- 2Q04 net loss of $0.11 per share -
- 2Q04 net loss of $0.10 per share excluding designated items -
HUNT VALLEY, Md., Aug. 9, 2004 (PRIMEZONE) -- Millennium Chemicals (NYSE:MCH) ("Millennium," or the "Company") today reported a net loss for the second quarter of 2004 of $7 million or $0.11 per common share. For the corresponding quarter of 2003, Millennium reported a net loss of $9 million or $0.14 per common share. Excluding designated items(Note 1), the second quarter 2004 net loss was $6 million or $0.10 per common share compared to a net loss of $4 million or $0.06 per common share for the corresponding quarter of 2003.(Note 2)
Operating income from majority-owned businesses was $11 million in the second quarter of 2004. This compares to $24 million of operating income in the second quarter of 2003 and $13 million of operating income in the first quarter of 2004. Sales from all majority-owned businesses were $488 million in the second quarter of 2004 compared to $416 million in the second quarter of 2003 and $465 million in the first quarter of 2004. The decrease in operating income from the first quarter of 2004 was primarily due to reduced Acetyls segment profitability.
During the second quarter of 2004, Millennium incurred approximately $1 million of expenses relating to the proposed business combination with Lyondell Chemical Company. These expenses relate primarily to fees for outside legal counsel and financial advisors. The transaction is subject to customary conditions, including approval by both companies' shareholders, and is expected to close in the fourth quarter of 2004.
TITANIUM DIOXIDE
The Titanium Dioxide segment reported second quarter 2004 operating income of $10 million compared to $23 million of operating income in the second quarter of last year and $12 million of operating income in the first quarter of 2004. Compared to the first quarter of 2004, operating income was lower due to lower average selling price in U.S. dollars, partially offset by additional profit from higher sales volume.
In U.S. dollar terms, the average second quarter selling price was 3 percent lower compared to the second quarter of 2003 and 2 percent lower than the first quarter of 2004 due to foreign currency exchange. The average local currency selling price in the second quarter of 2004 decreased 6 percent from last year's second quarter and was flat compared to the first quarter of 2004.
The second quarter 2004 TiO2 sales volume of 187,000 metric tons increased 29 percent from the second quarter of last year and increased 12 percent from the first quarter of 2004. Millennium estimates that the global TiO2 market increased 10 to 12 percent compared to the second quarter of 2003. The continued improvement in global economic conditions primarily accounts for the increased demand.
The second quarter 2004 TiO2 plant production operating rate was 92 percent of annual nameplate capacity of 670,000 metric tons compared to an operating rate of 96 percent in the second quarter of 2003 and 93 percent in the first quarter of 2004. Operating rates in 2003 and the first quarter of 2004 were based on annual nameplate capacity of 690,000 metric tons.
The second quarter 2004 manufacturing costs per metric ton increased 7 percent compared to the second quarter of 2003 primarily due to unfavorable currency exchange rates and lower operating rates. Manufacturing costs per metric ton in the second quarter of 2004 increased 2 percent compared to the first quarter of 2004 primarily due to scheduled maintenance shutdowns and higher maintenance costs due to the sulfuric plant outage at Le Havre, France, partially offset by favorable currency exchange and lower raw material costs.
Outlook
Operating income for the third quarter of 2004 is expected to be significantly higher than the second quarter of 2004 as we expect continued strong demand and improved local currency pricing for the Titanium Dioxide segment in the third quarter of 2004 as compared to the second quarter. In July of 2004, the average local currency selling price increased 2.5 percent compared to the average local currency selling price in the second quarter of 2004. Plant operating rates are expected to be slightly higher than in the second quarter of 2004 because there are no maintenance shutdowns scheduled in the third quarter of 2004.
ACETYLS
The Acetyls segment reported second quarter 2004 operating income of $2 million compared to $5 million in the second quarter of last year and $9 million in the first quarter of 2004. The operating profit decline from the first quarter of 2004 was primarily attributable to a delayed return to full operating rates at our acetic acid plant relating to an unscheduled outage at one of our major raw material suppliers.
