[LOGO] Millennium Chemicals
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NEWS RELEASE
FOR IMMEDIATE RELEASE
Contact: Mickey Foster
Vice President
Corporate and Investor Relations
(732) 933-5140
MILLENNIUM CHEMICALS REPORTS
FIRST QUARTER 2002 OPERATING RESULTS
-- 1Q02 EPS loss of ($0.49) before accounting change --
-- 1Q02 Pro forma EBITDA $34 million --
-- 1Q02 SD&A costs 47 percent lower than 1Q01 --
Red Bank, New Jersey, May 2, 2002 -- Millennium Chemicals (NYSE-MCH)
("Millennium") announced today a first quarter 2002 EPS loss of ($0.49) before
the cumulative effect of the accounting change for SFAS No. 142, "Goodwill and
Other Intangible Assets". Millennium reported first quarter 2002 pro forma
EBITDA(1) of $34 million compared to the first quarter 2001 pro forma EBITDA of
$77 million. First quarter pro forma sales were $686 million, down 29 percent
from last year's first quarter of $967 million.
William M. Landuyt, Chairman and CEO of Millennium, said, "Millennium reported a
net loss reflecting the difficult economic and business conditions in the first
quarter of 2002. Encouragingly, all of Millennium's wholly owned businesses
reported sequential monthly improvements in EBITDA in the first quarter of 2002,
reflecting our continued focus on cost-reduction programs and an increase in
demand for most of our products. Cautious optimism continues to build within the
markets Millennium serves and we expect modest business improvement in the
remaining quarters of 2002. However, prices for most of Millennium's products
remained depressed during the first quarter of 2002 ahead of announced price
increases for our principal products, which will take effect over the next
quarter. The success and timing of these price increases will depend upon the
continuation of the pattern of increases in downstream customer demand, which we
experienced in the first quarter. Obtaining benefits from cost containment and
reduction programs remains a priority. Selling, development and administrative
costs in the first quarter of 2002 were 47 percent lower than the first quarter
of 2001 and 30 percent lower than the fourth quarter of 2001."
The cumulative effect of the SFAS No.142 accounting change reported in the first
quarter of 2002 due to the write-off of certain of Millennium's and Equistar's
goodwill was ($305)
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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.
million or ($4.80) per share. Goodwill amortization, which has been eliminated
under the new rules, was a charge to income of $23 million in 2001, including
the Company's share of Equistar's goodwill amortization. The net loss in the
first quarter of 2002 after the cumulative effect of this accounting change was
($336) million or ($5.29) per share compared to a net loss of ($15) million or
($0.24) per share in the first quarter last year.
Net debt (total debt less cash) at March 31, 2002 totaled $1.122 billion versus
$1.073 billion at the end of 2001. John E. Lushefski, Senior Vice President and
Chief Financial Officer of Millennium, said, "Borrowing levels remain
substantially similar to the beginning of the year. Net debt levels increased in
the quarter due primarily to the use of cash to reduce trade payable
liabilities. Millennium completed a European accounts receivable securitization
transaction in March. Proceeds from this transaction were $43 million and were
used to pay down debt."
Net interest expense was $21 million in the first quarter of 2002; flat with the
first quarter of 2001 and down $1 million from the fourth quarter of 2001.
Capital spending was $13 million during the quarter and spending is expected to
be approximately $70 million in 2002.
Dividends
Millennium will declare a quarterly dividend on its common stock of $0.135 per
share. The dividend will be payable on June 30, 2002 to shareholders of record
on June 12, 2002. The ex-dividend date will be June 10, 2002.
TITANIUM DIOXIDE
The Titanium Dioxide (TiO[u]2) segment reported first quarter EBITDA of $30
million, compared to $49 million in the first quarter last year and similar to
the $28 million reported in the fourth quarter of 2001.
In local currencies, average first quarter prices were 14 percent lower than
last year's first quarter and down 6 percent from the prior quarter. In U.S.
dollar terms, the worldwide average first quarter price was down 16 percent from
the same quarter last year and down 6 percent from last year's fourth quarter.
Price increases have been announced by Millennium and most major producers
effective March 1, 2002.
