FORM 10-K
UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C.
20549
Form 10-K
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
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FOR THE FISCAL YEAR ENDED
DECEMBER 31, 2006
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OR
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
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001-32410
(Commission File Number)
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
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75234-6034
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(Address of Principal Executive
Offices)
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(Zip Code)
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(972) 443-4000
(Registrants telephone
number, including area code)
Securities registered pursuant to Section 12(b) of the
Act
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Name of Each Exchange
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Title of Each Class
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on Which Registered
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Series A Common Stock, par
value $0.0001 per share
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New York Stock
Exchange
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4.25% Convertible
Perpetual Preferred Stock, par
value $0.01 per share (liquidation preference $25.00
per share)
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New York Stock
Exchange
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Securities registered pursuant to Section 12(g) of the
Act
None
Indicate by check mark if the registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes þ No o
Indicate by check mark if the registrant is not required to file
reports pursuant to Section 13 or Section 15(d) of the
Act. Yes o No þ
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 if disclosure of delinquent filers
pursuant to Item 405 of
Regulation S-K
is not contained herein and will not be contained, to the best
of the Registrants knowledge, in definitive proxy or
information statements incorporated by reference in
Part III of this
Form 10-K
or any amendment to this
Form 10-K. þ
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, or a non-accelerated
filer. See definition of accelerated filer and large
accelerated filer in
Rule 12b-2
of the Exchange Act.
Large Accelerated
Filer þ Accelerated
filer o Non-accelerated
filer o
Indicate by check mark whether the registrant is a shell company
(as defined in
Rule 12-b2
of the
Act). Yes o No þ
The aggregate market value of the registrants common stock
held by non-affiliates as of June 30, 2006 (the last
business day of the registrants most recently completed
second fiscal quarter) was $2,191,406,218.
The number of outstanding shares of the registrants
Series A Common Stock, $0.0001 par value, as of
February 12, 2007 was 158,668,666.
DOCUMENTS
INCORPORATED BY REFERENCE
Certain portions of registrants Definitive Proxy Statement
for 2007 are incorporated by reference into Part III.
CELANESE
CORPORATION
Form 10-K
For the Fiscal Year Ended December 31, 2006
TABLE OF CONTENTS
2
Special
Note Regarding Forward-Looking Statements
Certain statements in this Annual Report are forward-looking in
nature as defined in the Private Securities Litigation Reform
Act of 1995. These statements, and other written and oral
forward-looking statements made by the Company from time to
time, may relate to, among other things, such matters as planned
and expected capacity increases and utilization; anticipated
capital spending; environmental matters; legal proceedings;
exposure to, and effects of hedging of, raw material and energy
costs and foreign currencies; global and regional economic,
political, and business conditions; expectations, strategies,
and plans for individual assets and products, segments, as well
as for the whole Company; cash requirements and uses of
available cash; financing plans; pension expenses and funding;
anticipated restructuring, divestiture, and consolidation
activities; cost reduction and control efforts and targets and
integration of acquired businesses. These plans and expectations
are based upon certain underlying assumptions, and are in turn
based upon internal estimates and analyses of current market
conditions and trends, management plans and strategies, economic
conditions, and other factors. Actual results could differ
materially from expectations expressed in the forward-looking
statements if one or more of the underlying assumptions and
expectations proves to be inaccurate or is unrealized. Certain
important factors that could cause actual results to differ
materially from those in the forward-looking statements are
included with such forward-looking statements and in
Managements Discussion and Analysis of Financial
Condition and Results of Operations Forward-Looking
Statements May Prove Inaccurate.
Basis of
Presentation
In this Annual Report on
Form 10-K,
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 BCP Crystal refers to
our subsidiary, BCP Crystal US Holdings Corp., a Delaware
corporation, and not its subsidiaries. The term
Purchaser refers to our subsidiary, Celanese Europe
Holding GmbH & Co. KG, formerly known as BCP Crystal
Acquisition GmbH & Co. KG, a German limited
partnership, and not its subsidiaries, except where otherwise
indicated. The term Original Shareholders refers,
collectively, to Blackstone Capital Partners (Cayman)
Ltd. 1, Blackstone Capital Partners (Cayman) Ltd. 2,
Blackstone Capital Partners (Cayman) Ltd. 3 and BA Capital
Investors Sidecar Fund, L.P. The terms Sponsor and
Advisor refer to certain affiliates of The
Blackstone Group. For accounting purposes, Celanese and its
consolidated subsidiaries are referred to as the
Successor.
Celanese AG is incorporated as a stock corporation organized
under the laws of the Federal Republic of Germany. As used in
this document, the term CAG refers to (i) prior
to the Organizational Restructuring (as defined in Note 2
of the consolidated financial statements), Celanese AG and
Celanese Americas Corporation (CAC), their
consolidated subsidiaries, their non-consolidated subsidiaries,
ventures and other investments, and (ii) following the
Organizational Restructuring, Celanese AG, its consolidated
subsidiaries, its non-consolidated subsidiaries, ventures and
other investments, except that with respect to shareholder and
similar matters where the context indicates, CAG
refers to Celanese AG. For accounting purposes,
Predecessor refers to CAG and its subsidiaries.
Change in
Ownership and Initial Public Offering
Pursuant to a voluntary tender offer commenced in February 2004,
the Purchaser, an indirect wholly owned subsidiary of Celanese
Corporation, on April 6, 2004, acquired approximately 84%
of the ordinary shares of Celanese AG, excluding treasury
shares, for a purchase price of $1,693 million, including
direct acquisition costs of $69 million. During the year
ended December 31, 2005 and the nine months ended
December 31, 2004, the Purchaser acquired additional CAG
shares for $473 million and $33 million, respectively,
including direct acquisition costs of $4 million and less
than $1 million, respectively. As of December 31,
2006, our ownership percentage in CAG was approximately 98%. As
a result of the effective registration of the Squeeze-Out (as
defined in Note 2 to the consolidated financial statements)
in the commercial register in December 2006, we acquired the
remaining 2% of CAG in January 2007.
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On November 3, 2004, Blackstone Crystal Holdings Capital
Partners (Cayman) IV Ltd., reorganized as a Delaware corporation
and changed its name to Celanese Corporation. Additionally, BCP
Crystal Holdings Ltd. 2, a subsidiary of Celanese Corporation,
was reorganized as a Delaware limited liability company and
changed its name to Celanese Holdings LLC.
In January 2005, we completed an initial public offering of
50,000,000 shares of Series A common stock and
received net proceeds of $752 million after deducting
underwriters discounts and offering expenses of
$48 million. Concurrently, we received net proceeds of
$233 million from the offering of our convertible perpetual
preferred stock. A portion of the proceeds of the share
offerings were used to redeem $188 million of our senior
discount notes and $521 million of our senior subordinated
notes, excluding early redemption premiums of $19 million
and $51 million, respectively. See Notes 2 and 3 to
the consolidated financial statements for additional information.
Overview
We are an integrated global hybrid producer of value-added
industrial chemicals. We are the worlds largest producer
of acetyl products, including acetic acid and vinyl acetate
monomer (VAM), polyacetal products
(POM), as well as a leading global producer of
high-performance engineered polymers used in consumer and
industrial products and designed to meet highly technical
customer requirements. We believe that approximately 95% of our
differentiated intermediate and specialty products hold first or
second market positions globally. Our operations are located
primarily in North America, Europe and Asia. We believe we are
one of the lowest-cost producers of key building block chemicals
in the acetyls chain, such as acetic acid and VAM, due to our
economies of scale, operating and purchasing efficiencies and
proprietary production technologies. In addition, we have a
significant portfolio of strategic investments, including a
number of ventures in North America, Europe and Asia.
Collectively, these strategic investments create value for the
Company and contribute significantly to sales, earnings and cash
flow.
Our large and diverse global customer base primarily consists of
major companies in a broad array of industries. For the year
ended December 31, 2006, approximately 33% of our net sales
were to customers located in North America, 42% to customers in
Europe and Africa and 25% to customers in Asia and the rest of
the world.
Market
Industry
This document includes industry data and forecasts that we have
prepared based, in part, upon industry data and forecasts
obtained from industry publications and surveys and internal
company surveys. Third-party industry publications and surveys
and forecasts generally state that the information contained
therein has been obtained from sources believed to be reliable.
The statements regarding Celaneses market position in this
document are based on information derived from the 2006
Stanford Research Institute International Chemical Economics
Handbook, CMAI 2004 World Methanol Analysis and
Tecnon Orbichem Acetic Acid and Vinyl Acetate World Survey
third quarter 2006 report.
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Segment
Overview
We operate principally through four business
segments: Chemical Products, Technical Polymers Ticona
(Ticona), Acetate Products and Performance Products.
The table below illustrates each segments net sales to
external customers for the year ended December 31, 2006, as
well as each segments major products and end use markets.
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Technical
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Performance
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Chemical Products
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Polymers Ticona
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Acetate Products
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Products
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2006 Net Sales(1)
Key Products
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$4,608 million
Acetic acid
VAM
Polyvinyl alcohol (PVOH)
Emulsions
Acetic anhydride
Acetate esters
Carboxylic acids
Methanol
Oxo Alcohols
Amines
Polyvinyl Acetate
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$915 million
POM UHMW-PE (GUR)
Liquid crystal polymers (Vectra)
Polyphenylene sulfide (PPS) (Fortron)
Polyester Engineering Resins
Long Fiber reinforced thermoplastics
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$700 million
Acetate tow
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$176 million
Sunett®
sweetener
Sorbates
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Major End-Use Markets
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Paints
Coatings
Adhesives
Lubricants
Detergents
Pharmaceuticals
Films
Textiles
Inks
Plasticizers
Esters
Solvents
Glass Fibers
Building products
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Fuel system components
Conveyor belts Battery Separators Electronics Seat belt mechanisms
Other Automotive Appliances and Electronics
Filtrations Coatings Medical Telecommunications
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Filter products
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Beverages
Confections
Baked goods
Pharmaceuticals
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Consolidated net sales of $6,656 million for the year ended
December 31, 2006 also include $257 million in net
sales from Other Activities, primarily attributable to our
captive insurance companies and our AT Plastics business.
Chemical Products net sales exclude inter-segment sales of
$134 million for the year ended December 31, 2006. |
Trademarks
AO
Plustm,
BuyTiconaDirecttm,
Celanex®,
Celcon®,
Celstran®,
Celvol®,
Celvolit®,
Compel®,
Erkol®,
GUR®,
Hostaform®,
Impet®,
Impet-HI®,
Mowilith®,
Nutrinova®,
Riteflex®,
Sunett®,
Vandar®,
VAntagetm,
Vectra®,
Vectran®,
Vinamul®,
Elite®,
Duroset®
and certain other products and services named in this document
are registered trademarks and service marks of the Company.
Acetex®
is a registered trademark of Acetex Corporation, a subsidiary of
the Company.
Fortron®
is a registered trademark of Fortron Industries LLC, a venture
of Celanese. Vectran is a registered trademark of Kuraray Co.,
Ltd.
Chemical
Products
Our Chemical Products segment produces and supplies acetyl
products, including acetic acid, acetate esters, VAM, polyvinyl
alcohol and emulsions. We are a leading global producer of
acetic acid and the worlds largest producer of VAM. We are
also the largest polyvinyl alcohol producer in North America.
These products are generally used as building blocks for
value-added products or in intermediate chemicals used in the
paints, coatings, inks, adhesives, films, textiles and building
products industries. Other chemicals produced in this segment
are
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organic solvents and intermediates for pharmaceutical,
agricultural and chemical products. For the year ended
December 31, 2006, net sales to external customers of
acetyls were $2,168 million, acetyl derivatives and polyols
were $1,083 million and all other business lines combined
were $1,357 million.
Technical
Polymers Ticona
Our Ticona segment develops, produces and supplies a broad
portfolio of high performance technical polymers for application
in automotive and electronics products and in other consumer and
industrial applications, often replacing metal or glass.
Together with our strategic affiliates, we are a leading
participant in the global technical polymers business. The
primary products of Ticona are POM, polybutylene terephthalate
(PBT) and GUR, an ultra-high molecular weight
polyethylene. POM and PBT are used in a broad range of products
including automotive components, electronics and appliances. GUR
is used in battery separators, conveyor belts, filtration
equipment, coatings and medical devices.
Acetate
Products
Our Acetate Products segment primarily produces and supplies
acetate tow and acetate flake, used in the production of filter
products. Including the production of our long-standing ventures
in China, we are one of the worlds leading producers of
acetate tow and well-positioned globally. At the end of 2006, we
had completed the majority of our planned restructuring
activities to consolidate our acetate flake and tow
manufacturing. This restructuring is being implemented to
increase efficiency, reduce over-capacities in certain
manufacturing areas and to focus on products and markets that
provide long-term value. These restructuring activities are on
track to be complete by early 2007.
Performance
Products
The Performance Products segment operates under the trade name
of Nutrinova and produces and sells
Sunett®
high intensity sweetener and food protection ingredients, such
as sorbates, for the food, beverage and pharmaceuticals
industries.
Competitive
Strengths
We benefit from a number of competitive strengths, including the
following:
Leading
Market Positions
We believe we have the first or second market positions globally
in approximately 95% of our differentiated intermediate and
specialty products that make up a majority of our sales. We also
believe we are a leading global producer of acetic acid and the
worlds largest producer of VAM. Ticona and our ventures,
Polyplastics and Korea Engineering Plastics Co., Ltd.
(KEPCO), are leading suppliers of POM and other
engineering resins in North America, Europe and the Asia/Pacific
region. Our leadership positions are based on our large share of
global production capacity, operating efficiencies, proprietary
technology and competitive cost structures in our major products.
Proprietary
Production Technology and Operating Expertise
Our production of acetyl products employs industry leading
proprietary and licensed technologies, including our proprietary
AO Plus acid-optimization technology for the production of
acetic acid and VAntage and VAntage Plus vinyl acetate monomer
technology. AO Plus enables plant capacity to be increased with
minimal investment, while VAntage and VAntage Plus enables
significant increases in production efficiencies, lower
operating costs and increases in capacity at ten to fifteen
percent of the cost of building a new plant.
Low
Cost Producer
Our competitive cost structures are based on economies of scale,
vertical integration, technical know-how and the use of advanced
technologies.
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Global
Reach
We operate thirty-five production facilities throughout the
world. The ventures in which we participate operate ten
additional facilities. Our infrastructure of manufacturing
plants, terminals, and sales offices provides us with a
competitive advantage in anticipating and meeting the needs of
our global and local customers in well-established and growing
markets, while our geographic diversity reduces the potential
impact of volatility in any individual country or region. We
have a strong, growing presence in Asia, particularly in China,
and we have defined a strategy to continue this growth. Our
strategy will help us to meet customer demand in this fast
growing region. For more information regarding our financial
information with respect to our geographic areas, see
Note 27 to our consolidated financial statements.
Strategic
Investments
Our strategic investments, including our ventures, have enabled
us to gain access, minimize costs and accelerate growth in new
markets, while also generating significant cash flow and
earnings. Our equity investments and cost investments represent
an important component of our growth strategy. See Note 10
to the consolidated financial statements and
Investments commencing on page 16 of
Item 1 for additional information on our equity and cost
investments.
Diversified
Products and End-Use Markets
We offer our customers a broad range of products in a wide
variety of end-use markets. For example, Ticona offers customers
a broad range of high-quality engineering plastics to meet the
needs of customers in numerous end-use markets, such as
automotive, electrical/electronics, appliance and medical.
Chemical Products has leading market positions in an integrated
chain of basic and performance-based acetyl products that are
sold into diverse industrial applications. This product and
market diversity helps us to reduce the potential impact of
volatility in any individual market segment.
Business
Strategies
We are focused on increasing operating cash flows,
profitability, return on investment and shareholder value, which
we believe can be achieved through the following business
strategies:
Execution
and Productivity
We continually seek ways to reduce our production and raw
material costs. We have established an operational excellence
culture which has enabled us to make productivity improvements.
Most significantly, Six Sigma is a pervasive and important tool
being used in both operations and administration for achieving
greater productivity and growth. We continue to pursue
opportunities and process technology improvements focused on
energy reduction. We will also continue using best practices to
reduce costs and increase equipment reliability in maintenance
and project engineering. Global operational excellence is an
integral part of our strategy to maintain our cost advantage and
productivity leadership.
Focused
Portfolio
We continue to further optimize our business portfolio through
divestitures, acquisitions and strategic investments that enable
us to focus on businesses in which we can achieve market, cost
and technology leadership over the long term. In addition, we
intend to expand our product mix into higher value-added
products.
Growth
We are investing strategically in growth areas and adding new
production capacity, when appropriate, to extend our global
market leadership position. Historically, our strong market
position has enabled us to initiate capacity growth to take
advantage of projected demand growth. For example, we are
building a 600,000 metric ton per year world-scale acetic acid
plant in China, the worlds fastest growing market for
acetic acid and its derivatives. The plant is scheduled for
commercial sales in 2007. As part of our growth strategy, we
also continue to develop new
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products and industry-leading production technologies that
deliver value-added solutions for our customers. For example,
Ticona has worked closely with fuel system suppliers to develop
an acetal copolymer with the chemical and impact resistance
necessary to withstand exposure to hot diesel fuels. In our
emulsions business, we pioneered a technological solution that
leads the industry in product offerings for ecologically
friendly emulsions for solvent-free interior paints. We believe
that our customers value our expertise, and we will continue to
work with them to enhance the quality of their products.
Business
Segments
For more information with respect to the financial results and
conditions of our business segments, see Note 27 to our
consolidated financial statements.
Chemical
Products
The Chemical Products segment consists of six business lines:
Acetyls, Acetyl Derivatives and Polyols, Polyvinyl Alcohol,
Emulsions, Specialties, and other chemical activities. All
business lines in this segment conduct business mainly using the
Celanese trade name, except Polyvinyl Alcohol, which
uses the trademarks Celvol and Erkol, Emulsions, which uses the
trademarks Mowilith and Celvolit, Vinamul, Elite and Duroset.
See Item 1. Business Segment Overview for
discussion of key products and major end-use markets.
Business
Lines
Acetyls. The acetyls business line produces:
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Acetic acid, used to manufacture VAM, other acetyl derivatives
and other end uses, including purified terephthalic acid
(PTA). We manufacture acetic acid for our own use,
as well as for sale to third parties, including other
participants in the acetyl derivatives business;
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VAM, used in a variety of adhesives, paints, films, coatings and
textiles. We manufacture VAM for our own use, as well as for
sale to third parties;
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Methanol, principally sold to the merchant market;
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Acetic anhydride, a raw material used in the production of
cellulose acetate, detergents and pharmaceuticals; and
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Acetaldehyde, a major feedstock for the production of polyols.
Acetaldehyde is also used in other organic compounds such as
pyridines, which are used in agricultural products.
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Acetic acid, methanol and VAM, our basic products, are directly
impacted by the global supply/demand balance for each of the
products and can be described as cyclical in nature. The
principal raw materials in these products are natural gas and
ethylene, which we purchase from numerous sources; carbon
monoxide, which we both manufacture and purchase under long-term
contracts; methanol, which we both manufacture and purchase
under long-term and short-term contracts; and butane, which we
purchase from one supplier and can also obtain from other
sources. All these raw materials, except carbon monoxide, are
commodities and are available from a wide variety of sources.
Our production of acetyl products employs leading proprietary
and licensed technologies, including our proprietary AO Plus
acid-optimization technology for the production of acetic acid
and VAntage and VAntage Plus vinyl acetate monomer technology.
Acetyl Derivatives and Polyols. The acetyl
derivatives and polyols business line produces a variety of
solvents, polyols, formaldehyde and other chemicals, which in
turn are used in the manufacture of paints, coatings, adhesives
and other products.
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Many acetyl derivatives products are derived from our production
of acetic acid and oxo alcohols. Primary products are:
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Ethyl acetate, an acetate ester that is a solvent used in
coatings, inks and adhesives and in the manufacture of
photographic films and coated papers;
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Butyl acetate, an acetate ester that is a solvent used in inks,
pharmaceuticals and perfume;
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Propyl acetate, an acetate ester that is a solvent used in inks,
lacquers and plastics;
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Methyl ethyl ketone, a solvent used in the production of
printing inks and magnetic tapes;
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Butyric acid, an intermediate for the production of esters used
in artificial flavors;
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Propionic acid, an organic acid used to protect and preserve
grain; and
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Formic acid, an organic acid used in textile dyeing and leather
tanning.
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Polyols and formaldehyde products are derivatives of methanol
and are made up of the following products:
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Formaldehyde, primarily used to produce adhesive resins for
plywood, particle board, POM engineering resins and a compound
used in making polyurethane;
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Polyol products such as trimethylolpropane, used in synthetic
lubricants; neopentyl glycol, used in powder coatings; and
1,3-butylene glycol, used in flavorings and plasticizers.
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Oxo alcohols and intermediates are produced from propylene and
ethylene and include:
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Butanol, used as a solvent for lacquers, dopes and thinners, and
as an intermediate in the manufacture of chemicals, such as
butyl acrylate;
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Propanol, used as an intermediate in the production of amines
for agricultural chemicals, and as a solvent for inks, resins,
insecticides and waxes.
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Acetyl derivatives and polyols are commodity products
characterized by cyclicality in pricing. The principal raw
materials used in the acetyl derivatives business line are
acetic acid, various alcohols, methanol, acetaldehyde,
propylene, ethylene and synthesis gas. We manufacture many of
these raw materials for our own use as well as for sales to
third parties, including our competitors in the acetyl
derivatives business. We purchase propylene and ethylene from a
variety of sources. We manufacture acetaldehyde for our European
production, but we purchase all acetaldehyde requirements for
our North American operations from third parties. Acetaldehyde
is also available from other sources.
Polyvinyl Alcohol. Polyvinyl alcohol
(PVOH) is a performance chemical engineered to
satisfy particular customer requirements. It is used in
adhesives, building products, paper coatings, films and
textiles. The primary raw material to produce PVOH is VAM, while
acetic acid is produced as a by-product. Prices vary depending
on industry segment and end use application. Products are sold
on a global basis, and competition is from all regions of the
world. Therefore, regional economies and supply and demand
balances affect the level of competition in other regions.
According to industry sources on PVOH, we are the largest North
American producer of PVOH and the third largest producer in the
world.
Emulsions. The products in our emulsions
business include conventional emulsions and high-pressure vinyl
acetate ethylene emulsions. Emulsions are made from VAM,
acrylate esters and styrene. They are a key component of
water-based quality surface coatings, adhesives, non-woven
textiles and other applications.
Specialties. The specialties business line
produces:
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Carboxylic acids such as pelargonic acid, used in detergents and
synthetic lubricants, and heptanoic acid, used in plasticizers
and synthetic lubricants;
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Amines such as methyl amines, used in agrochemicals,
monoisopropynol amines, used in herbicides, and butyl amines,
used in the treatment of rubber and in water treatment; and
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Oxo derivatives and special solvents, such as crotonaldehyde,
which is used by the Performance Products segment for the
production of sorbates, as well as raw materials for the
fragrance and food ingredients industry.
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The prices for these products are relatively stable due to
long-term contracts with customers whose industries are not
generally subject to the cyclical trends of commodity chemicals.
The primary raw materials for these products are olefins and
ammonia, which are purchased from world market suppliers based
on international prices.
In December 2006, we announced plans to sell the oxo products
and derivatives businesses as part of our strategy to optimize
our portfolio and divest non-core businesses. See Note 32
to the consolidated financial statements for additional
information.
During the third quarter of 2006, we discontinued our
Pentaerythritol (PE) operations.
Facilities
Chemical Products has production sites in the United States,
Canada, Mexico, Singapore, Spain, Sweden, Slovenia, the United
Kingdom, the Netherlands, France and Germany. The emulsions
business line also has tolling arrangements in France. We also
participate in a venture in Saudi Arabia that produces methanol
and Methyl Tertiary-Butyl Ether (MTBE). Over the
last few years, we have continued to shift our production
capacity to lower cost production facilities while expanding in
growth markets, such as China. As a result, we shut down our
formaldehyde unit in Edmonton, Alberta, Canada in mid-2004 and
announced in August 2005 that we intend to close this facility
in 2007.
Markets
The following table illustrates net sales by destination of the
Chemical Products segment by geographic region of the Successor
for the years ended December 31, 2006 and 2005 and for the
nine months ended December 31, 2004 and of the Predecessor
for the three months ended March 31, 2004.
Net Sales
to External Customers by Destination Chemical
Products
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
|
Predecessor
|
|
|
|
Year Ended
|
|
|
Year Ended
|
|
|
Nine Months Ended
|
|
|
|
Three Months Ended
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
March 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
2004
|
|
|
|
|
|
|
% of
|
|
|
|
|
|
% of
|
|
|
|
|
|
% of
|
|
|
|
|
|
|
% of
|
|
|
|
$
|
|
|
Segment
|
|
|
$
|
|
|
Segment
|
|
|
$
|
|
|
Segment
|
|
|
|
$
|
|
|
Segment
|
|
|
|
(In millions)
|
|
North America
|
|
|
1,630
|
|
|
|
35
|
%
|
|
|
1,570
|
|
|
|
38
|
%
|
|
|
923
|
|
|
|
37
|
%
|
|
|
|
297
|
|
|
|
38%
|
|
Europe/Africa
|
|
|
1,931
|
|
|
|
42
|
%
|
|
|
1,625
|
|
|
|
39
|
%
|
|
|
965
|
|
|
|
39
|
%
|
|
|
|
314
|
|
|
|
40%
|
|
Asia/Australia
|
|
|
864
|
|
|
|
19
|
%
|
|
|
809
|
|
|
|
19
|
%
|
|
|
484
|
|
|
|
20
|
%
|
|
|
|
144
|
|
|
|
19%
|
|
Rest of World
|
|
|
183
|
|
|
|
4
|
%
|
|
|
159
|
|
|
|
4
|
%
|
|
|
93
|
|
|
|
4
|
%
|
|
|
|
25
|
|
|
|
3%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chemical Products markets its products both directly to
customers and through distributors. It also utilizes a number of
e-channels, including its website at
www.chemvip.com, as well as system-to-system linking through its
industry portal, Elemica.
Acetic acid and VAM are global businesses which have several
large customers. Generally, we supply these global customers
under multi-year contracts. The customers of acetic acid and VAM
produce polymers used in water-based paints, adhesives, paper
coatings, polyesters, film modifiers and textiles. We have
long-standing relationships with most of these customers.
10
PVOH is sold to a diverse group of regional and multinational
customers mainly under single year contracts. The customers of
the PVOH business line are primarily engaged in the production
of adhesives, paper, films, building products, and textiles.
Emulsions are sold to a diverse group of regional and
multinational customers. Customers for emulsions are
manufacturers of water-based quality surface coatings, adhesives
and non-woven textiles.
Acetyl derivatives and polyols are sold to a diverse group of
regional and multinational customers both under multi-year
contracts and on the basis of long-standing relationships. The
customers of acetyl derivatives are primarily engaged in the
production of paints, coatings and adhesives. In addition to our
own demand for acetyl derivatives to produce cellulose acetate,
we sell acetyl derivatives to other participants in the
cellulose acetate industry. We manufacture formaldehyde for our
own use as well as for sale to a few regional customers that
include manufacturers in the wood products and chemical
derivatives industries. The sale of formaldehyde is based on
both long and short term agreements. Polyols are sold globally
to a wide variety of customers, primarily in the coatings and
resins and the specialty products industries. Oxo products are
sold to a wide variety of customers, primarily in the
construction and automotive industries and are used internally
to produce acetyl derivatives. The oxo market is characterized
by oversupply and numerous competitors. The specialties business
line primarily serves global markets in the synthetic lubricant,
agrochemical, rubber processing and other specialty chemical
areas.
Competition
Our principal competitors in the Chemical Products segment
include Air Products and Chemicals, Inc., Atofina S.A., BASF AG
(BASF), Borden Chemical, Inc., BP p.l.c., Chang Chun
Petrochemical Co., Ltd., Daicel Chemical Industries Ltd.
(Daicel), The Dow Chemical Company
(Dow), Eastman Chemical Corporation
(Eastman), E. I. DuPont de Nemours and Company
(DuPont), Methanex Corporation, Lyondell Chemical
Company, Nippon Gohsei, Perstorp Inc., Rohm & Haas
Company, Jiangsu Sopo Corporation (Group) Ltd., Showa Denko
K.K., and Kuraray Co. Ltd.
Technical
Polymers Ticona
The Ticona segment develops, produces and supplies a broad
portfolio of high performance technical polymers. See
Item 1. Business Segment Overview for
discussion of key products and major end-use markets.
Ticona technical polymers have chemical and physical properties
enabling them, among other things, to withstand high
temperatures, resist chemical reactions with solvents and resist
fracturing or stretching. These products are used in a wide
range of performance-demanding applications in the automotive
and electronics sectors and in other consumer and industrial
goods, often replacing metal or glass. Demand for high
performance polymers is expected to grow approximately 5% to 6%
per year.
Ticona works in concert with its customers to enable innovations
and develop new or enhanced products. Ticona focuses its efforts
on developing new markets and applications for its product
lines, often developing custom formulations to satisfy the
technical and processing requirements of a customers
applications. For example, Ticona has worked closely with fuel
system suppliers to develop an acetal copolymer with the
chemical and impact resistance necessary to withstand exposure
to hot diesel fuels in the new generation of common rail diesel
engines. The product can also be used in automotive fuel sender
units where it remains stable at the high operating temperatures
present in direct-injection diesel engines or meet the
requirements of the new generation of bio fuels.
Ticonas customer base consists primarily of a large number
of plastic molders and component suppliers, which are often the
primary suppliers to original equipment manufacturers
(OEM). Ticona works with these molders and component
suppliers as well as directly with the OEMs to develop and
improve specialized applications and systems.
Prices for most of these products, particularly specialized
product grades for targeted applications, generally reflect the
value added in complex polymer chemistry, precision formulation
and compounding, and the extensive application development
services provided. The specialized product lines are not
particularly susceptible to cyclical swings in pricing.
11
Business
Lines
POM is sold under the trademark Hostaform in all regions but
North America, where it is sold under the trademark Celcon.
Polyplastics and KEPCO are leading suppliers of POM and other
engineering resins in the
Asia/Pacific
region. POM is used for mechanical parts, including door locks
and seat belt mechanisms, in automotive applications and in
electrical, consumer and medical applications such as drug
delivery systems and gears for large appliances.
The primary raw material for POM is formaldehyde, which is
manufactured from methanol. Ticona currently purchases
formaldehyde in the United States from our Chemical Products
segment and, in Europe, manufactures formaldehyde from purchased
methanol.
GUR, an ultra high molecular weight polyethylene
(UHMW-PE), is an engineered material used in
heavy-duty automotive and industrial applications such as car
battery separator panels and industrial conveyor belts, as well
as in specialty medical and consumer applications, such as
sports equipment and prostheses. GUR micro powder grades are
used for high performance filters, membranes, diagnostic
devices, coatings and additives for thermoplastics &
elastomers. GUR fibers are also used in protective ballistic
applications.
Celstran and Compel are long fiber reinforced thermoplastics,
which impart extra strength and stiffness, making them more
suitable for larger parts than conventional thermoplastics.
Polyesters such as Celanex PBT, Vandar, a series of
PBT-polyester blends and Riteflex, a thermoplastic polyester
elastomer, are used in a wide variety of automotive, electrical
and consumer applications, including ignition system parts,
radiator grilles, electrical switches, appliance housings,
sensor housings, LEDs and technical fibers. Raw materials for
polyesters vary. Base monomers, such as dimethyl terephthalate
and PTA, are widely available with pricing dependent on broader
polyester fiber and packaging resins market conditions. Smaller
volume specialty co-monomers for these products are typically
supplied by a few companies.
Liquid crystal polymers (LCP), such as Vectra, are
used in electrical and electronics applications and for
precision parts with thin walls and complex shapes or on high
heat cookware application.
Fortron, a polyphenylene sulfide (PPS) product, is
used in a wide variety of automotive and other applications,
especially those requiring heat
and/or
chemical resistance, including fuel system parts, radiator pipes
and halogen lamp housings, and often replaces metal in these
demanding applications. Other possible application fields
include non-woven filtration devices such as coal fired power
plants. Fortron is manufactured by Fortron Industries LLC,
Ticonas
50-50
venture with Kureha Corporation (KCI) of Japan.
In December 2004, we approved a plan to dispose of our
Cyclo-olefine Copolymer (COC) business. The sale of
the COC business was completed in December 2005.
Facilities
Ticona has polymerization, compounding and research and
technology centers in Germany, Brazil and the United States.
Ticonas Kelsterbach, Germany production site is located in
close proximity to one of the sites being considered for a new
runway under the Frankfurt airports expansion plans. In
November 2006, we announced a settlement with the Frankfurt
Airport (Fraport) to relocate the Kelsterbach,
Germany operations. The terms of the settlement, which is
intended to be cost and tax neutral for Celanese, should allow
Ticona adequate time and resources to select a site, build new
production facilities and transition business activities within
Germany to a new location by mid-2011. See Note 31 to the
consolidated financial statements for further information.
12
Markets
The following table illustrates the destination of the net sales
of the Ticona segment by geographic region of the Successor for
the years ended December 31, 2006 and 2005 and the nine
months ended December 31, 2004 and of the Predecessor for
the three months ended March 31, 2004.
Net Sales
to External Customers by Destination Technical
Polymers Ticona
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
|
Predecessor
|
|
|
|
|
|
|
|
|
|
Nine Months
|
|
|
|
Three Months
|
|
|
|
Year Ended
|
|
|
Year Ended
|
|
|
Ended
|
|
|
|
Ended
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
March 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
2004
|
|
|
|
|
|
|
% of
|
|
|
|
|
|
% of
|
|
|
|
|
|
% of
|
|
|
|
|
|
|
% of
|
|
|
|
$
|
|
|
Segment
|
|
|
$
|
|
|
Segment
|
|
|
$
|
|
|
Segment
|
|
|
|
$
|
|
|
Segment
|
|
|
|
(In millions)
|
|
|
|
|
North America
|
|
|
311
|
|
|
|
34%
|
|
|
|
339
|
|
|
|
38%
|
|
|
|
247
|
|
|
|
39%
|
|
|
|
|
95
|
|
|
|
42%
|
|
Europe/Africa
|
|
|
500
|
|
|
|
55%
|
|
|
|
465
|
|
|
|
53%
|
|
|
|
331
|
|
|
|
52%
|
|
|
|
|
116
|
|
|
|
51%
|
|
Asia/Australia
|
|
|
55
|
|
|
|
6%
|
|
|
|
44
|
|
|
|
5%
|
|
|
|
33
|
|
|
|
5%
|
|
|
|
|
9
|
|
|
|
4%
|
|
Rest of World
|
|
|
49
|
|
|
|
5%
|
|
|
|
39
|
|
|
|
4%
|
|
|
|
25
|
|
|
|
4%
|
|
|
|
|
7
|
|
|
|
3%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ticonas sales in the Asian market are made mainly through
its ventures, Polyplastics, KEPCO and Fortron Industries, which
are accounted for under the equity method and therefore not
included in Ticonas consolidated net sales. If
Ticonas portion of the sales made by these ventures were
included in the chart above, the percentage of sales sold in
Asia/Australia would be substantially higher. A number of
Ticonas POM customers, particularly in the appliance,
electrical components, toys and certain sections of the
electronics/telecommunications fields, have moved tooling and
molding operations to Asia, particularly southern China. To meet
the expected increased demand in this region, we, along with
Polyplastics, Mitsubishi Gas Chemical Company Inc., and KEPCO
agreed on a venture which operates a world-scale 60,000 metric
ton POM facility in Nantong, China. Through our investment in
the aforementioned companies, we indirectly own an approximate
38% interest in this venture. The new plant commenced operations
in 2005.
Ticonas principal customers are consumer product
manufacturers and suppliers to the automotive industries. These
customers primarily produce engineered products, and Ticona
works closely with its customers to assist them to develop and
improve specialized applications and systems. Ticona has
long-standing relationships with most of its major customers,
but it also uses distributors for most of its major products, as
well as a number of electronic channels, such as its
BuyTiconaDirect on-line ordering system, and other electronic
marketplaces to reach a larger customer base. For most of
Ticonas product lines, contracts with customers typically
have a term of one to two years. A significant swing in the
economic conditions of the end markets of Ticonas
principal customers could significantly affect the demand for
Ticonas products.
Competition
Ticonas principal competitors include BASF, DuPont, DSM
N.V., General Electric Company and Solvay S.A. Smaller regional
competitors include Asahi Kasei Corporation, Mitsubishi Gas
Chemicals, Inc., Chevron Phillips Chemical Company, L.P.,
Braskem S.A., Lanxess AG, Teijin, Sumitomo, Inc. and Toray
Industries Inc.
Acetate
Products
The Acetate Products segment consists of acetate filter products
or acetate tow and acetate flake, which uses the
Celanese brand to market its products. The acetate
tow market continues to be characterized by stability and
expected global growth of between 1% and 2% per year. The
segments acetate filament business line was discontinued
in the fourth quarter of 2005. See Item 1.
Business Segment Overview for discussion of key
products and major end-use markets.
13
Business
Lines
Acetate tow is used primarily in cigarette filters. According to
the 2006 Stanford Research Institute International Chemical
Economics Handbook, we are the worlds leading producer of
acetate tow, including production of our ventures in Asia.
We produce acetate flake by processing wood pulp with acetic
anhydride. We purchase wood pulp that is made from reforested
trees from major suppliers and produce acetic anhydride
internally. The acetate flake is then further processed into
acetate fiber in the form of a tow band.
We have an approximate 30% interest in three manufacturing
ventures in China that produce cellulose acetate flake and tow.
Our partner in each of the ventures is a Chinese state-owned
tobacco entity. In addition, 12% of our 2006 acetate tow sales
were sold directly to China, the largest single market for
acetate tow in the world. Two of the ventures completed tow
expansions in January 2005, and the third venture completed its
tow expansion in June 2005. Flake expansion is expected to be
completed in 2007. Although our direct tow sales into China have
decreased as a result of the venture expansions, the future
dividends that we expect to receive from these ventures are
projected to increase.
Acetate Products is continuing its productivity and operations
improvement efforts. These efforts are directed toward reducing
costs while achieving higher productivity of employees and
equipment. In addition to our operating sites
restructuring activities previously undertaken, we closed our
Charlotte, North Carolina administrative and research and
development facility. In July 2005, we relocated our Rock Hill,
South Carolina administrative functions to our Dallas corporate
headquarters. In December 2005, we sold our Rock Hill and
Charlotte sites.
Facilities
Acetate Products has production sites in the United States,
Canada, Mexico and Belgium, and participates in three
manufacturing ventures in China. In October 2004, we announced
plans to discontinue our filament business, with operations at
our Narrows, Virginia and Ocotlan, Mexico sites, which occurred
in the fourth quarter of 2005. Additionally, we announced our
intentions to shutdown our high cost operations at our Rock
Hill, South Carolina flake production site and our Edmonton,
Alberta, Canada flake and tow production site. We shutdown our
Rock Hill flake and Edmonton tow operations in the second
quarter of 2005 and will shutdown our Edmonton flake facility in
early 2007. In addition to the above closures, we
re-commissioned our flake operations at Ocotlan in the first
quarter of 2005.
Markets
The following table illustrates the destination of the net sales
of Acetate Products by geographic region of the Successor for
the years ended December 31, 2006 and 2005 and the nine
months ended December 31, 2004 and of the Predecessor for
the three months ended March 31, 2004.
