UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
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☒ | | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended March 31,June 30, 2021
or
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☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission file number: 001-34726
LYONDELLBASELL INDUSTRIES N.V.
(Exact name of registrant as specified in its charter)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Netherlands | | | | | 98-0646235 | |
| (State or other jurisdiction of incorporation or organization) | | | | (I.R.S. Employer Identification No.) | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 1221 McKinney St., | | 4th Floor, One Vine Street | | | | |
| Suite 300 | | London | | Delftseplein 27E | |
| Houston, | | Texas | | W1J0AH | | 3013AA | Rotterdam | |
| USA | | 77010 | | United Kingdom | | Netherlands | |
(Addresses of registrant’s principal executive offices)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | (713) | | 309-7200 | | | +44 (0) | | 207 | 220 2600 | | | +31 (0) | | 10 | 2755 500 | |
(Registrant’s telephone numbers, including area codes)
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
| | | | | | | | | | | | | | |
Title of Each Class | | Trading Symbol | | Name of Each Exchange On Which Registered |
Ordinary Shares, €0.04 Par Value | | LYB | | New York Stock Exchange |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| | | | | | | | | | | |
Large accelerated filer | x | Accelerated filer | ☐ |
Non-accelerated filer | ☐ | Smaller reporting company | ☐ |
Emerging growth company | ☐ | | |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act). Yes ☐ No x
The registrant had 334,353,962334,515,368 ordinary shares, €0.04 par value, outstanding at AprilJuly 28, 2021 (excluding 5,691,6665,578,288 treasury shares).
LYONDELLBASELL INDUSTRIES N.V.
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
LYONDELLBASELL INDUSTRIES N.V.
CONSOLIDATED STATEMENTS OF INCOME
| | | | | Three Months Ended March 31, | | Three Months Ended June 30, | | Six Months Ended June 30, |
Millions of dollars, except earnings per share | Millions of dollars, except earnings per share | | | 2021 | | 2020 | Millions of dollars, except earnings per share | 2021 | | 2020 | | 2021 | | 2020 |
Sales and other operating revenues: | Sales and other operating revenues: | | | | | | Sales and other operating revenues: | | | | | | | |
Trade | Trade | | | $ | 8,851 | | | $ | 7,303 | | Trade | $ | 11,334 | | | $ | 5,371 | | | $ | 20,185 | | | $ | 12,674 | |
Related parties | Related parties | | | 231 | | | 191 | | Related parties | 227 | | | 175 | | | 458 | | | 366 | |
| | | | 9,082 | | | 7,494 | | | 11,561 | | | 5,546 | | | 20,643 | | | 13,040 | |
Operating costs and expenses: | Operating costs and expenses: | | | Operating costs and expenses: | |
Cost of sales | Cost of sales | | | 7,678 | | | 6,868 | | Cost of sales | 8,676 | | | 4,894 | | | 16,354 | | | 11,762 | |
| Selling, general and administrative expenses | Selling, general and administrative expenses | | | 287 | | | 295 | | Selling, general and administrative expenses | 327 | | | 288 | | | 614 | | | 583 | |
Research and development expenses | Research and development expenses | | | 29 | | | 27 | | Research and development expenses | 32 | | | 25 | | | 61 | | | 52 | |
| | | | 7,994 | | | 7,190 | | | 9,035 | | | 5,207 | | | 17,029 | | | 12,397 | |
Operating income | Operating income | | | 1,088 | | | 304 | | Operating income | 2,526 | | | 339 | | | 3,614 | | | 643 | |
Interest expense | Interest expense | | | (110) | | | (89) | | Interest expense | (130) | | | (125) | | | (240) | | | (214) | |
Interest income | Interest income | | | 2 | | | 3 | | Interest income | 5 | | | 4 | | | 7 | | | 7 | |
Other income, net | Other income, net | | | 25 | | | 0 | | Other income, net | 14 | | | 4 | | | 39 | | | 4 | |
Income from continuing operations before equity investments and income taxes | Income from continuing operations before equity investments and income taxes | | | 1,005 | | | 218 | | Income from continuing operations before equity investments and income taxes | 2,415 | | | 222 | | | 3,420 | | | 440 | |
Income from equity investments | Income from equity investments | | | 137 | | | 0 | | Income from equity investments | 148 | | | 61 | | | 285 | | | 61 | |
Income from continuing operations before income taxes | Income from continuing operations before income taxes | | | 1,142 | | | 218 | | Income from continuing operations before income taxes | 2,563 | | | 283 | | | 3,705 | | | 501 | |
Provision for income taxes | | | 70 | | | 75 | | |
Provision for (benefit from) income taxes | | Provision for (benefit from) income taxes | 506 | | | (32) | | | 576 | | | 43 | |
Income from continuing operations | Income from continuing operations | | | 1,072 | | | 143 | | Income from continuing operations | 2,057 | | | 315 | | | 3,129 | | | 458 | |
(Loss) income from discontinued operations, net of tax | | | (2) | | | 1 | | |
Income (loss) from discontinued operations, net of tax | | Income (loss) from discontinued operations, net of tax | 2 | | | (1) | | | 0 | | | 0 | |
Net income | Net income | | | 1,070 | | | 144 | | Net income | 2,059 | | | 314 | | | 3,129 | | | 458 | |
| Dividends on redeemable non-controlling interests | Dividends on redeemable non-controlling interests | | | (2) | | | (2) | | Dividends on redeemable non-controlling interests | (1) | | | (1) | | | (3) | | | (3) | |
Net income attributable to the Company shareholders | Net income attributable to the Company shareholders | | | $ | 1,068 | | | $ | 142 | | Net income attributable to the Company shareholders | $ | 2,058 | | | $ | 313 | | | $ | 3,126 | | | $ | 455 | |
| Earnings per share: | Earnings per share: | | | Earnings per share: | |
Net income (loss) attributable to the Company shareholders — | | | |
Net income attributable to the Company shareholders — | | Net income attributable to the Company shareholders — | |
Basic: | Basic: | | | Basic: | |
Continuing operations | Continuing operations | | | $ | 3.20 | | | $ | 0.42 | | Continuing operations | $ | 6.13 | | | $ | 0.94 | | | $ | 9.33 | | | $ | 1.36 | |
Discontinued operations | Discontinued operations | | | (0.01) | | | 0 | | Discontinued operations | 0.01 | | | 0 | | | 0 | | | 0 | |
| | | | $ | 3.19 | | | $ | 0.42 | | | $ | 6.14 | | | $ | 0.94 | | | $ | 9.33 | | | $ | 1.36 | |
Diluted: | Diluted: | | | | | | Diluted: | | | | | | | |
Continuing operations | Continuing operations | | | $ | 3.19 | | | $ | 0.42 | | Continuing operations | $ | 6.12 | | | $ | 0.94 | | | $ | 9.32 | | | $ | 1.36 | |
Discontinued operations | Discontinued operations | | | (0.01) | | | 0 | | Discontinued operations | 0.01 | | | 0 | | | 0 | | | 0 | |
| | | | $ | 3.18 | | | $ | 0.42 | | | $ | 6.13 | | | $ | 0.94 | | | $ | 9.32 | | | $ | 1.36 | |
See Notes to the Consolidated Financial Statements.
LYONDELLBASELL INDUSTRIES N.V.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
| | | | | | | | | | | | | | | | | |
| | | Three Months Ended March 31, |
Millions of dollars | | | | | 2021 | | 2020 |
Net income | | | | | $ | 1,070 | | | $ | 144 | |
Other comprehensive income (loss), net of tax – | | | | | | | |
Financial derivatives | | | | | 175 | | | (338) | |
Unrealized losses on available-for-sale debt securities | | | | | 0 | | | (2) | |
Defined benefit pension and other postretirement benefit plans | | | | | 11 | | | 10 | |
Foreign currency translations | | | | | (107) | | | (199) | |
Total other comprehensive income (loss), net of tax | | | | | 79 | | | (529) | |
Comprehensive income (loss) | | | | | 1,149 | | | (385) | |
Dividends on redeemable non-controlling interests | | | | | (2) | | | (2) | |
| | | | | | | |
Comprehensive income (loss) attributable to the Company shareholders | | | | | $ | 1,147 | | | $ | (387) | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
Millions of dollars | 2021 | | 2020 | | 2021 | | 2020 |
Net income | $ | 2,059 | | | $ | 314 | | | $ | 3,129 | | | $ | 458 | |
Other comprehensive income (loss), net of tax – | | | | | | | |
Financial derivatives | (78) | | | (26) | | | 97 | | | (364) | |
Unrealized (losses) gains on available-for-sale debt securities | (1) | | | 3 | | | (1) | | | 1 | |
Defined benefit pension and other postretirement benefit plans | 17 | | | 11 | | | 28 | | | 21 | |
Foreign currency translations | 77 | | | 66 | | | (30) | | | (133) | |
Total other comprehensive income (loss), net of tax | 15 | | | 54 | | | 94 | | | (475) | |
Comprehensive income (loss) | 2,074 | | | 368 | | | 3,223 | | | (17) | |
Dividends on redeemable non-controlling interests | (1) | | | (1) | | | (3) | | | (3) | |
| | | | | | | |
Comprehensive income (loss) attributable to the Company shareholders | $ | 2,073 | | | $ | 367 | | | $ | 3,220 | | | $ | (20) | |
See Notes to the Consolidated Financial Statements.
LYONDELLBASELL INDUSTRIES N.V.
CONSOLIDATED BALANCE SHEETS
| | | | | | | | | | | |
Millions of dollars | March 31, 2021 | | December 31, 2020 |
ASSETS | | | |
Current assets: | | | |
Cash and cash equivalents | $ | 1,452 | | | $ | 1,763 | |
Restricted cash | 11 | | | 2 | |
Short-term investments | 383 | | | 702 | |
Accounts receivable: | | | |
Trade, net | 3,796 | | | 3,291 | |
Related parties | 165 | | | 150 | |
Inventories | 4,632 | | | 4,344 | |
Prepaid expenses and other current assets | 1,525 | | | 1,382 | |
Total current assets | 11,964 | | | 11,634 | |
Operating lease assets | 1,466 | | | 1,492 | |
Property, plant and equipment, at cost | 21,631 | | | 21,484 | |
Less: Accumulated depreciation | (7,241) | | | (7,098) | |
Property, plant and equipment, net | 14,390 | | | 14,386 | |
Equity investments | 4,794 | | | 4,729 | |
Goodwill | 1,904 | | | 1,953 | |
Intangible assets, net | 717 | | | 751 | |
Other assets | 511 | | | 458 | |
Total assets | $ | 35,746 | | | $ | 35,403 | |
| | | | | | | | | | | |
Millions of dollars | June 30, 2021 | | December 31, 2020 |
ASSETS | | | |
Current assets: | | | |
Cash and cash equivalents | $ | 1,381 | | | $ | 1,763 | |
Restricted cash | 2 | | | 2 | |
Short-term investments | 136 | | | 702 | |
Accounts receivable: | | | |
Trade, net | 4,707 | | | 3,291 | |
Related parties | 190 | | | 150 | |
Inventories | 4,840 | | | 4,344 | |
Prepaid expenses and other current assets | 1,641 | | | 1,382 | |
Total current assets | 12,897 | | | 11,634 | |
Operating lease assets | 1,634 | | | 1,492 | |
Property, plant and equipment | 22,176 | | | 21,484 | |
Less: Accumulated depreciation | (7,531) | | | (7,098) | |
Property, plant and equipment, net | 14,645 | | | 14,386 | |
Equity investments | 4,902 | | | 4,729 | |
Goodwill | 1,931 | | | 1,953 | |
Intangible assets, net | 677 | | | 751 | |
Other assets | 573 | | | 458 | |
Total assets | $ | 37,259 | | | $ | 35,403 | |
See Notes to the Consolidated Financial Statements.
LYONDELLBASELL INDUSTRIES N.V.
CONSOLIDATED BALANCE SHEETS
| | | | | | | | | | | |
Millions of dollars, except shares and par value data | March 31, 2021 | | December 31, 2020 |
LIABILITIES, REDEEMABLE NON-CONTROLLING INTERESTS AND EQUITY | | | |
Current liabilities: | | | |
Current maturities of long-term debt | $ | 958 | | | $ | 8 | |
Short-term debt | 682 | | | 663 | |
Accounts payable: | | | |
Trade | 2,703 | | | 2,398 | |
Related parties | 579 | | | 550 | |
Accrued liabilities | 1,953 | | | 1,883 | |
Total current liabilities | 6,875 | | | 5,502 | |
Long-term debt | 13,785 | | | 15,286 | |
Operating lease liabilities | 1,199 | | | 1,222 | |
Other liabilities | 2,554 | | | 2,957 | |
Deferred income taxes | 2,403 | | | 2,332 | |
Commitments and contingencies | 0 | | 0 |
Redeemable non-controlling interests | 116 | | | 116 | |
Shareholders’ equity: | | | |
Ordinary shares, €0.04 par value, 1,275 million shares authorized, 334,313,140 and 334,015,220 shares outstanding, respectively | 19 | | | 19 | |
Additional paid-in capital | 5,993 | | | 5,986 | |
Retained earnings | 5,158 | | | 4,440 | |
Accumulated other comprehensive loss | (1,864) | | | (1,943) | |
Treasury stock, at cost, 5,732,488 and 6,030,408 ordinary shares, respectively | (506) | | | (531) | |
Total Company share of shareholders’ equity | 8,800 | | | 7,971 | |
Non-controlling interests | 14 | | | 17 | |
Total equity | 8,814 | | | 7,988 | |
Total liabilities, redeemable non-controlling interests and equity | $ | 35,746 | | | $ | 35,403 | |
| | | | | | | | | | | |
Millions of dollars, except shares and par value data | June 30, 2021 | | December 31, 2020 |
LIABILITIES, REDEEMABLE NON-CONTROLLING INTERESTS AND EQUITY | | | |
Current liabilities: | | | |
Current maturities of long-term debt | $ | 8 | | | $ | 8 | |
Short-term debt | 683 | | | 663 | |
Accounts payable: | | | |
Trade | 2,909 | | | 2,398 | |
Related parties | 577 | | | 550 | |
Accrued liabilities | 2,418 | | | 1,883 | |
Total current liabilities | 6,595 | | | 5,502 | |
Long-term debt | 13,482 | | | 15,286 | |
Operating lease liabilities | 1,364 | | | 1,222 | |
Other liabilities | 2,657 | | | 2,957 | |
Deferred income taxes | 2,507 | | | 2,332 | |
Commitments and contingencies | 0 | | 0 |
Redeemable non-controlling interests | 116 | | | 116 | |
Shareholders’ equity: | | | |
Ordinary shares, €0.04 par value, 1,275 million shares authorized, 334,503,518 and 334,015,220 shares outstanding, respectively | 19 | | | 19 | |
Additional paid-in capital | 6,011 | | | 5,986 | |
Retained earnings | 6,837 | | | 4,440 | |
Accumulated other comprehensive loss | (1,849) | | | (1,943) | |
Treasury stock, at cost, 5,590,138 and 6,030,408 ordinary shares, respectively | (494) | | | (531) | |
Total Company share of shareholders’ equity | 10,524 | | | 7,971 | |
Non-controlling interests | 14 | | | 17 | |
Total equity | 10,538 | | | 7,988 | |
Total liabilities, redeemable non-controlling interests and equity | $ | 37,259 | | | $ | 35,403 | |
See Notes to the Consolidated Financial Statements.
LYONDELLBASELL INDUSTRIES N.V.
CONSOLIDATED STATEMENTS OF CASH FLOWS
| | | Three Months Ended March 31, | | Six Months Ended June 30, |
Millions of dollars | Millions of dollars | 2021 | | 2020 | Millions of dollars | 2021 | | 2020 |
Cash flows from operating activities: | Cash flows from operating activities: | | | | Cash flows from operating activities: | | | |
Net income | Net income | $ | 1,070 | | | $ | 144 | | Net income | $ | 3,129 | | | $ | 458 | |
Adjustments to reconcile net income to net cash provided by operating activities: | Adjustments to reconcile net income to net cash provided by operating activities: | | Adjustments to reconcile net income to net cash provided by operating activities: | |
Depreciation and amortization | Depreciation and amortization | 335 | | | 342 | | Depreciation and amortization | 665 | | | 698 | |
| Amortization of debt-related costs | Amortization of debt-related costs | 5 | | | 4 | | Amortization of debt-related costs | 13 | | | 7 | |
| Share-based compensation | Share-based compensation | 19 | | | 16 | | Share-based compensation | 35 | | | 29 | |
Inventory valuation charges | Inventory valuation charges | 0 | | | 419 | | Inventory valuation charges | 0 | | | 323 | |
Equity investments— | Equity investments— | | Equity investments— | |
Equity income | Equity income | (137) | | | 0 | | Equity income | (285) | | | (61) | |
Distributions of earnings, net of tax | Distributions of earnings, net of tax | 20 | | | 15 | | Distributions of earnings, net of tax | 142 | | | 81 | |
| Deferred income tax (benefit) provision | Deferred income tax (benefit) provision | (83) | | | 68 | | Deferred income tax (benefit) provision | 34 | | | (90) | |
| Changes in assets and liabilities that provided (used) cash: | Changes in assets and liabilities that provided (used) cash: | | Changes in assets and liabilities that provided (used) cash: | |
Accounts receivable | Accounts receivable | (593) | | | 4 | | Accounts receivable | (1,502) | | | 487 | |
Inventories | Inventories | (360) | | | 121 | | Inventories | (541) | | | 463 | |
Accounts payable | Accounts payable | 327 | | | (235) | | Accounts payable | 482 | | | (485) | |
Other, net | Other, net | (32) | | | (356) | | Other, net | 301 | | | (76) | |
Net cash provided by operating activities | Net cash provided by operating activities | 571 | | | 542 | | Net cash provided by operating activities | 2,473 | | | 1,834 | |
Cash flows from investing activities: | Cash flows from investing activities: | | | | Cash flows from investing activities: | | | |
Expenditures for property, plant and equipment | Expenditures for property, plant and equipment | (340) | | | (660) | | Expenditures for property, plant and equipment | (771) | | | (1,248) | |
| Purchases of available-for-sale debt securities | | Purchases of available-for-sale debt securities | 0 | | | (270) | |
Proceeds from maturities of available-for-sale debt securities | Proceeds from maturities of available-for-sale debt securities | 74 | | | 0 | | Proceeds from maturities of available-for-sale debt securities | 291 | | | 0 | |
| Purchases of equity securities | | Purchases of equity securities | 0 | | | (184) | |
Proceeds from equity securities | Proceeds from equity securities | 226 | | | 1 | | Proceeds from equity securities | 264 | | | 1 | |
| Acquisition of equity method investment | | Acquisition of equity method investment | (104) | | | 0 | |
| Other, net | Other, net | (19) | | | (4) | | Other, net | (42) | | | (26) | |
Net cash used in investing activities | Net cash used in investing activities | (59) | | | (663) | | Net cash used in investing activities | (362) | | | (1,727) | |
Cash flows from financing activities: | Cash flows from financing activities: | | | | Cash flows from financing activities: | | | |
Repurchases of Company ordinary shares | Repurchases of Company ordinary shares | 0 | | | (4) | | Repurchases of Company ordinary shares | 0 | | | (4) | |
Dividends paid - common stock | Dividends paid - common stock | (352) | | | (351) | | Dividends paid - common stock | (730) | | | (701) | |
Purchase of non-controlling interest | Purchase of non-controlling interest | 0 | | | (30) | | Purchase of non-controlling interest | 0 | | | (30) | |
Issuance of long-term debt | Issuance of long-term debt | 0 | | | 500 | | Issuance of long-term debt | 0 | | | 2,492 | |
Payments of debt issuance costs | | Payments of debt issuance costs | 0 | | | (18) | |
Repayments of long-term debt | Repayments of long-term debt | (500) | | | 0 | | Repayments of long-term debt | (1,775) | | | (500) | |
| Debt extinguishment costs | | Debt extinguishment costs | (23) | | | 0 | |
Issuance of short-term debt | Issuance of short-term debt | 0 | | | 500 | | Issuance of short-term debt | 0 | | | 521 | |
| Repayments of short-term debt | | Repayments of short-term debt | 0 | | | (500) | |
Net proceeds from commercial paper | Net proceeds from commercial paper | 0 | | | 516 | | Net proceeds from commercial paper | 0 | | | 212 | |
Collateral received from (paid for) interest rate derivatives | Collateral received from (paid for) interest rate derivatives | 66 | | | (238) | | Collateral received from (paid for) interest rate derivatives | 51 | | | (238) | |
| Proceeds from settlement of cash flow hedges | | Proceeds from settlement of cash flow hedges | 0 | | | 346 | |
| Other, net | Other, net | 4 | | | (9) | | Other, net | 7 | | | (12) | |
Net cash (used in) provided by financing activities | Net cash (used in) provided by financing activities | (782) | | | 884 | | Net cash (used in) provided by financing activities | (2,470) | | | 1,568 | |
Effect of exchange rate changes on cash | Effect of exchange rate changes on cash | (32) | | | (18) | | Effect of exchange rate changes on cash | (23) | | | 15 | |
(Decrease) increase in cash and cash equivalents and restricted cash | (Decrease) increase in cash and cash equivalents and restricted cash | (302) | | | 745 | | (Decrease) increase in cash and cash equivalents and restricted cash | (382) | | | 1,690 | |
Cash and cash equivalents and restricted cash at beginning of period | Cash and cash equivalents and restricted cash at beginning of period | 1,765 | | | 888 | | Cash and cash equivalents and restricted cash at beginning of period | 1,765 | | | 888 | |
Cash and cash equivalents and restricted cash at end of period | Cash and cash equivalents and restricted cash at end of period | $ | 1,463 | | | $ | 1,633 | | Cash and cash equivalents and restricted cash at end of period | $ | 1,383 | | | $ | 2,578 | |
See Notes to the Consolidated Financial Statements.
