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 5, 2004
Set forth below is the text of a news release issued by Millennium on May 5,
2004. This is being filed pursuant to Rule 425 under the Securities Act of 1933.
Contact: Thomas Van Valkenburgh
Manager of Investor Relations
(410) 229-8113
FOR IMMEDIATE RELEASE
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MILLENNIUM CHEMICALS POSTPONES CONFERENCE CALL AND
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PROVIDES INFORMATION ON FIRST QUARTER RESULTS
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Hunt Valley, Maryland, May 5, 2004 -- Millennium Chemicals (NYSE-MCH)
("Millennium", or the "Company") announced today the postponement of its
previously announced conference call on first quarter operating results and
outlook scheduled for 1:00 p.m. on May 5, 2004. The postponement of the call and
the issuance of first quarter operating results is necessary to provide
Millennium with additional time to analyze the potential accounting
ramifications in the first quarter of revised FASB Interpretation No. 46 (FIN
46), Consolidation of Variable Interest Entities, effective January 1, 2004 for
variable interests acquired before February 1, 2003.
FIN 46 is a highly technical accounting pronouncement that introduces an
accounting model that under certain circumstances would require a company to
consolidate another entity based on the sharing of economic risk and rewards
rather than equity ownership and voting rights. The risk and rewards model of
FIN 46 requires consolidation of that entity if the company participates in the
majority of the entity's economics, whether or not those economics result from
contractual arrangements, equity investments or other capital support.
The following information is provided in lieu of the information normally
included in the Company's quarterly earnings release on operating results.
TITANIUM DIOXIDE
The improved global economy has increased worldwide demand for our titanium
dioxide products and has accelerated upward price momentum at the end of the
first quarter of 2004.
In US dollar terms, the average global first quarter price was similar to both
last year's first quarter and the fourth quarter of 2003. However, average local
currency selling prices in the first quarter of 2004 decreased 7 percent from
last year's first quarter and decreased 3 percent from the fourth quarter of
2003.
The first quarter 2004 TiO2 sales volume of 167,000 metric tons increased 15
percent from the first quarter of last year and increased 11 percent from the
fourth quarter of 2003. Millennium estimates that the global TiO2 market
increased 3 to 5 percent compared to the first quarter of 2003. Improved global
economic conditions primarily account for the increased demand. The Company's
TiO2 market share increased, which is consistent with the Company's objectives
of offering leading market performance products and being price competitive in
all markets to regain market share lost over the last few years.
The first quarter 2004 TiO2 plant production operating rate was 93 percent of
annual nameplate capacity of 690,000 metric tons compared to an operating rate
of 88 percent in both last year's first quarter and the fourth quarter of 2003.
Outlook
We expect seasonally higher sales volume and improved local currency pricing for
the Titanium Dioxide segment in the second quarter of 2004 as compared to the
first quarter. The Company expects to realize higher selling prices as a result
of implementing previous price announcements. Lower production volumes are
expected in the second quarter due to the scheduling of planned maintenance
activities.
ACETYLS
Higher prices and increased sales volume offset the high cost of natural gas
during the first quarter of 2004, as compared in each case to the fourth quarter
of 2003.
In the aggregate, the weighted-average US dollar selling price for VAM and
acetic acid in the first quarter of 2004 increased 4 percent from prices both in
the first quarter of 2003 and the fourth quarter of 2003. Aggregate sales volume
for VAM and acetic acid in the first quarter increased 8 percent from the first
quarter of 2003 and increased 3 percent from the fourth quarter of 2003.
Outlook
Sales volume is expected to be similar to the first quarter of 2004 and local
currency sales prices are expected to be slightly higher than the first quarter
of 2004. In the second quarter of 2004, scheduled maintenance shutdowns will
reduce production volumes. Additionally, future prices indicate higher second
quarter costs for natural gas, our primary raw material.
SPECIALTY CHEMICALS
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The Specialty Chemicals segment is expected to return to profitability in the
first quarter of 2004 driven primarily by higher sales volume.
Sales volume increased 8 percent from the first quarter of 2003 and was 21
percent higher than the fourth quarter of 2003 due to seasonal demand. Average
selling prices decreased 4 percent compared to both the first quarter of 2003
and the fourth quarter of 2003, primarily due to changes in product mix.
Outlook
Business conditions in the Specialty Chemicals segment in the second quarter of
2004 are expected to be similar to the first quarter of 2004.
EQUISTAR CHEMICALS, LP
Millennium's 29.5 percent stake in Equistar generated equity earnings on
investment of $2 million in the first quarter of 2004 compared to an equity loss
of $43 million in the first quarter of 2003 and $31 million equity loss in the
fourth quarter of 2003. Improving economic conditions and tight supply/demand
balances in several of Equistar's products contributed to improved results
during the quarter.
Compared to the first quarter of 2003, the first quarter of 2004 results
improved significantly due to the average prices for ethylene and ethylene
derivatives increasing by approximately 3 cents per pound. Equistar's combined
ethylene and ethylene derivative sales volumes increased by approximately 5
percent.
Compared to the fourth quarter of 2003, the first quarter of 2004 results
improved significantly as ethylene and ethylene derivative (ethylene oxygenates
and polyethylene) prices averaged 2 cents per pound to 3.5 cents per pound
higher than during the fourth quarter. Price increases in Equistar products more
than offset the impact of rising raw material costs, driven by average crude oil
prices that were $4 per barrel higher in the first quarter of 2004 versus the
fourth quarter of 2003. Significantly higher co-product (propylene, benzene, and
fuels) prices more than offset the impact of an increase of approximately $100
million in crude-oil-based liquid raw material costs for all of Equistar.
Ethylene and ethylene derivative volumes were relatively unchanged versus the
fourth quarter of 2003.
Outlook
The level and volatility of crude oil and natural gas prices continue to
negatively impact the industry, creating uncertainties for both near-term
product margins and demand. Although Equistar continues to face raw material
price uncertainties, improving industry conditions have enabled Equistar to deal
with this volatility more successfully than during the past three years. If
Equistar continues to experience solid global economic growth and some
stabilization of energy prices, Equistar's business could enjoy very positive
conditions later in the year.
DEBT AND LIQUIDITY
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During the first quarter of 2004, Millennium reduced net debt outstanding at
December 31, 2003 by $34 million. During the first quarter the Company also
repatriated cash of approximately $107 million from Australia and Europe to the
US. This cash was used to reduce outstanding borrowings under the Company's
Credit Agreement and for general corporate purposes. At the end of the first
quarter of 2004, the Company had $21 million of outstanding undrawn letters of
credit and no outstanding borrowings under the Credit Agreement and accordingly
had $129 million of unused availability under this facility.
COMBINATION UPDATE
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As announced on March 29, 2004, Millennium executed a definitive agreement with
Lyondell Chemical Company for a stock-for-stock business combination. The
proposed business combination is subject to approval by both Millennium and
Lyondell shareholders, the amendment of Millennium's and Lyondell's respective
bank credit agreements and Lyondell's account receivable sales facility and
other customary conditions. Millennium anticipates that the proposed business
combination will occur during the third quarter of 2004. There can be no
assurance that the proposed transaction will be completed.
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 TiO2 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, together with additional factors that could cause Millennium's
results to differ materially from those described in the forward-looking
statements, 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.
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