Celanese Corporation Reports Third Quarter 2018 Earnings; Increases 2018 Full Year and Long-Term Outlook

Thu, October 18 2018

DALLAS--(BUSINESS WIRE)-- Celanese Corporation (NYSE: CE), a global specialty materials company, today reported GAAP diluted earnings per share of $3.00, and adjusted earnings per share of $2.96. Net sales in the quarter expanded 13 percent year over year to $1.8 billion. 2018 full year outlook was increased, and the Company expects the business to perform at about the same level in 2019. Both the Acetyl Chain and Engineered Materials expanded margins in excess of higher raw material costs and grew earnings year over year. Celanese continues to invest in high return projects with the acquisition of Next Polymers in India, along with low-cost incremental expansions in POM, VAM, and acetic acid.

Third Quarter 2018 Financial Highlights:

    Three Months Ended
September 30,
2018     2017
(As Adjusted)
(unaudited)
(In $ millions)
Operating Profit (Loss)
Engineered Materials 124 105
Acetate Tow 26 45
Acetyl Chain
Industrial Specialties 19 19
Acetyl Intermediates 268   128  
Subtotal 287   147  
Other Activities (63 ) (68 )
Total 374   229  
 
   

Three Months Ended
September 30,

2018     2017
(unaudited)
(In $ millions, except per share data)
Net Earnings (Loss) 402 228
 
Adjusted EBIT(1)(2)
Engineered Materials 187 157
Acetate Tow 65 69
Acetyl Chain
Industrial Specialties 21 23
Acetyl Intermediates   256     134  
Subtotal   277     157  
Other Activities   (35 )   (38 )
Total   494     345  
 
Equity Earnings, Cost-Dividend Income, Other Income (Expense)
Engineered Materials 62 47
Acetate Tow 26 24
 
Operating EBITDA(1) 571 423
Diluted EPS - continuing operations $ 3.00 $ 1.68
Diluted EPS - total $ 2.96 $ 1.65
Adjusted EPS(1) $ 2.96 $ 1.93
 
Net cash provided by (used in) investing activities (78 ) (68 )
Net cash provided by (used in) financing activities (383 ) (247 )
Net cash provided by (used in) operating activities 467 255
Free cash flow(1) 382 181
______________________________
(1)   See "Non-US GAAP Financial Measures" below.
(2) The Company's discussion of adjusted earnings includes use of terms such as "segment income" and "core income". Those non-GAAP terms are defined below and reconciled in our Non-US GAAP Financial Measures and Supplemental Information document referenced below.
 

Third Quarter 2018 Highlights:

  • Signed a definitive agreement to acquire Next Polymers, a leading domestic engineering thermoplastics compounder in India. The deal is expected to close in the first quarter of 2019.
  • Commercialized 925 Engineered Materials projects in the third quarter of 2018, a 58 percent increase year over year, and on track to delivering more than 3,000 project wins in 2018.
  • Announced plans to expand the POM production capacity of its Frankfurt, Germany facility by 20 kt, making this the world's largest and most efficient POM plant.
  • Entering the final completion phase of the 150kt expansion of the Clear Lake, Texas VAM production unit. Start-up of the unit is planned for December of 2018.
  • Generated free cash flow of $382 million in the third quarter and executed $150 million worth of share repurchases. The Company has the ability to accelerate repurchases depending on need for other uses of cash.
  • Elected Kim K.W. Rucker to the Company's Board of Directors, effective October 5. Ms. Rucker most recently served as the executive vice president, general counsel and secretary of Andeavor (Tesoro Corp.).

Third Quarter 2018 Business Segment Overview

Engineered Materials (EM)

Engineered Materials generated net sales of $642 million in the quarter, a 12 percent improvement over the third quarter of 2017. GAAP operating profit was $124 million and segment income was $187 million, driven by increased pricing, volume growth, and improved product mix that more than offset higher raw material costs. EM commercialized 925 new projects in the quarter and originated 2,000 projects with a strong customer pull for technology-driven materials solutions. Operating profit margin in the third quarter was 19.3 percent and adjusted EBIT margin was 29.1 percent. The business expanded margins sequentially and year over year through pricing initiatives which more than offset raw material increases. Volume growth year over year was driven by higher project commercializations, the Omni acquisition, and growth mainly in Asia and the Americas. Affiliate earnings were $62 million and the increase over the same quarter last year was primarily due to the Celanese's higher economic interest in the Ibn Sina joint venture due to the start-up of the new POM plant and better MTBE pricing.

Acetate Tow

Acetate Tow GAAP operating profit was $26 million and segment income was $65 million in the third quarter. Price in the quarter declined compared to the same quarter in 2017 due to lower industry capacity utilization and was partially offset by mix and productivity gains. Dividends from affiliates were $26 million, in line with the prior year but lower sequentially due to the timing of dividend payments from the Chinese joint ventures, as expected.

Acetyl Chain

The Acetyl Chain generated net sales of $1.0 billion in the third quarter. The 17 percent increase year over year in the quarter resulted from sustained improvements in industry supply and demand fundamentals and from leveraging our flexible global network. GAAP operating profit was $287 million and core income was $277 million, reflecting the performance of the Acetyl Chain operating model. Higher prices and manufacturing activations supported the continuation of the upward reset in the earnings profile of the acetyls business. GAAP operating margin of 28.5 percent and core income margin of 27.5 percent resulted from price increases, mainly in acetic acid and VAM, in excess of raw material inflation. Industry demand growth for acetyls products has been stable at 3 to 4 percent for several years and continues to remain on that trajectory across products and regions.

Cash Flow and Tax

Operating cash flow in the third quarter was $467 million. Free cash flow was $382 million, driven by strong business results and supported by disciplined working capital management. Capital expenditures were $79 million in the quarter for a total of $244 million year-to-date and included a number of productivity-based organic capacity expansions in both Engineered Materials and the Acetyl Chain. A total of $223 million in cash was returned to shareholders, with $150 million in share buybacks and $73 million in dividends. The effective US GAAP tax rate was 12 percent compared to 20 percent in the third quarter of 2017, driven mainly by adjustments to valuation allowances on deferred tax assets and the impact of the Tax Cuts and Jobs Act. The tax rate for adjusted EPS was 14 percent in the quarter, 2 percent lower year over year.

Outlook

"Our earnings performance these past several quarters underline a sustainable upward shift in the earnings levels of both the Acetyl Chain and Engineered Materials as they each move toward becoming enterprises with $1 billion in adjusted EBIT by 2020," said Mark Rohr, chairman and chief executive officer. "Engineered Materials is expected to keep its current pace of earnings growth with traction from new projects, bolt-on acquisitions, as well as success in Asia. In the Acetyl Chain, a stable pace of demand growth along with prudent increments in supply will continue the sustained improvements in industry dynamics. For the remainder of 2018, there is continued momentum across businesses and after accounting for usual seasonality and planned turnaround activity, we are increasing our expectations for 2018 adjusted earnings to approximately $10.90-$11.10 per share. Resulting operating cash flow should exceed $1.5 billion and free cash flow should be closer to $1.2 billion for 2018. We are working hard to execute on our three-year strategic plan which now rolls up at around $34 per share of cumulative adjusted earnings through 2020."

We are unable to reconcile forecasted adjusted earnings per share and adjusted EBIT to US GAAP diluted earnings per share and net earnings (loss) attributable to Celanese Corporation without unreasonable efforts because a forecast of Certain Items, such as mark-to-market pension gains/losses, is not practical.

The Company's earnings presentation and prepared remarks related to the third quarter results will be posted on its website at www.celanese.com under Investor Relations/Events and Presentations after market close on October 18, 2018. Information about Non-US GAAP measures is included in a Non-US GAAP Financial Measures and Supplemental Information document posted on the website and available at the link below. See "Non-GAAP Financial Measures" below.

