HUNT VALLEY, Md., Nov. 9, 2004 (PRIMEZONE) -- Millennium Chemicals (NYSE:MCH) ("Millennium" or the "Company") today reported net income for the third quarter of 2004 of $28 million or $0.38 per common share on a fully diluted basis. For the corresponding quarter of 2003, Millennium reported a net loss of $28 million or $0.44 per common share. Excluding designated items (1), the third quarter 2004 net income was $29 million or $0.40 per common share on a fully diluted basis compared to a net loss of $21 million or $0.33 per common share for the corresponding quarter of 2003. (2)
Operating income from majority-owned businesses was $45 million in the third quarter of 2004. This compares to an operating loss of $5 million in the third quarter of 2003 and $11 million of operating income in the second quarter of 2004. Sales from all majority-owned businesses were $480 million in the third quarter of 2004 compared to $431 million in the third quarter of 2003 and $488 million in the second quarter of 2004.
During the third quarter of 2004, Millennium incurred approximately $1 million of advisory fees and other expenses relating to the proposed business combination with Lyondell Chemical Company ("Lyondell"). The transaction is subject to approval by both companies' shareholders and is expected to close after the close of business on November 30, 2004.
(1) The designated item for the third quarter of 2004 is $1 million (after
tax) of costs related to the Company’s cost reduction program. The
designated items for the third quarter of 2003 are $9 million (after
tax) of costs related to the Company's cost reduction program and $2
million (after tax) of income related to the Company's collection of
a note receivable.
(2) See Table V below for an explanation and quantification of these
items, and a reconciliation on a fully diluted basis between income
(loss) per common share,as adjusted for these designated items, and
income (loss) per common share determined according to accounting
principles generally accepted in the United States of America.
TITANIUM DIOXIDE
The Titanium Dioxide segment reported third quarter 2004 operating income of $26 million compared to $7 million of operating income in the third quarter of last year and $10 million of operating income in the second quarter of 2004. Compared to the third quarter of 2003, operating income was higher due to higher sales volume, higher U.S. dollar prices and lower manufacturing costs. Compared to the second quarter of 2004, operating income was higher due to an increase in the average selling price in U.S. dollars and lower manufacturing costs.
In U.S. dollar terms, the average third quarter selling price was 2 percent higher compared to the third quarter of 2003 and 3 percent higher than the second quarter of 2004. The average local currency selling price in the third quarter of 2004 decreased 1 percent from last year's third quarter and increased 3 percent from the second quarter of 2004.
The third quarter 2004 TiO2 sales volume increased 15 percent from the third quarter of last year and decreased 9 percent from the second quarter of 2004. Millennium estimates that the global TiO2 market increased 9 to 11 percent compared to the third quarter of 2003. The continued improvement in global economic conditions primarily accounts for the increased demand.
The third quarter 2004 TiO2 plant production operating rate was 99 percent of annual nameplate capacity of 670,000 metric tons compared to an operating rate of 84 percent in the third quarter of 2003 and 92 percent in the second quarter of 2004. Operating rates in 2003 were based on annual nameplate capacity of 690,000 metric tons.
The third quarter 2004 manufacturing costs per metric ton decreased 4 percent compared to both the second quarter of 2004 and the third quarter of 2003 primarily due to higher operating rates.
Outlook
Operating income for the fourth quarter of 2004 is expected to be seasonally lower than the third quarter of 2004 as we expect seasonally lower demand partially offset by improved pricing. In October of 2004, the average selling price in U.S. dollar terms increased approximately 5 percent compared to the average U.S. dollar selling price in the third quarter of 2004. Plant operating rates are expected to be lower than the third quarter of 2004 due to scheduled plant maintenance activities.
ACETYLS
The Acetyls segment reported third quarter 2004 operating income of $19 million compared to $6 million in the third quarter of last year and $2 million in the second quarter of 2004. The operating profit improvement from the second quarter of 2004 was primarily attributable to margin improvement driven by higher selling prices, lower costs for natural gas and a return to normal plant operating rates.
In the aggregate, the weighted-average U.S. dollar selling price for VAM and acetic acid in the third quarter of 2004 was 17 percent higher than the third quarter of 2003 and 9 percent higher than the second quarter of 2004. Aggregate sales volume for VAM and acetic acid in the third quarter decreased 15 percent from the third quarter of 2003 and increased 1 percent from the second quarter of 2004.
