RED BANK, N.J., Oct. 30, 2002 (PRIMEZONE) -- Millennium Chemicals (NYSE:MCH) ("Millennium") announced today third quarter 2002 EPS of $0.10, compared to an EPS loss of ($0.20) in the third quarter of last year. Millennium reported third quarter 2002 pro forma EBITDA(1) of $100 million compared to third quarter 2001 pro forma EBITDA of $63 million. Third quarter pro forma sales were $856 million compared to last year's third quarter pro forma sales of $792 million.
In the third quarter of 2002, Millennium reported net income of $6 million compared to a net loss of ($12) million in the third quarter of last year. Both basic and diluted EPS in the third quarter were $0.10 compared to a loss of ($0.20) in the comparable period last year.
William M. Landuyt, Chairman and Chief Executive Officer of Millennium, said, "Millennium reported its third consecutive quarterly EBITDA increase for our wholly owned businesses. Higher selling prices in our titanium dioxide and acetyls businesses this quarter have contributed to the profit improvement as compared to the second quarter of this year. Expectations are that seasonally lower demand for our products and higher energy-related raw material costs will negatively affect sequential trends at our wholly owned businesses in the fourth quarter, but that results will be much improved compared to the fourth quarter in 2001."
Goodwill amortization, which was eliminated due to the adoption of SFAS No. 142 on January 1, 2002, resulted in a charge to income of $6 million in the third quarter of 2001 and of $17 million for the nine months ended September 30, 2001, including the Company's share of Equistar's goodwill amortization.
TITANIUM DIOXIDE
The Titanium Dioxide (TiO2) segment reported third quarter EBITDA of $42 million, equal to the third quarter of last year and up from $34 million in the second quarter of 2002. The increase in third quarter EBITDA when compared to the second quarter reflected higher prices offset partially by seasonally lower volumes.
In local currencies, average third quarter prices were down 6 percent from last year's third quarter, and up 3 percent from the second quarter of 2002. In U.S. dollar terms, the worldwide average third quarter price was down 4 percent from the same quarter last year and was 5 percent higher than the second quarter of 2002.
Third quarter TiO2 sales volume of 161,000 metric tons increased 7 percent from the third quarter of last year and seasonally decreased 5 percent from the second quarter of 2002. Year-to-date sales volume of 485,000 metric tons was 6 percent higher than volume for the same period of last year.
The third quarter's TiO2 plant production operating rate was 90 percent of annual nameplate capacity of 690,000 metric tons. This represented an increase over the operating rate of 87 percent in last year's third quarter and was slightly higher than the 89 percent operating rate in the second quarter of 2002.
Outlook
Sales volume in the fourth quarter of 2002 is anticipated to be seasonally lower than the third quarter, but ahead of last year's fourth quarter. Previously announced price increases should be gradually obtained, with the extent and timing dependent on a continuation of the current pattern of increased year-on-year demand.
ACETYLS
The Acetyls segment reported third quarter 2002 EBITDA of $12 million which was up from $2 million in the third quarter of last year and $7 million in the second quarter of 2002. EBITDA in the third quarter of 2002 increased over the second quarter of 2002 primarily as a result of higher prices on relatively flat sales volumes.
Acetyls prices in the third quarter of 2002 decreased 3 percent from prices in the third quarter of last year and increased 15 percent from the second quarter of 2002. Acetyls volume in the third quarter increased 8 percent from the comparable period of last year and decreased 5 percent from the second quarter of 2002.
Outlook
Acetyl's volume and price should remain strong in the fourth quarter, although margins are currently being negatively affected by higher natural gas feedstock costs. Industry natural gas prices on the U.S. Gulf Coast averaged about $3.20 per MMBTU in the third quarter of 2002. In October average natural gas spot pricing on the U.S. Gulf Coast was approximately $4.10 per MMBTU. At current levels of natural gas pricing, profits in the fourth quarter of 2002 will likely be lower when compared to the third quarter of 2002, even though previously announced price increases should be obtained during the quarter.
SPECIALTY CHEMICALS
The Specialty Chemicals segment reported third quarter 2002 EBITDA of $4 million compared to $5 million in the third quarter of last year and flat with the second quarter of 2002. Sales volume was down 8 percent from last year's third quarter and was up 18 percent from the second quarter of 2002.
Average selling prices increased 19 percent compared to last year's third quarter and declined 11 percent from the second quarter of 2002. Selling prices have declined due to industry oversupply in certain fragrance chemical product lines.
Outlook
Fourth quarter 2002 operating results are expected to be comparable to the third quarter.
EQUISTAR
Millennium's 29.5 percent stake in Equistar reported third quarter post-interest equity income of $4 million compared to ($26) million of equity loss in the third quarter of last year and a ($10) million equity loss in the second quarter of 2002.
