þ
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the quarterly period ended March 31, 2006 | ||
or | ||
o
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Delaware
|
98-0420726 | |
(State or Other Jurisdiction of
Incorporation or Organization) |
(I.R.S. Employer
Identification No.) |
|
1601 West LBJ Freeway, Dallas, TX | 75234-6034 | |
(Address of Principal Executive Offices) | (Zip Code) |
1
Three Months Ended | Three Months Ended | ||||||||
March 31, 2006 | March 31, 2005 | ||||||||
(In $ millions, except for | |||||||||
share and per share data) | |||||||||
Net sales
|
1,652 | 1,478 | |||||||
Cost of sales
|
(1,285 | ) | (1,106 | ) | |||||
Gross profit
|
367 | 372 | |||||||
Selling, general and administrative expenses
|
(152 | ) | (159 | ) | |||||
Research and development expenses
|
(18 | ) | (23 | ) | |||||
Special (charges) gains:
|
|||||||||
Insurance recoveries associated with plumbing cases
|
1 | | |||||||
Restructuring, impairment and other special (charges) gains
|
(1 | ) | (38 | ) | |||||
Foreign exchange gain, net
|
| 3 | |||||||
Gain on disposition of assets, net
|
| 1 | |||||||
Operating profit
|
197 | 156 | |||||||
Equity in net earnings of affiliates
|
21 | 15 | |||||||
Interest expense
|
(71 | ) | (176 | ) | |||||
Interest income
|
8 | 15 | |||||||
Other income, net
|
6 | 3 | |||||||
Earnings from continuing operations before tax and minority
interests
|
161 | 13 | |||||||
Income tax provision
|
(45 | ) | (8 | ) | |||||
Earnings from continuing operations before minority interests
|
116 | 5 | |||||||
Minority interests
|
| (25 | ) | ||||||
Earnings (loss) from continuing operations
|
116 | (20 | ) | ||||||
Earnings from operation of discontinued operations
|
1 | 10 | |||||||
Net earnings (loss)
|
117 | (10 | ) | ||||||
Cumulative declared preferred stock dividend
|
(3 | ) | (2 | ) | |||||
Net earnings (loss) available to common shareholders
|
114 | (12 | ) | ||||||
Earnings (loss) per common share basic:
|
|||||||||
Continuing operations
|
0.71 | (0.15 | ) | ||||||
Discontinued operations
|
0.01 | 0.07 | |||||||
Net earnings (loss) available to common shareholders
|
0.72 | (0.08 | ) | ||||||
Earnings (loss) per common share diluted:
|
|||||||||
Continuing operations
|
0.68 | (0.15 | ) | ||||||
Discontinued operations
|
0.00 | 0.07 | |||||||
Net earnings (loss) available to common shareholders
|
0.68 | (0.08 | ) | ||||||
Weighted average shares basic:
|
158,562,161 | 141,742,428 | |||||||
Weighted average shares diluted:
|
171,487,669 | 141,742,428 |
2
3
Accumulated | ||||||||||||||||||||||||||
Other | ||||||||||||||||||||||||||
Additional | Comprehensive | Total | ||||||||||||||||||||||||
Preferred | Common | Paid-In | Retained | Income (Loss), | Shareholders | |||||||||||||||||||||
Stock | Stock | Capital | Earnings | Net | Equity | |||||||||||||||||||||
(In $ millions) | ||||||||||||||||||||||||||
Balance at December 31, 2005
|
| | 337 | 24 | (126 | ) | 235 | |||||||||||||||||||
Comprehensive income (loss), net of tax:
|
||||||||||||||||||||||||||
Net earnings
|
| | | 117 | | 117 | ||||||||||||||||||||
Other comprehensive income (loss):
|
||||||||||||||||||||||||||
Unrealized gain on securities
|
| | | | 1 | 1 | ||||||||||||||||||||
Unrealized gain on derivative contracts
|
| | | | 4 | 4 | ||||||||||||||||||||
Additional minimum pension liability
|
| | | | (1 | ) | (1 | ) | ||||||||||||||||||
Foreign currency translation
|
| | | | (11 | ) | (11 | ) | ||||||||||||||||||
Other comprehensive income (loss)
|
| | | | (7 | ) | (7 | ) | ||||||||||||||||||
Comprehensive income
|
| | | | | 110 | ||||||||||||||||||||
Indemnification of demerger liability
|
| | 1 | | | 1 | ||||||||||||||||||||
Common stock dividends
|
| | | (6 | ) | | (6 | ) | ||||||||||||||||||
Preferred stock dividends
|
| | | (3 | ) | | (3 | ) | ||||||||||||||||||
Stock-based compensation
|
| | 5 | | | 5 | ||||||||||||||||||||
Balance at March 31, 2006
|
| | 343 | 132 | (133 | ) | 342 | |||||||||||||||||||
4
Three Months | Three Months | |||||||||
Ended | Ended | |||||||||
March 31, 2006 | March 31, 2005 | |||||||||
(In $ millions) | ||||||||||
Operating activities:
|
||||||||||
Net earnings (loss)
|
117 | (10 | ) | |||||||
Adjustments to reconcile net earnings (loss) to net cash
provided by (used in) operating activities:
