NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
TABLE OF CONTENTS
8
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
LyondellBasell Industries N.V., together with its
consolidated subsidiaries (collectively 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 production of polymers. Unless otherwise indicated, the Company, we, us, our or similar words are used to refer to LyondellBasell N.V.
The accompanying Consolidated Financial Statements are unaudited and have been prepared from the books and records of LyondellBasell N.V. in accordance with
the instructions to Form 10-Q and Rule 10-1 of Regulation S-X for interim financial information. Accordingly, they do not include all of the information and notes required by accounting principles generally accepted in the United States (U.S.
GAAP) for complete financial statements. In our opinion, all adjustments, consisting only of normal recurring adjustments, considered necessary for a fair presentation have been included. The results for interim periods are not necessarily
indicative of results for the entire year. These Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and notes thereto included in the Companys Annual Report on Form 10-K for the year
ended December 31, 2016.
2.
|
Accounting and Reporting Changes
|
Recently Adopted Guidance
Intangibles-Goodwill and Other
In January 2017, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update
(ASU) 2017-04,
IntangiblesGoodwill and other (Topic 350): Simplifying the Test for Goodwill Impairment
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 early adoption of this amendment in the first quarter of 2017 did not have a material impact on our Consolidated Financial Statements.
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 adoption of this amendment in the first quarter of 2017 did not have a material impact on our Consolidated Financial
Statements.
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 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. Adoption of the amendments in this guidance in the first quarter of
2017 did not have a material impact 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
9
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
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, 2017, with early adoption permitted. Early adoption of the amendments in this guidance in the second quarter of 2017 resulted in a reclassification of cash flows related to
debt extinguishment costs incurred in March 2017 of $65 million from operating to financing activity cash flows. Other aspects of the amendment did not have a material impact on our Consolidated Statements of Cash Flows.
Statement of Cash Flows
In November 2016, the FASB issued ASU 2016-18,
Statement of Cash Flows: Restricted Cash
. The ASU requires entities
to include restricted cash and restricted cash equivalents in their cash and cash-equivalent balances in the statement of cash flows. Early retrospective adoption of this amendment in the second quarter of 2017 did not have a material impact on our
Consolidated Statements of Cash Flows.
CompensationStock Compensation
In May 2017, the FASB issued ASU 2017-09,
Stock Compensation:
Scope of Modification Accounting
. The amendments in this update provide guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in
Topic 718,
CompensationStock Compensation
. Early adoption of this amendment in the third quarter of 2017 did not have a material impact on our Consolidated Financial Statements.
Accounting Guidance Issued But Not Adopted as of September 30, 2017
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 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, 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 the modified retrospective transition method. We will complete any required changes to our systems and processes, including updating our internal controls, during the fourth quarter
of 2017.
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 do
not expect the adoption of this new guidance to have a material impact on our Consolidated Financial Statements.
10
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
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, all of which are classified as operating leases
under the existing guidance.
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 amendment in this guidance on our Consolidated Financial
Statements.
Income Taxes
In October 2016, the FASB issued ASU 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. We are currently assessing the impact of this new guidance on our Consolidated Financial Statements.
Business Combinations
In January 2017, the FASB issued ASU 2017-01,
Clarifying the Definition of a Business.
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 do not expect the adoption of this new guidance to have a material impact on our Consolidated Financial Statements.
Other Income
Gains and Losses from the Derecognition of Nonfinancial Assets
In February 2017, the FASB issued ASU 2017-05,
Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets
. The guidance provides clarification about the term
in substance nonfinancial asset
, other aspects of the scope of Subtopic
610-20
Other Income
, and how an entity should account for partial sales of nonfinancial assets once the amendments in Update 2014-09 become effective. The amendments will be effective for public entities for annual and interim periods
beginning after December 15, 2017. We do not expect the adoption of this new guidance to have a material impact on our Consolidated Financial Statements.
11
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
CompensationRetirement Benefits
In March 2017, the FASB issued ASU 2017-07,
Improving
the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost
. The guidance will require changes in presentation of current service cost and other components of net benefit cost. The amendments will be effective for
public entities for annual and interim periods beginning after December 15, 2017. We do not expect the adoption of this new guidance to have a material impact on our Consolidated Financial Statements.
ReceivablesNonrefundable Fees and Other Costs
In March 2017, the FASB issued ASU 2017-08,
Premium Amortization on Purchased Callable Debt
Securities
. This new guidance requires the premium on callable debt securities to be amortized to the earliest call date. Under current requirements, premiums on callable debt securities are generally amortized over the contractual life of the
security. The amendments will be effective for public entities for annual and interim periods beginning after December 15, 2018. Early adoption is permitted. We do not expect the adoption of this new guidance to have a material impact on our
Consolidated Financial Statements.
Derivatives and Hedging
In August 2017, the FASB issued ASU 2017-12,
Targeted Improvements to
Accounting for Hedging Activities.
The new guidance will make more financial and nonfinancial hedging strategies eligible for hedge accounting and amends the presentation and disclosure requirements while changing how companies assess
effectiveness. Overall, it is intended to more closely align hedge accounting with companies risk management strategies, simplify the application of hedge accounting, and increase transparency as to the scope and results of hedging programs.
The amendments will be effective for public entities for annual and interim periods beginning after December 15, 2018. Early adoption is permitted and the Company will adopt the guidance effective January 1, 2018. We do not expect the
adoption of this new guidance to have a material impact on our Consolidated Financial Statements.
Our allowance for doubtful accounts receivable, which is
reflected in the Consolidated Balance Sheets as a reduction of accounts receivable, totaled $17 million and $16 million at September 30, 2017 and December 31, 2016, respectively.