Celanese Corporation is a global technology leader in the production of differentiated chemistry solutions and specialty materials used in most major industries and consumer applications. Our businesses use the full breadth of Celanese's global chemistry, technology and commercial expertise to create value for our customers, employees, shareholders and the corporation. As we partner with our customers to solve their most critical business needs, we strive to make a positive impact on our communities and the world through The Celanese Foundation. Based in Dallas, Celanese employs approximately 7,700 employees worldwide and had 2017 net sales of $6.1 billion. For more information about Celanese Corporation and its product offerings, visit www.celanese.com or our blog at www.celaneseblog.com.

Forward-Looking Statements

This release may contain "forward-looking statements," which include information concerning the Company's plans, objectives, goals, strategies, future revenues, synergies, performance, capital expenditures, financing needs and other information that is not historical information. All forward-looking statements are based upon current expectations and beliefs and various assumptions, including the announced acquisition. There can be no assurance that the Company will realize these expectations or that these beliefs will prove correct. There are a number of risks and uncertainties that could cause actual results to differ materially from the results expressed or implied in the forward-looking statements contained in this release, including with respect to the acquisition. These risks and uncertainties include, among other things: changes in general economic, business, political and regulatory conditions in the countries or regions in which we operate; the length and depth of product and industry business cycles, particularly in the automotive, electrical, textiles, electronics and construction industries; changes in the price and availability of raw materials, particularly changes in the demand for, supply of, and market prices of ethylene, methanol, natural gas, wood pulp and fuel oil and the prices for electricity and other energy sources; the ability to pass increases in raw material prices on to customers or otherwise improve margins through price increases; the ability to maintain plant utilization rates and to implement planned capacity additions and expansions; the ability to reduce or maintain current levels of production costs and to improve productivity by implementing technological improvements to existing plants; the ability to identify desirable potential acquisition targets and to consummate acquisition or investment transactions consistent with the Company's strategy; increased price competition and the introduction of competing products by other companies; market acceptance of our technology; the ability to obtain governmental approvals and to construct facilities on terms and schedules acceptable to the Company; changes in tariffs, tax rates or legislation; changes in the degree of intellectual property and other legal protection afforded to our products or technologies, or the theft of such intellectual property; compliance and other costs and potential disruption or interruption of production or operations due to accidents, interruptions in sources of raw materials, cyber security incidents, terrorism or political unrest or other unforeseen events or delays in construction or operation of facilities, including as a result of geopolitical conditions, the occurrence of acts of war or terrorist incidents or as a result of weather or natural disasters; potential liability for remedial actions and increased costs under existing or future environmental regulations, including those relating to climate change; potential liability resulting from pending or future litigation, or from changes in the laws, regulations or policies of governments or other governmental activities in the countries in which we operate; changes in currency exchange rates and interest rates; our level of indebtedness, which could diminish our ability to raise additional capital to fund operations or limit our ability to react to changes in the economy or the chemicals industry; and various other factors discussed from time to time in the Company's filings with the Securities and Exchange Commission. Any forward-looking statement speaks only as of the date on which it is made, and the Company undertakes no obligation to update any forward-looking statements to reflect events or circumstances after the date on which it is made or to reflect the occurrence of anticipated or unanticipated events or circumstances.

Non-GAAP Financial Measures

Presentation

This document presents the Company's four business segments, Engineered Materials, Acetate Tow, Industrial Specialties and Acetyl Intermediates, with one subtotal reflecting our core, the Acetyl Chain, which is based on similarities among customers, business models and technical processes. The Acetyl Chain includes the Company's Acetyl Intermediates segment and the Industrial Specialties segment.

Use of Non-US GAAP Financial Information

This release uses the following Non-US GAAP measures: adjusted EBIT, adjusted EBIT margin, operating EBITDA, adjusted earnings per share and free cash flow. These measures are not recognized in accordance with US GAAP and should not be viewed as an alternative to US GAAP measures of performance or liquidity. The most directly comparable financial measure presented in accordance with US GAAP in our consolidated financial statements for adjusted EBIT and operating EBITDA is net earnings (loss) attributable to Celanese Corporation; for adjusted EBIT margin is operating margin; for adjusted earnings per share is earnings (loss) from continuing operations attributable to Celanese Corporation per common share-diluted; and for free cash flow is net cash provided by (used in) operations.

Definitions of Non-US GAAP Financial Measures

  • Adjusted EBIT is a performance measure used by the Company and is defined by the Company as net earnings (loss) attributable to Celanese Corporation, plus (earnings) loss from discontinued operations, less interest income, plus interest expense, plus refinancing expense and taxes, and further adjusted for Certain Items (refer to Table 8 of our Non-US GAAP Financial Measures and Supplemental Information document). We do not provide reconciliations for adjusted EBIT on a forward-looking basis (including those contained in this document) when we are unable to provide a meaningful or accurate calculation or estimation of reconciling items and the information is not available without unreasonable effort. This is due to the inherent difficulty of forecasting the timing and amount of Certain Items, such as mark-to-market pension gains and losses, that have not yet occurred, are out of our control and/or cannot be reasonably predicted. For the same reasons, we are unable to address the probable significance of the unavailable information. Adjusted EBIT margin is defined by the Company as adjusted EBIT divided by net sales.
  • Adjusted EBIT by core (i.e., the Acetyl Chain) may also be referred to by management as core income. Adjusted EBIT margin by core may also be referred to by management as core income margin. Adjusted EBIT by business segment may also be referred to by management as segment income. Adjusted EBIT margin by business segment may also be referred to by management as segment income margin.
  • Operating EBITDA is a performance measure used by the Company and is defined by the Company as net earnings (loss) attributable to Celanese Corporation, plus (earnings) loss from discontinued operations, less interest income, plus interest expense, plus refinancing expense, taxes and depreciation and amortization, and further adjusted for Certain Items, which Certain Items include accelerated depreciation and amortization expense. Operating EBITDA is equal to adjusted EBIT plus depreciation and amortization.
  • Adjusted earnings per share is a performance measure used by the Company and is defined by the Company as earnings (loss) from continuing operations attributable to Celanese Corporation, adjusted for income tax (provision) benefit, Certain Items, and refinancing and related expenses, divided by the number of basic common shares and dilutive restricted stock units and stock options calculated using the treasury method. We do not provide reconciliations for adjusted earnings per share on a forward-looking basis (including those contained in this document) when we are unable to provide a meaningful or accurate calculation or estimation of reconciling items and the information is not available without unreasonable effort. This is due to the inherent difficulty of forecasting the timing and amount of Certain Items, such as mark-to-market pension gains and losses, that have not yet occurred, are out of our control and/or cannot be reasonably predicted. For the same reasons, we are unable to address the probable significance of the unavailable information.

    Note: The income tax expense (benefit) on Certain Items ("Non-GAAP adjustments") is determined using the applicable rates in the taxing jurisdictions in which the Non-GAAP adjustments occurred and includes both current and deferred income tax expense (benefit). The income tax rate used for adjusted earnings per share approximates the midpoint in a range of forecasted tax rates for the year. This range may include certain partial or full-year forecasted tax opportunities and related costs, where applicable, and specifically excludes changes in uncertain tax positions, discrete recognition of GAAP items on a quarterly basis, other pre-tax items adjusted out of our GAAP earnings for adjusted earnings per share purposes and changes in management's assessments regarding the ability to realize deferred tax assets for GAAP. In determining the adjusted earnings per share tax rate, we reflect the impact of foreign tax credits when utilized, or expected to be utilized, absent discrete events impacting the timing of foreign tax credit utilization. We analyze this rate quarterly and adjust it if there is a material change in the range of forecasted tax rates; an updated forecast would not necessarily result in a change to our tax rate used for adjusted earnings per share. The adjusted tax rate is an estimate and may differ from the actual tax rate used for GAAP reporting in any given reporting period. Table 3a of our Non-US GAAP Financial Measures and Supplemental Information document summarizes the reconciliation of our estimated GAAP effective tax rate to the adjusted tax rate. The estimated GAAP rate excludes discrete recognition of GAAP items due to our inability to forecast such items. As part of the year-end reconciliation, we will update the reconciliation of the GAAP effective tax rate to the adjusted tax rate for actual results.
  • Free cash flow is a liquidity measure used by the Company and is defined by the Company as cash flow from operations, less capital expenditures on property, plant and equipment, and adjusted for capital contributions from or distributions to Mitsui & Co., Ltd. ("Mitsui") related to our methanol joint venture, Fairway Methanol LLC ("Fairway").

