NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
TABLE OF CONTENTS
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1. Description of Company and Operations
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.
2. Summary of Significant Accounting Policies
The following significant accounting policies were applied in the preparation of these Consolidated Financial Statements:
Basis of Preparation and Consolidation
The accompanying Consolidated Financial Statements have been prepared from the books and records of LyondellBasell N.V. under accounting principles
generally accepted in the U.S. (U.S. GAAP). Subsidiaries are defined as being those companies over which we, either directly or indirectly, have control through a majority of the voting rights or the right to exercise control or to
obtain the majority of the benefits and be exposed to the majority of the risks. Subsidiaries are consolidated from the date on which control is obtained until the date that such control ceases. All intercompany transactions and balances have been
eliminated in consolidation.
The Consolidated Financial Statements have been prepared under the historical cost convention, as modified for
the accounting of certain financial assets and financial liabilities (including derivative instruments) at fair value through profit or loss. Consolidated financial information, including subsidiaries, equity investments, has been prepared using
uniform accounting policies for similar transactions and other events in similar circumstances.
Cash and Cash Equivalents
Cash equivalents consist of highly liquid debt instruments such as certificates of deposit, commercial paper and money market accounts. Cash equivalents
include instruments with maturities of three months or less when acquired. Cash equivalents are stated at cost, which approximates fair value. Cash and cash equivalents exclude restricted cash. Our cash equivalents are placed in certificates of
deposit, high-quality commercial paper and money market accounts with major international banks and financial institutions.
Although, we have
no current requirements for compensating balances in a specific amount at a specific point in time, we maintain compensating balances at our discretion for some of our banking services and products.
Short-Term Investments
We also have
investments in marketable securities classified as
available-for-sale
and
held-to-maturity.
These securities, which are included in Short-term investments on the Consolidated Balance Sheets, are carried at estimated fair value with unrealized
gains and losses recorded as a component of Accumulated other comprehensive income (AOCI). We periodically review our
available-for-sale
and
held-to-maturity
securities for other-than-temporary declines in fair value below the cost basis, and when events or changes in
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circumstances indicate the carrying value of an asset may not be recoverable, the investment is written down to fair value, establishing a new cost basis.
Trade Receivables
Trade receivables are
amounts due from customers for merchandise sold or services performed in the ordinary course of business.
We calculate provisions for
doubtful accounts receivable based on our estimates of amounts that we believe are unlikely to be collected. Collectability of receivables is reviewed and the provision calculated for doubtful accounts is adjusted at least quarterly, based on aging
of specific accounts and other available information about the associated customers. Provisions for doubtful accounts are included in Selling, general and administrative expenses.
Inventories
Inventories are carried at the lower of current market value or cost. Cost is
determined using the
last-in,
first-out
(LIFO) method for raw materials, work in progress (WIP) and finished goods, and the moving average cost
method for materials and supplies.
Inventory exchange transactions, which involve fungible commodities, are not accounted for as purchases
and sales. Any resulting volumetric exchange balances are accounted for as inventory, with cost determined using the LIFO method.
Property, Plant and Equipment
Property,
plant and equipment are recorded at historical cost. Historical cost includes expenditures that are directly attributable to the acquisition of the items. Costs may also include borrowing costs incurred on debt during construction or major projects
exceeding one year, costs of major maintenance arising from turnarounds of major units relating to betterments and committed decommission costs. Routine maintenance costs are expensed as incurred. Land is not depreciated. Depreciation is computed
using the straight-line method over the estimated useful asset lives to their residual values.
The assets residual values and useful
lives are reviewed, and adjusted if appropriate, at the end of each reporting period.
We evaluate property, plant and equipment for
impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Long-lived assets are grouped at the lowest level for which there are identifiable cash flows that are largely independent
of the cash flows of other groups of assets, which, for us, is generally at the plant group level (or, at times, individual plants in certain circumstances where we have isolated production units with separately identifiable cash flows). When it is
probable that an asset or asset groups undiscounted future cash flows will not be sufficient to recover the carrying amount, the asset is written down to its estimated fair value.
Upon retirement or sale, we remove the cost of the asset and the related accumulated depreciation from the accounts and reflect any resulting gain or loss in the Consolidated Statements of Income.
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Equity Investments
We account for equity investments using the equity method of accounting if we have the ability to exercise significant influence over, but not control of, an investee. Significant influence generally
exists if we have an ownership interest representing between 20% and 50% of the voting rights. Under the equity method of accounting, investments are stated initially at cost and are adjusted for subsequent additional investments and our
proportionate share of profit or losses and distributions.
We record our share of the profits or losses of the equity method investments, net
of income taxes, in the Consolidated Statements of Income. When our share of losses in an equity investment equals or exceeds our interest in the equity investment, including any other unsecured receivables, we do not recognize further losses,
unless we have incurred obligations or made payments on behalf of the equity investment.
We evaluate our equity method investments for
impairment when events or changes in circumstances indicate, in managements judgment, that the carrying value of such investments may have experienced an other-than-temporary decline in value. When evidence of loss in value has occurred,
management compares the estimated fair value of investment to the carrying value of investment to determine whether an impairment has occurred. If the estimated fair value is less than the carrying value and management considers the decline in value
to be other-than temporary, the excess of the carrying value over the estimated fair value is recognized in the Consolidated Financial Statements as an impairment.
Goodwill
We recorded goodwill upon our application of fresh-start accounting on
May 1, 2010. Goodwill is not amortized, but is tested annually for impairment. We assess the recoverability of the carrying value of goodwill during the fourth quarter of each year or whenever events or changes in circumstances indicate that
the carrying amount of the goodwill of a reporting unit may not be fully recoverable.
We first assess qualitative factors to determine
whether it is more likely than not that the fair value of a reporting unit is less than its carrying value. Qualitative factors assessed for each of the reporting units include, but are not limited to, changes in long-term commodity prices, discount
rates, competitive environments, planned capacity, cost factors such as raw material prices, and financial performance of the reporting units. If the qualitative assessment indicates that it is more likely than not that the carrying value of a
reporting unit exceeds its estimated fair value, a
two-step
quantitative test is required.
In 2016
and 2015, management performed qualitative impairment assessments of our reporting units which indicated that the fair value of our reporting units was greater than their carrying value. Accordingly, a quantitative
two-step
goodwill impairment test was not required and no goodwill impairment was recognized.
Intangible Assets
Intangible
Assets
Intangible assets primarily consist of emission allowances, various contracts,
in-process
research and development and software costs. These assets are amortized using the straight-line method
over their estimated useful lives or over the term of the related agreement, if shorter. We evaluate definite-lived intangible assets for impairment whenever events or changes in circumstances indicate that the carrying value of the asset may not be
recoverable.
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Research and Development
Research and development (R&D) costs are expensed
when incurred. Subsidies for research and development are included in Other income (expense), net. Depreciation expense related to R&D assets is included as a cost of R&D.
Income Taxes
The income tax for the period comprises current and deferred tax. Income tax
is recognized in the Consolidated Statements of Income, except to the extent that it relates to items recognized in other comprehensive income or directly in equity. In these cases, the applicable tax amount is recognized in other comprehensive
income or directly in equity, respectively.
Deferred income taxes reflect the net tax effects of temporary differences between the carrying
amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes, as well as the net tax effects of net operating loss carryforwards. Valuation allowances are provided against deferred tax assets when
it is more likely than not that some portion or all of the deferred tax asset will not be realized.
We recognize uncertain income tax
positions in our financial statements when we believe it is more likely than not, based on the technical merits, that the position or a portion thereof will be sustained upon examination.
Employee Benefits
Pension Plans
We have both defined benefit (funded
and unfunded) and defined contribution plans. For the defined benefit plans, a projected benefit obligation is calculated annually by independent actuaries using the projected unit credit method. Pension costs primarily represent the increase in the
actuarial present value of the obligation for pension benefits based on employee service during the year and the interest on this obligation in respect of employee service in previous years, net of expected return on plan assets.
Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged or credited to equity and are reflected
in Accumulated other comprehensive income in the period in which they arise.
Other Post-Employment Obligations
Certain
employees are entitled to postretirement medical benefits upon retirement. The entitlement to these benefits is usually conditional on the employee remaining in service up to retirement age and the completion of a minimum service period. The
expected costs of these benefits are accrued over the period of employment applying the same accounting methodology used for defined benefit plans.
Termination Benefits
Contractual termination benefits are
payable when employment is terminated due to an event specified in the provisions of a social/labor plan or statutory
law. A liability is recognized for one time termination benefits when we are committed to i) make payments and the number of affected employees and the benefits received are known to both parties, and ii) terminating the employment of current
employees according to a detailed formal plan without possibility of withdrawal and can reasonably estimate such amount. Benefits falling due more than 12 months after the balance sheet date are discounted to present value.
Other Provisions
Environmental
Remediation Costs
Environmental remediation liabilities include liabilities related to sites we currently own, sites we no longer own, as well as sites where we have operated that belong to other parties. Liabilities for anticipated
expenditures related to investigation and remediation of contaminated sites are accrued
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when it is probable a liability has been incurred and the amount of the liability can be reasonably estimated. Only ongoing operating and monitoring costs, the timing of which can be
determined with reasonable certainty, are discounted to present value. Future legal costs associated with such matters, which generally are not estimable, are not included in these liabilities.
Asset Retirement Obligations
At some sites, we are contractually obligated to decommission our plants upon site exit. Asset retirement
obligations are recorded at the present value of the estimated costs to retire the asset at the time the obligation is incurred. That cost, which is capitalized as part of the related long-lived asset, is depreciated on a straight-line basis over
the remaining useful life of the related asset. Accretion expense in connection with the discounted liability is also recognized over the remaining useful life of the related asset. Such depreciation and accretion expenses are included in Cost of
sales.
Foreign Currency Translation
Functional and Reporting Currency
Items included in the financial information of each of LyondellBasell N.V.s entities are measured using the currency of the primary economic environment
in which the entity operates (the functional currency) and then translated to the U.S. dollar reporting currency through Other comprehensive income.
Transactions and Balances
Foreign currency transactions are translated into the functional currency using exchange rates prevailing at the dates of the transactions. Foreign exchange gains and
losses resulting from the settlement of such transactions and from the translation at
year-end
exchange rates of monetary assets and liabilities denominated in foreign currencies are recognized in the
Consolidated Statements of Income.
In the Consolidated Financial Statements, the results and financial position of all subsidiaries that have
a functional currency different from the presentation currency are translated into the reporting currency as follows:
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1.
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Assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet;
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2.
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Income and expenses for each income statement are translated at average exchange rates; and
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3.
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All resulting exchange differences are recognized as a separate component within Other comprehensive income (foreign currency translation).
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Revenue Recognition
Substantially all
of the Companys revenue is derived from product sales. Revenues are recognized when sales are realized or realizable, and the earnings process is complete. Revenue from product sales is recognized when the price is fixed or determinable,
collectability is reasonably assured, and the customer has an obligation to pay at the time of transfer of title and risk of loss to the customer, which usually occurs at the time of shipment. Revenue is recognized at the time of delivery if we
retain the risk of loss during shipment.
Share-Based Compensation
The Company grants stock-based compensation awards that vest over a specified period upon employees meeting certain service criteria. The fair value of equity instruments issued to employees is measured
on the grant date and is recognized over the vesting period.
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Contingent share awards are recognized ratably over the vesting period as a liability and
re-measured,
at fair value, at the balance sheet date.
Leases
We lease land and other assets for use in our operations. All lease agreements are evaluated and classified as either an operating lease or a capital
lease. A lease is classified as a capital lease if any of the following criteria are met: transfer of ownership to the lessee by the end of the lease term; the lease contains a bargain purchase option; the lease term is equal to 75% or greater of
the assets useful economic life; or the present value of the future minimum lease payments is equal to or greater than 90% of the assets fair market value. Capital leases are recorded at the lower of the net present value of the total
amount of rent payable under the leasing agreement (excluding finance charges) or fair market value of the leased asset. Capital lease assets are depreciated on a straight-line basis, over a period consistent with our normal depreciation policy for
tangible fixed assets, but generally not exceeding the lease term. Operating lease expense is recognized ratably over the entire lease term.
Derivative Financial Instruments and Hedging Activities
We selectively enter into derivative transactions to manage market risk volatility associated with changes in commodity pricing, currency exchange rates and interest rates. We categorize assets and
liabilities, measured at fair value, into one of three different levels depending on the observability of the inputs employed in the measurement. Level 1 inputs are quoted prices in active markets for identical assets or liabilities.
Level 2 inputs are observable inputs other than quoted prices included within Level 1 for the asset or liability, either directly or indirectly through market corroborated inputs. Level 3 inputs are unobservable inputs for the asset
or liability reflecting significant modifications to observable related market data or our assumptions about pricing by market participants. For a discussion related to financial instruments and derivatives policies, see Note 14.
Non-Controlling
Interests
Non-controlling
interests primarily represent the interests of a subsidiary owning an equity investment in
Al-Waha
Petrochemicals Ltd.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and
liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.
Recently Adopted Guidance
Compensation
In June 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU)
2014-12
, Stock Compensation (Topic 718): Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period
. Under this new
guidance, entities are required to treat performance targets that affect vesting and could be achieved after the requisite service period as a performance condition. The amendments in this ASU were effective for annual and interim periods beginning
after December 15, 2015. The early adoption of this amendment did not have a material impact on our Consolidated Financial Statements.
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Consolidation
In February 2015, the FASB issued ASU
2015-02,
Consolidation (Topic 810): Amendments to the Consolidation Analysis
, which amends and changes the consolidation analysis currently required under U.S. GAAP. This ASU modifies the process used
to evaluate whether limited partnerships and similar entities are variable interest entities (VIEs) or voting interest entities; affects the analysis performed by reporting entities regarding VIEs, particularly those with fee
arrangements and related party relationships; and provides a scope exception for certain investment funds. The amendments in this update were effective for annual and interim periods beginning after December 15, 2015. The adoption of this
amendment did not have a material impact on our Consolidated Financial Statements.
Consolidation: Interests Held through Related Parties
That Are under Common Control
In October, 2016, the FASB issued ASU
2016-17,
which amends the consolidation requirements that apply to a single decision makers evaluation of interests held
through related parties that are under common control when it is determining whether it is the primary beneficiary of a variable interest entity (VIE). Entities that already have adopted the amendments in ASU
2015-02
are required to apply amendments in this ASU retrospectively to all relevant periods beginning with the fiscal year in which ASU
2015-02
initially was
applied. The application of this amendment did not have a material impact on our Consolidated Financial Statements.
Going
Concern
In August 2014, the FASB issued ASU
2014-15,
Presentation of Financial StatementsGoing Concern (Subtopic
205-40):
Disclosure of Uncertainties
about an Entitys Ability to Continue as a Going Concern.
Under this new guidance, management is required to perform interim and annual assessments of an entitys ability to continue as a going concern within one year of the date the
financial statements are issued (or available to be issued when applicable). Additionally, the entity must provide certain disclosures if conditions or events raise substantial doubt about its ability to continue as a going concern. The amendments
in this update are effective for annual periods ending after December 15, 2016 and interim periods thereafter. The adoption of this amendment did not have a material impact on our Consolidated Financial Statements.
Derivatives and Hedging
In March 2016, the FASB issued ASU
2016-06,
Derivatives and Hedging (Topic
815): Contingent Put and Call Options in Debt Instruments
. The ASU clarifies that in assessing whether an embedded contingent put or call option is clearly and closely related to the debt host, an entity is required to apply only the four-step
decision sequence as described in the amended guidance. The ASU is effective for public entities for annual and interim periods beginning after December 15, 2016. The early adoption of this amendment did not have a material impact on our
Consolidated Financial Statements.
Investments
In March 2016, the FASB issued ASU
2016-07,
InvestmentsEquity Method and Joint Ventures (Topic 323): Simplifying the Transition to the Equity Method of Accounting
. This ASU simplifies the recognition and reporting requirements for
investments that become qualified for the equity method of accounting as a result of an increase in the level of ownership interest or degree of influence. The amendments in this ASU are effective for all entities for annual and interim periods
beginning after December 15, 2016. Prospective application is required. The early adoption of this amendment did not have a material impact on our Consolidated Financial Statements.
Accounting Guidance Issued But Not Adopted as of December 31, 2016
Revenue
Recognition
In May 2014, the FASB issued ASU
2014-09,
Revenue from Contracts with Customers (Topic 606)
, which supersedes the current revenue recognition requirements in Accounting Standard
Codification (ASC) 606,
Revenue Recognition.
Under this guidance, entities should recognize revenues to depict the transfer of promised goods or services to customers in an amount that reflects the consideration the entity expects
to receive in exchange for those goods or services. This ASU also requires enhanced disclosures. In August 2015,
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the FASB issued ASU
2015-14,
Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date
, which deferred the original
effective date for one year to annual and interim periods beginning after December 15, 2017. Retrospective and modified retrospective application is allowed.
Amendments to Revenue Recognition
In 2016 the FASB issued several amendments to
Topic 606, Revenue from Contracts with Customers.
ASU
2016-08,
Principal versus Agent Considerations,
contains amendments that clarify the implementation guidance on principal versus agent considerations. ASU
2016-10,
Identifying Performance Obligations and
Licensing
clarifies the guidance in the new revenue standard on identifying performance obligations and accounting for licenses of intellectual property. The FASB also issued ASU
2016-12,
Narrow-Scope
Improvements and Practical Expedients,
which further clarifies the new revenue guidance primarily in the areas of collectability, noncash consideration, presentation of sales tax, and transition. The FASB also issued ASU
2016-20
Technical Corrections and Improvements to Topic 606
, which provides numerous improvements related to the Topic 606. All amendments are effective with the same date as ASU
2014-09.
Management is currently assessing the effects of applying the new standard and has preliminarily
determined that there will not be a material impact on our Consolidated Financial Statements. We expect to use a modified retrospective transition method.
Inventories
In July 2015, the FASB issued ASU
2015-11,
Inventory (Topic 330): Simplifying the Measurement of Inventory
. Under this new guidance,
entities that measure inventory using any method other than
last-in,
first-out
or the retail inventory method will be required to measure inventory at the lower of cost
and net realizable value. The amendments in this ASU, which should be applied prospectively, are effective for annual and interim periods beginning after December 15, 2016. The application of this amendment is not expected to have a material
impact on our Consolidated Financial Statements.
Financial Instruments
In January 2016, the FASB issued ASU
2016-01,
Financial Instruments-Overall (Subtopic
825-10):
Recognition and Measurement of Financial Assets and Financial Liabilities
. The new guidance in this ASU
includes a requirement for equity investments (except those accounted for under the equity method of accounting or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income.
Prospective application of this ASU is required for public entities for annual and interim periods beginning on or after December 15, 2017. We are currently assessing the impact of this new guidance on our Consolidated Financial Statements.
Leases
In February 2016, the FASB issued ASU
2016-02,
Leases (Topic 842)
which
supersedes the existing guidance for lease accounting in ASC 840,
Leases
. Under the new guidance, for leases with a term longer than 12 months a lessee should recognize a liability for lease payments (the lease liability) and a
right-of-use
asset representing its right to use the underlying asset for the lease term. Topic 842 retains a classification distinction between finance leases and operating
leases, with the classification affecting the pattern of expense recognition in the income statement. This ASU also requires enhanced disclosures. A modified retrospective transition approach is required for annual and interim periods beginning on
or after December 15, 2018. Early adoption is permitted. We are currently assessing the impact of this new guidance on our Consolidated Financial Statements via an extensive review of numerous existing lease contracts and other purchase
obligations that contain embedded lease features, both classified as operating leases under the existing guidance.
Compensation
In March 2016, the FASB issued ASU
2016-09,
CompensationStock Compensation
(Topic 718): Improvements to Employee Share-Based Payment Accounting
. This ASU simplifies several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
awards as either equity or liabilities, and classification on the statement of cash flows. The amendments in this ASU are effective for public entities for annual and interim periods beginning
after December 15, 2016. Various transition methods are prescribed depending on the aspect of accounting impacted by the amended guidance. Adoption of the amendments in this guidance will result in a reclassification of approximately
$8 million and $52 million in 2016 and 2015, respectively, from cash flows from operating activities to cash flows from financing activities on our Consolidated Statement of Cash Flows.
Financial Instruments
In June 2016, the FASB issued ASU
2016-13,
Financial InstrumentsCredit
Losses (Topic 326)
:
Measurement of Credit Losses on Financial Instruments
. This amendment requires financial assets measured at amortized cost basis to be presented at the net amount expected to be collected, resulting in the use of a
current expected credit loss (CECL) model when measuring an impairment of financial instruments. Credit losses related to
available-for-sale
securities
should be recorded in the consolidated income statement through an allowance for credit losses. Estimated credit losses utilizing the CECL model are based on reasonable use of historical experience, current conditions and forecasts that affect the
collectability of reported financial assets. This ASU also modifies the impairment model for
available-for-sale
debt securities by eliminating the concept of other
than temporary as well as providing a simplified accounting model for purchased financial assets with credit deterioration since their origination. The guidance will be effective for public entities for annual and interim periods beginning
after December 15, 2019. Early adoption is permitted. We are currently assessing the impact of the amendments in this guidance on our Consolidated Financial Statements.
Statement of Cash Flows
In August 2016, the FASB issued ASU
2016-15,
Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and
Cash Payments
. The updated accounting requirement is intended to reduce diversity in practice in the classification of certain transactions in the statement of cash flows. Such transactions include but are not limited to debt prepayment or debt
extinguishment costs, settlement of zero coupon debt instruments, contingent consideration payments made after a business combination and distributions received from equity method of investments. The amendments in this ASU are effective for public
entities for annual and interim periods beginning after December 15, 2018. Early adoption is permitted. We are currently assessing the impact of this new guidance on our Consolidated Financial Statements.
Income Taxes: Intra-Entity Transfers of Assets Other Than Inventory
In October, 2016, the FASB issued Accounting Standards Update
2016-16,
Accounting for Income Taxes: Intra-Entity Asset Transfers of Assets Other than Inventory
. The ASU is aimed at reducing complexity in accounting standards. Under current GAAP, the tax effects of
intra-entity asset transfers (intercompany sales) are deferred until the transferred asset is sold to a third party or otherwise recovered through use. The new guidance eliminates the exception for all intra-entity sales of assets other than
inventory, and a reporting entity would recognize tax expense from the sale of assets in the sellers tax jurisdiction when the transfer occurs, even though the
pre-tax
effects of that transaction are
eliminated in consolidation. Any deferred tax asset that arises in the buyers jurisdiction would also be recognized at the time of the transfer. The new guidance will be effective for public entities for annual periods beginning after
December 15, 2017. Early adoption is permitted. We are currently assessing the impact of this new guidance on our Consolidated Financial Statements.
Statement of Cash Flows: Restricted Cash
In November 2016, the FASB issued ASU
2016-18.
The ASU requires entities to include in their cash and
cash-equivalent balances in the statement of cash flows those amounts that are deemed to be restricted cash and restricted cash equivalents. The ASU will become effective for public entities for annual periods beginning after December 15, 2017.
The adoption of this amendment is not expected to have a material impact on our Consolidated Financial Statements.
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Business Combinations: Clarifying the Definition of a Business
In January 2017, the FASB
issued ASU
2017-01.
This ASU clarifies the definition of a business with the objective of adding guidance to assist entities with evaluating whether a transaction should be accounted for as an acquisition (or
disposal) of an asset or a business. The amendments will be effective for public entities for annual and interim periods beginning after December 15, 2017. Early adoption is permitted. We are currently assessing the impact of this new guidance
on our Consolidated Financial Statements.
Simplifying the Test for Goodwill Impairment: IntangiblesGoodwill and Other
In
January, 2017, the FASB issued ASU
2017-04
to simplify the accounting for goodwill impairment. The guidance removes Step 2 of the goodwill impairment test, which requires a hypothetical purchase price
allocation. Goodwill impairment will now be the amount by which a reporting units carrying value exceeds its fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. All other
goodwill impairment guidance will remain largely unchanged. Entities will continue to have the option to perform a qualitative assessment to determine if a quantitative impairment test is necessary. The same
one-step
impairment test will be applied to goodwill at all reporting units, even those with zero or negative carrying amounts. Entities will be required to disclose the amount of goodwill at reporting units
with zero or negative carrying amounts. The amendments will be effective for public entities for annual and interim goodwill impairment tests in periods beginning after December 15, 2019. Early adoption is permitted for any impairment tests
performed after January 1, 2017. We do not believe the adoption of this new guidance will have a material impact on our Consolidated Financial Statements.
3. Discontinued Operations and Dispositions
Discontinued
Operations
We began reporting the Berre refinery as a discontinued operation in the second quarter of 2012. The impact of this discontinued operation is immaterial to our consolidated results.
Future cash outflows will occur for exit or disposal activities and for payments made to severed employees. Exit and disposal costs are expected to be
incurred through the end of 2017. Payments to the affected employees are expected to be substantially complete by 2019.
In May 2016, we
received a notice pertaining to the final closure of our Berre refinery from the Prefect of Bouches du Rhone. This notice outlines the requirements to dismantle the refinery facilities. At this time, the estimated cost and associated cash flows to
fulfill these requirements are not deemed to be material.
Dispositions
Upon the sale of our wholly owned subsidiary, Petroken
Petroquimica Ensenada S.A. in February 2016, we received net proceeds of $137 million, which is reflected in Cash flows from investing activities in the Consolidated Statement of Cash Flows. In connection with the sale, we recognized a pretax
and after tax gain of $78
million, which is reflected in Other Income, net in the Consolidated Income Statements.