Inventories consisted of the following components:
|
|
|
|
|
|
|
|
|
Millions of dollars
|
|
September 30,
2017
|
|
|
December 31,
2016
|
|
Finished goods
|
|
$
|
2,705
|
|
|
$
|
2,575
|
|
Work-in-process
|
|
|
188
|
|
|
|
154
|
|
Raw materials and supplies
|
|
|
1,284
|
|
|
|
1,080
|
|
|
|
|
|
|
|
|
|
|
Total inventories
|
|
$
|
4,177
|
|
|
$
|
3,809
|
|
|
|
|
|
|
|
|
|
|
12
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
Long-term loans, notes and other long-term debt consisted of the
following:
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
|
December 31,
|
|
Millions of dollars
|
|
2017
|
|
|
2016
|
|
Senior Notes due 2019, $2,000 million, 5.0% ($3 million of debt issuance cost)
|
|
$
|
959
|
|
|
$
|
1,906
|
|
Senior Notes due 2021, $1,000 million, 6.0% ($8 million of debt issuance cost)
|
|
|
990
|
|
|
|
988
|
|
Senior Notes due 2024, $1,000 million, 5.75% ($8 million of debt issuance cost)
|
|
|
992
|
|
|
|
991
|
|
Senior Notes due 2055, $1,000 million, 4.625% ($16 million of discount; $11 million of debt
issuance cost)
|
|
|
973
|
|
|
|
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% ($21 million of discount; $7 million of debt
issuance cost)
|
|
|
722
|
|
|
|
721
|
|
Guaranteed Notes due 2023, $750 million, 4.0% ($6 million of discount; $4 million of debt issuance
cost)
|
|
|
740
|
|
|
|
739
|
|
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)
|
|
|
880
|
|
|
|
785
|
|
Guaranteed Notes due 2027, $1,000 million, 3.5% ($10 million of discount; $8 million of debt
issuance cost)
|
|
|
992
|
|
|
|
|
|
Other
|
|
|
7
|
|
|
|
6
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
8,534
|
|
|
|
8,387
|
|
Less current maturities
|
|
|
(3
|
)
|
|
|
(2
|
)
|
|
|
|
|
|
|
|
|
|
Long-term debt
|
|
$
|
8,531
|
|
|
$
|
8,385
|
|
|
|
|
|
|
|
|
|
|
Gains (losses) related to fair value adjustments associated with the fair value hedge accounting of our fixed-for-floating
interest rate swaps for the applicable periods are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative
|
|
|
|
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
Year Ended
|
|
|
Amount
|
|
|
|
Inception
|
|
September 30,
|
|
|
September 30,
|
|
|
December 31,
|
|
|
Since
|
|
Millions of dollars
|
|
Year
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
|
2016
|
|
|
Inception
|
|
Senior Notes due 2019, 5.0%
|
|
2014
|
|
$
|
(4
|
)
|
|
$
|
26
|
|
|
$
|
(46
|
)
|
|
$
|
11
|
|
|
$
|
42
|
|
|
$
|
38
|
|
|
|
|
|
|
|
|
|
Senior Notes due 2021, 6.0%
|
|
2016
|
|
|
2
|
|
|
|
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
3
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
Guaranteed Notes due 2027, 3.5%
|
|
2017
|
|
|
|
|
|
|
|
|
|
|
(10
|
)
|
|
|
|
|
|
|
|
|
|
|
(10
|
)
|
These fair value adjustments are recognized in Interest expense in the Consolidated Statements of Income.
13
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
Short-term loans, notes, and other short-term debt consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
|
December 31,
|
|
Millions of dollars
|
|
2017
|
|
|
2016
|
|
$2,500 million Senior Revolving Credit Facility
|
|
$
|
|
|
|
$
|
|
|
$900 million U.S. Receivables Securitization Facility
|
|
|
|
|
|
|
|
|
Commercial paper
|
|
|
317
|
|
|
|
500
|
|
Precious metal financings
|
|
|
59
|
|
|
|
90
|
|
Other
|
|
|
5
|
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
Total short-term debt
|
|
$
|
381
|
|
|
$
|
594
|
|
|
|
|
|
|
|
|
|
|
Long-Term Debt
Guaranteed Notes due 2027
In March 2017, 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 $1,000 million of 3.5% guaranteed notes due 2027 at a discounted price of 98.968%.
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 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 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.
Senior Notes due 2019
In March 2017, we
redeemed $1,000 million aggregate principal amount of our outstanding 5% senior notes due 2019, and paid $65 million in make-whole premiums. In conjunction with the redemption of these notes, we recognized non-cash charges of $4 million for the
write-off of unamortized debt issuance costs and $44 million for the write-off of the cumulative fair value hedge accounting adjustment related to the redeemed notes.
Short-Term Debt
Senior Revolving Credit
Facility
In June 2017, the term of our $2,500 million revolving credit facility was extended for one year to June 2022 pursuant to a consent agreement. 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, including amounts outstanding
under our commercial paper program, and letters of credit under this 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.
14
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
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 fiscal 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 September 30,
2017. At September 30, 2017, we had $317 million of outstanding commercial paper, no outstanding letters of credit and no outstanding borrowings under this facility.
Commercial Paper Program
We have a commercial paper program under which we may issue up to $2,500 million of privately placed, unsecured,
short-term promissory notes (commercial paper). This program 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 September 30, 2017 are based on the term of the notes and range from 141 to 155 basis points.
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 in addition to 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 terms of the
agreement. The facility is also subject to customary covenants and warranties, 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 the parent company. Additional fees are incurred for the average daily unused commitments.
At September 30, 2017, there were no borrowings or letters of credit under the facility.
Other
At September 30, 2017 and December 31, 2016, our weighted average interest rate on outstanding short-term debt was 1.4% and 0.9%,
respectively.
Debt Discount and Issuance Costs
In
the nine months ended September 30, 2017 and 2016, amortization of debt discounts and debt issuance costs resulted in amortization expense of $16 million and $12 million, respectively, which is included in Interest expense in the Consolidated
Statements of Income.
15
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
6.
|
Financial Instruments and Fair Value Measurements
|
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.
A summary of the Companys financial instruments, risk management policies, derivative instruments, hedging activities and fair value measurement can be
found in Notes 14 and 15 to our Consolidated Financial Statements included in the Companys Annual Report on Form 10-K for the year ended December 31, 2016. If applicable, updates have been included in the respective sections below.