Equistar's performance improved in the third quarter from the second quarter primarily as a result of price increases that were implemented during the second quarter. However, over the course of the third quarter, the benefit was gradually eroded by higher raw material costs.
Total ethylene volume in the third quarter was approximately equal to the second quarter of this year. Polymer sales volume in the third quarter was approximately 4 percent below strong second-quarter volume.
Millennium's share of Equistar's underlying third quarter 2002 sales was $445 million; of operating income, $19 million; and of EBITDA, $41 million. Equistar did not distribute any cash to Millennium in the third quarter, and distributions are not expected until profit levels improve. Equistar produced sufficient cash flow in the third quarter, which enabled the partnership to reduce outstanding bank debt after paying large semi-annual interest payments on outstanding bonds.
Outlook
While Equistar entered the third quarter with good momentum, the latter portion of the quarter was impacted by rising raw material costs and what appears to be some slowing in the pace of the economy's recovery. Industry supply/demand balances in the ethylene chain have not been adequate to quickly realize price increases that would offset high raw material costs. Global economic and political climates continue to be uncertain. Equistar's near-term profitability depends on ethylene supply/demand balances and raw material costs, and these elements have placed pressure on Equistar's performance.
DEBT AND CAPITAL SPENDING
Net debt (total debt less cash) at September 30, 2002 totaled $1.096 billion versus $1.094 billion at the end of the second quarter of 2002. John E. Lushefski, Senior Vice President and Chief Financial Officer of Millennium, said, "Net debt was little changed at the end of the third quarter of 2002 when compared to the end of the second quarter. Net debt could rise in the fourth quarter since about $40 million of semi-annual interest payments on outstanding bonds will be made in the quarter." Net interest expense was $22 million in the third quarter of 2002, relatively flat with $21 million in the second quarter of 2002.
Year-to-date capital spending was $43 million compared to $85 million during the first nine months of 2001. Depreciation and amortization was $76 million for Millennium's wholly owned businesses in the first nine months of 2002. Full year capital spending for the wholly owned businesses is expected to approximate $60 to $65 million, while depreciation and amortization should total about $100 million.
PENSION ASSETS AND EQUITY
Because of the recent declines in the financial markets, Millennium's U.S. pension plans and some of its foreign pension plans may have an unfunded Accumulated Benefit Obligation (ABO) at the end of 2002. Since the beginning of 2002, the fair value of the pension plan assets has been significantly reduced. If the value of these assets does not increase sufficiently by the end of the year, Millennium will need to charge to stockholder's equity a minimum liability for any unfunded amount and the existing prepaid pension asset related to the affected plans. In this event, the charge to stockholder's equity would approximate $200 million. Although the reduction in pension trust assets could reduce profitability and increase the need to fund pensions in 2003 and beyond, this would have no immediate impact on Millennium's results of operations, cash flow or debt covenant compliance.
DIVIDENDS
Millennium has declared a quarterly dividend on its common stock of $0.135 per share. The dividend will be payable on December 31, 2002 to shareholders of record on December 10, 2002. The ex-dividend date will be December 6, 2002.
Millennium Chemicals (website: www.millenniumchem.com) is a major international chemicals company, with leading market positions in a broad range of commodity, industrial, performance and specialty chemicals.
Millennium Chemicals is:
-- The second-largest producer of TiO2 in the world and a leading
producer of titanium tetrachloride and other products, including
zirconia, cadmium/selenium pigments and silica gel;
-- The second-largest producer of acetic acid and vinyl acetate
monomer in North America;
-- A leading producer of fragrance chemicals; and,
-- Through its partnership interest in Equistar Chemicals, LP, a
partner in the second-largest producer of ethylene and third-
largest producer of polyethylene in North America, and a leading
producer of ethylene oxide and its derivatives and high value-
added specialty polymers.
