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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): May 1, 1995.
LYONDELL PETROCHEMICAL COMPANY
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 1-10145 95-4160558
- --------------------------------------------------------------------------------
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
1221 McKinney Street, Suite 1600, Houston, Texas 77010
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (713) 652-7200
Not Applicable
- --------------------------------------------------------------------------------
(Former name or former address, if changed since last report)
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ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
INDEX TO FINANCIAL STATEMENTS
(A) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED:
Unaudited financial statements for the Alathon Division of Occidental
Chemical Corporation are provided below as of and for the three months ended
March 31, 1995.
Unaudited Balance Sheet as of March 31, 1995 3
Unaudited Statement of Operations and Changes in Owner's
Investment for the three months ended March 31, 1995 4
Unaudited Statement of Cash Flows for the three months
ended March 31, 1995 5
Notes to Unaudited Financial Statements 6
(B) UNAUDITED PRO FORMA FINANCIAL INFORMATION:
Unaudited pro forma condensed financial statements are provided below as of
and for the three months ended March 31, 1995.
Unaudited Pro Forma Condensed Statement of Income for the
three months ended March 31, 1995 12
Unaudited Pro Forma Condensed Balance Sheet as of
March 31, 1995 13
Notes to Unaudited Pro Forma Condensed Financial Statements 14
(C) EXHIBITS: None
2
<PAGE>
OCCIDENTAL CHEMICAL CORPORATION
ALATHON DIVISION
BALANCE SHEET
UNAUDITED
March 31, 1995
(in thousands)
<TABLE>
<S> <C>
CURRENT ASSETS:
Cash....................................................... $ 3
Trade receivables, net of reserves $995.................... 11,087
Inventories................................................ 62,695
Deferred income taxes...................................... 2,200
Other current assets....................................... 312
--------
Total current assets..................................... 76,297
LONG-TERM RECEIVABLES........................................ 913
PROPERTY, PLANT AND EQUIPMENT, at cost, net of accumulated
depreciation of $127,577.................................... 327,204
OTHER ASSETS................................................. 2,624
--------
TOTAL ASSETS............................................. $407,038
========
CURRENT LIABILITIES
Accounts payable........................................... $ 9,981
Accrued liabilities........................................ 10,168
--------
Total current liabilities................................ 20,149
DEFERRED INCOME TAXES........................................ 104,501
OTHER LIABILITIES............................................ 3,133
--------
Total liabilities........................................ 127,783
OWNER'S INVESTMENT........................................... 279,255
--------
TOTAL LIABILITIES AND OWNER'S INVESTMENT................. $407,038
========
</TABLE>
The accompanying notes are an integral part of these statements.
3
<PAGE>
OCCIDENTAL CHEMICAL CORPORATION
ALATHON DIVISION
STATEMENT OF OPERATIONS AND CHANGES IN OWNER'S INVESTMENT
UNAUDITED
For the three months ended March 31,1995
(in thousands)
<TABLE>
<S> <C>
EXTERNAL SALES, net.......................................... $147,374
SALES TO OWNER AT MARKET VALUE............................... --
--------
TOTAL SALES, net............................................. 147,374
OPERATING COSTS AND EXPENSES:
Cost of sales.............................................. 117,369
Selling, general and administrative expenses............... 3,322
Other operating expense.................................... 1,096
--------
INCOME BEFORE CHARGE FROM OCCIDENTAL CHEMICAL
CORPORATION IN LIEU OF FEDERAL TAXES AND
PROVISION FOR STATE TAXES.................................... 25,587
Charge from Occidental Chemical Corporation in lieu of
federal taxes and provision for state taxes................ 8,997
--------
NET INCOME.................................................... 16,590
DECREASE IN OWNER'S INVESTMENT................................ (4,581)
OWNER'S INVESTMENT, beginning of period....................... 267,246
--------
OWNER'S INVESTMENT, end of period............................. $279,255
========
</TABLE>
The accompanying notes are an integral part of these statements.
