UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

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

For the quarterly period ended March 31, 2005

 

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

For the transition period from              to               

 

Commission file no. 333-59054-01

 

Chevron Phillips Chemical Company LLC

(Exact name of the Registrant as specified in its charter)

 

 

10001 Six Pines Drive
The Woodlands, TX 77380-1498

(Address of principal executive offices, including zip code)

 

(832) 813-4100
(Registrant’s telephone number, including area code)

 

NONE
(Former name, former address and former fiscal year if changed since last report)

 

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  o     No  ý

 

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).

 

Yes  o     No  ý

 

 

Chevron Phillips Chemical Company LLC

Index

 

			Page
Part I.	Financial Information (Unaudited)
	Item 1.	Financial Statements
		Condensed Consolidated Statement of Operations for the three months ended March 31, 2005 and 2004	3
		Condensed Consolidated Balance Sheet at March 31, 2005 and December 31, 2004	4
		Condensed Consolidated Statement of Cash Flows for the three months ended March 31, 2005 and 2004	5
		Notes to Condensed Consolidated Financial Statements	6
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19
	Item 3.	Quantitative and Qualitative Disclosures about Market Risk	22
	Item 4.	Controls and Procedures	22
Part II.	Other Information
	Item 6.	Exhibits	23
Signature			23

 

2

 

PART I.  FINANCIAL INFORMATION

 

ITEM 1.    Financial Statements

 

Chevron Phillips Chemical Company LLC

Condensed Consolidated Statement of Operations

(Unaudited)

 

			Three months ended March 31,
Millions			2005			2004
Revenue
Net sales			$	2,658		$	1,993
Equity in income of affiliates, net			50			27
Other income			26			19
Total revenue			2,734			2,039
Costs and Expenses
Cost of goods sold			2,205			1,798
Selling, general and administrative			110			104
Research and development			10			10
Total costs and expenses			2,325			1,912
Income Before Interest and Taxes			409			127
Interest income			4			2
Interest expense			(20		)	(18		)
Income Before Taxes			393			111
Income taxes			(4		)	(3		)
Net Income			389			108
Distributions on members’ preferred interests			(2		)	(6		)
Income Attributed to Members’ Interests			$	387		$	102

 

See Notes to Condensed Consolidated Financial Statements.

 

3

 

Chevron Phillips Chemical Company LLC

Condensed Consolidated Balance Sheet

(Unaudited)

 

Millions			March 31, 2005			December 31, 2004
ASSETS
Current assets
Cash and cash equivalents			$	56		$	63
Accounts receivable, net			1,339			1,266
Inventories			833			784
Other current assets			32			43
Total current assets			2,260			2,156
Property, plant and equipment, net			3,728			3,768
Investments in and advances to affiliates			949			893
Other assets and deferred charges			45			55
Total Assets			$	6,982		$	6,872
LIABILITIES AND MEMBERS’ EQUITY
Current liabilities
Accounts payable			$	943		$	884
Accrued income and other taxes			34			60
Secured borrowings and other debt			201			201
Other current liabilities and deferred credits			245			196
Total current liabilities			1,423			1,341
Long-term debt			1,265			1,390
Other liabilities and deferred credits			88			91
Total liabilities			2,776			2,822
Members’ preferred interests			—			75
Members’ capital			4,163			3,925
Accumulated other comprehensive income			43			50
Total members’ equity			4,206			3,975
Total Liabilities and Members’ Equity			$	6,982		$	6,872

 

See Notes to Condensed Consolidated Financial Statements.

 

4

 

Chevron Phillips Chemical Company LLC

Condensed Consolidated Statement of Cash Flows

(Unaudited)

 

			Three months ended March 31,
Millions			2005			2004
Cash Flows From Operating Activities
Net income			$	389		$	108
Adjustments to reconcile net income to net cash flows provided by (used in) operating activities
Depreciation, amortization and retirements			69			70
Undistributed equity in income of affiliates, net			(50		)	(27		)
Changes in operating working capital			(123		)	(172		)
Other operating cash flow activity			7			4
Net cash flows provided by (used in) operating activities			292			(17		)
Cash Flows From Investing Activities
Capital and investment expenditures			(33		)	(43		)
Investments in and advances to Qatar Chemical Company Ltd. (Q-Chem)			—			(9		)
Other investing cash flow activity			—			1
Net cash flows used in investing activities			(33		)	(51		)
Cash Flows From Financing Activities
Increase (decrease) in commercial paper, net			(125		)	77
Decrease in other debt, net			—			(13		)
Redemptions of members’ preferred interests			(75		)	—
Distributions on members’ preferred interests			(2		)	—
Other distributions to members			(64		)	—
Net cash flows provided by (used in) financing activities			(266		)	64
Net Decrease in Cash and Cash Equivalents			(7		)	(4		)
Cash and Cash Equivalents at Beginning of Period			63			43
Cash and Cash Equivalents at End of Period			$	56		$	39

 

See Notes to Condensed Consolidated Financial Statements.

