SECURITIES
AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) : August 9, 2005
CELANESE
CORPORATION
(Exact Name of Registrant as specified in its
charter)
DELAWARE | 001-32410 | 98-0420726 | ||||||||||||
(State or other jurisdiction
of incorporation) |
(Commission
File Number) |
(IRS
Employer
Identification No.) |
||||||||||||
1601 West
LBJ Freeway, Dallas, Texas 75234-6034
(Address of Principal
Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (972) 901-4500
Not Applicable
(Former name
or former address, if changed since last report):
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
[ ] | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
[ ] | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
[ ] | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
[ ] | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 2.02 Results of Operations and Financial Condition
On August 9, 2005, Celanese Corporation (the " Company ") issued a press release reporting the financial results for its second quarter 2005. A copy of the press release is attached to this Current Report on Form 8-K (" Current Report ") as Exhibit 99.1 and is incorporated herein solely for purposes of this Item 2.02 disclosure.
Item 7.01 Regulation FD Disclosure
On August 9, 2005, David N. Weidman, President and Chief Executive Officer of the Company, and Corliss Nelson, Executive Vice President and Chief Financial Officer of the Company, made a presentation to investors and analysts via webcast and teleconference hosted by the Company. A copy of the slide presentation posted during the webcast and teleconference is attached to this Current Report as Exhibit 99.2 and is incorporated herein solely for purposes of this Item 7.01 disclosure. Additionally, the Company has posted the slide presentation on its website at www.celanese.com under the Investor/Investor Webcast section.
The information in this Current Report, including the exhibits attached hereto, is being furnished and shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the " Exchange Act "), or otherwise subject to the liabilities of such section. The information in this Current Report, including the exhibits, shall not be incorporated by reference into any filing under the Securities Act of 1933, as amended or the Exchange Act, regardless of any incorporation by reference language in any such filing. This Current Report will not be deemed an admission as to the materiality of any information in this Current Report that is required to be disclosed solely by Regulation FD.
Item 9.01 Financial Statements and Exhibits.
(c) Exhibits
Exhibit Number | Description | |||||||||
99.1 | Press Release dated August 9, 2005 | |||||||||
99.2 | Slide Presentation dated August 9, 2005 | |||||||||
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
CELANESE CORPORATION |
By:
/s/ Corliss J. Nelson
Name:Corliss J. Nelson Title: Executive Vice President and Chief Financial Officer |
Date: August 9, 2005
Exhibit Index
Exhibit Number | Description | |||||
99.1 | Press Release dated August 9, 2005 | |||||
99.2 | Slide Presentation dated August 9, 2005 | |||||
Celanese
Corporation Reports Strong Second Quarter Results:
Basic EPS,
Diluted Adjusted EPS and Adjusted EBITDA Exceed Previous Guidance;
Company Raises Guidance for Full Year
Second Quarter Highlights:
• | Sales increase 23% from prior year on higher pricing and Vinamul emulsions acquisition |
• | Operating profit rises significantly on margin expansion in Chemical Products |
• | Basic EPS is $0.41; diluted adjusted EPS is $0.53 |
• | Adjusted EBITDA increases 51% to $283 million |
• | Third quarter diluted adjusted EPS guidance set at $0.45 to $0.50 |
• | Full year 2005 diluted adjusted EPS guidance raised to $1.90 to $2.00 |
in $ millions, except per share data | Q2 2005 | Q2 2004 | ||||||||
Net sales | 1,517 | 1,229 | ||||||||
Operating profit | 152 | 25 | ||||||||
Net earnings (loss) | 67 | (125 | ) | |||||||
Basic EPS | 0.41 | n.m. | ||||||||
Diluted Adjusted EPS | 0.53 | n.m. | ||||||||
Adjusted EBITDA | 283 | 188 | ||||||||
DALLAS, August 9, 2005 – Celanese Corporation (NYSE:CE) today reported net sales rose 23% to $1,517 million for the second quarter compared to the same period last year primarily on higher pricing, mainly in Chemical Products, and sales of the recently acquired Vinamul emulsions business, which closed in the first quarter of 2005.
Operating profit rose significantly to $152 million versus $25 million last year on margin expansion, principally driven by higher pricing and productivity improvements. These effects more than offset higher raw material and energy costs, mainly for ethylene and natural gas, and higher special charges. Operating profit in 2004 included a $49- million charge for a non-cash inventory-related purchase accounting adjustment.
Basic earnings per share were $0.41 and included $27 million, pretax, in special charges primarily for an additional non-cash impairment charge related to the company's previously announced planned exit from Ticona's cyclo-olefin copolymer (COC) business. A $14-million favorable impact on the company's non-operating foreign exchange position was also included in the results for the quarter.
Excluding special charges and the non-operating foreign exchange gain, diluted adjusted earnings per share were $0.53, above the company's guidance range of $0.39 to $0.44 per share. Adjusted EBITDA rose to $283 million on margin expansion, productivity improvements, and the non-operating foreign exchange gain and was higher than the company's previous guidance of between $235 million and $245 million.
"Celanese had an outstanding quarter, reflecting strong industry dynamics and our team's success in positioning our market leading businesses for improved growth and profitability," said David Weidman, president and chief executive officer. "As we continue to deliver on our strategy, we are positive about the company's outlook through 2007."