Reconciliation of Non-US GAAP Financial Measures

Reconciliations of the Non-US GAAP financial measures used in this press release to the comparable US GAAP financial measure, together with information about the purposes and uses of Non-US GAAP financial measures, are included in our Non-US GAAP Financial Measures and Supplemental Information document filed as an exhibit to our Current Report on Form 8-K filed with the SEC on or about October 18, 2018 and also available on our website at www.celanese.com under Financial Information, Non-GAAP Financial Measures, or at this link: http://investors.celanese.com/interactive/lookandfeel/4103411/Non-GAAP.PDF.

Results Unaudited

The results in this document, together with the adjustments made to present the results on a comparable basis, have not been audited and are based on internal financial data furnished to management. Quarterly results should not be taken as an indication of the results of operations to be reported for any subsequent period or for the full fiscal year.

Supplemental Information

Additional information about our prior period performance is included in our Quarterly Reports on Form 10-Q and in our Non-US GAAP Financial Measures and Supplemental Information document.

Consolidated Statements of Operations - Unaudited

    Three Months Ended
September 30,
2018     2017
(As Adjusted)
(In $ millions, except share and per share data)
Net sales 1,771 1,566
Cost of sales (1,255 ) (1,183 )
Gross profit 516 383
Selling, general and administrative expenses (129 ) (133 )
Amortization of intangible assets (5 ) (5 )
Research and development expenses (18 ) (19 )
Other (charges) gains, net 12
Foreign exchange gain (loss), net 4
Gain (loss) on disposition of businesses and assets, net (2 ) (1 )
Operating profit (loss) 374 229
Equity in net earnings (loss) of affiliates 66 50
Non-operating pension and other postretirement employee benefit (expense) income 25 23
Interest expense (30 ) (32 )
Interest income 2 1
Dividend income - cost investments 26 24
Other income (expense), net (1 ) (6 )
Earnings (loss) from continuing operations before tax 462 289
Income tax (provision) benefit (54 ) (57 )
Earnings (loss) from continuing operations 408   232  
Earnings (loss) from operation of discontinued operations (7 ) (5 )
Income tax (provision) benefit from discontinued operations 1   1  
Earnings (loss) from discontinued operations (6 ) (4 )
Net earnings (loss) 402 228
Net (earnings) loss attributable to noncontrolling interests (1 ) (2 )
Net earnings (loss) attributable to Celanese Corporation 401   226  
Amounts attributable to Celanese Corporation
Earnings (loss) from continuing operations 407 230
Earnings (loss) from discontinued operations (6 ) (4 )
Net earnings (loss) 401   226  
Earnings (loss) per common share - basic
Continuing operations 3.02 1.68
Discontinued operations (0.04 ) (0.03 )
Net earnings (loss) - basic 2.98   1.65  
Earnings (loss) per common share - diluted
Continuing operations 3.00 1.68
Discontinued operations (0.04 ) (0.03 )
Net earnings (loss) - diluted 2.96   1.65  
Weighted average shares (in millions)
Basic 134.5 136.6
Diluted 135.5 137.0
 
 

Consolidated Balance Sheets - Unaudited

   

As of
September 30,
2018

   

As of
December 31,
2017

(In $ millions)
ASSETS
Current Assets
Cash and cash equivalents 703 576
Trade receivables - third party and affiliates, net 1,086 986
Non-trade receivables, net 279 244
Inventories 1,033 900
Marketable securities, at fair value 31 32
Other assets 48   54  
Total current assets 3,180   2,792  
Investments in affiliates 981 976
Property, plant and equipment, net 3,699 3,762
Deferred income taxes 170 366
Other assets 413 338
Goodwill 1,064 1,003
Intangible assets, net 317   301  
Total assets 9,824   9,538  
LIABILITIES AND EQUITY
Current Liabilities
Short-term borrowings and current installments of long-term debt - third party and affiliates 229 326
Trade payables - third party and affiliates 819 807
Other liabilities 347 354
Income taxes payable 137   72  
Total current liabilities 1,532   1,559  
Long-term debt, net of unamortized deferred financing costs 3,196 3,315
Deferred income taxes 246 211
Uncertain tax positions 154 156
Benefit obligations 547 585
Other liabilities 206 413
Commitments and Contingencies
Stockholders' Equity
Preferred stock
Common stock
Treasury stock, at cost (2,281 ) (2,031 )
Additional paid-in capital 222 175
Retained earnings 5,819 4,920
Accumulated other comprehensive income (loss), net (219 ) (177 )
Total Celanese Corporation stockholders' equity 3,541 2,887
Noncontrolling interests 402   412  
Total equity 3,943   3,299  
Total liabilities and equity 9,824   9,538  
 
 

Non-US GAAP Financial Measures and Supplemental Information

October 18, 2018

In this document, the terms the "Company," "we" and "our" refer to Celanese Corporation and its subsidiaries on a consolidated basis.

Purpose

The purpose of this document is to provide information of interest to investors, analysts and other parties including supplemental financial information and reconciliations and other information concerning our use of non-US GAAP financial measures. This document is updated quarterly.

Presentation

This document presents the Company's four business segments, Engineered Materials, Acetate Tow, Industrial Specialties and Acetyl Intermediates, with one subtotal reflecting our core, the Acetyl Chain, which is based on similarities among customers, business models and technical processes. The Acetyl Chain includes the Company's Industrial Specialties segment and Acetyl Intermediates segment.

Use of Non-US GAAP Financial Measures

From time to time, management may publicly disclose certain numerical "non-GAAP financial measures" in the course of our earnings releases, financial presentations, earnings conference calls, investor and analyst meetings and otherwise. For these purposes, the Securities and Exchange Commission ("SEC") defines a "non-GAAP financial measure" as a numerical measure of historical or future financial performance, financial position or cash flows that excludes amounts, or is subject to adjustments that effectively exclude amounts, included in the most directly comparable measure calculated and presented in accordance with US GAAP, and vice versa for measures that include amounts, or are subject to adjustments that effectively include amounts, that are excluded from the most directly comparable US GAAP measure so calculated and presented. For these purposes, "GAAP" refers to generally accepted accounting principles in the United States.

Non-GAAP financial measures disclosed by management are provided as additional information to investors, analysts and other parties because the Company believes them to be important supplemental measures for assessing our financial and operating results and as a means to evaluate our financial condition and period-to-period comparisons. These non-GAAP financial measures should be viewed as supplemental to, and should not be considered in isolation or as alternatives to, net earnings (loss), operating profit (loss), operating margin, cash flow from operating activities (together with cash flow from investing and financing activities), earnings per share or any other US GAAP financial measure. These non-GAAP financial measures should be considered within the context of our complete audited and unaudited financial results for the given period, which are available on the Investor Relations/Financial Information/SEC Filings page of our website, www.celanese.com. The definition and method of calculation of the non-GAAP financial measures used herein may be different from other companies' methods for calculating measures with the same or similar titles. Investors, analysts and other parties should understand how another company calculates such non-GAAP financial measures before comparing the other company's non-GAAP financial measures to any of our own. These non-GAAP financial measures may not be indicative of the historical operating results of the Company nor are they intended to be predictive or projections of future results.