The statements in this press release that are not historical facts are, or may be deemed to be, "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995. Some of these statements can be identified by the use of forward-looking terminology such as "prospects," "outlook," "believes," "estimates," "intends," "may," "will," "should," "anticipates," "expects" or "plans," or the negative or other variation of these or similar words, or by discussion of trends and conditions, strategy or risks and uncertainties. In addition, from time to time, Millennium or its representatives have made or may make forward-looking statements in other filings that Millennium makes with the Securities and Exchange Commission, in press releases or in oral statements made by or with the approval of one of its authorized executive officers. These forward-looking statements are only present expectations. Actual events or results may differ materially. Factors that could cause such a difference include: the cyclicality and volatility of the segments of the chemical industry in which Millennium and Equistar Chemicals, LP ("Equistar") operate, particularly fluctuations in the demand for ethylene, its derivatives and acetyls and the sensitivity of these industry segments to capacity additions; general economic conditions in the geographic regions where Millennium and Equistar generate sales, and the impact of government regulation and other external factors; the ability of Equistar to distribute cash to its partners and uncertainties arising from Millennium's minority interest in Equistar and Millennium's future capital commitments to Equistar; changes in the cost of energy and raw materials; the ability of raw material suppliers to fulfill their commitments; the ability of Millennium and Equistar to achieve their productivity improvement, cost reduction and working capital targets, and the occurrence of operating problems at manufacturing facilities of Millennium or Equistar; risks of doing business outside the United States, including currency fluctuations; the cost of compliance with the extensive environmental regulations affecting the chemical industry and exposure to liabilities for environmental remediation and other environmental matters relating to Millennium's or Equistar's current and former operations; pricing and other competitive pressures; and legal proceedings relating to present and former operations (including proceedings based on alleged exposure to lead paint and pigments, asbestos and other materials) and other claims. A further description of these risks, uncertainties and other matters can be found in Exhibit 99.1 to Millennium's Report on Form 10-K for the year ended December 31, 2001. Millennium disclaims any obligation to update any forward-looking statement, whether as a result of new information, future events or otherwise.
Listen in live to Millennium's 2002 third quarter earnings discussion on Tuesday, October 30 at 10:00 am EST via webcast at http://www.millenniumchem.com and click on the Investor Relations icon. The teleconference number is 973-582-2741. Replay will be available until November 6 at 973-341-3080, reservation #3524441.
(1) EBITDA represents income from operations before interest, taxes, depreciation and amortization, other income items, equity earnings, reorganization charges and the cumulative effect of accounting changes. Pro forma EBITDA, presented for comparative purposes, includes the Company's underlying interest in Equistar's results, including an allocation of costs incurred by the Company. Pro forma sales includes the Company's underlying interest in Equistar's sales.
MILLENNIUM CHEMICALS INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Millions, Except Per Share Data)
TABLE I
Three months ended Nine months ended
September 30, September 30,
2002 2001 2002 2001
------- ------- ------- -------
Net sales $ 411 $ 393 $ 1,167 $ 1,256
Operating costs and expense
Cost of products sold 316 307 944 978
Selling, development and
administrative expenses 36 35 80 113
------- ------- ------- -------
EBITDA 59 51 143 165
Depreciation and
amortization 26 28 76 83
------- ------- ------- -------
Operating income before
reorganization and
plant closure charges 33 23 67 82
Net interest expense (22) (18) (64) (60)
Equity in results
of Equistar
- operating 19 (12) -- (14)
- interest (15) (14) (45) (41)
- plant closure -- -- -- (6)
Reorganization and
plant closure charges -- -- -- (36)
Net other (expense)
income (1) 2 (2) 1
------- ------- ------- -------
Income (loss) before
income taxes, minority
interest and cumulative
effect of accounting
change 14 (19) (44) (74)
(Provision for)
benefit from
income taxes (7) 8 22 26
------- ------- ------- -------
Income (loss) before
minority interest and
cumulative effect of
accounting change 7 (11) (22) (48)
Minority interest (1) (1) (2) (3)
------- ------- ------- -------
Income (loss) before
cumulative effect of
accounting change 6 (12) (24) (51)
Cumulative effect of
accounting change -- -- (305) --
------- ------- ------- -------
Net income (loss) $ 6 $ (12) $ (329) $ (51)
======= ======= ======= =======
Basic and diluted
EPS ($/share)
- before accounting
change $ 0.10 $ (0.20) $ (0.38) $ (0.81)
- from accounting
change -- -- (4.80) --
------- ------- ------- -------
- after accounting
change $ 0.10 $ (0.20) $ (5.18) $ (0.81)
======= ======= ======= =======
Weighted-average number
of shares used to
compute basic EPS 63.618 63.518 63.547 63.515
Weighted-average number
of shares used to
compute diluted EPS 63.938 63.518 63.547 63.515
MILLENNIUM CHEMICALS INC.