Recent Business Highlights:
• | Completed the acquisition of Acetex Corporation in July to strengthen Celanese's positioning in acetyls chemicals. Acetex debt is expected to be retired primarily with cash on hand in August. |
• | Began purchasing methanol from Southern Chemical Corporation in an arrangement that is expected to yield significant savings. |
1
• | Realized savings from restructuring and productivity improvements during the quarter in all business segments. Discontinued production of certain acetate flake and filament operations and relocated the Acetate Products headquarters to Dallas. Announced closure and relocation of the Bedminster, N.J., financial functions to Dallas by mid-2006. |
• | Announced intention to build a state-of-the-art vinyl acetate ethylene and conventional emulsion polymer facility in China. Startup is targeted for the first half of 2007. |
• | Announced plans to construct a world-scale plant in Asia for the manufacture of GUR® ultra high molecular weight polyethylene. Production is expected to begin in the second half of 2007. |
• | Continued to focus the product portfolio by exiting non-strategic businesses, such as the high performance polymer polybenzamidazole (PBI), Vectran polymer fiber, and emulsion powders. |
• | Adopted a policy to pay common stockholders a dividend of $0.16 per share annually, or 1%, based on the initial public offering price of $16. Declared the first quarterly dividend of $0.04 per share to be paid on August 11, 2005. |
Equity and Cost Investments
Dividends from equity and cost investments increased in the quarter to $17 million from $13 million in 2004. Equity in net earnings of affiliates decreased by $6 million to $12 million compared to the same quarter last year primarily due to the unfavorable performance of the Estech venture, a producer of neopolyol esters in Oberhausen, Germany.
"Our equity and cost investments are strong cash generators and we expect that cash dividends will increase to approximately $45 million in the third quarter," said C. J. Nelson, chief financial officer and executive vice president. "We, therefore, expect that dividends for the full year 2005 will now total between $120 million to $130 million, higher than the $90 million to $100 million we forecasted at the beginning of the year and significantly more than the $77 million we received in 2004." The increase is primarily driven by dividends from Ibn Sina, a Saudi Arabian cost investment in which Celanese owns 25%.
Second Quarter Segment Overview
Chemical Products
Chemical Products' net sales increased 34% to $1,085 million compared to the same period last year on significantly higher pricing, sales of Vinamul and favorable currency movements. Major business lines continued to operate at high utilization rates while volumes declined for non-core derivative products. Pricing increased for most products, particularly vinyl acetate, acetic acid and acetate esters, driven by continued strong demand, high utilization rates across the industry and higher raw material costs, mainly for ethylene and natural gas.
Earnings from continuing operations before tax and minority interests increased to $149 million from $34 million on higher pricing and productivity improvements, which were partly offset by higher raw material costs. Earnings of $34 million in 2004 included a $15-million charge for a non-cash inventory-related purchase accounting adjustment.
Technical Polymers Ticona
Ticona's net sales increased 1% to $223 million compared to the same period last year on higher pricing and favorable currency movements. Pricing rose as previously announced price increases took effect. Volumes declined largely for polyacetal (POM) due to weakness in the automotive sector, primarily in Europe, and on reduced sales for lower-end applications.
Earnings from continuing operations before tax and minority interests decreased to $22 million from $26 million as higher pricing, cost savings and dividend income from cost investments did not
2
fully offset $20 million in special charges, primarily for the impairment of the COC business, lower volumes and higher raw material costs. Earnings in 2004 included an $18-million charge for a non-cash inventory-related purchase accounting adjustment.
Acetate Products
Net sales for Acetate Products increased by 6% to $183 million compared to the same period last year on higher pricing and volumes. Pricing increased for all business lines while volumes increased mainly on higher flake sales to the company's recently expanded China tow ventures.
Earnings from continuing operations before tax and minority interests decreased to $12 million from $14 million in the same period last year. Higher pricing and savings from restructuring and productivity improvements were more than offset by increased raw material and energy costs as well as temporarily higher manufacturing costs, resulting from a realignment of production and inventory levels as part of the acetate restructuring strategy.
Performance Products
Net sales for Performance Products increased by 4% to $47 million compared to the same period last year mainly as the result of favorable currency effects and modest volume increases. Pricing for Sunett ® sweetener declined, consistent with the company's positioning strategy for the product while pricing for sorbates continued to improve.
Earnings from continuing operations before tax and minority interests increased to $14 million from $1 million last year, which included a $12-million charge for a non-cash inventory-related purchase accounting adjustment. The increase in earnings resulted from favorable currency movements, improved sorbates performance and productivity improvements.
Other Activities
Other Activities primarily consists of corporate center costs, including financing and administrative activities, and certain other operating entities, including the captive insurance companies.
Net sales for Other Activities decreased to $8 million from $11 million in the same quarter last year primarily due to the sale of the PBI and the Vectran product lines in the second quarter of 2005. Loss from continuing operations before tax and minority interests improved to a loss of $74 million from a loss of $179 million in the same period last year. This was primarily due to the expensing in 2004 of $71 million in deferred financing costs for the prepayment of the senior subordinated bridge loan facilities. Also contributing to this decrease was a $40-million favorable change in our foreign currency position.
Liquidity
As of June 30, 2005, the company had total debt of $3,393 million and cash and cash equivalents of $959 million. Net debt (total debt less cash and cash equivalents) decreased to $2,434 million from $2,549 million as of December 31, 2004, due to an increase in cash and cash equivalents of $121 million primarily from cash provided by operations.
In July 2005, the company completed the acquisition of Acetex Corporation and paid approximately $270 million with cash on hand for the shares and assumed approximately $235 million in debt, net of cash acquired, consisting mainly of the Acetex 10-7/8% senior notes due 2009, which will be redeemed on August 19, 2005 primarily with cash on hand. A premium of approximately $15 million will be incurred with the early redemption of the notes.
