Highlights HOUSTON, July 26 /PRNewswire-FirstCall/ -- Lyondell
Chemical Company (NYSE:LYO) today announced income from continuing
operations for the second quarter 2007 of $271 million, or $1.02
per share on a fully diluted basis. For the first six months of
2007, net income from continuing operations was $277 million, or
$1.05 per share on a fully diluted basis. Comparisons with the
prior quarter, second quarter 2006 and first half of 2006 are
available in the following table. Table 1 - Lyondell Earnings
Summary (a) 1st 1st Six Six Millions of 2Q 2Q 1Q Months Months
dollars except per 2007 2006 2007 2007 2006 share amounts Sales and
other operating revenues $7,482 $4,715 $5,789 $13,271 $9,133 Income
from continuing operations 271 129 6 277 415 Net income 176 160 19
195 450 Income from continuing operations: Basic earnings per share
1.07 0.53 0.03 1.10 1.68 Diluted earnings per share 1.02 0.50 0.02
1.05 1.61 Net income: Basic earnings per share 0.69 0.65 0.08 0.77
1.82 Diluted earnings per share 0.66 0.62 0.07 0.74 1.74 Basic
weighted average shares outstanding (millions) 252.9 247.4 251.1
252.0 247.1 Diluted weighted average shares outstanding (millions)
(b) 265.7 260.1 263.7 264.7 259.7 (a) Results include 100% of the
operations of Houston Refining LP ("Houston Refining")
prospectively from August 16, 2006. Prior to August 16, 2006,
Lyondell's 58.75% interest in Houston Refining was accounted for as
an equity investment. (b) Includes the dilutive effect of the
convertible debentures, stock options and warrants. Second-quarter
2007 results from continuing operations improved versus the first
quarter 2007 primarily due to record refining segment results
coupled with strong fuels (MTBE/ETBE) performance. Ethylene segment
results continued to reflect good volumes and operating rates with
modest margin improvement. In the propylene oxide segment, chemical
product results declined primarily due to increased raw material
costs; however, these were more than offset by the strength in
fuels (MTBE/ETBE). The inorganic chemicals business is accounted
for as a discontinued operation as it was sold midway through the
quarter for a total transaction value of approximately $1.3
billion. After-tax cash proceeds of approximately $1.05 billion
were used to repay debt. Additionally, results reflect the
following: Table 2 - Charges (Benefits) Included in Lyondell's
Results from Continuing Operations 1st 1st Millions of dollars Six
Six 2Q 2Q 1Q Months Months 2007 2006 2007 2007 2006 Pretax charges
(benefits): Net charges related to commercial disputes (a) $10 $ -
- $62 $72 $- - Debt retirement charges 43 - - - - 43 - - Houston
Refining LP - related settlement (b) - - - - - - - - (70) Texas
Margin Tax credit, net of federal income tax (17) - - - - (17) - -
Other tax effects of (charges) credits (19) - - (22) (40) 24
After-tax effect of net charges (credits) 17 - - 40 58 (46) Effect
on diluted earnings per share 0.06 - - 0.15 0.22 (0.18) (a)
Represents pretax charges related to commercial disputes, including
charges associated with the 2005 shutdown of the Lake Charles
toluene diisocyanate ("TDI") facility. (b) Represents the net
effect of the resolution of various matters among Houston Refining,
its owners and their affiliates. "The strength in our refining
operations was quite clear during the quarter and demonstrated the
way in which the segment complements our chemical operations and
provides balance within our portfolio. While our refining and fuel
products benefited from the strong fuel markets, similar dynamics
within the energy markets pressured our chemical products. In fact,
ethylene segment raw material costs on average increased by
approximately 20 percent. Consequently, despite a relatively strong
market and several price increases, margin improvement in this
segment was quite modest," said Dan F. Smith, chairman, president
and CEO of Lyondell Chemical Company. "The strong refining results
were complemented by the sale of our inorganics business, which
enabled us to accelerate our debt repayment program providing
additional value to our investors." OUTLOOK Thus far, third-quarter
market conditions have been similar to the prior quarter. Refining
and fuels have remained quite strong while elevated raw material
costs continue to pressure the chemical products. "Our outlook for
our chemical and fuel businesses continues to be positive and thus
far the summer season has been strong, meeting our expectations.
