<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
[XQUARTERLY]REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1995.
OR
[_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 1-10145
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LYONDELL PETROCHEMICAL COMPANY
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
---------
DELAWARE 95-4160558
(STATE OR OTHER (I.R.S. EMPLOYER
JURISDICTION OF IDENTIFICATION NO.)
INCORPORATION OR
ORGANIZATION)
77010
(ZIP CODE)
1221 MCKINNEY STREET,
SUITE 1600, HOUSTON,
TEXAS
(ADDRESS OF PRINCIPAL
EXECUTIVE OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (713) 652-7200
---------
NOT APPLICABLE
(FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR, IF CHANGED SINCE LAST
REPORT)
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
NUMBER OF SHARES OF COMMON STOCK, $1.00 PAR VALUE, OUTSTANDING AS OF
SEPTEMBER 30, 1995: 80,000,000.
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<PAGE>
PART I. FINANCIAL INFORMATION
LYONDELL PETROCHEMICAL COMPANY
CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
CONSOLIDATED STATEMENT OF INCOME
<TABLE>
<CAPTION>
FOR THE THREE MONTHS FOR THE NINE MONTHS
ENDED SEPTEMBER 30 ENDED SEPTEMBER 30
------------------------- -------------------------
MILLIONS OF DOLLARS EXCEPT PER SHARE AMOUNTS 1995 1994 1995 1994
- --------------------------------------------- ----------- ------------ ----------- ----------
<S> <C> <C> <C> <C>
SALES AND OTHER OPERATING REVENUES:
Unrelated parties $ 1,168 $ 948 $ 3,523 $ 2,521
Related parties 81 89 270 240
----------- ------------ ----------- ----------
1,249 1,037 3,793 2,761
OPERATION COSTS AND EXPENSES:
Cost of sales:
Unrelated parties 955 818 2,828 2,227
Related parties 56 62 175 183
Selling, general and administrative expenses 55 33 148 102
----------- ------------ ----------- ----------
1,066 913 3,151 2,512
----------- ------------ ----------- ----------
Operating income 183 124 642 249
Interest expense (20) (19) (59) (56)
Interest income -- 1 5 3
Minority interest in LYONDELL-CITGO
Refining Company Ltd. (4) (1) (12) (6)
----------- ------------ ----------- ----------
Income before income taxes 159 105 576 190
Provision for income taxes 59 39 214 70
----------- ------------ ----------- ----------
NET INCOME $ 100 $ 66 $ 362 $ 120
=========== ============ =========== ==========
EARNINGS PER SHARE $ 1.25 $ .83 $ 4.52 $ 1.51
=========== ============ =========== ==========
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
1
<PAGE>
LYONDELL PETROCHEMICAL COMPANY
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
SEPTEMBER 30 DECEMBER 31
MILLIONS OF DOLLARS 1995 1994
- ------------------- --------------- --------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 44 $ 52
Restricted cash and cash equivalents (Note 2) 27 42
Accounts receivable:
Trade 341 331
Related parties 25 29
Inventories 313 229
Prepaid expenses and other current assets 34 14
--------------- --------------
Total current assets 784 697
--------------- --------------
Fixed assets:
Property, plant and equipment 3,596 2,810
Less accumulated depreciation and amortization 1,971 1,930
--------------- --------------
1,625 880
Deferred charges and other assets 92 86
--------------- --------------
Total assets $ 2,501 $ 1,663
=============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable:
Trade $ 309 $ 287
Related parties 1 1
Income taxes payable --- 28
Notes payable 175 20
Current maturities of long-term debt 150 10
Other accrued liabilities 122 87
--------------- --------------
Total current liabilities 757 433
--------------- --------------
Long-term debt 732 707
Other liabilities and deferred credits 98 83
Deferred income taxes 117 109
Commitments and contingencies (Note 6)
Minority interest 427 268
Stockholders' equity:
Preferred stock, $.01 par value, 80,000,000 shares
authorized, none outstanding
Common stock, $1 par value, 250,000,000 shares
authorized, 80,000,000 issued and outstanding 80 80
Additional paid-in capital 158 158
Retained earnings (deficit) 132 (175)
--------------- --------------
Total stockholders' equity 370 63
--------------- --------------
Total liabilities and stockholders' equity $ 2,501 $ 1,663
=============== ==============
</TABLE>
See notes to consolidated financial statements.
2
<PAGE>
LYONDELL PETROCHEMICAL COMPANY
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED
SEPTEMBER 30
-----------------------------
Millions of dollars 1995 1994
- ------------------- ----------- ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 362 $ 120
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 61 46
Deferred taxes 2 6
Increase in accounts receivable (5) (101)
Increase in inventory (84) (6)
Increase in accounts payable 14 41
Net change in other working capital accounts (7) 11
Minority interest 12 6
Other (10) (9)
----------- ------------
Net cash provided by operating activities 345 114
----------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to fixed assets (781) (144)
Purchases of short-term investments --- (20)
Proceeds from sales of short-term investments --- 23
----------- ------------
Net cash used in investing activities (781) (141)
----------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Minority owner contribution 147 65
Net change in short-term debt 155 ---
Proceeds from issuance of long-term debt 175 ---
Repayments of long-term debt (10) (8)
Dividends paid (54) (54)
----------- ------------
Net cash provided by financing activities 413 3
----------- ------------
DECREASE IN CASH, RESTRICTED CASH AND CASH EQUIVALENTS (23) (24)
Cash, restricted cash and cash equivalents at beginning of period 94 113
----------- ------------
Cash, restricted cash and cash equivalents at end of period $ 71 $ 89
=========== ============
</TABLE>
See notes to consolidated financial statements.
3
<PAGE>
LYONDELL PETROCHEMICAL COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
1. BASIS OF PREPARATION
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Rule 10-01 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments, consisting
only of normal, recurring adjustments considered necessary for a fair
presentation, have been included. For further information, refer to the
consolidated financial statements and notes thereto for the year ended December
31, 1994 included in the Lyondell Petrochemical Company ("Company") 1994 Annual
Report and the Annual Report on Form 10-K pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934. The year-end condensed balance sheet data was
derived from audited financial statements but does not include all disclosures
required by generally accepted accounting principles. Certain amounts from prior
periods have been reclassified to conform to current period presentation.
