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
(ASC)
2017-04
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 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 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. Various transition methods are prescribed depending
on the aspect of accounting impacted by the amended guidance. Adoption of the amendments in this guidance in the first quarter of 2017 did not have a material impact on our Consolidated Statement of Cash Flows.
9
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
Accounting Guidance Issued But Not Adopted as of March 31, 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 method.
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.
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,
10
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
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
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. Early adoption is permitted. We are currently assessing the impact of this new guidance on our Consolidated Financial Statements.
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 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.
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 are currently assessing the impact of this new guidance 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 Derecogntion 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
which were confusing and complex; 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 are currently assessing the impact of this new guidance 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 are currently assessing the impact of this new guidance 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 U.S. GAAP, 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.
Our allowance for doubtful accounts receivable, which is reflected in the
Consolidated Balance Sheets as a reduction of accounts receivable, totaled $15 million and $16 million at March 31, 2017 and December 31, 2016, respectively.
Inventories consisted of the following components:
|
|
|
|
|
|
|
|
|
Millions of dollars
|
|
March 31,
2017
|
|
|
December 31,
2016
|
|
Finished goods
|
|
$
|
2,516
|
|
|
$
|
2,575
|
|
Work-in-process
|
|
|
207
|
|
|
|
154
|
|
Raw materials and supplies
|
|
|
1,152
|
|
|
|
1,080
|
|
|
|
|
|
|
|
|
|
|
Total inventories
|
|
$
|
3,875
|
|
|
$
|
3,809
|
|
|
|
|
|
|
|
|
|
|
For information related to lower of cost or market inventory valuation adjustments recognized during the three months ended
March 31, 2016, see Note 13.
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:
|
|
|
|
|
|
|
|
|
Millions of dollars
|
|
March 31,
2017
|
|
|
December 31,
2016
|
|
Senior Notes due 2019, $2,000 million, 5.0% ($5 million of debt issuance cost)
|
|
$
|
947
|
|
|
$
|
1,906
|
|
Senior Notes due 2021, $1,000 million, 6.0% ($8 million of debt issuance cost)
|
|
|
987
|
|
|
|
988
|
|
Senior Notes due 2024, $1,000 million, 5.75% ($9 million of debt issuance cost)
|
|
|
991
|
|
|
|
991
|
|
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, 4.0% ($7 million of discount; $4 million
of debt issuance cost)
|
|
|
739
|
|
|
|
739
|
|
Guaranteed Notes due 2027, $300 million, 8.1%
|
|
|
300
|
|
|
|
300
|
|
Guaranteed Notes due 2022, 750 million, 1.875% ($3 million of discount;
$4 million of debt issuance cost)
|
|
|
795
|
|
|
|
785
|
|
Guaranteed Notes due 2027, $1,000 million, 3.5% ($10 million of discount;
$8 million of debt issuance cost)
|
|
|
983
|
|
|
|
|
|
Other
|
|
|
7
|
|
|
|
6
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
8,421
|
|
|
|
8,387
|
|
Less current maturities
|
|
|
(2
|
)
|
|
|
(2
|
)
|
|
|
|
|
|
|
|
|
|
Long-term debt
|
|
$
|
8,419
|
|
|
$
|
8,385
|
|
|
|
|
|
|
|
|
|
|
Our 5% senior notes due 2019 include losses of $36 million and $19 million for the three months ended March 31,
2017 and 2016, respectively, and gains of $42 million for the year ended December 31, 2016 for fair value adjustments related to the fair value hedge accounting treatment of our
fixed-for-floating
interest rate swap strategy. Since inception in 2014, we have recognized net gains of $48 million related to these adjustments. Our 6% senior notes due 2021 include $5 million of
fair value gains since inception in 2016, which includes a $2 million gain for the three months ended March 31, 2017. Our 3.5% guaranteed notes due 2027 also include a $1 million fair value loss for the three months ended
March 31, 2017. 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:
|
|
|
|
|
|
|
|
|
|
|
March 31,
|
|
|
December 31,
|
|
Millions of dollars
|
|
2017
|
|
|
2016
|
|
$2,500 million Senior Revolving Credit Facility
|
|
$
|
|
|
|
$
|
|
|
$900 million U.S. Receivables Securitization Facility
|
|
|
|
|
|
|
|
|
Commercial paper
|
|
|
550
|
|
|
|
500
|
|
Financial payables to equity investees
|
|
|
2
|
|
|
|
2
|
|
Precious metal financings
|
|
|
57
|
|
|
|
90
|
|
Other
|
|
|
2
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
Total short-term debt
|
|
$
|
611
|
|
|
$
|
594
|
|
|
|
|
|
|
|
|
|
|
Long-Term Debt
Guaranteed Notes due 2027
In February 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
Our $2,500 million revolving credit facility, which expires in June 2021, 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 March 31,
2017. At March 31, 2017, we had $550 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) 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 March 31, 2017 are based on the term of the notes and range from 90 to 130 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 March 31, 2017, there were no borrowings or letters of credit under the facility.
Other
At March 31, 2017 and December 31, 2016, our weighted average interest rate on outstanding short-term debt was 1.1% and 0.9%,
respectively.
