filings.toolsItem 1. CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
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Item 1. CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
LYONDELLBASELL INDUSTRIES N.V.
CONSOLIDATED STATEMENTS OF INCOME
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| Millions of dollars, except earnings per share | 2023 | 2022 | 2023 | 2022 | |||||||||||||||||||
| Sales and other operating revenues: | |||||||||||||||||||||||
| Trade | $ | 10,477 | $ | 12,044 | $ | 30,702 | $ | 39,443 | |||||||||||||||
| Related parties | 148 | 206 | 476 | 802 | |||||||||||||||||||
| 10,625 | 12,250 | 31,178 | 40,245 | ||||||||||||||||||||
| Operating costs and expenses: | |||||||||||||||||||||||
| Cost of sales | 9,177 | 11,088 | 26,909 | 34,491 | |||||||||||||||||||
| Impairments | 25 | — | 277 | 69 | |||||||||||||||||||
| Selling, general and administrative expenses | 378 | 319 | 1,158 | 976 | |||||||||||||||||||
| Research and development expenses | 31 | 31 | 96 | 95 | |||||||||||||||||||
| 9,611 | 11,438 | 28,440 | 35,631 | ||||||||||||||||||||
| Operating income | 1,014 | 812 | 2,738 | 4,614 | |||||||||||||||||||
| Interest expense | (125) | (70) | (356) | (202) | |||||||||||||||||||
| Interest income | 37 | 7 | 88 | 13 | |||||||||||||||||||
| Other (expense) income, net | (31) | 4 | (33) | (63) | |||||||||||||||||||
| Income from continuing operations before equity investments and income taxes | 895 | 753 | 2,437 | 4,362 | |||||||||||||||||||
| Income (loss) from equity investments | 6 | (26) | 11 | 25 | |||||||||||||||||||
| Income from continuing operations before income taxes | 901 | 727 | 2,448 | 4,387 | |||||||||||||||||||
| Provision for income taxes | 153 | 154 | 508 | 848 | |||||||||||||||||||
| Income from continuing operations | 748 | 573 | 1,940 | 3,539 | |||||||||||||||||||
| Loss from discontinued operations, net of tax | (1) | (1) | (4) | (3) | |||||||||||||||||||
| Net income | 747 | 572 | 1,936 | 3,536 | |||||||||||||||||||
| Dividends on redeemable non-controlling interests | (2) | (2) | (5) | (5) | |||||||||||||||||||
| Net income attributable to the Company shareholders | $ | 745 | $ | 570 | $ | 1,931 | $ | 3,531 | |||||||||||||||
| Earnings per share: | |||||||||||||||||||||||
| Net income (loss) attributable to the Company shareholders — | |||||||||||||||||||||||
| Basic | |||||||||||||||||||||||
| Continuing operations | $ | 2.29 | $ | 1.75 | $ | 5.93 | $ | 10.77 | |||||||||||||||
| Discontinued operations | — | — | (0.01) | (0.01) | |||||||||||||||||||
| $ | 2.29 | $ | 1.75 | $ | 5.92 | $ | 10.76 | ||||||||||||||||
| Diluted | |||||||||||||||||||||||
| Continuing operations | $ | 2.29 | $ | 1.75 | $ | 5.91 | $ | 10.75 | |||||||||||||||
| Discontinued operations | — | — | (0.01) | (0.01) | |||||||||||||||||||
| $ | 2.29 | $ | 1.75 | $ | 5.90 | $ | 10.74 |
See Notes to the Consolidated Financial Statements.
LYONDELLBASELL INDUSTRIES N.V.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| Millions of dollars | 2023 | 2022 | 2023 | 2022 | |||||||||||||||||||
| Net income | $ | 747 | $ | 572 | $ | 1,936 | $ | 3,536 | |||||||||||||||
| Other comprehensive income (loss), net of tax – | |||||||||||||||||||||||
| Financial derivatives | 17 | 23 | 24 | 213 | |||||||||||||||||||
| Defined benefit pension and other postretirement benefit plans | 2 | 51 | 6 | 134 | |||||||||||||||||||
| Foreign currency translations | (86) | (169) | (58) | (355) | |||||||||||||||||||
| Total other comprehensive loss, net of tax | (67) | (95) | (28) | (8) | |||||||||||||||||||
| Comprehensive income | 680 | 477 | 1,908 | 3,528 | |||||||||||||||||||
| Dividends on redeemable non-controlling interests | (2) | (2) | (5) | (5) | |||||||||||||||||||
| Comprehensive income attributable to the Company shareholders | $ | 678 | $ | 475 | $ | 1,903 | $ | 3,523 |
See Notes to the Consolidated Financial Statements.
LYONDELLBASELL INDUSTRIES N.V.
CONSOLIDATED BALANCE SHEETS
| Millions of dollars | September 30, 2023 | December 31, 2022 | |||||||||
| ASSETS | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | 2,833 | $ | 2,151 | |||||||
| Restricted cash | 11 | 5 | |||||||||
| Accounts receivable: | |||||||||||
| Trade, net | 3,704 | 3,392 | |||||||||
| Related parties | 137 | 201 | |||||||||
| Inventories | 4,911 | 4,804 | |||||||||
| Prepaid expenses and other current assets | 1,632 | 1,292 | |||||||||
| Total current assets | 13,228 | 11,845 | |||||||||
| Operating lease assets | 1,509 | 1,725 | |||||||||
| Property, plant and equipment | 24,221 | 23,724 | |||||||||
| Less: Accumulated depreciation | (9,027) | (8,337) | |||||||||
| Property, plant and equipment, net | 15,194 | 15,387 | |||||||||
| Equity investments | 4,056 | 4,295 | |||||||||
| Goodwill | 1,604 | 1,827 | |||||||||
| Intangible assets, net | 642 | 662 | |||||||||
| Other assets | 642 | 624 | |||||||||
| Total assets | $ | 36,875 | $ | 36,365 |
See Notes to the Consolidated Financial Statements.
LYONDELLBASELL INDUSTRIES N.V.
CONSOLIDATED BALANCE SHEETS
| Millions of dollars, except shares and par value data | September 30, 2023 | December 31, 2022 | |||||||||
| LIABILITIES, REDEEMABLE NON-CONTROLLING INTERESTS AND EQUITY | |||||||||||
| Current liabilities: | |||||||||||
| Current maturities of long-term debt | $ | 781 | $ | 432 | |||||||
| Short-term debt | 112 | 349 | |||||||||
| Accounts payable: | |||||||||||
| Trade | 3,121 | 3,106 | |||||||||
| Related parties | 453 | 477 | |||||||||
| Accrued and other current liabilities | 2,533 | 2,396 | |||||||||
| Total current liabilities | 7,000 | 6,760 | |||||||||
| Long-term debt | 10,213 | 10,540 | |||||||||
| Operating lease liabilities | 1,397 | 1,510 | |||||||||
| Other liabilities | 2,003 | 1,954 | |||||||||
| Deferred income taxes | 2,929 | 2,858 | |||||||||
| Commitments and contingencies | |||||||||||
| Redeemable non-controlling interests | 114 | 114 | |||||||||
| Shareholders’ equity: | |||||||||||
| Ordinary shares, €0.04 par value, 1,275 million shares authorized, 324,359,296 and 325,723,567 shares outstanding, respectively | 19 | 19 | |||||||||
| Additional paid-in capital | 6,130 | 6,119 | |||||||||
| Retained earnings | 9,917 | 9,195 | |||||||||
| Accumulated other comprehensive loss | (1,400) | (1,372) | |||||||||
| Treasury stock, at cost, 16,063,202 and 14,698,931 ordinary shares, respectively | (1,461) | (1,346) | |||||||||
| Total Company share of shareholders’ equity | 13,205 | 12,615 | |||||||||
| Non-controlling interests | 14 | 14 | |||||||||
| Total equity | 13,219 | 12,629 | |||||||||
| Total liabilities, redeemable non-controlling interests and equity | $ | 36,875 | $ | 36,365 |
See Notes to the Consolidated Financial Statements.
LYONDELLBASELL INDUSTRIES N.V.