2. RESTRICTED FUNDS
As of September 30, 1995 and December 31, 1994, cash in the amount of $27
million and $42 million, respectively, was restricted for use in connection with
LYONDELL-CITGO Refining Company Ltd. ("LCR") capital projects, including the
Refinery upgrade project, and other expenditures as determined by the LCR
owners.
Presented below is a reconciliation of changes in restricted funds for the nine-
month period ended September 30, 1995.
<TABLE>
<S> <C>
Restricted - cash and cash equivalents
at December 31, 1994 $ 42
Minority owner investments:
Contributions 147
Reinvestments 8
Proceeds from bank loan 175
Interest on restricted funds 1
Additions to fixed assets:
Refinery upgrade project (321)
Refining segment-other (25)
----
Restricted - cash and cash equivalents $ 27
at September 30, 1995 ====
</TABLE>
4
<PAGE>
3. INVENTORIES
The categories of inventory and their book values at September 30, 1995 and
December 31, 1994 were:
<TABLE>
<CAPTION>
MILLIONS OF DOLLARS 1995 1994
------------------- ---- ----
<S> <C> <C>
Crude oil $ 42 $ 62
Refined products 34 30
Petrochemicals 196 102
Materials and supplies 41 35
----- -----
$ 313 $ 229
===== =====
</TABLE>
4. ACQUISITION OF ALATHON/(R)/ HIGH-DENSITY POLYETHYLENE BUSINESS
On May 1, 1995, the Company acquired the assets associated with Occidental
Chemical Corporation's Alathon/(R)/ high-density polyethylene ("HDPE") business
for $355 million including certain direct costs, plus approximately $64 million
for inventory. Assets involved in the purchase include resin production
facilities at Victoria and Matagorda, Texas, associated research and development
activities and the rights to the Alathon/(R)/ trademark. These facilities have a
combined annual production capacity of approximately 1.5 billion pounds of HDPE.
The Company financed the acquisition from internal cash and by borrowing from
its existing credit facilities.
The following unaudited pro forma information combines the results of operations
of the Company and the Alathon/(R)/ business for the nine months ended September
30, 1995 and 1994 and assumes that the acquisition of the Alathon/(R)/ business
occurred on January 1, 1994. This unaudited pro forma information may not be
indicative of results that would have actually resulted if this transaction had
occurred on January 1, 1994 or which may be obtained in the future.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30
---------------------
MILLIONS OF DOLLARS EXCEPT PER SHARE AMOUNTS 1995 1994
-------------------------------------------- ---- ----
<S> <C> <C>
Revenues $3,987 $3,045
Net income $ 382 $ 126
Earnings per share $ 4.78 $ 1.57
</TABLE>
5. FINANCING ARRANGEMENTS
LCR entered into two credit facilities, dated as of May 5, 1995, totaling $520
million with a group of banks with The Bank of New York as agent. The first
facility is a $70 million, 364 day revolving credit facility, which replaces
LCR's existing $70 million revolving credit facility, that will be utilized for
general business purposes, including letters of credit, unrelated to the
Refinery upgrade project. The second facility is a $450 million, five year term
credit facility that will be used in connection with the Refinery upgrade
project. Interest for the facilities is based on prime or eurodollar rates at
LCR's option. Prior to the completion of the Refinery upgrade project, all
financing and other costs related to the $450 million credit facility will be
funded by CITGO Petroleum Corporation, the minority owner of LCR. The facilities
contain covenants which require LCR to maintain a minimum net worth which
increases each year until 1998 and maintenance of certain financial ratios
defined in the agreements. The facilities also contain other customary covenants
which limit LCR's ability to modify certain significant contracts, incur
additional debt or liens, dispose of assets, make restricted payments as defined
in the agreements or merge or consolidate with other entities. As of September
30, 1995, a total of $190 million was outstanding under these facilities.
5
<PAGE>
5. FINANCING ARRANGEMENTS - (CONTINUED)
During June 1995, the Company elected to amend its existing $400 million credit
facility. The amended credit facility includes a provision allowing banks, in
their sole discretion, to make competitive bids for advances to the Company. The
term of the amended credit facility was extended from December 6, 1998 to June
30, 2000. All other terms and conditions remained substantially unchanged. As of
September 30, 1995, $40 million was outstanding under this credit facility.
As of September 30, 1995, the Company also had uncommitted lines of credit
totaling $240 million with banks and other financial institutions. These
uncommitted lines of credit provide the Company with additional borrowing
flexibility and potentially more competitive interest rates. The Company can
borrow money on these uncommitted lines of credit on such terms as may be
mutually agreed upon at the time amounts are borrowed. The lines of credit can
be terminated by the lenders, in their sole discretion, on short notice. As of
September 30, 1995, the Company had $120 million outstanding under these
uncommitted lines of credit.
6. COMMITMENTS AND CONTINGENCIES
The Company has various purchase commitments for materials, supplies and
services incident to the ordinary conduct of business. In the aggregate, such
commitments are not at prices in excess of current market.
In connection with the transfer of assets and liabilities from Atlantic
Richfield Company ("ARCO") to the Company, the Company agreed to assume certain
liabilities arising out of the operation of the Company's integrated
petrochemical and petroleum processing business prior to July 1, 1988. In
connection with the transfer of such liabilities, the Company and ARCO entered
into an agreement ("Cross-Indemnity Agreement") whereby the Company has agreed
to defend and indemnify ARCO against certain uninsured claims and liabilities
which ARCO may incur relating to the operation of the business of the Company
prior to July 1, 1988, including certain liabilities which may arise out of
pending and future lawsuits.
ARCO indemnified the Company under the Cross-Indemnity Agreement with respect to
other claims or liabilities and other matters of litigation not related to the
assets or business included in the consolidated financial statements. ARCO has
also indemnified the Company for all federal taxes which might be assessed upon
audit of the operations of the Company included in the consolidated financial
statements prior to January 12, 1989 and for all state and local taxes for the
period prior to July 1, 1988.
