UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
For the quarterly period ended March 31, 2018
or
For the transition period from to
Commission file number: 001-34726
LYONDELLBASELL INDUSTRIES N.V.
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
1221 McKinney St.,Suite 300
Houston, Texas
USA 77010
4th Floor, One Vine Street
London
W1J0AH
The United Kingdom
Delftseplein 27E
3013 AA Rotterdam
The Netherlands
(Addresses of registrant’s principal executive offices)
(Registrant’s telephone numbers, including area codes)
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 ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-acceleratedfiler, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes ☒ No ☐
The registrant had 392,069,274 ordinary shares, €0.04 par value, outstanding at April 24, 2018 (excluding 186,370,889 treasury shares).
TABLE OF CONTENTS
Part I – Financial Information
Item 1. Consolidated Financial Statements (Unaudited)
Consolidated Statements of Income
Consolidated Statements of Comprehensive Income
Consolidated Balance Sheets
Consolidated Statements of Cash Flows
Consolidated Statement of Stockholders’ Equity
Notes to the Consolidated Financial Statements
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II – Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 4. Mine Safety Disclosures
Item 6. Exhibits
Signature
PART I. FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
CONSOLIDATED STATEMENTS OF INCOME
Millions of dollars, except earnings per share
Sales and other operating revenues:
Trade
Related parties
Operating costs and expenses:
Cost of sales
Selling, general and administrative expenses
Research and development expenses
Operating income
Interest expense
Interest income
Other income, net
Income from continuing operations before equity investments and income taxes
Income from equity investments
Income from continuing operations before income taxes
Provision for income taxes
Income from continuing operations
Loss from discontinued operations, net of tax
Net income
Net (income) loss attributable to non-controllinginterests
Net income attributable to the Company shareholders
Earnings per share:
Net income (loss) attributable to the Company shareholders —
Basic:
Continuing operations
Discontinued operations
Diluted:
See Notes to the Consolidated Financial Statements.
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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Millions of dollars
Other comprehensive income (loss), net of tax –
Financial derivatives
Unrealized losses onavailable-for-sale debt securities
Unrealized gains on equity securities and equity securities held by equity investees
Defined pension and other postretirement benefit plans
Foreign currency translations
Total other comprehensive income, net of tax
Comprehensive income
Comprehensive (income) loss attributable tonon-controlling interests
Comprehensive income attributable to the Company shareholders
2
CONSOLIDATED BALANCE SHEETS
ASSETS
Current assets:
Cash and cash equivalents
Restricted cash
Short-term investments
Accounts receivable:
Trade, net
Inventories
Prepaid expenses and other current assets
Total current assets
Property, plant and equipment at cost
Less: Accumulated depreciation
Property, plant and equipment, net
Investments and long-term receivables:
Investment in PO joint ventures
Equity investments
Other investments and long-term receivables
Goodwill
Intangible assets, net
Other assets
Total assets
3
Millions of dollars, except shares and par value data
LIABILITIES AND EQUITY
Current liabilities:
Current maturities of long-term debt
Short-term debt
Accounts payable:
Accrued liabilities
Total current liabilities
Long-term debt
Other liabilities
Deferred income taxes
Commitments and contingencies
Stockholders’ equity:
Ordinary shares, €0.04 par value, 1,275 million shares authorized, 393,482,424 and 394,512,054 shares outstanding, respectively
Additional paid-in capital
Retained earnings
Accumulated other comprehensive loss
Treasury stock, at cost, 184,957,739 and 183,928,109 ordinary shares, respectively
Total Company share of stockholders’ equity
Non-controlling interests
Total equity
Total liabilities and equity
4
CONSOLIDATED STATEMENTS OF CASH FLOWS
Cash flows from operating activities:
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization
Amortization of debt-related costs
Charges related to repayment of debt
Share-based compensation
Equity investments –
Equity income
Distributions of earnings, net of tax
Changes in assets and liabilities that provided (used) cash:
Accounts receivable
Accounts payable
Other, net
Net cash provided by operating activities
Cash flows from investing activities:
Expenditures for property, plant and equipment
Payments for repurchase agreements
Proceeds from repurchase agreements
Purchases ofavailable-for-sale debt securities
Proceeds from sales and maturities of available-for-sale debt securities
Proceeds from maturities ofheld-to-maturity securities
Net cash used in investing activities
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Cash flows from financing activities:
Repurchases of Company ordinary shares
Dividends paid
Issuance of long-term debt
Repayment of long-term debt
Debt extinguishment costs
Net proceeds from commercial paper
Payments of debt issuance costs
Net cash used in financing activities
Effect of exchange rate changes on cash
Increase (decrease) in cash and cash equivalents and restricted cash
Cash and cash equivalents and restricted cash at beginning of period
Cash and cash equivalents and restricted cash at end of period
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CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY
Ordinary Shares
Balance, December 31, 2017
Adoption of accounting standards
Other comprehensive income
Dividends ($1.00 per share)
Purchase of non-controlling interest
Balance, March 31, 2018
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1.
Basis of Presentation
2.
Accounting and Reporting Changes
3.
Revenues
4.
Accounts Receivable
5.
6.
Debt
7.
Financial Instruments and Fair Value Measurements
8.
Pension and Other Postretirement Benefits
9.
Income Taxes
10.
Commitments and Contingencies
11.
Stockholders’ Equity
12.
Per Share Data
13.
Segment and Related Information
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
LyondellBasell Industries N.V., together with its consolidated subsidiaries (collectively “LyondellBasell N.V.”), is a worldwide manufacturer of chemicals and polymers, a refiner of crude oil, a significant producer of gasoline blending components and a developer and licensor of technologies for production of polymers. Unless otherwise indicated, the “Company,” “we,” “us,” “our” or similar words are used to refer to LyondellBasell N.V.
The accompanying Consolidated Financial Statements are unaudited and have been prepared from the books and records of LyondellBasell N.V. in accordance with the instructions to Form 10-Q and Rule 10-1 of Regulation S-X for interim financial information. Accordingly, they do not include all of the information and notes required by accounting principles generally accepted in the United States (“U.S. GAAP”) for complete financial statements. In our opinion, all adjustments, consisting only of normal recurring adjustments, considered necessary for a fair presentation have been included. The results for interim periods are not necessarily indicative of results for the entire year. These Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017.
Recently Adopted Guidance
Revenue Recognition—In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers (Topic 606), which supersedes the current revenue recognition requirements in ASC 606, Revenue Recognition. Under this guidance, entities should recognize revenues to depict the transfer of promised goods or services to customers in an amount that reflects the consideration the entity expects to receive in exchange for those goods or services. This ASU also requires enhanced disclosures. This guidance including subsequently issued amendments: ASU 2015-14, ASU 2016-08, ASU 2016-10, ASU2016-12, and ASU 2016-20, was effective for annual and interim periods beginning after December 15, 2017. We adopted this guidance in the first quarter of 2018. For disclosures related to the adoption of this guidance, see Note 3.
Financial Instruments—In January 2016, the FASB issued ASU 2016-01, Financial Instruments-Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. The new guidance in this ASU includes a requirement for equity investments (except those accounted for under the equity method of accounting or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income. This guidance was effective for annual and interim periods beginning on or after December 15, 2017. We adopted this guidance prospectively in the first quarter of 2018 and recorded a cumulative-effect adjustment of $15 million to beginning retained earnings.
Recognition and Measurement of Financial Assets and Financial Liabilities—In February 2018, the FASB issued ASU 2018-03, Technical Corrections and Improvements to Financial Instruments – Overall (Subtopic 825-10). This ASU was issued as part of the FASB’s ongoing agenda to make improvements clarifying the Accounting Standards Codification and provides technical corrections and improvements related to ASU 2016-01. This ASU was effective for annual and interim periods beginning after December 15, 2017. We adopted this guidance in the first quarter of 2018 and it did not have a material impact on our Consolidated Financial Statements.
Income Taxes—In October 2016, the FASB issued ASU 2016-16, Accounting for Income Taxes: Intra-Entity Asset Transfers of Assets Other than Inventory. The ASU is aimed at reducing complexity in accounting standards. Under current GAAP, the tax effects of intra-entity asset transfers (intercompany sales) are deferred until the transferred asset is sold to a third party or otherwise recovered through use. The new guidance eliminates the exception for all
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intra-entity sales of assets other than inventory. A reporting entity would be required to recognize tax expense from the sale of assets in the seller’s tax jurisdiction when the transfer occurs, even though the pre-tax effects of that transaction are eliminated in consolidation. Any deferred tax asset that arises in the buyer’s jurisdiction would also be recognized at the time of the transfer. This guidance was effective for annual periods beginning after December 15, 2017. We adopted this guidance in the first quarter of 2018 following the modified retrospective method and recorded a cumulative-effect adjustment of $9 million to beginning retained earnings.