Pursuant to the requirements of SEC Regulation G, whenever we refer to a non-GAAP financial measure, we will also present in this document, in the presentation itself or on a Form 8-K in connection with the presentation on the Investor Relations/Financial Information/Non-GAAP Financial Measures page of our website, www.celanese.com, to the extent practicable, the most directly comparable financial measure calculated and presented in accordance with GAAP, along with a reconciliation of the differences between the non-GAAP financial measure we reference and such comparable GAAP financial measure.

This document includes definitions and reconciliations of non-GAAP financial measures used from time to time by the Company.

Specific Measures Used

This document provides information about the following non-GAAP measures: adjusted EBIT, adjusted EBIT margin, operating EBITDA, operating EBITDA margin, operating profit (loss) attributable to Celanese Corporation, adjusted earnings per share, net debt, free cash flow and return on invested capital (adjusted). The most directly comparable financial measure presented in accordance with US GAAP in our consolidated financial statements for adjusted EBIT and operating EBITDA is net earnings (loss) attributable to Celanese Corporation; for adjusted EBIT margin and operating EBITDA margin is operating margin; for operating profit (loss) attributable to Celanese Corporation is operating profit (loss); for adjusted earnings per share is earnings (loss) from continuing operations attributable to Celanese Corporation per common share-diluted; for net debt is total debt; for free cash flow is net cash provided by (used in) operations; and for return on invested capital (adjusted) is net earnings (loss) attributable to Celanese Corporation divided by the sum of the average of beginning and end of the year short- and long-term debt and Celanese Corporation stockholders' equity.

Definitions

  • Adjusted EBIT is a performance measure used by the Company and is defined by the Company as net earnings (loss) attributable to Celanese Corporation, plus (earnings) loss from discontinued operations, less interest income, plus interest expense, plus refinancing expense and taxes, and further adjusted for Certain Items (refer to Table 8). We believe that adjusted EBIT provides transparent and useful information to management, investors, analysts and other parties in evaluating and assessing our primary operating results from period-to-period after removing the impact of unusual, non-operational or restructuring-related activities that affect comparability. Our management recognizes that adjusted EBIT has inherent limitations because of the excluded items. Adjusted EBIT is one of the measures management uses for planning and budgeting, monitoring and evaluating financial and operating results and as a performance metric in the Company's incentive compensation plan. We do not provide reconciliations for adjusted EBIT on a forward-looking basis (including those contained in this document) when we are unable to provide a meaningful or accurate calculation or estimation of reconciling items and the information is not available without unreasonable effort. This is due to the inherent difficulty of forecasting the timing and amount of Certain Items, such as mark-to-market pension gains and losses, that have not yet occurred, are out of our control and/or cannot be reasonably predicted. For the same reasons, we are unable to address the probable significance of the unavailable information. Adjusted EBIT margin is defined by the Company as adjusted EBIT divided by net sales. Adjusted EBIT margin has the same uses and limitations as Adjusted EBIT.
  • Adjusted EBIT by core (i.e. the Acetyl Chain) may also be referred to by management as core income. Adjusted EBIT margin by core may also be referred to by management as core income margin. Adjusted EBIT by business segment may also be referred to by management as segment income. Adjusted EBIT margin by business segment may also be referred to by management as segment income margin.
  • Operating EBITDA is a performance measure used by the Company and is defined by the Company as net earnings (loss) attributable to Celanese Corporation, plus (earnings) loss from discontinued operations, less interest income, plus interest expense, plus refinancing expense, taxes and depreciation and amortization, and further adjusted for Certain Items, which Certain Items include accelerated depreciation and amortization expense. Operating EBITDA is equal to adjusted EBIT plus depreciation and amortization. We believe that Operating EBITDA provides transparent and useful information to investors, analysts and other parties in evaluating our operating performance relative to our peer companies. Operating EBITDA margin is defined by the Company as Operating EBITDA divided by net sales. Operating EBITDA margin has the same uses and limitations as Operating EBITDA.
  • Operating profit (loss) attributable to Celanese Corporation is defined by the Company as operating profit (loss), less earnings (loss) attributable to noncontrolling interests ("NCI"). We believe that operating profit (loss) attributable to Celanese Corporation provides transparent and useful information to management, investors, analysts and other parties in evaluating our core operational performance. Operating margin attributable to Celanese Corporation is defined by the Company as operating profit (loss) attributable to Celanese Corporation divided by net sales. Operating margin attributable to Celanese Corporation has the same uses and limitations as Operating profit (loss) attributable to Celanese Corporation.
  • Adjusted earnings per share is a performance measure used by the Company and is defined by the Company as earnings (loss) from continuing operations attributable to Celanese Corporation, adjusted for income tax (provision) benefit, Certain Items, and refinancing and related expenses, divided by the number of basic common shares and dilutive restricted stock units and stock options calculated using the treasury method. We believe that adjusted earnings per share provides transparent and useful information to management, investors, analysts and other parties in evaluating and assessing our primary operating results from period-to-period after removing the impact of the above stated items that affect comparability and as a performance metric in the Company's incentive compensation plan. We do not provide reconciliations for adjusted earnings per share on a forward-looking basis (including those contained in this document) when we are unable to provide a meaningful or accurate calculation or estimation of reconciling items and the information is not available without unreasonable effort. This is due to the inherent difficulty of forecasting the timing and amount of Certain Items, such as mark-to-market pension gains and losses, that have not yet occurred, are out of our control and/or cannot be reasonably predicted. For the same reasons, we are unable to address the probable significance of the unavailable information.

    Note: The income tax expense (benefit) on Certain Items ("Non-GAAP adjustments") is determined using the applicable rates in the taxing jurisdictions in which the Non-GAAP adjustments occurred and includes both current and deferred income tax expense (benefit). The income tax rate used for adjusted earnings per share approximates the midpoint in a range of forecasted tax rates for the year. This range may include certain partial or full-year forecasted tax opportunities and related costs, where applicable, and specifically excludes changes in uncertain tax positions, discrete recognition of GAAP items on a quarterly basis, other pre-tax items adjusted out of our GAAP earnings for adjusted earnings per share purposes and changes in management's assessments regarding the ability to realize deferred tax assets for GAAP. In determining the adjusted earnings per share tax rate, we reflect the impact of foreign tax credits when utilized, or expected to be utilized, absent discrete events impacting the timing of foreign tax credit utilization. We analyze this rate quarterly and adjust it if there is a material change in the range of forecasted tax rates; an updated forecast would not necessarily result in a change to our tax rate used for adjusted earnings per share. The adjusted tax rate is an estimate and may differ from the actual tax rate used for GAAP reporting in any given reporting period. Table 3a summarizes the reconciliation of our estimated GAAP effective tax rate to the adjusted tax rate. The estimated GAAP rate excludes discrete recognition of GAAP items due to our inability to forecast such items. As part of the year-end reconciliation, we will update the reconciliation of the GAAP effective tax rate to the adjusted tax rate for actual results.
  • Free cash flow is a liquidity measure used by the Company and is defined by the Company as net cash provided by (used in) operations, less capital expenditures on property, plant and equipment, and adjusted for capital contributions from or distributions to Mitsui & Co., Ltd. ("Mitsui") related to our methanol joint venture, Fairway Methanol LLC ("Fairway"). We believe that free cash flow provides useful information to management, investors, analysts and other parties in evaluating the Company's liquidity and credit quality assessment because it provides an indication of the long-term cash generating ability of our business. Although we use free cash flow as a measure to assess the liquidity generated by our business, the use of free cash flow has important limitations, including that free cash flow does not reflect the cash requirements necessary to service our indebtedness, lease obligations, unconditional purchase obligations or pension and postretirement funding obligations.
  • Net debt is defined by the Company as total debt less cash and cash equivalents. We believe that net debt provides useful information to management, investors, analysts and other parties in evaluating changes to the Company's capital structure and credit quality assessment.
  • Return on invested capital (adjusted) is defined by the Company as adjusted EBIT, tax effected using the adjusted tax rate, divided by the sum of the average of beginning and end of the year short- and long-term debt and Celanese Corporation stockholders' equity. We believe that return on invested capital (adjusted) provides useful information to management, investors, analysts and other parties in order to assess our income generation from the point of view of our stockholders and creditors who provide us with capital in the form of equity and debt and whether capital invested in the Company yields competitive returns. In addition, achievement of certain predetermined targets relating to return on invested capital (adjusted) is one of the factors we consider in determining the amount of performance-based compensation received by our management.