In the aggregate, the weighted-average US dollar selling price for VAM and acetic acid in the second quarter of 2004 was flat compared to the second quarter of 2003 and increased 3 percent from the first quarter of 2004. Aggregate sales volume for VAM and acetic acid in the second quarter increased 8 percent from the second quarter of 2003 and decreased 10 percent from the first quarter of 2004.
Outlook
Operating income in the third quarter of 2004 is expected to be significantly higher than the second quarter of 2004. Sales volume is expected to be higher in the third quarter of 2004 as the plant returns to normal operating rates. Local currency sales prices are expected to be higher in the third quarter of 2004 as a result of implementing previously announced price increases.
SPECIALTY CHEMICALS
The Specialty Chemicals segment reported second quarter 2004 operating income of $2 million, equaling both last year's second quarter and the first quarter of 2004.
Sales volume decreased 7 percent from the second quarter of 2003 and was 8 percent lower than the first quarter of 2004. Average selling prices increased 6 percent compared to the second quarter of 2003 and decreased 1 percent compared to the first quarter of 2004, primarily due to changes in product mix.
Outlook
Operating income in the third quarter of 2004 is expected to be similar to the second quarter of 2004 as business conditions are expected to remain stable.
EQUISTAR CHEMICALS, LP
Millennium's 29.5 percent stake in Equistar generated equity earnings on investment of $12 million in the second quarter of 2004 compared to an equity loss of $14 million in the second quarter of 2003 and $2 million equity earnings in the first quarter of 2004. Improving economic conditions and higher prices for several of Equistar's products contributed to improved results during the quarter.
Compared to the first quarter of 2004, the second quarter of 2004 results continued to improve as higher co-product (propylene, benzene, butadiene, and fuels) and ethylene derivative (ethylene oxygenates and polyethylene) prices more than offset increased raw material costs. Equistar's combined ethylene and ethylene derivative sales volume increased by approximately 3.5 percent.
Compared to the second quarter of 2003, the second quarter of 2004 results improved significantly as ethylene and ethylene derivative sales volume increased by 520 million pounds (25 percent) versus last year's depressed levels. Raw material costs increased significantly as crude oil prices averaged more than 30 percent higher than the second quarter of 2003. The majority of the raw material increases were offset by product price increases.
Outlook
Industry conditions have continued to reflect an improving supply/demand balance for Equistar's products. The industry and Equistar's product lines continue to move through the early phase of a cyclical recovery and Equistar expects that this trend will continue. However, near-term results will remain vulnerable to the volatility of crude oil and natural gas prices as well as consumer spending patterns. Equistar anticipates that it will begin making cash distributions to its owners in the third quarter of 2004.
DEBT AND CAPITAL SPENDING
Net debt (total debt less cash) at June 30, 2004 totaled $1.217 billion versus $1.224 billion at March 31, 2004. Cash generated by a reduction in trade working capital and low capital spending offset semi-annual bond interest payments made during the quarter. Net interest expense was $24 million in the second quarter of 2004 compared to $23 million in the second quarter of 2003.
Capital spending in the second quarter of 2004 was $13 million compared to $11 million in the second quarter of 2003. Planned capital spending in 2004 is projected to be approximately $60 million. Depreciation and amortization expense in the second quarter was $24 million compared to $28 million in the second quarter of 2003.
RESTATEMENT OF FINANCIAL STATEMENTS
The Company restated its financial statements for the years 2001 through 2003 and for the first quarter of 2004 to correct errors in its computation of deferred taxes relating to its Equistar investment. This restatement reduced Millennium's liability for deferred income taxes and Shareholder's deficit at June 30, 2004 and December 31, 2003 by $15 million.
The information on Table III has been adjusted to reflect this restatement. The Company will file an amendment to its Annual Report on Form 10-K for the year ended December 31, 2003 and an amendment to its Quarterly Report on Form 10-Q for the quarter ended March 31, 2004 to reflect the restatement.
