CELANESE CORPORATION REPORTS STRONG FIRST QUARTER RESULTS:
NET SALES OF $1,509 MILLION UP 21%; OPERATING PROFIT OF $166 MILLION TRIPLED;
BASIC EPS (LOSS) OF $(0.08) PER SHARE;
ADJUSTED EBITDA OF $334 MILLION, UP 61%;
ADJUSTED BASIC EPS OF $0.87 PER SHARE
First quarter highlights:
o Net sales increase 21% to $1,509 million from first quarter 2004
o Operating profit and gross profit margins expand, particularly in Chemical
Products, on higher pricing, driven by strong demand and higher industry
capacity utilization, lower depreciation and amortization as well as
productivity improvements
o Basic earnings per share was a loss of ($0.08), based on a net loss of
($10) million, which includes, among other items, $102 million in costs to
refinance high-yield debt and $45 million in sponsor monitoring and related
cancellation fees
o Adjusted EBITDA increases 61% to $334 million
o Adjusted basic earnings per share was $0.87 reflecting strength in
underlying operations
Q1 2005 Q1 2004
-------------------------------
in $ millions, except per share data Successor Predecessor
---------------------------------------------------------------------------
Net sales 1,509 1,243
Net earnings (loss) (10) 78
Basic EPS (0.08)(1) n.m.
Adjusted EBITDA 334 208
Adjusted Basic EPS 0.87 (2) n.m.
---------------------------------------------------------------------------
(1) Based on average shares outstanding of 141,742,428
(2) Based on outstanding shares of 158,491,201 as of March 31, 2005
n.m. = not meaningful
DALLAS, May 10, 2005 -- Celanese Corporation today reported net sales rose
21% to $1,509 million in the first quarter compared to $1,243 million for
Celanese AG, the predecessor company, in the same period last year. The net
sales increase was primarily due to significantly higher pricing, mainly in the
Chemical Products segment, as well as increased volumes, composition changes in
Chemical Products largely due to the Vinamul emulsions acquisition, and
favorable currency effects.
1
Adjusted EBITDA, a key company performance measure, rose 61% to $334
million in the first quarter of 2005 compared to $208 million for the same
period last year, mainly on improved results in our businesses.
Adjusted basic earnings for the quarter were $0.87 per share and above the
company's guidance of $0.73 to $0.76 per share provided on March 23, 2005,
excluding special items and using outstanding shares as of March 31, 2005.
The company reported a net loss of ($10) million in the first quarter,
compared to earnings of $78 million for Celanese AG in the same period last year
mainly due to higher interest expense and special items, which were partially
offset by higher gross profit. The special items consisted of refinancing costs
of $102 million, an annual sponsor monitoring fee of $10 million, and special
charges of $38 million, which included a $35 million fee for cancellation of
sponsor monitoring services. Special items in the first quarter of 2004 were $28
million of special charges largely for advisory fees related to the Celanese AG
acquisition.
"Our 9,700 associates worldwide delivered another quarter of strong
underlying performance while continuing our efforts to build sustainable
earnings for the future," said David Weidman, chief executive officer. "In the
quarter, our chemicals business benefited from higher pricing driven by tight
capacity utilization across the industry and continued strong demand globally.
At the same time, our team continued to drive productivity improvements
throughout the company. We also strengthened our position in emulsions through
the Vinamul acquisition and we made progress on our expansions in China. We are
committed to increasing the profitability and growth of our company by expanding
our inherently attractive businesses worldwide while building on our track
2
record of productivity and operational excellence. We are pleased with the
progress we have made and are extremely proud of the Celanese team."
Operating profit increased to $166 million in the quarter compared to $52
million in the same period last year on gross margin expansion of $143 million,
as significantly higher pricing, primarily in Chemical Products, lower
depreciation expense and productivity improvements more than offset higher raw
material and energy costs. Operating profit also benefited from increased
volumes in Acetate Products, Performance Products and Technical Polymers Ticona.
Depreciation and amortization expense declined by $9 million resulting from
purchase accounting adjustments, which more than offset increased amortization
expense for acquired intangible assets.
EQUITY AND COST INVESTMENTS
Dividends received from equity and cost investments more than doubled in
the quarter from $22 million in 2004 to $50 million in 2005 mainly due to strong
business conditions in 2004 for Ticona's high performance product ventures and
Chemical Products' methanol venture as well as timing of payments.
