Filed by Millennium Chemicals Inc.
Pursuant to Rule 425 under the Securities Act of 1933 and
Deemed Filed Pursuant to Rule 14a-12 under the Securities Exchange Act of 1934
Subject Company: Millennium Chemicals Inc.
Commission File No. 1-12091
Date: May 17, 2004
This filing contains a press release issued by Millennium on May 14, 2004. These
materials are being filed pursuant to Rule 425 under the Securities Act of 1933.
[MILLENNIUM CHEMICALS GRAPHIC]
NEWS RELEASE
Contact: Thomas Van Valkenburgh
Manager of Investor Relations
(410) 229-8113
FOR IMMEDIATE RELEASE
MILLENNIUM CHEMICALS REPORTS FIRST QUARTER OPERATING RESULTS
AND SCHEDULES INTERNET WEBCAST/TELECONFERENCE
-- 1Q04 net loss of $0.16 per share --
-- 1Q04 net loss of $0.05 per share excluding designated items --
Hunt Valley, Maryland, May 14, 2004 -- Millennium Chemicals (NYSE-MCH)
("Millennium", or the "Company") today reported a net loss for the first quarter
of 2004 of $10 million or $0.16 per common share. For the corresponding quarter
of 2003, Millennium reported a net loss of $27 million or $0.43 per common
share. Excluding designated items(1), the first quarter 2004 net loss was $3
million or $0.05 per common share compared to a loss of $23 million or $0.36 per
common share for the corresponding quarter of 2003.(2)
The Company's adoption of revised FASB Interpretation No. 46, "Consolidation of
Variable Interest Entities", which was effective January 1, 2004 for certain
variable interests acquired before February 1, 2003, had no impact on the
Company's consolidated financial statements.
--------
(1) Designated items for the first quarter of 2004 include $6 million ($4
million after tax) of expenses related to an increase in legal and environmental
contingency liabilities for predecessor businesses, $3 million ($2 million after
tax) of costs related to the proposed business combination with Lyondell
Chemical Company, and $1 million ($1 million after tax) of reorganization costs
related to the Company's cost reduction program announced in July 2003.
Designated items for the first quarter of 2003 include $4 million ($3 million
after tax) for the Company's share of Equistar's loss on sale of assets and $1
million for the cumulative effect of the accounting change for asset retirement
obligations.
(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.
Robert E. Lee, President and CEO, said, "Financial results for all three
majority-owned businesses and Equistar were improved from the prior quarter. We
continue to be optimistic that, with the improved economy, improving global
demand for our products and our continued focus on our customers and costs, our
momentum toward overall profitability should continue into the second quarter."
Operating income from majority-owned businesses was $13 million in the first
quarter of 2004. This compares to $27 million of operating income in the first
quarter of 2003 and a $97 million operating loss in the fourth quarter of 2003,
which included $103 million of asset impairment charges. Sales from all
majority-owned businesses were $465 million in the first quarter of 2004
compared to $415 million in the first quarter of 2003 and $425 million in the
fourth quarter of 2003. The decrease in operating income from the first quarter
of 2003 was due to reduced Titanium Dioxide segment profitability. The increase
in operating income in the first quarter of 2004 compared to the prior quarter,
which included $103 million of asset impairment charges, was due to improved
Titanium Dioxide business results.
During the first quarter of 2004, Millennium incurred approximately $3 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 third
quarter of 2004.
TITANIUM DIOXIDE
The Titanium Dioxide segment reported first quarter 2004 operating income of $12
million compared to $21 million of operating income in the first quarter of last
year and $102 million of operating loss in the fourth quarter of 2003. Compared
to the first quarter of 2003, operating income was lower due to higher costs of
goods sold, only partially offset by additional profit from higher sales volume.
Operating income in the first quarter of 2004 was higher than the fourth quarter
of 2003 due to higher sales volume and lower costs of goods sold, only partially
offset by lower pricing.
The first quarter 2004 manufacturing costs per metric ton increased 1 percent
compared to the first quarter of 2003 primarily due to unfavorable currency
exchange rates, partially offset by lower energy and raw material costs and
higher plant operating rates. Manufacturing costs per metric ton in the first
quarter of 2004 decreased 4 percent compared to the fourth quarter of 2003
primarily due to higher operating rates and lower raw material costs and
maintenance spending, partially offset by unfavorable currency exchange.
ACETYLS
The Acetyls segment reported first quarter 2004 operating income of $9 million
compared to $7 million in the first quarter of last year and $9 million in the
fourth quarter of 2003.
SPECIALTY CHEMICALS
The Specialty Chemicals segment returned to profitability in the first quarter
of 2004 with operating income of $2 million equaling last year's first quarter
and exceeding the operating loss of $1 million in the fourth quarter of 2003.
