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Exhibit 99.1
[Millennium Chemicals LOGO]
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NEWS RELEASE
Contact: Thomas Van Valkenburgh
Manager of Investor Relations
(410) 229-8113
FOR IMMEDIATE RELEASE
MILLENNIUM CHEMICALS ANNOUNCES THIRD QUARTER OPERATING RESULTS AND OUTLOOK
-- 3Q04 net income of $0.38 per share on a fully diluted basis --
Hunt Valley, Maryland, November 9, 2004 -- Millennium Chemicals (NYSE-MCH)
("Millennium", or the "Company") today reported net income for the third quarter
of 2004 of $28 million or $0.38 per common share on a fully diluted basis. For
the corresponding quarter of 2003, Millennium reported a net loss of $28 million
or $0.44 per common share. Excluding designated items(1), the third quarter 2004
net income was $29 million or $0.40 per common share on a fully diluted basis
compared to a net loss of $21 million or $0.33 per common share for the
corresponding quarter of 2003.(2)
Operating income from majority-owned businesses was $45 million in the third
quarter of 2004. This compares to an operating loss of $5 million in the third
quarter of 2003 and $11 million of operating income in the second quarter of
2004. Sales from all majority-owned businesses were $480 million in the third
quarter of 2004 compared to $431 million in the third quarter of 2003 and $488
million in the second quarter of 2004.
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(1) The designated item for the third quarter of 2004 is $1 million (after tax)
of costs related to the Company's cost reduction program. The designated
items for the third quarter of 2003 are $9 million (after tax) of costs
related to the Company's cost reduction program and $2 million (after tax)
of income related to the Company's collection of a note receivable.
(2) See Table V below for an explanation and quantification of these items, and
a reconciliation on a fully diluted basis between income (loss) per common
share, as adjusted for these designated items, and income (loss) per common
share determined according to accounting principles generally accepted in
the United States of America.
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During the third quarter of 2004, Millennium incurred approximately $1 million
of advisory fees and other expenses relating to the proposed business
combination with Lyondell Chemical Company ("Lyondell"). The transaction is
subject to approval by both companies' shareholders and is expected to close
after the close of business on November 30, 2004.
TITANIUM DIOXIDE
The Titanium Dioxide segment reported third quarter 2004 operating income of $26
million compared to $7 million of operating income in the third quarter of last
year and $10 million of operating income in the second quarter of 2004. Compared
to the third quarter of 2003, operating income was higher due to higher sales
volume, higher US dollar prices and lower manufacturing costs. Compared to the
second quarter of 2004, operating income was higher due to an increase in the
average selling price in US dollars and lower manufacturing costs.
In US dollar terms, the average third quarter selling price was 2 percent higher
compared to the third quarter of 2003 and 3 percent higher than the second
quarter of 2004. The average local currency selling price in the third quarter
of 2004 decreased 1 percent from last year's third quarter and increased 3
percent from the second quarter of 2004.
The third quarter 2004 TiO[u]2 sales volume increased 15 percent from the third
quarter of last year and decreased 9 percent from the second quarter of 2004.
Millennium estimates that the global TiO[u]2 market increased 9 to 11 percent
compared to the third quarter of 2003. The continued improvement in global
economic conditions primarily accounts for the increased demand.
The third quarter 2004 TiO[u]2 plant production operating rate was 99 percent of
annual nameplate capacity of 670,000 metric tons compared to an operating rate
of 84 percent in the third quarter of 2003 and 92 percent in the second quarter
of 2004. Operating rates in 2003 were based on annual nameplate capacity of
690,000 metric tons.
The third quarter 2004 manufacturing costs per metric ton decreased 4 percent
compared to both the second quarter of 2004 and the third quarter of 2003
primarily due to higher operating rates.
Outlook
Operating income for the fourth quarter of 2004 is expected to be seasonally
lower than the third quarter of 2004 as we expect seasonally lower demand
partially offset by improved pricing. In October of 2004, the average selling
price in US dollar terms increased approximately 5 percent compared to the
average US dollar selling price in the third quarter of 2004. Plant operating
rates are expected to be lower than the third quarter of 2004 due to scheduled
plant maintenance activities.