"Our equity and cost investments, especially those located in Asia, had a
banner year in 2004, delivering significant cash in the first quarter," said C.
J. Nelson, chief financial officer. "While the dividend payments are usually
strongest in the first quarter, our ventures' performance points to the integral
part they play in extending our global reach."
3
FIRST QUARTER SEGMENT OVERVIEW
CHEMICAL PRODUCTS
Chemical Products' net sales increased 28% to $1,044 million compared to
the same period last year mainly on higher pricing, segment composition changes,
including $66 million related to the Vinamul emulsions acquisition, and
favorable currency effects. Pricing increased for most products, driven by
continued strong demand and high utilization rates across the chemical industry.
Earnings from continuing operations before tax and minority interests
increased to $193 million from $64 million in the same period last year as
higher pricing was partially offset by higher raw material costs. Earnings also
benefited from an increase of $9 million in dividends from our methanol cost
investment, which totaled $12 million in the quarter.
TECHNICAL POLYMERS TICONA
Net sales for Ticona increased by 5% to $239 million compared to the same
period last year due to favorable currency effects and slightly higher volumes.
Volumes increased for most product lines due to the successful introduction of
new applications, which outweighed declines in polyacetal volumes resulting from
the company's focus on high-end business and decreased sales to European
automotive customers. Overall pricing remained flat quarter over quarter as
successfully implemented price increases were offset by lower average pricing
for certain products due to the commercialization of lower priced grades for new
applications.
Earnings from continuing operations before tax and minority interests
increased 13% to $51 million as the result of cost savings from a recent
restructuring, the favorable effects of a planned maintenance turnaround as well
as slightly higher volumes. These increases were partially offset by higher raw
material and energy costs.
4
ACETATE PRODUCTS
Net sales for Acetate Products increased by 14% to $196 million compared to
the same quarter last year on higher volumes and pricing. Flake volumes
increased mainly as a result of demand from the company's ventures in China that
recently completed tow capacity expansions. Filament volumes rose in
anticipation of the company's plans to exit this business by the end of the
second quarter. Pricing increased for all business lines to cover higher raw
material costs.
Earnings from continuing operations before tax and minority interests more
than doubled from $9 million in first quarter last year to $20 million this year
due to increased volumes, pricing and productivity improvements, which more than
offset higher raw material and energy costs. Earnings also benefited from $4
million in lower depreciation and amortization expense largely as a result of
previous impairments related to a major restructuring, which was partly offset
by $3 million of expense for an asset retirement obligation.
PERFORMANCE PRODUCTS
Net sales for the Performance Products segment increased by 7% to $47
million compared to the same period last year mainly on higher volumes, which
more than offset lower pricing. Favorable currency movements also contributed to
the sales increase. Higher volumes for Sunett(R) sweetener reflected strong
growth from new and existing applications in the U.S. and European beverage and
confectionary markets. Pricing for Sunett(R) declined on lower unit selling
prices associated with higher volumes to major customers. Pricing for sorbates
continued to recover, although worldwide overcapacity still prevailed in the
industry.
5
Earnings from continuing operations before tax and minority interests
increased to $12 million from $11 million in the same quarter last year. Strong
volumes for Sunett(R), as well as favorable currency movements and cost savings,
more than offset lower pricing for the sweetener. A primary European and U.S.
production patent for Sunett(R) expired at the end of March 2005.
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 increased slightly to $12 million from $11
million in the same quarter last year. Loss from continuing operations before
tax and minority interests increased to ($253) million from a loss of ($57)
million in the same period last year, largely due to $169 million of higher
interest expense due to refinancing costs, increased debt levels, and higher
interest rates. Included in the first quarter 2005 loss are $45 million of
expenses for sponsor monitoring and related cancellation fees. This compares to
$25 million in expenses in the same period last year for advisory services
related to the tender offer for Celanese AG.