LYONDELLBASELL INDUSTRIES N.V.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Ordinary Shares | | Additional Paid-in Capital | | Retained Earnings | | Accumulated Other Comprehensive Loss | | Company Share of Shareholders’ Equity | | Non- Controlling Interests |
Millions of dollars | Issued | | Treasury | |
Balance, March 31, 2021 | $ | 19 | | | $ | (506) | | | $ | 5,993 | | | $ | 5,158 | | | $ | (1,864) | | | $ | 8,800 | | | $ | 14 | |
Net income | 0 | | | 0 | | | 0 | | | 2,059 | | | 0 | | | 2,059 | | | 0 | |
Other comprehensive income | 0 | | | 0 | | | 0 | | | 0 | | | 15 | | | 15 | | | 0 | |
Share-based compensation | 0 | | | 12 | | | 18 | | | (1) | | | 0 | | | 29 | | | 0 | |
Dividends - common stock ($1.13 per share) | 0 | | | 0 | | | 0 | | | (378) | | | 0 | | | (378) | | | 0 | |
Dividends - redeemable non-controlling interests ($15.00 per share) | 0 | | | 0 | | | 0 | | | (1) | | | 0 | | | (1) | | | 0 | |
| | | | | | | | | | | | | |
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| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Balance, June 30, 2021 | $ | 19 | | | $ | (494) | | | $ | 6,011 | | | $ | 6,837 | | | $ | (1,849) | | | $ | 10,524 | | | $ | 14 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Ordinary Shares | | Additional Paid-in Capital | | Retained Earnings | | Accumulated Other Comprehensive Loss | | Company Share of Shareholders’ Equity | | Non- Controlling Interests |
Millions of dollars | Issued | | Treasury | |
Balance, December 31, 2020 | $ | 19 | | | $ | (531) | | | $ | 5,986 | | | $ | 4,440 | | | $ | (1,943) | | | $ | 7,971 | | | $ | 17 | |
Net income | 0 | | | 0 | | | 0 | | | 1,070 | | | 0 | | | 1,070 | | | 0 | |
Other comprehensive income | 0 | | | 0 | | | 0 | | | 0 | | | 79 | | | 79 | | | 0 | |
Share-based compensation | 0 | | | 25 | | | 7 | | | 2 | | | 0 | | | 34 | | | 0 | |
Dividends - common stock ($1.05 per share) | 0 | | | 0 | | | 0 | | | (352) | | | 0 | | | (352) | | | 0 | |
Dividends - redeemable non-controlling interests ($15.00 per share) | 0 | | | 0 | | | 0 | | | (2) | | | 0 | | | (2) | | | 0 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Sale of non-controlling interest | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | (3) | |
| | | | | | | | | | | | | |
Balance, March 31, 2021 | $ | 19 | | | $ | (506) | | | $ | 5,993 | | | $ | 5,158 | | | $ | (1,864) | | | $ | 8,800 | | | $ | 14 | |
| | | Ordinary Shares | | Additional Paid-in Capital | | Retained Earnings | | Accumulated Other Comprehensive Loss | | Company Share of Shareholders’ Equity | | Non- Controlling Interests | | Ordinary Shares | | Additional Paid-in Capital | | Retained Earnings | | Accumulated Other Comprehensive Loss | | Company Share of Shareholders’ Equity | | Non- Controlling Interests |
Millions of dollars | Millions of dollars | Issued | | Treasury | | Millions of dollars | Issued | | Treasury | |
Balance, December 31, 2019 | $ | 19 | | | $ | (580) | | | $ | 5,954 | | | $ | 4,435 | | | $ | (1,784) | | | $ | 8,044 | | | $ | 19 | | |
Balance, March 31, 2020 | | Balance, March 31, 2020 | $ | 19 | | | $ | (559) | | | $ | 5,950 | | | $ | 4,227 | | | $ | (2,313) | | | $ | 7,324 | | | $ | 19 | |
Net income | Net income | 0 | | | 0 | | | 0 | | | 144 | | | 0 | | | 144 | | | 0 | | Net income | 0 | | | 0 | | | 0 | | | 314 | | | 0 | | | 314 | | | 0 | |
Other comprehensive loss | 0 | | | 0 | | | 0 | | | 0 | | | (529) | | | (529) | | | 0 | | |
Other comprehensive income | | Other comprehensive income | 0 | | | 0 | | | 0 | | | 0 | | | 54 | | | 54 | | | 0 | |
Share-based compensation | Share-based compensation | 0 | | | 25 | | | (11) | | | 1 | | | 0 | | | 15 | | | 0 | | Share-based compensation | 0 | | | 11 | | | 8 | | | (2) | | | 0 | | | 17 | | | 0 | |
Dividends - common stock ($1.05 per share) | Dividends - common stock ($1.05 per share) | 0 | | | 0 | | | 0 | | | (351) | | | 0 | | | (351) | | | 0 | | Dividends - common stock ($1.05 per share) | 0 | | | 0 | | | 0 | | | (350) | | | 0 | | | (350) | | | 0 | |
Dividends - redeemable non-controlling interests ($15.00 per share) | Dividends - redeemable non-controlling interests ($15.00 per share) | 0 | | | 0 | | | 0 | | | (2) | | | 0 | | | (2) | | | 0 | | Dividends - redeemable non-controlling interests ($15.00 per share) | 0 | | | 0 | | | 0 | | | (1) | | | 0 | | | (1) | | | 0 | |
Repurchases of Company ordinary shares | 0 | | | (4) | | | 0 | | | 0 | | | 0 | | | (4) | | | 0 | | |
Purchase of non-controlling interest | 0 | | | 0 | | | 7 | | | 0 | | | 0 | | | 7 | | | 0 | | |
| Balance, March 31, 2020 | $ | 19 | | | $ | (559) | | | $ | 5,950 | | | $ | 4,227 | | | $ | (2,313) | | | $ | 7,324 | | | $ | 19 | | |
| Balance, June 30, 2020 | | Balance, June 30, 2020 | $ | 19 | | | $ | (548) | | | $ | 5,958 | | | $ | 4,188 | | | $ | (2,259) | | | $ | 7,358 | | | $ | 19 | |
See Notes to the Consolidated Financial Statements.
LYONDELLBASELL INDUSTRIES N.V.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Ordinary Shares | | Additional Paid-in Capital | | Retained Earnings | | Accumulated Other Comprehensive Loss | | Company Share of Shareholders’ Equity | | Non- Controlling Interests |
Millions of dollars | Issued | | Treasury | |
Balance, December 31, 2020 | $ | 19 | | | $ | (531) | | | $ | 5,986 | | | $ | 4,440 | | | $ | (1,943) | | | $ | 7,971 | | | $ | 17 | |
Net income | 0 | | | 0 | | | 0 | | | 3,129 | | | 0 | | | 3,129 | | | 0 | |
Other comprehensive income | 0 | | | 0 | | | 0 | | | 0 | | | 94 | | | 94 | | | 0 | |
Share-based compensation | 0 | | | 37 | | | 25 | | | 1 | | | 0 | | | 63 | | | 0 | |
Dividends - common stock ($2.18 per share) | 0 | | | 0 | | | 0 | | | (730) | | | 0 | | | (730) | | | 0 | |
Dividends - redeemable non-controlling interests ($30.00 per share) | 0 | | | 0 | | | 0 | | | (3) | | | 0 | | | (3) | | | 0 | |
Sales of non-controlling interest | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | (3) | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Balance, June 30, 2021 | $ | 19 | | | $ | (494) | | | $ | 6,011 | | | $ | 6,837 | | | $ | (1,849) | | | $ | 10,524 | | | $ | 14 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Ordinary Shares | | Additional Paid-in Capital | | Retained Earnings | | Accumulated Other Comprehensive Loss | | Company Share of Shareholders’ Equity | | Non- Controlling Interests |
Millions of dollars | Issued | | Treasury | |
Balance, December 31, 2019 | $ | 19 | | | $ | (580) | | | $ | 5,954 | | | $ | 4,435 | | | $ | (1,784) | | | $ | 8,044 | | | $ | 19 | |
Net income | 0 | | | 0 | | | 0 | | | 458 | | | 0 | | | 458 | | | 0 | |
Other comprehensive loss | 0 | | | 0 | | | 0 | | | 0 | | | (475) | | | (475) | | | 0 | |
Share-based compensation | 0 | | | 36 | | | (3) | | | (1) | | | 0 | | | 32 | | | 0 | |
Dividends - common stock ($2.10 per share) | 0 | | | 0 | | | 0 | | | (701) | | | 0 | | | (701) | | | 0 | |
Dividends - redeemable non-controlling interests ($30.00 per share) | 0 | | | 0 | | | 0 | | | (3) | | | 0 | | | (3) | | | 0 | |
Repurchases of Company ordinary shares | 0 | | | (4) | | | 0 | | | 0 | | | 0 | | | (4) | | | 0 | |
Purchase of non-controlling interest | 0 | | | 0 | | | 7 | | | 0 | | | 0 | | | 7 | | | 0 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Balance, June 30, 2020 | $ | 19 | | | $ | (548) | | | $ | 5,958 | | | $ | 4,188 | | | $ | (2,259) | | | $ | 7,358 | | | $ | 19 | |
See Notes to the Consolidated Financial Statements.
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
TABLE OF CONTENTS
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LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
LyondellBasell Industries N.V. is a limited liability company (Naamloze Vennootschap) incorporated under Dutch law by deed of incorporation dated October 15, 2009. Unless otherwise indicated, the “Company,” “we,” “us,” “our” or similar words are used to refer to LyondellBasell Industries N.V. together with its consolidated subsidiaries (“LyondellBasell N.V.”).
LyondellBasell N.V. is a worldwide manufacturer of chemicals and polymers, a refiner of crude oil, a significant producer of gasoline blending components and a developer and licensor of technologies for the production of polymers.
The accompanying unaudited Consolidated Financial Statements have been prepared from the books and records of LyondellBasell N.V. in accordance with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X for interim financial information. Accordingly, they do not include all of the information and notes required by accounting principles generally accepted in the United States (“U.S. GAAP”) for complete financial statements. In our opinion, all adjustments, including normal recurring adjustments, considered necessary for a fair statement have been included. The results for interim periods are not necessarily indicative of results for the entire year. These Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.
2. Accounting and Reporting Changes
Recently Adopted Guidance
The following table provides a brief description of recently adopted Accounting Standard Updates (“ASU”) issued by the Financial Accounting Standards Board (“FASB”):
| | | | | | | | | | |
Standard | | Description | | |
| | | | |
ASU 2020-01, Clarifying the Interactions between Topic 321, Topic 323, Equity Method and Joint Ventures, and Topic 815, Derivatives and Hedging | | This guidance clarifies that an entity should consider observable transactions that require it to either apply or discontinue the equity method of accounting for the purposes of applying the measurement alternative in accordance with Topic 321 and includes scope considerations for entities that hold certain non-derivative forward contracts and purchased options to acquire equity securities that, upon settlement of the forward contract or exercise of the purchase option, would be accounted for under the equity method of accounting. This guidance is effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years.
The prospective adoption of this guidance from January 1, 2021 did not have a material impact on our Consolidated Financial Statements. | | |
ASU 2020-06, Debt - Debt with Conversion and Other Options and Derivatives and Hedging - Contracts in Entity’s Own Equity | | This guidance simplifies the accounting for convertible instruments and the application of the derivatives scope exception for contracts in an entity’s own equity. The standard also amends the accounting for convertible instruments in the diluted earnings per share calculation and requires enhanced disclosures of convertible instruments and contracts in an entity’s own equity. The guidance is effective for fiscal years beginning after December 15, 2021 and may be applied on a modified or fully retrospective basis.
The early adoption of this guidance on a modified retrospective basis from January 1, 2021 did not have a material impact on our Consolidated Financial Statements. | | |
| | | | |
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
| | | | | | | | | | |
Standard | | Description | | |
| | | | |
ASU 2020-09, Debt (Topic 470): Amendments to SEC Paragraphs Pursuant to SEC Release No. 33-10762 | | This guidance amends and supersedes SEC paragraphs in the Accounting Standards Codification to reflect the issuance of SEC Release No. 33-10762 related to financial disclosure requirements for subsidiary issuers and guarantors of registered debt securities and affiliates whose securities are pledged as collateral for registered securities. The guidance is effective for annual and interim periods ending after January 4, 2021.
The adoption of this guidance from January 1, 2021 did not have a material impact on our Consolidated Financial Statements. | | |
Accounting Guidance Issued But Not Adopted as of March 31,June 30, 2021
There are no ASUs issued and not yet adopted that could have a material impact on our Consolidated Financial Statements.
3. Revenues
Contract Balances—Contract liabilities were $185$181 million and $194 million at March 31,June 30, 2021 and December 31, 2020, respectively. Revenue recognized in each reporting period, included in the contract liability balance at the beginning of the period, was immaterial.
Disaggregation of Revenues—The following table presents our revenues disaggregated by key products:
| | | | | Three Months Ended March 31, | | Three Months Ended June 30, | | Six Months Ended June 30, |
Millions of dollars | Millions of dollars | | | 2021 | | 2020 | Millions of dollars | 2021 | | 2020 | | 2021 | | 2020 |
Sales and other operating revenues: | Sales and other operating revenues: | | | | | | Sales and other operating revenues: | | | | | | | |
Olefins and co-products | Olefins and co-products | | | $ | 1,091 | | | $ | 667 | | Olefins and co-products | $ | 1,185 | | | $ | 460 | | | $ | 2,276 | | | $ | 1,127 | |
Polyethylene | Polyethylene | | | 2,153 | | | 1,459 | | Polyethylene | 2,611 | | | 1,277 | | | 4,764 | | | 2,736 | |
Polypropylene | Polypropylene | | | 1,718 | | | 1,101 | | Polypropylene | 1,996 | | | 969 | | | 3,714 | | | 2,070 | |
Propylene oxide and derivatives | Propylene oxide and derivatives | | | 502 | | | 464 | | Propylene oxide and derivatives | 725 | | | 332 | | | 1,227 | | | 796 | |
Oxyfuels and related products | Oxyfuels and related products | | | 607 | | | 707 | | Oxyfuels and related products | 838 | | | 389 | | | 1,445 | | | 1,096 | |
Intermediate chemicals | Intermediate chemicals | | | 578 | | | 544 | | Intermediate chemicals | 948 | | | 404 | | | 1,526 | | | 948 | |
Compounding and solutions | Compounding and solutions | | | 1,038 | | | 912 | | Compounding and solutions | 1,077 | | | 549 | | | 2,115 | | | 1,461 | |
Advanced polymers | Advanced polymers | | | 231 | | | 181 | | Advanced polymers | 256 | | | 151 | | | 487 | | | 332 | |
Refined products | Refined products | | | 993 | | | 1,336 | | Refined products | 1,741 | | | 855 | | | 2,734 | | | 2,191 | |
Other | Other | | | 171 | | | 123 | | Other | 184 | | | 160 | | | 355 | | | 283 | |
Total | Total | | | $ | 9,082 | | | $ | 7,494 | | Total | $ | 11,561 | | | $ | 5,546 | | | $ | 20,643 | | | $ | 13,040 | |
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
The following table presents our revenues disaggregated by geography, based upon the location of the customer:
| | | | | | | | | | | | | | | | | |
| | | Three Months Ended March 31, |
Millions of dollars | | | | | 2021 | | 2020 |
Sales and other operating revenues: | | | | | | | |
United States | | | | | $ | 4,086 | | | $ | 3,187 | |
Germany | | | | | 765 | | | 641 | |
China | | | | | 560 | | | 243 | |
Italy | | | | | 378 | | | 335 | |
France | | | | | 290 | | | 270 | |
Poland | | | | | 270 | | | 224 | |
The Netherlands | | | | | 270 | | | 212 | |
Mexico | | | | | 247 | | | 380 | |
Japan | | | | | 230 | | | 335 | |
Other | | | | | 1,986 | | | 1,667 | |
Total | | | | | $ | 9,082 | | | $ | 7,494 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
Millions of dollars | 2021 | | 2020 | | 2021 | | 2020 |
Sales and other operating revenues: | | | | | | | |
United States | $ | 5,616 | | | $ | 2,417 | | | $ | 9,702 | | | $ | 5,604 | |
Germany | 934 | | | 398 | | | 1,699 | | | 1,039 | |
China | 561 | | | 302 | | | 1,121 | | | 545 | |
Italy | 472 | | | 259 | | | 850 | | | 594 | |
France | 366 | | | 161 | | | 656 | | | 431 | |
Mexico | 390 | | | 203 | | | 637 | | | 583 | |
The Netherlands | 346 | | | 153 | | | 616 | | | 365 | |
Japan | 331 | | | 143 | | | 561 | | | 478 | |
Poland | 271 | | | 188 | | | 541 | | | 412 | |
Other | 2,274 | | | 1,322 | | | 4,260 | | | 2,989 | |
Total | $ | 11,561 | | | $ | 5,546 | | | $ | 20,643 | | | $ | 13,040 | |
4. Accounts Receivable
Our accounts receivable are reflected in the Consolidated Balance Sheets net of allowance for credit losses of $7 million and $15 million at March 31,June 30, 2021 and December 31, 2020.2020, respectively.
5. Inventories
Inventories consisted of the following components:
| Millions of dollars | Millions of dollars | March 31, 2021 | | December 31, 2020 | Millions of dollars | June 30, 2021 | | December 31, 2020 |
Finished goods | Finished goods | $ | 2,733 | | | $ | 2,816 | | Finished goods | $ | 3,168 | | | $ | 2,816 | |
Work-in-process | Work-in-process | 184 | | | 144 | | Work-in-process | 197 | | | 144 | |
Raw materials and supplies | Raw materials and supplies | 1,715 | | | 1,384 | | Raw materials and supplies | 1,475 | | | 1,384 | |
Total inventories | Total inventories | $ | 4,632 | | | $ | 4,344 | | Total inventories | $ | 4,840 | | | $ | 4,344 | |
Our inventories are stated at the lower of cost or market (“LCM”). Cost is determined using the last-in, first-out (“LIFO”) inventory valuation methodology, which means that the most recently incurred costs are charged to cost of sales and inventories are valued at the earliest acquisition costs. Market is determined based on an assessment of the current estimated replacement cost and selling price of the inventory. In periods where the market price of our inventory declines substantially, cost values of inventory may be higher than the market value, and as a result we adjust the value of inventory to market value. Fluctuations in the prices of crude oil, natural gas and correlated products from period to period may result in the recognition of charges to adjust the value of inventory to the LCM in periods of falling prices and the reversal of those charges in subsequent interim periods, within the fiscal year, as market prices recover.
During the first threesix months of 2020, we recognized an LCM inventory valuation charge of $419$323 million related to the decline in pricing for many of our raw material and finished goods inventories since December 31, 2019.
During the second quarter of 2020, we recognized a LCM inventory valuation benefit of $96 million, largely driven by the recovery of market prices of crude oil and refined products during the second quarter.