Net Sales
to External Customers by Destination Acetate
Products
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
|
Predecessor
|
|
|
|
Year Ended
|
|
|
Year Ended
|
|
|
Nine Months Ended
|
|
|
|
Three Months Ended
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
March 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
2004
|
|
|
|
|
|
|
% of
|
|
|
|
|
|
% of
|
|
|
|
|
|
% of
|
|
|
|
|
|
|
% of
|
|
|
|
$
|
|
|
Segment
|
|
|
$
|
|
|
Segment
|
|
|
$
|
|
|
Segment
|
|
|
|
$
|
|
|
Segment
|
|
|
|
(In millions)
|
|
North America
|
|
|
127
|
|
|
|
18%
|
|
|
|
126
|
|
|
|
19%
|
|
|
|
67
|
|
|
|
15%
|
|
|
|
|
24
|
|
|
|
17%
|
|
Europe/Africa
|
|
|
184
|
|
|
|
26%
|
|
|
|
202
|
|
|
|
31%
|
|
|
|
139
|
|
|
|
32%
|
|
|
|
|
43
|
|
|
|
29%
|
|
Asia/Australia
|
|
|
370
|
|
|
|
53%
|
|
|
|
315
|
|
|
|
48%
|
|
|
|
222
|
|
|
|
50%
|
|
|
|
|
75
|
|
|
|
51%
|
|
Rest of World
|
|
|
19
|
|
|
|
3%
|
|
|
|
16
|
|
|
|
2%
|
|
|
|
13
|
|
|
|
3%
|
|
|
|
|
5
|
|
|
|
3%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14
Sales in the acetate tow industry were principally to the major
tobacco companies that account for a majority of worldwide
cigarette production. Our contracts with most of our customers
are entered into on an annual basis. In recent years, the
cigarette industry has experienced consolidation.
Competition
Principal competitors in the Acetate Products segment include
Daicel, Eastman and Rhodia S.A.
In January 2007, we acquired Acetate Products Ltd., a
manufacturer of cellulose acetate flake, tow and film, located
in the United Kingdom.
Performance
Products
The Performance Products segment consists of the food
ingredients business conducted by Nutrinova. This business uses
its own trade names to conduct business. See Item 1.
Business Segment Overview for discussion of key
products and major end-use markets.
Business
Lines
Nutrinovas food ingredients business consists of the
production and sale of high intensity sweeteners and food
protection ingredients, such as sorbic acid and sorbates
worldwide, as well as the resale of other food ingredients
mainly in Japan, Australia and Mexico.
Acesulfame potassium, a high intensity sweetener marketed under
the trademark
Sunett®,
is used in a variety of beverages, confections and dairy
products throughout the world.
Sunett®
pricing for targeted applications reflects the value added by
Nutrinova, such as technical services provided and consistency
of product quality. Nutrinovas strategy is to be the most
reliable and highest quality producer of this product, to
develop new applications for the product and to expand into new
markets. Nutrinova maintains a strict patent enforcement
strategy, which has resulted in favorable outcomes in a number
of patent infringement matters in Europe and the United States.
Nutrinovas European and U.S. primary production
patents for making
Sunett®
expired at the end of the first quarter of 2005.
Nutrinovas food protection ingredients are mainly used in
foods, beverages and personal care products. The primary raw
materials for these products are ketene and crotonaldehyde.
Sorbates pricing is extremely sensitive to demand and industry
capacity and is not necessarily dependent on the prices of raw
materials.
Diketene and ketene are both derivatives of acetic acid, one of
the primary products of the Chemical Products segment.
Facilities
Nutrinova has production facilities in Germany, as well as sales
and distribution facilities in all major world markets.
15
Markets
The following table illustrates the destination of the net sales
of Performance Products by geographic region of the Successor
for years ended December 31, 2006 and 2005 and the nine
months ended December 31, 2004 and of the Predecessor for
the three months ended March 31, 2004.
Net Sales
to External Customers by Destination Performance
Products
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
|
Predecessor
|
|
|
|
|
|
|
|
|
|
Nine Months
|
|
|
|
Three Months
|
|
|
|
Year Ended
|
|
|
Year Ended
|
|
|
Ended
|
|
|
|
Ended
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
March 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
2004
|
|
|
|
|
|
|
% of
|
|
|
|
|
|
% of
|
|
|
|
|
|
% of
|
|
|
|
|
|
|
% of
|
|
|
|
$
|
|
|
Segment
|
|
|
$
|
|
|
Segment
|
|
|
$
|
|
|
Segment
|
|
|
|
$
|
|
|
Segment
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions)
|
|
|
|
|
|
|
|
|
|
|
|
North America
|
|
|
73
|
|
|
|
42%
|
|
|
|
58
|
|
|
|
32%
|
|
|
|
52
|
|
|
|
40%
|
|
|
|
|
19
|
|
|
|
43%
|
|
Europe/Africa
|
|
|
64
|
|
|
|
36%
|
|
|
|
80
|
|
|
|
44%
|
|
|
|
49
|
|
|
|
37%
|
|
|
|
|
17
|
|
|
|
39%
|
|
Asia/Australia
|
|
|
25
|
|
|
|
14%
|
|
|
|
30
|
|
|
|
17%
|
|
|
|
21
|
|
|
|
16%
|
|
|
|
|
6
|
|
|
|
14%
|
|
Rest of World
|
|
|
14
|
|
|
|
8%
|
|
|
|
12
|
|
|
|
7%
|
|
|
|
9
|
|
|
|
7%
|
|
|
|
|
2
|
|
|
|
4%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nutrinova directly markets
Sunett®
primarily to a limited number of large multinational and
regional customers in the beverage and food industry under
long-term and annual contracts. Nutrinova markets food
protection ingredients primarily through regional distributors
to small and medium sized customers and directly through
regional sales offices to large multinational customers in the
food industry.
Competition
The principal competitors for Nutrinovas
Sunett®
sweetener are Holland Sweetener Company, The NutraSweet Company,
Ajinomoto Co., Inc., Tate & Lyle plc and several
Chinese manufacturers. In sorbates, Nutrinova competes with
Nantong AA, Daicel, Yu Yao/Ningbo, Yancheng AmeriPac and other
Chinese manufacturers of sorbates.
Other
Activities
Other Activities includes revenues mainly from the captive
insurance companies, Pemeas GmbH (Pemeas) until
December 2005 and, since July 2005, AT Plastics. Pemeas develops
high temperature membrane assemblies (MEA) for fuel
cells. We contributed our MEA activity to Pemeas in April 2004.
In December 2005, we sold our common stock interest back to
Pemeas Corporation. In December 2006, we sold our preferred
interest in Pemeas Corporation to BASF. Other Activities also
includes corporate activities, several service companies and
other ancillary businesses, which do not have significant sales.
Our two wholly-owned captive insurance companies are a key
component of our global risk management program, as well as a
form of self insurance for our property, liability and workers
compensation risks. The captive insurance companies issue
insurance policies to our subsidiaries to provide consistent
coverage amid fluctuating costs in the insurance market and to
lower long-term insurance costs by avoiding or reducing
commercial carrier overhead and regulatory fees. The captive
insurance companies issue insurance policies and coordinate
claims handling services with third party service providers.
They retain risk at levels approved by our board of directors
and obtain reinsurance coverage from third parties to limit the
net risk retained. One of the captive insurance companies also
insures certain third party risks.
Investments
We have a significant portfolio of strategic investments,
including a number of ventures, in Asia, North America and
Europe. In aggregate, these strategic investments enjoy
significant sales, earnings and cash flow. We have entered into
these strategic investments in order to gain access to local
markets, minimize costs and accelerate
16
growth in areas we believe have significant future business
potential. See Note 10 to our consolidated financial
statements for additional information.
The table below represents our significant ventures:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Location
|
|
Ownership
|
|
|
Segment
|
|
Partner(s)
|
|
Year Entered
|
|
|
Equity Investments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
European Oxo GmbH
|
|
Germany
|
|
|
50%
|
|
|
Chemical Products
|
|
Degussa AG
|
|
|
2003
|
|
KEPCO
|
|
South Korea
|
|
|
50%
|
|
|
Ticona
|
|
Mitsubishi Gas Chemical Company,
Inc.
|
|
|
1999
|
|
Polyplastics Co., Ltd.
|
|
Japan
|
|
|
45%
|
|
|
Ticona
|
|
Daicel Chemical Industries Ltd.
|
|
|
1964
|
|
Fortron Industries LLC
|
|
U.S.
|
|
|
50%
|
|
|
Ticona
|
|
Kureha Corporation
|
|
|
1992
|
|
Cost Investments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
National Methanol Co.
|
|
Saudi Arabia
|
|
|
25%
|
|
|
Chemical Products
|
|
Saudi Basic Industries Corporation
(SABIC)/
CTE Petrochemicals
|
|
|
1981
|
|
Kunming Cellulose Fibers Co.
Ltd.
|
|
China
|
|
|
30%
|
|
|
Acetate Products
|
|
China National
Tobacco Corp.
|
|
|
1993
|
|
Nantong Cellulose Fibers Co.
Ltd.
|
|
China
|
|
|
31%
|
|
|
Acetate Products
|
|
China National
Tobacco Corp.
|
|
|
1986
|
|
Zhuhai Cellulose Fibers
Co. Ltd.
|
|
China
|
|
|
30%
|
|
|
Acetate Products
|
|
China National
Tobacco Corp.
|
|
|
1993
|
|
Major
Equity Investments
European Oxo GmbH. European Oxo GmbH
(EOXO) is our 50/50 venture with Degussa for
propylene-based oxo chemicals and has production facilities in
Oberhausen and Marl, Germany. On August 28, 2006, we
entered into an agreement with Degussa pursuant to which Degussa
granted us an option to purchase Degussas interest in
EOXO. In connection with the sale of our oxo products and
derivatives businesses discussed herein, we anticipate giving
notice to Degussa that we will exercise our option, subject to
certain conditions, to purchase their 50% interest, which will
be subsequently sold to Advent International. See Notes 6
and 32 to the consolidated financial statements for further
information.
Korea Engineering Plastics Co. Ltd. Founded in
1987, KEPCO is the leading producer of polyacetal in
South Korea. Mitsubishi owns the remaining 50% of KEPCO.
KEPCO operates a 55,000-ton annual capacity POM plant in Ulsan,
South Korea and participates in the facility in China mentioned
under Polyplastics below.
Polyplastics Co., Ltd. Polyplastics is a
leading supplier of engineering plastics in the Asia-Pacific
region. Polyplastics principal production facilities are
located in Japan, Taiwan, Malaysia and together with KEPCO and
Mitsubishi, China. We believe Polyplastics is the largest
producer and marketer of POM in the Asia-Pacific region.
Fortron Industries LLC. Fortron Industries LLC
is a venture between us and KCI for PPS. Production facilities
are located in Wilmington, North Carolina. We believe Fortron
has the leading technology in linear polymer applications.
Other
Equity Investments
InfraServs. We hold ownership interests in
several InfraServ groups located in Germany. InfraServs own and
develop industrial parks and provide
on-site
general and administrative support to tenants.
Major
Cost Investments
National Methanol Co. (Ibn Sina). With
production facilities in Saudi Arabia, National Methanol Co.
represents 2% of the worlds methanol production capacity
and is the worlds eighth largest producer of MTBE.
Methanol and MTBE are key global commodity chemical products. We
indirectly own a 25% interest in National
17
Methanol Co., with the remainder held by SABIC (50%) and Texas
Eastern Arabian Corporation Ltd. (25%). SABIC has responsibility
for all product marketing.
China Acetate Products Ventures. We hold
approximately 30% ownership interests (50% board representation)
in three separate Acetate Products production entities in China:
the Nantong, Kunming and Zhuhai Cellulose Fiber Companies. In
each instance, Chinese state-owned entities control the
remainder. The ventures fund investments using operating cash
flows.
Certain cost investments where we own greater than a 20%
ownership interest are accounted for under the cost method of
accounting because we cannot exercise significant influence, are
not involved in the
day-to-day
operations and are unable to obtain timely U.S. GAAP
financial information from these entities.
Raw
Materials and Energy
We purchase a variety of raw materials from sources in many
countries for use in our production processes. We have a policy
of maintaining, when available, multiple sources of supply for
materials. However, some of our individual plants may have
single sources of supply for some of their raw materials, such
as carbon monoxide, steam and acetaldehyde. Although we have
been able to obtain sufficient supplies of raw materials, there
can be no assurance that unforeseen developments will not affect
our raw material supply. Even if we have multiple sources of
supply for a raw material, there can be no assurance that these
sources can make up for the loss of a major supplier. There
cannot be any guarantee that profitability will not be affected
should we be required to qualify additional sources of supply in
the event of the loss of a sole supplier. In addition, the price
of raw materials varies, often substantially, from year to year.
A substantial portion of our products and raw materials are
commodities whose prices fluctuate as market supply/demand
fundamentals change. Our production facilities rely largely on
coal, fuel oil, natural gas and electricity for energy. Most of
the raw materials for our European operations are centrally
purchased by our subsidiary, which also buys raw materials on
behalf of third parties. We manage our exposure through the use
of derivative instruments and forward purchase contracts for
commodity price hedging, entering into long-term supply
agreements and multi-year purchasing and sales agreements. See
Notes 4 and 24 to the consolidated financial statements for
additional information.
We also currently lease supplies of various precious metals,
such as rhodium, used as catalysts for the manufacture of
chemical products. With growing demand for these precious
metals, most notably in the automotive industry, the cost to
purchase or lease these precious metals has increased, caused by
a shortage in supply. For precious metals, the leases are
distributed between a minimum of three lessors per product and
are divided into several contracts. Although we seek to offset
increases in raw material prices with corresponding increases in
the prices of our products, we may not be able to do so, and
there may be periods when such product price increases lag
behind raw material cost increases.
Research
and Development
All of our businesses conduct research and development
activities to increase competitiveness. Our businesses are
innovation-oriented and conduct research and development
activities to develop new, and optimize existing, production
technologies, as well as to develop commercially viable new
products and applications. We consider the amount spent during
each of the last three fiscal years on research and development
activities to be adequate to drive our growth program.
Intellectual
Property
We attach great importance to patents, trademarks, copyrights
and product designs in order to protect our investment in
research and development, manufacturing and marketing. Our
policy is to seek the widest possible protection for significant
product and process developments in our major markets. Patents
may cover products, processes, intermediate products and product
uses. We also seek to register trademarks extensively as a means
of protecting the brand names of our products, which brand names
become more important once the corresponding
18
patents have expired. We protect our trademarks vigorously
against infringement and also seek to register design protection
where appropriate.
In most industrial countries, patent protection exists for new
substances and formulations, as well as for unique applications
and production processes. However, we do business in regions of
the world where intellectual property protection may be limited
and difficult to enforce. We maintain strict information
security policies and procedures wherever we do business. Such
information security policies and procedures include data
encryption, controls over the disclosure and safekeeping of
confidential information, as well as employee awareness
training. Moreover, we monitor our competitors and vigorously
challenge patent and trademark infringement. For example,
Chemical Products maintains a strict patent enforcement
strategy, which has resulted in favorable outcomes in a number
of patent infringement matters in Europe, Asia and the United
States. We are currently pursuing a number of matters relating
to the infringement of our acetic acid patents. Some of our
earlier acetic acid patents will expire in 2007; other patent
applications covering acetic acid are presently pending.
Neither our business as a whole nor any particular segment is
materially dependent upon any one particular patent, trademark,
copyright or trade secret.
Environmental
and Other Regulation
Matters pertaining to the environment are discussed in
Item 1A. Risk Factors, Item 7. Managements
Discussion and Analysis of Financial Condition and Results of
Operations, and Notes 18 and 25 to the consolidated
financial statements
Employees
As of December 31, 2006, we had approximately 8,900
employees worldwide from continuing operations, compared to
9,300 as of December 31, 2005. This represents a decrease
of approximately 4%. The following table sets forth the
approximate number of employees on a continuing basis as of
December 31, 2006, 2005 and 2004.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employees as of December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
North America
|
|
|
4,700
|
|
|
|
4,900
|
|
|
|
5,500
|
|
thereof USA
|
|
|
3,300
|
|
|
|
3,500
|
|
|
|
4,000
|
|
thereof Canada
|
|
|
500
|
|
|
|
600
|
|
|
|
400
|
|
thereof Mexico
|
|
|
900
|
|
|
|
800
|
|
|
|
1,100
|
|
Europe
|
|
|
3,900
|
|
|
|
4,100
|
|
|
|
3,300
|
|
thereof Germany
|
|
|
2,600
|
|
|
|
2,800
|
|
|
|
3,000
|
|
Asia
|
|
|
250
|
|
|
|
200
|
|
|
|
200
|
|
Rest of World
|
|
|
50
|
|
|
|
100
|
|
|
|
100
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Employees
|
|
|
8,900
|
|
|
|
9,300
|
|
|
|
9,100
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Many of our employees are unionized, particularly in Germany,
Canada, Mexico, Brazil, Belgium and France. However, in the
United States, less than one quarter of our employees are
unionized. Moreover, in Germany and France, wages and general
working conditions are often the subject of centrally negotiated
collective bargaining agreements. Within the limits established
by these agreements, our various subsidiaries negotiate directly
with the unions and other labor organizations, such as
workers councils, representing the employees. Collective
bargaining agreements between the German chemical employers
associations and unions relating to remuneration typically have
a term of one year, while in the United States a three year term
for collective bargaining agreements is typical. We offer
comprehensive benefit plans for employees and their families and
believe our relations with employees are satisfactory.
19
Backlog
We do not consider backlog to be a significant indicator of the
level of future sales activity. In general, we do not
manufacture our products against a backlog of orders. Production
and inventory levels are based on the level of incoming orders
as well as projections of future demand. Therefore, we believe
that backlog information is not material to understanding our
overall business and should not be considered a reliable
indicator of our ability to achieve any particular level of
revenue or financial performance.
Available
Information Securities and Exchange Commission
(SEC) Filings and Corporate Governance
Materials
We make available free of charge, through our Internet website
(www.celanese.com), our annual reports on
Form 10-K,
quarterly reports on
Form 10-Q,
current reports on
Form 8-K
and amendments to those reports filed or furnished pursuant to
Section 13(a) or 15(d) of the Securities Exchange Act of
1934, as soon as reasonably practicable after electronically
filing such material with, or furnishing it to, the SEC. The SEC
maintains an Internet site that contains reports, proxy and
information statements, and other information regarding issuers,
including Celanese Corporation, that electronically file with
the SEC at http://www.sec.gov.
We also make available free of charge, through our internet
website, our Corporate Governance Guidelines of our Board of
Directors and the charters of each of the committees of the
board. Such materials are also available in print upon the
written request of any shareholder to Celanese Corporation,
1601 West LBJ Freeway, Dallas, Texas,
75234-6034,
Attention: Investor Relations.
Many factors could have an effect on our financial condition,
cash flows and results of operations. We are subject to various
risks resulting from changing economic, environmental,
political, industry, business and financial conditions. The
factors described below represent our principal risks.
Risks
Related to Our Business
We are
an international company and are exposed to general economic,
political and regulatory conditions and risks in the countries
in which we have significant operations.
We operate in the global market and have customers in many
countries. We have major facilities located in North America,
Europe and Asia, hold interests in ventures that operate in
Germany, China, Japan, South Korea and Saudi Arabia. Our
principal customers are similarly global in scope, and the
prices of our most significant products are typically world
market prices. Consequently, our business and financial results
are affected directly and indirectly by world economic,
political and regulatory conditions.
Conditions such as the uncertainties associated with war,
terrorist activities, epidemics, pandemics or political
instability in any of the countries in which we operate could
affect us by causing delays or losses in the supply or delivery
of raw materials and products as well as increasing security
costs, insurance premiums and other expenses. These conditions
could also result in or lengthen economic recession in the
United States, Europe, Asia or elsewhere. Moreover, changes in
laws or regulations, such as unexpected changes in regulatory
requirements (including import or export licensing
requirements), or changes in the reporting requirements of the
United States, German or European Union governmental agencies,
could increase the cost of doing business in these regions. Any
of these conditions may have an effect on our business and
financial results as a whole and may result in volatile current
and future prices for our securities, including our stock.
The
industries of many of our customers, particularly the
automotive, electrical, construction and textile industries are
cyclical in nature and sensitive to changes in economic
conditions. A downturn in one or more of these industries may
result in a reduction in our operating margins or in operating
losses.
Some of the markets in which our customers participate, such as
the automotive, electrical, construction and textile industries,
are cyclical in nature, thus posing a risk to us which is beyond
our control. These markets are
20
highly competitive, to a large extent driven by end-use markets,
and may experience overcapacity, all of which may affect demand
for and pricing of our products.
We are
subject to risks associated with the increased volatility in the
prices and availability of key raw materials and
energy.
We purchase significant amounts of natural gas, ethylene,
butane, methanol and propylene from third parties for use in our
production of basic chemicals in the Chemical Products segment,
principally formaldehyde, acetic acid and VAM. We use a portion
of our output of these chemicals, in turn, as inputs in the
production of further products in all our segments. We also
purchase significant amounts of cellulose or wood pulp for use
in our production of cellulose acetate in the Acetate Products
segment. We purchase significant amounts of natural gas,
electricity, coal and fuel oil to supply the energy required in
our production processes. Prices of natural gas, oil and other
hydrocarbons and energy increased dramatically in 2006 and 2005.
We own or lease supplies of various precious metals, such as
rhodium, used as catalysts for the production of these
chemicals. With growing demand for these precious metals, most
notably in the automotive industry, the cost to purchase or
lease these precious metals has increased, caused by a shortage
in supply.
We are exposed to any volatility in the prices of our raw
materials and energy. Although we have agreements providing for
the supply of natural gas, ethylene, propylene, wood pulp,
electricity, coal and fuel oil, the contractual prices for these
raw materials and energy vary with market conditions and may be
highly volatile. Factors which have caused volatility in our raw
material prices in the past and which may do so in the future
include:
|
|
|
|
|
Shortages of raw materials due to increasing demand, e.g., from
growing uses or new uses;
|
|
|
|
Capacity constraints, e.g., due to construction delays, strike
action or involuntary shutdowns;
|
|
|
|
The general level of business and economic activity; and
|
|
|
|
The direct or indirect effect of governmental regulation.
|
If we are not able to fully offset the effects of higher energy
and raw material costs, or if such commodities were unavailable,
it could have a significant adverse effect on our financial
results.
Failure
to develop new products and production technologies or to
implement productivity and cost reduction initiatives
successfully may harm our competitive position.
Our operating results, especially in our Performance Products
and Ticona segments, depend significantly on the development of
commercially viable new products, product grades and
applications, as well as production technologies. If we are
unsuccessful in developing new products, applications and
production processes in the future, our competitive position and
operating results may be negatively affected. Likewise, we have
undertaken and are continuing to undertake initiatives in all
segments to improve productivity and performance and to generate
cost savings. These initiatives may not be completed or
beneficial or the estimated cost savings from such activities
may not be realized.
Environmental
regulations and other obligations relating to environmental
matters could subject us to liability for fines,
clean-ups
and other damages, require us to incur significant costs to
modify our operations and increase our manufacturing and
delivery costs.
Costs related to our compliance with environmental laws and
regulations, and potential obligations with respect to
contaminated sites may have a significant negative impact on our
operating results. These include obligations related to sites
currently or formerly owned or operated by us, or where waste
from our operations was disposed. We also have obligations
related to the indemnity agreement contained in the demerger and
transfer agreement between CAG and Hoechst, also referred to as
the demerger agreement, for environmental matters arising out of
certain divestitures that took place prior to the demerger. See
Managements Discussion and Analysis of Financial
Condition and Results of Operations Critical
Accounting Policies and Estimates Environmental
Liabilities and Notes 18 and 25 to the consolidated
financial statements.
21
Our operations are subject to extensive international, national,
state, local, and other supranational laws and regulations that
govern environmental and health and safety matters. We incur
substantial capital and other costs to comply with these
requirements. If we violate them, we can be held liable for
substantial fines and other sanctions, including limitations on
our operations as a result of changes to or revocations of
environmental permits involved. Stricter environmental, safety
and health laws, regulations and enforcement policies could
result in substantial costs and liabilities to us or limitations
on our operations and could subject our handling, manufacture,
use, reuse or disposal of substances or pollutants to more
rigorous scrutiny than at present. Consequently, compliance with
these laws and regulations could result in significant capital
expenditures as well as other costs and liabilities, which could
cause our business and operating results to be less favorable
than expected.
We are also involved in several claims, lawsuits and
administrative proceedings relating to environmental matters. An
adverse outcome in any of them may negatively affect our
earnings and cash flows in a particular reporting period.
Changes
in environmental, health and safety regulatory requirements
could lead to a decrease in demand for our
products.
New or revised governmental regulations relating to health,
safety and the environment may also affect demand for our
products.
Pursuant to the European Union regulation on Risk Assessment of
Existing Chemicals, the European Chemicals Bureau of the
European Commission has been conducting risk assessments on
approximately 140 major chemicals. Some of the chemicals
initially being evaluated include VAM, which we produce. These
risk assessments entail a multi-stage process to determine to
what extent the European Commission should classify the chemical
as a carcinogen and, if so, whether this classification and
related labeling requirements should apply only to finished
products that contain specified threshold concentrations of a
particular chemical. In the case of VAM, we currently do not
expect a final ruling until the end of 2007. We and other VAM
producers are participating in this process with detailed
scientific analyses supporting the industrys position that
VAM is not a probable human carcinogen and that labeling of
final products should not be required. We cannot predict the
outcome or effect of any final ruling.
Several recent studies have investigated possible links between
formaldehyde exposure and various end points including leukemia.
The International Agency for Research on Cancer or IARC recently
reclassified formaldehyde from Group 2A (probable human
carcinogen) to Group 1 (known human carcinogen) based on studies
linking formaldehyde exposure to nasopharyngeal cancer, a rare
cancer in humans. IARC also concluded that there is insufficient
evidence for a causal association between leukemia and
occupational exposure to formaldehyde, although it also
characterized evidence for such an association as strong. The
results of IARCs review will be examined by government
agencies with responsibility for setting worker and
environmental exposure standards and labeling requirements. We
are a producer of formaldehyde and plastics derived from
formaldehyde. We are participating together with other producers
and users in the evaluations of these findings. We cannot
predict the final effect of IARCs reclassification.
Other recent initiatives will potentially require toxicological
testing and risk assessments of a wide variety of chemicals,
including chemicals used or produced by us. These initiatives
include the Voluntary Childrens Chemical Evaluation
Program and High Production Volume Chemical Initiative in the
United States, as well as various European Commission programs,
such as the new European Environment and Health Strategy,
commonly known as SCALE, as well as the Proposal for the
Registration, Evaluation, Authorization and Restriction of
Chemicals or REACH. REACH, which the European Commission
proposed in October 2003, will establish a system to register
and evaluate chemicals manufactured in, or imported to, the
European Union. Additional testing, documentation and risk
assessments will occur for the chemical industry. This will
affect European producers of chemicals as well as all chemical
companies worldwide that export to member states of the European
Union.
The above-mentioned assessments in the United States and Europe
may result in heightened concerns about the chemicals involved
and additional requirements being placed on the production,
handling, labeling or use of the subject chemicals. Such
concerns and additional requirements could increase the cost
incurred by our customers to
22
use our chemical products and otherwise limit the use of these
products, which could lead to a decrease in demand for these
products. Such a decrease in demand would likely have an adverse
impact on our business and results of operations.
Our
production facilities handle the processing of some volatile and
hazardous materials that subject us to operating risks that
could have a negative effect on our operating
results.
Our operations are subject to operating risks associated with
chemical manufacturing, including the related storage and
transportation of raw materials, products and waste. These risks
include, among other things pipeline and storage tank leaks and
ruptures, explosions and fires and discharges or releases of
toxic or hazardous substances.
These operating risks can cause personal injury, property damage
and environmental contamination, and may result in the shutdown
of affected facilities and the imposition of civil or criminal
penalties. The occurrence of any of these events may disrupt
production and have a negative effect on the productivity and
profitability of a particular manufacturing facility and our
operating results and cash flows.
Recently
proposed federal legislation aimed at increasing security at
certain chemical production plants and similar legislation that
may be proposed in the future could, if passed into law, require
us to relocate certain manufacturing activities and require us
to alter or discontinue our production of certain chemical
products, thereby increasing our operating costs and causing an
adverse effect on our results of operations.
Legislation is currently pending in Congress which is aimed at
decreasing the risk, and effects, of potential terrorist attacks
on chemical plants located within the United States. Pursuant to
proposed legislation, these goals would be accomplished in part
through the requirement that certain high-priority facilities
develop a prevention, preparedness, and response plan after
conducting a vulnerability assessment. In addition, companies
may be required to evaluate the possibility of using less
dangerous chemicals and technologies as part of their
vulnerability assessments and prevention plans and implementing
feasible safer technologies in order to minimize potential
damage to their facilities from a terrorist attack. Pending
legislation will likely be revised further, and additional
legislation may be proposed in the future on this topic. It is
possible that such future legislation could contain terms that
are more restrictive than what has recently been proposed and
which would be more costly to us. We cannot predict the final
form of currently pending legislation, or other related
legislation that may be passed and can provide no assurance that
such legislation will not have an adverse effect on our results
of operations in a future reporting period.
Our
significant
non-U.S. operations
expose us to global exchange rate fluctuations that could
adversely impact our profitability.
We are exposed to market risk through commercial and financial
operations. Our market risk consists principally of exposure to
fluctuations in currency exchange and interest rates. As we
conduct a significant portion of our operations outside the
United States, fluctuations in currencies of other countries,
especially the euro, may materially affect our operating
results. For example, changes in currency exchange rates may
decrease our profits in comparison to the profits of our
competitors on the same products sold in the same markets and
increase the cost of items required in our operations.
A substantial portion of our net sales is denominated in
currencies other than the U.S. dollar. In our consolidated
financial statements, we translate our local currency financial
results into U.S. dollars based on average exchange rates
prevailing during a reporting period or the exchange rate at the
end of that period. During times of a strengthening
U.S. dollar, at a constant level of business, our reported
international sales, earnings, assets and liabilities will be
reduced because the local currency will translate into fewer
U.S. dollars.
In addition to currency translation risks, we incur a currency
transaction risk whenever one of our operating subsidiaries
enters into either a purchase or a sales transaction using a
currency different from the operating subsidiarys
functional currency. Given the volatility of exchange rates, we
may not be able to manage our currency transaction and
translation risks effectively, and volatility in currency
exchange rates may expose our financial
23
condition or results of operations to a significant additional
risk. Since a portion of our indebtedness is and will be
denominated in currencies other than U.S. dollars, a
weakening of the U.S. dollar could make it more difficult
for us to repay our indebtedness.
We use financial instruments to hedge our exposure to foreign
currency fluctuations, but we cannot guarantee that our hedging
strategies will be effective.
Failure to effectively manage these risks could have an adverse
impact on our financial position, results of operations and cash
flows
Significant
changes in pension fund investment performance or assumptions
relating to pension costs may have a material effect on the
valuation of pension obligations, the funded status of pension
plans, and our pension cost.
Our funding policy for pension plans is to accumulate plan
assets that, over the long run, will approximate the present
value of projected benefit obligations. Our pension cost is
materially affected by the discount rate used to measure pension
obligations, the level of plan assets available to fund those
obligations at the measurement date and the expected long-term
rate of return on plan assets. Significant changes in investment
performance or a change in the portfolio mix of invested assets
can result in corresponding increases and decreases in the
valuation of plan assets, particularly equity securities, or in
a change of the expected rate of return on plan assets. A change
in the discount rate would result in a significant increase or
decrease in the valuation of pension obligations, affecting the
reported funded status of our pension plans as well as the net
periodic pension cost in the following fiscal years. Similarly,
changes in the expected return on plan assets can result in
significant changes in the net periodic pension cost for
subsequent fiscal years.
CAG
may be required to make payments to Hoechst.
Under its 1999 demerger agreement with Hoechst, CAG agreed to
indemnify Hoechst for environmental liabilities that Hoechst may
incur with respect to CAGs German production sites, which
were transferred from Hoechst to CAG in connection with the
demerger. CAG also has an obligation to indemnify Hoechst
against liabilities for environmental damages or contamination
arising under certain divestiture agreements entered into by
Hoechst prior to the demerger. As the indemnification
obligations depend on the occurrence of unpredictable future
events, the costs associated with them are not yet determinable
and may materially affect operating results.
CAGs obligation to indemnify Hoechst against liabilities
for environmental contamination in connection with the
divestiture agreements is subject to the following thresholds:
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CAG will indemnify Hoechst for the total amount of these
liabilities up to 250 million;
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Hoechst will bear the full amount of those liabilities between
250 million and 750 million; and
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CAG will indemnify Hoechst for one third of those liabilities
for amounts exceeding 750 million.
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CAG has made total cumulative payments through December 31,
2006 of $44 million for environmental contamination
liabilities in connection with the divestiture agreements, and
may be required to make additional payments in the future. As of
December 31, 2006, we have reserves of approximately
$33 million for this contingency, and may be required to
record additional reserves in the future.
Also, CAG has undertaken in the demerger agreement to indemnify
Hoechst to the extent that Hoechst is required to discharge
liabilities, including tax liabilities, in relation to assets
included in the demerger, where such liabilities have not been
demerged due to transfer or other restrictions. CAG did not make
any payments to Hoechst during the year ended December 31,
2006, 2005 or 2004 in connection with this indemnity.
Under the demerger agreement, CAG will also be responsible,
directly or indirectly, for all of Hoechsts obligations to
past employees of businesses that were demerged to CAG. Under
the demerger agreement, Hoechst agreed to indemnify CAG from
liabilities (other than liabilities for environmental
contamination) stemming from the agreements governing the
divestiture of Hoechsts polyester businesses, which were
demerged to CAG, insofar as such liabilities relate to the
European part of that business. Hoechst has also agreed to bear
80% of the financial
24
obligations arising in connection with the government
investigation and litigation associated with the sorbates
industry for price fixing described in Note 25 to the
consolidated financial statements, and CAG has agreed to bear
the remaining 20%.
Our
variable rate indebtedness subjects us to interest rate risk,
which could cause our debt service obligations to increase
significantly and affect our operating results.
Certain of our borrowings, primarily borrowings under the
amended and restated senior credit facilities, are at variable
rates of interest and expose us to interest rate risk. If
interest rates were to increase, our debt service obligations on
our variable rate indebtedness would increase even though the
amount borrowed remained the same. As of December 31, 2006,
we had approximately $1.9 billion of variable rate debt, of
which $0.3 billion is hedged with an interest rate swap,
which leaves us approximately $1.6 billion of variable rate
debt subject to interest rate exposure. Accordingly, a 1%
increase in interest rates would increase annual interest
expense by approximately $16 million. There can be no
assurance that interest rates will not rise significantly in the
future. Such an increase could have an adverse impact on our
future results of operations and cash flows.
The
disposition by the Original Shareholders of at least 90% of
their equity interest will satisfy a vesting condition under our
deferred compensation plan.
In December 2004, we approved, among other incentive and
retention programs, a deferred compensation plan for executive
officers and key employees. The programs were intended to align
management performance with the creation of shareholder value.
The deferred compensation plan has an aggregate maximum amount
payable of $196 million over five years ending in 2009. The
initial component of the deferred compensation plan vested in
2004 and was paid in the first quarter of 2005. The remaining
aggregate maximum amount payable of $142 million is subject
to downward adjustment if the price of our Series A common
stock falls below the initial public offering price of
$16 per share and vests subject to both (i) continued
employment or the achievement of certain performance criteria
and (2) the disposition by three of the four Original
Shareholders of at least 90% of their equity interest in the
Company with at least a 25% cash internal rate of return on
their equity interest. The Original Shareholders have an equity
interest of approximately 14.09%. Upon the occurrence of a
qualifying sale, as defined, the amount vested and payable under
the plan as of December 31, 2006 would be approximately
$75 million, exclusive of $19 million accrued in 2006
and payable in 2007 due to the accelerated vesting of certain
plan participants.
Our
future success will depend in part on our ability to protect our
intellectual property rights. Our inability to enforce these
rights could reduce our ability to maintain our market position
and our profit margins.
We attach great importance to patents, trademarks, copyrights
and product designs in order to protect our investment in
research and development, manufacturing and marketing. Our
policy is to seek the widest possible protection for significant
product and process developments in our major markets. Patents
may cover products, processes, intermediate products and product
uses. Protection for individual products extends for varying
periods in accordance with the date of patent application filing
and the legal life of patents in the various countries. The
protection afforded, which may also vary from country to
country, depends upon the type of patent and its scope of
coverage. As patents expire, the products and processes
described and claimed in those patents become generally
available for use by the public. Our continued growth strategy
may bring us to regions of the world where intellectual property
protection may be limited and difficult to enforce.
We also seek to register trademarks extensively as a means of
protecting the brand names of our products, which brand names
become more important once the corresponding patents have
expired. If we are not successful in protecting our trademark or
patent rights, our revenues, results of operations and cash
flows may be adversely affected.
25
Provisions
in our second amended and restated certificate of incorporation
and amended and restated bylaws, as well as any
shareholders rights plan, may discourage a takeover
attempt.
Provisions contained in our second amended and restated
certificate of incorporation and bylaws could make it more
difficult for a third party to acquire us, even if doing so
might be beneficial to our shareholders. Provisions of our
second amended and restated certificate of incorporation and
bylaws impose various procedural and other requirements, which
could make it more difficult for shareholders to effect certain
corporate actions. For example, our second amended and restated
certificate of incorporation authorizes our board of directors
to determine the rights, preferences, privileges and
restrictions of unissued series of preferred stock, without any
vote or action by our shareholders. Thus, our board of directors
can authorize and issue shares of preferred stock with voting or
conversion rights that could adversely affect the voting or
other rights of holders of our Series A common stock. These
rights may have the effect of delaying or deterring a change of
control of our company. In addition, a change of control of our
company may be delayed or deterred as a result of our having
three classes of directors (each class elected for a three year
term) or as a result of any shareholders rights plan that
our board of directors may adopt. These provisions could limit
the price that certain investors might be willing to pay in the
future for shares of our Series A common stock.
Risks
Related to the Acquisition of CAG
The
amounts of the fair cash compensation and of the guaranteed
annual payment offered under the domination and profit and loss
transfer agreement (Domination Agreement) may be
increased, which may further reduce the funds the Purchaser can
otherwise make available to us.
Several minority shareholders of CAG have 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. On
March 14, 2005, the Frankfurt District Court dismissed on
grounds of inadmissibility the motions of all minority
shareholders regarding the initiation of these special award
proceedings. In January 2006, the Frankfurt Higher District
Court ruled that the appeals were admissible, and the
proceedings will therefore continue. On December 12, 2006,
the Frankfurt District Court appointed an expert to help
determine the value of CAG. As a result of these proceedings,
the amounts of the fair cash compensation and of the guaranteed
annual payment could be increased by the court, and the
Purchaser would be required to make such payments within two
months after the publication of the courts ruling. Any
such increase may be substantial. All minority shareholders
including those who have already received the fair cash
compensation would be entitled to claim the respective higher
amounts. This may reduce the funds the Purchaser can make
available to us and, accordingly, diminish our ability to make
payments on our indebtedness. See Notes 2 and 25 to our
consolidated financial statements for further information.
The
Purchaser may be required to compensate CAG for annual losses,
which may reduce the funds the Purchaser can otherwise make
available to us.
Under the Domination Agreement, the Purchaser is required, among
other things, to compensate CAG for any annual loss incurred,
determined in accordance with German accounting requirements, by
CAG at the end of the fiscal year in which the loss was
incurred. This obligation to compensate CAG for annual losses
will apply during the entire term of the Domination Agreement.