LIQUIDITY
As of March 31, 2005, the company had total debt of $3,439 million and cash
and cash equivalents of $1,738 million. Net debt (total debt less cash and cash
equivalents) temporarily decreased to $1,701 million from $2,549 million as of
December 31, 2004, as cash was unusually high before the payment of the $804
million dividend to holders of
6
Series B common stock, which was derived from borrowings under the company's
senior credit facilities and remaining proceeds from the initial public offering
of our Series A common stock and the concurrent offering of preferred stock. The
$804 million dividend was paid on April 7, 2005 to holders of Series B common
shares, which were then converted into Series A common shares on the same day.
In February, the company purchased the Vinamul business for $208 million.
In the first quarter of 2005, the company received $119 million in cash
from an early contractual settlement of receivables for a prior divestiture and
insurance recoveries related to the plumbing cases.
"We are pleased we could enhance our cash position through strong
operational performance and these settlements," said Nelson. "We will continue
to pursue all opportunities to improve our balance sheet as we move toward
investment grade credit ratings."
OUTLOOK
Based on our strong first quarter business performance and assuming
continued economic growth, we now expect full year 2005 adjusted basic earnings
to be between $1.79 and $1.87 per share versus our previous guidance of $1.61 to
$1.77 per share.
For the second quarter of 2005, we expect overall underlying business
conditions to be similar to those of the first quarter. As a result, adjusted
basic earnings is expected in the range of $0.36 to $0.41 per share. Basic EPS
is expected to increase from ($0.08) to $0.30 - $0.35, primarily due to the
absence of refinancing expenses of $102 million and lower special charges.
7
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 December
31, 2004 and March 31, 2005 and its consolidated results of operations for the
three months ended March 31, 2005. These consolidated financial statements
reflect the application of purchase accounting relating to the acquisition of
Celanese AG.
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.
8
Reconciliation of Non-U.S. GAAP Measures to U.S. GAAP
This release reflects four performance measures, net debt, adjusted EBITDA,
adjusted net earnings and adjusted basic 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 adjusted earnings 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.
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. Adjusted net earnings is defined as net earnings adjusted
for special and one-time expenses. Adjusted basic earnings per share is defined
as income available to common shareholders adjusted for special and one-time
expenses divided by the number of common shares outstanding as of March 31,
2005. (The IPO occurred on January 21, 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.
9
CONSOLIDATED STATEMENTS OF OPERATIONS
Q1 2005 Q1 2004
--------------------------------
in $ millions Successor Predecessor
--------------------------------------------------------------------------------
NET SALES 1,509 1,243
Cost of sales (1,125) (1,002)
--------------------------------------------------------------------------------
GROSS PROFIT 384 241
Selling, general and administrative expense (161) (137)
Research and development expense (23) (23)
Special charges (38) (28)
Foreign exchange gain, net 3 -
Gain (loss) on disposition of assets 1 (1)
--------------------------------------------------------------------------------
OPERATING PROFIT 166 52
Equity in net earnings of affiliates 15 12
Interest expense (176) (6)
Interest income 15 5
Other income (expense), net 3 9
--------------------------------------------------------------------------------
EARNINGS FROM CONTINUING OPERATIONS
BEFORE TAX AND MINORITY INTERESTS 23 72
Income tax provision (8) (17)
--------------------------------------------------------------------------------
EARNINGS FROM CONTINUING OPERATIONS
BEFORE MINORITY INTERESTS 15 55
Minority interests (25) -
--------------------------------------------------------------------------------
EARNINGS (LOSS) FROM CONTINUING OPERATIONS (10) 55
Earnings from operation of discontinued
operations (including gain on disposal
of discontinued operations) - 9
Related income tax benefit - 14
--------------------------------------------------------------------------------
Earnings from discontinued operations - 23
--------------------------------------------------------------------------------
NET EARNINGS (LOSS) (10) 78
--------------------------------------------------------------------------------
10
CONSOLIDATED BALANCE SHEETS
MARCH 31 DEC 31
in $ millions 2005 2004
--------------------------------------------------------------------------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents 1,738 838