4. Related Party
Transactions
We have related party transactions with affiliates of one of our major shareholders, Access Industries (Access)
and with the Companys joint venture partners (see Notes 8 and 9).
Access
In December 2010, we entered into a tax
cooperation agreement with Access which terminated on December 31, 2014. The tax cooperation agreement allowed either party to provide the other with information and support in connection with tax return preparation and audits on a time and
materials basis through 2014. No payments were made to or received from Access under this agreement during 2014.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
In December 2010, one of our subsidiaries received demand letters from affiliates of Access demanding
(i) indemnity for losses, including attorneys fees and expenses, arising out of a pending lawsuit and (ii) payment of (a) $100 million in management fees under a 2007 management agreement between an Access affiliate and the
predecessor of LyondellBasell AF and (b) other unspecified amounts related to advice purportedly given in connection with financing and other strategic transactions. For additional information related to this matter, see Note 19.
Joint Venture Partners
We have related party transactions with our equity investees. These related party transactions include the sales and
purchases of goods in the normal course of business as well as certain financing arrangements. In addition, under contractual arrangements with certain of our equity investees, we receive certain services, utilities and materials at some of our
manufacturing sites and we provide certain services to our equity investees.
We have guaranteed $18 million of the indebtedness of one
of our joint ventures as of December 31, 2016. In 2015, we received a $19 million payment for a loan made to our joint venture,
Al-Waha
Petrochemicals Ltd. in 2010.
Related party transactions are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
Millions of dollars
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
The Company billed related parties for:
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales of products
|
|
|
|
|
|
|
|
|
|
|
|
|
Joint venture partners
|
|
|
729
|
|
|
|
805
|
|
|
|
894
|
|
Shared service agreements
|
|
|
|
|
|
|
|
|
|
|
|
|
Joint venture partners
|
|
|
18
|
|
|
|
19
|
|
|
|
18
|
|
Related parties billed the Company for:
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales of products
|
|
|
|
|
|
|
|
|
|
|
|
|
Joint venture partners
|
|
|
2,402
|
|
|
|
2,831
|
|
|
|
3,507
|
|
Shared service agreements
|
|
|
|
|
|
|
|
|
|
|
|
|
Joint venture partners
|
|
|
71
|
|
|
|
73
|
|
|
|
85
|
|
5. Accounts Receivable
We sell our products primarily to other industrial concerns in the petrochemicals and refining industries. We perform ongoing credit evaluations of our customers financial conditions and, in certain
circumstances, require letters of credit or corporate guarantees from them. Our allowance for doubtful accounts receivable, which is reflected in the Consolidated Balance Sheets as a reduction of accounts receivable, was $16 million and
$24 million at December 31, 2016 and 2015, respectively. We recorded provisions for doubtful accounts receivable, which are reflected in the Consolidated Statements of Income, of less than $1 million in 2016 and 2015, and
$1 million in 2014, respectively. In 2014, we wrote off approximately $10 million of accounts receivable reserved in prior years.
82
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
6. Inventories
Inventories consisted of the following components at December 31:
|
|
|
|
|
|
|
|
|
Millions of dollars
|
|
2016
|
|
|
2015
|
|
Finished goods
|
|
$
|
2,575
|
|
|
$
|
2,668
|
|
Work-in-process
|
|
|
154
|
|
|
|
148
|
|
Raw materials and supplies
|
|
|
1,080
|
|
|
|
1,235
|
|
|
|
|
|
|
|
|
|
|
Total inventories
|
|
$
|
3,809
|
|
|
$
|
4,051
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2016 and 2015, approximately 85% and 87%, respectively, of our inventories were valued using the
last in, first out (LIFO) method and the remaining inventory, consisting primarily of materials and supplies, was valued at the moving average cost method. At December 31, 2016 and 2015, our LIFO cost exceeded current replacement
cost under the
first-in
first-out
method. The excess of our inventories at estimated net realizable value over LIFO cost after lower of cost or market charges was
approximately $499 million and $73 million at December 31, 2016 and 2015, respectively.
For information related to lower of
cost or market (LCM) inventory valuation charges recognized during 2016, 2015 and 2014, see Note 22.
7. Property, Plant and Equipment, Goodwill and Intangible Assets
Property, Plant and Equipment
The components of property, plant and equipment, at cost, and the related accumulated depreciation are as
follows at December 31:
|
|
|
|
|
|
|
|
|
|
|
|
|
Millions of dollars
|
|
Estimated
Useful Lives
(in Years)
|
|
|
2016
|
|
|
2015
|
|
Land
|
|
|
|
|
|
$
|
278
|
|
|
$
|
283
|
|
Major manufacturing equipment
|
|
|
25
|
|
|
|
9,061
|
|
|
|
7,718
|
|
Buildings
|
|
|
30
|
|
|
|
682
|
|
|
|
672
|
|
Light equipment and instrumentation
|
|
|
5-20
|
|
|
|
1,932
|
|
|
|
1,689
|
|
Office furniture
|
|
|
15
|
|
|
|
14
|
|
|
|
13
|
|
Major turnarounds
|
|
|
4-7
|
|
|
|
1,528
|
|
|
|
1,209
|
|
Information system equipment
|
|
|
3-5
|
|
|
|
58
|
|
|
|
54
|
|
Construction in progress
|
|
|
|
|
|
|
1,082
|
|
|
|
1,272
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total property, plant and equipment
|
|
|
|
|
|
|
14,635
|
|
|
|
12,910
|
|
Less accumulated depreciation
|
|
|
|
|
|
|
(4,498
|
)
|
|
|
(3,919
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment, net
|
|
|
|
|
|
$
|
10,137
|
|
|
$
|
8,991
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capitalized Interest
We capitalize interest costs incurred on funds used to construct property, plant and
equipment. In 2016, 2015 and 2014, we capitalized interest of $33 million, $11 million and $25 million, respectively.
83
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
Intangible Assets
The components of identifiable intangible assets, at cost, and the related
accumulated amortization are as follows at December 31:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
|
2015
|
|
Millions of dollars
|
|
Cost
|
|
|
Accumulated
Amortization
|
|
|
Net
|
|
|
Cost
|
|
|
Accumulated
Amortization
|
|
|
Net
|
|
In-process
research and development costs
|
|
$
|
106
|
|
|
$
|
(54
|
)
|
|
$
|
52
|
|
|
$
|
104
|
|
|
$
|
(46
|
)
|
|
$
|
58
|
|
Emission allowances
|
|
|
697
|
|
|
|
(421
|
)
|
|
|
276
|
|
|
|
687
|
|
|
|
(359
|
)
|
|
|
328
|
|
Various contracts
|
|
|
518
|
|
|
|
(306
|
)
|
|
|
212
|
|
|
|
525
|
|
|
|
(285
|
)
|
|
|
240
|
|
Software costs
|
|
|
70
|
|
|
|
(60
|
)
|
|
|
10
|
|
|
|
83
|
|
|
|
(69
|
)
|
|
|
14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total intangible assets
|
|
$
|
1,391
|
|
|
$
|
(841
|
)
|
|
$
|
550
|
|
|
$
|
1,399
|
|
|
$
|
(759
|
)
|
|
$
|
640
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of these identifiable intangible assets for the next five years is expected to be $103 million in 2017,
$98 million in 2018, $97 million in 2019, $85 million in 2020 and $32 million in 2021.
Depreciation and Amortization
Expense
Depreciation and amortization expense is summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
Millions of dollars
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
Property, plant and equipment
|
|
$
|
920
|
|
|
$
|
875
|
|
|
$
|
865
|
|
Investment in PO joint ventures
|
|
|
40
|
|
|
|
28
|
|
|
|
29
|
|
Emission allowances
|
|
|
62
|
|
|
|
97
|
|
|
|
69
|
|
Various contracts
|
|
|
27
|
|
|
|
32
|
|
|
|
38
|
|
In-process
research and development costs
|
|
|
8
|
|
|
|
8
|
|
|
|
10
|
|
Software costs
|
|
|
7
|
|
|
|
7
|
|
|
|
8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total depreciation and amortization
|
|
$
|
1,064
|
|
|
$
|
1,047
|
|
|
$
|
1,019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset Retirement Obligations
In certain cases, we are contractually obligated to decommission our plants upon
site exit. In such cases, we have accrued the net present value of the estimated costs. The majority of our asset retirement obligations are related to facilities in Europe. The changes in our asset retirement obligations are as follows:
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
Millions of dollars
|
|
2016
|
|
|
2015
|
|
Beginning balance
|
|
$
|
83
|
|
|
$
|
88
|
|
Provisions
|
|
|
|
|
|
|
1
|
|
Payments
|
|
|
(4
|
)
|
|
|
(1
|
)
|
Changes in estimates
|
|
|
(1
|
)
|
|
|
1
|
|
Accretion expense
|
|
|
3
|
|
|
|
3
|
|
Effects of exchange rate changes
|
|
|
(4
|
)
|
|
|
(9
|
)
|
|
|
|
|
|
|
|
|
|
Ending balance
|
|
$
|
77
|
|
|
$
|
83
|
|
|
|
|
|
|
|
|
|
|
Although, we may have asset retirement obligations associated with some of our other facilities, the present value of
those obligations is not material in the context of an indefinite expected life of the facilities. We continually review the optimal future alternatives for our facilities. Any decision to retire one or more facilities may result in an increase in
the present value of such obligations.
84
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
Goodwill
Goodwill was $528 million at December 31, 2016 and $536 million at
December 31, 2015. All movements were due to foreign exchange impacts.
8. Investment in PO Joint Ventures
We, together with Covestro PO LLC, a subsidiary of Covestro AG (collectively Covestro), share ownership in a U.S. propylene
oxide (PO) manufacturing joint venture (the U.S. PO joint venture). The U.S. PO joint venture owns a PO/styrene monomer (SM or styrene) and a PO tertiary butyl alcohol (TBA) manufacturing
facility. Covestros ownership interest represents an undivided interest in certain U.S. PO joint venture assets with correlative PO capacity reservation that resulted in ownership of annual
in-kind
cost-based PO production of approximately 1.5 billion pounds in 2016 and 2015. We take in kind the remaining cost-based PO and
co-product
production.
In addition, we and Covestro each have a 50% interest in a separate manufacturing joint venture (the European PO joint venture), which owns a
PO/SM plant at Maasvlakte near Rotterdam, The Netherlands. In substance, each partners ownership interest represents an undivided interest in all of the European PO joint venture assets with correlative capacity reservation that resulted in
ownership of annual
in-kind
cost-based PO and SM production.
We and Covestro do not share marketing
or product sales under the U.S. PO joint venture. We operate the U.S. PO joint ventures and the European PO joint ventures (collectively the PO joint ventures) plants and arrange and coordinate the logistics of product
delivery. The partners share in the cost of production and logistics is based on their product offtake.
We account for both the U.S. PO joint
venture and the European PO joint venture using the equity method. We report the cost of our product offtake as inventory and equity loss as cost of sales in our Consolidated Financial Statements. Related production cash flows are reported in the
operating cash flow section of the Consolidated Statements of Cash Flows.
Our equity investment in the PO joint ventures represents our share
of the manufacturing plants and is decreased by recognition of our share of equity loss, which is equal to the depreciation and amortization of the assets of the PO joint ventures. Other changes in the investment balance are principally due to our
additional capital contributions to the PO joint ventures to fund capital expenditures. Such contributions are reported in the investing cash flow section of the Consolidated Statements of Cash Flows.
Our product offtake was 6,024 million, 6,270 million and 5,878 million pounds of PO and its
co-products
for the years ended December 31, 2016, 2015 and 2014, respectively.
85
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
Changes in our investments in the U.S. and European PO joint ventures for 2016 and 2015 are summarized
below:
|
|
|
|
|
|
|
|
|
|
|
|
|
Millions of dollars
|
|
U.S. PO
Joint Venture
|
|
|
European PO
Joint Venture
|
|
|
Total PO
Joint Ventures
|
|
Investments in PO joint venturesJanuary 1, 2016
|
|
$
|
296
|
|
|
$
|
101
|
|
|
$
|
397
|
|
Cash contributions
|
|
|
52
|
|
|
|
9
|
|
|
|
61
|
|
Depreciation and amortization
|
|
|
(32
|
)
|
|
|
(8
|
)
|
|
|
(40
|
)
|
Effect of exchange rate changes
|
|
|
|
|
|
|
(3
|
)
|
|
|
(3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments in PO joint venturesDecember 31, 2016
|
|
$
|
316
|
|
|
$
|
99
|
|
|
$
|
415
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments in PO joint venturesJanuary 1, 2015
|
|
$
|
259
|
|
|
$
|
125
|
|
|
$
|
384
|
|
Cash contributions
|
|
|
(1
|
)
|
|
|
(2
|
)
|
|
|
(3
|
)
|
Prior years adjustment related to capital expenditures previously reported in property, plant and equipment
|
|
|
57
|
|
|
|
|
|
|
|
57
|
|
Depreciation and amortization
|
|
|
(19
|
)
|
|
|
(9
|
)
|
|
|
(28
|
)
|
Effect of exchange rate changes
|
|
|
|
|
|
|
(13
|
)
|
|
|
(13
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments in PO joint venturesDecember 31, 2015
|
|
$
|
296
|
|
|
$
|
101
|
|
|
$
|
397
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In 2015, we reclassified a total of $57 million related to cash contributions in prior years associated with
turnaround and other investment activities that were previously classified in property, plant and equipment.
9.
Equity Investments
Our PO joint ventures, which are also accounted for using the equity method of accounting, are discussed in Note 8 to
the accompanying Consolidated Financial Statements and are, therefore, not included in the following discussion.
Our remaining principal
direct and indirect equity investments are as follows at December 31:
|
|
|
|
|
Percent of Ownership
|
|
2016
|
|
2015
|
Basell Orlen Polyolefins Sp. Z.o.o.
|
|
50.00%
|
|
50.00%
|
PolyPacific Pty. Ltd.
|
|
50.00%
|
|
50.00%
|
SunAllomer Ltd.
|
|
%
|
|
50.00%
|
Saudi Polyolefins Company
|
|
25.00%
|
|
25.00%
|
Saudi Ethylene & Polyethylene Company Ltd.
|
|
25.00%
|
|
25.00%
|
Al-Waha
Petrochemicals Ltd.
|
|
20.95%
|
|
20.95%
|
Polymirae Co. Ltd.
|
|
50.00%
|
|
42.59%
|
HMC Polymers Company Ltd.
|
|
28.56%
|
|
28.56%
|
Indelpro S.A. de C.V.
|
|
49.00%
|
|
49.00%
|
Ningbo ZRCC Lyondell Chemical Co. Ltd.
|
|
26.65%
|
|
26.65%
|
Ningbo ZRCC Lyondell Chemical Marketing Co.
|
|
50.00%
|
|
50.00%
|
NOC Asia Ltd.
|
|
40.00%
|
|
40.00%
|
Geosel
|
|
27.00%
|
|
27.00%
|
86
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
The changes in our equity investments are as follows:
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
Millions of dollars
|
|
2016
|
|
|
2015
|
|
Beginning balance
|
|
$
|
1,608
|
|
|
$
|
1,636
|
|
Income from equity investments
|
|
|
367
|
|
|
|
339
|
|
Distribution of earnings, net of tax
|
|
|
(385
|
)
|
|
|
(285
|
)
|
Purchase of additional ownership interest in Polymirae Co. Ltd.
|
|
|
38
|
|
|
|
|
|
Sale of ownership interest in SunAllomer Ltd.
|
|
|
(58
|
)
|
|
|
|
|
Currency exchange effects
|
|
|
8
|
|
|
|
(63
|
)
|
Other
|
|
|
(3
|
)
|
|
|
(19
|
)
|
|
|
|
|
|
|
|
|
|
Ending balance
|
|
$
|
1,575
|
|
|
$
|
1,608
|
|
|
|
|
|
|
|
|
|
|
In September 2016, we received proceeds of $72 million from the sale of our ownership interest in SunAllomer Ltd.,
our joint venture in Japan. Also in September 2016, we purchased a net additional 7.41% interest in Polymirae Co. Ltd., our joint venture in Korea, for $36 million.
The subsidiary that holds the Companys equity interest in
Al-Waha
Petrochemicals Ltd. has a minority shareholder, which holds 16.21% of its equity. The equity
interest held by the minority shareholder can be called by the Company or can be put to the Company by the minority interest shareholder at any time. The price of the call option is the nominal value of the shares (initial $18 million
investment) plus accrued interest based on LIBOR plus 40 basis points, less paid dividends. The price of the put option is 1 plus the minority shareholders undistributed
pro-rata
earnings. On
November 9, 2016, Basell International Holdings, B.V. notified the minority shareholder of its intention to exercise the option to purchase all of the minority shareholders shares. The effective date of transfer is scheduled for April 2017 at
an Option price of $21 million, which is based on the option valuation as of June 30, 2016.
Summarized balance sheet information of
the Companys investments accounted for under the equity method are as follows at December 31:
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
Millions of dollars
|
|
2016
|
|
|
2015
|
|
Current assets
|
|
$
|
2,436
|
|
|
$
|
2,750
|
|
Noncurrent assets
|
|
|
4,687
|
|
|
|
5,032
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
|
7,123
|
|
|
|
7,782
|
|
Current liabilities
|
|
|
2,008
|
|
|
|
2,153
|
|
Noncurrent liabilities
|
|
|
1,668
|
|
|
|
1,963
|
|
|
|
|
|
|
|
|
|
|
Net assets
|
|
$
|
3,447
|
|
|
$
|
3,666
|
|
|
|
|
|
|
|
|
|
|
87
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
Summarized income statement information of the Companys investments accounted for under the equity
method are set forth below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
Millions of dollars
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
Revenues
|
|
$
|
6,608
|
|
|
$
|
8,017
|
|
|
$
|
9,824
|
|
Cost of sales
|
|
|
(4,933
|
)
|
|
|
(6,370
|
)
|
|
|
(8,366
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
1,675
|
|
|
|
1,647
|
|
|
|
1,458
|
|
Net operating expenses
|
|
|
(229
|
)
|
|
|
(196
|
)
|
|
|
(220
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
1,446
|
|
|
|
1,451
|
|
|
|
1,238
|
|
Interest income
|
|
|
8
|
|
|
|
7
|
|
|
|
6
|
|
Interest expense
|
|
|
(79
|
)
|
|
|
(66
|
)
|
|
|
(83
|
)
|
Foreign currency translation
|
|
|
(13
|
)
|
|
|
(29
|
)
|
|
|
(13
|
)
|
Other income, net
|
|
|
23
|
|
|
|
44
|
|
|
|
27
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
1,385
|
|
|
|
1,407
|
|
|
|
1,175
|
|
Provision for income taxes
|
|
|
(303
|
)
|
|
|
(299
|
)
|
|
|
(229
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
1,082
|
|
|
$
|
1,108
|
|
|
$
|
946
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The difference between our carrying value and the underlying equity in the net assets of our equity investments are
assigned to the investments assets and liabilities based on an analysis of the factors giving rise to the basis difference. The amortization of the basis difference is included in Income from equity investments in the Consolidated Statements
of Income.
10. Prepaid Expenses and Other Current Assets and Other Assets
The components of Prepaid expenses and other current assets were as follows at December 31:
|
|
|
|
|
|
|
|
|
Millions of dollars
|
|
2016
|
|
|
2015
|
|
Repurchase agreements
|
|
$
|
369
|
|
|
$
|
289
|
|
Renewable identification numbers
|
|
|
123
|
|
|
|
301
|
|
Advances to suppliers
|
|
|
37
|
|
|
|
54
|
|
Income taxes
|
|
|
82
|
|
|
|
315
|
|
VAT receivables
|
|
|
95
|
|
|
|
113
|
|
Prepaid insurance
|
|
|
28
|
|
|
|
33
|
|
Financial derivatives
|
|
|
61
|
|
|
|
20
|
|
Other taxes
|
|
|
9
|
|
|
|
12
|
|
Other
|
|
|
119
|
|
|
|
89
|
|
|
|
|
|
|
|
|
|
|
Total prepaid expenses and other current assets
|
|
$
|
923
|
|
|
$
|
1,226
|
|
|
|
|
|
|
|
|
|
|
For information related to our repurchase agreements, see Note 14. The renewable identification numbers reflected above
represent a U.S. government established credit used to show compliance in meeting the Environmental Protection Agencys Renewable Fuel Standard.
88
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
The components of Other assets were as follows at December 31:
|
|
|
|
|
|
|
|
|
Millions of dollars
|
|
2016
|
|
|
2015
|
|
Deferred tax assets
|
|
$
|
192
|
|
|
$
|
205
|
|
Debt issuance costs
|
|
|
19
|
|
|
|
23
|
|
Company-owned life insurance
|
|
|
55
|
|
|
|
54
|
|
Financial derivatives
|
|
|
296
|
|
|
|
326
|
|
Pension assets
|
|
|
13
|
|
|
|
12
|
|
Other
|
|
|
43
|
|
|
|
54
|
|
|
|
|
|
|
|
|
|
|
Total other assets
|
|
$
|
618
|
|
|
$
|
674
|
|
|
|
|
|
|
|
|
|
|
11. Accrued Liabilities
Accrued liabilities consisted of the following components at December 31:
|
|
|
|
|
|
|
|
|
Millions of dollars
|
|
2016
|
|
|
2015
|
|
Payroll and benefits
|
|
$
|
334
|
|
|
$
|
415
|
|
Renewable identification numbers
|
|
|
136
|
|
|
|
322
|
|
Product sales rebates
|
|
|
147
|
|
|
|
165
|
|
Taxes other than income taxes
|
|
|
177
|
|
|
|
217
|
|
Income taxes
|
|
|
311
|
|
|
|
319
|
|
Interest
|
|
|
142
|
|
|
|
132
|
|
Share repurchases
|
|
|
21
|
|
|
|
45
|
|
Deferred revenues
|
|
|
22
|
|
|
|
57
|
|
Restructuring
|
|
|
12
|
|
|
|
20
|
|
Priority and administrative claims
|
|
|
10
|
|
|
|
10
|
|
Other
|
|
|
103
|
|
|
|
108
|
|
|
|
|
|
|
|
|
|
|
Total accrued liabilities
|
|
$
|
1,415
|
|
|
$
|
1,810
|
|
|
|
|
|
|
|
|
|
|
For information related to the increase in income taxes, see Note 18. For information related to share repurchases, see
Note 20.
89
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
12. Debt
Long-term loans, notes and other long-term debt net of unamortized discount and debt issuance cost consisted of the following as of December 31:
|
|
|
|
|
|
|
|
|
Millions of dollars
|
|
2016
|
|
|
2015
|
|
Senior Notes due 2019, $2,000 million, 5.0% ($10 million of debt issuance cost)
|
|
$
|
1,906
|
|
|
$
|
1,943
|
|
Senior Notes due 2021, $1,000 million, 6.0% ($9 million of debt issuance cost)
|
|
|
988
|
|
|
|
989
|
|
Senior Notes due 2024, $1,000 million, 5.75% ($9 million of debt issuance cost)
|
|
|
991
|
|
|
|
990
|
|
Senior Notes due 2055, $1,000 million, 4.625% ($16 million of discount; $12 million of debt issuance
cost)
|
|
|
972
|
|
|
|
972
|
|
Guaranteed Notes due 2044, $1,000 million, 4.875% ($11 million of discount; $10 million of debt issuance
cost)
|
|
|
979
|
|
|
|
979
|
|
Guaranteed Notes due 2043, $750 million, 5.25% ($22 million of discount; $7 million of debt issuance
cost)
|
|
|
721
|
|
|
|
721
|
|
Guaranteed Notes due 2023, $750 million, 4% ($7 million of discount; $4 million of debt issuance
cost)
|
|
|
739
|
|
|
|
737
|
|
Guaranteed Notes due 2027, $300 million, 8.1%
|
|
|
300
|
|
|
|
300
|
|
Guaranteed Notes due 2022, 750 million, 1.875% ($3 million of discount; $3 million of debt issuance
cost)
|
|
|
785
|
|
|
|
|
|
Other
|
|
|
6
|
|
|
|
44
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
8,387
|
|
|
|
7,675
|
|
Less current maturities
|
|
|
(2
|
)
|
|
|
(4
|
)
|
|
|
|
|
|
|
|
|
|
Long-term
debt
|
|
$
|
8,385
|
|
|
$
|
7,671
|
|
|
|
|
|
|
|
|
|
|
Our 5% Senior Notes due 2019 include gains of $42 million and $35 million for the years ended December 31,
2016 and 2015, respectively, related to adjustments for our
fixed-for-floating
interest rate swaps, which are recognized in Interest expense in the Consolidated
Statements of Income. Since inception in 2014, we have recognized net gains of $84 million related to adjustments for these
fixed-for-floating
interest rate swaps.
Our 6% Senior Notes due 2021 also includes a $3 million gain related to our
fixed-for-floating
interest rate swaps. This gain is also recognized in interest
expense.