If CAG incurs losses during any period of the operative term of
the Domination Agreement and if such losses lead to an annual
loss of CAG at the end of any given fiscal year during the term
of the Domination Agreement, the Purchaser will be obligated to
make a corresponding cash payment to CAG to the extent that the
respective annual loss is not fully compensated for by the
dissolution of profit reserves accrued at the level of CAG
during the term of the Domination Agreement. The Purchaser may
be able to reduce or avoid cash payments to CAG by off-setting
against such loss compensation claims by CAG any valuable
counterclaims against CAG that the Purchaser may have. If the
Purchaser is obligated to make cash payments to CAG to cover an
annual loss, we may not have sufficient funds to make payments
on our indebtedness when due and, unless the Purchaser is able
to obtain funds from a source other than annual profits of CAG,
the Purchaser may not be able to satisfy its obligation to fund
such shortfall. See Note 2 to the consolidated financial
statements.
26
We and
two of our subsidiaries have taken on certain obligations with
respect to the Purchasers obligation under the Domination
Agreement and intercompany indebtedness to CAG, which may
diminish our ability to make payments on our
indebtedness.
Our subsidiaries, Celanese Caylux and BCP Crystal, have each
agreed to provide the Purchaser with financing so that the
Purchaser is at all times in a position to completely meet its
obligations under, or in connection with, the Domination
Agreement. In addition, Celanese has guaranteed (i) that
the Purchaser will meet its obligation under the Domination
Agreement to compensate CAG for any annual loss incurred by CAG
during the term of the Domination Agreement; and (ii) the
repayment of all existing intercompany indebtedness of
Celaneses subsidiaries to CAG. Further, under the terms of
Celaneses guarantee, in certain limited circumstances CAG
may be entitled to require the immediate repayment of some or
all of the intercompany indebtedness owed by Celaneses
subsidiaries to CAG. If Celanese, Celanese Caylux
and/or BCP
Crystal are obligated to make payments under their obligations
to the Purchaser or CAG, as the case may be, or if the
intercompany indebtedness owed to CAG is accelerated, we may not
have sufficient funds for payments on our indebtedness when due
or other expenditures.
The
price paid by the Purchaser for the acquisition of the remaining
outstanding CAG shares may be challenged in court.
The price could increase if the amount of fair cash compensation
is successfully challenged in court. See Note 25 to our
consolidated financial statements for further information.
Risks
Related to Our Indebtedness
Our
high level of indebtedness could diminish our ability to raise
additional capital to fund our operations, limit our ability to
react to changes in the economy or the chemicals industry and
prevent us from meeting obligations under our
indebtedness.
We are highly leveraged. Our total indebtedness is approximately
$3.5 billion as of December 31, 2006 (excluding
$134 million of future accretion on the senior discount
notes).
Our substantial debt could have important consequences,
including:
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making it more difficult for us to make payments on our debt;
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increasing vulnerability to general economic and industry
conditions;
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requiring a substantial portion of cash flow from operations to
be dedicated to the payment of principal and interest on
indebtedness, therefore reducing our ability to use our cash
flow to fund operations, capital expenditures and future
business opportunities;
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exposing us to the risk of increased interest rates as certain
of our borrowings, primarily the borrowings under the amended
and restated senior credit facilities, are at variable rates of
interest;
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limiting our ability to obtain additional financing for working
capital, capital expenditures, product development, debt service
requirements, acquisitions and general corporate or other
purposes; and
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limiting our ability to adjust to changing market conditions and
placing us at a competitive disadvantage compared to our
competitors who have less debt.
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Despite
our current high leverage, we and our subsidiaries may be able
to incur substantially more debt. This could further exacerbate
the risks of our high leverage.
We may be able to incur substantial additional indebtedness in
the future. The terms of our existing debt do not fully prohibit
us from doing so. If new debt, including amounts available under
our amended and restated senior credit facilities, is added to
our current debt levels, the related risks that we now face
could intensify. See Managements Discussion and
Analysis of Financial Condition and Results of
Operations Liquidity and Capital
Resources Liquidity Contractual
Obligations.
27
We may
not be able to generate sufficient cash to service our
indebtedness, and may be forced to take other actions to satisfy
obligations under our indebtedness, which may not be
successful.
Our ability to satisfy our cash needs depends on cash on hand,
receipt of additional capital, including possible additional
borrowings, and receipt of cash from our subsidiaries by way of
distributions, advances or cash payments. See
Managements Discussion and Analysis of Financial
Condition and Results of Operations Liquidity and
Capital Resources Liquidity Contractual
Obligations.
Our ability to make scheduled payments on or to refinance our
debt obligations depends on the financial condition and
operating performance of our subsidiaries, which is subject to
prevailing economic and competitive conditions and to certain
financial, business and other factors beyond our control. We may
not be able to maintain a level of cash flows from operating
activities sufficient to permit us to pay the principal,
premium, if any, and interest on our indebtedness.
If our cash flows and capital resources are insufficient to fund
our debt service obligations, we may be forced to reduce or
delay capital expenditures, sell assets, seek additional capital
or restructure or refinance our indebtedness. These alternative
measures may not be successful and may not permit us to meet our
scheduled debt service obligations. In the absence of such
operating results and resources, we could face substantial
liquidity problems and might be required to dispose of material
assets or operations to meet our debt service and other
obligations. The amended and restated senior credit facilities
and the indentures governing our indebtedness restrict our
ability to dispose of assets and use the proceeds from the
disposition. We may not be able to consummate those dispositions
or to obtain the proceeds which we could realize from them and
these proceeds may not be adequate to meet any debt service
obligations then due.
Restrictive
covenants in our debt instruments may limit our ability to
engage in certain transactions and may diminish our ability to
make payments on our indebtedness.
The amended and restated senior credit facilities and the
indentures governing our indebtedness contain various covenants
that limit our ability to engage in specified types of
transactions. The covenants contained in the indentures limit
the ability of Crystal LLC, BCP Crystal and their restricted
subsidiaries to, among other things, incur additional
indebtedness or issue preferred stock, pay dividends on or make
other distributions on or repurchase their capital stock or make
other restricted payments, make investments, and sell certain
assets.
In addition, the amended and restated senior credit facilities
contain covenants that require Celanese Holdings to maintain
specified financial ratios and satisfy other financial condition
tests. Celanese Holdings ability to meet those financial
ratios and tests can be affected by events beyond its control,
and it may not be able to meet those tests at all. A breach of
any of these covenants could result in a default under the
amended and restated senior credit facilities. Upon the
occurrence of an event of default under the amended and restated
senior credit facilities, the lenders could elect to declare all
amounts outstanding under the amended and restated senior credit
facilities to be immediately due and payable and terminate all
commitments to extend further credit. If Celanese Holdings were
unable to repay those amounts, the lenders under the amended and
restated senior credit facilities could proceed against the
collateral granted to them to secure that indebtedness. Our
subsidiaries have pledged a significant portion of our assets as
collateral under the amended and restated senior credit
facilities. If the lenders under the amended and restated senior
credit facilities accelerate the repayment of borrowings, we may
not have sufficient assets to repay amounts borrowed under the
amended and restated senior credit facilities as well as their
other indebtedness, which could have a material adverse effect
on the value of our stock.
The
terms of our amended and restated senior credit facilities limit
the ability of BCP Crystal and its subsidiaries to pay dividends
or otherwise transfer their assets to us.
Our operations are conducted through our subsidiaries and our
ability to pay dividends is dependent on the earnings and the
distribution of funds from our subsidiaries. However, the terms
of our amended and restated senior credit facilities limit the
ability of BCP Crystal and its subsidiaries to pay dividends or
otherwise transfer their assets to us. Accordingly, our ability
to pay dividends on our stock is similarly limited.
28
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Item 1B.
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Unresolved
Staff Comments
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None
Description
of Property
As of December 31, 2006, we had numerous production and
manufacturing facilities throughout the world. We also own or
lease other properties, including office buildings, warehouses,
pipelines, research and development facilities and sales
offices. We continuously review and evaluate our facilities as a
part of our strategy to optimize our business portfolio. The
following table sets forth a list of our principal production
and other facilities throughout the world as of
December 31, 2006.
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Site
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Leased/Owned
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Products/Functions
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Corporate Offices
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Dallas, Texas, USA
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Leased
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Corporate headquarters
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Kronberg/Taunus, Germany
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Leased
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Administrative offices
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Chemical Products
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Bay City, Texas, USA
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Owned
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Butyl acetate, Iso-butylacetate,
Propylacetate, VAM, Carboxylic acids, n/i-Butyraldehyde, Butyl
alcohols, Propionaldehyde, Propyl alcohol
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Bishop, Texas, USA
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Owned
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Formaldehyde, Methanol,
Pentaerythritol, Polyols
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Boucherville, Quebec, Canada
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Owned
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Conventional emulsions
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Calvert City, Kentucky, USA
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Leased
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PVOH
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Cangrejera, Veracruz, Mexico
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Owned
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Acetic anhydride, Acetone
derivatives, Ethyl acetate, VAM, Methyl amines
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Clear Lake, Texas, USA
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Owned
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Acetic acid, VAM
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Edmonton, Alberta, Canada
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Owned
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Methanol
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Enoree, South Carolina, USA
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Owned
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Conventional emulsions, Vinyl
acetate ethylene emulsions
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Frankfurt am Main, Germany
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Owned by InfraServ GmbH &
Co. Hoechst KG, in which CAG holds a 31.2% limited partnership
interest
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Acetaldehyde, Butyl acetate
Conventional emulsions,Vinyl acetate ethylene emulsions, VAM
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Geleen, Netherlands
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Owned
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Vinyl acetate ethylene emulsions
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Guardo, Spain
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Owned
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PVOH, Polyvinyl acetate
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Meredosia, Illinois, USA
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Owned
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Vinyl acetate ethylene emulsions,
Conventional emulsions
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Nanjing, China
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Leased
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Acetic acid, Acetic anhydride
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Oberhausen, Germany
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Owned by InfraServ GmbH &
Co. Oberhausen KG, in which CAG holds an 84.0% limited
partnership interest
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Amines, Carboxylic acids,
Neopentyl glycols
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Pampa, Texas, USA
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Owned
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Acetic acid, Acetic anhydride,
Ethyl acetate
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Pardies, France
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Owned
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Acetic acid, VAM
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29
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Site
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Leased/Owned
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Products/Functions
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Roussillon, France
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Leased
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Acetic anhydride, Polyvinyl acetate
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Pasadena, Texas, USA
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Leased
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PVOH
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Jurong Island, Singapore
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Owned
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Acetic acid, Butyl acetate, Ethyl
acetate, VAM
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Koper, Slovenia
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Owned
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Conventional emulsions
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Shanghai, China
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Leased
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Acetic acid
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Tarragona, Spain
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Owned by Complejo Industrial Taqsa
AIE, in which CAG holds a 15.0% share
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Vinyl acetate monomer, Vinyl
acetate ethylene emulsions, Conventional emulsions
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Tarragona, Spain
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Owned
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PVOH
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Perstorp, Sweden
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Owned
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Conventional emulsions, Vinyl
acetate ethylene emulsions
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Warrington, UK
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Owned
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Conventional emulsions, Vinyl
acetate ethylene emulsions
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Acetate Products
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Edmonton, Alberta, Canada(1)
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Owned
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Flake
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Lanaken, Belgium
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Owned
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Tow
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Little Heath, Coventry, UK(2)
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Leased
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Tow
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Narrows, Virginia, USA
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Owned
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Tow, Flake
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Ocotlán, Jalisco, Mexico
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Owned
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Tow, Flake
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Spondon, Derby, UK(2)
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Owned
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Tow, Flake and Films
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Technical Polymers
Ticona
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Auburn Hills, Michigan, USA
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Leased
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Automotive Development Center
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Bishop, Texas, USA
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Owned
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POM (Celcon), PE-UHMW (GUR),
Compounding
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Florence, Kentucky, USA
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Owned
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Compounding
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Kelsterbach, Germany(3)
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Owned by InfraServ GmbH &
Co. Kelsterbach KG, in which CAG holds a 100.0% limited
partnership interest
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LFT (Celstran), POM (Hostaform),
Compounding
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Oberhausen, Germany
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Owned by InfraServ GmbH &
Co. Oberhausen KG, in which CAG holds an 84.0% limited
partnership interest
|
|
PE-UHMW (GUR)
|
Shelby, North Carolina, USA
|
|
Owned
|
|
LCP, PBT and PET (Celanex),
Compounding
|
Suzano, Brazil
|
|
Owned
|
|
Compounding
|
Wilmington, North Carolina, USA
|
|
Owned by Fortron Industries LLC, a
non-consolidated venture, in which we have a 50% interest,
except for adjacent administrative office space which is leased
by the venture
|
|
PPS (Fortron)
|
Winona, Minnesota, USA
|
|
Owned
|
|
LFT (Celstran)
|
30
|
|
|
|
|
Site
|
|
Leased/Owned
|
|
Products/Functions
|
|
Performance Products
|
|
|
|
|
Frankfurt am Main, Germany
|
|
Owned by InfraServ GmbH &
Co. Hoechst KG, in which CAG holds a 31.2% limited partnership
interest
|
|
Sorbates,
Sunett®
|
|
|
|
(1) |
|
The Edmonton flake facility is expected to be closed in 2007. |
|
(2) |
|
Acquired in the January 2007 Acetate Products Limited
acquisition. |
|
(3) |
|
Will be relocated as a result of the Frankfurt, Germany, Airport
settlement. See Note 31 to the consolidated financial statements
for additional information. |
Polyplastics has its principal production facilities in Japan,
Taiwan and Malaysia. KEPCO has its principal production
facilities in South Korea. Our Chemical Products segment has
ventures with manufacturing facilities in Saudi Arabia and
Germany and our Acetate Products segment has three ventures with
production facilities in China.
We believe that our current facilities and those of our
consolidated subsidiaries are adequate to meet the requirements
of our present and foreseeable future operations. We continue to
review our capacity requirements as part of our strategy to
maximize our global manufacturing efficiency.
For information on environmental issues associated with our
properties, see Business Environmental and
Other Regulation and Managements Discussion
and Analysis of Financial Condition and Results of
Operations Liquidity and Capital
Resources Environmental Matters. Additional
information with respect to our property, plant and equipment,
and leases is contained in Notes 11 and 23 to the
consolidated financial statements.
|
|
Item 3.
|
Legal
Proceedings
|
We are involved in a number of legal proceedings, lawsuits and
claims incidental to the normal conduct of our business,
relating to such matters as product liability, antitrust, 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 believe, based on the advice of legal
counsel, that adequate provisions have been made and that the
ultimate outcomes will not have a material adverse effect on our
financial position, but may have a material adverse effect on
the results of operations or cash flows in any given accounting
period. See Note 25 (commitments and
contingencies) to the consolidated financial statements
for a discussion of legal proceedings.
|
|
Item 4.
|
Submission
of Matters to a Vote of Security Holders
|
No matters were submitted to a vote of security holders during
the fourth quarter of 2006.
31
PART II
|
|
Item 5.
|
Market
for the Registrants Common Equity, Related Stockholder
Matters and Issuer Purchases of Equity Securities
|
Market
Information
Our Series A common stock has traded on the New York Stock
Exchange under the symbol CE since January 21,
2005. The closing sale price of our Series A common stock,
as reported by the New York Stock Exchange, on February 12,
2007 was $28.53. The following table sets forth the high and low
intraday sales prices per share of our common stock, as reported
by the New York Stock Exchange, for the periods indicated.
|
|
|
|
|
|
|
|
|
|
|
Price Range
|
|
|
|
High
|
|
|
Low
|
|
|
2006
|
|
|
|
|
|
|
|
|
Quarter ended March 31, 2006
|
|
$
|
22.00
|
|
|
$
|
18.82
|
|
Quarter ended June 30, 2006
|
|
$
|
22.75
|
|
|
$
|
18.50
|
|
Quarter ended September 30,
2006
|
|
$
|
20.70
|
|
|
$
|
16.80
|
|
Quarter ended December 31,
2006
|
|
$
|
26.33
|
|
|
$
|
17.45
|
|
2005
|
|
|
|
|
|
|
|
|
Quarter ended March 31, 2005
|
|
$
|
18.65
|
|
|
$
|
15.10
|
|
Quarter ended June 30, 2005
|
|
$
|
18.16
|
|
|
$
|
13.54
|
|
Quarter ended September 30,
2005
|
|
$
|
20.06
|
|
|
$
|
15.88
|
|
Quarter ended December 31,
2005
|
|
$
|
19.76
|
|
|
$
|
15.58
|
|
Holders
No shares of Celaneses Series B common stock are
issued and outstanding. As of February 12, 2007, there were
118 holders of record of our Series A common stock, and one
holder of record of our perpetual preferred stock. By including
persons holding shares in broker accounts under street names,
however, we estimate our shareholder base to be approximately
46,300 as of February 12, 2007.
Dividend
Policy
In July 2005, our board of directors adopted a policy of
declaring, subject to legally available funds, a quarterly cash
dividend on each share of our Series A common stock at an
annual rate of $0.16 per share unless our board of
directors, in its sole discretion, determines otherwise.
Pursuant to this policy, we paid quarterly dividends of
$0.04 per share on February 1, 2006, May 1, 2006,
August 1, 2006, November 1, 2006 and February 1,
2007. Based on the number of outstanding shares of our
Series A common stock, the anticipated annual cash dividend
is approximately $26 million. However, there is no
assurance that sufficient cash will be available in the future
to pay such dividend. Further, such dividends payable to holders
of our Series A common stock cannot be declared or paid nor
can any funds be set aside for the payment thereof, unless we
have paid or set aside funds for the payment of all accumulated
and unpaid dividends with respect to the shares of our preferred
stock, as described below.
Our board of directors may, at any time, modify or revoke our
dividend policy on our Series A common stock.
We are required under the terms of the preferred stock to pay
scheduled quarterly dividends, subject to legally available
funds. For so long as the preferred stock remains outstanding,
(1) we will not declare, pay or set apart funds for the
payment of any dividend or other distribution with respect to
any junior stock or parity stock and (2) neither we, nor
any of our subsidiaries, will, subject to certain exceptions,
redeem, purchase or otherwise acquire for consideration junior
stock or parity stock through a sinking fund or otherwise, in
each case unless we have paid or set apart funds for the payment
of all accumulated and unpaid dividends with respect to the
shares of preferred stock and any parity stock for all preceding
dividend periods. Pursuant to this policy, we paid quarterly
dividends of $0.265625 on our 4.25% convertible perpetual
preferred stock on February 1, 2006, May 1, 2006,
August 1, 2006, November 1, 2006 and February 1,
2007. The anticipated annual cash dividend is approximately
$10 million.
32
The amount available to us to pay cash dividends is restricted
by our subsidiaries debt agreements. The indentures
governing the senior subordinated notes and the senior discount
notes also limit, but do not prohibit, the ability of BCP
Crystal, Crystal LLC and their respective subsidiaries to pay
dividends. Any decision to declare and pay dividends in the
future will be made at the discretion of our board of directors
and will depend on, among other things, our results of
operations, cash requirements, financial condition, contractual
restrictions and other factors that our board of directors may
deem relevant.
Under Delaware law, our board of directors may declare dividends
only to the extent of our surplus (which is defined
as total assets at fair market value minus total liabilities,
minus statutory capital), or if there is no surplus, out of our
net profits for the then current
and/or
immediately preceding fiscal years. The value of a
corporations assets can be measured in a number of ways
and may not necessarily equal their book value. The value of our
capital may be adjusted from time to time by our board of
directors but in no event will be less than the aggregate par
value of our issued stock. Our board of directors may base this
determination on our financial statements, a fair valuation of
our assets or another reasonable method. Our board of directors
will seek to assure itself that the statutory requirements will
be met before actually declaring dividends. In future periods,
our board of directors may seek opinions from outside valuation
firms to the effect that our solvency or assets are sufficient
to allow payment of dividends, and such opinions may not be
forthcoming. If we sought and were not able to obtain such an
opinion, we likely would not be able to pay dividends. In
addition, pursuant to the terms of our preferred stock, we are
prohibited from paying a dividend on our Series A common
stock unless all payments due and payable under the preferred
stock have been made.
Celanese
Purchases of its Equity Securities
None.
33
Performance
Graph
The following Performance Graph and related information shall
not be deemed soliciting material or to be
filed with the Securities and Exchange Commission,
nor shall such information be incorporated by reference into any
future filing under the Securities Act of 1933 or Securities
Exchange Act of 1934, each as amended, except to the extent that
the Company specifically incorporates it by reference into such
filing.
Cumulative
Total Return to Stockholders Celanese Corporation, S&P 500
Composite
Index, S&P 500 Chemicals Index and S&P 500 Specialty
Chemicals Index % Return
to Shareholders, January 21, 2005 to December 31,
2006
This comparison is based on a return assuming $100 invested
January 21, 2005 in Celanese Corporation Common Stock and
the S&P 500 Composite Index, the S&P 500 Chemicals Index
and the S&P Specialty Chemicals Index, assuming the
reinvestment of all dividends. January 21, 2005 is the date
the Companys Common Stock commenced trading on the New
York Stock Exchange.
Equity
Compensation Plans
Securities
Authorized for Issuance Under Equity Compensation
Plans
The following information is provided as of December 31,
2006 with respect to equity compensation plans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Securities to be
|
|
|
Weighted Average
|
|
|
|
|
|
|
Issued upon Exercise of
|
|
|
Exercise Price of
|
|
|
Number of Securities
|
|
|
|
Outstanding Options,
|
|
|
Outstanding Options,
|
|
|
Remaining Available
|
|
Plan Category
|
|
Warrants and Rights
|
|
|
Warrants and Rights
|
|
|
for Future Issuance
|
|
|
Equity compensation plans approved
by security holders
|
|
|
12,493,124
|
|
|
$
|
16.81
|
|
|
|
1,966,094
|
|
Equity compensation plans not
approved by security holders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
12,493,124
|
|
|
$
|
16.81
|
|
|
|
1,966,094
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recent
Sales of Unregistered Securities
None.
34
|
|
Item 6.
|
Selected
Financial Data
|
The balance sheet data shown below as of December 31, 2006
and 2005, and the statements of operations and cash flow data
for the years ended December 31, 2006 and 2005, the nine
months ended December 31, 2004 and the three months ended
March 31, 2004, all of which are set forth below, are
derived from the consolidated financial statements included
elsewhere in this document and should be read in conjunction
with those financial statements and the notes thereto. The
balance sheet data shown below as of December 31, 2004 was
derived from our 2005 Annual Report on
Form 10-K
filed with the SEC on March 31, 2006, adjusted for
applicable discontinued operations. The statement of operations
data for the years ended December 31, 2003 and 2002 and the
balance sheet data as of December 31, 2003 and 2002 (in the
case of the December 31, 2002 only, unaudited), all of
which are set forth below, have been derived from, and
translated into U.S. dollars based on, CAGs
historical euro audited financial statements and the underlying
accounting records. This document presents the financial
information relating to the Predecessor and the Successor.
Accordingly, financial and other information of CAG is presented
in this document for periods through March 31, 2004 and our
financial and other information is presented as of and for the
years ended December 31, 2006 and 2005 and as of and for
the nine months ended December 31, 2004.
35
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
|
Predecessor
|
|
|
|
|
|
|
Nine Months
|
|
|
|
Three Months
|
|
|
|
|
|
|
|
|
|
Ended
|
|
|
|
Ended
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
December 31,
|
|
|
|
March 31,
|
|
|
Year Ended December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
2004
|
|
|
2003
|
|
|
2002
|
|
|
|
(In $ millions, except per share and per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Statement of Operations
Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
|
6,656
|
|
|
|
6,033
|
|
|
|
3,718
|
|
|
|
|
1,209
|
|
|
|
4,451
|
|
|
|
3,704
|
|
Other (charges) gains, net:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Insurance recoveries associated
with plumbing cases
|
|
|
5
|
|
|
|
34
|
|
|
|
1
|
|
|
|
|
|
|
|
|
107
|
|
|
|
|
|
Sorbates antitrust matters
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(95
|
)
|
|
|
|
|
Restructuring, impairment and
other charges, net
|
|
|
(15
|
)
|
|
|
(100
|
)
|
|
|
(83
|
)
|
|
|
|
(28
|
)
|
|
|
(17
|
)
|
|
|
4
|
|
Operating profit (loss)
|
|
|
747
|
|
|
|
573
|
|
|
|
72
|
|
|
|
|
46
|
|
|
|
93
|
|
|
|
153
|
|
Earnings (loss) from continuing
operations before tax and minority interests
|
|
|
664
|
|
|
|
374
|
|
|
|
(180
|
)
|
|
|
|
66
|
|
|
|
172
|
|
|
|
160
|
|
Earnings (loss) from continuing
operations
|
|
|
407
|
|
|
|
276
|
|
|
|
(258
|
)
|
|
|
|
51
|
|
|
|
127
|
|
|
|
107
|
|
Earnings (loss) from discontinued
operations
|
|
|
(1
|
)
|
|
|
1
|
|
|
|
5
|
|
|
|
|
27
|
|
|
|
22
|
|
|
|
43
|
|
Cumulative effect of change in
accounting principle, net of income tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1
|
)
|
|
|
18
|
|
Net earnings (loss)
|
|
|
406
|
|
|
|
277
|
|
|
|
(253
|
)
|
|
|
|
78
|
|
|
|
148
|
|
|
|
168
|
|
Earnings (loss) per share from
continuing operations basic
|
|
|
2.51
|
|
|
|
1.72
|
|
|
|
(2.60
|
)
|
|
|
|
1.03
|
|
|
|
2.57
|
|
|
|
2.44
|
|
Earnings (loss) per share from
continuing operations diluted
|
|
|
2.37
|
|
|
|
1.66
|
|
|
|
(2.60
|
)
|
|
|
|
1.03
|
|
|
|
2.57
|
|
|
|
2.44
|
|
Statement of Cash Flows
Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating activities
|
|
|
751
|
|
|
|
701
|
|
|
|
(62
|
)
|
|
|
|
(102
|
)
|
|
|
401
|
|
|
|
363
|
|
Investing activities
|
|
|
(268
|
)
|
|
|
(907
|
)
|
|
|
(1,811
|
)
|
|
|
|
91
|
|
|
|
(275
|
)
|
|
|
(139
|
)
|
Financing activities
|
|
|
(108
|
)
|
|
|
(144
|
)
|
|
|
2,686
|
|
|
|
|
(43
|
)
|
|
|
(108
|
)
|
|
|
(150
|
)
|
Balance Sheet Data (at the end
of period) (2002 unaudited):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade working capital(1)
|
|
|
831
|
|
|
|
758
|
|
|
|
743
|
|
|
|
|
689
|
|
|
|
659
|
|
|
|
604
|
|
Total assets
|
|
|
7,895
|
|
|
|
7,445
|
|
|
|
7,410
|
|
|
|
|
6,613
|
|
|
|
6,814
|
|
|
|
6,417
|
|
Total debt
|
|
|
3,498
|
|
|
|
3,437
|
|
|
|
3,387
|
|
|
|
|
587
|
|
|
|
637
|
|
|
|
644
|
|
Shareholders equity (deficit)
|
|
|
787
|
|
|
|
235
|
|
|
|
(112
|
)
|
|
|
|
2,622
|
|
|
|
2,582
|
|
|
|
2,096
|
|
Other Financial Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
283
|
|
|
|
286
|
|
|
|
181
|
|
|
|
|
70
|
|
|
|
289
|
|
|
|
240
|
|
Capital expenditures
|
|
|
252
|
|
|
|
212
|
|
|
|
160
|
|
|
|
|
44
|
|
|
|
211
|
|
|
|
203
|
|
Cash basis dividends paid per
common share(2)
|
|
|
0.16
|
|
|
|
0.08
|
|
|
|
|
|
|
|
|
|
|
|
|
0.48
|
|
|
|
|
|
|
|
|
(1) |
|
Trade working capital is defined as trade accounts receivable
from third parties and affiliates net of allowance for doubtful
accounts, plus inventories, less trade accounts payable to third
parties and affiliates. Trade working capital is calculated in
the table below (2002 unaudited): |
36
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
|
Predecessor
|
|
|
|
December 31,
|
|
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
2004
|
|
|
2003
|
|
|
2002
|
|
|
|
(In $ millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade receivables, net
|
|
|
1,001
|
|
|
|
919
|
|
|
|
866
|
|
|
|
|
810
|
|
|
|
768
|
|
|
|
704
|
|
Inventories
|
|
|
653
|
|
|
|
650
|
|
|
|
603
|
|
|
|
|
491
|
|
|
|
514
|
|
|
|
514
|
|
Trade payables
|
|
|
(823
|
)
|
|
|
(811
|
)
|
|
|
(726
|
)
|
|
|
|
(612
|
)
|
|
|
(623
|
)
|
|
|
(614
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade working capital
|
|
|
831
|
|
|
|
758
|
|
|
|
743
|
|
|
|
|
689
|
|
|
|
659
|
|
|
|
604
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2) |
|
In the nine months ended December 31, 2004, CAG declared
and paid a dividend of 0.12 ($0.14) per share for the year
ended December 31, 2003. Dividends paid to Celanese and its
consolidated subsidiaries eliminate in consolidation. |
During 2006, we declared and paid dividends to holders of our
Series A common shares of $26 million, or
$0.04 per share per quarter. During 2005, we declared and
paid dividends to holders of our Series A common shares of
$13 million, or $0.04 per share per quarter.
37
Item 7. Managements
Discussion and Analysis of Financial Condition and Results
of Operations
In this Annual Report on
Form 10-K,
the term Celanese refers to Celanese Corporation, a
Delaware corporation, and not its subsidiaries. The terms the
Company, we, our,
us, and Successor refer to Celanese and its
subsidiaries on a consolidated basis. The term BCP
Crystal refers to our subsidiary, BCP Crystal US Holdings
Corp., a Delaware corporation, and not its subsidiaries. The
term Purchaser refers to our subsidiary, Celanese
Europe Holding GmbH & Co. KG, formerly known as BCP
Crystal Acquisition GmbH & Co. KG, a German limited
partnership, and not its subsidiaries, except where otherwise
indicated. The term Original Shareholders refers,
collectively, to Blackstone Capital Partners (Cayman)
Ltd. 1, Blackstone Capital Partners (Cayman) Ltd. 2,
Blackstone Capital Partners (Cayman) Ltd. 3 and BA Capital
Investors Sidecar Fund, L.P. The terms Sponsor and
Advisor refer to certain affiliates of The
Blackstone Group.
You should read the following discussion and analysis of the
financial condition and the results of operations together with
the consolidated financial statements and the accompanying notes
to consolidated financial statements, which were prepared in
accordance with accounting principles generally accepted in the
United States (U.S. GAAP).
The following discussion and analysis of financial condition
and results of operations covers periods prior and subsequent to
the acquisition of CAG and its subsidiaries (collectively
CAG or the Predecessor). Accordingly,
the discussion and analysis of historical periods prior to the
acquisition do not reflect the significant impact that the
acquisition of CAG has had and will have on the Successor,
including increased leverage and liquidity requirements as well
as purchase accounting adjustments. Furthermore, the Successor
and the Predecessor have different accounting policies with
respect to certain matters (see Note 4 to the notes to
consolidated financial statements). Investors are cautioned that
the forward-looking statements contained in this section involve
both risk and uncertainty. Several important factors could cause
actual results to differ materially from those anticipated by
these statements. Many of these statements are macroeconomic in
nature and are, therefore, beyond the control of management. See
Forward-Looking Information located below.
The results for the nine months ended December 31, 2005
and the three months ended March 31, 2005 have not been
audited and should not be taken as an indication of the results
of operations to be reported for any subsequent period or for
the full fiscal year.
Reconciliation of
Non-U.S. GAAP Measures:
We believe that using
non-U.S. GAAP
financial measures to supplement U.S. GAAP results is
useful to investors because such use provides a more complete
understanding of the factors and trends affecting the business
other than disclosing U.S. GAAP results alone. In this
regard, we disclose net debt, which is a
non-U.S. GAAP
financial measure. Net debt is defined as total debt less cash
and cash equivalents. We use net debt to evaluate the capital
structure. Net debt is not a substitute for any U.S. GAAP
financial measure. In addition, calculations of net debt
contained in this report may not be consistent with that of
other companies. The most directly comparable financial measure
presented in accordance with U.S. GAAP in our financial
statements for net debt is total debt. For a reconciliation of
net debt to total debt, see Financial Highlights
below. For a reconciliation of trade working capital to working
capital components, see Selected Financial Data.
Forward-Looking
Statements May Prove Inaccurate
This Annual Report contains 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. These statements include, but are
not limited to, statements about our strategies, plans,
objectives, expectations, intentions, expenditures, and
assumptions and other statements contained in this Annual Report
that are not historical facts. 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.
See the Risk Factors section under Part 1, Item 1A 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
38
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 fuel oil, natural gas, coal, electricity and
petrochemicals such as ethylene, propylene and butane, including
changes in production quotas in OPEC countries and the
deregulation of the natural gas transmission industry in Europe;
|
|
|
|
the ability to pass increases in raw material prices on to
customers or otherwise improve margins through price increases;
|
|
|
|
the ability to maintain plant utilization rates and to implement
planned capacity additions and expansions;
|
|
|
|
the ability to reduce production costs and improve productivity
by implementing technological improvements to existing plants;
|
|
|
|
increased price competition and the introduction of competing
products by other companies;
|
|
|
|
changes in the degree of patent and other legal protection
afforded to our products;
|
|
|
|
compliance costs and potential disruption or interruption of
production due to accidents or other unforeseen events or delays
in construction of facilities;
|
|
|
|
potential liability for remedial actions under existing or
future environmental regulations;
|
|
|
|
potential liability resulting from pending or future litigation,
or from changes in the laws, regulations or policies of
governments or other governmental activities in the countries in
which we operate;
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|
|
changes in currency exchange rates and interest rates;
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|
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|
pending or future challenges to the domination and profit and
loss transfer agreement (Domination
Agreement); and
|
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|
various other factors, both referenced and not referenced in
this document.
|
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 Annual 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.
Basis of
Presentation
The Successor period represents our audited consolidated
financial position as of December 31, 2006 and 2005 and our
audited consolidated results of operations and cash flows for
the years ended December 31, 2006 and 2005 and the nine
months ended December 31, 2004 and its unaudited interim
consolidated results of operations and cash flows for the nine
months ended December 31, 2005 and the three months ended
March 31, 2005. These consolidated financial statements
reflect the application of purchase accounting relating to the
original acquisition of CAG and purchase price accounting
adjustments relating to the acquisitions of Vinamul, Acetex and
additional CAG shares acquired during the year ended
December 31, 2005.
The Predecessor period represents CAGs audited interim
consolidated results of operations and cash flows for the three
months ended March 31, 2004. These consolidated financial
statements relate to periods prior to the acquisition of CAG and
present CAGs historical basis of accounting without the
application of purchase accounting.
39
The results of the Successor are not comparable to the results
of the Predecessor due to the difference in the basis of
presentation of purchase accounting as compared to historical
cost. Furthermore, the Successor and the Predecessor have
different accounting policies with respect to certain matters.
Change in
Ownership and Initial Public Offering
Pursuant to a voluntary tender offer commenced in February 2004,
the Purchaser, an indirect wholly owned subsidiary of Celanese
Corporation, on April 6, 2004, acquired approximately 84%
of the ordinary shares of Celanese AG, excluding treasury
shares, for a purchase price of $1,693 million, including
direct acquisition costs of $69 million (the
Acquisition). During the year ended
December 31, 2005 and the nine months ended
December 31, 2004, the Purchaser acquired additional CAG
shares for $473 million and $33 million, respectively,
including direct acquisition costs of $4 million and less
than $1 million, respectively. As of December 31,
2006, our ownership percentage in CAG was approximately 98%. As
a result of the effective registration of the Squeeze-Out (as
defined in Note 2 to the consolidated financial statements)
in the commercial register in December 2006, we acquired the
remaining 2% of CAG in January 2007.
On November 3, 2004, Blackstone Crystal Holdings Capital
Partners (Cayman) IV Ltd., reorganized as a Delaware corporation
and changed its name to Celanese Corporation. Additionally, BCP
Crystal Holdings Ltd. 2, a subsidiary of Celanese Corporation,
was reorganized as a Delaware limited liability company and
changed its name to Celanese Holdings LLC.
In January 2005, we completed an initial public offering of
50,000,000 shares of Series A common stock and
received net proceeds of $752 million after deducting
underwriters discounts and offering expenses of
$48 million. Concurrently, we received net proceeds of
$233 million from the offering of our convertible perpetual
preferred stock. A portion of the proceeds of the share
offerings were used to redeem $188 million of our senior
discount notes and $521 million of our senior subordinated
notes, excluding early redemption premiums of $19 million
and $51 million, respectively. See Notes 2 and 3 to
the consolidated financial statements for additional information.
Overview
We are an integrated global hybrid producer of value-added
industrial chemicals. We are the worlds largest producer
of acetyl products, including acetic acid and vinyl acetate
monomer (VAM), polyacetal products
(POM), as well as a leading global producer of
high-performance engineered polymers used in consumer and
industrial products and designed to meet highly technical
customer requirements. We believe that approximately 95% of our
differentiated intermediate and specialty products hold first or
second market positions globally. Our operations are located
primarily in North America, Europe and Asia. We believe we are
one of the lowest-cost producers of key building block chemicals
in the acetyls chain, such as acetic acid and VAM, due to our
economies of scale, operating and purchasing efficiencies and
proprietary production technologies. In addition, we have a
significant portfolio of strategic investments, including a
number of ventures in North America, Europe and Asia.
Collectively, these strategic investments create value for the
Company and contribute significantly to sales, earnings and cash
flow. These investments play an integral role in our strategy
for growth and expansion of our global reach. We have entered
into these strategic investments in order to gain access to
local markets, minimize costs and accelerate growth in areas we
believe have significant future business potential.
We operate principally through four business segments: Chemical
Products, Technical Polymers Ticona (Ticona),
Acetate Products and Performance Products. For further detail on
the business segments, see below Summary by Business
Segment in the Results of Operations section
of MD&A.
Sale of
Oxo Products and Derivatives businesses
On December 13, 2006, we signed a definitive agreement to
sell our oxo products and derivatives businesses, including
European Oxo GmbH (EOXO), a joint venture between
CAG and Degussa AG (Degussa), to Advent
International, for a purchase price of 480 million
subject to final agreement adjustments and successful exercise
of our option to purchase Degussas interest. We anticipate
the sale to be completed in the first quarter of 2007. During
the year ended December 31, 2006, we recorded approximately
$8 million of expense to Gain (loss) on disposition of
assets, net for incremental costs associated with this pending
divestiture.
40
Relocation
of Ticona Plant in Kelsterbach
On November 29, 2006, we reached a settlement with the
Frankfurt, Germany, Airport (Fraport) to relocate
our Kelsterbach, Germany, business, resolving several years of
legal disputes related to the planned Frankfurt airport
expansion. As a result of the settlement, we will transition our
administration and operations from Kelsterbach to another
location in Germany by mid-2011. Over a five-year period,
Fraport will pay us a total of 650 million to offset
the costs associated with the transition of the business from
its current location and the closure of the Kelsterbach plant.
As of December 31, 2006, Fraport has paid us a total of
20 million ($26 million) towards the transition.
The amount has been accounted for as deferred income, is
included in Other liabilities in the consolidated balance sheet
as of December 31, 2006 and is reflected as an investing
activity in the consolidated statement of cash flows for the
year ended December 31, 2006.