Accumulated Other Comprehensive Income—In February 2018, the FASB issued ASU 2018-02, Income Statement—Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. The guidance permits entities to reclassify tax effects stranded in accumulated other comprehensive income as a result of the U.S.-enacted “H.R.1,” also known as the “Tax Cuts and Jobs Act” (the “Tax Act”) to retained earnings. The amendment will be effective for annual and interim periods beginning after December 15, 2018. We early adopted this guidance in the first quarter of 2018 using the specific identification method and recorded a cumulative-effect adjustment of $52 million to beginning retained earnings.
Business Combinations—In January 2017, the FASB issued ASU 2017-01, Clarifying the Definition of a Business. This ASU clarifies the definition of a business with the objective of adding guidance to assist entities with evaluating whether a transaction should be accounted for as an acquisition or disposal of an asset or a business. This amendment was effective for annual and interim periods beginning after December 15, 2017. The prospective adoption of this guidance in the first quarter of 2018 did not have a material impact on our Consolidated Financial Statements.
Other Income—Gains and Losses from the Derecognition of Nonfinancial Assets—In February 2017, the FASB issued ASU 2017-05, Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets. The guidance provides clarification about the term in substance nonfinancial asset, other aspects of the scope of Subtopic 610-20 Other Income, and how an entity should account for partial sales of nonfinancial assets once the amendments in ASU2014-09 become effective. This amendment was effective for annual and interim periods beginning after December 15, 2017. The retrospective adoption of this guidance in the first quarter of 2018 did not have a material impact on our Consolidated Financial Statements.
Compensation—Retirement Benefits—In March 2017, the FASB issued ASU 2017-07, Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost. The guidance requires changes in presentation of current service cost and other components of net benefit cost. This amendment was effective for annual and interim periods beginning after December 15, 2017. The retrospective adoption of this guidance in the first quarter of 2018 did not have a material impact on our Consolidated Financial Statements.
Derivatives and Hedging—In August 2017, the FASB issued ASU 2017-12, Targeted Improvements to Accounting for Hedging Activities. The new guidance makes more financial and nonfinancial hedging strategies eligible for hedge accounting and amends the presentation and disclosure requirements while changing how companies assess effectiveness. These amendments will be effective for annual and interim periods beginning after December 15, 2018. The early adoption of this guidance in the first quarter of 2018 did not have a material impact on our Consolidated Financial Statements.
Accounting Guidance Issued But Not Adopted as of March 31, 2018
Leases—In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) which supersedes the existing guidance for lease accounting in ASC 840, Leases. Under the new guidance, for leases with a term longer than 12 months a lessee should recognize a lease liability and aright-of-use asset representing its right to use the underlying asset for the lease term. Topic 842 retains a classification distinction between finance leases and operating leases, with the classification affecting the pattern of expense recognition in the income statement. This ASU also requires
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enhanced disclosures. A modified retrospective transition approach is required for annual and interim periods beginning on or after December 15, 2018. Early adoption is permitted. We are currently assessing the impact of this new guidance on our Consolidated Financial Statements via review of existing lease contracts and other purchase obligations that contain embedded lease features, which are generally classified as operating leases under the existing guidance. We will complete any required changes to our systems and processes, including updating our internal controls during 2018. In 2018, the FASB also issued ASU 2018-01, Land Easement Practical Expedient for Transition to Topic 842. Under this guidance, an optional transition practical expedient is available whereby existing or expired land easements that were not previously accounted for as leases under Topic 840 are not required to be evaluated under Topic 842. We will evaluate the application of this ASU together with the overall assessment of Topic 842.
Financial Instruments—In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. This amendment requires financial assets measured at amortized cost basis to be presented at the net amount expected to be collected, resulting in the use of a current expected credit loss (“CECL”) model when measuring an impairment of financial instruments. Credit losses related to available-for-sale securities should be recorded in the consolidated income statement through an allowance for credit losses. Estimated credit losses utilizing the CECL model are based on reasonable use of historical experience, current conditions and forecasts that affect the collectability of reported financial assets. This ASU also modifies the impairment model for available-for-sale debt securities by eliminating the concept of “other than temporary” as well as providing a simplified accounting model for purchased financial assets with credit deterioration since their origination. The guidance will be effective for public entities for annual and interim periods beginning after December 15, 2019. Early adoption is permitted. We are currently assessing the impact of the amendment in this guidance on our Consolidated Financial Statements.
Receivables—Nonrefundable Fees and Other Costs—In March 2017, the FASB issued ASU 2017-08, Premium Amortization of Purchased Callable Debt Securities. This new guidance requires the premium on callable debt securities to be amortized to the earliest call date. Under current requirements, premiums on callable debt securities are generally amortized over the contractual life of the security. The amendment will be effective for public entities for annual and interim periods beginning after December 15, 2018. Early adoption is permitted. We are currently assessing the impact of this guidance on our Consolidated Financial Statements.
Adoption of new revenue accounting guidance—On January 1, 2018, we adopted the accounting standard ASC 606, Revenue from Contracts with Customers and all related amendments using the modified retrospective method applied to those contracts which were not completed as of January 1, 2018. We recognized an $18 million adjustment to the beginning retained earnings balance for the cumulative effect of initially applying the new standard. Comparative information has not been restated and continues to be reported under the accounting standards in effect for those periods. The impact of the adoption of this new guidance was immaterial for the three months ended March 31, 2018, and we expect the impact to be immaterial to our Consolidated Financial Statements on an ongoing basis.
Revenue Recognition—Substantially all our revenues are derived from contracts with customers. We account for contracts when both parties have approved the contract and are committed to perform, the rights of the parties and payment terms have been identified, the contract has commercial substance, and collectability is probable. Payments are typically required within a short period following the transfer of control over the product to the customer. We occasionally require customers to prepay purchases to ensure collectability. Such prepayments do not represent financing arrangements, and payment and fulfillment of the performance obligation occurs within a short time frame. We elected to apply the practical expedient, which permits us not to adjust the promised amount of consideration for the effects of a significant financing component when, at contract inception, we expect that payment will occur in one year or less.
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Revenue is recognized when obligations under the terms of a contract with our customer are satisfied. This generally occurs at the point in time when performance obligations are fulfilled and control transfers to the customer. In most instances, control transfers upon transfer of risk of loss and title to the customer, which usually occurs when we ship products to the customer from our manufacturing facility. Revenue is measured as the amount of consideration we expect to receive in exchange for transferring goods. Customer incentives are generally based on volumes purchased and recognized over the period earned. Sales, value added, and other taxes that we collect concurrent with revenue-producing activities are excluded from the transaction price as they represent amounts collected on behalf of third parties. Incidental costs incurred to obtain a contract are immaterial in the context of the contract and are recognized as expense. We have elected the practical expedient to recognize the incremental costs of obtaining a contract as an expense when incurred if the amortization period of the asset that we otherwise would have recognized is one year or less. Shipping and handling costs are treated as a fulfillment cost and not a separate performance obligation.
Contract Balances—Contract balances typically arise when a difference in timing between the transfer of control to the customer and receipt of consideration occurs. Our contract liabilities, which are reflected in our Consolidated Financial Statements as Accrued liabilities and Other liabilities, consist primarily of customer payments for products or services received before the transfer of control to the customer occurs. These contract liabilities were $144 million as of March 31, 2018. Revenue recognized in the reporting period included in the contract liability balance at the beginning of the period is immaterial.
Disaggregation of Revenues—We participate globally across the petrochemical value chain and are an industry leader in many of our product lines. Our chemicals businesses consist primarily of large processing plants that convert large volumes of liquid and gaseous hydrocarbon feedstocks into plastic resins and other chemicals. Our chemical products tend to be basic building blocks for other chemicals and plastics, while our plastic products are typically used in large volume applications. Our refining business consists of our Houston refinery, which processes crude oil into refined products such as gasoline, diesel and jet fuel.
Petrochemical products generally follow global price trends of crude oil, natural gas liquids and/or natural gas. Price volatility significantly affects our revenues, as our sales contracts are tied to global commodity indexes. Other factors such as global industry capacities and operating rates, foreign exchange rates and worldwide geopolitical trends also affect our revenues.
The following table presents our revenues disaggregated by key products for the three months ended March 31, 2018:
Olefins & co-products
Polyethylene
Polypropylene
PO & derivatives
Oxyfuels and related products
Intermediate chemicals
Refined products
Other
Total
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The following table presents our revenues disaggregated by geography, based upon the location of the customer, for the three months ended March 31, 2018:
United States
Germany
Italy
France
Mexico
Transaction Price Allocated to the Remaining Performance Obligations—We have elected to exclude contracts which have an initial term of one year or less from this disclosure. Our contracts with customers are commodity supply arrangements that settle based on market prices at future delivery dates; therefore, transaction prices are entirely variable. Transaction prices are known at the time revenue is recognized since they are generally determined by the commodity price index at a specific date, at month-end or at the month average once products are shipped to our customers. Future estimates of transaction prices for disclosure purposes are substantially constrained as they are highly susceptible to factors outside our influence, including volatility in commodity markets, industry production capacities and operating rates, planned and unplanned industry operating interruptions, foreign exchange rates and worldwide geopolitical trends.