CONSOLIDATED STATEMENTS OF CASH FLOWS
| Nine Months Ended September 30, | |||||||||||
| Millions of dollars | 2023 | 2022 | |||||||||
| Cash flows from operating activities: | |||||||||||
| Net income | $ | 1,936 | $ | 3,536 | |||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||
| Depreciation and amortization | 1,154 | 933 | |||||||||
| Impairments | 277 | 69 | |||||||||
| Amortization of debt-related costs | 7 | 11 | |||||||||
| Share-based compensation | 71 | 54 | |||||||||
| Equity investments— | |||||||||||
| Equity income | (11) | (25) | |||||||||
| Distributions of earnings, net of tax | 109 | 219 | |||||||||
| Deferred income tax provision | 48 | 83 | |||||||||
| Changes in assets and liabilities that provided (used) cash: | |||||||||||
| Accounts receivable | (282) | 134 | |||||||||
| Inventories | (196) | (601) | |||||||||
| Accounts payable | 31 | 200 | |||||||||
| Other, net | 294 | (98) | |||||||||
| Net cash provided by operating activities | 3,438 | 4,515 | |||||||||
| Cash flows from investing activities: | |||||||||||
| Expenditures for property, plant and equipment | (1,047) | (1,417) | |||||||||
| Proceeds from settlement of net investment hedges | 612 | 614 | |||||||||
| Payments for settlement of net investment hedges | (550) | (501) | |||||||||
| Other, net | (186) | (129) | |||||||||
| Net cash used in investing activities | (1,171) | (1,433) | |||||||||
| Cash flows from financing activities: | |||||||||||
| Repurchases of Company ordinary shares | (211) | (420) | |||||||||
| Dividends paid - common stock | (1,204) | (2,859) | |||||||||
| Issuance of long-term debt | 500 | — | |||||||||
| Payments of debt issuance costs | (5) | — | |||||||||
| Repayment of long-term debt | (425) | — | |||||||||
| Net (repayments of) proceeds from commercial paper | (200) | 96 | |||||||||
| Collateral received from interest rate derivatives | — | 238 | |||||||||
| Other, net | — | 16 | |||||||||
| Net cash used in financing activities | (1,545) | (2,929) | |||||||||
| Effect of exchange rate changes on cash | (34) | (144) | |||||||||
| Increase in cash and cash equivalents and restricted cash | 688 | 9 | |||||||||
| Cash and cash equivalents and restricted cash at beginning of period | 2,156 | 1,477 | |||||||||
| Cash and cash equivalents and restricted cash at end of period | $ | 2,844 | $ | 1,486 |
See Notes to the Consolidated Financial Statements.
LYONDELLBASELL INDUSTRIES N.V.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
| 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, June 30, 2023 | $ | 19 | $ | (1,446) | $ | 6,111 | $ | 9,580 | $ | (1,333) | $ | 12,931 | $ | 14 | |||||||||||||||||||||||||||
| Net income | — | — | — | 747 | — | 747 | — | ||||||||||||||||||||||||||||||||||
| Other comprehensive loss | — | — | — | — | (67) | (67) | — | ||||||||||||||||||||||||||||||||||
| Share-based compensation | — | 23 | 19 | (1) | — | 41 | — | ||||||||||||||||||||||||||||||||||
| Dividends - common stock ($1.25 per share) | — | — | — | (407) | — | (407) | — | ||||||||||||||||||||||||||||||||||
| Dividends - redeemable non-controlling interests ($15.00 per share) | — | — | — | (2) | — | (2) | — | ||||||||||||||||||||||||||||||||||
| Repurchases of Company ordinary shares | — | (38) | — | — | — | (38) | — | ||||||||||||||||||||||||||||||||||
| Balance, September 30, 2023 | $ | 19 | $ | (1,461) | $ | 6,130 | $ | 9,917 | $ | (1,400) | $ | 13,205 | $ | 14 | |||||||||||||||||||||||||||
| 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, June 30, 2022 | $ | 19 | $ | (1,200) | $ | 6,077 | $ | 9,050 | $ | (1,716) | $ | 12,230 | $ | 14 | |||||||||||||||||||||||||||
| Net income | — | — | — | 572 | — | 572 | — | ||||||||||||||||||||||||||||||||||
| Other comprehensive loss | — | — | — | — | (95) | (95) | — | ||||||||||||||||||||||||||||||||||
| Share-based compensation | — | 2 | 22 | 7 | — | 31 | — | ||||||||||||||||||||||||||||||||||
| Dividends - common stock ($1.19 per share) | — | — | — | (395) | — | (395) | — | ||||||||||||||||||||||||||||||||||
| Dividends - redeemable non-controlling interests ($15.00 per share) | — | — | — | (2) | — | (2) | — | ||||||||||||||||||||||||||||||||||
| Repurchases of Company ordinary shares | — | (150) | — | — | — | (150) | — | ||||||||||||||||||||||||||||||||||
| Balance, September 30, 2022 | $ | 19 | $ | (1,348) | $ | 6,099 | $ | 9,232 | $ | (1,811) | $ | 12,191 | $ | 14 | |||||||||||||||||||||||||||
LYONDELLBASELL INDUSTRIES N.V.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
| 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, 2022 | $ | 19 | $ | (1,346) | $ | 6,119 | $ | 9,195 | $ | (1,372) | $ | 12,615 | $ | 14 | |||||||||||||||||||||||||||
| Net income | — | — | — | 1,936 | — | 1,936 | — | ||||||||||||||||||||||||||||||||||
| Other comprehensive loss | — | — | — | — | (28) | (28) | — | ||||||||||||||||||||||||||||||||||
| Share-based compensation | — | 96 | 11 | (5) | — | 102 | — | ||||||||||||||||||||||||||||||||||
| Dividends - common stock ($3.69 per share) | — | — | — | (1,204) | — | (1,204) | — | ||||||||||||||||||||||||||||||||||
| Dividends - redeemable non-controlling interests ($45.00 per share) | — | — | — | (5) | — | (5) | — | ||||||||||||||||||||||||||||||||||
| Repurchases of Company ordinary shares | — | (211) | — | — | — | (211) | — | ||||||||||||||||||||||||||||||||||
| Balance, September 30, 2023 | $ | 19 | $ | (1,461) | $ | 6,130 | $ | 9,917 | $ | (1,400) | $ | 13,205 | $ | 14 |
| 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, 2021 | $ | 19 | $ | (965) | $ | 6,044 | $ | 8,563 | $ | (1,803) | $ | 11,858 | $ | 14 | |||||||||||||||||||||||||||
| Net income | — | — | — | 3,536 | — | 3,536 | — | ||||||||||||||||||||||||||||||||||
| Other comprehensive loss | — | — | — | — | (8) | (8) | — | ||||||||||||||||||||||||||||||||||
| Share-based compensation | — | 23 | 55 | (3) | — | 75 | — | ||||||||||||||||||||||||||||||||||
| Dividends - common stock ($3.51 per share) | — | — | — | (1,155) | — | (1,155) | — | ||||||||||||||||||||||||||||||||||
| Special dividends - common stock ($5.20 per share) | — | — | — | (1,704) | — | (1,704) | — | ||||||||||||||||||||||||||||||||||
| Dividends - redeemable non-controlling interests ($45.00 per share) | — | — | — | (5) | — | (5) | — | ||||||||||||||||||||||||||||||||||
| Repurchases of Company ordinary shares | — | (406) | — | — | — | (406) | — | ||||||||||||||||||||||||||||||||||
| Balance, September 30, 2022 | $ | 19 | $ | (1,348) | $ | 6,099 | $ | 9,232 | $ | (1,811) | $ | 12,191 | $ | 14 |
See Notes to the Consolidated Financial Statements.
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
TABLE OF CONTENTS
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 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. Certain notes and other information have been condensed or omitted from the interim financial statements included in this report. 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. 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, 2022. In the opinion of management, all adjustments, including normal recurring adjustments, considered necessary for a fair statement have been included. These statements contain some amounts that are based upon management estimates and judgments. Future actual results could differ from such current estimates. The results for interim periods are not necessarily indicative of results for the entire year.
Effective January 1, 2023, our Catalloy and polybutene-1 businesses were moved from our Advanced Polymer Solutions segment and reintegrated into our Olefins and Polyolefins-Americas and Olefins and Polyolefins-Europe, Asia, International segments. This move allows the Advanced Polymer Solutions team to focus on our compounding and solutions business, and to develop a more agile operating model with meaningful regional and segment growth strategies. Segment information provided throughout the report has been revised for all periods presented to reflect these changes.
In March 2023, we announced our new strategy, which included a strategic pillar focused on growing and upgrading our core assets. At that time, we also announced our decision to explore strategic options for our U.S. Gulf Coast-based ethylene oxide & derivatives (“EO&D”) business, which had been identified as a non-core business within our Intermediates and Derivatives segment.
During the third quarter of 2023, we determined that a sale of the EO&D business is the best strategic option and approved a plan to proceed accordingly. As such, we have classified the associated assets and liabilities as held for sale as of September 30, 2023. Assets held for sale and liabilities held for sale are presented within Prepaid expenses and other current assets and Accrued and other current liabilities, respectively, in our Consolidated Balance Sheets.
2. Accounting and Reporting Changes
Recently Adopted Guidance
Supplier Finance Program—In September 2022, the FASB issued ASU 2022-04, Liabilities—Supplier Finance Programs (Subtopic 405-50): Disclosure of Supplier Finance Program Obligations. The guidance requires an entity that uses supplier finance programs in connection with the purchase of goods and services to disclose certain qualitative and quantitative information about its programs including the key terms and conditions, activity during the period, and potential magnitude. The guidance is effective retrospectively for the year ending December 31, 2023, including interim periods, with disclosures required for each period for which a balance sheet is presented, except for the disclosure of roll forward information, which is effective for fiscal years beginning after December 15, 2023. The adoption of this guidance did not have a material impact on our Consolidated Financial Statements.
