lyb-20200331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q


☒						QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2020


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number: 001-34726

LYONDELLBASELL INDUSTRIES N.V.

(Exact name of registrant as specified in its charter)

Netherlands

98-0646235

(State or other jurisdiction of
incorporation or organization)

(I.R.S. Employer
Identification No.)

1221 McKinney St.,

4th Floor, One Vine Street

Suite 300

London

Delftseplein 27E

Houston,

Texas

W1J0AH

3013AA

Rotterdam

USA

77010

United Kingdom

Netherlands

(Addresses of registrant’s principal executive offices)


						(713)						309-7200									+44 (0)						207			220 2600									+31 (0)						10			2755 500

(Registrant’s telephone numbers, including area codes)

______________________________________________________________________________________________________________________________

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class

Trading Symbol

Name of Each Exchange On Which Registered

Ordinary Shares, €0.04 Par Value

LYB

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	x	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange

Act). Yes ☐ No x

The registrant had 333,706,244 ordinary shares, €0.04 par value, outstanding at April 29, 2020 (excluding 6,339,384 treasury shares).

Table of Contents

LYONDELLBASELL INDUSTRIES N.V.

TABLE OF CONTENTS


			Page
Part I – Financial Information			1

Item 1. Consolidated Financial Statements (Unaudited)			1
Consolidated Statements of Income			1
Consolidated Statements of Comprehensive Income			2
Consolidated Balance Sheets			3
Consolidated Statements of Cash Flows			5
Consolidated Statements of Shareholders’ Equity			6
Notes to the Consolidated Financial Statements			7

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			28

Item 3. Quantitative and Qualitative Disclosures About Market Risk			45

Item 4. Controls and Procedures			45

Part II – Other Information			46

Item 1. Legal Proceedings			46

Item 1A. Risk Factors			46

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			47

Item 4. Mine Safety Disclosures			47

Item 6. Exhibits			48

Signature			50

Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

LYONDELLBASELL INDUSTRIES N.V.

CONSOLIDATED STATEMENTS OF INCOME

(In millions of dollars, except earnings per share)


	Three Months Ended March 31,
	2020		2019
Sales and other operating revenues:
Trade	$	7,303	$	8,565
Related parties	191		213
	7,494		8,778
Operating costs and expenses:
Cost of sales	6,868		7,446
Selling, general and administrative expenses	295		287
Research and development expenses	27		28
	7,190		7,761
Operating income	304		1,017
Interest expense	(89)		(92)
Interest income	3		6
Other income, net	—		25
Income from continuing operations before equity investments and income taxes	218		956
Income from equity investments	—		64
Income from continuing operations before income taxes	218		1,020
Provision for income taxes	75		203
Income from continuing operations	143		817
Income from discontinued operations, net of tax	1		—
Net income	144		817


Dividends on redeemable non-controlling interests	(2)		(2)
Net income attributable to the Company shareholders	$	142	$	815

Earnings per share:
Net income attributable to the Company shareholders —
Basic:
Continuing operations	$	0.42	$	2.19
Discontinued operations	—		—
	$	0.42	$	2.19
Diluted:
Continuing operations	$	0.42	$	2.19
Discontinued operations	—		—
	$	0.42	$	2.19

See Notes to the Consolidated Financial Statements.

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LYONDELLBASELL INDUSTRIES N.V.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In millions of dollars)


	Three Months Ended March 31,
	2020		2019
Net income	$	144	$	817
Other comprehensive income (loss), net of tax –
Financial derivatives	(338)		(50)
Unrealized losses on available-for-sale debt securities	(2)		—
Defined benefit pension and other postretirement benefit plans	10		5
Foreign currency translations	(199)		(10)
Total other comprehensive loss, net of tax	(529)		(55)
Comprehensive income (loss)	(385)		762
Dividends on redeemable non-controlling interests	(2)		(2)

Comprehensive income (loss) attributable to the Company shareholders	$	(387)	$	760

See Notes to the Consolidated Financial Statements.

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LYONDELLBASELL INDUSTRIES N.V.

CONSOLIDATED BALANCE SHEETS

(In millions of dollars)


	March 31, 2020		December 31, 2019
ASSETS
Current assets:
Cash and cash equivalents	$	1,596	$	858
Restricted cash	37		30
Short-term investments	199		196
Accounts receivable:
Trade, net	2,885		2,981
Related parties	158		121
Inventories	3,973		4,588
Prepaid expenses and other current assets	844		736
Total current assets	9,692		9,510
Operating lease assets	1,453		1,468
Property, plant and equipment, at cost	21,664		21,260
Less: Accumulated depreciation	(7,277)		(7,130)
Property, plant and equipment, net	14,387		14,130
Investments and long-term receivables:
Investment in PO joint ventures	497		504
Equity investments	1,539		1,602
Other investments and long-term receivables	22		22
Goodwill	1,800		1,891
Intangible assets, net	808		869
Other assets	902		439
Total assets	$	31,100	$	30,435

See Notes to the Consolidated Financial Statements.

