nameplate capacity of 690,000 metric tons in the first quarter of 2002.
Operating rates are expected to rise for the balance of the year to satisfy
demand and seasonally build inventories.
Manufacturing cost per ton in the second quarter of 2002 increased 3 percent
from the first quarter of 2002 primarily related to the effect of currency
exchange. If the effect of currency exchange is excluded, the increase was 1
percent.
Outlook
Operating results should continue to improve in the third quarter over the
second quarter, as it is expected that sales volume will continue to be robust
but seasonally lower, and price increases gradually obtained during the second
quarter will be in effect for the full third quarter. This is expected to be
partially offset by higher incentive pay costs.
ACETYLS
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The Acetyls segment reported second quarter EBITDA of $7 million compared to $10
million in the second quarter last year and negative ($4) million in the first
quarter of 2002. The first quarter of 2002 results were negatively impacted by
$7 million due to unfavorable fixed-price natural gas purchase positions. These
positions expired in March of 2002.
VAM prices in the second quarter were down 26 percent compared to the second
quarter last year and up 3 percent from the first quarter of 2002. Acetic acid
prices in the second quarter were down 21 percent from the comparable period
last year and up 3 percent from the first quarter of 2002. Millennium announced
another global price increase for VAM and acetic acid effective July 1, 2002.
Strong demand in the second quarter of 2002 led to higher sales volume for all
product lines when compared to the second quarter of last year and seasonally
higher than this year's first quarter.
Outlook
Third quarter operating results should continue to show improvement over the
second quarter as announced price increases are realized. Key raw material
costs, including costs for natural gas and ethylene, are expected to be
relatively stable through the third quarter.
SPECIALTY CHEMICALS
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The Specialty Chemicals segment reported second quarter EBITDA of $4 million,
compared to $6 million in both last year's second quarter and the first quarter
of 2002. Sales volume was down 25 percent from last year's second quarter and
down 14 percent from the first quarter of 2002. The reduced volume is primarily
in lower margin pine oil and basic fragrance products.
As a result of both mix and price increases instituted early this year, average
selling prices increased 24 percent compared to last year's second quarter and
increased 5 percent from the first quarter of 2002. The price of crude sulfate
turpentine, the key raw material, remained unchanged from last year's second
quarter and the first quarter of 2002.
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Outlook
Sales demand has recently begun to rebound from disappointing second quarter
levels and operating results in the third quarter are expected to be similar to
the results in the second quarter of 2002. Fragrance chemical markets remain
competitive, but new flavor products are contributing to results.
EQUISTAR
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Millennium's 29.5 percent stake in Equistar generated a post-interest equity
loss of ($10) million in the second quarters of both 2002 and 2001 compared to a
($39) million equity loss in the first quarter of 2002. Compared to the first
quarter, margins improved across most product lines while sales volume remained
strong.
Improvement in petrochemicals was due primarily to price increases across the
entire product range. Compared to the first quarter, Equistar's net cost of
ethylene production remained stable, as rising olefin raw material costs were
largely offset by increases in co-product prices and by the expiration of
fixed-price gas contracts, which negatively impacted first quarter results.
Price for Equistar's polymers products largely kept pace with price increases in
ethylene and propylene. Consequently, results for this segment remained
relatively unchanged from the first quarter. Ethylene volumes increased by 7
percent and polymer volumes were up 85 million pounds or approximately 6
percent.
Millennium's share of underlying second quarter sales was $431 million; of
operating income, $5 million; and of EBITDA, $26 million. Equistar did not
distribute any cash to Millennium in the second quarter of 2002.
Outlook
Results should improve in the third quarter compared to the second quarter as
polymer price increases begun in the second quarter are more fully realized.
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Millennium Chemicals (website: www.millenniumchem.com) is a major international
chemicals company, with leading market positions in a broad range of commodity,
industrial, performance and specialty chemicals.
Millennium Chemicals is:
o The second-largest producer of TiO2 in the world and a leading producer
of titanium tetrachloride and other products, including zirconia,
cadmium/selenium pigments and silica gel;
o The second-largest producer of acetic acid and vinyl acetate monomer in
North America;
o A leading producer of fragrance chemicals; and,
o Through its partnership interest in Equistar Chemicals, LP, a partner
in the second-largest producer of ethylene and third-largest producer
of polyethylene in North America, and a leading producer of ethylene
oxide and its derivatives and high value-added specialty polymers.