Our allowance for doubtful accounts receivable, which is reflected in the Consolidated Balance Sheets as a reduction of accounts receivable, was $17 million at March 31, 2018 and December 31, 2017.
Inventories consisted of the following components:
Finished goods
Work-in-process
Raw materials and supplies
Total inventories
13
Long-term loans, notes and other long-term debt, net of unamortized discount and debt issuance cost, consisted of the following:
Senior Notes due 2019, $1,000 million, 5.0% ($2 million of debt issuance cost)
Senior Notes due 2021, $1,000 million, 6.0% ($7 million of debt issuance cost)
Senior Notes due 2024, $1,000 million, 5.75% ($8 million of debt issuance cost)
Senior Notes due 2055, $1,000 million, 4.625% ($16 million of discount; $11 million of debt issuance cost)
Guaranteed Notes due 2044, $1,000 million, 4.875% ($11 million of discount; $9 million of debt issuance cost)
Guaranteed Notes due 2043, $750 million, 5.25% ($21 million of discount; $7 million of debt issuance cost)
Guaranteed Notes due 2023, $750 million, 4.0% ($6 million of discount; $3 million of debt issuance cost)
Guaranteed Notes due 2027, $300 million, 8.1%
Guaranteed Notes due 2022, €750 million, 1.875% ($3 million of discount; $3 million of debt issuance cost)
Guaranteed Notes due 2027, $1,000 million, 3.5% ($9 million of discount; $8 million of debt issuance cost)
Less current maturities
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:
Senior Notes due 2019, 5.0%
Senior Notes due 2021, 6.0%
Guaranteed Notes due 2027, 3.5%
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The cumulative fair value hedging adjustment remaining at March 31, 2018 and December 31, 2017 associated with our Senior Notes due 2019 includes $25 million and $31 million, respectively, for hedges that have been discontinued. The $36 million loss in the three months ended March 31, 2017 included a $44 million charge for the write-off of the cumulative fair value hedging adjustment related to our 5% Senior Notes due 2019 described below.
These fair value adjustments are recognized in Interest expense in the Consolidated Statements of Income.
Short-term loans, notes, and other short-term debt consisted of the following:
$2,500 million Senior Revolving Credit Facility
$900 million U.S. Receivables Securitization Facility
Commercial paper
Precious metal financings
Total short-term debt
Long-Term Debt
Guaranteed Notes due 2027—In March 2017, LYB International Finance II B.V. (“LYB Finance II”), a direct, 100% owned finance subsidiary of LyondellBasell Industries N.V., as defined in Rule 3-10(b) of Regulation S-X, issued $1,000 million of 3.5% guaranteed notes due 2027 at a discounted price of 98.968%.
Senior Notes due 2019—In March 2017, we redeemed $1,000 million aggregate principal amount of our outstanding 5% senior notes due 2019, and paid $65 million in make-whole premiums. In conjunction with the redemption of these notes, we recognized non-cash charges of $4 million for thewrite-off of unamortized debt issuance costs and $44 million for the write-off of the cumulative fair value hedge accounting adjustment related to the redeemed notes.
Short-Term Debt
Senior Revolving Credit Facility—Our $2,500 million revolving credit facility, which expires in June 2022, may be used for dollar and euro denominated borrowings, has a $500 million sublimit for dollar and euro denominated letters of credit, a $1,000 million uncommitted accordion feature, and supports our commercial paper program. The aggregate balance of outstanding borrowings, including amounts outstanding under our commercial paper program, and letters of credit under this facility may not exceed $2,500 million at any given time. Borrowings under the facility bear interest at a Base Rate or LIBOR, plus an applicable margin. Additional fees are incurred for the average daily unused commitments.
The facility contains customary covenants and warranties, including specified restrictions on indebtedness and liens. In addition, we are required to maintain a leverage ratio at the end of every fiscal quarter of 3.50 to 1.00 or less for the period covering the most recent four quarters. We are in compliance with these covenants as of March 31, 2018.
Commercial Paper Program—We have a commercial paper program under which we may issue up to $2,500 million of privately placed, unsecured, short-term promissory notes (“commercial paper”). This program is backed by our $2,500 million Senior Revolving Credit Facility. Proceeds from the issuance of commercial paper may be used for general corporate purposes, including dividends and share repurchases.
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U.S. Receivables Securitization Facility—Our U.S. accounts receivable securitization facility, which expires in August 2018, has a purchase limit of $900 million in addition to a $300 million uncommitted accordion feature. This facility provides liquidity through the sale or contribution of trade receivables by certain of our U.S. subsidiaries to a wholly owned, bankruptcy-remote subsidiary on an ongoing basis and without recourse. The bankruptcy-remote subsidiary may then, at its option and subject to a borrowing base of eligible receivables, sell undivided interests in the pool of trade receivables to financial institutions participating in the facility. In the event of liquidation, the bankruptcy-remote subsidiary’s assets will be used to satisfy the claims of its creditors prior to any assets or value in the bankruptcy-remote subsidiary becoming available to us. We are responsible for servicing the receivables. This facility also provides for the issuance of letters of credit up to $200 million. The term of the securitization facility may be extended in accordance with the terms of the agreement. The facility is also subject to customary warranties and covenants, including limits and reserves and the maintenance of specified financial ratios. We are required to maintain a leverage ratio at the end of every fiscal quarter of 3.50 to 1.00 or less for the period covering the most recent four quarters. Performance obligations under the facility are guaranteed by the parent company. Additional fees are incurred for the average daily unused commitments.
At March 31, 2018, there were no borrowings or letters of credit under the facility.
Weighted Average Interest Rate—At March 31, 2018 and December 31, 2017, our weighted average interest rate on outstanding short-term debt was 4.1% and 1.8%, respectively.
Debt Discount and Issuance Costs—In the three months ended March 31, 2018 and 2017, amortization of debt discounts and debt issuance costs resulted in amortization expense of $4 million and $8 million, respectively, which is included in Interest expense in the Consolidated Statements of Income.
Other Information—On December 28, 2016, LYB International Finance III, LLC was formed as a private company with limited liability in Delaware. LYB International Finance III, LLC is a direct, 100% owned finance subsidiary of LyondellBasell N.V., as defined in Rule 3-10(b) of Regulation S-X. Any debt securities issued by LYB International Finance III, LLC will be fully and unconditionally guaranteed by LyondellBasell N.V.
We are exposed to market risks, such as changes in commodity pricing, currency exchange rates and interest rates. To manage the volatility related to these exposures, we selectively enter into derivative transactions pursuant to our risk management policies.
A summary of our financial instruments, risk management policies, derivative instruments, hedging activities and fair value measurement can be found in Notes 2 and 14 to our Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2017. If applicable, updates have been included in the respective sections below.
At March 31, 2018 and December 31, 2017, we had marketable securities classified as Cash and cash equivalents of $1,312 million and $1,035 million, respectively.
Foreign Currency Gain (Loss)—Other income, net, in the Consolidated Statements of Income reflected foreign currency gains of $6 million for the three months ended March 31, 2018 and foreign currency losses of $5 million for the three months ended March 31, 2017.
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Financial Instruments Measured at Fair Value on a Recurring Basis—The following table summarizes financial instruments outstanding as of March 31, 2018 and December 31, 2017 that are measured at fair value on a recurring basis:
Assets–
Derivatives designated as hedges:
Foreign currency
Interest rates
Derivatives not designated as hedges:
Commodities
Non-derivatives:
Available-for-saledebt securities
Equity securities
Liabilities–
Performance share awards
17
All derivatives andavailable-for-sale debt securities in the tables above are classified as Level 2. Our limited partnership investments included in our equity securities discussed below, are measured at fair value using the net asset value (“NAV”) per share (or its equivalent) practical expedient and have not been classified in the fair value hierarchy.
At March 31, 2018, our outstanding foreign currency and commodity contracts not designated as hedges mature from April 2018 to June 2018 and from April 2018 to January 2019, respectively.
Financial Instruments Not Measured at Fair Value on a Recurring Basis—The following table presents the carrying value and estimated fair value of our financial instruments that are not measured at fair value on a recurring basis as of March 31, 2018 and December 31, 2017. Short-term loans receivable, which represent our repurchase agreements, and short-term and long-term debt are recorded at amortized cost in the Consolidated Balance Sheets. The carrying fair values of short-term and long-term debt exclude capital leases and commercial paper.
Assets:
Short-term loans receivable
Liabilities:
All financial instruments in the table above are classified as Level 2. There were no transfers between Level 1 and Level 2 for any of our financial instruments during the three months ended March 31, 2018 and the year ended December 31, 2017.
Net Investment Hedges—In March 2018, we entered into €400 million of foreign currency contracts that were designated as net investment hedges. These foreign currency contracts expire June 15, 2018. In 2017, we entered into €617 million of foreign currency contracts that were designated as net investment hedges.
In 2016, we also issued euro denominated notes payable due 2022 with notional amounts totaling €750 million that were designated as a net investment hedge.