DEBT AND CAPITAL SPENDING
Net debt (total debt less cash) at March 31, 2004 totaled $1.224 billion versus
$1.258 billion at December 31, 2003. The $34 million reduction in net debt
during the first quarter of 2004 was primarily due to a decrease of $22 million
in trade working capital. Net interest expense was $25 million in the first
quarter of 2004 compared to $22 million in the first quarter of 2003.
Capital spending in the first quarter of 2004 was $10 million compared to $8
million in the first quarter of 2003. Planned capital spending in 2004 is
projected to be approximately $60 million. Depreciation and amortization expense
in the first quarter was $24 million compared to $27 million in the first
quarter of 2003. The lower depreciation and amortization charge was primarily
due to the writedown of property, plant and equipment at the Company's Le Havre
TiO[u]2 manufacturing plant in the fourth quarter of 2003. Asset impairment
charges recorded in the first quarter of 2004 reflect the write-off of capital
spending at the Le Havre TiO[u]2 manufacturing plant during the quarter.
INTERNET WEBCAST/TELECONFERENCE
The Company has scheduled a webcast/teleconference call for 1:00 p.m. EST on
Tuesday, May 18, 2004 for its first quarter operating results. The
webcast/teleconference information is as follows:
Dial in Number: 973-582-2703
Please call 5-10 minutes before the scheduled start
of the teleconference
Management: Bob Lee, President and Chief Executive Officer
Jack Lushefski, Executive Vice President and Chief
Financial Officer
Thomas Van Valkenburgh, Manager - Investor Relations
Webcast: You can conveniently view the slide presentation and
listen to remarks live by accessing our website
http://www.millenniumchem.com and clicking on
Investor Relations
Replay: 973-341-3080 ID# 4785295 available through May 25,
2004
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:
o The second-largest producer of TiO[u]2 in the world, the largest merchant
seller of titanium tetrachloride and a major producer of zirconia, silica
gel and cadmium-based pigments;
o The second-largest producer of acetic acid and vinyl acetate monomer in
North America;
o A leading producer of terpene-based fragrance and flavor chemicals; and,
o 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: the cyclicality and volatility of the chemical industries 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 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 -- failure to
comply with the covenants and other restrictions in Millennium's debt
instruments would lead to additional restrictions and 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 fiscal year ended December 31, 2003, as amended and Lyondell's
registration statement containing the preliminary joint proxy statement/
prospectus in connection with the proposed business combination, which was
filed with the SEC on April 26, 2004. Millennium disclaims any obligation to
update any forward-looking statement, whether as a result of new information,
future events or otherwise.
In addition, in connection with the proposed business combination, Lyondell and
Millennium have filed relevant materials with the SEC, including a registration
statement containing a preliminary joint proxy statement/prospectus, which was
filed on April 26, 2004. The definitive joint proxy statement/prospectus 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 the preliminary
joint proxy statement/prospectus
on file with the SEC, the definitive joint proxy statement/prospectus when it
becomes available and any other relevant documents filed by Lyondell or
Millennium because they contain, or will contain, important information.
Investors and security holders may obtain a free copy of the preliminary joint
proxy statement/prospectus and the definitive joint proxy statement/prospectus
(when it becomes available) and other documents filed by Lyondell and Millennium
with the SEC for free 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 information regarding Millennium's directors and
its executive officers is available in Millennium's Amendment to its Annual
Report on Form10-K/A for the year ended December 31, 2003, which was filed with
the SEC on April 27, 2004. Other information regarding the participants in the
proxy solicitation and a description of their direct and indirect interests, by
security holdings or otherwise, is contained in the preliminary joint proxy
statement/prospectus and other relevant materials filed with the SEC and will be
contained in the definitive joint proxy statement/prospectus and other relevant
materials filed with the SEC, as they become available.
# # #
MILLENNIUM CHEMICALS INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Millions, except per share data)
TABLE I
Three months ended
March 31,
-------------------
2004 2003
---- ----
Net sales $ 465 $ 415
Operating costs and expenses
Cost of products sold 388 331
Selling, development and administrative 33 30
Depreciation and amortization 24 27
Asset impairment charges 3 --
Combination costs 3 --
Reorganization and office closure costs 1 --
------ ------
Operating income 13 27
Interest expense, net (25) (22)
Earnings (loss) on Equistar investment
- operating income (loss) 18 (25)
- interest (16) (14)
- loss on sale of assets -- (4)
Other expense, net (1) --
------ ------
Loss before income taxes, minority interest and cumulative
effect of accounting change (11) (38)
Benefit from income taxes 2 15
------ ------
Loss before minority interest and
cumulative effect of accounting change (9) (23)
Minority interest (1) (3)
------ ------
Loss before cumulative effect of
accounting change (10) (26)
Cumulative effect of accounting change -- (1)
------ ------
Net loss $ (10) $ (27)
====== ======
Basic and diluted EPS ($/share)
- before accounting change $(0.16) $(0.41)
- from accounting change -- (0.02)
------ ------
- after accounting change $(0.16) $(0.43)
====== ======
Weighted average number of shares used to
compute basic and diluted EPS 64.497 63.853
MILLENNIUM CHEMICALS INC.