Outlook
Based on strong second quarter results and the expectation that global GDP will remain strong in the second half of the year, the company raised its full year 2005 diluted adjusted earnings per share guidance to $1.90 to $2.00. Third quarter diluted adjusted earnings per share are expected to be between $0.45 and $0.50.
3
The company's outlook considers the expected impact on pricing as the acetyls market absorbs the industry capacity expansions planned for the second half of 2005. The company has now included the expected positive impact of the recently completed Acetex acquisition in its forecasts for 2005. Previous company guidance for the year was between $1.64 and $1.69 per share and did not include any impact from Acetex.
"While the Acetex acquisition is accretive in the second half of 2005, the bulk of the increase in our guidance is due to the ongoing strength of our businesses," said Weidman.
Adjusted EBITDA is expected to be between $240 million and $260 million for the third quarter and between $1,060 million and $1,090 million for the full year, an increase from the $960 million to $1,000 million forecasted previously.
Forward-Looking Statements
This release may contain "forward-looking statements," which include information concerning the company's plans, objectives, goals, strategies, future revenues or performance, capital expenditures, financing needs and other information that is not historical information. When used in this release, the words "estimates," "expects," "anticipates," "projects," "plans," "intends," "believes," and variations of such words or similar expressions are intended to identify forward-looking statements. All forward-looking statements are based upon current expectations and beliefs and various assumptions. 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 forward-looking statements contained in this release. Numerous factors, many of which are beyond the company's control, could cause actual results to differ materially from those expressed as forward-looking statements. Certain of these risk factors are discussed in the company's Annual Report on Form 10K. 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.
Successor
Successor represents Celanese Corporation's financial position as of June 30, 2005 and December 31, 2004 and its consolidated results of operations for the three months and six months ended June 30, 2005 and three months ended June 30, 2004. These consolidated financial statements reflect the application of purchase accounting relating to the acquisition of Celanese AG and preliminary purchase accounting adjustments relating to the acquisition of Vinamul.
Predecessor
Predecessor represents Celanese AG's consolidated results of its operations for the three months ended March 31, 2004. These results relate to a period prior to the acquisition of Celanese AG and present Celanese AG's historical basis of accounting without the application of purchase accounting.
The results of the Successor are not comparable to the results of the Predecessor due to the difference in the basis of presentation of purchase accounting as compared to historical cost and different accounting policies.
Reconciliation of Non-U.S. GAAP Measures to U.S. GAAP
This release reflects three performance measures, net debt, adjusted EBITDA, and diluted adjusted earnings per share as non-U.S. GAAP measures. The most directly comparable financial measure presented in accordance with U.S. GAAP in our consolidated financial statements for net debt is total debt; for adjusted EBITDA is net earnings (loss); and for diluted adjusted earnings per share is diluted earnings (loss) per share. For a reconciliation of these non-U.S. GAAP measures to U.S. GAAP figures, see the accompanying schedules to this release.
4
Use of Non-U.S. GAAP Financial Information
Adjusted EBITDA, a measure used by management to measure performance, is defined as earnings (loss) from continuing operations, plus interest expense net of interest income, income taxes and depreciation and amortization, and further adjusted for certain cash and non-cash charges. Our management believes adjusted EBITDA is useful to investors because it is one of the primary measures our management uses for its planning and budgeting processes and to monitor and evaluate financial and operating results. Adjusted EBITDA is not a recognized term under U.S. GAAP and does not purport to be an alternative to net earnings as a measure of operating performance or to cash flows from operating activities as a measure of liquidity. Because not all companies use identical calculations, this presentation of adjusted EBITDA may not be comparable to other similarly titled measures of other companies. Additionally, adjusted EBITDA is not intended to be a measure of free cash flow for management's discretionary use, as it does not consider certain cash requirements such as interest payments, tax payments and debt service requirements nor does it represent the amount used in our debt covenants. Net debt is defined as total debt less cash and cash equivalents. Our management uses net debt to evaluate the Company's capital structure. Diluted adjusted net earnings per share is defined as income available to common shareholders plus preferred dividends, adjusted for special and one-time expenses and divided by the number of basic common and diluted preferred shares outstanding as of June 30, 2005. We believe that the presentation of all of the non-U.S. GAAP information provides useful information to management and investors regarding various financial and business trends relating to our financial condition and results of operations, and that when U.S. GAAP information is viewed in conjunction with non-U.S. GAAP information, investors are provided with a more meaningful understanding of our ongoing operating performance. This non-U.S. GAAP information is not intended to be considered in isolation or as a substitute for U.S. GAAP financial information.
Results Unaudited: The results presented in this release, 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.
