EX-99.1 2 dex991.htm PRESS RELEASE Press Release
    EXHIBIT 99.1
LOGO   NEWS RELEASE
     
     

For information, contact:

Media—Susan Moore (713) 309-4645

Investors—Doug Pike (713) 309-7141

 

Lyondell Reports Fourth-Quarter and Full-Year 2004 Results

 

Full-Year 2004 Highlights

* Returned to profitability - $356 million year-to-year improvement
* Called $500 million of debt
* Completed Millennium acquisition

 

4Q 2004 Highlights

* Continued sequential improvement in business conditions
* Ethylene and refining segments lead strong performance versus Q4 2003
  * Ethylene, co-products and derivatives up $242 million
  * Refining up $83 million
* Non-cash charges related to Millennium acquisition accounting reduce net income by $64 million or $0.31 per share

 

HOUSTON, Feb. 3, 2005—Lyondell Chemical Company (NYSE: LYO) today announced net income for the fourth quarter 2004 of $16 million, or 8 cents per share. This compares to a net loss of $77 million, or 44 cents per share, for the fourth quarter 2003, and net income of $50 million, or 28 cents per share, for the third quarter 2004. Fourth-quarter 2004 results include a $64 million non-cash charge for purchased in-process research and development related to the acquisition of Millennium Chemicals as required by generally accepted accounting principles. Fourth-quarter 2004 results also include charges of $12 million related to the early retirement of Lyondell debt and $12 million reflecting a portion of future insurance premiums expected to be paid to industry mutual insurance consortia.

 

For the full year 2004, Lyondell had net income of $54 million, or 29 cents per share, compared to a 2003 net loss of $302 million, or $1.84 per share. These results include an $18 million charge related to the early retirement of $300 million of debt and

 

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$12 million reflecting a portion of future insurance premiums expected to be paid to industry mutual insurance consortia. Fourth-quarter and full-year results also were impacted by increased costs related to performance-based employee incentive plans.

 

Table 1—Lyondell Earnings Summary (a)

 

Millions of dollars except per share amounts

    4Q 2004
    4Q 2003
     3Q 2004
    Full Year
2004
    Full Year
2003
  

Sales and other operating revenues

    $ 2,395    $ 945     $ 1,307    $ 5,968    $ 3,801  
    
  
 
  
  

Net income (loss)

      16      (77 )     50      54      (302 )
    
  
 
  
  

Basic and diluted earnings (loss) per share

      0.08      (0.44 )     0.28      0.29      (1.84 )
    
  
 
  
  

Basic weighted average shares outstanding (millions)

      200.5      174.0       178.1      183.2      164.3  
    
  
 
  
  

Diluted weighted average shares outstanding (millions)

      207.7      174.0       179.9      186.0      164.3  
    
  
 
  
  
(a) Results of operations include the operations of Equistar and Millennium for the month of December 2004, and eleven months of Equistar accounted for as an equity investment.

 

“During 2004, the industry experienced a greater cyclical turnaround than was anticipated just one year earlier,” said Dan F. Smith, president and CEO of Lyondell Chemical Company. “At Lyondell, our timing has proved to be advantageous as our new European propylene oxide plant has operated at near full rates since its start-up in December 2003, and the Millennium acquisition has provided us access to an increased share of ethylene, co-product and derivative profitability as well as exposure to the strengthening inorganic chemicals market. In addition, during the trough, we completed turnarounds at all of our major liquid crackers. As a result of the improved conditions during the third quarter, we were able to resume our debt reduction plan. By year end, we had called $500 million of our debt, on our way to our target of repaying at least $3 billion of debt across the enterprise.”

 

OUTLOOK

 

Business conditions continue to be positive for the majority of Lyondell’s products and the company continues to benefit from particularly strong economics from its crude oil-based ethylene facilities. Through the spring, Lyondell expects that its gasoline-related products and titanium dioxide will benefit from a typical seasonal improvement.

 

“Supply/demand conditions for the majority of our products have strengthened, and we expect this strengthening to continue throughout 2005,” said Smith. “Volatile and elevated energy prices and resultant raw material prices continue to be a concern, but

 

Lyondell Chemical Company

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2

the industry continues to adapt to this challenge. Looking forward, the primary issue created by the energy price situation is the impact that it may have on the broader global economy. Overall, we believe that 2005 will be characterized by additional tightening of supply/demand and continued strengthening margins. Operationally, our focus will be to continue taking advantage of these conditions through our emphasis on safe and reliable operations. Financially, our focus continues to be debt reduction and improvement of our balance sheet.”

 

LYONDELL BUSINESS RESULTS DISCUSSION BY REPORTING SEGMENT

 

Lyondell’s operations are reported in four segments: 1) Ethylene, co-products and derivatives; 2) Propylene oxide (PO) and related products; 3) Inorganic Chemicals; and 4) Refining, which consists of Lyondell’s 58.75 percent ownership of LYONDELL-CITGO Refining (LCR), a joint venture with CITGO Petroleum Corp.

