Millennium Chemicals Reports Fourth Quarter and Full Year 2003 Operating Results and Outlook




                 -- 4Q03 loss of $1.87 per share --
  -- 4Q03 loss of $0.48 per share excluding designated items --
            -- 4Q03 asset writedowns of $103 million  --

HUNT VALLEY, Md., Feb. 3, 2004 (PRIMEZONE) -- Millennium Chemicals (NYSE:MCH) ("Millennium") today reported a net loss for the fourth quarter of 2003 of $120 million or $1.87 per common share. The net loss for the fourth quarter of 2003 included asset impairment charges of $101 million after tax and net tax benefits unrelated to 2003 results of operations of $18 million. For the corresponding quarter of 2002, Millennium reported a net loss of $2 million or $0.03 per common share. Excluding designated items, the fourth quarter 2003 loss was $31 million or $0.48 per common share compared to a loss of $25 million or $0.39 per common share for the corresponding quarter of 2002 (see Note 1).

Robert E. Lee, President and CEO, said, "We were pleased with the beginning recovery of our volumes in our Titanium Dioxide business but very disappointed with the low profit in this segment. We are reviewing all options to improve margins in this segment. Acetyls had its best quarter in the last three years. As we look to 2004, we are optimistic that the progress we have made in the last six months focusing on our customers, costs and balance sheet management has begun to change the momentum of our Company."

Operating loss from majority-owned businesses was $97 million in the fourth quarter of 2003. This compares to $23 million of operating income in the fourth quarter of 2002 and a $5 million operating loss in the third quarter of 2003. Operating income from majority-owned businesses, excluding designated items (see Note 2), was $8 million in the fourth quarter of 2003 compared to $22 million in the fourth quarter of 2002 and $10 million in the third quarter of 2003. Sales from all majority-owned businesses were $425 million in the fourth quarter of 2003 compared to $387 million in the fourth quarter of 2002 and $431 million in the third quarter of 2003. The decline in operating income after excluding designated items in the fourth quarter of 2003 compared to such prior quarters was due primarily to lower profits in the Titanium Dioxide segment caused primarily by higher manufacturing costs.

For the full year 2003, the reported net loss was $184 million or $2.88 per common share compared to a net loss of $333 million or $5.24 per common share in 2002. Excluding designated items, the net loss was $79 million or $1.23 per common share for 2003 and $54 million or $0.85 per common share for 2002 (see Note 1). Full year 2003 sales were $1.687 billion compared to full year 2002 sales of $1.554 billion.

TITANIUM DIOXIDE

The Titanium Dioxide segment reported a fourth quarter 2003 operating loss of $102 million, or operating income of $1 million excluding the $103 million of asset impairment charges, compared to $17 million of operating income in the fourth quarter last year and $7 million of operating income in the third quarter of 2003.

In local currencies, average fourth quarter prices decreased 1 percent both from last year's fourth quarter and from the third quarter of 2003. In US dollar terms, the average global fourth quarter price was up 5 percent from last year's fourth quarter and up 1 percent from the third quarter of 2003.

The fourth quarter TiO2 sales volume of 152,000 metric tons increased 7 percent from the fourth quarter of last year and increased 2 percent from the third quarter of 2003. Full year 2003 sales volume of 591,000 metric tons was 6 percent lower than sales volume in 2002.

The fourth quarter TiO2 plant production operating rate was 88 percent of annual nameplate capacity of 690,000 metric tons compared to an operating rate of 96 percent in last year's fourth quarter and 84 percent in the third quarter of 2003.

The fourth quarter 2003 manufacturing costs per metric ton increased 16 percent compared to the fourth quarter of 2002 primarily due to unfavorable currency exchange rates, higher energy costs, and lower operating rates. Manufacturing costs per metric ton in the fourth quarter of 2003 increased 2 percent compared to the third quarter of 2003 primarily due to unfavorable currency exchange rates.