|
||||||||||
Special (charges) gains, net of amounts used
|
(14 | ) | (10 | ) | ||||||
Stock-based compensation
|
5 | | ||||||||
Depreciation
|
51 | 47 | ||||||||
Amortization of intangibles and other assets
|
19 | 16 | ||||||||
Amortization of deferred financing fees
|
3 | 31 | ||||||||
Loss on extinguishment of debt
|
| 74 | ||||||||
Change in equity of affiliates
|
(3 | ) | 21 | |||||||
Deferred income taxes
|
(1 | ) | (23 | ) | ||||||
(Gain) loss on disposition of assets, net
|
| (1 | ) | |||||||
(Gain) loss on foreign currency transactions
|
(16 | ) | | |||||||
Minority interests
|
| 25 | ||||||||
Operating cash provided by (used in) discontinued operations
|
| 17 | ||||||||
Changes in operating assets and liabilities:
|
||||||||||
Trade receivables, net
|
(70 | ) | (138 | ) | ||||||
Other receivables
|
(61 | ) | 36 | |||||||
Prepaid expenses
|
14 | (27 | ) | |||||||
Inventories
|
(12 | ) | (12 | ) | ||||||
Trade payables third party and affiliates
|
(69 | ) | 44 | |||||||
Benefit obligations and other liabilities
|
(20 | ) | (86 | ) | ||||||
Income taxes payable
|
18 | 36 | ||||||||
Other, net
|
18 | 2 | ||||||||
Net cash provided by (used in) operating activities
|
(21 | ) | 42 | |||||||
Investing activities:
|
||||||||||
Capital expenditures on property, plant and equipment
|
(44 | ) | (40 | ) | ||||||
Acquisition of CAG, net of cash acquired
|
| (2 | ) | |||||||
Fees associated with acquisitions
|
| (7 | ) | |||||||
Acquisition of Vinamul, net of cash reimbursed
|
| (208 | ) | |||||||
Net proceeds from disposal of discontinued operations
|
| 75 | ||||||||
Proceeds from sale of marketable securities
|
20 | 104 | ||||||||
Purchases of marketable securities
|
(20 | ) | (27 | ) | ||||||
Increase in restricted cash
|
(42 | ) | | |||||||
Net cash provided by (used in) investing activities
|
(86 | ) | (105 | ) | ||||||
Financing activities:
|
||||||||||
Redemption of senior subordinated notes, including related
premium
|
| (572 | ) | |||||||
Repayment of floating rate term loan, including related premium
|
| (354 | ) | |||||||
Borrowings under term loan facility
|
| 1,135 | ||||||||
Proceeds from issuance of Series A common stock, net
|
| 752 | ||||||||
Proceeds from issuance of preferred stock, net
|
| 233 | ||||||||
Proceeds from issuance of discounted common stock
|
| 12 | ||||||||
Redemption of senior discount notes, including related premium
|
| (207 | ) | |||||||
Short-term borrowings (repayments), net
|
32 | (10 | ) | |||||||
Proceeds from long-term debt
|
7 | 6 | ||||||||
Payments of long-term debt
|
(5 | ) | (3 | ) | ||||||
Fees associated with financings
|
| (7 | ) | |||||||
Dividend payments on preferred stock
|
(3 | ) | | |||||||
Dividend payments on common stock
|
(6 | ) | | |||||||
Net cash provided by (used in) financing activities
|
25 | 985 | ||||||||
Exchange rate effects on cash
|
4 | (22 | ) | |||||||
Net increase (decrease) in cash and cash equivalents
|
(78 | ) | 900 | |||||||
Cash and cash equivalents at beginning of period
|
390 | 838 | ||||||||
Cash and cash equivalents at end of period
|
312 | 1,738 | ||||||||
5
1. | Description of the Company and Basis of Presentation |
Description of the Company |
Basis of Presentation |
Estimates and Assumptions |
6
Restricted Cash |
Reclassifications |
2. | Acquisition of Celanese AG |
Acquisition of Additional CAG Shares |
7
Pro Forma Information |
Three Months | ||||
Ended | ||||
March 31, 2005 | ||||
(In $ millions) | ||||
Net sales
|
1,478 | |||
Operating profit
|
154 | |||
Net earnings
|
11 |
Squeeze-Out |
8
3. | Domination Agreement and Organizational Restructuring |
Domination Agreement |
9
4. | Initial Public Offering and Concurrent Financings |
10
5. | Accounting Changes and New Accounting Pronouncements |
11
6. | Acquisitions, Divestitures and Ventures |
Acetex(1) | |||||
(In $ millions) | |||||
Cash
|
54 | ||||
Inventories
|
80 | ||||
Property, plant, and equipment
|
264 | ||||
Goodwill
|
172 | ||||
Intangible assets
|
76 | ||||
Debt
|
(316 | ) | |||
Pensions liabilities
|
(28 | ) | |||
Other current assets/liabilities
|
(16 | ) | |||
Net assets acquired
|
286 | ||||
(1) | Acetex purchase price allocation is preliminary. The Company expects to finalize the purchase price allocation by June 30, 2006. |
12
7.