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
6. Debt
Long-term loans, notes and other debt, net of unamortized discount and debt issuance cost, consisted of the following:
| Millions of dollars | Millions of dollars | March 31, 2021 | | December 31, 2020 | Millions of dollars | June 30, 2021 | | December 31, 2020 |
Senior Notes due 2024, $1,000 million, 5.75% ($4 million of debt issuance cost) | $ | 996 | | | $ | 996 | | |
Senior Notes due 2024, $1,000 million, 5.75% ($3 million of debt issuance cost) | | Senior Notes due 2024, $1,000 million, 5.75% ($3 million of debt issuance cost) | $ | 997 | | | $ | 996 | |
Senior Notes due 2055, $1,000 million, 4.625% ($15 million of discount; $11 million of debt issuance cost) | Senior Notes due 2055, $1,000 million, 4.625% ($15 million of discount; $11 million of debt issuance cost) | 974 | | | 974 | | Senior Notes due 2055, $1,000 million, 4.625% ($15 million of discount; $11 million of debt issuance cost) | 974 | | | 974 | |
Term Loan due 2022, $4,000 million ($1 million of debt issuance cost) | 949 | | | 1,448 | | |
Term Loan due 2022, $4,000 million | | Term Loan due 2022, $4,000 million | 0 | | | 1,448 | |
| Guaranteed Notes due 2023, $750 million, 4.0% ($3 million of discount; $1 million of debt issuance cost) | 746 | | | 745 | | |
Guaranteed Notes due 2023, $750 million, 4.0% ($1 million of discount; $1 million of debt issuance cost) | | Guaranteed Notes due 2023, $750 million, 4.0% ($1 million of discount; $1 million of debt issuance cost) | 423 | | | 745 | |
Guaranteed Floating Rate Notes due 2023, $650 million ($3 million of debt issuance cost) | Guaranteed Floating Rate Notes due 2023, $650 million ($3 million of debt issuance cost) | 647 | | | 646 | | Guaranteed Floating Rate Notes due 2023, $650 million ($3 million of debt issuance cost) | 647 | | | 646 | |
Guaranteed Notes due 2025, $500 million, 2.875% ($4 million of debt issuance cost) | 496 | | | 496 | | |
Guaranteed Notes due 2025, $500 million, 2.875% ($3 million of debt issuance cost) | | Guaranteed Notes due 2025, $500 million, 2.875% ($3 million of debt issuance cost) | 497 | | | 496 | |
Guaranteed Notes due 2025, $500 million, 1.25% ($1 million of discount; $4 million of debt issuance cost) | Guaranteed Notes due 2025, $500 million, 1.25% ($1 million of discount; $4 million of debt issuance cost) | 495 | | | 495 | | Guaranteed Notes due 2025, $500 million, 1.25% ($1 million of discount; $4 million of debt issuance cost) | 495 | | | 495 | |
Guaranteed Notes due 2026, €500 million, 0.875% ($2 million of discount; $3 million of debt issuance cost) | 583 | | | 608 | | |
Guaranteed Notes due 2027, $1,000 million, 3.5% ($7 million of discount; $5 million of debt issuance cost) | 1,086 | | | 1,090 | | |
Guaranteed Notes due 2026, €500 million, 0.875% ($1 million of discount; $3 million of debt issuance cost) | | Guaranteed Notes due 2026, €500 million, 0.875% ($1 million of discount; $3 million of debt issuance cost) | 591 | | | 608 | |
Guaranteed Notes due 2027, $1,000 million, 3.5% ($6 million of discount; $5 million of debt issuance cost) | | Guaranteed Notes due 2027, $1,000 million, 3.5% ($6 million of discount; $5 million of debt issuance cost) | 1,084 | | | 1,090 | |
Guaranteed Notes due 2027, $300 million, 8.1% | Guaranteed Notes due 2027, $300 million, 8.1% | 300 | | | 300 | | Guaranteed Notes due 2027, $300 million, 8.1% | 300 | | | 300 | |
Guaranteed Notes due 2030, $500 million, 3.375% ($1 million of discount; $4 million of debt issuance cost) | 495 | | | 495 | | |
Guaranteed Notes due 2030, $500 million, 3.375% ($1 million of discount; $3 million of debt issuance cost) | | Guaranteed Notes due 2030, $500 million, 3.375% ($1 million of discount; $3 million of debt issuance cost) | 500 | | | 495 | |
Guaranteed Notes due 2030, $500 million, 2.25% ($4 million of discount; $4 million of debt issuance cost) | Guaranteed Notes due 2030, $500 million, 2.25% ($4 million of discount; $4 million of debt issuance cost) | 492 | | | 492 | | Guaranteed Notes due 2030, $500 million, 2.25% ($4 million of discount; $4 million of debt issuance cost) | 492 | | | 492 | |
Guaranteed Notes due 2031, €500 million, 1.625% ($6 million of discount; $4 million of debt issuance cost) | 577 | | | 602 | | |
Guaranteed Notes due 2031, €500 million, 1.625% ($6 million of discount; $3 million of debt issuance cost) | | Guaranteed Notes due 2031, €500 million, 1.625% ($6 million of discount; $3 million of debt issuance cost) | 585 | | | 602 | |
Guaranteed Notes due 2040, $750 million, 3.375% ($2 million of discount; $8 million of debt issuance cost) | Guaranteed Notes due 2040, $750 million, 3.375% ($2 million of discount; $8 million of debt issuance cost) | 740 | | | 740 | | Guaranteed Notes due 2040, $750 million, 3.375% ($2 million of discount; $8 million of debt issuance cost) | 740 | | | 740 | |
Guaranteed Notes due 2043, $750 million, 5.25% ($20 million of discount; $7 million of debt issuance cost) | 723 | | | 723 | | |
Guaranteed Notes due 2043, $750 million, 5.25% ($19 million of discount; $7 million of debt issuance cost) | | Guaranteed Notes due 2043, $750 million, 5.25% ($19 million of discount; $7 million of debt issuance cost) | 724 | | | 723 | |
Guaranteed Notes due 2044, $1,000 million, 4.875% ($10 million of discount; $9 million of debt issuance cost) | Guaranteed Notes due 2044, $1,000 million, 4.875% ($10 million of discount; $9 million of debt issuance cost) | 981 | | | 981 | | Guaranteed Notes due 2044, $1,000 million, 4.875% ($10 million of discount; $9 million of debt issuance cost) | 981 | | | 981 | |
Guaranteed Notes due 2049, $1,000 million, 4.2% ($15 million of discount; $10 million of debt issuance cost) | Guaranteed Notes due 2049, $1,000 million, 4.2% ($15 million of discount; $10 million of debt issuance cost) | 975 | | | 975 | | Guaranteed Notes due 2049, $1,000 million, 4.2% ($15 million of discount; $10 million of debt issuance cost) | 975 | | | 975 | |
Guaranteed Notes due 2050, $1,000 million, 4.2% ($6 million of discount; $10 million of debt issuance cost) | Guaranteed Notes due 2050, $1,000 million, 4.2% ($6 million of discount; $10 million of debt issuance cost) | 984 | | | 984 | | Guaranteed Notes due 2050, $1,000 million, 4.2% ($6 million of discount; $10 million of debt issuance cost) | 984 | | | 984 | |
Guaranteed Notes due 2051, $1,000 million, 3.625% ($3 million of discount; $11 million of debt issuance cost) | Guaranteed Notes due 2051, $1,000 million, 3.625% ($3 million of discount; $11 million of debt issuance cost) | 986 | | | 986 | | Guaranteed Notes due 2051, $1,000 million, 3.625% ($3 million of discount; $11 million of debt issuance cost) | 986 | | | 986 | |
Guaranteed Notes due 2060, $500 million, 3.8% ($4 million of discount; $6 million of debt issuance cost) | Guaranteed Notes due 2060, $500 million, 3.8% ($4 million of discount; $6 million of debt issuance cost) | 490 | | | 490 | | Guaranteed Notes due 2060, $500 million, 3.8% ($4 million of discount; $6 million of debt issuance cost) | 490 | | | 490 | |
Other | Other | 28 | | | 28 | | Other | 25 | | | 28 | |
Total | Total | 14,743 | | | 15,294 | | Total | 13,490 | | | 15,294 | |
Less current maturities | Less current maturities | (958) | | | (8) | | Less current maturities | (8) | | | (8) | |
Long-term debt | Long-term debt | $ | 13,785 | | | $ | 15,286 | | Long-term debt | $ | 13,482 | | | $ | 15,286 | |
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
Fair value hedging adjustments associated with the fair value hedge accounting of our fixed-for-floating interest rate swaps for the applicable periods are as follows:
| | | | | | Gains (Losses) | | Cumulative Fair Value Hedging Adjustments Included in Carrying Amount of Debt | | | | Gains (Losses) | | Cumulative Fair Value Hedging Adjustments Included in Carrying Amount of Debt |
| | Inception Year | | | Three Months Ended March 31, | | March 31, | | December 31, | | Inception Year | | Three Months Ended June 30, | | Six Months Ended June 30, | | June 30, | | December 31, |
Millions of dollars | Millions of dollars | | | 2021 | | 2020 | | 2021 | | 2020 | Millions of dollars | Inception Year | | 2021 | | 2020 | | 2021 | | 2020 | | 2021 | | 2020 |
Senior Notes due 2021, 6.0% | Senior Notes due 2021, 6.0% | 2016 | | | $ | 0 | | | $ | (16) | | | $ | 0 | | | $ | 0 | | Senior Notes due 2021, 6.0% | | $ | 0 | | | $ | 2 | | | $ | 0 | | | $ | (14) | | | $ | 0 | | | $ | 0 | |
Guaranteed Notes due 2027, 3.5% | Guaranteed Notes due 2027, 3.5% | 2017 | | | 4 | | | (80) | | | (98) | | | (102) | | Guaranteed Notes due 2027, 3.5% | 2017 | | 4 | | | 7 | | | 8 | | | (73) | | | (94) | | | (102) | |
Guaranteed Notes due 2022, 1.875% | Guaranteed Notes due 2022, 1.875% | 2018 | | | 0 | | | 1 | | | 0 | | | 0 | | Guaranteed Notes due 2022, 1.875% | 2018 | | 0 | | | 0 | | | 0 | | | 1 | | | 0 | | | 0 | |
Guaranteed Notes due 2026, 0.875% | Guaranteed Notes due 2026, 0.875% | 2020 | | | 1 | | | 0 | | | (1) | | | (2) | | Guaranteed Notes due 2026, 0.875% | 2020 | | 0 | | | (1) | | | 1 | | | (1) | | | (1) | | | (2) | |
| Guaranteed Notes due 2027, 3.5% | | Guaranteed Notes due 2027, 3.5% | 2021 | | (1) | | | — | | | (1) | | | — | | | (1) | | | — | |
Guaranteed Notes due 2030, 3.375% | | Guaranteed Notes due 2030, 3.375% | 2021 | | (4) | | | — | | | (4) | | | — | | | (4) | | | — | |
Total | Total | | | $ | 5 | | | $ | (95) | | | $ | (99) | | | $ | (104) | | Total | | $ | (1) | | | $ | 8 | | | $ | 4 | | | $ | (87) | | | $ | (100) | | | $ | (104) | |
Fair value adjustments are recognized in Interest expense in the Consolidated Statements of Income.
Short-term loans, notes and other debt consisted of the following:
| Millions of dollars | Millions of dollars | March 31, 2021 | | December 31, 2020 | Millions of dollars | June 30, 2021 | | December 31, 2020 |
| U.S. Receivables Facility | U.S. Receivables Facility | $ | 0 | | | $ | 0 | | U.S. Receivables Facility | $ | 0 | | | $ | 0 | |
| Commercial paper | Commercial paper | 500 | | | 500 | | Commercial paper | 500 | | | 500 | |
Precious metal financings | Precious metal financings | 162 | | | 140 | | Precious metal financings | 167 | | | 140 | |
Other | Other | 20 | | | 23 | | Other | 16 | | | 23 | |
Total Short-term debt | Total Short-term debt | $ | 682 | | | $ | 663 | | Total Short-term debt | $ | 683 | | | $ | 663 | |
Long-Term Debt
Senior Revolving Credit Facility—Our $2,500 million Senior Revolving Credit Facility, of which $2,440 million expires in June 2023 and the remainder expires in June 2022, may be used for dollar and euro denominated borrowings. The facility has a $500 million sub-limit for dollar and euro denominated letters of credit, a $1,000 million uncommitted accordion feature, and supports our commercial paper program. Borrowings under the facility bear interest at either a base rate or LIBOR rate, plus an applicable margin. Additional fees are incurred for the average daily unused commitments. At March 31,June 30, 2021, we had 0 borrowings or letters of credit outstanding and $2,005$2,010 million of unused availability under this facility.
Term Loan due 2022—In March 2019, LYB Americas Finance Company LLC (“LYB Americas Finance”), a wholly owned subsidiary of LyondellBasell Industries N.V., entered into a $4,000 million senior unsecured delayed draw term loan credit facility that matures in March 2022. Borrowings under the credit agreement were available through December 31, 2019, subsequent to which no further borrowings may be made under the agreement. Outstanding borrowings bear interest at either a base rate or LIBOR rate, as defined, plus in each case, an applicable margin determined by reference to LyondellBasell N.V.’s current credit ratings.
In January 2021, we repaid $500 million outstanding under our Term Loan due 2022. An additional $500The remaining outstanding balance of $950 million was repaid in Aprilthe second quarter of 2021.
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
Guaranteed Notes due 2023—In July 2013, LYB Finance issued $750 million of 4% guaranteed notes due 2023 at a discounted price of 98.678%. In June 2021, we redeemed $325 million of the outstanding notes. In conjunction with the partial redemption, we recognized $25 million of debt extinguishment costs which are reflected in Interest expense in the Consolidated Statements of Income. The debt extinguishment costs include $23 million paid for make-whole premiums, fees and expenses related to the redemption of the notes and non-cash charges of $2 million for the write-off of unamortized debt discount and issuance costs.
Short-Term Debt
U.S. Receivables Facility—Our U.S. Receivables Facility which expires in July 2021, has a purchase limit of $900 million in addition to a $300 million uncommitted accordion feature. In June 2021, we extended the term of the facility to June 2024 in accordance with the terms of the agreement. This facility provides liquidity through the sale or contribution of trade receivables by certain of our U.S. subsidiaries to a wholly owned, bankruptcy-remote subsidiary on an ongoing basis and without recourse. We pay variable interest rates on our secured borrowings. Additional fees are incurred for the average daily unused commitments. This facility also provides for the issuance of letters of credit up to $200 million. We plan on extending
all or a portion of this facility prior to its maturity in July 2021 in accordance with the terms of the agreement. At March 31,June 30, 2021, we had 0 borrowings or letters of credit outstanding and $900 million unused availability under this facility.
Commercial Paper Program—We have a commercial paper program under which we may issue up to $2,500 million of privately placed, unsecured, short-term promissory notes (“commercial paper”). Interest rates on the commercial paper outstanding at March 31,June 30, 2021 are based on the terms of the notes and range from 0.19%0.14% to 0.27%0.25%. At March 31,June 30, 2021, we had $500 million of outstanding commercial paper.
Weighted Average Interest Rate—At March 31,June 30, 2021 and December 31, 2020, our weighted average interest rates on outstanding Short-term debt waswere 0.7% and 0.9%., respectively.
Additional Information
Debt Discount and Issuance Costs—Amortization of debt discounts and debt issuance costs resulted in amortization expense of $5$13 million and $4$7 million for the threesix months ended March 31,June 30, 2021 and 2020, respectively, which is included in Interest expense in the Consolidated Statements of Income.
As of March 31,June 30, 2021, we are in compliance with our debt covenants.
7. Financial Instruments and Fair Value Measurements
We are exposed to market risks, such as changes in commodity pricing, interest rates and currency exchange rates. To manage the volatility related to these exposures, we selectively enter into derivative contracts pursuant to our risk management policies.
A summary of our financial instruments, risk management policies, derivative instruments, hedging activities and fair value measurement can be found in Notes 2 and 13 to our Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2020. If applicable, updates have been included in the respective sections below.
Cash and Cash Equivalents—At March 31,June 30, 2021 and December 31, 2020, we had marketable securities classified as Cash and cash equivalents of $560$514 million and $682 million, respectively.
Foreign Currency Gain (Loss)—Other income, net, in the Consolidated Statements of Income reflectedincludes foreign currency gainslosses of $3$5 million and $2 million, and losses of less than $1 million and $7 million, for the three and six months ended March 31,June 30, 2021 and 2020, respectively.
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
Financial Instruments Measured at Fair Value on a Recurring Basis—The following table summarizes financial instruments outstanding for the periods presented that are measured at fair value on a recurring basis:
| | | | March 31, 2021 | | December 31, 2020 | | | | June 30, 2021 | | December 31, 2020 | | |
Millions of dollars | Millions of dollars | Notional Amount | | Fair Value | | Notional Amount | | Fair Value | | Balance Sheet Classification | Millions of dollars | Notional Amount | | Fair Value | | Notional Amount | | Fair Value | | Balance Sheet Classification |
Assets– | Assets– | | | | | | | | | | Assets– | | | | | | | | | |
Derivatives designated as hedges: | Derivatives designated as hedges: | | Derivatives designated as hedges: | |
Commodities | Commodities | $ | 25 | | | $ | 5 | | | $ | 19 | | | $ | 3 | | | Prepaid expenses and other current assets | Commodities | $ | 30 | | | $ | 22 | | | $ | 19 | | | $ | 3 | | | Prepaid expenses and other current assets |
Commodities | Commodities | 30 | | | 4 | | | 41 | | | 4 | | | Other Assets | Commodities | 20 | | | 7 | | | 41 | | | 4 | | | Other Assets |
Foreign currency | Foreign currency | 358 | | | 56 | | | 0 | | | 26 | | | Prepaid expenses and other current assets | Foreign currency | 358 | | | 26 | | | 0 | | | 26 | | | Prepaid expenses and other current assets |
| Foreign currency | | Foreign currency | 923 | | | 21 | | | 0 | | | 0 | | | Other assets |
Interest rates | Interest rates | 0 | | | 1 | | | 0 | | | 0 | | | Prepaid expenses and other current assets | Interest rates | 0 | | | 4 | | | 0 | | | 0 | | | Prepaid expenses and other current assets |
Interest rates | Interest rates | 117 | | | 1 | | | 122 | | | 2 | | | Other assets | Interest rates | 569 | | | 6 | | | 122 | | | 2 | | | Other assets |
Derivatives not designated as hedges: | Derivatives not designated as hedges: | | Derivatives not designated as hedges: | |
Commodities | Commodities | 111 | | | 5 | | | 71 | | | 2 | | | Prepaid expenses and other current assets | Commodities | 140 | | | 5 | | | 71 | | | 2 | | | Prepaid expenses and other current assets |
Foreign currency | Foreign currency | 34 | | | 1 | | | 149 | | | 0 | | | Prepaid expenses and other current assets | Foreign currency | 139 | | | 0 | | | 149 | | | 0 | | | Prepaid expenses and other current assets |
Non-derivatives: | Non-derivatives: | | Non-derivatives: | |
Available-for-sale debt securities | Available-for-sale debt securities | 265 | | | 266 | | | 348 | | | 349 | | | Short-term investments | Available-for-sale debt securities | 54 | | | 55 | | | 348 | | | 349 | | | Short-term investments |
Equity securities | Equity securities | 117 | | | 117 | | | 353 | | | 353 | | | Short-term investments | Equity securities | 81 | | | 81 | | | 353 | | | 353 | | | Short-term investments |
Total | Total | $ | 1,057 | | | $ | 456 | | | $ | 1,103 | | | $ | 739 | | | Total | $ | 2,314 | | | $ | 227 | | | $ | 1,103 | | | $ | 739 | | |
Liabilities– | Liabilities– | | | | | | | | | Liabilities– | | | | | | | | |
Derivatives designated as hedges: | Derivatives designated as hedges: | | Derivatives designated as hedges: | |
Commodities | Commodities | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 2 | | | Accrued liabilities | Commodities | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 2 | | | Accrued liabilities |
| Foreign currency | Foreign currency | 855 | | | 116 | | | 1,213 | | | 146 | | | Accrued liabilities | Foreign currency | 855 | | | 105 | | | 1,213 | | | 146 | | | Accrued liabilities |
Foreign currency | Foreign currency | 2,682 | | | 209 | | | 2,682 | | | 302 | | | Other liabilities | Foreign currency | 2,682 | | | 222 | | | 2,682 | | | 302 | | | Other liabilities |
| Interest rates | | Interest rates | 0 | | | 1 | | | 0 | | | 0 | | | Accrued liabilities |
Interest rates | Interest rates | 1,150 | | | 120 | | | 1,000 | | | 343 | | | Other liabilities | Interest rates | 1,000 | | | 243 | | | 1,000 | | | 343 | | | Other liabilities |
Derivatives not designated as hedges: | Derivatives not designated as hedges: | | Derivatives not designated as hedges: | |
Commodities | Commodities | 191 | | | 22 | | | 113 | | | 14 | | | Accrued liabilities | Commodities | 118 | | | 11 | | | 113 | | | 14 | | | Accrued liabilities |
Foreign currency | Foreign currency | 717 | | | 5 | | | 76 | | | 1 | | | Accrued liabilities | Foreign currency | 1,306 | | | 9 | | | 76 | | | 1 | | | Accrued liabilities |
| Total | Total | $ | 5,595 | | | $ | 472 | | | $ | 5,084 | | | $ | 808 | | | Total | $ | 5,961 | | | $ | 591 | | | $ | 5,084 | | | $ | 808 | | |
As of March 31,June 30, 2021, our limited partnership investments included in our equity securities discussed below are measured at fair value using the net asset value per share, (oror its equivalent)equivalent, practical expedient and have not been classified in the fair value hierarchy. All other financial instruments in the table above, including equity securities as of December 31, 2020, are classified as Level 2. We present the gross assets and liabilities of our derivative financial instruments on the Consolidated Balance Sheets.
At March 31,June 30, 2021, our outstanding foreign currency contracts, not designated as hedges, mature from AprilJuly 2021 to March 2022. Our commodity contracts, not designated as hedges, mature in MayJuly 2021.
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
Financial Instruments Not Measured at Fair Value on a Recurring Basis—The following table presents the carrying value and estimated fair value of our financial instruments that are not measured at fair value on a recurring basis for the periods presented. Due to the short maturity, the fair value of all non-derivative financial instruments included in Current assets and Current liabilities for which the carrying value approximates fair value are excluded from the table below. Short-term and long-term debt are recorded at amortized cost in the Consolidated Balance Sheets. The carrying and fair values of short-term and of long-term debt exclude commercial paper and other miscellaneous debt. All financial instruments in the table below are classified as Level 2.
| | | March 31, 2021 | | December 31, 2020 | | June 30, 2021 | | December 31, 2020 |
Millions of dollars | Millions of dollars | Carrying Value | | Fair Value | | Carrying Value | | Fair Value | Millions of dollars | Carrying Value | | Fair Value | | Carrying Value | | Fair Value |
Non-derivatives: | Non-derivatives: | | | | | | | | Non-derivatives: | | | | | | | |
| Liabilities: | Liabilities: | | Liabilities: | |
Short-term debt | Short-term debt | $ | 162 | | | $ | 181 | | | $ | 140 | | | $ | 154 | | Short-term debt | $ | 167 | | | $ | 175 | | | $ | 140 | | | $ | 154 | |
Long-term debt | Long-term debt | 14,715 | | | 15,895 | | | 15,266 | | | 17,290 | | Long-term debt | 13,465 | | | 15,123 | | | 15,266 | | | 17,290 | |
Total | Total | $ | 14,877 | | | $ | 16,076 | | | $ | 15,406 | | | $ | 17,444 | | Total | $ | 13,632 | | | $ | 15,298 | | | $ | 15,406 | | | $ | 17,444 | |
Net Investment Hedges—The following table summarizes our net investment hedges outstanding for the periods presented:
| | | | March 31, 2021 | | December 31, 2020 | | | June 30, 2021 | | December 31, 2020 | |
Millions of euro/dollars | Millions of euro/dollars | Notional Value | | Notional Value | | Expiration Date | Millions of euro/dollars | Notional Value | | Notional Value | | Expiration Date |
| | | Equivalent US$ | | | Equivalent US$ | | | | | Equivalent US$ | | | Equivalent US$ | | |
Foreign currency | Foreign currency | € | 1,667 | | | $ | 1,890 | | | € | 1,667 | | | $ | 1,890 | | | 2021 to 2030 | Foreign currency | € | 2,417 | | | $ | 2,813 | | | € | 1,667 | | | $ | 1,890 | | | 2021 to 2030 |
|
In Aprilthe second quarter of 2021, we entered into foreign currency contracts with an aggregate notional value of €750 million that were designated as net investment hedges.