Receivables, net:
Trade receivables, net - third party and affiliates 998 866
Other receivables 544 670
Inventories 641 618
Deferred income taxes 75 71
Other assets 113 86
Assets of discontinued operations 3 2
--------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 4,112 3,151
Investments 567 600
Property, plant and equipment, net 1,839 1,702
Deferred income taxes 56 54
Other assets 654 756
Goodwill 779 747
Intangible assets, net 396 400
--------------------------------------------------------------------------------
TOTAL ASSETS 8,403 7,410
--------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Short-term borrowings and current
installments of long-term debt 139 144
Accounts payable and accrued liabilities:
Trade payables - third party and affiliates 778 722
Other current liabilities 807 888
Dividends payable 804 -
Deferred income taxes 25 20
Income taxes payable 238 214
Liabilities of discontinued operations 8 7
--------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 2,799 1,995
Long-term debt 3,300 3,243
Deferred income taxes 230 256
Benefit obligations 987 1,000
Other liabilities 493 510
Minority interests 533 518
Shareholders' equity:
Preferred stock - -
Common stock - -
Additional paid-in capital 352 158
Retained earnings (deficit) (263) (253)
Accumulated other comprehensive loss (28) (17)
--------------------------------------------------------------------------------
Shareholders' equity (deficit) 61 (112)
--------------------------------------------------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT) 8,403 7,410
--------------------------------------------------------------------------------
11
SALES
TABLE 1
NET SALES
Q1 2005 Q1 2004
-------------------------------
in $ millions Successor Predecessor
------------------------------------------------------------------------
Chemical Products 1,044 818
Technical Polymers Ticona 239 227
Acetate Products 196 172
Performance Products 47 44
------------------------------------------------------------------------
SEGMENT TOTAL 1,526 1,261
Other activities 12 11
Intersegment eliminations (29) (29)
------------------------------------------------------------------------
TOTAL 1,509 1,243
------------------------------------------------------------------------
TABLE 2
FACTORS AFFECTING FIRST QUARTER 2005 SEGMENT SALES COMPARED TO FIRST QUARTER
2004
in percent VOLUME PRICE CURRENCY OTHER TOTAL
--------------------------------------------------------------------------------
Chemical Products -1% 22% 3% 4% 28%
Technical Polymers Ticona 2% 0% 3% 0% 5%
Acetate Products 11% 3% 0% 0% 14%
Performance Products 9% -7% 5% 0% 7%
--------------------------------------------------------------------------------
SEGMENT TOTAL 2% 15% 2% 2% 21%
--------------------------------------------------------------------------------
12
KEY FINANCIAL DATA
TABLE 3
OPERATING PROFIT (LOSS)
Q1 2005 Q1 2004
-------------------------------
in $ millions Successor Predecessor
------------------------------------------------------------------------
Chemical Products 177 65
Technical Polymers Ticona 39 31
Acetate Products 20 9
Performance Products 13 11
------------------------------------------------------------------------
SEGMENT TOTAL 249 116
Other activities (83) (64)
------------------------------------------------------------------------
TOTAL 166 52
------------------------------------------------------------------------
TABLE 4
EARNINGS (LOSS) FROM CONTINUING OPERATIONS BEFORE TAX AND MINORITY INTERESTS
Q1 2005 Q1 2004
-------------------------------
in $ millions Successor Predecessor
------------------------------------------------------------------------
Chemical Products 193 64
Technical Polymers Ticona 51 45
Acetate Products 20 9
Performance Products 12 11
------------------------------------------------------------------------
SEGMENT TOTAL 276 129
Other activities(1) (253) (57)
------------------------------------------------------------------------
TOTAL 23 72
------------------------------------------------------------------------
(1) Q1 2005 includes refinancing costs of $102 million
TABLE 5
DEPRECIATION AND AMORTIZATION EXPENSE
Q1 2005 Q1 2004
-------------------------------
in $ millions Successor Predecessor
------------------------------------------------------------------------
Chemical Products 34 39
Technical Polymers Ticona 15 16
Acetate Products 9 13
Performance Products 3 2
------------------------------------------------------------------------
SEGMENT TOTAL 61 70
Other activities 2 2
------------------------------------------------------------------------
TOTAL 63 72
------------------------------------------------------------------------
13
KEY FINANCIAL DATA - (CONTINUED)
TABLE 6
CASH DIVIDENDS RECEIVED
Q1 2005 Q1 2004
-------------------------------
in $ millions Successor Predecessor
------------------------------------------------------------------------