 

Ethylene, Co-products and Derivatives Segment – The primary products of this segment are ethylene, ethylene co-products (propylene, butadiene, benzene and toluene) and derivatives of ethylene (polyethylene, ethylene oxygenates and acetyls, which includes vinyl acetate monomer [VAM], acetic acid and methanol).

 

Lyondell acquired Millennium Chemicals, which owns the remaining 29.5 percent interest in Equistar, on November 30, 2004; accordingly, acetyls results were included in the ethylene, co-products and derivatives segment for December 2004 only. Acetyls operating income of $10 million for December is in addition to the amounts discussed below.

 

Table 2 — Ethylene, Co-Products & Derivatives Financial Overview — 100% Basis (a)

 

Millions of dollars

    4Q 2004
    4Q 2003
     3Q 2004
   

Full Year

2004

    Full Year
2003(c)
  

Sales and other operating revenues

    $ 2,816    $ 1,665     $ 2,439    $ 9,316    $ 6,545  
    
  
 
  
  

Operating income (loss)

      213      (29 )     129      502      (89 )
    
  
 
  
  

EBITDA (b)

      290      27       208      809      175  
    
  
 
  
  
(a) The Ethylene, Co-Products and Derivatives information presented above represents the historical operating results of Equistar on a 100% basis. See Table 5 for additional segment information.
(b) See Table 8 for a reconciliation of segment EBITDA to net income (loss) of Equistar.
(c) Full-year 2003 results include financing costs of $37 million and also include $33 million of charges for asset dispositions and employee severance.

 

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4Q04 v. 3Q04 – Ethylene and ethylene derivative product sales volumes increased slightly versus the third quarter 2004. Average prices of these products increased between 3 cents and 9 cents per pound, led by increases in ethylene glycol, polyethylene, ethylene, and ethylene oxide derivatives. The company’s cost of ethylene production metric (COE) increased between 1.5 cents and 2 cents per pound versus the third quarter. Essentially all of this increase is attributed to the higher price of natural gas liquid-based raw materials. The market price of crude oil-based raw materials also increased, but these increases were offset by an approximately equal increase in the value of co-products.

 

4Q04 v. 4Q03 – Ethylene and ethylene derivative sales volumes increased by approximately 170 million pounds, or 7 percent, compared to the fourth quarter 2003. The quarterly average price of these products increased between 12 cents and 18 cents per pound. Ethylene glycol and ethylene oxide derivative prices averaged 15 cents to 18 cents per pound higher, while ethylene and polyethylene increased an average of 12 cents to 13 cents per pound. The company’s COE increased by approximately 2 cents per pound due almost entirely to increased costs for natural gas liquid-based raw materials. Increased co-product prices largely offset a $17 per barrel increase in crude oil-based raw material costs.

 

2004 v. 2003 – For the full year, operating income increased by $591 million. Ethylene and ethylene derivative sales volumes increased by 1 billion pounds, or 10 percent. The average price for these products increased between 6 cents and 9 cents per pound, and the COE increased by 2 cents per pound. The cost of natural gas liquid-based raw materials accounted for the increase.

 

PO and Related Products Segment – The principal products of the PO and related products segment include propylene oxide (PO), PO derivatives (propylene glycol, propylene glycol ethers, butanediol and butanediol derivatives), styrene, MTBE, and toluene diisocyanate (TDI).

 

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Table 3 — PO & Related Products Financial Overview (a)

 

Millions of dollars

    4Q
2004
     4Q
2003
    3Q
2004
    Full
Year
2004
    Full
Year
2003(c)
  

Sales and other operating revenues

    $ 1,433     $ 945    $ 1,307    $ 5,006    $ 3,801  
    
 
  
  
  

Operating income (loss)

      (26 )     3      49      66      (1 )
    
 
  
  
  

EBITDA (b)

      25       60      100      293      245  
    
 
  
  
  
(a) See Table 5 for additional segment information.
(b) See Table 8 for a reconciliation of segment EBITDA to net income (loss) of Lyondell.
(c) Full-year 2003 results include an $18 million gain on Lyondell’s sale of a 10 percent interest in its Nihon Oxirane joint venture and financing costs of $6 million.

 

4Q04 v. 3Q04 – Fourth-quarter 2004 operations were negatively impacted by an approximately $60 million reduction in MTBE profitability as margins fell by approximately 25 cents per gallon, following typical seasonal trends. PO and PO derivative product results improved by approximately $40 million. Margin expansion accounted for the improvement as prices increased between 4 cents and 10 cents per pound, led by propylene glycol. Styrene results were unchanged while TDI results fell by approximately $10 million as a result of increased costs and scheduled maintenance turnaround activity.