4
<PAGE>
OCCIDENTAL CHEMICAL CORPORATION
ALATHON DIVISION
STATEMENT OF CASH FLOWS
UNAUDITED
For the three months ended March 31, 1995
(in thousands)
<TABLE>
<S> <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Net income.................................................. $16,590
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation.............................................. 4,451
Deferred income taxes..................................... 173
Changes in operating assets and liabilities:
Increase in trade receivables............................. (2,273)
Increase in inventories................................... (9,108)
Decrease in other current assets.......................... 85
Decrease in accounts payable and accrued liabilities...... (4,134)
Other operating, net........................................ 44
-------
Net cash provided by operating activities..................... 5,828
CASH FLOW FROM INVESTING ACTIVITIES:
Capital expenditures........................................ (1,246)
-------
Net cash used by investing activities......................... (1,246)
CASH FLOW FROM FINANCING ACTIVITIES:
Decrease in owner's investment.............................. (4,581)
-------
Net cash used by financing activities......................... (4,581)
-------
Change in cash................................................ 1
Cash - beginning of period.................................... 2
-------
Cash - end of period.......................................... $ 3
=======
</TABLE>
The accompanying notes are an integral part of these statements.
5
<PAGE>
OCCIDENTAL CHEMICAL CORPORATION
ALATHON DIVISION
NOTES TO FINANCIAL STATEMENTS
UNAUDITED
March 31, 1995
(1) GENERAL--
Organization, business and basis of presentation--
The accompanying unaudited interim financial statements have been prepared by
Occidental Chemical Corporation (OCC), a New York corporation, in accordance
with certain rules and regulations of the Securities and Exchange Commission.
All outstanding common shares of OCC are owned indirectly by Occidental
Petroleum Corporation (Occidental). Certain information and disclosures normally
included in the notes to financial statements have been condensed or omitted
pursuant to such rules and regulations, but resultant disclosures are in
accordance with generally accepted accounting principles as they apply to
interim reporting. These interim financial statements should be read in
conjunction with the Alathon Division's audited financial statements for the
year ended December 31, 1994 (1994 Financial Statements).
In the opinion of OCC's management, the accompanying interim financial
statements contain all adjustments (consisting of normal recurring adjustments)
necessary to present fairly the Alathon Division's financial position as of
March 31, 1995 and the results of operations and cash flows for the three months
then ended. The results of operations and cash flows for the period ended March
31, 1995 are not necessarily indicative of the results of operations or cash
flows to be expected for the full year.
Reference is made to Note 1 to the 1994 Financial Statements for a summary of
significant accounting policies.
Supplemental cash flow information--
For the three months ended March 31, 1995, all cash payments for income taxes
were made by Occidental. For the same period, there were no cash payments for
interest.
As of March 31, 1995, trade receivables of $80,185,000 were transferred to an
affiliate (see Note 2).
Environmental costs--
Environmental expenditures that relate to current operations are expensed or
capitalized as appropriate. Expenditures that relate to existing conditions
caused by past operations and that do not contribute to current or future
revenue generation are expensed. No costs relating to existing conditions caused
by past operations were incurred by the Alathon Division during the first
quarter of 1995. Reserves for estimated costs are recorded when environmental
remedial efforts are probable and the costs can be reasonably estimated. In
determining the reserves, the Alathon Division uses the most current information
available, including similar past experiences, available technology, regulations
in effect, the timing of remediation and cost-sharing arrangements. At March 31,
1995, there were no environmental reserves related to the Alathon Division.
6
<PAGE>
OCCIDENTAL CHEMICAL CORPORATION
ALATHON DIVISION
NOTES TO FINANCIAL STATEMENTS
UNAUDITED
March 31, 1995
(1) GENERAL--(continued)
The Alathon Division's estimated operating expenses relating to compliance
with environmental laws and regulations governing ongoing operations were
approximately $514,000 in the first quarter of 1995. In addition, estimated
capital expenditures for environmental compliance in the first quarter of 1995
were approximately $342,000. Management has not identified any material
environmental matter, nor has the Alathon Division been identified as a
potentially responsible party under the Comprehensive Environmental Response,
Compensation and Liability Act (Superfund) and corresponding state acts.
