8-K

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT PURSUANT

TO SECTION 13 OR 15(D) OF THE

SECURITIES EXCHANGE ACT OF 1934

Date of Report (date of earliest event reported): January 29, 2004

LYONDELL CHEMICAL COMPANY

(Exact name of registrant as specified in its charter)

Delaware

(State or other jurisdiction of incorporation)

1-10145	95-4160558
(Commission File Number)	(I.R.S. Employer Identification No.)

1221 McKinney Street, Suite 700, Houston, Texas	77010
(Address of principal executive offices)	(Zip Code)

(713) 652-7200

(Registrant’s telephone number, including area code)

Not Applicable

(Former Name or Former Address, if Changed Since Last Report)

Item 12. Results of Operations and Financial Condition

On January 29, 2004, Lyondell Chemical Company (the “Company”) issued a press release announcing its fourth quarter and full year 2003 results, which is furnished herewith as Exhibit 99.1 and incorporated by reference into this Item 12.

The Company will host a conference call on January 29, 2004 at 11:30 a.m. Eastern Time to discuss its results. The call will be broadcast live on the Company’s web site at www.lyondell.com/earnings. A replay of the call will be available on the Company’s web site at www.lyondell.com/earnings at 1:30 p.m. Eastern Time on January 29, 2004. Reconciliations of non-GAAP financial measures to GAAP financial measures, together with any other applicable disclosures, including the earnings release, will be available at 11:30 a.m. Eastern Time on January 29, 2004 at www.lyondell.com/earnings.

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 hereunto duly authorized.

LYONDELL CHEMICAL COMPANY
By:	/s/    Kerry A. Galvin
Name: Title:	Kerry A. Galvin Senior Vice President, General Counsel & Secretary

Date: January 29, 2004

INDEX TO EXHIBITS

Exhibit Number	Description
99.1	Press release dated January 29, 2004.

EX-99.1

Exhibit 99.1

For information, contact:

Media – Susan Moore (713) 309-4645

Investors – Doug Pike (713) 309-7141

Lyondell Reports Fourth Quarter and Full Year 2003 Results

Full Year 2003

n Record earnings at LYONDELL-CITGO Refining

n Price increases at Equistar help offset increased raw material costs, while costs of financing and R&D refocusing reduce reported results

n PO and derivatives improved vs. 2002; MTBE profitability significantly lower

4Q 2003

n Prices and key product volumes improved over 4Q 2002

n Lyondell and Equistar announce broad price increases for 2004

HOUSTON, Jan. 29, 2004 – Lyondell Chemical Company (NYSE: LYO) today announced a net loss for the fourth quarter of $77 million, or $0.44 per share. This compares to a net loss of $93 million, or $0.58 per share, for the fourth quarter 2002, and a net loss of $44 million, or $0.27 per share, for the third quarter 2003.

For the full year 2003, Lyondell had a net loss of $302 million, or $1.84 per share, compared to a 2002 net loss of $148 million, or $1.10 per share.

Table 1—Lyondell Earnings Summary

Millions of dollars except per share amounts	4Q2003			4Q2002			3Q2003			Full Year 2003			Full Year 2002
Sales and other operating revenues	$	945		$	890		$	954		$	3,801		$	3,262
Net loss		(77	)		(93	)		(44	)		(302	)		(148	)
Basic and diluted net loss per share (a)		(0.44	)		(0.58	)		(0.27	)		(1.84	)		(1.10	)
Weighted average shares outstanding (millions) (a)		174.0			159.9			161.6			164.3			133.9

(a) Lyondell sold 8.28 million shares of common stock in July 2002. Lyondell issued 34 million shares of Series B common stock to Occidental Petroleum Corporation (“Occidental”) in August 2002. Lyondell sold 13.8 million shares of common stock in October 2003, including 2.7 million shares to Occidental. In addition, Lyondell paid a dividend to Occidental each quarter by issuing approximately 0.6 million shares of Series B common stock beginning in December 2002 in lieu of a dividend payment in cash.

Table 2—Lyondell and Proportionate Share of Ventures—Supplemental Financial Data

Millions of dollars	4Q2003		4Q2002		3Q2003		Full Year 2003		Full Year 2002
Proportionate sales and other operating revenues (a)	$	2,732	$	2,461	$	2,717	$	10,860	$	8,166
Proportionate EBITDA (b)		144		136		207		590		721

(a) See Table 6 for components of proportionate share of sales and other operating revenues.

(b) See Table 7 for a reconciliation of net income (loss) to proportionate EBITDA and Table 8 for Lyondell’s income statement information.

Financial results for 2003 were negatively impacted by:

• Lower MTBE margins due to the expiration of a favorable contract at the end of 2002 and the phase-out of usage in California, New York and Connecticut;

• High, volatile crude oil and natural gas prices; and,

• Financing costs.