At March 31, 2018 and December 31, 2017, we had outstanding foreign currency contracts with an aggregate notional value of €1,142 million ($1,287 million) and €742 million ($789 million), respectively, designated as net investment hedges. In addition, at March 31, 2018 and December 31, 2017 we had outstanding foreign-currency denominated debt, with notional amounts totaling €750 million ($925 million) and €750 million ($899 million), respectively, designated as a net investment hedge.
There was no ineffectiveness recorded during the three months ended March 31, 2017 related to these hedging relationships.
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Cash Flow Hedges—The following table summarizes our cash flow hedges outstanding at March 31, 2018 and December 31, 2017:
As of March 31, 2018, less than $1 million (on a pretax basis) is scheduled to be reclassified as a decrease to interest expense and $7 million (on a pretax basis) is scheduled to be reclassified as an increase to cost of sales over the next twelve months.
Fair Value Hedges—In February 2017, we entered into U.S. dollar fixed-for-floating interest rate swaps to mitigate changes in the fair value of our $1,000 million 3.5% guaranteed notes due 2027 associated with the risk of variability in the 3 Month USD LIBOR rate (the benchmark interest rate). The fixed-rate and variable-rate are settled semi-annually and quarterly, respectively.
In March 2017, concurrent with the redemption of $1,000 million of our outstanding 5% senior notes due 2019, we dedesignated the related $2,000 million fair value hedge and terminated swaps in the notional amount of $1,000 million. At the same time, we redesignated the remaining $1,000 million notional amount of swaps as a fair value hedge of the remaining $1,000 million of 5% senior notes outstanding.
We had outstanding interest rate contracts with aggregate notional amounts of $3,000 million at March 31, 2018 and December 31, 2017, respectively, designated as fair value hedges. Our interest rate contracts outstanding at March 31, 2018 mature from 2019 to 2027.
There was no ineffectiveness recorded for the three months ended March 31, 2017 related to these hedging relationships.
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Impact on Earnings and Other Comprehensive Income—The following table summarizes the pre-tax effect of derivative instruments and non-derivative instruments on Other comprehensive income and earnings for the three months ended March 31:
Derivatives designated as net investment hedges:
Derivatives designated as cash flow hedges:
Derivatives designated as fair value hedges:
Non-derivatives designated as net investment hedges:
The derivative amounts excluded from effectiveness testing for foreign currency contracts designated as net investment hedges recognized in other comprehensive income and interest expense for the three months ended March 31, 2018 were $4 million and $5 million, respectively.
For the three months ended March 31, 2018, a $62 million gain for our foreign currency contracts designated as cash flow hedges was reclassified from AOCI to Other income, net.
The pre-tax effect of the periodic receipt of fixed interest and payment of variable interest associated with our fixed-for-floating interest rate swaps resulted in an additional gain recognized in Interest expense of $3 million and $7 million during the three months ended March 31, 2018 and 2017, respectively.
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Investments in Available-for-Sale Debt Securities—The following table summarizes the amortized cost, gross unrealized gains and losses, and fair value of our available-for-sale debt securities that are outstanding as of March 31, 2018 and December 31, 2017:
Available-for-saledebt securities:
Bonds
Totalavailable-for-sale debt securities
Available-for-salesecurities:
Certificates of deposit
Limited partnership investments
Totalavailable-for-sale securities
No losses related to other-than-temporary impairments of ouravailable-for-sale debt securities have been recorded in Accumulated other comprehensive loss during the three months ended March 31, 2018 and the year ended December 31, 2017.
As of March 31, 2018, our available-for-saledebt securities had the following maturities: commercial paper securities had maturities of three months and bonds had maturities between three and thirty-one months.
The proceeds from maturities and sales of our available-for-sale debt securities during the three months ended March 31, 2018 and 2017 are summarized in the following table:
Proceeds from maturities of securities
Proceeds from sales of securities
No gain or loss was realized in connection with the sales of our available-for-sale debt securities during the three months ended March 31, 2018 and 2017.
During the three months ended March 31, 2017, we had maturities of our held-to-maturity securities of $44 million.
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The following table summarizes the fair value and unrealized losses related toavailable-for-sale debt securities that were in a continuous unrealized loss position for less than and greater than twelve months as of March 31, 2018 and December 31, 2017:
Investments in Equity Securities—Our equity securities primarily consist of our limited partnership investments, which include investments in, among other things, equities and equity related securities, debt securities, credit instruments, global interest rate products, currencies, commodities, futures, options, warrants and swaps. These investments may be redeemed at least monthly with advance notice ranging up to ninety days.
The following table summarizes the portion of unrealized gains and losses for the equity securities that are outstanding as of March 31, 2018:
Net losses recognized during the period
Less: Net gains (losses) recognized during the period on securities sold
Unrealized losses recognized during the period
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Net periodic pension benefits included the following cost components for the periods presented:
Service cost
Interest cost
Expected return on plan assets
Actuarial and investment loss amortization
Net periodic benefit costs
Net periodic other postretirement benefits included the following cost components for the periods presented:
Actuarial loss amortization
The components of net periodic benefit cost other than the service cost component are included in Other income, net in the Consolidated Statements of Income.
Our effective income tax rate for the three months ended March 31, 2018 was 19.8% compared with 28.1% for the three months ended March 31, 2017. Our effective income tax rate fluctuates based on, among other factors, changes in statutory tax rates, changes in pretax income in countries with varying statutory tax rates, changes in valuation allowances, changes in foreign exchange gains/losses, the amount of exempt income, and changes in unrecognized tax benefits associated with uncertain tax positions.
Compared with the three months ended March 31, 2017, the lower effective tax rate for the three months ended March 31, 2018 was primarily attributable to the impact of the reduction to the U.S. federal statutory tax rate as a result of the U.S.-enacted “H.R.1,” also known as the “Tax Act” and increases in exempt income, partially offset by the repeal of the U.S. domestic production activity deduction.
We monitor income tax developments in countries where we conduct business. On December 22, 2017, the Tax Act was enacted with some provisions effective as early as 2017 while others were delayed until 2018. This change in U.S. tax law included a reduction in the federal corporate tax rate from 35% to 21% for years beginning after 2017, which resulted in the remeasurement of our U.S. net deferred income tax liabilities. Our 2017 income tax provision included a provisional estimate of $819 million income tax benefit related to the remeasurement of our U.S. net deferred income tax liabilities. The impact of the Tax Act may differ from this reasonable estimate due to additional guidance that may be issued, changes in assumptions made, and the finalization of certain U.S. income tax positions
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with the filing of our 2017 U.S. income tax return which will allow for the ability to conclude whether any further adjustments are necessary to our deferred tax assets and liabilities. Any adjustments to these provisional amounts will be reported as a component of income tax expense in the reporting period in which any such adjustments are identified which will be no later than the fourth quarter of 2018. We will continue to analyze the Tax Act to determine the full effects of the new law.
In September 2016, the United Kingdom enacted provisions (the so called “anti-hybrid provisions”), effective for years beginning January 1, 2017, that resulted in changes to our internal financing structure which did not materially impact our Consolidated Financial Statements. In addition, in October 2016 the U.S. Treasury issued final Section 385 debt-equity regulations that may impact our internal financings in future years. Pursuant to a recent Executive Order, the Treasury Department reviewed these regulations and determined to delay but retain these regulations, subject to further review after enactment of U.S. tax reform. There has been an increase in attention, both in the U.S. and globally, to the tax practices of multinational companies, including the European Union’s state aid investigations and proposals by the Organization for Economic Cooperation and Development with respect to base erosion and profit shifting. Such attention may result in additional legislative changes that could adversely affect our tax rate. Other than the recently enacted Tax Act, management does not believe that recent changes in income tax laws will have a material impact on our Consolidated Financial Statements, although new or proposed changes to tax laws could affect our tax liabilities in the future.
Financial Assurance Instruments—We have obtained letters of credit, performance and surety bonds and have issued financial and performance guarantees to support trade payables, potential liabilities and other obligations. Considering the frequency of claims made against the financial instruments we use to support our obligations, and the magnitude of those financial instruments in light of our current financial position, management does not expect that any claims against or draws on these instruments would have a material adverse effect on our Consolidated Financial Statements. We have not experienced any unmanageable difficulty in obtaining the required financial assurance instruments for our current operations.
Environmental Remediation—Our accrued liability for future environmental remediation costs at current and former plant sites and other remediation sites totaled $102 million as of March 31, 2018 and December 31, 2017. At March 31, 2018, the accrued liabilities for individual sites range from less than $1 million to $19 million. The remediation expenditures are expected to occur over a number of years, and not to be concentrated in any single year. In our opinion, it is reasonably possible that losses in excess of the liabilities recorded may have been incurred. However, we cannot estimate any amount or range of such possible additional losses. New information about sites, new technology or future developments such as involvement in investigations by regulatory agencies, could require us to reassess our potential exposure related to environmental matters.