Research and development costs--
Research and development costs, which are charged to operations as incurred,
were $1,214,000 in the three months ended March 31, 1995. These charges are
included in Selling, General and Administrative Expenses in the accompanying
financial statements.
(2) RECEIVABLES--
As of March 31, 1995, OCC had transferred, without recourse, to an Occidental
affiliate trade receivables of the Alathon Division under a revolving sale
program amounting to $80,185,000, in connection with the ultimate sale for cash
of such receivables by the affiliate. OCC transferred the receivables to the
affiliate in a noncash transaction that was reflected as a reduction in the
Alathon Division's Owner's Investment. OCC has retained the collection
responsibility with respect to the receivables sold. An interest in newly
created receivables is transferred monthly, net of collections made from
customers. Fees related to the sales of receivables under this program, which
are allocated from OCC, were $861,000 for the three months ended March 31, 1995
and are included in Other Operating Expense.
(3) ACCOUNTING CHANGE--
Reference is made to Note 3 to the 1994 Financial Statements for a description
of an accounting change.
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<PAGE>
OCCIDENTAL CHEMICAL CORPORATION
ALATHON DIVISION
NOTES TO FINANCIAL STATEMENTS
UNAUDITED
March 31, 1995
(4) INVENTORIES--
Inventories are valued at the lower of cost or market. The first-in, first-out
(FIFO) cost method was used in determining the costs of raw materials and
finished goods. Materials and supplies inventories were determined using the
weighted average cost method. Inventories consisted of the following as of
March 31, 1995 (in thousands):
<TABLE>
<S> <C>
Raw materials...................................... $ 2,254
Materials and supplies............................. 2,711
Work in process.................................... 154
Finished goods..................................... 57,576
---------
Inventory at lower of cost or market............... $ 62,695
=========
</TABLE>
(5) PROPERTY, PLANT AND EQUIPMENT--
<TABLE>
<S> <C>
Land and land improvements......................... $ 18,821
Buildings.......................................... 21,512
Machinery and equipment............................ 408,207
Construction in progress........................... 6,241
---------
454,781
Accumulated depreciation........................... (127,577)
---------
$ 327,204
=========
</TABLE>
Reference is made to Note 5 to the 1994 Financial Statements for a description
of investments in Property, Plant and Equipment.
(6) LEASE COMMITMENTS--
Reference is made to Note 6 to the 1994 Financial Statements for a description
of lease commitments.
(7) CHARGE FROM OCC IN LIEU OF FEDERAL TAXES AND PROVISION
FOR STATE TAXES--
The charge allocated by OCC in lieu of federal taxes and provision for state
taxes for the three months ended March 31, 1995 consisted of the following (in
thousands):
<TABLE>
<S> <C>
Current U.S. federal charge from OCC................. $8,824
Deferred U.S. federal charge from OCC................ 157
Deferred state....................................... 16
------
$8,997
======
</TABLE>
8
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OCCIDENTAL CHEMICAL CORPORATION
ALATHON DIVISION
NOTES TO FINANCIAL STATEMENTS
UNAUDITED
March 31,1995
(7) CHARGE FROM OCC IN LIEU OF FEDERAL TAXES AND PROVISION
FOR STATE TAXES--(continued)
The following table reconciles the maximum statutory U.S. federal income tax
rate multiplied by the Alathon Division's income before taxes to the recorded
charge for income taxes (in thousands):
<TABLE>
<S> <C>
U.S. federal income tax at 35%........................... $8,955
State income tax expense, net of U.S. federal benefit.... 10
Nondeductible expenses................................... 32
------
$8,997
======
</TABLE>
Deferred income taxes reflect the future tax consequences of temporary
differences between the tax bases of assets and liabilities and their financial
reporting amounts. Temporary differences are associated with the financial
statement assets and liabilities shown in the table below. Deferred income tax
assets and liabilities have been recorded in the following amounts as of March
31, 1995 (in thousands):
<TABLE>
<CAPTION>
DEFFERED TAX
ASSETS LIABILITIES
------ -----------
<S> <C> <C>
Inventories........................... $1,201 $ --
Property, plant and equipment......... -- (108,258)
Other assets.......................... -- (692)
Accrued liabilities................... 1,067 --
Other liabilities..................... 1,200 --
Deferred state income tax............. 3,181 --
------ ---------
$6,649 $(108,950)
====== =========
</TABLE>
(8) RETIREMENT PLANS AND POSTRETIREMENT BENEFITS--
Reference is made to Note 8 to the 1994 Financial Statements for a description
of retirement plans and postretirement benefits.