In the fourth quarter of 2003 Millennium reported $103 million of asset impairment charges associated primarily with the writedown of property, plant, and equipment at its Le Havre, France manufacturing plant. In accordance with Statement of Financial Accounting Standards No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets", an analysis of estimated future cash flows associated with these assets resulted in the need for an impairment charge to write down the property, plant, and equipment to its estimated fair value. Depreciation savings in 2004 will be offset to the extent of capital spending at the plant, which will be included in period charges.

Outlook

The Titanium Dioxide segment sales volume in the first quarter of 2004 is anticipated to be seasonally higher than the fourth quarter of 2003. Operating income in the first quarter of 2004 is expected to be slightly higher than the fourth quarter of 2003, but substantially lower than the first quarter of 2003.

ACETYLS

The Acetyls segment reported fourth quarter 2003 operating income of $9 million compared to $8 million in the fourth quarter of last year and $6 million in the third quarter of 2003.

In the aggregate, the weighted-average US dollar price for VAM and acetic acid in the fourth quarter of 2003 increased 10 percent from prices in the fourth quarter of 2002 and was consistent with the third quarter of 2003. Aggregate volume for VAM and acetic acid in the fourth quarter decreased 3 percent from the fourth quarter of 2002 and decreased 6 percent from the third quarter of 2003.

Outlook

The Acetyls segment operating income in the first quarter of 2004 is expected to be lower than the fourth quarter of 2003 due to anticipated higher feedstock costs. Sales volume is expected to be similar to the fourth quarter of 2003.

SPECIALTY CHEMICALS

The Specialty Chemicals segment reported a fourth quarter 2003 operating loss of $1 million compared to operating losses of $2 million in the fourth quarter of 2002 and $1 million in the third quarter of 2003.

Sales volume increased 1 percent from the fourth quarter of 2002 and was 8 percent lower than the third quarter of 2003 due to softening demand. Average selling prices increased 7 percent compared to the fourth quarter of 2002 and increased 5 percent from the third quarter of 2003, primarily due to changes in product mix.

Outlook

The Specialty Chemicals segment operating results in the first quarter of 2004 are expected to slightly improve from the fourth quarter of 2003 primarily due to higher sales volume, improved operating efficiency and favorable product mix.

EQUISTAR

Millennium's 29.5 percent stake in Equistar generated an equity loss on investment of $31 million in the fourth quarter of 2003 compared to an equity loss of $34 million in the fourth quarter of 2002 and a $12 million equity loss in the third quarter of 2003. Equistar's results were negatively impacted by high, volatile raw material and energy prices as well as financing and severance costs.

Compared to the third quarter of 2003, the fourth quarter of 2003 results were negatively impacted by an increase in the cost of ethylene production which was driven by higher crude oil and natural gas liquid prices. Price actions were implemented to offset these increases, but the timing of implementation was insufficient to fully offset the cost increases. Additionally, a scheduled maintenance turnaround at an ethylene plant had a negative $5 million to $10 million impact on Equistar's fourth quarter results.

Outlook

The early weeks of 2004 have yielded strong volumes, but raw material and energy cost increases are pressuring margins. Equistar has responded by announcing product price increases across the majority of their product lines. The improving economy should lead to improved performance for 2004. Since the products have broad utilization across the economy and a heavy dependence on hydrocarbons, external factors such as economic growth and raw materials prices will continue to be leveraging factors to Equistar's financial performance during 2004.

PENSION PLANS AND EQUITY

Due to recent improvement in the financial markets, the underfunded Accumulated Benefit Obligation ("ABO") for certain of Millennium's US and foreign pension plans has been reduced. Millennium recorded a benefit of $40 million ($26 million after tax) in stockholders' deficit in the fourth quarter of 2003 to reflect the improvement in the underfunded status of the ABO for these plans.

Due to a reduction of the discount rate assumption related to the Company's pension plans and the amortized recognition of pension fund investment losses in the financial markets in recent years prior to 2003, pension expense for 2004 is estimated to increase by approximately $10 million. Pension plan trust funding is expected to increase by approximately $5 million in 2004.