5
Consolidated Statements of Operations
Q2 2005 | Q2 2004 | 6M 2005 | 6M 2004 | |||||||||||||||
in $ millions | Successor | Successor | Successor | Combined | ||||||||||||||
Net sales | 1,517 | 1,229 | 3,026 | 2,472 | ||||||||||||||
Cost of sales | (1,175 | ) | (1,058 | ) | (2,300 | ) | (2,060 | ) | ||||||||||
Gross profit | 342 | 171 | 726 | 412 | ||||||||||||||
Selling, general and administrative expense | (136 | ) | (125 | ) | (297 | ) | (262 | ) | ||||||||||
Research and development expense | (23 | ) | (22 | ) | (46 | ) | (45 | ) | ||||||||||
Special charges: | ||||||||||||||||||
Insurance recoveries associated with plumbing cases | 4 | 2 | 4 | 2 | ||||||||||||||
Restructuring, impairment and other special charges | (31 | ) | (1 | ) | (69 | ) | (29 | ) | ||||||||||
Foreign exchange gain (loss), net | (1 | ) | — | 2 | — | |||||||||||||
Loss on disposition of assets | (3 | ) | — | (2 | ) | (1 | ) | |||||||||||
Operating profit | 152 | 25 | 318 | 77 | ||||||||||||||
Equity in net earnings of affiliates | 12 | 18 | 27 | 30 | ||||||||||||||
Interest expense | (68 | ) | (130 | ) | (244 | ) | (136 | ) | ||||||||||
Interest income | 9 | 7 | 24 | 12 | ||||||||||||||
Other income (expense), net | 18 | (24 | ) | 21 | (15 | ) | ||||||||||||
Earnings (loss) from continuing operations before tax and minority interests | 123 | (104 | ) | 146 | (32 | ) | ||||||||||||
Income tax provision | (43 | ) | (10 | ) | (51 | ) | (27 | ) | ||||||||||
Earnings (loss) from continuing operations before minority interests | 80 | (114 | ) | 95 | (59 | ) | ||||||||||||
Minority interests | (13 | ) | (10 | ) | (38 | ) | (10 | ) | ||||||||||
Earnings (loss) from continuing operations | 67 | (124 | ) | 57 | (69 | ) | ||||||||||||
Earnings (loss) from operation of discontinued operations (including gain on disposal of discontinued operations) | — | (1 | ) | — | 8 | |||||||||||||
Related income tax benefit | — | — | — | 14 | ||||||||||||||
Earnings (loss) from discontinued operations | — | (1 | ) | — | 22 | |||||||||||||
Net earnings (loss) | 67 | (125 | ) | 57 | (47 | ) | ||||||||||||
6
Consolidated Balance Sheets
in $ millions |
June 30
2005 |
Dec
31
2004 |
||||||||
ASSETS | ||||||||||
Current assets: | ||||||||||
Cash and cash equivalents | 959 | 838 | ||||||||
Receivables, net: | ||||||||||
Trade receivables, net - third party and affiliates | 955 | 866 | ||||||||
Other receivables | 523 | 670 | ||||||||
Inventories | 586 | 618 | ||||||||
Deferred income taxes | 75 | 71 | ||||||||
Other assets | 106 | 86 | ||||||||
Assets of discontinued operations | 3 | 2 | ||||||||
Total current assets | 3,207 | 3,151 | ||||||||
Investments | 543 | 600 | ||||||||
Property, plant and equipment, net | 1,756 | 1,702 | ||||||||
Deferred income taxes | 36 | 54 | ||||||||
Other assets | 652 | 756 | ||||||||
Goodwill | 813 | 747 | ||||||||
Intangible assets, net | 389 | 400 | ||||||||
Total assets | 7,396 | 7,410 | ||||||||
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT) | ||||||||||
Current liabilities: | ||||||||||
Short-term borrowings and current installments of long-term debt | 140 | 144 | ||||||||
Accounts payable and accrued liabilities: | ||||||||||
Trade payables - third party and affiliates | 682 | 722 | ||||||||
Other current liabilities | 739 | 888 | ||||||||
Deferred income taxes | 14 | 20 | ||||||||
Income taxes payable | 230 | 214 | ||||||||
Liabilities of discontinued operations | 7 | 7 | ||||||||
Total current liabilities | 1,812 | 1,995 | ||||||||
Long-term debt | 3,253 | 3,243 | ||||||||
Deferred income taxes | 227 | 256 | ||||||||
Benefit obligations | 1,003 | 1,000 | ||||||||
Other liabilities | 452 | 510 | ||||||||
Minority interests | 523 | 518 | ||||||||
Shareholders' equity (deficit): | ||||||||||
Preferred stock | — | — | ||||||||
Common stock | — | — | ||||||||
Additional paid-in capital | 350 | 158 | ||||||||
Retained earnings (deficit) | (196 | ) | (253 | ) | ||||||
Accumulated other comprehensive loss | (28 | ) | (17 | ) | ||||||
Shareholders' equity (deficit) | 126 | (112 | ) | |||||||
Total liabilities and shareholders' equity (deficit) | 7,396 | 7,410 | ||||||||
7
SALES
Table 1
Net Sales
Q2 2005 | Q2 2004 | 6M 2005 | 6M 2004 | |||||||||||||||
in $ millions | Successor | Successor | Successor | Combined | ||||||||||||||
Chemical Products | 1,085 | 808 | 2,129 | 1,626 | ||||||||||||||
Technical Polymers Ticona | 223 | 220 | 462 | 447 | ||||||||||||||
Acetate Products | 183 | 173 | 379 | 345 | ||||||||||||||
Performance Products | 47 | 45 | 94 | 89 | ||||||||||||||
Segment total | 1,538 | 1,246 | 3,064 | 2,507 | ||||||||||||||
Other activities | 8 | 11 | 20 | 22 | ||||||||||||||
Intersegment eliminations | (29 | ) | (28 | ) | (58 | ) | (57 | ) | ||||||||||
Total | 1,517 | 1,229 | 3,026 | 2,472 | ||||||||||||||
Table 2
Factors Affecting Second Quarter 2005 Segment Sales Compared to Second Quarter 2004