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ACETYLS
The Acetyls segment reported third quarter 2004 operating income of $19 million
compared to $6 million in the third quarter of last year and $2 million in the
second quarter of 2004. The operating profit improvement from the second quarter
of 2004 was primarily attributable to margin improvement driven by higher
selling prices, lower costs for natural gas and a return to normal plant
operating rates.
In the aggregate, the weighted-average US dollar selling price for VAM and
acetic acid in the third quarter of 2004 was 17 percent higher than the third
quarter of 2003 and 9 percent higher than the second quarter of 2004. Aggregate
sales volume for VAM and acetic acid in the third quarter decreased 15 percent
from the third quarter of 2003 and increased 1 percent from the second quarter
of 2004.
Outlook
Sales volume in the fourth quarter of 2004 is expected to be similar to the
third quarter of 2004. However, the fourth quarter results are difficult to
forecast due to high and volatile natural gas prices, which impact both selling
prices and cost of goods sold.
SPECIALTY CHEMICALS
The Specialty Chemicals segment reported third quarter 2004 operating income of
$1 million compared to an operating loss of $1 million in the third quarter of
last year and operating income of $2 million in the second quarter of 2004.
Sales volume decreased 8 percent from the third quarter of 2003 and was 11
percent lower than the second quarter of 2004. Average selling prices increased
10 percent compared to the third quarter of 2003 and increased 9 percent
compared to the second quarter of 2004 primarily due to changes in product mix.
Outlook
Operating income in the fourth quarter of 2004 is expected to be similar to the
third quarter of 2004 as business conditions are expected to remain stable.
EQUISTAR CHEMICALS, LP
Millennium's 29.5 percent stake in Equistar generated equity earnings on
investment of $22 million in the third quarter of 2004 compared to an equity
loss of $12 million in the third quarter of 2003 and $12 million equity earnings
in the second quarter of 2004.
Compared to the third quarter of 2003, the third quarter of 2004 results
improved as a result of increased product margins supplemented by increased
sales volumes. Average quarterly prices for ethylene and its major derivatives
(polyethylene and ethylene glycol) ranged from 6 1/2 to 8 1/2 cents per pound
higher than during the third quarter of 2003. Equistar's average
cost-of-ethylene-production metric increased by approximately 4 1/2 cents per
pound versus the same period last year, driven by the
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increased cost of crude oil and natural gas-based raw materials. Compared to the
third quarter of 2003, ethylene and ethylene derivative sales volumes increased
by approximately 140 million pounds or 5.5 percent.
Compared to the second quarter of 2004, the third quarter of 2004 results
continued to improve as margin improvements in ethylene derivatives
(polyethylene and ethylene oxygenates) were key contributors. Ethylene sales
margins were relatively unchanged as ethylene and co-product price increases
largely offset raw material costs. Total raw material costs increased by more
than $160 million versus the prior quarter. Ethylene and ethylene derivative
volumes continued to increase, growing by approximately 65 million pounds or
approximately 2.5 percent versus the second quarter.
Outlook
Industry conditions have continued to strengthen through October 2004. Product
price increase initiatives are underway for almost all Equistar's products in
response to both the strong supply/demand fundamentals and the high level of and
volatility in crude oil and natural gas prices. Solid global sales volume growth
has tightened industry supply/demand conditions, which, in turn, has led to
modest margin improvement despite significant increases in raw material costs.
Subject to the uncertainties of any significant economic slowdown or global
disruption, these industry conditions and resulting improving cyclical trends
are expected to continue. While there is significant uncertainty related to the
potential near-term earnings impacts of raw material price volatility and
seasonality, positive longer-term trends appear to be well established.
DEBT AND CAPITAL SPENDING
Net debt (total debt less cash) at September 30, 2004 totaled $1.094 billion
versus $1.217 billion at June 30, 2004. The reduction in net debt was achieved
through higher profitability, a $29.5 million distribution from Equistar and
capital spending at a level lower than depreciation and amortization. Net
interest expense was $24 million in the third quarter of 2004 compared to $23
million in the third quarter of 2003.