Supplemental Information

Supplemental Information we believe to be of interest to investors, analysts and other parties includes the following:

  • Net sales for the Acetyl Chain and each of our business segments and the percentage increase or decrease in net sales attributable to price, volume, currency and other factors for the Acetyl Chain and each of our business segments.
  • Cash dividends received from our equity and cost investments.
  • For those consolidated ventures in which the Company owns or is exposed to less than 100% of the economics, the outside stockholders' interests are shown as NCI. Beginning in 2014, this includes Fairway for which the Company's ownership percentage is 50%. Amounts referred to as "attributable to Celanese Corporation" are net of any applicable NCI.

Recent Developments

Effective January 1, 2018, we reorganized our operating and reportable segments to align with recent structural and management reporting changes. The change reflects the movement of our food ingredients business from the Consumer Specialties reportable segment into the Engineered Materials reportable segment. The former Consumer Specialties reportable segment is being renamed the Acetate Tow segment and the former Advanced Engineered Materials reportable segment is being renamed the Engineered Materials segment. This reorganization better reflects how we manage our food ingredients' related products commercially. Engineered Materials and food ingredients are both project-based models which focus on delivering customized solutions and are led by the same senior management team. These changes in operating and reportable segments were applied retrospectively to prior periods through 2014.

Results Unaudited

The results in this document, together with the adjustments made to present the results on a comparable basis, have not been audited and are based on internal financial data furnished to management. Quarterly results should not be taken as an indication of the results of operations to be reported for any subsequent period or for the full fiscal year.

 
 
Table 1
Adjusted EBIT and Operating EBITDA - Reconciliation of Non-GAAP Measures - Unaudited
 
    Q3 '18     Q2 '18     Q1 '18     2017       Q4 '17     Q3 '17     Q2 '17     Q1 '17
(In $ millions)
Net earnings (loss) attributable to Celanese Corporation 401 344 363 843 203 226 231 183
(Earnings) loss from discontinued operations 6 2 13 1 4 8
Interest income (2 ) (2 ) (2 ) (1 ) (1 )
Interest expense 30 32 33 122 31 32 30 29
Refinancing expense
Income tax provision (benefit) 54 97 65 213 60 57 40 56

Certain Items attributable to Celanese Corporation (Table 8)

5   18 13   167   57 27   18   65
Adjusted EBIT 494 491 474 1,356 352 345 326 333
Depreciation and amortization expense(1) 77   82 79   303   79 78   75   71
Operating EBITDA 571   573 553   1,659   431 423   401   404
 
Q3 '18 Q2 '18 Q1 '18 2017   Q4 '17 Q3 '17 Q2 '17 Q1 '17
(In $ millions)
Engineered Materials 1
Acetate Tow 11 3
Industrial Specialties 1 2 2
Acetyl Intermediates 1
Other Activities(2)          
Accelerated depreciation and amortization expense 13 4 2 2
Depreciation and amortization expense(1) 77   82 79   303   79 78   75   71
Total depreciation and amortization expense 90   86 79   305   79 80   75   71
______________________________

(1)

 

Excludes accelerated depreciation and amortization expense as detailed in the table above, which amounts are included in Certain Items above.

(2)

Other Activities includes corporate Selling, general and administrative ("SG&A") expenses, the results of captive insurance companies and certain components of net periodic benefit cost (interest cost, expected return on plan assets and net actuarial gains and losses).

 
 

Table 2 - Supplemental Segment Data and Reconciliation of Segment Adjusted EBIT and Operating EBITDA - Non-GAAP Measures - Unaudited

 
    Q3 '18     Q2 '18     Q1 '18     2017     Q4 '17     Q3 '17     Q2 '17     Q1 '17
(In $ millions, except percentages)
Operating Profit (Loss) / Operating Margin                                
Engineered Materials 124 19.3 % 114 17.2 % 127 19.1 % 412 18.6 % 98 16.9 % 105 18.3 % 105 19.2 % 104 20.2 %
Acetate Tow 26 16.5 % 39 24.1 % 46 27.4 % 189 28.3 % 41 26.1 % 45 28.7 % 41 25.2 % 62 32.5 %
Acetyl Chain(1) 287 28.5 % 273 26.0 % 253 24.1 % 509 15.1 % 175 19.7 % 147 17.0 % 135 16.3 % 52 6.5 %
Other Activities(2) (63 ) (68 ) (83 ) (253 ) (74 ) (68 ) (63 ) (48 )
Total 374   21.1 % 358   19.4 % 343   18.5 % 857   14.0 % 240   15.1 % 229   14.6 % 218   14.4 % 170   11.6 %
Less: Net Earnings (Loss) Attributable to NCI(1) 1   1   2   6   1   2   2   1  
Operating Profit (Loss) Attributable to Celanese Corporation 373   21.1 % 357   19.4 % 341   18.4 % 851   13.9 % 239   15.0 % 227   14.5 % 216   14.3 % 169   11.5 %
Operating Profit (Loss) / Operating Margin Attributable to Celanese Corporation
Engineered Materials 124 19.3 % 114 17.2 % 127 19.1 % 412 18.6 % 98 16.9 % 105 18.3 % 105 19.2 % 104 20.2 %
Acetate Tow 26 16.5 % 39 24.1 % 46 27.4 % 189 28.3 % 41 26.1 % 45 28.7 % 41 25.2 % 62 32.5 %
Acetyl Chain
Industrial Specialties 19 7.0 % 22 7.6 % 23 8.4 % 85 8.3 % 15 6.0 % 19 7.2 % 26 9.9 % 25 10.2 %
Acetyl Intermediates(1) 267 32.0 % 250 29.0 % 229 26.3 % 418 15.7 % 159 22.2 % 126 18.4 % 107 16.5 % 26 4.2 %
Eliminations     (1 )          
Subtotal 286   28.4 % 272   25.9 % 251   23.9 % 503   14.9 % 174   19.6 % 145   16.8 % 133   16.1 % 51   6.4 %
Other Activities(2) (63 ) (68 ) (83 ) (253 ) (74 ) (68 ) (63 ) (48 )
Total 373   21.1 % 357   19.4 % 341   18.4 % 851   13.9 % 239   15.0 % 227   14.5 % 216   14.3 % 169   11.5 %
Equity Earnings, Cost-Dividend Income, Other Income (Expense) Attributable to Celanese Corporation
Engineered Materials 62 54 54 171 43 47 38 43
Acetate Tow 26 33 32 107 26 24 28 29
Acetyl Chain
Industrial Specialties 1
Acetyl Intermediates 2   2   2   6   2   1   2   1  
Subtotal 2   3   2   6   2   1   2   1  
Other Activities(2) 1     6   10   8   (4 ) 2   4  
Total 91   90   94   294   79   68   70   77  
Non-Operating Pension and Other Post-Retirement Employee Benefit (Expense) Income Attributable to Celanese Corporation
Engineered Materials
Acetate Tow
Acetyl Chain
Industrial Specialties 2 1 1
Acetyl Intermediates                
Subtotal       2   1   1      
Other Activities(2) 25   26   26   42   (24 ) 22   22   22  
Total 25   26   26   44   (23 ) 23   22   22  

Certain Items Attributable to Celanese Corporation (Table 8)

 

Engineered Materials 1 7 1 16 1 5 7 3
Acetate Tow 13 5 5 1 2 2
Acetyl Chain
Industrial Specialties 2 2 3 3
Acetyl Intermediates (13 )     61   1   7   (3 ) 56  
Subtotal (11 ) 2     64   1   10   (3 ) 56  
Other Activities(2) 2   4   12   82   54   12   12   4  
Total 5   18   13   167   57   27   18   65  
___________________________

(1)

 

Net earnings (loss) attributable to NCI is included within the Acetyl Intermediates segment.