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
Accounting Guidance Issued But Not Adopted as of September 30, 2023
Fair Value Measurement—In June 2022, the FASB issued ASU 2022-03, Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions. The guidance clarifies that a contractual restriction on the sale of an equity security is not considered part of the unit of account of the equity security because it is a characteristic of the entity holding the equity security rather than a characteristic of the security and is not considered in measuring its fair value. The guidance is effective prospectively for the year ending December 31, 2024, including the interim periods, with the impact of adoption reflected in earnings. Early adoption is permitted. The adoption of this guidance will not have a material impact on our Consolidated Financial Statements.
3. Revenues
*Contract Balances—*Contract liabilities were $126 million and $167 million at September 30, 2023 and December 31, 2022, respectively. Revenue recognized in each reporting period that was included in the contract liability balance at the beginning of the period was immaterial.
*Disaggregation of Revenues—*Effective January 1, 2023, our Catalloy and polybutene-1 businesses were moved from our Advanced Polymer Solutions segment and reintegrated into our Olefins and Polyolefins-Americas and Olefins and Polyolefins-Europe, Asia, International segments. See Note 12 for additional detail regarding the change in segments. Consistent with this change, we have updated the disclosure of revenue disaggregated by key products for all periods presented.
The following table presents our revenues disaggregated by key products:
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| Millions of dollars | 2023 | 2022 | 2023 | 2022 | |||||||||||||||||||
| Sales and other operating revenues: | |||||||||||||||||||||||
| Olefins and co-products | $ | 868 | $ | 1,281 | $ | 2,658 | $ | 3,835 | |||||||||||||||
| Polyethylene | 1,814 | 2,329 | 5,750 | 7,785 | |||||||||||||||||||
| Polypropylene | 1,347 | 1,688 | 4,326 | 6,139 | |||||||||||||||||||
| Propylene oxide and derivatives | 558 | 721 | 1,737 | 2,537 | |||||||||||||||||||
| Oxyfuels and related products | 1,734 | 1,563 | 4,269 | 4,370 | |||||||||||||||||||
| Intermediate chemicals | 675 | 917 | 2,187 | 3,228 | |||||||||||||||||||
| Compounding and solutions | 897 | 1,049 | 2,848 | 3,297 | |||||||||||||||||||
| Refined products | 2,510 | 2,506 | 6,860 | 8,467 | |||||||||||||||||||
| Other | 222 | 196 | 543 | 587 | |||||||||||||||||||
| Total | $ | 10,625 | $ | 12,250 | $ | 31,178 | $ | 40,245 |
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
The following table presents our revenues disaggregated by geography, based upon the location of the customer:
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| Millions of dollars | 2023 | 2022 | 2023 | 2022 | |||||||||||||||||||
| Sales and other operating revenues: | |||||||||||||||||||||||
| United States | $ | 5,301 | $ | 5,966 | $ | 15,185 | $ | 19,465 | |||||||||||||||
| Germany | 601 | 822 | 2,006 | 2,892 | |||||||||||||||||||
| China | 526 | 647 | 1,573 | 1,989 | |||||||||||||||||||
| Mexico | 439 | 482 | 1,258 | 1,522 | |||||||||||||||||||
| Japan | 391 | 800 | 1,182 | 1,684 | |||||||||||||||||||
| Italy | 353 | 387 | 1,075 | 1,426 | |||||||||||||||||||
| France | 272 | 312 | 838 | 1,145 | |||||||||||||||||||
| Poland | 231 | 270 | 693 | 1,039 | |||||||||||||||||||
| The Netherlands | 154 | 261 | 627 | 995 | |||||||||||||||||||
| Other | 2,357 | 2,303 | 6,741 | 8,088 | |||||||||||||||||||
| Total | $ | 10,625 | $ | 12,250 | $ | 31,178 | $ | 40,245 |
4. Accounts Receivable
Accounts receivable are reflected in the Consolidated Balance Sheets, net of allowance for credit losses of $6 million as of September 30, 2023 and December 31, 2022.
5. Inventories
Inventories consisted of the following components:
| Millions of dollars | September 30, 2023 | December 31, 2022 | |||||||||
| Finished goods | $ | 3,154 | $ | 3,027 | |||||||
| Work-in-process | 264 | 227 | |||||||||
| Raw materials and supplies | 1,493 | 1,550 | |||||||||
| Total inventories | $ | 4,911 | $ | 4,804 |
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:
| Millions of dollars | September 30, 2023 | December 31, 2022 | |||||||||
| Senior Notes due 2024, $1,000 million, 5.75% ($1 million of debt issuance cost) | $ | 774 | $ | 774 | |||||||
| Senior Notes due 2055, $1,000 million, 4.625% ($15 million of discount; $11 million of debt issuance cost) | 974 | 974 | |||||||||
| Guaranteed Notes due 2027, $300 million, 8.1% | 300 | 300 | |||||||||
| Issued by LYB International Finance B.V.: | |||||||||||
| Guaranteed Notes due 2023, $750 million, 4.0% | — | 424 | |||||||||
| Guaranteed Notes due 2043, $750 million, 5.25% ($19 million of discount; $6 million of debt issuance cost) | 725 | 725 | |||||||||
| Guaranteed Notes due 2044, $1,000 million, 4.875% ($10 million of discount; $8 million of debt issuance cost) | 982 | 982 | |||||||||
| Issued by LYB International Finance II B.V.: | |||||||||||
| Guaranteed Notes due 2026, €500 million, 0.875% ($1 million of discount; $2 million of debt issuance cost) | 516 | 518 | |||||||||
| Guaranteed Notes due 2027, $1,000 million, 3.5% ($2 million of discount; $2 million of debt issuance cost) | 580 | 587 | |||||||||
| Guaranteed Notes due 2031, €500 million, 1.625% ($4 million of discount; $3 million of debt issuance cost) | 511 | 516 | |||||||||
| Issued by LYB International Finance III LLC: | |||||||||||
| Guaranteed Notes due 2025, $500 million, 1.25% ($1 million of discount; $1 million of debt issuance cost) | 477 | 475 | |||||||||
| Guaranteed Notes due 2030, $500 million, 3.375% ($1 million of debt issuance cost) | 117 | 120 | |||||||||
| Guaranteed Notes due 2030, $500 million, 2.25% ($3 million of discount; $3 million of debt issuance cost) | 467 | 469 | |||||||||
| Guaranteed Notes due 2033, $500 million, 5.625% ($5 million of debt issuance cost) | 495 | — | |||||||||
| Guaranteed Notes due 2040, $750 million, 3.375% ($2 million of discount; $7 million of debt issuance cost) | 741 | 741 | |||||||||
| Guaranteed Notes due 2049, $1,000 million, 4.2% ($14 million of discount; $10 million of debt issuance cost) | 976 | 976 | |||||||||
| Guaranteed Notes due 2050, $1,000 million, 4.2% ($6 million of discount; $10 million of debt issuance cost) | 973 | 971 | |||||||||
| Guaranteed Notes due 2051, $1,000 million, 3.625% ($2 million of discount; $10 million of debt issuance cost) | 884 | 897 | |||||||||
| Guaranteed Notes due 2060, $500 million, 3.8% ($4 million of discount; $6 million of debt issuance cost) | 477 | 481 | |||||||||
| Other | 25 | 42 | |||||||||
| Total | 10,994 | 10,972 | |||||||||
| Less current maturities | (781) | (432) | |||||||||
| Long-term debt | $ | 10,213 | $ | 10,540 |
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
Fair value hedging adjustments associated with the fair value hedge accounting of our fixed-for-floating interest rate swaps for the applicable periods are as follows:
| Gains (Losses) | Cumulative Fair Value Hedging Adjustments Included in Carrying Amount of Debt | |||||||||||||||||||||||||||||||||||||
| Three Months Ended September 30, | Nine Months Ended September 30, | September 30, | December 31, | |||||||||||||||||||||||||||||||||||
| Millions of dollars | 2023 | 2022 | 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||||||||||||||
| Guaranteed Notes due 2025, 1.25% | $ | — | $ | 3 | $ | (1) | $ | 12 | $ | 13 | $ | 14 | ||||||||||||||||||||||||||
| Guaranteed Notes due 2026, 0.875% | (1) | 3 | (2) | 10 | 11 | 13 | ||||||||||||||||||||||||||||||||
| Guaranteed Notes due 2027, 3.5% | 4 | 15 | 7 | 44 | 7 | — | ||||||||||||||||||||||||||||||||
| Guaranteed Notes due 2030, 3.375% | 3 | 8 | 3 | 24 | 24 | 21 | ||||||||||||||||||||||||||||||||
| Guaranteed Notes due 2030, 2.25% | 4 | 7 | 3 | 23 | 27 | 24 | ||||||||||||||||||||||||||||||||
| Guaranteed Notes due 2031, 1.625% | 2 | 7 | 1 | 10 | 12 | 11 | ||||||||||||||||||||||||||||||||
| Guaranteed Notes due 2050, 4.2% | (1) | 5 | (2) | 10 | 11 | 13 | ||||||||||||||||||||||||||||||||
| Guaranteed Notes due 2051, 3.625% | 12 | 41 | 14 | 95 | 104 | 90 | ||||||||||||||||||||||||||||||||
| Guaranteed Notes due 2060, 3.8% | 3 | 8 | 4 | 10 | 13 | 9 | ||||||||||||||||||||||||||||||||
| Total | $ | 26 | $ | 97 | $ | 27 | $ | 238 | $ | 222 | $ | 195 |
Fair value adjustments are recognized in Interest expense in the Consolidated Statements of Income.