Debt Discount and Issuance Costs
In
the three months ended March 31, 2017 and 2016, amortization of debt discounts and debt issuance costs resulted in amortization expense of $8 million and $4 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)
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 March 31, 2017 and December 31, 2016, we had marketable securities classified as Cash and cash equivalents of $120 million and
$351 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 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 March 31,
2017 and December 31, 2016 was $497 million and $369 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.
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
16
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
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 March 31, 2017, foreign currency forward contracts in the notional amount of $81 million, maturing from April 2017 to August 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 $5 million and $3 million for the three months ended March 31, 2017 and 2016, respectively.
Basis Swaps
In March
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 both the prospective and retrospective hedge effectiveness of these basis swaps by comparing the spot rate change in the euro notes and the spot rate change in the designated net investment.
We also have 400 million of basis swaps entered into in 2015 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 long-haul method to assess hedge effectiveness using a regression analysis approach under the hypothetical derivative method. We perform the regression
analysis of these 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.
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
applicable basis and will receive interest in U.S. dollars at 3 Month LIBOR plus applicable basis. Upon the maturities of these contracts, we will pay the principal amount in euros and receive U.S. dollars from our counterparties. 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 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.
There was no ineffectiveness recorded during the three months ended March 31, 2017 and 2016 related to these basis swaps.
The following table summarizes the notional and fair value of our basis swaps outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2017
|
|
|
December 31, 2016
|
|
Millions of dollars
|
|
Notional
Value
|
|
|
Fair
Value
|
|
|
Notional
Value
|
|
|
Fair
Value
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basis swaps expiring in 2017
|
|
$
|
305
|
|
|
$
|
12
|
|
|
$
|
305
|
|
|
$
|
15
|
|
Basis swaps expiring in 2018
|
|
|
139
|
|
|
|
5
|
|
|
|
139
|
|
|
|
6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
444
|
|
|
$
|
17
|
|
|
$
|
444
|
|
|
$
|
21
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basis swaps expiring in 2027
|
|
$
|
650
|
|
|
$
|
18
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
Forward Exchange Contracts
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 three months ended March 31, 2017 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 translation adjustments in Accumulated other comprehensive 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 during the three months ended March 31, 2016.
Guaranteed Euro Notes Due 2022
In March 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 each of the three months ended March 31, 2017 and 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.
18
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
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 three months ended March 31, 2017 and 2016.
The following table summarizes our cross-currency swaps outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2017
|
|
|
December 31, 2016
|
|
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
|
|
|
$
|
146
|
|
Receive U.S. dollars
|
|
|
|
|
|
|
6.00
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pay Euro
|
|
|
2024
|
|
|
|
4.37
|
%
|
|
|
1,000
|
|
|
|
137
|
|
|
|
1,000
|
|
|
|
134
|
|
Receive U.S. dollars
|
|
|
|
|
|
|
5.75
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pay Euro
|
|
|
2027
|
|
|
|
3.69
|
%
|
|
|
300
|
|
|
|
4
|
|
|
|
300
|
|
|
|
5
|
|
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 March 31, 2017. The ineffectiveness recorded for this hedging relationship was less than $1 million in each of the three months ended March 31, 2017 and 2016.
We elected to designate these forward-starting interest rate swaps as cash flow hedges. The effective portion of the gain or loss 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 will be 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.
There was no settlement of our forward-starting swap
agreements during each of the three months ended March 31, 2017 and 2016.
19
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
As of March 31, 2017, less than $1 million (on a pretax basis) is scheduled to be reclassified as a
decrease to interest expense over the next twelve months.
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 three months ended March 31, 2017.
As of March 31, 2017, 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 2017, 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
3.5% guaranteed notes due 2027 associated with the risk of variability in the 3 Month USD LIBOR rate (the benchmark interest rate).
We also have 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). 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.
Our 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 for 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. The fixed and variable payments for the interest rate swaps related to our guaranteed notes due 2027 are settled quarterly. 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.
20
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
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. There was no ineffectiveness for these hedging relationships in the three months ended March 31, 2017; however, we recognized a net gain of $9 million for the three months ended March 31, 2016.
At March 31, 2017, we had outstanding interest rate swap agreements with notional amounts of $1,000 million, maturing on April 15, 2019,
$1,000 million, maturing on November 15, 2021, and $1,000 million, maturing on March 2, 2027.