In July 2021, we entered into a foreign currency contract with a notional value of €250 million that was designated as a net investment hedge.
Cash Flow Hedges—The following table summarizes our cash flow hedges outstanding for the periods presented:
| | | March 31, 2021 | | December 31, 2020 | | | June 30, 2021 | | December 31, 2020 | |
Millions of dollars | Millions of dollars | Notional Value | | Notional Value | | Expiration Date | Millions of dollars | Notional Value | | Notional Value | | Expiration Date |
Foreign currency | Foreign currency | $ | 2,005 | | | $ | 2,005 | | | 2021 to 2027 | Foreign currency | $ | 2,005 | | | $ | 2,005 | | | 2021 to 2027 |
Interest rates | Interest rates | 1,000 | | | 1,000 | | | 2023 to 2024 | Interest rates | 1,000 | | | 1,000 | | | 2023 to 2024 |
Commodities | Commodities | 55 | | | 60 | | | 2021 to 2022 | Commodities | 50 | | | 60 | | | 2021 to 2022 |
As of March 31,June 30, 2021 and December 31, 2020, Other assets include $172187 million and $238 million of collateral held with our counterparties related to our forward-starting interest rate swaps, respectively. Related cash flows are included in financing activities in the Consolidated Statements of Cash Flows.
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
As of March 31,June 30, 2021, on a pre-tax basis, $5 million is scheduled to be reclassified from Accumulated other comprehensive loss as an increase to Interest expense over the next twelve months.
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
Fair Value Hedges—The following table summarizes our fair value hedges outstanding for the periods presented:
| | | | March 31, 2021 | | December 31, 2020 | | | June 30, 2021 | | December 31, 2020 | |
Millions of dollars | Millions of dollars | Notional Value | | Notional Value | | Expiration Date | Millions of dollars | Notional Value | | Notional Value | | Expiration Date |
Interest rates | Interest rates | $ | 267 | | | $ | 122 | | | 2026 to 2030 | Interest rates | $ | 569 | | | $ | 122 | | | 2025 to 2030 |
In March 2021, we entered into a fixed-for-floating interest rate swap to mitigate the change in the fair value of $150 million of our $500 million, 3.375% guaranteed notes due 2030 associated with the risk of variability in the 3-month LIBOR rate component.
In April 2021, we entered into two fixed-for-floating interest rate swaps to mitigate the change in the fair value associated with the risk of variability in the 3-month LIBOR rate component of $150 million of our $500 million, 2.875% guaranteed notes due 2025 and $150 million of our $1,000 million, 3.5% guaranteed notes due 2027.
The fixed-rate and variable-rate components for these trades are settled semi-annually and quarterly, respectively.
Impact on Earnings and Other Comprehensive Income—The following tables summarize the pre-tax effect of derivative and non-derivative instruments recorded in Accumulated other comprehensive loss (“AOCI”), the gains (losses) reclassified from AOCI to earnings and additional gains (losses) recognized directly in earnings: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| Effects of Financial Instruments |
| Three Months Ended June 30, |
| Gain (Loss) Recognized in AOCI | | Gain (Loss) Reclassified from AOCI to Income | | Gain (Loss) Recognized in Income | | Income Statement |
Millions of dollars | 2021 | | 2020 | | 2021 | | 2020 | | 2021 | | 2020 | | Classification |
Derivatives designated as hedges: | | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Commodities | $ | 23 | | | $ | (2) | | | $ | (3) | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | Cost of sales |
Foreign currency | (9) | | | (86) | | | 24 | | | 45 | | | 13 | | | 14 | | | Interest expense |
Interest rates | (123) | | | 3 | | | 2 | | | 2 | | | 3 | | | (6) | | | Interest expense |
Derivatives not designated as hedges: | | | | | | | | | | | | | |
Commodities | 0 | | | 0 | | | 0 | | | 0 | | | 9 | | | 14 | | | Sales and other operating revenues |
Commodities | 0 | | | 0 | | | 0 | | | 0 | | | 12 | | | 77 | | | Cost of sales |
Foreign currency | 0 | | | 0 | | | 0 | | | 0 | | | (15) | | | (6) | | | Other income, net |
Non-derivatives designated as hedges: | | | | | | | | | | | | | |
Long-term debt | 0 | | | (20) | | | 0 | | | 0 | | | 0 | | | 0 | | | Other income, net |
Total | $ | (109) | | | $ | (105) | | | $ | 23 | | | $ | 47 | | | $ | 22 | | | $ | 93 | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Effects of Financial Instruments |
| Three Months Ended March 31, |
| Gain (Loss) Recognized in AOCI | | Gain (Loss) Reclassified from AOCI to Income | | Gain (Loss) Recognized in Income | | Income Statement |
Millions of dollars | 2021 | | 2020 | | 2021 | | 2020 | | 2021 | | 2020 | | Classification |
Derivatives designated as hedges: | | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Commodities | $ | 6 | | | $ | 0 | | | $ | (1) | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | Cost of sales |
Foreign currency | 148 | | | 164 | | | (92) | | | (53) | | | 12 | | | 16 | | | Interest expense |
Interest rates | 223 | | | (535) | | | 1 | | | 0 | | | 2 | | | 96 | | | Interest expense |
Derivatives not designated as hedges: | | | | | | | | | | | | | |
Commodities | 0 | | | 0 | | | 0 | | | 0 | | | 3 | | | (9) | | | Sales and other operating revenues |
Commodities | 0 | | | 0 | | | 0 | | | 0 | | | 11 | | | (3) | | | Cost of sales |
Foreign currency | 0 | | | 0 | | | 0 | | | 0 | | | (14) | | | (4) | | | Other income, net |
Non-derivatives designated as hedges: | | | | | | | | | | | | | |
Long-term debt | 0 | | | 22 | | | 0 | | | 0 | | | 0 | | | 0 | | | Other income, net |
Total | $ | 377 | | | $ | (349) | | | $ | (92) | | | $ | (53) | | | $ | 14 | | | $ | 96 | | | |
17
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| Effects of Financial Instruments |
| Six Months Ended June 30, |
| Gain (Loss) Recognized in AOCI | | Gain (Loss) Reclassified from AOCI to Income | | Gain (Loss) Recognized in Income | | Income Statement |
Millions of dollars | 2021 | | 2020 | | 2021 | | 2020 | | 2021 | | 2020 | | Classification |
Derivatives designated as hedges: | | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Commodities | $ | 29 | | | $ | (2) | | | $ | (4) | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | Cost of sales |
Foreign currency | 139 | | | 78 | | | (68) | | | (8) | | | 25 | | | 30 | | | Interest expense |
Interest rates | 100 | | | (532) | | | 3 | | | 2 | | | 5 | | | 90 | | | Interest expense |
Derivatives not designated as hedges: | | | | | | | | | | | | | |
Commodities | 0 | | | 0 | | | 0 | | | 0 | | | 12 | | | 5 | | | Sales and other operating revenues |
Commodities | 0 | | | 0 | | | 0 | | | 0 | | | 23 | | | 74 | | | Cost of sales |
Foreign currency | 0 | | | 0 | | | 0 | | | 0 | | | (29) | | | (10) | | | Other income, net |
Non-derivatives designated as hedges: | | | | | | | | | | | | | |
Long-term debt | 0 | | | 2 | | | 0 | | | 0 | | | 0 | | | 0 | | | Other income, net |
Total | $ | 268 | | | $ | (454) | | | $ | (69) | | | $ | (6) | | | $ | 36 | | | $ | 189 | | | |
The derivative amounts excluded from the assessment of effectiveness for foreign currency contracts designated as net investment hedges recognized in Otherother comprehensive income for the three and six months ended March 31,June 30, 2021 and 2020 were gains of $4 million and less than $1 million respectively.and $4 million, respectively and for the three and six months ended June 30, 2020 were losses of $2 million each.
The derivative amounts excluded from the assessment of effectiveness for foreign currency contracts designated as net investment hedges recognized in Interest expense for the three and six months ended March 31,June 30, 2021 were gains of $2 million and $5 million, respectively, and for the three and six months ended June 30, 2020 were gains of $3 million and $4$7 million, respectively.
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
The pre-tax effect of the periodic receipt of fixed interest and payment of variable interest associated with our fixed-for-floating interest rate swaps resulted in less than $1 million and $2 million decreasesdecrease in Interest expense during each of the three and six months ended June 30, 2021, respectively, and $1 million and $3 million decrease in March 31, 2021interest expense during the three and six months ended June 30, 2020, respectively.
Investments in Available-for-Sale Debt Securities—The following table summarizes the amortized cost, gross unrealized gains and losses, and fair value of our outstanding available-for-sale debt securities:
| Millions of dollars | Millions of dollars | | Cost | | Gross Unrealized Gains | | Gross Unrealized Losses | | Fair Value | Millions of dollars | | Cost | | Gross Unrealized Gains | | Gross Unrealized Losses | | Fair Value |
| Debt securities at March 31, 2021 | | $ | 265 | | | $ | 1 | | | $ | 0 | | | $ | 266 | | |
Debt securities at June 30, 2021 | | Debt securities at June 30, 2021 | | $ | 54 | | | $ | 1 | | | $ | 0 | | | $ | 55 | |
Debt securities at December 31, 2020 | Debt securities at December 31, 2020 | | 348 | | | 1 | | | 0 | | | 349 | | Debt securities at December 31, 2020 | | 348 | | | 1 | | | 0 | | | 349 | |
NaN allowance for credit losses related to our available-for-sale debt securities were recorded for the three and six months ended March 31,June 30, 2021 and for the year ended December 31, 2020.
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
As of March 31,June 30, 2021, bonds classified as available-for-sale debt securities had remaining maturities betweenof less than 1 month and 3 months..
We received proceeds of $74$217 million and $291 million from maturities of our available-for-sale debt securities during the three and six months ended March 31,June 30, 2021. NaN proceeds were received from maturities of our available-for-sale debt securities during the three and six months ended March 31,June 30, 2020. In addition, 0 proceeds were received and 0 gain or loss was realized in connection with the sales of our available-for-sale debt securities during the three and six months ended March 31,June 30, 2021 and 2020, respectively.
We had 0 available-for-sale debt securities which were in a continuous unrealized loss position for less than or greater than twelve months as of March 31,June 30, 2021 and December 31, 2020.
Investments in Equity Securities—Our investment in equity securities consists of an investment in a limited partnership with a notional amount of $117$81 million and $353 million as of March 31,June 30, 2021 and December 31, 2020, respectively. CarryingThe carrying amount approximate fair value. The investment is carried at its net asset value as a practical expedient at March 31,June 30, 2021 and fair value at December 31, 2020. The investment is under voluntary liquidation by the fund administrator and we expect the investment to be fully liquidated within the next twelve months,by early 2022, during which time redemption or sale of the investment is restricted.
We received proceeds of $226$38 million and $1$264 million related to our investments in equity securities during the three and six months ended March 31,June 30, 2021, respectively, and 2020, respectively.$1 million during the six months ended June 30, 2020. NaN proceeds related to the sale of investments in equity securities were received during the three months ended June 30, 2020. Proceeds of $16$26 million were received in AprilJuly 2021.
We recognized unrealized gainsgain of less than $1 million on our equity securities that were outstanding during the three and six months ended March 31,June 30, 2021 and 0 unrealized gains or losses was recognized during the three and six months ended in June 30, 2020.
8. Income Taxes
For interim tax reporting, we estimate an annual effective tax rate which is applied to the year-to-date ordinary income (loss). Tax effects of significant unusual or infrequently occurring items are excluded from the estimated annual effective tax rate calculation and recognized in the interim period in which they occur.Our effective income tax rate fluctuates based on, among other factors, changes in pretax income in countries with varying statutory tax rates, changes in valuation allowances, changes in foreign exchange gains (losses),or losses, the amount of exempt income, changes in unrecognized tax benefits associated with uncertain tax positions and changes in tax laws.
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
Our exempt income primarily includes interest income, export incentives, and equity earnings ofjoint ventures. Interest income earned by certain of our European subsidiaries through intercompany financings is taxed at rates substantially lower than the U.S. statutory rate. Export incentives relate to tax benefits derived from elections and structures available for U.S. exports. Equity earnings attributable to the earnings of our joint ventures, when paid through dividends to certain European subsidiaries, are exempt from all or portions of normal statutory income tax rates. We currently anticipate the favorable treatment for interest income, dividends, and export incentives to continue in the near term; however, this treatment is based on current law and tax rulings, which could change.
Our effective income tax rate for the three months ended March 31,June 30, 2021 was 6.1%19.7% compared with 34.4%-11.3% for the three months ended June 30, 2020. In March 31, 2020. The lower effective tax rate was primarily attributable to2020, the remeasurement of U.S. deferred tax liabilities that occurred in the prior year as a result ofenacted the Coronavirus Aid, Relief, and Economic Security Act, also known as the “CARES Act”,Act.” The higher effective tax rate for the three months ended June 30, 2021 was primarily attributable to benefits resulting from the CARES Act (27.1%) and exempt income (10.0%) relative to pretax earnings.
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
Our effective income tax rate for the six months ended June 30, 2021 was 15.5% compared with 8.6% for the six months ended June 30, 2020.The higher effective tax rate for the six months ended June 30, 2021 was attributable to benefits resulting from the CARES Act (4.4%) and exempt income (8.9%) relative to pretax earnings. These drivers were partially offset by return to accrual adjustments primarily from a tax benefit associated with a step-up of certain Italian assets to fair market value. The tax benefit associated with a step-upvalue (-3.2%).
As of certain Italian assets resulted from a tax changeJune 30, 2021 and December 31, 2020, we had $499 million and $67 million, respectively, of income taxes payable which allows a voluntary step-up of tangible and intangible assets to fair market valuewas included in exchange for a substitute tax. During the first quarter of 2021, we assessed a reasonable estimate of the step-up of select assets and recognized a net tax benefit of $120 million. These drivers were partially offset by the reduced relative impact ofAccrued liabilities in our tax rate drivers, primarily exempt income, due to increased pre-tax earnings.Consolidated Balance Sheets.
9. Commitments and Contingencies
Commitments—We have various purchase commitments for materials, supplies and services incidental to the ordinary conduct of business, generally for quantities required for our businesses and at prevailing market prices. These commitments are designed to assure sources of supply and are not expected to be in excess of normal requirements. As of March 31,June 30, 2021, we had capital expenditure commitments, which we incurred in our normal course of business, including commitments of approximately $316$259 million related to building our new PO/TBA plant in Houston, Texas.
Financial Assurance Instruments—We have obtained letters of credit, performance and surety bonds and have issued financial and performance guarantees to support trade payables, potential liabilities and other obligations. Considering the frequency of claims made against the financial instruments we use to support our obligations, and the magnitude of those financial instruments in light of our current financial position, management does not expect that any claims against or draws on these instruments would have a material adverse effect on our Consolidated Financial Statements. We have not experienced any unmanageable difficulty in obtaining the required financial assurance instruments for our current operations.
Environmental Remediation—Our accrued liability for future environmental remediation costs at current and former plant sites and other remediation sites totaled $130$129 million and $133 million as of March 31,June 30, 2021 and December 31, 2020, respectively. At March 31,June 30, 2021, the accrued liabilities for individual sites range from less than $1 million to $16 million. The remediation expenditures are expected to occur over a number of years, and not concentrated in any single year. In our opinion, it is reasonably possible that losses in excess of the liabilities recorded may have been incurred. However, we cannot estimate any amount or range of such possible additional losses. New information about sites, new technology or future developments such as involvement in investigations by regulatory agencies, could require us to reassess our potential exposure related to environmental matters.
Indemnification—We are parties to various indemnification arrangements, including arrangements entered into in connection with acquisitions, divestitures and the formation and dissolution of joint ventures. Pursuant to these arrangements, we provide indemnification to and/or receive indemnification from other parties in connection with liabilities that may arise in connection with the transactions and in connection with activities prior to completion of the transactions. These indemnification arrangements typically include provisions pertaining to third-party claims relating to environmental and tax matters and various types of litigation. As of March 31,June 30, 2021, we had not accrued any significant amounts for our indemnification obligations, and we are not aware of other circumstances that would likely lead to significant future indemnification obligations. We cannot determine with certainty the potential amount of future payments under the indemnification arrangements until events arise that would trigger a liability under the arrangements.
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
As part of our technology licensing contracts, we give indemnifications to our licensees for liabilities arising from possible patent infringement claims with respect to certain proprietary licensed technologies. Such indemnifications have a stated maximum amount and generally cover a period of 5 to 10 years.
Legal Proceedings—We are subject to various lawsuits and claims, including but not limited to, matters involving contract disputes, environmental damages, personal injury and property damage. We vigorously defend ourselves and prosecute these matters as appropriate.
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
Our legal organization applies its knowledge, experience and professional judgment to the specific characteristics of our cases, employing a litigation management process to manage and monitor legal proceedings in which we are a party. Our process facilitates the early evaluation and quantification of potential exposures in individual cases. This process also enables us to track those cases that have been scheduled for trial, mediation or other resolution. We regularly assess the adequacy of legal accruals based on our professional judgment, experience and the information available regarding our cases.
Based on a consideration of all relevant facts and circumstances, we do not believe the ultimate outcome of any currently pending lawsuit against us will have a material adverse effect upon our operations, financial condition or Consolidated Financial Statements.
10. Shareholders’ Equity and Redeemable Non-controlling Interests
Shareholders’ Equity
Dividend Distributions—The following table summarized the dividends paid in the periods presented:
| | | | | | | | | | | | | | | | | |
Millions of dollars, except per share amounts | Dividend Per Ordinary Share | | Aggregate Dividends Paid | | Date of Record |
March 2021 | $ | 1.05 | | | $ | 352 | | | March 8, 2021 |
June 2021 | 1.13 | | | 378 | | | June 7, 2021 |
| | | | | |
| $ | 2.18 | | | $ | 730 | | | |
| | | | | |
Share Repurchase Authorization—In MarchMay 2021, we paidour shareholders approved a cash dividendproposal to authorize us to repurchase up to 34.0 million ordinary shares, through November 28, 2022 (“May 2021 Share Repurchase Authorization”), which superseded any prior repurchase authorizations. The timing and amount of $1.05 per sharethese repurchases, which are determined based on our evaluation of market conditions and other factors, may be executed from time to time through open market or privately negotiated transactions. The repurchased shares, which are recorded at cost, are classified as Treasury stock and may be retired or used for an aggregategeneral corporate purposes, including for various employee benefit and compensation plans. As of $352 million to shareholders of record on March 8, 2021.June 30, 2021, there were 0 repurchases under the May 2021 Share Repurchase Authorization.