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LYONDELLBASELL INDUSTRIES N.V.

CONSOLIDATED BALANCE SHEETS

(In millions of dollars, except shares and par value data)


	March 31, 2020		December 31, 2019
LIABILITIES, REDEEMABLE NON-CONTROLLING INTERESTS AND EQUITY
Current liabilities:
Current maturities of long-term debt	$	3	$	3
Short-term debt	1,493		445
Accounts payable:
Trade	2,217		2,516
Related parties	421		412
Accrued liabilities	1,387		1,822
Total current liabilities	5,521		5,198
Long-term debt	12,159		11,614
Operating lease liabilities	1,192		1,216
Other liabilities	2,808		2,213
Deferred income taxes	1,961		2,015
Commitments and contingencies
Redeemable non-controlling interests	116		116
Shareholders’ equity:
Ordinary shares, €0.04 par value, 1,275 million shares authorized, 333,703,450 and 333,476,883 shares outstanding, respectively	19		19
Additional paid-in capital	5,950		5,954
Retained earnings	4,227		4,435
Accumulated other comprehensive loss	(2,313)		(1,784)
Treasury stock, at cost, 6,342,178 and 6,568,745 ordinary shares, respectively	(559)		(580)
Total Company share of shareholders’ equity	7,324		8,044
Non-controlling interests	19		19
Total equity	7,343		8,063
Total liabilities, redeemable non-controlling interests and equity	$	31,100	$	30,435

See Notes to the Consolidated Financial Statements.

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LYONDELLBASELL INDUSTRIES N.V.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions of dollars)


	Three Months Ended March 31,
	2020		2019
Cash flows from operating activities:
Net income	$	144	$	817
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	342		322
Amortization of debt-related costs	4		1

Share-based compensation	16		12
Inventory valuation adjustment	419		—
Equity investments—
Equity income	—		(64)
Distributions of earnings, net of tax	15		25
Deferred income taxes	68		46

Changes in assets and liabilities that provided (used) cash:
Accounts receivable	4		(206)
Inventories	121		(3)
Accounts payable	(235)		105
Other, net	(356)		(398)
Net cash provided by operating activities	542		657
Cash flows from investing activities:
Expenditures for property, plant and equipment	(660)		(599)




Proceeds from maturities of available-for-sale debt securities	—		308


Proceeds from sales of equity securities	1		162



Other, net	(4)		(49)
Net cash used in investing activities	(663)		(178)
Cash flows from financing activities:
Repurchases of Company ordinary shares	(4)		(512)
Dividends paid - common stock	(351)		(372)
Purchase of non-controlling interest	(30)		(63)
Issuance of long-term debt	500		—
Repayments of long-term debt	—		(1,000)

Issuance of short-term debt	500		2,000

Net proceeds from (repayments of) commercial paper	516		(559)
Payments on forward-starting interest rate swaps that include financing elements	(238)		—
Other, net	(9)		(15)
Net cash provided by (used in) financing activities	884		(521)
Effect of exchange rate changes on cash	(18)		(1)
Increase (decrease) in cash and cash equivalents and restricted cash	745		(43)
Cash and cash equivalents and restricted cash at beginning of period	888		401
Cash and cash equivalents and restricted cash at end of period	$	1,633	$	358

See Notes to the Consolidated Financial Statements.

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LYONDELLBASELL INDUSTRIES N.V.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(In millions of dollars)


	Ordinary Shares						Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Company Share of Shareholders’ Equity		Non- Controlling Interests
	Issued		Treasury
Balance, December 31, 2019	$	19	$	(580)	$	5,954	$	4,435	$	(1,784)	$	8,044	$	19
Net income	—		—		—		144		—		144		—
Other comprehensive loss	—		—		—		—		(529)		(529)		—
Share-based compensation	—		25		(11)		1		—		15		—
Dividends - common stock ($1.05 per share)	—		—		—		(351)		—		(351)		—
Dividends - redeemable non-controlling interests ($15.00 per share)	—		—		—		(2)		—		(2)		—
Repurchases of Company ordinary shares	—		(4)		—		—		—		(4)		—
Purchase of non-controlling interest	—		—		7		—		—		7		—

