-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, DBfhbRf2O7JrBUXSLYq1pL4mU6Ww1L84Fzj2ANbFZaOYq5pzDCsVtWqBTK/z3auo E61JVDcN6IEOYJfnhPqn2w== 0000899243-96-001066.txt : 19960816 0000899243-96-001066.hdr.sgml : 19960816 ACCESSION NUMBER: 0000899243-96-001066 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960814 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: LYONDELL PETROCHEMICAL CO CENTRAL INDEX KEY: 0000842635 STANDARD INDUSTRIAL CLASSIFICATION: PETROLEUM REFINING [2911] IRS NUMBER: 954160558 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-10145 FILM NUMBER: 96611774 BUSINESS ADDRESS: STREET 1: 1221 MCKINNEY ST STREET 2: STE 1600 CITY: HOUSTON STATE: TX ZIP: 77010 BUSINESS PHONE: 7136527200 MAIL ADDRESS: STREET 1: 1221 MCKINNEY ST STREET 2: SUITE 1600 CITY: HOUSTON STATE: TX ZIP: 77010 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------ FORM 10-Q [x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1996. OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM . . . . . . . . . . TO . . . . . . . . . . COMMISSION FILE NUMBER 1-10145 ------------ LYONDELL PETROCHEMICAL COMPANY (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) ------------ DELAWARE 95-4160558 (STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.) 1221 MCKINNEY STREET, 77010 SUITE 1600, HOUSTON, TEXAS (ZIP CODE) (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (713) 652-7200 ------------ NOT APPLICABLE (FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR, IF CHANGED SINCE LAST REPORT) INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS REQUIRED TO BE FILED BY SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH FILING REQUIREMENTS FOR THE PAST 90 DAYS. YES X NO --- --- NUMBER OF SHARES OF COMMON STOCK, $1.00 PAR VALUE, OUTSTANDING AS OF JUNE 30, 1996: 80,000,000. PART I. FINANCIAL INFORMATION LYONDELL PETROCHEMICAL COMPANY CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS FOR THE SIX MONTHS ENDED JUNE 30 ENDED JUNE 30 MILLIONS OF DOLLARS EXCEPT -------------------- ----------------- PER SHARE AMOUNTS 1996 1995 1996 1995 - -------------------------- ---- ---- ---- ---- SALES AND OTHER OPERATING REVENUES: Unrelated parties $1,166 $1,271 $2,267 $2,355 Related parties 73 99 137 189 ------ ------ ------ ------ 1,239 1,370 2,404 2,544 OPERATING COSTS AND EXPENSES: Cost of sales Unrelated parties 1,069 1,021 2,052 1,873 Related parties 67 64 124 119 Selling, general and administrative expenses 58 48 122 93 ------ ------ ------ ------ 1,194 1,133 2,298 2,085 ------ ------ ------ ------ Operating income 45 237 106 459 Interest expense (23) (21) (43) (39) Interest income 1 2 2 5 Minority interest in LYONDELL-CITGO Refining Company Ltd. -- (3) (4) (8) ------ ------ ----- ------ Income before income taxes 23 215 61 417 Provision for income taxes 8 80 22 155 ------ ------ ------ ------ NET INCOME $ 15 $ 135 $ 39 $ 262 ====== ====== ====== ====== EARNINGS PER SHARE $.19 $1.68 $.49 $3.27 ====== ====== ====== ======
See notes to consolidated financial statements. 1 LYONDELL PETROCHEMICAL COMPANY CONSOLIDATED BALANCE SHEETS
JUNE 30 DECEMBER 31 MILLIONS OF DOLLARS 1996 1995 - ------------------- ------- ----------- ASSETS Current assets: Cash and cash equivalents $ 3 Restricted cash and cash $ 7 7 equivalents Accounts receivable: Trade 364 340 Related parties 24 22 Inventories 329 265 Prepaid expenses and other current assets 42 41 ------ ------ Total current assets 766 678 ------ ------ Fixed assets: Property, plant and equipment 4,130 3,804 Less accumulated depreciation and amortization (2,030) (1,990) ------- ------- 2,100 1,814 Deferred charges and other assets 142 114 ------- ------- Total assets $ 3,008 $ 2,606 ======= ======= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable: Trade $ 402 $ 358 Related parties 2 1 Notes payable 102 103 Current maturities of long-term debt 112 150 Other accrued liabilities 100 138 ------- ------- Total current liabilities 718 750 ------ ------ Long-term debt 1,134 807 Other liabilities and deferred credits 110 95 Deferred income taxes 123 115 Commitments and contingencies Minority interest 542 459 Stockholders' equity: Preferred stock, $.01 par value, 80,000,000 shares authorized, none outstanding Common stock, $1 par value, 250,000,000 shares authorized, 80,000,000 issued and outstanding 80 80 Additional paid-in-capital 158 158 Retained earnings 143 142 ------- ------- Total stockholders' equity 381 380 ------- ------- Total liabilities and stockholders' equity $ 3,008 $ 2,606 ======= =======
See notes to consolidated financial statements. 2 LYONDELL PETROCHEMICAL COMPANY CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30 --------------------- MILLIONS OF DOLLARS 1996 1995 - ------------------- ---------- --------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 39 $ 262 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 49 38 Deferred income taxes 8 (3) Increase in accounts receivable (27) (86) Increase in inventories (64) (78) Increase in accounts payable 75 36 Net change in other working capital accounts (38) 7 Minority interest 4 8 Other (24) 3 ----- ----- Net cash provided by operating activities 22 187 ------ ----- CASH FLOWS FROM INVESTING ACTIVITIES: Additions to fixed assets (356) (593) Sales of short-term investments 76 -- Purchases of short-term investments (76) -- ----- ----- Net cash used in investing activities (356) (593) ----- ----- CASH FLOWS FROM FINANCING ACTIVITIES: Minority owner contribution 79 145 Net change in short-term debt (1) 217 Borrowings of long-term debt 439 31 Repayments of long-term debt (150) (10) Dividends paid (36) (36) ----- ----- Net cash provided by financing activities 331 347 ----- ----- DECREASE IN CASH, RESTRICTED CASH AND CASH EQUIVALENTS (3) (59) Cash, restricted cash and cash equivalents at beginning of period 10 94 ----- ----- Cash, restricted cash and cash equivalents at end of period $ 7 $ 35 ===== =====
See notes to consolidated financial statements. 3 LYONDELL PETROCHEMICAL COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. BASIS OF PREPARATION The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments, consisting only of normal, recurring adjustments considered necessary for a fair presentation, have been included. For further information, refer to the consolidated financial statements and notes thereto for the year ended December 31, 1995 included in the Lyondell Petrochemical Company ("Company" or "Lyondell") 1995 Annual Report and the Annual Report on Form 10-K pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. The year-end condensed balance sheet data was derived from audited financial statements but does not include all disclosures required by generally accepted accounting principles. Certain amounts from prior periods have been reclassified to conform to current period presentation. 2. COMPANY OPERATIONS The Company operates in two business segments: petrochemicals and refining. The petrochemicals segment manufactures a wide variety of petrochemicals including olefins, polyolefins, methanol, MTBE and aromatics. The Company's petrochemical products are used primarily in the manufacture of other chemicals and products, which in turn are used in the production of a wide variety of consumer and industrial products. The refining segment operates primarily through the Company's interest in LYONDELL-CITGO Refining Company Ltd. ("LCR"), a Texas limited liability company that is owned by subsidiaries of Lyondell and CITGO Petroleum Corporation ("CITGO"), and manufactures refined petroleum products, including gasoline, heating oil, jet fuel, fuel oil, aromatics and lubricants. 3. INVENTORIES The categories of inventory and their recorded values at June 30, 1996 and December 31, 1995 were:
MILLIONS OF DOLLARS 1996 1995 - ------------------- ---- ---- Crude oil $ 53 $ 55 Refined products 53 33 Petrochemicals 178 135 Materials and supplies 45 42 ---- ---- Total inventories $329 $265 ==== ====