In addition to lawsuits for which the Company has indemnified ARCO, the Company
is also subject to various lawsuits and proceedings. Subject to the uncertainty
inherent in all litigation, management believes the resolution of these
proceedings will not have a material adverse effect upon the Company's financial
statements.
The Company's policy is to be in compliance with all applicable environmental
laws. The Company is subject to extensive environmental laws and regulations
concerning emissions to the air, discharges to surface and subsurface waters and
the generation, handling, storage, transportation, treatment and disposal of
waste materials. Some of these laws and regulations are subject to varying and
conflicting interpretations. In addition, the Company cannot accurately predict
future developments, such as increasingly strict requirements of environmental
laws, inspection and enforcement policies and compliance costs therefrom which
might affect the handling, manufacture, use, emission or disposal of products,
other materials or hazardous and non-hazardous waste.
Subject to the terms of the Cross-Indemnity Agreement, the Company is currently
contributing funds to the cleanup of two waste sites (French Ltd. and Brio, both
of which are located near Houston, Texas) under the Comprehensive Environmental
Response, Compensation and Liability Act ("CERCLA") as amended by the Superfund
Amendments and Reauthorization Act of 1986. The Company is also subject to
certain assessment and remedial actions at the Refinery under the Resource
Conservation and Recovery Act ("RCRA"). In addition, the
6
<PAGE>
6. COMMITMENTS AND CONTINGENCIES - (CONTINUED)
Company has negotiated an order with the Texas Natural Resource Conservation
Commission ("TNRCC"), formerly the Texas Water Commission, for assessment and
remediation of groundwater and soil contamination at the Refinery.
During July 1994, the Company reported results of an independent investigation
conducted by the Audit Committee of the Board of Directors regarding the
compliance status of two process waste-water streams under the applicable
Benzene National Emissions Standard for Hazardous Air Pollutants ("NESHAPS")
regulations and certain related issues raised by an employee. Noncompliance with
the Benzene NESHAPS regulations and the related reporting requirements can
result in civil penalties and, under certain circumstances, substantial civil
and, potentially, criminal penalties. The Company received a notice of violation
regarding the two streams and paid a fine of $10,200 to the TNRCC. The Company
incurred approximately $2 million in capital costs in connection with these
waste water streams to achieve on-going compliance with the Benzene NESHAPS
regulations. The Criminal Enforcement Division of the EPA is conducting a formal
investigation. However, the Company continues to believe that none of the
aspects of the matters described above will subject the Company to criminal
liability or have a material adverse effect on the Company's business or
financial statements.
The Company has accrued $17 million related to future CERCLA, RCRA and TNRCC
assessment and remediation costs, of which $3 million is included in current
liabilities while the remaining amounts are expected to be incurred over the
next two to seven years. In the opinion of management, there is currently no
material range of loss in excess of the amount accrued. However, it is possible
that new information about the sites for which the reserve has been established,
new technology or future developments such as involvement in other CERCLA, RCRA,
TNRCC or other comparable state law investigations, could require the Company to
reassess its potential exposure related to environmental matters.
In the opinion of management, any liability arising from the matters discussed
above will not have a material adverse effect on the consolidated financial
statements or liquidity of the Company, although the adverse resolution in any
reporting period of one or more of these matters discussed in this note could
have a material impact on the Company's results of operations for that period.
7. DIVIDENDS
On September 15, 1995, the Company paid a regular quarterly dividend of $.225
per share of common stock to stockholders of record on August 25, 1995.
Additionally, on October 20, 1995 the Board of Directors declared a regular
quarterly dividend of $.225 per share of common stock, payable December 15, 1995
to stockholders of record on November 24, 1995.
8. EARNINGS PER SHARE
Earnings per share for all periods presented are computed based on the weighted
average number of shares outstanding for the periods, which was 80,000,000
shares.
7
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
GENERAL
Lyondell Petrochemical Company (the "Company" or "Lyondell") operates in two
business segments: petrochemicals and refining. The petrochemical segment
consists of olefins including ethylene, propylene, butadiene, butylenes and
specialty products; polyolefins including polypropylene, low density
polyethylene and high-density polyethylene ("HDPE"); aromatics produced at the
Channelview petrochemical complex ("Channelview Complex") including benzene and
toluene; methanol; methyl tertiary butyl ether ("MTBE") and refinery blending
stocks. On May 1, 1995, the Company acquired from Occidental Chemical
Corporation resin production facilities at Victoria and Matagorda, Texas, with a
combined annual production capacity of approximately 1.5 billion pounds of HDPE,
associated research and development activities and the rights to the Alathon(R)
trademark. See Note 4 of "NOTES TO CONSOLIDATED FINANCIAL STATEMENTS."
On July 1, 1993, the Company and CITGO Petroleum Corporation ("CITGO") announced
the commencement of operations of LYONDELL-CITGO Refining Company Ltd. ("LCR"),
a new entity owned by subsidiaries of the Company and CITGO. LCR owns and
operates the refining business formerly owned by the Company, including the
full-conversion refinery ("Refinery"). LCR is undertaking a major upgrade
project at the Refinery to enable the facility to process substantial additional
volumes of very heavy crude oil. CITGO is providing a major portion of the funds
for the upgrade project and has provided in excess of $100 million for funding
other capital projects. At the present time, LCR management anticipates the cost
for the upgrade project will be approximately $980 million, which includes an
allowance for contingency costs.
On July 1, 1993, LCR entered into a long-term crude oil supply contract ("Crude
Supply Contract") with LAGOVEN, S.A., an affiliate of CITGO. In addition, under
terms of a long-term product sales agreement ("Products Agreement"), CITGO
purchased approximately 80 to 85 percent of the light refined products produced
at the Refinery. Effective July 1995, CITGO began purchasing approximately 100
percent of the light refined products produced at the Refinery. Both LAGOVEN and
CITGO are subsidiaries of Petroleos de Venezuela, S.A., the national oil company
of Venezuela.