The following table summarizes the activity in our accrued environmental liability included in “Accrued liabilities” and “Other liabilities:”
Beginning balance
Amounts paid
Foreign exchange effects
Ending balance
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Access Indemnity Demand—In December 2010, one of our subsidiaries received demand letters from affiliates of Access Industries (collectively, “Access Entities”), a more than five percent shareholder of the Company, demanding indemnity for losses, including attorney’s fees and expenses, arising out of a 2007 management agreement and a pending lawsuit styled Edward S. Weisfelner, as Litigation Trustee of the LB Litigation Trust v. Leonard Blavatnik, et al., Adversary Proceeding No. 09-1375 (REG), in the United States Bankruptcy Court, Southern District of New York. In the Weisfelner lawsuit, the plaintiffs sought recovery from Access all amounts earned by the Access Entities related to their purchase of shares of Lyondell Chemical Company (“Lyondell Chemical”) prior to its acquisition by Basell AF S.C.A.; distributions by Basell AF S.C.A. to its shareholders before it acquired Lyondell Chemical; and management and transaction fees and expenses.
The Access Entities also demanded $100 million in management fees under the management agreement between an Access affiliate and the predecessor of LyondellBasell AF, as well as other unspecified amounts relating to advice purportedly given in connection with financing and other strategic transactions.
In June 2009, an Access affiliate filed a proof of claim in Bankruptcy Court against LyondellBasell AF seeking “no less than $723,963.65” for the amounts allegedly owed under the 2007 management agreement.
We do not believe that the 2007 management agreement is in effect or that the Company or any Company-affiliated entity owes any obligations under the management agreement, including for management fees or for indemnification. We have defended our position in proceedings and against any claims or demands that have been asserted. In April 2011, Lyondell Chemical filed an objection to the claim and brought a declaratory judgment action for a determination that the demands are not valid and the declaratory judgment action was stayed per the parties’ agreement pending the outcome of the Weisfelner lawsuit.
The Weisfelner lawsuit went to trial in October 2016. In April 2017, the trial court awarded $12.6 million to the plaintiffs and denied all other relief, and in May 2017 the court issued its Final Judgment reflecting this ruling. The plaintiffs filed an appeal to the Federal District Court for the Southern District of New York, which largely affirmed the Final Judgment on January 24, 2018.
In April 2018, the Company and the Access Entities agreed to settle all claims, including under the 2009 Proof of Claim and 2007 Management Agreement, described in the April 2011 declaratory judgment action and the Access Entities’ December 2010 demand letters. No payments were required by either side under the settlement agreement; the declaratory judgment action will be dismissed and the Proof of Claim will be withdrawn.
Indemnification—We are parties to various indemnification arrangements, including arrangements entered into in connection with acquisitions, divestitures and the formation and dissolution of joint ventures. Pursuant to these arrangements, we provide indemnification to and/or receive indemnification from other parties in connection with liabilities that may arise in connection with the transactions and in connection with activities prior to completion of the transactions. These indemnification arrangements typically include provisions pertaining to third party claims relating to environmental and tax matters and various types of litigation. As of March 31, 2018, we had not accrued any significant amounts for our indemnification obligations, and we are not aware of other circumstances that would likely lead to significant future indemnification obligations. We cannot determine with certainty the potential amount of future payments under the indemnification arrangements until events arise that would trigger a liability under the arrangements.
As part of our technology licensing contracts, we give indemnifications to our licensees for liabilities arising from possible patent infringement claims with respect to certain proprietary licensed technologies. Such indemnifications have a stated maximum amount and generally cover a period of five to ten years.
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Dividend Distributions—On March 12, 2018, we paid a cash dividend of $1.00 per share for an aggregate of $395 million to shareholders of record on March 5, 2018.
Share Repurchase Programs—In May 2017, our shareholders approved a proposal to authorize us to repurchase up to an additional 10% of our outstanding ordinary shares through November 2018 (“May 2017 Share Repurchase Program”). As a result, the authorization of the remaining unpurchased shares under the share repurchase program approved by our shareholders in May 2016 (“May 2016 Share Repurchase Program”) was superseded. These repurchases, which are determined at the discretion of our Management Board, may be executed from time to time through open market or privately negotiated transactions. The repurchased shares, which are recorded at cost, are classified as Treasury stock and may be retired or used for general corporate purposes, including for various employee benefit and compensation plans.
The following table summarizes our share repurchase activity for the periods presented:
Millions of dollars, except shares and per share amounts
May 2017 Share Repurchase Program
May 2016 Share Repurchase Program
Due to the timing of settlements, total cash paid for share repurchases for the three months ended March 31, 2018 and 2017 was $119 million and $160 million, respectively.
Ordinary Shares—The changes in the outstanding amounts of ordinary shares are as follows:
Ordinary shares outstanding:
Warrants exercised
Employee stock purchase plan
Purchase of ordinary shares
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Treasury Shares—The changes in the amounts of treasury shares held by the Company are as follows:
Ordinary shares held as treasury shares:
Accumulated Other Comprehensive Income (Loss)—The components of, andafter-tax changes in, Accumulated other comprehensive loss as of and for the three months ended March 31, 2018 and 2017 are presented in the following table:
Balance – January 1, 2018
Other comprehensive income (loss) before reclassifications
Tax benefit before reclassifications
Amounts reclassified from accumulated other comprehensive income (loss)
Tax expense
Net other comprehensive income (loss)
Balance – March 31, 2018
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Balance – January 1, 2017
Tax (expense) benefit before reclassifications
Balance – March 31, 2017
The amounts reclassified out of each component of Accumulated other comprehensive loss are as follows:
Reclassification adjustments for:
Financial derivatives – Foreign currency
Financial derivatives – Commodities
Income tax expense
Financial derivatives, net of tax
Amortization of defined pension items:
Actuarial loss
Defined pension items, net of tax
Total reclassifications, before tax
Total reclassifications, after tax
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Amortization of prior service cost and actuarial loss is included in the computation of net periodic pension and other postretirement benefit costs (see Note 8).
Basic earnings per share are based upon the weighted average number of shares of common stock outstanding during the periods. Diluted earnings per share includes the effect of certain stock option awards and other equity-based compensation awards. We have unvested restricted stock units that are considered participating securities for earnings per share.
Earnings per share data and dividends declared per share of common stock are as follows:
Net income (loss)
Less: net (income) loss attributable to non-controllinginterests
Net income (loss) attributable to the Company shareholders
Net income attributable to participating securities
Net income (loss) attributable to ordinary shareholders – basic and diluted
Millions of shares, except per share amounts
Basic weighted average common stock outstanding
Effect of dilutive securities:
PSU awards
Potential dilutive shares
Earnings (loss) per share:
Basic
Diluted
Participating securities
Dividends declared per share of common stock
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Our operations are managed through five operating segments, as shown below. We disclose the results of each of our operating segments in accordance with ASC 280, Segment Reporting. Each of our operating segments is managed by a senior executive reporting directly to our Chief Executive Officer, the chief operating decision maker. Discrete financial information is available for each of the segments, and our Chief Executive Officer uses the operating results of each of the operating segments for performance evaluation and resource allocation. The activities of each of our segments from which they earn revenues and incur expenses are described below:
Our chief operating decision maker uses EBITDA as the primary measure for reviewing our segments’ profitability and therefore, in accordance with ASC 280, Segment Reporting, we have presented EBITDA for all segments. We define EBITDA as earnings before interest, taxes and depreciation and amortization.
“Other” includes intersegment eliminations and items that are not directly related or allocated to business operations, such as foreign exchange gains (losses) and components of pension and other postretirement benefit costs other than service cost. Sales between segments are made primarily at prices approximating prevailing market prices.
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Summarized financial information concerning reportable segments is shown in the following table for the periods presented:
Customers
Intersegment
EBITDA
In the first three months of 2017, our O&P–Americas segment results included a $31 million gain on the sale of our Lake Charles, Louisiana site. Our I&D segment results for the first quarter of 2017 included charges approximating $40 million primarily related to the precious metal catalysts.
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A reconciliation of EBITDA to Income from continuing operations before income taxes is shown in the following table for each of the periods presented:
EBITDA:
Total segment EBITDA
Other EBITDA
Less:
Depreciation and amortization expense
Add:
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Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
This discussion and analysis should be read in conjunction with the information contained in our Consolidated Financial Statements and the accompanying notes elsewhere in this report. When we use the terms “we,” “us,” “our” or similar words in this discussion, unless the context otherwise requires, we are referring to LyondellBasell Industries N.V. and its consolidated subsidiaries.
OVERVIEW
We started 2018 with strong operations, capturing higher margins for several of our products and advancing our organic and inorganic growth programs. EBITDA improved by 11% relative to the fourth quarter of 2017 and by 18% relative to the first quarter of 2017. Global polyolefins demand remained solid. While U.S. ethylene prices weakened, a tight market for polyolefins supported a polyethylene price increase and strong chain margins. Strong results for our Intermediates and Derivatives (“I&D”) segment were driven primarily by higher margins, while our reliability initiatives at our Houston refinery resulted in strong operations during the first quarter of 2018.