Ordinary Shares—The changes in the outstanding amounts of ordinary shares are as follows:
| | | | Three Months Ended March 31, | | Six Months Ended June 30, |
| | 2021 | | 2020 | | 2021 | | 2020 |
Ordinary shares outstanding: | Ordinary shares outstanding: | | | | Ordinary shares outstanding: | | | |
Beginning balance | Beginning balance | 334,015,220 | | | 333,476,883 | | Beginning balance | 334,015,220 | | | 333,476,883 | |
Share-based compensation | Share-based compensation | 247,964 | | | 196,037 | | Share-based compensation | 390,264 | | | 225,367 | |
| Employee stock purchase plan | Employee stock purchase plan | 49,956 | | | 81,215 | | Employee stock purchase plan | 98,034 | | | 178,239 | |
Purchase of ordinary shares | Purchase of ordinary shares | 0 | | | (50,685) | | Purchase of ordinary shares | 0 | | | (50,685) | |
Ending balance | Ending balance | 334,313,140 | | | 333,703,450 | | Ending balance | 334,503,518 | | | 333,829,804 | |
Treasury Shares—The changes in the amounts of treasury shares held by the Company are as follows:
| | | | | | | | | | | |
| Three Months Ended March 31, |
| 2021 | | 2020 |
Ordinary shares held as treasury shares: | | | |
Beginning balance | 6,030,408 | | | 6,568,745 | |
Share-based compensation | (247,964) | | | (196,037) | |
| | | |
Employee stock purchase plan | (49,956) | | | (81,215) | |
Purchase of ordinary shares | 0 | | | 50,685 | |
| | | |
Ending balance | 5,732,488 | | | 6,342,178 | |
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
Treasury Shares—The changes in the amounts of treasury shares held by the Company are as follows: | | | | | | | | | | | |
| Six Months Ended June 30, |
| 2021 | | 2020 |
Ordinary shares held as treasury shares: | | | |
Beginning balance | 6,030,408 | | | 6,568,745 | |
Share-based compensation | (390,264) | | | (225,367) | |
| | | |
Employee stock purchase plan | (50,006) | | | (178,239) | |
Purchase of ordinary shares | 0 | | | 50,685 | |
| | | |
Ending balance | 5,590,138 | | | 6,215,824 | |
Accumulated Other Comprehensive Loss—The components of, and after-tax changes in, Accumulated other comprehensive loss as of and for the threesix months ended March 31,June 30, 2021 and 2020 are presented in the following tables: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | |
Millions of dollars | Financial Derivatives | | Unrealized Gains on Available -for-Sale Debt Securities | | | | Defined Benefit Pension and Other Postretirement Benefit Plans | | Foreign Currency Translation Adjustments | | Total |
Balance – January 1, 2021 | $ | (426) | | | $ | 1 | | | | | $ | (752) | | | $ | (766) | | | $ | (1,943) | |
Other comprehensive income (loss) before reclassifications | 193 | | | (1) | | | | | 0 | | | (12) | | | 180 | |
Tax expense before reclassifications | (42) | | | 0 | | | | | 0 | | | (18) | | | (60) | |
Amounts reclassified from accumulated other comprehensive loss | (69) | | | 0 | | | | | 32 | | | 0 | | | (37) | |
Tax (expense) benefit | 15 | | | 0 | | | | | (4) | | | 0 | | | 11 | |
Net other comprehensive income (loss) | 97 | | | (1) | | | | | 28 | | | (30) | | | 94 | |
Balance – June 30, 2021 | $ | (329) | | | $ | 0 | | | | | $ | (724) | | | $ | (796) | | | $ | (1,849) | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Millions of dollars | Financial Derivatives | | Unrealized Gains on Available -for-Sale Debt Securities | | | | Defined Benefit Pension and Other Postretirement Benefit Plans | | Foreign Currency Translation Adjustments | | Total |
Balance – January 1, 2021 | $ | (426) | | | $ | 1 | | | | | $ | (752) | | | $ | (766) | | | $ | (1,943) | |
Other comprehensive income (loss) before reclassifications | 315 | | | 0 | | | | | 0 | | | (93) | | | 222 | |
Tax expense before reclassifications | (68) | | | 0 | | | | | 0 | | | (14) | | | (82) | |
Amounts reclassified from accumulated other comprehensive loss | (92) | | | 0 | | | | | 15 | | | 0 | | | (77) | |
Tax (expense) benefit | 20 | | | 0 | | | | | (4) | | | 0 | | | 16 | |
Net other comprehensive income (loss) | 175 | | | 0 | | | | | 11 | | | (107) | | | 79 | |
Balance – March 31, 2021 | $ | (251) | | | $ | 1 | | | | | $ | (741) | | | $ | (873) | | | $ | (1,864) | |
| | Millions of dollars | Millions of dollars | Financial Derivatives | | Unrealized Gains on Available -for-Sale Debt Securities | | | Defined Benefit Pension and Other Postretirement Benefit Plans | | Foreign Currency Translation Adjustments | | Total | Millions of dollars | Financial Derivatives | | Unrealized Gains on Available -for-Sale Debt Securities | | | Defined Benefit Pension and Other Postretirement Benefit Plans | | Foreign Currency Translation Adjustments | | Total |
Balance – January 1, 2020 | Balance – January 1, 2020 | $ | (200) | | | $ | 0 | | | | $ | (711) | | | $ | (873) | | | $ | (1,784) | | Balance – January 1, 2020 | $ | (200) | | | $ | 0 | | | | $ | (711) | | | $ | (873) | | | $ | (1,784) | |
Other comprehensive loss before reclassifications | (388) | | | (3) | | | | 0 | | | (195) | | | (586) | | |
Tax (expense) benefit before reclassifications | 88 | | | 1 | | | | 0 | | | (4) | | | 85 | | |
Other comprehensive income (loss) before reclassifications | | Other comprehensive income (loss) before reclassifications | (456) | | | 1 | | | | 0 | | | (133) | | | (588) | |
Tax benefit before reclassifications | | Tax benefit before reclassifications | 95 | | | 0 | | | | 0 | | | 0 | | | 95 | |
Amounts reclassified from accumulated other comprehensive loss | Amounts reclassified from accumulated other comprehensive loss | (53) | | | 0 | | | | 14 | | | 0 | | | (39) | | Amounts reclassified from accumulated other comprehensive loss | (6) | | | 0 | | | | 28 | | | 0 | | | 22 | |
Tax (expense) benefit | Tax (expense) benefit | 15 | | | 0 | | | | (4) | | | 0 | | | 11 | | Tax (expense) benefit | 3 | | | 0 | | | | (7) | | | 0 | | | (4) | |
Net other comprehensive income (loss) | Net other comprehensive income (loss) | (338) | | | (2) | | | | 10 | | | (199) | | | (529) | | Net other comprehensive income (loss) | (364) | | | 1 | | | | 21 | | | (133) | | | (475) | |
Balance – March 31, 2020 | $ | (538) | | | $ | (2) | | | | $ | (701) | | | $ | (1,072) | | | $ | (2,313) | | |
Balance – June 30, 2020 | | Balance – June 30, 2020 | $ | (564) | | | $ | 1 | | | | $ | (690) | | | $ | (1,006) | | | $ | (2,259) | |
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
The amounts reclassified out of each component of Accumulated other comprehensive loss are as follows:
| | | | Three Months Ended March 31, | | Affected Line Item on the Consolidated Statements of Income | | Three Months Ended June 30, | | Six Months Ended June 30, | | Affected Line Item on the Consolidated Statements of Income |
Millions of dollars | Millions of dollars | | 2021 | | 2020 | | Millions of dollars | 2021 | | 2020 | | 2021 | | | Affected Line Item on the Consolidated Statements of Income |
Reclassification adjustments for: | Reclassification adjustments for: | | | | | | | Reclassification adjustments for: | | | | | | | | |
Financial derivatives: | Financial derivatives: | | | Financial derivatives: | |
Foreign currency | Foreign currency | | $ | (92) | | | $ | (53) | | | Interest expense | Foreign currency | $ | 24 | | | $ | 45 | | | $ | (68) | | | $ | (8) | | | Interest expense |
| Commodities | Commodities | | (1) | | | 0 | | | Cost of sales | Commodities | (3) | | | 0 | | | (4) | | | 0 | | | Cost of sales |
Interest rates | Interest rates | | 1 | | | 0 | | | Interest expense | Interest rates | 2 | | | 2 | | | 3 | | | 2 | | | Interest expense |
Income tax expense (benefit) | | (20) | | | (15) | | | Provision for income taxes | |
Income tax (expense) benefit | | Income tax (expense) benefit | (5) | | | (12) | | | 15 | | | 3 | | | Provision for income taxes |
Financial derivatives, net of tax | Financial derivatives, net of tax | | (72) | | | (38) | | | Financial derivatives, net of tax | 18 | | | 35 | | | (54) | | | (3) | | |
Amortization of defined pension items: | Amortization of defined pension items: | | | Amortization of defined pension items: | |
Prior service cost | Prior service cost | | 1 | | | 1 | | | Other income, net | Prior service cost | 1 | | | 1 | | | 2 | | | 2 | | | Other income, net |
Actuarial loss | Actuarial loss | | 14 | | | 13 | | | Other income, net | Actuarial loss | 12 | | | 13 | | | 26 | | | 26 | | | Other income, net |
| Income tax expense (benefit) | | 4 | | | 4 | | | Provision for income taxes | |
Settlement loss | | Settlement loss | 4 | | | 0 | | | 4 | | | 0 | | | Other income, net |
Income tax expense | | Income tax expense | 0 | | | (3) | | | (4) | | | (7) | | | Provision for income taxes |
Defined pension items, net of tax | Defined pension items, net of tax | | 11 | | | 10 | | | Defined pension items, net of tax | 17 | | | 11 | | | 28 | | | 21 | | |
Total reclassifications, before tax | Total reclassifications, before tax | | (77) | | | (39) | | | Total reclassifications, before tax | 40 | | | 61 | | | (37) | | | 22 | | |
Income tax benefit | | (16) | | | (11) | | | Provision for income taxes | |
Income tax (expense) benefit | | Income tax (expense) benefit | (5) | | | (15) | | | 11 | | | (4) | | | Provision for income taxes |
Total reclassifications, after tax | Total reclassifications, after tax | | $ | (61) | | | $ | (28) | | | Amount included in net income | Total reclassifications, after tax | $ | 35 | | | $ | 46 | | | $ | (26) | | | $ | 18 | | | Amount included in net income |
Redeemable Non-controlling Interests
Our redeemable non-controlling interests relate to shares of cumulative perpetual special stock (“redeemable non-controlling interest stock”) issued by our consolidated subsidiary, formerly known as A. Schulman.subsidiary. As of March 31,June 30, 2021 and December 31, 2020, we had 115,374 shares of redeemable non-controlling interest stock outstanding.
In February and May 2021, we paid cash dividends of $15.00 per share to our redeemable non-controlling interest shareholders of record as of January 15, 2021 and April 15, 2021. These dividends totaled $2$3 million for each of the threesix months ended March 31,June 30, 2021 and 2020.
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
11. Per Share Data
Basic earnings per share are based upon the weighted average number of shares of common stock outstanding during the periods. Diluted earnings per share includes the effect of certain stock option awards and other equity-based compensation awards. We have unvested restricted stock units that are considered participating securities for earnings per share.
Earnings per share data and dividends declared per share of common stock are as follows: | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
| Three Months Ended June 30, |
| 2021 | | 2020 |
Millions of dollars | Continuing Operations | | Discontinued Operations | | Continuing Operations | | Discontinued Operations |
Net income (loss) | $ | 2,057 | | | $ | 2 | | | $ | 315 | | | $ | (1) | |
| | | | | | | |
| | | | | | | |
Dividends on redeemable non-controlling interests | (1) | | | 0 | | | (1) | | | 0 | |
Net (income) loss attributable to participating securities | (6) | | | 0 | | | (1) | | | 0 | |
Net income (loss) attributable to ordinary shareholders – basic and diluted | $ | 2,050 | | | $ | 2 | | | $ | 313 | | | $ | (1) | |
| | | | | | | |
Millions of shares, except per share amounts | | | | | | | |
Basic weighted average common stock outstanding | 334 | | | 334 | | | 334 | | | 334 | |
| | | | | | | |
Effect of dilutive securities | 1 | | | 1 | | | 0 | | | 0 | |
Potential dilutive shares | 335 | | | 335 | | | 334 | | | 334 | |
| | | | | | | |
Earnings (loss) per share: | | | | | | | |
Basic | $ | 6.13 | | | $ | 0.01 | | | $ | 0.94 | | | $ | 0 | |
Diluted | $ | 6.12 | | | $ | 0.01 | | | $ | 0.94 | | | $ | 0 | |
| | | | | | | |
| | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, |
| 2021 | | 2020 |
Millions of dollars | Continuing Operations | | Discontinued Operations | | Continuing Operations | | Discontinued Operations |
Net income (loss) | $ | 1,072 | | | $ | (2) | | | $ | 143 | | | $ | 1 | |
| | | | | | | |
| | | | | | | |
Dividends on redeemable non-controlling interests | (2) | | | 0 | | | (2) | | | 0 | |
Net (income) loss attributable to participating securities | (2) | | | 0 | | | 0 | | | 0 | |
Net income (loss) attributable to ordinary shareholders – basic and diluted | $ | 1,068 | | | $ | (2) | | | $ | 141 | | | $ | 1 | |
| | | | | | | |
Millions of shares, except per share amounts | | | | | | | |
Basic weighted average common stock outstanding | 334 | | | 334 | | | 334 | | | 334 | |
| | | | | | | |
Effect of dilutive securities | 0 | | | 0 | | | 0 | | | 0 | |
Potential dilutive shares | 334 | | | 334 | | | 334 | | | 334 | |
| | | | | | | |
Earnings (loss) per share: | | | | | | | |
Basic | $ | 3.20 | | | $ | (0.01) | | | $ | 0.42 | | | $ | 0 | |
Diluted | $ | 3.19 | | | $ | (0.01) | | | $ | 0.42 | | | $ | 0 | |
| | | | | | | |
| | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
| Six Months Ended June 30, |
| 2021 | | 2020 |
Millions of dollars | Continuing Operations | | Discontinued Operations | | Continuing Operations | | Discontinued Operations |
Net income (loss) | $ | 3,129 | | | $ | 0 | | | $ | 458 | | | $ | 0 | |
| | | | | | | |
| | | | | | | |
Dividends on redeemable non-controlling interests | (3) | | | 0 | | | (3) | | | 0 | |
Net (income) loss attributable to participating securities | (8) | | | 0 | | | (1) | | | 0 | |
Net income (loss) attributable to ordinary shareholders – basic and diluted | $ | 3,118 | | | $ | 0 | | | $ | 454 | | | $ | 0 | |
| | | | | | | |
Millions of shares, except per share amounts | | | | | | | |
Basic weighted average common stock outstanding | 334 | | | 334 | | | 334 | | | 334 | |
Effect of dilutive securities | 1 | | | 1 | | | 0 | | | 0 | |
| | | | | | | |
Potential dilutive shares | 335 | | | 335 | | | 334 | | | 334 | |
| | | | | | | |
Earnings (loss) per share: | | | | | | | |
Basic | $ | 9.33 | | | $ | 0 | | | $ | 1.36 | | | $ | 0 | |
Diluted | $ | 9.32 | | | $ | 0 | | | $ | 1.36 | | | $ | 0 | |
| | | | | | | |
| | | | | | | |
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
12. Segment and Related Information
Our operations are managed by senior executives who report to our Chief Executive Officer, the chief operating decision maker. Discrete financial information is available for each of the segments, and our Chief Executive Officer uses the operating results of each of the operating segments for performance evaluation and resource allocation. The activities of each of our segments from which they earn revenues and incur expenses are described below:
•Olefins and Polyolefins—Americas (“O&P—Americas”). Our O&P—Americas segment produces and markets olefins and co-products, polyethylene and polypropylene.
•Olefins and Polyolefins—Europe, Asia, International (“O&P—EAI”). Our O&P—EAI segment produces and markets olefins and co-products, polyethylene and polypropylene.
•Intermediates and Derivatives (“I&D”). Our I&D segment produces and markets propylene oxide and its derivatives, oxyfuels and related products, and intermediate chemicals such as styrene monomer, acetyls, ethylene oxide and ethylene glycol.
•Advanced Polymer Solutions (“APS”). Our APS segment produces and markets compounding and solutions, such as polypropylene compounds, engineered plastics, masterbatches, engineered composites, colors and powders, and advanced polymers, which includes Catalloy and polybutene-1.
•Refining. Our Refining segment refines heavy, high-sulfur crude oil and other crude oils of varied types and sources available on the U.S. Gulf Coast into refined products, including gasoline and distillates.
•Technology. Our Technology segment develops and licenses chemical and polyolefin process technologies and manufactures and sells polyolefin catalysts.
Our chief operating decision maker uses EBITDA as the primary measure for reviewing profitability of our segments, and therefore, we have presented EBITDA for all segments. We define EBITDA as earnings before interest, income taxes, and depreciation and amortization.
“Other” includes intersegment eliminations and items that are not directly related or allocated to business operations, such as foreign exchange gains or losses and components of pension and other postretirement benefit costs other than service costs. Sales between segments are made primarily at prices approximating prevailing market prices.
Summarized financial information concerning reportable segments is shown in the following tables for the periods presented:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, 2021 |
Millions of dollars | O&P– Americas | | O&P– EAI | | I&D | | APS | | Refining | | Technology | | Other | | Total |
Sales and other operating revenues: | | | | | | | | | | | | | | | |
Customers | $ | 2,135 | | | $ | 2,840 | | | $ | 1,704 | | | $ | 1,269 | | | $ | 993 | | | $ | 141 | | | $ | 0 | | | $ | 9,082 | |
Intersegment | 724 | | | 207 | | | 63 | | | 1 | | | 133 | | | 24 | | | (1,152) | | | 0 | |
| 2,859 | | | 3,047 | | | 1,767 | | | 1,270 | | | 1,126 | | | 165 | | | (1,152) | | | 9,082 | |
Income from equity investments | 30 | | | 95 | | | 12 | | | 0 | | | 0 | | | 0 | | | 0 | | | 137 | |
EBITDA | 867 | | | 412 | | | 182 | | | 135 | | | (110) | | | 94 | | | 5 | | | 1,585 | |
Capital expenditures | 65 | | | 40 | | | 145 | | | 20 | | | 25 | | | 22 | | | 23 | | | 340 | |
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| Three Months Ended June 30, 2021 |
Millions of dollars | O&P– Americas | | O&P– EAI | | I&D | | APS | | Refining | | Technology | | Other | | Total |
Sales and other operating revenues: | | | | | | | | | | | | | | | |
Customers | $ | 2,564 | | | $ | 3,240 | | | $ | 2,531 | | | $ | 1,333 | | | $ | 1,741 | | | $ | 152 | | | $ | 0 | | | $ | 11,561 | |
Intersegment | 1,159 | | | 215 | | | 54 | | | 3 | | | 204 | | | 31 | | | (1,666) | | | 0 | |
| 3,723 | | | 3,455 | | | 2,585 | | | 1,336 | | | 1,945 | | | 183 | | | (1,666) | | | 11,561 | |
Income from equity investments | 35 | | | 102 | | | 11 | | | 0 | | | 0 | | | 0 | | | 0 | | | 148 | |
EBITDA | 1,576 | | | 708 | | | 596 | | | 129 | | | (81) | | | 92 | | | (2) | | | 3,018 | |
Capital expenditures | 82 | | | 47 | | | 245 | | | 15 | | | 20 | | | 20 | | | 2 | | | 431 | |
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
| | | Three Months Ended March 31, 2020 | | Three Months Ended June 30, 2020 |
Millions of dollars | Millions of dollars | O&P– Americas | | O&P– EAI | | I&D | | APS | | Refining | | Technology | | Other | | Total | Millions of dollars | O&P– Americas | | O&P– EAI | | I&D | | APS | | Refining | | Technology | | Other | | Total |
Sales and other operating revenues: | Sales and other operating revenues: | | | | | | | | | | | | | | | | Sales and other operating revenues: | | | | | | | | | | | | | | | |
Customers | Customers | $ | 1,173 | | | $ | 2,064 | | | $ | 1,732 | | | $ | 1,093 | | | $ | 1,336 | | | $ | 96 | | | $ | 0 | | | $ | 7,494 | | Customers | $ | 1,073 | | | $ | 1,642 | | | $ | 1,140 | | | $ | 700 | | | $ | 854 | | | $ | 137 | | | $ | 0 | | | $ | 5,546 | |
Intersegment | Intersegment | 619 | | | 160 | | | 38 | | | 3 | | | 112 | | | 26 | | | (958) | | | 0 | | Intersegment | 360 | | | 60 | | | 17 | | | 5 | | | 65 | | | 40 | | | (547) | | | 0 | |
| | 1,792 | | | 2,224 | | | 1,770 | | | 1,096 | | | 1,448 | | | 122 | | | (958) | | | 7,494 | | | 1,433 | | | 1,702 | | | 1,157 | | | 705 | | | 919 | | | 177 | | | (547) | | | 5,546 | |
Income (loss) from equity investments | 2 | | | (3) | | | 2 | | | (1) | | | 0 | | | 0 | | | 0 | | | 0 | | |
LCM inventory valuation charge | 111 | | | 36 | | | 78 | | | 2 | | | 192 | | | 0 | | | 0 | | | 419 | | |
Income from equity investments | | Income from equity investments | 7 | | | 51 | | | 3 | | | 0 | | | 0 | | | 0 | | | 0 | | | 61 | |
LCM inventory valuation (benefit) charge | | LCM inventory valuation (benefit) charge | (38) | | | 34 | | | 20 | | | 67 | | | (179) | | | 0 | | | 0 | | | (96) | |
EBITDA | EBITDA | 366 | | | 189 | | | 203 | | | 113 | | | (272) | | | 56 | | | (9) | | | 646 | | EBITDA | 248 | | | 185 | | | 101 | | | (44) | | | 165 | | | 112 | | | (7) | | | 760 | |
Capital expenditures | Capital expenditures | 204 | | | 42 | | | 353 | | | 13 | | | 16 | | | 30 | | | 2 | | | 660 | | Capital expenditures | 190 | | | 34 | | | 305 | | | 10 | | | 21 | | | 26 | | | 2 | | | 588 | |
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| Six Months Ended June 30, 2021 |
Millions of dollars | O&P– Americas | | O&P– EAI | | I&D | | APS | | Refining | | Technology | | Other | | Total |
Sales and other operating revenues: | | | | | | | | | | | | | | | |
Customers | $ | 4,699 | | | $ | 6,080 | | | $ | 4,235 | | | $ | 2,602 | | | $ | 2,734 | | | $ | 293 | | | $ | 0 | | | $ | 20,643 | |
Intersegment | 1,883 | | | 422 | | | 117 | | | 4 | | | 337 | | | 55 | | | (2,818) | | | 0 | |
| 6,582 | | | 6,502 | | | 4,352 | | | 2,606 | | | 3,071 | | | 348 | | | (2,818) | | | 20,643 | |
Income from equity investments | 65 | | | 197 | | | 23 | | | 0 | | | 0 | | | 0 | | | 0 | | | 285 | |
EBITDA | 2,443 | | | 1,120 | | | 778 | | | 264 | | | (191) | | | 186 | | | 3 | | | 4,603 | |
Capital expenditures | 147 | | | 87 | | | 390 | | | 35 | | | 45 | | | 42 | | | 25 | | | 771 | |
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| Six Months Ended June 30, 2020 |
Millions of dollars | O&P– Americas | | O&P– EAI | | I&D | | APS | | Refining | | Technology | | Other | | Total |
Sales and other operating revenues: | | | | | | | | | | | | | | | |
Customers | $ | 2,246 | | | $ | 3,706 | | | $ | 2,872 | | | $ | 1,793 | | | $ | 2,190 | | | $ | 233 | | | $ | 0 | | | $ | 13,040 | |
Intersegment | 979 | | | 220 | | | 55 | | | 8 | | | 177 | | | 66 | | | (1,505) | | | 0 | |
| 3,225 | | | 3,926 | | | 2,927 | | | 1,801 | | | 2,367 | | | 299 | | | (1,505) | | | 13,040 | |
Income (loss) from equity investments | 9 | | | 48 | | | 5 | | | (1) | | | 0 | | | 0 | | | 0 | | | 61 | |
LCM inventory valuation charge | 73 | | | 70 | | | 98 | | | 69 | | | 13 | | | 0 | | | 0 | | | 323 | |
EBITDA | 614 | | | 374 | | | 304 | | | 69 | | | (107) | | | 168 | | | (16) | | | 1,406 | |
Capital expenditures | 394 | | | 76 | | | 658 | | | 23 | | | 37 | | | 56 | | | 4 | | | 1,248 | |
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
A reconciliation of EBITDA to Income from continuing operations before income taxes is shown in the following table for each of the periods presented:
| | | | | Three Months Ended March 31, | | Three Months Ended June 30, | | Six Months Ended June 30, |
Millions of dollars | Millions of dollars | | | 2021 | | 2020 | Millions of dollars | 2021 | | 2020 | | 2021 | | 2020 |
EBITDA: | EBITDA: | | | | | | EBITDA: | | | | | | | |
Total segment EBITDA | Total segment EBITDA | | | $ | 1,580 | | | $ | 655 | | Total segment EBITDA | $ | 3,020 | | | $ | 767 | | | $ | 4,600 | | | $ | 1,422 | |
Other EBITDA | Other EBITDA | | | 5 | | | (9) | | Other EBITDA | (2) | | | (7) | | | 3 | | | (16) | |
Less: | Less: | | | Less: | |
Depreciation and amortization expense | Depreciation and amortization expense | | | (335) | | | (342) | | Depreciation and amortization expense | (330) | | | (356) | | | (665) | | | (698) | |
Interest expense | Interest expense | | | (110) | | | (89) | | Interest expense | (130) | | | (125) | | | (240) | | | (214) | |
Add: | Add: | | | Add: | |
Interest income | Interest income | | | 2 | | | 3 | | Interest income | 5 | | | 4 | | | 7 | | | 7 | |
Income from continuing operations before income taxes | Income from continuing operations before income taxes | | | $ | 1,142 | | | $ | 218 | | Income from continuing operations before income taxes | $ | 2,563 | | | $ | 283 | | | $ | 3,705 | | | $ | 501 | |
Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
This discussion should be read in conjunction with the information contained in our Consolidated Financial Statements, and the accompanying notes elsewhere in this report. Unless otherwise indicated, the “Company”, “we”, “us,” “our” or similar words are used to refer to LyondellBasell Industries N.V. together with its consolidated subsidiaries (“LyondellBasell N.V.”).