Balance, March 31, 2020	$	19	$	(559)	$	5,950	$	4,227	$	(2,313)	$	7,324	$	19


	Ordinary Shares						Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Company Share of Shareholders’ Equity		Non- Controlling Interests
Millions of dollars	Issued		Treasury
Balance, December 31, 2018	$	22	$	(2,206)	$	7,041	$	6,763	$	(1,363)	$	10,257	$	23
Net income	—		—		—		817		—		817		—
Other comprehensive loss	—		—		—		—		(55)		(55)		—
Share-based compensation	—		26		2		—		—		28		—
Dividends - common stock ($1.00 per share)	—		—		—		(372)		—		(372)		—
Dividends - redeemable non-controlling interests ($15.00 per share)	—		—		—		(2)		—		(2)		—
Repurchases of Company ordinary shares	—		(488)		—		—		—		(488)		—
Purchase of non-controlling interest	—		—		(47)		—		—		(47)		(1)


Balance, March 31, 2019	$	22	$	(2,668)	$	6,996	$	7,206	$	(1,418)	$	10,138	$	22

See Notes to the Consolidated Financial Statements.

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LYONDELLBASELL INDUSTRIES N.V.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

TABLE OF CONTENTS


		Page
1.	Basis of Presentation	8

2.	Accounting and Reporting Changes	8

3.	Revenues	10

4.	Accounts Receivable	11

5.	Inventories	11

6.	Debt	12

7.	Financial Instruments and Fair Value Measurements	15

8.	Income Taxes	20

9.	Commitments and Contingencies	20

10.	Shareholders’ Equity and Redeemable Non-controlling Interests	21

11.	Per Share Data	25

12.	Segment and Related Information	26

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LYONDELLBASELL INDUSTRIES N.V.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1. Basis of Presentation

LyondellBasell Industries N.V. is a limited liability company (Naamloze Vennootschap) incorporated under Dutch law by deed of incorporation dated October 15, 2009. Unless otherwise indicated, the “Company,” “we,” “us,” “our” or similar words are used to refer to LyondellBasell Industries N.V. together with its consolidated subsidiaries (“LyondellBasell N.V.”).

LyondellBasell N.V. is a worldwide manufacturer of chemicals and polymers, a refiner of crude oil, a significant producer of gasoline blending components and a developer and licensor of technologies for the production of polymers.

The accompanying unaudited Consolidated Financial Statements have been prepared from the books and records of LyondellBasell N.V. in accordance with the instructions to Form 10-Q and Rule 10-01 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, including normal recurring adjustments, considered necessary for a fair statement 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 Company’s Annual Report on Form 10-K for the year ended December 31, 2019.

Events surrounding the ongoing novel strain of coronavirus, causing a pandemic referred to as COVID-19, and the significant drop in the price of oil continue to evolve and impact global markets for our products. During the first quarter of 2020, we recognized a lower of cost or market (“LCM”) inventory valuation charge of $419 million, see Note 5 to our Consolidated Financial Statements. Further, we assessed accounting matters that generally require consideration of forecasted financial information based on the information reasonably available to us and the uncertain future impacts of COVID-19 and volatility in commodity prices. Accounting matters assessed included, but were not limited to, the carrying value of our goodwill and other long-lived assets, inventory, valuation allowances for tax assets and expected credit losses. Other than the inventory valuation charges noted above, there were no other impacts to our consolidated financial statements for the first quarter of 2020 resulting from our assessments. We will continue to assess the potential financial statement impacts of COVID-19 and commodity price volatility throughout the duration of the pandemic in accordance with our corporate accounting policies. The extent of the impact of the pandemic and the decline in commodity prices on our operational and financial performance will depend on future developments which are uncertain and cannot be predicted. An extended period of economic disruption could have a material adverse impact on our business, results of operations, access to sources of liquidity and financial condition.

2. Accounting and Reporting Changes

Recently Adopted Guidance

The following table provides a brief description of recently adopted Accounting Standard Updates (“ASU”) issued by the Financial Accounting Standards Board (“FASB”). The adoption of the new standards listed below in the first quarter of 2020 did not have a material impact on our Consolidated Financial Statements.

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LYONDELLBASELL INDUSTRIES N.V.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

Standard

Description

ASU 2020-04, Facilitation of the Effects of Relief of Reference Rate Reform on Financial Reporting

This guidance provides optional expedients and exceptions for applying generally accepted accounting principles to contracts, hedging relationships, and other transactions that reference London Inter-Bank Offered Rate (“LIBOR”) or another reference rate expected to be discontinued because of reference rate reform, if certain criteria are met. The expedients and exceptions provided by this guidance are available from January 1, 2020, prospectively, and do not apply to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022, except for hedging relationships existing as of December 31, 2022, that an entity has elected certain optional expedients for and that are retained through the end of the hedging relationship. The adoption of the guidance will enable us to continue hedge accounting for the relevant designated hedges and is expected to ease the accounting burden associated with transitioning away from reference rates that are expected to be discontinued.

ASU 2020-03, Codification Improvements to Financial Instruments

This guidance makes narrow-scope changes that are intended to improve the guidance on financial instruments and current expected credit loss (“CECL”). We adopted the guidance related to CECL and other amendments on a modified retrospective basis.