 

5

 

Chevron Phillips Chemical Company LLC

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

Note 1.   General Information

 

The company, through its subsidiaries and equity affiliates, manufactures and markets a wide range of petrochemicals on a worldwide basis, with manufacturing facilities in the United States, Puerto Rico, Singapore, China, South Korea, Saudi Arabia, Qatar, Mexico and Belgium.  Chevron Phillips Chemical Company LLC is owned 50% each by ChevronTexaco Corporation (ChevronTexaco) and ConocoPhillips (collectively, the “members”).

 

The accompanying unaudited condensed consolidated financial statements include the accounts of Chevron Phillips Chemical Company LLC and its wholly-owned subsidiaries (collectively, “CPChem”), and should be read in conjunction with the consolidated financial statements included in CPChem’s Annual Report on Form 10-K for the year ended December 31, 2004.  The financial statements and accompanying Management’s Discussion and Analysis of Financial Condition and Results of Operations have been prepared in conformity with the rules and regulations of the Securities and Exchange Commission (the “SEC”).  Some information and footnote disclosures required by generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations.  The financial statements include all normal recurring adjustments that CPChem considers necessary for a fair presentation.  Certain amounts for prior periods may have been reclassified in order to conform to the current reporting presentation.  Results for the periods presented in this report are not necessarily indicative of future financial performance.

 

Note 2.   Accounting Pronouncements

 

The Financial Accounting Standards Board (FASB) issued Interpretation No. 46 (revised December 2003), “Consolidation of Variable Interest Entities,” (FIN No. 46(R)) which provides guidance as to when a company is required to include in its financial statements the assets, liabilities and activities of a variable interest entity (a “VIE”).  A VIE is generally a corporation, partnership, trust, or any other legal structure used for business purposes that either does not have equity investors with voting rights or that has equity investors that do not provide sufficient financial resources for the entity to support its activities.  FIN No. 46(R) requires a VIE to be consolidated by a company if that company is subject to a majority of the risk of loss from the activities of the VIE or is entitled to receive a majority of the residual returns of the VIE.  FIN No. 46(R) also requires disclosures about VIEs that are not required to be consolidated by a company, but in which the company has a significant variable interest.  The consolidation requirements of FIN No. 46(R) apply immediately to VIEs created after December 31, 2003, and for CPChem, which is considered to be a nonpublic entity as it relates to FIN No. 46(R), the consolidation requirements for VIEs created on or before December 31, 2003 became effective January 1, 2005.  FIN No. 46(R) did not require the consolidation of any existing VIE into CPChem’s consolidated financial statements.

 

In November 2004, FASB issued SFAS No. 151, “Inventory Costs, an Amendment of ARB No. 43, Chapter 4.”  The statement amends the guidance in Accounting Research Bulletin (ARB) No. 43, Chapter 4, “Inventory Pricing,” to clarify the accounting for abnormal amounts of idle facility expense, freight, handling costs and spoilage, requiring that such costs be recognized as current-period charges.  It also requires that allocation of fixed production overheads to the costs of conversion be based on the normal capacity of the production facilities.  For CPChem, the provisions of SFAS No. 151 are effective January 1, 2006.  CPChem believes that implementation of this standard will not have a material impact on consolidated results of operations, financial position or liquidity.

 

6

 

In December 2004, FASB issued SFAS No. 153, “Exchanges of Non-Monetary Assets, an Amendment of APB Opinion No. 29.”  The guidance in Accounting Principles Board (APB) Opinion No. 29, “Accounting for Non-Monetary Transactions,” is based on the principle that exchanges of non-monetary assets should be measured based on the fair value of the assets exchanged, with certain exceptions.  This statement amends APB Opinion No. 29 to eliminate the exception for non-monetary exchanges of similar productive assets and replaces it with a general exception for exchanges of non-monetary assets that do not have commercial substance.  A non-monetary exchange does not have commercial substance if the future cash flows of the entity are not expected to change significantly as a result of the exchange.  For CPChem, the provisions of SFAS No. 153 are effective July 1, 2005.  CPChem believes that implementation of this standard will not have a material impact on consolidated results of operations, financial position or liquidity.