SEGMENT INFORMATION
(Millions)
TABLE II
2001 2002
-------------------------------- ----------------
1Q 2Q 3Q 4Q FY 1Q 2Q 3Q
EBITDA(a)
Titanium
Dioxide 49 40 42 29 160 31 34 42
Acetyls 2 10 2 (7) 7 (4) 7 12
Specialty
Chemicals 6 6 5 3 20 6 4 4
Other 1 -- 2 2 5 3 3 1
--- --- --- --- ----- --- --- ---
REPORTED 58 56 51 27 192 36 48 59
Equistar 19 27 12 10 68 (2) 26 41
--- --- --- --- ----- --- --- ---
PRO FORMA
TOTAL 77 83 63 37 260 34 74 100
DEPRECIATION
AND
AMORTIZATION
Titanium
Dioxide 21 20 21 19 81 20 20 21
Acetyls 5 5 5 6 21 3 3 3
Specialty
Chemicals 2 2 2 2 8 2 2 2
--- --- --- --- ----- --- --- ---
REPORTED 28 27 28 27 110 25 25 26
Equistar 23 24 24 24 95 22 21 22
--- --- --- --- ----- --- --- ---
PRO FORMA
TOTAL 51 51 52 51 205 47 46 48
OPERATING
INCOME(a)
Titanium
Dioxide 28 20 21 10 79 11 14 21
Acetyls (3) 5 (3) (13) (14) (7) 4 9
Specialty
Chemicals 4 4 3 1 12 4 2 2
Other 1 -- 2 2 5 3 3 1
--- --- --- --- ----- --- --- ---
REPORTED 30 29 23 -- 82 11 23 33
Equistar (4) 3 (12) (14) (27) (24) 5 19
--- --- --- --- ----- --- --- ---
PRO FORMA
TOTAL 26 32 11 (14) 55 (13) 28 52
NET SALES
Titanium
Dioxide 319 298 286 242 1,145 262 300 296
Acetyls 99 98 85 73 355 65 83 91
Specialty
Chemicals 26 23 22 19 90 24 22 24
--- --- --- --- ----- --- --- ---
REPORTED 444 419 393 334 1,590 351 405 411
Equistar 523 472 399 350 1,744 335 431 445
--- --- --- --- ----- --- --- ---
PRO FORMA
TOTAL 967 891 792 684 3,334 686 836 856
CAPITAL
SPENDING
Titanium
Dioxide 23 26 23 10 82 12 11 14
Acetyls 2 3 -- 1 6 -- -- 1
Specialty
Chemicals 1 1 1 -- 3 1 1 3
Other 2 3 -- 1 6 -- -- --
--- --- --- --- ----- --- --- ---
TOTAL 28 33 24 12 97 13 12 18
--------
(a) EBITDA and operating income for purposes of this presentation
exclude reorganization and plant closure charges recorded in the
first and second quarters of 2001, and the second quarter of 2002
includes a $5 million adjustment of reserves due to favorable
resolution of environmental claims related to predecessor
businesses reserved for in prior years.
MILLENNIUM CHEMICALS INC.
CONSOLIDATED BALANCE SHEETS
(Millions)
TABLE III
September 30, December 31,
2002 2001
------ ------
ASSETS
Current Assets
Cash and cash equivalents $ 119 $ 114
Trade receivables, net 230 215
Inventories 343 370
Other current assets 70 61
------ ------
Total current assets 762 760
Property, plant and
equipment, net 845 880
Investment in Equistar 608 677
Deferred income taxes 89 72
Other assets 258 237
Goodwill 103 378
------ ------
Total assets $2,665 $3,004
====== ======
LIABILITIES AND
SHAREHOLDERS' EQUITY
Current Liabilities
Notes payable $ 4 $ 4
Current maturities of
long-term debt 12 11
Trade accounts payable 199 222
Income taxes payable 12 7
Accrued expenses and
other liabilities 167 139
------ ------
Total current liabilities 394 383
Long-term debt 1,200 1,172
Other liabilities 514 550
------ ------
Total liabilities 2,108 2,105
------ ------
Minority interest 15 21
Shareholders' equity 542 878
------ ------
Total liabilities and
shareholders' equity $2,665 $3,004
====== ======
MILLENNIUM CHEMICALS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Millions)
TABLE IV
Nine months ended
September 30,
2002 2001
------ ------
Cash flows from operating
activities
Net loss $(329) $ (51)
Adjustments to reconcile net
loss to net cash provided by
operating activities:
Cumulative effect of accounting
change 305 --
Write-off of assets related to
plant closure -- 10
Depreciation and amortization 76 83
Deferred income tax benefit (24) (40)
Equity in loss of Equistar 45 61
Net change in trade working
capital (67) 65
Securitization of accounts
receivable 56 --
Net change in other assets and
liabilities (10) (61)
----- -----
Cash provided by operating
activities 52 67
----- -----
Cash flows from investing activities
Capital expenditures (43) (85)
Proceeds from sale of fixed assets -- 5
----- -----
Cash used in investing activities (43) (80)
----- -----
Cash flows from financing activities
Dividends to shareholders (26) (26)
Net proceeds of borrowings 24 20
----- -----
Cash used in financing activities (2) (6)
----- -----
Effect of exchange rate changes
on cash (2) (7)
----- -----
Increase (decrease) in cash and
cash equivalents 5 (26)
Cash and cash equivalents at
beginning of year 114 107
----- -----
Cash and cash equivalents at
end of period $ 119 $ 81
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