Outlook
Sales volume in the fourth quarter of 2004 is expected to be similar to the third quarter of 2004. However, the fourth quarter results are difficult to forecast due to high and volatile natural gas prices, which impact both selling prices and cost of goods sold.
SPECIALTY CHEMICALS
The Specialty Chemicals segment reported third quarter 2004 operating income of $1 million compared to an operating loss of $1 million in the third quarter of last year and operating income of $2 million in the second quarter of 2004.
Sales volume decreased 8 percent from the third quarter of 2003 and was 11 percent lower than the second quarter of 2004. Average selling prices increased 10 percent compared to the third quarter of 2003 and increased 9 percent compared to the second quarter of 2004 primarily due to changes in product mix.
Outlook
Operating income in the fourth quarter of 2004 is expected to be similar to the third 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 $22 million in the third quarter of 2004 compared to an equity loss of $12 million in the third quarter of 2003 and $12 million equity earnings in the second quarter of 2004.
Compared to the third quarter of 2003, the third quarter of 2004 results improved as a result of increased product margins supplemented by increased sales volumes. Average quarterly prices for ethylene and its major derivatives (polyethylene and ethylene glycol) ranged from 6 1/2 to 8 1/2 cents per pound higher than during the third quarter of 2003. Equistar's average cost-of-ethylene-production metric increased by approximately 4 1/2 cents per pound versus the same period last year, driven by the increased cost of crude oil and natural gas-based raw materials. Compared to the third quarter of 2003, ethylene and ethylene derivative sales volumes increased by approximately 140 million pounds or 5.5 percent.
Compared to the second quarter of 2004, the third quarter of 2004 results continued to improve as margin improvements in ethylene derivatives (polyethylene and ethylene oxygenates) were key contributors. Ethylene sales margins were relatively unchanged as ethylene and co-product price increases largely offset raw material costs. Total raw material costs increased by more than $160 million versus the prior quarter. Ethylene and ethylene derivative volumes continued to increase, growing by approximately 65 million pounds or approximately 2.5 percent versus the second quarter.
Outlook
Industry conditions have continued to strengthen through October 2004. Product price increase initiatives are underway for almost all Equistar's products in response to both the strong supply/demand fundamentals and the high level of and volatility in crude oil and natural gas prices. Solid global sales volume growth has tightened industry supply/demand conditions, which, in turn, has led to modest margin improvement despite significant increases in raw material costs. Subject to the uncertainties of any significant economic slowdown or global disruption, these industry conditions and resulting improving cyclical trends are expected to continue. While there is significant uncertainty related to the potential near-term earnings impacts of raw material price volatility and seasonality, positive longer-term trends appear to be well established.
DEBT AND CAPITAL SPENDING
Net debt (total debt less cash) at September 30, 2004 totaled $1.094 billion versus $1.217 billion at June 30, 2004. The reduction in net debt was achieved through higher profitability, a $29.5 million distribution from Equistar and capital spending at a level lower than depreciation and amortization. Net interest expense was $24 million in the third quarter of 2004 compared to $23 million in the third quarter of 2003.
Capital spending in the third quarter of 2004 was $15 million compared to $10 million in the third quarter of 2003. Full year capital spending in 2004 is expected to be approximately $60 million. Depreciation and amortization expense in the third quarter was $24 million compared to $28 million in the third quarter of 2003.
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 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 Annual Report on Form 10-K for the year ended December 31, 2003, filed with the Securities and Exchange commission (the "SEC") on March 12, 2004 and Millennium's Quarterly Report on Form 10-Q for the quarter ended September 30, 2004, including Exhibit 99.1 thereto, which will be filed with the SEC in November 2004. Millennium disclaims any obligation to update any forward-looking statement, whether as a result of new information, future events or otherwise.
In addition, on October 15, 2004, Lyondell filed with the SEC the definitive joint proxy statement/prospectus regarding the proposed transaction between Lyondell and Millennium. Investors and security holders are urged to read that document and any other relevant documents filed or that will be filed with the SEC, 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 and other documents filed by Lyondell and Millennium with the SEC at the SEC's web site at www.sec.gov. The definitive joint proxy statement/prospectus 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.