Significant items that affected our results during the first quarter of 2018 relative to the first quarter of 2017 include:
Other noteworthy items since the beginning of the year include the following:
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Results of operations for the periods discussed are presented in the table below:
Sales and other operating revenues
RESULTS OF OPERATIONS
Revenues—Revenues increased by $1,337 million, or 16%, in the first quarter of 2018 compared to the first quarter of 2017.
Average sales prices in the first quarter of 2018 were higher for most of our products as sales prices generally correlate with crude oil prices, which on average, increased compared to the corresponding period in 2017. These higher prices led to an increase in first quarter 2018 revenues of 7%. Higher volumes in our Refining and O&P-EAI segments, which were offset approximately 35% by lower O&P–Americas and I&D segment volumes, resulted in a revenue increase of 3% in the first quarter of 2018. Favorable foreign exchange impacts also resulted in a revenue increase of 6%.
Cost of Sales—Cost of sales increased by $1,021 million, or 15%, in the first quarter of 2018 compared to the first quarter of 2017 primarily due to increases in feedstock and energy costs.
Operating Income—Operating income increased by $284 million in the first quarter of 2018 compared to the first quarter of 2017.
Operating income for our I&D, O&P–Americas and Refining segments increased relative to the first quarter of 2017 by $139 million, $92 million and $85 million, respectively. These increases were offset in part by a decrease of $28 million in our O&P–EAI segment.
Results for each of our business segments are discussed further in the “Segment Analysis” section below.
Interest Expense—Interest expense decreased by $116 million in the first quarter of 2018 compared to the first quarter of 2017.
In March 2017, we recognized charges totaling $113 million related to the redemption of $1,000 million of our outstanding 5% senior notes due 2019. These charges included $65 million of prepayment premiums, $44 million for adjustments associated with fair value hedges and $4 million for the write-off of associated unamortized debt issuance costs.
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Compared to 2017 and excluding the effects of fair value hedges and the charges described above, interest expense decreased $13 million in the first quarter of 2018 due to the redemption of our 5% senior notes due 2019 in the first quarter of 2017, and increased $7 million as a result of the related debt issuance in March 2017 of our 3.5% guaranteed notes due 2027. An increase in the amount of interest capitalized resulted in an incremental decrease in interest expense of $4 million during the first quarter of 2018.
Income Tax—Our effective income tax rate for the first quarter of 2018 was 19.8% compared with 28.1% for the first quarter of 2017.
Our effective income tax rate fluctuates based on, among other factors, changes in statutory tax rates, changes in pretax income in countries with varying statutory tax rates, changes in valuation allowances, changes in foreign exchange gains/losses, the amount of exempt income, and changes in unrecognized tax benefits associated with uncertain tax positions. Our exempt income primarily includes interest income, export incentives, and equity earnings of joint ventures. The interest income is earned by certain of our European subsidiaries through intercompany financings and is either untaxed or taxed at rates substantially lower than the U.S. statutory rate. The export incentives relate to tax benefits derived from elections and structures available for U.S. exports. The equity earnings are attributable to our joint ventures and these earnings when paid through dividends to certain European subsidiaries are eligible for participation exemptions, which exempt the dividend payments from all or portions of normal statutory income tax rates. We currently anticipate the favorable treatment for the interest income and dividends to continue in the near term; however, this treatment is based on current law and tax rulings, which could change. The foreign exchange gains/losses have a permanent impact on our effective income tax rate that can cause unpredictable movement in our effective income tax rate.
Compared with the first quarter of 2017, the lower effective tax rate for the first quarter of 2018 was primarily attributable to the impact of the reduction to the U.S. federal statutory tax rate as a result of the U.S.-enacted “H.R.1,” also known as the “Tax Cuts and Jobs Act” (the “Tax Act”) (-6.3%)and increases in exempt income (-3.3%), partially offset by the repeal of the U.S. domestic production activity deduction (1.2%).
We monitor income tax developments in countries where we conduct business. On December 22, 2017, the Tax Act was enacted with some provisions effective as early as 2017 while others were delayed until 2018. This change in U.S. tax law included a reduction in the federal corporate tax rate from 35% to 21% for years beginning after 2017, which resulted in the remeasurement of our U.S. net deferred income tax liabilities. Our 2017 income tax provision included a provisional estimate of $819 million income tax benefit related to the remeasurement of our U.S. net deferred income tax liabilities. The impact of the Tax Act may differ from this reasonable estimate due to additional guidance that may be issued, changes in assumptions made, and the finalization of certain U.S. income tax positions with the filing of our 2017 U.S. income tax return which will allow for the ability to conclude whether any further adjustments are necessary to our deferred tax assets and liabilities. Any adjustments to these provisional amounts will be reported as a component of income tax expense in the reporting period in which any such adjustments are identified which will be no later than the fourth quarter of 2018. We will continue to analyze the Tax Act to determine the full effects of the new law.
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Comprehensive Income—Comprehensive income increased by $415 million in the first quarter of 2018 compared to the first quarter of 2017. This improvement reflects higher net income in the first quarter of 2018. These increases were partly offset by unfavorable impacts of financial derivative instruments recognized in the first quarter of 2018 primarily driven by periodic changes in benchmark interest rates.
The predominant functional currency for our operations outside of the U.S. is the euro. Relative to the U.S. dollar, the value of the euro increased during the first quarter of 2018 resulting in net gains as reflected in the Consolidated Statements of Comprehensive Income. These net gains includepre-tax losses of $42 million in the first quarter of 2018 which represent the effective portion of our net investment hedges.
In the first quarter of 2018, the cumulative effects of our derivatives designated as cash flow hedges were net gains of $5 million. The strengthening of the euro against the U.S. dollar in the first quarter of 2018 and periodic changes in benchmark interest rates resulted in pre-tax losses of $108 million related to our cross-currency swaps. Pre-tax gains of $62 million related to our cross-currency swaps were reclassification adjustments included in other income, net in the first quarter of 2018. Pre-taxgains of $49 million related to forward-starting interest rate swaps were driven by changes in benchmark interest rates in the first quarter of 2018.
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Segment Analysis
We use earnings before interest, income taxes, and depreciation and amortization (“EBITDA”) as our measure of profitability for segment reporting purposes. This measure of segment operating results is used by our chief operating decision maker to assess the performance of and allocate resources to our operating segments. 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 benefits other than service costs are included in “Other.” For additional information related to our operating segments, as well as a reconciliation of EBITDA to its nearest GAAP measure, Income from continuing operations before income taxes, see Note 13, Segment and Related Information, to our Consolidated Financial Statements.
Our continuing operations are divided into five reportable segments: O&P–Americas; O&P–EAI; I&D; Refining; and Technology. Revenues and the components of EBITDA for the periods presented are reflected in the table below.
O&P–Americas segment
O&P–EAI segment
I&D segment
Refining segment
Technology segment
Other, including intersegment eliminations
Operating income (loss):
Depreciation and amortization:
Income from equity investments:
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Other income (expense), net:
Olefins and Polyolefins–Americas Segment
Overview—EBITDA in the first quarter 2018 was higher than the first quarter of 2017 due to strong polyolefins results, which were partly offset by lower volumes. EBITDA for the first quarter of 2017 included a $31 million gain on the sale of our Lake Charles, Louisiana, site.
Ethylene Raw Materials—Although prices of crude-based liquids and natural gas liquids are generally related to crude oil and natural gas prices, during specific periods the relationships among these materials and benchmarks may vary significantly. We have significant flexibility to vary the raw material mix and process conditions in our U.S. olefins plants in order to maximize profitability as market prices for both feedstocks and products change.
As in recent years, strong supplies from the U.S. shale gas/oil boom resulted in ethane being a preferred feedstock in our U.S. plants in 2018. In the first quarters of 2018 and 2017, we produced approximately 80% and 75%, respectively, of our ethylene from ethane. Despite generally higher liquid feedstock prices, strong propylene and butadiene coproduct prices at various points during these periods also brought liquids into our feedslate.
The following table sets forth selected financial information for the O&P–Americas segment including Income from equity investments, which is a component of EBITDA:
Revenues—Revenues for our O&P–Americas segment increased by $154 million, or 6%, in the first quarter of 2018 compared to the first quarter of 2017.
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Average polyolefins sales prices were higher in the first quarter of 2018, compared to first quarter of 2017. Polyethylene sales prices increased due to strong market demand, while polypropylene average sales prices rose in response to increases in propylene prices. These higher sales prices were responsible for an increase in revenues of 8% in the first quarter of 2018.
Sub-freezing weather conditions on the Gulf Coast inmid-January resulted in unplanned downtime at our facilities and those of our competitors. These unplanned outages led to a decline in sales volumes across most products, which was responsible for a revenue decrease of 2% in the first quarter of 2018.
EBITDA—EBITDA increased by $57 million, or 8%, in the first quarter of 2018 compared to the first quarter of 2017.