Prior to completion of the upgrade project, the Crude Supply Contract requires
LCR to purchase and LAGOVEN to supply a minimum of 125,000 barrels per day of
heavy Venezuelan crude oil. The contract incorporates a formula price based on
the market value of a slate of refined products deemed to be produced from each
particular crude oil or feedstock, less: (i) certain deemed refining costs,
adjustable for inflation; (ii) certain actual costs, including crude oil
transportation costs, import duties and taxes; and (iii) a deemed margin, which
varies according to the grade of crude oil or other feedstock delivered. Deemed
costs are adjusted periodically based on inflation rates for specific deemed
cost components. Adjustments to margins track, but are less than, inflation
rates. Because deemed operating costs and the slate of refined products deemed
to be produced from a given barrel of crude oil or other feedstock do not
necessarily reflect the actual costs and yields in any period and also because
the market value of the refined products used in the pricing formula does not
necessarily reflect the actual price received for the refined products, the
actual refining margin earned by LCR under the Crude Supply Contract will vary
depending on, among other things, the efficiency with which LCR conducts its
operations during such period.
Notwithstanding the limitations discussed above, however, the Crude Supply
Contract is designed to reduce the inherent volatility of earnings and cash flow
of LCR's refining operations irrespective of market fluctuations of either crude
oil or refined products. Specifically, should the market value of refined
products "deemed" to be produced from the Venezuelan crude oil increase, the
cost of crude oil to LCR will also increase. Alternatively, if the market value
of refined products "deemed" to be produced from the Venezuelan crude oil
decreases, the cost of crude oil to LCR will also decrease. This results in
relatively stable "deemed" margins regardless of the market
8
<PAGE>
volatility of either refined products or crude oil. If the actual yields, costs
or volumes differ substantially from those contemplated by the Crude Supply
Contract, the benefits of this agreement to LCR could be substantially different
than anticipated.
The refining segment consists of refined petroleum products, including gasoline,
heating oil and jet fuel; aromatics produced at the Refinery, including benzene,
toluene, paraxylene and orthoxylene; lubricants, including industrial and motor
oils; olefins feedstocks and crude oil resales. Crude oil resales consist of
revenues from the resale of previously purchased crude oil and from locational
exchanges of crude oil that are settled on a cash basis. Crude oil exchanges and
resales facilitate the operation of the refining segment by allowing the Company
to optimize the crude oil feedstock mix in response to market conditions and
refinery maintenance turnarounds and also to reduce transportation costs. Crude
oil resales amounted to $97 million and $84 million for the three-month periods
ended September 30, 1995 and 1994, respectively and $261 million and $203
million for the nine-month periods ended September 30, 1995 and 1994,
respectively.
The following table sets forth the Company's major product volumes sold for the
periods indicated. Sales volumes include production, purchases of products for
resale, propylene production from the product flexibility unit and draws from
inventory.
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
-------------------- -------------------
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
SELECTED PETROCHEMICAL PRODUCTS (MILLIONS)
(EXCLUDING INTERSEGMENT SALES):
Ethylene, propylene and polyolefins (lbs.) 1,749 1,545 5,113 4,506
Other olefins (lbs.) 251 271 823 756
Methanol (gallons) 49 36 145 128
Aromatics (gallons) 39 45 118 122
REFINED PRODUCTS (THOUSAND BARRELS PER DAY)
(EXCLUDING INTERSEGMENT SALES):
Gasoline 112 112 108 109
Heating oil (no. 2 distillate) 47 39 50 47
Jet fuel 29 25 30 26
Aromatics 7 7 8 8
Other refined products 57 48 56 46
---- ---- ---- ----
Total refined products volumes 252 231 252 236
==== ==== ==== ====
</TABLE>
Summarized below is the segment data for the Company. Intersegment sales between
the petrochemical and refining segments include olefins feedstocks and benzene
produced at the Refinery and gasoline blending stocks produced at the
Channelview Complex and were made at prices that were based on current market
values.
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
-------------------- -------------------
(MILLIONS OF DOLLARS) 1995 1994 1995 1994
- --------------------- ---- ---- ---- ----
<S> <C> <C> <C> <C>
SALES AND OTHER OPERATING REVENUES:
Petrochemical segment $ 687 $ 537 $ 2,102 $ 1,360
Refining segment 644 601 1,982 1,706
Unallocated (82) (101) (291) (305)
----- ------- ------- -------
$ 1,249 $ 1,037 $ 3,793 $ 2,761
======= ======= ======= =======
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
-------------------- -------------------
(MILLIONS OF DOLLARS) 1995 1994 1995 1994
- --------------------- ---- ---- ---- ----
<S> <C> <C> <C> <C>
COST OF SALES:
Petrochemical segment $ 498 $ 408 $ 1,455 $ 1,105
Refining segment 595 573 1,839 1,610
Unallocated (82) (101) (291) (305)
------ ------ ------- -------
$ 1,011 $ 880 $ 3,003 $ 2,410
======= ====== ======= =======
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES:
Petrochemical segment $ 26 $ 9 $ 58 $ 28
Refining segment 14 14 43 41
Unallocated 15 10 47 33
------ ------ ------- -------
$ 55 $ 33 $ 148 $ 102
======= ====== ======= =======
OPERATING INCOME:
Petrochemical segment $ 163 $ 120 $ 589 $ 227
Refining segment 35 14 100 55
Unallocated (15) (10) (47) (33)
------ ------ ------- -------
$ 183 $ 124 $ 642 $ 249
======= ====== ======= =======
Summarized below are intersegment sales for the two segments.
Petrochemical segment $ 49 $ 50 $ 150 $ 147
Refining segment 33 51 141 158
------ ------ ------- -------
$ 82 $ 101 $ 291 $ 305
======= ====== ======= =======
</TABLE>
RESULTS OF OPERATIONS
OVERVIEW
Net income for the third quarter of 1995 was $100 million or $1.25 per share
compared to a net income of $66 million or $.83 per share for the third quarter
of 1994. The $34 million improvement was primarily due to higher sales margins
for olefins and aromatics and the addition of the Alathon(R) business, which
more than offset lower olefins sales volumes.