Investments in marketable
securities
The following table summarizes our investments in marketable securities:
|
|
|
|
|
|
|
|
|
|
|
March 31,
|
|
|
December 31,
|
|
Millions of dollars
|
|
2017
|
|
|
2016
|
|
Short-term investments:
|
|
|
|
|
|
|
|
|
Available-for-sale
securities, at fair value
|
|
$
|
1,146
|
|
|
$
|
1,073
|
|
Held-to-maturity
securities, at cost
|
|
|
30
|
|
|
|
74
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,176
|
|
|
$
|
1,147
|
|
|
|
|
|
|
|
|
|
|
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 March 31, 2017 and December 31, 2016. Refer to
Note 7 for additional information regarding the fair value of
available-for-sale
and
held-to
maturity securities.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2017
|
|
|
|
|
|
|
Gross
|
|
|
Gross
|
|
|
|
|
|
|
|
|
|
Unrealized
|
|
|
Unrealized
|
|
|
Fair
|
|
Millions of dollars
|
|
Cost
|
|
|
Gains
|
|
|
Losses
|
|
|
Value
|
|
Available-for-sale
securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial paper
|
|
$
|
165
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
165
|
|
Bonds
|
|
|
366
|
|
|
|
|
|
|
|
(1
|
)
|
|
|
365
|
|
Certificates of deposit
|
|
|
258
|
|
|
|
|
|
|
|
|
|
|
|
258
|
|
Time deposits
|
|
|
9
|
|
|
|
|
|
|
|
|
|
|
|
9
|
|
Limited partnership investments
|
|
|
350
|
|
|
|
3
|
|
|
|
(4
|
)
|
|
|
349
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
available-for-sale
securities
|
|
$
|
1,148
|
|
|
$
|
3
|
|
|
$
|
(5
|
)
|
|
$
|
1,146
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Held-to-maturity
securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Time deposits
|
|
$
|
30
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
30
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
|
|
|
|
|
Gross
|
|
|
Gross
|
|
|
|
|
|
|
|
|
|
Unrealized
|
|
|
Unrealized
|
|
|
Fair
|
|
Millions of dollars
|
|
Cost
|
|
|
Gains
|
|
|
Losses
|
|
|
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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 three months ended March 31, 2017 and the year ended December 31, 2016.
As of March 31, 2017, our
available-for-sale
securities had the following maturities: commercial paper securities held by the Company had maturities between three and twelve months; bonds had
maturities between two and forty three months; certificates of deposit mature between two and twelve months; and limited partnership investments mature between one and three months. Our time deposits classified as
held-to-maturity
securities mature within three months.
The proceeds from maturities and sales of our
available-for-sale
securities during the three months ended March 31, 2017 and 2016 are summarized in the following table:
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
March 31,
|
|
Millions of dollars
|
|
2017
|
|
|
2016
|
|
Proceeds from maturities of securities
|
|
$
|
338
|
|
|
$
|
240
|
|
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 months ended March 31, 2017 and 2016. 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 three months ended March 31, 2017, we had maturities of our
held-to-maturity
securities totaling $44 million. 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.
22
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 March 31, 2017 and December 31, 2016.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2017
|
|
|
|
Less than 12 months
|
|
|
Greater than 12 months
|
|
|
|
Fair
|
|
|
Unrealized
|
|
|
Fair
|
|
|
Unrealized
|
|
Millions of dollars
|
|
Value
|
|
|
Loss
|
|
|
Value
|
|
|
Loss
|
|
Available-for-sale
securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Limited partnership investments
|
|
$
|
122
|
|
|
$
|
(2
|
)
|
|
$
|
105
|
|
|
$
|
(3
|
)
|
|
|
|
|
December 31, 2016
|
|
|
|
Less than 12 months
|
|
|
Greater than 12 months
|
|
|
|
Fair
|
|
|
Unrealized
|
|
|
Fair
|
|
|
Unrealized
|
|
Millions of dollars
|
|
Value
|
|
|
Loss
|
|
|
Value
|
|
|
Loss
|
|
Available-for-sale
securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Limited partnership investments
|
|
$
|
|
|
|
$
|
|
|
|
$
|
105
|
|
|
$
|
(3
|
)
|
Financial Instruments
The following table summarizes financial instruments outstanding as of March 31, 2017
and December 31, 2016 that are measured at fair value on a recurring basis. Refer to Note 7 for additional information regarding the fair value of financial instruments.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2017
|
|
|
December 31, 2016
|
|
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
|
|
|
$
|
12
|
|
|
$
|
305
|
|
|
$
|
15
|
|
Basis swaps
|
|
Other assets
|
|
|
139
|
|
|
|
5
|
|
|
|
139
|
|
|
|
6
|
|
Forward exchange contracts
|
|
Prepaid expenses and other current assets
|
|
|
299
|
|
|
|
8
|
|
|
|
299
|
|
|
|
10
|
|
|
|
|
|
|
|
Derivatives designated as cash flow hedges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cross-currency swaps
|
|
Other assets
|
|
|
2,300
|
|
|
|
269
|
|
|
|
2,300
|
|
|
|
276
|
|
Cross-currency swaps
|
|
Prepaid expenses and other current assets
|
|
|
|
|
|
|
18
|
|
|
|
|
|
|
|
9
|
|
Commodity swaps
|
|
Other assets
|
|
|
44
|
|
|
|
2
|
|
|
|
54
|
|
|
|
3
|
|
Commodity swaps
|
|
Prepaid expenses and other current assets
|
|
|
8
|
|
|
|
|
|
|
|
4
|
|
|
|
|
|
23
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2017
|
|
|
December 31, 2016
|
|
Millions of dollars
|
|
Balance Sheet
Classification
|
|
Notional
Amount
|
|
|
Fair
Value
|
|
|
Notional
Amount
|
|
|
Fair
Value
|
|
Forward-starting interest rate swaps
|
|
Other assets
|
|
|
400
|
|
|
|
3
|
|
|
|
200
|
|
|
|
1
|
|
Derivatives designated as fair value hedges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed-for-floating
interest rate swaps
|
|
Other assets
|
|
|
1,850
|
|
|
|
2
|
|
|
|
2,000