Financial
Reporting Changes
See Note 5 to the consolidated financial statements for
information regarding financial reporting changes and recent
accounting pronouncements.
Major
Events In 2006
|
|
|
|
|
As noted above, in December 2006, we reached a settlement with
Fraport related to the planned Frankfurt airport expansion.
|
|
|
|
As noted above, in December 2006, we signed a definitive
agreement to sell our oxo products and derivative businesses,
including EOXO, a joint venture between CAG and Degussa, to
Advent International.
|
|
|
|
In December 2006, we sold our preferred interest in Pemeas GmbH
to BASF and received net proceeds from the sale of
9 million and recognized a gain of
8 million.
|
|
|
|
The Squeeze-Out (as defined in Note 2 to the consolidated
financial statements) was approved by the affirmative vote of
the majority of the votes cast at CAGs annual general
meeting in May 2006. As a result of the effective registration
of the Squeeze-Out in the commercial register in December 2006,
we acquired the remaining 2% of CAG in January 2007.
|
|
|
|
Announced plans to relocate the strategic management of the
Acetyls business to Shanghai, China, in 2007.
|
|
|
|
As a result of the Sponsors sale of 65,000,000 shares
of our Series A common stock in 2006, affiliates of the
Sponsor control less than a majority of the voting power of our
outstanding Series A common stock. As a result, we are no
longer a controlled company within the meaning of
the New York Stock Exchange rules and, thus, are required to
have a board of directors comprised of a majority of independent
directors and nominating and compensation committees composed
entirely of independent directors. However, we will phase in
these corporate governance requirements prior to May 15,
2007.
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|
|
|
In August 2006, we signed a definitive agreement to purchase the
cellulose acetate flake, tow and film business of Acetate
Products Limited for a purchase price of approximately
£57 million ($110 million), subject to certain
adjustments as defined in the agreement. The transaction closed
on January 31, 2007. See Note 32 to the consolidated
financial statements for additional information.
|
|
|
|
In August 2006, we entered into an agreement with Degussa
pursuant to which Degussa granted us an option to purchase
Degussas interest in our EOXO venture. The option is
exercisable until June 30, 2007 and is subject to certain
conditions. In connection with the sale of our oxo products and
derivatives businesses noted above, we anticipate giving notice
to Degussa that we will exercise the option, subject to certain
conditions, to purchase their 50% interest, which will be
subsequently sold to Advent International. See Notes 6 and
32 to the consolidated financial statements for additional
information.
|
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|
|
We shut down our Pentaerythritol (PE) operations
during the third quarter of 2006.
|
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|
|
In July 2006, we made a $100 million equivalent voluntary
prepayment on our senior term loan facility. In connection with
the voluntary prepayment, we wrote off approximately
$1 million of unamortized deferred financing fees
associated with the senior term loan facility.
|
41
Major
Events In 2005
|
|
|
|
|
In December 2005, we reached settlements with two insurers of
CNA Holdings pursuant to which CNA Holdings will be paid a total
of $16 million in the next two years ($7 million in
2006 and $9 million in 2007) in exchange for the
release of certain claims against the policy of the insurer. We
recorded approximately $30 million in income to other
(charges) gains, net for two plumbing action insurance
settlements in the fourth quarter of 2005.
|
|
|
|
In December 2005, we resolved litigation pertaining to antitrust
claims filed against certain shipping companies. Pursuant to
these agreements, we received net proceeds of approximately
$36 million which was recorded as a reduction to cost of
sales in the fourth quarter of 2005.
|
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|
|
In December 2005, we announced a plan to develop our Nanjing,
China site into an integrated chemical complex that will include
a 600,000 metric ton acetic acid plant, a vinyl acetate unit and
a vinyl acetate emulsions unit. Startup is targeted for the
first half of 2007.
|
|
|
|
In December 2005, we sold our Cyclo-olefine Copolymer business
(COC) to a venture of Japans Daicel Chemical
Industries Ltd. (Daicel) and Polyplastics Co, Ltd.
(Polyplastics). Daicel holds a majority stake in the
venture with 55% interest and Polyplastics, which itself is a
venture between us and Daicel, owns the remaining 45%. The
transaction resulted in a loss of approximately $35 million.
|
|
|
|
In December 2005, we completed the sale of our common stock
interest in the Pemeas GmbH fuel cell venture and recognized a
gain of less than $1 million.
|
|
|
|
In December 2005, we announced that discussions regarding the
venture project being developed by Acetex and Tasnee
Petrochemicals in the Kingdom of Saudi Arabia have been
temporarily suspended due to the current high demand on
contractors and vendors which have affected expected project
costs.
|
|
|
|
In December 2005, we announced our intention to pursue strategic
alternatives for our Pampa, Texas plant. The facility, which
produces a variety of products based on butane, including
290,000 metric tons of acetic acid, faces competitive pressures
due to the technology utilized.
|
|
|
|
Increased our ownership of CAG to approximately 98% as of
November 2, 2005 following an agreement with major
shareholders and ongoing tender offers. In November 2005, our
Board of Directors granted approval to effect a Squeeze-Out of
the remaining minority shareholders of CAG. See Note 2 to
the consolidated financial statements for additional information.
|
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|
In the fourth quarter of 2005, we exited our filament business
(See Note 6 to the notes to consolidated financial
statements).
|
|
|
|
In October 2005, we completed the sale of our acetate
manufacturing facility in Rock Hill, South Carolina to Greens of
Rock Hill LLC. Production at the facility was phased out earlier
in 2005 as part of our previously announced plans to consolidate
our acetate flake manufacturing operations. We recognized a gain
on sale of approximately $23 million, which includes the
reversal of $12 million of asset retirement obligations and
$7 million of environmental reserves, as the purchaser
assumed these obligations.
|
|
|
|
In August 2005, our board adopted a dividend policy and we began
to pay common shareholders a dividend of $0.16 per share
annually, or 1%, based on the initial public offering price of
$16 per share.
|
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|
In July 2005, we completed the acquisition of Acetex Corporation
for $270 million and assumed Acetexs
$247 million of debt, which is net of cash acquired of
$54 million. We also redeemed Acetexs outstanding
107/8% senior
notes primarily with available cash of $280 million. See
Note 6 to the consolidated financial statements for
additional information.
|
|
|
|
Completed the transition to purchase our total requirements for
Gulf Coast methanol from Southern Chemical Corporation, a
Trinidad-based supplier.
|
|
|
|
Announced plans to construct a world-scale plant for the
manufacture of
GUR®
ultra-high molecular weight polyethylene in Asia. Production is
expected to begin in the second half of 2007.
|
42
|
|
|
|
|
Announced plans to implement our next generation of vinyl
acetate monomer technology, known as Vantage
Plustm.
We expect to further improve production efficiency and lower
operating costs across our global manufacturing platform through
the use of this technology.
|
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|
|
Continued to focus the product portfolio by exiting
non-strategic businesses, such as the high performance polymer
polybenzamidazole (PBI), vectran polymer and
emulsion powders.
|
|
|
|
In February 2005, we completed the acquisition of Vinamul, the
North American and European emulsion polymer business of
Imperial Chemical Industries PLC (ICI) for
$208 million. See Note 6 to the consolidated financial
statements for additional information.
|
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|
In January 2005, we completed an initial public offering of
50,000,000 shares of Series A common stock.
Concurrently, we issued 9,600,000 shares of convertible
perpetual preferred stock. See Note 3 to the consolidated
financial statements for additional information.
|
Major
Events In 2004
|
|
|
|
|
In December 2004, we approved a stock incentive plan for
executive officers, key employees and directors, a deferred
compensation plan for executive officers and key employees, as
well as other management incentive programs.
|
|
|
|
In November 2004, Blackstone Crystal Holdings Capital Partners
(Cayman) IV Ltd., reorganized as a Delaware company and changed
its name to Celanese Corporation.
|
|
|
|
In response to greater demand for Ticonas technical
polymers, two projects were announced to expand manufacturing
capacity. Ticona announced plans to increase production of
polyacetal in North America by about 20%, raising total capacity
to 102,000 tons per year at the Bishop, Texas facility. This
project was completed in October 2004.
|
|
|
|
In October 2004, we completed an organizational restructuring.
See Note 2 to the consolidated financial statements.
|
|
|
|
In October 2004, we announced plans to implement a strategic
restructuring of our acetate business to increase efficiency,
reduce overcapacity in certain areas and to focus on products
and markets that provide long-term value. The restructuring
resulted in $50 million of asset impairment charges
recorded as an other (charge) gain, net and $12 million in
charges to depreciation for related asset retirement obligations
for the nine months ended December 31, 2004.
|
43
Financial
Highlights
|
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|
|
|
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|
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|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
|
Predecessor
|
|
|
|
Year
|
|
|
Year
|
|
|
Nine Months
|
|
|
Nine Months
|
|
|
Three Months
|
|
|
|
Three Months
|
|
|
|
Ended
|
|
|
Ended
|
|
|
Ended
|
|
|
Ended
|
|
|
Ended
|
|
|
|
Ended
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
December 31,
|
|
|
December 31,
|
|
|
March 31,
|
|
|
|
March 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
2005
|
|
|
2004
|
|
|
2005
|
|
|
|
2004
|
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
(In $ millions, except percentages)
|
|
Statement of Operations
Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
|
6,656
|
|
|
|
6,033
|
|
|
|
4,564
|
|
|
|
3,718
|
|
|
|
1,469
|
|
|
|
|
1,209
|
|
Selling, general and
administrative expenses
|
|
|
(538
|
)
|
|
|
(511
|
)
|
|
|
(363
|
)
|
|
|
(454
|
)
|
|
|
(148
|
)
|
|
|
|
(136
|
)
|
Other (charges) gains, net:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Insurance recoveries associated
with plumbing cases
|
|
|
5
|
|
|
|
34
|
|
|
|
34
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
Restructuring, impairment and
other (charges) gains
|
|
|
(15
|
)
|
|
|
(100
|
)
|
|
|
(62
|
)
|
|
|
(83
|
)
|
|
|
(38
|
)
|
|
|
|
(28
|
)
|
Operating profit
|
|
|
747
|
|
|
|
573
|
|
|
|
417
|
|
|
|
72
|
|
|
|
156
|
|
|
|
|
46
|
|
Equity in net earnings of
affiliates
|
|
|
86
|
|
|
|
61
|
|
|
|
46
|
|
|
|
36
|
|
|
|
15
|
|
|
|
|
12
|
|
Interest expense
|
|
|
(294
|
)
|
|
|
(387
|
)
|
|
|
(211
|
)
|
|
|
(300
|
)
|
|
|
(176
|
)
|
|
|
|
(6
|
)
|
Earnings (loss) from continuing
operations before tax and minority interests
|
|
|
664
|
|
|
|
374
|
|
|
|
361
|
|
|
|
(180
|
)
|
|
|
13
|
|
|
|
|
66
|
|
Income tax provision
|
|
|
(253
|
)
|
|
|
(61
|
)
|
|
|
(53
|
)
|
|
|
(70
|
)
|
|
|
(8
|
)
|
|
|
|
(15
|
)
|
Earnings (loss) from continuing
operations
|
|
|
407
|
|
|
|
276
|
|
|
|
296
|
|
|
|
(258
|
)
|
|
|
(20
|
)
|
|
|
|
51
|
|
Earnings (loss) from discontinued
operations
|
|
|
(1
|
)
|
|
|
1
|
|
|
|
(9
|
)
|
|
|
5
|
|
|
|
10
|
|
|
|
|
27
|
|
Net earnings (loss)
|
|
|
406
|
|
|
|
277
|
|
|
|
287
|
|
|
|
(253
|
)
|
|
|
(10
|
)
|
|
|
|
78
|
|
Other Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
283
|
|
|
|
286
|
|
|
|
223
|
|
|
|
181
|
|
|
|
63
|
|
|
|
|
70
|
|
Operating margin(1)
|
|
|
11.2
|
%
|
|
|
9.5
|
%
|
|
|
9.1
|
%
|
|
|
1.9
|
%
|
|
|
10.6
|
%
|
|
|
|
3.8
|
%
|
Earnings (loss) from continuing
operations before tax and minority interests as a percentage of
net sales
|
|
|
10.0
|
%
|
|
|
6.2
|
%
|
|
|
7.9
|
%
|
|
|
(4.8
|
)%
|
|
|
0.9
|
%
|
|
|
|
5.5
|
%
|
|
|
|
(1) |
|
Defined as operating profit divided by net sales. |
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
|
As of
|
|
|
As of
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
|
(In $ millions)
|
|
|
Balance Sheet Data:
|
|
|
|
|
|
|
|
|
Short-term borrowings and current
installments of long-term debt third party and
affiliates
|
|
|
309
|
|
|
|
155
|
|
Plus: Long-term debt
|
|
|
3,189
|
|
|
|
3,282
|
|
|
|
|
|
|
|
|
|
|
Total debt
|
|
|
3,498
|
|
|
|
3,437
|
|
Less: Cash and cash equivalents
|
|
|
791
|
|
|
|
390
|
|
|
|
|
|
|
|
|
|
|
Net debt
|
|
|
2,707
|
|
|
|
3,047
|
|
|
|
|
|
|
|
|
|
|
44
Summary
of Consolidated Results for the Year Ended December 31,
2006 compared with Year Ended December 31, 2005
Net
Sales
For the year ended December 31, 2006, net sales increased
by 10.3% to $6,656 million compared to the same period in
2005. An increase in pricing of 4% for the year ended
December 31, 2006 driven by continued strong demand for the
majority of our products and higher raw material and energy
costs contributed to the improvement in net sales. Also, an
increase in overall volumes of 1% for the year ended
December 31, 2006, driven by our Ticona and Performance
Products business segments, contributed to the increase in net
sales. The volume increases are the results of increased market
penetration from several of Ticonas key products, an
improved business environment in Europe, continued growth in
Asia and continued growth in new and existing applications from
our
Sunett®
sweetener. Additionally, net sales from Acetex of
$542 million contributed to the increase in net sales for
the year ended December 31, 2006 as compared to
$247 million of net sales from Acetex for the same period
in 2005. The Acetex business was acquired in July 2005.
Gross
Profit
Gross profit as a percentage of net sales remained flat for the
year ended December 31, 2006 (21.7%) compared to the same
period in 2005 (21.6%). Overall higher raw material and energy
costs were mostly offset by higher volumes and pricing. Volumes
increased for such products as acetyls, acetyl derivative
products, POM, Vectra and GUR while overall pricing increased,
driven by increases in acetyls and acetyl derivative products.
Selling,
General and Administrative Expenses
Selling, general and administrative expenses increased by
$27 million to $538 million for the year ended
December 31, 2006 compared to the same period last year.
The increase consists of stock-based compensation expense of
$20 million resulting from our adoption of
SFAS No. 123(R) and $14 million related to our
long-term incentive plan. Additionally, the year ended
December 31, 2006 included additional selling, general and
administrative expenses from the Acetex business, which was
acquired in July 2005, as well as costs related to executive
severance and legal costs associated with the Squeeze-Out of CAG
shareholders of $23 million. These expenses were mostly
offset by ongoing cost savings initiatives from the Ticona and
Acetate Products segments and lower costs from the divestiture
of the COC business.
Other
(Charges) Gains, Net
The components of other (charges) gains, net for the years ended
December 31, 2006 and 2005 were as follows:
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
|
Year Ended
|
|
|
Year Ended
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
|
(In $ millions)
|
|
|
Employee termination benefits
|
|
|
(12
|
)
|
|
|
(23
|
)
|
Plant/office closures
|
|
|
1
|
|
|
|
(4
|
)
|
|
|
|
|
|
|
|
|
|
Total restructuring
|
|
|
(11
|
)
|
|
|
(27
|
)
|
Environmental related plant
closures
|
|
|
|
|
|
|
(12
|
)
|
Plumbing actions
|
|
|
5
|
|
|
|
34
|
|
Asset impairments
|
|
|
|
|
|
|
(25
|
)
|
Other
|
|
|
(4
|
)
|
|
|
(36
|
)
|
|
|
|
|
|
|
|
|
|
Total other (charges) gains, net
|
|
|
(10
|
)
|
|
|
(66
|
)
|
|
|
|
|
|
|
|
|
|
Other (charges) gains, net for the year ended December 31,
2006 decreased $56 million compared to the same period in
2005. The decrease is due to the absence of environmental
related plant closures of $12 million, the
45
absence of asset impairment charges of $25 million related
to the divestiture of our COC business and the absence of
$35 million related to the termination of advisor
monitoring services, all of which were recorded in 2005.
Operating
Profit
Operating profit for the year ended December 31, 2006
increased 30.3% compared to the same period last year. This is
principally driven by higher overall volumes and pricing, lower
other (charges) gains, net and productivity improvements. Also,
the year ended December 31, 2006 included operating profit
from Acetex of $5 million, an increase of $8 million
compared to the same period in 2005.
Equity
in Net Earnings of Affiliates
Equity in net earnings of affiliates increased 41% in the year
ended December 31, 2006 compared to the same period last
year. The increase was primarily due to additional income of
$8 million from the Infraserv affiliates, $4 million
from our Ticona affiliates as well as the absence of a
$10 million loss from Estech GmbH, recorded in 2005.
Interest
Expense
Interest expense decreased to $294 million for the year
ended December 31, 2006 from $387 million in the same
period last year. The decrease is primarily due to the absence
of $28 million related to accelerated amortization of
deferred financing costs and $74 million related to early
redemption premiums associated with the partial redemption of
the senior subordinated notes, senior discount notes and
floating rate term loan, both recorded in 2005.
Income
Taxes
Income tax expense increased by $192 million to
$253 million for the year ended December 31, 2006 and
the effective tax rate for this period was 38%, slightly higher
than the combined federal and state statutory rate of 37%. The
effective tax rate was favorably impacted by unrepatriated low
taxed earnings, primarily in Singapore. The effective tax rate
was unfavorably affected by (1) dividends and other passive
income inclusions from foreign subsidiaries and equity
investments, and (2) higher tax rates in certain foreign
jurisdictions, primarily Germany. The effective rate reflects a
partial benefit for the reversal of valuation allowance on
earnings in the U.S. of $5 million. Reversals of valuation
allowance established at the Acquisition resulting from positive
earnings or a change in judgment regarding the realizability of
the net deferred tax asset are primarily reflected as a
reduction of goodwill, which amounted to $84 million in
2006.
Earnings
(Loss) from Discontinued Operations
Earnings (loss) from discontinued operations primarily relates
to Acetate Products filament operations, which were
discontinued during the fourth quarter of 2005, and Chemical
Products Pentaerythritol (PE) operations,
which were discontinued during the third quarter of 2006. As a
result, revenues and expenses related to the filament and PE
operations are reflected as a component of discontinued
operations.
Summary
of Consolidated Results for the Three Months Ended
March 31, 2005 and the Nine Months Ended December 31,
2005 compared with the Three Months Ended March 31, 2004
and the Nine Months Ended December 31, 2004
Net
Sales
Net sales increased 22.8% to $4,564 million in the nine
months ended December 31, 2005 compared to the same period
in 2004. The improvement is primarily due to an 11% increase in
net sales from the Vinamul and Acetex acquisitions and 11%
higher pricing, mainly in the Chemical Products segment. Net
sales from Vinamul and Acetex (including AT Plastics) were
approximately $280 million and approximately
$247 million, respectively. These increases are partially
offset by a 1% decline in volumes primarily from the Chemical
Products acetyl derivatives business line and a decline in
Ticonas polyacetal volumes, partially offset by improved
volumes from
46
Acetate Products and Performance Products. For Chemical
Products, this is primarily due to weaker European market
conditions. The decline for Ticona is due to a weak European
automotive market and reduced sales to lower-end applications.
Acetate Products volumes improved 7% due to higher flake sales
to our recently expanded China tow ventures, which were
partially offset by lower tow volumes due to the shutdown of the
Canadian tow plant. Volumes from Performance Products improved
primarily for the
Sunett®
sweetener and sorbates due to continued growth from new and
existing applications mainly in the U.S. and European beverage
and confectionary markets.
Net sales rose 21.5% to $1,469 million in the first quarter
of 2005 compared to the same period in 2004 primarily on higher
pricing of 15%, mainly in the Chemical Products segment.
Favorable currency movements, higher volumes, and a composition
change in the Chemical Products segment each increased net sales
by 2%.
The segment composition changes consisted of the acquisition of
Vinamul in February 2005, which was partly offset by the effects
of a contract manufacturing arrangement under which certain
acrylates products are now being sold. Only the margin realized
under the contract manufacturing arrangement is included in net
sales.
Gross
Profit
Gross profit increased to 20.4% of net sales for the nine months
ended December 31, 2005 from 19.3% of net sales for the
same period in 2004. Gross profit increased to 25.3% of net
sales for the three months ended March 31, 2005 from 19.4%
of net sales for the same period in 2004. The increases are
primarily due to higher overall pricing, mainly in the Chemical
Products segment, offsetting higher raw material and energy
costs, mainly from natural gas and ethylene. The increase during
the nine months ended December 31, 2005 compared to the
same period in 2004 was also due to the additional gross profit
of $26 million and $24 million from Vinamul and Acetex
(including AT Plastics), respectively.
Selling,
General and Administrative Expenses
Selling, general and administrative expenses decreased
$91 million to $363 million in the nine months ended
December 31 2005 compared to the same period in 2004. This
decrease is due to ongoing cost savings initiatives,
organizational redesign of the Ticona and Acetate Products
segments, and decreases in legal, audit and general expenses
associated with the acquisition of CAG and the IPO. In addition,
2004 included approximately $50 million in new management
incentive compensation expenses, which includes charges for a
new deferred compensation plan, a new stock incentive plan and
other executive bonuses. These decreases are partially offset by
the addition of costs associated with Vinamul and Acetex of
$23 million and $22 million, respectively, which
included integration costs incurred in connection with the
acquisitions.
Selling, general and administrative expense increased to
$148 million in the three months ended March 31, 2005
compared to $136 million for the same period in 2004. This
increase is primarily due to expenses for sponsor monitoring
services of $10 million as well as higher costs primarily
related to compliance with Section 404 of the
Sarbanes-Oxley Act of 2002.
47
Other
(Charges) Gains, Net
The components of other (charges) gains, net for the nine months
ended December 31, 2005 and 2004 and the three months ended
March 31, 2005 and 2004 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
|
Predecessor
|
|
|
|
Nine Months Ended
|
|
|
Three Months Ended
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
March 31,
|
|
|
|
March 31,
|
|
|
|
2005
|
|
|
2004
|
|
|
2005
|
|
|
|
2004
|
|
|
|
(Unaudited)
|
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
(In $ millions)
|
|
Employee termination benefits
|
|
|
(21
|
)
|
|
|
(8
|
)
|
|
|
(2
|
)
|
|
|
|
(2
|
)
|
Plant/office closures
|
|
|
(3
|
)
|
|
|
(45
|
)
|
|
|
(1
|
)
|
|
|
|
|
|
Restructuring adjustments
|
|
|
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Restructuring
|
|
|
(24
|
)
|
|
|
(50
|
)
|
|
|
(3
|
)
|
|
|
|
(2
|
)
|
Environmental related plant
closures
|
|
|
(12
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plumbing actions
|
|
|
34
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
Asset impairments
|
|
|
(25
|
)
|
|
|
(32
|
)
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
(1
|
)
|
|
|
(1
|
)
|
|
|
(35
|
)
|
|
|
|
(26
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other (charges) gains, net
|
|
|
(28
|
)
|
|
|
(82
|
)
|
|
|
(38
|
)
|
|
|
|
(28
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other (charges) gains, net decreased to $28 million
compared to $82 million for the same period in 2004. The
nine months ended December 31, 2005 primarily relates to
charges for a change in the environmental remediation strategy
related to the closure of the Edmonton methanol plant, severance
associated with the same closure, severance related to the
relocation of corporate offices and asset impairments associated
with the planned disposal of the COC business of
$12 million, $8 million, $10 million and
$25 million, respectively. In addition, 2005 includes
$34 million associated with plumbing insurance recoveries.
Other (charges) gains, net for the nine months ended
December 31, 2004 of $82 million were largely related
to restructuring charges of $43 million resulting from
plans by the Acetate Products segment to consolidate tow
production at fewer sites and to discontinue production of
acetate filament and $32 million related to a decision to
dispose of the Ticona COC business.
Other (charges) gains, net increased $10 million for the
three months ended March 31, 2005 compared to the same
period in 2004. The charge for the three months ended
March 31, 2005 relates to fees paid to the Advisor to
terminate the monitoring services and all obligations to pay
future monitoring fees under the transaction and monitoring fee
agreement. The three months ended March 31, 2004 primarily
relates to $26 million for advisory services related to the
acquisition of CAG.
Operating
Profit
Operating profit increased to $417 million in the nine
months ended December 31, 2005 compared to $72 million
in the same period in 2004, principally driven by higher pricing
and productivity improvements resulting in a $212 million
increase in the gross profit margin, $91 million of lower
selling, general and administrative expenses and
$54 million of lower other (charges) gains, net. Partially
offsetting the increase is an $11 million loss on
disposition of assets compared to a $3 million gain
recorded in the same period in 2004 and higher raw material and
energy costs, mainly for ethylene and natural gas in 2005.
Included in 2005 is a $23 million gain on the disposition
of two Acetate Products properties, a $5 million gain on
the sale of Performance Products omega-3 DHA business,
offset by a $35 million loss on the disposal of
Ticonas COC business and $2 million of other losses.
For the nine months ended December 31, 2005, Vinamul and
Acetex (including AT Plastics), had operating losses of
$15 million and $4 million, respectively, primarily
related to integration costs in connection with the acquisitions
and inventory purchase accounting adjustments for Acetex.
Operating profit increased to $156 million for the three
months ended March 31, 2005 compared to $46 million in
the same period in 2004 on gross margin expansion of
$138 million, as significantly higher pricing, primarily in
Chemical Products, lower depreciation expense and productivity
improvements more than offset higher raw material and energy
costs. Operating profit also benefited from increased volumes in
Acetate Products,
48
Performance Products and Ticona. Depreciation and amortization
expense declined by $9 million as decreases in depreciation
resulting from purchase accounting adjustments, more than offset
increased amortization expense for acquired intangible assets.
Equity
in Net Earnings of Affiliates
Equity in net earnings of affiliates increased by
$10 million to $46 million for the nine months ended
December 31, 2005 compared to the same period in 2004. The
increase is primarily due to restructuring charges in our
European oxo venture in 2004. During the nine months ended
December 31, 2005, we received cash distributions from our
equity affiliates of $29 million compared to
$22 million in the same period in 2004.
Equity in net earnings of affiliates rose by $3 million to
$15 million for the three months ended March 31, 2005,
compared to the same period in 2004. Cash distributions received
from equity affiliates increased to $36 million for the
three months ended March 31, 2005, compared to
$16 million in the same period in 2004. The increase in
cash distributions is mainly due to strong business conditions
in 2004 for Ticonas high performance product ventures and
Chemical Products methanol venture and the timing of
dividend payments.
Interest
Expense
Interest expense decreased $89 million to $211 million
for the nine months ended December 31, 2005 compared to
$300 million in the same period in 2004. The decrease in
interest expense is due to expensing deferred financing costs of
$89 million and a prepayment premium of $21 million
associated with the refinancing of the mandatorily redeemable
preferred stock in 2004. The decrease was offset by a
$21 million increase in interest expense due to higher debt
levels and interest rates in 2005.
Interest expense increased to $176 million for the three
months ended March 31, 2005 from $6 million in the
same period in 2004, primarily due to expenses of
$102 million including early redemption premiums and
deferred financing costs associated with the refinancing that
occurred in the first quarter of 2005. Higher debt levels
resulting primarily from the acquisition of CAG and higher
interest rates also increased interest expense.
Other
Income (Expense), Net
Other income (expense), net increased to income of
$86 million for the nine months ended December 31,
2005, compared to expense of $12 million for the comparable
period in 2004. This increase is largely due to $42 million
in higher dividend income in 2005 primarily from our Saudi cost
investment due to higher methanol pricing. In addition,
$36 million of the increase is related to favorable
exchange rate movements and $17 million is due to favorable
changes in cross currency swap valuations in 2005.
Other income (expense), net decreased to $3 million of
income for the three months ended March 31, 2005, compared
to $9 million for the comparable period in 2004. This
decrease is primarily due to expenses associated with the
anticipated guaranteed payment to CAG minority shareholders and
the ineffective portion of a net investment hedge. These
decreases were partially offset by higher dividends from cost
investments. Dividend income accounted for under the cost method
increased by $8 million to $14 million for the three
months ended March 31, 2005, compared to the same period in
2004. The increase in the first quarter of 2005 primarily
resulted from the timing of receipt of dividends.
Income
Taxes
For the year ending December 31, 2005, the annual effective
tax rate was 16%, which is less than the combination of the
federal statutory rate and blended state income tax rates in the
U.S. The annual effective tax rate for 2005 reflects earnings in
low tax jurisdictions, a valuation allowance on the tax benefit
associated with U.S. and other foreign losses, tax expense in
certain non-U.S. jurisdictions and reversal of a
$31 million valuation allowance on certain German deferred
tax assets, primarily net operating loss carryforwards,
principally as a result of a tax sharing agreement. For the
nine months ended December 31, 2005, we recorded tax
expense of $53 million and the effective rate was 15%. For
the nine months ended December 31, 2004, we recorded
tax expense of $70 million and the effective tax rate was
negative 39%. The effective tax rate in 2004 was unfavorably
affected primarily by the
49
application of full valuation allowances against
post-Acquisition net U.S. deferred tax assets, Canadian deferred
tax assets due to post-acquisition restructuring, certain German
deferred tax assets and the non-recognition of tax benefits
associated with acquisition related expenses. These unfavorable
effects were partially offset by unrepatriated low taxed
earnings primarily in Singapore.
Income taxes for the three months ended March 31, 2005
and 2004, are recorded based on the annual effective tax rate.
As of March 31, 2005, the annual effective tax rate for
2005 was 35%, which was slightly less than the combination of
the statutory rate and state income tax rates in the U.S. The
estimated annual effective tax rate for 2005 reflects earnings
in low tax jurisdictions, a valuation allowance for the tax
benefit associated with projected U.S. losses (which includes
expenses associated with the early redemption of debt), and tax
expense in certain non-U.S. jurisdictions. The Predecessor had
an effective tax rate of 24% for the three months ended
March 31, 2004, compared to the German statutory rate of
40%, which was primarily affected by earnings in low tax
jurisdictions.
Earnings
(Loss) from Discontinued Operations
Earnings (loss) from discontinued operations primarily relates
to Acetate Products filament operations and Chemical
Products Pentaerythritol (PE) operations and
acrylates business. As a result, the related revenues and
expenses have been reflected as a component of discontinued
operations.
50
Selected
Data by Business Segment Year Ended
December 31, 2006 Compared with Year Ended
December 31, 2005, Nine Months Ended December 31, 2005
Compared with Nine Months Ended December 31, 2004 and Three
Months Ended March 31, 2005 Compared with Three Months
Ended March 31, 2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
|
Predecessor
|
|
|
|
Year Ended December 31,
|
|
|
Nine Months Ended December 31,
|
|
|
Three Months Ended March 31,
|
|
|
|
|
|
|
|
|
|
Change
|
|
|
|
|
|
|
|
|
Change
|
|
|
|
|
|
|
|
|
|
Change
|
|
|
|
2006
|
|
|
2005
|
|
|
in $
|
|
|
2005
|
|
|
2004
|
|
|
in $
|
|
|
2005
|
|
|
|
2004
|
|
|
in $
|
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
(In $ millions)
|
|
Net Sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chemical Products
|
|
|
4,742
|
|
|
|
4,299
|
|
|
|
443
|
|
|
|
3,264
|
|
|
|
2,547
|
|
|
|
717
|
|
|
|
1,035
|
|
|
|
|
809
|
|
|
|
226
|
|
Technical Polymers Ticona
|
|
|
915
|
|
|
|
887
|
|
|
|
28
|
|
|
|
648
|
|
|
|
636
|
|
|
|
12
|
|
|
|
239
|
|
|
|
|
227
|
|
|
|
12
|
|
Acetate Products
|
|
|
700
|
|
|
|
659
|
|
|
|
41
|
|
|
|
494
|
|
|
|
441
|
|
|
|
53
|
|
|
|
165
|
|
|
|
|
147
|
|
|
|
18
|
|
Performance Products
|
|
|
176
|
|
|
|
180
|
|
|
|
(4
|
)
|
|
|
133
|
|
|
|
131
|
|
|
|
2
|
|
|
|
47
|
|
|
|
|
44
|
|
|
|
3
|
|
Other Activities
|
|
|
257
|
|
|
|
144
|
|
|
|
113
|
|
|
|
132
|
|
|
|
45
|
|
|
|
87
|
|
|
|
12
|
|
|
|
|
11
|
|
|
|
1
|
|
Inter-segment Eliminations
|
|
|
(134
|
)
|
|
|
(136
|
)
|
|
|
2
|
|
|
|
(107
|
)
|
|
|
(82
|
)
|
|
|
(25
|
)
|
|
|
(29
|
)
|
|
|
|
(29
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Net Sales
|
|
|
6,656
|
|
|
|
6,033
|
|
|
|
623
|
|
|
|
4,564
|
|
|
|
3,718
|
|
|
|
846
|
|
|
|
1,469
|
|
|
|
|
1,209
|
|
|
|
260
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other (Charges) Gains,
net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chemical Products
|
|
|
(7
|
)
|
|
|
(18
|
)
|
|
|
11
|
|
|
|
(17
|
)
|
|
|
(3
|
)
|
|
|
(14
|
)
|
|
|
(1
|
)
|
|
|
|
(1
|
)
|
|
|
|
|
Technical Polymers Ticona
|
|
|
6
|
|
|
|
8
|
|
|
|
(2
|
)
|
|
|
9
|
|
|
|
(37
|
)
|
|
|
46
|
|
|
|
(1
|
)
|
|
|
|
(1
|
)
|
|
|
|
|
Acetate Products
|
|
|
1
|
|
|
|
(9
|
)
|
|
|
10
|
|
|
|
(8
|
)
|
|
|
(41
|
)
|
|
|
33
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
(1
|
)
|
Performance Products
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Activities
|
|
|
(10
|
)
|
|
|
(47
|
)
|
|
|
37
|
|
|
|
(12
|
)
|
|
|
(1
|
)
|
|
|
(11
|
)
|
|
|
(35
|
)
|
|
|
|
(26
|
)
|
|
|
(9
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Other (Charges) Gains, net
|
|
|
(10
|
)
|
|
|
(66
|
)
|
|
|
56
|
|
|
|
(28
|
)
|
|
|
(82
|
)
|
|
|
54
|
|
|
|
(38
|
)
|
|
|
|
(28
|
)
|
|
|
(10
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Profit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chemical Products
|
|
|
637
|
|
|
|
585
|
|
|
|
52
|
|
|
|
408
|
|
|
|
248
|
|
|
|
160
|
|
|
|
177
|
|
|
|
|
64
|
|
|
|
113
|
|
Technical Polymers Ticona
|
|
|
145
|
|
|
|
60
|
|
|
|
85
|
|
|
|
21
|
|
|
|
(12
|
)
|
|
|
33
|
|
|
|
39
|
|
|
|
|
31
|
|
|
|
8
|
|
Acetate Products
|
|
|
106
|
|
|
|
67
|
|
|
|
39
|
|
|
|
57
|
|
|
|
(17
|
)
|
|
|
74
|
|
|
|
10
|
|
|
|
|
4
|
|
|
|
6
|
|
Performance Products
|
|
|
50
|
|
|
|
51
|
|
|
|
(1
|
)
|
|
|
38
|
|
|
|
18
|
|
|
|
20
|
|
|
|
13
|
|
|
|
|
11
|
|
|
|
2
|
|
Other Activities
|
|
|
(191
|
)
|
|
|
(190
|
)
|
|
|
(1
|
)
|
|
|
(107
|
)
|
|
|
(165
|
)
|
|
|
58
|
|
|
|
(83
|
)
|
|
|
|
(64
|
)
|
|
|
(19
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Operating Profit
|
|
|
747
|
|
|
|
573
|
|
|
|
174
|
|
|
|
417
|
|
|
|
72
|
|
|
|
345
|
|
|
|
156
|
|
|
|
|
46
|
|
|
|
110
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (Loss) from Continuing
Operations Before Tax and Minority Interests
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chemical Products
|
|
|
709
|
|
|
|
667
|
|
|
|
42
|
|
|
|
474
|
|
|
|
265
|
|
|
|
209
|
|
|
|
193
|
|
|
|
|
63
|
|
|
|
130
|
|
Technical Polymers Ticona
|
|
|
201
|
|
|
|
116
|
|
|
|
85
|
|
|
|
65
|
|
|
|
26
|
|
|
|
39
|
|
|
|
51
|
|
|
|
|
45
|
|
|
|
6
|
|
Acetate Products
|
|
|
128
|
|
|
|
71
|
|
|
|
57
|
|
|
|
61
|
|
|
|
(13
|
)
|
|
|
74
|
|
|
|
10
|
|
|
|
|
4
|
|
|
|
6
|
|
Performance Products
|
|
|
49
|
|
|
|
46
|
|
|
|
3
|
|
|
|
34
|
|
|
|
15
|
|
|
|
19
|
|
|
|
12
|
|
|
|
|
11
|
|
|
|
1
|
|
Other Activities
|
|
|
(423
|
)
|
|
|
(526
|
)
|
|
|
103
|
|
|
|
(273
|
)
|
|
|
(473
|
)
|
|
|
200
|
|
|
|
(253
|
)
|
|
|
|
(57
|
)
|
|
|
(196
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Earnings (Loss) from
Continuing Operations Before Tax and Minority Interests
|
|
|
664
|
|
|
|
374
|
|
|
|
290
|
|
|
|
361
|
|
|
|
(180
|
)
|
|
|
541
|
|
|
|
13
|
|
|
|
|
66
|
|
|
|
(53
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
51
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
|
Predecessor
|
|
|
|
Year Ended December 31,
|
|
|
Nine Months Ended December 31,
|
|
|
Three Months Ended March 31,
|
|
|
|
|
|
|
|
|
|
Change
|
|
|
|
|
|
|
|
|
Change
|
|
|
|
|
|
|
|
|
|
Change
|
|
|
|
2006
|
|
|
2005
|
|
|
in $
|
|
|
2005
|
|
|
2004
|
|
|
in $
|
|
|
2005
|
|
|
|
2004
|
|
|
in $
|
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
(In $ millions)
|
|
Depreciation &
Amortization
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chemical Products
|
|
|
155
|
|
|
|
167
|
|
|
|
(12
|
)
|
|
|
133
|
|
|
|
89
|
|
|
|
44
|
|
|
|
34
|
|
|
|
|
39
|
|
|
|
(5
|
)
|
Technical Polymers Ticona
|
|
|
65
|
|
|
|
60
|
|
|
|
5
|
|
|
|
45
|
|
|
|
48
|
|
|
|
(3
|
)
|
|
|
15
|
|
|
|
|
16
|
|
|
|
(1
|
)
|
Acetate Products
|
|
|
24
|
|
|
|
29
|
|
|
|
(5
|
)
|
|
|
20
|
|
|
|
30
|
|
|
|
(10
|
)
|
|
|
9
|
|
|
|
|
11
|
|
|
|
(2
|
)
|
Performance Products
|
|
|
15
|
|
|
|
13
|
|
|
|
2
|
|
|
|
10
|
|
|
|
10
|
|
|
|
|
|
|
|
3
|
|
|
|
|
2
|
|
|
|
1
|
|
Other Activities
|
|
|
24
|
|
|
|
17
|
|
|
|
7
|
|
|
|
15
|
|
|
|
4
|
|
|
|
11
|
|
|
|
2
|
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Depreciation &
Amortization
|
|
|
283
|
|
|
|
286
|
|
|
|
(3
|
)
|
|
|
223
|
|
|
|
181
|
|
|
|
42
|
|
|
|
63
|
|
|
|
|
70
|
|
|
|
(7
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
52
Factors
Affecting Year Ended December 31, 2006 Segment Net Sales
Compared to Year Ended December 31, 2005
The charts below set forth the percentage increase (decrease) in
net sales attributable to each of the factors indicated in each
of our business segments.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Volume
|
|
|
Price
|
|
|
Currency
|
|
|
Other
|
|
|
Total
|
|
|
|
In percentages
|
|
|
Chemical Products
|
|
|
1
|
|
|
|
5
|
|
|
|
1
|
|
|
|
3
|
(a)
|
|
|
10
|
|
Technical Polymers Ticona
|
|
|
6
|
|
|
|
|
|
|
|
(1
|
)
|
|
|
(2
|
)(b)
|
|
|
3
|
|
Acetate Products
|
|
|
(1
|
)
|
|
|
7
|
|
|
|
|
|
|
|
|
|
|
|
6
|
|
Performance Products
|
|
|
7
|
|
|
|
(9
|
)
|
|
|
|
|
|
|
|
|
|
|
(2
|
)
|
|
|
|
Total Company
|
|
|
1
|
|
|
|
4
|
|
|
|
1
|
|
|
|
4
|
(c)
|
|
|
10
|
|
|
Factors
Affecting Nine Months Ended December 31, 2005 Segment Net
Sales Compared to Nine Months Ended December 31,
2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Volume
|
|
|
Price
|
|
|
Currency
|
|
|
Other
|
|
|
Total
|
|
|
|
In percentages
|
|
|
Chemical Products
|
|
|
(3
|
)
|
|
|
15
|
|
|
|
|
|
|
|
16
|
(a)
|
|
|
28
|
|
Technical Polymers Ticona
|
|
|
(1
|
)
|
|
|
4
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
2
|
|
Acetate Products
|
|
|
7
|
|
|
|
5
|
|
|
|
|
|
|
|
|
|
|
|
12
|
|
Performance Products
|
|
|
6
|
|
|
|
(4
|
)
|
|
|
|
|
|
|
|
|
|
|
2
|
|
|
|
|
Total Company
|
|
|
(1
|
)
|
|
|
11
|
|
|
|
|
|
|
|
11
|
(c)
|
|
|
21
|
|
|
Factors
Affecting Three Months Ended March 31, 2005 Segment Net
Sales Compared to Three Months Ended March 31,
2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Volume
|
|
|
Price
|
|
|
Currency
|
|
|
Other
|
|
|
Total
|
|
|
|
In percentages
|
|
|
Chemical Products
|
|
|
(1
|
)
|
|
|
22
|
|
|
|
3
|
|
|
|
4
|
|
|
|
28
|
|
Technical Polymers Ticona
|
|
|
2
|
|
|
|
|
|
|
|
3
|
|
|
|
|
|
|
|
5
|
|
Acetate Products
|
|
|
9
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
12
|
|
Performance Products
|
|
|
9
|
|
|
|
(7
|
)
|
|
|
5
|
|
|
|
|
|
|
|
7
|
|
|
|
|
Total Company
|
|
|
1
|
|
|
|
15
|
|
|
|
2
|
|
|
|
2
|
|
|
|
21
|
|
|
|
|
(a) |
Includes net sales from the Acetex business, excluding AT
Plastics
|
|
|
(b) |
Includes loss of sales related to the COC divestiture
|
|
|
(c) |
Includes the effects of AT Plastics and the captive insurance
companies
|
53
Summary
by Business Segment Year Ended December 31,
2006 Compared with Year Ended December 31, 2005
Chemical
Products
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
|
Year Ended
|
|
|
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
Change
|
|
|
|
2006
|
|
|
2005
|
|
|
in $
|
|
|
|
In $ millions (except for percentages)
|
|
|
Net sales
|
|
|
4,742
|
|
|
|
4,299
|
|
|
|
443
|
|
Net sales variance:
|
|
|
|
|
|
|
|
|
|
|
|
|
Volume
|
|
|
1
|
%
|
|
|
|
|
|
|
|
|
Price
|
|
|
5
|
%
|
|
|
|
|
|
|
|
|
Currency
|
|
|
1
|
%
|
|
|
|
|
|
|
|
|
Other
|
|
|
3
|
%
|
|
|
|
|
|
|
|
|
Operating profit
|
|
|
637
|
|
|
|
585
|
|
|
|
52
|
|
Operating margin
|
|
|
13.4
|
%
|
|
|
13.6
|
%
|
|
|
|
|
Other (charges) gains, net
|
|
|
(7
|
)
|
|
|
(18
|
)
|
|
|
11
|
|
Earnings from continuing
operations before tax and minority interests
|
|
|
709
|
|
|
|
667
|
|
|
|
42
|
|
Depreciation and amortization
|
|
|
155
|
|
|
|
167
|
|
|
|
(12
|
)
|
Chemical Products net sales increased 10% to
$4,742 million for the year ended December 31, 2006
compared to the same period in 2005. Pricing increased for most
products driven primarily by the Acetyl, Acetyl Derivatives and
Specialty business lines. Higher pricing was a result of
continued strong demand for the majority of the products and
higher raw material costs. Overall volumes increased 1% for the
year ended December 31, 2006 compared to the same period in
2005 primarily due to increased demand in Asia. Net sales also
increased due to $307 million of net sales from Acetex
(excluding AT Plastics), which was acquired in July 2005, an
increase of $172 million compared to the same period in
2005.