The portfolio changes that we made over the past year, coupled with
our operational focus, have positioned us to benefit in a growing
global economy," said Smith. LYONDELL BUSINESS RESULTS DISCUSSION
BY REPORTING SEGMENT Lyondell operates in three segments: 1)
Ethylene, co-products and derivatives; 2) Propylene oxide (PO) and
related products; and 3) Refining. Inorganic chemicals is presented
as a discontinued operation due to the May 15 sale of this
business. Ethylene, Co-products and Derivatives Segment -- The
primary products of this segment are ethylene, ethylene co-products
(propylene, butadiene and benzene), and derivatives of ethylene
(polyethylene, ethylene oxygenates and vinyl acetate monomer or
VAM). Table 3 - Ethylene, Co-Products & Derivatives Financial
Overview (a) 1st 1st Six Six 2Q 2Q 1Q Months Months Millions of
dollars 2007 2006 2007 2007 2006 Sales and other operating revenues
$3,665 $3,401 $2,991 $6,656 $6,553 Operating income 95 181 77 172
480 EBITDA (b) 194 279 177 371 676 (a) See Table 7 for additional
financial information. (b) See Table 10 for a reconciliation of
segment EBITDA to income from continuing operations. 2Q07 v. 1Q07
-- Ethylene and ethylene derivative product sales volumes increased
by approximately 125 million pounds (approximately 4 percent)
versus the first quarter 2007. Compared with the first quarter, our
quarterly average prices for ethylene and polyethylene increased by
approximately 4.5 cents and 5 cents per pound, respectively, while
the ethylene glycol price increased by 1.5 cents per pound. The
company's average cost-of-ethylene-production metric (COE)
increased by approximately 2.5 cents per pound versus the first
quarter primarily due to increases from natural gas liquid-based
raw materials. Acetyls results declined by approximately $15
million as a result of higher costs and lower methanol prices. 2Q07
v. 2Q06 -- Ethylene and ethylene derivative product sales volumes
were up approximately 150 million pounds versus the second quarter
2006. The quarterly average prices for ethylene and polyethylene
decreased by approximately 2.5 cents and 2 cents per pound,
respectively, and the ethylene glycol price increased by 4 cents
per pound. The company's average COE metric increased by
approximately 1 cent per pound. Acetyls results were unchanged. PO
and Related Products Segment -- The principal products of the PO
and related products segment include PO, PO derivatives (propylene
glycol, propylene glycol ethers, butanediol and butanediol
derivatives), styrene, fuel products (methyl tertiary butyl ether
[MTBE] and ethyl tertiary butyl ether [ETBE]), isobutylene and
toluene diisocyanate (TDI). Table 4 - PO & Related Products
Financial Overview (a) 1st 1st Six Six 2Q 2Q 1Q Months Months
Millions of dollars 2007 2006 2007 2007 2006 Sales and other
operating revenues $2,169 $1,763 $1,758 $3,927 $3,407 Operating
income (b) 133 108 27 160 225 EBITDA (b) (c) 195 170 87 282 345 (a)
See Table 7 for additional financial information. (b) Includes
pretax charges in the second and first quarters of 2007 of $10
million and $62 million, respectively, and $72 million in the first
six months of 2007 related to commercial disputes, including
charges associated with the 2005 shutdown of the Lake Charles TDI
facility. (c) See Table 10 for a reconciliation of segment EBITDA
to income from continuing operations. 2Q07 v. 1Q07 -- Segment
EBITDA increased by $108 million versus the first quarter 2007
partially due to the absence of the $62 million first-quarter TDI
charge. Fuel-product results increased by approximately $105
million primarily as a result of increased raw material margins
(approximately 40 cents per gallon) and sales volumes. PO and PO
derivative results decreased by approximately $45 million primarily
due to increased propylene raw material costs, compensation expense
and charges related to commercial disputes. Styrene results were
relatively unchanged. Absent the first-quarter charge, TDI results
decreased by approximately $10 million due to scheduled
second-quarter maintenance. 2Q07 v. 2Q06 -- Segment EBITDA
increased by $25 million versus the second quarter 2006 primarily
due to increased fuel product margins. Fuel product results
increased by approximately $45 million due to higher volumes and
margins. PO and PO derivative results decreased by approximately
$10 million primarily due to compensation expense and charges
related to commercial disputes. Together, styrene and TDI results
declined by approximately $10 million. Refining Segment -- Lyondell
owned a 58.75 percent interest in Houston Refining LP (formerly
known as Lyondell-Citgo Refining LP) prior to Aug. 16, 2006, at
which time Lyondell purchased the remaining 41.25 percent interest
from CITGO Petroleum Corporation. Prior to Aug. 16, Lyondell's
interest was accounted for by the equity method. As a result of the
acquisition, Houston Refining's operations are consolidated from
Aug. 16. The following review is on a 100-percent basis. Table 5 -
Refining Financial Overview - 100% Basis (a) 1st 1st Six Six 2Q 2Q
1Q Months Months Millions of dollars 2007 2006 2007 2007 2006 Sales
and other operating revenues $2,793 $2,411 $1,884 $4,677 $4,505
Operating income 387 163 78 465 325 EBITDA (b) 451 194 133 584 387
(a) The Refining segment information presented above represents the
historical operating results of Houston Refining on a 100% basis,
and reflects purchase accounting adjustments from August 16, 2006.
See Table 7 for additional financial information. (b) See Table 10
for a reconciliation of segment EBITDA to income from continuing
operations and, as appropriate, to net income of Houston Refining.
2Q07 v. 1Q07 -- Segment EBITDA was $318 million higher than the
prior quarter, which was negatively impacted by $140 million
related to the planned maintenance turnaround and upgrade of the
fluid catalytic cracking unit and related units. In addition to the
absence of turnaround-related impacts, second-quarter results were
positively impacted by approximately $160 million from increased
margins versus the first quarter. Additionally, aromatics and lubes
benefited by a combined $20 million as a result of strong
operations. 2Q07 v. 2Q06 -- Results increased primarily due to
increased margins, which are partially attributed to stronger
market conditions and partially attributed to the cancellation of
the previous PdVSA crude supply agreement during August 2006.