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, the largest merchant seller of titanium tetrachloride and a major producer of silica gel and cadmium-based pigments; - The second-largest producer of acetic acid and vinyl acetate monomer in North America; - A leading producer of terpene-based fragrance and flavor chemicals; and, - Through its 29.5% 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 performance polymers, oxygenated chemicals, aromatics and specialty petrochemicals.
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 filings that Millennium makes with the Securities and Exchange Commission, in press releases or in written or oral statements made by or with the approval of one of its authorized executive officers. These forward-looking statements are only present expectations reflecting current assumptions about future events. Actual events or results may differ materially. Factors that could cause such a difference include: Millennium's ability to complete its proposed business combination with Lyondell within the expected time frame or at all; the cyclicality and volatility of the chemical industries in which Millennium and Equistar operate, particularly fluctuations in the demand for ethylene, its derivatives and acetyls and the sensitivity of these industries 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, in particular the events in the Middle East; the ability of Equistar to distribute cash to its partners and uncertainties arising from Millennium's minority interest in Equistar, and Millennium's contractual commitments regarding possible future capital contributions to Equistar; changes in the cost of energy and raw materials, particularly natural gas and ethylene, and Millennium's and Equistar's ability to pass on cost increases to their respective customers; Millennium's substantial indebtedness and its impact on Millennium's cash flow, business operations and ability to obtain additional financing; Millennium's ability to comply with the covenants and other restrictions in Millennium's debt instruments, a failure of which could lead to additional restrictions, costs, or an acceleration of Millennium's indebtedness; limitations on credit extended to Millennium and demands from creditors and suppliers for additional credit restrictions or security; 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 and 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-based paints and lead pigments, asbestos and other materials), ongoing and future tax audits, pension and retiree medical costs, and other claims. A further description of these risks, uncertainties and other matters can be found in Exhibit 99.1 to Millennium's Quarterly Report on Form 10-Q for the quarter ended March 31, 2004, and Lyondell's Amendment No. 1 to its registration statement on Form S-4 (as amended, the "Form S-4") containing the preliminary joint proxy statement/prospectus regarding the proposed business combination, which was filed with the Securities and Exchange Commission (the "SEC") on June 18, 2004. Millennium disclaims any obligation to update any forward-looking statement, whether as a result of new information, future events or otherwise.
The definitive joint proxy statement/prospectus regarding the proposed business combination will be sent to holders of Lyondell's and Millennium's common stock when it becomes available. Investors and security holders are urged to read that document and any other relevant documents filed or that will be filed with the SEC, including the definitive joint proxy statement/prospectus that will be part of the definitive registration statement, as they become available, because they contain, or will contain, important information. Investors and security holders may obtain a free copy of the definitive joint proxy statement/prospectus (when it becomes available) and other documents filed by Lyondell and Millennium with the SEC at the SEC's web site at www.sec.gov. The preliminary joint proxy statement/prospectus and the definitive joint proxy statement/prospectus (when it becomes available) and the other documents filed by Millennium may also be obtained free from Millennium by calling Millennium's Investor Relations department at (410) 229-8113.
The respective executive officers and directors of Lyondell and Millennium and other persons may be deemed to be participants in the solicitation of proxies in respect of the proposed transaction. Information regarding Lyondell's executive officers and directors is available in the proxy statement filed with the SEC by Lyondell on March 16, 2004 and in the Form S-4, and information regarding Millennium's directors and its executive officers is available in Millennium's Annual Report on Form 10-K/A for the year ended December 31, 2003, which was filed with the SEC on April 27, 2004, and in the Form S-4. Other information regarding the participants in the proxy solicitation and a description of their direct and indirect interests, by security holdings or otherwise, will be contained in the definitive joint proxy statement/prospectus and other relevant materials filed with the SEC, as they become available.
Note 1 - The designated item for the second quarter of 2004 is $1 million ($1 million after tax) of costs related to the proposed business combination with Lyondell Chemical Company. The designated items for the second quarter of 2003 are $1 million ($1 million after tax) of costs related to reorganization and closure costs and $6 million ($4 million after tax) related to the Company's share of Equistar's debt prepayment cost.
Note 2 - See Table V below for an explanation and quantification of these items, and a reconciliation between loss per common share, as adjusted for these designated items, and loss per common share determined according to accounting principles generally accepted in the United States of America.