Operating profit increased 9% to $637 million for the year
ended December 31, 2006 compared to the same period in 2005
as price increases and lower other (charges) gains, net more
than offset raw material price increases. The lower other
(charges) gains, net was due to the absence of $6 million
of severance costs associated with the closure of the Edmonton
Methanol plant and $5 million of environmental relates
plant closure costs, both recorded in 2005.
Earnings from continuing operations before tax and minority
interests increased 6% to $709 million for the year ended
December 31, 2006 compared to the same period in 2005. The
improvement is primarily due to the increases in operating
profit. Equity in net earnings of affiliates increased
$17 million for the year ended December 31, 2006
compared to the same period in 2005.
54
Technical
Polymers Ticona
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
|
Year Ended
|
|
|
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
Change
|
|
|
|
2006
|
|
|
2005
|
|
|
in $
|
|
|
|
In $ millions (except for percentages)
|
|
|
Net sales
|
|
|
915
|
|
|
|
887
|
|
|
|
28
|
|
Net sales variance:
|
|
|
|
|
|
|
|
|
|
|
|
|
Volume
|
|
|
6
|
%
|
|
|
|
|
|
|
|
|
Price
|
|
|
0
|
%
|
|
|
|
|
|
|
|
|
Currency
|
|
|
(1
|
)%
|
|
|
|
|
|
|
|
|
Other
|
|
|
(2
|
)%
|
|
|
|
|
|
|
|
|
Operating profit
|
|
|
145
|
|
|
|
60
|
|
|
|
85
|
|
Operating margin
|
|
|
15.8
|
%
|
|
|
6.8
|
%
|
|
|
|
|
Other (charges) gains, net
|
|
|
6
|
|
|
|
8
|
|
|
|
(2
|
)
|
Earnings from continuing
operations before tax and minority interests
|
|
|
201
|
|
|
|
116
|
|
|
|
85
|
|
Depreciation and amortization
|
|
|
65
|
|
|
|
60
|
|
|
|
5
|
|
Ticonas net sales increased 3% to $915 million for
the year ended December 31, 2006 compared to the same
period in 2005. The increase for the year was primarily driven
by 6% higher volumes. Volumes increased in all product lines due
to increased market penetration and a stronger business
environment in Europe. Improved volumes during 2006 were
partially offset by the absence of net sales from the COC
business, which was divested in December 2005. During the year
ended December 31, 2005, COC recorded approximately
$19 million in net sales.
Operating profit increased to $145 million for the year
ended December 31, 2006 compared to $60 million for
the same period in 2005 as improved net sales more than offset
higher raw material and energy costs. Also contributing to the
increases are positive effects from the exit of the COC business
(including a reduction in other charges due to the 2005 asset
impairment charge of $25 million), productivity
improvements and lower spending due to an organizational
redesign. During the year ended December 31, 2005, COC
recorded an operating loss of $69 million, including asset
impairments mentioned above.
Earnings from continuing operations before tax and minority
interests increased 73% to $201 million for the year ended
December 31, 2006 compared to the same period in 2005. This
increase is primarily due to the increases in operating profit.
Equity in net earnings of affiliates increased $4 million
for the year ended December 31, 2006 compared to the same
period in 2005.
55
Acetate
Products
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
|
Year Ended
|
|
|
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
Change
|
|
|
|
2006
|
|
|
2005
|
|
|
in $
|
|
|
|
In $ millions (except for percentages)
|
|
|
Net sales
|
|
|
700
|
|
|
|
659
|
|
|
|
41
|
|
Net sales variance:
|
|
|
|
|
|
|
|
|
|
|
|
|
Volume
|
|
|
(1
|
)%
|
|
|
|
|
|
|
|
|
Price
|
|
|
7
|
%
|
|
|
|
|
|
|
|
|
Currency
|
|
|
0
|
%
|
|
|
|
|
|
|
|
|
Other
|
|
|
0
|
%
|
|
|
|
|
|
|
|
|
Operating profit
|
|
|
106
|
|
|
|
67
|
|
|
|
39
|
|
Operating margin
|
|
|
15.1
|
%
|
|
|
10.2
|
%
|
|
|
|
|
Other (charges) gains, net
|
|
|
1
|
|
|
|
(9
|
)
|
|
|
10
|
|
Earnings from continuing
operations before tax and minority interests
|
|
|
128
|
|
|
|
71
|
|
|
|
57
|
|
Depreciation and amortization
|
|
|
24
|
|
|
|
29
|
|
|
|
(5
|
)
|
Acetate Products net sales for the year ended
December 31, 2006 increased 6% to $700 million
compared to the same period in 2005 as higher prices and
increased flake volumes more than offset lower tow volumes. The
lower tow volumes, which were a result of shutting down our
Canadian tow plant, and lower sales to China, which were due to
the recent expansion of our China tow ventures were partially
offset by an increase in flake sales to other third parties and
venture partners.
Operating profit increased to $106 million for the year
ended December 31, 2006 compared to operating income of
$67 million in the same period in 2005. Higher pricing of
7%, savings from restructuring and lower other (charges) gain,
net and manufacturing costs more than offset lower overall sales
volumes and higher raw material and energy costs. The lower
other (charges) gains, net was due to the absence of
$7 million of environmental related plant closure costs,
which were recorded in 2005. Depreciation and amortization
decreased by $5 million due to a charge in 2005 related to
additions to asset retirement obligations.
Earnings from continuing operations before tax and minority
interests increased 80% to $128 million for the year ended
December 31, 2006 compared to the same period in 2005. This
increase is primarily due to the higher operating profits as
well as an increase of $19 million in dividends from our
China ventures received in 2006.
56
Performance
Products
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
|
Year Ended
|
|
|
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
Change
|
|
|
|
2006
|
|
|
2005
|
|
|
in $
|
|
|
|
In $ millions (except for percentages)
|
|
|
Net sales
|
|
|
176
|
|
|
|
180
|
|
|
|
(4
|
)
|
Net sales variance:
|
|
|
|
|
|
|
|
|
|
|
|
|
Volume
|
|
|
7
|
%
|
|
|
|
|
|
|
|
|
Price
|
|
|
(9
|
)%
|
|
|
|
|
|
|
|
|
Currency
|
|
|
0
|
%
|
|
|
|
|
|
|
|
|
Other
|
|
|
0
|
%
|
|
|
|
|
|
|
|
|
Operating profit
|
|
|
50
|
|
|
|
51
|
|
|
|
(1
|
)
|
Operating margin
|
|
|
28.4
|
%
|
|
|
28.3
|
%
|
|
|
|
|
Other (charges) gains, net
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings from continuing
operations before tax and minority interests
|
|
|
49
|
|
|
|
46
|
|
|
|
3
|
|
Depreciation and amortization
|
|
|
15
|
|
|
|
13
|
|
|
|
2
|
|
Performance Products net sales for the year ended
December 31, 2006 decreased 2% to $176 million
compared to $180 million in the same period in 2005. A 7%
improvement in volumes was more than offset by lower pricing of
9%. Volumes increased overall by 12% from the
Sunett®
sweetener products during the year ended December 31, 2006
due to strong demand from our customers associated with new
product launches, as well as the impact from the warmer than
normal temperatures in Europe and North America. Consistent with
our strategy,
Sunett®
sweetener pricing declined on lower unit selling prices
associated with higher volumes to our major customers. Pricing
for sorbates remained relatively flat during the year ended
December 31, 2006, while worldwide overcapacity still
prevailed in the industry.
Earnings from continuing operations before tax and minority
interests remained relatively flat for the year ended
December 31, 2006 compared to the same period in 2005,
increasing to $49 million from $46 million.
Other
Activities
Other Activities primarily consists of corporate center costs,
including financing and administrative activities, and certain
other operating entities, including the captive insurance
companies and the AT Plastics business.
Net sales for Other Activities increased to $257 million
from $144 million for the year ended December 31, 2006
compared to the same period in 2005. The increase is primarily
due to a full year of sales activity for AT Plastics in 2006
compared to five months of activity in 2005. Net sales for AT
Plastics increased to $235 million for the year ended
December 31, 2006 compared to $112 million for the
same period in 2005. The increase was partially offset by an
$8 million decrease in net sales resulting from the sale of
PBI and the Vectran product lines during the second quarter of
2005.
Operating loss of Other Activities remained flat for the year
ended December 31, 2006 compared to the same period in
2005. The operating loss increased during the year due to
executive severance and legal costs of $23 million
associated with the acquisition of minority shares of CAG and
related restructuring, stock-based compensation expense of
$20 million resulting from our adoption of
SFAS No. 123(R) and $14 million related to our
long-term incentive plan. The increase was offset by an increase
in operating profit from the AT Plastics business of
$17 million, the absence of $45 million related to the
2005 advisor monitoring fee and the termination of advisor
monitoring services agreement during the first quarter of 2005.
Loss from continuing operations before tax and minority
interests improved to a loss of $423 million from a loss of
$526 million for the year ended December 31, 2006
compared to the same period in 2005. The decrease is primarily
due to the decrease in operating losses previously discussed
above within this segment and a decrease in interest expense of
$93 million, due to $28 million related to accelerated
amortization of deferred financing costs
57
and $74 million related to early redemption premiums
associated with the partial redemption of the senior
subordinated notes, senior discount notes and floating rate term
loan, both recorded in 2005.
Summary
by Business Segment Nine Months Ended
December 31, 2005 Compared with Nine Months Ended
December 31, 2004 and Three Months Ended March 31,
2005 Compared with Three Months Ended March 31,
2004
Chemical
Products
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
|
Predecessor
|
|
|
|
|
|
|
Nine Months Ended
|
|
|
Three Months Ended
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
Change
|
|
|
March 31,
|
|
|
|
March 31,
|
|
|
Change
|
|
|
|
2005
|
|
|
2004
|
|
|
in $
|
|
|
2005
|
|
|
|
2004
|
|
|
in $
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
In $ millions (except for percentages)
|
|
Net sales
|
|
|
3,264
|
|
|
|
2,547
|
|
|
|
717
|
|
|
|
1,035
|
|
|
|
|
809
|
|
|
|
226
|
|
Net sales variance:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Volume
|
|
|
(3
|
)%
|
|
|
|
|
|
|
|
|
|
|
(1
|
)%
|
|
|
|
|
|
|
|
|
|
Price
|
|
|
15
|
%
|
|
|
|
|
|
|
|
|
|
|
22
|
%
|
|
|
|
|
|
|
|
|
|
Currency
|
|
|
0
|
%
|
|
|
|
|
|
|
|
|
|
|
3
|
%
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
16
|
%
|
|
|
|
|
|
|
|
|
|
|
4
|
%
|
|
|
|
|
|
|
|
|
|
Operating profit
|
|
|
408
|
|
|
|
248
|
|
|
|
160
|
|
|
|
177
|
|
|
|
|
64
|
|
|
|
113
|
|
Operating margin
|
|
|
12.5
|
%
|
|
|
9.7
|
%
|
|
|
|
|
|
|
17.1
|
%
|
|
|
|
7.9
|
%
|
|
|
|
|
Other (charges) gains, net
|
|
|
(17
|
)
|
|
|
(3
|
)
|
|
|
(14
|
)
|
|
|
(1
|
)
|
|
|
|
(1
|
)
|
|
|
|
|
Earnings from continuing
operations before tax and minority interests
|
|
|
474
|
|
|
|
265
|
|
|
|
209
|
|
|
|
193
|
|
|
|
|
63
|
|
|
|
130
|
|
Depreciation and amortization
|
|
|
133
|
|
|
|
89
|
|
|
|
44
|
|
|
|
34
|
|
|
|
|
39
|
|
|
|
(5
|
)
|
Nine
Months Ended December 31, 2005 Compared with Nine Months
Ended December 31, 2004
Chemical Products net sales increased 28% to
$3,264 million for the nine months ended December 31,
2005 compared to the same period in 2004. The increase is
primarily due to the inclusion of net sales from Vinamul and
Acetex (excluding AT Plastics) during 2005 of approximately
$280 million and $135 million, respectively. In
addition, pricing increased for most products, but primarily
from acetic acid, vinyl acetate monomer and acetyl derivatives.
The price increase was driven by continued strong demand, high
industry utilization in base products and higher raw material
costs, particularly for ethylene and natural gas. Overall,
volumes declined 3% primarily from acetyl derivatives partially
offset by significantly improved volumes from vinyl acetate
monomer. Volumes for emulsions were flat. The increase in
volumes from vinyl acetate monomer is primarily driven by
continued strong demand.
Other (charges) gain, net increased by $14 million for the
nine months ended December 31, 2005 compared to the same
period in 2004. Included in 2005 is $12 million in charges
for a change in the environmental remediation strategy related
to the closure of the Edmonton methanol plant and
$6 million for severance charges related to the same
closure.
Operating profit increased 65% to $408 million for the nine
months ended December 31, 2005 compared to the same period
in 2004. The increase is principally driven by higher pricing,
which more than offset higher raw material and energy costs. The
segment also benefited from a full quarter impact of its
Southern Chemical methanol supply contract. Basic products, such
as acetic acid and vinyl acetate monomer, had greater success in
maintaining margins while downstream products, such as polyvinyl
alcohol and emulsions, continued to experience margin
compression due to raw material costs rising faster than our
pricing. Operating profit was also favorably impacted in this
period due to $36 million from the settlement of
transportation-related antitrust matters, $14 million in
lower non-cash inventory-related purchase accounting adjustments
and Acetex (excluding AT Plastics) recording an operating profit
of $11 million in the nine months ended December 31,
2005. The increase in operating profit was
58
partially offset by Vinamul recording operating losses of
$15 million, which included integration costs in connection
with the acquisition. Additionally, depreciation and
amortization increased in 2005 compared to the same period in
2004 primarily related to purchase accounting adjustments in
both years.
Earnings from continuing operations before tax and minority
interests increased 79% to $474 million compared to the
same period in 2004 benefiting from increased operating profit
and dividends from our Saudi cost investment.
Three
Months Ended March 31, 2005 Compared with Three Months
Ended March 31, 2004
Chemical Products net sales increased 28% to
$1,035 million compared to the same period in 2004 mainly
on higher pricing, segment composition changes, of which
$66 million was related to Vinamul, and favorable currency
effects. Pricing increased for most products, driven by
continued strong demand and high utilization rates across the
chemical industry.
Earnings from continuing operations before tax and minority
interests increased to $193 million from $63 million
in the same period in 2004 as higher pricing was partially
offset by higher raw material costs. Earnings also benefited
from an increase of $9 million in dividends from our Saudi
cost investment, which totaled $12 million in the quarter.
The three months ended March 31, 2005 included
$1 million in earnings from Vinamul, which included
$1 million in non-cash inventory-related purchase
accounting adjustments and integration costs in connection with
the acquisition.
Technical
Polymers Ticona
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
|
Predecessor
|
|
|
|
|
|
|
Nine Months Ended
|
|
|
Three Months Ended
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
Change
|
|
|
March 31,
|
|
|
|
March 31,
|
|
|
Change
|
|
|
|
2005
|
|
|
2004
|
|
|
in $
|
|
|
2005
|
|
|
|
2004
|
|
|
in $
|
|
|
|
(Unaudited)
|
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
In $ millions (except for percentages)
|
|
Net sales
|
|
|
648
|
|
|
|
636
|
|
|
|
12
|
|
|
|
239
|
|
|
|
|
227
|
|
|
|
12
|
|
Net sales variance:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Volume
|
|
|
(1
|
)%
|
|
|
|
|
|
|
|
|
|
|
2
|
%
|
|
|
|
|
|
|
|
|
|
Price
|
|
|
4
|
%
|
|
|
|
|
|
|
|
|
|
|
0
|
%
|
|
|
|
|
|
|
|
|
|
Currency
|
|
|
(1
|
)%
|
|
|
|
|
|
|
|
|
|
|
3
|
%
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
0
|
%
|
|
|
|
|
|
|
|
|
|
|
0
|
%
|
|
|
|
|
|
|
|
|
|
Operating profit
|
|
|
21
|
|
|
|
(12
|
)
|
|
|
33
|
|
|
|
39
|
|
|
|
|
31
|
|
|
|
8
|
|
Operating margin
|
|
|
3.2
|
%
|
|
|
(1.9
|
)%
|
|
|
|
|
|
|
16.3
|
%
|
|
|
|
13.7
|
%
|
|
|
|
|
Other (charges) gains, net
|
|
|
9
|
|
|
|
(37
|
)
|
|
|
46
|
|
|
|
(1
|
)
|
|
|
|
(1
|
)
|
|
|
|
|
Earnings from continuing
operations before tax and minority interests
|
|
|
65
|
|
|
|
26
|
|
|
|
39
|
|
|
|
51
|
|
|
|
|
45
|
|
|
|
6
|
|
Depreciation and amortization
|
|
|
45
|
|
|
|
48
|
|
|
|
(3
|
)
|
|
|
15
|
|
|
|
|
16
|
|
|
|
(1
|
)
|
Nine
Months Ended December 31, 2005 Compared with Nine Months
Ended December 31, 2004
Ticonas net sales increased 2% to $648 million for
the nine months ended December 31, 2005 compared to the
same period in 2004. The increase is primarily driven by the
successful implementation of price increases, introduction of
new applications and increased penetration into key markets.
This increase is partially offset by lower overall volumes and
slightly unfavorable currency effects. Improved volumes from
most of Ticonas product lines were more than offset by a
decline in polyacetal volumes attributable to a weak European
automotive market and reduced sales to lower-end applications.
Ticona recorded income from other (charges) gains, net of
$9 million for the nine months ended December 31, 2005
compared to expense of $37 million for the same period in
2004. Included in 2005 is approximately $34 million
associated with plumbing insurance recoveries, which was
partially offset by an additional $25 million
59
non-cash impairment charge associated with the planned disposal
of the COC business. The $37 million in 2004 is primarily
related to a non-cash impairment charge from the COC business.
Operating profit increased to $21 million for the nine
months ended December 31, 2005 compared to an operating
loss of $12 million for the same period in 2004. The
successful implementation of price increases helped to offset
higher raw material and energy costs. Also contributing to the
increase are productivity improvements, cost savings from an
organizational redesign and lower depreciation and amortization
expenses due to changes in the useful lives of certain property,
plant and equipment. In addition, 2004 included a
$20 million charge to cost of sales for a non-cash
inventory-related purchase accounting adjustment. Operating
profit in the nine months ended December 31, 2005 includes
approximately $35 million for the loss on disposal of the
COC business compared to an impairment charge of
$32 million taken in 2004.
Earnings from continuing operations before tax and minority
interests increased to $65 million for the nine months
ended December 31, 2005 compared to $26 million in the
same period in 2004. This increase is primarily due to the
increase in operating profit, improved equity earnings from
Asian and U.S. affiliates due to increased sales volumes, a
$46 million reduction in other (charges) gains, net, and
the absence of a 2004 purchase accounting adjustment of
$20 million in 2005.
Three
Months Ended March 31, 2005 Compared with Three Months
Ended March 31, 2004
Net sales for Ticona increased by 5% to $239 million
compared to the same period in 2004 due to favorable currency
effects and slightly higher volumes. Volumes increased for most
product lines due to the successful introduction of new
applications, which outweighed declines in polyacetal volumes
resulting from our focus on high-end business and decreased
sales to European automotive customers. Overall pricing remained
flat over the same periods as successfully implemented price
increases were offset by lower average pricing for certain
products due to the commercialization of lower cost grades for
new applications.
Earnings from continuing operations before tax and minority
interests increased 13% to $51 million as the result of
restructuring cost savings, the favorable effects of a planned
maintenance turnaround and slightly higher volumes. These
increases were partially offset by higher raw material and
energy costs.
Acetate
Products
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
|
Predecessor
|
|
|
|
|
|
|
Nine Months Ended
|
|
|
Three Months Ended
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
Change
|
|
|
March 31,
|
|
|
|
March 31,
|
|
|
Change
|
|
|
|
2005
|
|
|
2004
|
|
|
in $
|
|
|
2005
|
|
|
|
2004
|
|
|
in $
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
In $ millions (except for percentages)
|
|
Net sales
|
|
|
494
|
|
|
|
441
|
|
|
|
53
|
|
|
|
165
|
|
|
|
|
147
|
|
|
|
18
|
|
Net sales variance:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Volume
|
|
|
7
|
%
|
|
|
|
|
|
|
|
|
|
|
9
|
%
|
|
|
|
|
|
|
|
|
|
Price
|
|
|
5
|
%
|
|
|
|
|
|
|
|
|
|
|
3
|
%
|
|
|
|
|
|
|
|
|
|
Currency
|
|
|
0
|
%
|
|
|
|
|
|
|
|
|
|
|
0
|
%
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
0
|
%
|
|
|
|
|
|
|
|
|
|
|
0
|
%
|
|
|
|
|
|
|
|
|
|
Operating profit
|
|
|
57
|
|
|
|
(17
|
)
|
|
|
74
|
|
|
|
10
|
|
|
|
|
4
|
|
|
|
6
|
|
Operating margin
|
|
|
11.5
|
%
|
|
|
(3.9
|
)%
|
|
|
|
|
|
|
6.1
|
%
|
|
|
|
2.7
|
%
|
|
|
|
|
Other (charges) gains, net
|
|
|
(8
|
)
|
|
|
(41
|
)
|
|
|
33
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
(1
|
)
|
Earnings from continuing
operations before tax and minority interests
|
|
|
61
|
|
|
|
(13
|
)
|
|
|
74
|
|
|
|
10
|
|
|
|
|
4
|
|
|
|
6
|
|
Depreciation and amortization
|
|
|
20
|
|
|
|
30
|
|
|
|
(10
|
)
|
|
|
9
|
|
|
|
|
11
|
|
|
|
(2
|
)
|
60
Nine
Months Ended December 31, 2005 Compared with Nine Months
Ended December 31, 2004
Acetate Products net sales for the nine months ended
December 31, 2005 increased 12% to $494 million
compared to the same period in 2004. The improvement is due to a
5% increase in pricing and a 7% increase in overall volumes.
Higher flake volumes from increased sales to our recently
expanded China tow ventures were partially offset by lower tow
volumes due to the shutdown of our Edmonton, Alberta, Canada tow
plant. Price increases partially offset higher raw material and
energy costs.
For the nine months ended December 31, 2005, the Acetate
Products segment recorded other (charges) gains, net of
$8 million compared to $41 million in the same period
in 2004. Other (charges) gains, net in 2005 primarily related to
a change in the environmental remediation strategy related to
the closure of the Edmonton methanol plant, while other
(charges) gains, net in the same period in 2004 primarily
represented asset impairments associated with the planned
consolidation of tow and flake production.
Operating profit increased to $57 million in the nine
months ended December 31, 2005 compared to an operating
loss of $17 million in the same period in 2004. The
increase is largely due to the decrease in other (charges)
gains, net described above and a $23 million gain on the
sale of the Rock Hill, S.C. plant and the Charlotte, N.C.
research and development center. In addition, depreciation and
amortization expense decreased primarily resulting from a lower
depreciable asset base due to previous asset impairments and an
$8 million charge for asset retirement obligations recorded
in 2004 associated with the restructuring of the business.
Higher pricing and savings from restructuring and productivity
improvements more than offset increased raw material and energy
costs, as well as temporarily higher manufacturing costs
resulting from a realignment of inventory levels as part of the
restructuring strategy.
Earnings from continuing operations before tax and minority
interests increased to $61 million for the nine months
ended December 31, 2005 compared to a $13 million loss
from continuing operations in the same period in 2004. This
increase is primarily due to the increase in operating profit
which included $33 million in lower other (charges) gains,
net and the $23 million gain on disposition of assets.
Three
Months Ended March 31, 2005 Compared with Three Months
Ended March 31, 2004
Net sales for Acetate Products increased by 12% to
$165 million compared to the same quarter in 2004 on higher
volumes and pricing. Flake volumes increased due to higher sales
to our recently expanded China tow ventures. Pricing increased
to partially offset higher raw material and energy costs.
Earnings from continuing operations before tax and minority
interests more than doubled from $4 million in the first
quarter of 2004 to $10 million in 2005 due to increased
volumes, pricing and productivity improvements, which more than
offset higher raw material and energy costs. Earnings also
benefited from $2 million in lower depreciation and
amortization expense largely as a result of previous
restructuring impairments, which was offset by $3 million
of expense for an asset retirement obligation.
61
Performance
Products
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
|
Predecessor
|
|
|
|
|
|
|
Nine Months Ended
|
|
|
Three Months Ended
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
Change
|
|
|
March 31,
|
|
|
|
March 31,
|
|
|
Change
|
|
|
|
2005
|
|
|
2004
|
|
|
in $
|
|
|
2005
|
|
|
|
2004
|
|
|
in $
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
In $ millions (except for percentages)
|
|
Net sales
|
|
|
133
|
|
|
|
131
|
|
|
|
2
|
|
|
|
47
|
|
|
|
|
44
|
|
|
|
3
|
|
Net sales variance:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Volume
|
|
|
6
|
%
|
|
|
|
|
|
|
|
|
|
|
9
|
%
|
|
|
|
|
|
|
|
|
|
Price
|
|
|
(4
|
)%
|
|
|
|
|
|
|
|
|
|
|
(7
|
)%
|
|
|
|
|
|
|
|
|
|
Currency
|
|
|
0
|
%
|
|
|
|
|
|
|
|
|
|
|
5
|
%
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
0
|
%
|
|
|
|
|
|
|
|
|
|
|
0
|
%
|
|
|
|
|
|
|
|
|
|
Operating profit
|
|
|
38
|
|
|
|
18
|
|
|
|
20
|
|
|
|
13
|
|
|
|
|
11
|
|
|
|
2
|
|
Operating margin
|
|
|
28.6
|
%
|
|
|
13.7
|
%
|
|
|
|
|
|
|
27.7
|
%
|
|
|
|
25
|
%
|
|
|
|
|
Other (charges) gains, net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings from continuing
operations before tax and minority interests
|
|
|
34
|
|
|
|
15
|
|
|
|
19
|
|
|
|
12
|
|
|
|
|
11
|
|
|
|
1
|
|
Depreciation and amortization
|
|
|
10
|
|
|
|
10
|
|
|
|
|
|
|
|
3
|
|
|
|
|
2
|
|
|
|
1
|
|
Nine
Months Ended December 31, 2005 Compared with Nine Months
Ended December 31, 2004
Net sales for the Performance Products segment increased 2% to
$133 million compared to $131 million in the same
period in 2004. The increase is primarily due to higher volumes
for the
Sunett®
sweetener partially offset by lower pricing. The increased
volumes for
Sunett®
reflects continuous growth from new and existing applications
mainly in the U.S. and European beverage and confectionary
markets. Pricing for
Sunett®
declined on lower unit selling prices associated with higher
volumes to major customers which is consistent with our
positioning strategy for the product. The pricing decrease for
Sunett®
was also driven by the expiration of a primary European and
U.S. production patent for
Sunett®
at the end of March 2005. Pricing for Sorbates increased in
2005, although worldwide overcapacity still prevailed in the
industry.
Operating profit increased 111% from the same period in 2004.
The increase was driven by improved business conditions for
Sorbates, as well as the results of various ongoing cost saving
initiatives. In addition, 2005 included a $3 million gain
on the sale of the omega-3 DHA business as part of our strategy
to sharpen its focus on the core sweetener and food protection
businesses. 2004 included a $12 million charge to cost of
sales for a non-cash inventory-related purchase accounting
adjustment.
Earnings from continuing operations before tax and minority
interests increased 127% primarily due to the increase in
operating profit, which principally resulted from the absence of
the purchase accounting charge in 2005 and the gain on the sale
of the omega-3 DHA business.
Three
Months Ended March 31, 2005 Compared with Three Months
Ended March 31, 2004
Net sales for the Performance Products segment increased by 7%
to $47 million compared to the same period in 2004 mainly
on higher volumes, which more than offset lower pricing.
Favorable currency movements also contributed to the sales
increase. Higher volumes for
Sunett®
sweetener reflected strong growth from new and existing
applications in the U.S. and European beverage and confectionary
markets. Pricing for
Sunett®
declined on lower unit selling prices associated with higher
volumes to major customers. Pricing for sorbates continued to
recover, although worldwide overcapacity still prevailed in the
industry.
Earnings from continuing operations before tax and minority
interests increased to $12 million from $11 million in
the same quarter in 2004. Strong volumes for
Sunett®,
as well as favorable currency movements and cost savings
outpaced lower pricing for the sweetener.
62
Other
Activities
Other Activities primarily consists of corporate center costs,
including financing and administrative activities, and certain
other operating entities, including the captive insurance
companies and the AT Plastics business. AT Plastics is a
business acquired in connection with the acquisition of Acetex
in July 2005.
Nine
Months Ended December 31, 2005 Compared with Nine Months
Ended December 31, 2004
Net sales for Other Activities increased to $132 million
from $45 million in the same period in 2004. The increase
is primarily due to the addition of $112 million in net
sales from the AT Plastics business, which was partially offset
by $13 million in lower third party revenues from the
captive insurance companies and $7 million related to the
divestitures of the performance polymer polybenzamidazole and
vectran polymer fiber businesses in the second quarter of 2005.
The operating loss of Other Activities decreased to
$107 million for the nine months ended December 31,
2005 compared to $165 million for the same period in 2004.
This decrease was primarily due to the absence of
$38 million in management incentive compensation expenses,
which were recorded in 2004, and lower IPO related consulting
and professional fees. The management incentive compensation
expenses included charges related to a new deferred compensation
plan, a new stock incentive plan and other executive bonuses.
The decrease is partially offset by operating losses from AT
Plastics of $15 million in 2005.
Loss from continuing operations before tax and minority
interests improved to a loss of $273 million from a loss of
$473 million in the same period in 2004. The decrease is
primarily due to the decrease in operating losses discussed
above and a decrease in interest expense of $89 million.
The decrease in interest expense is due to expensing deferred
financing costs of $89 million and a prepayment premium of
$21 million associated with the refinancing of the
mandatorily redeemable preferred stock in 2004. The decrease was
partially offset by a $21 million increase in interest
expense due to higher debt levels and interest rates in 2005.
Three
Months Ended March 31, 2005 Compared with Three Months
Ended March 31, 2004
Net sales for Other Activities increased slightly to
$12 million from $11 million in the same quarter in
2004. Loss from continuing operations before tax and minority
interests increased to $253 million from a loss of
$57 million in the same period in 2004, largely due to
$169 million of higher interest expense related to
refinancing costs, increased debt levels, and higher interest
rates in 2005. The loss includes $45 million of expenses
for sponsor monitoring and related cancellation fees compared to
other (charges) gains, net of $25 million in the same
period in 2004 for advisory services related to the acquisition
of CAG.
63
Liquidity
and Capital Resources
Our primary source of liquidity will continue to be cash
generated from operations, available cash and cash equivalents
and dividends from our portfolio of strategic investments. In
addition, we have availability under our amended and restated
credit facilities to assist, if required, in meeting our working
capital needs and other contractual obligations. We believe we
will have available resources to meet our liquidity requirements
for the remainder of the year, including debt service. 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 to increase our borrowings under
our lines of credit, reduce or delay capital expenditures, seek
additional capital or seek 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.
Cash
Flows
Cash and cash equivalents at December 31, 2006 were
$791 million, which was an increase of $401 million
from December 31, 2005. Cash and cash equivalents at
December 31, 2005 were $390 million, which was a
decrease of $448 million from December 31, 2004. See
below for details on the change in cash and cash equivalents
from December 31, 2005 to December 31, 2006 and the
change in cash and cash equivalents from December 31, 2004
to December 31, 2005.
Net
Cash Provided by/Used in Operating Activities
Cash provided by operating activities was $751 million for
the year ended December 31, 2006 compared with
$701 million for the same period in 2005. The increase in
operating cash flows was due primarily to an increase in
earnings from continuing operations partially offset by an
increase in cash used from changes in operating assets and
liabilities. Earnings from continuing operations increased to
$407 million for the year ended December 31, 2006
compared with $276 million for the same period in 2005. The
changes in operating assets and liabilities were driven
primarily by higher trade and other receivables offset by higher
trade payables. The increase in receivables is due to higher net
sales. The increase in trade payables is due to the timing of
payments.
Cash flow from operating activities increased to a cash inflow
of $701 million in 2005 compared to a cash outflow of
$164 million for the same period in 2004. This increase
primarily resulted from a $452 million increase in net
earnings from 2004, $429 million in lower pension
contributions and a $142 million increase in cash received
for trade receivables due to better receivables turnover. These
increases were partially offset by $72 million in less cash
from trade accounts payable as trade accounts payable grew, but
at a slower rate than in 2004. In addition, we paid
$77 million more interest payments and $45 million in
monitoring fees.
Net
Cash Used in Investing Activities
Net cash from investing activities improved to a cash outflow of
$268 million in 2006 compared to a cash outflow of
$907 million in 2005. The decrease in cash outflow is
primarily due to cash paid of $473 million for the purchase
of additional CAG shares in 2005, $216 million for the
purchase of Acetex in July 2005 and $198 million for the
purchase of Vinamul in February 2005. These decreases were
offset by the net effect of an increase in capital expenditures
of $40 million, an increase in purchases of other long term
assets of $43 million, an increase in restricted cash of
$42 million for the anticipated purchase of the remaining
CAG shares, a decrease in net proceeds from the sale and
purchase of marketable securities of $42 million, proceeds
received for the Ticona plant relocation of $26 million in
2006, a decrease in net proceeds received for the disposal of
discontinued operations of $75 million, a decrease in fees
associated with the 2005 acquisitions of $29 million and a
decrease in the proceeds received from the sales of assets of
$25 million.