Dividends from equity investments 36 15
Other distributions from equity
investments - 1
Dividends from cost investments 14 6
------------------------------------------------------------------------
TOTAL 50 22
------------------------------------------------------------------------
SPECIAL CHARGES AND OTHER EXPENSES
TABLE 7
SPECIAL CHARGES IN OPERATING PROFIT (LOSS)
Q1 2005 Q1 2004
-------------------------------
in $ millions Successor Predecessor
------------------------------------------------------------------------
Chemical Products (1) (1)
Technical Polymers Ticona (1) (1)
Acetate Products (1) -
Performance Products - -
------------------------------------------------------------------------
SEGMENT TOTAL (3) (2)
Other activities (35) (26)
------------------------------------------------------------------------
TOTAL (38) (28)
------------------------------------------------------------------------
TABLE 8
BREAKOUT OF SPECIAL CHARGES BY TYPE
Q1 2005 Q1 2004
-------------------------------
in $ millions Successor Predecessor
---------------------------------------------------------------------------
Employee termination benefits (2) (2)
Plant/office closures (1) -
-------------------------------
Total restructuring (3) (2)
Termination of advisor monitoring agreement (35) -
Advisory services - (25)
Other - (1)
---------------------------------------------------------------------------
TOTAL (38) (28)
---------------------------------------------------------------------------
14
RECONCILATION OF NON-US GAAP ITEMS
TABLE 9
ADJUSTED NET EARNINGS AND ADJUSTED BASIC EPS
in $ millions, except per share data Q1 2005
--------------------------------------------------------------------------------
Basic EPS (0.08)
Basic average shares outstanding 141,742,428 (1)
--------------------------------------------------------------------------------
Net loss available to common shareholders (12)
Cumulative undeclared preferred stock dividend 2
--------------------------------------------------------------------------------
Net loss (10)
Special items:
Advisor monitoring fee 10
Refinancing costs 102
Special charges 38
--------------------------------------------------------------------------------
ADJUSTED NET EARNINGS 140
Cumulative undeclared preferred stock dividend (2)
--------------------------------------------------------------------------------
Adjusted net earnings available to common shareholders 138
Shares outstanding as of March 31, 2005 158,491,201
--------------------------------------------------------------------------------
ADUSTED BASIC EPS 0.87
================================================================================
(1) Basic earnings/(loss) per share is based on net earnings (loss) available to
common shareholders divided by the weighted average number of common shares
outstanding during the period, which includes 99,377,884 shares outstanding as
of the beginning of the period and 59,113,317 shares issued as part of the
initial public offering in January 2005 and a related stock dividend.
TABLE 10
NET DEBT
MARCH 31 DEC 31
in $ millions 2005 2004
--------------------------------------------------------------------------------
Short-term borrowings and current
installments of long-term debt 139 144
Plus: Long-term debt 3,300 3,243
--------------------------------------------------------------------------------
Total debt 3,439 3,387
Less: Cash and cash equivalents 1,738 838
--------------------------------------------------------------------------------
NET DEBT 1,701 2,549
--------------------------------------------------------------------------------
15
TABLE 11
ADJUSTED EBITDA
Q1 2005 Q1 2004
----------------------------
in $ millions Successor Predecessor
--------------------------------------------------------------------------------
Net earnings (loss) (10) 78
Earnings from discontinued operations - (23)
Interest expense net:
Interest expense 176 6
Interest income (15) (5)
Cash interest income used by captive insurance
subsidiaries to fund operations 3 3
Taxes:
Income tax provision 8 17
Depreciation and amortization 63 72
Unusual items:
Special charges(1) 38 28
Severance and other restructuring charges not
included in special charges 2 11
Unusual and non-recurring items 9 (2)
Other non-cash charges (income):
Non-cash charges(2) 5 9
Cash dividends received in excess of equity in
net earnings of affiliates 21 4
Excess of minority interest income over cash
dividends paid to minority shareholders 25 -
Other adjustments:
Advisor monitoring fee 10 -
Net (gain) loss on disposition of assets (1) 1
Pro forma cost savings(3) - 9
--------------------------------------------------------------------------------
Adjusted EBITDA 334 208
--------------------------------------------------------------------------------
16
(1) Special charges include provisions for restructuring and other expenses and
income incurred outside the normal ongoing course of operations.