Financial Instruments Measured at Fair Value on a Recurring Basis
The following table summarizes financial instruments outstanding as of
September 30, 2017 and December 31, 2016 that are measured at fair value on a recurring basis:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2017
|
|
|
December 31, 2016
|
|
|
|
|
|
|
Notional
|
|
|
Fair
|
|
|
Notional
|
|
|
Fair
|
|
|
Balance Sheet
|
|
Millions of dollars
|
|
Amount
|
|
|
Value
|
|
|
Amount
|
|
|
Value
|
|
|
Classification
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives designated as hedges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodities
|
|
$
|
22
|
|
|
$
|
|
|
|
$
|
4
|
|
|
$
|
|
|
|
|
Prepaid expenses and other current assets
|
|
Commodities
|
|
|
16
|
|
|
|
|
|
|
|
54
|
|
|
|
3
|
|
|
|
Other assets
|
|
Foreign currency
|
|
|
|
|
|
|
15
|
|
|
|
604
|
|
|
|
34
|
|
|
|
Prepaid expenses and other current assets
|
|
Foreign currency
|
|
|
2,000
|
|
|
|
70
|
|
|
|
2,439
|
|
|
|
282
|
|
|
|
Other assets
|
|
Interest rates
|
|
|
|
|
|
|
24
|
|
|
|
|
|
|
|
5
|
|
|
|
Prepaid expenses and other current assets
|
|
Interest rates
|
|
|
1,950
|
|
|
|
11
|
|
|
|
2,200
|
|
|
|
11
|
|
|
|
Other assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives not designated as hedges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodities
|
|
|
131
|
|
|
|
12
|
|
|
|
85
|
|
|
|
3
|
|
|
|
Prepaid expenses and other current assets
|
|
Foreign currency
|
|
|
32
|
|
|
|
|
|
|
|
11
|
|
|
|
|
|
|
|
Prepaid expenses and other current assets
|
|
Non-derivatives:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale securities
|
|
|
1,299
|
|
|
|
1,295
|
|
|
|
1,069
|
|
|
|
1,073
|
|
|
|
Short-term investments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
5,450
|
|
|
$
|
1,427
|
|
|
$
|
6,466
|
|
|
$
|
1,411
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2017
|
|
|
December 31, 2016
|
|
|
|
|
|
|
Notional
|
|
|
Fair
|
|
|
Notional
|
|
|
Fair
|
|
|
Balance Sheet
|
|
Millions of dollars
|
|
Amount
|
|
|
Value
|
|
|
Amount
|
|
|
Value
|
|
|
Classification
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives designated as hedges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodities
|
|
$
|
59
|
|
|
$
|
2
|
|
|
$
|
|
|
|
$
|
|
|
|
|
Accrued liabilities
|
|
Commodities
|
|
|
13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other liabilities
|
|
Foreign currency
|
|
|
139
|
|
|
|
9
|
|
|
|
|
|
|
|
|
|
|
|
Accrued liabilities
|
|
Foreign currency
|
|
|
950
|
|
|
|
120
|
|
|
|
|
|
|
|
|
|
|
|
Other liabilities
|
|
Interest rates
|
|
|
2,050
|
|
|
|
42
|
|
|
|
1,400
|
|
|
|
20
|
|
|
|
Other liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives not designated as hedges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodities
|
|
|
192
|
|
|
|
16
|
|
|
|
103
|
|
|
|
11
|
|
|
|
Accrued liabilities
|
|
Foreign currency
|
|
|
631
|
|
|
|
1
|
|
|
|
28
|
|
|
|
1
|
|
|
|
Accrued liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-derivatives:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance share awards
|
|
|
20
|
|
|
|
20
|
|
|
|
19
|
|
|
|
19
|
|
|
|
Accrued liabilities
|
|
Performance share awards
|
|
|
21
|
|
|
|
21
|
|
|
|
22
|
|
|
|
22
|
|
|
|
Other liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
4,075
|
|
|
$
|
231
|
|
|
$
|
1,572
|
|
|
$
|
73
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All derivatives and available-for-sale securities in the tables above are classified as Level 2, except for our limited
partnership investments included in our available-for-sale securities discussed below, that are measured at fair value using the net asset per share (or its equivalent) practical expedient and have not been classified in the fair value hierarchy.
At September 30, 2017, our outstanding foreign currency and commodity contracts not designated as hedges mature from October 2017 to December 2017
and from October 2017 to June 2018, respectively.
17
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
Financial Instruments Not Measured at Fair Value on a Recurring Basis
The following table
presents the carrying value and estimated fair value of our financial instruments that are not measured at fair value on a recurring basis as of September 30, 2017 and December 31, 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2017
|
|
|
December 31, 2016
|
|
Millions of dollars
|
|
Carrying
Value
|
|
|
Fair
Value
|
|
|
Carrying
Value
|
|
|
Fair
Value
|
|
Non-derivatives:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term loans receivable
|
|
$
|
561
|
|
|
$
|
561
|
|
|
$
|
369
|
|
|
$
|
369
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term debt
|
|
$
|
59
|
|
|
$
|
67
|
|
|
$
|
90
|
|
|
$
|
98
|
|
Long-term debt
|
|
|
8,528
|
|
|
|
9,428
|
|
|
|
8,382
|
|
|
|
9,147
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
8,587
|
|
|
$
|
9,495
|
|
|
$
|
8,472
|
|
|
$
|
9,245
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All financial instruments in the table above are classified as Level 2. There were no transfers between Level 1 and Level 2
for any of our financial instruments during the nine months ended September 30, 2017 and the year ended December 31, 2016.
Net Investment
Hedges
In August 2017 and September 2017, forward exchange contracts and basis swaps with an aggregate notional value of 550 million expired. Upon settlement of these foreign currency contracts, we paid 550 million
($658 million at the expiry spot rate) to our counterparties and received $609 million from our counterparties. The $49 million loss is reflected in foreign currency translation adjustments in Accumulated other comprehensive loss. Cash flows from
the settlement of these foreign currency contracts are reported in Cash flows from investing activities in the Consolidated Statements of Cash Flows.
In
February 2017, we entered into 617 million of 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. We use the
critical terms match to assess hedge effectiveness of these basis swaps by comparing the spot rate change in the basis swaps and the spot rate change in the designated net investment.
In September 2016, 450 million of our basis swaps expired. Upon settlement of these basis swap contracts, 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.
On
March 31, 2016, we settled forward exchange contracts with an aggregate notional value of 750 million. 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 in foreign currency translations adjustments in Accumulated other
comprehensive loss. Cash flows from the settlement of these forward exchange contracts are reported in Cash flows from investing activities in the Consolidated Statements of Cash Flows.
At September 30, 2017 and December 31, 2016, we had outstanding foreign currency contracts with an aggregate notional value of
742 million ($789 million) and 675 million ($743 million), respectively, designated as net
18
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
investment hedges. In addition, we had outstanding foreign-currency denominated debt, with notional amounts totaling 750 million ($850 million), designated as a net investment hedge at
each of September 30, 2017 and December 31, 2016.
There was no ineffectiveness recorded for any of these net investment hedging relationships
during the three and nine months ended September 30, 2017 and 2016.
Cash Flow Hedges
The following table summarizes our cash flow hedges
outstanding at September 30, 2017 and December 31, 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2017
|
|
|
December 31, 2016
|
|
|
|
|
Millions of dollars
|
|
Notional
Value
|
|
|
Notional
Value
|
|
|
Expiration
Date
|
|
Foreign currency
|
|
$
|
2,300
|
|
|
$
|
2,300
|
|
|
|
2021 to 2027
|
|
Interest rates
|
|
|
1,000
|
|
|
|
1,000
|
|
|
|
2049
|
|
Commodities
|
|
|
110
|
|
|
|
58
|
|
|
|
2017 to 2019
|
|
The ineffectiveness recorded for these cash flow hedging relationships was losses of less than $1 million during each of
the three months ended September 30, 2017 and 2016 and losses of $1 million and $1 million during the nine months ended September 30, 2017 and 2016.
As of September 30, 2017, less than $1 million (on a pretax basis) and $2 million (on a pretax basis) are scheduled to be reclassified as
decreases to interest expense and cost of sales respectively over the next twelve months.
Fair Value Hedges
In February 2017, we entered into
U.S. dollar fixed-for-floating interest rate swaps to mitigate changes in the fair value of our $1,000 million 3.5% guaranteed notes due 2027 associated with the risk of variability in the 3 Month USD LIBOR rate (the benchmark interest rate).
The fixed-rate and variable-rate are settled semi-annually and quarterly, respectively.