Net cash from investing activities improved to a cash outflow of
$907 million in 2005 compared to a cash outflow of
$1,720 million in 2004. The cash outflow in 2004 primarily
resulted from the CAG acquisition. The 2005 cash outflow
included the acquisitions of the Vinamul and Acetex businesses,
the acquisition of additional CAG shares and a decrease in net
proceeds from disposal of discontinued operations of
$64 million. The net proceeds from the disposal of
discontinued operations represents cash received in 2005 from an
early contractual settlement
64
of receivables of $75 million related to the sale of
Vinnolit Kunstoff GmbH and Vintron GmbH. The net proceeds of
$139 million in the same period last year represented the
net proceeds from the sale of the acrylates business.
Our capital expenditures were $252 million,
$212 million and $204 million for the calendar years
2006, 2005 and 2004, respectively. Capital expenditures were
primarily related to major replacements of equipment, capacity
expansions, major investments to reduce future operating costs,
environmental, health and safety initiatives and in 2004, the
integration of a company-wide SAP platform. Capital expenditures
in 2006 and 2005 included costs for the expansion of our
Nanjing, China site into an integrated chemical complex. Capital
expenditures in 2004 included expenditures related to a new
Ticona research and administrative facility in Florence,
Kentucky and the expansion of production facilities for
polyacetal in Bishop, Texas and GUR in Oberhausen, Germany.
Capital expenditures are expected to be approximately
$280 million in 2007.
Net
Cash Provided by/Used in Financing Activities
Net cash from financing activities decreased to a cash outflow
of $108 million in 2006 compared to a cash outflow of
$144 million in 2005. The cash outflow in 2006 primarily
relates to the $100 million equivalent voluntary prepayment
of our Senior Term Loan facility on July 14, 2006 as well
as increased dividends paid on our Series A common stock
and our preferred stock of $15 million in 2006. We
commenced making common and preferred cash dividends during the
third quarter of 2005. The cash outflow in 2005 primarily
relates to the major financing activities for 2005 listed below.
Net cash from financing activities decreased to a cash outflow
of $144 million in 2005 compared to a cash inflow of
$2,643 million in the same period in 2004. The cash inflow
in 2004 primarily reflected higher net proceeds from borrowings
in connection with the acquisition of CAG. Major financing
activities for 2005 are as follows:
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Borrowings under the term loan facility of $1,135 million.
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Distribution to Series B shareholders of $804 million.
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Redemption and related premiums of the senior subordinated notes
of $572 million and senior discount notes of
$207 million.
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Proceeds from the issuances of common stock, net of
$752 million and preferred stock, net of $233 million.
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Repayment of floating rate term loan, including related premium,
of $354 million.
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Exercise of Acetexs option to redeem its
107/8% senior
notes for approximately $280 million.
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Payment of cash dividends of $13 million on our
Series A common stock and $8 million on our
convertible preferred stock.
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In addition, exchange rate effects on cash and cash equivalents
increased to a favorable currency effect of $26 million in
2006 from an unfavorable currency effect of $98 million in
2005. Exchange rate effects on cash and cash equivalents
decreased to an unfavorable currency effect of $98 million
in 2005 from a favorable currency effect of $24 million in
2004.
Liquidity
Our contractual obligations, commitments and debt service
requirements over the next several years are significant and are
substantially higher than historical amounts. As stated above,
our primary source of liquidity will continue to be cash
generated from operations, available cash and cash equivalents
and dividends from our portfolio of strategic investments. In
addition, we have availability under our amended and restated
credit facilities to assist, if required, in meeting our working
capital needs and other contractual obligations.
Debt,
Capital and Other Obligations
In January 2005, we completed an initial public offering of
Series A common stock and received net proceeds of
approximately $752 million after deducting
underwriters discounts and offering expenses of
$48 million. Concurrently, we received net proceeds of
$233 million from the offering of our convertible preferred
stock and
65
borrowed an additional $1,135 million under the amended and
restated senior credit facilities. A portion of the proceeds of
the share offerings were used to redeem $188 million of
senior discount notes and $521 million of senior
subordinated notes, which excludes early redemption premiums of
$19 million and $51 million, respectively. We also
used a portion of the proceeds from additional borrowings under
our senior credit facilities to repay our $350 million
floating rate term loan, which excludes a $4 million early
redemption premium and used $200 million of the proceeds as
the primary financing for the acquisition of the Vinamul
emulsions business.
On April 7, 2005, we used the remaining proceeds to pay a
special cash dividend to holders of our Series B common
stock of $804 million. Upon payment of the
$804 million dividend, all of the shares of Series B
common stock converted automatically to shares of Series A
common stock. In addition, we may use the available sources of
liquidity to purchase the remaining outstanding shares of CAG.
As discussed above, in 2005 we issued $240 million
aggregate liquidation preference of outstanding preferred stock.
Holders of the preferred stock are entitled to receive, when, as
and if, declared by our board of directors, out of funds legally
available therefor, cash dividends at the rate of 4.25% per
annum (or $1.06 per share) of liquidation preference,
payable quarterly in arrears, commencing on May 1, 2005.
Dividends on the preferred stock are cumulative from the date of
initial issuance. This dividend is expected to result in an
annual dividend payment of approximately $10 million.
Accumulated but unpaid dividends accumulate at an annual rate of
4.25%. The preferred stock is convertible, at the option of the
holder, at any time into shares of our Series A common
stock at a conversion rate of approximately 1.25 shares of
our Series A common stock per $25.00 liquidation preference
of the preferred stock. For the years ended December 31,
2006 and 2005, we paid $10 million and $8 million,
respectively, in aggregate dividends on our preferred stock. In
addition, at December 31, 2006, we had $2 million of
accumulated but undeclared and unpaid dividends, which were
declared on January 5, 2007 and paid on February 1,
2007.
In July 2005, our board of directors adopted a policy of
declaring, subject to legally available funds, a quarterly cash
dividend on each share of our Series A common stock at an
annual rate initially equal to approximately 1% of the $16.00
initial public offering price per share of our Series A
common stock (or $0.16 per share) unless our board of
directors in its sole discretion determines otherwise. For the
years ended December 31, 2006 and 2005, we paid
$26 million and $13 million, respectively, in
aggregate dividends on our Series A common stock. Based
upon the number of outstanding shares as of December 31,
2006, the anticipated annual cash dividend payment is
approximately $26 million. We declared on January 5,
2007 and paid on February 1, 2007 a quarterly cash dividend
of $6 million. However, there is no assurance that
sufficient cash or surplus will be available to pay the
remainder of the anticipated 2007 cash dividend.
As of December 31, 2006, we had total debt of
$3,498 million and cash and cash equivalents of
$791 million. As of December 31, 2006, net debt (total
debt less cash and cash equivalents) decreased to
$2,707 million from $3,047 million as of
December 31, 2005 primarily due to cash flows from
operations of $751 million offset by capital expenditures
of $252 million, the accretion of our senior discount notes
of $40 million, foreign currency impacts of
$73 million and the payment of dividends on our Series A
common stock and our preferred stock of $36 million.
We were initially capitalized by equity contributions totaling
$641 million from the Original Shareholders. On a stand
alone basis, Celanese Corporation and Crystal US Holdings 3 LLC
(Crystal LLC), the issuer of the senior discount
notes, have no material assets other than the stock of their
subsidiaries, and no independent external operations of their
own apart from the financing. As such, Celanese Corporation and
Crystal LLC generally will depend on the cash flow of their
subsidiaries to meet their obligations under the preferred
stock, the senior discount notes, the senior subordinated notes,
the term loans and any revolving credit borrowings and
guarantees.
66
Contractual Debt and Cash Obligations. The
following table sets forth our fixed contractual debt and cash
obligations as of December 31, 2006.
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Less Than
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After 5
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Fixed Contractual Debt and Cash Obligations
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Total
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1 Year
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Years 2 & 3
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Years 4 & 5
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Years
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(In $ millions)
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Term Loans Facility
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1,622
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115
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31
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1,476
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Interest Payments on Debt(1)
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1,843
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|
|
239
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|
483
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|
480
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|
|
641
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Senior Subordinated Notes(2)
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967
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967
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Senior Discount Notes(3)
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554
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|
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554
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Capital Lease Obligations
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25
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3
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4
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5
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13
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Other Debt(4)
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464
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191
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40
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43
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|
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190
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Total Fixed Contractual Debt
Obligations
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5,475
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548
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558
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2,004
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2,365
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Operating Leases
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339
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|
75
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|
121
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|
75
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|
68
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Unconditional Purchase Obligations
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2,229
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|
245
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|
500
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419
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1,065
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Other Contractual Obligations
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|
355
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|
|
|
239
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|
|
81
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|
33
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2
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Total Fixed Contractual Debt and
Cash Obligations
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8,398
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1,107
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1,260
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2,531
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3,500
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(1) |
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For future interest expense, we assumed no change in variable
rates. See Note 16 in the consolidated financial statements
for the applicable interest rates. |
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(2) |
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Does not include a $3 million premium. |
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(3) |
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Reflects an additional $134 million representing the
accreted value of the notes at maturity. |
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(4) |
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Does not include a $2 million reduction due to purchase
accounting. |
Senior Credit Facilities. As of
December 31, 2006, the senior credit facilities of
$2,450 million consist of a term loan facility of
$1,622 million, a revolving credit facility of
$600 million and a credit-linked revolving facility of
$228 million.
Subsequent to the consummation of the initial public offering in
January 2005, we entered into amended and restated senior credit
facilities which increased the term facility. The terms of the
amended and restated senior credit facilities are substantially
similar to the terms of our immediately previous senior credit
facilities. As of December 31, 2006, the term loan facility
had a balance of $1,622 million (including approximately
253 million of euro denominated debt), which matures
in 2011.
In addition, we have a $228 million credit-linked facility,
which matures in 2009 and includes borrowing capacity available
for letters of credit. As of December 31, 2006, there were
$218 million of letters of credit issued under the
credit-linked revolving facility; accordingly $10 million
remained available for borrowing. Substantially all of the
assets of Celanese Holdings LLC (Celanese Holdings),
the direct parent of BCP Crystal, and, subject to certain
exceptions, substantially all of its existing and future
U.S. subsidiaries, referred to as U.S. Guarantors,
secure these facilities. The borrowings under the senior credit
facilities bear interest at a rate equal to an applicable margin
plus, at the borrowers option, either a base rate or a
LIBOR rate. The applicable margin for borrowing under the base
rate option is 1.50% and for the LIBOR option, 2.50% (in each
case, subject to a step-down based on a performance test).
In the first quarter of 2005, the revolving credit facility was
increased from $380 million to $600 million under the
amended and restated senior credit facilities. As of
December 31, 2006, there were no letters of credit issued
or outstanding borrowings under the revolving credit facility;
accordingly $600 million remained available for borrowing.
In November of 2005, we entered into an amendment of the Amended
and Restated Credit Agreement decreasing the margin over LIBOR
on approximately $1,386 million of the U.S. dollar
denominated portion of the
67
Term Loans from 2.25% to 2.00%. In addition, a further reduction
of the interest rate to LIBOR plus 1.75% is allowed if certain
conditions are met.
As stated in the prepayment requirements under the amended and
restated senior credit facilities, we are required to prepay 50%
of our excess cash flow against our senior term loan facility.
Based on the excess cash flow calculation, as defined in our
amended and restated senior credit facilities, at
December 31, 2006, we will make a prepayment of
approximately $98 million on the senior term loan facility
in March 2007. In connection with this excess cash flow
prepayment, we will write off approximately $1 million of
unamortized deferred financing fees associated with the senior
term loan facility.
In July 2006, we made a $100 million equivalent voluntary
prepayment on our senior term loan facility. In connection with
the voluntary prepayment, we wrote off approximately
$1 million of unamortized deferred financing fees
associated with the senior term loan facility.
The senior credit facilities are subject to prepayment
requirements and contain covenants, defaults and other
provisions. The senior credit facilities require us to prepay
outstanding term loans, subject to certain exceptions, with:
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75% (such percentage will be reduced to 50% if BCP
Crystals leverage ratio is less than 3.00 to 1.00 for any
fiscal year ending on or after December 31, 2005) of
BCP Crystals excess cash flow;
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100% of the net cash proceeds of all non-ordinary course asset
sales and casualty and condemnation events, unless BCP Crystal
reinvests or contracts to reinvest those proceeds in assets to
be used in BCP Crystals business or to make certain other
permitted investments within 12 months, subject to certain
limitations;
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100% of the net cash proceeds of any incurrence of debt other
than debt permitted under the senior credit facilities, subject
to certain exceptions; and
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50% of the net cash proceeds of issuances of equity
of Celanese Holdings, subject to certain exceptions.
BCP Crystal may voluntarily repay outstanding loans under the
senior credit facility at any time without premium or penalty,
other than customary breakage costs with respect to
LIBOR loans.
In connection with the borrowing by BCP Crystal under the term
loan portion of the senior credit facilities, BCP Crystal and
CAC have entered into an intercompany loan agreement whereby BCP
Crystal has agreed to lend the proceeds from any borrowings
under its term loan facility to CAC. The intercompany loan
agreement contains the same amortization provisions as the
senior credit facilities. The interest rate with respect to the
loans made under the intercompany loan agreement is the same as
the interest rate with respect to the loans under BCP
Crystals term loan facility plus three basis points. BCP
Crystal intends to service the indebtedness under its term loan
facility with the proceeds of payments made to it by CAC under
the intercompany loan agreement.
Senior Subordinated Notes. In February 2005,
we used approximately $521 million of the net proceeds of
the offering of our Series A common stock to redeem a
portion of the senior subordinated notes and $51 million to
pay the premium associated with the redemption. As of
December 31, 2006, the senior subordinated notes, excluding
$3 million of premiums, consist of $796 million of
95/8% Senior
Subordinated Notes due 2014 and $171 million
(130 million) of
103/8%
Senior Subordinated Notes due 2014. All of BCP Crystals
obligations under the senior credit facilities guarantee the
senior subordinated notes on an unsecured senior subordinated
basis.
Senior Discount Notes. In September 2004,
Crystal LLC and Crystal US Sub 3 Corp., a subsidiary of Crystal
LLC, issued $853 million aggregate principal amount at
maturity of their senior discount notes due 2014 consisting of
$163 million principal amount at maturity of their 10%
Series A Senior Discount Notes due 2014 and
$690 million principal amount at maturity of their
101/2%
Series B Senior Discount Notes due 2014 (collectively, the
senior discount notes). The gross proceeds of the
offering were $513 million. Approximately $500 million
of the proceeds were distributed to our Original Shareholders,
with the remaining proceeds used to pay fees associated with the
refinancing. Until October 1, 2009, interest on the senior
discount notes will accrue in the form of an increase in the
accreted value of such notes. Cash interest on the senior
discount notes will accrue commencing on October 1, 2009
and be payable semiannually in arrears on April 1 and
October 1. In February 2005, we used approximately
$37 million of the net proceeds of the offering of our
Series A common stock to redeem a portion of the
Series A senior discount notes and $151 million to
redeem a portion of the Series B senior discount notes and
$19 million to pay the premium associated with such
redemption. As of December 31, 2006, there were
$554 million aggregate principal amount at maturity
outstanding, consisting of $106 million principal amount at
maturity of the 10% Series A Senior Discount Notes due 2014
and $448 million principal amount at maturity of the
101/2%
Series B
68
Senior Discount Notes due 2014. At December 31, 2006,
$339 million and $81 million were outstanding under
the
101/2%
and 10% Senior Discount Notes, respectively.
Other Debt. Other debt of $489 million,
which does not include a $2 million fair value reduction
due to purchase accounting, is primarily made up of fixed rate
pollution control and industrial revenue bonds, short-term
borrowings from affiliated companies and capital lease
obligations.
Other Cash Obligations. Unconditional Purchase
Obligations primarily include take or pay contracts. We do not
expect to incur any material losses under these contractual
arrangements. In addition, these contracts may include variable
price components.
Other Contractual Obligations primarily includes committed
capital spending and fines associated with the
U.S. antitrust settlement described in Note 25 to the
consolidated financial statements. Included in Other Contractual
Obligations is a 99 million fine from the European
Commission related to antitrust matters in the sorbates
industry, which is pending an appeal. We are indemnified by a
third party for 80% of the expenses relating to these matters,
which is not reflected in the amount above.
Covenants. The senior credit facilities
require BCP Crystal to maintain the following financial
covenants: a maximum total leverage ratio, a minimum interest
coverage ratio and maximum capital expenditures limitation. As
of December 31, 2006, we were in compliance with these
covenants. See Note 16 to the consolidated financial
statements for information regarding non-financial covenants.
At December 31, 2006, we have contractual guarantees and
commitments as follows:
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Expiration per period
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Less Than
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After 5
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Contractual Guarantees and Commitments
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Total
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1 Year
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Years 2 & 3
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Years 4 & 5
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Years
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(In $ millions)
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Financial Guarantees
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41
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7
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15
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16
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3
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Standby Letters of Credit
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218
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218
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Contractual Guarantees and
Commitments
|
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259
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225
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15
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16
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3
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Deferred Compensation. See Note 22,
Stock-Based and Other Management Compensation Plans, of the
consolidated financial statements for additional information.
The remaining aggregate maximum amount payable at
December 31, 2006 under this plan is $142 million, of
which $19 million has been accrued at that date due to the
accelerated vesting of certain plan participants. Should the
payout be triggered, we will fund the payments with either
existing cash, or borrowings from the revolving credit facility,
or a combination thereof. Upon the occurrence of the triggering
events mentioned in Note 22 to the consolidated financial
statements, the maximum amount earned and vested under the plan
as of December 31, 2006 is approximately $75 million,
exclusive of $19 million accrued in 2006 and payable in
2007 due to the accelerated vesting of certain plan participants.
Long-Term Incentive Plan. See Note 22,
Stock-Based and Other Management Compensation Plans, of the
consolidated financial statements for additional information. On
February 16, 2007, approximately $26 million was paid
to the LTIP plan participants.
Domination Agreement. The Domination Agreement
was approved at the CAG extraordinary shareholders meeting
on July 31, 2004. The Domination Agreement between CAG and
the Purchaser became effective on October 1, 2004. Our
subsidiaries, BCP Caylux Holdings Luxembourg S.C.A. and BCP
Crystal, have each agreed to provide the Purchaser with
financing to strengthen the Purchasers ability to fulfill
its obligations under, or in connection with, the Domination
Agreement and to ensure that the Purchaser will perform all of
its obligations under, or in connection with, the Domination
Agreement when such obligations become due, including, without
limitation, the obligation to compensate CAG for any statutory
annual loss incurred by CAG during the term of the Domination
Agreement. If BCP Caylux
and/or BCP
Crystal are obligated to make payments under such guarantees
69
or other security to the Purchaser
and/or the
minority shareholders, we may not have sufficient funds for
payments on our indebtedness when due. We have not had to
compensate CAG for an annual loss for any period during which
the Domination Agreement has been in effect.
Squeeze-Out Payment. The Squeeze-Out was
registered in the commercial register on December 31, 2006,
after several lawsuits by minority shareholders challenging the
shareholders resolution approving the Squeeze-Out were
withdrawn pursuant to a settlement agreement entered into
between plaintiff shareholders, the Purchaser and CAG on the
same day. A total amount of approximately 62 million
(approximately $82 million at December 31,
2006) was paid to minority shareholders in January 2007 as
fair cash compensation for the acquisition of their shares of
CAG.
Other
Obligations
We expect to continue to incur costs for the following
significant obligations. Although, we cannot predict with
certainty the annual spending for these matters, such matters
will affect our future cash flows.
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Spending for
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Spending for
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2007
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the Year Ended
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the Year Ended
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Projected
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December 31,
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December 31,
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Other Obligations
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Spending
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2006
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2005
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(In $ millions)
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Environmental Matters
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45
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71
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84
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Pension and Other Benefits
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104
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112
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111
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Other Obligations
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149
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183
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195
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We are secondarily liable under a lease agreement pursuant to
which we have assigned a direct obligation to a third party. The
lease assumed by the third party expires on April 30, 2012.
The lease liability for the period from January 1, 2007 to
April 30, 2012 is estimated to be approximately
$41 million.
Standby letters of credit of $218 million outstanding at
December 31, 2006 are irrevocable obligations of an issuing
bank that ensure payment to third parties in the event that
certain subsidiaries fail to perform in accordance with
specified contractual obligations. The likelihood is remote that
material payments will be required under these agreements. The
stand-by letters of credit include approximately
$29 million related to obligations associated with the
sorbates antitrust matters as described in the Other
Contractual Obligations above.
For additional commitments and contingencies, see Note 25
to the consolidated financial statements.
Environmental
Matters
For the years ended December 31, 2006 and 2005 and the nine
months ended December 31, 2004, the Successors
worldwide expenditures, including expenditures for legal
compliance, internal environmental initiatives and remediation
of active, orphan, divested and U.S. Superfund sites were
$71 million, $84 million and $66 million,
respectively. The Predecessors worldwide expenditures for
the three months ended March 31, 2004 were
$22 million. The Successors capital project related
environmental expenditures for the years ended December 31,
2006 and 2005 and the nine months ended December 31, 2004,
and the Predecessors for the three months ended
March 31, 2004, included in worldwide expenditures, were
$5 million, $8 million, $6 million and
$2 million, respectively. Environmental reserves for
remediation matters were $114 million and $124 million
as of December 31, 2006 and 2005, respectively, which
represents our best estimate. See Note 18 to the
consolidated financial statements.
It is anticipated that stringent environmental regulations will
continue to be imposed on the chemical industry in general. We
cannot predict with certainty future environmental expenditures,
especially expenditures beyond 2007. Due to new air regulations
in the U.S., we expect that there will be a temporary increase
in compliance costs that will total approximately
$10 million to $15 million through 2008.
Accordingly, Emission Trading Systems will directly affect the
power plants at the Kelsterbach and Oberhausen sites in Germany
and the Lanaken site in Belgium, as well as power plants
operated by InfraServ entities on sites at which we operate. We,
along with the InfraServ entities, may be required to purchase
carbon dioxide credits,
70
which could result in increased operating costs, or may be
required to develop additional cost-effective methods to reduce
carbon dioxide emissions further, which could result in
increased capital expenditures. Additionally, the new regulation
indirectly affects our other operations in the European Union,
which may experience higher energy costs from third party
providers. We have not yet determined the impact of this
legislation on our operating costs.
Due to our industrial history, we have the obligation to
remediate specific areas on our active sites as well as on
divested, orphan or U.S. Superfund sites. In addition, as
part of the demerger agreement with Hoechst, a specified
proportion of the responsibility for environmental liabilities
from a number of pre-demerger divestitures was transferred to
us. We have provided for such obligations when the event of loss
is probable and reasonably estimable. We believe that the
environmental costs will not have a material adverse effect on
our financial position, but they may have a material adverse
effect on our results of operations or cash flows in any given
accounting period. See Notes 18 and 25 to the consolidated
financial statements.
Pension
and Other Benefits
The funding policy for pension plans is to accumulate plan
assets that, over the long run, will approximate the present
value of projected benefit obligations. For the years ended
December 31, 2006 and 2005, there were no pension
contributions to the U.S. qualified defined benefit pension
plan. Contributions to other non-qualified plans (including Rest
of the World) for the years ended December 31, 2006 and
2005 were $53 million and $44 million, respectively.
On December 31, 2006, we adopted the recognition and
disclosure provisions of SFAS No. 158, which caused us
to recognize the funded status (i.e., the difference between the
fair value of plan assets and the projected benefit obligations)
of our benefit plans in the December 31, 2006 consolidated
balance sheet, with a corresponding adjustment to Accumulated
other comprehensive income (loss), net of tax. The net impact of
the adoption of SFAS No. 158 was an increase in
pension and postretirement benefit obligations of
$113 million with an offset to Accumulated other
comprehensive income (loss), net of tax. Based on the funded
status of our defined benefit pension and postretirement benefit
plans as of December 31, 2006, we reported a total unfunded
amount of $884 million of pension and postretirement
benefit obligations. Our adoption of SFAS No. 158 on
December 31, 2006 had no impact on our earnings.
Our spending associated with other benefit plans, primarily
retiree medical, defined contribution and long-term disability,
amounted to $59 million and $67 million for the years
ended December 31, 2006 and 2005, respectively. See
Note 17 to the consolidated financial statements.
In 2004, we amended our long-term disability plan to align the
benefit levels with the retiree medical plan. As a result of
this change, the employee contribution for the long-term
disability medical coverage increased substantially for current
participants in the disability plan. Subsequent to the adoption
of the change, enrollment in the plan has been trending
downward, with 20% of the participants declining coverage.
Accordingly, as a result of the lower enrollment experience, we
reduced the disability accrual by $3 million and
$9 million at December 31, 2006 and 2005,
respectively. In addition, medical claims assumptions were
lowered to reflect actual plan experience and the percentage of
long-term disability medical payments paid for by Medicare. This
change lowered the long-term disability accrual by an additional
$9 million.
Other
Matters
Plumbing
Actions and Sorbates Litigation
We are involved in a number of legal proceedings and claims
incidental to the normal conduct of our business. For the year
ended December 31, 2006, there were $14 million of
cash inflows in connection with the plumbing actions and
sorbates litigation. In February 2005, we settled with an
insurance carrier and received cash proceeds of $44 million
in March 2005 and in December 2005, we received $30 million
in additional settlements. For the year ended December 31,
2004, there were no net cash inflows in connection with the
plumbing actions and sorbates litigation. As of
December 31, 2006 and 2005, there were reserves of
$214 million and $197 million, respectively, for these
matters. In addition, we have receivables from insurance
companies and Hoechst in connection with the plumbing and
sorbates matters of $141 million and $140 million as
of December 31, 2006 and 2005, respectively.
71
Although it is impossible at this time to determine with
certainty the ultimate outcome of these matters, we believe,
based on the advice of legal counsel, that adequate provisions
have been made and that the ultimate outcome will not have a
material adverse effect on our financial position, but could
have a material adverse effect on our results of operations or
cash flows in any given accounting period. See Note 25 to
the consolidated financial statements.
Off-Balance
Sheet Arrangements
We have not entered into any material off-balance sheet
arrangements.
Market
Risks
Please see Quantitative and Qualitative Disclosure about
Market Risk under Item 7A of this
Form 10-K
for additional information about our Market Risks.
Critical
Accounting Policies and Estimates
Our consolidated financial statements are based on the selection
and application of significant accounting policies. The
preparation of these financial statements and application of
these policies requires us to make estimates and assumptions
that affect the reported amounts of assets and liabilities and
the disclosure of contingent assets and liabilities at the date
of the financial statements as well as the reported amounts of
revenues and expenses 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.
We believe the following accounting polices and estimates are
critical to understanding the financial reporting risks present
in the current economic environment. These matters, and the
judgments and uncertainties affecting them, are also essential
to understanding our reported and future operating results. See
Note 4 to the consolidated financial statements for a more
comprehensive discussion of our significant accounting policies.
Recoverability
of Long-Lived Assets
Our business is capital intensive and has required, and will
continue to require, significant investments in property, plant
and equipment. At December 31, 2006 and 2005, the carrying
amount of property, plant and equipment was $2,155 million
and $2,031 million, respectively. We assess the
recoverability of property, plant and equipment to be held and
used by a comparison of the carrying amount of an asset or group
of assets to the future net undiscounted cash flows expected to
be generated by the asset or group of assets. If such assets are
considered impaired, the impairment recognized is measured as
the amount by which the carrying amount of the assets exceeds
the fair value of the assets.
In December 2004, we approved a plan to dispose of the COC
business included within the Ticona segment. This decision
resulted in $25 million and $32 million of asset
impairment charges recorded as other (charges) gains, net
related to the COC business in the year ended December 31,
2005 and the nine months ended December 31, 2004,
respectively.
As a result of the consolidation of tow production and the
termination of filament production, the Acetate Products segment
recorded impairment charges of $50 million associated with
plant and equipment in the nine months ended December 31,
2004.
We assess the recoverability of the carrying value of our
goodwill and other intangible assets with indefinite useful
lives at least annually or whenever events or changes in
circumstances indicate that the carrying amount of the asset may
not be fully recoverable. As a result of our annual impairment
test on intangible assets with indefinite useful lives, we
recorded an impairment loss of $2 million for the year
ended December 31, 2006. As of December 31, 2006 and
2005, we had $1,338 million and $1,430 million,
respectively, of goodwill and other intangible assets, net.
As of December 31, 2006, there were no significant changes
in the underlying business assumptions or circumstances that led
us to believe goodwill might have been impaired. We will
continue to evaluate the need for
72
impairment if changes in circumstances or available information
indicate that impairment may have occurred. We perform the
required impairment test at least annually during the third
quarter of our fiscal year using June 30 balances unless
circumstances dictate more frequent testing. During 2006, we
performed the impairment test and determined that there was no
impairment of goodwill.
A prolonged general economic downturn and, specifically, a
continued downturn in the chemical industry as well as other
market factors could intensify competitive pricing pressure,
create an imbalance of industry supply and demand, or otherwise
diminish volumes or profits. Such events, combined with changes
in interest rates, could adversely affect our estimates of
future net cash flows to be generated by our long-lived assets.
Consequently, it is possible that our future operating results
could be materially and adversely affected by additional
impairment charges related to the recoverability of our
long-lived assets.
Other
(Charges) Gains, Net
Other (charges) gains, net include provisions for restructuring
and other expenses and income incurred outside the normal
ongoing course of operations. Restructuring provisions represent
costs related to severance and other benefit programs related to
major activities undertaken to fundamentally redesign our
operations as well as costs incurred in connection with a
decision to exit non-strategic businesses. These measures are
based on formal management decisions, establishment of
agreements with the employees representatives or
individual agreements with the affected employees as well as the
public announcement of the restructuring plan. The related
reserves reflect certain estimates, including those pertaining
to separation costs, settlements of contractual obligations and
other closure costs. We reassess the reserve requirements to
complete each individual plan under our restructuring program at
the end of each reporting period. Actual experience has been and
may continue to be different from these estimates. See
Note 20 to the consolidated financial statements.
Environmental
Liabilities
We recognize losses and accrue liabilities relating to
environmental matters if available information indicates that it
is probable that a liability has been incurred and the amount of
loss is reasonably estimated. Depending on the nature of the
site, we accrue through time horizons of ten to
fifteen years, unless we have government orders or other
agreements that extend beyond these time horizons. All other
fees are expensed as incurred. If the event of loss is neither
probable nor reasonably estimable, but is reasonably possible,
we provide appropriate disclosure in the notes to the
consolidated financial statements if the contingency is
considered material. The measurement of environmental
liabilities is based on a range of our periodic estimate of what
it will cost to perform each of the elements of the remediation
effort. We use our best estimate within the range to establish
our environmental reserves. We utilize third parties to assist
in the management and the development of our cost estimates for
our sites. We accrue for legal fees related to loss contingency
matters when the costs associated with defense can be reasonably
estimated and are probable to occur. See also Note 18 to
the consolidated financial statements.
Asset
Retirement Obligations
Total reserves for asset retirement obligations were
$59 million and $54 million at December 31, 2006
and 2005, respectively. SFAS No. 143 requires that the
fair value of a liability for an asset retirement obligation be
recognized in the period in which it is incurred and FASB
Interpretation No. 47, Accounting for Conditional Asset
Retirement Obligations an interpretation of FASB
Statement No. 143 (FIN No. 47)
provides guidelines as to when a company is required to
record a conditional asset retirement obligation. The liability
is measured at the discounted fair value and is adjusted to its
present value in subsequent periods as accretion expense is
recorded. The corresponding asset retirement costs are
capitalized as part of the carrying amount of the related
long-lived asset and depreciated over the assets remaining
useful life. We have identified but not recognized asset
retirement obligations related to substantially all of our
existing operating facilities. Examples of these types of
obligations include demolition, decommissioning, disposal and
restoration activities. Legal obligations exist in connection
with the retirement of these assets upon closure of the
facilities or abandonment of the existing operations. However,
operations at these facilities are expected to continue
indefinitely and therefore a reasonable estimate of fair value
cannot be determined at this time. We will continue to assess
strategies that may differ from past business decisions
regarding the continuing operation of existing facilities. Asset
retirement obligations will be recorded if these
73
strategies are changed and probabilities of closure are assigned
to existing facilities. If certain operating facilities were to
close, the related asset retirement obligations could
significantly affect our results of operations and cash flows.
Realization
of Deferred Tax Assets
We regularly review our deferred tax assets for recoverability
and establish a valuation allowance based on historical taxable
income, projected future taxable income, applicable tax
strategies, and the expected timing of the reversals of existing
temporary differences. A valuation allowance is provided when it
is more likely than not that some portion or all of the deferred
tax assets will not be realized. Such evaluations require
significant management judgments. Valuation allowances have been
established primarily for U.S. federal and state net
operating losses carryforwards, Mexican net operating loss
carryforwards and Canadian deferred tax assets. See Note 21
in the consolidated financial statements.
Tax
Contingencies
We have accruals for taxes and associated interest that may
become payable in future years as a result of audits by tax
authorities. We accrue for tax contingencies when it is probable
that a liability to a taxing authority has been incurred and the
amount of the contingency can be reasonably estimated. Although
we believe that the positions taken on previously filed tax
returns are reasonable, we nevertheless have established tax and
interest reserves in recognition that various taxing authorities
may challenge the positions taken by us resulting in additional
liabilities for taxes and interest. These amounts are reviewed
as circumstances warrant and adjusted as events occur that
affect our potential liability for additional taxes, such as
lapsing of applicable statutes of limitations, conclusion of tax
audits, additional exposure based on current calculations,
identification of new issues, release of administrative
guidance, or rendering of a court decision affecting a
particular tax issue. This policy may be impacted by the
adoption of FASB Interpretation No. 48, Accounting for
Uncertainty in Income Taxes an interpretation of
FASB Statement No. 109 (FIN 48), as
discussed in Note 5 in the consolidated financial
statements.
Benefit
Obligations
We have pension and other postretirement benefit plans covering
substantially all employees who meet eligibility requirements.
With respect to its U.S. qualified defined benefit pension
plan, minimum funding requirements are determined by the
Employee Retirement Income Security Act. Contributions to the
various pension and other postretirement benefit plans are
further discussed in Note 17 to the consolidated financials
statements. Benefits are generally based on years of service
and/or
compensation. Various assumptions are used in the calculation of
the actuarial valuation of the employee benefit plans. These
assumptions include the weighted average discount rate, rates of
increase in compensation levels, expected long-term rates of
return on plan assets and increases or trends in health care
costs. In addition to the above mentioned assumptions, actuarial
consultants use subjective factors such as withdrawal and
mortality rates to estimate the projected benefit obligation.
The actuarial assumptions used may differ materially from actual
results due to changing market and economic conditions, higher
or lower withdrawal rates or longer or shorter life spans of
participants. These differences may result in a significant
impact to the amount of pension expense recorded in future
periods.
The amounts recognized in the consolidated financial statements
related to pension and other postretirement benefits are
determined on an actuarial basis. A significant assumption used
in determining our pension expense is the expected long-term
rate of return on plan assets. At December 31, 2006 and
2005, we assumed an expected long-term rate of return on plan
assets of 8.5% for the U.S. qualified defined benefit
pension plan, which represents greater than 84% and 76% of
pension plan assets and liabilities, respectively. On average,
the actual return on plan assets over the long-term (15 to
20 years) has exceeded 9.0%. For the year ended
December 31, 2006, the U.S. qualified defined benefit
pension plan assets actual return was 630 basis points more
than the expected long-term rate of return of plan assets.
However, for the year ended December 31, 2005, the actual
return was 50 basis points less than the expected long-term
rate of return of plan assets. Based on our investment strategy,
we believe that 8.5% is a reasonable long-term rate of return.
74
We estimate a 25 basis point decline in the expected
long-term rate of return for the U.S. qualified defined
benefit pension plan to increase pension expense by an estimated
$6 million in 2006. Another estimate that affects our
pension and other postretirement benefit expense is the discount
rate used in the annual actuarial valuations of pension and
other postretirement benefit plan obligations. At the end of
each year, we determine the appropriate discount rate, used to
determine the present value of future cash flows currently
expected to be required to settle the pension and other
postretirement benefit obligations. The discount rate is
generally based on the yield on high-quality corporate
fixed-income securities. At December 31, 2006, we increased
the discount rate to 5.88% from 5.63% at December 31, 2005
for the U.S. plans. We estimate that a 50 basis point
decline in the discount rate for the U.S. pension and
postretirement medical plans will increase pension and other
postretirement benefit annual expenses by an estimated
$1 million and less than $1 million, respectively, and
our benefit obligations by approximately $165 million and
approximately $12 million, respectively. We estimate that a
50 basis point decline in the discount rate for the
non-U.S. pension
and postretirement medical plans will increase pension and other
postretirement benefit annual expenses by an estimated
$2 million and less than $1 million, respectively, and
will increase our benefit obligations by approximately
$56 million and approximately $3 million, respectively.
In 2005 and 2004, we experienced significant increases (in
excess of $300 million) in unrecognized net actuarial
pension losses. The losses were mainly due to the decline in the
discount rate utilized to reflect current market conditions.
However, in 2006, the discount rate increased resulting in a
lower unrecognized loss of $64 million. The increase in
discount rate and higher actual returns on plan assets resulted
in lower pension and postretirement benefit obligations in 2006
of approximately $295 million compared to 2005.
Other postretirement benefit plans provide medical and life
insurance benefits to retirees who meet minimum age and service
requirements. The postretirement benefit cost for the years
ended December 31, 2006 and 2005, the nine months ended
December 31, 2004 and the three months ended March 31,
2004, includes $21 million, $25 million,
$21 million and $8 million, respectively. The accrued
post-retirement liability was $343 million and
$408 million as of December 31, 2006 and 2005,
respectively, and is included in other noncurrent liabilities.
The key determinants of the accumulated postretirement benefit
obligation (APBO) are the discount rate and the
healthcare cost trend rate. The healthcare cost trend rate has a
significant effect on the reported amounts of APBO and related
expense. For example, increasing or decreasing the healthcare
cost trend rate by one percentage point in each year would
result in the APBO at December 31, 2006, and the 2006
postretirement benefit cost to change by approximately
$4 million and $1 million, respectively. See
Note 17 to the consolidated financial statements.
Accounting
for Commitments and Contingencies
We are subject to a number of legal proceedings, lawsuits,
claims, and investigations, incidental to the normal conduct of
our business, relating to and including product liability,
patent and intellectual property, commercial, contract,
antitrust, past waste disposal practices, release of chemicals
into the environment and employment matters, which are handled
and defended in the ordinary course of business. We routinely
assess the likelihood of any adverse judgments or outcomes to
these matters as well as ranges of probable and reasonably
estimable losses. Reasonable estimates involve judgments made by
us after considering a broad range of information including:
notifications, demands, settlements which have been received
from a regulatory authority or private party, estimates
performed by independent consultants and outside counsel,
available facts, identification of other potentially responsible
parties and their ability to contribute, as well as prior
experience. A determination of the amount of loss contingency
required, if any, is assessed in accordance with
SFAS No. 5 Contingencies and
Commitments and recorded if probable and estimable
after careful analysis of each individual matter. The required
reserves may change in the future due to new developments in
each matter and as additional information becomes available. See
Note 25 to the consolidated financial statements for
further discussion of the outstanding commitments and
contingencies and the related impact on our financial position
and results of operations.
Business
Combinations
Upon closing an acquisition, we estimate the fair values of
assets and liabilities acquired as soon as practicable. Given
the time it takes to obtain pertinent information to finalize
the acquired companys balance sheet (frequently with
implications for the purchase price of the acquisition), then to
adjust the acquired companys accounting policies,
procedures, books and records to our standards, it is often
several quarters before we are able to finalize
75
those initial fair value estimates. Accordingly, it is not
uncommon for the initial estimates to be subsequently revised
within twelve months of an acquisition. The judgments made in
determining the estimated fair value assigned to each class of
assets acquired and liabilities assumed, as well as asset lives,
can materially impact Net earnings (loss). See Note 2 to
the consolidated financial statements.