Restructuring provisions represent costs related to severance and other
benefit programs related to major activities undertaken to fundamentally
redesign the business operations, as well as costs incurred in connection
with decisions to exit non-strategic businesses. These measures are based
on formal management decisions, establishment of agreements with employees'
representatives or individual agreements with affected employees, as well
as the public announcement of the restructuring plan. The related reserves
reflect certain estimates, including those pertaining to separation costs,
settlements of contractual obligations and other closure costs. We reassess
the reserve requirements to complete each individual plan under existing
restructuring programs at the end of each reporting period. Actual
experience may be different from these estimates.
(2) Consists of the following:
Q1 2005 Q1 2004
---------------------------
in $ millions Successor Predecessor
---------------------------------------------------------------------------
Purchase accounting for inventories 1 -
Amortization included in pension
and OPEB expense - 8
Stock option expense - 1
Ineffective portion of a net investment hedge 4 -
---------------------------------------------------------------------------
Total non-cash charges 5 9
---------------------------------------------------------------------------
(3) Pro forma cost savings represent adjustments to net earnings (loss) on a
pro forma basis for certain cost savings that we expect to achieve.
17
Q1 2005 Q1 2004
---------------------------
in $ millions Successor Predecessor
---------------------------------------------------------------------------
Impact of additional assumed returns on
pension contributions - 9
---------------------------------------------------------------------------
Total pro forma cost savings - 9
---------------------------------------------------------------------------
TABLE 12
GUIDANCE RECONCILIATION BASIC TO ADJUSTED EPS
Q1 2005 Q2 2005 FY 2005
------- ----------- -----------
BASIC EPS GUIDANCE $/SHARE (0.08) 0.30 - 0.35 0.55 - 0.75
ADJUSTMENTS
REFINANCING 0.64 0.64
SPECIAL CHARGES 0.25 0.06 0.54 - 0.42
MONITORING FEE 0.06 0.06
------- ----------- -----------
ADJUSTED BASIC EPS - GUIDANCE $/SHARE 0.87 0.36 - 0.41 1.79 - 1.87
18
[Celanese logo
Graphic omitted]
FIRST QUARTER EARNINGS
CELANESE 1Q2005 EARNINGS
NYSE: CE
CONFERENCE CALL/WEBCAST
Tues., May 10, 2005 10 a.m CT
David Weidman, CEO
C.J. Nelson, CFO
[Celanese logo
Graphic omitted]
FORWARD-LOOKING STATEMENTS
This presentation 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 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 Company's 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 Company's Annual Report on Form 10-K at the SEC's
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.
[Celanese logo
Graphic omitted]
RECONCILIATION OF NON-GAAP MEASURES TO U.S. GAAP
This presentation reflects four performance measures, net debt, adjusted
EBITDA, adjusted net earnings and adjusted basic 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 adjusted earnings
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.
[Celanese logo
Graphic omitted]
USE OF NON-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. Adjusted net earnings is defined as net earnings adjusted
for special and one-time expenses. Adjusted basic earnings per share is defined
as income available to common shareholders adjusted for special and one-time
expenses divided by the number of average common shares outstanding as of March
31, 2005. (The IPO occurred on January 21, 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.