OVERVIEW
First quarter performance built upon the economic momentumOur results demonstrate that we saw toward the end of last year. We experienced improved consumer-driven demand, recovery in durable goods markets and industry supply constraints, which enabled price increases and drove margin improvements for many of our products. During February 2021, unusually cold weather and related power outages impacted operations in our industry across the state of Texas and reduced our production volumes. In March 2021 we achieved the first full quarter of results for our recently formed Louisiana Integrated PolyEthylene JV LLC joint venture (the “Louisiana Joint Venture”) in which we have a 50% ownership interest. We benefitedcontinue to be well positioned to benefit from the increased geographic diversity of our portfolio as the Louisiana ethylene cracker operated continuously when most Texas assets were down due to the cold weather. Tight markets and strong demand drove margin improvements inongoing global economic recovery. In our O&P—Americas and O&P—EAI segments. Highersegments, strong demand supported price and margin improvements during the second quarter of 2021. During the second quarter, we operated all of our available capacity at near full rates to begin rebuilding depleted industry-wide inventories and addressing our customers' backlogs. Our growth investments expanded the earnings power of our global portfolio and contributed to our ability to generate a total of $1.9 billion in cash from automotive and other non-durable markets increased volumes foroperations during the quarter. Further, during the second quarter we raised our Advanced Polymer Solutions segmentquarterly dividend by 7.6% while margins compressed duecontinuing to rapidly rising raw material costs.focus on deleveraging our balance sheet.
Significant items that affected our results during the second quarter and first quartersix months of 2021 relative to the second quarter and first quartersix months of 2020 include:
•O&P—Americas results increased primarily due to olefin and polyolefin margin improvements and the first full quarter of results for our newly formed Louisiana Joint Venture;improvements;
•O&P—EAI results improved as a result of higher polyolefin margins and equity income, partly offset by lower olefin margins; and
•I&D results declinedincreased primarily driven by lower volumeshigher margins across most businesses from the downtime in Texas due to the weather events.businesses.
Other noteworthy items since the beginning of the year include the following:
•In JanuaryJune 2021, signed an agreementinvested $104 million to formpurchase a 50 percent owned50% interest in a joint venture with the China Petroleum & Chemical Corporation which will construct a new POpropylene oxide and SMstyrene monomer unit in China; and
•In both January and Aprilthe first six months of 2021, repaid $500$1,450 million and $325 million outstanding under our Term Loan due 2022 for a total repayment of $1 billion.and 4% Guaranteed Notes due 2023, respectively.
Results of operations for the periods discussed are presented in the table below:
| | | | | Three Months Ended March 31, | | Three Months Ended June 30, | | Six Months Ended June 30, |
Millions of dollars | Millions of dollars | | | 2021 | | 2020 | Millions of dollars | 2021 | | 2020 | | 2021 | | 2020 |
Sales and other operating revenues | Sales and other operating revenues | | | $ | 9,082 | | | $ | 7,494 | | Sales and other operating revenues | $ | 11,561 | | | $ | 5,546 | | | $ | 20,643 | | | $ | 13,040 | |
Cost of sales | Cost of sales | | | 7,678 | | | 6,868 | | Cost of sales | 8,676 | | | 4,894 | | | 16,354 | | | 11,762 | |
| Selling, general and administrative expenses | Selling, general and administrative expenses | | | 287 | | | 295 | | Selling, general and administrative expenses | 327 | | | 288 | | | 614 | | | 583 | |
Research and development expenses | Research and development expenses | | | 29 | | | 27 | | Research and development expenses | 32 | | | 25 | | | 61 | | | 52 | |
Operating income | Operating income | | | 1,088 | | | 304 | | Operating income | 2,526 | | | 339 | | | 3,614 | | | 643 | |
Interest expense | Interest expense | | | (110) | | | (89) | | Interest expense | (130) | | | (125) | | | (240) | | | (214) | |
Interest income | Interest income | | | 2 | | | 3 | | Interest income | 5 | | | 4 | | | 7 | | | 7 | |
Other income, net | Other income, net | | | 25 | | | — | | Other income, net | 14 | | | 4 | | | 39 | | | 4 | |
Income from equity investments | Income from equity investments | | | 137 | | | — | | Income from equity investments | 148 | | | 61 | | | 285 | | | 61 | |
Income from continuing operations before income taxes | Income from continuing operations before income taxes | | | 1,142 | | | 218 | | Income from continuing operations before income taxes | 2,563 | | | 283 | | | 3,705 | | | 501 | |
Provision for income taxes | | | 70 | | | 75 | | |
Provision for (benefit from) income taxes | | Provision for (benefit from) income taxes | 506 | | | (32) | | | 576 | | | 43 | |
Income from continuing operations | Income from continuing operations | | | 1,072 | | | 143 | | Income from continuing operations | 2,057 | | | 315 | | | 3,129 | | | 458 | |
(Loss) income from discontinued operations, net of tax | | | (2) | | | 1 | | |
Income (loss) from discontinued operations, net of tax | | Income (loss) from discontinued operations, net of tax | 2 | | | (1) | | | — | | | — | |
Net income | Net income | | | $ | 1,070 | | | $ | 144 | | Net income | $ | 2,059 | | | $ | 314 | | | $ | 3,129 | | | $ | 458 | |
RESULTS OF OPERATIONS
Revenues—Revenues increased by $1,588$6,015 million, or 21%108%, in the firstsecond quarter of 2021 compared to the second quarter of 2020 and by $7,603 million, or 58%, in the first quartersix months of 2021 compared to the first six months of 2020. Average sales prices in the second quarter and first quartersix months of 2021 were higher for many of our products as sales prices generally correlate with crude oil prices, which increased relative to the corresponding periodperiods in 2020. These higher prices led to a 26%99% and 54% increase in revenue in the second quarter and first quartersix months of 2021.2021, respectively. Favorable foreign exchange impacts resulted in a revenue increase of 3% and 4% during the second quarter and first six months of 2021, respectively. Sales volumes were relatively unchanged in the first six months of 2021 compared to the first six months of 2020. In the second quarter of 2021. Lower2021, higher sales volumes resulted in a revenue decreaseincrease of 9%6% relative to the firstsecond quarter of 2020 primarily due to unusually cold temperatures and associated electrical power outages that led to shutdowns in our Refining and I&D manufacturing facilities in Texas partially offset by revenues generated from our Louisiana Joint Venture.as a result of increased demand.
Cost of Sales—Cost of sales increased by $810$3,782 million, or 12%77%, in the firstsecond quarter of 2021 compared to the firstsecond quarter of 2020.2020 and by $4,592 million, or 39%, in the first six months of 2021 compared to the first six months of 2020, respectively. This increase primarily related to higher feedstock and energy costs. Additionally, in
During the first quartersix months of 2020, we recognized an LCM inventory valuation chargecharges of $419$323 million related to the decline in market pricing for many of our raw material and finished goods inventories during the period. During the second quarter of 2020, we recognized a $96 million LCM inventory valuation benefit largely driven by the recovery of market prices of crude oil and refined products during the second quarter.
Operating Income—Operating income increased by $784$2,187 million, or 258%645%, in the firstsecond quarter of 2021 compared to the second quarter of 2020 and by $2,971 million, or 462%, in the first quartersix months of 2021 compared to the first six months of 2020. In the firstsecond quarter of 2021, operating income in our O&P–Americas, Refining, O&P–EAI, TechnologyI&D and APS segments increased by $449$1,288 million, $184$470 million, $124 million, $35$469 million and $34$184 million, respectively, relative to the second quarter of 2020. The increases were partially offset by declines of $211 million and $22 million in our Refining and Technology segments, respectively, in the second quarter of 2021 compared to the second quarter of 2020.
In the first quartersix months of 2021, operating income in our O&P–Americas, O&P–EAI, I&D, APS and Technology segments increased by $1,737 million, $594 million, $426 million, $218 million and $13 million, respectively, compared to the first six months of 2020. The increases were partially offset by a decline of $43$27 million in our I&DRefining segment in the first quartersix months of 2021 compared to the first quarter ofsix months 2020. Results for each of our business segments are discussed further in the “Segment Analysis”Segment Analysis section below.
Income from Equity Investments—Income from our equity investments increased $137$87 million, or 100%143%, in the firstsecond quarter of 2021 compared to the firstsecond quarter of 2020 and by $224 million, or 367%, in the second quarter of 2021 compared to the second quarter of 2020. The increase was primarily due to increases in Income from equity investments in our O&P–EAI segment driven primarily by higher margins due to increased demand.
Income Taxes—Our effective income tax rate for the three months ended March 31,second quarter of 2021 was 6.1%19.7% compared with 34.4%-11.3% for the three months ended March 31,second quarter of 2020. The lowerOur effective income tax rate for the first six months of 2021 was primarily attributable15.5% compared with 8.6% for the first six months of 2020. Our income tax results are discussed further in Note 8 to the remeasurement of U.S. deferred tax liabilities that occurred in the prior year as a result of the CARES Act (-20.9%) and return to accrual adjustments primarily from a tax benefit associated with a step-up of certain Italian assets to fair market value (-11.3%). These drivers were partially offset by the reduced relative impact of our tax rate drivers, primarily exempt income, due to increased pre-tax earnings (7.1%).Consolidated Financial Statements.
Comprehensive Income—Comprehensive income increased by $1,534$1,706 million in the firstsecond quarter of 2021 compared to the firstsecond quarter of 2020 and by $3,240 million in the first six months of 2021 compared to the first six months of 2020. These changes were primarily due to higher net income net favorable impacts ofand financial derivative instruments driven by periodic changes in benchmark interest rates and improved foreign currency translation adjustments.derivatives activity.
In the second quarter and first quartersix months of 2021, and 2020, the cumulative after-tax effects of our derivatives designated as cash flow hedges were net gainslosses of $175$78 million and net lossesgains of $338$97 million, respectively. Pre-tax gainslosses of $223$123 million and pre-tax lossesgains of $535$100 million related to forward-starting interest rate swaps were driven by periodic changes in benchmark interest rates in the second quarter and first quartersix months of 2021, and 2020, respectively. The fluctuations of the U.S. dollar against the euro and the periodic changes in benchmark interest rates, in the second quarter and first quartersix months of 2021, and 2020, resulted in pre-tax losses of $22 million and pre-tax gains of $86 million and $147$64 million, respectively, related to our cross-currency swaps. Pre-tax gains of $24 million and pre-tax losses of $92 million and $53$68 million related to our cross-currency swaps were reclassified from Accumulated other comprehensive loss to Interest expense in the second quarter and first quartersix months of 2021, and 2020, respectively. The remaining change pertains to our commodity cash flow hedges.
In the first six months of 2020, the cumulative after-tax effects of our derivatives designated as cash flow hedges were net losses of $364 million. Included was pre-tax losses of $532 million related to forward-starting interest rate swaps, driven by the significant decline in benchmark interest rates in the first quarter of 2020, primarily due to changes in the economy impacting late in the first quarter of 2020.
The predominant functional currency for our operations outside of the U.S. is the euro. Relative to the U.S. dollar, the value of the euro decreased duringstrengthened in the firstsecond quarter of 2021, and 2020, resulting in net gains reflected in the Consolidated Statements of Comprehensive Income. During the first six months of 2021, the value of the euro decreased relative to the U.S. dollar, resulting in cumulative year-to-date net losses reflected in the Consolidated Statements of Comprehensive Income. The gains and losses related to unrealized changes in foreign currency translation impacts were partially offset byinclude pre-tax gains of $62$13 million and $39$75 million in the second quarter and first quartersix months of 2021, and 2020, respectively, which represent the effective portion of our net investment hedges. In the first six months of 2020, relative to the U.S. dollar, the value of the euro decreased resulting in net losses in the Consolidated Statements of Comprehensive Income.
Segment Analysis
We use earnings before interest, income taxes, and depreciation and amortization (“EBITDA”) as our measure of profitability for segment reporting purposes. This measure of segment operating results is used by our chief operating decision maker to assess the performance of and allocate resources to our operating segments. Intersegment eliminations and items that are not directly related or allocated to business operations, such as foreign exchange gains or losses and components of pension and other postretirement benefits other than service costs are included in “Other”. For additional information related to our operating segments, as well as a reconciliation of EBITDA to its nearest GAAP measure, Income from continuing operations before income taxes, see Note 12 to our Consolidated Financial Statements.
Revenues and the components of EBITDA for the periods presented are reflected in the table below:
| | | | | Three Months Ended March 31, | | Three Months Ended June 30, | | Six Months Ended June 30, |
Millions of dollars | Millions of dollars | | | 2021 | | 2020 | Millions of dollars | 2021 | | 2020 | | 2021 | | 2020 |
Sales and other operating revenues: | Sales and other operating revenues: | | | | | | Sales and other operating revenues: | | | | | | | |
O&P–Americas segment | O&P–Americas segment | | | $ | 2,859 | | | $ | 1,792 | | O&P–Americas segment | $ | 3,723 | | | $ | 1,433 | | | $ | 6,582 | | | $ | 3,225 | |
O&P–EAI segment | O&P–EAI segment | | | 3,047 | | | 2,224 | | O&P–EAI segment | 3,455 | | | 1,702 | | | 6,502 | | | 3,926 | |
I&D segment | I&D segment | | | 1,767 | | | 1,770 | | I&D segment | 2,585 | | | 1,157 | | | 4,352 | | | 2,927 | |
APS segment | APS segment | | | 1,270 | | | 1,096 | | APS segment | 1,336 | | | 705 | | | 2,606 | | | 1,801 | |
Refining segment | Refining segment | | | 1,126 | | | 1,448 | | Refining segment | 1,945 | | | 919 | | | 3,071 | | | 2,367 | |
Technology segment | Technology segment | | | 165 | | | 122 | | Technology segment | 183 | | | 177 | | | 348 | | | 299 | |
Other, including intersegment eliminations | Other, including intersegment eliminations | | | (1,152) | | | (958) | | Other, including intersegment eliminations | (1,666) | | | (547) | | | (2,818) | | | (1,505) | |
Total | Total | | | $ | 9,082 | | | $ | 7,494 | | Total | $ | 11,561 | | | $ | 5,546 | | | $ | 20,643 | | | $ | 13,040 | |
Operating income (loss): | Operating income (loss): | | | | | | Operating income (loss): | | | | | | | |
O&P–Americas segment | O&P–Americas segment | | | $ | 687 | | | $ | 238 | | O&P–Americas segment | $ | 1,395 | | | $ | 107 | | | $ | 2,082 | | | $ | 345 | |
O&P–EAI segment | O&P–EAI segment | | | 259 | | | 135 | | O&P–EAI segment | 551 | | | 81 | | | 810 | | | 216 | |
I&D segment | I&D segment | | | 88 | | | 131 | | I&D segment | 493 | | | 24 | | | 581 | | | 155 | |
APS segment | APS segment | | | 104 | | | 70 | | APS segment | 101 | | | (83) | | | 205 | | | (13) | |
Refining segment | Refining segment | | | (130) | | | (314) | | Refining segment | (95) | | | 116 | | | (225) | | | (198) | |
Technology segment | Technology segment | | | 82 | | | 47 | | Technology segment | 82 | | | 104 | | | 164 | | | 151 | |
Other, including intersegment eliminations | Other, including intersegment eliminations | | | (2) | | | (3) | | Other, including intersegment eliminations | (1) | | | (10) | | | (3) | | | (13) | |
Total | Total | | | $ | 1,088 | | | $ | 304 | | Total | $ | 2,526 | | | $ | 339 | | | $ | 3,614 | | | $ | 643 | |
Depreciation and amortization: | Depreciation and amortization: | | | | | | Depreciation and amortization: | | | | | | | |
O&P–Americas segment | O&P–Americas segment | | | $ | 143 | | | $ | 124 | | O&P–Americas segment | $ | 142 | | | $ | 133 | | | $ | 285 | | | $ | 257 | |
O&P–EAI segment | O&P–EAI segment | | | 53 | | | 53 | | O&P–EAI segment | 50 | | | 53 | | | 103 | | | 106 | |
I&D segment | I&D segment | | | 80 | | | 70 | | I&D segment | 81 | | | 74 | | | 161 | | | 144 | |
APS segment | APS segment | | | 28 | | | 44 | | APS segment | 27 | | | 39 | | | 55 | | | 83 | |
Refining segment | Refining segment | | | 19 | | | 42 | | Refining segment | 19 | | | 49 | | | 38 | | | 91 | |
Technology segment | Technology segment | | | 12 | | | 9 | | Technology segment | 11 | | | 8 | | | 23 | | | 17 | |
Total | Total | | | $ | 335 | | | $ | 342 | | Total | $ | 330 | | | $ | 356 | | | $ | 665 | | | $ | 698 | |
Income (loss) from equity investments: | Income (loss) from equity investments: | | | | | | Income (loss) from equity investments: | | | | | | | |
O&P–Americas segment | O&P–Americas segment | | | $ | 30 | | | $ | 2 | | O&P–Americas segment | $ | 35 | | | $ | 7 | | | $ | 65 | | | $ | 9 | |
O&P–EAI segment | O&P–EAI segment | | | 95 | | | (3) | | O&P–EAI segment | 102 | | | 51 | | | 197 | | | 48 | |
I&D segment | I&D segment | | | 12 | | | 2 | | I&D segment | 11 | | | 3 | | | 23 | | | 5 | |
APS segment | APS segment | | | — | | | (1) | | APS segment | — | | | — | | | — | | | (1) | |
Total | Total | | | $ | 137 | | | $ | — | | Total | $ | 148 | | | $ | 61 | | | $ | 285 | | | $ | 61 | |
| | | | | Three Months Ended March 31, | | Three Months Ended June 30, | | Six Months Ended June 30, |
Millions of dollars | Millions of dollars | | | 2021 | | 2020 | Millions of dollars | 2021 | | 2020 | | 2021 | | 2020 |
Other income (loss), net: | Other income (loss), net: | | | | | | Other income (loss), net: | | | | | | | |
O&P–Americas segment | O&P–Americas segment | | | $ | 7 | | | $ | 2 | | O&P–Americas segment | $ | 4 | | | $ | 1 | | | $ | 11 | | | $ | 3 | |
O&P–EAI segment | O&P–EAI segment | | | 5 | | | 4 | | O&P–EAI segment | 5 | | | — | | | 10 | | | 4 | |
I&D segment | I&D segment | | | 2 | | | — | | I&D segment | 11 | | | — | | | 13 | | | — | |
APS segment | APS segment | | | 3 | | | — | | APS segment | 1 | | | — | | | 4 | | | — | |
Refining segment | Refining segment | | | 1 | | | — | | Refining segment | (5) | | | — | | | (4) | | | — | |
| Technology segment | | Technology segment | (1) | | | — | | | (1) | | | — | |
Other, including intersegment eliminations | Other, including intersegment eliminations | | | 7 | | | (6) | | Other, including intersegment eliminations | (1) | | | 3 | | | 6 | | | (3) | |
Total | Total | | | $ | 25 | | | $ | — | | Total | $ | 14 | | | $ | 4 | | | $ | 39 | | | $ | 4 | |
EBITDA: | EBITDA: | | | | | | EBITDA: | | | | | | | |
O&P–Americas segment | O&P–Americas segment | | | $ | 867 | | | $ | 366 | | O&P–Americas segment | $ | 1,576 | | | $ | 248 | | | $ | 2,443 | | | $ | 614 | |
O&P–EAI segment | O&P–EAI segment | | | 412 | | | 189 | | O&P–EAI segment | 708 | | | 185 | | | 1,120 | | | 374 | |
I&D segment | I&D segment | | | 182 | | | 203 | | I&D segment | 596 | | | 101 | | | 778 | | | 304 | |
APS segment | APS segment | | | 135 | | | 113 | | APS segment | 129 | | | (44) | | | 264 | | | 69 | |
Refining segment | Refining segment | | | (110) | | | (272) | | Refining segment | (81) | | | 165 | | | (191) | | | (107) | |
Technology segment | Technology segment | | | 94 | | | 56 | | Technology segment | 92 | | | 112 | | | 186 | | | 168 | |
Other, including intersegment eliminations | Other, including intersegment eliminations | | | 5 | | | (9) | | Other, including intersegment eliminations | (2) | | | (7) | | | 3 | | | (16) | |
Total | Total | | | $ | 1,585 | | | $ | 646 | | Total | $ | 3,018 | | | $ | 760 | | | $ | 4,603 | | | $ | 1,406 | |
Olefins and Polyolefins–Americas Segment
Overview—EBITDA improved in the second quarter and first quartersix months of 2021 relative to the second quarter and first quartersix months of 2020 primarily due to higherdriven by olefin margins.and polyolefin margin improvements.