 

4Q04 v. 4Q03 – Versus the year-ago quarter, PO and PO derivative product results improved by approximately $35 million primarily as a result of increased sales volumes. Margins also contributed to the improvement as price increases more than offset a 15 cents-per-pound increase in raw material (propylene) prices. Styrene and MTBE results were relatively unchanged versus the prior-year quarter. TDI results were down $20 million due to higher operating costs and scheduled maintenance activity.

 

2004 v. 2003 – PO and PO derivative product results improved by approximately $100 million in 2004. The improvement is attributed to a 480 million pound increase in sales volume, as well as increased prices, which more than offset increased raw material (propylene) costs. Higher margins led to an approximately $40 million increase in MTBE results. Styrene results fell by approximately $20 million as the pace of price increases lagged significant raw material (benzene) cost increases. TDI performance fell by approximately $30 million as average prices were unchanged while raw material and operating costs increased.

 

Lyondell Chemical Company

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Inorganic Chemicals Segment – The principal product of the inorganic chemicals segment is titanium dioxide (TiO2).

 

Lyondell acquired Millennium Chemicals on November 30, 2004; accordingly, results for the inorganic chemicals segment reflect December 2004 only. December operating income was $5 million and sales volume of TiO2 was approximately 45,000 metric tons during this seasonally slow month.

 

Refining Segment – Lyondell owns a 58.75 percent interest in LCR, a major refiner of heavy crude oil. This investment is accounted for using the equity method.

 

Table 4—Refining Financial Overview – 100% Basis (a)

 

Millions of dollars

    4Q 2004
    4Q 2003
    3Q 2004
   

Full Year

2004(c)

    Full Year
2003(d)

Sales and other operating revenues

    $ 1,564    $ 1,044    $ 1,546    $ 5,603    $ 4,162
    
  
  
  
  

Operating income

      165      82      139      516      264
    
  
  
  
  

EBITDA (b)

      193      110      182      645      377
    
  
  
  
  
(a) The Refining segment information presented above represents the historical operating results of LCR on a 100% basis. See Table 5 for additional segment information.
(b) See Table 8 for a reconciliation of segment EBITDA to net income (loss) of LCR.
(c) Full-year 2004 results include a cash receipt of $14 million related to a third-party contract settlement which is partially offset by a non-cash charge of $9 million for the write-off of obsolete equipment.
(d) Full-year 2003 results include a $25 million charge related to the redesign of a low-sulfur gasoline project and a $6 million charge related to personnel reductions.

 

4Q04 v. 3Q04 – Results continued to be strong in the fourth quarter. Venezuelan contract (CSA) crude volumes (235,000 barrels per day) and total crude volumes (268,000 barrels per day) were slightly reduced from the third quarter while spot crude margins increased by more than $4 per barrel.

 

4Q04 v. 4Q03 – Volumes of heavy crude processed under the CSA contract increased by 8,000 barrels per day versus the same quarter in 2003. Margins on both CSA and spot crude were stronger than during the fourth quarter 2003.

 

2004 v. 2003 – LCR had record earnings in 2004, driven primarily by strong operating performance, increased production rates, and increased spot crude and aromatics margins. For 2004, total crude volumes averaged 272,000 barrels per day while CSA volumes averaged 237,000 barrels per day.

 

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CASH DISTRIBUTIONS AND DEBT REDUCTION

 

LCR to Lyondell – During the fourth quarter 2004, net distributions received by Lyondell from LCR were $61 million. During 2004, Lyondell received net distributions of $341 million versus $223 million in 2003.

 

Equistar to Lyondell and Millennium – During the fourth quarter 2004, Lyondell received $151 million of distributions from Equistar and, for the full year 2004, Lyondell received $222 million. There were no distributions to Lyondell or Millennium during 2003. Millennium received $63 million from Equistar during the fourth quarter and $93 million during 2004.

 

Millennium to Lyondell – There were no dividends from Millennium to Lyondell during 2004.

 

Debt reduction – For the year, Lyondell called $500 million of debt and paid $300 million toward early debt reduction. The remaining $200 million was paid in January 2005.

 

CONFERENCE CALL

 

Lyondell will host a conference call today, Feb. 3, 2005, 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, Vice President of Investor Relations. The dial-in numbers are 888-391-2385 (U.S – toll free) and 484-644-0641 (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 Feb. 3 to 5 p.m. ET Feb. 11. The dial-in numbers are 800-216-3058 (U.S.) and 402-220-3764 (international). Pass code for each is 5549. Web replay will be available at 2:30 p.m. ET Feb. 3 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 Feb. 3 at www.lyondell.com/earnings.