Short-term loans, notes and other debt consisted of the following:
| Millions of dollars | September 30, 2023 | December 31, 2022 | |||||||||
| U.S. Receivables Facility | $ | — | $ | — | |||||||
| Commercial paper | — | 200 | |||||||||
| Precious metal financings | 112 | 131 | |||||||||
| Other | — | 18 | |||||||||
| Total Short-term debt | $ | 112 | $ | 349 |
Long-Term Debt
Senior Revolving Credit Facility—Our $3,250 million senior unsecured revolving credit facility (the “Senior Revolving Credit Facility”), which expires in November 2026, may be used for dollar and euro denominated borrowings. The facility has a $200 million sub-limit for dollar and euro denominated letters of credit, a $1,000 million uncommitted accordion feature and supports our commercial paper program. In May 2023, we amended our Senior Revolving Credit Facility to update the interest rate benchmark to reference the secured overnight financing rate (“SOFR”) rather than the London Interbank Offered Rate (“LIBOR”). Borrowings under the facility bear interest at either a base rate, SOFR or EURIBOR rate, plus an applicable margin. Additional fees are incurred for the average daily unused commitments. At September 30, 2023, we had no borrowings or letters of credit outstanding and $3,250 million of unused availability under this facility.
Guaranteed Notes due 2033—In May 2023, LYB International Finance III, LLC (“LYB Finance III”), a wholly owned finance subsidiary of LyondellBasell Industries N.V., as defined in Rule 13-01 of Regulation S-X, issued $500 million of 5.625% guaranteed notes due 2033 (the “2033 Notes”) at a discounted price of 99.895%. Net proceeds from the sale of the notes totaled $495 million, after deducting underwriting discounts and offering expenses.
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
The 2033 Notes are the first green financing instruments we have issued related to our green financing framework. Net proceeds from the sale of the 2033 Notes will be used to finance or refinance, in whole or in part, new or existing eligible green projects in the areas of circular economy, renewable energy, pollution prevention and control, and energy efficiency. Pending the full allocation of the net proceeds, any portion that has not been allocated to eligible green projects will be managed in accordance with our normal liquidity management practices.
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 III’s and LyondellBasell Industries N.V.’s existing and future senior unsecured indebtedness and will rank senior in right of payment to any future subordinated indebtedness that LYB Finance III or LyondellBasell Industries N.V. incurs. There are no significant restrictions that would impede LyondellBasell Industries 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 2033 Notes may be redeemed at any time in whole, or from time to time in part, prior to the scheduled maturity date, at a redemption price equal to the greater of (i) the sum of the present values of the remaining scheduled payments of principal and interest (discounted at the treasury rate plus the applicable basis points) less interest accrued on the notes to be redeemed, and (ii) 100% of the principal amount of the notes redeemed; plus, in either case, accrued and unpaid interest thereon to, but excluding, the redemption date. The 2033 Notes may also be redeemed at any time, 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 to be redeemed plus accrued and unpaid interest thereon to, but excluding, the redemption date. The notes are also redeemable upon certain tax events.
Guaranteed Notes due 2023—In July 2023, we repaid the $425 million remaining outstanding principal of our 4.0% guaranteed notes due 2023 at maturity.
Short-Term Debt
U.S. Receivables Facility—Our U.S. Receivables Facility, which expires in June 2024, 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. We pay variable interest rates on our secured borrowings. Additional fees are incurred for the average daily unused commitments. In May 2023, we amended our U.S. Receivables Facility to update the interest rate benchmark to reference SOFR rather than LIBOR. This facility also provides for the issuance of letters of credit up to $200 million. At September 30, 2023, we had no borrowings or letters of credit outstanding and $900 million unused availability 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”). At September 30, 2023, we had no borrowings of outstanding commercial paper.
Weighted Average Interest Rate—At September 30, 2023 and December 31, 2022, our weighted average interest rates on outstanding Short-term debt were 2.2% and 3.7%, respectively.
Additional Information
Debt Compliance—As of September 30, 2023, we are in compliance with our debt covenants.
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
Supply Chain Finance Arrangements
We facilitate a voluntary supply chain finance program that provides suppliers, at their sole discretion, the opportunity to sell their receivables due from us to a participating financial intermediary in order to be paid earlier than our contracted payment terms. We are not a party to any agreement between our suppliers and the financial intermediary. When a supplier utilizes the program and receives an early payment from the financial intermediary, the supplier takes a discount on the invoice. We pay the financial intermediary the full amount of the invoice on the contractually agreed upon due date. The majority of the suppliers using the program are on 90-day payment terms. There is no economic impact to the Company from a supplier’s decision to take an early payment. No guarantees are provided by us or any of our subsidiaries under the program.
As of September 30, 2023 and December 31, 2022, Accounts payable-Trade included $64 million and $53 million, respectively, payable to suppliers who have elected to participate in the supply chain financing program.
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
7. Financial Instruments and Fair Value Measurements
We are exposed to market risks, such as changes in commodity pricing, interest rates and currency exchange rates. To manage the volatility related to these exposures, we selectively enter into derivative contracts pursuant to our risk management policies.
Financial Instruments Measured at Fair Value on a Recurring Basis—The following table summarizes financial instruments outstanding for the periods presented that are measured at fair value on a recurring basis:
| September 30, 2023 | December 31, 2022 | Balance Sheet Classification | |||||||||||||||||||||||||||
| Millions of dollars | Fair Value | Fair Value | |||||||||||||||||||||||||||
| Assets– | |||||||||||||||||||||||||||||
| Derivatives designated as hedges: | |||||||||||||||||||||||||||||
| Commodities | $ | 1 | $ | — | Prepaid expenses and other current assets | ||||||||||||||||||||||||
| Commodities | 1 | — | Other assets | ||||||||||||||||||||||||||
| Foreign currency | 107 | 109 | Prepaid expenses and other current assets | ||||||||||||||||||||||||||
| Foreign currency | 121 | 133 | Other assets | ||||||||||||||||||||||||||
| Interest rates | 68 | 16 | Prepaid expenses and other current assets | ||||||||||||||||||||||||||
| Interest rates | — | 25 | Other assets | ||||||||||||||||||||||||||
| Derivatives not designated as hedges: | |||||||||||||||||||||||||||||
| Commodities | 12 | 27 | Prepaid expenses and other current assets | ||||||||||||||||||||||||||
| Commodities | 3 | — | Other assets | ||||||||||||||||||||||||||
| Foreign currency | 4 | — | Prepaid expenses and other current assets | ||||||||||||||||||||||||||
| Total | $ | 317 | $ | 310 | |||||||||||||||||||||||||
| Liabilities– | |||||||||||||||||||||||||||||
| Derivatives designated as hedges: | |||||||||||||||||||||||||||||
| Commodities | $ | 9 | $ | 14 | Accrued and other current liabilities | ||||||||||||||||||||||||
| Commodities | 12 | — | Other liabilities | ||||||||||||||||||||||||||
| Foreign currency | 27 | 15 | Accrued and other current liabilities | ||||||||||||||||||||||||||
| Foreign currency | 4 | 8 | Other liabilities | ||||||||||||||||||||||||||
| Interest rates | 29 | 23 | Accrued and other current liabilities | ||||||||||||||||||||||||||
| Interest rates | 251 | 229 | Other liabilities | ||||||||||||||||||||||||||
| Derivatives not designated as hedges: | |||||||||||||||||||||||||||||
| Commodities | 51 | 11 | Accrued and other current liabilities | ||||||||||||||||||||||||||
| Commodities | 4 | 3 | Other liabilities | ||||||||||||||||||||||||||
| Foreign currency | 2 | 6 | Accrued and other current liabilities | ||||||||||||||||||||||||||
| Total | $ | 389 | $ | 309 |
The financial instruments in the table above are classified as Level 2. We present the gross assets and liabilities of our derivative financial instruments on the Consolidated Balance Sheets.