Ethylene Raw Materials—We have flexibility to vary the raw material mix and process conditions in our U.S. olefins plants in order to maximize profitability as market prices fluctuate for both feedstocks and products. Although prices of crude-based liquids and natural gas liquids are generally related to crude oil and natural gas prices, during specific periods the relationships among these materials and benchmarks may vary significantly. In the second quarter and first quartersix months of 2021 and 2020 approximately 60%65% of the raw materials used in our North American crackers was ethane.
The following table sets forth selected financial information for the O&P–Americas segment including Income from equity investments, which is a component of EBITDA:
| | | | | | | | | | | | | | | | | |
| | | Three Months Ended March 31, |
Millions of dollars | | | | | 2021 | | 2020 |
Sales and other operating revenues | | | | | $ | 2,859 | | | $ | 1,792 | |
Income from equity investments | | | | | 30 | | | 2 | |
EBITDA | | | | | 867 | | | 366 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
Millions of dollars | 2021 | | 2020 | | 2021 | | 2020 |
Sales and other operating revenues | $ | 3,723 | | | $ | 1,433 | | | $ | 6,582 | | | $ | 3,225 | |
Income from equity investments | 35 | | | 7 | | | 65 | | | 9 | |
EBITDA | 1,576 | | | 248 | | | 2,443 | | | 614 | |
Revenues—Revenues for our O&P–Americas segment increased by $1,067$2,290 million, or 60%160%, in the firstsecond quarter of 2021 compared to the firstsecond quarter of 2020.
Average sales prices were higher2020 and by $3,357 million, or 104%, in the first quartersix months of 2021 compared to the first quartersix months of 2020 which2020. Higher average sales prices resulted in a revenue146% and 93% increase of 50%in revenue in the second quarter and first quartersix months of 2021.2021, respectively, primarily driven by tight market conditions. Volume improvements resulted in a revenue increase of 10%14% and 11% in the second quarter and first quartersix months of 2021, primarilyrespectively, due to a full quarter of results associatedimproved demand in combination with our Louisiana Joint Venture partially offset by the effects of unusually cold temperatures and associated electrical power outages that led to shutdowns of our manufacturing facilities in Texas.industry-wide supply constraints.
EBITDA—EBITDA increased by $501$1,328 million, or 137%535%, in the firstsecond quarter of 2021 compared to the first quarter of 2020. Firstsecond quarter of 2020 and by $1,829 million, or 298%, in the first six months of 2021 compared to the first six months of 2020. Higher olefin results led to a 350% and 195% increase in EBITDA in the second quarter and first six months of 2021, respectively. This increase was primarily due to margin improvements as higher ethylene and propylene prices outpaced increases in feedstock costs. Higher polyethylene results led to a 135% and 53% increase in EBITDA in the second quarter and first six months of 2021, respectively, while polypropylene results led to a 58% and 30% increase in EBITDA in the second quarter and first six months of 2021, respectively. These improvements were primarily due to polyolefin sales price increases which outpaced higher feedstock costs. Income from our equity method investments lead to a 11% and 9% increase in EBITDA due to improved results at our Indelpro joint venture in Mexico.
Results for the first six months of 2020 included a $111$73 million LCM inventory valuation charge primarily driven by a decline in the price of heavy liquids and ethylene. Results in the second quarter of 2020 included a $38 million LCM inventory valuation benefit related to the reversal of LCM inventory valuation charges recognized in the first quarter of 2020, largely driven by recovery of market prices of heavy liquids and ethylene duringwhich were partially offset by declines in the quarter.price of polymers. The absence of a similar chargeadjustments in the first six months and second quarter 2021 resulted in a 30%12% and 15% change in EBITDA. The first full quarter of results for our newly formed Louisiana Joint Venture improved EBITDA, by 36% during the quarter.
Including the results of the Louisiana Joint Venture, higher olefin results led to a 89% improvement in EBITDA in the first quarter of 2021, primarily due to ethylene variable margin improvements associated with higher sales prices. Polypropylene results led to a 12% increase in EBITDA in the first quarter of 2021, largely due to improved margins attributed to higher price spreads over propylene in the first quarter of 2021. Higher income from our equity investments led to increases in EBITDA of 7% in the first quarter of 2021 mainly attributable to improved results at our polypropylene joint venture in Mexico.respectively.
Olefins and Polyolefins–Europe, Asia, International Segment
Overview—EBITDA increased for the second quarter and first quartersix months of 2021 increased comparedrelative to the second quarter and first quartersix months of 2020 mainly as a result of higher polymer margins across all businesses and equity income, partly offset by lower olefin margins.income.
While the majority of the feedstock used in our EAI segment’s ethylene crackers is naphtha, in the second quarter and first six months of 2021 and 2020 approximately 30-40% of the raw materials used in our crackers were advantaged feedstocks.
The following table sets forth selected financial information for the O&P–EAI segment including Income (loss) from equity investments, which is a component of EBITDA:
| | | | | Three Months Ended March 31, | | Three Months Ended June 30, | | Six Months Ended June 30, |
Millions of dollars | Millions of dollars | | | 2021 | | 2020 | Millions of dollars | 2021 | | 2020 | | 2021 | | 2020 |
Sales and other operating revenues | Sales and other operating revenues | | | $ | 3,047 | | | $ | 2,224 | | Sales and other operating revenues | $ | 3,455 | | | $ | 1,702 | | | $ | 6,502 | | | $ | 3,926 | |
Income (loss) from equity investments | Income (loss) from equity investments | | | 95 | | | (3) | | Income (loss) from equity investments | 102 | | | 51 | | | 197 | | | 48 | |
EBITDA | EBITDA | | | 412 | | | 189 | | EBITDA | 708 | | | 185 | | | 1,120 | | | 374 | |
Revenues—Revenues increased by $823$1,753 million, or 37%103%, in the firstsecond quarter of 2021 compared to the firstsecond quarter of 2020 and by $2,576 million, or 66%, in the first six months of 2021 compared to the first six months of 2020.
Average sales prices in the second quarter and first quartersix months of 2021 were higher across most products as sales prices generally correlate with crude oil prices, which on average, increased compared to the same period in 2020. These higher average sales prices were responsible for a revenue increase of 18%86% and 47% in the second quarter and first quartersix months of 2021.2021, respectively. Volume improvements resulted in a revenue increase of 10% and 12% increase in sales in the second quarter and first quartersix months of 2021, fromrespectively, primarily due to strong polymer demand.demand in combination with tight market supply. Favorable foreign exchange impacts resulted in a revenue increase of 7% in each of the second quarter and first quartersix months of 2021.
EBITDA—EBITDA increased by $223$523 million, or 118%283%, in the firstsecond quarter of 2021 compared to the firstsecond quarter of 2020. First quarter of 2020 results included a $36 and by $746 million, LCM inventory valuation charge primarily driven by a decline in the price of naphtha during the quarter. The absence of a similar chargeor 199%, in the first six months of 2021 compared to the first six months of 2020. Polyethylene results led to a 96% and 74% increase in EBITDA in the second quarter and first six months of 2021, resulted in a 19% change in EBITDA.
Improved polyethylene andrespectively while polypropylene results increasedled to a 86% and 61% increase in EBITDA by 54% and 35%, respectively, in the second quarter and first quartersix months of 2021.2021, respectively. These improvements were largely attributed to higher margins due to strong demand. Lowerdemand and tight markets. Higher olefins results led to a 51% decrease52% increase in EBITDA in the firstsecond quarter of 2021 primarily driven by lowerhigher margins attributable to increased ethylene price which outpaced an increase in feedstock costs. Higher income from our equity investments led to increases in EBITDA of 52%28% and 40% in the second quarter and first quartersix months of 2021, respectively, mainly attributable to higher polyolefinpolyolefins margins due toassociated with increased demand. Favorable foreign exchange impacts resulted in a 11%8% and 9% increase in EBITDA in the second quarter and first six months of 2021, respectively.
Results for the second quarter and first six months of 2020 included LCM inventory valuation charges of $34 million and $70 million, respectively, resulting from a decline in the price of naphtha in the first quarter of 2021.2020 and a decline in the price of polymers in the second quarter of 2020. The absence of similar charges in the second quarter and first six months of 2021 resulted in a 18% and 19% change in EBITDA, respectively.
Intermediates and Derivatives Segment
Overview—EBITDA declinedincreased in the second quarter and first quartersix months of 2021 compared to the second quarter and first quartersix months of 2020, primarily driven by lower volumeshigher margins across most businesses in particular propylene oxide and derivatives.due to tight market supply from industry outages coupled with strong demand recovery.
The following table sets forth selected financial information for the I&D segment including Income from equity investments, which is a component of EBITDA:
| | | | | Three Months Ended March 31, | | Three Months Ended June 30, | | Six Months Ended June 30, |
Millions of dollars | Millions of dollars | | | 2021 | | 2020 | Millions of dollars | 2021 | | 2020 | | 2021 | | 2020 |
Sales and other operating revenues | Sales and other operating revenues | | | $ | 1,767 | | | $ | 1,770 | | Sales and other operating revenues | $ | 2,585 | | | $ | 1,157 | | | $ | 4,352 | | | $ | 2,927 | |
Income from equity investments | Income from equity investments | | | 12 | | | 2 | | Income from equity investments | 11 | | | 3 | | | 23 | | | 5 | |
EBITDA | EBITDA | | | 182 | | | 203 | | EBITDA | 596 | | | 101 | | | 778 | | | 304 | |
Revenues—Revenues decreasedincreased by $3$1,428 million, remaining relatively flat,or 123%, in the firstsecond quarter of 2021 compared to the firstsecond quarter of 2020 and by $1,425, or 49% in the first six months of 2021 compared to the first six months of 2020. LowerHigher average sales volumesprices resulted in a 17% decline110% and 51% increase in revenue in the second quarter and first six months of 2021, respectively, as sales prices generally correlate with crude oil prices, which on average, increased compared to the same periods in 2020. Higher sales volumes driven by strong product demand across most businesses resulted in a 10% increase in sales primarily driven byin the second quarter of 2021. Sales volumes in the six months of 2021 declined resulting in a decline5% decrease in productionrevenue due to the impact of unusually cold temperatures and associated electrical power outages that led to shutdowns of our manufacturing facilities in Texas. This decrease was largely offset by higher average sales pricesTexas in the first quarter of 2021 for most products as sales prices generally correlate with crude oil prices, which on average, increased compared to the same period in 2020. This increase in average sales prices resulted in a 14% increase in revenue.early 2021. Favorable foreign exchange impacts also increasedresulted in a revenue byincrease of 3% in each of the second quarter and first quartersix months of 2021.
EBITDA—EBITDA decreasedincreased by $21$495 million, or 10%490%, in the firstsecond quarter of 2021 compared to the firstsecond quarter of 2020 and by $474 million, or 156%, in the first six months of 2021 compared to the first six months of 2020. Propylene oxide and derivatives results increased by 205% and 60% in the second quarter and first six months of 2021, respectively. This increase was primarily a result of higher margins due to strong demand recovery coupled with tight market supply resulting from industry outages. Similar market conditions drove an increase in margins for intermediate chemicals which resulted in a 153% and 44% increase in EBITDA for the second quarter and first six months of 2021, respectively. Oxyfuels and related products results increased 99% and 10% in the second quarter and first six months of 2021, respectively, primarily driven by margin improvement as a result of higher demand and gasoline prices. Favorable foreign exchange impacts resulted in a 3% and 4% increase in EBITDA in the second quarter and first six months of 2021, respectively.
In the first quartersix months of 2020 EBITDA for our I&D segment included a $78$98 million LCM inventory valuation charge primarily driven by a decline in the price of various gasoline blending components, butane, benzene and styrene during the period. EBITDA in the second quarter of 2020 included a $20 million LCM inventory valuation charge primarily driven by a decline in the price of benzene and styrene, despite price improvements for various gasoline blending components and butane duringsince the quarter.first quarter of 2020. The absence of a similar chargecharges in the first six months and second quarter 2021 resulted in a 38%32% and 20% change in EBITDA.EBITDA, respectively.
Oxyfuels and related products results declined, resulting in a 35% decrease in EBITDA in the first quarter of 2021. Approximately 60% of this decline was driven by a decrease in margins due to lower blending premium over gasoline prices, higher feedstock costs and higher utility costs related to Texas weather events. The remaining decrease was due to lower volumes driven by Texas weather events and lower gasoline demand. Declines in propylene oxide and derivatives results led to an EBITDA decrease of 12% in the first quarter of 2021. This decrease was a result of lower volumes driven by Texas weather events as discussed above and planned maintenance. Approximately half of this volume decrease was offset by margin improvements due to tight market supply. Intermediate chemicals results declined, contributing to a 10% decrease in EBITDA primarily due to a decrease in margins due to higher feedstock costs. Higher income from our equity investments led to increases in EBITDA of 5% in the first quarter of 2021 mainly attributable to improved results at our joint venture in China. Favorable foreign exchange impacts increased EBITDA by 4% in the first quarter of 2021.
Planned maintenance in 2021 is expected to reduce EBITDA by approximately $115 million, which is $30 million lower than previously estimated in 2020, due to reduced scope of work and associated downtime for the maintenance.
Advanced Polymer Solutions Segment
Overview—EBITDA for our APS segment increased in the second quarter and first quartersix months of 2021 relative to the second quarter and first quartersix months of 2020, primarily due to improved compounding and solution results and the absence of integration costs related to the acquisition of A. Schulman recognized in the first quarter of 2020.higher volumes.
The following table sets forth selected financial information for the APS segment including losses from equity investments, which is a component of EBITDA:
| | | | | Three Months Ended March 31, | | Three Months Ended June 30, | | Six Months Ended June 30, |
Millions of dollars | Millions of dollars | | | 2021 | | 2020 | Millions of dollars | 2021 | | 2020 | | 2021 | | 2020 |
Sales and other operating revenues | Sales and other operating revenues | | | $ | 1,270 | | | $ | 1,096 | | Sales and other operating revenues | $ | 1,336 | | | $ | 705 | | | $ | 2,606 | | | $ | 1,801 | |
Income (loss) from equity investments | Income (loss) from equity investments | | | — | | | (1) | | Income (loss) from equity investments | — | | | — | | | — | | | (1) | |
EBITDA | EBITDA | | | 135 | | | 113 | | EBITDA | 129 | | | (44) | | | 264 | | | 69 | |
Revenues—Revenues increased by $174$631 million, or 16%90%, in the firstsecond quarter of 2021 compared to the firstsecond quarter of 2020 and by $805, or 45%, in the first six months of 2021 compared to the first six months of 2021. Sales volumes increased resulting in a 44% and 20% increase in revenue in the second quarter and first six months of 2021 stemming from higher automotive and construction demand. Average sales price increased resulting in a 37% and 16% increase in revenue in the second quarter and first six months of 2021, respectively, as sales prices generally correlate with crude oil prices, which on average, increased compared to the same periods in 2020. Foreign exchange impacts resulted in a revenue increase of 8%9% in each of the second quarter and first quarter of 2021. Sales volumes increased in the first quarter of 2021 stemming from higher market demand for compounding and solutions, including higher automotive and construction demand, which led to a 4% increase in revenue. Average sales price increased resulting in a 4% increase in revenue in the first quartersix months of 2021.
EBITDA—EBITDA increased by $22$173 million, or 19%393%, in the firstsecond quarter of 2021 compared to the second quarter of 2020 and by $195 million, or 283%, in the first quartersix months of 2021 compared to the first six months of 2020. Increased compounding and solutions results led to an EBITDA increase of 8%164% and 119% in the second quarter and first six months of 2021, respectively, primarily due to volume improvements driven by higher demand. Increased advanced polymer results led to an EBITDA increase of 64% and 36%, in the second quarter and first six months of 2021. This increase was2021, respectively, mainly attributable to higher volumes driven by increased demand for our products utilized in the automotive and construction end marketsmarkets.
Results for the second quarter and first six months of 2020 included LCM inventory valuation charges of $67 million and $69 million, respectively, resulting from a decline in Asia and Europe. Integration activities related to our 2018 acquisitionthe price of A. Schulman Inc. were substantially completedpolymers during the third quarter of 2020. In theperiods. The absence of these integration costssimilar charges in the second quarter and first quartersix months of 2021 resulted in a 152% and 100% change in EBITDA, changed 12% during the quarter. Favorable foreign exchange impacts increased EBITDA by 6% in the first quarter 2021.respectively.
Refining Segment
Overview—EBITDA increaseddecreased in the second quarter and first quartersix months of 2021 relative to the second quarter and first quartersix months of 2020, primarily due to the absence of an LCM inventory valuation charge which was recognized in the first quarter of 2020.lower margins.
The following table sets forth selected financial information and heavy crude oil processing rates for the Refining segment and the U.S. refining market margins for the applicable periods. “Brent” is a light sweet crude oil and is one of the main benchmark prices for purchases of oil worldwide. “Maya” is a heavy sour crude oil grade produced in Mexico that is a relevant benchmark for heavy sour crude oils in the U.S. Gulf Coast market. References to industry benchmarks for refining market margins are to industry prices reported by Platts, a division of S&P Global.
| | | | | Three Months Ended March 31, | | Three Months Ended June 30, | | Six Months Ended June 30, |
Millions of dollars | Millions of dollars | | | 2021 | | 2020 | Millions of dollars | 2021 | | 2020 | | 2021 | | 2020 |
Sales and other operating revenues | Sales and other operating revenues | | | $ | 1,126 | | | $ | 1,448 | | Sales and other operating revenues | $ | 1,945 | | | $ | 919 | | | $ | 3,071 | | | $ | 2,367 | |
EBITDA | EBITDA | | | (110) | | | (272) | | EBITDA | (81) | | | 165 | | | (191) | | | (107) | |
| Thousands of barrels per day | Thousands of barrels per day | | | Thousands of barrels per day | |
Heavy crude oil processing rates | Heavy crude oil processing rates | | | 152 | | | 226 | | Heavy crude oil processing rates | 248 | | | 237 | | | 200 | | | 231 | |
| Market margins, dollars per barrel | Market margins, dollars per barrel | | | Market margins, dollars per barrel | |
Brent - 2-1-1 | Brent - 2-1-1 | | | $ | 10.57 | | | $ | 7.43 | | Brent - 2-1-1 | $ | 15.32 | | | $ | 4.42 | | | $ | 12.95 | | | $ | 5.87 | |
Brent - Maya differential | Brent - Maya differential | | | 4.75 | | | 9.79 | | Brent - Maya differential | 6.14 | | | 8.85 | | | 5.44 | | | 9.32 | |
Total Maya 2-1-1 | Total Maya 2-1-1 | | | $ | 15.32 | | | $ | 17.22 | | Total Maya 2-1-1 | $ | 21.46 | | | $ | 13.27 | | | $ | 18.39 | | | $ | 15.19 | |
Revenues—Revenues decreasedincreased by $322$1,026 million, or 22%112%, in the firstsecond quarter of 2021 compared to the firstsecond quarter of 2020 and by $704 million, or 30%, in the first six months of 2021 compared to the first six months of 2020. HeavyHigher product prices led to a revenue increase of 116% and 48% in the second quarter and first six months of 2021, respectively, due to an average Brent crude oil processing rates decreased duringprice increase of approximately $36 and $23 per barrel in the second quarter and first quartersix months of 2021, respectively.This increase was partially offset by a decline in volumes of 4% and 18% in the second quarter and first six months of 2021, respectively, due to planned and unplanned outages, including the effects of unusually cold temperatures and associated electrical power outages that led to shutdowns of our manufacturing facilities in Texas. This declineTexas in sales volumes resulted in a 32% reduction in revenue. This decrease was partially offset by higher product prices, which led to a revenue increase of 10% due to an average Brent crude oil price increase of approximately $10 per barrel in the first quarter ofearly 2021.
EBITDA—EBITDA increaseddecreased by $162$246 million, or 60%149%, in the firstsecond quarter of 2021 compared to the second quarter of 2020 and by $84 million, or 79%, in the first six months of 2021 compared to the first six months of 2020.
EBITDA decreased by 43% and 69% in the second quarter and first six months of 2021, respectively, due to lower margins. These margin declines were driven by unfavorable byproduct crack spreads of $14 per barrel and $8 per barrel in the second quarter and first six months of 2020, respectively, higher costs of Renewable Identification Numbers (“RINs”) of approximately $1 per gallon and the absence of a $50 million of favorable mark-to-market gains on hedges recognized in the second quarter of 2020. FirstThese declines in margin were partially offset by an increase in the Maya 2-1-1 market margin during the second quarter of 2021 due to higher demand for refined products and the absence of unplanned outages at our fluid catalytic cracking unit in the first two quarters of 2020, resultswhich restricted the yield of higher-margin refined products. In the first six months of 2021, EBITDA decreased by 21% due to lower heavy crude oil processing rates driven by the impact of facility outages as discussed above.
Results for the first six months of 2020 included a $192$13 million LCM inventory valuation charge primarily driven by a decline in the price of crude oil and refined products, the absence of a similar chargeproducts. Results in the firstsecond quarter 2021 resulted inof 2020 included a 71% change in EBITDA. This increase$179 million LCM inventory valuation benefit related to the reversal of LCM inventory valuation charges recognized in the first quarter of 2021 was partially offset by a 7% decrease in EBITDA due to lower heavy crude oil processing rates2020, largely driven by recovery of market prices during the impactquarter. The absence of facility outages as discussed abovesimilar adjustments in the first six months and lower demand for transportation fuels. Margin declinessecond quarter of 2021 resulted in a 4% decrease12% and 108% change in EBITDA, driven by a decrease in the Maya 2-1-1 market margin due to tighter heavy oil supply and a decrease in refined product demand as well as higher costs of Renewable Identification Numbers (“RINs”).respectively.