Short-term loans, notes and other short-term debt consisted of the following:
|
|
|
|
|
|
|
|
|
Millions of dollars
|
|
2016
|
|
|
2015
|
|
$2,500 million Senior Revolving Credit Facility
|
|
$
|
|
|
|
$
|
|
|
$900 million U.S. Receivables Securitization Facility
|
|
|
|
|
|
|
|
|
450 million European Receivables Securitization Facility
|
|
|
|
|
|
|
|
|
Commercial paper
|
|
|
500
|
|
|
|
323
|
|
Financial payables to equity investees
|
|
|
2
|
|
|
|
4
|
|
Precious metal financings
|
|
|
90
|
|
|
|
26
|
|
Other
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total short-term debt
|
|
$
|
594
|
|
|
$
|
353
|
|
|
|
|
|
|
|
|
|
|
Aggregate maturities of debt during the next five years are $596 million in 2017, $1 million in 2018, $2,001
million in 2019, $1,000 million in 2021 and $5,593 million thereafter. There are no scheduled maturities of debt in 2020.
90
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
Long-Term Debt
Guaranteed Notes due 2022
In March 2016, LYB International Finance II B.V. (LYB Finance II), a direct, 100% owned finance subsidiary of LyondellBasell Industries N.V., as defined
in Rule
3-10(b)
of Regulation
S-X,
issued 750 million of 1.875% guaranteed notes due 2022 at a discounted price of 99.607%.
These unsecured notes, which are fully and unconditionally guaranteed by LyondellBasell Industries N.V., rank equally in right of payment to all of LYB
Finance IIs existing and future unsecured indebtedness and to all of LyondellBasell N.V.s existing and future unsubordinated indebtedness. There are no significant restrictions that would impede LyondellBasell N.V., as guarantor, from
obtaining funds by dividend or loan from its subsidiaries.
The indenture governing these notes contains limited covenants, including those
restricting our ability and the ability of our subsidiaries to incur indebtedness secured by significant property or by capital stock of subsidiaries that own significant property, enter into certain sale and lease-back transactions with respect to
any significant property or enter into consolidations, mergers or sales of all or substantially all of our assets.
The notes may be redeemed
before the date that is three months prior to the scheduled maturity date at a redemption price equal to the greater of 100% of the principal amount of the notes redeemed and the sum of the present values of the remaining scheduled payments of
principal and interest (discounted at the applicable Comparable Government Bond Rate plus 35 basis points) on the notes to be redeemed. The notes may also be redeemed on or after the date that is three months prior to the scheduled maturity date of
the notes at a redemption price equal to 100% of the principal amount of the notes redeemed plus accrued and unpaid interest. The notes are also redeemable upon certain tax events.
Senior Notes due 2055
In March 2015, we issued $1,000 million of 4.625% Notes due 2055 at a discounted price of 98.353%.
These unsecured notes rank equally in right of payment to all of LyondellBasell N.V.s existing and future unsubordinated indebtedness.
The indenture governing these notes contains limited covenants, including those restricting our ability and the ability of our subsidiaries to incur indebtedness secured by significant property or by
capital stock of subsidiaries that own significant property, enter into certain sale and lease-back transactions with respect to any significant property or enter into consolidations, mergers or sales of all or substantially all of our assets.
The notes may be redeemed before the date that is six months prior to the scheduled maturity date at a redemption price equal to the greater
of 100% of the principal amount of the notes redeemed and the sum of the present values of the remaining scheduled payments of principal and interest (discounted at the applicable Treasury Yield plus 35 basis points) on the notes to be redeemed. The
notes may also be redeemed on or after the date that is six months prior to the final maturity date of the notes at a redemption price equal to 100% of the principal amount of the notes redeemed plus accrued and unpaid interest.
Guaranteed Notes due 2044
In February 2014, LYB International Finance B.V. (LYB Finance), a direct, 100% owned finance subsidiary
of LyondellBasell Industries N.V., as defined in Rule
3-10(b)
of Regulation
S-X,
issued $1,000 million of 4.875% guaranteed notes due 2044 at a discounted price of
98.831%.
These unsecured notes, which are fully and unconditionally guaranteed by LyondellBasell Industries N.V., rank equally in right of
payment to all of LYB Finances existing and future unsecured indebtedness and to all of LyondellBasells existing and future unsubordinated indebtedness. There are no significant restrictions that
91
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
would impede the Guarantor from obtaining funds by dividend or loan from its subsidiaries. Subsidiaries are generally prohibited from entering into arrangements that would limit their ability to
make dividends to or enter into loans with the Guarantor.
The indenture governing these notes contains limited covenants, including those
restricting our ability and the ability of our subsidiaries to incur indebtedness secured by significant property or by capital stock of subsidiaries that own significant property, enter into certain sale and lease-back transactions with respect to
any significant property or enter into consolidations, mergers or sales of all or substantially all of our assets.
The notes may be redeemed
before the date that is six months prior to the scheduled maturity date at a redemption price equal to the greater of 100% of the principal amount of the notes redeemed and the sum of the present values of the remaining scheduled payments of
principal and interest (discounted at the applicable Treasury Yield plus 20 basis points) on the notes to be redeemed. The notes may also be redeemed on or after the date that is six months prior to the final maturity date of the notes at a
redemption price equal to 100% of the principal amount of the notes redeemed plus accrued and unpaid interest.
Guaranteed Notes due 2023
and 2043
In July 2013, LYB Finance issued $750 million of 4% guaranteed notes due 2023 and $750 million of 5.25% Notes due 2043 at discounted prices of 98.678% and 97.004%, respectively.
These unsecured notes, which are fully and unconditionally guaranteed by LyondellBasell Industries N.V., rank equally in right of payment to all of LYB
Finances existing and future unsecured indebtedness and to all of LyondellBasells existing and future unsubordinated indebtedness. There are no significant restrictions that would impede the Guarantor from obtaining funds by dividend or
loan from its subsidiaries. Subsidiaries are generally prohibited from entering into arrangements that would limit their ability to make dividends to or enter into loans with the Guarantor.
The indenture governing these notes contains limited covenants, including those restricting our ability and the ability of our subsidiaries to incur indebtedness secured by significant property or by
capital stock of subsidiaries that own significant property, enter into certain sale and lease-back transactions with respect to any significant property or enter into consolidations, mergers or sales of all or substantially all of our assets.
The notes may be redeemed and repaid, in whole or in part, at any time and from time to time prior to maturity at a redemption price equal to
the greater of 100% of the principal amount of the notes redeemed, and the sum of the present values of the remaining scheduled payments of principal and interest on the notes to be redeemed. Such interest will be discounted to the date of
redemption on a semi-annual basis at the applicable Treasury Yield plus 25 basis points in the case of the 4% Notes due 2023 and plus 30 basis points in the case of the 5.25% Notes due 2043.
Senior Notes due 2019, 2021 and 2024
In April 2012, we issued $2,000 million aggregate principal amount of 5% senior notes due 2019 and $1,000 million aggregate principal amount of
5.75% senior notes due 2024, each at an issue price of 100%. In November 2011, we issued $1,000 million of 6% senior notes due 2021.
The
indentures governing the 5%, 5.75% and 6% Senior Notes contain limited covenants, including those restricting our ability and the ability of our subsidiaries to incur indebtedness secured by any property or assets, enter into certain sale and
lease-back transactions with respect to any assets or enter into consolidations, mergers or sales of all or substantially all of our assets.
These notes may be redeemed and repaid, in whole or in part, at any time and from time to time prior to the date that is 90 days prior to the scheduled
maturity date of the notes at a redemption price equal to 100% of the
92
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
principal amount of the notes redeemed plus a premium for each note redeemed equal to the greater of 1.00% of the then outstanding principal amount of the note and the excess of: (a) the
present value at such redemption date of (i) the principal amount of the note at maturity plus (ii) all required interest payments due on the note through maturity (excluding accrued but unpaid interest), computed using a discount rate
equal to the Treasury Rate as of such redemption date plus 50 basis points; over (b) the outstanding principal amount of the note. These notes may also be redeemed, in whole or in part, at any time on or after the date which is 90 days prior to
the final maturity date of the notes, at a redemption price equal to 100% of the principal amount of the notes redeemed plus accrued and unpaid interest.
Guaranteed Notes due 2027
We have outstanding $300 million aggregate principal amount of 8.1% Guaranteed Notes due 2027. These notes, which are guaranteed by LyondellBasell Industries
Holdings B.V., a subsidiary of LyondellBasell N.V., contain certain restrictions with respect to the level of maximum debt that can be incurred and security that can be granted by certain operating companies that are direct or indirect wholly owned
subsidiaries of LyondellBasell Industries Holdings B.V.
The 2027 Notes contain customary provisions for default, including, among others, the
non-payment
of principal and interest, certain failures to perform or observe obligations under the Agreement on the notes the occurrence of certain defaults under other indebtedness, failure to pay certain
indebtedness and the insolvency or bankruptcy of certain LyondellBasell N.V. subsidiaries.
Short-Term Debt
Senior Revolving Credit Facility
In June 2016, the term of our revolving credit facility was extended for one year to June 2021 pursuant to a
consent agreement. We also amended the revolving credit facility in June 2016 to increase its size to $2,500 million. All other material terms of the revolving credit facility remained unchanged.
The revolving credit facility may be used for dollar and euro denominated borrowings, has a $500 million sublimit for dollar and euro denominated
letters of credit, a $1,000 million uncommitted accordion feature, and supports our commercial paper program. The aggregate balance of outstanding borrowings and letters of credit under the facility may not exceed $2,500 million at any
given time. Borrowings under the facility bear interest at a Base Rate or LIBOR, plus an applicable margin. Additional fees are incurred for the average daily unused commitments.
The facility contains customary covenants and warranties, including specified restrictions on indebtedness and liens. In addition, we are required to maintain a leverage ratio at the end of every quarter
of 3.50 to 1.00 or less for the period covering the most recent four quarters. We are in compliance with these covenants as of December 31, 2016.
At December 31, 2016, we had $500 million of outstanding commercial paper, no outstanding letters of credit and no outstanding borrowings under the facility.
Commercial Paper Program
In June 2016, in connection with the increase of our revolving credit facility, we increased the size of our
commercial paper program to $2,500 million. We may issue up to $2,500 million of privately placed, unsecured, short-term promissory notes (commercial paper) under this program, which is backed by our $2,500 million Senior
Revolving Credit Facility. Proceeds from the issuance of commercial paper may be used for general corporate purposes, including dividends and share repurchases. Interest rates on the commercial paper outstanding at December 31, 2016 are based
on the term of the notes and range from 75 to 100 basis points.
93
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
U.S. Receivables Securitization Facility
Our $900 million U.S. accounts receivable
securitization facility, which expires in 2018, has a purchase limit of $900 million and a $300 million uncommitted accordion feature. 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. The bankruptcy-remote subsidiary may then, at its option and subject to a borrowing base of eligible receivables, sell undivided interests in
the pool of trade receivables to financial institutions participating in the facility. In the event of liquidation, the bankruptcy-remote subsidiarys assets will be used to satisfy the claims of its creditors prior to any assets or value in
the bankruptcy-remote subsidiary becoming available to us. We are responsible for servicing the receivables. This facility also provides for the issuance of letters of credit up to $200 million. The term of the securitization facility may be
extended in accordance with the provisions of the agreement.
The facility is also subject to customary warranties and covenants, including
limits and reserves and the maintenance of specified financial ratios. We are required to maintain a leverage ratio at the end of every fiscal quarter of 3.50 to 1.00 or less for the period covering the most recent four quarters. Performance
obligations under the facility are guaranteed by our parent company.
At December 31, there were no borrowings or letters of credit
outstanding under the facility.
European Receivables Securitization Facility
Our 450 million European receivables
securitization facility expired in April 2016.
Precious Metal Financings
We enter into lease agreements for precious metals which
are used in our production processes. All precious metal borrowings are classified as Short-term debt.
Weighted Average Interest
Rate
At December 31, 2016 and 2015, our weighted average interest rates on outstanding short-term debt were 0.9% and 0.7%, respectively.
Debt Discount and Issuance Costs
Amortization of debt discount and debt issuance costs resulted in amortization expense of $16 million for each year ended December 31, 2016 and 2015,
and $20 million for the year ended December 31, 2014, which is included in Interest expense in the Consolidated Statements of Income.
Other Information
On December 28, 2016, LYB International Finance III, LLC was formed as a private company with limited liability in
Delaware. LYB International Finance III, LLC is a direct, 100% owned finance subsidiary of LyondellBasell N.V., as defined in Rule
3-10(b)
of Regulation
S-X.
Any debt
securities issued by LYB International Finance III, LLC will be fully and unconditionally guaranteed by LyondellBasell N.V.
13. Lease Commitments
We lease office facilities, railcars, vehicles, and other equipment under operating leases. Some leases contain
renewal provisions, purchase options and escalation clauses.
94
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
The aggregate future estimated payments under these commitments are:
|
|
|
|
|
Millions of dollars
|
|
|
|
2017
|
|
$
|
341
|
|
2018
|
|
|
286
|
|
2019
|
|
|
211
|
|
2020
|
|
|
173
|
|
2021
|
|
|
146
|
|
Thereafter
|
|
|
493
|
|
|
|
|
|
|
Total minimum lease payments
|
|
$
|
1,650
|
|
|
|
|
|
|
Rental expense for the years ended December 31, 2016, 2015 and 2014 was $426 million, $422 million and
$412 million, respectively.
14. Financial Instruments
Cash Concentration
Our cash equivalents are placed in high-quality commercial paper, money market funds, marketable securities with maturities
less than three months and time deposits with major international banks and financial institutions.
Market Risks
We are exposed
to market risks, such as changes in commodity pricing, currency exchange rates and interest rates. To manage the volatility related to these exposures, we selectively enter into derivative transactions pursuant to our risk management policies.
Derivative instruments are recorded at fair value on the balance sheet. Gains and losses related to changes in the fair value of derivative instruments not designated as hedges are recorded in earnings. For derivatives that have been designated as
fair value hedges, the gains and losses of the derivatives and hedged instruments are recorded in earnings. For derivatives designated as cash flow and net investment hedges, the effective portion of the gains and losses is recorded in Other
comprehensive income (loss). The ineffective portion of cash flow and net investment hedges is recorded in earnings.
Marketable
Securities
We invest cash in investment-grade securities for periods generally not exceeding three years. Investments in securities with original maturities of three months or less are classified as Cash and cash equivalents. At
December 31, 2016 and 2015, we had marketable securities classified as Cash and cash equivalents of $351 million and $575 million, respectively.
We also have investments in marketable securities classified as
available-for-sale
and
held-to-maturity.
These securities are included in Short-term investments on the Consolidated Balance Sheets. Investments classified as
available-for-sale
are carried at estimated fair value with unrealized gains and losses recorded as a component of Accumulated other comprehensive income
(AOCI). Investments classified as
held-to-maturity
are carried at amortized cost. We periodically review our
available-for-sale
and
held-to-maturity
securities for other-than-temporary declines in fair value below the cost basis, and
when events or changes in circumstances indicate the carrying value of an asset may not be recoverable, the investment is written down to fair value, establishing a new cost basis.
Repurchase Agreements
We invest in
tri-party
repurchase agreements. Under these agreements, we make cash purchases of securities according to a
pre-agreed
profile from our counterparties. The counterparties have an obligation to repurchase, and we have an obligation to sell, the same or substantially the same securities at a
pre-defined
date for a price equal to the purchase price plus interest. These securities, which pursuant to our
95
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
internal policies are held by a third-party custodian and must generally have a minimum collateral value of 102%, secure the counterpartys obligation to repurchase the securities. Depending
upon maturity, these
tri-party
repurchase agreements are treated as short-term loans receivable and are reflected in Prepaid expenses and other current assets or as long-term loans receivable reflected in
Other investments and long-term receivables on our Consolidated Balance Sheets. The balance of our investment at December 31, 2016 and 2015 was $369 million and $387 million, respectively.
Commodity Prices
We are exposed to commodity price volatility related to purchases of natural gas liquids, crude oil and other raw materials
and sales of our products. We selectively use
over-the-counter
commodity swaps, options and exchange traded futures contracts with various terms to manage the volatility
related to these risks. In addition, we are exposed to volatility on the prices of precious metals to the extent that we have obligations, classified as embedded derivatives, tied to the price of precious metals associated with secured borrowings.
At December 31, 2016, the outstanding commodity derivatives designated as cash-flow hedges mature from January 2017 to December 2019.
Foreign Currency Rates
We have significant worldwide operations. The functional currencies of our consolidated subsidiaries through which we
operate are primarily the U.S. dollar and the euro. We enter into transactions denominated in currencies other than our designated functional currencies. As a result, we are exposed to foreign currency risk on receivables and payables. We maintain
risk management control policies intended to monitor foreign currency risk attributable to our outstanding foreign currency balances. These control policies involve the centralization of foreign currency exposure management, the offsetting of
exposures and the estimating of expected impacts of changes in foreign currency rates on our earnings. We enter into foreign currency forward contracts to reduce the effects of our net currency exchange exposures. At December 31, 2016, foreign
currency forward contracts in the notional amount of $39 million, maturing in January 2017 to March 2017, were outstanding.
For forward
contracts that economically hedge recognized monetary assets and liabilities in foreign currencies and that are not designated as net investment hedges, hedge accounting is not applied. Changes in the fair value of foreign currency forward
contracts, which are reported in the Consolidated Statements of Income, are offset in part by the currency translation results recognized on the assets and liabilities.
Foreign Currency Gain (Loss)
Other income, net, in the Consolidated Statements of Income reflected losses of $4 million and $7 million in 2016 and 2015, respectively, and a gain of
$15 million in 2014.
Basis Swaps
In September 2015, we entered into 850 million of cross-currency
floating-to-floating
interest rate swaps (basis swaps) to reduce the volatility in stockholders equity resulting from changes in currency exchange rates of
our foreign subsidiaries with respect to the U.S. dollar. Under the terms of these contracts, which have been designated as net investment hedges, we will make interest payments in euros at 3 Month EURIBOR plus basis and will receive interest in
U.S. dollars at 3 Month LIBOR. Upon the maturities of these contracts, we will pay the principal amount in euros and receive U.S. dollars from our counterparties.
We use the long-haul method to assess hedge effectiveness using a regression analysis approach under the hypothetical derivative method. We perform the regression analysis of our basis swap contracts at
least on a quarterly basis over an observation period of three years, utilizing data that is relevant to the hedge duration. We use the forward method to measure ineffectiveness.
The effective portion of the unrealized gains and losses on these basis swap contracts is reported within Foreign currency translation adjustments in Accumulated other comprehensive loss and reclassified
to earnings only
96
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
when realized upon the sale or upon complete or substantially complete liquidation of the investment in the foreign entity. Cash flows from basis swaps are reported in Cash flows from investing
activities in the Consolidated Statement of Cash Flows.
In September 2016, 450 million of our basis swaps expired. Upon settlement
of these basis swap contracts, which had a notional value of $500 million, we paid 450 million ($506 million at the expiry spot rate) to our counterparties and received $500 million from our counterparties. The
$6 million loss is reflected in foreign currency translation adjustments in Accumulated other comprehensive loss. Cash flows from the settlement of these basis swap contracts are reported in Cash flows from investing activities in the
Consolidated Statements of Cash Flows.
There was no ineffectiveness recorded during the years ended December 31, 2016 and 2015 related
to these basis swaps.
The following table summarizes the notional and fair value of our basis swaps outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
|
December 31, 2015
|
|
Millions of dollars
|
|
Notional Value
|
|
|
Fair Value
|
|
|
Notional Value
|
|
|
Fair Value
|
|
Basis swaps expiring in 2016
|
|
$
|
|
|
|
$
|
|
|
|
$
|
500
|
|
|
$
|
10
|
|
Basis swaps expiring in 2017
|
|
|
305
|
|
|
|
15
|
|
|
|
305
|
|
|
|
6
|
|
Basis swaps expiring in 2018
|
|
|
139
|
|
|
|
6
|
|
|
|
139
|
|
|
|
2
|
|
Forward Exchange
Contract
s
In October 2016, we entered into forward exchange contracts with an
aggregate notional value of 275 million ($299 million) to mitigate the risk associated with the fluctuations in the Euro to U.S. Dollar exchange rate related to our investments in foreign subsidiaries. There was no ineffectiveness
recorded during the year ended December 31, 2016 related to these forward exchange contracts.
We use the critical terms match to assess
both prospective and retrospective hedge effectiveness by comparing the spot rate change in the Euro notes and the spot rate change in the designated net investment. We use the hypothetical derivative method to measure hedge ineffectiveness.
In December 2015, we entered into forward exchange contracts with an aggregate notional value of 750 million ($795 million) to
mitigate the risk associated with the fluctuations in the Euro to U.S. Dollar exchange rate related to our investments in foreign subsidiaries. We elected to designate these forward exchange contracts as net investment hedges. The effective
portion of the gains or losses was recorded within foreign currency translations adjustments in Accumulated other comprehensive income (loss). In periods where the hedging relationship was deemed ineffective, changes in the fair value were recorded
directly to Other income, net in the Consolidated Statements of Income. Cash flows from these forward exchange contracts are reported in Cash flows from investing activities in the Consolidated Statement of Cash Flows.
On March 31, 2016, the forward exchange contracts entered into in December 2015 expired. Upon settlement of these contracts, we paid
750 million ($850 million at the expiry spot rate) to our counterparties and received $795 million from our counterparties. The $55 million difference, which includes a $30 million loss in the first quarter of 2016, is
reflected within foreign currency translations adjustments in Accumulated other comprehensive loss. Cash flows from these forward exchange contracts are reported in Cash flows from investing activities in the Consolidated Statement of Cash Flows.
There was no ineffectiveness recorded for this hedging relationship in 2016. In 2015, we recognized a $1 million loss related to ineffectiveness.
97
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
Guaranteed Euro Notes Due 2022
In 2016, we issued euro denominated notes payable due 2022
(Euro notes) with notional amounts totaling 750 million. To mitigate the risk to our investments in foreign subsidiaries associated with fluctuations in the euro to U.S. dollar exchange rate, we designated these Euro notes as
a net investment hedge.
We use the critical terms match to assess both prospective and retrospective hedge effectiveness by comparing the
spot rate change in the Euro notes and the spot rate change in the designated net investment. We use the hypothetical derivative method to measure hedge ineffectiveness.
The effective portion of the gain or loss is recorded within foreign currency translation adjustments in Accumulated other comprehensive loss and will be reclassified to earnings only when realized upon
the sale of or the complete or substantially complete liquidation of the investment in the foreign entity. In periods where the hedging relationship is deemed ineffective, changes in remeasurement of the Euro notes due to changes in the spot
exchange rate will be recorded directly to Other income, net in the Consolidated Statements of Income. Cash flows related to our Euro notes are reported in Cash flows from financing activities and related interest payments are reported in Cash flows
from operating activities in the Consolidated Statement of Cash Flows.
There was no ineffectiveness recorded for this hedging relationship in
the year ended December 31, 2016.
Cross-Currency Swaps
We have cross-currency swap contracts that reduce our exposure to the
foreign currency exchange risk associated with certain intercompany loans. Under the terms of these contracts, which have been designated as cash flow hedges, we make interest payments in euros and receive interest in U.S. dollars. Upon the
maturities of these contracts, we will pay the principal amount of the loans in euros and receive U.S. dollars from our counterparties.
We
use the long-haul method to assess hedge effectiveness using a regression analysis approach under the hypothetical derivative method. We perform the regression analysis over an observation period of three years, utilizing data that is relevant to
the hedge duration. We use the dollar offset method under the hypothetical derivative method to measure ineffectiveness.
The effective
portion of the unrealized gains and losses on these cross-currency swap contracts is reported in Accumulated other comprehensive loss and reclassified to earnings over the period that the hedged intercompany loans affect earnings based on changes in
spot rates. The ineffective portion of the unrealized gains and losses is recorded directly to Other income, net in the Consolidated Statements of Income. In addition, the swaps are
marked-to-market
each reporting period with the euro notional values measured based on the current foreign exchange spot rate. There was no ineffectiveness recorded
during the years ended December 31, 2016, 2015 and 2014.
98
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
The following table summarizes our cross-currency swaps outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
|
December 31, 2015
|
|
Millions of dollars, except expiration date and rates
|
|
Expiration
Date
|
|
|
Average
Interest Rate
|
|
|
Notional
Value
|
|
|
Fair
Value
|
|
|
Notional
Value
|
|
|
Fair
Value
|
|
Pay Euro
|
|
|
2021
|
|
|
|
4.55
|
%
|
|
$
|
1,000
|
|
|
$
|
146
|
|
|
$
|
1,000
|
|
|
$
|
141
|
|
Receive U.S. dollars
|
|
|
|
|
|
|
6.00
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pay Euro
|
|
|
2024
|
|
|
|
4.37
|
%
|
|
|
1,000
|
|
|
|
134
|
|
|
|
1,000
|
|
|
|
145
|
|
Receive U.S. dollars
|
|
|
|
|
|
|
5.75
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pay Euro
|
|
|
2027
|
|
|
|
3.69
|
%
|
|
|
300
|
|
|
|
5
|
|
|
|
300
|
|
|
|
14
|
|
Receive U.S. dollars
|
|
|
|
|
|
|
5.49
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forward-Starting Interest Rate Swaps
In March 2015, we entered into forward-starting interest rate swaps to
mitigate the risk of adverse changes in the benchmark interest rates on the anticipated refinancing of our senior notes due 2019. These interest rate swaps will be terminated upon debt issuance. The total notional amount of these forward-starting
interest rate swaps was $1,000 million at December 31, 2015. The ineffectiveness recorded for this hedging relationship was less than $1 million during each of the years ended December 31, 2016 and 2015.