LYONDELL-CITGO Refining LP continues to operate with significant positive cash flow, while Lyondell and Equistar each finished the year with substantial financial liquidity and improving market conditions.

“Weak demand for chemicals and persistently high and volatile raw material and energy prices severely impacted our financial results for the year,” said Dan F. Smith, president and CEO of Lyondell Chemical Company. “We began 2003 with many uncertainties including the Venezuelan strike, the Iraq war and California’s phase-out of MTBE; however, as a result of our continued focus on financial liquidity and operational excellence, we are well positioned for the upcycle.”

“During 2003, we started production at our new propylene oxide/styrene monomer plant in Europe, and Equistar completed major maintenance turnaround activity at its two largest ethylene plants. These plants are now prepared to operate for the next seven years before the next scheduled maintenance turnaround.”

OUTLOOK

The early weeks of 2004 have yielded strong volumes, but raw material and energy cost increases are pressuring margins. Lyondell and Equistar have responded by announcing product price increases across the majority of their product lines.

2

“The improving economy and the impact of our new propylene oxide plant in Europe should lead to improved performance for 2004. Since our products have broad utilization across the economy and a heavy dependence on hydrocarbons, external factors such as economic growth and raw materials prices will continue to be leveraging factors to our financial performance during 2004,” said Smith.

LYONDELL AND JOINT VENTURES

Lyondell’s operations comprise: Lyondell’s IC&D segment; Equistar, a joint venture with Millennium Chemicals Inc.; and LYONDELL-CITGO Refining LP (LCR), a joint venture with CITGO Petroleum Corp.

Lyondell’s Intermediate Chemicals & Derivatives (IC&D) Segment – The IC&D segment includes propylene oxide (PO) and derivatives, MTBE, styrene and TDI.

Table 3—IC&D Financial Overview

Millions of dollars	4Q2003		4Q2002		3Q2003		Full Year 2003			Full Year 2002
Sales and other operating revenues	$	945	$	890	$	954	$	3,801		$	3,262
Operating income (loss) (a)		3		12		20		(1	)		174
EBITDA (a)		60		69		84		245			390

(a) See Table 7 for a reconciliation of Lyondell’s net loss to EBITDA and Table 8 for Lyondell’s IC&D operating income (loss) and net loss.

Full-year 2003 results at IC&D include an $18 million gain on Lyondell’s sale of a 10 percent interest in Nihon Oxirane and financing costs of $6 million. Financing costs of $23 million were included in the full year 2002 results.

4Q03 v. 3Q03 – Following an unusually strong third quarter, lower MTBE margins negatively impacted fourth-quarter operating income by approximately $40 million. Performance in PO, PO derivatives, and TDI products improved based primarily on higher margins. Styrene results were unchanged.

4Q03 v. 4Q02 – MTBE results were down approximately $45 million versus the fourth quarter of 2002. PO and PO derivative results improved in the fourth quarter of

3

2003 based on stronger margins and 10 percent higher volumes. Styrene and TDI results were relatively unchanged.

2003 v. 2002 – The year-to-year decrease is attributable to MTBE, as results were negatively impacted by both the expiration of a key contract at the end of 2002 and transition of the gasoline markets in several states away from the use of MTBE.

The MTBE impact was partially offset by improvement in PO and PO derivatives. Price and volume increases in these products offset increased raw material and energy costs. TDI results fell somewhat short of 2002 performance, while styrene results were unchanged.

Equistar Chemicals, LP – Lyondell owns a 70.5 percent interest in Equistar, which consists of the petrochemicals and polymers segments.

Table 4—Equistar Financial Overview – 100% Basis

Millions of dollars	4Q2003			4Q2002			3Q2003			Full Year 2003			Full Year 2002
Sales and other operating revenues	$	1,665		$	1,431		$	1,642		$	6,545		$	5,537
Operating income (loss)		(29	)		(62	)		12			(89	)		(44	)
Net loss (a) (b)		(104	)		(114	)		(40	)		(339	)		(1,299	)
EBITDA (a)		27			14			87			175			256

(a) See Table 7 for a reconciliation of Equistar’s net loss to EBITDA.

(b) The full year 2002 net loss includes a $1.1 billion charge for goodwill impairment as a cumulative effect of accounting change upon adoption of SFAS No. 142.

Fourth-quarter 2003 results include $18 million in financing costs and $6 million related to employee severance. Full-year 2003 results include financing costs of $37 million and $33 million of charges for asset dispositions and employee severance.

4Q03 v. 3Q03 – Fourth-quarter operations were negatively impacted by an increase in the cost of ethylene production which was driven by higher crude oil and natural gas liquid prices. Price actions were implemented to offset these increases, but the timing of implementation was insufficient to fully offset the cost increases. Additionally, a scheduled maintenance turnaround at an ethylene plant had a negative $5 million to $10 million impact on the fourth-quarter results. Third-quarter results included a charge of $12 million primarily related to the write-off of a polymer R&D facility.