|
|
|
|
10
|
|
Fixed-for-floating
interest rate swaps
|
|
Prepaid expenses and other current assets
|
|
|
|
|
|
|
17
|
|
|
|
|
|
|
|
5
|
|
|
|
|
|
|
|
Derivatives not designated as hedges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodities
|
|
Prepaid expenses and other current assets
|
|
|
40
|
|
|
|
1
|
|
|
|
68
|
|
|
|
2
|
|
Embedded derivatives
|
|
Prepaid expenses and other current assets
|
|
|
|
|
|
|
|
|
|
|
17
|
|
|
|
1
|
|
Foreign currency
|
|
Prepaid expenses and other current assets
|
|
|
|
|
|
|
|
|
|
|
11
|
|
|
|
|
|
|
|
|
|
|
|
Non-derivatives:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale
securities
|
|
Short-term investments
|
|
|
1,143
|
|
|
|
1,146
|
|
|
|
1,069
|
|
|
|
1,073
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
6,528
|
|
|
$
|
1,483
|
|
|
$
|
6,466
|
|
|
$
|
1,411
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
24
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2017
|
|
|
December 31, 2016
|
|
Millions of dollars
|
|
Balance Sheet
Classification
|
|
Notional
Amount
|
|
|
Fair
Value
|
|
|
Notional
Amount
|
|
|
Fair
Value
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives designated as net investment hedges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basis swaps
|
|
Other liabilities
|
|
$
|
650
|
|
|
$
|
18
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
Derivatives designated as cash flow hedges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forward-starting interest rate swaps
|
|
Other liabilities
|
|
|
600
|
|
|
|
11
|
|
|
|
800
|
|
|
|
16
|
|
Commodities
|
|
Accrued liabilities
|
|
|
8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives designated as fair value hedges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed-for-floating
interest rate swaps
|
|
Other liabilities
|
|
|
1,150
|
|
|
|
7
|
|
|
|
600
|
|
|
|
4
|
|
|
|
|
|
|
|
Derivatives not designated as hedges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodities
|
|
Accrued liabilities
|
|
|
25
|
|
|
|
2
|
|
|
|
30
|
|
|
|
1
|
|
Embedded derivatives
|
|
Accrued liabilities
|
|
|
57
|
|
|
|
4
|
|
|
|
73
|
|
|
|
10
|
|
Foreign currency
|
|
Accrued liabilities
|
|
|
81
|
|
|
|
|
|
|
|
28
|
|
|
|
1
|
|
|
|
|
|
|
|
Non-derivatives:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance share awards
|
|
Accrued liabilities
|
|
|
14
|
|
|
|
14
|
|
|
|
19
|
|
|
|
19
|
|
Performance share awards
|
|
Other liabilities
|
|
|
14
|
|
|
|
14
|
|
|
|
22
|
|
|
|
22
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2,599
|
|
|
$
|
70
|
|
|
$
|
1,572
|
|
|
$
|
73
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25
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
|
|
|
Three Months Ended March 31, 2017
|
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
|
|
$
|
(20
|
)
|
|
$
|
|
|
|
$
|
|
|
|
Other income, net
|
Forward exchange contracts
|
|
|
(2
|
)
|
|
|
|
|
|
|
|
|
|
Other income, net
|
|
|
|
|
|
Derivatives designated as cash-flow hedges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cross-currency swaps
|
|
|
(7
|
)
|
|
|
25
|
|
|
|
|
|
|
Other income, net
|
Forward-starting interest rate swaps
|
|
|
7
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
Commodities
|
|
|
(2
|
)
|
|
|
|
|
|
|
|
|
|
Cost of sales
|
|
|
|
|
|
Derivatives designated as fair value hedges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed-for-floating
interest rate swaps
|
|
|
|
|
|
|
|
|
|
|
(1
|
)
|
|
Interest expense
|
|
|
|
|
|
Derivatives not designated as hedges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodities
|
|
|
|
|
|
|
|
|
|
|
(1
|
)
|
|
Sales and other operating revenues
|
Embedded derivatives
|
|
|
|
|
|
|
|
|
|
|
(11
|
)
|
|
Cost of sales
|
Foreign currency
|
|
|
|
|
|
|
|
|
|
|
(1
|
)
|
|
Other income, net
|
|
|
|
|
|
Non-derivatives
designated as net investment
hedges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Euro notes payable
|
|
|
(10
|
)
|
|
|
|
|
|
|
|
|
|
Other income, net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(34
|
)
|
|
$
|
25
|
|
|
$
|
(14
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 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
|
|
$
|
(40
|
)
|
|
$
|
|
|
|
$
|
|
|
|
Other income, net
|
Forward exchange contracts
|
|
|
(30
|
)
|
|
|
|
|
|
|
|
|
|
Other income, net
|
Derivatives designated as cash-flow hedges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cross-currency swaps
|
|
|
(106
|
)
|
|
|
90
|
|
|
|
|
|
|
Other income, net
|
Forward-starting interest rate swaps
|
|
|
(88
|
)
|
|
|
|
|
|
|
(1
|
)
|
|
Interest expense
|
Derivatives designated as fair value hedges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed-for-floating
interest rate swaps
|
|
|
|
|
|
|
|
|
|
|
33
|
|
|
Interest expense
|
Derivatives not designated as hedges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodities
|
|
|
|
|
|
|
|
|
|
|
(1
|
)
|
|
Sales and other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
operating revenues
|
Commodities
|
|
|
|
|
|
|
|
|
|
|
6
|
|
|
Cost of sales
|
Embedded derivatives
|
|
|
|
|
|
|
|
|
|
|
(8
|
)
|
|
Cost of sales
|
Foreign currency
|
|
|
|
|
|
|
|
|
|
|
19
|
|
|
Other income, net
|
Non-derivatives
designated as net investment
hedges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Euro notes payable
|
|
|
(4
|
)
|
|
|
|
|
|
|
|
|
|
Other income, net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(268
|
)
|
|
$
|
90
|
|
|
$
|
48
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The pretax effect of the gains (losses) recognized in income for our
fixed-for-floating
interest rate swaps includes the net value of interest accrued of $7 million and $6 million during the three months ended March 31, 2017 and 2016, respectively.