 

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ABOUT LYONDELL

 

Lyondell Chemical Company, headquartered in Houston, Texas, is North America’s third-largest independent, publicly traded chemical company. Lyondell is a major global manufacturer of basic chemicals and derivatives including ethylene, propylene, titanium dioxide, styrene, polyethylene, propylene oxide and acetyls. It also is a significant producer of gasoline blending components. The company has a 58.75 percent interest in LYONDELL-CITGO Refining LP, a refiner of heavy, high-sulfur crude oil. As a result of Lyondell’s November 30, 2004 acquisition of Millennium Chemicals Inc., Millennium and Equistar Chemicals, LP are wholly owned subsidiaries of Lyondell. Lyondell is a global company operating on five continents and employs approximately 10,000 people worldwide.

 

FORWARD-LOOKING STATEMENTS

 

The statements in this release and the related teleconference relating to matters that are not historical facts are forward-looking statements, including, but not limited to, Lyondell’s earnings guidance, preliminary financial information, and the information regarding the restatement of Millennium’s financial statements for prior periods and the impact thereof. Forward-looking statements are subject to risks and uncertainties. Actual results could differ materially based on factors including, but not limited to, the timing and nature of the final resolution of the accounting matters discussed in this release and the related teleconference. Until the restatement of Millennium’s financial statements for prior periods has been completed, no assurance can be given with respect to the financial statement adjustments, the impacts resulting from such adjustments or the periods affected by such adjustments. Other factors that may affect actual results include the following: availability, cost and price volatility of raw materials and utilities; uncertainties associated with the U.S. and worldwide economies; current and potential governmental regulatory actions; terrorist acts; international political unrest; operating interruptions; legal, tax and environmental proceedings; cyclical nature of the chemical and refining industries; competitive products and pricing; industry production capacities and operating rates; supply/demand balances; risks of doing business outside of the U.S.; access to capital markets; technological developments; and other risk factors. All of such forward-looking statements are based upon the current beliefs and expectations of management, and are subject to significant risks and uncertainties. Additional factors that could cause results to differ materially from those described in the forward-looking statements can be found in the Lyondell and Millennium Annual Reports on Form 10-K for the year ended December 31, 2003 (in the case of Millennium, as amended), the Lyondell and Millennium Quarterly Reports on Form 10-Q for the quarter ended September 30, 2004, and the Lyondell and Millennium Annual Reports on Form 10-K for the year ended December 31, 2004, which will be filed with the SEC in March 2005.

 

###

 

SOURCE: Lyondell Chemical Company; Equistar Chemicals, LP; Millennium Chemicals Inc.

 

Lyondell Chemical Company

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Table 5 - Selected Unaudited Segment Financial Information (a)

 

     For the three months ended
    For the twelve
months ended
December 31,
  
     December 31,
     September 30,
2004
   

(Millions of dollars)

    2004
     2003
        2004
    2003
  

Sales and other operating revenues (b)

                                       

Ethylene, Co-Products & Derivatives

    $ 2,816     $ 1,665     $ 2,439    $ 9,316    $ 6,545  

PO & Related Products

      1,433       945       1,307      5,006      3,801  

Refining

      1,564       1,044       1,546      5,603      4,162  

Operating income (loss)

                                       

Ethylene, Co-Products & Derivatives

    $ 213     $ (29 )   $ 129    $ 502    $ (89 )

PO & Related Products

      (26 )     3       49      66      (1 )

Refining

      165       82       139      516      264  

Depreciation and amortization

                                       

Ethylene, Co-Products & Derivatives

    $ 79     $ 77     $ 81    $ 313    $ 307  

PO & Related Products

      64       66       59      250      250  

Refining

      28       28       29      115      113  

EBITDA (c)

                                       

Ethylene, Co-Products & Derivatives

    $ 290     $ 27     $ 208    $ 809    $ 175  

PO & Related Products

      25       60       100      293      245  

Refining

      193       110       182      645      377  

CAPITAL EXPENDITURES

                                       

Ethylene, Co-Products & Derivatives

    $ 32     $ 44     $ 28    $ 101    $ 106  

PO & Related Products

      19       21       16      62      268  

Refining

      29       10       13      71      46  
(a) The information presented above includes operating results of LCR and Equistar on a 100% basis. See Tables 13 and 16 for additional Equistar and LCR financial information. See Table 7 for reconciliation of PO and related products segment information to consolidated Lyondell financial information for the three months and twelve months ended December 31, 2004 and Table 9 for PO and related products segment information for all other periods presented.

 

(b) Sales include sales to affiliates and intersegment sales.

 

(c) See Table 8 for reconciliation of segment EBITDA to company net income (loss).