 

In March 2005, FASB issued Interpretation No. 47, “Accounting for Conditional Asset Retirement Obligations, an Interpretation of FASB Statement No. 143” (FIN No. 47) which mainly clarifies the timing of the recording of certain asset retirement obligations required by FASB Statement No. 143, “Accounting for Asset Retirement Obligations.”  For CPChem, the provisions of FIN No. 47 are effective December 31, 2005.  CPChem is evaluating what impact FIN No. 47 will have regarding its asset retirement obligations, but currently believes that implementation of FIN No. 47 will not have a material impact on consolidated results of operations, financial position or liquidity.

 

Note 3.  Comprehensive Income

 

 

Note 4.   Postretirement Benefits Information

 

CPChem expects to contribute approximately $50 million to its pension plans for pension benefits during 2005.  There were no contributions to pension plans in the first quarters of 2005 or 2004.

 

Net periodic benefit costs for pension and other postretirement benefits follow:

 

			Pension benefits						Other benefits
			Three months ended March 31,						Three months ended March 31,
Millions			2005			2004			2005			2004
Service cost on benefits earned			$	6		$	5		$	—		$	—
Interest cost on projected benefit obligations			5			5			1			1
Expected return on plan assets			(4		)	(3		)	—			—
Amortization of prior service costs			3			3			1			1
Net periodic benefit cost			$	10		$	10		$	2		$	2

 

7

 

Note 5.   Taxes

 

CPChem is treated as a flow-through entity for federal income tax and for most state income tax purposes whereby each member is taxable on its respective share of income and loss.  However, CPChem is directly liable for federal and state income taxes and franchise taxes on certain separate legal entities and for any foreign taxes incurred.  CPChem follows the liability method of accounting for these income taxes.

 

CPChem is required to make quarterly distributions to its members in amounts representing the liability for combined federal and state income taxes calculated at specified rates based on CPChem’s estimate of federal taxable income.  At March 31, 2005, $124 million of tax distributions were accrued in Other Current Liabilities and Deferred Credits that will be paid in the second quarter of 2005.  At December 31, 2004, $39 million of tax distributions were accrued that were subsequently paid in the first quarter of 2005.

 

Note 6.  Investments

 

Qatar Chemical Company Ltd. (Q-Chem)

 

Qatar Chemical Company Ltd. (Q-Chem) is a joint venture company that owns a petrochemical complex in Qatar.  Prior to achieving project completion, CPChem made certain advances to Q-Chem under a subordinated loan agreement.  In addition, CPChem agreed to provide up to $75 million of loans to Q-Chem if there is insufficient cash to pay the minimum debt service payments on Q-Chem’s senior bank financing.  CPChem also agreed to loan funds to Q-Chem through December 2006 if there is insufficient cash to make Q-Chem’s target debt service payments.  This loan is limited to the amount of lost operating margins resulting from sales volumes being less than design capacity, or the actual cash deficiency, whichever is less.  CPChem believes it is unlikely that funding under these support agreements will be required.

 

CPChem’s rights under the subordinated loan agreement and the other contingent loan agreements related to Q-Chem previously described are subordinate to Q-Chem’s senior bank debt.  Security interests in the notes related to such loans have been granted to the banks to support the terms of subordination.  Advances to Q-Chem, including accrued interest, under the subordinated loan agreement totaled $313 million at March 31, 2005 and $310 million at December 31, 2004.

 

CPChem records its 49% share of Q-Chem’s operating results using the equity method of accounting for investments.  Q-Chem is a VIE under the provisions of FIN No. 46(R).  CPChem’s maximum exposure to loss per FIN No. 46(R) was $405 million at March 31, 2005, representing CPChem’s carrying value of its investment in and advances to Q-Chem.