Net income was $35 million lower for the third quarter of 1995 compared to the
second quarter of 1995. This decrease was primarily caused by lower olefins
sales margins and volumes, partially offset by higher refined products sales
margins.
Net income for the first nine months of 1995 was $362 million or $4.52 per share
compared to a net income of $120 million or $1.51 per share for the first nine
months of 1994. The $242 million improvement in net income was primarily caused
by higher sales margins for all petrochemical products and the addition of the
Alathon(R) business. Contributing to the improvement were higher sales margins
for aromatics and refined products which more than offset higher refining period
costs.
10
<PAGE>
PETROCHEMICAL SEGMENT
REVENUES Sales and other operating revenues for the third quarter of 1995 were
$687 million compared to $537 million for the third quarter of 1994. The $150
million increase was primarily due to sales of HDPE resulting from the
acquisition of the Alathon(R) business effective May 1, 1995. Contributing to
the increase were higher olefins sales prices resulting from improved market
conditions, partially offset by lower olefins sales volumes.
Sales and other operating revenues for the first nine months of 1995 were $2.1
billion, an increase of $742 million compared to the first nine months of 1994.
The increase was due to higher olefins and polyolefins sales prices and the HDPE
sales from the Alathon(R) business. The higher olefins sales prices reflected
continued strong market conditions for petrochemicals that resulted from the
high U.S. economic growth rate, an improved worldwide economy and industry
supply disruptions during the latter part of 1994
COST OF SALES Cost of sales was $498 million in the third quarter of 1995
compared to $408 million in the third quarter of 1994, an increase of $90
million. The increase was primarily due to the addition of the Alathon(R)
business.
Cost of sales for the first nine months of 1995 was $1.5 billion, an increase of
$350 million compared to the first nine months of 1994. This increase was
primarily due to the addition of the Alathon(R) business and to higher olefins
feedstock costs resulting mostly from higher raw material prices. Olefins raw
material prices were higher due to higher worldwide crude oil and petroleum
product prices.
SELLING EXPENSES Selling expenses for the third quarter of 1995 were $26
million, an increase of $17 million compared to the third quarter of 1994.
Selling expenses for the first nine months of 1995 compared to the first nine
months of 1994 were $30 million higher. These increases were primarily caused
by selling expenses associated with the Alathon(R) business.
OPERATING INCOME Operating income for the third quarter of 1995 was $163
million compared to $120 million in the third quarter of 1994. The $43 million
improvement was primarily due to higher olefins sales margins and the
contribution from the Alathon(R) business, partially offset by lower olefins
sales volumes and lower methanol sales margins. The higher olefins sales
margins resulted from higher sales prices which were due to higher industry-wide
demand resulting from the improved worldwide economy and industry supply
disruptions during the latter part of 1994. However, the olefins market
environment began to weaken during the third quarter of 1995 for most products
as a result of lower demand. Methanol sales margins were lower due to a
significant decline in prices which began late in the first quarter of 1995 due
to a decline in MTBE related demand for reformulated gasoline and an increase in
methanol supply.
Operating income for the third quarter of 1995 compared to the second quarter of
1995 decreased $67 million due to lower olefins sales margins and volumes.
Olefins sales margins declined due to lower ethylene and propylene sales prices
which more than offset lower feedstock costs. An increase in industry ethylene
production during the first nine months of 1995 coupled with lower economic
activity contributed to the decline in olefins sales prices during the third
quarter. The reduction in olefins sales volumes during the third quarter was
due to the lower economic activity and the Company's efforts to build
inventories in preparation for the turnaround of one of the olefins units during
the fourth quarter.
Operating income for the first nine months of 1995 was $589 million compared to
an operating income of $227 million during the first nine months of 1994. This
$362 million improvement in operating income was primarily caused by higher
sales margins for all petrochemical products and the addition of the
Alathon(R) business. Olefins sales margins were higher due to significantly
higher ethylene and olefins co-products sales prices that more than offset
increased raw material prices. Olefins sales prices were higher due to the
improved economy and supply and demand factors. The improved methanol sales
margins resulted from higher sales prices caused by higher demand growth
resulting from the improved worldwide economy, increased use of MTBE and
industry supply disruptions
11
<PAGE>
in the latter part of 1994. The improved polyolefins performance resulted from
the contribution of the Alathon(R) business and higher sales prices for other
polyolefins products caused by the improved economic conditions.
REFINING SEGMENT
REVENUES Sales and other operating revenues for the third quarter of 1995 were
$644 million compared to $601 million for the third quarter of 1994. This $43
million increase was primarily due to higher sales prices for aromatics and
higher sales volumes for crude oil resales. Aromatics sales prices, specifically
for paraxylene and orthoxylene, increased because of improved market conditions
over the latter part of 1994 and first half of 1995. Paraxylene prices were
positively impacted by high worldwide growth of polyester, particularly in the
polyethylene terephthalate bottle sector.
Sales and other operating revenues for the first nine months of 1995 were $2.0
billion, an increase of $276 million compared to the first nine months of 1994.
This increase was primarily due to higher sales prices for both refined products
and aromatics, particularly for paraxylene and orthoxylene, and higher sales
volumes and prices for crude oil resales. Refined products sales prices were
higher generally due to the higher worldwide crude oil prices.
COST OF SALES Cost of sales was $595 million during the third quarter of 1995
compared to $573 million during the third quarter of 1994. Contributing to this
$22 million increase were higher crude oil resale volumes and higher period
costs.
Cost of sales was $1.8 billion during the first nine months of 1995 compared to
$1.6 billion during the first nine months of 1994. This $229 million increase
was primarily due to higher crude oil and other feedstock prices and to higher
volumes and costs related to crude oil resales.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES Selling, general and administrative
expenses were $14 million in the third quarter of 1995, unchanged from the third
quarter of 1994. Selling, general and administrative expenses were $43 million
during the first nine months of 1995 compared to $41 million during the first
nine months of 1994.
OPERATING INCOME Operating income for the third quarter of 1995 was $35 million
compared to $14 million for the third quarter of 1994. The $21 million increase
was primarily due to higher aromatics sales margins which increased because of
higher sales prices, particularly for paraxylene and orthoxylene.