TAX BENEFITS

Tax benefits were reported in the fourth quarter of 2003 as a result of the favorable resolution of certain tax matters that were reserved for in prior years. These benefits were partially offset by deferred tax expense recorded on certain unremitted earnings of foreign subsidiaries that resulted from Millennium's plan to implement certain intercompany financing strategies. The aggregate net tax benefit of $18 million associated with these matters is included in results of operations for the fourth quarter of 2003.

DEBT AND CAPITAL SPENDING

Net debt (total debt less cash) at December 31, 2003 totaled $1.258 billion versus $1.205 billion at September 30, 2003 and $1.117 billion at the end of 2002. Net debt increased by $53 million during the fourth quarter of 2003. This was primarily due to an increase of $59 million from the termination of an accounts receivable securitization program in conjunction with the amendment to the Company's Credit Agreement. Net interest expense was $24 million in the fourth quarter of 2003 compared to $23 million in the third quarter of 2003. Net interest expense was $92 million for 2003, up from $86 million in 2002.

The Company amended its Credit Agreement during the fourth quarter of 2003 which became effective upon the closing of the convertible senior debenture offering in November 2003. The amended Credit Agreement includes revised covenants which provide the Company with greater financial flexibility.

Capital spending in 2003 was $48 million compared to $71 million in 2002. Planned capital spending in 2004 is projected to be approximately $60 million. Depreciation and amortization was $113 million for Millennium's wholly owned businesses in 2003.

Note 1: See Table V below for an explanation and quantification of these items, and a reconciliation between loss per common share, as adjusted for these designated items, and loss per common share determined according to accounting principles generally accepted in the United States of America.

Note 2: Designated items include asset impairment charges of $103 million ($101 million after tax) and $2 million of reorganization costs in the fourth quarter of 2003; a benefit of $1 million in the fourth quarter of 2002 from the reduction of reserves due to the favorable resolution of environmental claims related to predecessor businesses reserved for in prior years; and $15 million of reorganization costs in the third quarter of 2003.

Millennium Chemicals (website: www.millenniumchem.com) is a major international chemicals company, with leading market positions in a broad range of commodity, industrial, performance and specialty chemicals.

Millennium Chemicals is:

- The second-largest producer of TiO2 in the world, the largest merchant seller of titanium tetrachloride and a major producer of zirconia, silica gel and cadmium-based pigments;

- The second-largest producer of acetic acid and vinyl acetate monomer in North America;

- A leading producer of terpene-based fragrance and flavor chemicals; and,

- Through its 29.5% interest in Equistar Chemicals, LP, a partner in the second-largest producer of ethylene and third-largest producer of polyethylene in North America, and a leading producer of performance polymers, oxygenated chemicals, aromatics and specialty petrochemicals.



       Listen in live to Millennium's 2003 fourth quarter earnings
 and outlook discussion on Tuesday, February 3, 2004 at 1:00 p.m. EST
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                       the Investor Relations icon.
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The statements in this press release that are not historical facts are, or may be deemed to be, "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995. Some of these statements can be identified by the use of forward-looking terminology such as "prospects," "outlook," "believes," "estimates," "intends," "may," "will," "should," "anticipates," "expects" or "plans," or the negative or other variation of these or similar words, or by discussion of trends and conditions, strategy or risks and uncertainties. In addition, from time to time, Millennium or its representatives have made or may make forward-looking statements in filings that Millennium makes with the Securities and Exchange Commission, in press releases or in written or oral statements made by or with the approval of one of its authorized executive officers. These forward-looking statements are only present expectations reflecting current assumptions about future events. Actual events or results may differ materially. Factors that could cause such a difference include: the cyclicality and volatility of the chemical industries in which Millennium and Equistar Chemicals, LP ("Equistar") operate, particularly fluctuations in the demand for ethylene, its derivatives and acetyls and the sensitivity of these industries to capacity additions; general economic conditions in the geographic regions where Millennium and Equistar generate sales, and the impact of government regulation and other external factors, in particular the events in the Middle East; the ability of Equistar to distribute cash to its partners and uncertainties arising from Millennium's minority interest in Equistar, and Millennium's contractual commitments regarding possible future capital contributions to Equistar; changes in the cost of energy and raw materials, particularly natural gas and ethylene, and Millennium's and Equistar's ability to pass on cost increases to their respective customers; Millennium's substantial indebtedness and its impact on Millennium's cash flow, business operations and ability to obtain additional financing -- failure to comply with the covenants and other restrictions in Millennium's debt instruments would lead to additional restrictions and costs, or an acceleration of Millennium's indebtedness; limitations on credit extended to Millennium and demands from creditors and suppliers for additional credit restrictions or security; the ability of raw material suppliers to fulfill their commitments; the ability of Millennium and Equistar to achieve their productivity improvement, cost reduction and working capital targets, and the occurrence of operating problems at manufacturing facilities of Millennium or Equistar; risks of doing business outside the United States, including currency fluctuations; the cost of compliance with the extensive environmental regulations affecting the chemical industry and exposure to liabilities for environmental remediation and other environmental matters relating to Millennium's and Equistar's current and former operations; pricing and other competitive pressures; and legal proceedings relating to present and former operations (including proceedings based on alleged exposure to lead-based paints and lead pigments, asbestos and other materials), ongoing and future tax audits, pension and retiree medical costs, and other claims. A further description of these risks, uncertainties and other matters can be found in Exhibit 99.1 to Millennium's Quarterly Report on Form 10-Q for the period ended September 30, 2003. Millennium disclaims any obligation to update any forward-looking statement, whether as a result of new information, future events or otherwise.