Receivables, net
As of
As of
March 31, 2006
December 31, 2005
(In $ millions)
1,017
935
142
117
401
364
1,560
1,416
(17
)
(16
)
1,543
1,400
8. | Inventories |
As of | As of | ||||||||
March 31, 2006 | December 31, 2005 | ||||||||
(In $ millions) | |||||||||
Finished goods
|
513 | 504 | |||||||
Work-in-process
|
28 | 27 | |||||||
Raw materials and supplies
|
137 | 130 | |||||||
Total inventories
|
678 | 661 | |||||||
9. | Goodwill and Intangible Assets |
Chemical | Acetate | Performance | |||||||||||||||||||||||
Products | Products | Ticona | Products | Other | Total | ||||||||||||||||||||
(In $ millions) | |||||||||||||||||||||||||
As of December 31, 2005
|
380 | 188 | 285 | 79 | 17 | 949 | |||||||||||||||||||
Acquisition of Acetex
|
7 | | | | (1 | ) | 6 | ||||||||||||||||||
Acquisition of CAG(1)
|
(9 | ) | (3 | ) | (4 | ) | | | (16 | ) | |||||||||||||||
Exchange rate changes
|
(8 | ) | | (4 | ) | 1 | | (11 | ) | ||||||||||||||||
As of March 31, 2006
|
370 | 185 | 277 | 80 | 16 | 928 | |||||||||||||||||||
(1) | The adjustments recorded during the three months ended March 31, 2006 consist primarily of the reversals of certain pre-acquisition tax valuation allowances. |
13
As of
As of
March 31, 2006
December 31, 2005
(In $ millions)
76
73
496
474
12
12
11
11
595
570
(108
)
(89
)
487
481
10. | Debt |
As of | As of | ||||||||||
March 31, 2006 | December 31, 2005 | ||||||||||
(In $ millions) | |||||||||||
Short-term borrowings and current installments of long-term
debt third party and affiliates
|
|||||||||||
Current installments of long-term debt
|
20 | 20 | |||||||||
Short-term borrowings, principally comprised of amounts due to
affiliates
|
192 | 135 | |||||||||
Total short-term borrowings and current installments of
long-term debt third party and affiliates
|
212 | 155 | |||||||||
Long-term debt
|
|||||||||||
Senior Credit Facilities: Term loan facility
|
1,712 | 1,708 | |||||||||
Senior Subordinated Notes 9.625%, due 2014
|
800 | 800 | |||||||||
Senior Subordinated Notes 10.375%, due 2014
|
157 | 153 | |||||||||
Senior Discount Notes 10.5%, due 2014
|
313 | 306 | |||||||||
Senior Discount Notes 10%, due 2014
|
75 | 73 | |||||||||
Term notes 7.125%, due 2009
|
14 | 14 | |||||||||
Pollution control and industrial revenue bonds, interest rates
ranging from 5.2% to 6.7%, due at various dates through 2030
|
191 | 191 | |||||||||
Obligations under capital leases and other secured borrowings
due at various dates through 2018
|
27 | 28 | |||||||||
Other borrowings
|
37 | 29 | |||||||||
Subtotal
|
3,326 | 3,302 | |||||||||
Less: Current installments of long-term debt
|
20 | 20 | |||||||||
Total long-term debt
|
3,306 | 3,282 | |||||||||
14
Three Months Ended | Three Months Ended | ||||||||
March 31, 2006 | March 31, 2005 | ||||||||
(In $ millions) | |||||||||
Accelerated amortization of deferred financing costs on early
redemption and prepayment of debt
|
| 28 | |||||||
Premium paid on early redemption of debt
|
| 74 | |||||||
Interest expense
|
71 | 74 | |||||||
Total interest expense
|
71 | 176 | |||||||
11. | Other Current Liabilities |
As of | As of | ||||||||
March 31, 2006 | December 31, 2005 | ||||||||
(In $ millions) | |||||||||
Accrued salaries and benefits
|
152 | 159 | |||||||
Environmental liabilities
|
25 | 25 | |||||||
Accrued restructuring
|
38 | 44 | |||||||
Insurance liabilities
|
115 | 125 | |||||||
Accrued legal
|
138 | 133 | |||||||
Other
|
294 | 301 | |||||||
Total other current liabilities
|
762 | 787 | |||||||
15
12.
Benefit Obligations
Pension Benefits
Postretirement Benefits
Three Months Ended
Three Months Ended
Three Months Ended
Three Months Ended
March 31, 2006
March 31, 2005
March 31, 2006
March 31, 2005
(In $ millions)
10
10
1
1
46
45
5
6
(51
)
(49
)
(1
)
5
6
6
6
13. | Shareholders Equity |
Preferred | Series A | |||||||
Stock | Common Stock | |||||||
(Number of shares) | ||||||||
Balance as of December 31, 2005
|
9,600,000 | 158,562,161 | ||||||
Issuance of preferred stock
|
| | ||||||
Issuance of common stock
|
| | ||||||
Stock dividend
|
| | ||||||
Balance as of March 31, 2006
|
9,600,000 | 158,562,161 | ||||||
16
14. | Commitments and Contingencies |
17
18
19
20
| The Company agreed to indemnify Hoechst for environmental liabilities associated with contamination arising under 19 divestiture agreements entered into by Hoechst prior to the demerger. |
| The Company will indemnify Hoechst against those liabilities up to 250 million; | |
| Hoechst will bear those liabilities exceeding 250 million, however the Company will reimburse Hoechst for one-third of those liabilities for amounts that exceed 750 million in the aggregate. |
21
22
| The Company is secondarily liable under a lease agreement pursuant to which the Company has assigned a direct obligation to a third party. The lease assumed by the third party expires on April 30, 2012. The lease liability for the period from April 1, 2006 to April 30, 2012 is estimated to be approximately $47 million. | |