Aromatics and lubes contributed an additional $20 million versus
the second quarter 2006. Discontinued Operations -- Inorganic
Chemicals The principal product of inorganic chemicals is titanium
dioxide (TiO2). In view of the May 15, 2007, sale, the inorganic
chemicals business is reported as a discontinued operation
including comparative periods. Second-quarter results for the
discontinued operations include a $91 million loss on the sale due
primarily to the impact of income taxes. Table 6 - Discontinued
Operations - Inorganic Chemicals Financial Overview (a) 1st 1st Six
Six Millions of dollars 2Q 2Q 1Q Months Months 2007 2006 2007 2007
2006 Sales and other operating revenues $181 $355 $333 $514 $695
Income (loss) from discontinued operations, net of tax (b) (95) 31
13 (82) 35 (a) See Table 7 for additional financial information.
(b) Income (loss) from discontinued operations, net of tax, for the
three and six months ended June 30, 2007 includes a $21 million
pretax loss or $91 million after tax, related to the sale of the
worldwide inorganic chemicals business. Cash Distributions and Debt
Reduction Equistar Chemicals, LP to Lyondell Chemical Company (LCC)
and Millennium Chemicals Inc. -- There were no distributions during
the quarter. Millennium to Lyondell Chemical Company (LCC) -- There
were no dividends paid by Millennium to LCC during the second
quarter. Debt Reduction -- During the second quarter, debt
repayment, including scheduled amortization of term loans and debt
of discontinued operations, totaled $1.3 billion. Millennium debt
repayment was $436 million, Equistar repaid $600 million, and LCC
repaid $274 million. Receivable Facilities Utilization -- As of
June 30, 2007, Lyondell's receivable facility was unutilized and
Equistar's receivable facility was utilized by $155 million.
CONFERENCE CALL Lyondell will host a conference call today, July
26, 2007, at 11:30 a.m. Eastern Time (ET). Participating on the
call will be: Dan F. Smith, Chairman, 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 517-645-6239 (international). The pass code for each is
Lyondell. The call will be broadcast live on the Investor Relations
page of the company's web site, http://www.lyondell.com/earnings. A
replay of the prepared remarks will be available from 1:30 p.m. ET
July 26 to 6 p.m. ET on Aug. 3. The dial-in numbers are
866-513-9969 (U.S.) and 203-369-1996 (international). The pass code
for each is 5549. Web replay of the prepared remarks will be
available at 2:30 p.m. ET July 26 on the Investor Relations page of
the company's web site, http://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 July 26
at http://www.lyondell.com/earnings. ABOUT LYONDELL Lyondell
Chemical Company, headquartered in Houston, Texas, is North
America's third-largest independent, publicly traded chemical
company. Lyondell is a leading global manufacturer of chemicals and
plastics, a refiner of heavy, high-sulfur crude oil and a
significant producer of fuel products. Key products include
ethylene, polyethylene, styrene, propylene, propylene oxide,
gasoline, ultra low-sulfur diesel, MTBE and ETBE. FORWARD-LOOKING
STATEMENTS The statements in this release and the related
teleconference relating to matters that are not historical facts
are forward-looking statements. These forward-looking statements
are based upon the current beliefs and expectations of management,
and are subject to significant risks and uncertainties. Actual
results could differ materially based on factors including, but not
limited to, Lyondell's ability to implement its business
strategies, including the ability of Lyondell and Basell to
complete the proposed merger; availability, cost and price
volatility of raw materials and utilities; supply/demand balances;
industry production capacities and operating rates; uncertainties
associated with the U.S. and worldwide economies; legal, tax and
environmental proceedings; cyclical nature of the chemical and
refining industries; operating interruptions; current and potential
governmental regulatory actions; terrorist acts; international
political unrest; competitive products and pricing; technological
developments; risks of doing business outside of the U.S.; access
to capital markets; and other risk factors. Additional factors that
could cause results to differ materially from those described in
the forward-looking statements can be found in the Lyondell,
Equistar and Millennium Annual Reports on Form 10-K for the year
ended December 31, 2006 and Quarterly Reports on Form 10-Q for the
quarter ended March 31, 2007, Quarterly Reports on Form 10-Q for
the quarter ended June 30, 2007 which will be filed with the SEC in
August 2007 and the Lyondell Current Report on Form 8-K filed on
May 21, 2007. Additional Information and Where to Find It In
connection with the solicitation of proxies by Lyondell with
respect to the meeting of its stockholders to be called with
respect to the proposed merger, Lyondell will file a proxy
statement with the Securities and Exchange Commission (the "SEC").
STOCKHOLDERS OF LYONDELL ARE ADVISED TO READ THE PROXY STATEMENT
WHEN IT IS FINALIZED AND DISTRIBUTED TO THE STOCKHOLDERS BECAUSE IT
WILL CONTAIN IMPORTANT INFORMATION. Stockholders will be able to
obtain a free-of-charge copy of the proxy statement (when
available) and other relevant documents filed with the SEC from the
SEC's web site at http://www.sec.gov/. Stockholders will also be
able to obtain a free-of-charge copy of the proxy statement and
other relevant documents (when available) by directing a request by
mail to Lyondell Chemical Company, Investor Relations, 1221
McKinney Street, Suite 700, Houston, Texas 77010, telephone (713)
309-4590, or from Lyondell's website at http://www.lyondell.com/.