4. RESTRICTED FUNDS As of June 30, 1996 and December 31, 1995, cash in the amount of $7 million was restricted for use in connection with LCR capital projects, including the upgrade project ("Upgrade Project") at the Houston, Texas refinery ("Refinery") and other expenditures as determined by the LCR owners. Presented below is a reconciliation of changes in restricted funds for the six-month period ended June 30, 1996. 4
MILLIONS OF DOLLARS - ------------------- Restricted cash and cash equivalents at December 31, 1995 $ 7 Minority owner investments: Contributions 79 Distributable cash reinvested 6 Lyondell investments: Loan for Upgrade Project 70 Other loans 14 Contributions 6 Proceeds from bank loan 139 Additions to fixed assets: Upgrade Project (284) Refining segment - other (30) ----- Restricted cash and cash equivalents at June 30, 1996 $ 7 =====
5. ACQUISITION OF ALATHON/R/ HIGH-DENSITY POLYETHYLENE BUSINESS On May 1, 1995, the Company acquired the assets associated with Occidental Chemical Corporation's Alathon/R/ high-density polyethylene ("HDPE") business ("ALATHON Business") for $356 million including certain direct costs, plus approximately $64 million for inventory. Assets involved in the purchase include resin production facilities at Victoria and Matagorda, Texas, associated research and development activities and the rights to the Alathon/R/ trademark. These facilities have a combined annual production capacity of approximately 1.5 billion pounds of HDPE. The Company financed the acquisition from internal cash and $230 million of short-term borrowings from its existing financing arrangements. The following unaudited pro forma information combines the results of operations of the Company and the ALATHON Business for the six months ended June 30, 1995 and assumes that the acquisition of the ALATHON Business occurred on January 1, 1995. This unaudited pro forma information may not be indicative of results that would have actually resulted if this transaction had occurred on January 1, 1995 or which may be obtained in the future.
MILLIONS OF DOLLARS EXCEPT FOR THE SIX MONTHS ENDED PER SHARE AMOUNTS JUNE 30, 1995 - -------------------------- ------------------------ Sales and other operating revenues $2,738 Net income 282 Earnings per share 3.52
6. COMMITMENTS AND CONTINGENCIES The Company has various purchase commitments for materials, supplies and services incident to the ordinary conduct of business. In the aggregate, such commitments are not at prices in excess of current market. In connection with the transfer of assets and liabilities from Atlantic Richfield Company ("ARCO") to the Company, the Company agreed to assume certain liabilities arising out of the operation of the Company's integrated petrochemical and petroleum processing business prior to July 1, 1988. In connection with the transfer 5 of such liabilities, the Company and ARCO entered into an agreement ("Cross- Indemnity Agreement") whereby the Company agreed to defend and indemnify ARCO against certain uninsured claims and liabilities which ARCO may incur relating to the operation of the business of the Company prior to July 1, 1988, including certain liabilities which may arise out of pending and future lawsuits. ARCO has indemnified the Company under the Cross-Indemnity Agreement with respect to other claims or liabilities and other matters of litigation not related to the assets or business included in the consolidated financial statements. ARCO has also indemnified the Company for all federal taxes which might be assessed upon audit of the operations of the Company included in the ARCO consolidated income tax returns prior to January 12, 1989 and for all state and local taxes for the period prior to July 1, 1988. In addition to lawsuits for which the Company has indemnified ARCO, the Company is also subject to various lawsuits and proceedings. Subject to the uncertainty inherent in all litigation, management believes the resolution of these proceedings will not have a material adverse effect on the consolidated financial statements or liquidity of the Company. The Company's policy is to be in compliance with all applicable environmental laws. The Company is subject to extensive environmental laws and regulations concerning emissions to the air, discharges to surface and subsurface waters and the generation, handling, storage, transportation, treatment and disposal of waste materials. Some of these laws and regulations are subject to varying and conflicting interpretations. In addition, the Company cannot accurately predict future developments, such as increasingly strict requirements of environmental laws, inspection and enforcement policies and compliance costs therefrom which might affect the handling, manufacture, use, emission or disposal of products, other materials or hazardous and non-hazardous waste. Subject to the terms of the Cross-Indemnity Agreement, the Company is currently contributing funds to the cleanup of two waste sites (French Ltd. and Brio, both of which are located near Houston, Texas) under the Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA") as amended by the Superfund Amendments and Reauthorization Act of 1986. The Company is also subject to certain assessment and remedial actions at the Refinery under the Resource Conservation and Recovery Act ("RCRA"). In addition, the Company has negotiated an order with the Texas Natural Resource Conservation Commission ("TNRCC") for assessment and remediation of groundwater and soil contamination at the Refinery. During July 1994, the Company reported results of an independent investigation conducted by the Audit Committee of the Board of Directors regarding the compliance status of two process waste-water streams under the applicable Benzene National Emissions Standard for Hazardous Air Pollutants ("NESHAPS") regulations and certain related issues raised by an employee. Noncompliance with the Benzene NESHAPS regulations and the related reporting requirements can result in civil penalties and, under certain circumstances, substantial civil and, potentially, criminal penalties. The Company received a notice of violation regarding the two streams and paid a fine of $10,200 to the TNRCC. In addition, the Company incurred approximately $2 million in capital costs in connection with these waste water streams to achieve on-going compliance with the Benzene NESHAPS regulations. Although the Criminal Enforcement Division of the EPA is conducting a formal investigation, the Company does not believe that any aspects of the matters described above will subject the Company to criminal liability or have a material adverse effect on the consolidated financial statements or liquidity of the Company. As of June 30, 1996, the Company has accrued $17 million related to CERCLA, RCRA and TNRCC assessment and remediation costs, of which $2 million is included in current liabilities while the remaining amounts are expected to be incurred over the next two to seven years. In the opinion of management, there is currently no material range of loss in excess of the amount accrued. However, it is possible that new information about the sites for which the reserve has been established, new technology or future developments such as involvement in other CERCLA, RCRA, TNRCC or other comparable state law investigations, could require the Company to reassess its potential exposure related to environmental matters. 6 In the opinion of management, any liability arising from the matters discussed in this note will not have a material adverse effect on the consolidated financial statements or liquidity of the Company. However, the adverse resolution in any reporting period of one or more of these matters discussed in this note could have a material impact on the Company's results of operations for that period without giving effect to contribution or indemnification obligations of co-defendants or others, or to the effect of any insurance coverage that may be available to offset the effects of any such award. 