Capital spending in the third quarter of 2004 was $15 million compared to $10
million in the third quarter of 2003. Full year capital spending in 2004 is
expected to be approximately $60 million. Depreciation and amortization expense
in the third quarter was $24 million compared to $28 million in the third
quarter of 2003.
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.
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Millennium Chemicals is:
o The second-largest producer of TiO[u]2 in the world, the largest merchant
seller of titanium tetrachloride and a producer of silica gel and
cadmium-based pigments;
o The second-largest producer of acetic acid and vinyl acetate monomer in
North America;
o A leading producer of terpene-based fragrance and flavor chemicals; and,
o Through its 29.5% 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 performance
polymers, oxygenated chemicals, aromatics and specialty petrochemicals.
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 filings that
Millennium makes with the Securities and Exchange Commission, in press releases
or in written or oral statements made by or with the approval of one of its
authorized executive officers. These forward-looking statements are only present
expectations reflecting current assumptions about future events. Actual events
or results may differ materially. Factors that could cause such a difference
include: Millennium's ability to complete its proposed business combination with
Lyondell within the expected time frame or at all; the cyclicality and
volatility of the chemical industries in which Millennium and Equistar operate,
particularly fluctuations in the demand for ethylene, its derivatives and
acetyls and the sensitivity of these industries 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, in particular the events in the Middle East; the ability of Equistar to
distribute cash to its partners and uncertainties arising from Millennium's
minority interest in Equistar, and Millennium's contractual commitments
regarding possible future capital contributions to Equistar; changes in the cost
of energy and raw materials, particularly natural gas and ethylene, and
Millennium's and Equistar's ability to pass on cost increases to their
respective customers; Millennium's substantial indebtedness and its impact on
Millennium's cash flow, business operations and ability to obtain additional
financing; Millennium's ability to comply with the covenants and other
restrictions in Millennium's debt instruments, a failure of which could lead to
additional restrictions, costs, or an acceleration of Millennium's indebtedness;
limitations on credit extended to Millennium and demands from creditors and
suppliers for additional credit restrictions or security; 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, and the occurrence of operating problems at manufacturing
facilities of Millennium or Equistar; risks of doing business outside the United
States, including currency fluctuations; the cost of compliance with the
extensive environmental regulations affecting the chemical industry and exposure
to liabilities for environmental remediation and other environmental matters
relating to Millennium's and Equistar's current and former operations; pricing
and other competitive pressures; and legal proceedings relating to present and
former operations (including proceedings based on alleged exposure to lead-based
paints and lead pigments, asbestos and other materials), ongoing and future tax
audits, pension and retiree medical costs, and other claims. A further
description of these risks, uncertainties and other matters can be found in
Exhibit 99.1 to Millennium's Annual Report on Form 10-K for the year ended
December 31, 2003, filed with the Securities and Exchange commission (the "SEC")
on March 12, 2004 and Millennium's Quarterly Report on Form 10-Q for the quarter
ended September 30, 2004, including Exhibit 99.1 thereto, which will be filed
with the SEC in November 2004. Millennium disclaims any obligation to update any
forward-looking statement, whether as a result of new information, future events
or otherwise.
In addition, on October 15, 2004, Lyondell filed with the SEC the definitive
joint proxy statement/prospectus regarding the proposed transaction between
Lyondell and Millennium. Investors and security holders are urged to read that
document and any other relevant documents filed or that will be filed with the
SEC, as they become available, because they contain, or will contain, important
information. Investors and security holders may obtain a free copy of the
definitive joint proxy statement/prospectus and other documents filed by
Lyondell and Millennium with the SEC at the SEC's web site at www.sec.gov. The
definitive joint proxy statement/prospectus and the other documents filed by
Millennium may also be obtained free from Millennium by calling Millennium's
Investor Relations department at 410-229-8113.