Lyondell and certain of its directors and executive officers may,
under the rules of the SEC, be deemed to be "participants" in the
solicitation of proxies from its stockholders in connection with
the proposed merger. Information concerning the interests of the
persons who may be "participants" in the solicitation is set forth
in Lyondell's proxy statements and annual reports on Form 10-K
(including any amendments thereto), previously filed with the SEC,
and in the proxy statement relating to the merger and other
relevant materials to be filed with the SEC when they become
available. Table 7 - Selected Unaudited Financial Information For
the three For the six months ended months ended June 30, March 31,
June 30, (Millions of dollars) 2007 2006 2007 2007 2006 Sales and
other operating revenues: (a) (b) Ethylene, Co-Products &
Derivatives $3,665 $3,401 $2,991 $6,656 $6,553 PO & Related
Products 2,169 1,763 1,758 3,927 3,407 Refining 2,793 2,411 1,884
4,677 4,505 Operating income: (a) Ethylene, Co-Products &
Derivatives $95 $181 $77 $172 $480 PO & Related Products (c)
133 108 27 160 225 Refining 387 163 78 465 325 Depreciation and
amortization: (a) Ethylene, Co-Products & Derivatives $96 $96
$98 $194 $194 PO & Related Products 59 59 59 118 115 Refining
64 31 55 119 62 EBITDA: (d) Ethylene, Co-Products & Derivatives
$194 $279 $177 $371 $676 PO & Related Products (c) 195 170 87
282 345 Refining 451 194 133 584 387 Capital expenditures: (a)
Ethylene, Co-Products & Derivatives $53 $43 $41 $94 $66 PO
& Related Products 19 18 9 28 33 Refining 28 49 90 118 109
Discontinued Operations - Inorganic Chemicals: (e) Sales and other
operating revenues $181 $355 $333 $514 $695 Income (loss) from
discontinued operations, net of tax (95) 31 13 (82) 35 Capital
expenditures 7 13 8 15 23 (a) See Table 9 for a reconciliation of
segment information for the three and six months ended June 30,
2007 and 2006 and the three months ended March 31, 2007 to
consolidated Lyondell financial information. The Refining
information presented above represents operating results of Houston
Refining on a 100% basis. Lyondell acquired the remaining 41.25% of
Houston Refining on August 16, 2006. From August 16, 2006,
depreciation and amortization, as well as operating income, reflect
the effects of that acquisition. See Table 14 for additional
Houston Refining financial information. (b) Sales include
intersegment sales. (c) Includes pretax charges in the three months
ended June 30, 2007 and March 31, 2007 of $10 million and $62
million, respectively, and $72 million in the six months ended June
30, 2007 related to commercial disputes, including charges
associated with the 2005 shutdown of the Lake Charles TDI facility.
(d) See Table 10 for a reconciliation of segment EBITDA to income
from continuing operations. (e) On May 15, 2007, Lyondell completed
the sale of its worldwide inorganic chemicals business. Table 8 -
Selected Operating Information (a) For the three For the six months
ended months ended June 30, March 31, June 30, 2007 2006 2007 2007
2006 Selected Segment Sales Volumes: Ethylene, Co-Products and
Derivatives (in millions) Ethylene and derivatives (pounds) 3,083
2,930 2,958 6,041 5,801 Polyethylene included above (pounds) 1,502
1,489 1,479 2,981 2,822 Co-products, nonaromatic (pounds) 2,009
2,154 2,025 4,034 4,120 Aromatics (gallons) 87 88 95 182 177 PO and
Related Products (in millions) PO and derivatives (pounds) 794 763
868 1,662 1,597 Co-products: Styrene monomer (pounds) 991 1,031 987
1,978 2,013 Fuel products and other TBA derivatives (gallons) 374
290 300 674 587 Refined products (thousand barrels per day) (b)
Gasoline 136 116 79 108 114 Diesel and heating oil 90 82 71 80 94
Jet fuel 22 11 19 21 10 Aromatics 8 7 6 7 7 Other refined products
121 118 145 133 117 Total refined products volumes 377 334 320 349
342 Discontinued Operations - Inorganic Chemicals (thousand metric
tons) (c) TiO2 79 158 146 225 309 Refining Metrics: (b) Crude
processing rates (thousand barrels per day) 273 271 221 247 266
Throughput margin ($ per barrel) (d) 25.44 15.43 21.00 Market
margins ($ per barrel): (e) WTI 2-1-1 21.67 9.28 15.48 WTI-Maya
10.00 12.72 11.36 Total 31.67 22.00 26.84 (a) Sales volumes include
intersegment sales. (b) The Refining information represents the
operating results of Houston Refining on a 100% basis. (c) On May
15, 2007, Lyondell completed the sale of its worldwide inorganic
chemicals business. (d) As a result of Lyondell's acquisition of
100% of Houston Refining, Lyondell is providing throughput margin
per barrel information for the refining segment. See Table 14 for
calculation of throughput margin and reconciliation to Refining
segment operating income. The throughput margin is divided by the
number of barrels of crude oil processed in the period to derive
the margin per barrel. (e) Market margins are reported by Platts, a
division of The McGraw-Hill Companies. Table 9 - Reconciliation of