Captive
Insurance Companies
We have two wholly owned insurance companies (the
Captives) that are used as a form of self insurance
for property, liability and workers compensation risks. One of
the Captives also insures certain third party risks. The
liabilities recorded by the Captives relate to the estimated
risk of loss which is based on our estimates and actuarial
valuations, and unearned premiums, which represent the portion
of the third party premiums written applicable to the unexpired
terms of the policies in-force. Liabilities are recognized for
known claims when sufficient information has been developed to
indicate involvement of a specific policy and we can reasonably
estimate its liability. In addition, liabilities have been
established to cover additional exposure on both known and
unasserted claims. Estimates of the liabilities are reviewed and
updated regularly. It is possible that actual results could
differ significantly from the recorded liabilities. Premiums
written are recognized as revenue based on the terms of the
policies. Capitalization of the Captives is determined by
regulatory guidelines.
The Captives enter into reinsurance arrangements to reduce their
risk of loss. The reinsurance arrangements do not relieve the
Captives from its obligation to policyholders. Failure of the
reinsurers to honor their obligations could result in losses to
the Captives. The Captives evaluate the financial condition of
its reinsurers and monitor concentrations of credit risk to
minimize their exposure to significant losses from reinsurer
insolvencies and to establish allowances for amounts deemed
non-collectible.
76
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Item 7A.
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Quantitative
and Qualitative Disclosures about Market Risk
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Market
Risks
We are exposed to market risk through commercial and financial
operations. Our market risk consists principally of exposure to
currency exchange rates, interest rates and commodity prices. We
have in place policies of hedging against changes in currency
exchange rates, interest rates and commodity prices as described
below. Contracts to hedge exposures are accounted for under
SFAS No. 133, Accounting for Derivative Instruments
and Hedging Activities amended by SFAS No. 138,
Accounting for Certain Derivative Instruments and Certain
Hedging Activities and SFAS No. 148, Amendment
of Statement 133 on Derivative Instruments and Hedging
Activities.
Interest
Rate Risk Management
We may enter into interest rate swap agreements to reduce the
exposure of interest rate risk inherent in our outstanding debt
by locking in borrowing rates to achieve a desired level of
fixed/floating rate debt depending on market conditions. At both
December 31, 2006 and 2005, we had an outstanding interest
rate swap with a notional amount of $300 million. At
December 31, 2004, we had no interest rate swap agreements
in place. As of December 31, 2006, we had approximately
$1.6 billion of variable rate debt, net of the interest
rate swap. A 1% increase in interest rates would increase annual
interest expense by approximately $16 million.
See Note 24 to the consolidated financial statements for
further discussion of our interest rate risk management and the
related impact on our financial position and results of
operations.
Foreign
Exchange Risk Management
We have receivables and payables denominated in currencies other
than the functional currencies of the various subsidiaries,
which create foreign exchange risk. For the purposes of this
document, our reporting currency is the U.S. dollar, and
the functional reporting currency of CAG continues to be the
euro. The U.S. dollar, the euro, Mexican peso, Japanese
yen, British pound sterling, Chinese yuan and Canadian dollar
are the most significant sources of currency risk. Accordingly,
we enter into foreign currency forwards and swaps to minimize
our exposure to foreign currency fluctuations. The foreign
currency contracts are mainly for booked exposure and, in some
cases, cash flow hedges for anticipated exposure associated with
sales from the Performance Products segment. The terms of these
contracts are generally under one year. Our centralized hedging
strategy states that foreign currency denominated receivables or
liabilities recorded by the operating entities will be
internally hedged, only the remaining net foreign exchange
position will then be hedged externally with banks. As a result,
foreign currency forward contracts relating to this centralized
strategy did not meet the criteria of SFAS No. 133 to
qualify for hedge accounting. Net foreign currency transaction
gains or losses are recognized on the underlying transactions,
which are offset by losses and gains related to foreign currency
forward contracts.
A substantial portion of our assets, liabilities, revenues and
expenses are denominated in currencies other than
U.S. dollar, principally the euro. Fluctuations in the
value of these currencies against the U.S. dollar,
particularly the value of the euro, can have, and in the past
have had, a direct and material impact on the business and
financial results. For example, a decline in the value of the
euro versus the U.S. dollar, results in a decline in the
U.S. dollar value of our sales denominated in euros and
earnings due to translation effects. Likewise, an increase in
the value of the euro versus the U.S. dollar would result
in an opposite effect.
To protect the foreign currency exposure of a net investment in
a foreign operation, we entered into cross currency swaps with
certain financial institutions. Under the terms of the cross
currency swap arrangements, we will pay approximately
13 million in interest and receive approximately
$16 million in interest on each June 15 and
December 15. Upon maturity of the cross currency swap
agreement in June 2008, we will pay approximately
276 million and receive approximately
$333 million. We designated the cross currency swaps, part
of our senior euro term loan and the euro senior subordinated
note as a net investment hedge (for accounting purposes) in the
fourth quarter of 2004.
See Note 24 to the consolidated financial statements for
further discussion of our foreign exchange risk management and
the related impact on our financial position and results of
operations.
77
Commodity
Risk Management
Our policy for the majority of our commodity raw materials
requirements allows us to enter into forward purchase and/or
swap contracts to manage our risk. Although these contracts are
structured to limit our exposure to increases in commodity
prices, they can also limit the potential benefit we might have
otherwise received from decreases in commodity prices. We have
elected to apply the normal purchases provision to the forward
purchase and swap contracts that qualify as derivative
instruments as it was probable at the inception and throughout
the term of the contract that they would not settle net and
would result in physical delivery. Realized gains and losses on
these contracts are included in the cost of the commodity upon
settlement of the contract.
See Note 24 to the consolidated financial statements for
further discussion of our commodity risk management and the
related impact on our financial position and results of
operations.
|
|
Item 8.
|
Financial
Statements and Supplementary Data
|
Our consolidated financial statements and supplementary data are
included in pages F-2 through F-86 of this Annual Report on
Form 10-K.
See accompanying Item 15. Exhibits and Financial
Statement Schedules and Index to the consolidated
financial statements on
page F-1.
Quarterly
Financial Information
CELANESE
CORPORATION AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF OPERATIONS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
|
Three Months
|
|
|
Three Months
|
|
|
Three Months
|
|
|
Three Months
|
|
|
|
Ended
|
|
|
Ended
|
|
|
Ended
|
|
|
Ended
|
|
|
|
March 31,
|
|
|
June 30,
|
|
|
September 30,
|
|
|
December 31,
|
|
|
|
2006
|
|
|
2006
|
|
|
2006
|
|
|
2006
|
|
|
|
(Unaudited)
|
|
|
|
(In $ millions except for share and per share data)
|
|
|
Net sales
|
|
|
1,646
|
|
|
|
1,669
|
|
|
|
1,685
|
|
|
|
1,656
|
|
Other (charges) gains, net:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Insurance recoveries associated
with plumbing cases
|
|
|
1
|
|
|
|
2
|
|
|
|
|
|
|
|
2
|
|
Restructuring, impairment and
other (charges) gains, net
|
|
|
(1
|
)
|
|
|
(14
|
)
|
|
|
|
|
|
|
|
|
Operating profit
|
|
|
197
|
|
|
|
165
|
|
|
|
200
|
|
|
|
185
|
|
Earnings from continuing
operations before tax and minority interests
|
|
|
161
|
|
|
|
148
|
|
|
|
181
|
|
|
|
174
|
|
Earnings from continuing operations
|
|
|
116
|
|
|
|
105
|
|
|
|
107
|
|
|
|
79
|
|
Earnings (loss) from discontinued
operations
|
|
|
1
|
|
|
|
(2
|
)
|
|
|
2
|
|
|
|
(2
|
)
|
Net earnings
|
|
|
117
|
|
|
|
103
|
|
|
|
109
|
|
|
|
77
|
|
Earnings per share
basic
|
|
|
0.72
|
|
|
|
0.64
|
|
|
|
0.67
|
|
|
|
0.47
|
|
Earnings per share
diluted
|
|
|
0.67
|
|
|
|
0.60
|
|
|
|
0.64
|
|
|
|
0.45
|
|
78
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
|
Three Months
|
|
|
Three Months
|
|
|
Three Months
|
|
|
Three Months
|
|
|
|
Ended
|
|
|
Ended
|
|
|
Ended
|
|
|
Ended
|
|
|
|
March 31,
|
|
|
June 30,
|
|
|
September 30,
|
|
|
December 31,
|
|
|
|
2005
|
|
|
2005
|
|
|
2005
|
|
|
2005
|
|
|
|
(Unaudited)
|
|
|
|
(In $ millions except for share and per share data)
|
|
|
Net sales
|
|
|
1,469
|
|
|
|
1,498
|
|
|
|
1,526
|
|
|
|
1,540
|
|
Other (charges) gains, net:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Insurance recoveries associated
with plumbing cases
|
|
|
|
|
|
|
4
|
|
|
|
|
|
|
|
30
|
|
Restructuring, impairment and
other (charges) gains, net
|
|
|
(38
|
)
|
|
|
(31
|
)
|
|
|
(24
|
)
|
|
|
(7
|
)
|
Operating profit
|
|
|
156
|
|
|
|
155
|
|
|
|
95
|
|
|
|
167
|
|
Earnings from continuing
operations before tax and minority interests
|
|
|
13
|
|
|
|
126
|
|
|
|
77
|
|
|
|
158
|
|
Earnings (loss) from continuing
operations
|
|
|
(20
|
)
|
|
|
69
|
|
|
|
47
|
|
|
|
180
|
|
Earnings (loss) from discontinued
operations
|
|
|
10
|
|
|
|
(2
|
)
|
|
|
(2
|
)
|
|
|
(5
|
)
|
Net earnings (loss)
|
|
|
(10
|
)
|
|
|
67
|
|
|
|
45
|
|
|
|
175
|
|
Earnings (loss) per
share basic
|
|
|
(0.08
|
)
|
|
|
0.41
|
|
|
|
0.26
|
|
|
|
1.08
|
|
Earnings (loss) per
share diluted
|
|
|
(0.08
|
)
|
|
|
0.39
|
|
|
|
0.26
|
|
|
|
1.02
|
|
79
|
|
Item 9.
|
Changes
in and Disagreements with Accountants on Accounting and
Financial Disclosure
|
None.
|
|
Item 9A.
|
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
There were no changes in our internal control over financial
reporting that have materially affected, or are reasonably
likely to materially affect, our internal control over financial
reporting during our fourth quarter of 2006.
REPORT OF
MANAGEMENT ON INTERNAL CONTROL OVER FINANCIAL
REPORTING
Our management is responsible for establishing and maintaining
adequate internal control over financial reporting for the
company. Internal control over financial reporting is a process
to provide reasonable assurance regarding the reliability of our
financial reporting for external purposes in accordance with
accounting principles generally accepted in the United States of
America. Internal control over financial reporting includes
maintaining records that in reasonable detail accurately and
fairly reflect our transactions; providing reasonable assurance
that transactions are recorded as necessary for preparation of
our financial statements; providing reasonable assurance that
receipts and expenditures of company assets are made in
accordance with management authorization; and providing
reasonable assurance that unauthorized acquisition, use or
disposition of company assets that could have a material effect
on our financial statements would be prevented or detected on a
timely basis. Because of its inherent limitations, internal
control over financial reporting is not intended to provide
absolute assurance that a misstatement of our financial
statements would be prevented or detected.
Management conducted an evaluation of the effectiveness of our
internal control over financial reporting based on the framework
in Internal Control Integrated Framework issued by
the Committee of Sponsoring Organizations of the Treadway
Commission. Based on this evaluation, management concluded that
the companys internal control over financial reporting was
effective as of December 31, 2006. KPMG LLP has audited
this assessment of our internal control over financial
reporting; their report is included below.
80
REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Shareholders
Celanese Corporation:
We have audited managements assessment, included in the
accompanying Managements Report on Internal Control Over
Financial Reporting, that Celanese Corporation and
subsidiaries (Successor or the Company)
maintained effective internal control over financial reporting
as of December 31, 2006, based on criteria established in
Internal Control Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission
(COSO). The Companys management is responsible for
maintaining effective internal control over financial reporting
and for its assessment of the effectiveness of internal control
over financial reporting. Our responsibility is to express an
opinion on managements assessment and an opinion on the
effectiveness of the Companys internal control over
financial reporting based on our audit.
We conducted our audit in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether effective internal control
over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of
internal control over financial reporting, evaluating
managements assessment, testing and evaluating the design
and operating effectiveness of internal control, and performing
such other procedures as we considered necessary in the
circumstances. We believe that our audit provides a reasonable
basis for our opinion.
A companys internal control over financial reporting is a
process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with
generally accepted accounting principles. A companys
internal control over financial reporting includes those
policies and procedures that (1) pertain to the maintenance
of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the
company; (2) provide reasonable assurance that transactions
are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the company
are being made only in accordance with authorizations of
management and directors of the company; and (3) provide
reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of the
companys assets that could have a material effect on the
financial statements.
Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree
of compliance with the policies or procedures may deteriorate.
In our opinion, managements assessment that Celanese
Corporation maintained effective internal control over financial
reporting as of December 31, 2006, is fairly stated, in all
material respects, based on criteria established in Internal
Control Integrated Framework issued by the Committee
of Sponsoring Organizations of the Treadway Commission (COSO).
Also, in our opinion, Celanese Corporation maintained, in all
material respects, effective internal control over financial
reporting as of December 31, 2006, based on criteria
established in Internal Control Integrated Framework
issued by the Committee of Sponsoring Organizations of the
Treadway Commission (COSO).
We also have audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States), the
consolidated balance sheets of Celanese Corporation as of
December 31, 2006 and 2005, and the related consolidated
statements of operations, shareholders equity, and cash
flows for the years ended December 31, 2006 and
December 31, 2005 and the nine-month period ended
December 31, 2004, and our report dated February 20,
2007 expressed an unqualified opinion on those consolidated
financial statements.
/s/ KPMG LLP
Dallas, Texas
February 20, 2007
81
|
|
Item 9B.
|
Other
Information
|
None.
PART III
|
|
Item 10.
|
Directors
and Executive Officers of the Registrant
|
The information required by this Item 10 is incorporated
herein by reference from the section captioned Corporate
Governance, Our Management Team, and
Section 16(a) Beneficial Ownership Reporting
Compliance of the Companys definitive proxy
statement for the 2007 annual meeting of stockholders to be
filed not later than April 16, 2007 with the Securities and
Exchange Commission pursuant to Regulation 14A under the
Securities Exchange Act of 1934, as amended (the 2007
Proxy Statement).
|
|
Item 11.
|
Executive
Compensation
|
The information required by this Item 11 is incorporated by
reference from the section captioned Executive
Compensation of the 2007 Proxy Statement.
|
|
Item 12.
|
Security
Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters
|
The information required by this Item 12 is incorporated by
reference from the section captioned Stock
Ownership Information of the 2007 Proxy Statement.
|
|
Item 13.
|
Certain
Relationships and Related Transactions
|
The information required by this Item 13 is incorporated by
reference from the section captioned Certain Relationships
and Related Party Transactions of the 2007 Proxy Statement.
|
|
Item 14.
|
Principal
Accounting Fees and Services
|
The information required by this Item 14 is incorporated by
reference from the section captioned Ratification of
Independent Auditors Audit and Related Fees of
the 2007 Proxy Statement.
PART IV
|
|
Item 15.
|
Exhibits
and Financial Statement Schedules
|
1. Financial Statements. The reports of
our independent registered public accounting firm and our
consolidated financial statements are listed below and begin on
page F-1
of this Annual Report on
Form 10-K.
|
|
|
|
|
|
|
Page Number
|
|
|
|
|
|
F-2
|
|
|
|
|
F-4
|
|
|
|
|
F-5
|
|
|
|
|
F-6
|
|
|
|
|
F-7
|
|
|
|
|
F-8
|
|
2. Financial Statement Schedules.
The financial statement schedules required by this item are
included as an Exhibit to this Annual Report on
Form 10-K.
3. Exhibit List.
82
See Index to Exhibits following our consolidated financial
statements contained in this Annual Report on
Form 10-K.
PLEASE NOTE: It is inappropriate for readers
to assume the accuracy of, or rely upon any covenants,
representations or warranties that may be contained in
agreements or other documents filed as Exhibits to, or
incorporated by reference in, this Annual Report. Any such
covenants, representations or warranties may have been qualified
or superseded by disclosures contained in separate schedules or
exhibits not filed with or incorporated by reference in this
Annual Report, may reflect the parties negotiated risk
allocation in the particular transaction, may be qualified by
materiality standards that differ from those applicable for
securities law purposes, and may not be true as of the date of
this Annual Report or any other date and may be subject to
waivers by any or all of the parties. Where exhibits and
schedules to agreements filed or incorporated by reference as
Exhibits hereto are not included in these exhibits, such
exhibits and schedules to agreements are not included or
incorporated by reference herein.
83
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused
the report to be signed on its behalf by the undersigned,
thereunto duly authorized.
CELANESE CORPORATION
Name: David N. Weidman
|
|
|
|
Title:
|
Chairman of the Board of Directors,
Chief Executive Officer and
|
President
Date: February 21, 2007
POWER OF
ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose
signature appears below constitutes and appoints John J.
Gallagher III, his true and lawful attorney-in-fact with power
of substitution and resubstitution to sign in his name, place
and stead, in any and all capacities, to do any and all things
and execute any and all instruments that such attorney may deem
necessary or advisable under the Securities Exchange Act of 1934
and any rules, regulations and requirements of the U.S.
Securities and Exchange Commission in connection with the Annual
Report on
Form 10-K
and any and all amendments hereto, as fully for all intents and
purposes as he might or could do in person, and hereby ratifies
and confirms said attorney-in-fact, acting alone, and his
substitute or substitutes, may lawfully do or cause to be done
by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed by the following persons in
the capacities and on the dates indicated.
|
|
|
|
|
|
|
Signature
|
|
Title
|
|
Date
|
|
|
|
|
|
|
/s/ David
N. Weidman
David
N. Weidman
|
|
Chairman of the Board of
Directors, Chief Executive Officer
(Principal Executive Officer) and
President
|
|
February 21, 2007
|
|
|
|
|
|
/s/ John
J.
Gallagher III
John
J. Gallagher III
|
|
Executive Vice President,
Chief Financial Officer
(Principal Financial Officer)
|
|
February 21, 2007
|
|
|
|
|
|
/s/ Steven
M. Sterin
Steven
M. Sterin
|
|
Vice President, Controller
(Principal Accounting Officer)
|
|
February 21, 2007
|
|
|
|
|
|
/s/ James
E. Barlett
James
E. Barlett
|
|
Director
|
|
February 21, 2007
|
|
|
|
|
|
/s/ Chinh
E. Chu
Chinh
E. Chu
|
|
Director
|
|
February 21, 2007
|
84
|
|
|
|
|
|
|
Signature
|
|
Title
|
|
Date
|
|
/s/ David
F. Hoffmeister
David
F. Hoffmeister
|
|
Director
|
|
February 21, 2007
|
|
|
|
|
|
/s/ Benjamin
J. Jenkins
Benjamin
J. Jenkins
|
|
Director
|
|
February 21, 2007
|
|
|
|
|
|
/s/ Martin
G. McGuinn
Martin
G. McGuinn
|
|
Director
|
|
February 21, 2007
|
|
|
|
|
|
/s/ Anjan
Mukherjee
Anjan
Mukherjee
|
|
Director
|
|
February 21, 2007
|
|
|
|
|
|
/s/ Paul
H. ONeill
Paul
H. ONeill
|
|
Director
|
|
February 21, 2007
|
|
|
|
|
|
/s/ James
A. Quella
James
A. Quella
|
|
Director
|
|
February 21, 2007
|
|
|
|
|
|
/s/ Daniel
S. Sanders
Daniel
S. Sanders
|
|
Director
|
|
February 21, 2007
|
|
|
|
|
|
/s/ John
K. Wulff
John
K. Wulff
|
|
Director
|
|
February 21, 2007
|
85
INDEX TO
CONSOLIDATED FINANCIAL STATEMENTS
|
|
|
|
|
|
|
Page
|
|
ANNUAL CELANESE CORPORATION
CONSOLIDATED FINANCIAL STATEMENTS
|
|
|
|
|
|
|
|
F-2
|
|
|
|
|
F-4
|
|
|
|
|
F-5
|
|
|
|
|
F-6
|
|
|
|
|
F-7
|
|
|
|
|
F-8
|
|
F-1
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Shareholders
Celanese Corporation:
We have audited the accompanying consolidated balance sheets of
Celanese Corporation (Successor or the
Company) and subsidiaries as of December 31, 2006 and
2005, and the related consolidated statements of operations,
shareholders equity (deficit), and cash flows for the
years ended December 31, 2006 and December 31, 2005
and the nine-month period ended December 31, 2004. These
consolidated financial statements are the responsibility of the
Companys management. Our responsibility is to express an
opinion on these consolidated financial statements based on our
audits.
We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred
to above present fairly, in all material respects, the financial
position of Celanese Corporation and subsidiaries as of
December 31, 2006 and 2005, and the results of their
operations and their cash flows for the years ended
December 31, 2006 and December 31, 2005 and the
nine-month period ended December 31, 2004, in conformity
with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States), the
effectiveness of Celanese Corporations internal control
over financial reporting as of December 31, 2006, based on
criteria established in Internal Control Integrated
Framework issued by the Committee of Sponsoring Organizations of
the Treadway Commission (COSO), and our report dated
February 20, 2007 expressed an unqualified opinion on
managements assessment of, and the effective operation of,
internal control over financial reporting.
As discussed in Note 22 to the consolidated financial
statements, the Company adopted Statement of Accounting
Standards No. 123 (revised 2004), Share-Based
Payment, during the year ended December 31, 2006.
As discussed in Note 17 to the consolidated financial
statements, the Company adopted Statement of Accounting
Standards No. 158, Employers Accounting for
Defined Benefit Pension and Other Postretirement Plans,
during the year ended December 31, 2006.
As discussed in Notes 1 and 2 to the consolidated financial
statements, effective April 1, 2004 (a convenience date for
the April 6, 2004 acquisition date), a subsidiary of
Celanese Corporation acquired 84.3% of the outstanding stock of
Celanese AG in a business combination. As a result of the
acquisition, the consolidated financial information for the
periods after the acquisition is presented on a different cost
basis than that for the periods before the acquisition and,
therefore, is not comparable.
Dallas, Texas
February 20, 2007
F-2
Report
of Independent Registered Public Accounting Firm
To the Supervisory Board
Celanese AG:
We have audited the accompanying consolidated statements of
operations, shareholders equity, and cash flows of
Celanese AG and subsidiaries (Predecessor) for the
three-month period ended March 31, 2004 (Predecessor
periods). These consolidated financial statements are the
responsibility of the Companys management. Our
responsibility is to express an opinion on these consolidated
financial statements based on our audit.
We conducted our audit in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred
to above present fairly, in all material respects, the results
of operations and cash flows of Celanese AG and subsidiaries for
the Predecessor periods, in conformity with U.S. generally
accepted accounting principles.
As discussed in Note 4 to the consolidated financial statements,
Celanese AG and subsidiaries changed from using the last-in,
first-out or LIFO method of determining cost of inventories at
certain locations to the first-in, first-out or FIFO method.
/s/ KPMG
Deutsche Treuhand-Gesellschaft Aktiengesellschaft
Wirtschaftsprüfungsgesellschaft
Frankfurt am Main, Germany
March 30, 2005, except as to Note 4 (cash flows from
discontinued operations), and Note 6 (acetate filament
discontinued operations), which are as of March 31, 2006
and Note 6 (penthaerythritol discontinued operations), which is
as of February 20, 2007
F-3
CELANESE
CORPORATION AND SUBSIDIARIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
|
Predecessor
|
|
|
|
|
|
|
|
|
|
Nine Months
|
|
|
|
Three Months
|
|
|
|
Year Ended
|
|
|
Year Ended
|
|
|
Ended
|
|
|
|
Ended
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
March 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
2004
|
|
|
|
(In $ millions, except for share and per share data)
|
|
Net sales
|
|
|
6,656
|
|
|
|
6,033
|
|
|
|
3,718
|
|
|
|
|
1,209
|
|
Cost of sales
|
|
|
(5,214
|
)
|
|
|
(4,731
|
)
|
|
|
(3,000
|
)
|
|
|
|
(975
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
1,442
|
|
|
|
1,302
|
|
|
|
718
|
|
|
|
|
234
|
|
Selling, general and administrative
expenses
|
|
|
(538
|
)
|
|
|
(511
|
)
|
|
|
(454
|
)
|
|
|
|
(136
|
)
|
Amortization of intangible assets
(customer related)
|
|
|
(66
|
)
|
|
|
(51
|
)
|
|
|
(43
|
)
|
|
|
|
|
|
Research and development expenses
|
|
|
(70
|
)
|
|
|
(91
|
)
|
|
|
(67
|
)
|
|
|
|
(23
|
)
|
Other (charges) gains, net:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Insurance recoveries associated
with plumbing cases
|
|
|
5
|
|
|
|
34
|
|
|
|
1
|
|
|
|
|
|
|
Restructuring, impairment and other
(charges) gains
|
|
|
(15
|
)
|
|
|
(100
|
)
|
|
|
(83
|
)
|
|
|
|
(28
|
)
|
Foreign exchange gain (loss), net
|
|
|
(2
|
)
|
|
|
|
|
|
|
(3
|
)
|
|
|
|
|
|
Gain (loss) on disposition of
assets, net
|
|
|
(9
|
)
|
|
|
(10
|
)
|
|
|
3
|
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit
|
|
|
747
|
|
|
|
573
|
|
|
|
72
|
|
|
|
|
46
|
|
Equity in net earnings of affiliates
|
|
|
86
|
|
|
|
61
|
|
|
|
36
|
|
|
|
|
12
|
|
Interest expense
|
|
|
(294
|
)
|
|
|
(387
|
)
|
|
|
(300
|
)
|
|
|
|
(6
|
)
|
Interest income
|
|
|
37
|
|
|
|
38
|
|
|
|
24
|
|
|
|
|
5
|
|
Other income (expense), net
|
|
|
88
|
|
|
|
89
|
|
|
|
(12
|
)
|
|
|
|
9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) from continuing
operations before tax and minority interests
|
|
|
664
|
|
|
|
374
|
|
|
|
(180
|
)
|
|
|
|
66
|
|
Income tax provision
|
|
|
(253
|
)
|
|
|
(61
|
)
|
|
|
(70
|
)
|
|
|
|
(15
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) from continuing
operations before minority interests
|
|
|
411
|
|
|
|
313
|
|
|
|
(250
|
)
|
|
|
|
51
|
|
Minority interests
|
|
|
(4
|
)
|
|
|
(37
|
)
|
|
|
(8
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) from continuing
operations
|
|
|
407
|
|
|
|
276
|
|
|
|
(258
|
)
|
|
|
|
51
|
|
Earnings (loss) from discontinued
operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) from operation of
discontinued operations
|
|
|
(8
|
)
|
|
|
(3
|
)
|
|
|
3
|
|
|
|
|
1
|
|
Gain on disposal of discontinued
operations
|
|
|
5
|
|
|
|
|
|
|
|
2
|
|
|
|
|
13
|
|
Income tax benefit
|
|
|
2
|
|
|
|
4
|
|
|
|
|
|
|
|
|
13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) from discontinued
operations
|
|
|
(1
|
)
|
|
|
1
|
|
|
|
5
|
|
|
|
|
27
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings (loss)
|
|
|
406
|
|
|
|
277
|
|
|
|
(253
|
)
|
|
|
|
78
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative preferred stock dividend
|
|
|
(10
|
)
|
|
|
(10
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings (loss) available to
common shareholders
|
|
|
396
|
|
|
|
267
|
|
|
|
(253
|
)
|
|
|
|
78
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) per common
share basic:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
|
2.51
|
|
|
|
1.72
|
|
|
|
(2.60
|
)
|
|
|
|
1.03
|
|
Discontinued operations
|
|
|
(0.01
|
)
|
|
|
0.01
|
|
|
|
0.05
|
|
|
|
|
0.55
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings (loss) available to
common shareholders
|
|
|
2.50
|
|
|
|
1.73
|
|
|
|
(2.55
|
)
|
|
|
|
1.58
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) per common
share diluted:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
|
2.37
|
|
|
|
1.66
|
|
|
|
(2.60
|
)
|
|
|
|
1.03
|
|
Discontinued operations
|
|
|
(0.01
|
)
|
|
|
0.01
|
|
|
|
0.05
|
|
|
|
|
0.54
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings (loss) available to
common shareholders
|
|
|
2.36
|
|
|
|
1.67
|
|
|
|
(2.55
|
)
|
|
|
|
1.57
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares
basic:
|
|
|
158,597,424
|
|
|
|
154,402,575
|
|
|
|
99,377,884
|
|
|
|
|
49,321,468
|
|
Weighted average shares
diluted:
|
|
|
171,807,599
|
|
|
|
166,200,048
|
|
|
|
99,377,884
|
|
|
|
|
49,712,421
|
|
See the accompanying notes to the consolidated financial
statements.
F-4
CELANESE
CORPORATION AND SUBSIDIARIES
CONSOLIDATED
BALANCE SHEETS
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
|
As of
|
|
|
As of
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
|
(In $ millions, except
|
|
|
|
share amounts)
|
|
|
ASSETS
|
Current assets:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
791
|
|
|
|
390
|
|
Restricted cash
|
|
|
46
|
|
|
|
|
|
Receivables:
|
|
|
|
|
|
|
|
|
Trade receivables third
party and affiliates, net
|
|
|
1,001
|
|
|
|
919
|
|
Other receivables
|
|
|
475
|
|
|
|
481
|
|
Inventories
|
|
|
653
|
|
|
|
650
|
|
Deferred income taxes
|
|
|
76
|
|
|
|
37
|
|
Other assets
|
|
|
69
|
|
|
|
91
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
3,111
|
|
|
|
2,568
|
|
|
|
|
|
|
|
|
|
|
Investments
|
|
|
763
|
|
|
|
775
|
|
Property, plant and equipment, net
|
|
|
2,155
|
|
|
|
2,031
|
|
Deferred income taxes
|
|
|
22
|
|
|
|
139
|
|
Other assets
|
|
|
506
|
|
|
|
502
|
|
Goodwill
|
|
|
875
|
|
|
|
949
|
|
Intangible assets, net
|
|
|
463
|
|
|
|
481
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
|
7,895
|
|
|
|
7,445
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND
SHAREHOLDERS EQUITY
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Short-term borrowings and current
installments of long-term debt third party and
affiliates
|
|
|
309
|
|
|
|
155
|
|
Trade payables third
party and affiliates
|
|
|
823
|
|
|
|
811
|
|
Other current liabilities
|
|
|
787
|
|
|
|
787
|
|
Deferred income taxes
|
|
|
18
|
|
|
|
36
|
|
Income taxes payable
|
|
|
279
|
|
|
|
224
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
2,216
|
|
|
|
2,013
|
|
|
|
|
|
|
|
|
|
|
Long-term debt
|
|
|
3,189
|
|
|
|
3,282
|
|
Deferred income taxes
|
|
|
297
|
|
|
|
285
|
|
Benefit obligations
|
|
|
889
|
|
|
|
1,126
|
|
Other liabilities
|
|
|
443
|
|
|
|
440
|
|
Minority interests
|
|
|
74
|
|
|
|
64
|
|
Commitments and contingencies
|
|
|
|
|
|
|
|
|
Shareholders equity:
|
|
|
|
|
|
|
|
|
Preferred stock, $0.01 par
value, 100,000,000 shares authorized and 9,600,000 issued
and outstanding as of December 31, 2006 and 2005,
respectively
|
|
|
|
|
|
|
|
|
Series A common stock,
$0.0001 par value, 400,000,000 shares authorized and
158,668,666 and 158,562,161 shares issued and outstanding
as of December 31, 2006 and 2005, respectively
|
|
|
|
|
|
|
|
|
Series B common stock,
$0.0001 par value, 100,000,000 shares authorized and
0 shares issued and outstanding as of December 31,
2006 and 2005, respectively
|
|
|
|
|
|
|
|
|
Additional paid-in capital
|
|
|
362
|
|
|
|
337
|
|
Retained earnings
|
|
|
394
|
|
|
|
24
|
|
Accumulated other comprehensive
income (loss), net
|
|
|
31
|
|
|
|
(126
|
)
|
|
|
|
|
|
|
|
|
|
Total shareholders equity
|
|
|
787
|
|
|
|
235
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and
shareholders equity
|
|
|
7,895
|
|
|
|
7,445
|
|
|
|
|
|
|
|
|
|
|
See the accompanying notes to the consolidated financial
statements.
F-5
CELANESE
CORPORATION AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF SHAREHOLDERS EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retained
|
|
|
other
|
|
|
|
|
|
|
|
|
|
Preferred Stock
|
|
|
Common Stock
|
|
|
Additional
|
|
|
Earnings
|
|
|
Comprehensive
|
|
|
|
|
|
Total
|
|
|
|
Number
|
|
|
|
|
|
Number of
|
|
|
|
|
|
Paid-in
|
|
|
(Accumulated
|
|
|
Income (Loss),
|
|
|
Treasury
|
|
|
Shareholders
|
|
|
|
of Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Deficit)
|
|
|
Net
|
|
|
Stock
|
|
|
Equity (Deficit)
|
|
|
|
(In $ millions, except share and per share data)
|
|
|
Predecessor
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2003
|
|
|
|
|
|
|
|
|
|
|
49,321,468
|
|
|
|
150
|
|
|
|
2,714
|
|
|
|
25
|
|
|
|
(198
|
)
|
|
|
(109
|
)
|
|
|
2,582
|
|
Comprehensive income (loss), net of
tax:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
78
|
|
|
|
|
|
|
|
|
|
|
|
78
|
|
Other comprehensive income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gain (loss) on securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7
|
|
|
|
|
|
|
|
7
|
|
Foreign currency translation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(46
|
)
|
|
|
|
|
|
|
(46
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(39
|
)
|
|
|
|
|
|
|
(39
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
39
|
|
Amortization of deferred
compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at March 31, 2004
|
|
|
|
|
|
|
|
|
|
|
49,321,468
|
|
|
|
150
|
|
|
|
2,715
|
|
|
|
103
|
|
|
|
(237
|
)
|
|
|
(109
|
)
|
|
|
2,622
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series B common stock issued
upon formation of the Company
|
|
|
|
|
|
|
|
|
|
|
99,377,884
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contributed Capital
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
641
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
641
|
|
Comprehensive income (loss), net of
tax:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(253
|
)
|
|
|
|
|
|
|
|
|
|
|
(253
|
)
|
Other comprehensive income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized loss on securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7
|
)
|
|
|
|
|
|
|
(7
|
)
|
Foreign currency translation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7
|
|
|
|
|
|
|
|
7
|
|
Unrealized gain on derivative
contracts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2
|
|
|
|
|
|
|
|
2
|
|
Additional minimum pension liability
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(19
|
)
|
|
|
|
|
|
|
(19
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(17
|
)
|
|
|
|
|
|
|
(17
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(270
|
)
|
Indemnification of demerger
liability
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3
|
|
Dividend to Original Shareholders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(500
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(500
|
)
|
Management compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2004
|
|
|
|
|
|
|
|
|
|
|
99,377,884
|
|
|
|
|
|
|
|
158
|
|
|
|
(253
|
)
|
|
|
(17
|
)
|
|
|
|
|
|
|
(112
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Conversion of Series B common
stock to Series A common stock
|
|
|
|
|
|
|
|
|
|
|
(99,377,884
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of Series A common
stock
|
|
|
|
|
|
|
|
|
|
|
151,062,161
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of preferred stock
|
|
|
9,600,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series A stock dividend
|
|
|
|
|
|
|
|
|
|
|
7,500,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income (loss), net of
tax:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
277
|
|
|
|
|
|
|
|
|
|
|
|
277
|
|
Other comprehensive income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gain (loss) on securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3
|
|
|
|
|
|
|
|
3
|
|
Unrealized gain on derivative
contracts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional minimum pension liability
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(117
|
)
|
|
|
|
|
|
|
(117
|
)
|
Foreign currency translation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5
|
|
|
|
|
|
|
|
5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(109
|
)
|
|
|
|
|
|
|
(109
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
168
|
|
Indemnification of demerger
liability
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5
|
|
Common stock dividends
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(13
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(13
|
)
|
Preferred stock dividends
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(8
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(8
|
)
|
Net proceeds from issuance of
common stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
752
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
752
|
|
Net proceeds from issuance of
preferred stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
233
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
233
|
|
Net proceeds from issuance of
discounted common stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12
|
|
Stock based compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2
|
|
Special cash dividend to original
shareholders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(804
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(804
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2005
|
|
|
9,600,000
|
|
|
|
|
|
|
|
158,562,161
|
|
|
|
|
|
|
|
337
|
|
|
|
24
|
|
|
|
(126
|
)
|
|
|
|
|
|
|
235
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of Series A shares
related to stock option exercises
|
|
|
|
|
|
|
|
|
|
|
106,505
|
|
|
|
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2
|
|
Comprehensive income (loss), net of
tax:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
406
|
|
|
|
|
|
|
|
|
|
|
|
406
|
|
Other comprehensive income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gain on securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13
|
|
|
|
|
|
|
|
13
|
|
Unrealized gain on derivative
contracts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2
|
|
|
|
|
|
|
|
2
|
|
Pension and postretirement benefits
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
137
|
|
|
|
|
|
|
|
137
|
|
Foreign currency translation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5
|
|
|
|
|
|
|
|
5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
157
|
|
|
|
|
|
|
|
157
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
563
|
|
Indemnification of demerger
liability
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3
|
|
Common stock dividends
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(26
|
)
|
|
|
|
|
|
|
|
|
|
|
(26
|
)
|
Preferred stock dividends
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(10
|
)
|
|
|
|
|
|
|
|
|
|
|
(10
|
)
|
Stock-based compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2006
|
|
|
9,600,000
|
|
|
|
|
|
|
|
158,668,666
|
|
|
|
|
|
|
|
362
|
|
|
|
394
|
|
|
|
31
|
|
|
|
|
|
|
|
787
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See the accompanying notes to the consolidated financial
statements.