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
Financial Instruments Not Measured at Fair Value on a Recurring Basis—The following table presents the carrying value and estimated fair value of our Short-term precious metal financings and Long-term debt:
| September 30, 2023 | December 31, 2022 | ||||||||||||||||||||||
| Millions of dollars | Carrying Value | Fair Value | Carrying Value | Fair Value | |||||||||||||||||||
| Precious metal financings | $ | 112 | $ | 113 | $ | 131 | $ | 113 | |||||||||||||||
| Long-term debt | 10,195 | 8,274 | 10,517 | 8,882 | |||||||||||||||||||
| Total | $ | 10,307 | $ | 8,387 | $ | 10,648 | $ | 8,995 |
The financial instruments in the table above are classified as Level 2. Our other financial instruments classified within Current assets and Current liabilities have a short maturity and their carrying value generally approximates fair value.
Derivative Instruments:
Commodity Prices—The following table presents the notional amounts of our outstanding commodity derivative instruments:
| September 30, 2023 | December 31, 2022 | ||||||||||||||||||||||
| Millions of units | Notional Amount | Notional Amount | Unit of Measure | Maturity Date | |||||||||||||||||||
| Derivatives designated as hedges: | |||||||||||||||||||||||
| Natural gas | 68 | 5 | MMBtu | 2023 to 2026 | |||||||||||||||||||
| Ethane | 4 | — | Bbl | 2024 | |||||||||||||||||||
| Power | 1 | — | MWhs | 2023 to 2025 | |||||||||||||||||||
| Derivatives not designated as hedges: | |||||||||||||||||||||||
| Crude oil | 14 | 2 | Bbl | 2023 to 2024 | |||||||||||||||||||
| Refined products | 18 | 2 | Bbl | 2023 to 2024 | |||||||||||||||||||
| Precious metals | 1 | 1 | Troy Ounces | 2023 to 2024 | |||||||||||||||||||
| Renewable Identification Numbers | 68 | — | RINs | 2023 to 2024 |
Interest Rates—The following table presents the notional amounts of our outstanding interest rate derivative instruments:
| September 30, 2023 | December 31, 2022 | ||||||||||||||||||||||||||||
| Millions of dollars | Notional Amount | Notional Amount | Maturity Date | ||||||||||||||||||||||||||
| Cash flow hedges | $ | 200 | $ | 400 | 2024 | ||||||||||||||||||||||||
| Fair value hedges | 2,162 | 2,164 | 2025 to 2031 |
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
Foreign Currency Rates—The following table presents the notional amounts of our outstanding foreign currency derivative instruments:
| September 30, 2023 | December 31, 2022 | |||||||||||||||||||
| Millions of dollars | Notional Amount | Notional Amount | Maturity Date | |||||||||||||||||
| Net investment hedges | $ | 3,306 | $ | 3,128 | 2023 to 2030 | |||||||||||||||
| Cash flow hedges | 1,150 | 1,150 | 2024 to 2027 | |||||||||||||||||
| Not designated | 450 | 396 | 2023 to 2024 | |||||||||||||||||
Impact on Earnings and Other Comprehensive Income—The following tables summarize the pre-tax effect of derivative instruments recorded in Accumulated other comprehensive loss (“AOCI”), the gains (losses) reclassified from AOCI to earnings and additional gains (losses) recognized directly in earnings:
| Effects of Financial Instruments | |||||||||||||||||||||||||||||||||||||||||
| Three Months Ended September 30, | |||||||||||||||||||||||||||||||||||||||||
| Balance Sheet | Income Statement | ||||||||||||||||||||||||||||||||||||||||
| Gain (Loss) Recognized in AOCI | Gain (Loss) Reclassified to Income from AOCI | Additional Gain (Loss) Recognized in Income | Income Statement | ||||||||||||||||||||||||||||||||||||||
| Millions of dollars | 2023 | 2022 | 2023 | 2022 | 2023 | 2022 | Classification | ||||||||||||||||||||||||||||||||||
| Derivatives designated as hedges: | |||||||||||||||||||||||||||||||||||||||||
| Commodities | $ | (24) | $ | 10 | $ | 6 | $ | (22) | $ | — | $ | — | Cost of sales | ||||||||||||||||||||||||||||
| Foreign currency | 83 | 285 | (27) | (67) | 18 | 20 | Interest expense | ||||||||||||||||||||||||||||||||||
| Interest rates | 39 | 29 | 1 | 1 | (47) | (94) | Interest expense | ||||||||||||||||||||||||||||||||||
| Derivatives not designated as hedges: | |||||||||||||||||||||||||||||||||||||||||
| Commodities | — | — | — | — | 10 | (16) | Sales and other operating revenues | ||||||||||||||||||||||||||||||||||
| Commodities | — | — | — | — | (34) | (28) | Cost of sales | ||||||||||||||||||||||||||||||||||
| Foreign currency | — | — | — | — | 5 | (15) | Other expense, net | ||||||||||||||||||||||||||||||||||
| Total | $ | 98 | $ | 324 | $ | (20) | $ | (88) | $ | (48) | $ | (133) |
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
| Effects of Financial Instruments | |||||||||||||||||||||||||||||||||||||||||
| Nine Months Ended September 30, | |||||||||||||||||||||||||||||||||||||||||
| Balance Sheet | Income Statement | ||||||||||||||||||||||||||||||||||||||||
| Gain (Loss) Recognized in AOCI | Gain (Loss) Reclassified to Income from AOCI | Additional Gain (Loss) Recognized in Income | Income Statement | ||||||||||||||||||||||||||||||||||||||
| Millions of dollars | 2023 | 2022 | 2023 | 2022 | 2023 | 2022 | Classification | ||||||||||||||||||||||||||||||||||
| Derivatives designated as hedges: | |||||||||||||||||||||||||||||||||||||||||
| Commodities | $ | (32) | $ | 40 | $ | 25 | $ | (54) | $ | — | $ | — | Cost of sales | ||||||||||||||||||||||||||||
| Foreign currency | 20 | 607 | (13) | (169) | 56 | 51 | Interest expense | ||||||||||||||||||||||||||||||||||
| Interest rates | 37 | 287 | 4 | 4 | (77) | (221) | Interest expense | ||||||||||||||||||||||||||||||||||
| Derivatives not designated as hedges: | |||||||||||||||||||||||||||||||||||||||||
| Commodities | — | — | — | — | (24) | 66 | Sales and other operating revenues | ||||||||||||||||||||||||||||||||||
| Commodities | — | — | — | — | (7) | (17) | Cost of sales | ||||||||||||||||||||||||||||||||||
| Foreign currency | — | — | — | — | (19) | (54) | Other expense, net | ||||||||||||||||||||||||||||||||||
| Total | $ | 25 | $ | 934 | $ | 16 | $ | (219) | $ | (71) | $ | (175) |
As of September 30, 2023, on a pre-tax basis, $5 million is scheduled to be reclassified from Accumulated other comprehensive loss as an increase to Interest expense over the next twelve months.
Other Financial Instruments:
Cash and Cash Equivalents—At September 30, 2023 and December 31, 2022, we had marketable securities classified as Cash and cash equivalents of $1,928 million and $1,191 million, respectively.
8. Income Taxes
For interim tax reporting, we estimate an annual effective tax rate which is applied to the year-to-date ordinary income. Tax effects of significant, unusual, or infrequently occurring items are excluded from the estimated annual effective tax rate calculation and recognized in the interim period in which they occur. Our effective income tax rate fluctuates based on, among other factors, changes in pre-tax income in countries with varying statutory tax rates, changes in valuation allowances, changes in foreign exchange gains or losses, the amount of exempt income, changes in unrecognized tax benefits associated with uncertain tax positions and changes in tax laws.
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
Our exempt income primarily includes interest income, export incentives, and equity earnings of joint ventures. Interest income earned by certain of our subsidiaries through intercompany financings is taxed at rates substantially lower than the U.S. statutory rate. Export incentives relate to tax benefits derived from elections and structures available for U.S. exports. Equity earnings attributable to the earnings of our joint ventures, when paid through dividends to certain European subsidiaries, are exempt from all or portions of normal statutory income tax rates. We currently anticipate the favorable treatment for interest income, dividends, and export incentives to continue in the near term; however, this treatment is based on current law. We continue to monitor the Organization for Economic Cooperation and Development’s Pillar One and Two legislation which focus on taxing rights and minimum taxes in countries where we operate, including the United Kingdom. On July 11, 2023, as part of the Finance (No. 2) Act 2023, legislation was enacted in the United Kingdom which introduced an Income Inclusion Rule, known locally as the multinational top-up tax, and domestic minimum top-up tax. This legislation is applicable to periods after December 31, 2023. We continue to assess and monitor legislative changes, however, we do not expect the impact to be material based on the legislation enacted at this stage.