Operating income for the third quarter of 1995 compared with the second quarter
of 1995 increased $13 million primarily due to higher refined products sales
margins and lower period costs. Refined products sales margins were higher due
to improved operating performance, and period costs were lower due to reduced
maintenance and repairs costs.
Operating income for the first nine months of 1995 was $100 million compared to
$55 million for the first nine months of 1994. The $45 million increase was
primarily due to higher sales margins for aromatics and refined products,
partially offset by higher refining period costs. Aromatics sales margins were
higher due to higher sales prices, particularly for paraxylene and orthoxylene.
Refined products sales margins were higher due to processing higher volumes of
Venezuelan crude oil purchased under the Crude Supply Contract in both the
coking and cracking modes. Refined products period costs were higher due to
increased maintenance expenses for scheduled and unscheduled downtime of various
manufacturing units.
12
<PAGE>
UNALLOCATED
GENERAL AND ADMINISTRATIVE EXPENSES General and administrative expenses were $15
million in the third quarter of 1995 compared to $10 million in the third
quarter of 1994. The $5 million increase was primarily due to the absence of
life insurance proceeds during the current quarter that were received in the
third quarter of 1994 and to higher outside legal fees.
General and administrative expenses were $47 million in the first nine months of
1995 compared to $33 million in the first nine months of 1994. The $14 million
increase was primarily due to higher management incentive compensation related
expenses, a significant portion of which was for a management incentive
compensation plan adopted in 1995, and the absence during the current period of
the life insurance proceeds.
INTEREST EXPENSE Interest expense was $20 million during the third quarter of
1995 compared to $19 million during the third quarter of 1994. Interest expense
was $59 million during the first nine months of 1995 compared to $56 million
during the first nine months of 1994. These interest expense increases resulted
from amounts borrowed to partially finance the Alathon(R) acquisition.
INTEREST INCOME Interest income was $5 million during the first nine months of
1995 compared to $3 million during the first nine months of 1994. This $2
million increase in interest income resulted from higher levels of excess cash
invested at higher interest rates prior to the Alathon(R) acquisition.
MINORITY INTEREST IN LYONDELL-CITGO REFINING COMPANY LTD. Minority interest was
$4 million in the third quarter of 1995 and $12 million for the first nine
months of 1995, representing the allocated share of LCR's net income to CITGO,
the minority owner of LCR.
INCOME TAX The effective income tax rate during the first nine months of 1995
was 37.2 percent. State income tax was the primary difference between the
effective tax rate and the 35 percent federal statutory rate.
FINANCIAL CONDITION
Lyondell's cash provided by operating activities was $345 million and $114
million during the first nine months of 1995 and 1994, respectively. This $231
million increase is attributable to the $242 million increase in net income.
Cash provided by operating activities during the first nine months of 1995 was
reduced by working capital increases of $82 million which includes $96 million
for the initial working capital requirements of the Alathon(R) business.
Cash used in investing activities during the first nine months of 1995 consisted
of capital expenditures of $781 million, of which $355 million was for the
Alathon(R) acquisition, $321 million was for the upgrade project at the
Refinery and $21 million was for environmentally related projects. As of
September 30, 1995, $27 million of cash was restricted for use in LCR capital
projects, including the Refinery upgrade project, and other expenditures as
determined by the LCR owners.
The total expenditure for the Alathon(R) acquisition was $419 million, including
approximately $64 million for inventories. The Company financed the acquisition
with internal cash and $230 million of short-term borrowings from its existing
financing arrangements. At September 30, 1995, $160 million was outstanding
under these financing arrangements. Expenditures during the nine months ended
September 30, 1995 for the Refinery upgrade project were funded by contributions
from CITGO in the amount of $147 million and $175 million borrowed by LCR under
a $450 million credit facility.
During June 1995, the Company's $400 million revolving credit facility was
amended by extending the term of the facility to the year 2000 and adding a
competitive auction feature wherein the interest rate on borrowings can be
13
<PAGE>
based on competitive bids submitted by the sponsoring banks or at either the
eurodollar, certificate of deposit or prime rates, all at the Company's option.
All other terms and conditions remained substantially unchanged. See Note 5 of
"NOTES TO CONSOLIDATED FINANCIAL STATEMENTS."
In May 1995, LCR entered into two credit facilities totaling $520 million with a
group of banks with The Bank of New York as agent. The first facility was a $70
million, 364 day revolving credit facility, which replaced LCR's former $70
million revolving credit facility, that will be utilized for general business
purposes, including letters of credit, unrelated to the Refinery upgrade
project. The second facility is a $450 million, five year term credit facility
that will be used in connection with the Refinery upgrade project. Interest for
both facilities is based on prime or eurodollar rates at LCR's option. Prior to
the completion of the Refinery upgrade project, all financing and other costs
related to the $450 million credit facility will be funded by CITGO. See Note 5
of "NOTES TO CONSOLIDATED FINANCIAL STATEMENTS."
On October 20, 1995, the Board of Directors declared a regular quarterly
dividend of $.225 per share of common stock, payable December 15, 1995 to
stockholders of record on November 24, 1995.
CURRENT BUSINESS OUTLOOK
Lyondell's results for the third quarter and for the nine month period ended
September 30, 1995 reflect strong markets for its petrochemical and polyolefins
products and continued strong aromatics performance at LCR. The positive
contribution from the Alathon(R) business since its purchase on May 1, 1995
met management's expectation. However, petrochemical prices continued to
decline, as expected, during the third quarter from peak levels experienced in
early 1995.
An increase in industry ethylene capacity over the past nine months, coupled
with slower economic growth, may cause further and broader declines in the
prices of olefins and polyolefins. New methanol industry capacity which has been
added this year and uncertainty with regard to MTBE demand may put additional
pressure on methanol prices.