[Celanese logo
Graphic omitted]
David Weidman
Chief Executive Officer
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STRONG UNDERLYING BUSINESS RESULTS
(IN $MILLIONS)
1ST QTR 2005
------------
SALES $1,509 UP
OPERATING PROFIT 21%
ADJUSTED BASIC EPS $166 UP 219%
DIVIDENDS FROM EQUITY & COST INVESTMENTS $0.87
ADJUSTED EBITDA $50
$334 UP 61%
o Expansion of operating profit and strengthened cash position
o Higher pricing on strong demand and high capacity utilization in Chemical
Products
o Bolstered downstream acetyls business with Vinamul acquisition
o New leadership team in place
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CHEMICALS PRODUCTS
(IN $MILLIONS) 1ST QTR 05
---------------
SALES $1,044 UP 28%
SEGMENT EARNINGS(1) $193 UP 202%
First Quarter:
o Significant price increases on robust demand, high industry capacity
utilization
o Pricing more than offset higher raw material costs
Outlook:
o Continued strength in the business in 2nd quarter
o 2nd quarter earnings to be in same range as first quarter
o In second half 2005, new acetyls capacity expected to temporarily ease tight
supply/demand
STRONG INTEGRATED CHAIN OF ACETYL PRODUCTS
(1) -Earnings from continuing operations before tax and minority interests
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TICONA
(IN $MILLIONS)
1ST QTR 05
----------
SALES $239 UP 5%
SEGMENT $51 UP 13%
EARNINGS(1)
First Quarter:
o Volume growth from continued penetration in new applications
o Weakened sales to European automotive sector
o Successfully implemented price increases, understated by product mix
Outlook:
o Expect further success in increasing prices
o Modest volume growth due to downturn in automotive
FOCUS ON INCREASED GROWTH THROUGH INNOVATION
(1) -Earnings from continuing operations before tax and minority interests
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ACETATE/PERFORMANCE PRODUCTS SUMMARIES
(IN $MILLIONS) 1ST QTR 05
----------
SALES $196 UP 14%
SEGMENT
EARNINGS(1) $20 MILLION UP 122%
ACETATE
o Strong results on higher volumes, pricing and productivity improvements
o China venture expansions moving forward
o Restructuring of operations on schedule
(IN $MILLIONS) 1ST QTR 05
----------
SALES $47 UP 7%
SEGMENT $12 UP 9%
EARNINGS(1)
PERFORMANCE PRODUCTS
o Stable earnings on strong sweetener demand
o Pricing declines on sales to large-volume customers
ATTRACTIVE, CASH GENERATING BUSINESSES
(1) -Earnings from continuing operations before tax and minority interests
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C. J. Nelson
Executive Vice President and Chief Financial Officer
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FINANCIAL HIGHLIGHTS
IN $ MILLIONS (EXCEPT PER SHARE DATA) 1ST QTR 2005 1st Qtr 2004
------------------------------------- ------------ ------------
SUCCESSOR Predecessor
--------- -----------
Net sales 1,509 1,243
Operating Profit 166 52
SG&A (161) (137)
Net income (10) 78
Basic EPS (0.08) n.m.
Special items
Refinancing expenses 102 -
Special charges 38 28
Advisor monitoring fee 10 -
--------------------------------------------------------------------------------
Adjusted Basic EPS 0.87 n.m.
================================================================================
Adjusted EBITDA 334 208
================================================================================
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FULL YEAR 2005 KEY MODELING ASSUMPTIONS
INCOME STATEMENT EQUITY - CE SHARES
---------------- ------------------
($ MILLIONS)
o COMMON STOCK = 158.5 MILLION OUTSTANDING
o DEPRECIATION = $240-$260
o SPECIAL CHARGES = $65-$85 o POTENTIALLY DILUTIVE SECURITIES AS OF MAR. 31:
o INCLUDES 1Q CANCELLATION OF o 11 MILLION SHARES - STOCK OPTIONS
MONITORING FEE $35 o 12 MILLION SHARES - CONVERTED PREFERRED
o INTEREST EXPENSE = $290-$300 o PREFERRED STOCK DIVIDENDS = APPROX. $10
o EXCLUDING DEFERRED MILLION ON 9.6 MILLION OUTSTANDING SHARES
FINANCE/DEBT PREMIUM OF
APPROX. $102 EQUITY - CAG MINORITY INTEREST
o AVG COST OF BORROWED ------------------------------
CAPITAL = 7%
o APPROXIMATELY 8 MILLION SHARES OUTSTANDING
o EFFECTIVE TAX RATE OF 35% AT THE AS OF APRIL 26
BASIC EPS LEVEL
o CURRENT TENDER OFFER PRICE = [EURO]41.92/SHARE
o 1Q MONITOR FEE PAYMENT $10
o NET GUARANTEED PAYMENT = APPROXIMATELY
o MINORITY INTEREST IN TEENS/QTR [EURO]24 MILLION
BEYOND 1Q