MILLENNIUM CHEMICALS INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Millions, except per share data)
TABLE I
Three months ended Six months ended
June 30, June 30,
---------------- ----------------
2004 2003 2004 2003
------ ------ ------ ------
Net sales $ 488 $ 416 $ 953 $ 831
Operating costs and expenses
Cost of products sold 413 326 801 657
Selling, development and
administrative 33 37 66 67
Depreciation and amortization 24 28 48 55
Asset impairment charges 5 - 8 -
Combination costs 1 - 4 -
Reorganization and
closure costs 1 1 2 1
------ ------ ------ ------
Operating income 11 24 24 51
Net interest expense (24) (23) (49) (45)
Earnings (loss) on Equistar
investment
- operating income (loss) 29 8 47 (17)
- interest (17) (16) (33) (30)
- loss on sale of assets -- -- -- (4)
- debt prepayment cost -- (6) -- (6)
Net other expense (1) (1) (2) (1)
------ ------ ------ ------
Loss before income taxes,
minority interest and
cumulative effect of
accounting change (2) (14) (13) (52)
(Provision for) benefit from
income taxes (3) 6 (1) 21
------ ------ ------ ------
Loss before minority interest
and cumulative effect of
accounting change (5) (8) (14) (31)
Minority interest (2) (1) (3) (4)
------ ------ ------ ------
Loss before cumulative effect
of accounting change (7) (9) (17) (35)
Cumulative effect of
accounting change -- -- -- (1)
------ ------ ------ ------
Net loss $ (7) $ (9) $ (17) $ (36)
====== ====== ====== ======
Basic and diluted EPS
($/share)
- before accounting change $(0.11) $(0.14) $(0.26) $(0.54)
- from accounting change -- -- -- (0.02)
------ ------ ------ ------
- after accounting change $(0.11) $(0.14) $(0.26) $(0.56)
====== ====== ====== ======
Weighted-average number of
shares used to compute
basic and diluted EPS 64.963 63.973 64.730 63.913
MILLENNIUM CHEMICALS INC.
SEGMENT INFORMATION
(Millions)
TABLE II
2004 2003
--------- ----------------------------------
1Q 2Q 1Q 2Q 3Q 4Q FY
--- --- --- --- --- ---- -----
NET SALES
Titanium Dioxide 333 363 288 293 293 298 1,172
Acetyls 106 101 102 99 115 105 421
Specialty Chemicals 26 24 25 24 23 22 94
--- --- --- --- --- ---- -----
Total 465 488 415 416 431 425 1,687
OPERATING INCOME
(LOSS)
Titanium Dioxide(1) 12 10 21 23 7 (102) (51)
Acetyls 9 2 7 5 6 9 27
Specialty Chemicals 2 2 2 2 (1) (1) 2
Other(2) (10) (3) (3) (6) (17) (3) (29)
--- --- --- --- --- ---- -----
Total 13 11 27 24 (5) (97) (51)
DEPRECIATION AND
AMORTIZATION
Titanium Dioxide 19 19 22 23 24 25 94
Acetyls 3 3 3 3 2 3 11
Specialty Chemicals 2 2 2 2 2 2 8
--- --- --- --- --- ---- -----
Total 24 24 27 28 28 30 113
CAPITAL SPENDING
Titanium Dioxide 9 12 7 10 9 16 42
Acetyls 1 1 -- -- 1 2 3
Specialty Chemicals -- -- 1 1 -- 1 3
--- --- --- --- --- ---- -----
Total 10 13 8 11 10 19 48
(1) The Titanium Dioxide segment includes $103 million of asset
impairment charges in the fourth quarter of 2003 associated
primarily with the writedown of property, plant, and equipment at
Millennium's Le Havre, France manufacturing plant.