Segment Information to Consolidated Lyondell Financial Information
Sales and Depreciation other Operating and Capital operating income
amortization expenditures (Millions of dollars) revenues (loss) For
the three months ended June 30, 2007: Segment Data: Ethylene,
Co-Products & Derivatives $3,665 $95 $96 $53 PO & Related
Products (a) 2,169 133 59 19 Refining (b) 2,793 387 64 28 Other (c)
(1,145) (16) 7 1 Continuing Operations $7,482 $599 $226 $101 For
the three months ended June 30, 2006: Segment Data: Ethylene,
Co-Products & Derivatives $3,401 $181 $96 $43 PO & Related
Products 1,763 108 59 18 Other (c) (449) 2 2 2 Continuing
Operations $4,715 $291 $157 $63 For the three months ended March
31, 2007: Segment Data: Ethylene, Co-Products & Derivatives
$2,991 $77 $98 $41 PO & Related Products (a) 1,758 27 59 9
Refining (b) 1,884 78 55 90 Other (c) (844) (3) 1 1 Continuing
Operations $5,789 $179 $213 $141 For the six months ended June 30,
2007: Segment Data: Ethylene, Co-Products & Derivatives $6,656
$172 $194 $94 PO & Related Products (a) 3,927 160 118 28
Refining (b) 4,677 465 119 118 Other (c) (1,989) (19) 8 2
Continuing Operations $13,271 $778 $439 $242 For the six months
ended June 30, 2006: Segment Data: Ethylene, Co-Products &
Derivatives $6,553 $480 $194 $66 PO & Related Products 3,407
225 115 33 Other (c) (827) (2) 4 2 Continuing Operations $9,133
$703 $313 $101 (a) Includes pretax charges in the three months
ended June 30, 2007 and March 31, 2007 of $10 million and $62
million, respectively, and $72 million in the six months ended June
30, 2007 related to commercial disputes, including charges
associated with the 2005 shutdown of the Lake Charles TDI facility.
(b) The Refining segment information reflects the consolidation of
Houston Refining prospectively from August 16, 2006. For periods
prior to August 16, 2006, Houston Refining was accounted for as an
equity investment. (c) Includes items not allocated to segments or
discontinued operations and elimination of intersegment
transactions between segments and discontinued operations. Table 10
- Reconciliations Segment EBITDA to Income from Continuing
Operations For the three For the six months ended months ended June
30, March 31, June 30, (Millions of dollars) 2007 2006 2007 2007
2006 LYONDELL Segment EBITDA: Ethylene, Co-Products &
Derivatives $194 $279 $177 $371 $676 PO & Related Products 195
170 87 282 345 Refining (a) 451 - 133 584 - Other (14) 3 (1) (15)
75 Add: Income from equity investment in Houston Refining (a) - 86
- - 177 Deduct: Depreciation and amortization (226) (157) (213)
(439) (313) Interest expense, net (161) (151) (174) (335) (276)
Provision for income taxes (125) (101) (3) (128) (269) Debt
prepayment premiums and charges (43) - - (43) - Lyondell income
from continuing operations $271 $129 $6 $277 $415 Refining EBITDA
(b) $194 $387 Deduct: Depreciation and amortization (31) (62)
Interest expense, net (12) (23) Provision for income taxes (8) (8)
Houston Refining net income $143 $294 (a) The Refining segment
information reflects the consolidation of Houston Refining
prospectively from August 16, 2006. For periods prior to August 16,
2006, Houston Refining was accounted for as an equity investment.
(b) The Refining information represents operating results of
Houston Refining on a 100% basis. Table 11 - Lyondell Unaudited
Income Statement Information (a) For the three For the six months
ended months ended (Millions of dollars, except June 30, March 31,
June 30, per share data) 2007 2006 2007 2007 2006 Sales and other
operating revenues $7,482 $4,715 $5,789 $13,271 $9,133 Cost of
sales (b) 6,675 4,268 5,442 12,117 8,149 Selling, general and
administrative expenses 189 137 150 339 244 Research and
development expenses 19 19 18 37 37 Operating income 599 291 179
778 703 Income from equity investment in Houston Refining - 86 - -
177 Income from other equity investments - 3 2 2 2 Interest
expense, net (161) (151) (174) (335) (276) Other income (expense),
net (c) (42) 1 2 (40) 78 Income from continuing operations before
income taxes 396 230 9 405 684 Provision for income taxes 125 101 3
128 269 Income from continuing operations 271 129 6 277 415 Income
(loss) from discontinued operations, net of tax (d) (95) 31 13 (82)
35 Net income $176 $160 $19 $195 $450 Income from continuing
operations: Basic $1.07 $0.53 $0.03 $1.10 $1.68 Diluted $1.02 $0.50
$0.02 $1.05 $1.61 Net income: Basic $0.69 $0.65 $0.08 $0.77 $1.82
Diluted $0.66 $0.62 $0.07 $0.74 $1.74 Weighted average shares (in
millions): Basic 252.9 247.4 251.1 252.0 247.1 Diluted 265.7 260.1
263.7 264.7 259.7 (a) On May 15, 2007, Lyondell completed the sale
of its worldwide inorganic chemicals business. Results of
operations reflect the consolidation of Houston Refining
prospectively from August 16, 2006. For periods prior to August 16,
2006, Houston Refining was accounted for as an equity investment.