| The Company has agreed to indemnify various insurance carriers, for amounts not in excess of the settlements received, from claims made against these carriers subsequent to the settlement. The aggregate amount of guarantees under these settlements is approximately $10 million, which is unlimited in term. |
23
15. | Special (Charges) Gains |
Three Months | Three Months | ||||||||
Ended | Ended | ||||||||
March 31, 2006 | March 31, 2005 | ||||||||
(In $ millions) | |||||||||
Employee termination benefits
|
(2 | ) | (2 | ) | |||||
Plant/office closures
|
2 | (1 | ) | ||||||
Total restructuring
|
| (3 | ) | ||||||
Insurance recoveries associated with plumbing cases
|
1 | | |||||||
Other
|
(1 | ) | (35 | ) | |||||
Total special (charges) gains
|
| (38 | ) | ||||||
Employee | |||||||||||||
Termination | Plant/Office | ||||||||||||
Benefits | Closures | Total | |||||||||||
(In $ millions) | |||||||||||||
Restructuring reserve at December 31, 2005
|
51 | 14 | 65 | ||||||||||
Restructuring additions
|
2 | (2 | ) | | |||||||||
Cash and noncash uses
|
(8 | ) | (3 | ) | (11 | ) | |||||||
Restructuring reserve at March 31, 2006
|
45 | 9 | 54 | ||||||||||
24
16. | Stock-based and Other Management Compensation Plans |
25
Three Months | Three Months | ||||||||
Ended | Ended | ||||||||
March 31, 2006 | March 31, 2005 | ||||||||
(In $ millions) | |||||||||
Included in reported Operating earnings
|
|||||||||
Selling, general and administrative
|
5 | | |||||||
Incremental pro forma
|
|||||||||
Selling, general and administrative
|
| 2 | |||||||
Actual/pro forma stock-based employee compensation expense
|
5 | 2 | |||||||
Risk free interest rate
|
4.0 | % | ||
Estimated life in years
|
7.5 | |||
Dividend yield
|
0.75 | % | ||
Volatility
|
26.0 | % | ||
Expected annual forfeiture rate(1)
|
0 | % |
(1) | At March 31, 2006, the expected annual forfeiture rate is estimated to be 5%. |
26
Three Months Ended March 31, 2006
Weighted-
Weighted-
Average
Aggregate
Number of
Average
Remaining
Intrinsic
Options
Grant
Contractual
Value
(In millions)
Price in $
Term
(In $ millions)
12
16.15
9
38
12
16.15
9
58
10
16.14
9
47
5
16.07
9
24
Three Months Ended March 31, 2005 | ||||||||||||
Basic | Diluted | |||||||||||
Net | Earnings (loss) | Earnings (loss) | ||||||||||
Earnings | Per Common | Per Common | ||||||||||
(Loss) | Share | Share | ||||||||||
(In $ millions, except per share information) | ||||||||||||
Net earnings (loss) available to common shareholders,
as reported
|
(12 | ) | (0.08 | ) | (0.08 | ) | ||||||
Add: stock-based employee compensation expense included in
reported net earnings, net of the related tax effects
|
| | | |||||||||
Less: stock-based compensation under SFAS No. 123, net
of the related tax effects
|
(2 | ) | (0.02 | ) | (0.02 | ) | ||||||
Pro forma net earnings (loss) available to common shareholders
|
(14 | ) | (0.10 | ) | (0.10 | ) | ||||||
17. | Income Taxes |
27
18. | Business Segments |
Chemical | Acetate | Performance | Total | Other | ||||||||||||||||||||||||||||
Products | Ticona | Products | Products | Segments | Activities | Reconciliation | Consolidated | |||||||||||||||||||||||||
(In $ millions) | ||||||||||||||||||||||||||||||||
As of and for the three months ended March 31, 2006
|
||||||||||||||||||||||||||||||||
Sales to external customers
|
1,144 | 231 | 167 | 49 | 1,591 | 61 | | 1,652 | ||||||||||||||||||||||||
Inter-segment revenues
|
25 | | | | 25 | | (25 | ) | | |||||||||||||||||||||||
Operating profit
|
162 | 41 | 23 | 17 | 243 | (46 | ) | | 197 | |||||||||||||||||||||||
Earnings (loss) from continuing operations before tax and
minority interests
|
171 | 56 | 23 | 15 | 265 | (104 | ) | | 161 | |||||||||||||||||||||||
Depreciation and amortization
|
38 | 16 | 7 | 4 | 65 | 5 | | 70 | ||||||||||||||||||||||||
Capital expenditures
|
22 | 5 | 16 | | 43 | 1 | | 44 | ||||||||||||||||||||||||
Total assets
|
3,395 | 1,608 | 725 | 355 | 6,083 | 1,438 | 7,521 | |||||||||||||||||||||||||
As of and for the three months ended March 31, 2005
|
||||||||||||||||||||||||||||||||
Sales to external customers
|
1,015 | 239 | 165 | 47 | 1,466 | 12 | | 1,478 | ||||||||||||||||||||||||
Inter-segment revenues
|
29 | | | | 29 | | (29 | ) | | |||||||||||||||||||||||
Operating profit
|
177 | 39 | 10 | 13 | 239 | (83 | ) | | 156 | |||||||||||||||||||||||
Earnings (loss) from continuing operations before tax and
minority interests
|
193 | 51 | 10 | 12 | 266 | (253 | ) | | 13 | |||||||||||||||||||||||
Depreciation and amortization
|
34 | 15 | 9 | 3 | 61 | 2 | | 63 | ||||||||||||||||||||||||
Capital expenditures
|
18 | 14 | 5 | 2 | 39 | 1 | | 40 | ||||||||||||||||||||||||
Total assets(1)
|
3,280 | 1,583 | 691 | 342 | 5,896 | 1,549 | | 7,445 |
(1) | Due to purchase accounting related to the acquisition of CAG not being finalized as of March 31, 2005, these amounts represent the balances as of December 31, 2005. |