CAPITAL EXPENDITURES
o OTHER ACTIVITIES OPERATING PROFIT IN --------------------
MID ($30'S)/QTR BEYOND 1Q o CAPITAL EXPENDITURES = $200 - $220 MM
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SIGNIFICANT CONTRIBUTION FROM EQUITY
AND COST INVESTMENTS
[BAR CHART - GRAPHIC OMITTED]
$ MILLIONS
50
o 2004 Full Year
14 Dividends = $76 million
40
o 2005 expected to be
30 $90-100 million
1
20
36 6
10
15 15
12
0
1ST QTR 05 1ST QTR 05 1ST QTR 04 1ST QTR 04
[ ] Equity Earnings
[ ] Dividends - cost investments
[ ] Dividends - equity investments
[ ] Dividends Other
DIVIDEND PAYMENTS USUALLY STRONGEST IN 1ST QTR
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CAPITALIZATION
--------------------------------------------------------------------------------
(IN $MILLIONS)
DECEMBER 31,
2004 MARCH 31, 2005
------------ --------------
CASH 838 1,738
===== =====
Senior Credit Term Loan 624 1,750
Delayed Draw Term Loan - -
Floating Rate Term Loan 350 -
----- -----
TOTAL SENIOR DEBT 974 1,750
Senior Sub Notes ($) 1,231 800
Senior Sub Notes ((euro) - translated at 272 169
1.2964 ) 383 369
----- -----
Assumed Debt 2,860 3,088
----- -----
TOTAL CASH PAY DEBT 103 68
Discount Notes Series A 424 283
----- -----
Discount Notes Series B 3,387 3,439
===== =====
TOTAL DEBT
(112) 61
----- -----
Shareholders' Equity 3,275 3,500
===== =====
TOTAL CAPITALIZATION
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DEBT AMORTIZATION AND MATURITY
AS OF MARCH 31, 2005
$ IN MILLIONS
[BAR CHART - GRAPHIC OMITTED]
SENIOR SECURED TERM LOAN - SENIOR SUBORDINATED NOTES -
1,800 $1,652 $969
1,600 SENIOR DISCOUNT NOTES - $554
1,400
1,200
1,000
800
600
400
200
0
REMAINING 2005* 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 THEREAFTER
* INCLUDES $114 SHORT-TERM BORROWING FROM AFFILIATED COMPANIES
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SIGNIFICANT NEAR-TERM OPPORTUNITIES
MAJOR ACETATE RESTRUCTURING PURCHASING SAVINGS OPPORTUNITIES
} Exiting non-strategic filament } Potential EBITDA improvement
business of roughly $100 million
} Consolidating 5 sites into 3 o 70-80% from MRO, Logistics,
and Capex
} Reducing work force by 35-40%
o 20-30% from Raw Materials
} Increasing China JV capacity to
capture growth } Full effects of initiative to be
realized in two to three years
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COMBINED BUSINESS OUTLOOK
--------------------------------------------------------------------------------
2ND QUARTER
-----------
o Basic EPS to increase to $0.30 - $0.35
o Reflects absence of $102 million in refinancing expenses and lower special
charges
FULL YEAR 2005
--------------
o Adjusted EPS to increase to $1.79 to $1.87
o Basic EPS to increase to $0.55 to $0.75
o Based on strong first quarter performance, continued economic growth and
cautious view of new acetyls capacity in second half
ADJUSTED
--------
EBITDA
------
o Full year adjusted EBITDA expected to increase 20-25% from 2004
result of $801 million
o 2nd quarter expected to increase 25-30% from 2004 result of $188 million
ADJUSTED EBITDA GUIDANCE RECONCILIATION
(usd millions) Q2 2005 FY 2005
------------------------------------
Median Median
Guidance Guidance
-----------------------------------------------------------------------------------------------------------------
Net earnings (loss) 60 105
Interest Expense Net:
Interest Expense 70 395
Interest Income (5) (30)
Taxes:
Income tax provision 40 95
Depreciation and Amortization 65 250
Unusual items:
Special Charges 10 75
Other non-cash charges (income):
Cash dividends received in excess of equity in net earnings
of affiliates (10) (5)
Excess of minority interest income over cash dividends
paid to minority shareholders 10 60
Other Adjustments:
Advisor monitoring fee 0 10
Other (1) 0 25
-----------------------------------------------------------------------------------------------------------------
Adjusted EBITDA 240 980
-----------------------------------------------------------------------------------------------------------------
Other includes:
Earnings from Discontinued Operations
Cash interest income used by captive Insurance subsidiaries to fund operations
Severance and other restructuring charges not included in special charges
Unusual and non-recurring items
Other non-cash charges (income):
Net (gain) loss on disposition of assets
Pro forma cost savings