(b) Includes pretax charges in the three months ended June 30, 2007
and March 31, 2007 of $10 million and $62 million, respectively,
and $72 million in the six months ended June 30, 2007 related to
commercial disputes, including charges associated with the 2005
shutdown of the Lake Charles TDI facility. (c) Includes pretax
charges of $43 million in the three and six months ended June 30,
2007 related to the prepayment of debt, and a $70 million net
benefit in the six months ended June 30, 2006 for resolution of
various matters among Houston Refining, its owners and affiliates.
(d) Includes a $91 million after-tax loss in the three and six
months ended June 30, 2007 related to the May 15, 2007 sale of the
worldwide inorganic chemicals business. Table 12 - Lyondell
Unaudited Cash Flow Information (a) For the three For the six
months ended months ended June 30, June 30, (Millions of dollars)
2007 2006 2007 2006 Net income $176 $160 $195 $450 Loss (income)
from discontinued operations, net of tax 95 (31) 82 (35)
Adjustments: Depreciation and amortization 226 157 439 313 Equity
investments - Amounts included in net income - (89) (2) (179)
Distributions of earnings 1 52 1 122 Deferred income taxes 215 30
140 106 Debt prepayment premiums and charges 43 - 43 - Changes in
assets and liabilities: Accounts receivable (296) (260) (350) (201)
Inventories 124 126 (13) (53) Accounts payable 153 164 376 140
Other, net (134) (146) (404) (237) Cash provided by operating
activities - continuing operations 603 163 507 426 Cash provided by
(used in) operating activities - discontinued operations (3) 12
(16) 12 Cash provided by operating activities 600 175 491 438
Expenditures for property, plant and equipment (101) (63) (242)
(101) Acquisition of Houston Refining LP and related payments - -
(94) - Contributions and advances to affiliates (14) (20) (26) (57)
Other 13 6 13 6 Cash used in investing activities - continuing
operations (102) (77) (349) (152) Net proceeds from sale of
discontinued operations 990 - 990 - Cash used in investing
activities - discontinued operations (7) (13) (15) (23) Cash
provided by (used in) investing activities 881 (90) 626 (175)
Repayment of long-term debt (b) (1,311) - (1,319) (443) Issuance of
long-term debt 510 - 510 - Net repayments on revolving credit
facility (145) - - - Dividends paid (57) (55) (114) (111) Proceeds
from and tax benefits of stock option exercises 14 7 77 9 Other,
net 12 (1) 20 - Cash used in financing activities - continuing
operations (977) (49) (826) (545) Cash provided by (used in)
financing activities - discontinued operations (1) 7 23 5 Cash used
in financing activities (978) (42) (803) (540) Effect of exchange
rate changes on cash - 2 2 4 Increase (decrease) in cash and cash
equivalents $503 $45 $316 $(273) (a) On May 15, 2007, Lyondell
completed the sale of its worldwide inorganic chemicals business.
Houston Refining became a wholly owned subsidiary as of August 16,
2006. Prior to August 16, 2006, Lyondell's investment in Houston
Refining was accounted for on an equity basis. (b) Includes
prepayment premiums of $63 million in the three and six months
ended June 30, 2007 and $9 million in the six months ended June 30,
2006. Table 13 - Lyondell Unaudited Balance Sheet Information (a)
June 30, December 31, (Millions of dollars) 2007 2006 Cash and cash
equivalents $762 $401 Accounts receivable, net 2,301 1,932
Inventories 1,895 1,877 Prepaid expenses and other current assets
176 147 Deferred tax assets 53 102 Current assets held for sale -
687 Total current assets 5,187 5,146 Property, plant and equipment,
net 8,475 8,542 Investments and long-term receivables: Investment
in PO joint ventures 787 778 Other 103 115 Goodwill, net 1,373
1,332 Other assets, net 867 864 Long-term assets held for sale -
1,069 Total assets $16,792 $17,846 Current maturities of long-term
debt $518 $18 Accounts payable 2,292 1,868 Accrued liabilities 996
980 Current liabilities associated with assets held for sale - 341
Total current liabilities 3,806 3,207 Long-term debt 6,647 7,936
Other liabilities 1,270 1,453 Deferred income taxes 1,619 1,537
Long-term liabilities associated with assets held for sale - 391
Minority interests 117 134 Stockholders' equity (253,448,132 and
248,970,570 shares outstanding at June 30, 2007 and December 31,
2006, respectively) 3,333 3,188 Total liabilities and stockholders'