Millennium's global price increases, which range from 5 to 8 percent, were
announced in order to begin the restoration of margins that have become
unacceptably poor after more than a year of excessive price decreases in all
global market regions. Successful implementation of these increases is dependent
upon the continuation of the pattern of increases in customer demand experienced
in the first quarter. Contracts with Millennium's large-volume TiO[u]2 customers
include periods of price protection. Therefore, the benefits of such price
increases may not be fully realized by Millennium until the third quarter.
First quarter TiO[u]2 sales volume was down 3 percent from the first quarter of
last year and up 15 percent from last year's depressed fourth quarter levels.
Volume was up sequentially in the three months of the first quarter of 2002
partially due to customer restocking and buying ahead of price increases.
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The first quarter's TiO[u]2 operating rate was 80 percent of annual nameplate
capacity of 690,000 metric tons compared to 88 percent of annual nameplate
capacity of 712,000 metric tons in last year's first quarter, and 82 percent of
annual nameplate capacity of 690,000 metric tons in last year's fourth quarter.
Manufacturing cost per ton in the first quarter of 2002 was down 10 percent from
last year's first quarter and down 2 percent from last year's fourth quarter.
Outlook
Earnings should improve slightly in the second quarter over the first quarter as
sales volume should increase seasonally due to the North American and European
coatings season and global TiO[u]2 price increases should be gradually realized.
ACETYLS
The Acetyls segment reported first quarter EBITDA of ($4) million compared to $2
million in the first quarter last year and ($7) million in last year's fourth
quarter. The first quarter results were negatively impacted by $7 million due to
unfavorable fixed-price natural gas purchase positions. These positions expired
in March of 2002.
Due to the adoption as of January 1, 2002 of a new accounting pronouncement,
SFAS No.142, "Goodwill and Other Intangible Assets", Millennium reported a
reduction in the value of goodwill of $275 million associated with the Acetyls
business segment as a charge for the cumulative effect of a change in accounting
principle. Additionally, under the new rules, goodwill amortization has been
eliminated and is no longer included as a charge to operating income of the
Acetyls business segment. Goodwill amortization expense of $11 million was
included in operating income of the Acetyls business segment in 2001, including
$3 million in each of the first and fourth quarters of last year.
VAM prices in the first quarter were down 35 percent compared to the first
quarter last year and down 8 percent from last year's fourth quarter due to
cost-based price reductions and weak global economic conditions. Acetic acid
prices in the first quarter decreased 31 percent from the comparable period last
year and were down 8 percent from last year's fourth quarter for similar
reasons. In mid-March, all major acetyls producers announced price increases for
both VAM and acetic acid effective April 1, 2002, citing rising feedstock costs
and unacceptable margins.
Outlook
Acetyls profitability should improve in the second quarter over the first
quarter with the absence of higher cost fixed-price natural gas purchase
positions and expected moderate improvement in sales volume.
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SPECIALTY CHEMICALS
The Specialty Chemicals segment reported first quarter EBITDA of $6 million,
which was flat with the first quarter of last year and an improvement over the
$3 million reported in last year's fourth quarter. Sales volume was down 22
percent from last year's first quarter and up seasonally 4 percent from last
year's fourth quarter.
Average selling prices increased 19 percent compared to last year's first
quarter and increased 18 percent from last year's fourth quarter. The price of
crude sulfate turpentine, the key raw material, remained unchanged from last
year's first quarter and fourth quarter.
Outlook
Earnings in the second quarter of 2002 should be comparable to the first quarter
of 2002. The market for fragrance chemicals has improved but remains
competitive. New product development efforts continue, with a new coolant and a
new flavor chemical launched in the first quarter.
EQUISTAR
Millennium's 29.5 percent stake in Equistar generated a first quarter
post-interest equity loss of ($39) million compared to ($24) million of equity
loss in the first quarter of last year and a ($29) million equity loss in last
year's fourth quarter.
Compared to the fourth quarter of 2001, sales volume for olefins increased 7
percent in the first quarter of 2002 due to improved demand following aggressive
industry inventory reductions that characterized the fourth quarter of 2001.
However, the benefits of increased demand were offset by a significant reduction
in ethylene margins. During the first quarter of 2002, ethylene prices declined
in an environment of rising feedstock and energy costs. In addition, certain
fixed-price natural gas and natural gas liquid supply contracts, which were
entered into in early 2001, resulted in costs that were approximately $33
million higher than market-based contracts would have been for the same period.