Polyethylene and polypropylene margins increased by 11 cents per pound and 5 cents per pound, respectively, leading to a 20% improvement in EBITDA in the first quarter of 2018. These margin increases reflect higher sales prices and lower ethylene feedstock price in the case of polyethylene, and for polypropylene, higher sales prices that rose in response to increases in propylene feedstock costs.
These EBITDA improvements were offset by a 4% decrease relative to the first quarter of 2017 related to the gain on sale of our Lake Charles, Louisiana site discussed above. The lower volumes discussed above resulted in a further decline in EBITDA of 8%.
Olefins and Polyolefins–Europe, Asia, International Segment
Overview—First quarter 2018 EBITDA declined slightly compared to the first quarter of 2017 as lower margins in Europe were mostly offset by the favorable impacts of foreign exchange, increased sales volumes and improved income from equity investments.
The following table sets forth selected financial information for the O&P–EAI segment including Income from equity investments, which is a component of EBITDA:
Revenues—Revenues increased by $538 million, or 18%, in the first quarter of 2018 compared to the first quarter of 2017.
Increased production stemming from an improvement in operating rates, and higher demand compared to the first quarter of 2017 led to higher sales volumes across most products. These increased volumes resulted in a revenue increase of 3% in the first quarter of 2018. Higher average sales prices for most products in the first quarter of 2018 also resulted in a 3% revenue increase.
Foreign exchange impacts that, on average, were favorable for the first quarter of 2018 resulted in an additional revenue increase of 12% compared to the first quarter of 2017.
EBITDA—EBITDA in the first quarter of 2018 decreased by $11 million, or 2%, compared to the first quarter of 2017.
In the first quarter of 2018, lower margins in Europe, which declined mainly due to a 4 cents per pound decrease in polyethylene spreads and a 4 cents per pound increase in the weighted average cost of ethylene production, led to a 19% decline in EBITDA.
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This decline was largely offset by favorable foreign exchange impacts and higher volumes across most products which increased EBITDA by 12% and 3%, respectively, relative to the first quarter of 2017. An additional 2% increase in EBITDA resulted from higher income from our equity investments in the first quarter of 2018.
Intermediates and Derivatives Segment
Overview—EBITDA for our I&D segment was higher in the first quarter of 2018 than the first quarter of 2017 as margins benefited from industry supply constraints and strong demand. EBITDA for the first quarter of 2017 included a negative impact of approximately $40 million related to precious metal catalysts.
The following table sets forth selected financial information for the I&D segment including Income from equity investments, which is a component of EBITDA:
Revenues—Revenues increased by $193 million, or 9%, in the first quarter of 2018 compared to the first quarter of 2017.
Higher average sales prices in the first quarter of 2018 for most products, which reflect the impacts of higher feedstock and energy costs and recent industry supply constraints, were responsible for a revenue increase of 7%. Foreign exchange impacts that, on average, were higher in the first quarter of 2018 relative to the prior year period added another 4% to revenues.
These increases were partially offset by a revenue decrease of 2% in the first quarter of 2018, primarily due to lower sales volumes for intermediate chemicals products. This volume driven decline was largely due to planned and unplanned outages at our facilities at La Porte and Channelview, Texas, and Tuscola, Illinois.
EBITDA—EBITDA increased $147 million, or 43%, in the first quarter of 2018 compared to the first quarter of 2017.
Higher margins led to a 36% improvement in first quarter 2018 EBITDA relative to the first quarter of 2017. Tight supplies driven by seasonal demand for PO and derivatives products and by industry outages for several intermediate chemicals products led to higher sales prices. PO and derivatives and intermediate chemicals each accounted for approximately 40% of the margin improvement. The remaining increase in margins was attributable to oxyfuels and related products, which benefited from an approximate $13 per barrel increase in crude oil prices that more than offset the higher cost of feedstocks. An additional 12% increase in first quarter 2018 EBITDA, as compared to the corresponding prior year period, stems from the absence of the first quarter 2017 unfavorable impact associated with precious metal catalysts. These improvements were partly offset by a 5% decline in EBITDA due to the impact of lower volumes discussed above.
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Refining Segment
Overview—EBITDA for our Refining segment benefited from higher crude processing rates and higher yields in the first quarter of 2018 compared to the corresponding period in 2017, which was impacted by planned and unplanned maintenance outages.
The following table sets forth selected financial information and heavy crude oil processing rates for the Refining segment and the U.S. refining market margins for the applicable periods. Light Louisiana Sweet, is a light, sweet crude oil, while “Maya” is a heavy, sour crude oil. References to industry benchmarks for refining market margins are to industry prices reported by Platts, a division of S&P Global.
Heavy crude processing rates, thousands of barrels per day
Market margins, dollars per barrel
Light crude oil –2-1-1
Light crude – Maya differential
Total Maya2-1-1
Revenues—Revenues increased by $904 million, or 67%, in the first quarter of 2018 compared to the first quarter of 2017.
Higher product prices led to a revenue increase of 26%, relative to the first quarter of 2017 due to an average crude oil price increase of approximately $13 per barrel. Heavy crude oil processing rates increased by approximately 30% in the first quarter of 2017, leading to a volume driven revenue increase of 41%.
EBITDA—EBITDA increased by $93 million, or 310%, in the first quarter of 2018 compared to the first quarter of 2017.
Higher production accounted for approximately one third of the EBITDA improvement in the first quarter of 2017. Crude oil processing rates in 2018 were higher than 2017, which was negatively impacted by downtime at one of our crude units and at our fluid catalytic cracking (“FCC”) unit.
Refining margins accounted for the remaining improvement in first quarter 2018 EBITDA. Margins were higher on better yields for the first quarter 2018 compared to the same period in 2017, which was negatively impacted by the planned turnaround activity on our FCC unit.
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Technology Segment
Overview—EBITDA for the Technology segment declined in the first quarter of 2018 compared to the first quarter 2017 with lower licensing and services revenues.
The following table sets forth selected financial information for the Technology segment:
Revenues—Revenues decreased by $5 million, or 4%, in the first quarter of 2018 compared to the first quarter of 2017.
Lower licensing and services revenues were responsible for a revenue decrease of 4% in the first quarter of 2018 relative to the first quarter of 2017. Lower catalyst volumes and average sales prices led to additional revenue declines of 9% and 5%, respectively. These revenue decreases were partially offset by a 14% revenue increase in the first quarter of 2018 stemming from favorable foreign exchange impacts.
EBITDA—EBITDA decreased by $4 million, or 7%, in the first quarter of 2018 compared to the first quarter of 2017, primarily due to lower licensing and services revenues.
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FINANCIAL CONDITION
Operating, investing and financing activities, which are discussed below, are presented in the following table:
Source (use) of cash:
Operating activities
Investing activities
Financing activities
Operating Activities—Cash of $1,006 million generated by operating activities in the first quarter of 2018 reflected an increase in earnings adjusted for non-cash items, offset by payments for taxes and employee bonuses, and $179 million of cash consumed by the main components of working capital–accounts receivable, inventories and accounts payable.
Higher first quarter 2018 sales volumes in our O&P–EAI segment relative to the fourth quarter of 2017 resulted in the increase in accounts receivable. The delay in cargo deliveries for our refining segment from December 2017 to the first quarter of 2018 combined with their seasonally loweryear-end inventory levels led to the increase in inventories. Increased feedstock prices for our refining segment in the first quarter of 2018 was the primary driver for the increase in accounts payable.
The main components of working capital consumed $423 million of cash in the first quarter of 2017. The increase in accounts receivable, which was the most significant component of the change in working capital, was mainly driven by higher product sales prices in our O&P–Americas, O&P–EAI and I&D segments in the first quarter of 2017 relative to the fourth quarter of 2016.
Investing Activities—We invest cash in investment-grade and other high-quality instruments that provide adequate flexibility to redeploy funds as needed to meet our cash flow requirements while maximizing yield.
In the first quarter of 2018 and 2017, we invested $50 million and $408 million, respectively, in debt securities that are deemed available-for-sale and classified as Short-term investments. In the first quarter of 2017, we also invested $324 million in tri-party repurchase agreements, which are classified as short-term loans receivable.
We received proceeds of $335 million and $338 million in the first quarter of 2018 and 2017, respectively, upon the sale and maturity of certain of our available-for-sale debt securities. In the first quarter of 2017, we also received proceeds of $202 million and $44 million, respectively, upon maturity of certain of our repurchase agreements and held-to-maturity securities.
See note 7 to the Consolidated Financial Statements for additional information regarding these investments.
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Capital Expenditures—The following table summarizes capital expenditures for the periods presented:
Capital expenditures by segment:
O&P–Americas
O&P–EAI
I&D
Refining
Technology
Consolidated capital expenditures
In the first quarter of 2018 and 2017, our capital expenditures included construction related to our new Hyperzone polyethylene plant at our La Porte, Texas facility and our new PO/TBA plant at our Channelview, Texas facility, debottlenecks of certain assets to enhance production, turnaround activities at several sites as well as other plant improvement projects. The higher level of capital expenditures for our O&P–Americas segment in the first quarter of 2018 relative to the same period in 2017 is largely due to the construction of our new Hyperzone polyethylene plant. The lower level of capital expenditures for our Refining segment reflects the completion of turnaround activities in 2017.