4

4Q03 v. 4Q02 – Versus the year-ago quarter, sales volumes of ethylene and ethylene derivatives (ethylene oxygenates and polyethylene) increased by 7 percent. Additionally, higher prices for ethylene and its derivatives more than offset the higher cost of ethylene production. Chemical Marketing Associates, Inc. (CMAI) estimates that the industry’s average cost of ethylene production increased by 3.0 to 3.5 cents per pound over the same period last year.

2003 v. 2002 – For the year, total sales volume of ethylene and ethylene derivatives were down approximately 360 million pounds (4 percent). The majority of this shortfall occurred during the second quarter 2003. The average cost of ethylene production, as estimated by CMAI, increased by approximately 5 cents per pound, while their reported benchmark sales prices increased by 6 cents per pound for ethylene. Polyethylene prices increased by several cents per pound more than the ethylene price increased. Equistar’s 2003 results were negatively impacted by scheduled maintenance turnarounds and costs related to financings, asset dispositions and employee severance.

LYONDELL-CITGO Refining LP (LCR) – Lyondell owns a 58.75 percent interest in LCR, a major refiner of heavy crude oil.

Table 5—LCR Financial Overview – 100% Basis

Millions of dollars	4Q2003		4Q2002		3Q2003		Full Year 2003		Full Year 2002
Sales and other operating revenues	$	1,044	$	956	$	1,030	$	4,162	$	3,392
Operating income		82		69		77		264		246
Net income (a)		73		59		69		228		213
EBITDA (a)		110		97		105		377		361

(a) See Table 7 for a reconciliation of LCR’s net income to EBITDA.

Full-year 2003 results include a $25 million charge related to the redesign of a low-sulfur gasoline project and a $6 million charge relating to personnel reductions.

4Q03 v. 3Q03 – Results continued to be strong in the fourth quarter. Venezuelan contract (CSA) crude volumes and total crude volumes were relatively unchanged.

4Q03 v. 4Q02 – Volumes of heavy crude processed under the CSA contract averaged 227,000 barrels per day in the fourth quarter of 2003, an increase of 18,000

5

barrels per day versus the same quarter in 2002 when crude deliveries were disrupted by a strike in Venezuela.

2003 v. 2002 – LCR had record earnings in 2003 driven primarily by higher CSA crude volumes, strong operating performance, and improved aromatics/lube product performance. These improvements were partially offset by higher natural gas costs and the charges mentioned above. For 2003, total crude volumes averaged 264,000 barrels per day while CSA volumes averaged 224,000 barrels per day.

CONFERENCE CALL

Lyondell will host a conference call today, Jan. 29, 2004, at 11:30 a.m. Eastern Time (ET). Participating on the call will be: Dan F. Smith, President and CEO, Morris Gelb, Executive Vice President and COO, T. Kevin DeNicola, Senior Vice President and CFO; and Doug Pike, Director of Investor Relations. The dial-in numbers are 888-385-9734 (U.S – toll free) and 212-547-0409 (international). Pass code for each is Lyondell. The call will be broadcast live on the Investor Relations page of the company’s web site, www.lyondell.com/earnings.

A replay of the call will be available from 1:30 p.m. ET Jan. 29 to 5 p.m. ET Feb. 6. The dial-in numbers are 888-277-9381 (U.S) and 402-998-0506 (international). Pass code for each is 5549. Web replay will be available at 1:30 p.m. ET Jan. 29 on the Investor Relations page of the company’s web site, www.lyondell.com/earnings.

Reconciliations of non-GAAP financial measures to GAAP financial measures, together with any other applicable disclosures, including this earnings release, will be available at 11:30 a.m. ET on January 29 at www.lyondell.com/earnings.

ABOUT LYONDELL

Lyondell Chemical Company, (www.lyondell.com), headquartered in Houston, Texas, is a leading producer of: propylene oxide (PO); PO derivatives, including toluene diisocyanate (TDI), propylene glycol (PG), butanediol (BDO) and propylene glycol ether (PGE); and styrene monomer and MTBE as co-products of PO production. Through its 70.5% interest in Equistar Chemicals, LP, Lyondell also is one of the largest producers of ethylene, propylene and polyethylene in North America and a leading producer of ethylene oxide, ethylene glycol, high value-added specialty polymers and polymeric powder. Through its 58.75% interest in LYONDELL-CITGO Refining LP, Lyondell is one of the largest refiners in the United States, processing extra heavy Venezuelan crude oil to produce gasoline, low sulfur diesel and jet fuel.