SEGMENT INFORMATION
(Millions)
TABLE II
2004 2003
------- ----------------------------------------------
1Q 1Q 2Q 3Q 4Q FY
------- -------- -------- -------- -------- --------
NET SALES
Titanium Dioxide 333 288 293 293 298 1,172
Acetyls 106 102 99 115 105 421
Specialty Chemicals 26 25 24 23 22 94
--- --- --- --- ---- -----
Total 465 415 416 431 425 1,687
OPERATING INCOME (LOSS)
Titanium Dioxide (1) 12 21 23 7 (102) (51)
Acetyls 9 7 5 6 9 27
Specialty Chemicals 2 2 2 (1) (1) 2
Other (2) (10) (3) (6) (17) (3) (29)
--- --- --- --- ---- -----
Total 13 27 24 (5) (97) (51)
DEPRECIATION AND AMORTIZATION
Titanium Dioxide 19 22 23 24 25 94
Acetyls 3 3 3 2 3 11
Specialty Chemicals 2 2 2 2 2 8
--- --- --- --- ---- -----
Total 24 27 28 28 30 113
CAPITAL SPENDING
Titanium Dioxide 9 7 10 9 16 42
Acetyls 1 - - 1 2 3
Specialty Chemicals - 1 1 - 1 3
--- --- --- --- ---- -----
Total 10 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,
$3 million of combination costs and $1 million of reorganization and office
closure costs in the first quarter 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
March 31, December 31,
2004 2003
---- ----
ASSETS
Current assets
Cash and cash equivalents $ 196 $ 209
Trade receivables, net 323 277
Inventories 417 457
Other current assets 77 65
------ ------
Total current assets 1,013 1,008
Property, plant and equipment, net 753 766
Investment in Equistar 471 469
Other assets 54 51
Goodwill 104 104
------ ------
Total assets $2,395 $2,398
====== ======
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current liabilities
Notes payable $ 6 $ --
Current maturities of long-term debt 5 6
Trade accounts payable 260 236
Income taxes payable 3 5
Accrued expenses and other liabilities 146 124
------ ------
Total current liabilities 420 371
Long-term debt 1,409 1,461
Deferred income taxes 284 287
Other liabilities 324 325
------ ------
Total liabilities 2,437 2,444
Minority interest 28 27
Shareholders' deficit (70) (73)
------ ------
Total liabilities and shareholders' deficit $2,395 $2,398
====== ======
MILLENNIUM CHEMICALS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Millions)
TABLE IV
Three months ended
March 31,
------------------
2004 2003
---- ----
Cash flows from operating activities:
Net loss $ (10) $ (27)
Adjustments to reconcile net loss to
net cash provided by (used in) operating activities:
Cumulative effect of accounting change -- 1
Asset impairment charges 3 --
Depreciation and amortization 24 27
Deferred income tax benefit (5) (21)
(Earnings) loss on Equistar investment (2) 43
Net change in trade working capital 22 (31)
Minority interest and other (8) 1
Net change in other assets and liabilities 13 (7)
---- ----
Cash provided by (used in) operating activities 37 (14)
---- ----
Cash flows from investing activities:
Capital expenditures (10) (8)
---- ----
Cash used in investing activities (10) (8)
---- ----
Cash flows from financing activities:
Dividends to shareholders -- (9)
Net (repayment of) proceeds from borrowings (48) 29
Proceeds from exercise of stock options 3 --
---- ----
Cash (used in) provided by financing activities (45) 20
---- ----
Effect of exchange rate changes on cash 5 2
---- ----
Decrease in cash and cash equivalents (13) --
Cash and cash equivalents at beginning of year 209 125
---- ----
Cash and cash equivalents at end of period $196 $125
==== ====
Millennium Chemicals Inc.
GAAP Reconciliation
(Millions, except per share data)
Table V
Three months ended Three months ended
March 31, 2004 March 31, 2003
------------------- --------------------
Net Loss EPS Net Loss EPS
-------- --- -------- ---
Reported GAAP $(10) $(0.16) $(27) $(0.43)
Increase in legacy liabilities 4 0.06 -- --
Combination costs 2 0.03 -- --
Reorganization and office closure costs 1 0.02 -- --
Company's share of Equistar's loss on sale of
assets -- -- 3 0.05
Cumulative effect of accounting change for asset
retirement obligations -- -- 1 0.02
---- ------ ---- ------
As adjusted $ (3) $(0.05) $(23) $(0.36)
==== ====== ==== ======