27
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
7.
|
Fair Value Measurement
|
The following table presents the financial instruments outstanding as of
March 31, 2017 and December 31, 2016 that are measured at fair value on a recurring basis.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2017
|
|
Millions of dollars
|
|
Fair
Value
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basis swaps
|
|
$
|
17
|
|
|
$
|
|
|
|
$
|
17
|
|
|
$
|
|
|
Cross-currency swaps
|
|
|
287
|
|
|
|
|
|
|
|
287
|
|
|
|
|
|
Forward exchange contracts
|
|
|
8
|
|
|
|
|
|
|
|
8
|
|
|
|
|
|
Forward-starting interest rate swaps
|
|
|
3
|
|
|
|
|
|
|
|
3
|
|
|
|
|
|
Fixed-for-floating
interest rate swaps
|
|
|
19
|
|
|
|
|
|
|
|
19
|
|
|
|
|
|
Commodities
|
|
|
3
|
|
|
|
1
|
|
|
|
2
|
|
|
|
|
|
Non-derivatives:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale
securities
|
|
|
797
|
|
|
|
|
|
|
|
797
|
|
|
|
|
|
Available-for-sale
securities measured at net asset value*
|
|
|
349
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,483
|
|
|
$
|
1
|
|
|
$
|
1,133
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basis swaps
|
|
$
|
18
|
|
|
$
|
|
|
|
$
|
18
|
|
|
$
|
|
|
Forward-starting interest rate swaps
|
|
|
11
|
|
|
|
|
|
|
|
11
|
|
|
|
|
|
Fixed-for-floating
interest rate swaps
|
|
|
7
|
|
|
|
|
|
|
|
7
|
|
|
|
|
|
Commodities
|
|
|
2
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
Embedded derivatives
|
|
|
4
|
|
|
|
|
|
|
|
4
|
|
|
|
|
|
Non-derivatives:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance share awards
|
|
|
28
|
|
|
|
28
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
70
|
|
|
$
|
30
|
|
|
$
|
40
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
28
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*
|
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 three months ended March 31, 2017 and
the year ended December 31, 2016.
29
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 March 31, 2017 and December 31, 2016. Short-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.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2017
|
|
Millions of dollars
|
|
Carrying
Value
|
|
|
Fair
Value
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
Non-derivatives:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term loans receivable
|
|
$
|
497
|
|
|
$
|
497
|
|
|
$
|
|
|
|
$
|
497
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term debt
|
|
$
|
57
|
|
|
$
|
63
|
|
|
$
|
|
|
|
$
|
63
|
|
|
$
|
|
|
Long-term debt
|
|
|
8,415
|
|
|
|
9,156
|
|
|
|
|
|
|
|
9,155
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
8,472
|
|
|
$
|
9,219
|
|
|
$
|
|
|
|
$
|
9,218
|
|
|
$
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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.
30
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 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.
8.
|
Pension and Other Postretirement Benefits
|
Net periodic pension benefits included the following cost
components for the periods presented:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
|
2017
|
|
|
2016
|
|
Millions of dollars
|
|
U.S.
|
|
|
Non-U.S.
|
|
|
U.S.
|
|
|
Non-U.S.
|
|
Service cost
|
|
$
|
12
|
|
|
$
|
9
|
|
|
$
|
11
|
|
|
$
|
8
|
|
Interest cost
|
|
|
15
|
|
|
|
5
|
|
|
|
22
|
|
|
|
8
|
|
Expected return on plan assets
|
|
|
(30
|
)
|
|
|
(4
|
)
|
|
|
(35
|
)
|
|
|
(6
|
)
|
Actuarial and investment loss amortization
|
|
|
5
|
|
|
|
4
|
|
|
|
5
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic pension benefit costs
|
|
$
|
2
|
|
|
$
|
14
|
|
|
$
|
3
|
|
|
$
|
12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
Net periodic other postretirement benefits included the following cost components for the periods presented:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
|
2017
|
|
|
2016
|
|
Millions of dollars
|
|
U.S.