MILLENNIUM CHEMICALS INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Millions, except per share data)
TABLE I
Three months ended Nine months ended
September 30, September 30,
------------------ ---------------------
2004 2003 2004 2003
------- ------- --------- --------
Net sales $ 480 $ 431 $ 1,433 $ 1,262
Operating costs
and expenses
Cost of products
sold 373 362 1,174 1,019
Selling, development
and administrative 33 31 99 98
Depreciation
and amortization 24 28 72 83
Asset impairment
charges 3 -- 11 --
Combination costs 1 -- 5 --
Reorganization and
office closure costs 1 15 3 16
-------- --------- --------- ----------
Operating income (loss) 45 (5) 69 46
Net interest expense (24) (23) (73) (68)
Earnings (loss)on
Equistar investment
- operating
income (loss) 38 3 85 (14)
- interest (16) (15) (49) (45)
- loss on sale of
assets -- -- -- (4)
- debt prepayment cost -- -- -- (6)
Net other income
(expense) 1 2 (1) 1
-------- --------- --------- ----------
Income (loss) before
income taxes,
minority interest and
cumulative effect of
accounting change 44 (38) 31 (90)
(Provision for) benefit
from income taxes (14) 11 (15) 32
-------- --------- --------- ----------
Income (loss) before
minority interest and
cumulative effect
of accounting change 30 (27) 16 (58)
Minority interest (2) (1) (5) (5)
-------- --------- --------- ----------
Income (loss) before
cumulative effect of
accounting change 28 (28) 11 (63)
Cumulative effect of
accounting change -- -- -- (1)
-------- --------- --------- ----------
Net income (loss) $ 28 $ (28) $ 11 $ (64)
======== ========= ========= ==========
Basic EPS ($/share)
- before accounting
change $ 0.43 $ (0.44) $ 0.17 $ (0.98)
- from accounting
change -- -- -- (0.02)
-------- --------- --------- ----------
- after accounting
change $ 0.43 $ (0.44) $ 0.17 $ (1.00)
======== ========= ========= ==========
Weighted-average number
of shares used to
compute basic EPS 65,428 64,051 64,963 63,960
Diluted EPS ($/share)
- before accounting
change $ 0.38 $ (0.44) $ 0.17 $ (0.98)
- from accounting
change -- -- -- (0.02)
-------- --------- --------- ----------
- after accounting
change $ 0.38 $ (0.44) $ 0.17 $ (1.00)
======== ========= ========= ==========
Weighted-average number
of shares used to
compute diluted EPS 76,976 64,051 65,273 63,960
MILLENNIUM CHEMICALS INC.
SEGMENT INFORMATION
(Millions)
TABLE II
2004 2003
------------------- ---------------------------------
1Q 2Q 3Q 1Q 2Q 3Q 4Q FY
----- ----- ----- ----- ----- ----- ----- -----
NET SALES
Titanium
Dioxide 333 363 342 288 293 293 298 1,172
Acetyls 106 101 115 102 99 115 105 421
Specialty
Chemicals 26 24 23 25 24 23 22 94
----- ----- ----- ----- ----- ----- ----- -----
Total 465 488 480 415 416 431 425 1,687
OPERATING
INCOME (LOSS)
Titanium
Dioxide (1) 12 10 26 21 23 7 (102) (51)
Acetyls 9 2 19 7 5 6 9 27
Specialty
Chemicals 2 2 1 2 2 (1) (1) 2
Other (2) (10) (3) (1) (3) (6) (17) (3) (29)
----- ----- ----- ----- ----- ----- ----- -----
Total 13 11 45 27 24 (5) (97) (51)
DEPRECIATION
AND
AMORTIZATION
Titanium
Dioxide 19 19 20 22 23 24 25 94
Acetyls 3 3 2 3 3 2 3 11
Specialty
Chemicals 2 2 2 2 2 2 2 8
----- ----- ----- ----- ----- ----- ----- -----
Total 24 24 24 27 28 28 30 113
CAPITAL
SPENDING
Titanium
Dioxide 9 12 14 7 10 9 16 42
Acetyls 1 1 -- -- -- 1 2 3
Specialty
Chemicals -- -- 1 1 1 -- 1 3
----- ----- ----- ----- ----- ----- ----- -----
Total 10 13 15 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 both the second quarter and third quarter of 2004, and
reorganization and office closure costs of $1 million in each of
the first, second and third 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
September 30, December 31,
2004 2003
------------- ------------
ASSETS
Current assets
Cash and cash
equivalents $ 313 $ 209
Trade receivables, net 342 277
Inventories 370 457
Other current assets 71 65
------------- --------------