6

FORWARD LOOKING STATEMENTS

The statements in this release relating to matters that are not historical facts are forward-looking statements that are subject to risks and uncertainties. Actual results could differ materially, based on factors including, but not limited to: the cyclical nature of the chemical and refining industries; availability, cost and volatility of raw materials and utilities; governmental regulatory actions and political unrest; global economic conditions; industry production capacity and operating rates; the supply/demand balance for Lyondell’s and its joint ventures’ products; competitive products and pricing pressures; access to capital markets; technological developments and other risk factors. For more detailed information about the factors that could cause actual results to differ materially, please refer to Lyondell’s Annual Report on Form 10-K for the year ended December 31, 2002, Lyondell’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2003, and Lyondell’s Annual Report on Form 10-K for the year ended December 31, 2003, which will be filed in March 2004.

###

7

Table 6—Unaudited Financial and Operating Information

	Lyondell Chemical Company			Joint Ventures							Lyondell and Proportionate Share of Equity Investments(b)
(Millions of dollars)				Equistar 100%		LCR 100%		LMC 100%(a)
Three months ended December 31, 2003:
Sales and other operating revenues(c)	$	945		$	1,665	$	1,044	$	—		$	2,732
SG&A and R&D		56			60		14		—			107
EBITDA		60			27		110		—			144
Depreciation and amortization		66			77		28		—			135
Interest expense, net		104			54		9		—			147
Net loss		(77	)(d)
Capital expenditures		21	(e)		44		10		—			58
Cash dividends		31
Three months ended December 31, 2002:
Sales and other operating revenues(c)	$	890		$	1,431	$	956	$	—		$	2,461
SG&A and R&D		42			43		14		—			81
EBITDA		69			14		97		—			136
Depreciation and amortization		67			77		29		—			136
Interest expense, net		96			51		9		—			137
Net loss		(93	)(d)
Capital expenditures		2	(e)		75		12		—			62
Cash dividends		28
Three months ended September 30, 2003:
Sales and other operating revenues(c)	$	954		$	1,642	$	1,030	$	—		$	2,717
SG&A and R&D		43			57		14		—			91
EBITDA		84			87		105		—			207
Depreciation and amortization		66			76		28		—			134
Interest expense, net		106			51		8		—			147
Net loss		(44	)(d)
Capital expenditures		9	(e)		28		8		—			33
Cash dividends		28
Year ended December 31, 2003:
Sales and other operating revenues(c)	$	3,801		$	6,545	$	4,162	$	—		$	10,860
EBITDA		245			175		377		—			590
Interest expense, net		392			207		36		—			559
Capital expenditures		268	(e)(f)		106		46		—			370
Cash dividends		116
Year ended December 31, 2002:
Sales and other operating revenues(c)	$	3,262		$	5,537	$	3,392	$	36		$	8,166
EBITDA		390			256		361		(4	)		721
Interest expense, net		373			204		32		—			497
Capital expenditures		22	(e)		118		65		—			133
Cash dividends		109

(a) As of May 1, 2002, Lyondell Methanol Company (“LMC”) is wholly owned by Lyondell Chemical Company (“Lyondell”) and its operations are included in the Intermediate Chemicals and Derivatives (“IC&D”) business segment.

(b) This column reflects Lyondell’s 100% owned operations and its pro rata share of each joint venture’s operations, which is not a presentation in accordance with generally accepted accounting principles. Lyondell has a 58.75% interest in LYONDELL-CITGO Refining LP (“LCR”) and a 70.5% interest in Equistar Chemicals, LP (“Equistar”). Prior to August 22, 2002, Lyondell had a 41% interest in Equistar.

(c) Includes revenues from sales to affiliates.

(d) Includes income (loss) from equity investments in Equistar and LCR.

(e) In addition, Lyondell made cash contributions to the PO-11 joint venture and the U.S. PO joint venture. See footnote (a) of Table 10 for detail of cash contributions.

(f) Capital expenditures of $268 million for the twelve months ended December 31, 2003 include Lyondell’s purchase of the BDO-2 facility from the lessor for $218 million.