ASU 2019-12, Simplifying the Accounting for Income Taxes

This guidance enhances and simplifies various aspects of income tax accounting by removing exceptions for recognizing deferred taxes for changes from a subsidiary to an equity method investment and vice versa, performing intraperiod allocation and calculating income taxes in interim periods. The new guidance also reduces complexity in certain areas, including the tax basis step-up in goodwill in a transaction that is not a business combination and interim period accounting for enacted changes in tax law. We early adopted the amendments applicable to us on a prospective basis.

ASU 2018-15, Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract

This guidance requires a customer in a hosted, cloud computing arrangement that is a service contract to follow the internal-use software guidance to determine which implementation costs to capitalize as assets or expense as incurred. Capitalized costs are amortized over the term of the hosting arrangement when the recognized asset is ready for its intended use.

ASU 2018-13, Disclosure Framework - Change to the Disclosure Requirements for Fair Value Measurement

This guidance eliminates, adds and modifies certain disclosure requirements for fair value measurements as part of its disclosure framework project. It removes transfer disclosures between Level 1 and Level 2 of the fair value hierarchy, and adds disclosures for the range and weighted average used to develop significant unobservable inputs for Level 3 fair value measurements.

Accounting Guidance Issued But Not Adopted as of March 31, 2020

We are currently assessing the impact of the standard listed below on our Consolidated Financial Statements.

Standard

Description

ASU 2018-14, Disclosure Framework - Changes to the Disclosure Requirements for Defined Benefit Plans

This guidance changes disclosure requirements for employers that sponsor defined benefit pension and/or other postretirement benefit plans. It eliminates the requirement of certain disclosures that are no longer considered cost beneficial and adds more pertinent disclosures.

This guidance will be effective for public entities for annual periods ending after December 15, 2020. Early adoption is permitted.

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LYONDELLBASELL INDUSTRIES N.V.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

3. Revenues

Contract Balances—Contract liabilities were $151 million and $124 million at March 31, 2020 and December 31, 2019, respectively. Revenue recognized in each reporting period, included in the contract liability balance at the beginning of the period, was immaterial.

Disaggregation of Revenues—The following table presents our revenues disaggregated by key products:


	Three Months Ended March 31,
Millions of dollars	2020		2019
Sales and other operating revenues:
Olefins and co-products	$	667	$	748
Polyethylene	1,459		1,666
Polypropylene	1,101		1,315
Propylene oxide and derivatives	464		528
Oxyfuels and related products	707		664
Intermediate chemicals	544		640
Compounding and solutions	912		1,140
Advanced polymers	181		198
Refined products	1,336		1,743
Other	123		136
Total	$	7,494	$	8,778

The following table presents our revenues disaggregated by geography, based upon the location of the customer:


	Three Months Ended March 31,
Millions of dollars	2020		2019
Sales and other operating revenues:
United States	$	3,187	$	3,893
Germany	641		731
Mexico	380		528
Italy	335		387
France	270		362
China	243		298
The Netherlands	212		252
Japan	335		203
Other	1,891		2,124
Total	$	7,494	$	8,778

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LYONDELLBASELL INDUSTRIES N.V.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

4. Accounts Receivable

Our accounts receivable are reflected in the Consolidated Balance Sheets net of allowance for credit losses of $14 million and $16 million at March 31, 2020 and December 31, 2019, respectively.

5. Inventories

Inventories consisted of the following components:


Millions of dollars	March 31, 2020		December 31, 2019
Finished goods	$	2,691	$	3,083
Work-in-process	124		130
Raw materials and supplies	1,158		1,375
Total inventories	$	3,973	$	4,588

Our inventories are stated at the lower of cost or market (“LCM”). Cost is determined using the last-in, first-out ("LIFO") inventory valuation methodology, which means that the most recently incurred costs are charged to cost of sales and inventories are valued at the earliest acquisition costs. Market is determined based on an assessment of the current estimated replacement cost and selling price of the inventory. In periods where the market price of our inventory declines substantially, cost values of inventory may be higher than the market value, which reduces the value of inventory to market value. This adjustment is related to the recent decline in pricing for many of our raw material and finished goods inventories. Fluctuation in the prices of crude oil, natural gas and correlated products from period to period may result in the recognition of charges to adjust the value of inventory to the lower of cost or market in periods of falling prices and the reversal of those charges in subsequent interim periods as market prices recover.

During the first quarter of 2020, we recognized an LCM inventory charge of $419 million. This charge is related to the recent decline in pricing for many of our raw material and finished goods inventories

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LYONDELLBASELL INDUSTRIES N.V.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

6. Debt

Long-term loans, notes and other debt, net of unamortized discount and debt issuance cost, consisted of the following: