e10vq
UNITED STATES
SECURITIES AND EXCHANGE
COMMISSION
Washington, D.C.
20549
Form 10-Q
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þ
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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For the quarterly period ended March 31,
2010
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Or
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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(Commission
File Number)
001-32410
CELANESE CORPORATION
(Exact Name of Registrant as
Specified in its Charter)
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Delaware
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98-0420726
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(State or Other Jurisdiction of
Incorporation or Organization)
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(I.R.S. Employer
Identification No.)
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1601 West LBJ Freeway,
Dallas, TX
(Address of Principal Executive Offices)
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75234-6034
(Zip Code)
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(972) 443-4000
(Registrants telephone number, including area
code)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been
subject to such filing requirements for the past
90 days. Yes þ No o
Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate Web site, if any,
every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of
Regulation S-T
(§ 232.405 of this chapter) during the preceding
12 months (or for such shorter period that the registrant
was required to submit and post such
files). Yes þ No o
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated
filer, or a smaller reporting company. See the definitions of
large accelerated filer, accelerated
filer and smaller reporting company in
Rule 12b-2
of the Exchange Act. (Check one):
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Large accelerated
filer þ
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Accelerated
filer o
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Non-accelerated
filer o
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Smaller reporting
company o
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(Do not check if a smaller reporting
company)
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Indicate by check mark whether the registrant is a shell company
(as defined in
Rule 12b-2
of the Exchange
Act). Yes o No þ
The number of outstanding shares of the registrants
Series A common stock, $0.0001 par value, as of
April 21, 2010 was 156,673,802.
CELANESE
CORPORATION
Form 10-Q
For the Quarterly Period Ended March 31, 2010
TABLE OF CONTENTS
2
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Item 1.
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Financial
Statements
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CELANESE
CORPORATION AND SUBSIDIARIES
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Three Months Ended March 31,
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2010
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2009
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(In $ millions, except for per share data)
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Net sales
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1,388
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1,146
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Cost of sales
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(1,170
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)
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(946
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)
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Gross profit
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218
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200
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Selling, general and administrative expenses
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(123
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)
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(114
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)
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Amortization of intangible assets (primarily customer-related
intangible assets)
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(15
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)
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(17
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)
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Research and development expenses
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(19
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)
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(20
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)
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Other (charges) gains, net
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(77
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)
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(21
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)
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Foreign exchange gain (loss), net
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2
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2
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Gain (loss) on disposition of businesses and assets, net
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-
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(3
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)
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Operating profit (loss)
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(14
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)
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27
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Equity in net earnings (loss) of affiliates
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26
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(2
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)
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Interest expense
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(49
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)
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(51
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)
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Interest income
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1
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3
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Dividend income cost investments
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27
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6
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Other income (expense), net
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6
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1
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Earnings (loss) from continuing operations before tax
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(3
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)
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(16
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)
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Income tax (provision) benefit
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20
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(5
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)
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Earnings (loss) from continuing operations
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17
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(21
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)
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Earnings (loss) from operation of discontinued operations
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-
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1
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Gain (loss) on disposition of discontinued operations
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2
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-
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Income tax (provision) benefit from discontinued operations
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(1
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)
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-
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Earnings (loss) from discontinued operations
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1
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1
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Net earnings (loss)
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18
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(20
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)
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Net (earnings) loss attributable to noncontrolling interests
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-
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-
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Net earnings (loss) attributable to Celanese Corporation
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18
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(20
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)
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Cumulative preferred stock dividends
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(3
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)
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(3
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)
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Net earnings (loss) available to common shareholders
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15
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(23
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)
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Amounts attributable to Celanese Corporation
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Earnings (loss) from continuing operations
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17
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(21
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)
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Earnings (loss) from discontinued operations
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1
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1
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Net earnings (loss)
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18
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(20
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)
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Earnings (loss) per common share basic
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Continuing operations
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0.09
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(0.17
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)
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Discontinued operations
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0.01
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0.01
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Net earnings (loss) basic
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0.10
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(0.16
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)
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Earnings (loss) per common share diluted
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Continuing operations
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0.09
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(0.17
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)
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Discontinued operations
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0.01
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0.01
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Net earnings (loss) diluted
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0.10
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(0.16
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)
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Weighted average shares basic
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150,272,227
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143,506,981
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Weighted average shares diluted
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152,642,371
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143,506,981
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See the accompanying notes to the unaudited interim consolidated
financial statements.
3
CELANESE
CORPORATION AND SUBSIDIARIES
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As of
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As of
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March 31,
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December 31,
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2010
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2009
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(In $ millions,
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except share amounts)
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ASSETS
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Current assets
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Cash and cash equivalents
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1,139
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1,254
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Trade receivables third party and affiliates (net of
allowance for doubtful accounts 2010: $18; 2009: $18)
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801
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721
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Non-trade receivables
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276
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262
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Inventories
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545
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522
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Deferred income taxes
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41
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42
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Marketable securities, at fair value
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4
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3
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Assets held for sale
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3
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2
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Other assets
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42
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50
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Total current assets
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2,851
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2,856
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Investments in affiliates
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764
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790
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Property, plant and equipment (net of accumulated depreciation
2010: $1,122; 2009: $1,130)
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2,723
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2,797
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Deferred income taxes
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488
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484
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Marketable securities, at fair value
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79
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80
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Other assets
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266
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311
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Goodwill
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765
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798
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Intangible assets, net
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266
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294
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Total assets
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8,202
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8,410
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LIABILITIES AND SHAREHOLDERS EQUITY
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Current liabilities
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Short-term borrowings and current installments of long-term debt
third party and affiliates
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258
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242
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Trade payables third party and affiliates
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626
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649
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Other liabilities
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552
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611
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Deferred income taxes
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32
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33
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Income taxes payable
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72
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72
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Total current liabilities
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1,540
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1,607
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Long-term debt
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3,233
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3,259
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Deferred income taxes
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129
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|
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|
137
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Uncertain tax positions
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227
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|
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|
229
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Benefit obligations
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1,275
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1,288
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Other liabilities
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1,224
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1,306
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Commitments and contingencies
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Shareholders equity
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Preferred stock, $0.01 par value, 100,000,000 shares
authorized
(2010 and 2009: 0 and 9,600,000 issued and outstanding,
respectively)
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-
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|
-
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Series A common stock, $0.0001 par value,
400,000,000 shares authorized
(2010: 177,242,954 issued and 156,641,268 outstanding; 2009:
164,995,755 issued and 144,394,069 outstanding)
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-
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-
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Series B common stock, $0.0001 par value,
100,000,000 shares authorized
(2010 and 2009: no shares issued and outstanding)
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-
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-
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Treasury stock, at cost (2010 and 2009: 20,601,686 shares)
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(781)
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|
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(781)
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Additional paid-in capital
|
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|
530
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|
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|
522
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|
Retained earnings
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|
1,511
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|
|
|
1,502
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|
Accumulated other comprehensive income (loss), net
|
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|
(686)
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|
|
|
(659)
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|
|
|
|
|
|
|
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Total Celanese Corporation shareholders equity
|
|
|
574
|
|
|
|
584
|
|
Noncontrolling interests
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|
-
|
|
|
|
-
|
|
Total shareholders equity
|
|
|
574
|
|
|
|
584
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and shareholders equity
|
|
|
8,202
|
|
|
|
8,410
|
|
|
|
|
|
|
|
|
|
|
See the accompanying notes to the unaudited interim consolidated
financial statements.
4
CELANESE
CORPORATION AND SUBSIDIARIES
SHAREHOLDERS
EQUITY AND COMPREHENSIVE INCOME (LOSS)
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Three Months Ended
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|
March 31, 2010
|
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Shares Outstanding
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Amount
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(In $ millions, except share data)
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Preferred stock
|
|
|
|
|
|
|
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Balance as of the beginning of the period
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|
9,600,000
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|
|
-
|
|
Redemption of preferred stock
|
|
|
(9,600,000
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)
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|
|
-
|
|
|
|
|
|
|
|
|
|
|
Balance as of the end of the period
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|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
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Series A common stock
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|
|
|
|
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Balance as of the beginning of the period
|
|
|
144,394,069
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|
|
|
-
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Stock option exercises
|
|
|
152,718
|
|
|
|
-
|
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Conversion of preferred stock
|
|
|
12,084,942
|
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|
|
-
|
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Redemption of preferred stock
|
|
|
7,437
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|
|
|
-
|
|
Stock awards
|
|
|
2,102
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Balance as of the end of the period
|
|
|
156,641,268
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Treasury stock
|
|
|
|
|
|
|
|
|
Balance as of the beginning of the period
|
|
|
20,601,686
|
|
|
|
(781
|
)
|
Purchases of treasury stock, including related fees
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Balance as of the end of the period
|
|
|
20,601,686
|
|
|
|
(781
|
)
|
|
|
|
|
|
|
|
|
|
Additional paid-in capital
|
|
|
|
|
|
|
|
|
Balance as of the beginning of the period
|
|
|
|
|
|
|
522
|
|
Stock-based compensation, net of tax
|
|
|
|
|
|
|
5
|
|
Stock option exercises, net of tax
|
|
|
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
Balance as of the end of the period
|
|
|
|
|
|
|
530
|
|
|
|
|
|
|
|
|
|
|
Retained earnings
|
|
|
|
|
|
|
|
|
Balance as of the beginning of the period
|
|
|
|
|
|
|
1,502
|
|
Net earnings (loss) attributable to Celanese Corporation
|
|
|
|
|
|
|
18
|
|
Series A common stock dividends
|
|
|
|
|
|
|
(6
|
)
|
Preferred stock dividends
|
|
|
|
|
|
|
(3
|
)
|
|
|
|
|
|
|
|
|
|
Balance as of the end of the period
|
|
|
|
|
|
|
1,511
|
|
|
|
|
|
|
|
|
|
|
Accumulated other comprehensive income (loss), net
|
|
|
|
|
|
|
|
|
Balance as of the beginning of the period
|
|
|
|
|
|
|
(659
|
)
|
Unrealized gain (loss) on securities
|
|
|
|
|
|
|
3
|
|
Foreign currency translation
|
|
|
|
|
|
|
(31
|
)
|
Unrealized gain (loss) on interest rate swaps
|
|
|
|
|
|
|
(3
|
)
|
Pension and postretirement benefits
|
|
|
|
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
Balance as of the end of the period
|
|
|
|
|
|
|
(686
|
)
|
|
|
|
|
|
|
|
|
|
Total Celanese Corporation shareholders equity
|
|
|
|
|
|
|
574
|
|
|
|
|
|
|
|
|
|
|
Noncontrolling interests
|
|
|
|
|
|
|
|
|
Balance as of the beginning of the period
|
|
|
|
|
|
|
-
|
|
Net earnings (loss) attributable to noncontrolling interests
|
|
|
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Balance as of the end of the period
|
|
|
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Total shareholders equity
|
|
|
|
|
|
|
574
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income (loss)
|
|
|
|
|
|
|
|
|
Net earnings (loss)
|
|
|
|
|
|
|
18
|
|
Other comprehensive income (loss), net of tax
|
|
|
|
|
|
|
|
|
Unrealized gain (loss) on securities
|
|
|
|
|
|
|
3
|
|
Foreign currency translation
|
|
|
|
|
|
|
(31
|
)
|
Unrealized gain (loss) on interest rate swaps
|
|
|
|
|
|
|
(3
|
)
|
Pension and postretirement benefits
|
|
|
|
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income (loss), net of tax
|
|
|
|
|
|
|
(9
|
)
|
|
|
|
|
|
|
|
|
|
Comprehensive (income) loss attributable to noncontrolling
interests
|
|
|
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income (loss) attributable to Celanese Corporation
|
|
|
|
|
|
|
(9
|
)
|
|
|
|
|
|
|
|
|
|
See the accompanying notes to the unaudited interim consolidated
financial statements.
5
CELANESE
CORPORATION AND SUBSIDIARIES
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
March 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
|
(In $ millions)
|
|
|
Operating activities
|
|
|
|
|
|
|
|
|
Net earnings (loss)
|
|
|
18
|
|
|
|
(20
|
)
|
Adjustments to reconcile net earnings (loss) to net cash
provided by operating activities:
|
|
|
|
|
|
|
|
|
Other charges (gains), net of amounts used
|
|
|
48
|
|
|
|
(2
|
)
|
Depreciation, amortization and accretion
|
|
|
93
|
|
|
|
74
|
|
Deferred income taxes, net
|
|
|
(7
|
)
|
|
|
(1
|
)
|
(Gain) loss on disposition of businesses and assets, net
|
|
|
-
|
|
|
|
3
|
|
Other, net
|
|
|
29
|
|
|
|
28
|
|
Operating cash provided by (used in) discontinued operations
|
|
|
(3
|
)
|
|
|
1
|
|
Value-added tax on deferred proceeds from Ticona Kelsterbach
plant relocation
|
|
|
-
|
|
|
|
75
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Trade receivables third party and affiliates, net
|
|
|
(82
|
)
|
|
|
(11
|
)
|
Inventories
|
|
|
(38
|
)
|
|
|
42
|
|
Other assets
|
|
|
23
|
|
|
|
55
|
|
Trade payables third party and affiliates
|
|
|
32
|
|
|
|
9
|
|
Other liabilities
|
|
|
(58
|
)
|
|
|
(54
|
)
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) operating activities
|
|
|
55
|
|
|
|
199
|
|
Investing activities
|
|
|
|
|
|
|
|
|
Capital expenditures on property, plant and equipment
|
|
|
(44
|
)
|
|
|
(56
|
)
|
Proceeds from sale of businesses and assets, net
|
|
|
5
|
|
|
|
(1
|
)
|
Deferred proceeds on Ticona Kelsterbach plant relocation
|
|
|
-
|
|
|
|
412
|
|
Capital expenditures related to Ticona Kelsterbach plant
relocation
|
|
|
(85
|
)
|
|
|
(58
|
)
|
Proceeds from sale of marketable securities
|
|
|
-
|
|
|
|
15
|
|
Other, net
|
|
|
(8
|
)
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) investing activities
|
|
|
(132
|
)
|
|
|
311
|
|
Financing activities
|
|
|
|
|
|
|
|
|
Short-term borrowings (repayments), net
|
|
|
1
|
|
|
|
(16
|
)
|
Repayments of long-term debt
|
|
|
(10
|
)
|
|
|
(23
|
)
|
Stock option exercises
|
|
|
3
|
|
|
|
-
|
|
Series A common stock dividends
|
|
|
(6
|
)
|
|
|
(6
|
)
|
Preferred stock dividends
|
|
|
(3
|
)
|
|
|
(3
|
)
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities
|
|
|
(15
|
)
|
|
|
(48
|
)
|
Exchange rate effects on cash and cash equivalents
|
|
|
(23
|
)
|
|
|
12
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents
|
|
|
(115
|
)
|
|
|
474
|
|
Cash and cash equivalents at beginning of period
|
|
|
1,254
|
|
|
|
676
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period
|
|
|
1,139
|
|
|
|
1,150
|
|
|
|
|
|
|
|
|
|
|
See the accompanying notes to the unaudited interim consolidated
financial statements.
6
CELANESE
CORPORATION AND SUBSIDIARIES
NOTES TO
THE UNAUDITED INTERIM CONSOLIDATED FINANCIAL
STATEMENTS
|
|
1.
|
Description
of the Company and Basis of Presentation
|
Description
of the Company
Celanese Corporation and its subsidiaries (collectively the
Company) is a leading global integrated chemical and
advanced materials company. The Companys business involves
processing chemical raw materials, such as methanol, carbon
monoxide and ethylene, and natural products, including wood
pulp, into value-added chemicals, thermoplastic polymers and
other chemical-based products.
Basis
of Presentation
The unaudited interim consolidated financial statements for the
three months ended March 31, 2010 and 2009 contained in
this Quarterly Report were prepared in accordance with
accounting principles generally accepted in the United States of
America (US GAAP) for all periods presented. The
unaudited interim consolidated financial statements and other
financial information included in this Quarterly Report, unless
otherwise specified, have been presented to separately show the
effects of discontinued operations. In this Quarterly Report on
Form 10-Q,
the term Celanese US refers to the Companys
subsidiary, Celanese US Holdings LLC, a Delaware limited
liability company, and not its subsidiaries.
In the opinion of management, the accompanying unaudited
consolidated balance sheets and related unaudited interim
consolidated statements of operations, cash flows and
shareholders equity and comprehensive income (loss)
include all adjustments, consisting only of normal recurring
items necessary for their fair presentation in conformity with
US GAAP. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with US
GAAP have been condensed or omitted in accordance with rules and
regulations of the Securities and Exchange Commission
(SEC). These unaudited interim consolidated
financial statements should be read in conjunction with the
Companys consolidated financial statements as of and for
the year ended December 31, 2009, as filed on
February 12, 2010 with the SEC as part of the
Companys Annual Report on
Form 10-K
(the 2009
Form 10-K).
Operating results for the three months ended March 31, 2010
are not necessarily indicative of the results to be expected for
the entire year.
In the ordinary course of the business, the Company enters into
contracts and agreements relative to a number of topics,
including acquisitions, dispositions, joint ventures, supply
agreements, product sales and other arrangements. The Company
endeavors to describe those contracts or agreements that are
material to its business, results of operations or financial
position. The Company may also describe some arrangements that
are not material but which the Company believes investors may
have an interest in or which may have been subject to a
Form 8-K
filing. Investors should not assume the Company has described
all contracts and agreements relative to the Companys
business in this Quarterly Report on
Form 10-Q.
Estimates
and Assumptions
The preparation of consolidated financial statements in
conformity with US GAAP requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities, disclosure of contingent assets and liabilities at
the date of the consolidated financial statements and the
reported amounts of revenues, expenses and allocated charges
during the reporting period. Significant estimates pertain to
impairments of goodwill, intangible assets and other long-lived
assets, purchase price allocations, restructuring costs and
other (charges) gains, net, income taxes, pension and other
postretirement benefits, asset retirement obligations,
environmental liabilities and loss contingencies, among others.
Actual results could differ from those estimates.
Reclassifications
The Company has reclassified certain prior period amounts to
conform to the current periods presentation.
7
|
|
2.
|
Recent
Accounting Pronouncements
|
In February 2010, the Financial Accounting Standards Board
(FASB) issued FASB Accounting Standards Update
2010-09,
Subsequent Events: Amendments to Certain Recognition and
Disclosure Requirements (ASU
2010-09),
which amends FASB ASC Topic 855, Subsequent Events. The
update provides that SEC filers, as defined in ASU
2010-09, are
no longer required to disclose the date through which subsequent
events have been evaluated in originally issued and revised
financial statements. The update also requires SEC filers to
evaluate subsequent events through the date the financial
statements are issued rather than the date the financial
statements are available to be issued. The Company adopted ASU
2010-09 upon
issuance. This update had no impact on the Companys
financial position, results of operations or cash flows.
In January 2010, the FASB issued FASB Accounting Standards
Update
2010-06,
Fair Value Measurements and Disclosures: Improving
Disclosures about Fair Value Measurements (ASU
2010-06),
which amends FASB ASC Topic
820-10,
Fair Value Measurements and Disclosures. The update
provides additional disclosures for transfers in and out of
Levels 1 and 2 and for activity in Level 3 and
clarifies certain other existing disclosure requirements. The
Company adopted ASU
2010-06
beginning January 15, 2010. This update had no impact on
the Companys financial position, results of operations or
cash flows.
|
|
3.
|
Acquisitions,
Dispositions and Plant Closures
|
In December 2009, the Company acquired the business and assets
of FACT GmbH (Future Advanced Composites Technology)
(FACT), a German company, for a purchase price of
5 million ($7 million). FACT is in the business
of developing, producing and marketing long-fiber reinforced
thermoplastics. As part of the acquisition, the Company has
entered into a ten year lease agreement with the seller for the
property and buildings on which the FACT business is located
with the option to purchase the property at various times
throughout the lease. The acquired business is included in the
Advanced Engineered Materials segment.
In July 2009, the Company completed the sale of its polyvinyl
alcohol (PVOH) business to Sekisui Chemical Co.,
Ltd. (Sekisui) for a net cash purchase price of
$168 million, resulting in a gain on disposition of
$34 million. The net cash purchase price excludes the
accounts receivable and payable retained by the Company. The
transaction includes long-term supply agreements between Sekisui
and the Company and therefore, does not qualify for treatment as
a discontinued operation. The PVOH business is included in the
Industrial Specialties segment.
In July 2009, the Company announced that its wholly-owned French
subsidiary, Acetex Chimie, completed the consultation procedure
with the workers council on its Project of Closure
and social plan related to the Companys Pardies, France
facility pursuant to which the Company announced its formal plan
to cease all manufacturing operations and associated activities
by December 2009. The Company agreed with the workers council on
a set of measures of assistance aimed at minimizing the effects
of the plants closing on the Pardies workforce, including
training, outplacement and severance.
As a result of the Pardies, France Project of Closure, the
Company recorded exit costs of $7 million during the three
months ended March 31, 2010, which included $1 million
in employee termination benefits, $3 million of contract
termination costs and $3 million of reindustrialization
costs (Note 14) to Other charges (gains), net, in the
unaudited interim consolidated statements of operations. In
addition, the Company recorded $2 million of environmental
remediation reserves, $4 million of inventory write-offs
and $3 million of other plant shutdown costs for the three
months ended March 31, 2010 related to the shutdown of the
Companys Pardies, France facility. The Pardies, France
facility is included in the Acetyl Intermediates segment.
Assets held for sale in the unaudited consolidated balance
sheets included an office building and plant assets with a net
book value of $3 million and an office building with a net
book value of $2 million as of March 31, 2010 and
December 31, 2009, respectively.
|
|
4.
|
Marketable
Securities, at Fair Value
|
The Companys captive insurance companies and
pension-related trusts hold
available-for-sale
securities for capitalization and funding requirements,
respectively. The Company received proceeds from sales of
marketable
8
securities and recorded realized gains (losses) to Other income
(expense), net, in the unaudited interim consolidated statements
of operations as follows:
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
|
|
March 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
|
(In $ millions)
|
|
|
Proceeds from sale of securities
|
|
|
-
|
|
|
|
15
|
|
|
|
|
|
|
|
|
|
|
Realized gain on sale of securities
|
|
|
-
|
|
|
|
1
|
|
Realized loss on sale of securities
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Net realized gain (loss) on sale of securities
|
|
|
-
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
The Company reviews all investments for
other-than-temporary
impairment at least quarterly or as indicators of impairment
exist. Indicators of impairment include the duration and
severity of the decline in fair value below carrying value as
well as the intent and ability to hold the investment to allow
for a recovery in the market value of the investment. In
addition, the Company considers qualitative factors that
include, but are not limited to: (i) the financial
condition and business plans of the investee including its
future earnings potential, (ii) the investees credit
rating, and (iii) the current and expected market and
industry conditions in which the investee operates. If a decline
in the fair value of an investment is deemed by management to be
other-than-temporary,
the Company writes down the carrying value of the investment to
fair value, and the amount of the write-down is included in net
earnings. Such a determination is dependent on the facts and
circumstances relating to each investment. As of March 31,
2010, the Company had gross unrealized losses of $2 million
related to equity securities held for greater than twelve months
in the unaudited consolidated balance sheets. The Company did
not recognize any
other-than-temporary
impairment losses related to equity securities in the unaudited
interim consolidated statements of operations for the three
months ended March 31, 2010.
The amortized cost, gross unrealized gain, gross unrealized loss
and fair values for
available-for-sale
securities by major security type are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
|
|
|
Gross
|
|
|
|
|
|
|
Amortized
|
|
|
Unrealized
|
|
|
Unrealized
|
|
|
Fair
|
|
|
|
Cost
|
|
|
Gain
|
|
|
Loss
|
|
|
Value
|
|
|
|
(In $ millions)
|
|
|
US government debt securities
|
|
|
24
|
|
|
|
2
|
|
|
|
-
|
|
|
|
26
|
|
US corporate debt securities
|
|
|
1
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total debt securities
|
|
|
25
|
|
|
|
2
|
|
|
|
-
|
|
|
|
27
|
|
Equity securities
|
|
|
55
|
|
|
|
-
|
|
|
|
(2)
|
|
|
|
53
|
|
Money market deposits and other securities
|
|
|
3
|
|
|
|
-
|
|
|
|
-
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of March 31, 2010
|
|
|
83
|
|
|
|
2
|
|
|
|
(2)
|
|
|
|
83
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
US government debt securities
|
|
|
26
|
|
|
|
2
|
|
|
|
-
|
|
|
|
28
|
|
US corporate debt securities
|
|
|
1
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total debt securities
|
|
|
27
|
|
|
|
2
|
|
|
|
-
|
|
|
|
29
|
|
Equity securities
|
|
|
55
|
|
|
|
-
|
|
|
|
(3)
|
|
|
|
52
|
|
Money market deposits and other securities
|
|
|
2
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2009
|
|
|
84
|
|
|
|
2
|
|
|
|
(3)
|
|
|
|
83
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed maturities as of March 31, 2010 by contractual
maturity are shown below. Actual maturities could differ from
contractual maturities because borrowers may have the right to
call or prepay obligations, with or without call or prepayment
penalties.
9
|
|
|
|
|
|
|
|
|
|
|
Amortized
|
|
|
Fair
|
|
|
|
Cost
|
|
|
Value
|
|
|
|
(In $ millions)
|
|
|
Within one year
|
|
|
4
|
|
|
|
4
|
|
From one to five years
|
|
|
-
|
|
|
|
-
|
|
From six to ten years
|
|
|
-
|
|
|
|
-
|
|
Greater than ten years
|
|
|
24
|
|
|
|
26
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
28
|
|
|
|
30
|
|
|
|
|
|
|
|
|
|
|
Proceeds received from fixed maturities that mature within one
year are expected to be reinvested into additional securities
upon such maturity.
|
|
|
|
|
|
|
|
|
|
|
As of
|
|
|
As of
|
|
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
|
(In $ millions)
|
|
|
Finished goods
|
|
|
397
|
|
|
|
367
|
|
Work-in-process
|
|
|
29
|
|
|
|
28
|
|
Raw materials and supplies
|
|
|
119
|
|
|
|
127
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
545
|
|
|
|
522
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Advanced
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Engineered
|
|
|
Consumer
|
|
|
Industrial
|
|
|
Acetyl
|
|
|
|
|
|
|
Materials
|
|
|
Specialties
|
|
|
Specialties
|
|
|
Intermediates
|
|
|
Total
|
|
|
|
(In $ millions)
|
|
|
As of December 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill
|
|
|
263
|
|
|
|
257
|
|
|
|
35
|
|
|
|
243
|
|
|
|
798
|
|
Accumulated impairment losses
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
263
|
|
|
|
257
|
|
|
|
35
|
|
|
|
243
|
|
|
|
798
|
|
Exchange rate changes
|
|
|
(10
|
)
|
|
|
(8
|
)
|
|
|
(1
|
)
|
|
|
(14
|
)
|
|
|
(33
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of March 31, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill
|
|
|
253
|
|
|
|
249
|
|
|
|
34
|
|
|
|
229
|
|
|
|
765
|
|
Accumulated impairment losses
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
253
|
|
|
|
249
|
|
|
|
34
|
|
|
|
229
|
|
|
|
765
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10
|
|
7.
|
Intangible
Assets, Net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer-
|
|
|
|
|
|
Covenants
|
|
|
|
|
|
|
Trademarks
|
|
|
|
|
|
Related
|
|
|
|
|
|
not to
|
|
|
|
|
|
|
and Trade
|
|
|
|
|
|
Intangible
|
|
|
Developed
|
|
|
Compete
|
|
|
|
|
|
|
names
|
|
|
Licenses
|
|
|
Assets
|
|
|
Technology
|
|
|
and Other
|
|
|
Total
|
|
|
|
(In $ millions)
|
|
|
Gross Asset Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2009
|
|
|
83
|
|
|
|
29
|
|
|
|
552
|
|
|
|
13
|
|
|
|
12
|
|
|
|
689
|
|
Exchange rate changes
|
|
|
(3
|
)
|
|
|
-
|
|
|
|
(28
|
)
|
|
|
-
|
|
|
|
(1
|
)
|
|
|
(32
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of March 31, 2010
|
|
|
80
|
|
|
|
29
|
|
|
|
524
|
|
|
|
13
|
|
|
|
11
|
|
|
|
657
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated Amortization
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2009
|
|
|
(5
|
)
|
|
|
(6
|
)
|
|
|
(362
|
)
|
|
|
(11
|
)
|
|
|
(11
|
)
|
|
|
(395
|
)
|
Amortization
|
|
|
-
|
|
|
|
(1
|
)
|
|
|
(14
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(15
|
)
|
Exchange rate changes
|
|
|
-
|
|
|
|
-
|
|
|
|
19
|
|
|
|
-
|
|
|
|
-
|
|
|
|
19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of March 31, 2010
|
|
|
(5
|
)
|
|
|
(7
|
)
|
|
|
(357
|
)
|
|
|
(11
|
)
|
|
|
(11
|
)
|
|
|
(391
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net book value
|
|
|
75
|
|
|
|
22
|
|
|
|
167
|
|
|
|
2
|
|
|
|
|
|
|
|
266
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aggregate amortization expense for intangible assets with finite
lives during the three months ended March 31, 2010 and 2009
was $15 million and $17 million, respectively.
Estimated amortization expense for the succeeding five fiscal
years is $57 million in 2011, $45 million in 2012,
$26 million in 2013, $15 million in 2014 and
$6 million in 2015. The Companys trademarks and trade
names have an indefinite life. Accordingly, no amortization was
recorded on these intangible assets for the three months ended
March 31, 2010.
For the three months ended March 31, 2010, the Company did
not renew or extend any intangible assets.
|
|
8.
|
Current
Other Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
As of
|
|
|
As of
|
|
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
|
(In $ millions)
|
|
|
Salaries and benefits
|
|
|
83
|
|
|
|
100
|
|
Environmental (Note 12)
|
|
|
21
|
|
|
|
13
|
|
Restructuring (Note 14)
|
|
|
79
|
|
|
|
99
|
|
Insurance
|
|
|
25
|
|
|
|
37
|
|
Asset retirement obligations
|
|
|
12
|
|
|
|
22
|
|
Derivatives
|
|
|
71
|
|
|
|
75
|
|
Current portion of benefit obligations
|
|
|
49
|
|
|
|
49
|
|
Interest
|
|
|
20
|
|
|
|
20
|
|
Sales and use tax/foreign withholding tax payable
|
|
|
13
|
|
|
|
15
|
|
Uncertain tax positions
|
|
|
5
|
|
|
|
5
|
|
Other
|
|
|
174
|
|
|
|
176
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
552
|
|
|
|
611
|
|
|
|
|
|
|
|
|
|
|
11
|
|
9.
|
Noncurrent
Other Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
As of
|
|
|
As of
|
|
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
|
(In $ millions)
|
|
|
Environmental (Note 12)
|
|
|
85
|
|
|
|
93
|
|
Insurance
|
|
|
87
|
|
|
|
85
|
|
Deferred revenue
|
|
|
46
|
|
|
|
49
|
|
Deferred proceeds (Note 21)
|
|
|
793
|
|
|
|
846
|
|
Asset retirement obligations
|
|
|
58
|
|
|
|
45
|
|
Derivatives
|
|
|
41
|
|
|
|
44
|
|
Income taxes payable
|
|
|
35
|
|
|
|
61
|
|
Other
|
|
|
79
|
|
|
|
83
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
1,224
|
|
|
|
1,306
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of
|
|
|
As of
|
|
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
|
(In $ millions)
|
|
|
Short-term borrowings and current installments of long-term
debt third party and affiliates
|
|
|
|
|
|
|
|
|
Current installments of long-term debt, interest rates ranging
from 2.31% to 25.73%
|
|
|
104
|
|
|
|
102
|
|
Short-term borrowings, including amounts due to affiliates,
interest rates ranging from 0.04% to 5.04%
|
|
|
154
|
|
|
|
140
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
258
|
|
|
|
242
|
|
|
|
|
|
|
|
|
|
|
Long-term debt
|
|
|
|
|
|
|
|
|
Senior credit facilities: Term loan facility due 2014
|
|
|
2,742
|
|
|
|
2,785
|
|
Pollution control and industrial revenue bonds, interest rates
ranging from 5.7% to 6.7%, due at various dates through 2030
|
|
|
181
|
|
|
|
181
|
|
Obligations under capital leases and other secured and unsecured
borrowings due at various dates through 2054
|
|
|
261
|
|
|
|
242
|
|
Other bank obligations, interest rates ranging from 2.3% to
5.3%, due at various dates through 2014
|
|
|
153
|
|
|
|
153
|
|
|
|
|
|
|
|
|
|
|
Subtotal
|
|
|
3,337
|
|
|
|
3,361
|
|
Less: Current installments of long-term debt
|
|
|
104
|
|
|
|
102
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
3,233
|
|
|
|
3,259
|
|
|
|
|
|
|
|
|
|
|
Senior
Credit Facilities
The Companys senior credit agreement consists of
$2,280 million of US dollar-denominated and
400 million of Euro-denominated term loans due 2014,
a $600 million revolving credit facility terminating in
2013 and a $228 million credit-linked revolving facility
terminating in 2014. Borrowings under the senior credit
agreement bear interest at a variable interest rate based on
LIBOR (for US dollars) or EURIBOR (for Euros), as applicable,
or, for US dollar-denominated loans under certain circumstances,
a base rate, in each case plus an applicable margin. The
applicable margin for the term loans and any loans under the
credit-linked revolving facility is 1.75%, subject to potential
reductions as defined in the senior credit agreement. As of
March 31, 2010, the applicable margin was
12
1.75%. The term loans under the senior credit agreement are
subject to amortization at 1% of the initial principal amount
per annum, payable quarterly. The remaining principal amount of
the term loans is due on April 2, 2014.
As of March 31, 2010, there were no outstanding borrowings
or letters of credit issued under the revolving credit facility.
As of March 31, 2010, there were $90 million of
letters of credit issued under the credit-linked revolving
facility and $138 million remained available for borrowing.
In June 2009, the Company entered into an amendment to the
senior credit agreement. The amendment reduced the amount
available under the revolving credit facility from
$650 million to $600 million and increased the first
lien senior secured leverage ratio that is applicable when any
amount is outstanding under the revolving credit portion of the
senior credit agreement. The first lien senior secured leverage
ratio is calculated as the ratio of consolidated first lien
senior secured debt to earnings before interest, taxes,
depreciation and amortization, subject to adjustments identified
in the credit agreement.
Prior to giving effect to the amendment, the maximum first lien
senior secured leverage ratio was 3.90 to 1.00. As amended, the
maximum senior secured leverage ratio for the following trailing
four-quarter periods is as follows:
|
|
|
|
|
First Lien Senior Secured
|
|
|
Leverage Ratio
|
|
March 31, 2010
|
|
4.75 to 1.00
|
June 30, 2010
|
|
4.25 to 1.00
|
September 30, 2010
|
|
4.25 to 1.00
|
December 31, 2010 and thereafter
|
|
3.90 to 1.00
|
As a condition to borrowing funds or requesting that letters of
credit be issued under that facility, the Companys first
lien senior secured leverage ratio (as calculated as of the last
day of the most recent fiscal quarter for which financial
statements have been delivered under the revolving facility)
cannot exceed the threshold as specified above. Further, the
Companys first lien senior secured leverage ratio must be
maintained at or below that threshold while any amounts are
outstanding under the revolving credit facility.
Based on the estimated first lien senior secured leverage ratio
for the trailing four quarters at March 31, 2010, the
Companys borrowing capacity under the revolving credit
facility is currently $600 million. As of March 31,
2010, the Company estimates its first lien senior secured
leverage ratio to be 3.02 to 1.00 (which would be 3.66 to 1.00
were the revolving credit facility fully drawn). The maximum
first lien senior secured leverage ratio under the revolving
credit facility for such period is 4.75 to 1.00.
The Companys senior credit agreement also contains a
number of restrictions on certain of its subsidiaries,
including, but not limited to, restrictions on their ability to
incur indebtedness; grant liens on assets; merge, consolidate,
or sell assets; pay dividends or make other restricted payments;
make investments; prepay or modify certain indebtedness; engage
in transactions with affiliates; enter into sale-leaseback
transactions or certain hedge transactions; or engage in other
businesses. The senior credit agreement also contains a number
of affirmative covenants and events of default, including a
cross default to other debt of certain of the Companys
subsidiaries in an aggregate amount equal to more than
$40 million and the occurrence of a change of control.
Failure to comply with these covenants, or the occurrence of any
other event of default, could result in acceleration of the
loans and other financial obligations under the Companys
senior credit agreement.
The Company is in compliance with all of the covenants related
to its debt agreements as of March 31, 2010.
The senior credit agreement is guaranteed by Celanese Holdings
LLC, a subsidiary of Celanese Corporation, and certain domestic
subsidiaries of the Companys subsidiary, Celanese US, and
is secured by a lien on substantially all assets of Celanese US
and such guarantors, subject to certain agreed exceptions,
pursuant to the Guarantee and Collateral Agreement, dated as of
April 2, 2007, by and among Celanese Holdings LLC, Celanese
US, certain subsidiaries of Celanese US and Deutsche Bank AG,
New York Branch, as Administrative Agent and as Collateral Agent.
13
The components of net periodic benefit costs recognized are as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Postretirement
|
|
|
|
Pension Benefits
|
|
|
Benefits
|
|
|
|
Three Months Ended March 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
|
|
(In $ millions)
|
|
|
Service cost
|
|
|
8
|
|
|
|
7
|
|
|
|
-
|
|
|
|
-
|
|
Interest cost
|
|
|
48
|
|
|
|
47
|
|
|
|
4
|
|
|
|
4
|
|
Expected return on plan assets
|
|
|
(50
|
)
|
|
|
(50
|
)
|
|
|
-
|
|
|
|
-
|
|
Recognized actuarial (gain) loss
|
|
|
2
|
|
|
|
-
|
|
|
|
(1
|
)
|
|
|
(1
|
)
|
Curtailment (gain) loss
|
|
|
(2
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
6
|
|
|
|
4
|
|
|
|
3
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company expects to contribute $46 million to its
defined benefit pension plans in 2010. As of March 31,
2010, $10 million of contributions have been made. The
Companys estimates of its US defined benefit pension plan
contributions reflect the provisions of the Pension Protection
Act of 2006.
The Company expects to make benefit contributions of
$27 million under the provisions of its other
postretirement benefit plans in 2010. For the three months ended
March 31, 2010, $7 million of benefit contributions
have been made.
The Company participates in multiemployer defined benefit plans
in Europe covering certain employees. The Companys
contributions to the multiemployer defined benefit plans are
based on specified percentages of employee contributions and
totaled $1 million for each of the three months ended
March 31, 2010 and 2009.
General
The Company is subject to environmental laws and regulations
worldwide that impose limitations on the discharge of pollutants
into the air and water and establish standards for the
treatment, storage and disposal of solid and hazardous wastes.
The Company believes that it is in substantial compliance with
all applicable environmental laws and regulations. The Company
is also subject to retained environmental obligations specified
in various contractual agreements arising from the divestiture
of certain businesses by the Company or one of its predecessor
companies. The Companys environmental reserves for
remediation matters as of March 31, 2010 were
$106 million with $21 million recorded in current
Other liabilities and $85 million recorded in noncurrent
Other liabilities in the unaudited consolidated balance sheets.
The Companys environmental reserves for remediation
matters as of December 31, 2009 were $106 million with
$13 million recorded in current Other liabilities and
$93 million recorded in noncurrent Other liabilities in the
unaudited consolidated balance sheets.
Remediation
Due to its industrial history and through retained contractual
and legal obligations, the Company has the obligation to
remediate specific areas on its own sites as well as on
divested, orphan or US Superfund sites (as defined below). In
addition, as part of the demerger agreement between the Company
and Hoechst AG (Hoechst), a specified portion of the
responsibility for environmental liabilities from a number of
Hoechst divestitures was transferred to the Company. The Company
provides for such obligations when the event of loss is probable
and reasonably estimable. The Company believes that
environmental remediation costs will not have a material adverse
effect on the financial position of the Company, but may have a
material adverse effect on the results of operations or cash
flows in any given accounting period.
14
US
Superfund Sites
In the US, the Company may be subject to substantial claims
brought by US federal or state regulatory agencies or private
individuals pursuant to statutory authority or common law. In
particular, the Company has a potential liability under the US
Federal Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended, and related state laws
(collectively referred to as Superfund) for
investigation and cleanup costs at approximately 40 sites. At
most of these sites, numerous companies, including certain
companies comprising the Company, or one of its predecessor
companies, have been notified that the Environmental Protection
Agency, state governing bodies or private individuals consider
such companies to be potentially responsible parties
(PRP) under Superfund or related laws. The
proceedings relating to these sites are in various stages. The
cleanup process has not been completed at most sites and the
status of the insurance coverage for most of these proceedings
is uncertain. Consequently, the Company cannot accurately
determine its ultimate liability for investigation or cleanup
costs at these sites.
As events progress at each site for which it has been named a
PRP, the Company accrues, as appropriate, a liability for site
cleanup. Such liabilities include all costs that are probable
and can be reasonably estimated. In establishing these
liabilities, the Company considers its shipment of waste to a
site, its percentage of total waste shipped to the site, the
types of wastes involved, the conclusions of any studies, the
magnitude of any remedial actions that may be necessary and the
number and viability of other PRPs. Often the Company joins with
other PRPs to sign joint defense agreements that settle, among
PRPs, each partys percentage allocation of costs at the
site. Although the ultimate liability may differ from the
estimate, the Company routinely reviews the liabilities and
revises the estimate, as appropriate, based on the most current
information available. The Company had provisions totaling
$11 million and $10 million as of March 31, 2010
and December 31, 2009, respectively, for US Superfund sites
which is included in the $106 million recorded in the
unaudited consolidated balance sheets for environmental reserves
for remediation as of March 31, 2010 and December 31,
2009.
Additional information relating to environmental remediation
activity is contained in the footnotes to the Companys
consolidated financial statements included in the 2009
Form 10-K.
Preferred
Stock
On February 1, 2010, the Company delivered notice to the
holders of its 4.25% Convertible Perpetual Preferred Stock
(the Preferred Stock), pursuant to which the Company
called for the redemption of all 9.6 million outstanding
shares of Preferred Stock. Holders of the Preferred Stock were
entitled to convert each share of Preferred Stock into
1.2600 shares of the Companys Series A Common
Stock, par value $0.0001 per share (Common Stock),
at any time prior to 5:00 p.m., New York City time, on
February 19, 2010. As of such date, holders of Preferred
Stock had elected to convert 9,591,276 shares of Preferred
Stock into an aggregate of 12,084,942 shares of Common
Stock. The 8,724 shares of Preferred Stock that remained
outstanding after such conversions were redeemed by the Company
on February 22, 2010 for 7,437 shares of Common Stock,
in accordance with the terms of the Preferred Stock. In addition
to the shares of Common Stock issued in respect of the shares of
Preferred Stock converted and redeemed, the Company paid cash in
lieu of fractional shares. The Company recorded expense of less
than $1 million in Additional paid-in capital in the
unaudited interim consolidated statements of shareholders
equity and comprehensive income (loss) for the three months
ended March 31, 2010 related to the conversion and
redemption of the Preferred Stock.
Treasury
Stock
In February 2008, the Companys Board of Directors
authorized the repurchase of up to $400 million of the
Companys Common Stock. This authorization was increased by
the Board to $500 million in October 2008. The
authorizations give management discretion in determining the
conditions under which shares may be repurchased. As of
March 31, 2010, the Company had repurchased
9,763,200 shares of its Common Stock at an average purchase
price of $38.68 per share for a total of $378 million
pursuant to this authorization. During the three months ended
March 31, 2010 and 2009, the Company did not repurchase any
shares of its Common Stock.
15
Purchases of treasury stock reduce the number of shares
outstanding and the repurchased shares may be used by the
Company for compensation programs utilizing the Companys
stock and other corporate purposes. The Company accounts for
treasury stock using the cost method and includes treasury stock
as a component of Shareholders equity.
Other
Comprehensive Income (Loss), Net
Adjustments to net earnings (loss) to calculate other
comprehensive income (loss) totaled $(27) million and
$(111) million for the three months ended March 31,
2010 and 2009, respectively. These amounts included tax expense
of $2 million and $0 for the three months ended
March 31, 2010 and 2009, respectively.
|
|
14.
|
Other
(Charges) Gains, Net
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
March 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
|
(In $ millions)
|
|
|
Employee termination benefits
|
|
|
(5
|
)
|
|
|
(24
|
)
|
Ticona Kelsterbach plant relocation (Note 21)
|
|
|
(6
|
)
|
|
|
(3
|
)
|
Plumbing actions
|
|
|
12
|
|
|
|
1
|
|
Insurance recoveries associated with Clear Lake, Texas
|
|
|
-
|
|
|
|
6
|
|
Asset impairments
|
|
|
(72
|
)
|
|
|
(1
|
)
|
Plant/office closures
|
|
|
(6
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
(77
|
)
|
|
|
(21
|
)
|
|
|
|
|
|
|
|
|
|
2010
As a result of the proposed closure of the Spondon, Derby,
United Kingdom acetate production facility (Note 22), the
Company wrote down the related property, plant and equipment to
its fair value of $31 million, resulting in long-lived
asset impairment losses of $72 million for the three months
ended March 31, 2010. The Company calculated the fair value
using a discounted cash flow model incorporating discount rates
commensurate with the risks involved for the reporting unit
which is classified as a Level 3 measurement under FASB ASC
Topic 820. The key assumptions used in the discounted cash flow
valuation model include discount rates, growth rates, cash flow
projections and terminal value rates. Discount rates, growth
rates and cash flow projections are the most sensitive and
susceptible to change as they require significant management
judgment.
The Spondon, Derby, United Kingdom facility is included in the
Consumer Specialties segment.
As a result of the Companys Pardies, France Project of
Closure (Note 3), the Company recorded exit costs of
$7 million during the three months ended March 31,
2010, which consisted of $1 million in employee termination
benefits, $3 million of contract termination costs and
$3 million of reindustrialization costs.
Other charges for the three months ended March 31, 2010 was
partially offset by $11 million of recoveries and a
$1 million decrease in legal reserves associated with
plumbing cases which is included in the Companys Advanced
Engineered Materials business segment.
2009
During the three months ended March 31, 2009, the Company
began efforts to align production capacity and staffing levels
with the Companys current view of an economic environment
of prolonged lower demand. The Company recorded employee
termination benefits of $21 million related to this
endeavor. As a result of the shutdown of the vinyl acetate
monomer (VAM) production unit in Cangrejera, Mexico,
the Company recognized employee termination benefits of $1
million and long-lived asset impairment losses of
$1 million during the three months ended March 31,
2009. The VAM production unit in Cangrejera, Mexico is included
in the Companys Acetyl Intermediates segment.
16
Other charges for the three months ended March 31, 2009 was
partially offset by $6 million of insurance recoveries in
satisfaction of claims the Company made related to the unplanned
outage of the Companys Clear Lake, Texas acetic acid
facility during 2007 and $1 million of insurance recoveries
associated with plumbing cases.
The changes in the restructuring reserves by business segment
are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Advanced
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Engineered
|
|
|
Consumer
|
|
|
Industrial
|
|
|
Acetyl
|
|
|
|
|
|
|
|
|
|
Materials
|
|
|
Specialties
|
|
|
Specialties
|
|
|
Intermediates
|
|
|
Other
|
|
|
Total
|
|
|
|
(In $ millions)
|
|
|
Employee Termination Benefits
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reserve as of December 31, 2009
|
|
|
7
|
|
|
|
4
|
|
|
|
3
|
|
|
|
60
|
|
|
|
7
|
|
|
|
81
|
|
Additions
|
|
|
1
|
|
|
|
1
|
|
|
|
-
|
|
|
|
1
|
|
|
|
1
|
|
|
|
4
|
|
Cash payments
|
|
|
(3
|
)
|
|
|
(2
|
)
|
|
|
(1
|
)
|
|
|
(10
|
)
|
|
|
(2
|
)
|
|
|
(18
|
)
|
Other changes
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(1
|
)
|
|
|
(1
|
)
|
Exchange rate changes
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(4
|
)
|
|
|
-
|
|
|
|
(4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reserve as of March 31, 2010
|
|
|
5
|
|
|
|
3
|
|
|
|
2
|
|
|
|
47
|
|
|
|
5
|
|
|
|
62
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plant/Office Closures
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reserve as of December 31, 2009
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
17
|
|
|
|
1
|
|
|
|
18
|
|
Additions
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
6
|
|
|
|
-
|
|
|
|
6
|
|
Cash payments
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(6
|
)
|
|
|
-
|
|
|
|
(6
|
)
|
Exchange rate changes
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(1
|
)
|
|
|
-
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reserve as of March 31, 2010
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
16
|
|
|
|
1
|
|
|
|
17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
5
|
|
|
|
3
|
|
|
|
2
|
|
|
|
63
|
|
|
|
6
|
|
|
|
79
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Companys effective income tax rate for the three
months ended March 31, 2010 was 667% compared to (31)% for
the three months ended March 31, 2009. The change in the
effective rate was primarily due to the effect of new tax
legislation in Mexico, partially offset by foreign losses not
resulting in tax benefits in the current period, the effect of
healthcare reform in the US and lower earnings in jurisdictions
participating in tax holidays.
In March 2010, the President of the United States signed into
law the Patient Protection and Affordable Care Act and the
Health Care and Education Reconciliation Act of 2010. Currently,
employers providing retiree prescription drug coverage that is
at least as valuable as the coverage offered under Medicare
Part D are entitled to a subsidy from the government. Prior
to the new law, employers were entitled to deduct the entire
cost of providing the retiree prescription drug coverage, even
though a portion was offset by the subsidy. Under the new
legislation, in years subsequent to 2012, the tax deductible
prescription coverage is reduced by the amount of the subsidy.
As a result, the Company reduced its deferred tax asset related
to postretirement prescription drug coverage by the amount of
the subsidy to be received subsequent to 2012. This reduction of
$7 million to the Companys deferred tax asset was
charged to deferred tax expense during the three months ended
March 31, 2010.
On December 7, 2009, Mexico enacted the 2010 Mexican Tax
Reform Bill (Tax Reform Bill) to be effective
January 1, 2010. The estimated income tax impact to the
Company of the Tax Reform Bill at December 31, 2009 was
$73 million and was charged to tax expense during the three
months ended December 31, 2009.
On March 31, 2010, the Mexican tax authorities issued new
regulations to clarify various provisions included in the Tax
Reform Bill, including certain aspects of the recapture rules
related to income tax loss carryforwards, intercompany dividends
and differences between consolidated and individual Mexican tax
earnings and profits. At March 31, 2010, the application of
the new regulations resulted in a reduction of $43 million
to the estimated income tax impact of the Tax Reform Bill that
was recorded by the Company during the three months ended
December 31, 2009. After inflation and currency
adjustments, the Companys estimated tax liability at
March 31, 2010 related to the combined Tax Reform Bill and
the new regulations is $35 million, payable $2 million
in 2010, $2 million in 2011, $4 million in 2012,
$4 million in 2013, and $23 million in 2014 and
thereafter.
17
Liabilities for uncertain tax positions and related interest and
penalties are recorded in Uncertain tax positions and current
Other liabilities in the unaudited consolidated balance sheets.
For the three months ended March 31, 2010, the total
unrecognized tax benefits, interest and penalties related to
uncertain tax positions increased by $7 million for
interest and changes in unrecognized tax benefits in foreign
jurisdictions, and decreased $10 million due to currency
translation adjustments. Currently, uncertain tax positions are
not expected to change significantly over the next
12 months.
|
|
16.
|
Derivative
Financial Instruments
|
Risk
Management
To reduce the interest rate risk inherent in the Companys
variable rate debt, the Company utilizes interest rate swap
agreements to convert a portion of the variable rate debt to a
fixed rate obligation. These interest rate swap agreements are
designated as cash flow hedges. If an interest rate swap
agreement is terminated prior to its maturity, the amount
previously recorded in Accumulated other comprehensive income
(loss), net is recognized into earnings over the period that the
hedged transaction impacts earnings. If the hedging relationship
is discontinued because it is probable that the forecasted
transaction will not occur according to the original strategy,
any related amounts previously recorded in Accumulated other
comprehensive income (loss), net are recognized into earnings
immediately.
The notional value of the Companys US dollar interest rate
swap agreements at March 31, 2010 and December 31,
2009 was $1.5 billion and $1.6 billion, respectively.
The notional value of the Companys Euro interest rate swap
agreement was 150 million at both March 31, 2010
and December 31, 2009.
The Company enters into foreign currency forwards and swaps to
minimize its exposure to foreign currency fluctuations. Through
these instruments, the Company mitigates its foreign currency
exposure on transactions with third party entities as well as
intercompany transactions. The foreign currency forwards and
swaps are not designated as hedges under FASB ASC 815,
Derivatives and Hedging. Gains and losses on foreign
currency forwards and swaps entered into to offset foreign
exchange impacts on intercompany balances are classified as
Other income (expense), net, in the unaudited interim
consolidated statements of operations. Gains and losses on
foreign currency forwards and swaps entered into to offset
foreign exchange impacts on all other assets and liabilities are
classified as Foreign exchange gain (loss), net, in the
unaudited interim consolidated statements of operations. The
notional value of the Companys foreign currency forwards
and swaps at March 31, 2010 and December 31, 2009 was
$1.1 billion and $1.5 billion, respectively.
The following table presents information regarding changes in
the fair value of the Companys derivative arrangements:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
|
Three months ended
|
|
|
|
March 31, 2010
|
|
|
March 31, 2009
|
|
|
|
Gain (Loss)
|
|
|
|
|
|
Gain (Loss)
|
|
|
|
|
|
|
Recognized in Other
|
|
|
Gain (Loss)
|
|
|
Recognized in Other
|
|
|
Gain (Loss)
|
|
|
|
Comprehensive
|
|
|
Recognized in
|
|
|
Comprehensive
|
|
|
Recognized in
|
|
|
|
Income
|
|
|
Income
|
|
|
Income
|
|
|
Income
|
|
|
|
(In $ millions)
|
|
|
Derivatives designated as cash flow hedging instruments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swaps
|
|
|
(16
|
) (2)
|
|
|
(18
|
) (1)
|
|
|
(15
|
)
|
|
|
(12
|
) (1)
|
Derivatives designated as net investment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
hedging instruments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Euro-denominated term loan
|
|
|
-
|
|
|
|
-
|
|
|
|
(1
|
)
|
|
|
-
|
|
Derivatives not designated as
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
hedging instruments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency forwards and swaps
|
|
|
-
|
|
|
|
25
|
|
|
|
-
|
|
|
|
(9
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
(16
|
)
|
|
|
7
|
|
|
|
(16
|
)
|
|
|
(21
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Amount represents reclassification from Accumulated other
comprehensive income and is classified as interest expense in
the unaudited interim consolidated statements of operations.
|
|
(2)
|
Amount excludes $4 million of losses associated with the
Companys equity method investments derivative
activity and $1 million of tax expense recognized in Other
comprehensive income (loss).
|
18
|
|
17.
|
Fair
Value Measurements
|
On January 1, 2009, the Company adopted the provisions of
FASB ASC 820, Fair Value Measurements and Disclosures
(FASB ASC Topic 820) for nonrecurring fair value
measurements of non-financial assets and liabilities, such as
goodwill, indefinite-lived intangible assets, property, plant
and equipment and asset retirement obligations. The adoption did
not have a material impact on the Companys financial
position, results of operations or cash flows.
FASB ASC 820 establishes a three-tiered fair value
hierarchy that prioritizes inputs to valuation techniques used
in fair value calculations. The three levels of inputs are
defined as follows:
|
|
|
|
Level 1
|
unadjusted quoted prices for identical assets or liabilities in
active markets accessible by the Company
|
Level 2 inputs that are observable in the
marketplace other than those inputs classified as Level 1
Level 3 inputs that are unobservable in the
marketplace and significant to the valuation
FASB ASC Topic 820 requires the Company to maximize the use of
observable inputs and minimize the use of unobservable inputs.
If a financial instrument uses inputs that fall in different
levels of the hierarchy, the instrument will be categorized
based upon the lowest level of input that is significant to the
fair value calculation.
The Companys financial assets and liabilities are measured
at fair value on a recurring basis and include securities
available for sale and derivative financial instruments.
Securities available for sale include US government and
corporate bonds and equity securities. Derivative financial
instruments include interest rate swaps and foreign currency
forwards and swaps.
Marketable Securities. Where possible, the Company
utilizes quoted prices in active markets to measure debt and
equity securities; such items are classified as Level 1 in
the hierarchy and include equity securities and US government
bonds. When quoted market prices for identical assets are
unavailable, varying valuation techniques are used. Common
inputs in valuing these assets include, among others, benchmark
yields, issuer spreads and recently reported trades. Such assets
are classified as Level 2 in the hierarchy and typically
include corporate bonds and other US government securities.
Derivatives. Derivative financial instruments are
valued in the market using discounted cash flow techniques.
These techniques incorporate Level 1 and Level 2
inputs such as interest rates and foreign currency exchange
rates. These market inputs are utilized in the discounted cash
flow calculation considering the instruments term,
notional amount, discount rate and credit risk. Significant
inputs to the derivative valuation for interest rate swaps and
foreign currency forwards and swaps are observable in the active
markets and are classified as Level 2 in the hierarchy.
19
The following fair value hierarchy tables present information
about the Companys assets and liabilities measured at fair
value on a recurring basis:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurement Using
|
|
|
|
|
|
|
Quoted Prices in
|
|
|
|
|
|
|
|
|
|
Active Markets for
|
|
|
Significant Other
|
|
|
|
|
|
|
Identical Assets
|
|
|
Observable Inputs
|
|
|
|
|
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
Total
|
|
|
|
(In $ millions)
|
|
|
Marketable securities, at fair value
|
|
|
|
|
|
|
|
|
|
|
|
|
US government debt securities
|
|
|
-
|
|
|
|
26
|
|
|
|
26
|
|
US corporate debt securities
|
|
|
-
|
|
|
|
1
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total debt securities
|
|
|
-
|
|
|
|
27
|
|
|
|
27
|
|
Equity securities
|
|
|
53
|
|
|
|
-
|
|
|
|
53
|
|
Money market deposits and other securities
|
|
|
-
|
|
|
|
3
|
|
|
|
3
|
|
Derivatives not designated as hedging instruments
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency forwards and swaps
|
|
|
-
|
|
|
|
6
|
|
|
|
6
|
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets as of March 31, 2010
|
|
|
53
|
|
|
|
36
|
|
|
|
89
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives designated as cash flow hedging instruments
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swaps
|
|
|
-
|
|
|
|
(67
|
)
|
|
|
(67
|
) (2)
|
Interest rate swaps
|
|
|
-
|
|
|
|
(41
|
)
|
|
|
(41
|
) (3)
|
Derivatives not designated as hedging instruments
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency forwards and swaps
|
|
|
-
|
|
|
|
(4
|
)
|
|
|
(4
|
) (2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities as of March 31, 2010
|
|
|
-
|
|
|
|
(112
|
)
|
|
|
(112
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marketable securities, at fair value
|
|
|
|
|
|
|
|
|
|
|
|
|
US government debt securities
|
|
|
-
|
|
|
|
28
|
|
|
|
28
|
|
US corporate debt securities
|
|
|
-
|
|
|
|
1
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total debt securities
|
|
|
-
|
|
|
|
29
|
|
|
|
29
|
|
Equity securities
|
|
|
52
|
|
|
|
-
|
|
|
|
52
|
|
Money market deposits and other securities
|
|
|
-
|
|
|
|
2
|
|
|
|
2
|
|
Derivatives not designated as hedging instruments
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency forwards and swaps
|
|
|
-
|
|
|
|
12
|
|
|
|
12
|
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets as of December 31, 2009
|
|
|
52
|
|
|
|
43
|
|
|
|
95
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives designated as cash flow hedging instruments
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swaps
|
|
|
-
|
|
|
|
(68
|
)
|
|
|
(68
|
) (2)
|
Interest rate swaps
|
|
|
-
|
|
|
|
(44
|
)
|
|
|
(44
|
) (3)
|
Derivatives not designated as hedging instruments
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency forwards and swaps
|
|
|
-
|
|
|
|
(7
|
)
|
|
|
(7
|
) (2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities as of December 31, 2009
|
|
|
-
|
|
|
|
(119
|
)
|
|
|
(119
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Included in current Other assets in the unaudited consolidated
balance sheets. |
|
(2) |
|
Included in current Other liabilities in the unaudited
consolidated balance sheets. |
|
(3) |
|
Included in noncurrent Other liabilities in the unaudited
consolidated balance sheets. |
20
Summarized below are the carrying values and estimated fair
values of financial instruments that are not carried at fair
value on the Companys unaudited consolidated balance
sheets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of March 31, 2010
|
|
|
As of December 31, 2009
|
|
|
|
Carrying
|
|
|
Fair
|
|
|
Carrying
|
|
|
Fair
|
|
|
|
Amount
|
|
|
Value
|
|
|
Amount
|
|
|
Value
|
|
|
|
|
|
|
(In $ millions)
|
|
|
|
|
|
Cost investments
|
|
|
182
|
|
|
|
-
|
|
|
|
183
|
|
|
|
-
|
|
Insurance contracts in nonqualified pension trusts
|
|
|
66
|
|
|
|
66
|
|
|
|
66
|
|
|
|
66
|
|
Long-term debt, including current installments of long-term debt
|
|
|
3,337
|
|
|
|
3,269
|
|
|
|
3,361
|
|
|
|
3,246
|
|
In general, the cost investments included in the table above are
not publicly traded and their fair values are not readily
determinable; however, the Company believes the carrying values
approximate or are less than the fair values.
As of March 31, 2010 and December 31, 2009, the fair
values of cash and cash equivalents, receivables, trade
payables, short-term debt and the current installments of
long-term debt approximate carrying values due to the short-term
nature of these instruments. These items have been excluded from
the table with the exception of the current installments of
long-term debt. Additionally, certain noncurrent receivables,
principally insurance recoverables, are carried at net
realizable value.
The fair value of long-term debt is based on valuations from
third-party banks and market quotations.
|
|
18.
|
Commitments
and Contingencies
|
The Company is involved in a number of legal and regulatory
proceedings, lawsuits and claims incidental to the normal
conduct of business, relating to such matters as product
liability, antitrust, intellectual property, workers
compensation, chemical exposure, prior acquisitions and
divestitures, past waste disposal practices and release of
chemicals into the environment. While it is impossible at this
time to determine with certainty the ultimate outcome of these
proceedings, lawsuits and claims, the Company is actively
defending those matters where the Company is named as a
defendant. Additionally, the Company believes, based on the
advice of legal counsel, that adequate reserves have been made
and that the ultimate outcomes of all such litigation and claims
will not have a material adverse effect on the financial
position of the Company; however, the ultimate outcome of any
given matter may have a material impact on the results of
operations or cash flows of the Company in any given reporting
period.
Plumbing
Actions
CNA Holdings LLC (CNA Holdings), a US subsidiary of
the Company, which included the US business now conducted by the
Ticona business that is included in the Advanced Engineered
Materials segment, along with Shell Oil Company
(Shell), E.I. DuPont de Nemours and Company
(DuPont) and others, has been a defendant in a
series of lawsuits, including a number of class actions,
alleging that plastics manufactured by these companies that were
utilized in the production of plumbing systems for residential
property were defective or caused such plumbing systems to fail.
Based on, among other things, the findings of outside experts
and the successful use of Ticonas acetal copolymer in
similar applications, CNA Holdings does not believe
Ticonas acetal copolymer was defective or caused the
plumbing systems to fail. In many cases CNA Holdings
potential future exposure may be limited by invocation of the
statute of limitations since CNA Holdings ceased selling the
resin for use in the plumbing systems in site-built homes during
1986 and in manufactured homes during 1990.
In November 1995, CNA Holdings, DuPont and Shell entered into
national class action settlements that called for the
replacement of plumbing systems of claimants who have had
qualifying leaks, as well as reimbursements for certain leak
damage. In connection with such settlement, the three companies
had agreed to fund these replacements and reimbursements up to
an aggregate amount of $950 million. As of March 31,
2010, the aggregate funding is $1,110 million, due to
additional contributions and funding commitments made primarily
by other parties.
21
During the period between 1995 and 2001, CNA Holdings was also
named as a defendant in the following putative class actions:
§ Cox,
et al. v. Hoechst Celanese Corporation, et al.,
No. 94-0047
(Chancery Ct., Obion County, Tennessee) (class was certified).
§ Couture,
et al. v. Shell Oil Company, et al.,
No. 200-06-000001-985
(Quebec Superior Court, Canada).
§ Dilday,
et al. v. Hoechst Celanese Corporation, et al.,
No. 15187 (Chancery Ct., Weakley County, Tennessee).
§ Furlan v.
Shell Oil Company, et al., No. C967239 (British
Columbia Supreme Court, Vancouver Registry, Canada).
§ Gariepy,
et al. v. Shell Oil Company, et al., No. 30781/99
(Ontario Court General Division, Canada).
§ Shelter
General Insurance Co., et al. v. Shell Oil Company, et
al., No. 16809 (Chancery Ct., Weakley County,
Tennessee).
§ St. Croix
Ltd., et al. v. Shell Oil Company, et al.,
No. 1997/467 (Territorial Ct., St. Croix Division, the
US Virgin Islands).
§ Tranter v.
Shell Oil Company, et al., No. 46565/97 (Ontario Court
General Division, Canada).
In addition, between 1994 and 2008 CNA Holdings was named as a
defendant in numerous
non-class
actions filed in Arizona, Florida, Georgia, Louisiana,
Mississippi, New Jersey, Tennessee and Texas, the US Virgin
Islands and Canada of which ten are currently pending. In all of
these actions, the plaintiffs have sought recovery for alleged
damages caused by leaking polybutylene plumbing. Damage amounts
have generally not been specified but these cases generally do
not involve (either individually or in the aggregate) a large
number of homes.
As of March 31, 2010 and December 31, 2009, the
Company had remaining accruals of $54 million and
$55 million, respectively, of which $1 million and
$1 million, respectively, is included in current Other
liabilities in the unaudited consolidated balance sheets with
the remainder recorded in noncurrent Other liabilities. During
the three months ended March 31, 2010, the Company recorded
$11 million in plumbing claim recoveries.
Plumbing
Insurance Indemnifications
Celanese GmbH entered into agreements with insurance companies
related to product liability settlements associated with
Celcon®
plumbing claims. These agreements, except those with insolvent
insurance companies, require the Company to indemnify
and/or
defend these insurance companies in the event that third parties
seek additional monies for matters released in these agreements.
The indemnifications in these agreements do not provide for time
limitations.
In certain of the agreements, Celanese GmbH received a fixed
settlement amount. The indemnities under these agreements
generally are limited to, but in some cases are greater than,
the amount received in settlement from the insurance company.
The maximum exposure under these indemnifications is
$95 million. Other settlement agreements have no stated
limits.
There are other agreements whereby the settling insurer agreed
to pay a fixed percentage of claims that relate to that
insurers policies. The Company has provided
indemnifications to the insurers for amounts paid in excess of
the settlement percentage. These indemnifications do not provide
for monetary or time limitations.
Sorbates
Antitrust Actions
In 2004 a civil antitrust action styled Freeman Industries
LLC v. Eastman Chemical Co., et. al. was filed against
Hoechst and Nutrinova, Inc. in the Law Court for Sullivan County
in Kingsport, Tennessee. The plaintiff sought monetary damages
and other relief for alleged conduct involving the sorbates
industry. The trial court dismissed the plaintiffs claims
and upon appeal the Supreme Court of Tennessee affirmed the
dismissal of the plaintiffs claims. In December 2005, the
plaintiff lost an attempt to amend its complaint and the entire
action was dismissed with prejudice. Plaintiffs counsel
subsequently filed a new complaint with new class
representatives in the District Court
22
of the District of Tennessee. The Companys motion to
strike the class allegations was granted in April 2008 and the
plaintiffs request to appeal the ruling remains pending.
Polyester
Staple Antitrust Litigation
CNA Holdings, the successor in interest to Hoechst Celanese
Corporation (HCC), Celanese Americas Corporation and
Celanese GmbH (collectively, the Celanese Entities)
and Hoechst, the former parent of HCC, were named as defendants
in two actions (involving 25 individual participants) filed in
September 2006 by US purchasers of polyester staple fibers
manufactured and sold by HCC. The actions allege that the
defendants participated in a conspiracy to fix prices, rig bids
and allocate customers of polyester staple sold in the United
States. These actions were consolidated in a proceeding by a
Multi-District Litigation Panel in the United States District
Court for the Western District of North Carolina styled In re
Polyester Staple Antitrust Litigation, MDL 1516. On
June 12, 2008 the court dismissed these actions against all
Celanese Entities in consideration of a payment by the Company
of $107 million. This proceeding related to sales by the
polyester staple fibers business which Hoechst sold to KoSa,
Inc. in 1998. Accordingly, the impact of this settlement was
reflected within discontinued operations in the consolidated
statements of operations for the year ended December 31,
2008. The Company also previously entered into tolling
arrangements with four other alleged US purchasers of polyester
staple fibers manufactured and sold by the Celanese Entities.
These purchasers were not included in the settlement and one
such company filed suit against the Company in December 2008 in
the Western District of North Carolina entitled
Milliken & Company v. CNA Holdings, Inc.,
Celanese Americas Corporation and Hoechst AG
(No. 8-CV-00578).
The Company is actively defending this matter.
In 1998, HCC sold its polyester staple business as part of the
sale of its Film & Fibers Division to KoSa B.V., f/k/a
Arteva B.V. and a subsidiary of Koch Industries, Inc.
(KoSa). In March 2001 the US Department of Justice
(DOJ) commenced an investigation of possible price
fixing regarding sales in the US of polyester staple fibers
after the period the Celanese Entities were engaged in the
polyester staple fiber business. The Celanese Entities were
never named in these DOJ actions. As a result of the DOJ action,
during August of 2002, Arteva Specialties, S.a.r.l., a
subsidiary of KoSa, (Arteva Specialties) pled guilty
to criminal violation of the Sherman Act related to
anti-competitive conduct occurring after the 1998 sale of the
polyester staple fiber business and paid a fine of
$29 million. In a complaint pending against the Celanese
Entities and Hoechst in the United States District Court for the
Southern District of New York, Koch Industries, Inc., KoSa,
Arteva Specialties and Arteva Services S.a.r.l. seek damages in
excess of $371 million that includes indemnification for
all damages related to the defendants alleged
participation in, and failure to disclose, the alleged
conspiracy during due diligence. The Company is actively
defending this matter.
Acetic
Acid Patent Infringement Matters
On May 9, 1999, Celanese International Corporation filed a
private criminal action styled Celanese International
Corporation v. China Petrochemical Development Corporation
against China Petrochemical Development Corporation
(CPDC) in the Taiwan Kaoshiung District Court
alleging that CPDC infringed Celanese International
Corporations patent covering the manufacture of acetic
acid. Celanese International Corporation also filed a
supplementary civil brief that, in view of changes in Taiwanese
patent laws, was subsequently converted to a civil action
alleging damages against CPDC based on a period of infringement
of ten years,
1991-2000,
and based on CPDCs own data that was reported to the
Taiwanese securities and exchange commission. Celanese
International Corporations patent was held valid by the
Taiwanese patent office. On August 31, 2005, the District
Court held that CPDC infringed Celanese International
Corporations acetic acid patent and awarded Celanese
International Corporation approximately $28 million (plus
interest) for the period of 1995 through 1999. In October 2008,
the High Court, on appeal, reversed the District Courts
$28 million award to the Company. The Company appealed to
the Superior Court in November 2008, and the court remanded the
case to the Intellectual Property Court on June 4, 2009. On
January 16, 2006, the District Court awarded Celanese
International Corporation $800,000 (plus interest) for the year
1990. In January 2009, the High Court, on appeal, affirmed the
District Courts award and CPDC appealed on
February 5, 2009 to the Supreme Court. During the three
months ended March 31, 2010, this case was remanded to the
Intellectual Property Court. On June 29, 2007, the District
Court awarded Celanese International Corporation
$60 million (plus interest) for the period of 2000 through
2005. CPDC appealed this ruling and on
23
July 21, 2009, the High Court ruled in CPDCs favor.
The Company appealed to the Supreme Court and in December 2009,
the case was remanded to the Intellectual Property Court.
Asbestos
Claims
As of March 31, 2010, the Company and several of its US
subsidiaries are defendants in approximately 516 asbestos cases.
During the three months ended March 31, 2010, 17 new cases
were filed against the Company and 27 cases were resolved.
Because many of these cases involve numerous plaintiffs, the
Company is subject to claims significantly in excess of the
number of actual cases. The Company has reserves for defense
costs related to claims arising from these matters. The Company
believes that there is no material exposure related to these
matters.
Award
Proceedings in relation to Domination Agreement and Squeeze
Out
On October 1, 2004, a Domination Agreement between Celanese
GmbH and the Purchaser became operative. When the Domination
Agreement became operative, the Purchaser became obligated to
offer to acquire all outstanding Celanese GmbH shares from the
minority shareholders of Celanese GmbH in return for payment of
fair cash compensation. The amount of this fair cash
compensation was determined to be 41.92 per share, plus
interest, in accordance with applicable German law. Until the
Squeeze-Out was registered in the commercial register in Germany
on December 22, 2006, any minority shareholder who elected
not to sell its shares to the Purchaser was entitled to remain a
shareholder of Celanese GmbH and to receive from the Purchaser a
gross guaranteed annual payment on its shares of 3.27 per
Celanese GmbH share less certain corporate taxes in lieu of any
dividend.
The amounts of the fair cash compensation and of the guaranteed
annual payment offered under the Domination Agreement as well as
the Squeeze-Out compensation are under court review in two
separate special award proceedings. The amounts of the fair cash
compensation and of the guaranteed annual payment offered under
the Domination Agreement may be increased in special award
proceedings initiated by minority shareholders, which may
further reduce the funds the Purchaser can otherwise make
available to the Company. As of March 30, 2005, several
minority shareholders of Celanese GmbH had initiated special
award proceedings seeking the courts review of the amounts
of the fair cash compensation and of the guaranteed annual
payment offered under the Domination Agreement. As a result of
these proceedings, the amount of the fair cash consideration and
the guaranteed annual payment offered under the Domination
Agreement could be increased by the court so that all minority
shareholders, including those who have already tendered their
shares into the mandatory offer and have received the fair cash
compensation could claim the respective higher amounts. The
court dismissed all of these proceedings in March 2005 on the
grounds of inadmissibility. Thirty-three plaintiffs appealed the
dismissal, and in January 2006, twenty-three of these appeals
were granted by the court. They were remanded back to the court
of first instance, where the valuation will be further reviewed.
On December 12, 2006, the court of first instance appointed
an expert to help determine the value of Celanese GmbH. In the
first quarter of 2007, certain minority shareholders that
received 66.99 per share as fair cash compensation also
filed award proceedings challenging the amount they received as
fair cash compensation.
The Company received applications for the commencement of award
proceedings filed by 79 shareholders against the Purchaser
with the Frankfurt District Court requesting the court to set a
higher amount for the Squeeze-Out compensation. The motions are
based on various alleged shortcomings and mistakes in the
valuation of Celanese GmbH done for purposes of the Squeeze-Out.
On May 11, 2007, the court of first instance appointed a
common representative for those shareholders that have not filed
an application on their own.
Should the court set a higher value for the Squeeze-Out
compensation, former Celanese GmbH shareholders who ceased to be
shareholders of Celanese GmbH due to the Squeeze-Out are
entitled, pursuant to a settlement agreement between the
Purchaser and certain former Celanese GmbH shareholders, to
claim for their shares the higher of the compensation amounts
determined by the court in these different proceedings. Payments
these shareholders already received as compensation for their
shares will be offset so that those shareholders who ceased to
be shareholders of Celanese GmbH due to the Squeeze-Out are not
entitled to more than the higher of the amount set in the two
court proceedings.
24
Guarantees
The Company has agreed to guarantee or indemnify third parties
for environmental and other liabilities pursuant to a variety of
agreements, including asset and business divestiture agreements,
leases, settlement agreements and various agreements with
affiliated companies. Although many of these obligations contain
monetary
and/or time
limitations, others do not provide such limitations.
As indemnification obligations often depend on the occurrence of
unpredictable future events, the future costs associated with
them cannot be determined at this time.
The Company has accrued for all probable and reasonably
estimable losses associated with all known matters or claims
that have been brought to its attention. These known obligations
include the following:
Demerger Obligations
The Company has obligations to indemnify Hoechst, and its legal
successors, for various liabilities under the Demerger
Agreement, including for environmental liabilities associated
with contamination arising under 19 divestiture agreements
entered into by Hoechst prior to the demerger.
The Companys obligation to indemnify Hoechst, and its
legal successors, is subject to the following thresholds:
§ The
Company will indemnify Hoechst, and its legal successors,
against those liabilities up to 250 million;
§ Hoechst,
and its legal successors, will bear those liabilities exceeding
250 million, however the Company will reimburse
Hoechst, and its legal successors, for one-third of those
liabilities for amounts that exceed 750 million in
the aggregate.
The aggregate maximum amount of environmental indemnifications
under the remaining divestiture agreements that provide for
monetary limits is approximately 750 million. Three
of the divestiture agreements do not provide for monetary limits.
Based on the estimate of the probability of loss under this
indemnification, the Company had reserves of $31 million
and $32 million as of March 31, 2010 and
December 31, 2009, respectively, for this contingency.
Where the Company is unable to reasonably determine the
probability of loss or estimate such loss under an
indemnification, the Company has not recognized any related
liabilities.
The Company has also undertaken in the Demerger Agreement to
indemnify Hoechst and its legal successors for liabilities that
Hoechst is required to discharge, including tax liabilities,
which are associated with businesses that were included in the
demerger but were not demerged due to legal restrictions on the
transfers of such items. These indemnities do not provide for
any monetary or time limitations. The Company has not provided
for any reserves associated with this indemnification as it is
not probable or estimable. The Company has not made any payments
to Hoechst or its legal successors during the three months ended
March 31, 2010 and 2009, respectively, in connection with
this indemnification.
Divestiture Obligations
The Company and its predecessor companies agreed to indemnify
third-party purchasers of former businesses and assets for
various pre-closing conditions, as well as for breaches of
representations, warranties and covenants. Such liabilities also
include environmental liability, product liability, antitrust
and other liabilities. These indemnifications and guarantees
represent standard contractual terms associated with typical
divestiture agreements and, other than environmental
liabilities, the Company does not believe that they expose the
Company to any significant risk. As of both March 31, 2010
and December 31, 2009, the Company has reserves in the
aggregate of $32 million for these matters.
The Company has divested numerous businesses, investments and
facilities through agreements containing indemnifications or
guarantees to the purchasers. Many of the obligations contain
monetary
and/or time
limitations, ranging from one year to thirty years. The
aggregate amount of guarantees provided for under these
agreements is approximately $1.9 billion as of
March 31, 2010. Other agreements do not provide for any
monetary or time limitations.
25
Purchase
Obligations
In the normal course of business, the Company enters into
commitments to purchase goods and services over a fixed period
of time. The Company maintains a number of
take-or-pay
contracts for purchases of raw materials and utilities. As of
March 31, 2010, there were outstanding future commitments
of $1.7 billion under
take-or-pay
contracts. The Company recognized $3 million of losses
related to
take-or-pay
contract termination costs for the three months ended
March 31, 2010 related to the Companys Pardies,
France Project of Closure (Note 3 and Note 14). The
Company does not expect to incur any material losses under
take-or-pay
contractual arrangements unrelated to the Pardies, France
Project of Closure. Additionally, as of March 31, 2010,
there were other outstanding commitments of $684 million
representing maintenance and service agreements, energy and
utility agreements, consulting contracts and software agreements.
During March 2010, the Company successfully completed an amended
raw material purchase agreement with a supplier who had filed
for bankruptcy. Under the original contract, the Company made
advance payments in exchange for preferential pricing on certain
volumes of material purchases over the life of the contract. The
cancellation of the original contract and the terms of the
subsequent amendment resulted in the Company accelerating
amortization on the unamortized prepayment balance of
$22 million during the three months ended March 31,
2010. The accelerated amortization was recorded to Cost of sales
in the unaudited interim consolidated statements of operations
as follows: $20 million was recorded in the Acetyl
Intermediates segment and $2 million was recorded in the
Advanced Engineered Materials segment.
26
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Advanced
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Engineered
|
|
|
Consumer
|
|
|
Industrial
|
|
|
Acetyl
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
Materials
|
|
|
Specialties
|
|
|
Specialties
|
|
|
Intermediates
|
|
|
Activities
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
(In $ millions)
|
|
|
Three months ended
March 31, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
|
282
|
|
|
|
238
|
(1)
|
|
|
242
|
|
|
|
724
|
(1)
|
|
|
-
|
|
|
|
(98
|
)
|
|
|
1,388
|
|
Other (charges) gains, net
|
|
|
5
|
|
|
|
(73
|
)
|
|
|
-
|
|
|
|
(7
|
)
|
|
|
(2
|
)
|
|
|
-
|
|
|
|
(77
|
)
|
Equity in net earnings (loss) of affiliates
|
|
|
21
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1
|
|
|
|
4
|
|
|
|
-
|
|
|
|
26
|
|
Earnings (loss) from continuing operations before tax
|
|
|
67
|
|
|
|
(30
|
)
|
|
|
12
|
|
|
|
30
|
|
|
|
(82
|
)
|
|
|
-
|
|
|
|
(3
|
)
|
Depreciation and amortization
|
|
|
20
|
(3)
|
|
|
11
|
|
|
|
10
|
|
|
|
45
|
(3)
|
|
|
3
|
|
|
|
-
|
|
|
|
89
|
|
Capital expenditures
(2)
|
|
|
5
|
|
|
|
6
|
|
|
|
5
|
|
|
|
5
|
|
|
|
2
|
|
|
|
-
|
|
|
|
23
|
|
Goodwill and intangible assets
|
|
|
365
|
|
|
|
287
|
|
|
|
58
|
|
|
|
321
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,031
|
|
Total Assets
|
|
|
2,263
|
|
|
|
981
|
|
|
|
755
|
|
|
|
1,996
|
|
|
|
2,207
|
|
|
|
-
|
|
|
|
8,202
|
|
Three months ended March 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
|
165
|
|
|
|
266
|
|
|
|
242
|
|
|
|
572
|
(1)
|
|
|
-
|
|
|
|
(99
|
)
|
|
|
1,146
|
|
Other (charges) gains, net
|
|
|
(9
|
)
|
|
|
-
|
|
|
|
(2
|
)
|
|
|
(1
|
)
|
|
|
(9
|
)
|
|
|
-
|
|
|
|
(21
|
)
|
Equity in net earnings (loss) of affiliates
|
|
|
(8
|
)
|
|
|
1
|
|
|
|
-
|
|
|
|
2
|
|
|
|
3
|
|
|
|
-
|
|
|
|
(2
|
)
|
Earnings (loss) from continuing operations before tax
|
|
|
(27
|
)
|
|
|
69
|
|
|
|
10
|
|
|
|
16
|
|
|
|
(84
|
)
|
|
|
-
|
|
|
|
(16
|
)
|
Depreciation and amortization
|
|
|
17
|
|
|
|
12
|
|
|
|
13
|
|
|
|
27
|
|
|
|
2
|
|
|
|
-
|
|
|
|
71
|
|
Capital expenditures
(2)
|
|
|
4
|
|
|
|
8
|
|
|
|
10
|
|
|
|
8
|
|
|
|
-
|
|
|
|
-
|
|
|
|
30
|
|
Goodwill and intangible assets as of December 31, 2009
|
|
|
385
|
|
|
|
299
|
|
|
|
62
|
|
|
|
346
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,092
|
|
Total Assets as of December 31, 2009
|
|
|
2,211
|
|
|
|
1,083
|
|
|
|
740
|
|
|
|
1,986
|
|
|
|
2,390
|
|
|
|
-
|
|
|
|
8,410
|
|
|
|
(1)
|
Includes $98 million and $99 million of intersegment
sales eliminated in consolidation for the three months ended
March 31, 2010 and 2009, respectively.
|
|
(2)
|
Includes decrease of accrued capital expenditures of
$21 million and $26 million for the three months ended
March 31, 2010 and 2009, respectively.
|
|
(3)
|
Includes $2 million for Advanced Engineered Materials and
$20 million for Acetyl Intermediates for the accelerated
amortization of the unamortized prepayment related to a raw
material purchase agreement (Note 18).
|
27
|
|
20.
|
Earnings
(Loss) Per Share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
|
Basic
|
|
|
Diluted
|
|
|
Basic
|
|
|
Diluted
|
|
|
|
(In $ millions, except for share and per share data)
|
|
|
Amounts attributable to Celanese Corporation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) from continuing operations
|
|
|
17
|
|
|
|
17
|
|
|
|
(21)
|
|
|
|
(21)
|
|
Earnings (loss) from discontinued operations
|
|
|
1
|
|
|
|
1
|
|
|
|
1
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings (loss)
|
|
|
18
|
|
|
|
18
|
|
|
|
(20)
|
|
|
|
(20)
|
|
Less: Cumulative preferred stock dividends
|
|
|
(3)
|
|
|
|
(3)
|
|
|
|
(3)
|
|
|
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings (loss) available to common shareholders
|
|
|
15
|
|
|
|
15
|
|
|
|
(23)
|
|
|
|
(23)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average shares basic
|
|
|
150,272,227
|
|
|
|
150,272,227
|
|
|
|
143,506,981
|
|
|
|
143,506,981
|
|
Dilutive stock options
|
|
|
|
|
|
|
1,921,121
|
|
|
|
|
|
|
|
-
|
|
Dilutive restricted stock units
|
|
|
|
|
|
|
449,023
|
|
|
|
|
|
|
|
-
|
|
Assumed conversion of preferred stock
|
|
|
|
|
|
|
-
|
|
|
|
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average shares diluted
|
|
|
|
|
|
|
152,642,371
|
|
|
|
|
|
|
|
143,506,981
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) from continuing operations
|
|
|
0.09
|
|
|
|
0.09
|
|
|
|
(0.17)
|
|
|
|
(0.17)
|
|
Earnings (loss) from discontinued operations
|
|
|
0.01
|
|
|
|
0.01
|
|
|
|
0.01
|
|
|
|
0.01
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings (loss)
|
|
|
0.10
|
|
|
|
0.10
|
|
|
|
(0.16)
|
|
|
|
(0.16)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following securities were not included in the computation of
diluted net earnings per share as their effect would have been
antidilutive:
|
|
|
|
|
|
|
|
|
|
|
Three Months
|
|
|
|
Ended March 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
Stock options
|
|
|
611,250
|
|
|
|
6,941,949
|
|
Restricted stock units
|
|
|
-
|
|
|
|
628,005
|
|
Convertible preferred stock
|
|
|
6,302,027
|
|
|
|
12,076,985
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
6,913,277
|
|
|
|
19,646,939
|
|
|
|
|
|
|
|
|
|
|
|
|
21.
|
Ticona
Kelsterbach Plant Relocation
|
In November 2006, the Company finalized a settlement agreement
with the Frankfurt, Germany Airport (Fraport) to
relocate the Kelsterbach, Germany Ticona business, included in
the Advanced Engineered Materials segment, resolving several
years of legal disputes related to the planned Fraport
expansion. As a result of the settlement, the Company will
transition Ticonas operations from Kelsterbach to the
Hoechst Industrial Park in the Rhine Main area in Germany by
mid-2011. Under the original agreement, Fraport agreed to pay
Ticona a total of 670 million over a five-year period
to offset the costs associated with the transition of the
business from its current location and the closure of the
Kelsterbach plant. In February 2009, the Company announced the
Fraport supervisory board approved the acceleration of the 2009
and 2010 payments of 200 million and
140 million, respectively, required by the settlement
agreement signed in June 2007. In February 2009, the Company
received a discounted amount of 322 million
($412 million) under this agreement. In addition, the
Company received 59 million ($75 million) in
value-added tax from Fraport which was remitted to the tax
authorities in April 2009. Amounts received from Fraport are
accounted for as deferred proceeds and are included in
noncurrent Other liabilities in the unaudited consolidated
balance sheets.
28
Below is a summary of the financial statement impact associated
with the Ticona Kelsterbach plant relocation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Total From
|
|
|
|
March 31,
|
|
|
Inception Through
|
|
|
|
2010
|
|
|
2009
|
|
|
March 31, 2010
|
|
|
|
(In $ millions)
|
|
|
Proceeds received from Fraport
|
|
|
-
|
|
|
|
412
|
|
|
|
749
|
|
Costs expensed
|
|
|
5
|
|
|
|
3
|
|
|
|
38
|
|
Costs
capitalized(1)
|
|
|
68
|
|
|
|
65
|
|
|
|
684
|
|
|
|
(1) |
Includes decrease in accrued capital expenditures of
$17 million and increase in accrued capital expenditures of
$7 million for the three months ended March 31, 2010
and 2009, respectively.
|
On April 1, 2010, the Company announced that its National
Methanol Co. joint venture (Ibn Sina), whose term is
now being extended until 2032, will construct a 50,000 ton
polyacetal (POM) production facility in Saudi
Arabia. The Companys pro rata share of invested capital in
the POM expansion is expected to total approximately
$150 million over a three-year period, beginning in late
2010. The Company, Saudi Basic Industries Corporation
(SABIC) and Duke Energy Corporation entered into the
Ibn Sina joint venture in 1981. The Company and an affiliate of
Duke Energy each hold a 25% interest in the venture, with the
remaining 50% held by SABIC. Upon successful startup of the POM
facility, the Companys economic interest in Ibn Sina will
increase from 25% to a total of 32.5%. SABICs economic
interest will remain unchanged. In connection with this
transaction, the Company reassessed the factors surrounding the
accounting method for this investment and will change the
accounting from the cost method of accounting for investments to
the equity method of accounting for investments beginning
April 1, 2010. The impact of this change in accounting has
not been determined. The Ibn Sina joint venture is included in
the Acetyl Intermediates segment.
On April 5, 2010, the Company declared a cash dividend of
$0.04 per share on its Common Stock amounting to
$6 million. The cash dividends are for the period from
February 1, 2010 to April 30, 2010 and will be paid on
May 1, 2010 to holders of record as of April 15, 2010.
On April 26, 2010, the Company announced that its Board of
Directors approved a 25% increase in the Companys
quarterly Common Stock cash dividend. The Directors increased
the quarterly dividend rate from $0.04 to $0.05 per share of
Common Stock on a quarterly basis and $0.16 to $0.20 per share
of Common Stock on an annual basis. The new dividend rate will
be applicable to dividends payable beginning in August 2010.
On April 27, 2010, the Company announced it is considering
a plan to consolidate its global acetate manufacturing
capabilities by proposing the closure of its acetate
manufacturing facility in Spondon, Derby, United Kingdom. The
consolidation is designed to strengthen the Companys
competitive position, reduce fixed costs and align future
production capacities with anticipated industry demand trends.
The consolidation is also driven by a global shift in product
consumption. The Company would expect to serve its acetate
customers under this proposal by optimizing its global
production network, which includes facilities in Lanaken,
Belgium; Narrows, Virginia; and Ocotlan, Mexico, as well as the
Companys acetate joint venture facilities in China. If the
Company proceeds with the proposed closure, the Company expects
to operate its Spondon, Derby, United Kingdom facility through
late 2011 to ensure a smooth transition to these other
manufacturing facilities. The Company will engage in a
consultation procedure with labor unions associated with the
proposed closure.
In connection with the proposed closure of the Spondon, Derby,
United Kingdom facility, the Company concluded that certain
long-lived assets were partially impaired. Accordingly, during
the three months ended March 31, 2010, the Company recorded
long-lived asset impairment losses of $72 million to Other
charges (gains), net in the unaudited interim consolidated
statements of operations (Note 14).
29
|
|
Item 2.
|
Managements
Discussion and Analysis of Financial Condition and Results of
Operations
|
In this Quarterly Report on
Form 10-Q,
the term Celanese refers to Celanese Corporation, a
Delaware corporation, and not its subsidiaries. The terms the
Company, we, our and
us, refer to Celanese and its subsidiaries on a
consolidated basis. The term Celanese US refers to
our subsidiary, Celanese US Holdings LLC, a Delaware limited
liability company, and not its subsidiaries. The term
Purchaser refers to our subsidiary, Celanese Europe
Holding GmbH & Co. KG, and not its subsidiaries,
except where otherwise indicated.
Forward-Looking
Statements May Prove Inaccurate
Managements Discussion and Analysis of Financial Condition
and Results of Operations (MD&A) and other
parts of this Quarterly Report on
Form 10-Q
contain certain forward-looking statements and information
relating to us that are based on the beliefs of our management
as well as assumptions made by, and information currently
available to, us. When used in this document, words such as
anticipate, believe,
estimate, expect, intend,
plan and project and similar
expressions, as they relate to us are intended to identify
forward-looking statements. These statements reflect our current
views with respect to future events, are not guarantees of
future performance and involve risks and uncertainties that are
difficult to predict. Further, certain forward-looking
statements are based upon assumptions as to future events that
may not prove to be accurate.
The following discussion should be read in conjunction with the
Celanese Corporation and Subsidiaries consolidated financial
statements as of and for the year ended December 31, 2009,
as filed on February 12, 2010 with the Securities and
Exchange Commission (SEC) as part of the
Companys Annual Report on
Form 10-K
(the 2009
Form 10-K)
and the unaudited interim consolidated financial statements and
notes thereto included elsewhere in this Quarterly Report on
Form 10-Q.
We assume no obligation to revise or update any forward-looking
statements for any reason, except as required by law.
See Part I - Item 1A. Risk Factors of our 2009
Form 10-K
for a description of risk factors that could significantly
affect our financial results. In addition, the following factors
could cause our actual results to differ materially from those
results, performance or achievements that may be expressed or
implied by such forward-looking statements. These factors
include, among other things:
|
|
|
|
|
changes in general economic, business, political and regulatory
conditions in the countries or regions in which we operate;
|
|
|
|
the length and depth of product and industry business cycles
particularly in the automotive, electrical, electronics and
construction industries;
|
|
|
|
changes in the price and availability of raw materials,
particularly changes in the demand for, supply of, and market
prices of ethylene, methanol, natural gas, wood pulp, fuel oil
and electricity;
|
|
|
|
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;
|
|
|
|
increased price competition and the introduction of competing
products by other companies;
|
|
|
|
changes in the degree of intellectual property 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 and increased costs
under existing or future environmental regulations, including
those relates to climate change;
|
|
|
|
potential liability resulting from pending or future litigation,
or from changes in the laws, regulations or policies of
governments or other governmental activities in the countries in
which we operate;
|
30
|
|
|
|
|
changes in currency exchange rates and interest rates; and
|
|
|
|
various other factors, both referenced and not referenced in
this Quarterly Report on
Form 10-Q.
|
Many of these factors are macroeconomic in nature and are,
therefore, beyond our control. Should one or more of these risks
or uncertainties materialize, or should underlying assumptions
prove incorrect, our actual results, performance or achievements
may vary materially from those described in this Quarterly
Report as anticipated, believed, estimated, expected, intended,
planned or projected. We neither intend nor assume any
obligation to update these forward-looking statements, which
speak only as of their dates.
Overview
We are a leading global integrated producer of chemicals and
advanced materials. We are one of the worlds largest
producers of acetyl products, which are intermediate chemicals
for nearly all major industries, as well as a leading global
producer of high-performance engineered polymers that are used
in a variety of high-value end-use applications. As an industry
leader, we hold geographically balanced global positions and
participate in diversified end-use markets. Our operations are
primarily located in North America, Europe and Asia. We combine
a demonstrated track record of execution, strong performance
built on shared principles and objectives, and a clear focus on
growth and value creation.
2010 Significant Events:
We announced the
construction of a 50,000 ton polyacetal (POM)
production facility in our National Methanol Co. joint venture
(Ibn Sina) in Saudi Arabia and extended the venture,
which will now run until 2032. Upon successful startup of the
POM facility, our economic interest in Ibn Sina will increase
from 25% to a total of 32.5%.
We announced that we are
considering a consolidation of our global acetate manufacturing
capabilities with the potential closure of our acetate
manufacturing facility in Spondon, Derby, United Kingdom. We
expect this proposed action would meet our return criteria for
investment in productivity-related projects.
We received formal approval
of our previously announced plans to expand flake and tow
capacities, each by 30,000 tons, at our joint venture facility
in Nantong, China, with our joint venture partner, China
National Tobacco Corporation.
We announced a 25% increase
in our quarterly common stock cash dividend beginning August
2010. The annual dividend rate will increase from $0.16 to $0.20
per share of common stock and the quarterly rate will increase
from $0.04 to $0.05 per share.
Results
of Operations
Financial
Highlights
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
|
|
|
|
% of
|
|
|
|
|
|
% of
|
|
|
|
2010
|
|
|
Net Sales
|
|
|
2009
|
|
|
Net Sales
|
|
|
|
(unaudited)
|
|
|
|
(In $ millions, except for percentages)
|
|
|
Net sales
|
|
|
1,388
|
|
|
|
100.0
|
|
|
|
1,146
|
|
|
|
100.0
|
|
Gross profit
|
|
|
218
|
|
|
|
15.7
|
|
|
|
200
|
|
|
|
17.4
|
|
Selling, general and administrative expenses
|
|
|
(123
|
)
|
|
|
(8.9
|
)
|
|
|
(114
|
)
|
|
|
(9.9
|
)
|
Other (charges) gains, net
|
|
|
(77
|
)
|
|
|
(5.5
|
)
|
|
|
(21
|
)
|
|
|
(1.8
|
)
|
Operating profit (loss)
|
|
|
(14
|
)
|
|
|
(1.0
|
)
|
|
|
27
|
|
|
|
2.4
|
|
Equity in net earnings (loss) of affiliates
|
|
|
26
|
|
|
|
1.9
|
|
|
|
(2
|
)
|
|
|
(0.2
|
)
|
Interest expense
|
|
|
(49
|
)
|
|
|
(3.5
|
)
|
|
|
(51
|
)
|
|
|
(4.4
|
)
|
Dividend income cost investments
|
|
|
27
|
|
|
|
1.9
|
|
|
|
6
|
|
|
|
0.5
|
|
Earnings (loss) from continuing operations before tax
|
|
|
(3
|
)
|
|
|
(0.2
|
)
|
|
|
(16
|
)
|
|
|
(1.4
|
)
|
Amounts attributable to Celanese Corporation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) from continuing operations
|
|
|
17
|
|
|
|
1.2
|
|
|
|
(21
|
)
|
|
|
(1.8
|
)
|
Earnings (loss) from discontinued operations
|
|
|
1
|
|
|
|
0.1
|
|
|
|
1
|
|
|
|
0.1
|
|
Net earnings (loss)
|
|
|
18
|
|
|
|
1.3
|
|
|
|
(20
|
)
|
|
|
(1.7
|
)
|
Depreciation and amortization
|
|
|
89
|
|
|
|
6.4
|
|
|
|
71
|
|
|
|
6.2
|
|
31
|
|
|
|
|
|
|
|
|
|
|
As of
|
|
|
As of
|
|
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
|
(unaudited)
|
|
|
|
(In $ millions)
|
|
|
Short-term borrowings and current installments of long-term
debt third party and affiliates
|
|
|
258
|
|
|
|
242
|
|
Long-term debt
|
|
|
3,233
|
|
|
|
3,259
|
|
|
|
|
|
|
|
|
|
|
Total debt
|
|
|
3,491
|
|
|
|
3,501
|
|
|
|
|
|
|
|
|
|
|
Summary of Consolidated Results for the Three Months Ended
March 31, 2010 Compared to the Three Months Ended
March 31, 2009
Net sales increased 21% during the three months ended
March 31, 2010 compared to the same period in 2009
primarily due to increased volumes across all business segments,
except for Consumer Specialties, as a result of the gradual
recovery of the global economy. Consumer Specialties continued
to experience volume declines due to softening in consumer
demand, particularly within our Nutrinova business. Net sales
were also positively affected by favorable foreign currency
impacts across all business segments. An increase in net sales
as a result of our acquisition of FACT GmbH (Future Advanced
Composites Technology) (FACT) in December 2009
within our Advanced Engineered Materials segment only slightly
offset the decrease in net sales due to the sale of our
polyvinyl alcohol (PVOH) business in July 2009
within our Industrial Specialties segment.
Gross profit increased due to higher net sales. As a percentage
of sales, gross profit declined due to overall increased raw
material and energy costs which were only partially offset by
increased prices. The write-off of other productive assets of
$17 million related to our Singapore and Nanjing, China
facilities and increased depreciation and amortization also
contributed to a lower gross profit percentage. The increase in
amortization was a result of $22 million of accelerated
amortization to write-off the asset associated with a raw
material purchase agreement with a supplier who filed for
bankruptcy during 2009. The accelerated amortization was
recorded as $20 million to the Acetyl Intermediates segment
and $2 million to the Advanced Engineered Materials segment.
Selling, general and administrative expenses increased
$9 million for the three months ended March 31, 2010
compared to the same period in 2009 primarily due to the
increase in operations. As a percentage of sales, selling,
general and administrative expenses declined due to our fixed
spending reduction efforts and restructuring efficiencies.
The components of Other (charges) gains, net are as follows:
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
March 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
|
(unaudited)
|
|
|
|
(In $ millions)
|
|
|
Employee termination benefits
|
|
|
(5
|
)
|
|
|
(24
|
)
|
Ticona Kelsterbach plant relocation
|
|
|
(6
|
)
|
|
|
(3
|
)
|
Plumbing actions
|
|
|
12
|
|
|
|
1
|
|
Insurance recoveries associated with Clear Lake, Texas
|
|
|
-
|
|
|
|
6
|
|
Asset impairments
|
|
|
(72
|
)
|
|
|
(1
|
)
|
Plant/office closures
|
|
|
(6
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
(77
|
)
|
|
|
(21
|
)
|
|
|
|
|
|
|
|
|
|
As a result of the proposed closure of the Spondon, Derby,
United Kingdom acetate production facility (see Note 22 to
the unaudited interim consolidated financial statements), we
wrote down the related property, plant and equipment to its fair
value of $31 million, resulting in long-lived asset
impairment losses of $72 million for the three months ended
March 31, 2010. The Spondon, Derby, United Kingdom facility
is included in the Consumer Specialties segment.
32
As a result of the Pardies, France Project of Closure, we
recorded exit costs of $7 million during the three months
ended March 31, 2010, which consisted primarily of
$1 million in employee termination benefits,
$3 million of contract termination costs and
$3 million of reindustrialization costs. The Pardies,
France facility is included in our Acetyl Intermediates segment.
Other charges for the three months ended March 31, 2010 was
partially offset by $11 million of recoveries and a
$1 million decrease in legal reserves associated with
plumbing cases which is included in our Advanced Engineered
Materials segment.
During the three months ended March 31, 2009, we began
efforts to align production capacity and staffing levels given
the potential for an economic environment of prolonged lower
demand. We recorded employee termination benefits of
$21 million related to this endeavor. As a result of the
shutdown of the vinyl acetate monomer (VAM)
production unit in Cangrejera, Mexico, we recognized employee
termination benefits of $1 million and long-lived asset
impairment losses of $1 million during the three months
ended March 31, 2009 which is included in our Acetyl
Intermediates segment.
Other charges for the three months ended March 31, 2009 was
partially offset by $6 million of insurance recoveries in
satisfaction of claims we made related to the unplanned outage
of our Clear Lake, Texas acetic acid facility during 2007 and
$1 million of insurance recoveries associated with plumbing
cases.
Operating profit decreased $41 million for the three months
ended March 31, 2010, as compared to the same period in
2009, resulting in an operating loss of $14 million.
Operating profit was negatively impacted by a significant
increase in Other charges for the period. The long-lived asset
impairment losses related to our Spondon, Derby, United Kingdom
plant and plant closure costs for our Pardies, France facility
contributed to the overall increase in Other charges. The
write-off of other productive assets of $17 million related
to our Singapore and Nanjing, China facilities and increased
depreciation and amortization also contributed to a lower gross
profit percentage. The increase in amortization was a result of
$22 million of accelerated amortization to write-off the
asset associated with a raw material purchase agreement with a
supplier who filed for bankruptcy during 2009.
Earnings (loss) from continuing operations before tax increased
$13 million during the three months ended March 31,
2010 compared to the same period in 2009 primarily due to
increased equity in net earnings of affiliates and increased
dividend income from cost investments more than offsetting the
decrease in operating profit. Equity in net earnings of
affiliates increased $28 million compared to the same
period in 2009. Dividend income from our Acetyl Intermediates
segments cost investment, Ibn Sina, increased
$24 million for the three months ended March 31, 2010
compared to the same period in 2009 as a result of increased
earnings.
Our effective income tax rate for the three months ended
March 31, 2010 was 667% compared to (31)% for the three
months ended March 31, 2009. The change in the effective
rate was primarily due to the effect of new tax legislation in
Mexico, partially offset by foreign losses not resulting in tax
benefits in the current period, the effect of healthcare reform
in the US and lower earnings in jurisdictions participating in
tax holidays.
33
Selected
Data by Business Segment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
March 31,
|
|
|
|
|
|
|
|
|
|
Change
|
|
|
|
2010
|
|
|
2009
|
|
|
in $
|
|
|
|
(unaudited)
|
|
|
|
(In $ millions)
|
|
|
Net sales
|
|
|
|
|
|
|
|
|
|
|
|
|
Advanced Engineered Materials
|
|
|
282
|
|
|
|
165
|
|
|
|
117
|
|
Consumer Specialties
|
|
|
238
|
|
|
|
266
|
|
|
|
(28)
|
|
Industrial Specialties
|
|
|
242
|
|
|
|
242
|
|
|
|
-
|
|
Acetyl Intermediates
|
|
|
724
|
|
|
|
572
|
|
|
|
152
|
|
Other Activities
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Inter-segment eliminations
|
|
|
(98)
|
|
|
|
(99)
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
1,388
|
|
|
|
1,146
|
|
|
|
242
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other (charges) gains, net
|
|
|
|
|
|
|
|
|
|
|
|
|
Advanced Engineered Materials
|
|
|
5
|
|
|
|
(9)
|
|
|
|
14
|
|
Consumer Specialties
|
|
|
(73)
|
|
|
|
-
|
|
|
|
(73)
|
|
Industrial Specialties
|
|
|
-
|
|
|
|
(2)
|
|
|
|
2
|
|
Acetyl Intermediates
|
|
|
(7)
|
|
|
|
(1)
|
|
|
|
(6)
|
|
Other Activities
|
|
|
(2)
|
|
|
|
(9)
|
|
|
|
7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
(77)
|
|
|
|
(21)
|
|
|
|
(56)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
Advanced Engineered Materials
|
|
|
46
|
|
|
|
(19)
|
|
|
|
65
|
|
Consumer Specialties
|
|
|
(30)
|
|
|
|
66
|
|
|
|
(96)
|
|
Industrial Specialties
|
|
|
12
|
|
|
|
10
|
|
|
|
2
|
|
Acetyl Intermediates
|
|
|
2
|
|
|
|
12
|
|
|
|
(10)
|
|
Other Activities
|
|
|
(44)
|
|
|
|
(42)
|
|
|
|
(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
(14)
|
|
|
|
27
|
|
|
|
(41)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) from continuing operations before tax
|
|
|
|
|
|
|
|
|
|
|
|
|
Advanced Engineered Materials
|
|
|
67
|
|
|
|
(27)
|
|
|
|
94
|
|
Consumer Specialties
|
|
|
(30)
|
|
|
|
69
|
|
|
|
(99)
|
|
Industrial Specialties
|
|
|
12
|
|
|
|
10
|
|
|
|
2
|
|
Acetyl Intermediates
|
|
|
30
|
|
|
|
16
|
|
|
|
14
|
|
Other Activities
|
|
|
(82)
|
|
|
|
(84)
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
(3)
|
|
|
|
(16)
|
|
|
|
13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
|
|
|
|
|
|
|
|
|
|
Advanced Engineered Materials
|
|
|
20
|
|
|
|
17
|
|
|
|
3
|
|
Consumer Specialties
|
|
|
11
|
|
|
|
12
|
|
|
|
(1)
|
|
Industrial Specialties
|
|
|
10
|
|
|
|
13
|
|
|
|
(3)
|
|
Acetyl Intermediates
|
|
|
45
|
|
|
|
27
|
|
|
|
18
|
|
Other Activities
|
|
|
3
|
|
|
|
2
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
89
|
|
|
|
71
|
|
|
|
18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
34
Factors
Affecting Business Segment Net Sales
The charts below set forth the percentage increase (decrease) in
net sales from the period ended March 31, 2009 to the
period ended March 31, 2010 attributable to each of the
factors indicated for the following business segments.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Volume
|
|
|
Price
|
|
|
Currency
|
|
|
Other(1)
|
|
|
Total
|
|
|
|
(unaudited)
|
|
|
|
(In percentages)
|
|
|
Three Months Ended March 31, 2010 Compared to Three Months
Ended March 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Advanced Engineered Materials
|
|
|
71
|
|
|
|
(11
|
)
|
|
|
6
|
|
|
|
5
|
(2
|
)
|
|
|
71
|
|
Consumer Specialties
|
|
|
(11
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
(11
|
)
|
Industrial Specialties
|
|
|
16
|
|
|
|
(4
|
)
|
|
|
3
|
|
|
|
(15
|
|
)(3)
|
|
|
-
|
|
Acetyl Intermediates
|
|
|
14
|
|
|
|
10
|
|
|
|
3
|
|
|
|
-
|
|
|
|
|
27
|
|
Total Company
|
|
|
18
|
|
|
|
3
|
|
|
|
3
|
|
|
|
(3
|
|
)
|
|
|
21
|
|
|
|
|
(1) |
|
Includes the effects of the captive insurance companies and the
impact of fluctuations in intersegment eliminations. |
|
(2) |
|
2010 includes the effects of the FACT acquisition. |
|
(3) |
|
2010 does not include the effects of the PVOH business, which
was sold on July 1, 2009. |
Summary by Business Segment for the Three Months Ended
March 31, 2010 compared to the Three Months Ended
March 31, 2009
Advanced
Engineered Materials
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
March 31,
|
|
|
|
|
|
|
|
|
|
Change
|
|
|
|
2010
|
|
|
2009
|
|
|
in $
|
|
|
|
(unaudited)
|
|
|
|
(In $ millions, except for percentages)
|
|
|
Net sales
|
|
|
282
|
|
|
|
165
|
|
|
|
117
|
|
Net sales variance
|
|
|
|
|
|
|
|
|
|
|
|
|
Volume
|
|
|
71
|
%
|
|
|
|
|
|
|
|
|
Price
|
|
|
(11
|
) %
|
|
|
|
|
|
|
|
|
Currency
|
|
|
6
|
%
|
|
|
|
|
|
|
|
|
Other
|
|
|
5
|
%
|
|
|
|
|
|
|
|
|
Other (charges) gains, net
|
|
|
5
|
|
|
|
(9
|
)
|
|
|
14
|
|
Operating profit (loss)
|
|
|
46
|
|
|
|
(19
|
)
|
|
|
65
|
|
Operating margin
|
|
|
16.3
|
%
|
|
|
(11.5
|
) %
|
|
|
|
|
Earnings (loss) from continuing operations before tax
|
|
|
67
|
|
|
|
(27
|
)
|
|
|
94
|
|
Depreciation and amortization
|
|
|
20
|
|
|
|
17
|
|
|
|
3
|
|
Our Advanced Engineered Materials segment develops, produces and
supplies a broad portfolio of high performance technical
polymers for application in automotive and electronics products,
as well as other consumer and industrial applications. Together
with our strategic affiliates, we are a leading participant in
the global technical polymers industry. The primary products of
Advanced Engineered Materials are POM, polyphenylene sulfide
(PPS), long-fiber reinforced thermoplastics
(LFT), polybutylene terephthalate (PBT),
polyethylene terephthalate (PET), ultra-high
molecular weight polyethylene
(GUR®)
and liquid crystal polymers (LCP). POM, PPS, LFT,
PBT and PET are used in a broad range of products including
automotive components, electronics, appliances and industrial
applications.
GUR®
is used in battery separators, conveyor belts, filtration
equipment, coatings and medical devices. Primary end markets for
LCP are electrical and electronics.
Advanced Engineered Materials net sales increased
$117 million for the three months ended March 31, 2010
compared to the same period in 2009. The increase in net sales
is related to significant increases in volume which is primarily
due to the gradual recovery in the global economy. Advanced
Engineered Materials reported our lowest net sales during
the three months ended March 31, 2009. Since then, the
business segment has continued to see
35
sequential volume improvement each quarter. Net sales were also
positively affected by favorable foreign currency impacts and
the acquisition of FACT at December 31, 2009, which was
offset by decreases in average prices driven by product mix.
Operating profit increased from an operating loss of
$19 million for the three months ended March 31, 2009
to an operating profit of $46 million for the three months
ended March 31, 2010. The impact from higher sales volumes
and positive changes from inventory restocking was only
partially offset by lower sales pricing as a result of higher
raw material and energy costs. Other charges positively impacted
operating profit by decreasing from an expense of
$9 million for the three months ended March 31, 2009
to income of $5 million for the three months ended
March 31, 2010. Other charges decreased primarily as a
result of plumbing recoveries and lower employee severance.
Deprecation and amortization includes $2 million of
accelerated amortization to write-off the asset associated with
a raw material purchase agreement with a supplier who filed for
bankruptcy during 2009.
Our equity affiliates have experienced similar volume increases
due to increased demand during the three months ended
March 31, 2010. As a result, our proportional share of net
earnings of these affiliates increased $29 million compared
to the same period in 2009.
Consumer
Specialties
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
March 31,
|
|
|
|
|
|
|
|
|
|
Change
|
|
|
|
2010
|
|
|
2009
|
|
|
in $
|
|
|
|
(unaudited)
|
|
|
|
(In $ millions, except for percentages)
|
|
|
Net sales
|
|
|
238
|
|
|
|
266
|
|
|
|
(28
|
)
|
Net sales variance
|
|
|
|
|
|
|
|
|
|
|
|
|
Volume
|
|
|
(11
|
) %
|
|
|
|
|
|
|
|
|
Price
|
|
|
-
|
%
|
|
|
|
|
|
|
|
|
Currency
|
|
|
-
|
%
|
|
|
|
|
|
|
|
|
Other
|
|
|
-
|
|
|
|
|
|
|
|
|
|
Other (charges) gains, net
|
|
|
(73
|
)
|
|
|
-
|
|
|
|
(73
|
)
|
Operating profit (loss)
|
|
|
(30
|
)
|
|
|
66
|
|
|
|
(96
|
)
|
Operating margin
|
|
|
(12.6
|
) %
|
|
|
24.8
|
%
|
|
|
|
|
Earnings (loss) from continuing operations before tax
|
|
|
(30
|
)
|
|
|
69
|
|
|
|
(99
|
)
|
Depreciation and amortization
|
|
|
11
|
|
|
|
12
|
|
|
|
(1
|
)
|
Our Consumer Specialties segment consists of our Acetate
Products and Nutrinova businesses. Our Acetate Products business
primarily produces and supplies acetate tow, which is used in
the production of filter products. We also produce acetate
flake, which is processed into acetate tow and acetate film. Our
Nutrinova business produces and sells
Sunett®,
a high intensity sweetener, and food protection ingredients,
such as sorbates, for the food, beverage and pharmaceuticals
industries.
Decreased volumes in our Acetate and Nutrinova businesses and a
decrease in price in
Sunett®
partially offset by an increase in pricing in our Acetate
business contributed to a decrease in net sales during the three
month period ended March 31, 2010 as compared to 2009.
Decreased volumes were primarily due to softening in consumer
demand in our Nutrinova business and continuing soft demand for
tow coupled with the timing of sales related to an electrical
disruption and subsequent production outage at our manufacturing
facility in Narrows, Virginia in our Acetate business. The
facility resumed normal operations during the quarter and we
expect to recover the impacted volume throughout the remainder
of the year.
Operating profit of $66 million for the three month period
ended March 31, 2009 decreased to an operating loss of
$30 million for the three month period ended March 31,
2010. Improved pricing and the companys fixed spending
reduction efforts were not able to offset the lower volumes and
higher energy costs. An increase in other charges had the most
significant impact on operating profit as it was unfavorably
impacted by long-lived asset impairment losses of
$72 million associated with the proposed closure of our
acetate production facility in Spondon, Derby, United Kingdom.
36
During the three month period ended March 31, 2010,
earnings from continuing operations before tax decreased due to
lower operating profit and lower dividends from our China
ventures by $3 million compared to 2009.
Industrial
Specialties
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
March 31,
|
|
|
|
|
|
|
|
|
|
Change
|
|
|
|
2010
|
|
|
2009
|
|
|
in $
|
|
|
|
(unaudited)
|
|
|
|
(In $ millions, except for percentages)
|
|
|
Net sales
|
|
|
242
|
|
|
|
242
|
|
|
|
-
|
|
Net sales variance
|
|
|
|
|
|
|
|
|
|
|
|
|
Volume
|
|
|
16
|
%
|
|
|
|
|
|
|
|
|
Price
|
|
|
(4
|
) %
|
|
|
|
|
|
|
|
|
Currency
|
|
|
3
|
%
|
|
|
|
|
|
|
|
|
Other
|
|
|
(15
|
) %
|
|
|
|
|
|
|
|
|
Other (charges) gains, net
|
|
|
-
|
|
|
|
(2
|
)
|
|
|
2
|
|
Operating profit (loss)
|
|
|
12
|
|
|
|
10
|
|
|
|
2
|
|
Operating margin
|
|
|
5.0
|
%
|
|
|
4.1
|
%
|
|
|
|
|
Earnings (loss) from continuing operations before tax
|
|
|
12
|
|
|
|
10
|
|
|
|
2
|
|
Depreciation and amortization
|
|
|
10
|
|
|
|
13
|
|
|
|
(3
|
)
|
Our Industrial Specialties segment includes our Emulsions and
ethylene vinyl acetate (EVA) Performance Polymers
businesses. Our Emulsions business is a global leader which
produces a broad product portfolio, specializing in vinyl
acetate ethylene emulsions, and is a recognized authority on low
volatile organic compounds, an environmentally-friendly
technology. Our emulsions products are used in a wide array of
applications including paints and coatings, adhesives,
construction, glass fiber, textiles and paper. EVA Performance
Polymers offers a complete line of low-density polyethylene and
specialty ethylene vinyl acetate resins and compounds. EVA
Performance Polymers products are used in many
applications including flexible packaging films, lamination film
products, hot melt adhesives, medical devices and tubing,
automotive, carpeting and solar cell encapsulation films.
In July 2009, we completed the sale of our PVOH business to
Sekisui Chemical Co., Ltd. (Sekisui) for a net cash
purchase price of $168 million, excluding the value of
accounts receivable and payable retained by Celanese. The
transaction resulted in a gain on disposition of
$34 million and includes long-term supply agreements
between Sekisui and Celanese.
Net sales were flat for the three months ended March 31,
2010 compared to the same period in 2009. Lower net sales
resulting from the sale of our PVOH business were offset by
increased volumes from our EVA Performance Polymers and
Emulsions businesses. EVA Performance Polymers volumes
were lower for the three months ended March 31, 2009 due to
the force majeure event at our Edmonton, Alberta, Canada plant.
Repairs to restore production have been completed and normal
operations resumed in late 2009. Lower prices in Emulsions were
largely offset by favorable currency impacts for the three
months ended March 31, 2010.
Operating profit increased $2 million for the three months
ended March 31, 2010 compared to the same period in 2009.
Increased sales volumes were largely offset by higher raw
material costs in our Emulsions business and increased spending
and energy costs attributable to the resumption of normal
operations at our Edmonton, Alberta, Canada plant.
37
Acetyl
Intermediates
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
March 31,
|
|
|
|
|
|
|
|
|
|
Change
|
|
|
|
2010
|
|
|
2009
|
|
|
in $
|
|
|
|
(unaudited)
|
|
|
|
(In $ millions, except for percentages)
|
|
|
Net sales
|
|
|
724
|
|
|
|
572
|
|
|
|
152
|
|
Net sales variance
|
|
|
|
|
|
|
|
|
|
|
|
|
Volume
|
|
|
14
|
%
|
|
|
|
|
|
|
|
|
Price
|
|
|
10
|
%
|
|
|
|
|
|
|
|
|
Currency
|
|
|
3
|
%
|
|
|
|
|
|
|
|
|
Other
|
|
|
-
|
|
|
|
|
|
|
|
|
|
Other (charges) gains, net
|
|
|
(7
|
)
|
|
|
(1
|
)
|
|
|
(6
|
)
|
Operating profit (loss)
|
|
|
2
|
|
|
|
12
|
|
|
|
(10
|
)
|
Operating margin
|
|
|
0.3
|
%
|
|
|
2.1
|
%
|
|
|
|
|
Earnings (loss) from continuing operations before tax
|
|
|
30
|
|
|
|
16
|
|
|
|
14
|
|
Depreciation and amortization
|
|
|
45
|
|
|
|
27
|
|
|
|
18
|
|
Our Acetyl Intermediates segment produces and supplies acetyl
products, including acetic acid, VAM, acetic anhydride and
acetate esters. These products are generally used as starting
materials for colorants, paints, adhesives, coatings, textiles,
medicines and more. Other chemicals produced in this business
segment are organic solvents and intermediates for
pharmaceutical, agricultural and chemical products. To meet the
growing demand for acetic acid in China and ongoing site
optimization efforts, we successfully expanded our acetic acid
unit in Nanjing, China from 600,000 tons per reactor annually to
1.2 million tons per reactor annually. Using new
AOPlus®2
capability, the acetic acid unit could be further expanded to
1.5 million tons per reactor annually with only modest
additional capital.
Acetyl Intermediates net sales increased by
$152 million during the three months ended March 31,
2010 compared to the same period in 2009 due to improvement in
the global economy and increased overall demand. Current period
increases in volume were also a direct result of our successful
acetic acid expansion at our Nanjing, China plant. We also
experienced favorable pricing which was driven by rising raw
material costs and price increases in Asian and European acetic
acid prices and VAM prices across all regions. Favorable foreign
currency impacts also contributed to the increase in net sales.
Operating profit decreased from $12 million during the
three months ended March 31, 2009 to $2 million during
the three months ended March 31, 2010. The decline is
primarily related to increases in variable costs, other charges,
depreciation and amortization and unusual cost of sales charges
which were only partially offset by higher volumes and prices.