|
|
|
Non-U.S.
|
|
|
U.S.
|
|
|
Non-U.S.
|
|
Service cost
|
|
$
|
1
|
|
|
$
|
1
|
|
|
$
|
1
|
|
|
$
|
1
|
|
Interest cost
|
|
|
2
|
|
|
|
|
|
|
|
3
|
|
|
|
|
|
Actuarial loss amortization
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic benefit costs
|
|
$
|
3
|
|
|
$
|
2
|
|
|
$
|
4
|
|
|
$
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The total net periodic cost of our pension and other postretirement benefit plans were as follows:
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31,
|
|
Millions of dollars
|
|
2017
|
|
|
2016
|
|
Pension plans
|
|
$
|
16
|
|
|
$
|
15
|
|
Other postretirement benefit plans
|
|
|
5
|
|
|
|
6
|
|
|
|
|
|
|
|
|
|
|
Net periodic benefit costs
|
|
$
|
21
|
|
|
$
|
21
|
|
|
|
|
|
|
|
|
|
|
Our effective income tax rate for the three months ended
March 31, 2017 was 28.1% compared with 29.5% for the three months ended March 31, 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 three months ended March 31, 2016, the lower effective tax rate for the three months ended March 31, 2017 was primarily
attributable to a reduction in foreign exchange gains, changes in pretax income in countries with varying statutory tax rates, adjustments to our deferred tax liabilities, partially offset by fluctuations in valuation allowances and local taxes.
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. In October 2016, the U.S. Treasury issued final Section 385 debt-equity regulations that may 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 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.
32
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
10.
|
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 $94 million and $95 million as of March 31, 2017 and December 31, 2016, respectively. At March 31, 2017, the accrued liabilities for individual sites range from less than $1 million to $15 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:
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31,
|
|
Millions of dollars
|
|
2017
|
|
|
2016
|
|
Beginning balance
|
|
$
|
95
|
|
|
$
|
106
|
|
Changes in estimates
|
|
|
|
|
|
|
(1
|
)
|
Amounts paid
|
|
|
(2
|
)
|
|
|
(2
|
)
|
Foreign exchange effects
|
|
|
1
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
Ending balance
|
|
$
|
94
|
|
|
$
|
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 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. This ruling remains subject to potential appeal by the parties.
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.
33
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
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 a ruling in
Weisfelner
in April 2017 as noted above, it remains subject to potential appeal by the parties.
Accordingly, 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 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 March 31, 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
On
March 13, 2017, we paid a cash dividend of $0.85 per share for an aggregate of $343 million to shareholders of record on March 6, 2017.
Share Repurchase Programs
During the second quarter of 2016, we completed the repurchase of shares under a share repurchase program approved by
our shareholders in May 2015 (May 2015 Share Repurchase Program). We were authorized to purchase up to 10% of our outstanding shares under this program. 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 recorded as Treasury stock and may be retired or used for general corporate purposes, including for various employee benefit and
compensation plans.
34
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
The following table summarizes our share repurchase activity for the periods presented:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 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
|
|
|
1,533,713
|
|
|
$
|
90.64
|
|
|
$
|
139
|
|
|
|
|
|
Three Months Ended March 31, 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
|
|
|
12,294,388
|
|
|
$
|
78.70
|
|
|
$
|
968
|
|
Due to the timing of settlements, total cash paid for share repurchases for the three months ended March 31, 2017 and
2016 was $160 million and $986 million, respectively.