In the third quarter of 2014, we entered into U.S. dollar
fixed-for-floating interest rate swaps to mitigate changes in the fair value of our $2,000 million 5% senior notes due 2019. In March 2017, concurrent with the redemption of $1,000 million of our outstanding 5% senior notes due 2019, we dedesignated
the related $2,000 million fair value hedge and terminated swaps in the notional amount of $1,000 million. At the same time, we redesignated the remaining $1,000 million notional amount of swaps as a fair value hedge of the remaining $1,000 million
of 5% senior notes outstanding. For information related to charges recognized as a result of the dedesignation of the hedging relationship, see Note 5.
At September 30, 2017 and December 31, 2016, we had outstanding interest rate contracts with aggregate notional amounts of $3,000 million and $2,600
million, respectively, designated as fair value hedges. Our interest rate contracts outstanding at September 30, 2017 mature from 2019 to 2027.
The
ineffectiveness related to these fair value hedging relationships resulted in net losses of $4 million and $11 million for the three months and nine months ended September 30, 2017, respectively, and net gains of $8 million and $26 million,
respectively, for the three and nine months ended September 30, 2016, respectively.
19
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
Impact on Earnings and Other Comprehensive Income
The following table summarizes the pre-tax
effect of derivative instruments and non-derivative instruments on Other comprehensive income and earnings for the three months ended September 30:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of Financial Instruments
|
|
|
|
Gain (Loss)
Recognized
in AOCI
|
|
|
Gain (Loss)
Reclassified
from AOCI
to Income
|
|
|
Additional
Gain (Loss)
Recognized
in Income
|
|
|
Income Statement
Classification
|
|
Millions of dollars
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
|
Derivatives designated as hedges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodities
|
|
$
|
3
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
|
Cost of sales
|
|
Foreign currency
|
|
|
(155
|
)
|
|
|
(52
|
)
|
|
|
74
|
|
|
|
5
|
|
|
|
|
|
|
|
|
|
|
|
Other income, net
|
|
Interest rates
|
|
|
(5
|
)
|
|
|
(21
|
)
|
|
|
|
|
|
|
|
|
|
|
3
|
|
|
|
(12
|
)
|
|
|
Interest expense
|
|
Derivatives not designated as hedges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6
|
)
|
|
|
(4
|
)
|
|
|
Sales and other
operating revenues
|
|
Commodities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6
|
|
|
|
(5
|
)
|
|
|
Cost of sales
|
|
Foreign currency
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6
|
)
|
|
|
1
|
|
|
|
Other income, net
|
|
Non-derivatives designated as hedges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt
|
|
|
(30
|
)
|
|
|
(2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
(187
|
)
|
|
$
|
(75
|
)
|
|
$
|
74
|
|
|
$
|
5
|
|
|
$
|
(3
|
)
|
|
$
|
(20
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
The following table summarizes the pre-tax effect of derivative instruments and non-derivative instruments on
Other comprehensive income and earnings for the nine months ended September 30:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of Financial Instruments
|
|
|
|
Gain (Loss)
Recognized
in AOCI
|
|
|
Gain (Loss)
Reclassified
from AOCI
to Income
|
|
|
Additional
Gain (Loss)
Recognized
in Income
|
|
|
Income Statement
Classification
|
|
Millions of dollars
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
|
Derivatives designated as hedges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodities
|
|
$
|
(4
|
)
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
|
Cost of sales
|
|
Foreign currency
|
|
|
(403
|
)
|
|
|
(134
|
)
|
|
|
232
|
|
|
|
52
|
|
|
|
|
|
|
|
|
|
|
|
Other income, net
|
|
Interest rates
|
|
|
(23
|
)
|
|
|
(175
|
)
|
|
|
|
|
|
|
|
|
|
|
20
|
|
|
|
31
|
|
|
|
Interest expense
|
|
Derivatives not designated as hedges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(9
|
)
|
|
|
6
|
|
|
|
Sales and other
operating revenues
|
|
Commodities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(31
|
)
|
|
|
(27
|
)
|
|
|
Cost of sales
|
|
Foreign currency
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7
|
)
|
|
|
13
|
|
|
|
Other income, net
|
|
Non-derivatives designated as hedges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt
|
|
|
(95
|
)
|
|
|
12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
(525
|
)
|
|
$
|
(297
|
)
|
|
$
|
232
|
|
|
$
|
52
|
|
|
$
|
(27
|
)
|
|
$
|
23
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency losses recognized in other comprehensive income representing the effective portion of our net investment
hedges include losses of $87 million and $265 million in the three and nine months ended September 30, 2017, respectively, and $6 million and $39 million in the three and nine months ended September 30, 2016, respectively.
The pre-tax effect of the gains (losses) recognized in income for our fixed-for-floating interest rate swaps includes the net value of interest accrued of $5
million and $18 million during the three and nine months ended September 30, 2017 and $6 million and $17 million for the three and nine months ended 2016, respectively.
21
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
Investments in Marketable Securities
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 September 30, 2017 and December 31, 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2017
|
|
Millions of dollars
|
|
Cost
|
|
|
Gross
Unrealized
Gains
|
|
|
Gross
Unrealized
Losses
|
|
|
Fair
Value
|
|
Available-for-sale securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial paper
|
|
$
|
177
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
177
|
|
Bonds
|
|
|
621
|
|
|
|
1
|
|
|
|
|
|
|
|
622
|
|
Certificates of deposit
|
|
|
150
|
|
|
|
|
|
|
|
|
|
|
|
150
|
|
Time deposits
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
1
|
|
Limited partnership investments
|
|
|
350
|
|
|
|
1
|
|
|
|
(6
|
)
|
|
|
345
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total available-for-sale securities
|
|
$
|
1,299
|
|
|
$
|
2
|
|
|
$
|
(6
|
)
|
|
$
|
1,295
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At September 30, 2017 and December 31, 2016, we had marketable securities classified as Cash and cash equivalents of
$725 million and $351 million, respectively.
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 three and nine months ended September 30, 2017 and the year ended December 31, 2016.
As of September 30, 2017, our available-for-sale securities had the following maturities: commercial paper securities held by the Company had maturities
between five and six months; bonds had maturities between seven and thirty-seven months; certificates of deposit mature within six months; and limited partnership investments mature between one and three months.
22
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
The proceeds from maturities and sales of our available-for-sale securities during the three and nine months
ended September 30, 2017 and 2016 are summarized in the following table:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30,
|
|
|
Nine Months Ended
September 30,
|
|
Millions of dollars
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
Proceeds from maturities of securities
|
|
$
|
12
|
|
|
$
|
8
|
|
|
$
|
499
|
|
|
$
|
665
|
|
Proceeds from sales of securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
No gain or loss was realized in connection with the sales of our available-for-sale securities during the three and nine
months ended September 30, 2017 and 2016.