Table 6 - Selected Segment Sales Volumes (a) (b)

 

     For the three months ended
    For the twelve
months ended
December 31,
     December 31,
    September 30,
2004
   

(In millions)

    2004
    2003
       2004
    2003

Ethylene, co-products and derivatives

                         

Ethylene and derivatives (pounds)

    2,881    2,713    2,836    11,194    10,175

Other olefins (pounds)

    2,029    2,030    2,037    7,942    7,092

Aromatics (gallons)

    105    96    99    377    384

PO and related products

                         

PO and derivatives (pounds)

    885    794    736    3,330    2,844

Co-products:

                         

Styrene monomer (pounds)

    997    953    962    3,720    3,467

MTBE and other TBA derivatives (gallons)

    289    271    269    1,114    1,142

Refined products (thousand barrels per day):

                         

Gasoline

    119    121    117    118    119

Diesel and heating oil

    92    93    99    95    85

Jet fuel

    17    20    20    17    19

Aromatics

    7    8    9    8    8

Other refined products

    105    94    99    96    91
    
  
  
  
  

Total refined products volumes

    340    336    344    334    322
    
  
  
  
  

Refinery Runs

                         

Crude processing rates (thousand barrels per day):

                         

Crude Supply Agreement

    235    227    243    237    224

Other crude oil

    33    44    35    35    40
    
  
  
  
  

Total crude oil

    268    271    278    272    264
    
  
  
  
  
(a) The information presented above includes operating results of LCR and Equistar on a 100% basis.

 

(b) Sales volumes include sales to affiliates and intersegment sales.

Table 7 - Reconciliation of Segment Information to Consolidated Financial Information

 

(Millions of dollars)

    Sales and
other
operating
revenues
     Operating
income
     Depreciation
and
amortization
    Capital
expenditures

For the three months ended December 31, 2004:

                              

Segment Data

                              

PO & Related Products

    $ 1,433     $ (26 )   $ 64    $ 19

Add:

                              

December 2004 Equistar operations

      945       88       30      16

December 2004 Millennium operations

      148       (49 )     11      7

Other (a)

      (131 )     —         —        —  
    
 
 
  

Lyondell (consolidated)

    $ 2,395     $ 13     $ 105    $ 42
    
 
 
  

For the twelve months ended December 31, 2004:

                              

Segment Data

                              

PO & Related Products

    $ 5,006     $ 66     $ 250    $ 62

Add:

                              

December 2004 Equistar operations

      945       88       30      16

December 2004 Millennium operations

      148       (49 )     11      7

Other (a)

      (131 )     —         —        —  
    
 
 
  

Lyondell (consolidated)

    $ 5,968     $ 105     $ 291    $ 85
    
 
 
  
(a) Represents elimination of December 2004 intersegment transactions.

Table 8 - Reconciliation of Segment EBITDA to Net Income (Loss)

 

     For the three months ended
     For the twelve
months ended
December 31,
  
     December 31,
     September 30,
2004
    

(Millions of dollars)

    2004
     2003
       2004
     2003
  

LYONDELL

                                         

PO & Related Products EBITDA

    $ 25     $ 60     $ 100     $ 293     $ 245  

Add:

                                         

December 2004 Equistar net income

      90       —         —         90       —    

December 2004 Millennium net income

      5       —         —         5       —    

Income from equity investment in Equistar(a)

      48       (70 )     54       141       (228 )

Income from equity investment in LCR

      95       45       89       303       144  

Deduct:

                                         

Depreciation and amortization

      (105 )     (66 )     (59 )     (291 )     (250 )

Interest expense, net

      (124 )     (104 )     (108 )     (449 )     (392 )

Provision for income taxes

      (3 )     58       (26 )     (23 )     179  

Less: December amounts for Equistar and Millennium

      64       —         —         64       —    

Intercompany profit elimination

      (15 )     —         —         (15 )     —    

Purchased in process R&D

      (64 )     —         —         (64 )     —    
    
 
 
 
 

Lyondell net income (loss)

    $ 16     $ (77 )   $ 50     $ 54     $ (302 )
    
 
 
 
 

EC&D EBITDA

    $ 290     $ 27     $ 208     $ 809     $ 175  

Deduct:

                                         

Depreciation and amortization

      (79 )     (77 )     (81 )     (313 )     (307 )

Interest expense, net

      (55 )     (54 )     (55 )     (220 )     (207 )
    
 
 
 
 

Equistar net income (loss)

    $ 156     $ (104 )   $ 72     $ 276     $ (339 )
    
 
 
 
 

Refining EBITDA

    $ 193     $ 110     $ 182     $ 645     $ 377  

Deduct:

                                         

Depreciation and amortization

      (28 )     (28 )     (29 )     (115 )     (113 )

Interest expense, net

      (6 )     (9 )     (6 )     (30 )     (36 )
    
 
 
 
 

LCR net income

    $ 159     $ 73     $ 147     $ 500     $ 228  
    
 
 
 
 
(a) Represents income from equity investment in Equistar prior to December 1, 2004.