 

Saudi Chevron Phillips Company

 

Saudi Chevron Phillips Company (SCP) is a joint venture company that owns an aromatics complex in Al Jubail, Saudi Arabia.  The subsidiary of Chevron Phillips Chemical Company LLC which directly owns the 50% interest in SCP, along with the other co-venturer, have each guaranteed their respective 50% share of certain loans to SCP from a Saudi Arabian governmental agency.  These loans totaled $57 million (gross) at March 31, 2005 and $69 million at December 31, 2004.  CPChem believes it is unlikely that funding under this guarantee will be required.  Chevron Phillips Chemical Company LLC is not a direct party to this guarantee.  SCP is not a VIE under the provisions of FIN No. 46(R).

 

8

 

Jubail Chevron Phillips Company

 

Jubail Chevron Phillips Company (JCP), a joint venture company, was formed in 2003 to develop an integrated styrene facility in Al Jubail, Saudi Arabia.  Construction of the JCP facility is in conjunction with an expansion of SCP’s benzene plant, together called the “JCP project.”  Construction began in the fourth quarter of 2004 and operational start-up is anticipated in late 2007.  It is estimated that project completion, as defined in the JCP project’s financing agreements, will be achieved in the first half of 2008.  JCP is not a VIE under the provisions of FIN No. 46(R).

 

The JCP project will be financed through equity contributions and subordinated loans from the co-venturers, in proportion to their equal ownership interests, and limited recourse loans from commercial banks and two Saudi Arabian governmental agencies (collectively, called “senior debt”).  Principal and accrued interest outstanding under the commercial bank loans totaled $70 million at March 31, 2005 and $50 million at December 31, 2004.  Principal and accrued interest outstanding under loans from the first governmental agency totaled $82 million at March 31, 2005 and $42 million at December 31, 2004.  No amounts were outstanding under the loan agreements with the second governmental agency.

 

Under the terms of the commercial bank facilities, funding available from the senior debt is limited to 75% of the estimated project cost, as defined.  The JCP co-venturers are obligated to each fund their respective 50% share of the remaining estimated project cost through equity contributions and/or subordinated loans.  In addition, the co-venturers are obligated to each fund their respective 50% share, through equity contributions and/or subordinated loans, of any project costs incurred in excess of the estimated project cost and of any project costs not funded by senior debt.  These funding obligations terminate upon achieving project completion.

 

Certain bridge loan guarantees obligate the JCP co-venturers to each repay their respective 50% share of the commercial bank loans to JCP and SCP if the loans from the second Saudi Arabian governmental agency are not available by June 21, 2005.

 

Under the terms of completion guarantees, the commercial bank lenders and the first Saudi Arabian governmental agency have the right to demand from each JCP co-venturer, on a pro rata basis, funds to cover the debt service requirements associated with the JCP project that are due after March 31, 2009 until project completion.  Furthermore, if the project is not completed by March 31, 2010, the commercial bank lenders and the first Saudi Arabian governmental agency have the right to demand from each co-venturer, on a pro rata basis, repayment of all outstanding principal and interest.

 

The subsidiary of CPChem which directly owns the 50% interest in JCP, along with the other co-venturer, have each guaranteed their respective 50% share of certain loans payable by JCP to the second Saudi Arabian governmental agency for the duration of the loans.  Chevron Phillips Chemical Company LLC is not a direct party to this guarantee.

 

In addition to the above guarantees, CPChem guaranteed payment to a contractor for certain construction costs of the project, limited to a maximum of $103 million.  The guarantee remains in effect until payment for those construction costs is made.  CPChem also granted a guarantee related to the delivery of stated amounts of JCP’s styrene monomer production to a JCP customer, limited to a maximum of $8 million.  This guarantee terminates upon the achievement of commercial production of styrene by JCP.

 

9

 

The total carrying amount of liabilities recorded, discounted and weighted for probability, for the aforementioned guarantees related to the JCP project totaled $6 million at March 31, 2005 and $4 million at December 31, 2004.  The liabilities are recorded as Other Liabilities and Deferred Credits, with an offsetting increase to Investments in and Advances to Affiliates.  CPChem believes it is unlikely that performance under any of the guarantees will be required.  However, should such performance be required, CPChem believes it would not have a material adverse effect on consolidated results of operations, financial position or liquidity.