Table 7—Reconciliation of Net Income (Loss) to EBITDA

	For the three months ended									For the twelve months ended December 31,
	December 31,						September 30, 2003
(Millions of dollars)	2003			2002						2003			2002
LYONDELL
Net loss	$	(77	)	$	(93	)	$	(44	)	$	(302	)	$	(148	)
Add:
Benefit from income taxes		(58	)		(42	)		(27	)		(179	)		(66	)
Interest expense, net		104			96			106			392			373
Depreciation and amortization		66			67			66			250			244
Loss from equity investment in Equistar		70			78			26			228			117
Income from equity investment in LCR		(45	)		(37	)		(43	)		(144	)		(135	)
Loss from equity investment in LMC(a)		—			—			—			—			5
IC&D EBITDA	$	60		$	69		$	84		$	245		$	390
EQUISTAR
Net loss	$	(104	)	$	(114	)	$	(40	)	$	(339	)	$	(1,299	)
Add:
Depreciation and amortization		77			77			76			307			298
Interest expense, net		54			51			51			207			204
Cumulative effect of accounting change		—			—			—			—			1,053
EBITDA	$	27		$	14		$	87		$	175		$	256
Lyondell Proportionate Share(b)	$	19		$	10		$	61		$	123		$	122
LCR
Net income	$	73		$	59		$	69		$	228		$	213
Add:
Depreciation and amortization		28			29			28			113			116
Interest expense, net		9			9			8			36			32
EBITDA	$	110		$	97		$	105		$	377		$	361
Lyondell Proportionate Share—58.75%	$	65		$	57		$	62		$	222		$	212
EBITDA—Lyondell and Proportionate Share of Equity Investments
Lyondell EBITDA	$	60		$	69		$	84		$	245		$	390
Lyondell share of Equistar EBITDA(b)		19			10			61			123			122
58.75% of LCR EBITDA		65			57			62			222			212
75% of LMC EBITDA through April 30, 2002(a)		—			—			—			—			(3	)
Lyondell and Proportionate Share of Equity Investments	$	144		$	136		$	207		$	590		$	721

(a) LMC is wholly owned by Lyondell and its operations are included in the IC&D business segment prospectively from May 1, 2002. Lyondell had a 75% interest in LMC and applied the equity method of accounting through April 30, 2002.

(b) Lyondell has a 70.5% interest in Equistar. Prior to August 22, 2002, it had a 41% interest.

Table 8—Lyondell Unaudited Income Statement Information

	For the three months ended									For the twelve months ended
	December 31,						September 30,			December 31,
(Millions of dollars, except per share data)	2003			2002			2003			2003			2002
Sales and other operating revenues	$	945		$	890		$	954		$	3,801		$	3,262
Operating costs and expenses:
Cost of sales		886			836			891			3,599			2,898
Selling, general and administrative expenses		45			34			34			166			160
Research and development expenses		11			8			9			37			30
Operating income (loss)		3			12			20			(1	)		174
Loss from equity investment in Equistar (a) (b)		(70	)		(78	)		(26	)		(228	)		(117	)
Income from equity investment in LCR		45			37			43			144			135
Loss from other equity investments		(9	)		—			(4	)		(19	)		(4	)
Interest expense, net		(104	)		(96	)		(106	)		(392	)		(373	)
Other income (expense), net		—			(10	)		2			15			(29	)
Loss before income taxes		(135	)		(135	)		(71	)		(481	)		(214	)
Benefit from income taxes		(58	)		(42	)		(27	)		(179	)		(66	)
Net loss	$	(77	)	$	(93	)	$	(44	)	$	(302	)	$	(148	)
Basic and diluted loss per share	$	(0.44	)	$	(0.58	)	$	(0.27	)	$	(1.84	)	$	(1.10	)
Basic and diluted shares (in thousands) (c)		174,016			159,851			161,574			164,288			133,943

(a) As of January 1, 2002, Lyondell’s share of Equistar’s $1.1 billion charge for the write-off of goodwill, or $432 million, was offset by Lyondell’s write-off of a portion of the excess of its underlying equity in Equistar’s net assets over its investment in Equistar.

(b) Lyondell has a 70.5% interest in Equistar. Prior to August 22, 2002, it had a 41% interest.

(c) Lyondell sold 8.28 million shares of common stock in July 2002. Lyondell issued 34 million shares of Series B common stock to Occidental in August 2002. Lyondell sold 13.8 million shares of common stock in October 2003, including 2.7 million shares to Occidental. In addition, Lyondell paid a dividend to Occidental each quarter by issuing approximately 0.6 million shares of Series B common stock beginning in December 2002 in lieu of a dividend payment in cash.

Table 9—Lyondell Intermediate Chemicals and Derivatives Segment—Operating Information

	For the three months ended			For the twelve months ended
	December 31,		September 30,	December 31,
(In millions)	2003	2002	2003	2003	2002
PO and derivatives (pounds) (a)	829	744	816	3,288	3,028
Co-products:
Styrene monomer (pounds)	953	889	865	3,467	3,337
MTBE and other TBA derivatives (gallons)	271	303	292	1,142	1,208

(a) Includes propylene oxide (“PO”), PO derivatives and isocyanates.