7. DIVIDENDS The Company paid regular quarterly dividends of $.225 per share of common stock during the first and second quarters of 1996. Additionally, on July 19, 1996 the Board of Directors declared a regular quarterly dividend of $.225 per share of common stock, payable September 15, 1996 to stockholders of record on August 23, 1996. 8. EARNINGS PER SHARE Earnings per share for all periods presented are computed based on the weighted average number of shares outstanding for the periods, which was 80,000,000 shares. 9. CAPITALIZED INTEREST The Company's policy is to capitalize interest cost incurred on debt during the construction of major projects that exceed one year. Total interest cost incurred during the three months ended June 30, 1996 and the six months ended June 30, 1996 were approximately $29 million and $54 million, respectively, of which approximately $6 million and $11 million, respectively, were capitalized. Total interest cost incurred during the three months ended June 30, 1995 and the six months ended June 30, 1995 were approximately $22 million and $40 million, respectively. Approximately $1 million was capitalized during the three months ended June 30, 1995. No interest was capitalized during the three months ended March 31, 1995. 10. SUBSEQUENT EVENT On July 27, 1996, the Company experienced a fire at its Channelview Facility due to a rupture in a pipeline owned and operated by ARCO Pipe Line Company ("ARCO Pipe Line"). Although no operating units were directly involved in the fire, the damage to the pipeline and electrical systems forced the Company to shut down the entire Channelview Facility. Although the Company and ARCO Pipe Line are still evaluating the cost of the damage to their respective facilities, the Company believes that the physical damage to the two companies' facilities on Lyondell's plant site could be in the $10 million to $15 million range and that the potential negative impact on Lyondell's after-tax earnings could be in the $20 million to $25 million range. Certain of the units at the Channelview Facility have been brought back into operation and the olefins units are in startup mode. The Channelview Facility is currently expected to be fully operational within the next several days. A number of factors, including the full extent of the damage to all the facilities, the availability of repair materials and the Company's ability to find alternatives to meet customer needs, will impact the Company's ability to mitigate the financial impact on the Company's business. In addition, the estimates contained herein are based on preliminary information and do not take into account the potential effects of any insurance coverage or contributions to costs by other parties that may be available to offset such costs. 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS GENERAL Lyondell Petrochemical Company ("Company" or "Lyondell") operates in two business segments: petrochemicals and refining. The petrochemical segment consists of olefins including ethylene, propylene, butadiene, butylenes and specialty products; polyolefins including polypropylene, low-density polyethylene and high-density polyethylene ("HDPE"); aromatics produced at the Channelview petrochemical facility ("Channelview Facility") including benzene and toluene; methanol; methyl tertiary butyl ether ("MTBE"); and refinery blending stocks. On May 1, 1995, the Company acquired from Occidental Chemical Corporation resin production facilities at Victoria and Matagorda, Texas, with a combined annual production capacity of approximately 1.5 billion pounds of HDPE, associated research and development activities and the rights to the Alathon/R/ trademark ("ALATHON Business"). See Note 5 of "NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)." The refining segment consists of refined petroleum products, including gasoline, heating oil and jet fuel; aromatics produced at the Houston, Texas refinery ("Refinery") including benzene, toluene, paraxylene and orthoxylene; lubricants, including industrial and motor oils; olefins feedstocks; and crude oil resales. On July 1, 1993, Lyondell and CITGO Petroleum Corporation ("CITGO") announced the commencement of operations of LYONDELL-CITGO Refining Company Ltd. ("LCR"), a Texas limited liability company owned by subsidiaries of the Company and CITGO. LCR owns and operates the refining business formerly owned by the Company. LCR is undertaking a major upgrade project at the Refinery to enable the facility to process substantial additional volumes of very heavy crude oil ("Upgrade Project"). CITGO is providing a major portion of the funds for the Upgrade Project, which through June 30, 1996 totaled approximately $407 million. In addition, through June 30, 1996, CITGO has contributed $100 million and reinvested approximately $35 million of cash distributions for funding other capital projects. Lyondell currently expects the cost of the Upgrade Project to be approximately $1.1 billion. Lyondell expects to fund one-half of costs in excess of $1 billion in the form of subordinated loans. The Upgrade Project is expected to be operational in early 1997. Concurrent with the commencement of operations, LCR entered into a long-term crude oil supply contract ("Crude Supply Contract") with Lagoven, S.A. ("LAGOVEN"), an affiliate of CITGO. In addition, under terms of a long-term product sales agreement ("Products Agreement"), CITGO is currently purchasing all of the light refined products produced at the Refinery. Both LAGOVEN and CITGO are subsidiaries of Petroleos de Venezuela, S.A., the national oil company of Venezuela. The Crude Supply Contract incorporates a formula price based on the market value of a slate of refined products deemed to be produced from each particular crude oil or feedstock, less certain deemed and actual costs and a deemed margin which varies according to the grade of crude oil or other feedstock delivered. The actual refining margin earned by LCR under the Crude Supply Contract will vary depending on, among other things, the efficiency with which LCR conducts its operations during such period. If the actual yields, costs or volumes differ substantially from those contemplated by the Crude Supply Contract, the benefits of this agreement to LCR could be substantially different than anticipated. Notwithstanding these limitations, however, the Crude Supply Contract is designed to reduce the inherent earnings and cash flow volatility of the refining operations of LCR irrespective of market fluctuations of either crude oil or refined products. 8 The following table sets forth sales volumes for the Company's major products for the periods indicated. Sales volumes include production, purchases of products for resale, propylene production from the product flexibility unit and draws from inventory.
FOR THE THREE FOR THE SIX MONTHS MONTHS ENDED JUNE 30 ENDED JUNE 30 -------------------------------------- 1996 1995 1996 1995 -------------------------------------- SELECTED PETROCHEMICAL PRODUCTS (MILLIONS) (EXCLUDING INTERSEGMENT SALES): Ethylene, propylene and polyolefins (lbs.) 1,767 1,851 3,558 3,364 Other olefins (lbs.) 247 279 497 572 Methanol (gallons) 55 45 104 96 Aromatics (gallons) 42 40 84 79 REFINED PRODUCTS (THOUSAND BARRELS PER DAY) (EXCLUDING INTERSEGMENT SALES): Gasoline 110 107 110 106 Heating oil (no. 2 distillate) 42 51 46 53 Jet fuel 24 29 26 30 Aromatics 7 8 7 9 Other refined products 58 57 55 55 ----- ----- ----- ----- Total refined products volumes 241 252 244 253 ===== ===== ===== =====
Summarized below is the segment data for the Company. Intersegment sales between the petrochemical and refining segments include olefins feedstocks and benzene produced at the Refinery and gasoline blending stocks produced at the Channelview Facility and were made at prices that were based on current market values.