During the third quarter, LCR refined products margins remained above refining
industry margins due to the benefits of the Crude Supply Contract. Early in the
fourth quarter, refining industry coking and cracking margins have declined
compared to the average third quarter levels, affecting LCR's profitability on
the approximately 40 percent of crude oil runs not covered by the Crude Supply
Contract. The aromatics business remains strong, particularly for paraxylene,
although orthoxylene prices have declined. Management expects LCR to continue to
benefit from the stabilization of cash flows and reduction in market volatility
provided by the Crude Supply Contract. The keys to profitability for LCR
continue to be maximizing the amount of heavy Venezuelan crude oil processed in
the coking mode, optimizing the efficient utilization of the remaining cracking
capacity and low cost operations. On November 3, 1995, the coker was taken down
for unscheduled maintenance. LCR management believes the unit will be back in
operation in approximately two to three weeks.
Profitability and cash flows for the petrochemical and refining businesses are
affected by industry supply and demand, feedstock cost volatility, capital
expenditures required to meet more stringent environmental standards, repair and
maintenance costs and downtime of production units due to maintenance
turnarounds. Turnarounds on major units can have significant financial impacts
due to the repair and maintenance costs incurred as well as the associated loss
of production, resulting in lower profitability during the period of the
turnaround. The Company began a turnaround on one of its two olefins units
beginning in late September, 1995. During this turnaround, which is expected to
last six to eight weeks, work will be completed to debottleneck the unit which
will increase its capacity by approximately 120 million pounds per year. The
Company plans to perform a turnaround and debottleneck of its other olefins unit
during the first half of 1996. LCR plans to perform a turnaround of its fluid
catalytic cracking unit in the second half of 1996.
14
<PAGE>
The Company announced August 23, 1995 the commencement of an engineering study
of the planned construction of a worldscale olefins plant. The proposed 1.5
billion pound per year plant would be jointly owned by the Company and two other
olefins producers and would be located at the Company's Channelview, Texas,
Petrochemical Complex with the Company as plant operator.
The Company believes that business conditions will be such that cash balances,
cash generated from operating activities and existing lines of credit will be
adequate to meet future cash requirements for scheduled debt repayments,
necessary capital expenditures and to sustain for the reasonably foreseeable
future the regular quarterly dividend. However, the Company continually
evaluates its cash requirements and allocates cash in order to maximize
stockholder returns.
__________________________
Management cautions against projecting any future results based on present or
prior earnings levels because of the cyclical nature of the refining and
petrochemical industries and uncertainties associated with the United States and
worldwide economies and current and potential United States governmental
regulatory actions.
15
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
1. Reference is made to the disclosure on page 20 of the Company's
Annual Report on Form 10-K for the year ended December 31, 1994
(hereinafter the " 1994 Form 10-K Report") regarding Atlantic
Richfield Company's (ARCO) litigation with certain of its insurance
carriers over insurance coverage and the impact of such coverage
disputes on the Company's Cross-Indemnity Agreement with ARCO. ARCO
has reported that it has settled with several of the insurance carrier
defendants and that ARCO expects that trial with the remainder of the
defendants will be scheduled for the first half of 1996. At this time,
the Company is unable to assess the impact on it, if any, of the
resolution of the coverage disputes.
2. There have been no material developments with respect to the
Company's legal proceedings as previously reported in the 1994
Form 10-K Report or subsequent Quarterly Reports on Form 10-Q.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.1 Amendment No. 1 to the Lyondell Petrochemical Company
Supplementary Executive Retirement Plan.
10.2 Amendment No. 2 to the Lyondell Petrochemical Company
Executive Deferral Plan.
10.3 Amendment No. 1 to the Lyondell Petrochemical Company
Restricted Stock Plan.
10.4 Amendment No. 2 to the Lyondell Petrochemical Company
Value Share Plan.
27 Financial Data Schedule.
(b) Reports on Form 8-K
None.
16
<PAGE>
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.
Lyondell Petrochemical Company
(Registrant)
Dated: November 8, 1995 JOSEPH M. PUTZ
------------------------------
(Signature)
Joseph M. Putz
Vice President and Controller
(Duly Authorized Officer and
Principal Accounting Officer)
17
<PAGE>
EXHIBIT 10.1
INSTRUMENT AMENDING LYONDELL PETROCHEMICAL COMPANY
SUPPLEMENTARY EXECUTIVE RETIREMENT PLAN
LYONDELL PETROCHEMICAL COMPANY hereby amends, effective January 1, 1995, the
Lyondell Petrochemical Company Supplementary Executive Retirement Plan, as
follows:
SECTION 1.1, PURPOSE AND INTENT OF PLAN, paragraph three, subpart (a), is
amended to read as follows:
This Plan is intended to provide supplemental retirement allowances in
accordance with the provisions of the Plan contained herein, to those
Employees who:
(a) have received Awards under the Lyondell Petrochemical Company Value
Share Plan, the Lyondell Petrochemical Management Value Share Plan, the
Lyondell Petrochemical Company Annual Incentive Plan, the Atlantic
Richfield Company Annual Incentive Plan, the ARCO Chemical Company Annual
Incentive Plan and/or the LYONDELL-CITGO Refining Company Ltd Annual
Incentive Plan or its equivalent,
SECTION 1.4, DEFINITIONS, AWARD, is amended to read as follows:
AWARD means a cash award made under the Lyondell Petrochemical Company
Value Share Plan, the Lyondell Petrochemical Management Value Share Plan,
the Lyondell Petrochemical Company Annual Incentive Plan, the Atlantic
Richfield Company Annual Incentive Plan, the ARCO Chemical Company Annual
Incentive Plan and/or the Lyondell-CITGO Refining Company Ltd. Annual
Incentive Plan or its equivalent. Award does not include Deferred Cash as
such term is used in the Lyondell Petrochemical Company Value Share Plan or
Management Value Share Plan.
<PAGE>
SECTION 5.1, ADMINISTRATIVE COMMITTEE, is amended to read as follows:
The Benefits Administrative Committee of Lyondell Petrochemical Company
shall act as the Administrative Committee for this Plan.
LYONDELL PETROCHEMICAL COMPANY hereby amends effective July 1, 1995, the
Lyondell Petrochemical Company Supplementary Executive Retirement Plan, as
follows:
SECTION 5.2, RULES OF CONDUCT; ADMINISTRATIVE PROCEDURES, is amended to delete
the words "CAP Plan" and to substitute the words "Lyondell Petrochemical Company
401(K) and Savings Plan."