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MILLENNIUM CHEMICALS INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Millions, except per share data)
TABLE I
Three months ended Nine months ended
September 30, September 30,
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2004 2003 2004 2003
------- ------- ------- -------
Net sales $ 480 $ 431 $ 1,433 $ 1,262
Operating costs and expenses
Cost of products sold 373 362 1,174 1,019
Selling, development and administrative 33 31 99 98
Depreciation and amortization 24 28 72 83
Asset impairment charges 3 -- 11 --
Combination costs 1 -- 5 --
Reorganization and office closure costs 1 15 3 16
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Operating income (loss) 45 (5) 69 46
Net interest expense (24) (23) (73) (68)
Earnings (loss) on Equistar investment
- operating income (loss) 38 3 85 (14)
- interest (16) (15) (49) (45)
- loss on sale of assets -- -- -- (4)
- debt prepayment cost -- -- -- (6)
Net other income (expense) 1 2 (1) 1
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Income (loss) before income taxes, minority interest and
cumulative effect of accounting change 44 (38) 31 (90)
(Provision for) benefit from income taxes (14) 11 (15) 32
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Income (loss) before minority interest and cumulative
effect of accounting change 30 (27) 16 (58)
Minority interest (2) (1) (5) (5)
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Income (loss) before cumulative effect of accounting change 28 (28) 11 (63)
Cumulative effect of accounting change -- -- -- (1)
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Net income (loss) $ 28 $ (28) $ 11 $ (64)
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Basic EPS ($/share)
- before accounting change $ 0.43 $ (0.44) $ 0.17 $ (0.98)
- from accounting change -- -- -- (0.02)
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- after accounting change $ 0.43 $ (0.44) $ 0.17 $ (1.00)
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Weighted-average number of shares used to
compute basic EPS 65,428 64,051 64,963 63,960
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Diluted EPS ($/share)
- before accounting change $ 0.38 $ (0.44) $ 0.17 $ (0.98)
- from accounting change -- -- -- (0.02)
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- after accounting change $ 0.38 $ (0.44) $ 0.17 $ (1.00)
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Weighted-average number of shares used to compute diluted
EPS 76,976 64,051 65,273 63,960
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MILLENNIUM CHEMICALS INC.
SEGMENT INFORMATION
(Millions)
TABLE II
2004 2003
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1Q 2Q 3Q 1Q 2Q 3Q 4Q FY
--- --- --- --- --- --- ---- -----
NET SALES
Titanium Dioxide 333 363 342 288 293 293 298 1,172
Acetyls 106 101 115 102 99 115 105 421
Specialty Chemicals 26 24 23 25 24 23 22 94
--- --- --- --- --- --- ---- -----
Total 465 488 480 415 416 431 425 1,687
OPERATING INCOME (LOSS)
Titanium Dioxide (1) 12 10 26 21 23 7 (102) (51)
Acetyls 9 2 19 7 5 6 9 27
Specialty Chemicals 2 2 1 2 2 (1) (1) 2
Other (2) (10) (3) (1) (3) (6) (17) (3) (29)
--- --- --- --- --- --- ---- -----
Total 13 11 45 27 24 (5) (97) (51)
DEPRECIATION AND AMORTIZATION
Titanium Dioxide 19 19 20 22 23 24 25 94
Acetyls 3 3 2 3 3 2 3 11
Specialty Chemicals 2 2 2 2 2 2 2 8
--- --- --- --- --- --- ---- -----
Total 24 24 24 27 28 28 30 113
CAPITAL SPENDING
Titanium Dioxide 9 12 14 7 10 9 16 42
Acetyls 1 1 -- -- -- 1 2 3
Specialty Chemicals -- -- 1 1 1 -- 1 3
--- --- --- --- --- --- ---- -----
Total 10 13 15 8 11 10 19 48
(1) The Titanium Dioxide segment includes $103 million of asset impairment
charges in the fourth quarter of 2003 associated primarily with the
writedown of property, plant, and equipment at Millennium's Le Havre,
France manufacturing plant.
(2) The Other segment includes $6 million of expenses related to an increase in
legal and environmental contingency liabilities for predecessor businesses
in the first quarter of 2004, combination costs of $3 million in the first
quarter of 2004 and $1 million in both the second quarter and third quarter
of 2004, and reorganization and office closure costs of $1 million in each
of the first, second and third quarters of 2004. The Other segment also
includes reorganization and office closure costs of $1 million in the
second quarter of 2003, $15 million in the third quarter of 2003 and $2
million in the fourth quarter of 2003, in each case associated with the
Company's cost reduction program announced in July 2003.