Most of these contracts expired at the end of the first quarter of 2002.
Compared to the fourth quarter of 2001, the polymers business benefited from
improved margins, as falling ethylene prices more than offset lower polyethylene
prices. The polymers business also benefited from volume improvements of 3
percent in the quarter.
Due to the adoption of SFAS No. 142 as of January 1, 2002, Equistar reported an
impairment of goodwill in the first quarter of 2002. The write-off required an
adjustment of $30 million for the cumulative effect of the change in accounting
principal to reduce the carrying value of Millennium's investment in Equistar.
Under the new guidelines, goodwill amortization has been eliminated.
Millennium's share of Equistar's goodwill amortization expense for 2001 included
in Equity in (loss) of Equistar was approximately $10 million.
Millennium's share of underlying first quarter sales was $335 million; of
operating losses, ($24) million and of EBITDA, ($2) million. Equistar did not
distribute any cash to Millennium in the first quarter.
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Outlook
Prices for most of Equistar's products are expected to improve in the second
quarter, but feedstock costs remain volatile. April orders suggest US demand is
running ahead of the historical seasonal increase usually experienced for these
markets. It is too early to determine whether the increased volume is resulting
from fundamental demand or inventory re-building ahead of market price
increases.
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 TiO[u]2 in the world and a leading producer
of titanium tetrachloride;
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. These
statements are only present expectations. Actual events or results may differ
materially. Factors that could cause such a difference include: the cyclicality
and volatility of the segments of the chemical industry in which the Company and
Equistar operate, particularly fluctuations in the demand for ethylene, its
derivatives and acetyls and the sensitivity of these industry segments to
capacity additions; general economic conditions in the geographic regions where
the Company and Equistar generate sales, and the impact of government regulation
and other external factors; the ability of Equistar to distribute cash to its
partners and uncertainties arising from the shared control of Equistar and the
Company's future capital commitments to Equistar; changes in the cost of energy
and raw materials; the ability of raw material suppliers to fulfill their
commitments; the ability of the Company and Equistar to achieve their
productivity improvement, cost reduction and working capital targets; the
occurrence of operating problems at manufacturing facilities of the Company or
Equistar; fluctuations in currency exchange rates and other risks of doing
business abroad; the cost of compliance with the extensive environmental
regulations affecting the chemical industry and exposure to liabilities for
environmental remediation and other environmental matters; pricing and other
competitive pressures; 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 the
Company's Annual Report on Form 10-K for year ended December 31, 2001.
The Company undertakes no 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 first quarter earnings discussion and
outlook for 2002 on Thursday, May 2nd, at 11:00 am EDT via webcast at
http://www.millenniumchem.com and click on the Investor Relations Icon.
The teleconference number is 706-679-7718.
Replay will be available for 24 hours at 706-645-9291, reservation #3782913.
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MILLENNIUM CHEMICALS INC.
CONSOLIDATED STATEMENTS OF INCOME
(Millions, except share data)
TABLE I
Three months ended
March 31,
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2002 2001
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Net sales $ 351 $ 444
Operating costs and expenses
Cost of products sold 292 343
Selling, development and administrative expenses 23 43
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EBITDA 36 58
Depreciation and amortization 25 28
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Operating income before restructuring charges 11 30
Net interest expense (21) (21)
Equity in loss of Equistar - operating (24) (4)
- interest (15) (14)
- plant closure -- (6)
Restructuring charges -- (5)
Net other expense (1) --
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Loss before income taxes and minority interest (50) (20)
Benefit from income taxes 20 6
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Loss before minority interest (30) (14)
Minority interest (1) (1)
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Loss before cumulative effect of accounting change (31) (15)
Cumulative effect of accounting change (305) --
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Net loss $ (336) $ (15)
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Basic and diluted EPS ($/share)
- before accounting change $ (0.49) $ (0.24)
- from accounting change (4.80) --
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- after accounting change $ (5.29) $ (0.24)
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Weighted average number of shares
used to compute basic and diluted EPS 63.477 63.510
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MILLENNIUM CHEMICALS INC.