Total current assets 1,096 1,008
Property, plant and
equipment, net 719 766
Investment in Equistar 475 469
Other assets 42 51
Goodwill 104 104
------------- ---------------
Total assets $ 2,436 $ 2,398
============= ===============
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current liabilities
Notes payable $ -- $ --
Current maturities
of long-term debt 6 6
Trade accounts payable 268 236
Income taxes payable 7 5
Accrued expenses and
other liabilities 161 124
------------- --------------
Total current
liabilities 442 371
Long-term debt 1,401 1,461
Deferred income taxes 276 272
Other liabilities 314 325
------------- --------------
Total liabilities 2,433 2,429
Minority interest 30 27
Shareholders' deficit (27) (58)
------------- --------------
Total liabilities and
shareholders' deficit $ 2,436 $ 2,398
============= ==============
MILLENNIUM CHEMICALS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Millions)
TABLE IV
Nine months ended
September 30,
--------------------
2004 2003
--------------------
Cash flows from operating activities:
Net income (loss) $ 11 $ (64)
Adjustments to reconcile
net loss to net cash
provided by (used in)
operating activities:
Cumulative effect of
accounting change -- 1
Depreciation and
amortization 72 83
Deferred income tax
provision (benefit) 8 (43)
(Earnings) loss on
Equistar investment (36) 69
Net change in trade
working capital 56 (104)
Minority interest
and other 17 5
Net change in other assets
and liabilities 16 4
-------- ---------
Cash provided by (used in)
operating activities 144 (49)
-------- ---------
Cash flows from investing activities:
Capital expenditures (38) (29)
Distribution from Equistar 30 --
Proceeds from sale of
property, plant and equipment 1 --
-------- --------
Cash used in investing activities (7) (29)
-------- --------
Cash flows from financing
activities:
Dividends to shareholders -- (17)
Net (repayment of) proceeds
from borrowings (55) 119
Proceeds from exercise of
stock options 15 --
-------- --------
Cash (used in) provided by
financing activities (40) 102
-------- --------
Effect of exchange rate
changes on cash 7 9
-------- --------
Increase in cash and cash
equivalents 104 33
Cash and cash equivalents
at beginning of year 209 125
-------- --------
Cash and cash equivalents
at end of period 313 158
======== ========
MILLENNIUM CHEMICALS INC.
GAAP RECONCILIATION
(MILLIONS, EXCEPT PER SHARE DATA)
TABLE V
Three months ended Three months ended
September 30, 2004 September 30, 2003
------------------ -------------------
Net Net
Income EPS(1) Loss EPS(2)
------ -------- -------- --------
Reported GAAP $ 28 $ 0.38 $ (28) $ (0.44)
Reorganization
and office closure
costs 1 0.02 9 0.14
Collection of
note receivable -- -- (2) (0.03)
------ -------- -------- --------
As adjusted $ 29 $ 0.40 $ (21) $ (0.33)
====== ======== ======== ========
Nine months ended Nine months ended
September 30, 2004 September 30, 2003
------------------ ------------------
Net Net
Income EPS(1) Loss EPS(2)
------ -------- -------- --------
Reported GAAP $ 11 $ 0.17 $ (64) $ (1.00)
Combination costs 3 0.05 -- --
Reorganization and
office closure costs 2 0.03 10 0.16
Increase in legacy
liabilities 4 0.06 -- --
Cumulative effect of
accounting change
for asset retirement
obligations -- -- 1 0.02
Collection of note
receivable -- -- (2) (0.03)
Company's share of
Equistar's:
Loss on sale of
assets -- -- 3 0.04
Debt prepayment
costs -- -- 4 0.06
------ -------- -------- --------
As adjusted $ 20 $ 0.31 $ (48) $ (0.75)
====== ======== ======== ========
(1) Earnings per share on a fully diluted basis
(2) Approximately 286 and 284 shares of common stock issuable for
options, awards and shares held in trust for certain employee
benefit plans for the three month and nine month periods ended
September 30, 2003, respectively, were excluded from the
calculation of EPS because the effect would be antidilutive.