in percent | Volume | Price | Currency | Other* | Total | |||||||||||||||||
Chemical Products | –1 | % | 21 | % | 2 | % | 12 | % | 34 | % | ||||||||||||
Technical Polymers Ticona | –5 | % | 4 | % | 2 | % | 0 | % | 1 | % | ||||||||||||
Acetate Products | 1 | % | 5 | % | 0 | % | 0 | % | 6 | % | ||||||||||||
Performance Products | 2 | % | –3 | % | 5 | % | 0 | % | 4 | % | ||||||||||||
Segment total | –2 | % | 15 | % | 2 | % | 8 | % | 23 | % | ||||||||||||
* | Primarily represents sales of the recently acquired Vinamul emulsion business |
Table 3
Factors Affecting Six Months 2005 Segment Sales Compared to Six Months 2004
in percent | Volume | Price | Currency | Other* | Total | |||||||||||||||||
Chemical Products | –1 | % | 21 | % | 3 | % | 8 | % | 31 | % | ||||||||||||
Technical Polymers Ticona | –1 | % | 2 | % | 2 | % | 0 | % | 3 | % | ||||||||||||
Acetate Products | 6 | % | 4 | % | 0 | % | 0 | % | 10 | % | ||||||||||||
Performance Products | 5 | % | –5 | % | 6 | % | 0 | % | 6 | % | ||||||||||||
Segment total | 0 | % | 15 | % | 2 | % | 5 | % | 22 | % | ||||||||||||
* | Primarily represents sales of the recently acquired Vinamul emulsion business |
8
KEY FINANCIAL DATA
Table 4
Operating Profit (Loss)
Q2 2005 | Q2 2004 | 6M 2005 | 6M 2004 | |||||||||||||||
in $ millions | Successor | Successor | Successor | Combined | ||||||||||||||
Chemical Products | 155 | 36 | 332 | 101 | ||||||||||||||
Technical Polymers Ticona | 5 | 11 | 44 | 42 | ||||||||||||||
Acetate Products | 10 | 10 | 30 | 19 | ||||||||||||||
Performance Products | 15 | 2 | 28 | 13 | ||||||||||||||
Segment total | 185 | 59 | 434 | 175 | ||||||||||||||
Other activities | (33 | ) | (34 | ) | (116 | ) | (98 | ) | ||||||||||
Total | 152 | 25 | 318 | 77 | ||||||||||||||
Table 5
Earnings (Loss) from Continuing Operations Before Tax and Minority Interests
Q2 2005 | Q2 2004 | 6M 2005 | 6M 2004 | |||||||||||||||
in $ millions | Successor | Successor | Successor | Combined | ||||||||||||||
Chemical Products | 149 | 34 | 342 | 98 | ||||||||||||||
Technical Polymers Ticona | 22 | 26 | 73 | 71 | ||||||||||||||
Acetate Products | 12 | 14 | 32 | 23 | ||||||||||||||
Performance Products | 14 | 1 | 26 | 12 | ||||||||||||||
Segment total | 197 | 75 | 473 | 204 | ||||||||||||||
Other activities | (74 | ) | (179 | ) | (327 | ) | (236 | ) | ||||||||||
Total | 123 | (104 | ) | 146 | (32 | ) | ||||||||||||
Table 6
Depreciation and Amortization Expense
9
KEY FINANCIAL DATA - (continued)
Table 7
Cash Dividends Received
Q2 2005 | Q2 2004 | 6M 2005 | 6M 2004 | |||||||||||||||
in $ millions | Successor | Successor | Successor | Combined | ||||||||||||||
Dividends from equity investments | 10 | 6 | 46 | 21 | ||||||||||||||
Other distributions from equity investments | — | — | — | 1 | ||||||||||||||
Dividends from cost investments | 7 | 7 | 21 | 13 | ||||||||||||||
Total | 17 | 13 | 67 | 35 | ||||||||||||||
SPECIAL CHARGES AND OTHER EXPENSES
Table 8
Special Charges in Operating Profit (Loss)
Q2 2005 | Q2 2004 | 6M 2005 | 6M 2004 | |||||||||||||||
in $ millions | Successor | Successor | Successor | Combined | ||||||||||||||
Chemical Products | (3 | ) | (1 | ) | (4 | ) | (2 | ) | ||||||||||
Technical Polymers Ticona | (20 | ) | 2 | (21 | ) | 1 | ||||||||||||
Acetate Products | — | — | (1 | ) | — | |||||||||||||
Performance Products | — | — | — | — | ||||||||||||||
Segment total | (23 | ) | 1 | (26 | ) | (1 | ) | |||||||||||
Other activities | (4 | ) | — | (39 | ) | (26 | ) | |||||||||||
Total | (27 | ) | 1 | (65 | ) | (27 | ) | |||||||||||
Table 9
Breakout of Special Charges by Type
10
RECONCILATION OF NON-US GAAP ITEMS
Table 10
Earnings Per Share
in $ millions, except for share and per share data |
Q2 2005
Actual |
Q2
2005
Adjusted |
||||||||
Earnings from continuing operations before tax and minority interests | 123 | 123 | ||||||||
Adjustments: | ||||||||||
Favorable impact on non-operating foreign exchange position | — | (14 | ) | |||||||
Special charges | — | 27 | ||||||||
Earnings from continuing operations before tax and minority interests | 123 | 136 | ||||||||
Income tax provision* | (43 | ) | (33 | ) | ||||||
Minority interests | (13 | ) | (13 | ) | ||||||
Preferred dividends | (2 | ) | (2 | ) | ||||||
Net earnings available to common shareholders | 65 | 88 | ||||||||
Basic EPS Calculation | ||||||||||
Weighted average shares outstanding (thousands) | 158,530 | — | ||||||||
Basic EPS | 0.41 | — | ||||||||
Diluted EPS Calculation | ||||||||||
Net earnings available to common shareholders | 65 | 88 | ||||||||
Add back: Preferred dividends | 2 | 2 | ||||||||
Net earnings for diluted EPS | 67 | 90 | ||||||||
Diluted shares (thousands) | ||||||||||
Weighted average shares outstanding | 158,530 | 158,530 | ||||||||
Conversion of Preferred Shares | 12,000 | 12,000 | ||||||||
Assumed conversion of stock options | — | — | ||||||||
Total diluted shares | 170,530 | 170,530 | ||||||||