19. | Transactions and Relationships with Affiliates and Related Parties |
28
20. | Consolidating Guarantor Financial Information |
29
Three Months Ended March 31, 2006
Parent
Non-
Guarantor
Issuer
Guarantors
Eliminations
Consolidated
(In $ millions)
1,652
1,652
(1,285
)
(1,285
)
367
367
(4
)
(148
)
(152
)
(18
)
(18
)
1
1
(1
)
(1
)
(4
)
201
197
121
127
21
(248
)
21
(10
)
(61
)
(71
)
8
8
6
6
117
117
175
(248
)
161
4
(49
)
(45
)
117
121
126
(248
)
116
117
121
126
(248
)
116
1
1
117
121
127
(248
)
117
30
Three Months Ended March 31, 2005
Parent
Non-
Guarantor
Issuer
Guarantors
Eliminations
Consolidated
(In $ millions)
1,478
1,478
(1,106
)
(1,106
)
372
372
(3
)
(156
)
(159
)
(23
)
(23
)
(38
)
(38
)
3
3
1
1
(3
)
159
156
(12
)
15
15
(3
)
15
(36
)
(140
)
(176
)
5
10
15
3
3
(10
)
(21
)
47
(3
)
13
9
(17
)
(8
)
(10
)
(12
)
30
(3
)
5
(25
)
(25
)
(10
)
(12
)
5
(3
)
(20
)
10
10
(10
)
(12
)
15
(3
)
(10
)
31
32
33
34
35
36
Table of Contents
Table of Contents
Three Months Ended March 31, 2006
Parent
Non-
Guarantor
Issuer
Guarantors
Eliminations
Consolidated
(In $ millions)
(21
)
(21
)
(44
)
(44
)
20
20
(20
)
(20
)
(42
)
(42
)
(86
)
(86
)
32
32
7
7
(5
)
(5
)
9
9
(18
)
(9
)
(9
)
18
(3
)
(3
)
(6
)
(6
)
25
25
4
4
(78
)
(78
)
1
389
390
1
311
312
Table of Contents
Three Months Ended March 31, 2005
Parent
Non-
Guarantor
Issuer
Guarantors
Eliminations
Consolidated
(In $ millions)
10
32
42
(40
)
(40
)
(779
)
207
572
(2
)
(2
)
(7
)
(7
)
(208
)
(208
)
75
75
104
104
(27
)
(27
)
(779
)
207
467
(105
)
(572
)
(572
)
(354
)
(354
)
1,135
1,135
752
752
233
233
12
12
(207
)
(207
)
(10
)
(10
)
6
6
(3
)
(3
)
(7
)
(7
)
997
(207
)
195
985
(22
)
(22
)
228
672
900
838
838
228
1,510
1,738
Table of Contents
21.
Earnings (Loss) Per Share
Three Months Ended March 31, 2006
Three Months Ended March 31, 2005
Continuing
Discontinued
Net Earnings
Continuing
Discontinued
Net Earnings
Operations
Operations
(Loss)
Operations
Operations
(Loss)
(In $ millions, except for share and per share data)
116
1
117
(20
)
10
(10
)
(3
)
(3
)
(2
)
(2
)
113
1
114
(22
)
10
(12
)
0.71
0.01
0.72
(0.15
)
0.07
(0.08
)
0.68
0.00
0.68
(0.15
)
0.07
(0.08
)
158,562,161
158,562,161
158,562,161
141,742,428
141,742,428
141,742,428
919,625
919,625
919,625
12,005,883
12,005,883
12,005,883
171,487,669
171,487,669
171,487,669
141,742,428
141,742,428
141,742,428
22.
Subsequent Events
Table of Contents
Item 2. | Managements Discussion and Analysis of Financial Condition and Results of Operations |
Change in Ownership |
Squeeze-Out |
37
Overview |
Financial Reporting Changes |
38
Results of Operations |
Financial Highlights |
Three Months | Three Months | |||||||||||||||
Ended | % of | Ended | % of | |||||||||||||
March 31, 2006 | Net Sales | March 31, 2005 | Net Sales | |||||||||||||
(Unaudited) | (Unaudited) | |||||||||||||||
(In $ millions)
|
||||||||||||||||
Statement of Operations Data:
|
||||||||||||||||
Net sales
|
1,652 | 100.0 | % | 1,478 | 100.0 | % | ||||||||||
Gross profit
|
367 | 22.2 | % | 372 | 25.2 | % | ||||||||||
Special (charges) gains
|
| | (38 | ) | (2.6 | )% | ||||||||||
Operating profit
|
197 | 11.9 | % | 156 | 10.6 | % | ||||||||||
Equity in net earnings of affiliates
|
21 | 1.3 | % | 15 | 1.0 | % | ||||||||||
Earnings from continuing operations before tax and minority
interests
|
161 | 9.7 | % | 13 | 0.9 | % | ||||||||||
Earnings (loss) from continuing operations
|
116 | 7.0 | % | (20 | ) | (1.4 | )% | |||||||||
Earnings from discontinued operations
|
1 | | 10 | 0.7 | % | |||||||||||
Net earnings (loss)
|
117 | 7.0 | % | (10 | ) | (0.7 | )% | |||||||||
Depreciation and amortization
|
70 | 4.2 | % | 63 | 4.3 | % |
As of | As of | |||||||
March 31, 2006 | December 31, 2005 | |||||||
(In $ millions) | ||||||||
(Unaudited) | ||||||||
Balance Sheet Data:
|
||||||||
Short-term borrowings and current installments of long-term
debt third party and affiliates
|
212 | 155 | ||||||
Plus: Long-term debt
|
3,306 | 3,282 | ||||||
Total debt
|
3,518 | 3,437 | ||||||
Net Sales |
Cost of Sales |
39
Gross Profit |
Selling, General and Administrative Expenses |
Special (Charges) Gains |
Three Months | Three Months | ||||||||
Ended | Ended | ||||||||
March 31, 2006 | March 31, 2005 | ||||||||
(Unaudited) | |||||||||
(In $ millions) | |||||||||
Employee termination benefits
|
(2 | ) | (2 | ) | |||||
Plant/office closures
|
2 | (1 | ) | ||||||
Total restructuring
|
| (3 | ) | ||||||
Insurance recoveries associated with plumbing cases
|
1 | | |||||||
Other
|
(1 | ) | (35 | ) | |||||
Total special (charges) gains
|
| (38 | ) | ||||||
Operating Profit |
Equity in Net Earnings of Affiliates |
Interest Expense |
40
Other Income (Expense), Net |
Income Taxes |
Earnings from Discontinued Operations |
Net Earnings (Loss) |
41
Three Months | Three Months | |||||||||||
Ended | Ended | Change | ||||||||||
March 31, 2006 | March 31, 2005 | in $ | ||||||||||
(In $ millions) | ||||||||||||
(Unaudited) | ||||||||||||
Net Sales
|
||||||||||||
Chemical Products
|