Our effective income tax rate for the third quarter of 2023 was 17.0% compared to 21.2% for the third quarter of 2022. The lower effective tax rate for the third quarter of 2023 is primarily attributable to fluctuations in exempt income as a result of the relative impact of earnings of 5.9% coupled with changes in return to accrual adjustments and foreign exchange gains or losses of 2.9% and 0.8%, respectively. These decreases were partially offset by changes in pre-tax income in countries with varying statutory tax rates of 6.2%.
Our effective income tax rate for the first nine months of 2023 was 20.8% compared to 19.3% for the first nine months of 2022. The higher effective tax rate for the first nine months of 2023 was primarily due to the first quarter 2023 goodwill impairment, for which there is no tax benefit, of 1.7% coupled with an audit settlement during the second quarter 2023 of 1.6%. These increases were partially offset by a 1.4% decrease in our effective income tax rate due to the increased relative impact of exempt income due to lower earnings.
9. Commitments and Contingencies
Commitments—We have various purchase commitments for materials, supplies and services incidental to the ordinary conduct of business, generally for quantities required for our businesses and at prevailing market prices. These commitments are designed to assure sources of supply and are not expected to be in excess of normal requirements. Additionally, we have capital expenditure commitments, which we incur in our normal course of business.
Financial Assurance Instruments—We have obtained letters of credit, performance and surety bonds and have issued financial and performance guarantees to support trade payables, potential liabilities and other obligations. Considering the frequency of claims made against the financial instruments we use to support our obligations, and the magnitude of those financial instruments in light of our current financial position, management does not expect that any claims against or draws on these instruments would have a material adverse effect on our Consolidated Financial Statements. We have not experienced any unmanageable difficulties 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 $119 million and $127 million as of September 30, 2023 and December 31, 2022, respectively. At September 30, 2023, the accrued liabilities for individual sites range from less than $1 million to $24 million. The remediation expenditures are expected to occur over a number of years and are not 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.
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
Indemnification—We are parties to various indemnification arrangements, including arrangements entered into in connection with acquisitions, divestitures and the formation and dissolution of joint ventures. Pursuant to these arrangements, we provide indemnification to and/or receive indemnification from other parties in connection with liabilities that may arise in connection with the transactions and in connection with activities prior to completion of the transactions. These indemnification arrangements typically include provisions pertaining to third-party claims relating to environmental and tax matters and various types of litigation. As of September 30, 2023, 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 5 to 10 years.
*Legal Proceedings—*We are subject to various lawsuits and claims, including but not limited to, matters involving contract disputes, environmental damages, personal injury and property damage. We vigorously defend ourselves and prosecute these matters as appropriate.
Our legal organization applies its knowledge, experience and professional judgment to the specific characteristics of our cases, employing a litigation management process to manage and monitor legal proceedings in which we are a party. Our process facilitates the early evaluation and quantification of potential exposures in individual cases. This process also enables us to track those cases that have been scheduled for trial, mediation or other resolution. We regularly assess the adequacy of legal accruals based on our professional judgment, experience and the information available regarding our cases.
Based on consideration of all relevant facts and circumstances, we do not believe the ultimate outcome of any currently pending lawsuit against us will have a material adverse effect upon our operations, financial condition or Consolidated Financial Statements.
10. Shareholders’ Equity and Redeemable Non-controlling Interests
Shareholders’ Equity
Dividend Distributions—The following table summarizes the quarterly dividends paid in the periods presented:
| Millions of dollars, except per share amounts | Dividend Per Ordinary Share | Aggregate Dividends Paid | Date of Record | ||||||||||||||
| March 2023 | $ | 1.19 | $ | 389 | March 6, 2023 | ||||||||||||
| June 2023 | 1.25 | 408 | May 30, 2023 | ||||||||||||||
| September 2023 | 1.25 | 407 | August 28, 2023 | ||||||||||||||
| $ | 3.69 | $ | 1,204 |
Share Repurchase Authorization—In May 2023, our shareholders approved a proposal to authorize us to repurchase up to 34.0 million ordinary shares, through November 19, 2024 (“2023 Share Repurchase Authorization”), which superseded any prior repurchase authorizations. The timing and amount of these repurchases, which are determined based on our evaluation of market conditions and other factors, may be executed from time to time through open market or privately negotiated transactions. The repurchased shares, which are recorded at cost, are classified as Treasury stock and may be retired or used for general corporate purposes, including for various employee benefit and compensation plans.
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
The following table summarizes our share repurchase activity for the periods presented:
| Millions of dollars, except shares and per share amounts | Shares Repurchased | Average Purchase Price | Total Purchase Price, Including Commissions and Fees | |||||||||||||||||
| For nine months ended September 30, 2023: | ||||||||||||||||||||
| 2022 Share Repurchase Authorization | 1,365,898 | $ | 88.98 | $ | 122 | |||||||||||||||
| 2023 Share Repurchase Authorization | 983,309 | 90.99 | 89 | |||||||||||||||||
| 2,349,207 | $ | 89.82 | $ | 211 | ||||||||||||||||
| For nine months ended September 30, 2022: | ||||||||||||||||||||
| 2021 Share Repurchase Authorization | 2,111,538 | $ | 97.72 | $ | 206 | |||||||||||||||
| 2022 Share Repurchase Authorization | 2,286,216 | 87.50 | 200 | |||||||||||||||||
| 4,397,754 | $ | 92.41 | $ | 406 |
Total cash paid for share repurchases for the nine months ended September 30, 2023 and 2022 was $211 million and $420 million, respectively. Cash payments made during the reporting period may differ from the total purchase price, including commissions and fees, due to the timing of payments.
Ordinary Shares—The changes in the outstanding amounts of ordinary shares are as follows:
| Nine Months Ended September 30, | |||||||||||
| 2023 | 2022 | ||||||||||
| Ordinary shares outstanding: | |||||||||||
| Beginning balance | 325,723,567 | 329,536,389 | |||||||||
| Share-based compensation | 746,727 | 273,943 | |||||||||
| Employee stock purchase plan | 238,209 | 210,504 | |||||||||
| Purchase of ordinary shares | (2,349,207) | (4,397,754) | |||||||||
| Ending balance | 324,359,296 | 325,623,082 |
*Treasury Shares—*The changes in the amounts of treasury shares held by the Company are as follows:
| Nine Months Ended September 30, | |||||||||||
| 2023 | 2022 | ||||||||||
| Ordinary shares held as treasury shares: | |||||||||||
| Beginning balance | 14,698,931 | 10,675,605 | |||||||||
| Share-based compensation | (746,727) | (273,943) | |||||||||
| Employee stock purchase plan | (238,209) | — | |||||||||
| Purchase of ordinary shares | 2,349,207 | 4,397,754 | |||||||||
| Ending balance | 16,063,202 | 14,799,416 |
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
Accumulated Other Comprehensive Loss—The components of, and after-tax changes in, Accumulated other comprehensive loss as of and for the nine months ended September 30, 2023 and 2022 are presented in the following tables:
| Millions of dollars | Financial Derivatives | Defined Benefit Pension and Other Postretirement Benefit Plans | Foreign Currency Translation Adjustments | Total | |||||||||||||||||||||||||||||||
| Balance – December 31, 2022 | $ | (146) | $ | (182) | $ | (1,044) | $ | (1,372) | |||||||||||||||||||||||||||
| Other comprehensive income (loss) before reclassifications | 13 | — | (54) | (41) | |||||||||||||||||||||||||||||||
| Tax expense before reclassifications | (2) | — | (4) | (6) | |||||||||||||||||||||||||||||||
| Amounts reclassified from accumulated other comprehensive loss | 16 | 8 | — | 24 | |||||||||||||||||||||||||||||||
| Tax expense | (3) | (2) | — | (5) | |||||||||||||||||||||||||||||||
| Net other comprehensive income (loss) | 24 | 6 | (58) | (28) | |||||||||||||||||||||||||||||||
| Balance – September 30, 2023 | $ | (122) | $ | (176) | $ | (1,102) | $ | (1,400) |
| Millions of dollars | Financial Derivatives | Defined Benefit Pension and Other Postretirement Benefit Plans | Foreign Currency Translation Adjustments | Total | |||||||||||||||||||||||||||||||
| Balance – December 31, 2021 | $ | (354) | $ | (528) | $ | (921) | $ | (1,803) | |||||||||||||||||||||||||||
| Other comprehensive income (loss) before reclassifications | 490 | 53 | (236) | 307 | |||||||||||||||||||||||||||||||
| Tax expense before reclassifications | (113) | (12) | (119) | (244) | |||||||||||||||||||||||||||||||
| Amounts reclassified from accumulated other comprehensive loss | (219) | 121 | — | (98) | |||||||||||||||||||||||||||||||
| Tax (expense) benefit | 55 | (28) | — | 27 | |||||||||||||||||||||||||||||||
| Net other comprehensive income (loss) | 213 | 134 | (355) | (8) | |||||||||||||||||||||||||||||||
| Balance – September 30, 2022 | $ | (141) | $ | (394) | $ | (1,276) | $ | (1,811) |
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
The amounts reclassified out of each component of Accumulated other comprehensive loss are as follows:
| Three Months Ended September 30, | Nine Months Ended September 30, | Affected Line Item on the Consolidated Statements of Income | |||||||||||||||||||||||||||
| Millions of dollars | 2023 | 2022 | 2023 | 2022 | |||||||||||||||||||||||||
| Reclassification adjustments for: | |||||||||||||||||||||||||||||
| Financial derivatives: | |||||||||||||||||||||||||||||
| Commodities | $ | 6 | $ | (22) | $ | 25 | $ | (54) | Cost of sales | ||||||||||||||||||||
| Foreign currency | (27) | (67) | (13) | (169) | Interest expense | ||||||||||||||||||||||||
| Interest rates | 1 | 1 | 4 | 4 | Interest expense | ||||||||||||||||||||||||
| Income tax (expense) benefit | 6 | 22 | (3) | 55 | Provision for income taxes | ||||||||||||||||||||||||
| Financial derivatives, net of tax | (14) | (66) | 13 | (164) | |||||||||||||||||||||||||
| Amortization of defined pension items: | |||||||||||||||||||||||||||||
| Settlement loss | — | 6 | — | 100 | Other expense, net | ||||||||||||||||||||||||
| Actuarial loss | 3 | 5 | 6 | 18 | Other expense, net | ||||||||||||||||||||||||
| Prior service cost | — | 1 | 2 | 3 | Other expense, net | ||||||||||||||||||||||||
| Income tax expense | (1) | (2) | (2) | (28) | Provision for income taxes | ||||||||||||||||||||||||
| Defined pension items, net of tax | 2 | 10 | 6 | 93 | |||||||||||||||||||||||||
| Total reclassifications, before tax | (17) | (76) | 24 | (98) | |||||||||||||||||||||||||
| Income tax (expense) benefit | 5 | 20 | (5) | 27 | Provision for income taxes | ||||||||||||||||||||||||
| Total reclassifications, after tax | $ | (12) | $ | (56) | $ | 19 | $ | (71) | Amount included in net income |
Redeemable Non-controlling Interests
Our redeemable non-controlling interests relate to shares of cumulative perpetual special stock (“redeemable non-controlling interest stock”) issued by a consolidated subsidiary. As of September 30, 2023 and December 31, 2022, we had 113,290 and 113,471 shares of redeemable non-controlling interest stock outstanding, respectively. These shares may be redeemed at any time at the discretion of the holders.