Table 9 - Lyondell Unaudited Income Statement Information (a)

 

     For the three months ended
     For the twelve
months ended
December 31,
  
     December 31,
     September 30,
2004
    

(Millions of dollars, except per share data)

    2004
     2003
       2004
     2003
  

Sales and other operating revenues

    $ 2,395     $ 945     $ 1,307     $ 5,968     $ 3,801  

Cost of sales

      2,167       886       1,195       5,475       3,599  

Selling, general and administrative expenses

      134       45       55       283       166  

Research and development expenses

      81       11       8       105       37  
    
 
 
 
 

Operating income (loss)

      13       3       49       105       (1 )

Income (loss) from equity investment in Equistar

      48       (70 )     54       141       (228 )

Income from equity investment in LCR

      95       45       89       303       144  

Income (loss) from other equity investments

      4       (9 )     1       7       (19 )

Interest expense, net

      (124 )     (104 )     (108 )     (449 )     (392 )

Other income (expense), net

      (17 )     —         (9 )     (30 )     15  
    
 
 
 
 

Income (loss) before income taxes

      19       (135 )     76       77       (481 )

Provision for (benefit from) income taxes

      3       (58 )     26       23       (179 )
    
 
 
 
 

Net income (loss)

    $ 16     $ (77 )   $ 50     $ 54     $ (302 )
    
 
 
 
 

Basic and diluted earnings (loss) per share:

    $ 0.08     $ (0.44 )   $ 0.28     $ 0.29     $ (1.84 )
    
 
 
 
 

Weighted average shares (in millions):

                                         

Basic

      200.5       174.0       178.1       183.2       164.3  
    
 
 
 
 

Diluted

      207.7       174.0       179.9       186.0       164.3  
    
 
 
 
 
(a) Results of operations include the operations of Equistar and Millennium for the month of December 2004, and eleven months of Equistar accounted for as an equity investment.

Table 10 - Lyondell Unaudited Cash Flow Information (a)

 

     For the twelve
months ended
December 31,
  

(Millions of dollars)

    2004
     2003
  

Net income (loss)

    $ 54     $ (302 )

Adjustments:

                 

Depreciation and amortization

      291       250  

(Income) loss from equity investments

      (451 )     103  

Distributions of earnings from affiliates

      446       146  

Deferred income taxes

      141       (172 )

Gain on sale of equity interest

      —         (18 )

Changes in assets and liabilities:

                 

Accounts receivable

      190       (54 )

Inventories

      (125 )     14  

Accounts payable

      (159 )     61  

Accrued interest

      64       1  

Income taxes refundable, net of payable

      9       27  

Other assets and liabilities, net

      (66 )     47  
    
 

Cash provided by operating activities

      394       103  
    
 

Expenditures for property, plant and equipment

      (85 )     (268 )

Distributions from affiliates in excess of earnings

      74       111  

Contributions and advances to affiliates

      (53 )     (137 )

Maturity of other short-term investments

      —         44  

Cash received in acquisition of Equistar

      85       —    

Cash received in acquisition of Millennium

      367       —    

Proceeds from sale of equity interest

      —         28  
    
 

Cash (used in) provided by investing activities

      388       (222 )
    
 

Issuance of long-term debt

      4       318  

Repayment of long-term debt

      (319 )     (103 )

Dividends paid

      (127 )     (116 )

Other

      24       167  
    
 

Cash provided by (used in) financing activities

      (418 )     266  
    
 

Effect of exchange rate changes on cash

      2       5  
    
 

Increase in cash and cash equivalents

    $ 366     $ 152  
    
 
(a) Equistar and Millennium became wholly owned subsidiaries as of December 1, 2004. Prior to December 1, 2004, Lyondell's investment in Equistar was accounted for on an equity basis.

Table 11 - Lyondell Unaudited Balance Sheet Information (a) (b)

 

(Millions of dollars)

    December 31,
2004
    December 31,
2003

Cash and cash equivalents

    $ 804    $ 438

Accounts receivable, net

      1,569      449

Inventories

      1,619      347

Prepaid expenses and other current assets

      208      82

Deferred tax assets

      236      43
    
  

Total current assets

      4,436      1,359

Property, plant and equipment, net

      7,230      2,640

Investments and long-term receivables:

              

Investment in Equistar

      —        965

Investment in PO joint ventures

      838      866

Investment in and receivable from LCR

      192      232

Other investments and long-term receivables

      160      85

Goodwill, net

      2,216      1,080

Other assets, net

      858      406
    
  

Total assets

    $ 15,930    $ 7,633
    
  

Accounts payable

    $ 1,197    $ 431

Current maturities of long-term debt

      308      —  

Accrued liabilities

      677      268
    
  

Total current liabilities

      2,182      699

Long-term debt

      7,556      4,151

Other liabilities

      1,806      680

Deferred income taxes

      1,545      792

Minority interest

      181      155

Stockholders' equity (244,541,913 and 176,792,587 shares outstanding at December 31, 2004 and December 31, 2003, respectively)

      2,660      1,156
    
  

Total liabilities and stockholders' equity

    $ 15,930    $ 7,633
    
  
(a) Reflects Lyondell and its consolidated subsidiaries, including Equistar and Millennium at December 31, 2004. Prior to December 1, 2004, Lyondell's investment in Equistar was accounted for on an equity basis.