Financing Activities—In the first quarter of 2018 and 2017, we made payments of $119 million and $160 million to acquire approximately 1 million and 2 million, respectively, of our outstanding ordinary shares. We also made dividend payments totaling $395 million and $343 million during the first quarter of 2018 and 2017, respectively. For additional information related to our share repurchases and dividend payments, see Note 11 to the Consolidated Financial Statements.
We received net proceeds of $50 million in the first quarter of 2017 through the issuance and repurchase of commercial paper instruments under our commercial paper program.
In March 2017, we issued $1,000 million of 3.5% guaranteed notes due 2027 and received net proceeds of $990 million. The proceeds from these notes, together with available cash, were used to repay $1,000 million of our outstanding 5% senior notes due 2019. We paid $65 million in premiums related to this prepayment.
Additional information related to these notes can be found in the Liquidity and Capital Resources section below and in Note 6 to the Consolidated Financial Statements.
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Liquidity and Capital Resources—As of March 31, 2018, we had $2,882 million of unrestricted cash and cash equivalents and marketable securities classified as Short-term investments and held $586 million of tri-party repurchase agreements classified as Prepaid expenses and other current assets. For additional information related to our purchases of marketable securities see “Investing Activities” above and Note 7 to the Consolidated Financial Statements.
At March 31, 2018, we held $617 million of cash in jurisdictions outside of the U.S., principally in the United Kingdom. There are currently no legal or economic restrictions that materially would impede our transfers of cash.
We also had total unused availability under our credit facilities of $3,400 million at March 31, 2018, which included the following:
At March 31, 2018, we had total debt, including current maturities, of $8,613 million, and $296 million of outstanding letters of credit, bank guarantees and surety bonds issued under uncommitted credit facilities.
In accordance with our current interest rate risk management strategy and subject to management’s evaluation of market conditions and the availability of favorable interest rates among other factors, we may from time to time enter into interest rate swap agreements to economically convert a portion of our fixed rate debt to variable rate debt or convert a portion of variable rate debt to fixed rate debt.
For additional information related to our credit facilities discussed above, see Note 6 to the Consolidated Financial Statements.
In May 2017, our shareholders approved a proposal to authorize us to repurchase up to an additional 10%, or approximately 40 million, of our outstanding ordinary shares through November 2018 (“May 2017 Share Repurchase Program”). Our share repurchase program does not have a stated dollar amount, and purchases may be made through open market purchases, private market transactions or other structured transactions. Repurchased shares could be retired or used for general corporate purposes, including for various employee benefit and compensation plans. In the first quarter of 2018, we purchased approximately 1 million shares under this program for approximately $138 million. As of April 24, 2018, we had approximately 31 million shares remaining under the current authorization. The timing and amounts of additional shares repurchased will be determined by our Management Board based on its evaluation of market conditions and other factors. For additional information related to our share repurchase programs, see Note 11 to the Consolidated Financial Statements.
We may repay or redeem our debt, including purchases of our outstanding bonds in the open market, using cash and cash equivalents, cash from our short-term investments and tri-party repurchase agreements, cash from operating activities, proceeds from the issuance of debt, proceeds from asset divestitures, or a combination thereof. In connection with any repayment or redemption of our debt, we may incur cash and non-cash charges, which could be material in the period in which they are incurred.
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In July 2017, we announced our final investment decision to build a world-scale PO/TBA plant in Texas with a capacity of 1 billion pounds of PO and 2.2 billion pounds of TBA. The project is estimated to cost approximately $2.4 billion, with groundbreaking expected in the third quarter of 2018. We anticipate the project to be completed in the middle of 2021.
We plan to fund our ongoing working capital, capital expenditures, debt service and other funding requirements with cash from operations, which could be affected by general economic, financial, competitive, legislative, regulatory, business and other factors, many of which are beyond our control. Cash and cash equivalents, cash from our short-term investments and tri-party repurchase agreements, cash from operating activities, proceeds from the issuance of debt, or a combination thereof, may be used to fund the purchase of shares under our share repurchase program.
We intend to continue to declare and pay quarterly dividends, with the goal of increasing the dividend over time, after giving consideration to our cash balances and expected results from operations.
In March 2018, we received U.S. antitrust clearance for the acquisition of A. Schulman, Inc. The closing of this transaction remains subject to other customary closing conditions, including approval of A. Schulman, Inc.’s shareholders and the receipt of other required regulatory clearances and approvals. Closing of this $2.25 billion acquisition is expected in the second half of 2018. We plan to use cash-on-hand to fund the acquisition.
We believe that our current liquidity availability and cash from operating activities provide us with sufficient financial resources to meet our anticipated capital requirements and obligations as they come due.
CURRENT BUSINESS OUTLOOK
We are beginning to see the typical seasonal margin improvements for oxyfuels and related products and refining products, and we look forward to the benefits of continued high operating rates in the second quarter. Over the past two months, the U.S. market has experienced an imbalance between ethylene production and consumption, but this is expected to improve as the downstream derivative units attain full operating rates. Robust global demand and recent higher oil prices continue to support strong polyolefin pricing. Our organic growth program continues with our Hyperzone HDPE and PO/TBA projects on track.
ACCOUNTING AND REPORTING CHANGES
For a discussion of the impact of new accounting pronouncements on our consolidated financial statements, see Note 2 to the Consolidated Financial Statements.
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CAUTIONARY STATEMENT FOR THE PURPOSES OF THE “SAFE HARBOR” PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
This report includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. You can identify our forward-looking statements by the words “anticipate,” “estimate,” “believe,” “continue,” “could,” “intend,” “may,” “plan,” “potential,” “predict,” “should,” “will,” “expect,” “objective,” “projection,” “forecast,” “goal,” “guidance,” “outlook,” “effort,” “target” and similar expressions.
We based forward-looking statements on our current expectations, estimates and projections of our business and the industries in which we operate. We caution you that these statements are not guarantees of future performance. They involve assumptions about future events that, while made in good faith, may prove to be incorrect, and involve risks and uncertainties we cannot predict. Our actual outcomes and results may differ materially from what we have expressed or forecast in the forward-looking statements. Any differences could result from a variety of factors, including the following:
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Any of these factors, or a combination of these factors, could materially affect our future results of operations and the ultimate accuracy of the forward-looking statements. Our management cautions against putting undue reliance on forward-looking statements or projecting any future results based on such statements or present or prior earnings levels.
All subsequent written and oral forward-looking statements attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section and any other cautionary statements that may accompany such forward-looking statements. Except as otherwise required by applicable law, we disclaim any duty to update any forward-looking statements.
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Our exposure to market and regulatory risks is described in Item 7A of our Annual Report on Form 10-K for the year ended December 31, 2017. Our exposure to such risks has not changed materially in the three months ended March 31, 2018.
As of March 31, 2018, with the participation of our management, our Chief Executive Officer (principal executive officer) and our Chief Financial Officer (principal financial officer) carried out an evaluation, pursuant to Rule 13a-15(b) of the Securities Exchange Act of 1934, as amended (the Act), of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) of the Act). Based upon that evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that our disclosure controls and procedures were operating effectively as of March 31, 2018.
There have been no changes in our internal control over financial reporting, as defined in Rule 13a-15(f) of the Act, in the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II. OTHER INFORMATION
Information regarding our litigation and other legal proceedings can be found in Note 10, Commitments and Contingencies, to the Consolidated Financial Statements, which is incorporated into this Item 1 by reference.
The following is a description of environmental proceedings to which a governmental authority is a party and potential monetary sanctions are reasonably likely to be $100,000 or more.
In August 2015, the Victoria plant experienced a hexane leak into the cooling water system which resulted in estimated emissions of 154,000 pounds of hexane over a 12-day period from the cooling water pond operated by the site host, Invista. In November 2017, the Texas Commission on Environmental Quality (the “TCEQ”) issued a proposed agreed order to both Invista and Equistar assessing a proposed penalty of $300,000. TCEQ issued a revised proposed agreed order in January 2018 that lowered the administrative penalty to $93,750.
In January 2018, Houston Refining, LP learned that the TCEQ had referred an environmental matter to the Texas Attorney General’s office (“TAGO”) for enforcement. The environmental matter referred to TAGO for enforcement stems from air emissions events sustained at the refinery. We reasonably believe that TAGO may assert a penalty demand in excess of $100,000.
Additional information about such environmental proceedings can be found in Part I, Item 3 of our 2017 Annual Report on Form10-K, which is incorporated into this Item 1 by reference.
There have been no material changes from the risk factors disclosed in Item 1A of our 2017 Annual Report on Form 10-K.
Period
January 1 – January 31
February 1 – February 28
March 1 – March 31
Not applicable.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
/s/ Thomas Aebischer
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