(9) RELATED PARTY TRANSACTIONS--
Transactions with other plants and affiliates of OCC included purchases of
feedstocks of $98,680,000 for the three months ended March 31, 1995. These
purchases are recorded at market value.
The Alathon Division has been charged for certain financial and operational
support services provided by OCC. Charges for such support services, included in
Selling, General and Administrative Expenses in the accompanying statement of
operations, totaled $544,000 for the three months ended March 31, 1995. These
charges were allocated based on ratios including such factors as revenues,
operating income, fixed assets, and working capital in a reasonable and
consistent manner.
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<PAGE>
OCCIDENTAL CHEMICAL CORPORATION
ALATHON DIVISION
NOTES TO FINANCIAL STATEMENTS
UNAUDITED
March 31, 1995
(10) SALE OF ALATHON DIVISION--
On May 1, 1995, OCC sold the Alathon Division to Lyondell Petrochemical
Company (Lyondell). Under the terms of the agreement, Lyondell purchased the
assets, and assumed certain of the liabilities, that constitute the Alathon
Division. Certain of the Alathon Division's assets and liabilities included in
these financial statements were not included in the sale to Lyondell.
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<PAGE>
LYONDELL PETROCHEMICAL COMPANY
UNAUDITED PRO FORMA CONDENSED FINANCIAL STATEMENTS
The accompanying unaudited pro forma condensed financial statements give
effect to the acquisition by Lyondell Petrochemical Company ("Lyondell") of
Occidental Chemical Corporation's (an affiliate of Occidental Petroleum
Corporation) Alathon(R) high-density polyethylene ("HDPE") business (the
"Alathon Division") in a transaction accounted for as a purchase. The unaudited
pro forma condensed balance sheet is based on the balance sheet of Lyondell
adjusted to reflect the purchase of the assets of the Alathon Division (acquired
by Lyondell as of May 1, 1995) as of March 31, 1995. The unaudited pro forma
condensed statement of income is based on the individual statements of income of
Lyondell and the Alathon Division and combines the results of operations of
Lyondell and the Alathon Division for the three months ended March 31, 1995 as
if the acquisition occurred on January 1, 1995. These unaudited pro forma
condensed financial statements should be read in conjunction with both the
historical financial statements and notes thereto of Lyondell which are included
in its quarterly report on Form 10-Q for the three months ended March 31, 1995,
which is incorporated herein by reference and the historical financial
statements and notes thereto of the Alathon Division included elsewhere in this
Form 8-K.