Diluted EPS | 0.39 | 0.53 | ||||||||
* | Effective tax rate for Adjusted EPS is 24% and for Actual EPS is 35% |
Table 11
Net Debt
in $ millions |
June 30
2005 |
Dec
31
2004 |
||||||||
Short-term borrowings and current installments of long-term debt | 140 | 144 | ||||||||
Plus: Long-term debt | 3,253 | 3,243 | ||||||||
Total debt | 3,393 | 3,387 | ||||||||
Less: Cash and cash equivalents | 959 | 838 | ||||||||
Net Debt | 2,434 | 2,549 | ||||||||
11
Table 12
Adjusted EBITDA
in $ millions | Q2 2005 | Q2 2004 | 6M 2005 | |||||||||||
Net earnings (loss) | 67 | (125 | ) | 57 | ||||||||||
(Earnings) loss from discontinued operations | — | 1 | — | |||||||||||
Interest expense | 68 | 130 | 244 | |||||||||||
Interest income | (9 | ) | (7 | ) | (24 | ) | ||||||||
Income tax provision | 43 | 10 | 51 | |||||||||||
Depreciation and amortization | 67 | 71 | 130 | |||||||||||
EBITDA | 236 | 80 | 458 | |||||||||||
Adjustments: | ||||||||||||||
Cash dividends received in excess of equity in net earnings of affiliates | (2 | ) | (12 | ) | 19 | |||||||||
Special charges | 27 | (1 | ) | 65 | ||||||||||
Other unusual items and adjustments (1) | 22 | 121 | 75 | |||||||||||
Adjusted EBITDA | 283 | 188 | 617 | |||||||||||
(1) | Other Unusual Items and Adjustments |
in $ millions | Q2 2005 | Q2 2004 | 6M 2005 | |||||||||||
Net (gain) loss on disposition of assets | 3 | — | 2 | |||||||||||
Excess of minority interest income over cash dividends paid to minority shareholders | 13 | 9 | 38 | |||||||||||
Severance and other restructuring charges not included in special charges | — | 9 | 2 | |||||||||||
Cash interest income used by captive insurance subsidiaries to fund operations | 3 | 2 | 6 | |||||||||||
Franchise taxes | 1 | 1 | 1 | |||||||||||
Unusual and non-recurring items* | 6 | 40 | 15 | |||||||||||
Non-cash charges** | (4 | ) | 50 | 1 | ||||||||||
Advisor monitoring fee | — | 2 | 10 | |||||||||||
Pro forma cost savings*** | — | 8 | — | |||||||||||
Total Other Unusual Items and Adjustments | 22 | 121 | 75 | |||||||||||
* | Primarily includes costs related to the Celanese AG (Q2 2004) and Vinamul acquisition (Q2 2005 and 6M 2005), productivity enhancement programs (all periods presented), Summit (all periods presented) and Bedminster relocations (Q2 2005 and 6M 2005), and IPO bonus (6M 2005). |
** | Primarily includes ineffective portion of a net investment hedge (Q2 2005 and 6M 2005) and purchase accounting adjustment for inventories (Q2 2004). |
*** | Primarily represents adjustments on a proforma basis for certain cost savings that we expect to achieve from additional pension contributions (Q2 2004). |
12
Table 13
Guidance Diluted Adjusted EPS
in $ millions, except for share and per share data |
Q3 2005
Mid-
Point Guidance Diluted EPS |
Q3 2005 Mid-
Point Guidance Diluted Adj. EPS |
FY 2005 Mid-
Point Guidance Diluted EPS |
FY 2005 Mid-
Point Guidance Diluted Adj. EPS |
||||||||||||||
Earnings from continuing operations before tax and minority interests | 92 | 92 | 299 | 299 | ||||||||||||||
Adjustments: | ||||||||||||||||||
Monitor Fee | — | — | — | 10 | ||||||||||||||
Refinancing costs | — | 15 | — | 117 | ||||||||||||||
Favorable impact on non-operating foreign exchange position | — | — | — | (14 | ) | |||||||||||||
Special charges | — | 15 | — | 105 | ||||||||||||||
Earnings from continuing operations before tax and minority interests | 92 | 122 | 299 | 517 | ||||||||||||||
Income tax provision | (32 | ) | (29 | ) | (105 | ) | (124 | ) | ||||||||||
Minority interest | (12 | ) | (12 | ) | (60 | ) | (60 | ) | ||||||||||
Preferred dividends | (2 | ) | (2 | ) | (10 | ) | (10 | ) | ||||||||||
Net earnings available to common shareholders | 46 | 79 | 124 | 323 | ||||||||||||||
Basic EPS Calculation | ||||||||||||||||||
Weighted average shares outstanding (thousands) | 158,530 | — | 158,530 | — | ||||||||||||||
Basic EPS | 0.29 | — | 0.78 | — | ||||||||||||||
Diluted EPS Calculation | ||||||||||||||||||
Net earnings available to common shareholders | 46 | 79 | 124 | 323 | ||||||||||||||
Add back: Preferred dividends | 2 | 2 | 10 | 10 | ||||||||||||||
Net earnings for diluted EPS | 48 | 81 | 134 | 333 | ||||||||||||||
Diluted shares (thousands) | ||||||||||||||||||
Weighted average shares outstanding | 158,530 | 158,530 | 158,530 | 158,530 | ||||||||||||||
Conversion of Preferred Shares | 12,000 | 12,000 | 12,000 | 12,000 | ||||||||||||||
Assumed conversion of stock options | — | — | — | — | ||||||||||||||
Total diluted shares | 170,530 | 170,530 | 170,530 | 170,530 | ||||||||||||||
Diluted EPS | 0.28 | 0.47 | 0.79 | 1.95 | ||||||||||||||
13
Table 14
Guidance Adjusted EBITDA
in $ millions |
Guidance
Q3 2005 |
Guidance
FY 2005 |
||||||||
Net earnings (loss) | 48 | 134 | ||||||||
(Earnings) loss from discontinued operations | — | — | ||||||||
Interest expense | 90 | 412 | ||||||||