(2) The Other segment includes $6 million of expenses related to an
increase in legal and environmental contingency liabilities for
predecessor businesses in the first quarter of 2004, combination
costs of $3 million in the first quarter of 2004 and $1 million
in the second quarter of 2004, and reorganization and office
closure costs of $1 million in both the first and second quarters
of 2004. The Other segment also includes reorganization and
office closure costs of $1 million in the second quarter of 2003,
$15 million in the third quarter of 2003 and $2 million in the
fourth quarter of 2003, in each case associated with the
Company's cost reduction program announced in July 2003.
MILLENNIUM CHEMICALS INC.
CONSOLIDATED BALANCE SHEETS
(Millions)
Table III
June 30, December 31,
2004 2003
------- -------
(Restated)
ASSETS
Current assets
Cash and cash equivalents $ 191 $ 209
Trade receivables, net 342 277
Inventories 372 457
Other current assets 69 65
------- -------
Total current assets 974 1,008
Property, plant and equipment, net 725 766
Investment in Equistar 483 469
Other assets 45 51
Goodwill 104 104
------- -------
Total assets $ 2,331 $ 2,398
======= =======
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current liabilities
Notes payable $ 3 $ --
Current maturities of long-term debt 5 6
Trade accounts payable 264 236
Income taxes payable 6 5
Accrued expenses and other liabilities 116 124
------- -------
Total current liabilities 394 371
Long-term debt 1,400 1,461
Deferred income taxes 270 272
Other liabilities 314 325
------- -------
Total liabilities 2,378 2,429
Minority interest 29 27
Shareholders' deficit (76) (58)
------- -------
Total liabilities and shareholders'
deficit $ 2,331 $ 2,398
======= =======
MILLENNIUM CHEMICALS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Millions)
TABLE IV
Six months ended
June 30,
-------------------
2004 2003
----- -----
Cash flows from operating activities:
Net loss $ (17) $ (36)
Adjustments to reconcile net loss to
net cash provided by (used in)
operating activities:
Cumulative effect of accounting change -- 1
Depreciation and amortization 48 55
Deferred income tax benefit (4) (32)
(Earnings) loss on Equistar investment (14) 57
Net change in trade working capital 45 (68)
Minority interest and other 8 5
Net change in other assets and liabilities (21) (24)
----- -----
Cash provided by (used in) operating
activities 45 (42)
----- -----
Cash flows from investing activities:
Capital expenditures (23) (19)
----- -----
Cash flows from financing activities:
Dividends to shareholders -- (17)
Net (repayment of) proceeds from borrowings (53) 101
Proceeds from exercise of stock options 9 --
----- -----
Cash (used in) provided by financing
activities (44) 84
----- -----
Effect of exchange rate changes on cash 4 7
----- -----
(Decrease) increase in cash and cash
equivalents (18) 30
Cash and cash equivalents at beginning
of year 209 125
----- -----
Cash and cash equivalents at end of period 191 155
===== =====
Millennium Chemicals Inc.
GAAP Reconciliation
(Millions, except per share data)
Table V
Three months ended Three months ended
June 30, 2004 June 30, 2003
------------------ -------------------
Net Loss EPS Net Loss EPS
-------- ------ -------- ------
Reported GAAP $ (7) $(0.11) $ (9) $(0.14)
Reorganization and
office closure costs -- -- 1 0.02
Combination costs 1 0.01 -- --
Company's share of
Equistar's debt
prepayment costs -- -- 4 0.06
------ ------ ------ ------
As adjusted $ (6) $(0.10) $ (4) $(0.06)
====== ====== ====== ======
Six months ended Six months ended
June 30, 2004 June 30, 2003
------------------ -------------------
Net Loss EPS Net Loss EPS
-------- ------ -------- ------
Reported GAAP $ (17) $(0.26) $ (36) $(0.56)
Combination costs 3 0.04 -- --
Reorganization and
office closure costs 1 0.02 1 0.02
Increase in legacy
liabilities 4 0.06 -- --
Cumulative effect of
accounting change for
asset retirement
obligations -- -- 1 0.02
Company's share of Equistar:
Loss on sale of assets -- -- 3 0.04
Debt prepayment costs -- -- 4 0.06
------ ------ ------ ------
As adjusted $ (9) $(0.14) $ (27) $(0.42)
====== ====== ====== ======