Table 10—Lyondell Unaudited Cash Flow Information

	For the twelve months ended December 31,
(Millions of dollars)	2003			2002
Net loss	$	(302	)	$	(148	)
Adjustments:
Depreciation and amortization		250			244
Losses from equity investments		249			121
Deferred income taxes		(172	)		(24	)
Gain on sale of equity interest		(18	)		—
Debt prepayment charges and premiums		5			23
Changes in assets and liabilities:
Accounts receivable		(54	)		(7	)
Inventories		14			(14	)
Accounts payable		61			13
Accrued interest		1			13
Refundable income taxes, net		27			62
Other assets and liabilities, net		42			6
Net cash provided by operating activities		103			289
Purchase of equity investment in Equistar		—			(440	)
Expenditures for property, plant and equipment		(268	)		(22	)
Contributions and advances to affiliates (a)		(137	)		(114	)
Distributions from affiliates in excess of earnings		111			—
Maturity (purchase) of other short-term investments		44			(44	)
Proceeds from sale of equity interest		28			—
Other		—			(3	)
Net cash used in investing activities		(222	)		(623	)
Issuance of Series B common stock, warrants and right		—			440
Issuance of common stock		171			110
Issuance of long-term debt		318			591
Repayment of long-term debt		(103	)		(543	)
Dividends paid		(116	)		(109	)
Other		(4	)		(18	)
Net cash provided by financing activities		266			471
Effect of exchange rate changes on cash		5			3
Increase in cash and cash equivalents	$	152		$	140

(a) Includes cash contributions to the PO-11 joint venture and the U.S. PO joint venture of $25 million, $21 million and $15 million in the three-month periods ended December 31, 2003 and 2002 and September 30, 2003, respectively, and $88 million and $54 million in the twelve-month periods ended December 31, 2003 and December 31, 2002, respectively. These amounts included $9 million, $21 million and $11 million, respectively, and $60 million and $54 million, respectively, related to funding for capital expenditures. Also includes capitalized interest related to the PO-11 construction project of $4 million, $3 million and $6 million, during the three-month periods, respectively, and $19 million and $10 million, during the twelve-month periods, respectively.

Table 11—Lyondell Unaudited Balance Sheet Information

(Millions of dollars)	December 31, 2003		December 31, 2002
Cash and cash equivalents	$	438	$	286
Other short-term investments		—		44
Accounts receivable, net		449		396
Inventories		347		344
Prepaid expenses and other current assets		82		66
Deferred tax assets		43		35
Total current assets		1,359		1,171
Property, plant and equipment, net		2,640		2,369
Investments and long-term receivables:
Investment in Equistar		965		1,184
Investment in PO joint ventures		866		770
Investment in and receivable from LCR		232		297
Other investments and long-term receivables		85		98
Goodwill, net		1,080		1,130
Other assets, net		406		429
Total assets	$	7,633	$	7,448
Accounts payable	$	431	$	344
Current maturities of long-term debt		—		1
Accrued liabilities		249		279
Total current liabilities		680		624
Long-term debt		4,151		3,926
Other liabilities		699		673
Deferred income taxes		792		881
Minority interest		155		165
Stockholders’ equity (176,792,587 and 160,413,144 shares outstanding at December 31, 2003 and December 31, 2002, respectively)		1,156		1,179
Total liabilities and stockholders’ equity	$	7,633	$	7,448

Table 12—Lyondell Selected Equity Investment Activity

(Millions of dollars)	For the three months ended December 31, 2003			For the twelve months ended December 31, 2003
Investment in Equistar, beginning of period	$	1,022		$	1,184
Lyondell’s share of Equistar net loss		(70	)		(228	)
Lyondell’s share of Equistar other comprehensive income		13			13
Other		—			(4	)
Investment in Equistar, end of period	$	965		$	965
Investment in LCR, beginning of period	$	(14	)	$	68
Lyondell’s share of LCR net income		45			144
Cash distributions from LCR		(38	)		(253	)
Cash contributions to LCR		6			30
Conversion of interest receivable from LCR to equity investment		—			10
Lyondell’s share of LCR other comprehensive income		4			4
Investment in LCR, end of period		3			3
LCR receivable, beginning and end of period		229			229
Investment in and receivable from LCR, end of period	$	232		$	232

Table 13—Equistar Unaudited Income Statement Information

	For the three months ended									For the twelve months ended December 31,
	December 31,						September 30,
(Millions of dollars)	2003			2002			2003			2003			2002
Sales and other operating revenues(a)	$	1,665		$	1,431		$	1,642		$	6,545		$	5,537
Operating costs and expenses:
Cost of sales		1,633			1,450			1,561			6,387			5,388
Selling, general and administrative expenses		51			33			47			182			155
Research and development expenses		9			10			10			38			38
Losses on asset dispositions		1			—			12			27			—
Operating income (loss)		(29	)		(62	)		12			(89	)		(44	)
Interest expense, net		(54	)		(51	)		(51	)		(207	)		(204	)
Other income (expense), net		(21	)		(1	)		(1	)		(43	)		2
Loss before cumulative effect of accounting change		(104	)		(114	)		(40	)		(339	)		(246	)
Cumulative effect of accounting change(b)		—			—			—			—			(1,053	)
Net loss(c)	$	(104	)	$	(114	)	$	(40	)	$	(339	)	$	(1,299	)

(a) Sales and other operating revenues include sales to affiliates.

