UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
| x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE |
| SECURITIES EXCHANGE ACT OF 1934 |
| For the quarterly period ended June 30, 2003 |
OR
| ¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE |
| SECURITIES EXCHANGE ACT OF 1934 |
| For the transition period from to |
Commission file number 1-10145
LYONDELL CHEMICAL COMPANY
(Exact name of registrant as specified in its charter)
| Delaware | 95-4160558 | |
| (State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) | |
| 1221 McKinney Street, Suite 700, Houston, Texas |
77010 | |
| (Address of principal executive offices) | (Zip Code) | |
Registrant’s telephone number, including area code: (713) 652-7200
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes x No ¨
Number of shares of common stock outstanding as of June 30, 2003: 161,867,168
(includes common stock, $1.00 par value, and Series B common stock, $1.00 par value)
PART I. FINANCIAL INFORMATION
LYONDELL CHEMICAL COMPANY
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
CONSOLIDATED STATEMENTS OF INCOME
| For the three months ended June 30, |
For the six months ended June 30, |
|||||||||||||||
| Millions of dollars, except per share data |
2003 |
2002 |
2003 |
2002 |
||||||||||||
| Sales and other operating revenues |
$ | 913 | $ | 843 | $ | 1,902 | $ | 1,517 | ||||||||
| Operating costs and expenses: |
||||||||||||||||
| Cost of sales |
866 | 724 | 1,822 | 1,313 | ||||||||||||
| Selling, general and administrative expenses |
45 | 46 | 87 | 86 | ||||||||||||
| Research and development expense |
8 | 8 | 17 | 15 | ||||||||||||
| 919 | 778 | 1,926 | 1,414 | |||||||||||||
| Operating income (loss) |
(6 | ) | 65 | (24 | ) | 103 | ||||||||||
| Interest expense |
(102 | ) | (94 | ) | (202 | ) | (187 | ) | ||||||||
| Interest income |
3 | 3 | 20 | 5 | ||||||||||||
| Other income (expense), net |
(3 | ) | (4 | ) | 13 | (3 | ) | |||||||||
| Loss before equity investments and income taxes |
(108 | ) | (30 | ) | (193 | ) | (82 | ) | ||||||||
| Income (loss) from equity investments: |
||||||||||||||||
| Equistar Chemicals, LP |
(32 | ) | (5 | ) | (132 | ) | (50 | ) | ||||||||
| LYONDELL-CITGO Refining LP |
37 | 39 | 56 | 66 | ||||||||||||
| Other |
(4 | ) | (2 | ) | (6 | ) | (5 | ) | ||||||||
| 1 | 32 | (82 | ) | 11 | ||||||||||||
| Income (loss) before income taxes |
(107 | ) | 2 | (275 | ) | (71 | ) | |||||||||
| Benefit from income taxes |
(39 | ) | — | (94 | ) | (18 | ) | |||||||||
| Net income (loss) |
$ | (68 | ) | $ | 2 | $ | (181 | ) | $ | (53 | ) | |||||
| Basic and diluted earnings (loss) per share |
$ | (0.43 | ) | $ | 0.02 | $ | (1.13 | ) | $ | (0.45 | ) | |||||
See Notes to the Consolidated Financial Statements.