equity $16,792 $17,846 (a) On May 15, 2007, Lyondell completed the
sale of its worldwide inorganic chemicals business. Table 14 -
Refining Segment Throughput Margin and Reconciliation to Unaudited
Refining Segment Operating Income For the three For the six months
ended months ended June 30, March 31, June 30, (Millions of
dollars) 2007 2007 2007 Refining Throughput Margin: Sales and other
operating revenues (a) $2,793 $1,884 $4,677 Crude oil and feedstock
costs 2,161 1,577 3,738 Throughput margin 632 307 939 Operating
expenses 238 225 463 Selling, general and administrative expense 7
4 11 Refining operating income (a) $387 $78 $465 (a) See Table 9
for reconciliation of Refining segment sales and other operating
revenues and operating income to Lyondell sales and other operating
revenues and operating income. Tables 15 through 20 represent
additional financial information for Equistar Chemicals, LP
(together with its consolidated subsidiaries, "Equistar") and
Millennium Chemicals Inc. (together with its consolidated
subsidiaries, "Millennium"). Table 15 - Equistar Unaudited Income
Statement Information (a) For the three For the six months ended
months ended June 30, March 31, June 30, (Millions of dollars) 2007
2006 2007 2007 2006 Sales and other operating revenues (b) $3,534
$3,278 $2,869 $6,403 $6,314 Cost of sales 3,362 3,028 2,738 6,100
5,698 Selling, general and administrative expenses 72 61 59 131 109
Research and development expenses 9 9 9 18 17 Operating income 91
180 63 154 490 Interest expense, net (50) (52) (53) (103) (105)
Other income (expense) (c) (33) - 1 (32) (1) Net income (d) $8 $128
$11 $19 $384 (a) Represents information for Equistar on the basis
reflected in Equistar's financial statements as filed in its Annual
Report on Form 10-K. (b) Sales and other operating revenues include
sales to affiliates. (c) Includes $34 million of charges in the
three and six month periods ended June 30, 2007 related to the
prepayment of debt. (d) As a partnership, Equistar is not subject
to federal income taxes. Table 16 - Equistar Unaudited Balance
Sheet Information (a) June 30, December 31, (Millions of dollars)
2007 2006 Cash and cash equivalents $10 $133 Accounts receivable,
net 1,327 1,167 Inventories 704 809 Prepaid expenses and other
current assets 70 49 Total current assets 2,111 2,158 Property,
plant and equipment, net 2,812 2,846 Investments 51 59 Other
assets, net 270 296 Total assets $5,244 $5,359 Accounts payable
$1,035 $905 Accrued liabilities 248 312 Notes payable - Millennium
(b) 500 - Total current liabilities 1,783 1,217 Long-term debt
1,553 2,160 Other liabilities and deferred revenues 384 378
Partners' capital 1,524 1,604 Total liabilities and partners'
capital $5,244 $5,359 (a) Represents information for Equistar on
the basis reflected in Equistar's financial statements as filed in
its Annual Report on Form 10-K. (b) In June 2007, Equistar issued
promissory notes to Millennium and received proceeds of $500
million, which was used to repay debt. Table 17 - Equistar
Unaudited Cash Flow Information (a) For the three For the six
months ended months ended June 30, June 30, (Millions of dollars)
2007 2006 2007 2006 Net income $8 $128 $19 $384 Adjustments:
Depreciation and amortization 81 82 162 164 Debt prepayment charges
and premiums 34 - 34 - Changes in assets and liabilities: Accounts
receivable (118) (267) (160) (232) Inventories 51 88 105 (56)
Accounts payable 93 158 130 204 Other, net 19 49 (99) (37) Cash
provided by operating activities 168 238 191 427 Expenditures for
property, plant and equipment (52) (41) (90) (63) Other 8 2 8 2
Cash used in investing activities (44) (39) (82) (61) Repayment of
long-term debt (b) (632) - (632) (150) Proceeds from notes payable
to Millennium (c) 500 - 500 - Distributions to owners - (100) (100)
(300) Other (9) - - 1 Cash used in financing activities (141) (100)
(232) (449) Increase (decrease) in cash and cash equivalents $(17)
$99 $(123) $(83) (a) Represents information for Equistar on the
basis reflected in Equistar's financial statements as filed in its
Annual Report on Form 10-K. (b) Includes prepayment premiums of $32
million in the three and six months ended June 30, 2007. (c) In
June 2007, Equistar issued promissory notes to Millennium and
received proceeds of $500 million, which was used to repay debt.