(b) Concurrent with the adoption of SFAS No. 142, Equistar reviewed goodwill for impairment and concluded that the entire balance was impaired, resulting in the $1.1 billion charge.

(c) As a partnership, Equistar is not subject to federal income taxes.

Table 14—Equistar Unaudited Segment Financial and Operating Information

	For the three months ended									For the twelve months ended December 31,
	December 31,						September 30,
(Millions of dollars)	2003			2002			2003			2003			2002
Sales and other operating revenues(a)
Petrochemicals segment	$	1,528		$	1,284		$	1,491		$	6,036		$	4,957
Polymers segment		547			476			517			2,023			1,868
Intersegment eliminations		(410	)		(329	)		(366	)		(1,514	)		(1,288	)
Total	$	1,665		$	1,431		$	1,642		$	6,545		$	5,537
Operating income (loss)
Petrochemicals segment	$	6		$	(5	)	$	66		$	124		$	146
Polymers segment		2			(33	)		(19	)		(78	)		(74	)
Unallocated		(37	)		(24	)		(35	)		(135	)		(116	)
Total	$	(29	)	$	(62	)	$	12		$	(89	)	$	(44	)
Depreciation and amortization:
Petrochemicals segment	$	57		$	55		$	58		$	228		$	217
Polymers segment		14			16			13			57			58
Unallocated		6			6			5			22			23
Total	$	77		$	77		$	76		$	307		$	298
EBITDA(b)	$	27		$	14		$	87		$	175		$	256
Sales Volumes (including intersegment sales) (millions)(a)
Selected petrochemical products:
Ethylene, propylene and other olefins (pounds)		4,433			4,026			3,976			16,053			16,815
Aromatics (gallons)		96			87			96			384			369
Polymers products (pounds)		1,444			1,471			1,405			5,389			6,098

(a) Sales and other operating revenues include sales to affiliates. Sales volumes include sales to affiliates as well as intersegment sales volumes.

(b) See Table 7 for reconciliation of Equistar's net loss to EBITDA.

Table 15—Equistar Unaudited Balance Sheet Information

(Millions of dollars)	December 31, 2003		December 31, 2002
Cash and cash equivalents	$	199	$	27
Accounts receivable, net		608		625
Inventories		408		424
Prepaid expenses and other current assets		46		50
Total current assets		1,261		1,126
Property, plant and equipment, net		3,334		3,565
Investments		60		65
Other assets, net		373		296
Total assets	$	5,028	$	5,052
Accounts payable	$	513	$	459
Current maturities of long-term debt		—		32
Accrued liabilities		227		223
Total current liabilities		740		714
Long-term debt		2,314		2,196
Other liabilities and deferred revenues		373		221
Partners’ capital		1,601		1,921
Total liabilities and partners’ capital	$	5,028	$	5,052

Table 16—Equistar Unaudited Cash Flow Information

	For the twelve months ended December 31,
(Millions of dollars)	2003			2002
Net loss	$	(339	)	$	(1,299	)
Adjustments:
Cumulative effect of accounting change		—			1,053
Depreciation and amortization		307			298
Debt prepayment charges and premiums		30			—
Losses on asset dispositions		27			—
Changes in assets and liabilities:
Accounts receivable (a)		26			(54	)
Inventories		4			24
Accounts payable		40			99
Accrued interest		(2	)		(2	)
Deferred revenues		147			23
Other assets and liabilities, net		(76	)		(87	)
Net cash provided by operating activities		164			55
Expenditures for property, plant and equipment		(106	)		(118	)
Proceeds from sales of assets		69			—
Contributions to affiliates		—			(6	)
Net cash used in investing activities		(37	)		(124	)
Issuance of long-term debt		695			—
Repayment of long-term debt		(642	)		(104	)
Other		(8	)		(2	)
Net cash provided by (used in) financing activities		45			(106	)
Increase (decrease) in cash and cash equivalents	$	172		$	(175	)

(a) In consideration of discounts offered to certain customers for early payment for product delivered in December 2003, some receivable amounts were collected in December 2003 that otherwise would have been expected to be collected in January 2004, including $41 million from Occidental.