(2)

Other Activities includes corporate SG&A expenses, the results of captive insurance companies and certain components of net periodic benefit cost (interest cost, expected return on plan assets and net actuarial gains and losses).

 
 

Table 2 - Supplemental Segment Data and Reconciliation of Segment Adjusted EBIT and Operating EBITDA - Non-GAAP Measures - Unaudited (cont.)

 
    Q3 '18     Q2 '18     Q1 '18     2017     Q4 '17     Q3 '17     Q2 '17     Q1 '17
(In $ millions, except percentages)
Adjusted EBIT / Adjusted EBIT Margin                                
Engineered Materials 187 29.1 % 175 26.4 % 182 27.4 % 599 27.1 % 142 24.5 % 157 27.4 % 150 27.5 % 150 29.2 %
Acetate Tow 65 41.1 % 77 47.5 % 78 46.4 % 301 45.1 % 68 43.3 % 69 43.9 % 71 43.6 % 93 48.7 %
Acetyl Chain
Industrial Specialties 21 7.7 % 25 8.7 % 23 8.4 % 90 8.8 % 16 6.3 % 23 8.7 % 26 9.9 % 25 10.2 %
Acetyl Intermediates 256 30.7 % 252 29.3 % 231 26.5 % 485 18.2 % 162 22.6 % 134 19.6 % 106 16.3 % 83 13.4 %
Eliminations     (1 )          
Subtotal 277   27.5 % 277   26.4 % 253   24.1 % 575   17.1 % 178   20.0 % 157   18.2 % 132   16.0 % 108   13.6 %
Other Activities(2) (35 ) (38 ) (39 ) (119 ) (36 ) (38 ) (27 ) (18 )
Total 494   27.9 % 491   26.6 % 474   25.6 % 1,356   22.1 % 352   22.1 % 345   22.0 % 326   21.6 % 333   22.6 %
Depreciation and Amortization Expense(1)
Engineered Materials 31 32 32 111 29 30 27 25
Acetate Tow 10 10 10 41 11 10 10 10
Acetyl Chain
Industrial Specialties 9 10 9 36 10 8 10 8
Acetyl Intermediates 25   26   26   105   27   26   26   26  
Subtotal 34   36   35   141   37   34   36   34  
Other Activities(2) 2   4   2   10   2   4   2   2  
Total 77   82   79   303   79   78   75   71  
Operating EBITDA / Operating EBITDA Margin
Engineered Materials 218 34.0 % 207 31.2 % 214 32.2 % 710 32.1 % 171 29.5 % 187 32.6 % 177 32.4 % 175 34.0 %
Acetate Tow 75 47.5 % 87 53.7 % 88 52.4 % 342 51.2 % 79 50.3 % 79 50.3 % 81 49.7 % 103 53.9 %
Acetyl Chain
Industrial Specialties 30 11.0 % 35 12.2 % 32 11.7 % 126 12.3 % 26 10.3 % 31 11.7 % 36 13.7 % 33 13.5 %
Acetyl Intermediates 281 33.7 % 278 32.3 % 257 29.5 % 590 22.1 % 189 26.4 % 160 23.4 % 132 20.3 % 109 17.6 %
Eliminations     (1 )          
Subtotal 311   30.9 % 313   29.8 % 288   27.4 % 716   21.2 % 215   24.2 % 191   22.1 % 168   20.3 % 142   17.9 %
Other Activities(2) (33 ) (34 ) (37 ) (109 ) (34 ) (34 ) (25 ) (16 )
Total 571   32.2 % 573   31.1 % 553   29.9 % 1,659   27.0 % 431   27.1 % 423   27.0 % 401   26.6 % 404   27.5 %
___________________________

(1)

 

Excludes accelerated depreciation and amortization expense, which amounts are included in Certain Items above. See Table 1 for details.

(2)

Other Activities includes corporate SG&A expenses, the results of captive insurance companies and certain components of net periodic benefit cost (interest cost, expected return on plan assets and net actuarial gains and losses).

 
 
Table 3
Adjusted Earnings (Loss) per Share - Reconciliation of a Non-GAAP Measure - Unaudited
 
    Q3 '18     Q2 '18     Q1 '18     2017     Q4 '17     Q3 '17     Q2 '17     Q1 '17
    per share     per share     per share     per share     per share     per share     per share     per share
(In $ millions, except per share data)
Earnings (loss) from continuing operations attributable to Celanese Corporation 407 3.00 344 2.52 365 2.68 856 6.19 204 1.50 230 1.68 239 1.72 183 1.30
Income tax provision (benefit) 54   97   65   213   60   57   40   56  
Earnings (loss) from continuing operations before tax 461 441 430 1,069 264 287 279 239

Certain Items attributable to Celanese Corporation (Table 8)

5   18   13   167   57   27   18   65  
Adjusted earnings (loss) from continuing operations before tax 466 459 443 1,236 321 314 297 304
Income tax (provision) benefit on adjusted earnings(1) (65 ) (64 ) (62 ) (198 ) (51 ) (50 ) (48 ) (49 )
Adjusted earnings (loss) from continuing operations(2) 401   2.96 395   2.90 381   2.79 1,038   7.51 270   1.98 264   1.93 249   1.79 255   1.81
Diluted shares (in millions)(3)
Weighted average shares outstanding 134.5 135.6 135.9 137.9 135.8 136.6 138.6 140.6
Incremental shares attributable to equity awards 1.0   0.7   0.5   0.4   0.5   0.4   0.4   0.4  
Total diluted shares 135.5   136.3   136.4   138.3   136.3   137.0   139.0   141.0  

______________________________

(1) Calculated using adjusted effective tax rates (Table 3a) as follows:

    Q3 '18     Q2 '18     Q1 '18     2017     Q4 '17     Q3 '17     Q2 '17     Q1 '17
(In percentages)
Adjusted effective tax rate 14     14     14     16     16     16     16     16    

(2) Excludes the immediate recognition of actuarial gains and losses and the impact of actual vs. expected plan asset returns.

   

Actual Plan
Asset Returns

   

Expected
Plan Asset
Returns

(In percentages)
2017 10.5 7.3

(3) Potentially dilutive shares are included in the adjusted earnings per share calculation when adjusted earnings are positive.

 
 
Table 3a
Adjusted Tax Rate - Reconciliation of a Non-GAAP Measure - Unaudited
 
    Estimated     Actual
2018 2017
(In percentages)
US GAAP annual effective tax rate 15 20
Discrete quarterly recognition of GAAP items(1) (2 ) (11 )
Tax impact of other charges and adjustments(2) (2 ) 1
Utilization of foreign tax credits 20
Changes in valuation allowances, excluding impact of other charges and adjustments(3) 2 (13 )
Other(4) 1   (1 )
Adjusted tax rate 14   16  
______________________________
Note: As part of the year-end reconciliation, we will update the reconciliation of the GAAP effective tax rate for actual results.

(1)

  Such as changes in tax laws (including US tax reform), deferred taxes on outside basis differences, changes in uncertain tax positions and prior year audit adjustments.