During the nine months ended September 30, 2017, we had maturities of our held-to-maturity securities
of $75 million. During the three and nine months ended September 30, 2017, we had no sales of our held-to-maturity securities and we had no transfers of investments classified as held-to-maturity to available-for-sale.
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 September 30, 2017 and December 31, 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2017
|
|
|
|
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
|
|
$
|
122
|
|
|
$
|
(5
|
)
|
|
$
|
105
|
|
|
$
|
(2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
)
|
Foreign Currency Gain (Loss)
Other income, net, in the Consolidated Statements of Income reflected losses of less
than $1 million and $6 million for the three and nine months ended September 30, 2017, respectively, and a gain of $1 million and a loss of $5 million for the three and nine months ended September 30, 2016, respectively.
Repurchase Agreements
At September 30, 2017 and December 31, 2016, we had investments in tri-party repurchase agreements of $561 million
and $369 million, respectively. 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.
23
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
7.
|
Pension and Other Postretirement Benefits
|
Net periodic pension benefits
included the following cost components for the periods presented:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Plans
|
|
|
|
Three Months Ended
September 30,
|
|
|
Nine Months Ended
September 30,
|
|
Millions of dollars
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
Service cost
|
|
$
|
11
|
|
|
$
|
11
|
|
|
$
|
35
|
|
|
$
|
33
|
|
Interest cost
|
|
|
15
|
|
|
|
22
|
|
|
|
45
|
|
|
|
66
|
|
Expected return on plan assets
|
|
|
(30
|
)
|
|
|
(34
|
)
|
|
|
(91
|
)
|
|
|
(104
|
)
|
Actuarial and investment loss amortization
|
|
|
5
|
|
|
|
5
|
|
|
|
16
|
|
|
|
15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic benefit costs
|
|
$
|
1
|
|
|
$
|
4
|
|
|
$
|
5
|
|
|
$
|
10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-U.S. Plans
|
|
|
|
Three Months Ended
September 30,
|
|
|
Nine Months Ended
September 30,
|
|
Millions of dollars
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
Service cost
|
|
$
|
9
|
|
|
$
|
8
|
|
|
$
|
28
|
|
|
$
|
24
|
|
Interest cost
|
|
|
5
|
|
|
|
8
|
|
|
|
16
|
|
|
|
24
|
|
Expected return on plan assets
|
|
|
(4
|
)
|
|
|
(6
|
)
|
|
|
(13
|
)
|
|
|
(18
|
)
|
Actuarial and investment loss amortization
|
|
|
4
|
|
|
|
2
|
|
|
|
11
|
|
|
|
6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic benefit costs
|
|
$
|
14
|
|
|
$
|
12
|
|
|
$
|
42
|
|
|
$
|
36
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic other postretirement benefits included the following cost components for the periods presented:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Plans
|
|
|
|
Three Months Ended
September 30,
|
|
|
Nine Months Ended
September 30,
|
|
Millions of dollars
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
Service cost
|
|
$
|
|
|
|
$
|
|
|
|
$
|
2
|
|
|
$
|
2
|
|
Interest cost
|
|
|
3
|
|
|
|
3
|
|
|
|
7
|
|
|
|
9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic benefit costs
|
|
$
|
3
|
|
|
$
|
3
|
|
|
$
|
9
|
|
|
$
|
11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-U.S. Plans
|
|
|
|
Three Months Ended
September 30,
|
|
|
Nine Months Ended
September 30,
|
|
Millions of dollars
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
Service cost
|
|
$
|
1
|
|
|
$
|
|
|
|
$
|
2
|
|
|
$
|
1
|
|
Interest cost
|
|
|
|
|
|
|
|
|
|
|
1
|
|
|
|
1
|
|
Actuarial loss amortization
|
|
|
1
|
|
|
|
1
|
|
|
|
2
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic benefit costs
|
|
$
|
2
|
|
|
$
|
1
|
|
|
$
|
5
|
|
|
$
|
4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
24
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
Our effective income tax rate for the three months ended
September 30, 2017 was 26.4% compared with 25.4% for the three months ended September 30, 2016. For the nine months ended September 30, 2017, the effective income tax rate was 27.8% compared with 26.4% for the first nine months ended
September 30, 2016. Our effective income tax rate fluctuates based on, among other factors, changes in pretax income in countries with varying statutory tax rates, the U.S. domestic production activity deduction, changes in valuation
allowances, changes in foreign exchange gains/losses, the amount of exempt income, and changes in unrecognized tax benefits associated with uncertain tax positions.
Compared with the third quarter of 2016, the higher effective tax rate for the third quarter of 2017 was primarily attributable to changes in pretax income in
countries with varying statutory tax rates, prior year adjustments to our deferred tax liabilities, and an increase in foreign currency exchange gains, partially offset by an increase in exempt income, and an increase in U.S. domestic production
activity deduction. Compared with the first nine months of 2016, the higher effective tax rate for the first nine months of 2017 was primarily attributable to changes in valuation allowances, changes in pretax income in countries with varying
statutory tax rates, a decrease in exempt income, and prior year adjustments to our deferred tax liabilities, partially offset by an increase in U.S. domestic production activity deduction.
We operate in multiple jurisdictions throughout the world, and our tax returns are periodically audited or subjected to review by tax authorities. The Company
is currently under examination in a number of tax jurisdictions. As a result, there is an uncertainty in income taxes recognized in the Companys financial statements. Tax benefits totaling $552 million and $546 million were unrecognized as of
September 30, 2017 and December 31, 2016, respectively. Positions challenged by the tax authorities may be settled or appealed by the Company. It is reasonably possible that, within the next twelve months, due to the settlement of
uncertain tax positions with various tax authorities and the expiration of statutes of limitations, unrecognized tax benefits could decrease by up to approximately $90 million.
We monitor income tax developments (including, for example, the U.S. tax reform proposals and the European Unions state aid investigations) in countries
where we conduct business. 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 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. In October 2016, the U.S. Treasury issued final Section 385 debt-equity regulations that may impact our internal financings in
future years. Pursuant to an Executive Order, the Treasury Department reviewed these regulations and recently concluded to partially retain the regulations pending potential enactment of U.S. tax reform, which is expected to make it possible for the
regulations to be revoked.
25
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
9.
|
Commitments and Contingencies
|
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 $99 million and $95 million as of September 30, 2017 and December 31, 2016, respectively. At September 30, 2017, the accrued liabilities for individual sites range from less than $1 million to $17 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 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:
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
September 30,
|
|
Millions of dollars
|
|
2017
|
|
|
2016
|
|
Beginning balance
|
|
$
|
95
|
|
|
$
|
106
|
|
Additional provision
|
|
|
|
|
|
|
3
|
|
Changes in estimates
|
|
|
3
|
|
|
|
10
|
|
Amounts paid
|
|
|
(7
|
)
|
|
|
(16
|
)
|
Foreign exchange effects
|
|
|
8
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
Ending balance
|
|
$
|
99
|
|
|
$
|
105
|
|
|
|
|
|
|
|
|
|
|
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 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. Trial of the lawsuit was held in October 2016. In April 2017, the court awarded $7.2 million to the
plaintiffs and denied all other relief, and in May 2017 the court issued its Final Judgment reflecting this ruling. With prejudgment interest included, the total Final Judgment is $12.6 million. In May 2017, the plaintiffs filed an appeal of this
Final Judgment to the Federal District Court for the Southern District of New York. That appeal remains pending.