In January 2015, we entered into forward-starting interest rate swaps with a total notional value of $750 million to mitigate the risk of adverse
changes in the benchmark interest rates on the Companys planned issuance of fixed-rate debt in 2015. These forward-starting interest rate swaps were terminated upon issuance of the $1,000 million senior notes due 2055 in March 2015. The
ineffectiveness recorded for this hedging relationship was less than $1 million during the year ended December 31, 2015.
In
February 2014, we entered into forward-starting interest rate swaps with a total notional value of $500 million to hedge the risk of adverse changes in the benchmark interest rates for anticipated fixed-rate debt issuances in 2014. The swap was
terminated upon issuance of the $1,000 million of guaranteed notes due 2044.
We elected to designate these forward-starting interest
rate swaps as cash flow hedges. The effective portion of the gains or losses is recorded in Accumulated other comprehensive loss. In periods where the hedging relationship is deemed ineffective, the ineffective portion of the changes in the fair
value will be recorded as Interest expense in the Consolidated Statements of Income. The related deferred gains and losses recognized in Accumulated other comprehensive loss are amortized to interest expense over the original term of the related
swaps using the effective interest method.
We use a regression analysis approach under the hypothetical derivative method to assess both
prospective and retrospective hedge effectiveness. We use the dollar-offset method under the hypothetical derivative method to measure hedge ineffectiveness.
In 2016, there was no settlement of our forward-starting swap agreements. In 2015 and 2014, we recognized a gain of $15 million and a loss of $17 million, respectively, in Accumulated other
comprehensive loss related to the settlement of our forward-starting interest rate swap agreements.
As of December 31, 2016, less than
$1 million (on a pretax basis) is scheduled to be reclassified as an increase to interest expense over the next twelve months.
99
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
Commodity swaps designated as cash-flow hedges
We have commodity swaps designated as
cash-flow
hedges to manage the volatility of the commodity price related to anticipated purchases of raw materials. We enter into
over-the-counter
commodity swaps
with one or more counterparties whereby these commodity swaps require us to pay a predetermined fixed price and receive a price based on the average monthly forward rate of a specified index for the specified nominated volumes.
We use the long-haul method to assess hedge effectiveness using a regression analysis approach under the hypothetical derivative method. We perform the
regression analysis monthly. We use the dollar offset method under the hypothetical derivative method to measure ineffectiveness.
The
effective portion of the unrealized gains and losses on these commodity swaps designated as cash-flow hedges is reported in Accumulated other comprehensive loss and reclassified to earnings in the same period or periods that the hedged forecasted
transaction affects earnings. The ineffective portion of the unrealized gains and losses is recorded directly to Other income, net in the Consolidated Statements of Income. There was no ineffectiveness recorded during the year ended
December 31, 2016.
As of December 31, 2016, less than $1 million (on a pretax basis) is scheduled to be reclassified as an
increase to cost of sales over the next twelve months.
Fixed-for-Floating
Interest Rate Swaps
In 2016, we entered
into U.S. dollar
fixed-for-floating
interest rate swaps with third party financial institutions to mitigate changes in the fair value of our $1,000 million 6%
senior notes due 2021 associated with the risk of variability in the 1 Month USD LIBOR rate (the benchmark interest rate).
In 2014, we
entered into U.S. dollar
fixed-for-floating
interest rate swaps with third party financial institutions to mitigate changes in the fair value of our $2,000 million
5% senior notes due 2019 associated with the risk of variability in the 3 Month USD LIBOR rate (the benchmark interest rate).
These interest
rate swaps are used as part of our current interest rate risk management strategy to achieve a desired proportion of variable versus fixed rate debt.
Under these arrangements, we exchange fixed-rate for floating-rate interest payments to effectively convert our fixed-rate debt to floating-rate debt. The fixed and variable cash payments related to the
interest rate swaps related to our 5% senior notes due 2019 are net settled semi-annually. The fixed and variable payments for the interest rate swaps related to our 6% senior notes due 2021 are settled semi-annually and monthly, respectively. These
payments are classified as Other, net, in the Cash flows from operating activities section of the Consolidated Statements of Cash Flows.
We
elected to designate these
fixed-for-floating
interest rate swaps as fair value hedges. We use the long-haul method to assess hedge effectiveness using a regression
analysis approach. We perform the regression analysis over an observation period of three years, utilizing data that is relevant to the hedge duration. We use the dollar offset method to measure ineffectiveness.
Changes in the fair value of the derivatives and changes in the value of the hedged items based on changes in the benchmark interest rate are recorded as
Interest expense in our Consolidated Statements of Income. We evaluate the effectiveness of the hedging relationship quarterly and calculate the changes in the fair value of the derivatives and the underlying hedged items separately. During the
years ended December 31, 2016, 2015 and 2014, we recognized net gains of $32 million, $44 million and $17 million, respectively, related to the ineffectiveness of our hedging relationships.
100
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
At December 31, 2016, we had outstanding interest rate swap agreements with notional amounts of
totaling $600 million, maturing on November 15, 2021, and notional amounts of $2,000 million, maturing on April 15, 2019.
Investments in marketable securities
The following table summarizes our investments in marketable securities at December 31:
|
|
|
|
|
|
|
|
|
Millions of dollars
|
|
2016
|
|
|
2015
|
|
Short-term investments:
|
|
|
|
|
|
|
|
|
Available-for-sale
securities, at fair
value
|
|
$
|
1,073
|
|
|
$
|
1,064
|
|
Held-to-maturity
securities, at
cost
|
|
|
74
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,147
|
|
|
$
|
1,064
|
|
|
|
|
|
|
|
|
|
|
The following table summarizes the amortized cost, gross unrealized gains and losses, and fair value of our
available-for-sale
and
held-to-maturity
securities that are outstanding as of December 31,
2016 and 2015. Refer to Note 15 for additional information regarding the fair value of these
available-for-sale
and
held-to-maturity
securities.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
Millions of dollars
|
|
Cost
|
|
|
Gross
Unrealized
Gains
|
|
|
Gross
Unrealized
Losses
|
|
|
Fair
Value
|
|
Available-for-sale
securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial paper
|
|
$
|
232
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
232
|
|
Bonds
|
|
|
141
|
|
|
|
|
|
|
|
|
|
|
|
141
|
|
Certificates of deposit
|
|
|
347
|
|
|
|
1
|
|
|
|
|
|
|
|
348
|
|
Limited partnership investments
|
|
|
350
|
|
|
|
2
|
|
|
|
|
|
|
|
352
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
available-for-sale
securities
|
|
$
|
1,070
|
|
|
$
|
3
|
|
|
$
|
|
|
|
$
|
1,073
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Held-to-maturity
securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Time deposits
|
|
$
|
74
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
74
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2015
|
|
Millions of dollars
|
|
Cost
|
|
|
Gross
Unrealized
Gains
|
|
|
Gross
Unrealized
Losses
|
|
|
Fair
Value
|
|
Available-for-sale
securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial paper
|
|
$
|
329
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
329
|
|
Bonds
|
|
|
175
|
|
|
|
|
|
|
|
|
|
|
|
175
|
|
Certificates of deposit
|
|
|
215
|
|
|
|
|
|
|
|
|
|
|
|
215
|
|
Limited partnership investments
|
|
|
350
|
|
|
|
|
|
|
|
(5
|
)
|
|
|
345
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
available-for-sale
securities
|
|
$
|
1,069
|
|
|
$
|
|
|
|
$
|
(5
|
)
|
|
$
|
1,064
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
101
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
Our limited partnership investments include investments in, among other things, equities and equity
related securities, debt securities, credit instruments, global interest rate products, currencies, commodities, futures, options, warrants and swaps. These investments, which include both long and short positions, may be redeemed at least
monthly with advance notice ranging up to ninety days. The fair value of these funds is estimated using the net asset value (NAV) per share of the respective pooled fund investment.
No losses related to other-than-temporary impairments of our
available-for-sale
and
held-to-maturity
investments have been recorded in Accumulated
other comprehensive loss during the years ended December 31, 2016, 2015 and 2014.
As of December 31, 2016, our
available-for-sale
securities had the following maturities: commercial paper securities held by the Company had maturities between one and six months; bonds had maturities
between one and thirty eight months; certificates of deposit mature between one and fifteen months; and limited partnership investments mature between one and three months. Our time deposits classified as
held-to-maturity
securities had maturities between three and six months.
The proceeds from
maturities and sales of our
available-for-sale
securities during the years ended December 31, 2016, 2015 and 2014 are summarized in the following table:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
Millions of dollars
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
Proceeds from maturities of securities
|
|
$
|
674
|
|
|
$
|
2,288
|
|
|
$
|
1,730
|
|
Proceeds from sales of securities
|
|
|
|
|
|
|
201
|
|
|
|
21
|
|
No gain or loss was realized in connection with the sales of our
available-for-sale
securities during the year ended December 31, 2016. We recognized realized gains of less than $1 million in connection with the sale of securities during the years ended
December 31, 2015 and 2014.
The specific identification method was used to identify the cost of the securities sold and the amounts
reclassified out of Accumulated other comprehensive loss into earnings.
During the year ended December 31, 2016, we had no sales or
maturities of our
held-to-maturity
securities and no transfers of investments classified as
held-to-maturity
to
available-for-sale.
102
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
The following table summarizes the fair value and unrealized losses related to
available-for-sale
and
held-to-maturity
securities that were in a continuous unrealized loss
position for less than and greater than twelve months as of December 31, 2016 and 2015.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
|
|
Less than 12 months
|
|
|
Greater than 12 months
|
|
Millions of dollars
|
|
Fair
Value
|
|
|
Unrealized
Loss
|
|
|
Fair
Value
|
|
|
Unrealized
Loss
|
|
Available-for-sale
securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Limited partnership investments
|
|
$
|
|
|
|
$
|
|
|
|
$
|
105
|
|
|
$
|
(3
|
)
|
|
|
|
|
December 31, 2015
|
|
|
|
Less than 12 months
|
|
|
Greater than 12 months
|
|
Millions of dollars
|
|
Fair
Value
|
|
|
Unrealized
Loss
|
|
|
Fair
Value
|
|
|
Unrealized
Loss
|
|
Available-for-sale
securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Limited partnership investments
|
|
$
|
345
|
|
|
$
|
(5
|
)
|
|
$
|
|
|
|
$
|
|
|
Financial Instruments
The following table summarizes financial instruments outstanding as of
December 31, 2016 and 2015 that are measured at fair value on a recurring basis. Refer to Note 15,
Fair Value Measurement,
for additional information regarding the fair value of financial instruments.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
|
December 31, 2015
|
|
Millions of dollars
|
|
Balance Sheet
Classification
|
|
Notional
Amount
|
|
|
Fair
Value
|
|
|
Notional
Amount
|
|
|
Fair
Value
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives designated as net investment hedges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basis swaps
|
|
Prepaid expenses
and other current
assets
|
|
$
|
305
|
|
|
$
|
15
|
|
|
$
|
500
|
|
|
$
|
10
|
|
|
|
Other assets
|
|
|
139
|
|
|
|
6
|
|
|
|
444
|
|
|
|
8
|
|
Forward exchange contracts
|
|
Prepaid expenses
and other current
assets
|
|
|
299
|
|
|
|
10
|
|
|
|
|
|
|
|
|
|
Derivatives designated as cash flow hedges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cross-currency swaps
|
|
Other assets
|
|
|
2,300
|
|
|
|
276
|
|
|
|
2,300
|
|
|
|
291
|
|
Cross-currency swaps
|
|
Prepaid expenses
and other current
assets
|
|
|
|
|
|
|
9
|
|
|
|
|
|
|
|
9
|
|
Commodity swaps
|
|
Other assets
|
|
|
54
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
Commodity swaps
|
|
Prepaid expenses
and other current
assets
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forward-starting interest rate swaps
|
|
Other assets
|
|
|
200
|
|
|
|
1
|
|
|
|
600
|
|
|
|
8
|
|
Derivatives designated as fair value hedges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed-for-floating
interest rate
swaps
|
|
Other assets
|
|
|
2,000
|
|
|
|
10
|
|
|
|
2,000
|
|
|
|
19
|
|
Fixed-for-floating
interest rate
swaps
|
|
Prepaid expenses
and other current
assets
|
|
|
|
|
|
|
5
|
|
|
|
|
|
|
|
6
|
|
Derivatives not designated as hedges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodities
|
|
Prepaid expenses
and other current
assets
|
|
|
68
|
|
|
|
2
|
|
|
|
73
|
|
|
|
8
|
|
103
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
|
December 31, 2015
|
|
Millions of dollars
|
|
Balance Sheet
Classification
|
|
Notional
Amount
|
|
|
Fair
Value
|
|
|
Notional
Amount
|
|
|
Fair
Value
|
|
Embedded derivatives
|
|
Prepaid expenses
and other current
assets
|
|
|
17
|
|
|
|
1
|
|
|
|
42
|
|
|
|
4
|
|
Foreign currency
|
|
Prepaid expenses
and other current
assets
|
|
|
11
|
|
|
|
|
|
|
|
105
|
|
|
|
1
|
|
Non-derivatives:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale
securities
|
|
Short-term
investments
|
|
|
1,069
|
|
|
|
1,073
|
|
|
|
1,073
|
|
|
|
1,064
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
6,466
|
|
|
$
|
1,411
|
|
|
$
|
7,137
|
|
|
$
|
1,428
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives designated as net investment hedges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forward exchange contracts
|
|
Accrued liabilities
|
|
$
|
|
|
|
$
|
|
|
|
$
|
795
|
|
|
$
|
24
|
|
Derivatives designated as cash flow hedges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forward-starting interest rate swaps
|
|
Other liabilities
|
|
|
800
|
|
|
|
16
|
|
|
|
400
|
|
|
|
6
|
|
Derivatives designated as fair value hedges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed-for-floating
interest rate
swaps
|
|
Other liabilities
|
|
|
600
|
|
|
|
4
|
|
|
|
|
|
|
|
|
|
Derivatives not designated as hedges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodities
|
|
Accrued liabilities
|
|
|
30
|
|
|
|
1
|
|
|
|
67
|
|
|
|
2
|
|
Embedded derivatives
|
|
Accrued liabilities
|
|
|
73
|
|
|
|
10
|
|
|
|
21
|
|
|
|
|
|
Foreign currency
|
|
Accrued liabilities
|
|
|
28
|
|
|
|
1
|
|
|
|
75
|
|
|
|
3
|
|
Non-derivatives:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance share awards
|
|
Accrued liabilities
|
|
|
19
|
|
|
|
19
|
|
|
|
23
|
|
|
|
23
|
|
Performance share awards
|
|
Other liabilities
|
|
|
22
|
|
|
|
22
|
|
|
|
17
|
|
|
|
17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,572
|
|
|
$
|
73
|
|
|
$
|
1,398
|
|
|
$
|
75
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
104
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
The following table summarizes the pretax effect of derivative instruments and
non-derivative
instruments designated as net investment hedges charged directly to income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of Financial Instruments
|
|
|
Year Ended December 31, 2016
|
Millions of dollars
|
|
Gain (Loss)
Recognized
in AOCI
|
|
|
Gain (Loss)
Reclassified
from AOCI
to Income
|
|
|
Additional
Gain (Loss)
Recognized
in Income
|
|
|
Income Statement
Classification
|
Derivatives designated as net investment hedges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basis swaps
|
|
$
|
6
|
|
|
$
|
|
|
|
$
|
|
|
|
Other income, net
|
Forward exchange contracts
|
|
|
(21
|
)
|
|
|
|
|
|
|
|
|
|
Other income, net
|
Derivatives designated as cash-flow hedges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cross-currency swaps
|
|
|
(15
|
)
|
|
|
(63
|
)
|
|
|
|
|
|
Other income, net
|
Forward-starting interest rate swaps
|
|
|
(17
|
)
|
|
|
|
|
|
|
|
|
|
Interest expense
|
Commodity swaps
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
Cost of sales
|
Derivatives designated as fair value hedges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed-for-floating
interest rate
swaps
|
|
|
|
|
|
|
|
|
|
|
8
|
|
|
Interest expense
|
Derivatives not designated as hedges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodities
|
|
|
|
|
|
|
|
|
|
|
12
|
|
|
Sales and other operating revenues
|
Commodities
|
|
|
|
|
|
|
|
|
|
|
4
|
|
|
Cost of sales
|
Embedded derivatives
|
|
|
|
|
|
|
|
|
|
|
2
|
|
|
Cost of sales
|
Foreign currency
|
|
|
|
|
|
|
|
|
|
|
16
|
|
|
Other income, net
|
Non-derivatives
designated as net investment hedges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Euro notes payable
|
|
|
58
|
|
|
|
|
|
|
|
|
|
|
Other income, net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
14
|
|
|
$
|
(63
|
)
|
|
$
|
42
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
105
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of Financial Instruments
|
|
|
Year Ended December 31, 2015
|
Millions of dollars
|
|
Gain (Loss)
Recognized
in AOCI
|
|
|
Gain (Loss)
Reclassified
from AOCI
to Income
|
|
|
Additional
Gain (Loss)
Recognized
in Income
|
|
|
Income Statement
Classification
|
Derivatives designated as net investment hedges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basis swaps
|
|
$
|
19
|
|
|
$
|
|
|
|
$
|
|
|
|
Other income, net
|
Forward exchange contracts
|
|
|
(24
|
)
|
|
|
|
|
|
|
(1
|
)
|
|
Other income, net
|
Derivatives designated as cash-flow hedges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cross-currency swaps
|
|
|
262
|
|
|
|
(207
|
)
|
|
|
|
|
|
Other income, net
|
Forward-starting interest rate swaps
|
|
|
17
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
Derivatives designated as fair value hedges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed-for-floating
interest rate
swaps
|
|
|
|
|
|
|
|
|
|
|
38
|
|
|
Interest expense
|
Derivatives not designated as hedges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodities
|
|
|
|
|
|
|
|
|
|
|
(14
|
)
|
|
Sales and other operating revenues
|
Commodities
|
|
|
|
|
|
|
|
|
|
|
34
|
|
|
Cost of sales
|
Embedded derivatives
|
|
|
|
|
|
|
|
|
|
|
16
|
|
|
Cost of sales
|
Foreign currency
|
|
|
|
|
|
|
|
|
|
|
(24
|
)
|
|
Other income, net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
274
|
|
|
$
|
(207
|
)
|
|
$
|
49
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2014
|
Millions of dollars
|
|
Gain (Loss)
Recognized
in AOCI
|
|
|
Gain (Loss)
Reclassified
from AOCI
to Income
|
|
|
Additional
Gain (Loss)
Recognized
in Income
|
|
|
Income Statement
Classification
|
Derivatives designated as cash-flow hedges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cross-currency swaps
|
|
$
|
30
|
|
|
$
|
(89
|
)
|
|
$
|
|
|
|
Other income, net
|
Forward-starting interest rate swaps
|
|
|
(17
|
)
|
|
|
|
|
|
|
(1
|
)
|
|
Interest expense
|
Derivatives designated as fair value hedges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed-for-floating
interest rate
swaps
|
|
|
|
|
|
|
|
|
|
|
16
|
|
|
Interest expense
|
Derivatives not designated as hedges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodities
|
|
|
|
|
|
|
|
|
|
|
(8
|
)
|
|
Cost of sales
|
Embedded derivatives
|
|
|
|
|
|
|
|
|
|
|
2
|
|
|
Cost of sales
|
Foreign currency
|
|
|
|
|
|
|
|
|
|
|
(54
|
)
|
|
Other income, net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
13
|
|
|
$
|
(89
|
)
|
|
$
|
(45
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the years ended December 31, 2016, 2015 and 2014, the pretax effect of additional gain (loss) recognized in
income for the
fixed-for-floating
interest rate swaps includes the net value for accrued interest of $21 million, $29 million and $6 million,
respectively.
106
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
15. Fair Value Measurement
The following table presents the financial instruments outstanding as of December 31, 2016 and 2015 that are measured at fair value on a recurring
basis.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
Millions of dollars
|
|
Fair Value
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basis swaps
|
|
$
|
21
|
|
|
$
|
|
|
|
$
|
21
|
|
|
$
|
|
|
Cross-currency swaps
|
|
|
285
|
|
|
|
|
|
|
|
285
|
|
|
|
|
|
Forward exchange contracts
|
|
|
10
|
|
|
$
|
|
|
|
|
10
|
|
|
|
|
|
Forward-starting interest rate swaps
|
|
|
1
|
|
|
|
|
|
|
|
1
|
|
|
|
|
|
Fixed-for-floating
interest rate
swaps
|
|
|
15
|
|
|
|
|
|
|
|
15
|
|
|
|
|
|
Commodities
|
|
|
5
|
|
|
|
2
|
|
|
|
3
|
|
|
|
|
|
Embedded derivatives
|
|
|
1
|
|
|
|
|
|
|
|
1
|
|
|
|
|
|
Non-derivatives:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale
securities
|
|
|
738
|
|
|
|
|
|
|
|
738
|
|
|
|
|
|
Available-for-sale
securities measured at net
asset value*
|
|
|
335
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,411
|
|
|
$
|
2
|
|
|
$
|
1,074
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forward-starting interest rate swaps
|
|
$
|
16
|
|
|
$
|
|
|
|
$
|
16
|
|
|
$
|
|
|
Fixed-for-floating
interest rate
swaps
|
|
|
4
|
|
|
|
|
|
|
|
4
|
|
|
|
|
|
Commodities
|
|
|
1
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
Embedded derivatives
|
|
|
10
|
|
|
|
|
|
|
|
10
|
|
|
|
|
|
Foreign currency
|
|
|
1
|
|
|
|
|
|
|
|
1
|
|
|
|
|
|
Non-derivatives:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance share awards
|
|
|
41
|
|
|
|
41
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
73
|
|
|
$
|
42
|
|
|
$
|
31
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
107
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2015
|
|
Millions of dollars
|
|
Fair Value
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basis swaps
|
|
$
|
18
|
|
|
$
|
|
|
|
$
|
18
|
|
|
$
|
|
|
Cross-currency swaps
|
|
|
300
|
|
|
|
|
|
|
|
300
|
|
|
|
|
|
Forward-starting interest rate swaps
|
|
|
8
|
|
|
|
|
|
|
|
8
|
|
|
|
|
|
Fixed-for-floating
interest rate
swaps
|
|
|
25
|
|
|
|
|
|
|
|
25
|
|
|
|
|
|
Commodities
|
|
|
8
|
|
|
|
8
|
|
|
|
|
|
|
|
|
|
Embedded derivatives
|
|
|
4
|
|
|
|
|
|
|
|
4
|
|
|
|
|
|
Foreign currency
|
|
|
1
|
|
|
|
|
|
|
|
1
|
|
|
|
|
|
Non-derivatives:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale
securities
|
|
|
719
|
|
|
|
|
|
|
|
719
|
|
|
|
|
|
Available-for-sale
securities measured at net
asset value*
|
|
|
345
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,428
|
|
|
$
|
8
|
|
|
$
|
1,075
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forward exchange contracts
|
|
$
|
24
|
|
|
$
|
|
|
|
$
|
24
|
|
|
$
|
|
|
Forward-starting interest rate swaps
|
|
|
6
|
|
|
|
|
|
|
|
6
|
|
|
|
|
|
Commodities
|
|
|
2
|
|
|
|
|
|
|
|
2
|
|
|
|
|
|
Foreign currency
|
|
|
3
|
|
|
|
|
|
|
|
3
|
|
|
|
|
|
Non-derivatives:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance share awards
|
|
|
40
|
|
|
|
40
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
75
|
|
|
$
|
40
|
|
|
$
|
35
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*
|
In accordance with Fair Measurement Topic 820, Subtopic 10, certain investments measured at fair value using the net asset value per share (or its equivalent) practical
expedient have not been classified in the fair value hierarchy. The amounts presented in this table are intended to facilitate reconciliation to the Consolidated Balance Sheets.
|
The fair value of the commodities assets classified as Level 2 is associated with our commodity swaps designated as cash-flow hedges. The fair values of the commodities assets and liabilities
classified as Level 1 are associated with our commodity derivatives not designated as hedges.
There were no transfers between
Level 1 and Level 2 during the years ended December 31, 2016 and 2015.
108
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
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 as of December 31, 2016 and 2015. Short-term and long-term loans receivable, which represent our repurchase agreements, and 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 long-term debt exclude capital leases.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
Millions of dollars
|
|
Carrying
Value
|
|
|
Fair
Value
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
Non-derivatives:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term loans receivable
|
|
$
|
369
|
|
|
$
|
369
|
|
|
$
|
|
|
|
$
|
369
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term debt
|
|
$
|
90
|
|
|
$
|
98
|
|
|
$
|
|
|
|
$
|
98
|
|
|
$
|
|
|
Long-term
debt
|
|
|
8,382
|
|
|
|
9,147
|
|
|
|
|
|
|
|
9,146
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
8,472
|
|
|
$
|
9,245
|
|
|
$
|
|
|
|
$
|
9,244
|
|
|
$
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2015
|
|
Millions of dollars
|
|
Carrying
Value
|
|
|
Fair
Value
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
Non-derivatives:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term loans receivable
|
|
$
|
289
|
|
|
$
|
289
|
|
|
$
|
|
|
|
$
|
289
|
|
|
$
|
|
|
Long-term
loans receivable
|
|
|
98
|
|
|
|
98
|
|
|
|
|
|
|
|
98
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
387
|
|
|
$
|
387
|
|
|
$
|
|
|
|
$
|
387
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term debt
|
|
$
|
26
|
|
|
$
|
23
|
|
|
$
|
|
|
|
$
|
23
|
|
|
$
|
|
|
Long-term
debt
|
|
|
7,671
|
|
|
|
8,034
|
|
|
|
|
|
|
|
8,032
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
7,697
|
|
|
$
|
8,057
|
|
|
$
|
|
|
|
$
|
8,055
|
|
|
$
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The fair value of all
non-derivative
financial instruments included in Current
assets described below, Current liabilities, including Short-term debt excluding precious metal financings, and Accounts payable, approximates the applicable carrying value due to the short maturity of those instruments. Current assets include Cash
and cash equivalents, Restricted cash,
held-to-maturity
time deposits and Accounts receivable.