The statements in this press release that are not historical facts are, or may
be deemed to be, "forward-looking statements" as defined in the Private
Securities Litigation Reform Act of 1995. Some of these statements can be
identified by the use of forward-looking terminology such as "prospects,"
"outlook," "believes," "estimates," "intends," "may," "will," "should,"
"anticipates," "expects" or "plans," or the negative or other variation of these
or similar words, or by discussion of trends and conditions, strategy or risks
and uncertainties. In addition, from time to time, Millennium or its
representatives have made or may make forward-looking statements in other
filings that Millennium makes with the Securities and Exchange Commission, in
press releases or in oral statements made by or with the approval of one of its
authorized executive officers. These forward-looking statements are only present
expectations. Actual events or results may differ materially. Factors that could
cause such a difference include: the cyclicality and volatility of the segments
of the chemical industry in which Millennium and Equistar Chemicals, LP
("Equistar") operate, particularly fluctuations in the demand for ethylene, its
derivatives and acetyls and the sensitivity of these industry segments to
capacity additions; general economic conditions in the geographic regions where
Millennium and Equistar generate sales, and the impact of government regulation
and other external factors; the ability of Equistar to distribute cash to its
partners and uncertainties arising from the shared control of Equistar and
Millennium's future capital commitments to Equistar; changes in the cost of
energy and raw materials; the ability of raw material suppliers to fulfill their
commitments; the ability of Millennium and Equistar to achieve their
productivity improvement, cost reduction and working capital targets; the
occurrence of operating problems at manufacturing facilities of Millennium or
Equistar; fluctuations in currency exchange rates and other risks of doing
business abroad; the cost of compliance with the extensive environmental
regulations affecting the chemical industry and exposure to liabilities for
environmental remediation and other environmental matters; pricing and other
competitive pressures; and exposure to legal proceedings relating to present and
former operations (including proceedings based on exposure to lead pigments,
asbestos and other materials) and other claims. A further description of these
risks, uncertainties and other matters can be found in Exhibit 99.1 to
Millennium's Report on Form 10-K for the year ended December 31, 2001.
Millennium disclaims any obligation to update any forward-looking statement,
whether as a result of new information, future events or otherwise.
(Tables follow)
Listen in live to Millennium's 2002 second quarter earnings discussion and
outlook for 2002 on Wednesday, July 31st at 10:00 am EDT via webcast at
http://www.millenniumchem.com and click on the Investor Relations icon.
The teleconference number is 973-582-2732
Replay will be available until August 7, 2002, by dialing
973-341-3080 enter pin #3370672.
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MILLENNIUM CHEMICALS INC.
Consolidated Statements of Operations
(Millions, except per share data)
TABLE I
Three months ended Six months ended
June 30, June 30,
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2002 2001 2002 2001
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Net sales $ 405 $ 419 $ 756 $ 863
Operating costs and expenses
Cost of products sold 336 328 628 671
Selling, development and
administrative expenses 21 35 44 78
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EBITDA 48 56 84 114
Depreciation and amortization 25 27 50 55
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Operating income before reorganization
and plant closure charges 23 29 34 59
Net interest expense (21) (22) (42) (42)
Equity in results of Equistar - operating 5 3 (19) (2)
- interest (15) (13) (30) (27)
- plant closure - - - (6)
Reorganization and plant closure charges - (31) - (36)
Net other expense - - (1) (1)
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Loss before income taxes, minority
interest and cumulative
effect of accounting change (8) (34) (58) (55)
Benefit from income taxes 9 12 29 18
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Income (loss) before minority interest
and cumulative effect of account change 1 (22) (29) (37)
Minority interest - (1) (1) (2)
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Income (loss) before cumulative
effect of accounting change 1 (23) (30) (39)
Cumulative effect of accounting change - - (305) -
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Net income (loss) $ 1 $ (23) $ (335) $ (39)
========= ========= ========= =========
Basic and diluted EPS ($/share)
- before accounting change $ 0.01 $ (0.37) $ (0.48) $ (0.61)
- from accounting change - - (4.80) -
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- after accounting change $ 0.01 $ (0.37) $ (5.28) $ (0.61)
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Weighted average number of shares
used to compute basic EPS 63.546 63.518 63.511 63.514
Weighted average number of shares
used to compute diluted EPS 63.976 63.518 63.511 63.514
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MILLENNIUM CHEMICALS INC.