FOR THE THREE MONTHS FOR THE SIX MONTHS ENDED JUNE 30 ENDED JUNE 30 ----------------------------------------- (MILLIONS OF DOLLARS) 1996 1995 1996 1995 - --------------------- ------------------------------------------ SALES AND OTHER OPERATING REVENUES: Petrochemical segment $ 614 $ 769 $1,192 $1,415 Refining segment 709 709 1,395 1,338 Intersegment sales (84) (108) (183) (209) ------------------------------------- $1,239 $1,370 $2,404 $2,544 ===================================== COST OF SALES: Petrochemical segment $ 532 $ 520 $1,030 $ 957 Refining segment 688 673 1,329 1,244 Intersegment purchases (84) (108) (183) (209) ------------------------------------- $1,136 $1,085 $2,176 $1,992 ===================================== SELLING, GENERAL AND ADMINISTRATIVE EXPENSES: Petrochemical segment $ 29 $ 19 $ 60 $ 32 Refining segment 16 14 33 29 Unallocated 13 15 29 32 ------------------------------------- $ 58 $ 48 $ 122 $ 93 ===================================== OPERATING INCOME: Petrochemical segment $ 53 $ 230 $ 102 $ 426 Refining segment 5 22 33 65 Unallocated (13) (15) (29) (32) ------------------------------------- $ 45 $ 237 $ 106 $ 459 =====================================
9 Summarized below are intersegment sales for the two segments.
FOR THE THREE FOR THE SIX MONTHS MONTHS ENDED JUNE 30 ENDED JUNE 30 ---------------------------------------- (MILLIONS OF DOLLARS) 1996 1995 1996 1995 - -------------------- ---------------------------------------- Petrochemical segment $ 43 $ 55 $ 101 $ 101 Refining segment 41 53 82 108 ------------------------------------- $ 84 $ 108 $ 183 $ 209 =====================================
RESULTS OF OPERATIONS OVERVIEW Net income for the second quarter of 1996 was $15 million or $.19 per share compared to a net income of $135 million or $1.68 per share for the second quarter of 1995. The $120 million decrease was primarily due to lower sales margins for olefins. Net income was $9 million lower for the second quarter of 1996 compared to the first quarter of 1996. This decrease was primarily caused by lower sales margins for refined products and aromatics. Net income for the first six months of 1996 was $39 million or $.49 per share compared to a net income of $262 million or $3.27 per share for the first six months of 1995. The $223 million decrease was primarily due to lower sales margins for olefins and methanol. PETROCHEMICAL SEGMENT REVENUES Sales and other operating revenues, including intersegment sales, were $614 million in the second quarter of 1996 compared to $769 million in the second quarter of 1995, a decline of $155 million. Sales and other operating revenues were $223 million lower in the first six months of 1996 compared to the first six months of 1995. These decreases were primarily due to lower olefins sales prices and volumes, partially offset by higher sales of HDPE resulting from the acquisition of the ALATHON Business effective May 1, 1995. Compared to the first part of 1995, which was a period of strong market conditions for petrochemicals generally, sales prices for petrochemicals during the current periods were lower due to a decline in market conditions which began in the latter part of 1995. This decline was due to additional olefins and polymers capacity that came onstream in 1995, slower economic growth and inventory corrections in olefins derivatives. Additionally, methanol sales prices were lower in 1996 due to the slower economic growth and higher industry supply. COST OF SALES Cost of sales was $532 million in the second quarter of 1996 compared to $520 million in the second quarter of 1995, an increase of $12 million. This increase was due to the addition of the ALATHON Business, partially offset by lower production costs due to the seven week planned turnaround of one of the olefins units during the second quarter of 1996. Cost of sales was $73 million higher during the first six months of 1996 compared to the first six months of 1995. This increase was primarily due to the addition of the ALATHON Business and higher feedstock costs in the olefins and methanol businesses. SELLING EXPENSES Selling expenses for the second quarter of 1996 were $29 million, an increase of $10 million compared to the second quarter of 1995. Selling expenses for the first six months of 1996 were $60 million, an 10 increase of $28 million compared to the first six months of 1995. These increases were primarily caused by selling expenses associated with the newly acquired ALATHON Business. OPERATING INCOME On June 2, 1996, the Company's Mont Belvieu, Texas terminal experienced a fire. Replacement of the facilities is expected to be completed late in the third quarter. The before-tax impact of the fire to second quarter operating income was approximately $2 million for equipment write-off and repair costs plus additional costs due to business interruption, all of which were below the Company's insurance deductible. Operating income for the second quarter of 1996 was $53 million compared to $230 million in the second quarter of 1995. The $177 million decrease was primarily due to lower sales margins for olefins and to a lesser extent to lower sales margins for polymers and to the higher selling expenses. The lower olefins and polymers sales margins during the second quarter of 1996 compared to the second quarter of 1995 resulted primarily from lower sales prices. Olefins and polymers sales prices were lower due to the decline in market conditions which began in the third quarter of 1995. Contributing to the lower olefins sales margins were higher feedstock costs which were caused by higher industry crude oil prices and lower production resulting from the olefins unit turnaround. Operating income for the second quarter of 1996 compared to the first quarter of 1996 increased $4 million. This improvement was primarily due to higher olefins sales margins. Olefins sales margins increased due to higher sales prices resulting from improved markets which more than offset the impacts of higher feedstock costs, the olefins unit turnaround and the Mont Belvieu fire. Operating income for the first six months of 1996 was $102 million compared to $426 million for the first six months of 1995. The $324 million decrease was primarily due to lower olefins and methanol sales margins. The lower olefins and methanol sales margins during the first six months of 1996 compared to the first six months of 1995 primarily resulted from lower sales prices and higher feedstock costs. Olefins sales prices were lower due to the decline in market conditions which began in the third quarter of 1995. Methanol sales margins were lower due to a significant decline in prices which began late in the first quarter of 1995 due to a decline in MTBE-related demand for reformulated gasoline and an increase in methanol supply. REFINING SEGMENT REVENUES Sales and other operating revenues for the second quarter of 1996 were $709 million, unchanged compared to the second quarter of 1995. Sales and other operating revenues for the first six months of 1996 were $1.4 billion, an increase of $57 million compared to the first six months of 1995. This increase was primarily due to higher sales volumes and prices for crude oil resales and higher sales prices for light refined products which were caused by higher industry petroleum prices. COST OF SALES Cost of sales was $688 million during the second quarter of 1996 compared to $673 million during the second quarter of 1995, an increase of $15 million. Cost of sales was $1.3 billion during the first six months of 1996 compared to $1.2 billion during the first six months of 1995, an increase of $85 million. These increases were primarily caused by higher crude oil and other petroleum feedstock prices due to higher industry crude oil prices and higher purchases of crude oil that were resold. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES Selling, general and administrative expenses were $2 million higher in the second quarter of 1996 compared to the second quarter of 1995 and were $4 million higher during the first six months of 1996 compared to the first six months of 1995. These increases were primarily due to higher employee compensation and various outside consulting services. OPERATING INCOME Operating income for the second quarter of 1996 was $5 million compared to $22 million for the second quarter of 1995. The $17 million decrease was primarily due to lower aromatics margins. Aromatics margins were lower in 1996 primarily due to lower sales prices, particularly for orthoxylene. Orthoxylene prices were 11 at historical highs during the first half of 1995 before returning to a more normal level in the second half of 1995 due to increased production and lower demand which was further impacted by customers' inventory reductions. Operating income for the second quarter of 1996 compared with the first quarter of 1996 decreased $23 million. This decrease in operating income was primarily due to lower sales margins for refined products and aromatics. The lower refined products sales margins were caused by operating problems with the sulfur plant which reduced Venezuelan crude oil processing rates and limited the optimal performance of other units resulting in significantly lower conversion to high value products. Contributing to the lower refined products sales margins were the higher crude oil and other petroleum feedstock prices. The lower margins for aromatics were primarily due to lower paraxylene sales prices and higher feedstock costs. Paraxylene prices declined due to additional capacity and continued customers' inventory reductions in the polyethylene terephthalate (PET) and polyester fibers businesses during the second quarter of 1996. Operating income for the first six months of 1996 was $33 million compared to $65 million for the first six months of 1995. The $32 million decrease was primarily due to lower aromatics and refined products sales margins and to higher period costs. Overall, aromatics sales margins were lower in 1996 primarily due to generally lower sales prices, particularly orthoxylene. Refined products sales margins decreased due to higher crude oil and other feedstock prices which more than offset higher refined product sales prices. Refinery period costs were higher due to higher personnel compensation, property taxes and depreciation, partially offset by lower maintenance expenses. UNALLOCATED GENERAL AND ADMINISTRATIVE EXPENSES General and administrative expenses were $2 million lower in the second quarter of 1996 compared to the second quarter of 1995 and were $3 million lower in the first six months of 1996 compared to the first six months of 1995. These decreases were primarily due to a reduced charge for management incentive compensation related expense and lower materials, supplies and equipment expense. INTEREST EXPENSE Interest expense was $2 million higher during the second quarter of 1996 compared to the second quarter of 1995 and $4 million higher during the first six months of 1996 compared to the first six months of 1995. These increases in interest expense resulted primarily from a net increase in debt outstanding resulting from the issuance of $300 million of long-term notes and debentures during February 1996, partially offset by the repayment of $150 million of long-term notes in June 1996. INTEREST INCOME Interest income decreased $1 million during the second quarter of 1996 compared to the second quarter of 1995 and decreased $3 million during the first six months of 1996 compared to the first six months of 1995. This decrease resulted from lower levels of cash available for investment due in part to the acquisition of the ALATHON Business effective May 1, 1995. MINORITY INTEREST IN LYONDELL-CITGO REFINING COMPANY LTD. Minority interest was less than one million dollars in the second quarter of 1996 and $4 million in the first six months of 1996 representing the allocated share of LCR's net income to CITGO, the minority owner of LCR. INCOME TAX The effective income tax rate during the second quarter of 1996 and during the first six months of 1996 was 35.1 percent and 36.4 percent, respectively. The income portion of the state franchise tax was the primary difference between the effective tax rates and the 35 percent federal statutory rate. 12 FINANCIAL CONDITION Lyondell's cash provided by operating activities was $22 million in the first six months of 1996 compared to cash provided of $187 million during the first six months of 1995. This $165 million decrease is attributable to the $223 million decrease in net income, partially offset primarily by changes in working capital. Cash used in investing activities during the first six months of 1996 consisted of capital expenditures of $356 million, of which $284 million was for the Upgrade Project at the Refinery, $19 million was for environmentally related projects primarily at the Refinery and $53 million was for other projects at the various petrochemical plants and at the Refinery. Upgrade Project expenditures during the first six months of 1996 were funded by $139 million from external borrowings by LCR, $79 million of contributions by CITGO, the minority owner of LCR, and $70 million from Lyondell in the form of subordinated loans to LCR. The $4 million excess of funding for the Upgrade Project over cash expenditures is held in a restricted cash account. As of June 30, 1996, $7 million of cash and cash equivalents were restricted for use in LCR capital projects, including the Upgrade Project, and other expenditures as determined by the LCR owners. In February 1996, the Company issued $300 million of debt securities ("Debt Securities") consisting of $150 million of 6.5 percent notes due 2006 and $150 million of 7.55 percent debentures due 2026. A portion of the proceeds received from the sale of the Debt Securities was used to repay short-term debt during the first quarter of 1996, and the remainder was used for retirement of maturing long-term debt and general corporate purposes. The Debt Securities are unsecured obligations and rank on a parity with all other unsecured and unsubordinated debt of the Company. The Mont Belvieu terminal fire on June 2, 1996 will result in an approximate $15 capital expenditure to replace damaged equipment. As a result, the Board of Directors has deferred certain capital expenditures with the overall impact of increasing the 1996 capital budget by $8 million, to $133 million. The Company paid regular quarterly dividends of $.225 per share of common stock during the first and second quarters of 1996. Additionally, on July 19, 1996 the Board of Directors declared a regular quarterly dividend of $.225 per share of common stock, payable September 15, 1996 to stockholders of record on August 23, 1996. CURRENT BUSINESS OUTLOOK Strong export demand and a strengthening economy provided an improved environment for olefins and polymers during the first six months of 1996 compared to the latter part of 1995. This improvement was partially offset by higher feedstock costs and the olefins unit turnaround. During the remainder of 1996, management expects olefins supply and demand fundamentals to be more favorable than in the latter part of 1995 and early 1996 with demand growth exceeding capacity additions and less significant downstream inventory corrections. Management believes that if demand growth in 1996 is sustained at average historic levels, olefins market conditions will continue to improve. However, olefins profitability will continue to be negatively impacted if feedstock costs remain high. Methanol business conditions returned to more typical levels in the latter part of 1995 and first six months of 1996 from the very favorable conditions that existed during the early part of 1995. Although methanol demand growth is still good and is expected to increase in 1996, substantial new capacity is expected in various parts of the world over the next few years. While the Company expects its methanol business to remain profitable, it is not likely that methanol profitability will return in the near-term to the high levels of late 1994 and early 1995. 