We use the following inputs and valuation techniques to estimate the fair value of our financial instruments:
Basis Swaps
The fair value of our basis swap contracts is calculated using the present value of future cash flows discounted using observable inputs such as known notional value amounts, yield
curves, and spot and forward exchange rates
.
Cross-Currency Swaps
The fair value of our cross-currency swaps is calculated
using the present value of future cash flows discounted using observable inputs with the foreign currency leg revalued using published spot and future exchange rates on the valuation date.
Forward-Starting Interest Rate Swaps
The fair value of our forward-starting interest rate swaps is calculated using the present value of future cash flows method and based on observable inputs
such as benchmark interest rates.
109
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
Fixed-for-Floating
Interest Rate Swaps
The fair value of our
fixed-for-floating
interest rate swaps is calculated using the present value of future cash flows method and based on
observable inputs such as interest rates and market yield curves.
Commodity and Embedded Derivatives
The fair values of our
commodity derivatives classified as Level 1 and embedded derivatives are measured using closing market prices at the end of the reporting period obtained from the New York Mercantile Exchange and from third-party broker quotes and pricing
providers.
The fair value of our commodity swaps classified as Level 2 in 2015 is determined using a combination of observable and
unobservable inputs. The observable inputs consist of future market values of various crude and heavy fuel oils, which are readily available through public data sources. The unobservable input, which is the estimated discount or premium used in the
market pricing, is calculated using an internally-developed, multi-linear regression model based on the observable prices of the known components and their relationships to historical prices. A significant change in this unobservable input would not
have a material impact on the fair value measurement of our Level 2 commodity swaps.
Foreign Currency Derivatives and Forward
Exchange Contracts
The fair value of our foreign currency derivatives is based on forward market rates.
Available-for-Sale
Securities
Fair value is calculated using observable market data for similar securities and broker quotes from recognized purveyors of market data
or the net asset value for limited partnership investments provided by the fund administrator.
Performance Share Awards
Fair
value is determined using the quoted market price of our stock.
Short-Term and Long-Term Loans Receivable
Valuations are based on
discounted cash flows, which consider prevailing market rates for the respective instrument maturity in addition to corroborative support from the minimum underlying collateral requirements.
Short-Term Debt
Fair values of short-term borrowings related to precious metal financing arrangements are determined based on the current market price of the associated precious metal.
Long-Term Debt
Fair value is calculated using pricing data obtained from well-established and recognized vendors of market data
for debt valuations.
16. Pension and Other Postretirement Benefits
We have defined benefit pension plans which cover employees in the U.S. and various
non-U.S.
countries. We also
sponsor postretirement benefit plans other than pensions that provide medical benefits to certain of our U.S., Canadian, and French employees. In addition, we provide other postemployment benefits such as early retirement and deferred compensation
severance benefits to employees of certain
non-U.S.
countries. We use a measurement date of December 31 for all of our benefit plans.
For 2016, the actual returns on the assets of our U.S. and
non-U.S.
defined benefit pension plans were a gain of 7.22% and 15.81%, respectively.
110
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
The following table provides a reconciliation of projected benefit obligations, plan assets and the
funded status of our U.S. and
non-U.S.
defined benefit pension plans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2016
|
|
|
2015
|
|
Millions of dollars
|
|
U.S.
|
|
|
Non-U.S.
|
|
|
U.S.
|
|
|
Non-U.S.
|
|
Change in benefit obligation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefit obligation, beginning of period
|
|
$
|
2,066
|
|
|
$
|
1,317
|
|
|
$
|
2,178
|
|
|
$
|
1,408
|
|
Service cost
|
|
|
44
|
|
|
|
32
|
|
|
|
45
|
|
|
|
32
|
|
Interest cost
|
|
|
88
|
|
|
|
32
|
|
|
|
85
|
|
|
|
37
|
|
Actuarial loss (gain)
|
|
|
15
|
|
|
|
254
|
|
|
|
(109
|
)
|
|
|
8
|
|
Plan amendments
|
|
|
|
|
|
|
(4
|
)
|
|
|
|
|
|
|
|
|
Benefits paid
|
|
|
(79
|
)
|
|
|
(33
|
)
|
|
|
(120
|
)
|
|
|
(56
|
)
|
Participant contributions
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
1
|
|
Settlement
|
|
|
(288
|
)
|
|
|
(25
|
)
|
|
|
(13
|
)
|
|
|
(1
|
)
|
Business divestiture
|
|
|
|
|
|
|
(11
|
)
|
|
|
|
|
|
|
|
|
Foreign exchange effects
|
|
|
|
|
|
|
(72
|
)
|
|
|
|
|
|
|
(112
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefit obligation, end of period
|
|
|
1,846
|
|
|
|
1,491
|
|
|
|
2,066
|
|
|
|
1,317
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in plan assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of plan assets, beginning of period
|
|
|
1,789
|
|
|
|
723
|
|
|
|
1,898
|
|
|
|
735
|
|
Actual return on plan assets
|
|
|
100
|
|
|
|
146
|
|
|
|
(27
|
)
|
|
|
63
|
|
Company contributions
|
|
|
49
|
|
|
|
65
|
|
|
|
51
|
|
|
|
56
|
|
Benefits paid
|
|
|
(79
|
)
|
|
|
(33
|
)
|
|
|
(120
|
)
|
|
|
(56
|
)
|
Participant contributions
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
1
|
|
Settlement
|
|
|
(288
|
)
|
|
|
(25
|
)
|
|
|
(13
|
)
|
|
|
(1
|
)
|
Foreign exchange effects
|
|
|
|
|
|
|
(53
|
)
|
|
|
|
|
|
|
(75
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of plan assets, end of period
|
|
|
1,571
|
|
|
|
824
|
|
|
|
1,789
|
|
|
|
723
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Funded status of continuing operations, end of period
|
|
$
|
(275
|
)
|
|
$
|
(667
|
)
|
|
$
|
(277
|
)
|
|
$
|
(594
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
|
December 31, 2015
|
|
Millions of dollars
|
|
U.S.
|
|
|
Non-U.S.
|
|
|
U.S.
|
|
|
Non-U.S.
|
|
Amounts recognized in the Consolidated Balance Sheets consist of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prepaid benefit cost, long-term
|
|
$
|
3
|
|
|
$
|
10
|
|
|
$
|
1
|
|
|
$
|
10
|
|
Accrued benefit liability, current
|
|
|
|
|
|
|
(18
|
)
|
|
|
|
|
|
|
(19
|
)
|
Accrued benefit liability, long-term
|
|
|
(278
|
)
|
|
|
(659
|
)
|
|
|
(278
|
)
|
|
|
(585
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Funded status, end of period
|
|
$
|
(275
|
)
|
|
$
|
(667
|
)
|
|
$
|
(277
|
)
|
|
$
|
(594
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
|
December 31, 2015
|
|
Millions of dollars
|
|
U.S.
|
|
|
Non-U.S.
|
|
|
U.S.
|
|
|
Non-U.S.
|
|
Amounts recognized in Accumulated other comprehensive loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Actuarial and investment loss
|
|
$
|
376
|
|
|
$
|
346
|
|
|
$
|
400
|
|
|
$
|
225
|
|
Prior service cost (credit)
|
|
|
2
|
|
|
|
(1
|
)
|
|
|
3
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, end of period
|
|
$
|
378
|
|
|
$
|
345
|
|
|
$
|
403
|
|
|
$
|
228
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
111
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
The following additional information is presented for our U.S. and
non-U.S.
pension plans as of December 31:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
|
December 31, 2015
|
|
Millions of dollars
|
|
U.S.
|
|
|
Non-U.S.
|
|
|
U.S.
|
|
|
Non-U.S.
|
|
Accumulated benefit obligation for defined benefit plans
|
|
$
|
1,816
|
|
|
$
|
1,382
|
|
|
$
|
2,040
|
|
|
$
|
1,215
|
|
Pension plans with projected benefit obligations in excess of the fair value of assets are summarized as follows at
December 31:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
|
December 31, 2015
|
|
Millions of dollars
|
|
U.S.
|
|
|
Non-U.S.
|
|
|
U.S.
|
|
|
Non-U.S.
|
|
Projected benefit obligations
|
|
$
|
1,703
|
|
|
$
|
943
|
|
|
$
|
2,004
|
|
|
$
|
864
|
|
Fair value of assets
|
|
|
1,425
|
|
|
|
265
|
|
|
|
1,726
|
|
|
|
260
|
|
Pension plans with accumulated benefit obligations in excess of the fair value of assets are summarized as follows at
December 31:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
|
December 31, 2015
|
|
Millions of dollars
|
|
U.S.
|
|
|
Non-U.S.
|
|
|
U.S.
|
|
|
Non-U.S.
|
|
Accumulated benefit obligations
|
|
$
|
1,676
|
|
|
$
|
725
|
|
|
$
|
1,897
|
|
|
$
|
665
|
|
Fair value of assets
|
|
|
1,425
|
|
|
|
135
|
|
|
|
1,643
|
|
|
|
132
|
|
The following table provides the components of net periodic pension costs:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Plans
|
|
|
|
Year Ended December 31,
|
|
Millions of dollars
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
Net Periodic Pension Cost:
|
|
|
|
|
|
|
|
|
|
|
|
|
Service cost
|
|
$
|
44
|
|
|
$
|
45
|
|
|
$
|
43
|
|
Interest cost
|
|
|
88
|
|
|
|
85
|
|
|
|
88
|
|
Actual return on plan assets
|
|
|
(100
|
)
|
|
|
27
|
|
|
|
(65
|
)
|
Lessreturn in excess of (less than) expected return
|
|
|
(39
|
)
|
|
|
(175
|
)
|
|
|
(90
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expected return on plan assets
|
|
|
(139
|
)
|
|
|
(148
|
)
|
|
|
(155
|
)
|
Settlement loss
|
|
|
58
|
|
|
|
2
|
|
|
|
2
|
|
Prior service cost (benefit) amortization
|
|
|
1
|
|
|
|
|
|
|
|
|
|
Actuarial and investment loss amortization
|
|
|
20
|
|
|
|
13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic benefit cost (credit)
|
|
$
|
72
|
|
|
$
|
(3
|
)
|
|
$
|
(22
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
112
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-U.S.
Plans
|
|
|
|
Year Ended December 31,
|
|
Millions of dollars
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
Net Periodic Pension Cost:
|
|
|
|
|
|
|
|
|
|
|
|
|
Service cost
|
|
$
|
32
|
|
|
$
|
32
|
|
|
$
|
29
|
|
Interest cost
|
|
|
32
|
|
|
|
37
|
|
|
|
48
|
|
Actual return on plan assets
|
|
|
(146
|
)
|
|
|
(63
|
)
|
|
|
(117
|
)
|
Lessreturn in excess of (less than) expected return
|
|
|
122
|
|
|
|
39
|
|
|
|
91
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expected return on plan assets
|
|
|
(24
|
)
|
|
|
(24
|
)
|
|
|
(26
|
)
|
Settlement loss
|
|
|
3
|
|
|
|
|
|
|
|
1
|
|
Prior service cost amortization
|
|
|
|
|
|
|
2
|
|
|
|
|
|
Actuarial and investment loss amortization
|
|
|
8
|
|
|
|
8
|
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic benefit cost
|
|
$
|
51
|
|
|
$
|
55
|
|
|
$
|
56
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lump sum benefit payments of $288 million were made from existing plan assets in 2016. These payments in total
exceeded annual service and interest cost, resulting in pension settlement expense of $58 million. A significant portion of the lump sum payments were due to a voluntary lump sum program to certain former employees in select U.S. pension plans.
Our goal is to manage pension investments over the longer term to achieve optimal returns with an acceptable level of risk and volatility.
The assets are externally managed by professional investment firms and performance is evaluated continuously against specific benchmarks.
The
actual and target asset allocations for our plans are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
|
2015
|
|
Millions of dollars
|
|
Actual
|
|
|
Target
|
|
|
Actual
|
|
|
Target
|
|
Canada
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity securities
|
|
|
49
|
%
|
|
|
50
|
%
|
|
|
47
|
%
|
|
|
50
|
%
|
Fixed income
|
|
|
51
|
%
|
|
|
50
|
%
|
|
|
53
|
%
|
|
|
50
|
%
|
United KingdomLyondell Chemical Plans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity securities
|
|
|
50
|
%
|
|
|
50
|
%
|
|
|
50
|
%
|
|
|
50
|
%
|
Fixed income
|
|
|
50
|
%
|
|
|
50
|
%
|
|
|
50
|
%
|
|
|
50
|
%
|
United KingdomBasell Plans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity securities
|
|
|
58
|
%
|
|
|
60
|
%
|
|
|
56
|
%
|
|
|
60
|
%
|
Fixed income
|
|
|
42
|
%
|
|
|
40
|
%
|
|
|
44
|
%
|
|
|
40
|
%
|
United States
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity securities
|
|
|
33
|
%
|
|
|
32
|
%
|
|
|
52
|
%
|
|
|
51
|
%
|
Fixed income
|
|
|
47
|
%
|
|
|
38
|
%
|
|
|
32
|
%
|
|
|
30
|
%
|
Alternatives
|
|
|
20
|
%
|
|
|
30
|
%
|
|
|
16
|
%
|
|
|
19
|
%
|
NetherlandsLyondell Chemical Plans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed income
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
100
|
%
|
NetherlandsBasell Plans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity securities
|
|
|
7
|
%
|
|
|
10
|
%
|
|
|
9
|
%
|
|
|
10
|
%
|
Fixed income
|
|
|
93
|
%
|
|
|
90
|
%
|
|
|
91
|
%
|
|
|
90
|
%
|
113
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
We estimate the following contributions to our pension plans in 2017:
|
|
|
|
|
|
|
|
|
Millions of dollars
|
|
U.S.
|
|
|
Non-U.S.
|
|
Defined benefit plans
|
|
$
|
47
|
|
|
$
|
64
|
|
Multi-employer plans
|
|
|
|
|
|
|
7
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
47
|
|
|
$
|
71
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2016, future expected benefit payments by our pension plans which reflect expected future
service, as appropriate, are as follows:
|
|
|
|
|
|
|
|
|
Millions of dollars
|
|
U.S.
|
|
|
Non-U.S.
|
|
2017
|
|
$
|
144
|
|
|
$
|
54
|
|
2018
|
|
|
144
|
|
|
|
52
|
|
2019
|
|
|
142
|
|
|
|
48
|
|
2020
|
|
|
139
|
|
|
|
47
|
|
2021
|
|
|
135
|
|
|
|
48
|
|
2022 through 2026
|
|
|
640
|
|
|
|
263
|
|
The following tables set forth the principal assumptions on discount rates, projected rates of compensation increase and
expected rates of return on plan assets, where applicable. These assumptions vary for the different plans, as they are determined in consideration of local conditions.
The assumptions used in determining the net benefit liabilities for our pension plans were as follows at December 31:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
|
2015
|
|
|
|
U.S.
|
|
|
Non-U.S.
|
|
|
U.S.
|
|
|
Non-U.S.
|
|
Weighted average assumptions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discount rate
|
|
|
4.20
|
%
|
|
|
1.52
|
%
|
|
|
4.38
|
%
|
|
|
2.70
|
%
|
Rate of compensation increase
|
|
|
4.00
|
%
|
|
|
2.93
|
%
|
|
|
4.00
|
%
|
|
|
3.15
|
%
|
The assumptions used in determining net benefit costs for our pension plans were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
|
|
U.S.
|
|
|
Non-U.S.
|
|
|
U.S.
|
|
|
Non-U.S.
|
|
|
U.S.
|
|
|
Non-U.S.
|
|
Weighted average assumptions for the year:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discount rate
|
|
|
4.38
|
%
|
|
|
2.70
|
%
|
|
|
4.04
|
%
|
|
|
2.84
|
%
|
|
|
4.73
|
%
|
|
|
3.78
|
%
|
Expected return on plan assets
|
|
|
8.00
|
%
|
|
|
3.37
|
%
|
|
|
8.00
|
%
|
|
|
3.63
|
%
|
|
|
8.00
|
%
|
|
|
4.12
|
%
|
Rate of compensation increase
|
|
|
4.00
|
%
|
|
|
3.15
|
%
|
|
|
4.00
|
%
|
|
|
3.19
|
%
|
|
|
4.00
|
%
|
|
|
3.37
|
%
|
The discount rate assumptions reflect the rates at which the benefit obligations could be effectively settled, based on
the yields of high quality long-term bonds where the term closely matches the term of the benefit obligations. At the beginning of 2017, we will change the approach used to measure service and interest costs for pension and other postretirement
benefits under significant U.S. plans. For 2016, we measured service and interest costs utilizing a single weighted-average discount rate derived from the yield curve used to measure the plan obligations. For 2017, we will measure service and
interest costs by applying the specific spot rates along that
114
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
same yield curve to the plans projected cash flows. We believe the new approach provides a more precise measurement of service and interest costs. This change does not affect the
measurement of our plan obligations. We will account for this change as a change in accounting estimate and, accordingly, will account for it on a prospective basis. The weighted average expected long-term rate of return on assets in our U.S. plans
of 8.00% is based on the average level of earnings that our independent pension investment advisor had advised could be expected to be earned over a fifteen to twenty year time period consistent with the plans target asset allocation,
historical capital market performance, historical plan performance (since the 1997 inception of the U.S. Master Trust) and a forecast of expected future asset returns. The weighted average expected long-term rate of return on assets in our
non-U.S.
plans of 3.37% is based on expectations and asset allocations that vary by region. We review these long-term assumptions on a periodic basis.
In the U.S. plans, the expected rate of return was derived based on the target asset allocation of 32.5% equity securities (8.8% expected return), 37.5% fixed income securities (4.9% expected return), and
30% alternative investments (8.1% expected return). In the
non-U.S.
plans, the investments consist primarily of fixed income securities whose expected rates of return range from 2.45% to 5.75%.
The following table reflects the actual annualized total returns for the periods ended December 31, 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Annualized
|
|
|
|
December 31,
2016
|
|
|
One
Year
|
|
|
Three
Years
|
|
|
Five
Years
|
|
|
Ten
Years
|
|
U.S. plan assets
|
|
|
7.22
|
%
|
|
|
7.22
|
%
|
|
|
3.25
|
%
|
|
|
8.14
|
%
|
|
|
4.78
|
%
|
Non-U.S.
plan assets
|
|
|
15.81
|
%
|
|
|
15.81
|
%
|
|
|
14.18
|
%
|
|
|
7.79
|
%
|
|
|
4.13
|
%
|
Actual rates of return may differ from the expected rate due to the volatility normally experienced in capital markets.
The goal is to manage the investments over the long term to achieve optimal returns with an acceptable level of risk and volatility in order to meet the benefit obligations of the plans as they come due.
Our pension plans have not directly invested in securities of LyondellBasell N.V., and there have been no significant transactions between any of the
pension plans and the Company or related parties thereof.
In accordance with ASC 820,
Fair Value Measurements and Disclosures
, fair
value measurements are classified using the following hierarchy:
Level 1Quoted prices for identical instruments in active markets.
Level 2Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are
not active; and model-derived valuations in which all significant inputs or significant value-drivers are observable in active markets.
Level
3Model-derived valuations in which one or more significant inputs or significant value-drivers are unobservable.
When available, quoted
market prices are used to determine fair value and such measurements are classified within Level 1. In some cases where market prices are not available, observable market-based inputs are used to calculate fair value, in which case the
measurements are classified within Level 2. If quoted or observable market prices are not available, fair value is based upon internally-developed models that use, where possible, current market-based parameters such as interest rates, yield
curves and currency rates. These measurements are classified within Level 3.
115
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
Fair value measurements are classified according to the lowest level input or value-driver that is
significant to the valuation. A measurement may therefore be classified within Level 3 even though there may be significant inputs that are readily observable.
Changes in fair value levels
Management reviews the disclosures regarding fair value measurements annually at year end. If an instrument classified as Level 1 subsequently ceases to be
actively traded, it is transferred out of Level 1. In such cases, instruments are reclassified as Level 2, unless the measurement of its fair value requires the use of significant unobservable inputs, in which case it is reclassified as
Level 3.
The major classes of the pension assets are measured at fair value using the following valuation methodologies:
Common and preferred stock
Valued at the closing price reported on the market on which the individual securities are traded.
Fixed income securities
Certain securities that are not traded on an exchange are valued at the closing price reported by pricing services.
Other securities are valued based on yields currently available on comparable securities of issuers with similar credit ratings.
Commingled funds
Valued based upon the unit values of such collective trust funds held at year end by the pension plans. Unit values are
based on the fair value of the underlying assets of the fund derived from inputs principally from, or corroborated by, observable market data by correlation or other means.
Real estate
Valued on the basis of a discounted cash flow approach, which includes the future rental receipts, expenses, and residual values as the highest and best use of the real estate from
a market participant view as rental property.
Hedge funds
Valued based upon the unit values of such alternative investments held
at year end by the pension plans. Unit values are based on the fair value of the underlying assets of the fund.
Private
equity
Valued based upon the unit values of such alternative investments held at year end by the pension plans. Unit values are based on the fair value of the underlying assets of the fund. Certain securities held in the fund are valued at
the closing price reported on the exchange or other established quotation service for
over-the-counter
securities. Other assets held in the fund are valued based on the
most recent financial statements prepared by the fund manager.
Convertible securities
Valued at the quoted prices for similar
assets or liabilities in active markets.
U.S. government securities
Certain securities are valued at the closing price reported
on the active market on which the individual securities are traded. Other securities are valued based on yields currently available on comparable securities of issuers with similar credit ratings.
Cash and cash equivalents
Valued at the quoted prices for similar assets or liabilities in active markets.
116
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
The pension investments that are measured at fair value as of December 31, 2016 and 2015 are
summarized below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
Millions of dollars
|
|
Fair Value
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
U.S.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common and preferred stock
|
|
$
|
394
|
|
|
$
|
394
|
|
|
$
|
|
|
|
$
|
|
|
Commingled funds measured at net asset value*
|
|
|
215
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed income securities
|
|
|
215
|
|
|
|
114
|
|
|
|
101
|
|
|
|
|
|
Real estate measured at net asset value*
|
|
|
100
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hedge funds measured at net asset value*
|
|
|
126
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Private equity measured at net asset value*
|
|
|
77
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. government securities
|
|
|
138
|
|
|
|
136
|
|
|
|
2
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
294
|
|
|
|
294
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total U.S. Pension Assets
|
|
$
|
1,559
|
|
|
$
|
938
|
|
|
$
|
103
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
Millions of dollars
|
|
Fair Value
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
Non-U.S.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock
|
|
$
|
2
|
|
|
$
|
2
|
|
|
$
|
|
|
|
$
|
|
|
Commingled funds measured at net asset value*
|
|
|
337
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed income securities
|
|
|
463
|
|
|
|
|
|
|
|
463
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
21
|
|
|
|
21
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Non-U.S.
Pension Assets
|
|
$
|
823
|
|
|
$
|
23
|
|
|
$
|
463
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2015
|
|
Millions of dollars
|
|
Fair Value
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
U.S.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common and preferred stock
|
|
$
|
643
|
|
|
$
|
640
|
|
|
$
|
3
|
|
|
$
|
|
|
Commingled funds measured at net asset value*
|
|
|
573
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed income securities
|
|
|
230
|
|
|
|
|
|
|
|
230
|
|
|
|
|
|
Real estate measured at net asset value*
|
|
|
97
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hedge funds measured at net asset value*
|
|
|
140
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Private equity measured at net asset value*
|
|
|
60
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. government securities
|
|
|
36
|
|
|
|
34
|
|
|
|
2
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
32
|
|
|
|
32
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total U.S. Pension Assets
|
|
$
|
1,811
|
|
|
$
|
706
|
|
|
$
|
235
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2015
|
|
Millions of dollars
|
|
Fair Value
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
Non-U.S.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock
|
|
$
|
2
|
|
|
$
|
2
|
|
|
$
|
|
|
|
$
|
|
|
Commingled funds measured at net asset value*
|
|
|
317
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed income securities
|
|
|
375
|
|
|
|
|
|
|
|
375
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
28
|
|
|
|
28
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Non-U.S.