 

Summarized Financial Information

 

In accordance with the SEC’s rules pertaining to equity investments that are deemed to be “significant,” summarized financial information for CPChem’s equity investments, shown at 100%, follows:

 

 

Note 7.   Trade Receivables Securitization

 

CPChem had $200 million of secured borrowings outstanding at March 31, 2005 and December 31, 2004 under a trade receivables securitization agreement.  These borrowings are classified as short-term and were secured by $700 million and $665 million of trade receivables, respectively.  The trade receivables securitization agreement expires on May 17, 2005.  CPChem has commitments from banks, subject to final documentation, to renew the receivables securitization agreement through May 2006 on terms substantially identical to the current agreement.

 

Note 8.   Contingent Liabilities

 

In the case of known contingent liabilities, CPChem records an undiscounted liability when a loss is probable and the amount can be reasonably estimated.  These liabilities are not reduced for potential insurance recoveries.  If applicable, undiscounted receivables are recorded for probable insurance or other third-party recoveries.  Based on currently available information, CPChem believes it is remote that future costs related to known contingent liabilities will exceed current accruals by an amount that would have a material adverse effect on consolidated results of operations, financial position or liquidity.

 

10

 

As facts concerning contingent liabilities become known, CPChem reassesses its position with respect to accrued liabilities and other potential exposures.  Estimates that are particularly sensitive to future change include legal matters and contingent liabilities for environmental remediation.  Estimated future environmental remediation costs are subject to change due to such factors as the unknown magnitude of cleanup costs, prospective changes in laws and regulations, the unknown timing and extent of remedial actions that may be required and the determination of CPChem’s liability in proportion to those of other responsible parties.  Estimated future costs related to legal matters are subject to change as events occur and as additional information becomes available.

 

CPChem is a party to certain asbestos lawsuits for which the financial responsibility between CPChem and ConocoPhillips is disputed.  CPChem and ConocoPhillips are attempting to resolve where the financial responsibility for these lawsuits rests.  In the meantime, ConocoPhillips is managing and defending these lawsuits.  In the event the financial responsibility for these lawsuits is ultimately determined to rest with CPChem, CPChem may be required to record a charge to operations that could be material to the period reported.

 

CPChem is a party to a number of other legal proceedings that arose in the ordinary course of business for which, in many instances, no provision has been made in the financial statements.  While the final outcome of these proceedings cannot be predicted with certainty, CPChem believes that none of these proceedings, when resolved, will have a material adverse effect on consolidated results of operations, financial position or liquidity.

 

Electricity Deregulation

 

Legislation for electricity deregulation enacted in 1999 allowed utilities to file an application with the Public Utility Commission of Texas (PUCT) for the determination and reimbursement of certain costs associated with utility asset devaluation that may have occurred due to that legislation.  CenterPoint Energy Houston Electric LLC (CenterPoint), which previously provided electricity to CPChem’s Cedar Bayou manufacturing facility and Kingwood research center, both located in Texas, filed its application for such determination with the PUCT on March 31, 2004.  A number of entities intervened in the PUCT proceedings to object to certain claims in CenterPoint’s application.  In November 2004, the PUCT entered an order for a recovery of approximately one-half of Centerpoint’s request.  Both sides are appealing the decision.

 

If it is determined that CenterPoint is entitled to recover any of the costs claimed in its application, CPChem would receive a monthly charge added to its electricity cost over an extended period of time to pay for such reimbursement.  Based on the stated amounts of CenterPoint’s application and the PUCT’s subsequent order, it is currently anticipated that the additional monthly cost to CPChem that is approved by the PUCT, when finalized, would not have a material adverse effect on consolidated results of operations, financial position or liquidity.

 

Note 9.   Guarantees and Indemnifications

 

Guarantees

 

CPChem’s headquarters building is leased under a synthetic lease agreement, entered into in 2002 and subsequently extended in March 2005, which contains a fixed price purchase option and a residual guarantee.  The purchase option price was considered to be the fair market value of the building at the time of the extension of the lease.  If CPChem does not extend the lease or exercise the purchase option upon the expiration of the lease in 2010, CPChem has an obligation to pay the lessor the shortfall, if any, in the proceeds realized from the sale of the building to a third party

 

11

 

relative to the purchase option price, not to exceed $27 million.  CPChem is entitled to receive any proceeds from the sale of the building that are in excess of the purchase option price.  While it is not possible to predict with certainty the amount, if any, that CPChem would be required to pay or be entitled to receive should the building be sold to a third party upon the expiration of the lease, CPChem believes that the amount paid or received would not be material to consolidated results of operations, financial position or liquidity.

 

See also Note 6 for a discussion of certain guarantees related to CPChem’s equity investments.