1,169 | 1,044 | 125 | |||||||||
Technical Polymers Ticona
|
231 | 239 | (8 | ) | ||||||||
Acetate Products
|
167 | 165 | 2 | |||||||||
Performance Products
|
49 | 47 | 2 | |||||||||
Segment Total
|
1,616 | 1,495 | 121 | |||||||||
Other Activities
|
61 | 12 | 49 | |||||||||
Inter-segment Eliminations
|
(25 | ) | (29 | ) | 4 | |||||||
Total Net Sales
|
1,652 | 1,478 | 174 | |||||||||
Special (Charges) Gains
|
||||||||||||
Chemical Products
|
1 | (1 | ) | 2 | ||||||||
Technical Polymers Ticona
|
2 | (1 | ) | 3 | ||||||||
Acetate Products
|
| (1 | ) | 1 | ||||||||
Performance Products
|
| | | |||||||||
Segment Total
|
3 | (3 | ) | 6 | ||||||||
Other Activities
|
(3 | ) | (35 | ) | 32 | |||||||
Total Special Charges
|
| (38 | ) | 38 | ||||||||
Operating Profit (Loss)
|
||||||||||||
Chemical Products
|
162 | 177 | (15 | ) | ||||||||
Technical Polymers Ticona
|
41 | 39 | 2 | |||||||||
Acetate Products
|
23 | 10 | 13 | |||||||||
Performance Products
|
17 | 13 | 4 | |||||||||
Segment Total
|
243 | 239 | 4 | |||||||||
Other Activities
|
(46 | ) | (83 | ) | 37 | |||||||
Total Operating Profit
|
197 | 156 | 41 | |||||||||
Earnings (Loss) from Continuing Operations Before Tax and
Minority Interests
|
||||||||||||
Chemical Products
|
171 | 193 | (22 | ) | ||||||||
Technical Polymers Ticona
|
56 | 51 | 5 | |||||||||
Acetate Products
|
23 | 10 | 13 | |||||||||
Performance Products
|
15 | 12 | 3 | |||||||||
Segment Total
|
265 | 266 | (1 | ) | ||||||||
Other Activities
|
(104 | ) | (253 | ) | 149 | |||||||
Total Earnings from Continuing Operations Before Tax and
Minority Interests
|
161 | 13 | 148 | |||||||||
42
Three Months | Three Months | |||||||||||
Ended | Ended | Change | ||||||||||
March 31, 2006 | March 31, 2005 | in $ | ||||||||||
(In $ millions) | ||||||||||||
(Unaudited) | ||||||||||||
Depreciation & Amortization
|
||||||||||||
Chemical Products
|
38 | 34 | 4 | |||||||||
Technical Polymers Ticona
|
16 | 15 | 1 | |||||||||
Acetate Products
|
7 | 9 | (2 | ) | ||||||||
Performance Products
|
4 | 3 | 1 | |||||||||
Segment Total
|
65 | 61 | 4 | |||||||||
Other Activities
|
5 | 2 | 3 | |||||||||
Total Depreciation & Amortization
|
70 | 63 | 7 | |||||||||
Volume | Price | Currency | Other* | Total | ||||||||||||||||
(In percentages) | ||||||||||||||||||||
Chemical Products
|
(1 | ) | 8 | (3 | ) | 8 | 12 | |||||||||||||
Technical Polymers Ticona
|
1 | 3 | (5 | ) | (2 | ) | (3 | ) | ||||||||||||
Acetate Products
|
(6 | ) | 7 | | | 1 | ||||||||||||||
Performance Products
|
23 | (12 | ) | (7 | ) | | 4 | |||||||||||||
Total Company
|
(1 | ) | 6 | (3 | ) | 10 | 12 | |||||||||||||
* | Primarily represents net sales from the Acetex business, AT Plastics and captive insurance companies, which are included in Other Activities, and the loss of sales related to the cyclo-olefine copolymer (COC) divestiture. |
43
Chemical Products
Three Months
Three Months
Ended
Ended
Change
March 31, 2006
March 31, 2005
in $
(In $ millions)
(Unaudited)
1,169
1,044
125
(1
)%
8
%
(3
)%
8
%
162
177
(15
)
13.9
%
17.0
%
1
(1
)
2
171
193
(22
)
38
34
4
44
Technical Polymers Ticona |
Three Months | Three Months | ||||||||||||
Ended | Ended | Change | |||||||||||
March 31, 2006 | March 31, 2005 | in $ | |||||||||||
(In $ millions) | |||||||||||||
(Unaudited) | |||||||||||||
Net sales
|
231 | 239 | (8 | ) | |||||||||
Net sales variance:
|
|||||||||||||
Volume
|
1 | % | |||||||||||
Price
|
3 | % | |||||||||||
Currency
|
(5 | )% | |||||||||||
Other
|
(2 | )% | |||||||||||
Operating profit
|
41 | 39 | 2 | ||||||||||
Operating margin
|
17.7 | % | 16.3 | % | |||||||||
Special (charges) gains
|
2 | (1 | ) | 3 | |||||||||
Earnings from continuing operations before tax and minority
interests
|
56 | 51 | 5 | ||||||||||
Depreciation and amortization
|
16 | 15 | 1 |
45
Three Months
Three Months
Ended
Ended
Change
March 31, 2006
March 31, 2005
in $
(In $ millions)
(Unaudited)
167
165
2
(6
)%
7
%
23
10
13
13.8
%
6.1
%
(1
)
1
23
10
13
7
9
(2
)
46
Performance Products |
Three Months | Three Months | ||||||||||||
Ended | Ended | Change | |||||||||||
March 31, 2006 | March 31, 2005 | in $ | |||||||||||
(In $ millions) | |||||||||||||
(Unaudited) | |||||||||||||
Net sales
|
49 | 47 | 2 | ||||||||||
Net sales variance:
|
|||||||||||||
Volume
|
23 | % | |||||||||||
Price
|
(12 | )% | |||||||||||
Currency
|
(7 | )% | |||||||||||
Operating profit
|
17 | 13 | 4 | ||||||||||
Operating margin
|
34.7 | % | 27.7 | % | |||||||||
Special (charges) gains
|
| | | ||||||||||
Earnings from continuing operations before tax and minority
interests
|
15 | 12 | 3 | ||||||||||
Depreciation and amortization
|
4 | 3 | 1 |
Other Activities |
47
Net Cash Provided by/(Used in) Operating Activities |
Net Cash Used in Investing Activities |
Net Cash Provided by Financing Activities |
| Borrowings under the term loan facility of $1,135 million. | |
| Redemption and related premiums of the senior subordinated notes of $572 million and senior discount notes of $207 million. |