Table 17—LCR Unaudited Income Statement Information

	For the three months ended									For the twelve months ended
	December 31,						September 30,			December 31,
(Millions of dollars)	2003			2002			2003			2003			2002
Sales and other operating revenues (a)	$	1,044		$	956		$	1,030		$	4,162		$	3,392
Operating costs and expenses:
Cost of sales		948			873			939			3,842			3,093
Selling, general and administrative expenses		14			14			14			56			53
Operating income		82			69			77			264			246
Interest expense, net		(9	)		(9	)		(8	)		(36	)		(32	)
Other expense, net		—			(1	)		—			—			(1	)
Net income (b)	$	73		$	59		$	69		$	228		$	213
EBITDA (c)	$	110		$	97		$	105		$	377		$	361

(a) Includes revenues from sales to affiliates.

(b) As a partnership, LCR is not subject to federal income taxes.

(c) See Table 7 for reconciliation of LCR’s net income to EBITDA.

Table 18—LCR Operating Information

	For the three months ended			For the twelve months ended
	December 31,		September 30,	December 31,
	2003	2002	2003	2003	2002
Sales Volumes (including intersegment sales) (a)
Refined products (thousand barrels per day):
Gasoline	121	116	127	119	115
Diesel and heating oil	93	90	84	85	84
Jet fuel	20	15	18	19	18
Aromatics	8	9	7	8	9
Other refined products	94	81	91	91	96
Total refined products volumes	336	311	327	322	322
Refinery Runs
Crude processing rates (thousand barrels per day):
Crude Supply Agreement	227	209	229	224	213
Other crude oil	44	41	36	40	46
Total crude oil	271	250	265	264	259

(a) Includes volumes from sales to affiliates.

Table 19—LCR Unaudited Balance Sheet Information

(Millions of dollars)	December 31, 2003		December 31, 2002
Total current assets	$	316	$	357
Property, plant and equipment, net		1,240		1,312
Deferred charges and other assets, net		81		88
Total assets	$	1,637	$	1,757
Current maturities of long-term debt	$	714	$	—
Other current liabilities		419		514
Long-term debt		—		450
Loans payable to partners		—		264
Other liabilities and deferred credits		81		126
Partners’ capital		423		403
Total liabilities and partners’ capital	$	1,637	$	1,757

Table 20—LCR Unaudited Cash Flow Information

	For the twelve months ended December 31,
(Millions of dollars)	2003		2002
Cash flow from operations	$	374	$	361
Capital expenditures		46		65
Depreciation and amortization		113		116

Table 21—Reconciliation of Lyondell’s Days of Working Capital

(Millions of dollars)	December 31, 2003			September 30, 2003			December 31, 2002
Working Capital: (a)
Accounts receivable	$	449		$	380		$	396
Inventories		347			342			344
Accounts payable		(431	)		(354	)		(344	)
Total		365			368			396
Add: Accounts receivable sold (b)		75			67			65
Adjusted working capital	$	440		$	435		$	461
Days of Working Capital:
Sales and other operating revenues for the three months ended	$	945		$	954		$	890
Number of days in quarter		92			92			92
Sales per day	$	10.3		$	10.4		$	9.7
Days of working capital (c)		43			42			48

(a) Defined as the major controllable components of working capital—receivables, inventories and payables.

(b) Receivables sold are added back for consistency as such amounts are included in sales and in the sales per day calculation. Management believes that this provides useful information to investors because it reflects Lyondell’s and Equistar’s responsibility for administration and collection of said amounts.

(c) Days of working capital are calculated as adjusted working capital divided by sales per day.

Table 22—Reconciliation of Equistar’s Days of Working Capital

(Millions of dollars)	December 31, 2003			September 30, 2003			December 31, 2002
Working Capital: (a)
Accounts receivable (b)	$	608		$	569		$	625
Inventories		408			448			424
Accounts payable		(513	)		(451	)		(459	)
Total		503			566			590
Add: Accounts receivable sold (c)		102			77			81
Adjusted working capital	$	605		$	643		$	671
Days of Working Capital:
Sales and other operating revenues for the three months ended	$	1,665		$	1,642		$	1,431
Number of days in quarter		92			92			92
Sales per day	$	18.1		$	17.8		$	15.6
Days of working capital (b) (d)		33			36			43

(a) Defined as the major controllable components of working capital—receivables, inventories and payables.

(b) In consideration of discounts offered to certain customers for early payment for product delivered in December 2003, some receivable amounts were collected in December 2003 that otherwise would have been expected to be collected in January 2004, including $41 million from Occidental. Similarly, in September 2003, $33 million was received from Occidental that otherwise would have been expected to be collected in October 2003. Had such amounts been collected in January 2004 and October 2003, respectively, days of working capital would have been 36 days and 38 days at December 31 and September 30, 2003, respectively.

(c) Receivables sold are added back for consistency as such amounts are included in sales and in the sales per day calculation. Management believes that this provides useful information to investors because it reflects Lyondell’s and Equistar’s responsibility for administration and collection of said amounts.

(d) Days of working capital are calculated as adjusted working capital divided by sales per day.