1
LYONDELL CHEMICAL COMPANY
CONSOLIDATED BALANCE SHEETS
| Millions, except shares and par value data |
June 30, 2003 |
December 31, 2002 |
||||||
| ASSETS |
||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ | 308 | $ | 286 | ||||
| Other short-term investments |
19 | 44 | ||||||
| Accounts receivable: |
||||||||
| Trade, net |
317 | 340 | ||||||
| Related parties |
64 | 56 | ||||||
| Inventories |
366 | 344 | ||||||
| Prepaid expenses and other current assets |
65 | 66 | ||||||
| Deferred tax assets |
35 | 35 | ||||||
| Total current assets |
1,174 | 1,171 | ||||||
| Property, plant and equipment, net |
2,596 | 2,369 | ||||||
| Investments and long-term receivables: |
||||||||
| Investment in Equistar Chemicals, LP |
1,052 | 1,184 | ||||||
| Investment in PO joint ventures |
825 | 770 | ||||||
| Receivable from LYONDELL-CITGO Refining LP |
229 | 229 | ||||||
| Investment in LYONDELL-CITGO Refining LP |
1 | 68 | ||||||
| Other investments and long-term receivables |
78 | 98 | ||||||
| Goodwill, net |
1,135 | 1,130 | ||||||
| Other assets, net |
392 | 429 | ||||||
| Total assets |
$ | 7,482 | $ | 7,448 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY |
||||||||
| Current liabilities: |
||||||||
| Accounts payable: |
||||||||
| Trade |
$ | 307 | $ | 260 | ||||
| Related parties |
89 | 84 | ||||||
| Current maturities of long-term debt |
— | 1 | ||||||
| Accrued liabilities |
256 | 279 | ||||||
| Total current liabilities |
652 | 624 | ||||||
| Long-term debt |
4,150 | 3,926 | ||||||
| Other liabilities |
660 | 673 | ||||||
| Deferred income taxes |
807 | 881 | ||||||
| Commitments and contingencies |
||||||||
| Minority interest |
148 | 165 | ||||||
| Stockholders’ equity: |
||||||||
| Common stock, $1.00 par value, 340,000,000 shares authorized, 128,530,000 shares issued |
128 | 128 | ||||||
| Series B common stock, $1.00 par value, 80,000,000 shares authorized, 35,716,792 and 34,568,224 shares issued, respectively |
36 | 35 | ||||||
| Additional paid-in capital |
1,396 | 1,380 | ||||||
| Accumulated deficit |
(277 | ) | (18 | ) | ||||
| Accumulated other comprehensive loss |
(152 | ) | (271 | ) | ||||
| Treasury stock, at cost, 2,379,624 and 2,685,080 shares, respectively |
(66 | ) | (75 | ) | ||||
| Total stockholders’ equity |
1,065 | 1,179 | ||||||
| Total liabilities and stockholders’ equity |
$ | 7,482 | $ | 7,448 | ||||
See Notes to the Consolidated Financial Statements.
2
LYONDELL CHEMICAL COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
| For the six months ended June 30, |
||||||||
| Millions of dollars |
2003 |
2002 |
||||||
| Cash flows from operating activities: |
||||||||
| Net loss |
$ | (181 | ) | $ | (53 | ) | ||
| Adjustments to reconcile net loss to net cash provided by operating activities: |
||||||||
| Depreciation and amortization |
118 | 115 | ||||||
| Losses from equity investments |
138 | 55 | ||||||
| Earnings from equity investments in excess of distributions |
— | (15 | ) | |||||
| Gain on sale of equity interest |
(18 | ) | — | |||||
| Deferred income taxes |
(92 | ) | 16 | |||||
| Changes in assets and liabilities that provided (used) cash: |
||||||||
| Accounts receivable |
(4 | ) | 23 | |||||
| Inventories |
(14 | ) | 11 | |||||
| Accounts payable |
34 | (2 | ) | |||||
| Other assets and liabilities, net |
47 | 55 | ||||||
| Cash provided by operating activities |
28 | 205 | ||||||
| Cash flows from investing activities: |
||||||||
| Expenditures for property, plant and equipment |
(238 | ) | (12 | ) | ||||
| Distributions from affiliates in excess of earnings |
102 | — | ||||||
| Contributions and advances to affiliates |
(78 | ) | (54 | ) | ||||
| Proceeds from sale of equity interest |
28 | — | ||||||
| Maturity of other short-term investments |
25 | — | ||||||
| Other |
— | (3 | ) | |||||
| Cash used in investing activities |
(161 | ) | (69 | ) | ||||
| Cash flows from financing activities: |
||||||||
| Issuance of long-term debt |
318 | — | ||||||
| Repayment of long-term debt |
(103 | ) | (16 | ) | ||||
| Dividends paid |
(57 | ) | (53 | ) | ||||
| Other |
(4 | ) | — | |||||
| Cash provided by (used in) financing activities |
154 | (69 | ) | |||||
| Effect of exchange rate changes on cash |
1 | |||||||