(2)

Reflects the tax impact on pre-tax adjustments presented in Certain Items (Table 8), which are excluded from pre-tax income for adjusted earnings per share purposes.

(3)

Reflects changes in valuation allowances related to changes in judgment regarding the realizability of deferred tax assets or current year operations, excluding other charges and adjustments.

(4)

Tax impacts related to full-year forecasted tax opportunities and related costs.
 
 

Table 4

Net Sales by Segment - Unaudited

 
    Q3 '18     Q2 '18     Q1 '18     2017     Q4 '17     Q3 '17     Q2 '17     Q1 '17
(In $ millions)
Engineered Materials 642 664 665 2,213 580 573 546 514
Acetate Tow 158 162 168 668 157 157 163 191
Acetyl Chain
Industrial Specialties 273 288 274 1,023 252 264 262 245
Acetyl Intermediates 835 861 871 2,669 717 684 649 619
Eliminations(1) (102 ) (100 ) (94 ) (321 ) (81 ) (85 ) (85 ) (70 )
Subtotal 1,006   1,049   1,051   3,371   888   863   826   794  
Other Activities(2)

Intersegment eliminations(1)

(35 ) (31 ) (33 ) (112 ) (32 ) (27 ) (25 ) (28 )
Net sales 1,771   1,844   1,851   6,140   1,593   1,566   1,510   1,471  
 
___________________________

(1)

 

Includes intersegment sales as follows:

 

Q3 '18 Q2 '18 Q1 '18 2017 Q4 '17 Q3 '17 Q2 '17 Q1 '17
(In $ millions)
Acetate Tow (2 ) (2 )
Industrial Specialties (1 ) (2 ) (4 ) (1 ) (1 ) (1 ) (1 )
Acetyl Intermediates (137 ) (130 ) (125 ) (427 ) (110 ) (111 ) (109 ) (97 )
Intersegment eliminations (137 ) (131 ) (127 ) (433 ) (113 ) (112 ) (110 ) (98 )
 

(2)

Other Activities includes corporate SG&A expenses, the results of captive insurance companies and certain components of net periodic benefit cost (interest cost, expected return on plan assets and net actuarial gains and losses).

 
 
Table 4a
Factors Affecting Segment Net Sales Sequentially - Unaudited
 

Three Months Ended September 30, 2018 Compared to Three Months Ended June 30, 2018

 
    Volume     Price     Currency     Other     Total
(In percentages)
Engineered Materials (2 ) (1 ) (3 )
Acetate Tow (2 ) (2 )
 
Industrial Specialties (5 ) 2 (2 ) (5 )
Acetyl Intermediates (3 ) 2 (2 ) (3 )
Acetyl Chain (4 ) 2 (2 ) (4 )
 
Total Company (3 ) 1 (2 ) (4 )
 
 

Three Months Ended June 30, 2018 Compared to Three Months Ended March 31, 2018

 
    Volume     Price     Currency     Other     Total
(In percentages)
Engineered Materials (1 ) 3 (2 )
Acetate Tow (3 ) (1 ) (4 )
 
Industrial Specialties 6 1 (2 ) 5
Acetyl Intermediates (4 ) 4 (1 ) (1 )
Acetyl Chain (2 ) 4 (1 ) (1 )
 
Total Company (2 ) 3 (1 )
 
 

Three Months Ended March 31, 2018 Compared to Three Months Ended December 31, 2017

 
    Volume     Price     Currency     Other     Total  
(In percentages)
Engineered Materials 10 3 2 15

(1)

Acetate Tow 8 8
 
Industrial Specialties 5 1 3 9
Acetyl Intermediates 9 11 2 22
Acetyl Chain 8 9 3 (2 ) 18
 
Total Company 9 6 2 (1 ) 16
 
 

Three Months Ended December 31, 2017 Compared to Three Months Ended September 30, 2017

 
    Volume     Price     Currency     Other     Total
(In percentages)
Engineered Materials (8 ) 9 1
Acetate Tow 2 (2 )
 
Industrial Specialties (6 ) 1 (5 )
Acetyl Intermediates (4 ) 9 5
Acetyl Chain (5 ) 7 1 3
 
Total Company (5 ) 7 2
 
 

Three Months Ended September 30, 2017 Compared to Three Months Ended June 30, 2017

 
    Volume     Price     Currency     Other     Total
(In percentages)
Engineered Materials 1 1 3 5
Acetate Tow (5 ) 1 (4 )
 
Industrial Specialties (4 ) 2 3 1
Acetyl Intermediates 3 (1 ) 3 5
Acetyl Chain 1 3 4
 
Total Company 1 3 4
 
 

Three Months Ended June 30, 2017 Compared to Three Months Ended March 31, 2017

 
    Volume     Price     Currency     Other     Total  
(In percentages)
Engineered Materials 4 2 6

(2)

Acetate Tow (12 ) (3 ) (15 )
 
Industrial Specialties 2 3 2 7
Acetyl Intermediates (1 ) 5 1 5
Acetyl Chain 5 1 (2 ) 4
 
Total Company 3 1 (1 ) 3
___________________________

(1)

  2018 includes the effect of the acquisition of Omni Plastics, L.L.C.

(2)

2017 includes the effect of the acquisition of the nylon compounding division of Nilit Group.
 
 
Table 4a
Factors Affecting Segment Net Sales Sequentially - Unaudited (cont.)
 
Three Months Ended March 31, 2017 Compared to Three Months Ended December 31, 2016
 
    Volume   Price   Currency   Other   Total  
(In percentages)
Engineered Materials 33 (1 ) 32

(1)

Acetate Tow 2 (6 ) (4 )
 
Industrial Specialties 11 1 12
Acetyl Intermediates (2 ) 6 4
Acetyl Chain 2 5 (1 ) 6
 
Total Company 11 2 (1 ) 12
___________________________

(1)

  2017 includes the effect of the SO.F.TER. S.p.A. acquisition.
 
 
Table 4b
Factors Affecting Segment Net Sales Year Over Year - Unaudited
 
Three Months Ended September 30, 2018 Compared to Three Months Ended September 30, 2017
 
    Volume     Price     Currency     Other     Total
(In percentages)
Engineered Materials 7 6 (1 ) 12
Acetate Tow 5 (3 ) (1 ) 1
 
Industrial Specialties (1 ) 5 (1 ) 3
Acetyl Intermediates (4 ) 26 22
Acetyl Chain (3 ) 22 (2 ) 17
 
Total Company 1 14 (1 ) (1 ) 13
 
 

Three Months Ended June 30, 2018 Compared to Three Months Ended June 30, 2017

 
    Volume     Price     Currency     Other     Total
(In percentages)
Engineered Materials 11 7 4 22
Acetate Tow 1 (2 ) (1 )
 
Industrial Specialties 5 5 10
Acetyl Intermediates 8 22 4 (1 ) 33
Acetyl Chain 6 19 5 (3 ) 27
 
Total Company 7 13 4 (2 ) 22
 
 

Three Months Ended March 31, 2018 Compared to Three Months Ended March 31, 2017

 
    Volume     Price     Currency     Other     Total
(In percentages)
Engineered Materials 19 3 7 29
Acetate Tow (9 ) (4 ) 1 (12 )
 
Industrial Specialties (3 ) 7 8 12
Acetyl Intermediates 5 30 6 41
Acetyl Chain 3 25 7 (3 ) 32
 
Total Company 7 14 6 (1 ) 26
 
 

Three Months Ended December 31, 2017 Compared to Three Months Ended December 31, 2016

 
    Volume     Price     Currency     Other     Total
(In percentages)
Engineered Materials 45 4 49
Acetate Tow (14 ) (9 ) 1 1 (21 )
 
Industrial Specialties 3 7 5 15
Acetyl Intermediates (4 ) 21 3 20

Acetyl Chain

(2 ) 19 4 (2 ) 19
 
Total Company 10 10 3 (1 ) 22
 
 

Three Months Ended September 30, 2017 Compared to Three Months Ended September 30, 2016

 
    Volume     Price     Currency     Other     Total
(In percentages)
Engineered Materials 45 (2 ) 2 45
Acetate Tow (12 ) (8 ) 1 (19 )
 
Industrial Specialties 2 4 2 8
Acetyl Intermediates (1 ) 16 1 16

Acetyl Chain

13 2 (2 ) 13
 
Total Company 11 6 2 (1 ) 18
 
 

Three Months Ended June 30, 2017 Compared to Three Months Ended June 30, 2016

 
    Volume     Price     Currency     Other     Total
(In percentages)
Engineered Materials 42 (2 ) (1 ) 39
Acetate Tow (13 ) (9 ) (22 )
 
Industrial Specialties (1 ) 3 (2 )
Acetyl Intermediates (4 ) 14 (1 ) 1 10
Acetyl Chain (3 ) 12 (2 ) (1 ) 6
 
Total Company 8 5 (1 ) 12
 
 
Table 4b
Factors Affecting Segment Net Sales Year Over Year - Unaudited (cont.)
 