Higher variable costs were a direct result of price increases,
primarily in ethylene. Other charges consisted primarily of
plant closure costs related to our Pardies, France facility. In
addition, we recorded $2 million of environmental
remediation reserves, $4 million of inventory write-offs
and $3 million of other plant shutdown costs for the three
months ended March 31, 2010 related to the shutdown of the
Pardies, France facility. The write-off of other productive
assets of $17 million at our Singapore and Nanjing, China
plants and increased depreciation and amortization also
contributed to a lower operating profit. The increase in
amortization was a result of $20 million of accelerated
amortization to write-off the asset associated with a raw
material purchase agreement with a supplier who filed for
bankruptcy during 2009.
Earnings from continuing operations before tax increased
$14 million for the three months ended March 31, 2010
compared to the same period in 2009, due to increased dividend
income from Ibn Sina which was only partially offset by lower
operating profit. Dividend income from Ibn Sina increased
$24 million for the three months ended March 31, 2010
compared to the same period in 2009 as a result of increased
earnings.
Other
Activities
Other Activities primarily consists of corporate center costs,
including financing and administrative activities, and our
captive insurance companies.
38
Net sales remained flat for the three months ended
March 31, 2010 as compared to the same period in 2009.
The operating loss for Other Activities increased
$2 million for the three months ended March 31, 2010,
compared to the same period in 2009. The increase was due to
higher selling, general and administrative costs, which were
only partially offset by lower other charges. Higher selling,
general and administrative expenses were primarily due to
increased stock-based compensation costs as a result of a change
in assumptions and higher environmental remediation costs. Other
charges were higher in the first quarter of 2009 related to
employee termination benefits.
The loss from continuing operations before tax was relatively
flat for the three months ended March 31, 2010, compared to
the same period in 2009
Liquidity
and Capital Resources
Our primary source of liquidity is cash generated from
operations, available cash and cash equivalents and dividends
from our portfolio of strategic investments. In addition, we
have $138 million available for borrowing under our
credit-linked revolving facility and $600 million available
under our revolving credit facility to assist, if
required, in meeting our working capital needs and other
contractual obligations.
While our contractual obligations, commitments and debt service
requirements over the next several years are significant, we
continue to believe we will have available resources to meet our
liquidity requirements, including debt service, for the
remainder of 2010. If our cash flow from operations is
insufficient to fund our debt service and other obligations, we
may be required to use other means available to us such as
increasing our borrowings, reducing or delaying capital
expenditures, seeking additional capital or seeking to
restructure or refinance our indebtedness. There can be no
assurance, however, that we will continue to generate cash flows
at or above current levels or that we will be able to maintain
our ability to borrow under our revolving credit facilities.
As a result of the Pardies, France Project of Closure, we
recorded exit costs of $16 million during the three months
ended March 31, 2010 in the accompanying unaudited interim
statements of operations. We may incur up to an additional
$14 million in contingent employee termination benefits
related to the Pardies, France Project of Closure. We expect
that substantially all of the remaining exit costs will result
in future cash expenditures through mid-2011. The Pardies,
France facility is included in the Acetyl Intermediates segment.
See Note 3 and Note 14 in the accompanying unaudited
interim consolidated financial statements.
In March 2010, the President of the United States signed into
law the Patient Protection and Affordable Care Act and the
Health Care and Education Reconciliation Act of 2010. Although
many of the provisions of this new legislation are directed
toward health insurance providers and companies in the
pharmaceutical and medical devices industries, the new
legislation is expected to affect companies across many
industries, particularly those companies that offer
post-employment benefits to employees. Most provisions of the
bill are not expected to have a material impact on the Company
except for the immediate accounting recognition of the loss of
the retiree drug subsidy tax deduction related to our
postretirement healthcare benefit plan. The immediate accounting
recognition of the subsidy tax deduction loss was
$7 million.
On a stand-alone basis, Celanese Corporation has no material
assets other than the stock of its subsidiaries and no
independent external operations of its own. As such, Celanese
Corporation generally will depend on the cash flow of its
subsidiaries to meet its obligations under its Series A
common stock and the senior credit agreement.
Cash
Flows
Cash and cash equivalents as of March 31, 2010 were
$1,139 million, which was a decrease of $115 million
from December 31, 2009.
Net Cash
Provided by Operating Activities
Cash flow from operations decreased $144 million during the
three months ended March 31, 2010 as compared to the same
period in 2009. The decrease in operating profit of
$41 million and the decline in trade working capital
contributed to the decrease. During the three months ended
March 31, 2009, we received 59 million
($75 million)
39
for value-added tax received from Fraport, which was remitted to
the German tax authorities in April 2009. No such taxes were
received in 2010.
Net Cash
Provided by (Used in) Investing Activities
Net cash from investing activities decreased from a cash inflow
of $311 million for the three months ended March 31,
2009 to a cash outflow of $132 million for the same period
in 2010. The decrease is primarily related to receipt of
proceeds of $412 million related to the Ticona Kelsterbach
plant relocation and $15 million from the sale of
marketable securities that were received in 2009. There were no
such proceeds in 2010.
Our cash outflow for capital expenditures was $44 million
and $56 million for the three months ended March 31,
2010 and 2009, respectively. Capital expenditures were primarily
related to major replacements of equipment, capacity expansions,
major investments to reduce future operating costs, and
environmental and health and safety initiatives. Capital
expenditures are expected to be approximately $265 million
for 2010, excluding amounts related to the relocation of our
Ticona plant in Kelsterbach. We anticipate cash outflows for
capital expenditures for our Ticona plant in Kelsterbach to be
238 million during 2010.
Net Cash
Used in Financing Activities
Net cash used in financing activities decreased from a cash
outflow of $48 million for the three months ended
March 31, 2009 to a cash outflow of $15 million for
the same period in 2010. The $33 million decrease primarily
relates to the decrease in cash payments made on our long and
short-term debt during the three months ended March 31,
2010 as compared to 2009.
Debt
and Capital
On February 1, 2010, we delivered notice to the holders of
our 4.25% Convertible Perpetual Preferred Stock (the
Preferred Stock), pursuant to which we called for
the redemption of all 9.6 million outstanding shares of
Preferred Stock. Holders of the Preferred Stock were entitled to
convert each share of Preferred Stock into 1.2600 shares of
the our Series A common stock, par value $0.0001 per share
(Common Stock), at any time prior to 5:00 p.m.,
New York City time, on February 19, 2010. As of such date,
holders of Preferred Stock had elected to convert
9,591,276 shares of Preferred Stock into an aggregate of
12,084,942 shares of Common Stock. The 8,724 shares of
Preferred Stock that remained outstanding after such conversions
were redeemed by us on February 22, 2010 for
7,437 shares of Common Stock, in accordance with the terms
of the Preferred Stock. In addition to the Common Stock issued
in respect of the shares of Preferred Stock converted and
redeemed, we paid cash in lieu of fractional shares. In issuing
these shares of Common Stock, we relied on the exemption from
registration provided by Section 3(a)(9) of the Securities
Act of 1933, as amended. We paid cash dividends on our Preferred
Stock of $3 million during the three months ended
March 31, 2010. As a result of the redemption of our
Preferred Stock, no future dividends on Preferred Stock will be
paid.
On April 5, 2010, we declared a cash dividend of $0.04 per
share on our Common Stock amounting to $6 million. The cash
dividends are for the period from February 1, 2010 to
April 30, 2010 and will be paid on May 1, 2010 to
holders of record as of April 15, 2010.
On April 26, 2010, we announced that our Board of Directors
approved a 25% increase in the Celanese quarterly Common Stock
cash dividend. The Directors increased the quarterly dividend
rate from $0.04 to $0.05 per share of Common Stock on a
quarterly basis and $0.16 to $0.20 per share of Common Stock on
an annual basis. The new dividend rate will be applicable to
dividends payable beginning in August 2010.
In February 2008, our Board of Directors authorized the
repurchase of up to $400 million of our Common Stock. This
authorization was increased by the Board to $500 million in
October 2008. The authorizations give management discretion in
determining the conditions under which shares may be
repurchased. This repurchase program does not have an expiration
date. As of March 31, 2010, we have repurchased
9,763,200 shares of our Common Stock at an average purchase
price of $38.68 per share for a total of $378 million
pursuant to this authorization. No shares were repurchased
during the three months ended March 31, 2010.
40
As of March 31, 2010, we had total debt of
$3,491 million compared to $3,501 million as of
December 31, 2009. We were in compliance with all of the
covenants related to our debt agreements as of March 31,
2010.
Our senior credit agreement consists of $2,280 million of
US dollar-denominated and 400 million of
Euro-denominated term loans due 2014, a $600 million
revolving credit facility terminating in 2013 and a
$228 million credit-linked revolving facility terminating
in 2014. As of March 31, 2010, there were no outstanding
borrowings or letters of credit issued under the revolving
credit facility; accordingly, $600 million remained
available for borrowing. As of March 31, 2010, there were
$90 million of letters of credit issued under the
credit-linked revolving facility and $138 million remained
available for borrowing.
In June 2009, we entered into an amendment to the senior credit
agreement. The amendment reduced the amount available under the
revolving credit facility from $650 million to
$600 million and increased the first lien senior secured
leverage ratio that is applicable when any amount is outstanding
under the revolving credit portion of the senior credit
agreement. The first lien senior secured leverage ratio is
calculated as the ratio of consolidated first lien senior
secured debt to earnings before interest, taxes, depreciation
and amortization, subject to adjustments identified in the
credit agreement. Prior to giving effect to the amendment, the
maximum first lien senior secured leverage ratio was 3.90 to
1.00. As amended, the maximum senior secured leverage ratio for
the following trailing four-quarter periods is as follows:
|
|
|
|
|
|
|
First Lien Senior Secured
|
|
|
|
Leverage Ratio
|
|
|
March 31, 2010
|
|
|
4.75 to 1.00
|
|
June 30, 2010
|
|
|
4.25 to 1.00
|
|
September 30, 2010
|
|
|
4.25 to 1.00
|
|
December 31, 2010 and thereafter
|
|
|
3.90 to 1.00
|
|
As a condition to borrowing funds or requesting that letters of
credit be issued under the revolving credit facility, our first
lien senior secured leverage ratio (as calculated as of the last
day of the most recent fiscal quarter for which financial
statements have been delivered under the revolving facility)
cannot exceed the threshold as specified above. Further, our
first lien senior secured leverage ratio must be maintained at
or below that threshold while any amounts are outstanding under
the revolving credit facility.
Based on the estimated first lien senior secured leverage ratio
for the trailing four quarters at March 31, 2010, our
borrowing capacity under the revolving credit facility is
$600 million. As of the quarter ended March 31, 2010,
we estimate our first lien senior secured leverage ratio to be
3.02 to 1.00 (which would be 3.66 to 1.00 were the revolving
credit facility fully drawn). The maximum first lien senior
secured leverage ratio under the revolving credit facility for
such quarter is 4.75 to 1.00. Our availability in future periods
will be based on the first lien senior secured leverage ratio
applicable to the future periods.
Contractual
Obligations
Except as otherwise described in this report, there have been no
material revisions to our contractual obligations as described
in our 2009
Form 10-K.
Off-Balance
Sheet Arrangements
We have not entered into any material off-balance sheet
arrangements.
Critical
Accounting Policies and Estimates
Our consolidated financial statements are based on the selection
and application of significant accounting policies. The
preparation of consolidated financial statements in conformity
with accounting principles generally accepted in the United
States of America requires management to make estimates and
assumptions that affect the reported amounts of assets and
liabilities, disclosure of contingent assets and liabilities at
the date of the consolidated financial statements and the
reported amounts of revenues, expenses and allocated charges
during the reporting period. Actual results could differ from
those estimates. However, we are not currently aware of any
reasonably likely events or circumstances that would result in
materially different results.
41
We describe our significant accounting policies in Note 2,
Summary of Accounting Policies, of the Notes to Consolidated
Financial Statements included in our 2009
Form 10-K.
We discuss our critical accounting policies and estimates in
MD&A in our 2009
Form 10-K.
There have been no material revisions to the critical accounting
policies as filed in our 2009
Form 10-K.
Recent
Accounting Pronouncements
See Note 2 to the accompanying unaudited interim
consolidated financial statements included in this Quarterly
Report on
Form 10-Q
for a discussion of recent accounting pronouncements.
|
|
Item 3.
|
Quantitative
and Qualitative Disclosures about Market Risk
|
Market risk for our Company has not changed materially from the
foreign exchange, interest rate and commodity risks disclosed in
Item 7A. Quantitative and Qualitative Disclosures about
Market Risk in our 2009
Form 10-K.
|
|
Item 4.
|
Controls
and Procedures
|
Disclosure
Controls and Procedures
Under the supervision and with the participation of our
management, including the Chief Executive Officer and Chief
Financial Officer, we have evaluated the effectiveness of our
disclosure controls and procedures pursuant to Exchange Act
Rule 13a-15(b)
as of the end of the period covered by this report. Based on
that evaluation, the Chief Executive Officer and Chief Financial
Officer have concluded that these disclosure controls and
procedures are effective.
Changes
in Internal Control Over Financial Reporting
None.
PART II
OTHER INFORMATION
|
|
Item 1.
|
Legal
Proceedings
|
We are involved in a number of legal and regulatory proceedings,
lawsuits and claims incidental to the normal conduct of our
business, relating to such matters as product liability,
antitrust, intellectual property, workers compensation,
chemical exposure, prior acquisitions, past waste disposal
practices and release of chemicals into the environment. While
it is impossible at this time to determine with certainty the
ultimate outcome of these proceedings, lawsuits and claims, we
are actively defending those matters where the Company is named
as a defendant. Additionally, we believe, based on the advice of
legal counsel, that adequate reserves have been made and that
the ultimate outcomes of all such litigation claims will not
have a material adverse effect on our financial position, but
may have a material adverse effect on our results of operations
or cash flows in any given accounting period. See also
Note 18 to the unaudited interim consolidated financial
statements for a discussion of material legal proceedings.
There have been no significant developments in the Legal
Proceedings described in our 2009
Form 10-K
other than those disclosed in Note 18 to the unaudited
interim consolidated financial statements.
There have been no material revisions to the Risk
factors as described in our 2009
Form 10-K.
|
|
Item 2.
|
Unregistered
Sales of Equity Securities and Use of Proceeds
|
On February 1, 2010, the Company delivered notice to the
holders of its Preferred Stock, pursuant to which the Company
called for the redemption of all 9.6 million outstanding
shares of Preferred Stock. Holders of the Preferred Stock were
entitled to convert each share of Preferred Stock into
1.2600 shares of the Companys Series A common
42
stock (Common Stock), at any time prior to
5:00 p.m., New York City time, on February 19, 2010.
As of such date, holders of Preferred Stock had elected to
convert 9,591,276 shares of Preferred Stock into an
aggregate of 12,084,942 shares of Common Stock. The
8,724 shares of Preferred Stock that remained outstanding
after such conversions were redeemed by the Company on
February 22, 2010 for 7,437 shares of Common Stock, in
accordance with the terms of the Preferred Stock. In addition to
the Common Stock issued in respect of the shares of Preferred
Stock converted and redeemed, the Company paid cash in lieu of
fractional shares. In issuing these shares of Common Stock, the
Company relied on the exemption from registration provided by
Section 3(a)(9) of the Securities Act of 1933, as amended.
The table below sets forth information regarding repurchases of
our Common Stock during the three months ended March 31,
2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Approximate Dollar
|
|
|
|
|
|
|
|
|
|
Total Number of
|
|
|
Value of Shares
|
|
|
|
Total Number
|
|
|
Average
|
|
|
Shares Purchased as
|
|
|
Remaining that may be
|
|
|
|
of Shares
|
|
|
Price Paid
|
|
|
Part of Publicly
|
|
|
Purchased Under
|
|
Period
|
|
Purchased(1)
|
|
|
per Share
|
|
|
Announced Program
|
|
|
the Program
|
|
|
January 1-31, 2010
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
$
|
122,300,000
|
|
February 1-28, 2010
|
|
|
909
|
|
|
$
|
29.90
|
|
|
|
-
|
|
|
$
|
122,300,000
|
|
March 1-31, 2010
|
|
|
3,870
|
|
|
$
|
32.31
|
|
|
|
-
|
|
|
$
|
122,300,000
|
|
|
|
|
(1) |
|
Relates to shares employees have elected to have withheld to
cover their statutory minimum withholding requirements for
personal income taxes related to the vesting of restricted stock
units. No shares were purchased during the three months ended
March 31, 2010 under our previously announced stock
repurchase plan. |
|
|
Item 3.
|
Defaults
Upon Senior Securities
|
None.
|
|
Item 4.
|
[Removed
and Reserved]
|
|
|
Item 5.
|
Other
Information
|
None.
43
|
|
|
|
|
Exhibit
|
|
|
Number
|
|
Description
|
|
|
3
|
.1
|
|
Second Amended and Restated Certificate of Incorporation
(Incorporated by reference to Exhibit 3.1 to the Current
Report on
Form 8-K
filed with the SEC on January 28, 2005).
|
|
3
|
.2
|
|
Third Amended and Restated By-laws, effective as of
October 23, 2008 (Incorporated by reference to
Exhibit 3.1 to the Current Report on
Form 8-K
filed with the SEC on October 29, 2008).
|
|
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).
|
|
101
|
.INS
|
|
XBRL Instance Document
|
|
101
|
.SCH
|
|
XBRL Taxonomy Extension Schema Document
|
|
101
|
.CAL
|
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
|
101
|
.DEF
|
|
XBRL Taxonomy Extension Definition Linkbase Document
|
|
101
|
.LAB
|
|
XBRL Taxonomy Extension Label Linkbase Document
|
|
101
|
.PRE
|
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
44
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 thereunto duly authorized.
CELANESE CORPORATION
David N. Weidman
Chairman of the Board of Directors and
Chief Executive Officer
Date: April 27, 2010
Steven M. Sterin
Senior Vice President and
Chief Financial Officer
Date: April 27, 2010
45