 

Indemnifications

 

As part of CPChem’s ongoing business operations and consistent with generally accepted and recognized industry practice, CPChem enters into numerous agreements with other parties which apportion future risks between the parties to the transaction or relationship governed by the agreements.  One method of apportioning risk is the inclusion of provisions requiring one party to indemnify the other party against losses that might be incurred in the future.  Many of CPChem’s agreements, including technology license agreements, contain indemnities that require CPChem to perform certain acts, such as defending certain licensees against patent infringement claims of others, as a result of the occurrence of a triggering event or condition.

 

The nature of these indemnity obligations are diverse and numerous and each has different terms, business purposes, and triggering events or conditions.  In addition, the indemnities in each agreement vary widely in their definitions of both the triggering event and the resulting obligation, which is contingent upon that triggering event.  Because many of CPChem’s indemnity obligations are not limited in duration or potential monetary exposure, CPChem cannot reasonably calculate the maximum potential amount of future payments that could possibly be paid under the indemnity obligations stemming from all of CPChem’s existing agreements.  In the case of known contingent liabilities, however, CPChem records an undiscounted liability when a loss is probable and the amount can be reasonably estimated.

 

CPChem is not aware of the occurrence of any triggering event or condition that would have a material adverse impact on consolidated results of operations, financial position or liquidity as a result of an indemnity obligation arising from such triggering event or condition.

 

Note 10. Segment Information

 

Financial information by segment follows:

 

Millions			Olefins & Polyolefins			Aromatics & Styrenics			Specialty Products			Corporate, Other & Eliminations			Consolidated
Three months ended March 31, 2005
Net sales – external			$	1,665		$	861		$	132		$	—		$	2,658
Net sales – inter-segment			85			1			—			(86		)	—
Income (loss) before interest & taxes			302			93			15			(1		)	409
Three months ended March 31, 2004
Net sales – external			1,239			639			115			—			1,993
Net sales – inter-segment			61			—			—			(61		)	—
Income (loss) before interest & taxes			103			14			15			(5		)	127
Total assets – March 31, 2005			4,188			2,186			500			108			6,982
Total assets – December 31, 2004			4,108			2,125			508			131			6,872

 

12

 

Note 11. Condensed Consolidating Financial Statements

 

Condensed consolidating financial statements follow.  This information is presented in accordance with SEC rules and regulations as they relate to the debt jointly and severally issued by Chevron Phillips Chemical Company LLC and Chevron Phillips Chemical Company LP.

 

The LLC is the non-operating parent holding company.  The LP is the primary U.S. operating company.  “Other Entities” is principally comprised of foreign operations and the holding companies that have direct ownership of the LP.  These condensed consolidating financial statements were prepared using the equity method of accounting for investments.

 

Chevron Phillips Chemical Company LLC

Condensed Consolidating Statement of Operations

For the three months ended March 31, 2005

(Unaudited)

 

Millions			LLC			LP			Other Entities			Eliminations			Total
Revenue
Net sales			$	—		$	2,379		$	485		$	(206	)	$	2,658
Equity in income (loss) of affiliates, net			407			(1		)	368			(724		)	50
Other income			—			17			29			(20		)	26
Total revenue			407			2,395			882			(950		)	2,734
Costs and Expenses
Cost of goods sold			—			1,957			445			(197		)	2,205
Selling, general and administrative			—			109			30			(29		)	110
Research and development			—			10			—			—			10
Total costs and expenses			—			2,076			475			(226		)	2,325
Income Before Interest and Taxes			407			319			407			(724		)	409
Interest income			—			3			4			(3		)	4
Interest expense			(18		)	—			(5		)	3			(20		)
Income Before Taxes			389			322			406			(724		)	393
Income taxes			—			(1		)	(3		)	—			(4		)
Net Income			389			321			403			(724		)	389
Distributions on members’ preferred interests			(2		)	—			—			—			(2		)
Income Attributed to Members’ Interests			$	387		$	321		$	403		$	(724	)	$	387

 

13

 

Note 11. Condensed Consolidating Financial Statements (continued)

 

Chevron Phillips Chemical Company LLC

Condensed Consolidating Statement of Operations

For the three months ended March 31, 2004

(Unaudited)

 