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
26
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
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.
Although the court issued its Final Judgment in
Weisfelner
in May 2017 as
noted above, it remains on appeal and subject to further potential appeal by the parties. Accordingly, we cannot at this time estimate the reasonably possible loss or range of loss that may be incurred.
409A Matter
Certain of the Companys current and former executives were being audited by the Internal Revenue Service for the 2012 tax year
regarding the treatment of their Company stock options under Section 409A of the Internal Revenue Code. In early 2017, the audits were settled and the Company has incurred an aggregate of $1.7 million for all liabilities relating to the 2012
tax year. The Company believes that any additional future liability that may arise related to this issue will not be material.
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 September 30, 2017, 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.
Dividend distributions
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
|
March
|
|
$
|
0.85
|
|
|
$
|
343
|
|
|
March 6, 2017
|
June
|
|
|
0.90
|
|
|
|
361
|
|
|
June 5, 2017
|
September
|
|
|
0.90
|
|
|
|
356
|
|
|
September 6, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2.65
|
|
|
$
|
1,060
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
27
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
Share Repurchase Programs
In May 2017, our shareholders approved a proposal to authorize us to
repurchase up to an additional 10% of our outstanding ordinary shares through November 2018 (May 2017 Share Repurchase Program). As a result, the authorization of the remaining unpurchased shares under the share repurchase program
approved by our shareholders in May 2016 (May 2016 Share Repurchase Program) was superseded.
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 recorded 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:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, 2017
|
|
Millions of dollars, except shares and per share amounts
|
|
Shares
Repurchased
|
|
|
Average
Purchase
Price
|
|
|
Total Purchase
Price, Including
Commissions
|
|
May 2016 Share Repurchase Program
|
|
|
3,501,084
|
|
|
$
|
85.71
|
|
|
$
|
300
|
|
May 2017 Share Repurchase Program
|
|
|
6,516,917
|
|
|
|
83.54
|
|
|
|
545
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,018,001
|
|
|
$
|
84.30
|
|
|
$
|
845
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, 2016
|
|
Millions of dollars, except shares and per share amounts
|
|
Shares
Repurchased
|
|
|
Average
Purchase
Price
|
|
|
Total Purchase
Price, Including
Commissions
|
|
May 2015 Share Repurchase Program
|
|
|
15,302,707
|
|
|
$
|
80.15
|
|
|
$
|
1,226
|
|
May 2016 Share Repurchase Program
|
|
|
16,091,214
|
|
|
|
77.73
|
|
|
|
1,251
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31,393,921
|
|
|
$
|
78.91
|
|
|
$
|
2,477
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Due to the timing of settlements, total cash paid for share repurchases for the nine months ended September 30, 2017 and
2016 was $866 million and $2,501 million, respectively.
Ordinary Shares
The changes in the outstanding amounts of ordinary shares are as
follows:
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
September 30,
|
|
|
|
2017
|
|
|
2016
|
|
Ordinary shares outstanding:
|
|
|
|
|
|
|
|
|
Beginning balance
|
|
|
404,046,331
|
|
|
|
440,150,069
|
|
Share-based compensation
|
|
|
343,663
|
|
|
|
338,103
|
|
Warrants expired or exercised
|
|
|
4,184
|
|
|
|
200
|
|
Employee stock purchase plan
|
|
|
81,964
|
|
|
|
71,108
|
|
Repurchase of ordinary shares
|
|
|
(10,018,001
|
)
|
|
|
(31,393,921
|
)
|
|
|
|
|
|
|
|
|
|
Ending balance
|
|
|
394,458,141
|
|
|
|
409,165,559
|
|
|
|
|
|
|
|
|
|
|
28
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
Treasury SharesThe changes in the amounts of treasury shares held by the Company are as follows:
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
|
|
|
|
September 30,
|
|
|
|
2017
|
|
|
2016
|
|
Ordinary shares held as treasury shares:
|
|
|
|
|
|
|
|
|
Beginning balance
|
|
|
174,389,139
|
|
|
|
138,285,201
|
|
Share-based compensation
|
|
|
(343,663
|
)
|
|
|
(338,103
|
)
|
Warrants exercised
|
|
|
509
|
|
|
|
|
|
Employee stock purchase plan
|
|
|
(81,964
|
)
|
|
|
(71,108
|
)
|
Repurchase of ordinary shares
|
|
|
10,018,001
|
|
|
|
31,393,921
|
|
|
|
|
|
|
|
|
|
|
Ending balance
|
|
|
183,982,022
|
|
|
|
169,269,911
|
|
|
|
|
|
|
|
|
|
|
Accumulated Other Comprehensive Income (Loss)
The components of, and after-tax changes in, Accumulated other
comprehensive loss as of and for the nine months ended September 30, 2017 and 2016 are presented in the following table:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
|
|
|
Holding
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized
|
|
|
Gains
|
|
|
Defined
|
|
|
|
|
|
|
|
|
|
|
|
|
Holding
|
|
|
(Losses)
|
|
|
Pension
|
|
|
Foreign
|
|
|
|
|
|
|
|
|
|
Gains
|
|
|
Attributable
|
|
|
and Other
|
|
|
Currency
|
|
|
|
|
|
|
Financial
|
|
|
(Losses) on
|
|
|
to Equity
|
|
|
Postretirement
|
|
|
Translation
|
|
|
|
|
Millions of dollars
|
|
Derivatives
|
|
|
Investments
|
|
|
Investees
|
|
|
Benefit Plans
|
|
|
Adjustments
|
|
|
Total
|
|
Balance January 1, 2017
|
|
$
|
(75
|
)
|
|
$
|
1
|
|
|
$
|
|
|
|
$
|
(498
|
)
|
|
$
|
(939
|
)
|
|
$
|
(1,511
|
)
|
Other comprehensive income (loss) before reclassifications
|
|
|
(187
|
)
|
|
|
(5
|
)
|
|
|
14
|
|
|
|
|
|
|
|
143
|
|
|
|
(35
|
)
|
Amounts reclassified from Accumulated other comprehensive loss
|
|
|
167
|
|
|
|
|
|
|
|
|
|
|
|
20
|
|
|
|
|
|
|
|
187
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net other comprehensive income (loss)
|
|
|
(20
|
)
|
|
|
(5
|
)
|
|
|
14
|
|
|
|
20
|
|
|
|
143
|
|
|
|
152
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance September 30, 2017
|
|
$
|
(95
|
)
|
|
$
|
(4
|
)
|
|
$
|
14
|
|
|
$
|
(478
|
)
|
|
$
|
(796
|
)
|
|
$
|
(1,359
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance January 1, 2016
|
|
$
|
(79
|
)
|
|
$
|
(5
|
)
|
|
$
|
|
|
|
$
|
(428
|
)
|
|
$
|
(926
|
)
|
|
$
|
(1,438
|
)
|
Other comprehensive income (loss) before reclassifications
|
|
|
(201
|
)
|
|
|
(7
|
)
|
|
|
|
|
|
|
|
|
|
|
80
|
|
|
|
(128
|
)
|
Amounts reclassified from Accumulated other comprehensive loss
|
|
|
52
|
|
|
|
|
|
|
|
|
|
|
|
15
|
|