IN WITNESS WHEREOF, LYONDELL PETROCHEMICAL COMPANY, acting by and
through its duly authorized officer, has caused this Instrument to be executed
on this 18th day of September, 1995.
ATTEST: LYONDELL PETROCHEMICAL COMPANY
BY: /s/ Gerald O'Brien BY: /s/ Richard W. Park
----------------------- ---------------------------------
Assistant Secretary Richard W. Park
Vice President, Human Resources
<PAGE>
EXHIBIT 10.2
INSTRUMENT AMENDING LYONDELL PETROCHEMICAL COMPANY
EXECUTIVE DEFERRAL PLAN
LYONDELL PETROCHEMICAL COMPANY hereby amends the Lyondell Petrochemical
Company Executive Deferral Plan, effective January 1, 1995, as follows:
SECTION 1.1, PURPOSE AND INTENT OF PLAN, is amended to delete "Annual Incentive
Plan awards" and to substitute "a portion of Value Share Plan awards or a
portion of Management Value Share Plan awards".
SECTION 1.3, DEFINITIONS, AWARDS, is amended to read as follows:
AWARDS means cash awards under the Lyondell Petrochemical Company Value
Share Plan, Management Value Share Plan or awards under any other plan that
the Board of Directors of Lyondell Petrochemical Company, or the
Compensation Committee thereof, has authorized the Company to adopt and has
further authorized awards thereunder to be treated as Awards under this
Plan.
SECTION 1.3, DEFINITIONS, CONSTRUCTIVE TERMINATION FOR GOOD REASON, subpart (2),
is amended to read as follows:
(2) the reduction of the Participant's annual salary (including any
deferred portions thereof), the reduction of the Participant's Value Share
Plan as a result of an adverse change in Plan terms (and not as a result of
a reduction solely to satisfy federal tax law requirements), or a material
reduction in the level of benefits or supplemental compensation provided to
the Participant; or
<PAGE>
LYONDELL PETROCHEMICAL COMPANY hereby amends the Lyondell Petrochemical Company
Executive Deferral Plan, effective July 1, 1995, as follows:
SECTION 1.3, DEFINITIONS, CAP PLAN, and SECTION 1.3, DEFINITIONS, SAVINGS PLAN,
are deleted.
SECTION 1.3, DEFINITIONS, is amended to add new definition, 401(K) AND SAVINGS
PLAN, to read as follows:
401(K) AND SAVINGS PLAN means the Lyondell Petrochemical Company 401(K) and
Savings Plan maintained by Lyondell Petrochemical Company.
The Executive Deferral Plan is amended to delete references to "CAP Plan" or
"Savings Plan" or both and to substitute "401(k) and Savings Plan" for any
former reference to "CAP Plan" or "Savings Plan" or both.
IN WITNESS WHEREOF, LYONDELL PETROCHEMICAL COMPANY, acting by and
through its duly authorized officer, has caused this Instrument to be executed
on the 18th day of September, 1995.
ATTEST: LYONDELL PETROCHEMICAL COMPANY
BY: /s/ Gerald A. O'Brien BY: /s/ Richard W. Park
----------------------- -----------------------------------
Assistant Secretary Richard W. Park
Vice President, Human Resources
<PAGE>
EXHIBIT 10.3
INSTRUMENT AMENDING
RESTRICTED STOCK PLAN
OF
LYONDELL PETROCHEMICAL COMPANY
LYONDELL PETROCHEMICAL COMPANY hereby amends the Restricted Stock Plan of
Lyondell Petrochemical Company, effective September 1, 1995, as follows:
Section 5, Terms and Conditions of Restricted Shares, subsection (b), Restricted
Period, is amended to read as follows:
Section 5 Terms and Conditions of Restricted Shares
(b) Restricted Period. The Restricted Period shall begin on the date of
the grant and shall continue for a period of time determined on the
date of the grant, subject to the following conditions: (i) The
Restricted Period for a grant to a Value Share Plan Participant shall
lapse on December 15 of each year following the grant as to one third
of the grant of Restricted Shares, until, on December 15 of the third
year following the grant, the Restricted Period has totally lapsed as
to all Restricted Shares for that particular grant; and (ii) The
Restricted Period for a grant to Participants who are not Value Share
Plan Participants shall not be less than the Restricted Period for a
grant to Value Share Plan Participants.
IN WITNESS WHEREOF, LYONDELL PETROCHEMICAL COMPANY, acting by and
through its duly authorized officer, has caused this Instrument to be executed
on August 28, 1995.
ATTEST: LYONDELL PETROCHEMICAL COMPANY
By: /s/ Gerald A. O'Brien By: /s/ Richard W. Park
--------------------- -------------------------------
Assistant Secretary Richard W. Park
Vice President, Human Resources
<PAGE>
EXHIBIT 10.4
AMENDMENT NO. 2
LYONDELL PETROCHEMICAL COMPANY
VALUE SHARE PLAN
LYONDELL PETROCHEMICAL COMPANY hereby amends the Value Share Plan of
Lyondell Petrochemical Company, effective September 1, 1995, as follows:
Section II.9, PAYOUT OF AWARDS, paragraph four, is amended to read as follows:
The number of shares of Restricted Stock to be granted to each Participant
will be calculated by dividing the Participant's award in (b) above by the
Company's average daily closing stock price during the last month of the
Performance Cycle. The Restricted Stock will vest in three equal
installments on December 15 in each of the three years following the end of
the Performance Cycle. Restricted Stock will vest immediately upon a Change
in Control or upon the Participant's death, Retirement or permanent
Disability. Shares of Restricted Stock will earn dividends, as paid, and
have voting rights over the restricted period.
IN WITNESS WHEREOF, LYONDELL PETROCHEMICAL COMPANY, acting by and
through its duly authorized officer, has caused this Instrument to be executed
on August 28, 1995.
ATTEST: LYONDELL PETROCHEMICAL COMPANY
By: GERALD A. O'BRIEN By: RICHARD W. PARK
Assistant Secretary Richard W. Park
Vice President, Human Resources
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