In February, May and August 2023, we paid cash dividends of $15.00 per share to our redeemable non-controlling interest shareholders of record as of January 15, 2023, April 15, 2023 and July 15, 2023. Dividends totaled $5 million for each of the nine months ended September 30, 2023 and 2022.
11. Per Share Data
Basic earnings per share is based upon the weighted average number of shares of common stock outstanding during the period. Diluted earnings per share includes the effect of certain stock option and other equity-based compensation awards. Our unvested restricted stock units contain non-forfeitable rights to dividend equivalents and are considered participating securities. We compute basic and diluted earnings per share under the two-class method.
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
Earnings per share data is as follows:
| Three Months Ended September 30, | |||||||||||||||||||||||
| 2023 | 2022 | ||||||||||||||||||||||
| Millions of dollars | Continuing Operations | Discontinued Operations | Continuing Operations | Discontinued Operations | |||||||||||||||||||
| Net income (loss) | $ | 748 | $ | (1) | $ | 573 | $ | (1) | |||||||||||||||
| Dividends on redeemable non-controlling interests | (2) | — | (2) | — | |||||||||||||||||||
| Net income attributable to participating securities | (2) | — | — | — | |||||||||||||||||||
| Net income (loss) attributable to ordinary shareholders – basic and diluted | $ | 744 | $ | (1) | $ | 571 | $ | (1) | |||||||||||||||
| Millions of shares, except per share amounts | |||||||||||||||||||||||
| Basic weighted average common stock outstanding | 324 | 324 | 326 | 326 | |||||||||||||||||||
| Effect of dilutive securities | 1 | 1 | 1 | 1 | |||||||||||||||||||
| Potential dilutive shares | 325 | 325 | 327 | 327 | |||||||||||||||||||
| Earnings per share: | |||||||||||||||||||||||
| Basic | $ | 2.29 | $ | — | $ | 1.75 | $ | — | |||||||||||||||
| Diluted | $ | 2.29 | $ | — | $ | 1.75 | $ | — | |||||||||||||||
| Nine Months Ended September 30, | |||||||||||||||||||||||
| 2023 | 2022 | ||||||||||||||||||||||
| Millions of dollars | Continuing Operations | Discontinued Operations | Continuing Operations | Discontinued Operations | |||||||||||||||||||
| Net income (loss) | $ | 1,940 | $ | (4) | $ | 3,539 | $ | (3) | |||||||||||||||
| Dividends on redeemable non-controlling interests | (5) | — | (5) | — | |||||||||||||||||||
| Net income attributable to participating securities | (7) | — | (9) | — | |||||||||||||||||||
| Net income (loss) attributable to ordinary shareholders – basic and diluted | $ | 1,928 | $ | (4) | $ | 3,525 | $ | (3) | |||||||||||||||
| Millions of shares, except per share amounts | |||||||||||||||||||||||
| Basic weighted average common stock outstanding | 325 | 325 | 327 | 327 | |||||||||||||||||||
| Effect of dilutive securities | 1 | 1 | 1 | 1 | |||||||||||||||||||
| Potential dilutive shares | 326 | 326 | 328 | 328 | |||||||||||||||||||
| Earnings per share: | |||||||||||||||||||||||
| Basic | $ | 5.93 | $ | (0.01) | $ | 10.77 | $ | (0.01) | |||||||||||||||
| Diluted | $ | 5.91 | $ | (0.01) | $ | 10.75 | $ | (0.01) | |||||||||||||||
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
12. Segment and Related Information
Our operations are managed by senior executives who report 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 Polyolefins-Americas (“O&P-Americas”). Our O&P-Americas segment produces and markets olefins and co-products, polyethylene and polypropylene.
-
Olefins and Polyolefins-Europe, Asia, International (“O&P-EAI”). Our O&P-EAI segment produces and markets olefins and co-products, polyethylene and polypropylene.
-
Intermediates and Derivatives (“I&D”). Our I&D segment produces and markets propylene oxide and its derivatives; oxyfuels and related products; and intermediate chemicals such as styrene monomer, acetyls, ethylene oxide and ethylene glycol.
-
Advanced Polymer Solutions (“APS”). Our APS segment produces and markets compounding and solutions, such as polypropylene compounds, engineered plastics, masterbatches, engineered composites, colors and powders.
-
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 profitability of our segments, and therefore, we have presented EBITDA for all segments. We define EBITDA as earnings from continuing operations before interest, income taxes, and depreciation and amortization.
“Other” includes intersegment eliminations and items that are not directly related or allocated to business operations, such as foreign exchange gains or losses and components of pension and other postretirement benefit costs other than service costs. Sales between segments are made at prices approximating prevailing market prices.