SEGMENT INFORMATION
(Millions)
TABLE II
2001 2002
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1Q 2Q 3Q 4Q FY 1Q 2Q
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EBITDA1
Titanium Dioxide 49 40 42 29 160 31 34
Acetyls 2 10 2 (7) 7 (4) 7
Specialty Chemicals 6 6 5 3 20 6 4
Other 1 - 2 2 5 3 3
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REPORTED 58 56 51 27 192 36 48
Equistar 19 27 12 10 68 (2) 26
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PRO FORMA TOTAL 77 83 63 37 260 34 74
DEPRECIATION AND AMORTIZATION
Titanium Dioxide 21 20 21 19 81 20 20
Acetyls 5 5 5 6 21 3 3
Specialty Chemicals 2 2 2 2 8 2 2
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REPORTED 28 27 28 27 110 25 25
Equistar 23 24 24 24 95 22 21
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PRO FORMA TOTAL 51 51 52 51 205 47 46
OPERATING INCOME1
Titanium Dioxide 28 20 21 10 79 11 14
Acetyls (3) 5 (3) (13) (14) (7) 4
Specialty Chemicals 4 4 3 1 12 4 2
Other 1 - 2 2 5 3 3
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REPORTED 30 29 23 - 82 11 23
Equistar (4) 3 (12) (14) (27) (24) 5
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PRO FORMA TOTAL 26 32 11 (14) 55 (13) 28
NET SALES
Titanium Dioxide 319 298 286 242 1,145 262 300
Acetyls 99 98 85 73 355 65 83
Specialty Chemicals 26 23 22 19 90 24 22
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REPORTED 444 419 393 334 1,590 351 405
Equistar 523 472 399 350 1,744 335 431
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PRO FORMA TOTAL 967 891 792 684 3,334 686 836
CAPITAL SPENDING
Titanium Dioxide 23 26 23 10 82 12 11
Acetyls 2 3 - 1 6 - -
Specialty Chemicals 1 1 1 - 3 1 1
Other 2 3 - 1 6 - -
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TOTAL 28 33 24 12 97 13 12
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1 EBITDA and operating income for purposes of this presentation exclude
reorganization and plant closure charges recorded in the first and second
quarter of 2001, and the second quarter of 2002 includes a $5 million adjustment
of reserves due to favorable developments in legacy claims reserved for in prior
years.
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MILLENNIUM CHEMICALS INC.
CONSOLIDATED BALANCE SHEETS
(Millions)
TABLE III
June 30, December 31,
2002 2001
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ASSETS
Current Assets
Cash and cash equivalents $ 122 $ 114
Trade receivables, net 218 215
Inventories 330 370
Other current assets 82 61
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Total current assets 752 760
Property, plant and equipment, net 869 880
Investment in Equistar 602 677
Deferred income taxes 94 72
Other assets 255 237
Goodwill 103 378
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Total assets $2,675 $3,004
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Notes payable $ 7 $ 4
Current maturities of long-term debt 13 11
Trade accounts payable 208 222
Income taxes payable 8 7
Accrued expenses and other liabilities 138 139
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Total current liabilities 374 383
Long-term debt 1,196 1,172
Other liabilities 531 550
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Total liabilities 2,101 2,105
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Minority interest 19 21
Shareholders' equity 555 878
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Total liabilities and shareholders' equity $2,675 $3,004
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MILLENNIUM CHEMICALS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Millions)
TABLE IV
Six months ended
June 30,
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2002 2001
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Cash flows from operating activities
Net loss $ (335) $ (39)
Adjustments to reconcile net loss to
net cash (used in) provided by operating
activities:
Cumulative effect of accounting change 305 -
Write-off of assets related to plant closure - 10
Depreciation and amortization 50 55
Deferred income tax benefit (26) (6)
Equity in loss of Equistar 49 35
Net change in trade working capital (26) 36
Securitization of accounts receivable 50 -
Net change in other assets and liabilities (53) (85)
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Cash provided by operating activities 14 6
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Cash flows from investing activities
Capital expenditures (25) (61)
Proceeds from sale of fixed assets - 2
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Cash used in investing activities (25) (59)
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Cash flows from financing activities
Dividends to shareholders (9) (17)
Net proceeds of borrowings 27 33
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Cash provided by financing activities 18 16
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Effect of exchange rate changes on cash 1 (3)
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Increase (decrease) in cash and cash equivalents 8 (40)
Cash and cash equivalents at beginning of year 114 107
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Cash and cash equivalents at end of period $ 122 $ 67
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