13 On July 27, 1996, the Company experienced a fire at its Channelview Facility due to a rupture in a pipeline owned and operated by ARCO Pipe Line Company ("ARCO Pipe Line"). Although no operating units were directly involved in the fire, the damage to the pipeline and electrical systems forced the Company to shut down the entire Channelview Facility. Although the Company and ARCO Pipe Line are still evaluating the cost of the damage to their respective facilities, the Company believes that the physical damage to the two companies' facilities on Lyondell's plant site could be in the $10 million to $15 million range and that the potential negative impact on Lyondell's after-tax earnings could be in the $20 million to $25 million range. Certain of the units at the Channelview Facility have been brought back into operation and the olefins units are in startup mode. The Channelview Facility is currently expected to be fully operational within the next several days. A number of factors, including the full extent of the damage to all the facilities, the availability of repair materials and the Company's ability to find alternatives to meet customer needs, will impact the Company's ability to mitigate the financial impact on the Company's business. In addition, the estimates contained herein are based on preliminary information and do not take into account the potential effects of any insurance coverage or contributions to costs by other parties that may be available to offset such costs. During the first six months of 1996, profit performance from refined products benefited from high processing rates of heavy Venezuelan crude oil. However, this improvement was mostly offset by lower margins due to rising feedstock costs for the approximately 40 percent of crude oil runs not covered by the Crude Supply Contract. Aromatics are in a weaker environment entering the third quarter of 1996 due to lower margins resulting from higher feedstock costs and continuing sales price decreases for paraxylene. Management believes that the Company has improved its refining business with the formation of LCR and the resulting benefits of the Crude Supply Contract and Products Agreement. These arrangements are designed to diminish the impact of market volatility and stabilize cash flows at attractive levels relative to historic performance. However, management expects that startups, shutdowns, revamps and tie-ins to the existing facilities will continue to affect LCR's operating efficiency and profitability as various units of the Upgrade Project approach completion during the remainder of 1996 and early 1997. LCR's near- term results are expected to reflect a continuing decline in aromatics margins. Until the Upgrade Project is operational in early 1997, the 40 percent of LCR's crude oil volume which is not purchased under the Crude Supply Contract continues to be sensitive to market conditions. The poor market conditions that have characterized the Gulf Coast refining business for the past several years have generally continued in 1996. Profitability and cash flows for the petrochemical and refining businesses are affected by industry supply and demand, feedstock cost volatility, capital expenditures required to meet more stringent environmental standards, repair and maintenance costs and downtime of production units due to maintenance turnarounds. Turnarounds on major units can have significant financial impacts due to the associated loss of production, resulting in lower profitability. LCR plans to perform a turnaround of its fluid catalytic cracking unit in the fourth quarter of 1996. The Company believes that business conditions will be such that cash balances, cash generated from operating activities and existing lines of credit will be adequate to meet future cash requirements for scheduled debt repayments, necessary capital expenditures and to sustain for the reasonably foreseeable future the regular quarterly dividend. However, the Company continually evaluates its cash requirements and allocates cash in order to maximize stockholder returns. __________________________ Certain of the statements in this Form 10-Q are forward-looking statements that involve risks and uncertainties and the factors described herein could cause actual results to differ materially from the estimates contained herein. Management cautions against projecting any future results based on present or prior earnings levels because of the cyclical nature of the refining and petrochemical industries and uncertainties associated with the United States and worldwide economies and current and potential United States governmental regulatory actions . 14 PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS 1. There have been no material developments with respect to the Company's legal proceedings previously reported in the 1995 Annual Report on Form 10-K and March 31, 1996 Form 10-Q. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits 4.7(a) Amendment No. 1 to the Lyondell Petrochemical Company $400,000,000 Amended and Restated Credit Agreement. 10.15 Restricted Stock Plan for Non-Employee Directors. 27 Financial Data Schedule. (b) Reports on Form 8-K The following Current Reports on Form 8-K were filed during the quarter ended June 30, 1996 and through the date hereof. Date of Report Item No. Financial Statements -------------- -------- -------------------- July 29, 1996 5 None 15 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Lyondell Petrochemical Company (Registrant) Dated: August 13, 1996 JOSEPH M. PUTZ ------------------------- (Signature) Joseph M. Putz Vice President and Controller (Duly Authorized Officer and Principal Accounting Officer) 16 EX-4.7(A) 2 AMENDMENT TO CREDIT AGMT. EXHIBIT 4.7(a) AMENDMENT NO. 1 TO LYONDELL PETROCHEMICAL COMPANY $400,000,000 AMENDED AND RESTATED CREDIT AGREEMENT This Amendment (the "Amendment"), is entered into as of May 31, 1996, among Lyondell Petrochemical Company (the "Borrower"), the Banks listed on the signature pages hereof and Texas Commerce Bank National Association, a national banking association, as Administrative Agent, Bank of America Illinois, as Co- Agent and Chemical Bank, as Auction Agent. The Borrower, the Banks, the Administrative Agent, the Co-Agent and the Auction Agent have entered into the Amended and Restated Credit Agreement dated as of June 27, 1995 (the "Agreement"). WHEREAS, Section 9.05 of the Agreement provides that the Borrower and the Banks may, by written action, amend or waive any provision of the Agreement; and WHEREAS, the Borrower has requested that the Banks eliminate Section 5.08(e) of the Agreement in its entirety; THEREFORE, in consideration of the mutual promises contained herein and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto do hereby agree that the Agreement shall be amended as follows: 1. Unless otherwise specified herein, all terms defined in the Agreement have the same meaning when used herein. 2. (a) Section 5.08(e) of the Agreement is deleted in its entirety; and (b) Section 5.08 (f) is re-numbered as Section 5.08(e). 3. Ratifications. Except as herein specifically amended and modified, (a) the Agreement is unchanged and continues in full force and effect, and (b) the Borrower hereby confirms and ratifies the Agreement's existence and each and every term, condition, and covenant therein contained, to the same extent and as though the same were set out herein in full. AMENDMENT NO. 1 TO LYONDELL PETROCHEMICAL COMPANY $400,000,000 AMENDED AND RESTATED CREDIT AGREEMENT PAGE 2 4. Representations and Warranties. The Borrower hereby represents and warrants to the Banks, the Administrative Agent, and the Co-Agent that (a) this Amendment and the Loan Documents to be delivered hereunder have been duly executed and delivered by the Borrower, (b) no action of, or filing with, any agency is required to authorize, or is otherwise required in connection with, the execution, delivery, and performance by the Borrower of this Amendment and the Loan Documents to be delivered hereunder, (c) this Amendment and the Loan Documents to be delivered hereunder are valid and binding upon the Borrower and are enforceable against the Borrower in accordance with their respective terms, except as limited by the Bankruptcy Code of the United States of America and all other similar Laws affecting the rights of creditors generally, (d) the execution, delivery and performance by the Borrower of this Amendment and the Loan Documents to be delivered hereunder do not require the consent of any other Person and do not and will not constitute a violation of any laws, agreement, or understanding to which the Borrower is a party or by which the Borrower is bound, (e) the representations and warranties contained in the Agreement, as amended hereby, and any other Loan Documents are true and correct in all material respects on and as of the date of execution hereof as though made as of the date of execution hereof, and (f) as of the date of this amendment, no Default or Event of Default has occurred and is continuing. 