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<PAGE>
LYONDELL PETROCHEMICAL COMPANY
UNAUDITED PRO FORMA CONDENSED STATEMENT OF INCOME
THREE MONTHS ENDED MARCH 31, 1995
<TABLE>
<CAPTION>
PRO FORMA
ALATHON ADJUSTMENTS
MILLIONS OF DOLLARS EXCEPT PER SHARE AMOUNTS LYONDELL DIVISION (NOTE 2) COMBINED
- -------------------------------------------- -------- -------- ----------- --------
<S> <C> <C> <C> <C>
Sales and other operating revenues................ $1,174 $147 $1,321
Cost of sales..................................... 907 117 1,024
Selling, general and administrative expenses...... 45 4 (1)(a) 48
------ ---- --- ------
952 121 (1) 1,072
------ ---- --- ------
Operating income.............................. 222 26 1 249
Interest expense.................................. (18) (4)(b) (22)
Interest income................................... 3 3
Minority interest in LYONDELL-CITGO
Refining Company Ltd. .......................... (5) (5)
------ ---- --- ------
Income before income taxes.................... 202 26 (3) 225
Provision for income taxes........................ 75 9 (1)(c) 83
------ ---- --- ------
NET INCOME........................................ $ 127 $ 17 $(2) $ 142
====== ==== === ======
EARNINGS PER SHARE................................ $ 1.59 $ 1.78
====== ======
</TABLE>
See notes to unaudited pro forma condensed financial statements.
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<PAGE>
LYONDELL PETROCHEMICAL COMPANY
UNAUDITED PRO FORMA CONDENSED BALANCE SHEET
MARCH 31, 1995
<TABLE>
<CAPTION>
PRO FORMA
MILLIONS OF DOLLARS LYONDELL ADJUSTMENTS PRO FORMA
- ------------------- -------- ----------- ---------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash, restricted cash and cash equivalents.................. $ 243 (207)(d) $ 36
Accounts receivable......................................... 326 326
Inventories................................................. 251 64 (e) 315
Prepaid expenses and other current assets................... 10 10
------ ------
Total current assets...................................... 830 687
------ ------
Fixed assets:
Property, plant and equipment............................... 2,909 360 (f) 3,269
Less accumulated depreciation and amortization.............. 1,943 1,943
------ ------
966 1,326
Deferred charges and other assets............................. 85 85
------ ------
Total assets.................................................. $1,881 $2,098
====== ======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable............................................ $ 295 $ 295
Notes payable............................................... 0 212 (g) 212
Other current liabilities................................... 171 171
------ ------
Total current liabilities................................. 466 678
------ ------
Long-term debt................................................ 707 707
Other liabilities and deferred credits........................ 88 5 (h) 93
Deferred income taxes......................................... 103 103
Commitments and contingencies.................................
Minority interest............................................. 345 345
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
Accumulated deficit......................................... (66) (66)
------ ------
Total stockholders' equity................................ 172 172
------ ------
Total liabilities and stockholders' equity..................... $1,881 $2,098
====== ======
</TABLE>
See notes to unaudited pro forma condensed financial statements.
13
<PAGE>
LYONDELL PETROCHEMICAL COMPANY
NOTES TO UNAUDITED PRO FORMA CONDENSED FINANCIAL STATEMENTS
(1) BASIS OF PREPARATION
The accompanying unaudited pro forma condensed financial statements have been
prepared to reflect the acquisition of the Alathon Division by Lyondell for a
purchase price of $350 million plus $64 million representing the value of the
Alathon Division's inventory.
(2) PRO FORMA ADJUSTMENTS
a. Elimination of certain fees incurred by the Alathon Division under a
revolving sale program related to the sales of receivables to its
affiliate, Occidental Chemical Corporation.
b. Pro forma interest charges for the three months ended March 31, 1995
related to borrowings from Lyondell's revolving credit facility,
calculated in accordance with the terms of the revolving credit facility.
c. Income taxes at statutory rates relating to foregoing adjustments.
d. Cash utilized to fund the acquisition price.
e. Cost of inventories acquired.
f. Acquisition price of fixed assets acquired plus certain transaction costs
and investment banking fees incurred and liabilities assumed for unfunded
postretirement benefit plans other than pensions related to Alathon
employees.
g. Borrowings from Lyondell's revolving credit facility necessary to
complete the acquisition.
h. Liability for unfunded postretirement benefit plans other than pensions
related to Alathon employees which were assumed by Lyondell.
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SIGNATURES
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 hereunto duly authorized.
Dated: June 26, 1995 LYONDELL PETROCHEMICAL COMPANY
By: /s/ Joseph M. Putz
---------------------------
Joseph M. Putz
Vice President and Controller
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