                      MILLENNIUM CHEMICALS INC.
                CONSOLIDATED STATEMENTS OF OPERATIONS
                  (Millions, except per share data)

 TABLE I
                               Three months ended      Year ended
                                  December 31,         December 31,
                                -----------------   -----------------
                                 2003       2002      2003     2002
                                -------   -------   -------   -------
                                        (Restated)          (Restated)
 Net sales                      $   425   $   387   $ 1,687   $ 1,554
 Operating costs and expenses
  Cost of products sold             358       289     1,377     1,234
  Selling, development and
   administrative                    29        49       127       138
  Depreciation and amortization      30        26       113       102
  Reorganization and office
   closure costs                      2        --        18        --
  Asset impairment charges          103        --       103        --
                                -------   -------   -------   -------
 Operating (loss) income            (97)       23       (51)       80
 Net interest expense               (24)      (22)      (92)      (86)
 Loss on Equistar investment
  -- operating loss                  (8)      (19)      (22)      (13)
  -- interest                       (16)      (15)      (61)      (60)
  -- loss on sale of assets          --        --        (4)       --
  -- financing costs                 (5)       --       (11)       --
  -- severance costs                 (2)       --        (2)       --
 Net other (expense) income          (1)        1        --        (1)
                                -------   -------   -------   -------
 Loss before income taxes,
  minority interest and
  cumulative effect of
  accounting change                (153)      (32)     (243)      (80)
 Benefit from income taxes           33        34        65        58
                                -------   -------   -------   -------
 (Loss) income before minority
  interest and cumulative
  effect of accounting change      (120)        2      (178)      (22)

 Minority interest                   --        (4)       (5)       (6)
                                -------   -------   -------   -------
 Loss before cumulative
  effect of accounting change      (120)       (2)     (183)      (28)

 Cumulative effect of
  accounting change                  --        --        (1)     (305)
                                -------   -------   -------   -------
 Net loss                       $  (120)  $    (2)  $  (184)  $  (333)
                                =======   =======   =======   =======
 Basic and diluted EPS
 ($/share)
  - before accounting change    $ (1.87)  $ (0.03)  $ (2.86)  $ (0.44)
  - from accounting change           --        --     (0.02)    (4.80)
                                -------   -------   -------   -------
  - after accounting change     $ (1.87)  $ (0.03)  $ (2.88)  $ (5.24)
                                =======   =======   =======   =======
 Weighted-average number of
  shares used to compute
  basic EPS                      64.183    63.707    64.019    63.588
 Weighted-average number of
  shares used to compute
  diluted EPS                    64.183    63.707    64.019    63.588


                       MILLENNIUM CHEMICALS INC.
                          SEGMENT INFORMATION
                              (Millions)