SEGMENT INFORMATION
(Millions)
TABLE II
2001 2002
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1Q 2Q 3Q 4Q FY 1Q
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EBITDA(2)
Titanium Dioxide 49 39 41 28 157 30
Acetyls 2 10 2 (7) 7 (4)
Specialty Chemicals 6 6 5 3 20 6
Other 1 1 3 3 8 4
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REPORTED 58 56 51 27 192 36
Equistar 19 27 12 10 68 (2)
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PRO FORMA TOTAL 77 83 63 37 260 34
DEPRECIATION AND AMORTIZATION
Titanium Dioxide 21 20 21 19 81 20
Acetyls 5 5 5 6 21 3
Specialty Chemicals 2 2 2 2 8 2
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REPORTED 28 27 28 27 110 25
Equistar 23 24 24 24 95 22
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PRO FORMA TOTAL 51 51 52 51 205 47
OPERATING INCOME(2)
Titanium Dioxide 28 19 20 9 76 10
Acetyls (3) 5 (3) (13) (14) (7)
Specialty Chemicals 4 4 3 1 12 4
Other 1 1 3 3 8 4
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REPORTED 30 29 23 -- 82 11
Equistar (4) 3 (12) (14) (27) (24)
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PRO FORMA TOTAL 26 32 11 (14) 55 (13)
NET SALES
Titanium Dioxide 317 297 284 240 1,138 260
Acetyls 99 98 85 73 355 65
Specialty Chemicals 26 23 22 19 90 24
Other 2 1 2 2 7 2
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REPORTED 444 419 393 334 1,590 351
Equistar 523 472 399 350 1,744 335
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PRO FORMA TOTAL 967 891 792 684 3,334 686
CAPITAL SPENDING
Titanium Dioxide 23 26 23 10 82 12
Acetyls 2 3 -- 1 6 --
Specialty Chemicals 1 1 1 -- 3 1
Other 2 3 -- 1 6 --
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TOTAL 28 33 24 12 97 13
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(2) EBITDA and operating income for purposes of this presentation exclude
reorganization and plant closure charges recorded in the first and second
quarter of 2001.
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MILLENNIUM CHEMICALS INC.
CONSOLIDATED BALANCE SHEETS
(Millions)
TABLE III
March 31, December 31,
2002 2001
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ASSETS
Current Assets
Cash and cash equivalents $ 71 $ 114
Trade receivables, net 211 215
Inventories 329 370
Other current assets 80 61
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Total current assets 691 760
Property, plant and equipment, net 866 880
Investment in Equistar 610 677
Deferred income taxes 96 72
Other assets 244 237
Goodwill 103 378
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Total assets $2,610 $3,004
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Notes payable $ 5 $ 4
Current maturities of long-term debt 13 11
Trade accounts payable 164 222
Income taxes payable 5 7
Accrued expenses and other liabilities 136 139
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Total current liabilities 323 383
Long-term debt 1,175 1,172
Other liabilities 550 550
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Total liabilities 2,048 2,105
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Minority interest 22 21
Shareholders' equity 540 878
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Total liabilities and shareholders' equity $2,610 $3,004
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MILLENNIUM CHEMICALS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Millions)
TABLE IV
March 31, March 31,
2002 2001
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Cash flows from operating activities
Net loss $(336) $(15)
Adjustments to reconcile net loss to
net cash (used in) provided by operating activities:
Cumulative effect of accounting change 305 --
Depreciation and amortization 25 28
Deferred income tax benefit (24) (3)
Equity in loss of Equistar 39 24
Net change in trade working capital (55) (9)
Net change in other assets and liabilities (30) (19)
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Cash (used in) provided by operating activities (76) 6
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Cash flows from investing activities
Capital expenditures (13) (28)
Proceeds from sale of fixed assets -- 2
Securitization of accounts receivable 43 --
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Cash provided by (used in) investing activities 30 (26)
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Cash flows from financing activities
Dividends to shareholders (9) (9)
Net proceeds (repayment) of borrowings 11 (18)
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Cash provided by (used in) financing activities 2 (27)
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Effect of exchange rate changes on cash 1 (2)
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Decrease in cash and cash equivalents (43) (49)
Cash and cash equivalents at beginning of year 114 107
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Cash and cash equivalents at end of period $ 71 $ 58
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