|
|
7
|
|
|
|
74
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net other comprehensive income (loss)
|
|
|
(149
|
)
|
|
|
(7
|
)
|
|
|
|
|
|
|
15
|
|
|
|
87
|
|
|
|
(54
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance September 30, 2016
|
|
$
|
(228
|
)
|
|
$
|
(12
|
)
|
|
$
|
|
|
|
$
|
(413
|
)
|
|
$
|
(839
|
)
|
|
$
|
(1,492
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
The amounts reclassified out of each component of Accumulated other comprehensive loss are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30,
|
|
|
Nine Months Ended
September 30,
|
|
|
Affected line item on
the Consolidated
Statements of Income
|
|
Millions of dollars
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
|
Reclassification adjustments for:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial derivatives
|
|
$
|
74
|
|
|
$
|
5
|
|
|
$
|
232
|
|
|
$
|
52
|
|
|
|
Other income, net
|
|
Defined pension and other postretirement benefit plan items:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prior service cost
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
1
|
|
|
|
|
|
Actuarial loss
|
|
|
10
|
|
|
|
8
|
|
|
|
29
|
|
|
|
23
|
|
|
|
|
|
Foreign currency translation adjustments
|
|
|
|
|
|
|
7
|
|
|
|
|
|
|
|
7
|
|
|
|
Other income, net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reclassifications, before tax
|
|
|
84
|
|
|
|
21
|
|
|
|
261
|
|
|
|
83
|
|
|
|
|
|
Income tax expense
|
|
|
21
|
|
|
|
4
|
|
|
|
74
|
|
|
|
9
|
|
|
|
Provision for income taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts reclassified out of Accumulated other comprehensive loss
|
|
$
|
63
|
|
|
$
|
17
|
|
|
$
|
187
|
|
|
$
|
74
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of actuarial loss and prior service cost is included in the computation of net periodic pension and other
postretirement benefit costs (see Note 7).
30
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
Basic earnings per share is based upon the weighted average
number of shares of common stock outstanding during the periods. Diluted earnings per share includes the effect of certain stock option awards and other equity-based compensation awards. We have unvested restricted stock units that are considered
participating securities for earnings per share.
Earnings per share data and dividends declared per share of common stock are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
Continuing
|
|
|
Discontinued
|
|
|
Continuing
|
|
|
Discontinued
|
|
Millions of dollars
|
|
Operations
|
|
|
Operations
|
|
|
Operations
|
|
|
Operations
|
|
Net income (loss)
|
|
$
|
1,058
|
|
|
$
|
(2
|
)
|
|
$
|
955
|
|
|
$
|
(2
|
)
|
Less: net (income) loss attributable to non-controlling interests
|
|
|
1
|
|
|
|
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to the Company shareholders
|
|
|
1,059
|
|
|
|
(2
|
)
|
|
|
954
|
|
|
|
(2
|
)
|
Net income attributable to participating securities
|
|
|
(1
|
)
|
|
|
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to ordinary shareholders basic and diluted
|
|
$
|
1,058
|
|
|
$
|
(2
|
)
|
|
$
|
953
|
|
|
$
|
(2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Millions of shares, except per share amounts
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic weighted average common stock outstanding
|
|
|
395
|
|
|
|
395
|
|
|
|
413
|
|
|
|
413
|
|
Effect of dilutive securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PSU awards
|
|
|
|
|
|
|
|
|
|
|
1
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Potential dilutive shares
|
|
|
395
|
|
|
|
395
|
|
|
|
414
|
|
|
|
414
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
2.67
|
|
|
$
|
|
|
|
$
|
2.31
|
|
|
$
|
(0.01
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
$
|
2.67
|
|
|
$
|
|
|
|
$
|
2.31
|
|
|
$
|
(0.01
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Millions of shares
|
|
|
|
|
|
|
|
|
|
|
|
|
Participating securities
|
|
|
0.4
|
|
|
|
0.4
|
|
|
|
0.4
|
|
|
|
0.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends declared per share of common stock
|
|
$
|
0.90
|
|
|
$
|
|
|
|
$
|
0.85
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
Continuing
|
|
|
Discontinued
|
|
|
Continuing
|
|
|
Discontinued
|
|
Millions of dollars
|
|
Operations
|
|
|
Operations
|
|
|
Operations
|
|
|
Operations
|
|
Net income (loss)
|
|
$
|
2,997
|
|
|
$
|
(14
|
)
|
|
$
|
3,077
|
|
|
$
|
(3
|
)
|
Less: net (income) loss attributable to non-controlling interests
|
|
|
2
|
|
|
|
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to the Company shareholders
|
|
|
2,999
|
|
|
|
(14
|
)
|
|
|
3,076
|
|
|
|
(3
|
)
|
Net income attributable to participating securities
|
|
|
(3
|
)
|
|
|
|
|
|
|
(3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to ordinary shareholders basic and diluted
|
|
$
|
2,996
|
|
|
$
|
(14
|
)
|
|
$
|
3,073
|
|
|
$
|
(3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Millions of shares, except per share amounts
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic weighted average common stock outstanding
|
|
|
400
|
|
|
|
400
|
|
|
|
423
|
|
|
|
423
|
|
Effect of dilutive securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PSU awards
|
|
|
|
|
|
|
|
|
|
|
1
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Potential dilutive shares
|
|
|
400
|
|
|
|
400
|
|
|
|
424
|
|
|
|
424
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
7.49
|
|
|
$
|
(0.03
|
)
|
|
$
|
7.26
|
|
|
$
|
(0.01
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
$
|
7.49
|
|
|
$
|
(0.03
|
)
|
|
$
|
7.24
|
|
|
$
|
(0.01
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Millions of shares
|
|
|
|
|
|
|
|
|
|
|
|
|
Participating securities
|
|
|
0.4
|
|
|
|
0.4
|
|
|
|
0.4
|
|
|
|
0.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends declared per share of common stock
|
|
$
|
2.65
|
|
|
$
|
|
|
|
$
|
2.48
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
32
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
12.
|
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 our 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, International
(O&PEAI). Our O&PEAI segment produces and markets olefins and co-products, polyethylene, and polypropylene, including
polypropylene compounds.
|
|
|
|
Intermediates and Derivatives
(I&D). Our I&D segment produces and markets propylene oxide and its co-products and 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 oils 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.