Ordinary Shares
The changes in the outstanding amounts of ordinary shares are
as follows:
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31,
|
|
|
|
2017
|
|
|
2016
|
|
Ordinary shares outstanding:
|
|
|
|
|
|
|
|
|
Beginning balance
|
|
|
404,046,331
|
|
|
|
440,150,069
|
|
Share-based compensation
|
|
|
237,758
|
|
|
|
284,818
|
|
Warrants exercised
|
|
|
4,099
|
|
|
|
|
|
Employee stock purchase plan
|
|
|
26,909
|
|
|
|
17,855
|
|
Purchase of ordinary shares
|
|
|
(1,533,713
|
)
|
|
|
(12,294,388
|
)
|
|
|
|
|
|
|
|
|
|
Ending balance
|
|
|
402,781,384
|
|
|
|
428,158,354
|
|
|
|
|
|
|
|
|
|
|
Treasury Shares
The changes in the amounts of treasury shares held by the Company are as follows:
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31,
|
|
|
|
2017
|
|
|
2016
|
|
Ordinary shares held as treasury shares:
|
|
|
|
|
|
|
|
|
Beginning balance
|
|
|
174,389,139
|
|
|
|
138,285,201
|
|
Share-based compensation
|
|
|
(237,758
|
)
|
|
|
(284,818
|
)
|
Warrants exercised
|
|
|
509
|
|
|
|
|
|
Employee stock purchase plan
|
|
|
(26,909
|
)
|
|
|
(17,855
|
)
|
Purchase of ordinary shares
|
|
|
1,533,713
|
|
|
|
12,294,388
|
|
|
|
|
|
|
|
|
|
|
Ending balance
|
|
|
175,658,694
|
|
|
|
150,276,916
|
|
|
|
|
|
|
|
|
|
|
35
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
Accumulated Other Comprehensive Income (Loss)
The components of, and
after-tax
changes in, Accumulated other comprehensive income (loss) as of and for the three months ended March 31, 2017 and 2016 are presented in the following table:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Millions of dollars
|
|
Financial
Derivatives
|
|
|
Net Unrealized
Holding Gains
on Investments
|
|
|
Net
Unrealized
Holding
Gains
(Losses)
Attributable
to Equity
Investees
|
|
|
Defined
Pension
and Other
Postretirement
Benefit Plans
|
|
|
Foreign
Currency
Translation
Adjustments
|
|
|
Total
|
|
Balance January 1, 2017
|
|
$
|
(75
|
)
|
|
$
|
1
|
|
|
$
|
|
|
|
$
|
(498
|
)
|
|
$
|
(939
|
)
|
|
$
|
(1,511
|
)
|
Other comprehensive income (loss) before reclassifications
|
|
|
4
|
|
|
|
(3
|
)
|
|
|
11
|
|
|
|
|
|
|
|
36
|
|
|
|
48
|
|
Amounts reclassified from accumulated other comprehensive loss
|
|
|
18
|
|
|
|
|
|
|
|
|
|
|
|
7
|
|
|
|
|
|
|
|
25
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net other comprehensive income (loss)
|
|
|
22
|
|
|
|
(3
|
)
|
|
|
11
|
|
|
|
7
|
|
|
|
36
|
|
|
|
73
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance March 31, 2017
|
|
$
|
(53
|
)
|
|
$
|
(2
|
)
|
|
$
|
11
|
|
|
$
|
(491
|
)
|
|
$
|
(903
|
)
|
|
$
|
(1,438
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance January 1, 2016
|
|
$
|
(79
|
)
|
|
$
|
(5
|
)
|
|
$
|
|
|
|
|
(428
|
)
|
|
$
|
(926
|
)
|
|
$
|
(1,438
|
)
|
Other comprehensive income (loss) before reclassifications
|
|
|
(141
|
)
|
|
|
(6
|
)
|
|
|
|
|
|
|
|
|
|
|
93
|
|
|
|
(54
|
)
|
Amounts reclassified from accumulated other comprehensive loss
|
|
|
90
|
|
|
|
|
|
|
|
|
|
|
|
5
|
|
|
|
|
|
|
|
95
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net other comprehensive income (loss)
|
|
|
(51
|
)
|
|
|
(6
|
)
|
|
|
|
|
|
|
5
|
|
|
|
93
|
|
|
|
41
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance March 31, 2016
|
|
$
|
(130
|
)
|
|
$
|
(11
|
)
|
|
$
|
|
|
|
$
|
(423
|
)
|
|
$
|
(833
|
)
|
|
$
|
(1,397
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
36
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
The amounts reclassified out of each component of Accumulated other comprehensive loss are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31,
|
|
|
Affected Line Item on
the Consolidated
Statements of Income
|
|
Millions of dollars
|
|
2017
|
|
|
2016
|
|
|
Reclassification adjustments for:
|
|
|
|
|
|
|
|
|
|
|
|
|
Defined pension and other postretirement benefit plan items:
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of:
|
|
|
|
|
|
|
|
|
|
|
|
|
Actuarial loss
|
|
$
|
10
|
|
|
$
|
8
|
|
|
|
|
|
Financial derivatives:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cross-currency swaps
|
|
|
25
|
|
|
|
90
|
|
|
|
Other income, net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reclassifications, before tax
|
|
|
35
|
|
|
|
98
|
|
|
|
|
|
Income tax expense
|
|
|
10
|
|
|
|
3
|
|
|
|
Provision for income taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts reclassified out of Accumulated other comprehensive loss
|
|
$
|
25
|
|
|
$
|
95
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of prior service cost and actuarial loss are included in the computation of net periodic pension and other
postretirement benefit costs (see Note 8).
37
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 March 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
Continuing
|
|
|
Discontinued
|
|
|
Continuing
|
|
|
Discontinued
|
|
Millions of dollars
|
|
Operations
|
|
|
Operations
|
|
|
Operations
|
|
|
Operations
|
|
Net income (loss)
|
|
$
|
805
|
|
|
$
|
(8
|
)
|
|
$
|
1,030
|
|
|
$
|
|
|
Less: net loss attributable to
non-controlling
interests
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to the Company shareholders
|
|
|
805
|
|
|
|
(8
|
)
|
|
|
1,030
|
|
|
|
|
|
Net income attributable to participating securities
|
|
|
(1
|
)
|
|
|
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to ordinary shareholders basic and diluted
|
|
$
|
804
|
|
|
$
|
(8
|
)
|
|
$
|
1,029
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Millions of shares, except per share data
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic weighted average common stock outstanding
|
|
|
403
|
|
|
|
403
|
|
|
|
433
|
|
|
|
433
|
|
Effect of dilutive securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MTI, QPA and PSU awards
|
|
|
|
|
|
|
|
|
|
|
1
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Potential dilutive shares
|
|
|
403
|
|
|
|
403
|
|
|
|
434
|
|
|
|
434
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
2.00
|
|
|
$
|
(0.02
|
)
|
|
$
|
2.38
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
$
|
2.00
|
|
|
$
|
(0.02
|
)
|
|
$
|
2.37
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Millions of shares, except per share data
|
|
|
|
|
|
|
|
|
|
|
|
|
Participating securities
|
|
|
0.4
|
|
|
|
0.4
|
|
|
|
0.4
|
|
|
|
0.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends declared per share of common stock
|
|
$
|
0.85
|
|
|
$
|
|
|
|
$
|
0.78
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
38
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
13.