Table 18 - Millennium Unaudited Income Statement Information (a)
(b) For the three For the six months ended months ended June 30,
March 31, June 30, (Millions of dollars) 2007 2006 2007 2007 2006
Sales and other operating revenues (c) $161 $153 $152 $313 $297
Cost of sales 142 134 122 264 280 Selling, general and
administrative expenses 22 11 12 34 22 Research and development
expenses 1 1 1 2 2 Operating income (loss) (4) 7 17 13 (7) Interest
expense, net (13) (18) (18) (31) (29) Other income (expense), net
(d) (16) 20 - (16) (5) Income (loss) from continuing operations
before equity investment and income taxes (33) 9 (1) (34) (41)
Income from equity investment in Equistar 3 38 3 6 113 Income
(loss) from continuing operations before income taxes (30) 47 2
(28) 72 Provision for (benefit from) income taxes (13) 2 1 (12) (5)
Income (loss) from continuing operations (17) 45 1 (16) 77 Income
from discontinued operations, net of tax (e) 232 69 14 246 70 Net
income $215 $114 $15 $230 $147 (a) Represents information for
Millennium on the basis reflected in Millennium's financial
statements as filed in its Current Report on Form 8-K dated May 29,
2007. (b) On May 15, 2007, Millennium completed the sale of its
worldwide inorganic chemicals business. (c) Sales and other
operating revenues include sales to affiliates. (d) Other income
(expense), net, included charges related to debt prepayment of $17
million in each of the three and six months ended June 30, 2007 and
$7 million in the six months ended June 30, 2006, and for the three
months ended June 30, 2006, included a $19 million benefit related
to resolution of prior years' income tax issues. (e) Income from
discontinued operations, net of tax, for the three and six months
ended June 30, 2007 included a $216 million after-tax gain related
to the sale of Millennium's worldwide inorganic chemicals business.
Table 19 - Millennium Unaudited Balance Sheet Information (a) (b)
June 30, December 31, (Millions of dollars) 2007 2006 Cash and cash
equivalents $33 $76 Accounts receivable, net 128 111 Inventories 92
87 Prepaid expenses and other current assets 27 13 Deferred tax
assets 38 62 Notes receivable - Equistar (c) 500 - Current assets
held for sale - 661 Total current assets 818 1,010 Property, plant
and equipment, net 121 129 Investments in Equistar 446 470
Goodwill, net 49 49 Other assets, net 71 62 Long-term assets held
for sale - 694 Total assets $1,505 $2,414 Accounts payable $102
$102 Accrued liabilities 152 72 Current liabilities associated with
assets held for sale - 335 Total current liabilities 254 509
Long-term debt 391 767 Other liabilities 255 381 Deferred income
taxes 261 248 Long-term liabilities associated with assets held for
sale - 361 Minority interest 5 5 Stockholder's equity (1,000 shares
authorized; 661 shares issued at June 30, 2007 and December 31,
2006) 339 143 Total liabilities and stockholder's equity $1,505
$2,414 (a) Represents information for Millennium on the basis
reflected in Millennium's financial statements as filed in its
Current Report on Form 8-K dated May 29, 2007. (b) On May 15, 2007,
Millennium completed the sale of its worldwide inorganic chemicals
business. (c) In June 2007, Millennium received promissory notes
from and advanced $500 million to Equistar. Table 20 - Millennium
Unaudited Cash Flow Information (a) (b) For the three For the six
months ended months ended June 30, June 30, (Millions of dollars)
2007 2006 2007 2006 Net income $215 $114 $230 $147 Income from
discontinued operations, net of tax (232) (69) (246) (70)
Adjustments: Depreciation and amortization 11 6 17 13 Equity
investment in Equistar - Amounts included in net income (3) (38)
(6) (113) Distributions of earnings 3 30 6 89 Debt prepayment
charges and premiums 14 - 14 7 Deferred income taxes 44 (49) 38
(48) Changes in assets and liabilities: Accounts receivable (30)
(3) (17) 12 Inventories 2 5 (5) 20 Accounts payable 15 18 (1) 11
Other, net (206) (15) (233) 3 Cash provided by (used in) operating
activities - continuing operations (167) (1) (203) 71 Cash provided
by (used in) operating activities - discontinued operations (3) 12
(16) 12 Cash provided by (used in) operating activities (170) 11
(219) 83 Expenditures for property, plant and equipment (2) (4) (6)
(5) Distributions from Equistar in excess of earnings (3) - 24 -
Advances under loan agreements to Equistar (c) (500) - (500) -
Other 3 1 3 1 Cash used in investing activities - continuing
operations (502) (3) (479) (4) Net proceeds from sale of
discontinued operations 990 - 990 - Cash used in investing
activities - discontinued operations (7) (13) (15) (23) Cash
provided by (used in) investing activities 481 (16) 496 (27)
Repayment of long-term debt (d) (386) - (390) (241) Other - (2) 1
(1) Cash used in financing activities - continuing operations (386)
(2) (389) (242) Cash provided by (used in) financing activities -
discontinued operations (1) 7 23 5 Cash provided by (used in)
financing activities (387) 5 (366) (237) Effect of exchange rate
changes on cash - 1 1 2 Increase (decrease) in cash and cash
equivalents $(76) $1 $(88) $(179) (a) Represents information for
Millennium on the basis reflected in Millennium's financial
statements as filed in its Current Report on Form 8-K dated May 29,
2007. (b) On May 15, 2007, Millennium completed the sale of its
worldwide inorganic chemicals business. (c) In June 2007,
Millennium received promissory notes from and advanced $500 million
to Equistar. (d) Includes prepayment premiums of $13 million in the
three and six months ended June 30, 2007 and $7 million in the six
months ended June 30, 2006. DATASOURCE: Lyondell Chemical Company;
Equistar Chemicals, LP; Millennium CONTACT: media, Susan Moore,
+1-713-309-4645, or investors, Doug Pike, +1-713-309-4590, both of
Lyondell Chemical Company Web site: http://www.lyondell.com/
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