Pension Assets
|
|
$
|
722
|
|
|
$
|
30
|
|
|
$
|
375
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
117
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
*
|
In accordance with Fair Value Measurement Topic 820, Subtopic 10, certain investments that are measured at fair value using the net asset value per share (or its
equivalent) practical expedient have not been classified in the fair value hierarchy.
|
The fair value measurements of the
investments in certain entities that calculate net asset value per share as of December 31, 2016 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Millions of dollars
|
|
Fair
Value
|
|
|
Unfunded
Commitments
|
|
|
Remaining
Life
|
|
|
Redemption Frequency
(if currently eligible)
|
|
Trade to
Settlement
Terms
|
|
|
Redemption
Notice Period
|
|
U.S.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commingled fund investing in Domestic Equity
|
|
$
|
78
|
|
|
$
|
|
|
|
|
N/A
|
|
|
daily
|
|
|
1 to 3 days
|
|
|
|
3 to 4 days
|
|
Commingled fund investing in International Equity
|
|
|
47
|
|
|
|
|
|
|
|
N/A
|
|
|
daily
|
|
|
1 to 3 days
|
|
|
|
3 days
|
|
Commingled fund investing in Fixed Income
|
|
|
90
|
|
|
|
|
|
|
|
N/A
|
|
|
daily
|
|
|
1 to 3 days
|
|
|
|
3 to 7 days
|
|
Real Estate
|
|
|
100
|
|
|
|
9
|
|
|
|
10 years
|
|
|
quarterly
|
|
|
15 to 25 days
|
|
|
|
45 to 90 days
|
|
Hedge Funds
|
|
|
126
|
|
|
|
|
|
|
|
N/A
|
|
|
quarterly
|
|
|
10 to 30 days
|
|
|
|
20 to 90 days
|
|
Private Equity
|
|
|
77
|
|
|
|
96
|
|
|
|
10 years
|
|
|
Not Eligible
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total U.S.
|
|
$
|
518
|
|
|
$
|
105
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Millions of dollars
|
|
Fair
Value
|
|
|
Unfunded
Commitments
|
|
|
Remaining
Life
|
|
|
Redemption Frequency
(if currently
eligible)
|
|
Trade to
Settlement
Terms
|
|
|
Redemption
Notice Period
|
|
Non-U.S.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commingled fund investing in Domestic Equity
|
|
$
|
27
|
|
|
$
|
|
|
|
|
N/A
|
|
|
1 to 7 days
|
|
|
1 to 3 days
|
|
|
|
1 to 3 days
|
|
Commingled fund investing in International Equity
|
|
|
125
|
|
|
|
|
|
|
|
N/A
|
|
|
1 to 7 days
|
|
|
1 to 3 days
|
|
|
|
1 to 3 days
|
|
Commingled fund investing in Fixed Income
|
|
|
185
|
|
|
|
|
|
|
|
N/A
|
|
|
daily
|
|
|
1 to 3 days
|
|
|
|
3 days
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Non-U.S.
|
|
$
|
337
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
118
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
The fair value measurements of the investments in certain entities that calculate net asset value per
share as of December 31, 2015 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Millions of dollars
|
|
Fair
Value
|
|
|
Unfunded
Commitments
|
|
|
Remaining
Life
|
|
|
Redemption Frequency
(if currently
eligible)
|
|
Trade to
Settlement
Terms
|
|
|
Redemption
Notice Period
|
|
U.S.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commingled fund investing in Domestic Equity
|
|
$
|
72
|
|
|
$
|
|
|
|
|
N/A
|
|
|
daily
|
|
|
1 to 3 days
|
|
|
|
3 to 4 days
|
|
Commingled fund investing in International Equity
|
|
|
216
|
|
|
|
|
|
|
|
N/A
|
|
|
daily
|
|
|
1 to 3 days
|
|
|
|
3 days
|
|
Commingled fund investing in Fixed Income
|
|
|
285
|
|
|
|
|
|
|
|
N/A
|
|
|
daily
|
|
|
1 to 3 days
|
|
|
|
3 to 7 days
|
|
Real Estate
|
|
|
97
|
|
|
|
10
|
|
|
|
10 years
|
|
|
quarterly
|
|
|
15 to 25 days
|
|
|
|
45 to 90 days
|
|
Hedge Funds
|
|
|
140
|
|
|
|
|
|
|
|
N/A
|
|
|
quarterly
|
|
|
10 to 30 days
|
|
|
|
20 to 90 days
|
|
Private Equity
|
|
|
60
|
|
|
|
90
|
|
|
|
10 years
|
|
|
Not eligible
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total U.S.
|
|
$
|
870
|
|
|
$
|
100
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Millions of dollars
|
|
Fair
Value
|
|
|
Unfunded
Commitments
|
|
|
Remaining
Life
|
|
|
Redemption Frequency
(if currently
eligible)
|
|
Trade to
Settlement
Terms
|
|
|
Redemption
Notice Period
|
|
Non-U.S.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commingled fund investing in Domestic Equity
|
|
$
|
27
|
|
|
$
|
|
|
|
|
N/A
|
|
|
1 to 7 days
|
|
|
1 to 3 days
|
|
|
|
1 to 3 days
|
|
Commingled fund investing in International Equity
|
|
|
116
|
|
|
|
|
|
|
|
N/A
|
|
|
1 to 7 days
|
|
|
1 to 3 days
|
|
|
|
1 to 3 days
|
|
Commingled fund investing in Fixed Income
|
|
|
174
|
|
|
|
|
|
|
|
N/A
|
|
|
daily
|
|
|
1 to 3 days
|
|
|
|
3 days
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Non-U.S.
|
|
$
|
317
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The preceding methods described may produce a fair value calculation that may not be indicative of net realizable value
or reflective of future fair values. The redemption frequency may be subject to market conditions and/or contractual obligations. Furthermore, although the Company believes its valuation methods are appropriate and consistent with other market
participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date.
Multi-employer Plan
The Company participates in a multi-employer arrangement with Pensionskasse der BASF WaG V.VaG (Pensionskasse) which
provides for benefits to the majority of our employees in Germany. Up to a certain salary level, the benefit obligations are covered by contributions of the Company and the employees to the plan. Contributions made to the multi-employer plan are
expensed as incurred.
The following table provides disclosure related to the Companys multi-employer plan:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company Contributions
|
|
Millions of dollars
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
Pensionskasse
(a)
|
|
$
|
7
|
|
|
$
|
7
|
|
|
$
|
7
|
|
(a)
|
The Company-specific plan information for the Pensionskasse is not publicly available and the plan is not subject to a collective-bargaining agreement.
The plan provides fixed, monthly retirement payments on the basis of the credits earned by the participating employees. To the extent that the Pensionskasse is
|
119
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
|
underfunded, the future contributions to the plan may increase and may be used to fund retirement benefits for employees related to other employers. The Pensionskasse financial statements for the
years ended December 31, 2015 and 2014 indicated total assets of $7,560 million and $7,485 million, respectively; total actuarial present value of accumulated plan benefits of $7,232 million and $7,146 million, respectively;
and total contributions for all participating employers of $244 million and $245 million, respectively. Our plan contributions did not exceed 5 percent of the total contributions in 2016, 2015 or 2014.
|
Other Postretirement Benefits
We sponsor unfunded health care and life insurance plans covering certain eligible retired employees and their
eligible dependents. Generally, the medical plans pay a stated percentage of medical expenses reduced by deductibles and other coverage. Life insurance benefits are generally provided by insurance contracts. We retain the right, subject to existing
agreements, to modify or eliminate these benefits.
120
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
The following table provides a reconciliation of benefit obligations of our unfunded other
postretirement benefit plans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2016
|
|
|
2015
|
|
Millions of dollars
|
|
U.S.
|
|
|
Non-U.S.
|
|
|
U.S.
|
|
|
Non-U.S.
|
|
Change in benefit obligation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefit obligation, beginning of period
|
|
$
|
285
|
|
|
$
|
56
|
|
|
$
|
347
|
|
|
$
|
60
|
|
Service cost
|
|
|
3
|
|
|
|
2
|
|
|
|
4
|
|
|
|
1
|
|
Interest cost
|
|
|
11
|
|
|
|
2
|
|
|
|
13
|
|
|
|
2
|
|
Actuarial (gain) loss
|
|
|
(7
|
)
|
|
|
9
|
|
|
|
(64
|
)
|
|
|
|
|
Benefits paid
|
|
|
(23
|
)
|
|
|
(1
|
)
|
|
|
(22
|
)
|
|
|
(1
|
)
|
Participant contributions
|
|
|
7
|
|
|
|
|
|
|
|
7
|
|
|
|
|
|
Foreign exchange effects
|
|
|
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
(6
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefit obligation, end of period
|
|
|
276
|
|
|
|
67
|
|
|
|
285
|
|
|
|
56
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in plan assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of plan assets, beginning of period
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employer contributions
|
|
|
16
|
|
|
|
1
|
|
|
|
15
|
|
|
|
1
|
|
Participant contributions
|
|
|
7
|
|
|
|
|
|
|
|
7
|
|
|
|
|
|
Benefits paid
|
|
|
(23
|
)
|
|
|
(1
|
)
|
|
|
(22
|
)
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of plan assets, end of period
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Funded status, end of period
|
|
$
|
(276
|
)
|
|
$
|
(67
|
)
|
|
$
|
(285
|
)
|
|
$
|
(56
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
|
|
December 31, 2015
|
|
Millions of dollars
|
|
U.S.
|
|
|
Non-U.S.
|
|
|
U.S.
|
|
|
Non-U.S.
|
|
Amounts recognized in the Consolidated Balance Sheets consist of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued benefit liability, current
|
|
$
|
(18
|
)
|
|
$
|
(1
|
)
|
|
$
|
(19
|
)
|
|
$
|
(1
|
)
|
Accrued benefit liability, long-term
|
|
|
(258
|
)
|
|
|
(66
|
)
|
|
|
(266
|
)
|
|
|
(55
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Funded status, end of period
|
|
$
|
(276
|
)
|
|
$
|
(67
|
)
|
|
$
|
(285
|
)
|
|
$
|
(56
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
|
December 31, 2015
|
|
Millions of dollars
|
|
U.S.
|
|
|
Non-U.S.
|
|
|
U.S.
|
|
|
Non-U.S.
|
|
Amounts recognized in Accumulated other comprehensive loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Actuarial and investment income (loss)
|
|
$
|
25
|
|
|
$
|
(37
|
)
|
|
$
|
18
|
|
|
$
|
(30
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, end of period
|
|
$
|
25
|
|
|
$
|
(37
|
)
|
|
$
|
18
|
|
|
$
|
(30
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
121
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
The following table provides the components of net periodic other postretirement benefit costs:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Plans
|
|
|
|
Year Ended December 31,
|
|
Millions of dollars
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
Net Periodic Other Postretirement Cost:
|
|
|
|
|
|
|
|
|
|
|
|
|
Service cost
|
|
$
|
3
|
|
|
$
|
4
|
|
|
$
|
4
|
|
Interest cost
|
|
|
11
|
|
|
|
13
|
|
|
|
15
|
|
Actuarial loss amortization
|
|
|
|
|
|
|
2
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic benefit cost
|
|
$
|
14
|
|
|
$
|
19
|
|
|
$
|
21
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-U.S.
Plans
|
|
|
|
Year Ended December 31,
|
|
Millions of dollars
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
Net Periodic Other Postretirement Cost:
|
|
|
|
|
|
|
|
|
|
|
|
|
Service cost
|
|
$
|
2
|
|
|
$
|
1
|
|
|
$
|
1
|
|
Interest cost
|
|
|
2
|
|
|
|
2
|
|
|
|
1
|
|
Actuarial loss amortization
|
|
|
2
|
|
|
|
3
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic benefit cost
|
|
$
|
6
|
|
|
$
|
6
|
|
|
$
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table sets forth the assumed health care cost trend rates:
|
|
|
|
|
|
|
|
|
|
|
U.S. Plans
|
|
|
|
December 31,
|
|
|
|
2016
|
|
|
2015
|
|
Assumed heath care trend rate:
|
|
|
|
|
|
|
|
|
Immediate trend rate
|
|
|
7.0
|
%
|
|
|
7.3
|
%
|
Ultimate trend rate (the rate to which the cost trend rate is assumed to decline)
|
|
|
4.5
|
%
|
|
|
4.5
|
%
|
Year that the rate reaches the ultimate trend rate
|
|
|
2038
|
|
|
|
2038
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-U.S.
Plans
|
|
|
|
Canada
|
|
|
France
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
2016
|
|
|
2015
|
|
Assumed heath care trend rate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Immediate trend rate
|
|
|
6.0
|
%
|
|
|
6.5
|
%
|
|
|
4.6
|
%
|
|
|
4.9
|
%
|
Ultimate trend rate (the rate to which the cost trend rate is assumed to decline)
|
|
|
4.5
|
%
|
|
|
5.0
|
%
|
|
|
4.6
|
%
|
|
|
4.9
|
%
|
Year that the rate reaches the ultimate trend rate
|
|
|
2021
|
|
|
|
2018
|
|
|
|
|
|
|
|
|
|
The health care cost trend rate assumption does not typically have a significant effect on the amounts reported due to
limits on maximum contribution levels to the medical plans. However, changing the assumed health care cost trend rates by one percentage point in each year would increase or decrease the accumulated other postretirement benefit liability as of
December 31, 2016 by $21 million and $14 million, respectively, for
non-U.S.
plans and by less than $1 million for U.S. plans and would not have a material effect on the aggregate service
and interest cost components of the net periodic other postretirement benefit cost for the year then ended.
122
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
The assumptions used in determining the net benefit liabilities for our other postretirement benefit
plans were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
|
U.S.
|
|
|
Non-U.S.
|
|
|
U.S.
|
|
|
Non-U.S.
|
|
Weighted average assumptions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discount rate
|
|
|
4.07
|
%
|
|
|
1.69
|
%
|
|
|
4.23
|
%
|
|
|
2.69
|
%
|
Rate of compensation increase
|
|
|
4.00
|
%
|
|
|
|
|
|
|
4.00
|
%
|
|
|
|
|
The assumptions used in determining the net benefit costs for our other postretirement benefit plans were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
|
|
U.S.
|
|
|
Non-U.S.
|
|
|
U.S.
|
|
|
Non-U.S.
|
|
|
U.S.
|
|
|
Non-U.S.
|
|
Weighted average assumptions for the year:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discount rate
|
|
|
4.23
|
%
|
|
|
2.69
|
%
|
|
|
3.85
|
%
|
|
|
2.92
|
%
|
|
|
4.53
|
%
|
|
|
3.99
|
%
|
Rate of compensation increase
|
|
|
4.00
|
%
|
|
|
|
|
|
|
4.00
|
%
|
|
|
|
|
|
|
4.00
|
%
|
|
|
3.00
|
%
|
As of December 31, 2016, future expected benefit payments by our other postretirement benefit plans, which reflect
expected future service, as appropriate, were as follows:
|
|
|
|
|
|
|
|
|
Millions of dollars
|
|
U.S.
|
|
|
Non-U.S.
|
|
2017
|
|
$
|
19
|
|
|
$
|
1
|
|
2018
|
|
|
20
|
|
|
|
1
|
|
2019
|
|
|
21
|
|
|
|
1
|
|
2020
|
|
|
21
|
|
|
|
1
|
|
2021
|
|
|
21
|
|
|
|
1
|
|
2022 through 2026
|
|
|
101
|
|
|
|
7
|
|
Accumulated Other Comprehensive Loss
The following pretax amounts were recognized in Accumulated other
comprehensive loss as of and for the years ended December 31, 2016 and 2015:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Benefits
|
|
|
Other Benefits
|
|
Millions of dollars
|
|
Actuarial
(Gain) Loss
|
|
|
Prior Service
Cost (Credit)
|
|
|
Actuarial
(Gain) Loss
|
|
|
Prior Service
Cost (Credit)
|
|
December 31, 2014
|
|
$
|
578
|
|
|
$
|
11
|
|
|
$
|
79
|
|
|
$
|
|
|
Arising during the period
|
|
|
71
|
|
|
|
|
|
|
|
(63
|
)
|
|
|
|
|
Amortization
|
|
|
(24
|
)
|
|
|
(5
|
)
|
|
|
(4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2015
|
|
|
625
|
|
|
|
6
|
|
|
|
12
|
|
|
|
|
|
Arising during the period
|
|
|
186
|
|
|
|
(4
|
)
|
|
|
2
|
|
|
|
|
|
Amortization
|
|
|
(28
|
)
|
|
|
(1
|
)
|
|
|
(2
|
)
|
|
|
|
|
Settlement loss
|
|
|
(61
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
$
|
722
|
|
|
$
|
1
|
|
|
$
|
12
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In 2016, $186 million of pension benefits actuarial loss primarily reflects $265 million of losses due to
changes in discount rate assumption offset by $79 million of gains due to asset experience (actual asset return compared
123
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
to expected return). There were $2 million of other postretirement benefits actuarial losses primarily due to $14 million of discount rate assumption changes, offset by a gain of
$10 million of changes due to favorable liability experience, and other immaterial items. In 2015, $71 million of actuarial losses primarily reflect $62 million of gains due to changes in discount rate assumption offset by
$133 million of losses due to asset experience (actual asset return compared to expected return) and other immaterial liability experience gains and losses. There were $63 million of other postretirement benefit actuarial gains due to
$11 million of discount rate assumption changes, $37 million of changes due to favorable liability experience, $13 million due to healthcare assumptions, and other immaterial items.
Deferred income taxes related to amounts in Accumulated other comprehensive income (loss) include provisions of $237 million and $216 million
as of December 31, 2016 and 2015, respectively.
At December 31, 2016, Accumulated other comprehensive income (loss) of
$14 million represents net actuarial and investment losses related to
non-U.S.
pension plans that are expected to be recognized as a component of net periodic benefit cost in 2017. There are
$22 million of net actuarial and investment losses in AOCI at December 31, 2016 for U.S. pension plans expected to be recognized in net periodic benefit cost in 2017. At December 31, 2016, AOCI included $3 million of net
actuarial loss related to
non-U.S.
other postretirement benefits that is expected to be recognized in net periodic benefit cost in 2017.
Defined Contribution Plans
Most employees in the U.S. and certain
non-U.S.
countries are eligible to participate in defined contribution plans by
contributing a portion of their compensation. We also make employer contributions, such as matching contributions, to certain of these plans. The Company has a nonqualified deferred compensation plan that covers senior management in the U.S. The
plan was amended in April, 2013 to provide for company contributions on behalf of certain eligible employees who earn base pay above the IRS annual compensation limit. We recognized less than $1 million of compensation expense related to the
plan amendment in 2014.
The following table provides the company contributions to the Employee Savings Plans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company Contributions
|
|
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
Millions of dollars
|
|
U.S.
|
|
|
Non-U.S.
|
|
|
U.S.
|
|
|
Non-U.S.
|
|
|
U.S.
|
|
|
Non-U.S.
|
|
Employee Savings Plans
|
|
$
|
35
|
|
|
$
|
7
|
|
|
$
|
32
|
|
|
$
|
4
|
|
|
$
|
32
|
|
|
$
|
5
|
|
17. Incentive and Share-Based Compensation
We are authorized to grant restricted stock units, stock options, performance share units, and other cash and stock awards under our Long-Term Incentive
Plan (LTIP). The Compensation Committee determines the recipients of the equity awards, the type of awards, the required performance measures, and the timing and duration of each grant. The maximum number of shares of our common stock
reserved for issuance under the LTIP is 22,000,000. As of December 31, 2016, there were 6,487,524 shares remaining available for issuance assuming maximum payout for PSUs. Upon share exercise or payment, shares are issued from our treasury
shares.
124
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
Total share-based compensation expense and the associated tax benefits are as follows for the years
ended December 31:
|
|
|
|
|
|
|
|
|
|
|
|
|
Millions of dollars
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
Compensation Expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted stock units
|
|
$
|
10
|
|
|
$
|
11
|
|
|
$
|
11
|
|
Stock options
|
|
|
7
|
|
|
|
6
|
|
|
|
5
|
|
Qualified performance awards
|
|
|
(3
|
)
|
|
|
25
|
|
|
|
15
|
|
Performance share units
|
|
|
24
|
|
|
|
11
|
|
|
|
6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
38
|
|
|
$
|
53
|
|
|
$
|
37
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax Benefit:
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted stock units
|
|
$
|
4
|
|
|
$
|
4
|
|
|
$
|
4
|
|
Stock options
|
|
|
2
|
|
|
|
2
|
|
|
|
2
|
|
Qualified performance awards
|
|
|
(1
|
)
|
|
|
9
|
|
|
|
5
|
|
Performance share units
|
|
|
8
|
|
|
|
4
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
13
|
|
|
$
|
19
|
|
|
$
|
13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted Stock Unit Awards (
RSUs
)
RSUs generally entitle the
recipient to be paid out an equal number of ordinary shares on the third anniversary of the grant date. RSUs, which are subject to customary accelerated vesting or forfeiture in the event of certain termination events, are accounted for as an equity
award with compensation cost recognized in the income statement ratably over the vesting period.
In 2015, 190,399 RSUs were granted to the
Chief Executive Officer (CEO) and three other executive officers. These RSUs vest in annual tranches with 10% vested after one year and an additional 15% vested after two years and the remaining vesting in equal tranches after each of
the third, fourth, and fifth years. Compensation cost for these awards is recognized using the graded vesting method.
The holders of all RSUs
are entitled to dividend equivalents to be settled no later than March 15, following the year in which dividends are paid, as long as the participant is in full employment at the time of the dividend payment. See the Dividend
Distribution section of Note 20 for the per share amount of dividend equivalent payments made to the holders of RSUs during 2016, 2015 and 2014. Total dividend equivalent payments were $1 million, $2 million and $4 million for
2016, 2015 and 2014, respectively.
RSUs are valued at the market price of the underlying stock on the date of grant. The weighted average
grant date fair value for RSUs granted during the years ended December 31, 2016, 2015 and 2014 was $79.77, $83.31 and $91.66, respectively. The total fair value of RSUs vested during 2016, 2015 and 2014 was $16 million, $120 million
and $30 million, respectively.
125
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
The following table summarizes RSU activity for the year ended December 31, 2016:
|
|
|
|
|
|
|
|
|
|
|
Number of
Units
(in thousands)
|
|
|
Weighted
Average Grant
Date Fair Value
(per share)
|
|
Outstanding at January 1, 2016
|
|
|
398
|
|
|
$
|
65.80
|
|
Granted
|
|
|
128
|
|
|
|
79.77
|
|
Vested
|
|
|
(188
|
)
|
|
|
51.44
|
|
Forfeited
|
|
|
(43
|
)
|
|
|
79.42
|
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2016
|
|
|
295
|
|
|
$
|
79.03
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2016, the unrecognized compensation cost related to RSUs was $11 million, which is expected
to be recognized over a weighted average period of two years.
Stock Options
Stock options are granted with an exercise price
equal to the market price of our ordinary shares at the date of grant. The awards generally have a three year vesting period that vests in equal increments on the first, second, and third anniversary of the grant date. The awards have a contractual
term of ten years, subject to customary accelerated vesting or forfeiture in the event of certain termination events. The stock options are accounted for as equity awards with compensation cost recognized using the graded vesting method. Outstanding
stock options have exercise prices ranging from $12.61 to $113.03.
In 2015, 457,555 stock options were granted to the Chief Executive Officer
and three other executive officers. These stock options vest in annual tranches with 10% vested after one year and an additional 15% vested after two years and the remaining vesting in equal tranches after each of the third, fourth, and fifth years.
The fair value of each stock option award is estimated, based on several assumptions, on the date of grant using the Black-Scholes option
valuation model. The principal assumptions utilized in valuing stock options include the expected stock price volatility (based on our historical stock price volatility over the expected term); the expected dividend yield; and the risk-free interest
rate (an estimate based on the yield of a United States Treasury zero coupon bond with a maturity equal to the expected life of the option).
The expected term of all options granted is estimated based on a simplified approach. In 2010, when the majority of our options were granted, we
determined that the simplified method was appropriate because of the life of LyondellBasell N.V. and its relative stage of development. Similarly, we did not possess exercise patterns similar to our situation. The option grants that have been made
since 2010 have been limited in number and have occurred during periods of substantial share price volatility.
Weighted average fair values
of stock options granted in each respective year and the assumptions used in estimating those fair values are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
Weighted average fair value
|
|
$
|
20.39
|
|
|
$
|
22.71
|
|
|
$
|
33.06
|
|
Fair value assumptions:
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividend yield
|
|
|
3.00-4.00
|
%
|
|
|
3.00
|
%
|
|
|
3.00
|
%
|
Expected volatility
|
|
|
35.3-36.0
|
%
|
|
|
35.9-37.0
|
%
|
|
|
46.0-49.0
|
%
|
Risk-free
interest rate
|
|
|
1.14-1.93
|
%
|
|
|
1.48-1.93
|
%
|
|
|
1.81-1.98
|
%
|
Weighted average expected term, in years
|
|
|
6.0
|
|
|
|
6.0-6.7
|
|
|
|
6.0
|
|
126
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
The following table summarizes stock option activity for the year ended December 31, 2016 for the
non-qualified
stock options:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number
of Shares
(in thousands)
|
|
|
Weighted
Average
Exercise
Price
|
|
|
Weighted
Average
Remaining
Term
|
|
|
Aggregate
Intrinsic
Value
(millions of
dollars)
|
|
Outstanding at January 1, 2016
|
|
|
780
|
|
|
$
|
73.15
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
328
|
|
|
|
78.89
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(81
|
)
|
|
|
72.61
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
(91
|
)
|
|
|
82.18
|
|
|
|
|
|
|
|
|
|
Expired
|
|
|
(9
|
)
|
|
|
88.86
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2016
|
|
|
927
|
|
|
$
|
74.19
|
|
|
|
7.6 years
|
|
|
$
|
12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at December 31, 2016
|
|
|
253
|
|
|
$
|
58.29
|
|
|
|
5.2 years
|
|
|
$
|
8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The aggregate intrinsic value of stock options exercised during the years ended December 31, 2016, 2015 and 2014 was
$1 million, $280 million and $98 million, respectively.