 TABLE II
                         2003                       2002
              --------------------------  -------------------------
              1Q*  2Q   3Q    4Q    FY    1Q*  2Q*  3Q*  4Q*   FY*
              ---  ---  ---  ----  -----  ---  ---  ---  ---  -----
 NET
 SALES

 Titanium
  Dioxide     288  293  293   298  1,172  262  300  296  271  1,129
 Acetyls      102   99  115   105    421   65   83   91   95    334
 Specialty
  Chemicals    25   24   23    22     94   24   22   24   21     91
              ---  ---  ---  ----  -----  ---  ---  ---  ---  -----
 Total        415  416  431   425  1,687  351  405  411  387  1,554

 OPERATING
 INCOME
 (LOSS)

 Titanium
  Dioxide(a)   21   23    7  (102)   (51)  10   15   21   17     63
 Acetyls        7    5    6     9     27   (8)   3    8    8     11
 Specialty
  Chemicals     2    2   (1)   (1)     2    4    2    2   (2)     6
 Other(b)      (3)  (6) (17)   (3)   (29)   1   --   (1)  --     --
              ---  ---  ---  ----  -----  ---  ---  ---  ---  -----
 Total         27   24   (5)  (97)   (51)   7   20   30   23     80

 DEPRECIATION
 AND
 AMORTIZATION

 Titanium
  Dioxide      22   23   24    25     94   20   20   21   22     83
 Acetyls        3    3    2     3     11    3    3    3    2     11
 Specialty
  Chemicals     2    2    2     2      8    2    2    2    2      8
              ---  ---  ---  ----  -----  ---  ---  ---  ---  -----
 Total         27   28   28    30    113   25   25   26   26    102

 CAPITAL
 SPENDING

 Titanium
  Dioxide       7   10    9    16     42   12   11   14   24     61
 Acetyls       --   --    1     2      3   --   --    1   --      1
 Specialty
  Chemicals     1    1   --     1      3    1    1    3    4      9
              ---  ---  ---  ----  -----  ---  ---  ---  ---  -----
 Total          8   11   10    19     48   13   12   18   28     71

 -------------------
 * Restated

 (a) The Titanium Dioxide segment includes $103 million of asset
     impairment charges in the fourth quarter of 2003 associated
     primarily with the writedown of property, plant, and equipment at
     Millennium's Le Havre, France manufacturing plant.

 (b) The Other segment includes $1 million of costs in the second
     quarter of 2003, $15 million of costs in the third quarter of
     2003 and $2 million of costs in the fourth quarter of 2003, in
     each case associated with Millennium's cost reduction program;
     and a $5 million benefit in the second quarter of 2002 and a
     $1 million benefit in the fourth quarter of 2002, in each case
     from the reduction of reserves due to favorable resolution of 
     environmental claims related to predecessor businesses reserved
     for in prior years.

                       MILLENNIUM CHEMICALS INC.
                      CONSOLIDATED BALANCE SHEETS
                              (Millions)
 Table III
                                                    December 31,
                                                  2003       2002
                                                -------    -------
                                                          (Restated)
 ASSETS
 Current assets
    Cash and cash equivalents                   $   209    $   125
    Trade receivables, net                          277        210
    Inventories                                     457        406
    Other current assets                             65         78
                                                -------    -------
           Total current assets                   1,008        819

 Property, plant and equipment, net                 766        862
 Investment in Equistar                             469        563
 Other assets                                        51         46
 Goodwill                                           104        106
                                                -------    -------
           Total assets                         $ 2,398    $ 2,396
                                                =======    =======

 LIABILITIES AND SHAREHOLDERS' DEFICIT
 Current liabilities
      Notes payable                             $    --    $     4
      Other short-term borrowings                    --         14
      Current maturities of long-term debt            6         12
      Trade accounts payable                        236        274
      Income taxes payable                            5         44
      Accrued expenses and other liabilities        124        127
                                                -------    -------
           Total current liabilities                371        475

 Long-term debt                                   1,461      1,212
 Deferred income taxes                              287        315
 Other liabilities                                  325        410
                                                -------    -------
           Total liabilities                      2,444      2,412