5. References. All references in the Loan Documents to the Agreement shall refer to the Agreement as amended by this amendment, and, because this amendment is a "Loan Document" referred to in the Agreement, then the provisions relating to Loan Documents set forth in the Agreement are incorporated herein by reference, the same as if set forth herein verbatim. 6. Counterparts. This Amendment may be executed in a number of identical counterparts, each of which shall be deemed an original. In making proof of this instrument, it shall not be necessary for any party to account for all counterparts, and it shall be sufficient for any party to produce but one such counterpart. 7. Parties Bound. This Amendment shall be binding upon and shall inure to the benefit of the Borrower, the Administrative Agent, the Co-Agent, the Auction Agent and each Bank, and, subject to Section 9.07 of the Agreement, their respective successors and assigns. 8. ENTIRETY. THIS AMENDMENT, THE AGREEMENT AS AMENDED HEREBY, AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL CREDIT AGREEMENT BETWEEN THE PARTIES FOR THE TRANSACTIONS THEREIN, AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR AMENDMENT NO. 1 TO LYONDELL PETROCHEMICAL COMPANY $400,000,000 AMENDED AND RESTATED CREDIT AGREEMENT PAGE 3 SUBSEQUENT ORAL AGREEMENTS BY THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. IN WITNESS WHEREOF, each of the parties hereto has caused this Amendment to be executed by its duly authorized officer as of the day and year first above written. LYONDELL PETROCHEMICAL COMPANY /s/ Russell S. Young ------------------------------------------------- By: Russell S. Young Title: Senior Vice President, Chief Financial Officer and Treasurer TEXAS COMMERCE BANK NATIONAL ASSOCIATION, Individually and as Administrative Agent /s/ David G. Mills ------------------------------------------------- By: David G. Mills Title: Vice President BANK OF AMERICA ILLINOIS, Individually and as Co-Agent /s/ Ronald E. McKaig ------------------------------------------------- By: Ronald E. McKaig Title: Vice President CHEMICAL BANK, as Auction Agent /s/ Janet Belden ---------------------------------------- By: Janet Belden Title: Vice President AMENDMENT NO. 1 TO LYONDELL PETROCHEMICAL COMPANY $400,000,000 AMENDED AND RESTATED CREDIT AGREEMENT PAGE 4 ABN AMRO BANK N.V. HOUSTON AGENCY, BY ABN AMRO BANK, North America, INC., as agent /s/ Robert J. Cunningham ------------------------------------------------------- By: Robert J. Cunningham Title: Vice President & Director /s/ Collis G. Sanders ------------------------------------------------------- By: Collis G. Sanders Title: Group Vice President & Director THE BANK OF NEW YORK /s/ Raymond J. Palmer ------------------------------------------------------- By: Raymond J. Palmer Title: Vice President THE BANK OF NOVA SCOTIA /s/ F. C. H. Ashby ------------------------------------------------------- By: F. C. H. Ashby Title: Senior Manager Loan Operations BANK OF SCOTLAND /s/ Catherine Oniffrey ------------------------------------------------------- By: Catherine Oniffrey Title: Vice President AMENDMENT NO. 1 TO LYONDELL PETROCHEMICAL COMPANY $400,000,000 AMENDED AND RESTATED CREDIT AGREEMENT PAGE 5 THE BANK OF TOKYO - MITSUBISHI, LTD. /s/Michael G. Meiss ------------------------------------------------------- By: Michael G. Meiss Title: Vice President CANADIAN IMPERIAL BANK OF COMMERCE /s/ Gary C. Gaskill ------------------------------------------------------- By: Gary C. Gaskill Title: Authorized Signatory /s/ Michael A. G. Corkum ------------------------------------------------------- By: Michael A. G. Corkum Title: Authorized Signatory COMERICA BANK /s/ Kim A. Uhlemann ------------------------------------------------------- By: Kim A. Uhlemann Title: Vice President CREDIT LYONNAIS /s/ Pascal Poupelle ------------------------------------------------------- By: Pascal Poupelle Title: Senior Vice President AMENDMENT NO. 1 TO LYONDELL PETROCHEMICAL COMPANY $400,000,000 AMENDED AND RESTATED CREDIT AGREEMENT PAGE 6 FIRST INTERSTATE BANK OF TEXAS, N.A. /s/ Collie Michaels ------------------------------------------------------- By: Collie Michaels Title: Vice President THE FIRST NATIONAL BANK OF BOSTON /s/ Michael Kane ------------------------------------------------------- By: Michael Kane Title: Managing Director THE FIRST NATIONAL BANK OF CHICAGO /s/ Dixon Schultz ------------------------------------------------------- By: Dixon Schultz Title: Vice President THE FUJI BANK, LIMITED /s/ David Kelley ------------------------------------------------------- By: David Kelley Title: Vice President, and Senior Manager THE INDUSTRIAL BANK OF JAPAN TRUST CO. /s/ Akijiro Yoshino ------------------------------------------------------- By: Akijiro Yoshino Title: Executive Vice President AMENDMENT NO. 1 TO LYONDELL PETROCHEMICAL COMPANY $400,000,000 AMENDED AND RESTATED CREDIT AGREEMENT PAGE 7 The Industrial Bank of Japan, Houston Office (Authorized Representative) THE LONG TERM CREDIT BANK OF JAPAN, LTD. /s/ Satoru Otsubo ------------------------------------------------------- By: Satoru Otsubo Title: Joint General Manager THE MITSUBISHI TRUST AND BANKING CORP. /s/ Patricia Loret de Mola ------------------------------------------------------- By: Patricia Loret de Mola Title: Senior Vice President NATIONSBANK OF TEXAS, N.A. /s/ Patrick M. Delaney ------------------------------------------------------- By: Patrick M. Delaney Title: Senior Vice President PNC BANK, NATIONAL ASSOCIATION /s/ Tamara O'Connor ------------------------------------------------------- By: Tamara O'Connor Title: Vice President AMENDMENT NO. 1 TO LYONDELL PETROCHEMICAL COMPANY $400,000,000 AMENDED AND RESTATED CREDIT AGREEMENT PAGE 8 SOCIETE GENERALE, SOUTHWEST AGENCY /s/ Elizabeth W. Hunter ------------------------------------------------------- By: Elizabeth W. Hunter Title: Vice President UNION BANK OF SWITZERLAND /s/ George Kubove ------------------------------------------------------- By: George Kubove Title: Assistant Vice President /s/ Kelly Boots ------------------------------------------------------- By: Kelly Boots Title: Assistant Treasurer THE YASUDA TRUST & BANKING CO., LTD. NEW YORK BRANCH /s/ Gerald T. Gill ------------------------------------------------------- By: Gerald T. Gill Title: Vice President EX-10.15 3 RESTRICTED STOCK PLAN EXHIBIT 10.15 LYONDELL PETROCHEMICAL COMPANY RESTRICTED STOCK PLAN FOR NON-EMPLOYEE DIRECTORS 1. Purpose. -------- The Restricted Stock Plan for Non-Employee Directors of Lyondell Petrochemical Company (the "Plan") is intended to provide non-employee directors of Lyondell Petrochemical Company (the "Company") with an increased propriety interest in the Company's success and progress by granting them shares of the Company's Common Stock ("Common Stock") that are restricted in accordance with the terms and conditions set forth below ("Restricted Shares"). The Plan is intended to increase the alignment of non-employee directors with the Company's shareholders in terms of both risk and reward. 2. Administration. --------------- The Plan is to be administered by the Directors Benefit Committee (the "Committee") of the Company or any successor committee with responsibility for the administration of compensation and benefit plans for directors. The Committee shall have all necessary authority and discretion to interpret any provision of this Plan or to determine any question regarding grants of Restricted Shares under this Plan. Any determination or interpretations of the Committee shall be final, conclusive and binding on all persons. 