Interest income | (5 | ) | (34 | ) | ||||||
Income tax provision (benefit) | 32 | 105 | ||||||||
Depreciation and amortization | 66 | 252 | ||||||||
EBITDA | 231 | 869 | ||||||||
Adjustments: | ||||||||||
Cash dividends received in excess of equity in net earnings of affiliates | (7 | ) | (4 | ) | ||||||
Special charges | 15 | 105 | ||||||||
Other unusual items and adjustments * | 11 | 105 | ||||||||
Adjusted EBITDA | 250 | 1,075 | ||||||||
* | Primarily includes the following: |
Excess of minority interest income over cash dividends paid to minority shareholders
Severance and other restructuring charges not included in special charges
Cash interest income used by captive insurance subsidiaries to fund operations
Unusual and non-recurring items
Advisor monitoring fee
Other minor items
14
Celanese
2Q 2005 Earnings
NYSE: CE
Conference
Call/Webcast
Tues.,
August 9, 2005 10 a.m CT
David
Weidman, CEO
C.J. Nelson, CFO
Second Quarter Earnings
1
This
presentation may contain forward-looking statements, which include
information concerning the Companys plans, objectives, goals,
strategies, future
revenues or performance, capital expenditures, financing
needs and other
information that is not historical
information. When used in this presentation, the
words
estimates, expects, anticipates,
projects, plans, intends,
believes,
and variations of such words or similar expressions
are intended to identify forward-
looking statements. All
forward-looking statements are based upon current
expectations and beliefs
and various assumptions. 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 forward-looking statements
contained in this presentation.
Numerous factors, many of which
are beyond the Companys control, could cause
actual results to differ
materially from those expressed as forward-looking
statements.
For a discussion of some of the factors, we
recommend that you review the
Companys Annual
Report on Form 10-K at the SECs website at
www.sec.gov
. 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.
Forward-Looking Statements
2
This
release reflects three performance measures, net debt, adjusted EBITDA,
and
diluted adjusted earnings per share as non-U.S. GAAP measures. The
most directly comparable financial measure presented in accordance with
U.S.
GAAP in our consolidated financial statements for net debt is total
debt; for
adjusted EBITDA is net earnings (loss); for diluted adjusted
earnings per share is
net earnings (loss); and, for adjusted basic earnings
per share is income
available to common shareholders. For a
reconciliation of these non-U.S. GAAP
measures to U.S. GAAP figures, see
the accompanying schedules to this
release.
Reconciliation
of Non-GAAP Measures
to U.S. GAAP
3
Adjusted
EBITDA, a measure used by management to measure performance, is defined as
earnings (loss) from continuing operations, plus interest expense net of
interest income, income
taxes and depreciation and amortization, and
further adjusted for certain cash and non-cash
charges. Our
management believes adjusted EBITDA is useful to investors because it is one of
the primary measures our management uses for its planning and budgeting
processes and to
monitor and evaluate financial and operating
results. Adjusted EBITDA is not a recognized term
under U.S.
GAAP and does not purport to be an alternative to net earnings as a measure of
operating performance or to cash flows from operating activities as a
measure of liquidity.
Because not all companies use identical
calculations, this presentation of adjusted EBITDA may
not be comparable to
other similarly titled measures of other companies. Additionally,
adjusted
EBITDA is not intended to be a measure of free cash flow for
managements discretionary use,
as it does not consider certain cash
requirements such as interest payments, tax payments and
debt service
requirements nor does it represent the amount used in our debt
covenants. Net
debt is defined as total debt less cash and cash
equivalents. Our management uses net debt to
evaluate the
Company's capital structure. Diluted adjusted net earnings per
share is defined as
income available to common shareholders plus preferred
dividends, adjusted for special and
one-time expenses and divided by the
number of basic common and diluted preferred shares
outstanding
as of June 30, 2005. We believe that the presentation of all
of the non-U.S. GAAP
information provides useful information to management
and investors regarding various financial
and business trends relating to
our financial condition and results of operations, and that when
U.S. GAAP
information is viewed in conjunction with non-U.S. GAAP information, investors
are
provided with a more meaningful understanding of our ongoing operating
performance. This
non-U.S. GAAP information is not intended to
be considered in isolation or as a substitute for
U.S. GAAP financial
information.