 Minority interest                                   27         19
 Shareholders' deficit                              (73)       (35)
                                                -------    -------
           Total liabilities and
             shareholders' deficit              $ 2,398    $ 2,396
                                                =======    =======


                       MILLENNIUM CHEMICALS INC.
                 CONSOLIDATED STATEMENTS OF CASH FLOWS
                              (Millions)

 TABLE IV
                                                      Year ended
                                                      December 31,
                                                   -------------------
                                                     2003       2002
                                                   --------  ---------
                                                            (Restated)
 Cash flows from operating activities:
   Net loss                                          $(184)   $(333)
   Adjustments to reconcile net loss to net cash
    (used in) provided by operating activities:
        Cumulative effect of accounting change           1      305
        Depreciation and amortization                  113      102
        Deferred income tax benefit                    (39)     (35)
        Noncash income tax benefit                     (37)     (22)
        Asset impairment charges                       103       --
        Loss on Equistar investment                    100       73
        Net change in trade working capital           (120)      23
        Minority interest and other                     12       11
        Net change in other assets and liabilities     (41)     (40)
                                                     -----    -----

 Cash (used in) provided by operating activities       (92)      84
                                                     -----    -----
 Cash flows from investing activities:
   Capital expenditures                                (48)     (71)
   Proceeds from sale of fixed assets                    2        1
                                                     -----    -----

 Cash used in investing activities                     (46)     (70)
                                                     -----    -----

 Cash flows from financing activities:
   Dividends to shareholders                           (17)     (35)
   Net proceeds of borrowings                          220       33
                                                     -----    -----

 Cash provided by (used in) financing activities       203       (2)
                                                     -----    -----
 Effect of exchange rate changes on cash                19       (1)
                                                     -----    -----
 Increase in cash and cash equivalents                  84       11
 Cash and cash equivalents at beginning of year        125      114
                                                     -----    -----
 Cash and cash equivalents at end of year            $ 209    $ 125
                                                     =====    =====

                      Millennium Chemicals Inc.
                         GAAP Reconciliation

                  (Millions, except per share data)

 Table V

                                      Three months ended
                           December 31, 2003     December 31, 2002
                          -------------------   -------------------
                          Net Loss  Per Share   Net Loss  Per Share
                          --------  ---------   --------  ---------
                                               (Restated) (Restated)
 Reported GAAP              $(120)   $(1.87)     $  (2)    $(0.03)

 Reorganization and office
  closure costs                 2      0.03         --         --
 Asset impairment charges     101      1.58         --         --
 Legacy claims                 --        --         (1)     (0.01)
 Company's share of
  Equistar's:
    Financing costs             3      0.04         --         --
    Severance costs             1      0.02         --         --
 Tax accrual adjustments      (18)    (0.28)       (22)     (0.35)
                            -----    ------      -----     ------

 As adjusted                $ (31)   $(0.48)     $ (25)    $(0.39)
                            =====    ======      =====     ======

                                         Year ended
                           December 31, 2003     December 31, 2002
                          -------------------   -------------------
                          Net Loss  Per Share   Net Loss  Per Share
                          --------  ---------   --------  ---------
                                               (Restated) (Restated)
 Reported GAAP              $(184)   $(2.88)     $(333)    $(5.24)

 Cumulative effect of
  accounting change:
   Goodwill write-off          --        --        305       4.80
 Asset retirement
  obligations                   1      0.02         --         --
 Reorganization and office
  closure costs                12      0.19         --         --
 Asset impairment charges     101      1.58         --         --
 Legacy claims                 --        --         (4)     (0.06)
 Collection of note
  receivable                   (2)    (0.03)        --         --
 Company's share of
 Equistar's:
  Loss on sale of assets        3      0.04         --         --
  Financing costs               7      0.11         --         --
  Severance costs               1      0.02         --         --
 Tax accrual adjustments      (18)    (0.28)       (22)     (0.35)
                            -----    ------      -----     ------
 As adjusted                $ (79)   $(1.23)     $ (54)    $(0.85)
                            =====    ======      =====     ======


            

Mot-clé


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