Summarized financial information concerning reportable segments is shown in the following tables for the periods presented:
| Three Months Ended September 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||
| Millions of dollars | O&P– Americas | O&P– EAI | I&D | APS | Refining | Technology | Other | Total | |||||||||||||||||||||||||||||||||||||||
| Sales and other operating revenues: | |||||||||||||||||||||||||||||||||||||||||||||||
| Customers | $ | 1,717 | $ | 2,324 | $ | 2,985 | $ | 897 | $ | 2,510 | $ | 192 | $ | — | $ | 10,625 | |||||||||||||||||||||||||||||||
| Intersegment | 1,164 | 122 | 96 | 2 | 155 | 26 | (1,565) | — | |||||||||||||||||||||||||||||||||||||||
| 2,881 | 2,446 | 3,081 | 899 | 2,665 | 218 | (1,565) | 10,625 | ||||||||||||||||||||||||||||||||||||||||
| Income (loss) from equity investments | 6 | (3) | 3 | — | — | — | — | 6 | |||||||||||||||||||||||||||||||||||||||
| EBITDA | 479 | (45) | 708 | 18 | 76 | 146 | (26) | 1,356 | |||||||||||||||||||||||||||||||||||||||
| Capital expenditures | 156 | 67 | 120 | 18 | 10 | 18 | 5 | 394 | |||||||||||||||||||||||||||||||||||||||
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
| Three Months Ended September 30, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||
| Millions of dollars | O&P– Americas | O&P– EAI | I&D | APS | Refining | Technology | Other | Total | |||||||||||||||||||||||||||||||||||||||
| Sales and other operating revenues: | |||||||||||||||||||||||||||||||||||||||||||||||
| Customers | $ | 2,413 | $ | 2,899 | $ | 3,229 | $ | 1,049 | $ | 2,506 | $ | 154 | $ | — | $ | 12,250 | |||||||||||||||||||||||||||||||
| Intersegment | 1,277 | 210 | 54 | — | 246 | 19 | (1,806) | — | |||||||||||||||||||||||||||||||||||||||
| 3,690 | 3,109 | 3,283 | 1,049 | 2,752 | 173 | (1,806) | 12,250 | ||||||||||||||||||||||||||||||||||||||||
| Income (loss) from equity investments | 19 | (39) | (6) | — | — | — | — | (26) | |||||||||||||||||||||||||||||||||||||||
| EBITDA | 588 | (74) | 360 | 28 | 106 | 92 | 8 | 1,108 | |||||||||||||||||||||||||||||||||||||||
| Capital expenditures | 70 | 52 | 245 | 19 | 22 | 25 | 6 | 439 | |||||||||||||||||||||||||||||||||||||||
| Nine Months Ended September 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||
| Millions of dollars | O&P- Americas | O&P- EAI | I&D | APS | Refining | Technology | Other | Total | |||||||||||||||||||||||||||||||||||||||
| Sales and other operating revenues: | |||||||||||||||||||||||||||||||||||||||||||||||
| Customers | $ | 5,200 | $ | 7,569 | $ | 8,255 | $ | 2,848 | $ | 6,860 | $ | 446 | $ | — | $ | 31,178 | |||||||||||||||||||||||||||||||
| Intersegment | 3,216 | 498 | 170 | 8 | 454 | 65 | (4,411) | — | |||||||||||||||||||||||||||||||||||||||
| 8,416 | 8,067 | 8,425 | 2,856 | 7,314 | 511 | (4,411) | 31,178 | ||||||||||||||||||||||||||||||||||||||||
| Income (loss) from equity investments | 41 | (21) | (8) | (1) | — | — | — | 11 | |||||||||||||||||||||||||||||||||||||||
| EBITDA | 1,699 | 116 | 1,606 | (174) | 369 | 298 | (44) | 3,870 | |||||||||||||||||||||||||||||||||||||||
| Capital expenditures | 340 | 186 | 403 | 49 | 12 | 50 | 7 | 1,047 | |||||||||||||||||||||||||||||||||||||||
| Nine Months Ended September 30, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||
| Millions of dollars | O&P– Americas | O&P– EAI | I&D | APS | Refining | Technology | Other | Total | |||||||||||||||||||||||||||||||||||||||
| Sales and other operating revenues: | |||||||||||||||||||||||||||||||||||||||||||||||
| Customers | $ | 7,576 | $ | 10,221 | $ | 10,219 | $ | 3,297 | $ | 8,467 | $ | 465 | $ | — | $ | 40,245 | |||||||||||||||||||||||||||||||
| Intersegment | 4,086 | 711 | 169 | 4 | 793 | 83 | (5,846) | — | |||||||||||||||||||||||||||||||||||||||
| 11,662 | 10,932 | 10,388 | 3,301 | 9,260 | 548 | (5,846) | 40,245 | ||||||||||||||||||||||||||||||||||||||||
| Income (loss) from equity investments | 81 | (39) | (17) | — | — | — | — | 25 | |||||||||||||||||||||||||||||||||||||||
| EBITDA | 2,481 | 326 | 1,581 | 141 | 672 | 307 | 1 | 5,509 | |||||||||||||||||||||||||||||||||||||||
| Capital expenditures | 312 | 250 | 673 | 43 | 48 | 81 | 10 | 1,417 |
The following assets are summarized and reconciled to consolidated totals in the following table:
| Millions of dollars | O&P- Americas | O&P- EAI | I&D | APS | Refining | Technology | Total | ||||||||||||||||||||||||||||||||||||||||
| September 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||
| Property, plant and equipment, net | $ | 6,370 | $ | 1,983 | $ | 5,615 | $ | 596 | $ | 140 | $ | 490 | $ | 15,194 | |||||||||||||||||||||||||||||||||
| Equity investments | 2,012 | 1,513 | 529 | 2 | — | — | 4,056 | ||||||||||||||||||||||||||||||||||||||||
| December 31, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||
| Property, plant and equipment, net | $ | 6,378 | $ | 1,880 | $ | 5,728 | $ | 636 | $ | 255 | $ | 510 | $ | 15,387 | |||||||||||||||||||||||||||||||||
| Equity investments | 2,053 | 1,655 | 585 | 2 | — | — | 4,295 | ||||||||||||||||||||||||||||||||||||||||
LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
*Segment Structure Changes and Related Goodwill Impairment—*Effective January 1, 2023, our Catalloy and polybutene-1 businesses were moved from our APS segment and reintegrated into our O&P-Americas and O&P-EAI segments. Accordingly, on January 1, 2023, we allocated goodwill from our APS segment to our O&P-Americas and O&P-EAI segments of $315 million and $269 million, respectively, based on the relative fair values of the businesses that were reintegrated compared to the fair value of the APS segment.
As of December 31, 2022, goodwill included in our APS reporting unit was $1,370 million, the majority of which related to the 2018 acquisition of A. Schulman. As of December 31, 2022, a large portion of the APS reporting unit’s fair value was derived from our Catalloy and polybutene-1 businesses, which had disproportionately low carrying values in comparison to the remaining assets of the reporting unit, which had relatively higher carrying values due to the 2018 purchase price allocation associated with the acquisition of A. Schulman. As a result of the reallocation of goodwill and the change in both fair value and carrying value among reporting units, we recognized a non-cash goodwill impairment charge of $252 million in the first quarter of 2023 in our APS segment. Fair values were determined utilizing a discounted cash flow method under the income approach and assumptions including management’s view on long-term growth rates in our industry, discount rates and other assumptions based on a market participant perspective, which are inherently subjective. The fair value of the reporting unit is Level 3 within the fair value hierarchy. The charge is reflected as Impairments in our Consolidated Statements of Income.
*Exit of Houston Refinery Operations—*In April 2022 we announced our decision to cease operation of our Houston refinery no later than the end of 2023 after determining that exiting the refining business is our best strategic and financial path forward. In May 2023 we announced our decision to extend the operations of our Houston refinery to no later than the end of the first quarter of 2025. Favorable inspections and consistent performance have given us confidence to continue safe and reliable operations. The extension will minimize workforce impacts as we continue to develop future options for the site and will enable a smoother transition between the shutdown and the implementation of the retrofitting and circular projects.
Costs incurred for the planned exit from the refinery business are as follows:
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| Millions of dollars | 2023 | 2022 | 2023 | 2022 | |||||||||||||||||||
| Accelerated lease amortization costs | $ | 11 | $ | 36 | $ | 100 | $ | 36 | |||||||||||||||
| Personnel costs | 16 | 48 | 59 | 48 | |||||||||||||||||||
| Asset retirement obligation accretion | 2 | — | 6 | — | |||||||||||||||||||
| Asset retirement cost depreciation | 20 | 8 | 119 | 8 | |||||||||||||||||||
| Refinery exit costs | $ | 49 | $ | 92 | $ | 284 | $ | 92 |
In subsequent periods, we expect to incur additional costs primarily consisting of accelerated amortization of operating lease assets of $10 million to $70 million, personnel costs of $35 million to $110 million and other charges of $50 million to $100 million. Additionally, we estimate that the Houston refinery’s asset retirement obligations are in the range of $150 million to $450 million. As of September 30, 2023, we recorded asset retirement obligations of $257 million representing our best estimate. We do not anticipate any material cash payments related to the exit of the refinery business to be made in 2023.
*Disposal of Australia Facility—*In the second quarter of 2022 we sold our ownership interest in our polypropylene manufacturing facility located in Geelong, Australia, LyondellBasell Australia (Holdings) Pty Ltd, for consideration of $38 million. In connection with this sale, we assessed the net assets of the disposal group for impairment and determined that the carrying value exceeded the fair value less costs to sell. As a result, we recognized a non-cash impairment charge in the second quarter of 2022 of $69 million in the operating results of our O&P-EAI segment. The fair value measurement for the disposal group is based on expected consideration and classified as Level 3 within the fair value hierarchy. The charge is reflected as Impairments in our Consolidated Statements of Income.
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 September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| Millions of dollars | 2023 | 2022 | 2023 | 2022 | |||||||||||||||||||
| EBITDA: | |||||||||||||||||||||||
| Total segment EBITDA | $ | 1,382 | $ | 1,100 | $ | 3,914 | $ | 5,508 | |||||||||||||||
| Other EBITDA | (26) | 8 | (44) | 1 | |||||||||||||||||||
| Less: | |||||||||||||||||||||||
| Depreciation and amortization expense | (367) | (318) | (1,154) | (933) | |||||||||||||||||||
| Interest expense | (125) | (70) | (356) | (202) | |||||||||||||||||||
| Add: | |||||||||||||||||||||||
| Interest income | 37 | 7 | 88 | 13 | |||||||||||||||||||
| Income from continuing operations before income taxes | $ | 901 | $ | 727 | $ | 2,448 | $ | 4,387 |
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