Use of Non-GAAP Financial Information
4
David Weidman
President and Chief Executive Officer
5
Expansion of operating profit and strengthened cash position
Higher
pricing on strong demand and high capacity utilization in
Chemical Products
Completed strategic acquisition of Acetex July 20
Sales
Operating Profit
Adjusted Diluted EPS
Dividends from Equity & Cost Investments
Adjusted EBITDA
$1,517 up
23%
$152 up 508%
$0.53
$17
$283 up 51%
2 nd Qtr 2005
(in $millions)
Strong
Underlying Business Results
6
C. J. Nelson
Executive Vice President and Chief Financial Officer
7
Financial Highlights
in $ millions (except per share data)
2 nd Qtr 2005
2 nd Qtr 2004
Net sales
1,517
1,229
Operating Profit
152
25
SG&A
(136)
(125)
Net Earnings (Loss)
67
(124)
Basic EPS
0.41
n.m.
Special Items
Refinancing expenses
-
-
Special charges
27
(1)
Non-Operating Foreign Exchange
(14)
-
Adjusted Diluted EPS
$ 0.53
n.m.
Adjusted EBITDA
283
188
8
Chemicals
Products
Second Quarter:
Significant
price increases on robust demand, high industry capacity
utilization
Pricing more than offset higher raw material costs
Outlook:
Continued favorable market conditions in the 3 rd quarter
In
second half 2005, new acetyls capacity expected to temporarily ease
tight
supply/demand
Longer-term outlook remains positive
Sales
Segment Earnings (1)
$1,085 up 34%
$149 up 338%
2 nd Qtr 05
(in $millions)
(1) Earnings from continuing operations before tax and minority interests
Strong integrated chain of acetyl products
9
Ticona
Second Quarter:
Successfully
implemented price increases offset higher raw
material and energy
costs
Weakened POM sales, primarily Europe and automotive sector
2005
results include $20 million in special charges primarily
related to exit of
COC business; 2004 results include $18 million
charge for purchase
accounting adjustment
Outlook:
Modest
volume growth due to downturn in automotive and sluggish
European economy
Consistent earnings supported by cost improvement effort
Sales
Segment
Earnings (1)
$223 up 1%
$22
down
15%
(in $millions)
(1) Earnings from continuing operations before tax and minority interests
Focus on increased growth through innovation
2 nd Qtr 05
10
Acetate/Performance Products Summaries
Sales
Segment
Earnings (1)
$183 up 6%
$12 down 14%
(in $millions)
(1)
Earnings from continuing operations before tax and minority interests
(2)
2004 results included $12 million in inventory-related purchase accounting adjustments
Acetate
Strong results on higher volumes, pricing and productivity improvements
China venture expansions moving forward
Restructuring
of operations on schedule, temporary higher manufacturing costs due to
production/inventory alignment
Performance Products
Stable earnings on strong sweetener demand
Pricing declines consistent with strategy on sales to large-volume customers
Attractive, Cash Generating Businesses
Sales
Segment
Earnings (1)
$47 up 4%
$14 up $13 (2)
(in $millions)
2 nd Qtr 05
2 nd Qtr 05
11
Dividend Payments Usually Strongest in 1 st Qtr
Significant
Contribution from Equity
and Cost Investments
2004 Full Year dividends = $76 million
2005 expected to be $120 - 130 million
3Q dividends expected to be $45 million
Income Statement
Cash Flow
12
Equity Investments Summary
13
Capitalization
Cash
Senior Credit Term Loan
Delayed Draw Term Loan
Floating Rate Term Loan
Total Senior Debt
Senior Sub Notes ($)
Senior
Sub Notes (
-
6/30/05
translated at
1.2092
)
Assumed Debt
Total Cash Pay Debt
Discount Notes Series A
Discount Notes Series B
Total Debt
Shareholders' Equity
Total Capitalization
838
624
-
350
974
1,231
272
383
2,860
103
424
3,387
(112)
3,275
1,738
1,750
-
-
1,750
800
169
369
3,088
68
283
3,439
61
3,500
December
31,
2004
March
31,
2005
(in $millions)
959
1,725
-
-
1,725
800
157
351
3,033
70
290
3,393
126
3,519
June
30,
2005
14
Combined Business Outlook
Adjusted EPS to increase to $0.45 - $0.50
Includes
$15 million pre-tax in special charges and $15 million for Acetex
debt
redemption
Includes impact of Acetex consolidation for two months
3 rd Quarter
Adjusted
EPS to increase to $1.90 to $2.00 up from previous guidance of
$1.64
and $1.69
Includes impact of Acetex consolidation for five months
Full Year 2005
Adjusted EBITDA
Full year adjusted EBITDA expected to increase to $1,060 to $1,090 million
3 rd quarter expected to be $240 to $260 million
Typical
seasonality in second half of year (55%/45%) and expected impact of
acetyl
capacity expansions
15
Full Year 2005 Key Modeling Assumptions
Income Statement
($ millions)
Depreciation = $250-$270
Special charges = $100-$110
Interest expense = $290-$300
Cash interest = $235-$245
Excluding
deferred finance/debt
premium of approx. $117
Avg cost of borrowed capital = 7%
Effective tax rate of 35% for EPS
level and 24% for Adjusted EPS
Minority
interest in teens/qtr beyond
1Q
Other
Activities Operating Profit in
mid to upper ($30s)/qtr beyond
2Q
Equity CE Shares
Common stock = 158.5 million outstanding
Potentially dilutive securities as of 6/30:
12 million shares converted preferred
12
million shares - stock options @
$16.00
August
9 guidance based on 170.5
million shares
Preferred
stock dividends = approx. $10
million
on 9.6 million outstanding shares
Equity CAG Minority Interest
Approximately 8 million shares
outstanding as of June 23, 2005
Current tender offer price = 41.92/share
Net guaranteed payment = approximately
24 million
Capital Expenditures
Capital expenditures = $215 - $225 mm
16