 

(b) The purchase price allocation and other information related to Millennium used in the preparation of this financial data are preliminary. Lyondell is seeking additional information related to the fair value of certain assets acquired and liabilities assumed. The finalization of these matters is not expected to have a material effect on the purchase price allocation.

 

Table 12 - Lyondell Selected Equity Investment Activity

 

(Millions of dollars)

    For the three
months ended
December 31,
2004
     For the
twelve
months ended
December 31,
2004
  

Investment in Equistar, beginning of period

    $ 985     $ 965  

Lyondell's share of Equistar net income, prior to December 1, 2004

      48       141  

Cash distributions from Equistar, prior to December 1, 2004

      (49 )     (120 )

Lyondell's share of Equistar other comprehensive loss, prior to December 1, 2004

      —         (2 )

Acquisition of Millennium's 29.5% interest, as of December 1, 2004

      1,262       1,262  

Consolidation of Equistar, as of December 1, 2004

      (2,246 )     (2,246 )
    
 

Investment in Equistar, end of period

    $ —       $ —    
    
 

Investment in LCR, beginning of period

    $ (68 )   $ 3  

Lyondell's share of LCR net income

      95       303  

Cash distributions from LCR

      (77 )     (385 )

Cash contributions to LCR

      16       44  

Other

      (3 )     (2 )
    
 

Investment in LCR, end of period

      (37 )     (37 )

LCR receivable, beginning and end of period

      229       229  
    
 

Investment in and receivable from LCR, end of period

    $ 192     $ 192  
    
 

Tables 13 through 19 represent additional financial

information on a 100% basis for Equistar and LCR.

 

Table 13 - Equistar Unaudited Income Statement Information (a)

 

     For the three months ended
     For the twelve
months ended
December 31,
  
     December 31,
     September 30,
2004
    

(Millions of dollars)

    2004
     2003
     2004
     2004
     2003
  

Sales and other operating revenues (b)

    $ 2,816     $ 1,665     $ 2,439     $ 9,316     $ 6,545  

Cost of sales

      2,524       1,633       2,255       8,587       6,387  

Selling, general and administrative expenses

      68       51       47       197       182  

Research and development expenses

      11       9       8       34       38  

(Gain) loss on asset dispositions

      —         1       —         (4 )     27  
    
 
 
 
 

Operating income (loss)

      213       (29 )     129       502       (89 )

Interest expense, net

      (55 )     (54 )     (55 )     (220 )     (207 )

Other expense, net

      (2 )     (21 )     (2 )     (6 )     (43 )
    
 
 
 
 

Net income (loss) (c)

    $ 156     $ (104 )   $ 72     $ 276     $ (339 )
    
 
 
 
 
(a) Represents information for Equistar on a stand-alone basis and does not reflect purchase accounting adjustments.

 

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

 

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

 

Table 14 - Equistar Unaudited Balance Sheet Information (a)

 

(Millions of dollars)

    December 31,
2004
    December 31,
2003

Cash and cash equivalents

    $ 39    $ 199

Accounts receivable, net (b)

      818      608

Inventories

      582      408

Prepaid expenses and other current assets

      43      46
    
  

Total current assets

      1,482      1,261

Property, plant and equipment, net

      3,167      3,334

Investments

      60      60

Other assets, net

      365      373
    
  

Total assets

    $ 5,074    $ 5,028
    
  

Accounts payable

    $ 532    $ 513

Current maturities of long-term debt

      1      —  

Accrued liabilities

      244      241
    
  

Total current liabilities

      777      754

Long-term debt

      2,312      2,314

Other liabilities and deferred revenues

      424      359

Partners' capital

      1,561      1,601
    
  

Total liabilities and partners' capital

    $ 5,074    $ 5,028
    
  
(a) Represents information for Equistar on a stand-alone basis and does not reflect purchase accounting adjustments.

 

(b) See Table 19 for accounts receivable sold.