As of December 31, 2016, the unrecognized compensation cost
related to
non-qualified
stock options was $6 million, which is expected to be recognized over a
one-year
period. During 2016, cash received from the exercise of
stock options was $6 million. There was no tax benefit associated with these exercises.
Performance Share Units
(
PSUs
), Qualified Performance Awards (
QPAs
), Medium-Term Incentive Program (
MTI
)
Shares issued in satisfaction of PSU
and QPA awards are granted under our LTIP. PSU and QPA awards are similar. The target number of share awards is established at the beginning of a three-calendar year performance period. Each unit is equivalent to one share of our common stock. The
final number of shares payable is determined at the end of the three-calendar year performance period by the Compensation Committee. Since the service-inception date precedes the grant date, these share awards are treated as a liability award
until the grant date and compensation expense during the three-calendar year performance period is accrued on a straight-line basis subject to fair value adjustments. These share awards are subject to customary accelerated vesting and forfeiture in
the event of certain termination events.
Beginning January 1, 2016, the holders of PSUs are entitled to accrue dividend equivalent
units. These dividend equivalent units will be converted to shares upon payment at the end of the three-year performance cycle based on the overall payout percentage as determined by the Compensation Committee. PSUs and associated dividend
equivalent units are classified in Accrued and Other liabilities on the Consolidated Balance Sheets. For the fair value of the share awards, see Note 15.
PSUs are valued at the market price of the underlying stock on the date of payment. As of December 31, 2016, the unrecognized compensation cost related to PSUs and dividend equivalents assuming
target payout was $26 million, which is expected to be recognized over a weighted average period of two years.
For grants made in 2012
and 2013, eligible employees other than executive officers could elect to receive share-based awards (QPAs) or cash-based awards (MTI) while executive officers were only eligible for the share-based awards (QPAs). Awards under the MTI are accounted
for as a liability and classified in Other liabilities on the Consolidated Balance Sheets. We recorded compensation expense for cash MTI awards of $1 million, $10 million and $9 million for the years ended December 31, 2016, 2015
and 2014, respectively, based on the expected achievement of performance results.
127
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
The weighted average grant date fair value for QPAs granted during the years ended December 31,
2016 and 2015 was $77.93 and $89.94, respectively. The total fair value of QPAs vested during 2016 and 2015 was $20 million and $33 million, respectively.
Employee Stock Purchase Plan
We have an Employee Share Purchase Plan (ESPP)
which includes a 10% discount and a look-back provision. These provisions allow participants to purchase our stock at a discount on the lower of the fair market value at the beginning or end of the purchase period. As a result of the 10% discount
and the look-back provision, the ESPP is considered a compensatory plan under generally accepted accounting principles.
18. Income Taxes
LyondellBasell N.V. is tax resident in the United Kingdom pursuant to a mutual agreement procedure determination
ruling between the Dutch and United Kingdom competent authorities and therefore subject solely to the United Kingdom corporate income tax system.
Through our subsidiaries, we have substantial operations world-wide and in recent years have earned significant income in the United States. Taxes are primarily paid on the earnings generated in various
jurisdictions, including the United States, The Netherlands, Germany, France, Italy and other countries. LyondellBasell N.V. has little or no taxable income of its own because, as a holding company, it does not conduct any operations. Instead, the
subsidiaries through which we operate incur tax obligations in the jurisdictions in which they operate.
We monitor income tax developments
(including, for example, the U.S. tax reform proposal and the European Unions state aid investigations) in countries where we conduct business. In September 2016, the UK enacted provisions (the so called anti-hybrid provisions),
effective for years beginning January 1, 2017, that will impact our internal financing structure. In addition, in October 2016 the U.S. Treasury issued final Section 385 debt-equity regulations that may also impact our internal financings.
Recently, there has been an increase in attention, both in the U.K. and globally, to the tax practices of multinational companies, including proposals by the Organization for Economic Cooperation and Development (OECD) with respect to
base erosion and profit shifting. Such attention may result in legislative changes that could affect our tax rate. Management does not believe that recent changes in income tax laws will have a material impact on our Consolidated Financial
Statements, although new or proposed changes to tax laws could affect our tax liabilities in the future.
128
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
The significant components of the provision for income taxes are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
Millions of dollars
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
Current:
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. federal
|
|
$
|
421
|
|
|
$
|
1,009
|
|
|
$
|
985
|
|
Non-U.S.
|
|
|
557
|
|
|
|
468
|
|
|
|
277
|
|
State
|
|
|
51
|
|
|
|
72
|
|
|
|
101
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current
|
|
|
1,029
|
|
|
|
1,549
|
|
|
|
1,363
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred:
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. federal
|
|
|
339
|
|
|
|
66
|
|
|
|
122
|
|
Non-U.S.
|
|
|
20
|
|
|
|
104
|
|
|
|
50
|
|
State
|
|
|
(2
|
)
|
|
|
11
|
|
|
|
5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deferred
|
|
|
357
|
|
|
|
181
|
|
|
|
177
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for income taxes before tax effects of other comprehensive income
|
|
|
1,386
|
|
|
|
1,730
|
|
|
|
1,540
|
|
|
|
|
|
Tax effects of elements of other comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension and postretirement liabilities
|
|
|
(21
|
)
|
|
|
4
|
|
|
|
(172
|
)
|
Financial derivatives
|
|
|
(96
|
)
|
|
|
71
|
|
|
|
4
|
|
Foreign currency translation
|
|
|
(7
|
)
|
|
|
(5
|
)
|
|
|
|
|
Unrealized gain from
available-for-sale
securities
|
|
|
1
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total income tax expense in comprehensive income
|
|
$
|
1,263
|
|
|
$
|
1,799
|
|
|
$
|
1,372
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Since the proportion of U.S. revenues, assets, operating income and associated tax provisions is significantly greater
than any other single taxing jurisdiction within the worldwide group, the reconciliation of the differences between the provision for income taxes and the statutory rate is presented on the basis of the U.S. statutory federal income tax rate of 35%
as opposed to the United Kingdom statutory rate of 20% to provide a more meaningful insight into those differences. Our effective tax rate for the year ended December 31, 2016 is 26.5%. This summary is shown below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
Millions of dollars
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
Income before income taxes:
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
|
|
$
|
2,511
|
|
|
$
|
3,691
|
|
|
$
|
3,743
|
|
Non-U.S.
|
|
|
2,722
|
|
|
|
2,518
|
|
|
|
1,969
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
5,233
|
|
|
$
|
6,209
|
|
|
$
|
5,712
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax at U.S. statutory rate
|
|
$
|
1,832
|
|
|
$
|
2,173
|
|
|
$
|
1,999
|
|
Increase (reduction) resulting from:
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-U.S.
income taxed at lower statutory rates
|
|
|
(159
|
)
|
|
|
(130
|
)
|
|
|
(61
|
)
|
State income taxes, net of federal benefit
|
|
|
24
|
|
|
|
59
|
|
|
|
64
|
|
Exempt income
|
|
|
(349
|
)
|
|
|
(319
|
)
|
|
|
(275
|
)
|
U.S. manufacturing deduction
|
|
|
(42
|
)
|
|
|
(88
|
)
|
|
|
(106
|
)
|
Other, net
|
|
|
80
|
|
|
|
35
|
|
|
|
(81
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax provision
|
|
$
|
1,386
|
|
|
$
|
1,730
|
|
|
$
|
1,540
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
129
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
Our 2016 income tax provision includes a charge of $135 million for
non-cash
out of period adjustments from prior years which is reflected in Other, net in the table above. $74 million of the charge relates to a correction for the tax effects on our cross currency swaps
with the remainder relating primarily to adjustments for deferred tax liabilities associated with some of our consolidated subsidiaries. Management has concluded that these adjustments were immaterial to all periods presented.
The deferred tax effects of tax loss and credit carryforwards (tax attributes) and the tax effects of temporary differences between the tax
basis of assets and liabilities and their reported amounts in the Consolidated Financial Statements, reduced by a valuation allowance where appropriate, are presented below:
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
Millions of dollars
|
|
2016
|
|
|
2015
|
|
Deferred tax liabilities:
|
|
|
|
|
|
|
|
|
Accelerated tax depreciation
|
|
$
|
1,910
|
|
|
$
|
1,519
|
|
Investment in joint venture partnerships
|
|
|
304
|
|
|
|
300
|
|
Intangible assets
|
|
|
140
|
|
|
|
215
|
|
Inventory
|
|
|
379
|
|
|
|
440
|
|
Other liabilities
|
|
|
41
|
|
|
|
124
|
|
|
|
|
|
|
|
|
|
|
Total deferred tax liabilities
|
|
|
2,774
|
|
|
|
2,598
|
|
|
|
|
|
|
|
|
|
|
Deferred tax assets:
|
|
|
|
|
|
|
|
|
Tax attributes
|
|
|
255
|
|
|
|
322
|
|
Employee benefit plans
|
|
|
404
|
|
|
|
406
|
|
Other assets
|
|
|
72
|
|
|
|
73
|
|
|
|
|
|
|
|
|
|
|
Total deferred tax assets
|
|
|
731
|
|
|
|
801
|
|
Deferred tax asset valuation allowances
|
|
|
(96
|
)
|
|
|
(125
|
)
|
|
|
|
|
|
|
|
|
|
Net deferred tax assets
|
|
|
635
|
|
|
|
676
|
|
|
|
|
|
|
|
|
|
|
Net deferred tax liabilities
|
|
$
|
2,139
|
|
|
$
|
1,922
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
Millions of dollars
|
|
2016
|
|
|
2015
|
|
Balance sheet classifications:
|
|
|
|
|
|
|
|
|
Deferred tax assetslong-term
|
|
$
|
192
|
|
|
$
|
205
|
|
Deferred tax liabilitylong-term
|
|
|
2,331
|
|
|
|
2,127
|
|
|
|
|
|
|
|
|
|
|
Net deferred tax liabilities
|
|
$
|
2,139
|
|
|
$
|
1,922
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2016 and 2015, we had total tax attributes available in the amount of $968 million and
$1,082 million, respectively, for which a deferred tax asset was recognized at December 31, 2016 and 2015 of $255 million and $322 million, respectively.
130
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
The scheduled expiration of the tax attributes and the related deferred tax assets, before valuation
allowance, as of December 31, 2016 are as follows:
|
|
|
|
|
|
|
|
|
Millions of dollars
|
|
Tax
Attributes
|
|
|
Deferred Tax
on Tax
Attributes
|
|
2017
|
|
$
|
|
|
|
$
|
|
|
2018
|
|
|
31
|
|
|
|
11
|
|
2019
|
|
|
40
|
|
|
|
10
|
|
2020
|
|
|
|
|
|
|
|
|
2021
|
|
|
37
|
|
|
|
2
|
|
Thereafter
|
|
|
200
|
|
|
|
39
|
|
Indefinite
|
|
|
660
|
|
|
|
193
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
968
|
|
|
$
|
255
|
|
|
|
|
|
|
|
|
|
|
The tax attributes are primarily related to operations in France, Canada, the United Kingdom, Spain, The Netherlands and
the United States. The related deferred tax assets by primary jurisdictions are shown below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
Millions of dollars
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
France
|
|
$
|
140
|
|
|
$
|
197
|
|
|
$
|
261
|
|
Canada
|
|
|
29
|
|
|
|
31
|
|
|
|
38
|
|
United Kingdom
|
|
|
16
|
|
|
|
17
|
|
|
|
25
|
|
Spain
|
|
|
33
|
|
|
|
38
|
|
|
|
52
|
|
The Netherlands
|
|
|
19
|
|
|
|
23
|
|
|
|
13
|
|
United States
|
|
|
16
|
|
|
|
15
|
|
|
|
15
|
|
Other
|
|
|
2
|
|
|
|
1
|
|
|
|
5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
255
|
|
|
$
|
322
|
|
|
$
|
409
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In order to fully realize these net deferred tax assets, we will need to generate sufficient future taxable income in the
countries where these tax attributes exist during the periods in which the attributes can be utilized. Based upon projections of future taxable income over the periods in which the attributes can be utilized and/or temporary differences can be
reversed, management believes it is more likely than not that only $160 million of these deferred tax assets at December 31, 2016 will be realized.
Prior to the close of each reporting period, management considers the weight of all evidence, both positive and negative, to determine if a valuation allowance is necessary for each jurisdictions
net deferred tax assets. We place greater weight on historical evidence over future predictions of our ability to utilize net deferred tax assets. We consider future reversals of existing taxable temporary differences, future taxable income
exclusive of reversing temporary differences, and taxable income in prior carryback year(s) if carryback is permitted under applicable law, as well as available prudent and feasible tax planning strategies that would, if necessary, be implemented to
ensure realization of the net deferred tax asset.
131
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
A summary of the valuation allowances by primary jurisdiction is shown below, reflecting the valuation
allowances for all the net deferred tax assets, including deferred tax assets for tax attributes and other temporary differences.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
Millions of dollars
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
France
|
|
$
|
22
|
|
|
$
|
27
|
|
|
$
|
29
|
|
Canada
|
|
|
30
|
|
|
|
33
|
|
|
|
41
|
|
United Kingdom
|
|
|
16
|
|
|
|
11
|
|
|
|
13
|
|
Spain
|
|
|
|
|
|
|
19
|
|
|
|
24
|
|
The Netherlands
|
|
|
12
|
|
|
|
20
|
|
|
|
13
|
|
United States
|
|
|
16
|
|
|
|
14
|
|
|
|
14
|
|
Other
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
96
|
|
|
$
|
125
|
|
|
$
|
134
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
During 2016, we released $19 million of our valuation allowance related to Spanish net deferred tax assets
associated with operating losses, as Spanish operations are no longer in a three-year cumulative loss position and our projections indicate and management now expects the operating losses will be fully utilized within the next nine years.
During 2015, the reduction in our valuation allowances was primarily attributable to currency translation adjustments.
During 2014, the change in our valuation allowances primarily related to the expiration of $99 million of Canadian tax loss carryforwards for which
a full valuation allowance had been provided on the associated deferred tax asset of $26 million. Additionally, our valuation allowances were impacted by adjustments related to activity in 2014.
French tax law provides for an indefinite carryforward of tax losses; however, losses allowed in any particular year may not exceed fifty percent of
taxable income. With respect to our French operations, we have a total net deferred tax asset of $116 million, against which we retain a valuation allowance of $22 million for losses that the Company does not expect to realize a future
benefit due to limitations imposed by French tax law. The remaining portion of the net deferred tax asset of $94 million, primarily related to French tax losses, is expected to be fully realized.
We continue to maintain a full valuation allowance against the net deferred tax asset in Canada. Given our operational structure in Canada and the
relevant Canadian loss utilization rules, the Company does not expect to realize a future benefit related to the net deferred tax asset.
Deferred taxes on the unremitted earnings of certain equity joint ventures and subsidiaries of $47 million and $51 million at December 31,
2016 and 2015, respectively, have been provided.
132
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
Tax benefits totaling $491 million, $464 million and $475 million relating to uncertain
tax positions, which are reflected in Other liabilities, were unrecognized as of December 31, 2016, 2015 and 2014, respectively. The following table presents a reconciliation of the beginning and ending amounts of unrecognized tax benefits:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
Millions of dollars
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
Balance, beginning of period
|
|
$
|
464
|
|
|
$
|
475
|
|
|
$
|
495
|
|
Additions for tax positions of current year
|
|
|
18
|
|
|
|
11
|
|
|
|
12
|
|
Additions for tax positions of prior years
|
|
|
11
|
|
|
|
5
|
|
|
|
12
|
|
Reductions for tax positions of prior years
|
|
|
(2
|
)
|
|
|
(24
|
)
|
|
|
(40
|
)
|
Settlements (payments/refunds)
|
|
|
|
|
|
|
(3
|
)
|
|
|
(4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, end of period
|
|
$
|
491
|
|
|
$
|
464
|
|
|
$
|
475
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The majority of the 2016, 2015 and 2014 balances, if recognized, will affect the effective tax rate. We operate in
multiple jurisdictions throughout the world, and our tax returns are periodically audited or subjected to review by tax authorities. We are no longer subject to any significant income tax examinations by tax authorities for the years prior to 2015
in the Netherlands, prior to 2010 in Italy, prior to 2010 in Germany, prior to 2009 in France, prior to 2015 in the United Kingdom, and prior to 2011 in the U.S., our principal tax jurisdictions. The Company is currently under examination in a
number of tax jurisdictions. It is reasonably possible that some of these examinations may be resolved during the next twelve months. We do not expect any significant changes in the amounts of unrecognized tax benefits during the next 12 months.
We recognize interest accrued related to unrecognized tax benefits in income tax expense. During the years ended December 31, 2016, 2015
and 2014, we recognized approximately $16 million, $5 million and $15 million, respectively, for interest and penalties. We had accrued approximately $47 million, $31 million and $26 million for interest and penalties
as of December 31, 2016, 2015 and 2014, respectively.
19. Commitments and Contingencies
Commitments
We have various purchase commitments for materials, supplies and services incident 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. Our capital expenditure commitments at
December 31, 2016 were in the normal course of business.
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 $95 million and
$106 million as of December 31, 2016 and 2015, respectively. At December 31, 2016, 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 to be concentrated in any single year. In our opinion, it is reasonably possible that losses in excess of the liabilities
133
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
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.
The following table summarizes the activity in our accrued environmental liability included in Accrued liabilities and Other
liabilities:
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
Millions of dollars
|
|
2016
|
|
|
2015
|
|
Beginning balance
|
|
$
|
106
|
|
|
$
|
106
|
|
Additional provisions
|
|
|
5
|
|
|
|
20
|
|
Changes in estimates
|
|
|
15
|
|
|
|
2
|
|
Amounts paid
|
|
|
(29
|
)
|
|
|
(14
|
)
|
Foreign exchange effects
|
|
|
(2
|
)
|
|
|
(8
|
)
|
|
|
|
|
|
|
|
|
|
Ending balance
|
|
$
|
95
|
|
|
$
|
106
|
|
|
|
|
|
|
|
|
|
|
Access Indemnity Demand
In December 2010, one of our subsidiaries received demand letters from affiliates of
Access Industries (collectively, Access Entities), a more than five percent shareholder of the Company, demanding indemnity for losses, including attorneys fees and expenses, arising out of a pending lawsuit styled
Edward S.
Weisfelner, as Litigation Trustee of the LB Litigation Trust v. Leonard Blavatnik, et al.,
Adversary Proceeding
No. 09-1375
(REG), in the United States Bankruptcy Court, Southern District of New York.
In the
Weisfelner
lawsuit, the plaintiffs seek to recover from Access the return of all amounts earned by the Access Entities related to their purchase of shares of Lyondell Chemical Company (Lyondell Chemical) prior to its
acquisition by Basell AF S.C.A.; distributions by Basell AF S.C.A. to its shareholders before it acquired Lyondell Chemical; and management and transaction fees and expenses. A trial was held in October 2016 and post-trial briefings are being
completed by the parties at this time. The Court held closing arguments in February 2017.
The Access Entities have also demanded
$100 million in management fees under a 2007 management agreement between an Access affiliate and the predecessor of LyondellBasell AF, as well as other unspecified amounts relating to advice purportedly given in connection with financing and
other strategic transactions. In June 2009, an Access affiliate filed a proof of claim in Bankruptcy Court against LyondellBasell AF seeking no less than $723 thousand for amounts allegedly owed under the 2007 management
agreement. In April 2011, Lyondell Chemical filed an objection to the claim and brought a declaratory judgment action for a determination that the demands are not valid. The declaratory judgment action is stayed pending the outcome of the
Weisfelner
lawsuit.
We do not believe that the 2007 management agreement is in effect or that the Company or any Company-affiliated
entity owes any obligations under the management agreement, including for management fees or for indemnification. We intend to vigorously defend our position in any proceedings and against any claims or demands that may be asserted.
We cannot at this time estimate the reasonably possible loss or range of loss that may be incurred in the
Weisfelner
lawsuit; therefore, we cannot
estimate the loss that may be sought by way of indemnity.
409A Matter
Certain of the Companys current and former executives
are being audited by the Internal Revenue Service for the 2012 tax year. The IRS has issued proposed assessments of additional taxes to these individuals for wages and penalties under Section 409A of the Internal Revenue Code. The IRS has argued
that stock options awarded to the individuals in 2010 in connection with the Companys emergence from bankruptcy
134
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
should not have used the exercise price set under the bankruptcy court approved plan of reorganization but instead should have used an exercise price based on
pre-emergence
trading by parties not controlled by the Company. If the individuals are unsuccessful in their defenses against these audits, or any audits for subsequent tax years, the Company believes it is
reasonably possible that it may be liable to the individual executive taxpayers for the additional amounts they may owe to the IRS as a result of the stock options allegedly not meeting the exemption from Section 409A. Any amount that may be owed by
the Company is dependent on the ultimate resolution of the IRS audits, but the Company believes that such amount could range from no liability to up to $170 million. The Company intends to vigorously defend its compensation practices.
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 December 31, 2016, 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.
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 five to ten years.
20. Stockholders Equity
Dividend
Distribution
The following table summarizes the dividends paid in the periods presented:
|
|
|
|
|
|
|
|
|
|
|
Millions of dollars, except per share amounts
|
|
Dividend Per
Ordinary
Share
|
|
|
Aggregate
Dividends
Paid
|
|
|
Date of Record
|
For the year 2016:
|
|
|
|
|
|
|
|
|
|
|
March
|
|
$
|
0.78
|
|
|
$
|
336
|
|
|
February 29, 2016
|
June
|
|
|
0.85
|
|
|
|
362
|
|
|
May 24, 2016
|
September
|
|
|
0.85
|
|
|
|
351
|
|
|
August 16, 2016
|
December
|
|
|
0.85
|
|
|
|
346
|
|
|
November 29, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
3.33
|
|
|
$
|
1,395
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the year 2015:
|
|
|
|
|
|
|
|
|
|
|
March
|
|
$
|
0.70
|
|
|
$
|
334
|
|
|
March 2, 2015
|
May
|
|
|
0.78
|
|
|
|
368
|
|
|
June 1, 2015
|
September
|
|
|
0.78
|
|
|
|
361
|
|
|
August 25, 2015
|
December
|
|
|
0.78
|
|
|
|
347
|
|
|
November 23, 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
3.04
|
|
|
$
|
1,410
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share Repurchase Program
We completed the repurchase of shares under share repurchase programs authorized by
our shareholders in May 2015 (May 2015 Share Repurchase Program), April 2014 (April 2014 Share Repurchase Program) and May 2013 (May 2013 Share Repurchase Program) in 2016, 2015 and 2014,
135
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
respectively. We were authorized to purchase up to 10% of our outstanding shares under each of these programs. In May 2016, our shareholders approved a proposal to authorize us to repurchase up
to an additional 10% of our outstanding ordinary shares through November 2017 (May 2016 Share Repurchase Program). These repurchases, which are determined at the discretion of our Management Board, 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 general corporate purposes, including for various employee benefit and
compensation plans.
The following table summarizes our share repurchase activity for the periods presented:
|
|
|
|
|
|
|
|
|
|
|
|
|
Millions of dollars, except shares and per share amounts
|
|
Shares
Repurchased
|
|
|
Average
Purchase
Price
|
|
|
Total
Purchase
Price,
Including
Commissions
|
|
For the year 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
May 2015 Share Repurchase Program
|
|
|
15,302,707
|
|
|
$
|
80.15
|
|
|
$
|
1,226
|
|
May 2016 Share Repurchase Program
|
|
|
21,316,627
|
|
|
|
79.18
|
|
|
|
1,688
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
36,619,334
|
|
|
$
|
79.58
|
|
|
$
|
2,914
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the year 2015:
|
|
|
|
|
|
|
|
|
|
|
|
|
April 2014 Share Repurchase Program
|
|
|
19,892,101
|
|
|
$
|
86.40
|
|
|
$
|
1,719
|
|
May 2015 Share Repurchase Program
|
|
|
31,947,812
|
|
|
|
90.66
|
|
|
|
2,896
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
51,839,913
|
|
|
$
|
89.03
|
|
|
$
|
4,615
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the year 2014:
|
|
|
|
|
|
|
|
|
|
|
|
|
May 2013 Share Repurchase Program
|
|
|
30,225,236
|
|
|
$
|
90.31
|
|
|
$
|
2,730
|
|
April 2014 Share Repurchase Program
|
|
|
33,070,101
|
|
|
|
95.08
|
|
|
|
3,143
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
63,295,337
|
|
|
$
|
92.80
|
|
|
$
|
5,873
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Due to the timing of settlements, total cash paid for share repurchases for the years ended December 31, 2016, 2015
and 2014 was $2,938 million, $4,656 million and $5,788 million, respectively.