48
| Proceeds from the issuances of common stock, net of $752 million and preferred stock, net of $233 million. | |
| Repayment of floating rate term loan, including related premium, of $354 million. |
Liquidity |
Debt and Capital |
Remaining | 2007- | 2009- | 2011 and | ||||||||||||||||||
Fixed Contractual Debt Obligations | Total | 2006 | 2008 | 2010 | Thereafter | ||||||||||||||||
(In $ millions) | |||||||||||||||||||||
Term Loan Facilities
|
1,712 | 13 | 34 | 33 | 1,632 | ||||||||||||||||
Senior Subordinated Notes(1)
|
954 | | | | 954 | ||||||||||||||||
Senior Discount Notes(2)
|
554 | | | | 554 | ||||||||||||||||
Other Debt(3)
|
463 | 194 | 19 | 39 | 211 | ||||||||||||||||
Total Fixed Contractual Debt Obligations
|
3,683 | 207 | 53 | 72 | 3,351 | ||||||||||||||||
(1) | Does not include $3 million of premium. |
(2) | Reflects the accreted value of the notes at maturity of $165 million. |
(3) | Does not include a $2 million reduction due to purchase accounting. |
49
Domination Agreement |
50
| 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, electronics and construction industries; |
51
| changes in the price and availability of raw materials, particularly changes in the demand for, supply of, and market prices of fuel oil, natural gas, coal, electricity and petrochemicals such as ethylene, propylene and butane, including changes in production quotas in OPEC countries and the deregulation of the natural gas transmission industry in Europe; | |
| 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 production costs and improve productivity by implementing technological improvements to existing plants; | |
| the existence of temporary industry surplus production capacity resulting from the integration and start-up of new world-scale plants; | |
| increased price competition and the introduction of competing products by other companies; | |
| the ability to develop, introduce and market innovative products, product grades and applications, particularly in the Ticona and Performance Products segments of our business; | |
| changes in the degree of patent and other legal protection afforded to our products; | |
| compliance costs and potential disruption or interruption of production due to accidents or other unforeseen events or delays in construction of facilities; | |
| potential liability for remedial actions under existing or future environmental regulations; | |
| 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; | |
| changes in the composition or restructuring of us or our subsidiaries and the successful completion of acquisitions, divestitures and venture activities; | |
| inability to successfully integrate current and future acquisitions; | |
| pending or future challenges to the Domination Agreement; and | |
| various other factors, both referenced and not referenced in this document. |
Item 3. | Quantitative and Qualitative Disclosures about Market Risk |
Item 4. | Controls and Procedures |
52
53
Item 1. | Legal Proceedings |
Plumbing Actions |
Sorbates Antitrust Actions |
Shareholder Litigation |
Other Matters |
Item 1A. | Risk Factors |
54
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds |
Item 3. | Defaults Upon Senior Securities |
Item 4. | Submission of Matters to a Vote of Security Holders |
Item 5. | Other Information |
Item 6. | Exhibits |
Exhibit | ||||
Number | Description | |||
3 | .1 | Second Amended and Restated Certificate of Incorporation of Registrant (incorporated by reference to Exhibit 3.1 to the Registrants Current Report on Form 8-K (File No. 001-32410) filed with the SEC on January 28, 2005) | ||
3 | .2 | Amended and Restated By-laws of Registrant (incorporated by reference to Exhibit 3.2 to the Registrants Registration Statement on Form S-4 (File No. 333-124049-01) filed with the SEC on April 13, 2005). | ||
3 | .3 | Certificate of Designations of Convertible Perpetual Preferred Stock (incorporated by reference to Exhibit 3.2 to the Registrants Current Report on Form 8-K (File No. 001-32410) filed with the SEC on January 28, 2005) | ||
4 | .1 | Form of certificate of Series A common stock (incorporated by reference to Exhibit 4.1 to Amendment No. 6 to the Registrants Registration Statement on Form S-1 (File No. 333-120187) (the Form S-1) filed with the SEC on January 19, 2005) | ||
4 | .2 | Form of certificate of Convertible Perpetual Preferred Stock (incorporated by reference to Exhibit 4.2 to Amendment No. 5 to the Form S-1 filed with the SEC on January 13, 2005) | ||
4 | .3 | Third Amended and Restated Shareholders Agreement, dated as of October 31, 2005, among Celanese Corporation, Blackstone Capital Partners (Cayman) Ltd. 1, Blackstone Capital Partners (Cayman) Ltd. 2, Blackstone Capital Partners (Cayman) Ltd. 3 and BA Capital Investors Sidecar Fund, L.P. (incorporated by reference to Exhibit 4.3 to the Registrants Registration Statement filed on Form S-1 (File No. 333-127902) filed with the SEC on November 1, 2005) | ||