|
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.
39
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 March 31, 2017
|
|
Millions of dollars
|
|
O&P
Americas
|
|
|
O&P
EAI
|
|
|
I&D
|
|
|
Refining
|
|
|
Technology
|
|
|
Other
|
|
|
Total
|
|
Sales and other operating revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customers
|
|
$
|
1,999
|
|
|
$
|
2,967
|
|
|
$
|
2,121
|
|
|
$
|
1,250
|
|
|
$
|
93
|
|
|
$
|
|
|
|
$
|
8,430
|
|
Intersegment
|
|
|
605
|
|
|
|
57
|
|
|
|
29
|
|
|
|
103
|
|
|
|
27
|
|
|
|
(821
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,604
|
|
|
|
3,024
|
|
|
|
2,150
|
|
|
|
1,353
|
|
|
|
120
|
|
|
|
(821
|
)
|
|
|
8,430
|
|
|
|
|
|
|
|
|
|
Income from equity investments
|
|
|
14
|
|
|
|
66
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
81
|
|
EBITDA
|
|
|
723
|
|
|
|
529
|
|
|
|
339
|
|
|
|
(30
|
)
|
|
|
60
|
|
|
|
(4
|
)
|
|
|
1,617
|
|
|
|
|
|
Three Months Ended March 31, 2016
|
|
Millions of dollars
|
|
O&P
Americas
|
|
|
O&P
EAI
|
|
|
I&D
|
|
|
Refining
|
|
|
Technology
|
|
|
Other
|
|
|
Total
|
|
Sales and other operating revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customers
|
|
$
|
1,595
|
|
|
$
|
2,545
|
|
|
$
|
1,676
|
|
|
$
|
821
|
|
|
$
|
106
|
|
|
$
|
|
|
|
$
|
6,743
|
|
Intersegment
|
|
|
520
|
|
|
|
33
|
|
|
|
26
|
|
|
|
134
|
|
|
|
26
|
|
|
|
(739
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,115
|
|
|
|
2,578
|
|
|
|
1,702
|
|
|
|
955
|
|
|
|
132
|
|
|
|
(739
|
)
|
|
|
6,743
|
|
|
|
|
|
|
|
|
|
Income from equity investments
|
|
|
22
|
|
|
|
69
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
91
|
|
EBITDA
|
|
|
878
|
|
|
|
509
|
|
|
|
326
|
|
|
|
14
|
|
|
|
83
|
|
|
|
(3
|
)
|
|
|
1,807
|
|
Operating results for our O&PAmericas segment include a $31 million gain on the sale of a Lake Charles,
Louisiana site in the first quarter of 2017. Our I&D segment results for the first quarter of 2017 include charges totaling $38 million primarily related to the settlement of precious metal financings.
Operating results for our O&PEAI segment included a
non-cash
charge of $40 million in the first quarter
of 2016 related to a lower of cost or market (LCM) inventory valuation adjustment driven primarily by declines in prices of several of our polyolefins products and naphtha. Operating results for our I&D segment reflected a
non-cash
charge of $28 million in the first quarter of 2016 related to an LCM inventory valuation adjustment primarily driven by declines in the prices of benzene and styrene. Our O&PAmericas and
O&PEAI segments also benefited from gains of $57 million and $21 million, respectively, related to the first quarter 2016 sale of our wholly owned subsidiary, Petroken Petroquimica Ensenada S.A.
40
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
A reconciliation of EBITDA to Income from continuing operations before income taxes is shown in the following
table for each of the periods presented:
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
Millions of dollars
|
|
2017
|
|
|
2016
|
|
EBITDA:
|
|
|
|
|
|
|
|
|
Total segment EBITDA
|
|
$
|
1,621
|
|
|
$
|
1,810
|
|
Other EBITDA
|
|
|
(4
|
)
|
|
|
(3
|
)
|
Less:
|
|
|
|
|
|
|
|
|
Depreciation and amortization expense
|
|
|
(296
|
)
|
|
|
(268
|
)
|
Interest expense
|
|
|
(207
|
)
|
|
|
(82
|
)
|
Add:
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
6
|
|
|
|
5
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations before income taxes
|
|
$
|
1,120
|
|
|
$
|
1,462
|
|
|
|
|
|
|
|
|
|
|
41