Technology Segment
Overview—Overview—EBITDA increaseddecreased in the firstsecond quarter of 2021 compared to the second quarter of 2020 driven by lower licensing revenues and catalyst margins, but increased in the first quartersix months of 2021 compared to the first six months of 2020, primarily due to higher licensing revenues.
The following table sets forth selected financial information for the Technology segment:
| | | | | Three Months Ended March 31, | | Three Months Ended June 30, | | Six Months Ended June 30, |
Millions of dollars | Millions of dollars | | | 2021 | | 2020 | Millions of dollars | 2021 | | 2020 | | 2021 | | 2020 |
Sales and other operating revenues | Sales and other operating revenues | | | $ | 165 | | | $ | 122 | | Sales and other operating revenues | $ | 183 | | | $ | 177 | | | $ | 348 | | | $ | 299 | |
EBITDA | EBITDA | | | 94 | | | 56 | | EBITDA | 92 | | | 112 | | | 186 | | | 168 | |
Revenues—
Revenues—Revenues increased by $43$6 million, or 35%3%, in the firstsecond quarter of 2021 compared to the firstsecond quarter of 2020 and by $49 million, or 16%, in the first six months of 2021 compared to the first six months of 2020. Licensing revenues decreased by 6% in the second quarter but increased by 5% in the first six months of 2021, respectively. Higher licensing revenuescatalyst volumes resulted in a 20%3% and 5% increase in the second quarter and first six months of 2021, respectively, primarily driven by a strong demand. Changes in average catalyst sales price resulted in a revenue increase of 1% in the second quarter of 2021 and a revenue decrease of 2% in the first six months of 2021. Favorable foreign exchange impacts increased revenue by 5% and 8% in the second quarter and first six months of 2021, respectively.
EBITDA—EBITDA decreased by $20 million, or 18%, in the second quarter of 2021 compared to the firstsecond quarter of 2020. Higher catalyst volumes resulted in a 8% increase in revenue in the first quarter of 2021 primarily driven by a strong demand. Favorable foreign exchange impact led to a revenue increase of 7% in the first quarter of 2021.
EBITDA—EBITDA2020 and increased by $38$18 million, or 68%11%, in the first quartersix months of 2021 compared to the first six months of 2020. Lower EBITDA during the second quarter of 2020. Higher2021 was equally driven by lower licensing revenues from more contracts reaching significant milestonesrevenue and lower catalyst margins. EBITDA improvements in the first quartersix months of 2021 comparedwas due to the first quarter of 2020higher licensing revenue. Favorable foreign exchange impacts resulted in a 41%an EBITDA increase in EBITDA. Higher catalyst volumes resulted in a 14% increase in EBITDA. Foreign exchange impacts, which on average, were favorable led to a 9% increase in EBITDAof 5% and 7% in the second quarter and first quartersix months of 2021.2021, respectively.
FINANCIAL CONDITION
Operating, investing and financing activities of continuing operations, which are discussed below, are presented in the following table:
| | | Three Months Ended March 31, | | Six Months Ended June 30, |
Millions of dollars | Millions of dollars | 2021 | | 2020 | Millions of dollars | 2021 | | 2020 |
Cash provided by (used in) : | Cash provided by (used in) : | | | | Cash provided by (used in) : | | | |
Operating activities | Operating activities | $ | 571 | | | $ | 542 | | Operating activities | $ | 2,473 | | | $ | 1,834 | |
Investing activities | Investing activities | (59) | | | (663) | | Investing activities | (362) | | | (1,727) | |
Financing activities | Financing activities | (782) | | | 884 | | Financing activities | (2,470) | | | 1,568 | |
Operating Activities—Cash provided by operating activities of $5712,473 million in the first quartersix months of 2021 reflected earnings adjusted for non-cash items, payments for employee bonuses, income taxes, income from equity investments, and cash used by the main components of working capital—Accounts receivable, Inventories and Accounts payable.
In the first quartersix months of 2021, the main components of working capital used $626$1,561 million of cash driven primarily by an increase in Accounts receivable and Inventories partially offset by an increase in Accounts payable. The increase in Accounts receivable was driven by higher revenues for our O&P—Americas, O&P—EAI, and APS segments. The increase in Inventory wasacross most businesses primarily driven by higher inventory volumes,average sales prices. The increase in Inventories was primarily due to lower crude oil consumption as a resultthe replenishment of Texas weather events, and prices within our Refining segment.inventory levels to support anticipated business demands. The increase in Accounts payables was primarily driven by increased raw material costs.
Other operating activities in 2021 includes the effects of changes in income tax accruals, primarily driven by the increased pretax income, partially offset by income tax payments made during the period.
Cash provided by operating activities of $542$1,834 million in the first quartersix months of 2020 reflected earnings adjusted for non-cash items, payments for employee bonuses, income taxes, and cash consumedprovided by the main components of working capital.
In the first quartersix months of 2020, the main components of working capital used $110provided $465 million of cash driven primarily by a decreasedecreases in Accounts payablereceivable and Inventory, partially offset by a decrease in Inventories.Accounts payable. The decrease in Accounts payablereceivable was primarily due todriven by lower feedstock prices in our O&P–EAI segment as well as a decrease in crude oil purchasessales in our Refining, segment.APS and I&D segments due to unfavorable market conditions. The decrease in Inventory was primarily driven by company-wide inventory reduction initiatives as well as higherlower prices. The decrease in Accounts payable was primarily due to lower cost of sales volumes in our O&P–EAI segment compared to the fourth quarter 2019 and turnaround activities in our I&D segment.resulting from lower production across multiple segments driven by unfavorable market conditions.
Investing Activities—We invest cash in investment-grade and other high-quality instruments that provide adequate flexibility to redeploy funds as needed to meet our cash flow requirements while maximizing yield.
In the first quarterssix months of 2021 and 2020 we received proceeds of $226$264 million and $1 million, respectively, from our investments in equity securities. Additionally, we received proceeds of $74$291 million in the first quartersix months of 2021 upon the maturity of certain available-for-sale debt securities.
In the first six months of 2021 we made an equity contribution of $104 million to form Ningbo ZRCC LyondellBasell New Material Company Limited, a 50/50 joint venture with China Petroleum & Chemical Corporation. The joint venture will construct a new propylene oxide and styrene monomer unit in Zhenhai Ningbo, China and startup is expected at the end of 2021. The joint venture is included in our I&D segment.
Capital expenditures forin the first threesix months of 2021 totaled $340$771 million compared to $660$1,248 million forin the first threesix months of 2020, resulting2020. Approximately half of our capital spending in a decreaseboth periods was for profit-generating growth projects, primarily our PO/TBA plant, with the remaining spending supporting sustaining maintenance. We estimate capital spending to increase in the second half of $320 million or 48% in 2021 compared to 2020. Reduced spending within our I&D segment accounted for 32%the first half of the decline which was driven by decreased spending at our PO/TBA plant. Additionally, spending in our O&P—Americas segment decreased by 21% due to the completion of our Hyperzone polyethylene plant in 2020 and a decline in other plant improvement projects in 2021.year, while remaining flat year-over-year. See Note 12 to the Consolidated Financial Statements for additional information regarding capital spending by segment.
In the first six months of 2020 we invested $270 million in debt securities that are deemed available-for-sale. We also invested $184 million in equity securities in the first six months of 2020. Our investments in available-for-sale debt securities and equity securities are classified as Short-term investments.
Financing Activities—We made dividend payments totaling $352$730 million and $351$701 million in the first quarterssix months of 2021 and 2020, respectively.
In January 2021, we repaid $500 million outstanding under our Term Loan due 2022.
In the first quarterssix months of 2021 and 2020 we received a return of collateral of $66$51 million and posted collateral of $238 million, respectively, related to the positions held with our counterparties for certain forward-starting interest rate swaps.
In 2021, we repaid $1,450 million and $325 million outstanding under our Term Loan due 2022 and 4% Guaranteed Notes due 2023, respectively. In MarchApril 2020, LYB International Finance III, LLC (“LYB Finance III”), a wholly owned finance subsidiary of LyondellBasell Industries N.V. issued $500 million of 2.875% guaranteed notes due 2025 (the “2025 Notes”) at a discounted price of 99.911%, $500 million of 3.375% guaranteed notes due 2030 (the “2030 Notes”) at a discounted price of 99.813% and $1,000 million of 4.2% guaranteed notes due 2050 (the “2050 Notes”) at a discounted price of 99.373%. Net proceeds from the sale of the notes totaled $1,974 million. We used the net proceeds from the sale of the notes for general corporate purposes, including to increase our liquidity and manage short-term debt maturities.
Additionally, in April 2020 we borrowedrepaid $500 million fromof our Senior Revolving Credit Facility and $500 million fromof our U.S. Receivables Facility borrowed in March 2020 to increase our liquidity.
In May 2020, we terminated and cash settled $2,000 million in notional value of our cross-currency interest rate swaps, designated as cash flows hedges, maturing in 2021 and 2024. Upon termination of the swaps, we received $346 million from our counterparties.
In the first quartersix months of 2020, we received net proceeds of $516$212 million, through the issuance and repurchase of commercial paper instruments under our commercial paper program.
Additional information related to the issuance of debt and commercial paper can be found in Note 6 to the Consolidated Financial Statements.
Liquidity and Capital Resources
Overview
We plan to fund our ongoing working capital, capital expenditures, debt service, dividends and other funding requirements with our current available liquidity and cash from operations, which could be affected by general economic, financial, competitive, legislative, regulatory, business and other factors, many of which are beyond our control. Cash and cash equivalents, cash from our short-term investments, cash from operating activities, proceeds from the issuance of debt, or a combination thereof, may be used to fund the purchase of shares under our share repurchase authorization.
We intend to continue to declare and pay quarterly dividends, with the goal of increasing the dividend over time, after giving consideration to our cash balances and expected results from operations. Our focus on funding our dividends while remaining committed to a strong investment grade balance sheet continues to be the foundation of our capital deployment strategy. In the near term, we are prioritizing debt reduction on our balance sheet.
Cash and Liquid Investments
As of March 31,June 30, 2021, we had Cash and cash equivalents and marketable securities classified as Short-term investments totaling $1,835$1,517 million, which includes $1,197$1,062 million in jurisdictions outside of the U.S., principally in the United Kingdom. There are currently no legal or economic restrictions that would materially impede our transfers of cash.
Credit Arrangements
At March 31,June 30, 2021, we had total debt, including current maturities, of $15,425$14,173 million, and $197$224 million of outstanding letters of credit, bank guarantees and surety bonds issued under uncommitted credit facilities.
We had total unused availability under our credit facilities of $2,905$2,910 million at March 31,June 30, 2021, which included the following:
•$2,0052,010 million under our $2,500 million Senior Revolving Credit Facility, which backs our $2,500 million commercial paper program. Availability under this facility is net of outstanding borrowings, outstanding letters of credit provided under the facility and notes issued under our commercial paper program. A small portion of our availability under this facility is impacted by changes in the euro/U.S. dollar exchange rate. At March 31,June 30, 2021, we had $500 million of outstanding commercial paper, net of discount, no borrowings or letters of credit outstanding under this facility; and
•$900 million under our $900 million U.S. Receivables Facility. Availability under this facility is subject to a borrowing base of eligible receivables, which is reduced by outstanding borrowings and letters of credit, if any. At March 31,June 30, 2021, we had no borrowings or letters of credit outstanding under this facility.
We believe that our recent value-driven growth investments should benefit us over the coming years. With an improving outlook for cash generation, we remain committed to further strengthening our investment grade balance sheet through deleveraging. In January 2021, we repaid $500$1,450 million and $325 million outstanding under our Term Loan due 2022. An additional $500 million was repaid in April 2021. We expect that our robust cash generation from operations should continue throughout the year2022 and our4% Guaranteed Notes due 2023, respectively. Our top priority for capital deployment in 2021 is debt reduction; we expect total reduction which will enable meaningful progress toward improvingof our credit metricsoutstanding debt for the year to two times total debt to EBITDA.be between $3 billion and $4 billion.
At any time and from time to time, we may repay or redeem our outstanding debt, including purchases of our outstanding bonds in the open market, through privately negotiated transactions or a combination thereof, in each case using cash and cash equivalents, cash from our short-term investments, cash from operating activities, proceeds from the issuance of debt or proceeds from asset divestitures. Any repayment or redemption of our debt will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. In connection with such repurchases or redemptions, we may incur cash and non-cash charges, which could be material in the period in which they are incurred.
In accordance with our current interest rate risk management strategy and subject to management’s evaluation of market conditions and the availability of favorable interest rates among other factors, we may from time to time enter into interest rate swap agreements to economically convert a portion of our fixed rate debt to variable rate debt or convert a portion of our variable rate debt to fixed rate debt.
CURRENT BUSINESS OUTLOOK
With no significant planned maintenanceWe expect demand for our assets duringproducts to remain strong. Three broad themes support our expectations. First, as we work to overcome the second quarter, we planchallenges of virus variants, the phased rollout of vaccines and the progression of societal reopening around the world should support robust global demand for our products in both the manufactured goods and service industries for several quarters to operate at nearly full capacity worldwide to meet improved demand that is expected to persist due to low inventories and maintenance downtime acrosscome. Second, as our industry. Strong North American integrated polyethylene margins should continue as U.S. producerscustomers seek to fulfill domesticaddress order backlogs, rebuild inventories and serve export demand. Duringincreasing consumer demand, we expect strong integrated polyethylene margins to continue. Third, increasing mobility during the second half of 2021 increased mobility should drive higher demand for gasoline and jet fuel improvingresulting in improved margins for our Refiningoxyfuels and I&D segments. We also expect that moderating feedstock costs will increase second quarter margins for our Advanced Polymer Solutions segment.related products and refining businesses.
ACCOUNTING AND REPORTING CHANGES
For a discussion of the potential impact of new accounting pronouncements on our Consolidated Financial Statements, see Note 2 to the Consolidated Financial Statements.
CAUTIONARY STATEMENT FOR THE PURPOSES OF THE “SAFE HARBOR” PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
This report includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. You can identify our forward-looking statements by the words “anticipate,” “estimate,” “believe,” “continue,” “could,” “intend,” “may,” “plan,” “potential,” “predict,” “should,” “will,” “expect,” “objective,” “projection,” “forecast,” “goal,” “guidance,” “outlook,” “effort,” “target” and similar expressions.
We based forward-looking statements on our current expectations, estimates and projections of our business and the industries in which we operate. We caution you that these statements are not guarantees of future performance. They involve assumptions about future events that, while made in good faith, may prove to be incorrect, and involve risks and uncertainties we cannot predict. Our actual outcomes and results may differ materially from what we have expressed or forecast in the forward-looking statements. Any differences could result from a variety of factors, including the following:
•the cost of raw materials represents a substantial portion of our operating expenses, and energy costs generally follow price trends of crude oil, natural gas liquids and/or natural gas; price volatility can significantly affect our results of operations and we may be unable to pass raw material and energy cost increases on to our customers due to the significant competition that we face, the commodity nature of our products and the time required to implement pricing changes;
•our operations in the United States (“U.S.”) have benefited from low-cost natural gas and natural gas liquids; decreased availability of these materials (for example, from their export or regulations impacting hydraulic fracturing in the U.S.) could reduce the current benefits we receive;
•if crude oil prices fall materially, or remain low relative to U.S. natural gas prices, we would see less benefit from low-cost natural gas and natural gas liquids and it could have a negative effect on our results of operations;
•industry production capacities and operating rates may lead to periods of oversupply and low profitability;
•we may face unplanned operating interruptions (including leaks, explosions, fires, weather-related incidents, mechanical failures, unscheduled downtime, supplier disruptions, labor shortages, strikes, work stoppages or other labor difficulties, transportation interruptions, spills and releases and other environmental incidents) at any of our facilities, which would negatively impact our operating results; for example, because the Houston refinery is our only refining operation, we would not have the ability to increase production elsewhere to mitigate the impact of any outage at that facility;
•changes in general economic, business, political and regulatory conditions in the countries or regions in which we operate could increase our costs, restrict our operations and reduce our operating results;
•our ability to execute our organic growth plans may be negatively affected by our ability to complete projects on time and on budget;
•our ability to acquire new businesses and assets and integrate those operations into our existing operations and make cost-saving changes in operations;
•uncertainties associated with worldwide economies could create reductions in demand and pricing, as well as increased counterparty risks, which could reduce liquidity or cause financial losses resulting from counterparty default;
•uncertainties related to the extent and duration of the pandemic-related decline in demand, or other impacts due to the pandemic in geographic regions or markets served by us, or where our operations are located, including the risk of prolonged recession;
•the negative outcome of any legal, tax and environmental proceedings or changes in laws or regulations regarding legal, tax and environmental matters may increase our costs, reduce demand for our products, or otherwise limit our ability to achieve savings under current regulations;
•any loss or non-renewal of favorable tax treatment under agreements or treaties, or changes in laws, regulations or treaties, may substantially increase our tax liabilities;
•we may be required to reduce production or idle certain facilities because of the cyclical and volatile nature of the supply-demand balance in the chemical and refining industries, which would negatively affect our operating results;
•we rely on continuing technological innovation, and an inability to protect our technology, or others’ technological developments could negatively impact our competitive position;
•we may be unable to meet our sustainability goals, including the ability to operate safely, increase production of recycled and renewable-based polymers, and reduce our emissions intensity;
•we have significant international operations, and fluctuations in exchange rates, valuations of currencies and our possible inability to access cash from operations in certain jurisdictions on a tax-efficient basis, if at all, could negatively affect our liquidity and our results of operations;
•we are subject to the risks of doing business at a global level, including wars, terrorist activities, political and economic instability and disruptions and changes in governmental policies, which could cause increased expenses, decreased demand or prices for our products and/or disruptions in operations, all of which could reduce our operating results;
•if we are unable to comply with the terms of our credit facilities, indebtedness and other financing arrangements, those obligations could be accelerated, which we may not be able to repay; and
•we may be unable to incur additional indebtedness or obtain financing on terms that we deem acceptable, including for refinancing of our current obligations; higher interest rates and costs of financing would increase our expenses.
Any of these factors, or a combination of these factors, could materially affect our future results of operations and the ultimate accuracy of the forward-looking statements. Our management cautions against putting undue reliance on forward-looking statements or projecting any future results based on such statements or present or prior earnings levels.
All subsequent written and oral forward-looking statements attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section and any other cautionary statements that may accompany such forward-looking statements. Except as otherwise required by applicable law, we disclaim any duty to update any forward-looking statements.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Our exposure to market and regulatory risks is described in Item 7A of our Annual Report on Form 10-K for the year ended December 31, 2020. Our exposure to such risks has not changed materially in the threesix months ended March 31,June 30, 2021.
Item 4. CONTROLS AND PROCEDURES
As of March 31,June 30, 2021, with the participation of our management, our Chief Executive Officer (principal executive officer) and our Chief Financial Officer (principal financial and accounting officer) carried out an evaluation, pursuant to Rule 13a-15(b) of the Securities Exchange Act of 1934, as amended (the Act), of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) of the Act). Based upon that evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that our disclosure controls and procedures were effective as of March 31,June 30, 2021.
There have been no changes in our internal controls over financial reporting, as defined in Rule 13a-15(f) of the Act, in the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
Information regarding our litigation and other legal proceedings can be found in Note 9 to the Consolidated Financial Statements, which is incorporated into this Item 1 by reference.
Additional information about our other environmental proceedings can be found in Part I, Item 3 of our 2020 Annual Report on Form 10-K, which is incorporated into this Item 1 by reference.
Item 1A. RISK FACTORS
There have been no material changes to the risk factors associated with our business previously disclosed in “Item 1A. Risk Factors,” in our Annual Report on Form 10-K for the year ended December 31, 2020.
Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.
Item 4. MINE SAFETY DISCLOSURES
Not applicable.
Item 6. EXHIBITS
| | | | | | | | |
Exhibit Number | | Description |
| | |
10.1*+10.1+ | | |
| | |
10.2*+10.2 | | Fourth Amendment to Receivables Purchase Agreement, dated as of June 30, 2021, among Lyondell Chemical Company, as servicer, LYB Receivables LLC, as seller, the conduit purchasers, related committed purchasers, LC participants and purchaser agents party thereto, the other parties thereto and Mizuho Bank, Ltd., as Administrator and LC Bank (incorporated by reference to Exhibit 10.1 to our Current Report on Form of Performance Share Unit Award Agreement |
| | |
10.3*+ | | |
| | |
22* | | |
| | |
31.1* | | |
| | |
31.2* | | |
| | |
32* | | |
| | |
101.INS* | | XBRL Instance Document–The instance document does not appear in the interactive data file because its XBRL tags are embedded within the Inline XBRL document. |
| | |
101.SCH* | | XBRL Schema Document |
| | |
101.CAL* | | XBRL Calculation Linkbase Document |
| | |
101.DEF* | | XBRL Definition Linkbase Document |
| | |
101.LAB* | | XBRL Labels Linkbase Document |
| | |
101.PRE* | | XBRL Presentation Linkbase Document |
| | |
104* | | Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101) |
| | |
+ Management contract or compensatory plan, contract or arrangement
* Filed herewith
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| | | | | | | | |
| | LYONDELLBASELL INDUSTRIES N.V. |
| | |
Date: | AprilJuly 30, 2021 | /s/ Michael C McMurray |
| | Michael C. McMurray |
| | Executive Vice President and |
| | Chief Financial Officer |
| | (Principal Financial and Accounting Officer) |