Table 15 - Equistar Unaudited Cash Flow Information (a)

 

     For the twelve
months ended
December 31,
  

(Millions of dollars)

    2004
     2003
  

Net income (loss)

    $ 276     $ (339 )

Adjustments:

                 

Depreciation and amortization

      313       307  

Deferred maintenance turnaround expenditures

      (55 )     (97 )

Deferred revenues

      —         147  

Debt prepayment charges and premiums

      —         30  

(Gain) loss on asset dispositions

      (4 )     27  

Changes in assets and liabilities:

                 

Accounts receivable (b) (c)

      (208 )     26  

Inventories

      (174 )     4  

Accounts payable

      30       40  

Accrued interest

      1       (2 )

Other assets and liabilities, net

      36       21  
    
 

Cash provided by operating activities

      215       164  
    
 

Expenditures for property, plant and equipment

      (101 )     (106 )

Proceeds from sales of assets

      41       69  
    
 

Cash used in investing activities

      (60 )     (37 )
    
 

Issuance of long-term debt

      —         695  

Repayment of long-term debt

      —         (642 )

Distributions to owners

      (315 )     —    

Other

      —         (8 )
    
 

Cash provided by (used in) financing activities

      (315 )     45  
    
 

Increase (decrease) in cash and cash equivalents

    $ (160 )   $ 172  
    
 

Distributions to owners:

                 

Lyondell

    $ 222     $ —    

Millennium

      93       —    
    
 

Total

    $ 315     $ —    
    
 
(a) Represents information for Equistar on a stand-alone basis and does not reflect purchase accounting adjustments.

 

(b) In consideration of discounts offered to certain customers for early payment for product, some receivable amounts were collected in December 2004 and 2003 that otherwise would have been expected to be collected in January of the subsequent year. This included $66 million and $41 million from Occidental Chemical Holding Corporation in December 2004 and 2003, respectively.

 

(c) See Table 19 for accounts receivable sold.

Table 16 - LCR Unaudited Income Statement Information

 

     For the three months ended
     For the twelve
months ended
December 31,
  
     December 31,
     September 30,
2004
    

(Millions of dollars)

    2004
     2003
       2004
     2003
  

Sales and other operating revenues (a)

    $ 1,564     $ 1,044     $ 1,546     $ 5,603     $ 4,162  

Cost of sales

      1,385       948       1,393       5,028       3,842  

Selling, general and administrative expenses

      14       14       14       59       56  
    
 
 
 
 

Operating income

      165       82       139       516       264  

Interest expense, net

      (6 )     (9 )     (6 )     (30 )     (36 )

Other income

      —         —         14       14       —    
    
 
 
 
 

Net income (b)

    $ 159     $ 73     $ 147     $ 500     $ 228  
    
 
 
 
 

EBITDA (c)

    $ 193     $ 110     $ 182     $ 645     $ 377  
(a) Sales and other operating revenues include sales to affiliates.

 

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

 

(c) See Table 8 for reconciliation of LCR's net income to EBITDA.

 

Table 17 - LCR Unaudited Balance Sheet Information

 

(Millions of dollars)

    December 31,
2004
    December 31,
2003

Total current assets

    $ 359    $ 320

Property, plant and equipment, net

      1,227      1,240

Other assets, net

      61      77
    
  

Total assets

    $ 1,647    $ 1,637
    
  

Current maturities of long-term debt

    $ 5    $ —  

Other current liabilities

      583      386

Long-term debt

      443      450

Loans payable to partners

      264      264

Other liabilities

      112      114

Partners' capital

      240      423
    
  

Total liabilities and partners' capital

    $ 1,647    $ 1,637
    
  

 

Table 18 - LCR Unaudited Cash Flow Information

 

     For the twelve
months ended
December 31,

(Millions of dollars)

    2004
    2003

Cash flow from operations

    $ 667    $ 374

Capital expenditures

      71      46

Depreciation and amortization

      115      113

Table 19 - Reconciliation of Equistar's Days of Working Capital

 

(Millions of dollars)

    December 31,
2004
     September 30,
2004
     December 31,
2003
  

Working Capital: (a)

                         

Accounts receivable (b)

    $ 818     $ 813     $ 608  

Inventories

      582       497       408  

Accounts payable

      (532 )     (581 )     (513 )
    
 
 

Total

      868       729       503  

Add: Accounts receivable sold (c)

      200       120       102  
    
 
 

Adjusted working capital

    $ 1,068     $ 849     $ 605  
    
 
 

Days of Working Capital:

                         

Sales and other operating revenues for the three months ended

    $ 2,816     $ 2,439     $ 1,665  

Number of days in quarter

      92       92       92  

Sales per day

    $ 30.6     $ 26.5     $ 18.1  

Days of working capital (b) (d)

      35       32       33  
(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 2004, some receivable amounts were collected in December 2004 that otherwise would have been expected to be collected in January 2005, including $66 million from OCHC. Similarly, in September 2004 and December 2003, $51 million and $41 million, respectively, was received from OCHC. Had these early payments not been received, days of working capital would have been 37 days, 34 days and 36 days at December and September 30, 2004 and December 31, 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 receivables as they would have been if no receivables had been sold.

 

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