Millions			LLC			LP			Other Entities			Eliminations			Total
Revenue
Net sales			$	—		$	1,795		$	331		$	(133	)	$	1,993
Equity in income of affiliates, net			128			—			96			(197		)	27
Other income			—			15			22			(18		)	19
Total revenue			128			1,810			449			(348		)	2,039
Costs and Expenses
Cost of goods sold			—			1,628			294			(124		)	1,798
Selling, general and administrative			—			108			23			(27		)	104
Research and development			—			10			—			—			10
Total costs and expenses			—			1,746			317			(151		)	1,912
Income Before Interest and Taxes			128			64			132			(197		)	127
Interest income			—			4			2			(4		)	2
Interest expense			(20		)	—			(2		)	4			(18		)
Income Before Taxes			108			68			132			(197		)	111
Income taxes			—			—			(3		)	—			(3		)
Net Income			108			68			129			(197		)	108
Distributions on members’ preferred interests			(6		)	—			—			—			(6		)
Income Attributed to Members’ Interests			$	102		$	68		$	129		$	(197	)	$	102

 

14

 

Note 11. Condensed Consolidating Financial Statements (continued)

 

Chevron Phillips Chemical Company LLC

Condensed Consolidating Balance Sheet

March 31, 2005

(Unaudited)

 

Millions			LLC			LP			Other Entities			Eliminations			Total
Current assets
Cash and cash equivalents			$	—		$	6		$	50		$	—		$	56
Accounts receivable, net			20			1,206			1,133			(1,020		)	1,339
Inventories			—			620			213			—			833
Other current assets			2			24			6			—			32
Total current assets			22			1,856			1,402			(1,020		)	2,260
Property, plant and equipment, net			—			3,419			309			—			3,728
Investments in and advances to affiliates			5,805			31			5,257			(10,144		)	949
Other assets and deferred charges			20			32			21			(28		)	45
Total Assets			$	5,847		$	5,338		$	6,989		$	(11,192	)	$	6,982
Current liabilities
Accounts payable			$	289		$	766		$	908		$	(1,020	)	$	943
Secured borrowings and other debt			—			1			200			—			201
Other current liabilities and deferred credits			134			121			24			—			279
Total current liabilities			423			888			1,132			(1,020		)	1,423
Long-term debt			1,257			8			—			—			1,265
Other liabilities and deferred credits			4			79			33			(28		)	88
Total liabilities			1,684			975			1,165			(1,048		)	2,776
Members’ capital			4,163			4,364			5,780			(10,144		)	4,163
Accumulated other comprehensive income (loss)			—			(1		)	44			—			43
Total members’ equity			4,163			4,363			5,824			(10,144		)	4,206
Total Liabilities and Members’ Equity			$	5,847		$	5,338		$	6,989		$	(11,192	)	$	6,982

 

15

 

Note 11. Condensed Consolidating Financial Statements (continued)

 

Chevron Phillips Chemical Company LLC

Condensed Consolidating Balance Sheet

December 31, 2004

 

Millions			LLC			LP			Other Entities			Eliminations			Total
Current assets
Cash and cash equivalents			$	—		$	15		$	48		$	—		$	63
Accounts receivable, net			16			945			1,013			(708		)	1,266
Inventories			—			601			183			—			784
Other current assets			2			34			7			—			43
Total current assets			18			1,595			1,251			(708		)	2,156
Property, plant and equipment, net			—			3,453			315			—			3,768
Investments in and advances to affiliates			5,496			32			4,968			(9,603		)	893
Other assets and deferred charges			20			32			31			(28		)	55
Total Assets			$	5,534		$	5,112		$	6,565		$	(10,339	)	$	6,872
Current liabilities
Accounts payable			$	100		$	710		$	782		$	(708	)	$	884
Secured borrowings and other debt			—			1			200			—			201
Other current liabilities and deferred credits			50			181			25			—			256
Total current liabilities			150			892			1,007			(708		)	1,341
Long-term debt			1,381			9			—			—			1,390
Other liabilities and deferred credits			3			85			31			(28		)	91
Total liabilities			1,534			986			1,038			(736		)	2,822
Members’ preferred interests			75			—			—			—			75
Members’ capital			3,925			4,127			5,476			(9,603		)	3,925
Accumulated other comprehensive income (loss)			—			(1		)	51			—			50
Total members’ equity			3,925			4,126			5,527			(9,603		)	3,975
Total Liabilities and Members’ Equity			$	5,534		$	5,112		$	6,565		$	(10,339	)	$	6,872

 

16