842635--3/15/2006--LYONDELL_CHEMICAL

related topics

{competitive, industry, competition}

{gas, price, oil}

{cost, regulation, environmental}

{debt, indebtedness, cash}

{customer, product, revenue}

{operation, international, foreign}

{cost, operation, labor}

{property, intellectual, protect}

{financial, litigation, operation}

{investment, property, distribution}

{capital, credit, financial}

Risks Relating to the Businesses Costs of raw materials and energy, as well as reliability of supply, may result in increased operating expenses and reduced results of operations. The cyclicality of the chemical and refining industries may cause significant fluctuations in Lyondell s operating results. External factors beyond Lyondell s or LCR s control can cause fluctuations in demand for their products and in their prices and margins, which may result in lower operating results. Lyondell sells commodity products in highly competitive markets and faces significant price pressures. Lyondell s international operations are subject to exchange rate fluctuations, exchange controls, political risks and other risks relating to non-U.S. operations. LCR s Crude Supply Agreement with PDVSA Oil is important to LCR s operations because it reduces the volatility of earnings and cash flow. The agreement is subject to the risk of enforcing contracts against non-U.S. affiliates of a sovereign nation and force majeure risks. Lyondell s and LCR s operations and assets are subject to extensive environmental, health and safety and other laws and regulations, which could result in material costs or liabilities. Legislative and other actions may reduce Lyondell s MTBE sales and cause Lyondell to produce less profitable alternative gasoline blending components instead, and may cause LCR s revenues to decline due to reduced sales of finished gasoline products. Proceedings related to the alleged exposure to lead-based paints and lead pigments could require Millennium to expend material amounts in litigation and settlement costs and judgments. Operating problems in the businesses of Lyondell and LCR may result in lower operating results. Shared control of joint ventures may delay decisions or actions regarding the joint ventures and changes in ownership of joint ventures may have an adverse effect on Lyondell. Lyondell pursues acquisitions, dispositions and joint ventures, which may not yield the expected benefits. Lyondell s consolidated balance sheet is highly leveraged and Lyondell s business and future prospects may be limited by its significant amount of debt and other financial obligations. LCC, Millennium, Equistar and LCR each require a significant amount of cash to service their indebtedness, and the ability of each of them to generate cash depends on many factors beyond their control. Debt and other agreements restrict the ability of LCC, Millennium, Equistar and LCR to take certain actions and require the maintenance of certain financial ratios; failure to comply with these requirements could result in acceleration of debt. LCC s Debt and Accounts Receivable Facility Equistar s Debt and Accounts Receivable Facility Debt covenants limit transfers of cash between Lyondell, Millennium, Equistar and LCR and, as a result, cash flows of Millennium, Equistar and LCR may not be available to LCC and, conversely, LCC may not be able to provide cash to them.

Full 10-K form ▸

842635--3/15/2006--LYONDELL_CHEMICAL_CO