4 | .4 | Amended and Restated Registration Rights Agreement, dated as of January 26, 2005, among Blackstone Capital Partners (Cayman) Ltd. 1, Blackstone Capital Partners (Cayman) Ltd. 2, Blackstone Capital Partners (Cayman) Ltd. 3, BA Capital Investors Sidecar Fund, L.P. and Celanese Corporation (incorporated by reference to Exhibit 10.2 to the Form 8-K (File No. 001-32410) filed with the SEC on January 28, 2005) | ||
4 | .5 | Amendment No. 1 to the Third Amended and Restated Shareholders Agreement, dated November 14, 2005, by and among Celanese Corporation, Blackstone Capital Partners (Cayman) Ltd. 1, Blackstone Capital Partners (Cayman) Ltd. 2, Blackstone Capital Partners (Cayman) Ltd. 3, and BA Capital Investors Sidecar Fund, L.P. (incorporated by reference to Current Report on Form 8-K, filed with the SEC on November 18, 2005) |
55
Exhibit
Number
Description
4
.6
Amendment No. 2, dated March 30, 2006, to the Third
Amended and Restated Shareholders Agreement, dated as of
October 31, 2005, as amended (the Agreement),
by and among Celanese Corporation, Blackstone Capital Partners
(Cayman) Ltd. 1 (BCP 1), Blackstone
Capital Partners (Cayman) Ltd. 2 (BCP 2),
Blackstone Capital Partners (Cayman) Ltd. 3
(BCP 3 and, together with BCP 1 and
BCP 2 and their respective successors and permitted
assigns, the Blackstone Entities) and BA Capital
Investors Sidecar Fund, L.P., a Cayman Islands limited
partnership (BACI) (incorporated by reference to
Exhibit 4.6 to the Form 10-K filed with the SEC on
March 31, 2006)
12
Computation of ratio of earnings to fixed charges (filed
herewith)
31
.1
Certification of Chief Executive Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002 (filed
herewith)
31
.2
Certification of Chief Financial Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002 (filed
herewith)
32
.1
Certification of Chief Executive Officer pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002 (filed
herewith)
32
.2
Certification of Chief Financial Officer pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002 (filed
herewith)
56
CELANESE CORPORATION |
By: | /s/ David N. Weidman |
|
|
Name: David N. Weidman |
Title: | Chief Executive Officer, |
President and Director | |
Date: May 9, 2006 |
By: | /s/ John J. Gallagher III |
|
|
Name: John J. Gallagher III |
Title: | Executive Vice President and |
Chief Financial Officer | |
(Principal Financial Officer) | |
Date: May 9, 2006 |
57
Three Months Ended
Three Months Ended
March 31, 2006
March 31, 2005
(In $ millions, except ratio of earnings
to combined fixed charges)
161
13
(21
)
(15
)
17
36
1
1
85
193
243
228
71
176
1
1
9
6
3
2
1
8
85
193
2.9
1.2
1. | I have reviewed this quarterly report on Form 10-Q of Celanese Corporation; |
2. | Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; |
4. | The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and we have: |
(a) | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; |
(b) | [ Reserved ] |
(c) | evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | disclosed in this report any change in the registrants internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
5. | The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of registrants Board of Directors (or persons performing the equivalent functions): |
(a) | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and |
(b) | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. |
/s/ David N. Weidman | |
|
|
David N. Weidman | |
Chief Executive Officer, President and Director |
1. | I have reviewed this quarterly report on Form 10-Q of Celanese Corporation; |
2. | Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; |
4. | The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and we have: |
(a) | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; |
(b) | [ Reserved ] |
(c) | evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | disclosed in this report any change in the registrants internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
5. | The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of registrants Board of Directors (or persons performing the equivalent functions): |
(a) | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and |
(b) | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. |
/s/ John J. Gallagher III | |
|
|
John J. Gallagher III | |
Executive Vice President and Chief Financial Officer | |
(Principal Financial Officer) |
1. | The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and | |
2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
/s/ David N. Weidman | |
|
|
David N. Weidman | |
Chief Executive Officer, President and Director |
1. | The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and | |
2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
/s/ John J. Gallagher III | |
|
|
John J. Gallagher III | |
Executive Vice President and Chief Financial Officer | |
(Principal Financial Officer) |