3. Eligibility. ------------ All current or subsequently elected members for the Company's Board of Directors and at the time such service began were not, and for the preceding ten years had not been, Executive Officers or employees of the Company or any of its subsidiaries ("Eligible Directors") shall be eligible to participate in the Plan. 4. Grants. ------- Each year 25 percent of the annual retainer paid to non-employee directors shall be made in the form of grants of Restricted Shares to Eligible Directors. The number of Restricted Shares granted shall be determined by dividing an amount equal to 25 percent of an Eligible Director's annual retainer fees by the closing price of a share of Common Stock on the effective date of the grant. Grants of Restricted Shares to Participants shall be on the terms and conditions and with the restrictions determined from time to time by the Committee under Section 5 of this Plan. 5. Terms and Conditions of Restricted Shares. ------------------------------------------ (a) General. Each grant of Restricted Shares shall be subject to the restrictions under subsection (c) for the Restricted Period of the grant. (b) Restricted Period. The Restricted Period shall begin on the date of the grant. The Restricted Period for a grant shall be at least one year, and shall be set by the Committee and described in the individual granting agreement to be executed by the Company and each non-employee director. (c) Restrictions. One or more of these restrictions shall be a restriction which constitutes a substantial risk of forfeiture. An Eligible Director shall have all ownership rights and privileges of a shareholder as to such Restricted Shares, including the right to receive dividends and the right to vote such Restricted Shares, except that the following restrictions shall apply: (i) an Eligible Director shall not be entitled to delivery of the certificate until the expiration of the Restricted Period, (ii) none of the Restricted Shares may be sold, transferred, assigned, pledged, or otherwise encumbered or disposed of during the Restricted Period, and (iii) except as provided in subsection 4(d), all grants of the Restricted Shares shall be forfeited and all rights of an Eligible Director to such Restricted Shares shall terminate without further obligation on the part of the Company if the Eligible Director fails to satisfy the terms of the grant of Restricted Shares. During the Restricted Period, the Restricted Shares may be held on an uncertificated basis or a stock certificate representing the number of Restricted Shares granted may be registered in each Eligible Director name but held in custody by the Plan for the Eligible Director account and not released to the Eligible Director until the Restricted Period lapses. (d) Termination of Directorship. ---------------------------- If an Eligible Director ceased to be a director of the Company by reason to Disability, Death, Retirement or Change of Control, the Restricted Shares granted to such Eligible Director shall immediately vest. If an Eligible Director ceases to be a director of the Company for any other reason, the Eligible Director shall immediately forfeit all Restricted Shares, except to the extent that a majority of the Board other than the Eligible Director approves the vesting of such Restricted Shares. Upon vesting, except as provided in Section 6, all restrictions applicable to such Restricted Shares shall lapse and a certificate for such shares shall be delivered to the Eligible Director, or the Eligible Director's beneficiary or estate, in accordance with Section 5(e). For purposes of this section, the following definitions apply: (i) "Disability" shall mean a permanent and total disability as defined in Section 22(e)(3) of the Internal Revenue Code. (ii) "Retirement" shall mean ceasing to be a director of the Company (i) on or after age 72 or (ii) at any time prior to age 72 with the consent of a majority of the members of the Board other than the Eligible Director. 2 (iii) "Change of Control" shall mean a change of control as defined in the Company's Supplemental Executive Benefit Plans Trust Agreement. (e) Delivery of Restricted Shares. At the end of the Restricted Period a stock of certificate for the number of Restricted Shares which have vested shall be delivered free of all such restrictions to the Eligible Director or the Eligible Director's beneficiary or estate, as the case may be. 6. Regulatory Compliance. ---------------------- An Eligible Director or an Eligible Director's beneficiary or estate shall not receive or sell any Common Stock granted pursuant to this Plan until all appropriate listing, registration and qualification requirements and consents and approvals have been satisfied or obtained, free of any condition unacceptable to the Board of Directors. The Committee shall have the authority to remove any or all of the restrictions on the Restricted Shares, including restrictions under the Restricted Period, whenever it determines that such action is appropriate as a result of changes in applicable laws or other circumstances after the date of the grant. 7. Shares Reserved Under the Plan ------------------------------- The shares of Common Stock covered by grants under this Plan as Restricted Shares will not exceed 100,000 shares in the aggregate, subject to adjustment as provided below, and in accordance with and subject to Rule 16b-3 of the Securities and Exchange Act of 1934, ("Exchange Act") as amended. Restricted Shares may be originally issued or treasury shares or a combination of both. Any shares of Common Stock granted as Restricted Shares that are terminated, forfeited or surrendered or which expire for any reason will not be available again for issuance under this Plan, if any Eligible Director received any of the benefits of ownership of those shares prior to termination, forfeiture or surrender. In the event of a recapitalization, stock split, stock dividend, combination or exchange of shares, merger, consolidation, rights offering, separation, reorganization or liquidation, or any other change in the Company's corporate structure or shares, the Committee may make such equitable adjustments in the number and class of shares authorized to be granted as Restricted Shares, as it deems appropriate to prevent dilution or enlargement of rights. Shares issued as a consequence of any such change shall be issued subject to the same restrictions and provisions applicable to the original grant of Restricted Shares. 8. Termination or Amendment of the Plan. ------------------------------------- The Committee may at any time terminate the Plan and may from time to time alter or amend the Plan or any part hereof (including any amendment deemed necessary to ensure that the 3 Company may comply with any regulatory requirement referred to in Section 6) without shareholder approval, unless otherwise required by law or by the rules of the Securities and Exchange Commission or New York Stock Exchange. No termination or amendment of the Plan may, without the consent of an Eligible Director, impair the rights of such director with respect to shares of Common Stock granted under the Plan. 9. Miscellaneous. -------------- (a) Nothing in the Plan shall be deemed to create any obligation on the part of the Board to nominate any director for reelection by the Company's shareholders. (b) The Company shall have the right to require, prior to the issuance or delivery of any Restricted Shares, payment by an Eligible Director of any taxes required by law with respect to the issuance or delivery of such shares, or the lapse of restrictions thereon. 10. Governing Law. -------------- The Plan shall be construed according to the law of the State of Texas to the extent federal law does not supersede and preempt state law. 11. Effective Date. --------------- The Plan shall become effective as of June 1, 1996, or such later date as may be fixed by the Committee. 4 EX-27 4 FINANCIAL DATA SCHEDULE
5 1,000,000 6-MOS DEC-31-1996 JAN-01-1996 JUN-30-1996 7 0 364 3 329 766 4,130 2,030 3,008 718 1,134 80 0 0 381 3,008 2,404 2,404 2,176 2,176 122 0 43 61 22 39 0 0 0 39 .49 .49
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