Ordinary Shares
The changes in the
outstanding amounts of ordinary shares are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
Ordinary shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance
|
|
|
440,150,069
|
|
|
|
486,969,402
|
|
|
|
548,824,138
|
|
Share-based compensation
|
|
|
418,892
|
|
|
|
4,972,908
|
|
|
|
1,411,837
|
|
Warrants exercised
|
|
|
200
|
|
|
|
1,989
|
|
|
|
1,116
|
|
Employee stock purchase plan
|
|
|
96,504
|
|
|
|
45,683
|
|
|
|
27,648
|
|
Purchase of ordinary shares
|
|
|
(36,619,334
|
)
|
|
|
(51,839,913
|
)
|
|
|
(63,295,337
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance
|
|
|
404,046,331
|
|
|
|
440,150,069
|
|
|
|
486,969,402
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
136
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:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
Ordinary shares held as treasury shares:
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance
|
|
|
138,285,201
|
|
|
|
91,463,729
|
|
|
|
29,607,877
|
|
Share-based compensation
|
|
|
(418,892
|
)
|
|
|
(4,972,908
|
)
|
|
|
(1,411,837
|
)
|
Warrants exercised
|
|
|
|
|
|
|
150
|
|
|
|
|
|
Employee stock purchase plan
|
|
|
(96,504
|
)
|
|
|
(45,683
|
)
|
|
|
(27,648
|
)
|
Purchase of ordinary shares
|
|
|
36,619,334
|
|
|
|
51,839,913
|
|
|
|
63,295,337
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance
|
|
|
174,389,139
|
|
|
|
138,285,201
|
|
|
|
91,463,729
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated Other Comprehensive Loss
The components of, and
after-tax
changes in, Accumulated other comprehensive loss as of and for the years ended December 31, 2016 and 2015 are presented in the following table:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Millions of dollars
|
|
Financial
Derivatives
|
|
|
Net Unrealized
Holding Loss
on Investments
Net of Tax
|
|
|
Defined Pension
and Other
Postretirement
Benefit Plans
|
|
|
Foreign
Currency
Translations
Adjustments
|
|
|
Total
|
|
BalanceJanuary 1, 2016
|
|
$
|
(79
|
)
|
|
$
|
(5
|
)
|
|
$
|
(428
|
)
|
|
$
|
(926
|
)
|
|
$
|
(1,438
|
)
|
Other comprehensive income (loss) before reclassifications
|
|
|
(22
|
)
|
|
|
6
|
|
|
|
(147
|
)
|
|
|
(20
|
)
|
|
|
(183
|
)
|
Amounts reclassified from accumulated other comprehensive loss
|
|
|
26
|
|
|
|
|
|
|
|
77
|
|
|
|
7
|
|
|
|
110
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net other comprehensive income (loss)
|
|
|
4
|
|
|
|
6
|
|
|
|
(70
|
)
|
|
|
(13
|
)
|
|
|
(73
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BalanceDecember 31, 2016
|
|
$
|
(75
|
)
|
|
$
|
1
|
|
|
$
|
(498
|
)
|
|
$
|
(939
|
)
|
|
$
|
(1,511
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BalanceJanuary 1, 2015
|
|
$
|
(80
|
)
|
|
$
|
|
|
|
$
|
(449
|
)
|
|
$
|
(497
|
)
|
|
$
|
(1,026
|
)
|
Other comprehensive income (loss) before reclassifications
|
|
|
208
|
|
|
|
(5
|
)
|
|
|
(6
|
)
|
|
|
(429
|
)
|
|
|
(232
|
)
|
Amounts reclassified from accumulated other comprehensive loss
|
|
|
(207
|
)
|
|
|
|
|
|
|
27
|
|
|
|
|
|
|
|
(180
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net other comprehensive income (loss)
|
|
|
1
|
|
|
|
(5
|
)
|
|
|
21
|
|
|
|
(429
|
)
|
|
|
(412
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BalanceDecember 31, 2015
|
|
$
|
(79
|
)
|
|
$
|
(5
|
)
|
|
$
|
(428
|
)
|
|
$
|
(926
|
)
|
|
$
|
(1,438
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
137
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:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
December 31,
|
|
|
Affected Line Item on
the
Consolidated
Statements of Income
|
Millions of dollars
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
|
Reclassification adjustments for:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Defined pension and other postretirement benefit plan items:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prior service cost
|
|
$
|
1
|
|
|
$
|
5
|
|
|
$
|
|
|
|
|
Actuarial loss
|
|
|
31
|
|
|
|
28
|
|
|
|
7
|
|
|
|
Settlement loss
|
|
|
61
|
|
|
|
|
|
|
|
|
|
|
|
Financial derivatives
|
|
|
(63
|
)
|
|
|
(207
|
)
|
|
|
(89
|
)
|
|
Other income, net
|
Foreign currency translations
|
|
|
7
|
|
|
|
|
|
|
|
|
|
|
Other income, net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reclassifications, before tax
|
|
|
37
|
|
|
|
(174
|
)
|
|
|
(82
|
)
|
|
|
Income tax expense (benefit)
|
|
|
(73
|
)
|
|
|
6
|
|
|
|
|
|
|
Provision for income taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts reclassified out of Accumulated other comprehensive loss
|
|
$
|
110
|
|
|
$
|
(180
|
)
|
|
$
|
(82
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of prior service cost and actuarial loss are included in the computation of net periodic pension and other
postretirement benefit costs (see Note 16).
Non-Controlling
Interests
In June 2015, we
received $24 million from a holder of a minority interest in one of our consolidated partnerships to exit the partnership. Accordingly, our interest in this partnership increased resulting in an impact to equity of a $4 million reduction
of
Non-controlling
interests and a $20 million increase in Additional
paid-in
capital.
21. 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 options awards and other equity-based compensation awards. We have unvested restricted stock units that
are considered participating securities for earnings per share.
138
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
Earnings per share data and dividends declared per share of common stock are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
Millions of dollars
|
|
Continuing
Operations
|
|
|
Discontinued
Operations
|
|
|
Continuing
Operations
|
|
|
Discontinued
Operations
|
|
|
Continuing
Operations
|
|
|
Discontinued
Operations
|
|
Net income (loss)
|
|
$
|
3,847
|
|
|
$
|
(10
|
)
|
|
$
|
4,479
|
|
|
$
|
(5
|
)
|
|
$
|
4,172
|
|
|
$
|
(4
|
)
|
Less: net (income) loss attributable to
non-controlling
interests
|
|
|
(1
|
)
|
|
|
|
|
|
|
2
|
|
|
|
|
|
|
|
6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to the Company shareholders
|
|
|
3,846
|
|
|
|
(10
|
)
|
|
|
4,481
|
|
|
|
(5
|
)
|
|
|
4,178
|
|
|
|
(4
|
)
|
Net income attributable to participating securities
|
|
|
(4
|
)
|
|
|
|
|
|
|
(8
|
)
|
|
|
|
|
|
|
(12
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to ordinary shareholdersbasic and diluted
|
|
$
|
3,842
|
|
|
$
|
(10
|
)
|
|
$
|
4,473
|
|
|
$
|
(5
|
)
|
|
$
|
4,166
|
|
|
$
|
(4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Millions of shares,
except per share amounts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic weighted average common stock outstanding
|
|
|
419
|
|
|
|
419
|
|
|
|
465
|
|
|
|
465
|
|
|
|
518
|
|
|
|
518
|
|
Effect of dilutive securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock options
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3
|
|
|
|
3
|
|
QPA and PSU awards
|
|
|
1
|
|
|
|
1
|
|
|
|
1
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Potential dilutive shares
|
|
|
420
|
|
|
|
420
|
|
|
|
466
|
|
|
|
466
|
|
|
|
521
|
|
|
|
521
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
9.17
|
|
|
$
|
(0.02
|
)
|
|
$
|
9.63
|
|
|
$
|
(0.01
|
)
|
|
$
|
8.04
|
|
|
$
|
(0.01
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
$
|
9.15
|
|
|
$
|
(0.02
|
)
|
|
$
|
9.60
|
|
|
$
|
(0.01
|
)
|
|
$
|
8.00
|
|
|
$
|
(0.01
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Participating securities
|
|
|
0.3
|
|
|
|
0.3
|
|
|
|
0.4
|
|
|
|
0.4
|
|
|
|
1.4
|
|
|
|
1.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends declared per share of common stock
|
|
$
|
3.33
|
|
|
$
|
|
|
|
$
|
3.04
|
|
|
$
|
|
|
|
$
|
2.70
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22. Segment and Related Information
Our operations are managed through five operating segments, as shown below. We disclose the results of each of our operating segments in accordance with
ASC 280,
Segment Reporting
. Each of the operating segments is managed by a senior executive reporting directly 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 PolyolefinsAmericas (O&PAmericas). Our O&PAmericas segment produces and markets olefins and
co-products,
polyethylene and polypropylene.
|
|
|
|
Olefins and PolyolefinsEurope, Asia, and International (O&PEAI). Our O&PEAI segment produces and markets olefins
and
co-products,
polyethylene, and polypropylene, including polypropylene compounds.
|
139
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
|
|
|
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.
|
|
|
|
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 our segments profitability and
therefore, in accordance with ASC 280,
Segment Reporting
, we have presented EBITDA for all segments. We define EBITDA as earnings before interest, taxes and depreciation and amortization.
Intersegment eliminations and items that are not directly related or allocated to business operations are included in Other. Sales between
segments are made primarily at prices approximating prevailing market prices.
Summarized financial information concerning reportable segments
is shown in the following table for the periods presented:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2016
|
|
Millions of dollars
|
|
O&P
Americas
|
|
|
O&P
EAI
|
|
|
I&D
|
|
|
Refining
|
|
|
Technology
|
|
|
Other
|
|
|
Total
|
|
Sales and other operating revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customers
|
|
$
|
6,757
|
|
|
$
|
10,404
|
|
|
$
|
7,085
|
|
|
$
|
4,559
|
|
|
$
|
378
|
|
|
$
|
|
|
|
$
|
29,183
|
|
Intersegment
|
|
|
2,320
|
|
|
|
175
|
|
|
|
141
|
|
|
|
576
|
|
|
|
101
|
|
|
|
(3,313
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,077
|
|
|
|
10,579
|
|
|
|
7,226
|
|
|
|
5,135
|
|
|
|
479
|
|
|
|
(3,313
|
)
|
|
|
29,183
|
|
Depreciation and amortization expense
|
|
|
362
|
|
|
|
229
|
|
|
|
269
|
|
|
|
163
|
|
|
|
41
|
|
|
|
|
|
|
|
1,064
|
|
Other income (loss), net
|
|
|
63
|
|
|
|
42
|
|
|
|
|
|
|
|
8
|
|
|
|
|
|
|
|
(2
|
)
|
|
|
111
|
|
Income from equity investments
|
|
|
59
|
|
|
|
302
|
|
|
|
6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
367
|
|
Capital expenditures
|
|
|
1,376
|
|
|
|
261
|
|
|
|
333
|
|
|
|
224
|
|
|
|
36
|
|
|
|
13
|
|
|
|
2,243
|
|
EBITDA
|
|
|
2,877
|
|
|
|
2,067
|
|
|
|
1,333
|
|
|
|
72
|
|
|
|
262
|
|
|
|
(9
|
)
|
|
|
6,602
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2015
|
|
Millions of dollars
|
|
O&P
Americas
|
|
|
O&P
EAI
|
|
|
I&D
|
|
|
Refining
|
|
|
Technology
|
|
|
Other
|
|
|
Total
|
|
Sales and other operating revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customers
|
|
$
|
7,344
|
|
|
$
|
11,371
|
|
|
$
|
7,596
|
|
|
$
|
6,059
|
|
|
$
|
365
|
|
|
$
|
|
|
|
$
|
32,735
|
|
Intersegment
|
|
|
2,620
|
|
|
|
205
|
|
|
|
176
|
|
|
|
498
|
|
|
|
100
|
|
|
|
(3,599
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,964
|
|
|
|
11,576
|
|
|
|
7,772
|
|
|
|
6,557
|
|
|
|
465
|
|
|
|
(3,599
|
)
|
|
|
32,735
|
|
Depreciation and amortization expense
|
|
|
353
|
|
|
|
219
|
|
|
|
233
|
|
|
|
196
|
|
|
|
46
|
|
|
|
|
|
|
|
1,047
|
|
Other income (loss), net
|
|
|
10
|
|
|
|
14
|
|
|
|
4
|
|
|
|
2
|
|
|
|
|
|
|
|
(5
|
)
|
|
|
25
|
|
Income from equity investments
|
|
|
42
|
|
|
|
283
|
|
|
|
14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
339
|
|
Capital expenditures
|
|
|
668
|
|
|
|
186
|
|
|
|
441
|
|
|
|
108
|
|
|
|
24
|
|
|
|
13
|
|
|
|
1,440
|
|
EBITDA
|
|
|
3,661
|
|
|
|
1,825
|
|
|
|
1,475
|
|
|
|
342
|
|
|
|
243
|
|
|
|
(13
|
)
|
|
|
7,533
|
|
140
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2014
|
|
Millions of dollars
|
|
O&P
Americas
|
|
|
O&P
EAI
|
|
|
I&D
|
|
|
Refining
|
|
|
Technology
|
|
|
Other
|
|
|
Total
|
|
Sales and other operating revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customers
|
|
$
|
9,608
|
|
|
$
|
14,861
|
|
|
$
|
9,985
|
|
|
$
|
10,768
|
|
|
$
|
385
|
|
|
$
|
1
|
|
|
$
|
45,608
|
|
Intersegment
|
|
|
4,340
|
|
|
|
342
|
|
|
|
145
|
|
|
|
942
|
|
|
|
112
|
|
|
|
(5,881
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,948
|
|
|
|
15,203
|
|
|
|
10,130
|
|
|
|
11,710
|
|
|
|
497
|
|
|
|
(5,880
|
)
|
|
|
45,608
|
|
Depreciation and amortization expense
|
|
|
316
|
|
|
|
248
|
|
|
|
225
|
|
|
|
169
|
|
|
|
61
|
|
|
|
|
|
|
|
1,019
|
|
Other income, net
|
|
|
2
|
|
|
|
5
|
|
|
|
7
|
|
|
|
2
|
|
|
|
|
|
|
|
22
|
|
|
|
38
|
|
Income from equity investments
|
|
|
21
|
|
|
|
229
|
|
|
|
7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
257
|
|
Capital expenditures
|
|
|
912
|
|
|
|
191
|
|
|
|
241
|
|
|
|
123
|
|
|
|
25
|
|
|
|
7
|
|
|
|
1,499
|
|
EBITDA
|
|
|
3,911
|
|
|
|
1,366
|
|
|
|
1,459
|
|
|
|
65
|
|
|
|
232
|
|
|
|
17
|
|
|
|
7,050
|
|
In 2016, operating results for our O&PAmericas segment includes a
non-cash,
LCM inventory valuation charge of $29 million due mainly to the drop in polypropylene prices. Our O&PAmericas and O&PEAI segments results benefited from gains of
$57 million and $21 million, respectively, related to the sale of our wholly owned subsidiary, Petroken Petroquimica Ensenada S.A. in 2016.
In 2015, operating results for the O&PAmericas, O&PEAI, I&D and Refining segments included
non-cash
charges of $160 million,
$30 million, $181 million and $177 million, respectively, related to LCM inventory valuation adjustments. Declines in the prices of ethylene, propylene and other products correlated with crude oil were the primary drivers of the LCM
inventory valuation adjustment for the O&PAmericas segment while the LCM inventory valuation adjustment recognized by our O&PEAI segment is mainly related to polyolefins. Declines in the prices of various chemicals, notably
benzene and ETBE, within our I&D segments inventory pools led to the LCM inventory valuation adjustment recognized by the I&D segment in 2015. The LCM inventory valuation adjustment recognized by the Refining segment in 2015 was driven
primarily by declines in the price of crude oil.
In 2014, operating results for the O&PAmericas, O&PEAI, I&D and
Refining segments included
non-cash
charges of $279 million, $44 million, $93 million and $344 million, respectively, related to lower of cost or market inventory valuation adjustments,
primarily driven by a decline in the price of crude oil and a related decline in the prices of heavy liquids and other correlated products. The O&PEAI segment operating results for 2014 included a $52 million benefit from a settlement
under a 2005 indemnification agreement for certain existing and future environmental liabilities.
141
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:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
Millions of dollars
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
EBITDA:
|
|
|
|
|
|
|
|
|
|
|
|
|
Total segment EBITDA
|
|
$
|
6,611
|
|
|
$
|
7,546
|
|
|
$
|
7,033
|
|
Other EBITDA
|
|
|
(9
|
)
|
|
|
(13
|
)
|
|
|
17
|
|
Less:
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization expense
|
|
|
(1,064
|
)
|
|
|
(1,047
|
)
|
|
|
(1,019
|
)
|
Interest expense
|
|
|
(322
|
)
|
|
|
(310
|
)
|
|
|
(352
|
)
|
Add:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
17
|
|
|
|
33
|
|
|
|
33
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations before income taxes
|
|
$
|
5,233
|
|
|
$
|
6,209
|
|
|
$
|
5,712
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-lived assets of continuing operations, including goodwill, are summarized and reconciled to consolidated totals in
the following table:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Millions of dollars
|
|
O&P
Americas
|
|
|
O&P
EAI
|
|
|
I&D
|
|
|
Refining
|
|
|
Technology
|
|
|
Other
|
|
|
Total
|
|
December 31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment, net
|
|
$
|
4,688
|
|
|
$
|
1,881
|
|
|
$
|
2,288
|
|
|
$
|
1,067
|
|
|
$
|
213
|
|
|
$
|
|
|
|
$
|
10,137
|
|
Investment in PO joint ventures
|
|
|
|
|
|
|
|
|
|
|
415
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
415
|
|
Equity investments
|
|
|
164
|
|
|
|
1,332
|
|
|
|
79
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,575
|
|
Goodwill
|
|
|
162
|
|
|
|
139
|
|
|
|
219
|
|
|
|
|
|
|
|
8
|
|
|
|
|
|
|
|
528
|
|
|
|
|
|
|
|
|
|
December 31, 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment, net
|
|
$
|
3,660
|
|
|
$
|
1,881
|
|
|
$
|
2,250
|
|
|
$
|
993
|
|
|
$
|
207
|
|
|
$
|
|
|
|
$
|
8,991
|
|
Investment in PO joint ventures
|
|
|
|
|
|
|
|
|
|
|
397
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
397
|
|
Equity investments
|
|
|
141
|
|
|
|
1,372
|
|
|
|
95
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,608
|
|
Goodwill
|
|
|
162
|
|
|
|
144
|
|
|
|
222
|
|
|
|
|
|
|
|
8
|
|
|
|
|
|
|
|
536
|
|
The following geographic data for revenues are based upon the location of the customer and for long-lived assets, the
location of the assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
Millions of dollars
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
Sales and other operating revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
United States
|
|
$
|
13,962
|
|
|
$
|
16,101
|
|
|
$
|
23,574
|
|
Germany
|
|
|
2,474
|
|
|
|
2,697
|
|
|
|
4,231
|
|
Italy
|
|
|
1,203
|
|
|
|
1,349
|
|
|
|
1,617
|
|
France
|
|
|
1,055
|
|
|
|
1,201
|
|
|
|
1,591
|
|
Mexico
|
|
|
1,026
|
|
|
|
951
|
|
|
|
1,361
|
|
The Netherlands
|
|
|
727
|
|
|
|
856
|
|
|
|
1,206
|
|
Other
|
|
|
8,736
|
|
|
|
9,580
|
|
|
|
12,028
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
29,183
|
|
|
$
|
32,735
|
|
|
$
|
45,608
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
142
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
|
|
|
|
|
|
|
|
|
|
|
Long-Lived Assets
|
|
Millions of dollars
|
|
2016
|
|
|
2015
|
|
United States
|
|
$
|
8,230
|
|
|
$
|
7,087
|
|
Germany
|
|
|
1,276
|
|
|
|
1,331
|
|
The Netherlands
|
|
|
657
|
|
|
|
669
|
|
France
|
|
|
530
|
|
|
|
485
|
|
Italy
|
|
|
309
|
|
|
|
331
|
|
Mexico
|
|
|
175
|
|
|
|
153
|
|
Other
|
|
|
1,500
|
|
|
|
1,580
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
12,677
|
|
|
$
|
11,636
|
|
|
|
|
|
|
|
|
|
|
Long-lived assets include Property, plant and equipment, net, Intangible assets, net, Equity investments, and Investments
in PO joint ventures (see Notes 7, 8 and 9).
Revenues by key product are summarized in the following table:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
Millions of dollars
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
Sales and other operating revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
Olefins &
co-products
|
|
$
|
3,215
|
|
|
$
|
3,446
|
|
|
$
|
5,920
|
|
Polyethylene
|
|
|
6,903
|
|
|
|
7,536
|
|
|
|
8,825
|
|
Polypropylene
|
|
|
6,917
|
|
|
|
7,616
|
|
|
|
9,598
|
|
PO & derivatives
|
|
|
1,852
|
|
|
|
2,149
|
|
|
|
2,758
|
|
Oxyfuels and related products
|
|
|
2,676
|
|
|
|
2,906
|
|
|
|
3,813
|
|
Intermediate chemicals
|
|
|
2,483
|
|
|
|
2,541
|
|
|
|
3,381
|
|
Refined products
|
|
|
4,559
|
|
|
|
6,059
|
|
|
|
10,768
|
|
Other
|
|
|
578
|
|
|
|
482
|
|
|
|
545
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
29,183
|
|
|
$
|
32,735
|
|
|
$
|
45,608
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23. Unaudited Quarterly Results
The following table presents selected financial data for the quarterly periods in 2016 and 2015:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Quarter Ended
|
|
Millions of dollars
|
|
March 31
|
|
|
June 30
|
|
|
September 30
|
|
|
December 31
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales and other operating revenues
|
|
$
|
6,743
|
|
|
$
|
7,328
|
|
|
$
|
7,365
|
|
|
$
|
7,747
|
|
Gross profit
(a)
|
|
|
1,577
|
|
|
|
1,626
|
|
|
|
1,462
|
|
|
|
1,327
|
|
Operating income
(b)
|
|
|
1,360
|
|
|
|
1,403
|
|
|
|
1,249
|
|
|
|
1,048
|
|
Income from equity investments
|
|
|
91
|
|
|
|
117
|
|
|
|
81
|
|
|
|
78
|
|
Income from continuing operations
(b)
|
|
|
1,030
|
|
|
|
1,092
|
|
|
|
955
|
|
|
|
770
|
|
Income (loss) from discontinued operations, net of tax
|
|
|
|
|
|
|
(1
|
)
|
|
|
(2
|
)
|
|
|
(7
|
)
|
Net income
(b)
|
|
|
1,030
|
|
|
|
1,091
|
|
|
|
953
|
|
|
|
763
|
|
Earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
2.38
|
|
|
|
2.57
|
|
|
|
2.30
|
|
|
|
1.87
|
|
Diluted
|
|
|
2.37
|
|
|
|
2.56
|
|
|
|
2.30
|
|
|
|
1.87
|
|
143
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Quarter Ended
|
|
Millions of dollars
|
|
March 31
|
|
|
June 30
|
|
|
September 30
|
|
|
December 31
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales and other operating revenues
|
|
$
|
8,185
|
|
|
$
|
9,145
|
|
|
$
|
8,334
|
|
|
$
|
7,071
|
|
Gross profit
(a)
|
|
|
1,806
|
|
|
|
2,098
|
|
|
|
1,869
|
|
|
|
1,279
|
|
Operating income
(b)
|
|
|
1,575
|
|
|
|
1,845
|
|
|
|
1,650
|
|
|
|
1,052
|
|
Income from equity investments
|
|
|
69
|
|
|
|
90
|
|
|
|
93
|
|
|
|
87
|
|
Income from continuing operations
(b)
|
|
|
1,167
|
|
|
|
1,326
|
|
|
|
1,189
|
|
|
|
797
|
|
Income (loss) from discontinued operations, net of tax
|
|
|
(3
|
)
|
|
|
3
|
|
|
|
(3
|
)
|
|
|
(2
|
)
|
Net income
(b)
|
|
|
1,164
|
|
|
|
1,329
|
|
|
|
1,186
|
|
|
|
795
|
|
Earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
2.42
|
|
|
|
2.82
|
|
|
|
2.56
|
|
|
|
1.78
|
|
Diluted
|
|
|
2.41
|
|
|
|
2.82
|
|
|
|
2.54
|
|
|
|
1.78
|
|
(a)
|
Represents Sales and other operating revenues less Cost of sales.
|
(b)
|
Includes charges in the three months ended March 31 2016 and June 30, 2016 of $40 million and $21 million, respectively, related to out of period
adjustments for deferred tax liabilities associated with some of our subsidiaries, and a $61 million charge in the three months ended December 31, 2016 for out of period tax corrections related to tax effects on our cross currency swaps.
Includes a pretax LCM inventory valuation charge of $68 million ($47 million after tax) in the three months ended March 31, 2016 which was reversed in the three months ended June 30, 2016. A pretax LCM inventory valuation charge
of $29 million ($18 million after tax) and a pension settlement charge of $58 million ($37 million after tax) were also recognized in the three months ended December 31, 2016. The three months ended March 31, 2016 also
includes a pretax and after tax gain of $78 million on the sale of our wholly owned Argentine subsidiary. Includes charges related to the pretax LCM inventory valuation adjustments of $92 million ($58 million after tax) in the three
months ended March 31, 2015; $181 million ($114 million after tax) in the three months ended September 30, 2015; and $284 million ($185 million after tax) in the three months ended December 31, 2015. The three
months ended June 30, 2015 includes a pretax benefit of $9 million ($6 million after tax) related to the partial reversal of the LCM inventory valuation adjustment recognized in the three months ended March 31, 2015. For
additional information related to these adjustments, see Note 22.
|
144