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MILLENNIUM CHEMICALS INC.
CONSOLIDATED BALANCE SHEETS
(Millions)
Table III
September 30, December 31,
2004 2003
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ASSETS
Current assets
Cash and cash equivalents $ 313 $ 209
Trade receivables, net 342 277
Inventories 370 457
Other current assets 71 65
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Total current assets 1,096 1,008
Property, plant and equipment, net 719 766
Investment in Equistar 475 469
Other assets 42 51
Goodwill 104 104
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Total assets $2,436 $2,398
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LIABILITIES AND SHAREHOLDERS' DEFICIT
Current liabilities
Notes payable $ -- $ --
Current maturities of long-term debt 6 6
Trade accounts payable 268 236
Income taxes payable 7 5
Accrued expenses and other liabilities 161 124
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Total current liabilities 442 371
Long-term debt 1,401 1,461
Deferred income taxes 276 272
Other liabilities 314 325
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Total liabilities 2,433 2,429
Minority interest 30 27
Shareholders' deficit (27) (58)
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Total liabilities and shareholders' deficit $2,436 $2,398
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MILLENNIUM CHEMICALS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Millions)
TABLE IV
Nine months ended
September 30,
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2004 2003
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Cash flows from operating activities:
Net income (loss) $ 11 $ (64)
Adjustments to reconcile net loss to
net cash provided by (used in) operating activities:
Cumulative effect of accounting change -- 1
Depreciation and amortization 72 83
Deferred income tax provision (benefit) 8 (43)
(Earnings) loss on Equistar investment (36) 69
Net change in trade working capital 56 (104)
Minority interest and other 17 5
Net change in other assets and liabilities 16 4
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Cash provided by (used in) operating activities 144 (49)
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Cash flows from investing activities:
Capital expenditures (38) (29)
Distribution from Equistar 30 --
Proceeds from sale of property, plant and equipment 1 --
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Cash used in investing activities (7) (29)
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Cash flows from financing activities:
Dividends to shareholders -- (17)
Net (repayment of) proceeds from borrowings (55) 119
Proceeds from exercise of stock options 15 --
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Cash (used in) provided by financing activities (40) 102
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Effect of exchange rate changes on cash 7 9
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Increase in cash and cash equivalents 104 33
Cash and cash equivalents at beginning of year 209 125
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Cash and cash equivalents at end of period 313 158
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MILLENNIUM CHEMICALS INC.
GAAP RECONCILIATION
(MILLIONS, EXCEPT PER SHARE DATA)
Table V
Three months ended Three months ended
September 30, 2004 September 30, 2003
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Net Net
Income EPS(1) Loss EPS(2)
------ ------ ---- ------
Reported GAAP $28 $0.38 $(28) $(0.44)
Reorganization and office closure costs 1 0.02 9 0.14
Collection of note receivable -- -- (2) (0.03)
--- ----- ---- ------
As adjusted $29 $0.40 $(21) $(0.33)
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Nine months ended Nine months ended
September 30, 2004 September 30, 2003
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Net Net
Income EPS(1) Loss EPS(2)
------ ------ ---- ------
Reported GAAP $11 $0.17 $(64) $(1.00)
Combination costs 3 0.05 -- --
Reorganization and office closure costs 2 0.03 10 0.16
Increase in legacy liabilities 4 0.06 -- --
Cumulative effect of accounting change
for asset retirement obligations -- -- 1 0.02
Collection of note receivable -- -- (2) (0.03)
Company's share of Equistar's:
Loss on sale of assets -- -- 3 0.04
Debt prepayment costs -- -- 4 0.06
--- ----- ---- ------
As adjusted $20 $0.31 $(48) $(0.75)
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(1) Earnings per share on a fully diluted basis
(2) Approximately 286 and 284 shares of common stock issuable for options,
awards and shares held in trust for certain employee benefit plans for the three
month and nine month periods ended September 30, 2003, respectively, were
excluded from the calculation of EPS because the effect would be antidilutive.