33
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
Summarized financial information concerning reportable segments is shown in the following table for the
periods presented:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, 2017
|
|
Millions of dollars
|
|
O&P
Americas
|
|
|
O&P
EAI
|
|
|
I&D
|
|
|
Refining
|
|
|
Technology
|
|
|
Other
|
|
|
Total
|
|
Sales and other operating revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customers
|
|
$
|
1,817
|
|
|
$
|
3,096
|
|
|
$
|
2,043
|
|
|
$
|
1,491
|
|
|
$
|
69
|
|
|
$
|
|
|
|
$
|
8,516
|
|
Intersegment
|
|
|
632
|
|
|
|
56
|
|
|
|
34
|
|
|
|
179
|
|
|
|
29
|
|
|
|
(930
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,449
|
|
|
|
3,152
|
|
|
|
2,077
|
|
|
|
1,670
|
|
|
|
98
|
|
|
|
(930
|
)
|
|
|
8,516
|
|
|
|
|
|
|
|
|
|
Income from equity investments
|
|
|
8
|
|
|
|
69
|
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
81
|
|
EBITDA
|
|
|
616
|
|
|
|
698
|
|
|
|
402
|
|
|
|
58
|
|
|
|
47
|
|
|
|
|
|
|
|
1,821
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, 2016
|
|
Millions of dollars
|
|
O&P
Americas
|
|
|
O&P
EAI
|
|
|
I&D
|
|
|
Refining
|
|
|
Technology
|
|
|
Other
|
|
|
Total
|
|
Sales and other operating revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customers
|
|
$
|
1,740
|
|
|
$
|
2,585
|
|
|
$
|
1,769
|
|
|
$
|
1,192
|
|
|
$
|
80
|
|
|
$
|
(1
|
)
|
|
$
|
7,365
|
|
Intersegment
|
|
|
602
|
|
|
|
49
|
|
|
|
36
|
|
|
|
138
|
|
|
|
22
|
|
|
|
(847
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,342
|
|
|
|
2,634
|
|
|
|
1,805
|
|
|
|
1,330
|
|
|
|
102
|
|
|
|
(848
|
)
|
|
|
7,365
|
|
|
|
|
|
|
|
|
|
Income from equity investments
|
|
|
12
|
|
|
|
67
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
81
|
|
EBITDA
|
|
|
682
|
|
|
|
584
|
|
|
|
304
|
|
|
|
(10
|
)
|
|
|
45
|
|
|
|
1
|
|
|
|
1,606
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, 2017
|
|
Millions of dollars
|
|
O&P
Americas
|
|
|
O&P
EAI
|
|
|
I&D
|
|
|
Refining
|
|
|
Technology
|
|
|
Other
|
|
|
Total
|
|
Sales and other operating revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customers
|
|
$
|
5,631
|
|
|
$
|
9,029
|
|
|
$
|
6,142
|
|
|
$
|
4,306
|
|
|
$
|
241
|
|
|
$
|
|
|
|
$
|
25,349
|
|
Intersegment
|
|
|
1,969
|
|
|
|
155
|
|
|
|
99
|
|
|
|
430
|
|
|
|
84
|
|
|
|
(2,737
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,600
|
|
|
|
9,184
|
|
|
|
6,241
|
|
|
|
4,736
|
|
|
|
325
|
|
|
|
(2,737
|
)
|
|
|
25,349
|
|
|
|
|
|
|
|
|
|
Income from equity investments
|
|
|
33
|
|
|
|
202
|
|
|
|
5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
240
|
|
EBITDA
|
|
|
2,198
|
|
|
|
1,926
|
|
|
|
1,080
|
|
|
|
53
|
|
|
|
155
|
|
|
|
(4
|
)
|
|
|
5,408
|
|
34
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, 2016
|
|
Millions of dollars
|
|
O&P
Americas
|
|
|
O&P
EAI
|
|
|
I&D
|
|
|
Refining
|
|
|
Technology
|
|
|
Other
|
|
|
Total
|
|
Sales and other operating revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customers
|
|
$
|
4,978
|
|
|
$
|
7,805
|
|
|
$
|
5,186
|
|
|
$
|
3,179
|
|
|
$
|
288
|
|
|
$
|
|
|
|
$
|
21,436
|
|
Intersegment
|
|
|
1,690
|
|
|
|
128
|
|
|
|
90
|
|
|
|
395
|
|
|
|
75
|
|
|
|
(2,378
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,668
|
|
|
|
7,933
|
|
|
|
5,276
|
|
|
|
3,574
|
|
|
|
363
|
|
|
|
(2,378
|
)
|
|
|
21,436
|
|
|
|
|
|
|
|
|
|
Income from equity investments
|
|
|
54
|
|
|
|
232
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
289
|
|
EBITDA
|
|
|
2,314
|
|
|
|
1,669
|
|
|
|
1,027
|
|
|
|
(9
|
)
|
|
|
201
|
|
|
|
(6
|
)
|
|
|
5,196
|
|
Our O&PAmericas results for the first nine months of 2017 include a $31 million gain on the first quarter sale of
our Lake Charles, Louisiana site. EBITDA for our O&PEAI segment in the third quarter and first nine months of 2017 includes a $108 million gain on the sale of our 27% interest in Geosel and the first nine months of 2017 also includes a $21
million non-cash gain stemming from the elimination of an obligation associated with a lease.
In the first nine months of 2016, our O&PAmericas
and O&PEAI segments also benefited from gains of $57 million and $21 million, respectively, related to the sale of our wholly owned Argentine subsidiary, Petroken Petroquimica Ensenada S.A.
A reconciliation of EBITDA to Income from continuing operations before income taxes is shown in the following table for each of the periods presented:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
|
Nine Months Ended September 30,
|
|
Millions of dollars
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
EBITDA:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total segment EBITDA
|
|
$
|
1,821
|
|
|
$
|
1,605
|
|
|
$
|
5,412
|
|
|
$
|
5,202
|
|
Other EBITDA
|
|
|
|
|
|
|
1
|
|
|
|
(4
|
)
|
|
|
(6
|
)
|
Less:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization expense
|
|
|
(294
|
)
|
|
|
(257
|
)
|
|
|
(876
|
)
|
|
|
(791
|
)
|
Interest expense
|
|
|
(94
|
)
|
|
|
(72
|
)
|
|
|
(396
|
)
|
|
|
(237
|
)
|
Add:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
5
|
|
|
|
4
|
|
|
|
15
|
|
|
|
13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations before income taxes
|
|
$
|
1,438
|
|
|
$
|
1,281
|
|
|
$
|
4,151
|
|
|
$
|
4,181
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
35