Three Months Ended March 31, 2017 Compared to Three Months Ended March 31, 2016
 
    Volume     Price     Currency     Other     Total
(In percentages)
Engineered Materials 43 (4 ) (2 ) 37
Acetate Tow (6 ) (7 ) (13 )
 
Industrial Specialties 1 (2 ) (2 ) (3 )
Acetyl Intermediates (12 ) 7 (2 ) (7 )
Acetyl Chain (9 ) 5 (2 ) 1 (5 )
 
Total Company 5 1 (2 ) 1 5
 
 
Table 4c
Factors Affecting Segment Net Sales Year Over Year - Unaudited
 
Year Ended December 31, 2017 Compared to Year Ended December 31, 2016
 
    Volume     Price     Currency     Other     Total
(In percentages)
Engineered Materials 44 (2 ) 1 43
Acetate Tow (11 ) (8 ) (19 )
 
Industrial Specialties 1 3 4
Acetyl Intermediates (5 ) 14 9
Acetyl Chain (4 ) 12 8
 
Total Company 9 5 14
 
 
Table 5
Free Cash Flow - Reconciliation of a Non-GAAP Measure - Unaudited
 
    2018

(Forecast)(3)

    Q3 '18     Q2 '18     Q1 '18     2017     Q4 '17     Q3 '17     Q2 '17     Q1 '17
(In $ millions)
Net cash provided by (used in) investing activities (550 ) (78 ) (96 ) (235 ) (549 ) (92 ) (68 ) (325 ) (64 )
Net cash provided by (used in) financing activities (870 ) (383 ) (254 ) (2 ) (351 ) 145 (247 ) 21 (270 )
 
Net cash provided by (used in) operating activities 1,550 467 585 143 803 58 255 298 192
Capital expenditures on property, plant and equipment (350 ) (79 ) (79 ) (86 ) (267 ) (87 ) (64 ) (54 ) (62 )
Capital (distributions to) contributions from NCI (20 ) (6 ) (6 ) (2 ) (27 ) (9 ) (10 ) (4 ) (4 )
Free cash flow(1)(2) 1,180   382   500   55   509   (38 ) 181   240   126  
 
Net sales N/A   1,771   1,844   1,851   6,140   1,593   1,566   1,510   1,471  
 
Free cash flow as % of Net sales N/A   21.6 % 27.1 % 3.0 % 8.3 % (2.4 )% 11.6 % 15.9 % 8.6 %
______________________________

(1)

 

 

Free cash flow is a liquidity measure used by the Company and is defined by the Company as net cash provided by (used in) operating activities, less capital expenditures on property, plant and equipment, and adjusted for capital contributions from or distributions to Mitsui & Co., Ltd. ("Mitsui") related to our joint venture, Fairway Methanol LLC ("Fairway").

(2)

Excludes required debt service and capital lease payments of $63 million and $27 million for the years ending December 31, 2018 and 2017, respectively.

(3)

Forward-looking amounts based upon estimates, management assumptions and expectations. Actual results may differ.
 
 
Table 6
Cash Dividends Received - Unaudited
 
    Q3 '18     Q2 '18     Q1 '18     2017     Q4 '17     Q3 '17     Q2 '17     Q1 '17
(In $ millions)
Dividends from equity method investments 44 39 76 131 17 5 59 50
Dividends from cost method investments 26 34 32 108 26 24 29 29
Total 70 73 108 239 43 29 88 79
 
 

Table 7

Net Debt - Reconciliation of a Non-GAAP Measure - Unaudited

 
    Q3 '18     Q2 '18     Q1 '18     2017     Q4 '17     Q3 '17     Q2 '17     Q1 '17
(In $ millions)
Short-term borrowings and current installments of long-term debt - third party and affiliates 229 366 425 326 326 435 384 107
Long-term debt, net of unamortized deferred financing costs 3,196   3,228   3,343   3,315   3,315   2,954   2,931   2,851  
Total debt 3,425 3,594 3,768 3,641 3,641 3,389 3,315 2,958
Cash and cash equivalents (703 ) (708 ) (490 ) (576 ) (576 ) (461 ) (511 ) (501 )
Net debt 2,722   2,886   3,278   3,065   3,065   2,928   2,804   2,457  
 
 
Table 8
Certain Items - Unaudited
 

The following Certain Items attributable to Celanese Corporation are included in Net earnings (loss) and are adjustments to non-GAAP measures:

 
    Q3 '18     Q2 '18     Q1 '18     2017     Q4 '17     Q3 '17     Q2 '17     Q1 '17     Income Statement Classification
(In $ millions)
Plant/office closures 3 58 2 2 (3 ) 57 Cost of sales / SG&A / R&D / Other charges (gains), net
Mergers and acquisitions 3 11 13 35 9 10 7 9 Cost of sales / SG&A / Other income (expense), net
Impact from natural disasters(1) 11 11 Cost of sales
InfraServ ownership change 8 8 Other charges (gains), net / Equity in net earnings (loss) of affiliates
Actuarial (gain) loss on pension and postretirement plans 46 46 Cost of sales / SG&A / R&D
Restructuring 2 3 9 4 3 2 Cost of sales / SG&A / R&D / Other charges (gains), net
Other 1 3   (3 ) (Gain) loss on disposition, net / Equity in net earnings (loss) of affiliates
Certain Items attributable to Celanese Corporation 5 18 13 167 57 27 18   65  
______________________________

(1)

  Primarily associated with Hurricane Harvey.
 
 
Table 9
Return on Invested Capital (Adjusted) - Presentation of a Non-GAAP Measure - Unaudited
 
            2017

(In $ millions,
except percentages)

 

Net earnings (loss) attributable to Celanese Corporation 843
 

Adjusted EBIT (Table 1)

1,356

Adjusted effective tax rate (Table 3a)

16 %
Adjusted EBIT tax effected 1,139
 
2017 2016 Average
(In $ millions, except percentages)
Short-term borrowings and current installments of long-term debt - third parties and affiliates 326 118 222
Long-term debt, net of unamortized deferred financing costs 3,315 2,890 3,103
Celanese Corporation stockholders' equity 2,887 2,588 2,738  
Invested capital 6,063  
 
Return on invested capital (adjusted) 18.8 %
 
Net earnings (loss) attributable to Celanese Corporation as a percentage of invested capital 13.9 %

Celanese Corporation
Investor Relations:
Surabhi Varshney, +1 972-443-3078
Surabhi.Varshney@celanese.com
or
Media - U.S.:
Travis Jacobsen, +1 972-443-3750
William.Jacobsen@celanese.com
or
Media - Europe:
Jens Kurth, +49(0)69 45009 1574
Jens.Kurth@celanese.com

Source: Celanese Corporation