F-6
CELANESE
CORPORATION AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
|
Predecessor
|
|
|
|
|
|
|
|
|
|
Nine Months
|
|
|
|
Three Months
|
|
|
|
Year Ended
|
|
|
Year Ended
|
|
|
Ended
|
|
|
|
Ended
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
March 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
2004
|
|
|
|
|
|
|
(In $ millions)
|
|
|
|
|
|
Operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings (loss)
|
|
|
406
|
|
|
|
277
|
|
|
|
(253
|
)
|
|
|
|
78
|
|
Adjustments to reconcile net
earnings (loss) to net cash provided by (used in) operating
activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other (charges) gains, net of
amounts used
|
|
|
(34
|
)
|
|
|
30
|
|
|
|
47
|
|
|
|
|
20
|
|
Stock based compensation
|
|
|
20
|
|
|
|
|
|
|
|
|
|
|
|
|
2
|
|
Depreciation
|
|
|
202
|
|
|
|
218
|
|
|
|
140
|
|
|
|
|
67
|
|
Amortization of intangible and
other assets
|
|
|
81
|
|
|
|
68
|
|
|
|
41
|
|
|
|
|
3
|
|
Amortization of deferred financing
fees
|
|
|
13
|
|
|
|
41
|
|
|
|
98
|
|
|
|
|
|
|
Accretion of senior discount notes
|
|
|
40
|
|
|
|
40
|
|
|
|
14
|
|
|
|
|
|
|
Change in equity of affiliates
|
|
|
27
|
|
|
|
5
|
|
|
|
(14
|
)
|
|
|
|
4
|
|
Deferred income taxes
|
|
|
125
|
|
|
|
(85
|
)
|
|
|
19
|
|
|
|
|
(14
|
)
|
(Gain) loss on disposition of
assets, net
|
|
|
(8
|
)
|
|
|
7
|
|
|
|
(3
|
)
|
|
|
|
|
|
Minority interests
|
|
|
4
|
|
|
|
37
|
|
|
|
8
|
|
|
|
|
|
|
Loss on extinguishment of debt
|
|
|
|
|
|
|
74
|
|
|
|
21
|
|
|
|
|
|
|
Operating cash provided by (used
in) discontinued operations
|
|
|
5
|
|
|
|
(2
|
)
|
|
|
3
|
|
|
|
|
(146
|
)
|
Changes in operating assets and
liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade receivables third
party and affiliates, net
|
|
|
(28
|
)
|
|
|
31
|
|
|
|
(24
|
)
|
|
|
|
(87
|
)
|
Other receivables
|
|
|
(6
|
)
|
|
|
12
|
|
|
|
110
|
|
|
|
|
(37
|
)
|
Inventories
|
|
|
16
|
|
|
|
17
|
|
|
|
(22
|
)
|
|
|
|
(10
|
)
|
Other current assets
|
|
|
12
|
|
|
|
(57
|
)
|
|
|
(8
|
)
|
|
|
|
14
|
|
Trade payables third
party and affiliates
|
|
|
(21
|
)
|
|
|
17
|
|
|
|
96
|
|
|
|
|
(7
|
)
|
Income taxes payable
|
|
|
45
|
|
|
|
17
|
|
|
|
10
|
|
|
|
|
38
|
|
Benefit obligations
|
|
|
(58
|
)
|
|
|
(50
|
)
|
|
|
(376
|
)
|
|
|
|
(22
|
)
|
Other liabilities
|
|
|
(85
|
)
|
|
|
(24
|
)
|
|
|
39
|
|
|
|
|
3
|
|
Other, net
|
|
|
(5
|
)
|
|
|
28
|
|
|
|
(8
|
)
|
|
|
|
(8
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in)
operating activities
|
|
|
751
|
|
|
|
701
|
|
|
|
(62
|
)
|
|
|
|
(102
|
)
|
Investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures on property,
plant and equipment
|
|
|
(252
|
)
|
|
|
(212
|
)
|
|
|
(160
|
)
|
|
|
|
(44
|
)
|
Purchases of other long-term assets
|
|
|
(43
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisitions and related fees, net
of cash acquired
|
|
|
|
|
|
|
(918
|
)
|
|
|
(1,633
|
)
|
|
|
|
|
|
Net proceeds on sale of businesses
and assets
|
|
|
23
|
|
|
|
48
|
|
|
|
31
|
|
|
|
|
|
|
Advances to (from) affiliates, net
|
|
|
(8
|
)
|
|
|
21
|
|
|
|
(1
|
)
|
|
|
|
(5
|
)
|
Net proceeds from disposal of
discontinued operations
|
|
|
|
|
|
|
75
|
|
|
|
|
|
|
|
|
139
|
|
Proceeds for Ticona plant relocation
|
|
|
26
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from sale of marketable
securities
|
|
|
95
|
|
|
|
221
|
|
|
|
132
|
|
|
|
|
42
|
|
Purchases of marketable securities
|
|
|
(65
|
)
|
|
|
(149
|
)
|
|
|
(173
|
)
|
|
|
|
(42
|
)
|
Increase in restricted cash
|
|
|
(42
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing cash used in discontinued
operations
|
|
|
|
|
|
|
|
|
|
|
(6
|
)
|
|
|
|
|
|
Other, net
|
|
|
(2
|
)
|
|
|
7
|
|
|
|
(1
|
)
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in)
investing activities
|
|
|
(268
|
)
|
|
|
(907
|
)
|
|
|
(1,811
|
)
|
|
|
|
91
|
|
Financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Initial capitalization
|
|
|
|
|
|
|
|
|
|
|
641
|
|
|
|
|
|
|
Dividend to Original Shareholders
|
|
|
|
|
|
|
(804
|
)
|
|
|
(500
|
)
|
|
|
|
|
|
Issuance of mandatorily redeemable
preferred shares
|
|
|
|
|
|
|
|
|
|
|
200
|
|
|
|
|
|
|
Repayment of mandatorily redeemable
preferred shares
|
|
|
|
|
|
|
|
|
|
|
(221
|
)
|
|
|
|
|
|
Proceeds from issuance of
Series A common stock, net
|
|
|
|
|
|
|
764
|
|
|
|
|
|
|
|
|
|
|
Proceeds from issuance of preferred
stock, net
|
|
|
|
|
|
|
233
|
|
|
|
|
|
|
|
|
|
|
Repayments of long-term debt
|
|
|
(125
|
)
|
|
|
(1,449
|
)
|
|
|
(254
|
)
|
|
|
|
(27
|
)
|
Proceeds from long-term debt
|
|
|
38
|
|
|
|
16
|
|
|
|
2,338
|
|
|
|
|
|
|
Borrowings under senior credit
facilities, net
|
|
|
|
|
|
|
1,135
|
|
|
|
608
|
|
|
|
|
|
|
Short-term borrowings (repayments),
net
|
|
|
13
|
|
|
|
22
|
|
|
|
36
|
|
|
|
|
(16
|
)
|
Settlement of lease obligations
|
|
|
|
|
|
|
(31
|
)
|
|
|
|
|
|
|
|
|
|
Stock option exercises
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of CAG treasury stock
|
|
|
|
|
|
|
|
|
|
|
29
|
|
|
|
|
|
|
Fees associated with financing
|
|
|
|
|
|
|
(9
|
)
|
|
|
(205
|
)
|
|
|
|
|
|
Dividend payments on Series A
common stock and preferred stock
|
|
|
(36
|
)
|
|
|
(21
|
)
|
|
|
|
|
|
|
|
|
|
Other, net
|
|
|
|
|
|
|
|
|
|
|
14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in)
financing activities
|
|
|
(108
|
)
|
|
|
(144
|
)
|
|
|
2,686
|
|
|
|
|
(43
|
)
|
Exchange rate effects on cash
|
|
|
26
|
|
|
|
(98
|
)
|
|
|
25
|
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and
cash equivalents
|
|
|
401
|
|
|
|
(448
|
)
|
|
|
838
|
|
|
|
|
(55
|
)
|
Cash and cash equivalents at
beginning of period
|
|
|
390
|
|
|
|
838
|
|
|
|
|
|
|
|
|
148
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of
period
|
|
|
791
|
|
|
|
390
|
|
|
|
838
|
|
|
|
|
93
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See the accompanying notes to the consolidated financial
statements.
F-7
CELANESE
CORPORATION AND SUBSIDIARIES
|
|
1.
|
Description
of the Company
|
Celanese Corporation and its subsidiaries (collectively the
Company or the Successor) is an
integrated global hybrid chemical company, representing the
former business of Celanese AG and its subsidiaries
(CAG or the Predecessor). The
Companys business involves processing chemical raw
materials, such as ethylene and propylene, and natural products,
including natural gas and wood pulp, into value-added chemicals
and chemical-based products.
Basis
of Presentation
The financial position, results of operations and cash flows and
related disclosures for periods prior to April 1, 2004 (a
convenience date for the April 6, 2004 acquisition date),
the effective date of the acquisition of Celanese AG (the
Effective Date), are presented as the results of the
Predecessor. The financial position, results of operations and
cash flows and related disclosures for periods subsequent to the
Effective Date, are presented as those of the Successor.
The consolidated financial statements of the Successor as of and
for the years ended December 31, 2006 and 2005 and as of
and for the nine months ended December 31, 2004 reflect the
acquisition of CAG under the purchase method of accounting in
accordance with Financial Accounting Standards Board
(FASB) Statement of Financial Accounting Standards
(SFAS) No. 141, Business Combinations.
The results of the Successor are not comparable to the results
of the Predecessor due to the difference in the basis of
presentation of purchase accounting as compared to historical
cost. Furthermore, the Successor and the Predecessor have
different accounting policies with respect to certain matters
(See Note 4). The consolidated financial statements for the
three months ended March 31, 2004 have been prepared in
accordance with CAGs accounting policies (See
Note 4) and the requirements for interim financial
reporting in accordance with Accounting Principles Board
(APB) No. 28, Interim Financial
Reporting.
Original
Acquisition of CAG
Pursuant to a voluntary tender offer commenced in February 2004,
Celanese Europe Holding GmbH & Co. KG, formerly known
as BCP Crystal Acquisition GmbH & Co. KG (the
Purchaser), an indirect wholly owned subsidiary of
Celanese Corporation, on April 6, 2004 acquired
approximately 84% of the ordinary shares of Celanese AG,
excluding treasury shares, (the CAG Shares) for a
purchase price of $1,693 million, including direct
acquisition costs of $69 million (the
Acquisition). The Company has allocated the purchase
price on the basis of the fair value of the underlying assets
acquired and liabilities assumed. The assets acquired and
liabilities assumed on the Effective Date were reflected at fair
value for the approximate 84% portion acquired and at historical
basis for the remaining minority interest. Upon completion of
the Organizational Restructuring (as defined below), the assets
acquired and liabilities assumed of Celanese Americas
Corporation (CAC) are reflected at fair value for
the 100% portion acquired. The excess of the purchase price over
the amounts allocated to specific assets and liabilities is
included in goodwill. The purchase price allocation was as
follows:
|
|
|
|
|
|
|
As of April 1,
|
|
|
|
2004
|
|
|
|
(In $ millions)
|
|
|
Current assets:
|
|
|
|
|
Cash and cash equivalents
|
|
|
93
|
|
Receivables
|
|
|
1,468
|
|
Inventories
|
|
|
568
|
|
Other current assets
|
|
|
125
|
|
Investments
|
|
|
777
|
|
Property plant and equipment
|
|
|
1,726
|
|
Other non-current assets
|
|
|
518
|
|
Intangible assets
|
|
|
433
|
|
Goodwill
|
|
|
747
|
|
|
|
|
|
|
Total assets acquired
|
|
|
6,455
|
|
|
|
|
|
|
F-8
CELANESE
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
|
|
|
|
As of April 1,
|
|
|
|
2004
|
|
|
|
(In $ millions)
|
|
|
Current liabilities:
|
|
|
|
|
Short-term borrowings and current
installments of long-term debt
|
|
|
279
|
|
Accounts payable and accrued
liabilities
|
|
|
599
|
|
Other current liabilities
|
|
|
1,166
|
|
Long term debt
|
|
|
306
|
|
Benefit obligations
|
|
|
1,370
|
|
Other long term liabilities
|
|
|
558
|
|
|
|
|
|
|
Total liabilities assumed
|
|
|
4,278
|
|
Minority interest
|
|
|
451
|
|
|
|
|
|
|
Net assets acquired
|
|
|
1,726
|
|
|
|
|
|
|
Cash and cash equivalents, receivables, other current assets,
accounts payable and accrued liabilities and other current
liabilities were stated at their historical carrying values,
which approximates fair value, given the short term nature of
these assets and liabilities.
The estimated fair value of inventory, as of the Effective Date,
was calculated based on the Companys computations. The
consolidated statement of operations for the nine months ended
December 31, 2004 includes $53 million in cost of
sales representing the capitalized manufacturing profit in
inventory on hand as of the Effective Date. The capitalized
manufacturing profit was recorded in purchase accounting and the
inventory was subsequently sold during the nine months ended
December 31, 2004.
Deferred income taxes were provided in the consolidated balance
sheet based on the Companys estimate of the tax versus
book basis of the assets acquired and liabilities assumed.
Valuation allowances were established against those assets for
which realization is not likely, primarily in the U.S. (See
Note 21).
The Companys estimate of pension and other postretirement
benefit obligations were reflected in the allocation of purchase
price at the projected benefit obligation less plan assets at
fair market value.
In connection with the Acquisition, at the acquisition date, the
Company implemented plans to exit or restructure certain
activities. The Company recorded liabilities of
$60 million, primarily for employee severance and related
costs in connection with the plan and approved the continuation
of all existing Predecessor restructuring and exit plans.
At the time of the Acquisition, CAG had a leading market
position as a global producer of acetic acid and is the
worlds largest producer of vinyl acetate monomer. It has
competitive cost structures based on economies of scale,
vertical integration, technical know-how and the use of advanced
technologies. Further, CAG has global reach, with major
operations in North America, Europe and Asia and an extensive
network of ventures. These characteristics, together with the
potential to a) reduce production and material costs,
b) increase cash flow through advanced process control
projects, and c) optimize the value of the portfolio
through strategic acquisitions and divestitures contributed to a
purchase price in excess of the fair value of the net tangible
and intangible assets acquired from CAG and as a result, the
Company has recorded goodwill in connection with the transaction.
Domination
Agreement
On October 1, 2004, a domination and profit and loss
transfer agreement (the Domination Agreement)
between CAG and the Purchaser became operative. When the
Domination Agreement became operative, the Purchaser became
obligated to offer to acquire all outstanding CAG shares from
the minority shareholders of CAG 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. Any minority shareholder
who elected
F-9
CELANESE
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
not to sell its shares to the Purchaser was, until the
Squeeze-Out (as defined below) was registered in the commercial
register on December 22, 2006, entitled to remain a
shareholder of CAG and to receive from the Purchaser a gross
guaranteed annual payment on its shares of 3.27 per
CAG share less certain corporate taxes in lieu of any dividend.
Taking into account the circumstances and the tax rates at the
time of entering into the Domination Agreement, the net
guaranteed annual payment was 2.89 per share for a
full fiscal year. For the years ended December 31, 2006 and
2005 and the nine months ended December 31, 2004, a charge
of 3 million ($4 million), 19 million
($22 million) and 6 million ($8 million),
respectively, was recorded in Other income (expense), net for
the anticipated guaranteed payment. The remaining liability at
December 31, 2006 to be paid in 2007 for CAGs 2006
fiscal year is 3 million ($3 million).
On June 1, 2006, the guaranteed dividend for the fiscal
year ended September 30, 2005, which amounted to
3 million, was paid. In addition, pursuant to a
settlement agreement entered into with plaintiff shareholders in
March 2006, the Purchaser paid 1 million on
June 30, 2006, the guaranteed dividend for the fiscal year
ended September 30, 2006, to those shareholders who signed
a letter waiving any further rights with respect to such
guaranteed dividend that ordinarily would become due and payable
after the 2007 annual general meeting. Between June 30,
2006, and January 17, 2007, the Purchaser paid a total
amount of less than 1 million to minority
shareholders who required early payment of the guaranteed
dividend for the fiscal year ended September 30, 2006, by
submitting such waiver letter after June 30, 2006.
On January 17, 2007, the Purchaser made, pursuant to a
settlement agreement entered into with plaintiff shareholders in
December 2006, the following guaranteed dividend payments:
(i) a total amount of 1 million was paid to all
minority shareholders who had not yet requested early payment of
the guaranteed dividend for the fiscal year ended on
September 30, 2006, and (ii) a total amount of
1 million representing the pro rata share of the
guaranteed dividend for the first five months of the fiscal year
ending September 30, 2007 was paid to all minority
shareholders.
Beginning October 1, 2004, under the terms of the
Domination Agreement, the Purchaser, as the dominating entity,
among other things, is required to compensate CAG for any
statutory annual loss incurred by CAG, the dominated entity, on
a non-consolidated basis, at the end of the fiscal year when the
loss was incurred. This obligation to compensate CAG for annual
losses will apply during the entire term of the Domination
Agreement. The Purchaser has not had to compensate CAG for an
annual loss for any period during which the Domination Agreement
has been in effect.
The Domination Agreement is subject to legal challenges
instituted by dissenting shareholders. During August 2004, ten
actions were brought by minority shareholders against CAG in the
Frankfurt District Court, all of which were consolidated in
September 2004. Several minority shareholders joined these
proceedings via a third party intervention in support of the
plaintiffs. The Purchaser joined the proceedings via a third
party intervention in support of CAG. Among other things, these
actions requested the court to set aside shareholder resolutions
passed at the extraordinary general meeting held on
July 30-31, 2004 based on allegations that include the
alleged violation of procedural requirements and information
rights of the shareholders. On March 6, 2006, the Purchaser
and CAG signed a settlement agreement settling the ten minority
shareholder actions (See Note 25).
Twenty-seven minority shareholders filed lawsuits in May and
June of 2005 in the Frankfurt District Court contesting the
shareholder resolutions passed at the annual general meeting
held May
19-20, 2005,
which confirmed the resolutions passed at the
July 30-31,
2004 extraordinary general meeting approving the Domination
Agreement and a change in CAGs fiscal year. In conjunction
with the Purchasers acquisition of 5.9 million
ordinary shares of CAG from two shareholders in August 2005, two
of those lawsuits were withdrawn. In February 2006, the
Frankfurt District Court ruled to dismiss all challenges
contesting the confirmatory resolutions and upheld only the
challenge regarding the ratification of the acts of the members
of the board of management and the supervisory board. CAG
appealed the decision with respect to the ratification. Three
plaintiff shareholders appealed the decision on the confirmatory
resolutions, however, two plaintiff shareholders agreed in a
settlement agreement to withdraw their actions.
F-10
CELANESE
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The Domination Agreement is further challenged in four Null and
Void actions pending in the Frankfurt District Court. These
actions are seeking to have the shareholders resolution
approving the Domination Agreement declared null and void based
on an alleged violation of formal requirements relating to the
invitation for the shareholders meeting.
If legal challenges of the Domination Agreement by dissenting
shareholders of CAG are successful, some or all actions taken
under the Domination Agreement, including the transfer of CAC
(see Organizational Restructuring below for discussion
regarding CACs transfer) may be required to be reversed
and the Company may be required to compensate CAG for damages
caused by such actions, which could have a material impact on
the Companys financial position, results of operations and
cash flows.
The amounts of the fair cash compensation and of the guaranteed
annual payment offered under the Domination Agreement are under
court review in special award proceedings (See Note 25). As
a result of these proceedings, either amount 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. Minority shareholders may initiate
such proceedings also with respect to the Squeeze-Out
compensation. In this case, shareholders who cease to be
shareholders of CAG due to the Squeeze-Out are entitled,
pursuant to a settlement agreement between the Purchaser and
minority shareholders, to claim for their shares the higher of
the compensation amounts determined by the court in these
different proceedings. Payments they already received as
compensation for their shares will be offset so that the
minority shareholders who cease to be shareholders of CAG due to
the Squeeze-Out are not entitled to more than the higher of the
amount set in the two court proceedings.
Organizational
Restructuring
In October 2004, Celanese and certain of its subsidiaries
completed an organizational restructuring (the
Organizational Restructuring) pursuant to which the
Purchaser effected, by giving a corresponding instruction under
the Domination Agreement, the transfer of all of the shares of
CAC from Celanese Holding GmbH, a wholly owned subsidiary of
CAG, to Celanese Caylux Holdings Luxembourg S.C.A., formerly BCP
Caylux Holdings Luxembourg S.C.A (Celanese Caylux),
which resulted in Celanese Caylux owning 100% of the equity of
CAC and indirectly, all of its assets, including subsidiary
stock. This transfer was affected by CAG selling all outstanding
shares in CAC for a 291 million note. This note
eliminates in consolidation.
Following the transfer of CAC to Celanese Caylux,
(1) Celanese Holdings contributed substantially all of its
assets and liabilities (including all outstanding capital stock
of Celanese Caylux) to BCP Crystal in exchange for all
outstanding capital stock of BCP Crystal and (2) BCP
Crystal assumed certain obligations of Celanese Caylux,
including all rights and obligations of Celanese Caylux under
the senior credit facilities, the floating rate term loan and
the senior subordinated notes. BCP Crystal, at its discretion,
may subsequently cause the liquidation of Celanese Caylux.
As a result of these transactions, BCP Crystal holds 100% of
CACs equity and, indirectly, all equity owned by CAC and
its subsidiaries. In addition, BCP Crystal holds, indirectly,
all of the CAG shares held by the Purchaser and all of the
wholly owned subsidiaries of the Company that guarantee Celanese
Cayluxs obligations under the senior credit facilities to
guarantee the senior subordinated notes issued on June 8,
2004 and July 1, 2004 (See Note 16) on an
unsecured senior subordinated basis.
Acquisition
of Additional CAG Shares
On August 24, 2005, the Company acquired 5.9 million,
or approximately 12%, of the outstanding CAG shares from two
shareholders for 302 million ($369 million). The
Company also paid to such shareholders 12 million
($15 million) in consideration for the settlement of
certain claims and for such shareholders agreeing to, among
other things, (1) accept the shareholders resolutions
passed at the extraordinary general meeting of CAG held on
F-11
CELANESE
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
July 30 and 31, 2004 and the annual general meeting of
CAG held on May 19 and 20, 2005, (2) acknowledge the
legal effectiveness of the Domination Agreement,
(3) irrevocably withdraw and abandon all actions,
applications and appeals each brought or joined in legal
proceedings related to, among other things, challenging the
effectiveness of the Domination Agreement and amount of fair
cash compensation offered by the Purchaser in the mandatory
offer required by Section 305(1) of the German Stock
Corporation Act, (4) refrain from acquiring any CAG shares
or any other investment in CAG, and (5) refrain from taking
any future legal action with respect to shareholder resolutions
or corporate actions of CAG. The Purchaser paid the aggregate
consideration of 314 million ($384 million) for
the additional CAG shares using available cash.
During the year ended December 31, 2005 and the nine months
ended December 31, 2004, the Purchaser acquired additional
CAG shares for $473 million and $33 million,
respectively, including direct acquisition costs of
$4 million and less than $1 million, respectively. The
additional CAG shares were acquired pursuant to either
i) the mandatory offer or ii) the acquisition of
additional CAG shares as described below.
Upon the acquisition of the additional CAG shares during the
second half of 2005, the assets and liabilities of CAG were
adjusted in the consolidated financial statements to fair value
for the additional 14% acquired. The primary amounts allocated
to assets acquired and liabilities assumed related to the
additional ownership percentage acquired resulted in an increase
in inventory of $8 million, which was subsequently charged
to cost of goods sold, an increase in property, plant and
equipment of $15 million, an increase in intangible assets
of $65 million and a decrease in goodwill of
$54 million, attributable to the carrying value of the
minority interest acquired being greater than the price paid.
Pro
Forma Information
The following pro forma information for the years ended
December 31, 2005 and 2004 was prepared as if the
Acquisition and the subsequent acquisition of additional CAG
shares during 2005 had occurred as of the beginning of such
period:
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2005
|
|
|
2004
|
|
|
|
(In $ millions)
|
|
|
Net sales
|
|
|
6,033
|
|
|
|
4,927
|
|
Operating profit
|
|
|
575
|
|
|
|
218
|
|
Net earnings (loss)
|
|
|
318
|
|
|
|
(76
|
)
|
Pro forma adjustments include (1) adjustments for purchase
accounting, including (i) the application of purchase
accounting to pension and other postretirement obligations and
(ii) the application of purchase accounting to property,
plant and equipment and intangible assets, (2) adjustments
for items directly related to the transaction, including
(i) the impact of the additional pension contribution,
(ii) the Advisor monitoring fee (See Note 28),
(iii) fees incurred by the Company related to the
Acquisition, and (iv) adjustments to interest expense to
reflect the Companys capital structure as a result of the
Acquisition including the reversal of $89 million of
accelerated amortization expense of deferred financing costs
recorded in the year ended December 31, 2004, and
(3) corresponding adjustments to income tax expense.
The pro forma information is not necessarily indicative of the
results that would have occurred had the Acquisition occurred as
of the beginning of the periods presented, nor is it necessarily
indicative of future results.
Squeeze-Out
On May 30, 2006, CAGs shareholders meeting
approved a transfer to the Purchaser of all shares owned by
minority shareholders against payment of cash compensation in
the amount of 66.99 per share (the
Squeeze-Out). The Squeeze-Out was registered in the
commercial register on December 22, 2006, after several
lawsuits by
F-12
CELANESE
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
minority shareholders challenging the shareholders
resolution approving the Squeeze-Out were withdrawn pursuant to
a settlement agreement entered into between plaintiff
shareholders, the Purchaser and CAG on the same day. A total
amount of approximately 62 million (approximately
$82 million at December 31, 2006) was paid to minority
shareholders in January 2007 as fair cash compensation for the
acquisition of their shares in CAG. The amount of the fair cash
compensation of 66.99 per share could increase if
successfully challenged in court.
|
|
3.
|
Initial
Public Offering and Concurrent Financings
|
In January 2005, the Company completed an initial public
offering of 50,000,000 shares of Series A common stock
and received net proceeds of $752 million after deducting
underwriters discounts and offering expenses of
$48 million. Concurrently, the Company received net
proceeds of $233 million from the offering of its
convertible perpetual preferred stock. A portion of the proceeds
of the share offerings were used to redeem $188 million of
senior discount notes and $521 million of senior
subordinated notes, excluding early redemption premiums of
$19 million and $51 million, respectively.
Subsequent to the closing of the initial public offering, the
Company borrowed an additional $1,135 million under the
amended and restated senior credit facilities, a portion of
which was used to repay a $350 million floating rate term
loan, which excludes a $4 million early redemption premium,
and $200 million of which was used as the primary financing
for the February 2005 acquisition of Vinamul (See Notes 6
and 16). Additionally, the amended and restated senior credit
facilities included a $242 million delayed draw term loan,
which expired unutilized in July 2005.
On March 9, 2005, the Company issued a 7,500,000
Series A common stock dividend to the Original Shareholders
(See Note 19) of its Series B common stock.
On April 7, 2005, the Company used the remaining proceeds
of the initial public offering and concurrent financings to pay
a special cash dividend declared on March 8, 2005 to
holders of the Companys Series B common stock of
$804 million. Upon payment of the $804 million
dividend, all of the outstanding shares of Series B common
stock converted automatically to shares of Series A common
stock.
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|
4.
|
Summary
of Accounting Policies
|
Consolidation principles
The consolidated financial statements have been prepared in
accordance with accounting principles generally accepted in the
United States (U.S. GAAP) for all periods
presented and include the accounts of the Company and its
majority owned subsidiaries over which the Company exercises
control as well as variable interest entities where the Company
is deemed the primary beneficiary. All significant intercompany
accounts and transactions have been eliminated in consolidation.
Estimates and assumptions
The preparation of consolidated financial statements in
conformity with U.S. 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 purchase price allocations, impairments of intangible
assets and other long-lived assets, 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.
Cash and cash equivalents
All highly liquid investments with original maturities of three
months or less are considered cash equivalents.
F-13
CELANESE
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Restricted Cash
At December 31, 2006, the Company has $46 million of
restricted cash. This cash is for the payment associated with
the settlement agreement entered into with the plaintiff
shareholders in December 2006 and was paid in January 2007.
Inventories
Inventories are stated at the lower of cost or market. Cost is
determined using the
first-in,
first-out (FIFO) method. Cost includes raw
materials, direct labor and manufacturing overhead. Stores and
supplies are valued at cost or market, whichever is lower. Cost
is generally determined by the average cost method.
Upon completion of the Acquisition, the Predecessor changed its
inventory valuation method of accounting for its
U.S. subsidiaries from the
last-in,
first-out (LIFO) method to the FIFO method to be
consistent with the Successors accounting policy. This
change more closely represents the physical flow of goods
resulting in ending inventory which better represents the
current cost of the inventory and the costs in income more
closely matches the flow of goods. The financial statements of
the Predecessor have been adjusted for all periods presented to
reflect this change. The impact of this change on the
Predecessors reported net earnings and earnings per share
for the three months ended March 31, 2004 is as follows:
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Predecessor
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Three Months Ended
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March 31, 2004
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|
|
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(In $ millions, except
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|
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|
per share data)
|
|
|
Net earnings prior to adjustment
|
|
|
67
|
|
Change in inventory valuation
method
|
|
|
17
|
|
Income tax effect of change
|
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|
(6
|
)
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Net earnings as adjusted
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|
78
|
|
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Basic earnings per share:(1)
|
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Prior to adjustment
|
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|
1.36
|
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Change in inventory valuation
method, net of tax
|
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|
0.22
|
|
|
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As adjusted
|
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|
1.58
|
|
|
|
|
|
|
Diluted earnings (loss) per
share:(1)
|
|
|
|
|
Prior to adjustment
|
|
|
1.35
|
|
Change in inventory valuation
method, net of tax
|
|
|
0.22
|
|
|
|
|
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|
As adjusted
|
|
|
1.57
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|
(1) |
|
Per-share data are based on weighted average shares outstanding. |
Investments in marketable securities
The Company classifies its investments in debt and equity
securities as available-for-sale and reports those
investments at their fair or market values in the balance sheet
as Other assets. Unrealized gains or losses, net of the related
tax effect on
available-for-sale
securities, are excluded from earnings and are reported as a
component of Accumulated other comprehensive income (loss), net
until realized. The cost of securities sold is determined by
using the specific identification method.
A decline in the market value of any
available-for-sale
security below cost that is deemed to be other than temporary
results in a reduction in the carrying amount to fair value. The
impairment is charged to earnings and a
F-14
CELANESE
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
new cost basis for the security is established. To determine
whether an impairment is
other-than-temporary,
the Company considers whether it has the ability and intent to
hold the investment until a market price recovery and evidence
indicating the cost of the investment is recoverable outweighs
evidence to the contrary. Evidence considered in this assessment
includes the reasons for the impairment, the severity and
duration of the impairment, changes in value subsequent to
year-end, and forecasted performance of the investee.
Investments and equity in net earnings of
affiliates
Accounting Principles Board (APB) Opinion
No. 18, The Equity Method of Accounting for Investments
in Common Stock, stipulates that the equity method should be
used to account for investments whereby an investor has
the ability to exercise significant influence over
operating and financial policies of an investee, but does
not exercise control. APB Opinion No. 18 generally
considers an investor to have the ability to exercise
significant influence when it owns 20% or more of the voting
stock of an investee. FASB Interpretation No. 35,
Criteria for Applying the Equity Method of Accounting for
Investments in Common Stock, which was issued to clarify the
criteria for applying the equity method of accounting to 50% or
less owned companies, lists circumstances under which, despite
20% ownership, an investor may not be able to exercise
significant influence. Certain investments where the Company
owns greater than a 20% ownership and can not exercise
significant influence or control are accounted for under the
cost method (See Note 10).
Property, plant and equipment
Property, plant and equipment are capitalized at cost.
Depreciation is calculated on a straight-line basis, generally
over the following estimated useful lives of the assets.
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|
Land Improvements
|
|
|
20 years
|
|
Buildings and Building Improvements
|
|
|
30 years
|
|
Machinery and Equipment
|
|
|
20 years
|
|
Assets acquired in business combinations are recorded at their
fair values and depreciated over the assets remaining
useful lives or the Companys policy lives, whichever is
shorter. Effective January 1, 2005, the Company revised the
estimated useful lives of certain assets purchased subsequent to
that date. The asset depreciation lives of machinery and
equipment that were previously ten years were increased to
twenty years and the useful lives of buildings and building
improvements increased from ten to thirty years. The impact of
the change in estimated useful lives was a $9 million
reduction in depreciation expense during the year ended
December 31, 2005 and an increase to net income of
$8 million during the same period.
Leasehold improvements are amortized over ten years or the
remaining life of the respective lease considering renewals that
are reasonably assured, whichever is shorter.
Repair and maintenance costs, including costs for planned
maintenance turnarounds, that do not extend the useful life of
the asset are charged against earnings as incurred. Major
replacements, renewals and significant improvements are
capitalized.
Interest costs incurred during the construction period of assets
are applied to the average value of constructed assets using the
estimated weighted average interest rate incurred on borrowings
outstanding during the construction period. The interest
capitalized is amortized over the life of the asset.
Impairment of property, plant and equipment
The Company assesses the recoverability of the carrying value of
its property, plant and equipment whenever events or changes in
circumstances indicate that the carrying amount of the asset may
not be fully recoverable. Recoverability of assets to be held
and used is measured by a comparison of the carrying amount of
an asset to the future net undiscounted cash flows expected to
be generated by the asset. If assets are considered to be
impaired, the impairment to be recognized is measured by the
amount by which the carrying value of the assets exceeds the
fair value of the assets. The estimate of fair value may be
F-15
CELANESE
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
determined as the amount at which the asset could be bought or
sold in a current transaction between willing parties. If this
information is not available, fair value is determined based on
the best information available in the circumstances. This
frequently involves the use of a valuation technique including
the present value of expected future cash flows, discounted at a
rate commensurate with the risk involved, or other acceptable
valuation techniques. Impairment of property, plant and
equipment to be disposed of is determined in a similar manner,
except that fair value is reduced by the costs to dispose of the
assets (See Note 11).
Goodwill and other intangible assets
Patents, customer related intangible assets and other
intangibles with finite lives are amortized on a straight-line
basis over their estimated economic lives. The weighted average
amortization period is 8.5 years. The excess of the
purchase price over fair value of net identifiable assets and
liabilities of an acquired business (goodwill) and
other intangible assets with indefinite useful lives are not
amortized, but rather tested for impairment, at least annually.
The Company tests for goodwill impairment during the third
quarter of its fiscal year using June 30 balances.
Impairment of goodwill and other intangible
assets The Company assesses the recoverability
of the carrying value of its goodwill and other intangible
assets with indefinite useful lives annually or whenever events
or changes in circumstances indicate that the carrying amount of
the asset may not be fully recoverable. Recoverability of
goodwill is measured at the reporting unit level based on a
two-step approach. First, the carrying amount of the reporting
unit is compared to the fair value as estimated by the future
net discounted cash flows expected to be generated by the
reporting unit. To the extent that the carrying value of the
reporting unit exceeds the fair value of the reporting unit, a
second step is performed, wherein the reporting units
assets and liabilities are fair valued. To the extent that the
reporting units carrying value of goodwill exceeds its
implied fair value of goodwill, impairment exists and must be
recognized. The implied fair value of goodwill is calculated as
the fair value of the reporting unit in excess of the fair value
of all non-goodwill assets and liabilities allocated to the
reporting unit. The estimate of fair value may be determined as
the amount at which the asset could be bought or sold in a
current transaction between willing parties. If this information
is not available, fair value is determined based on the best
information available in the circumstances. This frequently
involves the use of a valuation technique including the present
value of expected future cash flows, discounted at a rate
commensurate with the risk involved, or other acceptable
valuation techniques.
Recoverability of other intangible assets with indefinite useful
lives is measured by a comparison of the carrying amount of the
intangible assets to the fair value of the respective intangible
assets. Any excess of the carrying value of the intangible
assets over the fair value of the intangible assets is
recognized as an impairment loss. The estimate of fair value is
determined similar to that for goodwill outlined above.
The Company assesses the recoverability of intangible assets
with finite lives in the same manner as for property, plant and
equipment. See Impairment of property, plant and
equipment.
Financial instruments
The Company addresses certain financial exposures through a
controlled program of risk management that includes the use of
derivative financial instruments (See Note 24). As a matter
of principle, the Company does not use derivative financial
instruments for trading purposes. The Company has been party to
interest rate swaps as well as foreign currency forward
contracts in the management of its interest rate and foreign
currency exchange rate exposures. The Company generally utilizes
interest rate derivative contracts in order to fix or limit the
interest paid on existing variable rate debt. The Company
utilizes foreign currency derivative financial instruments to
eliminate or reduce the exposure of its foreign currency
denominated receivables and payables, which includes the
Companys exposure on its dollar denominated intercompany
net receivables and payables held by euro denominated entities.
Additionally, the Company has utilized derivative instruments to
reduce the exposure of its commodity prices. The Company also
uses derivative and non-derivative financial instruments that
may give rise to
F-16
CELANESE
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
foreign currency transaction gains or losses, to hedge the
foreign currency exposure of a net investment in a foreign
operation.
The Companys risk management policy for the majority of
its commodity raw material requirements allows entering into
supply agreements and forward purchase or swap contracts.
Financial instruments which could potentially subject the
Company to concentrations of credit risk are primarily
receivables concentrated in various geographic locations and
cash equivalents. The Company performs ongoing credit
evaluations of its customers financial condition.
Generally, collateral is not required from customers. Allowances
are provided for specific risks inherent in receivables.
Deferred financing costs
The Company capitalizes direct costs incurred to obtain debt
financings and amortizes these costs using the straight-line
method over the terms of the related debt. Upon the
extinguishment of the related debt, any unamortized capitalized
debt financing costs are immediately expensed. For the years
ended December 31, 2006 and 2005 and the nine months ended
December 31, 2004, the Successor recorded amortization of
deferred financing costs, which is classified in Interest
expense, of $13 million, $41 million and
$98 million, respectively, of which $1 million,
$28 million and $89 million, respectively, related to
accelerated amortization of deferred financing costs. As of
December 31, 2006 and 2005, the Company had
$58 million and $73 million of net deferred financing
costs included within long term other assets.
Environmental liabilities
The Company manufactures and sells a diverse line of chemical
products throughout the world. Accordingly, the Companys
operations are subject to various hazards incidental to the
production of industrial chemicals including the use, handling,
processing, storage and transportation of hazardous materials.
The Company recognizes losses and accrues liabilities relating
to environmental matters if available information indicates that
it is probable that a liability has been incurred and the amount
of loss is reasonably estimated. Depending on the nature of the
site, the Company accrues through time horizons of ten to
fifteen years, unless the Company has government orders or other
agreements that extend beyond these time horizons. All other
fees are expensed as incurred. If the event of loss is neither
probable nor reasonably estimable, but is reasonably possible,
the Company provides appropriate disclosure in the notes to the
consolidated financial statements if the contingency is
considered material. The Company estimates environmental
liabilities on a
case-by-case
basis using the most current status of available facts, existing
technology, presently enacted laws and regulations and prior
experience in remediation of contaminated sites. Environmental
liabilities for which the remediation period is fixed and
associated costs are readily determinable are recorded at their
net present value. Recoveries of environmental costs from other
parties are recorded as assets when their receipt is deemed
probable.
An environmental reserve related to cleanup of a contaminated
site might include, for example, a provision for one or more of
the following types of costs: site investigation and testing
costs, cleanup costs, costs related to soil and water
contamination resulting from tank ruptures and post-remediation
monitoring costs. These reserves do not take into account any
claims or recoveries from insurance. There are no pending
insurance claims for any environmental liability that are
expected to be material. The measurement of environmental
liabilities is based on the Companys periodic estimate of
what it will cost to perform each of the elements of the
remediation effort. The Company uses its best estimate to
establish its environmental reserves. The Company utilizes third
parties to assist in the management and development of cost
estimates for its sites. Changes to environmental regulations or
other factors affecting environmental liabilities are reflected
in the consolidated financial statements in the period in which
they occur (See Note 18).
F-17
CELANESE
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Legal Fees
The Company accrues for legal fees related to loss contingency
matters when the costs associated with defending these matters
can be reasonably estimated and are probable of occurring. All
other legal fees are expensed as incurred.
Revenue recognition
The Company recognizes revenue when title and risk of loss have
been transferred to the customer, generally at the time of
shipment of products, and provided that four basic criterion are
met: (1) persuasive evidence of an arrangement exists;
(2) delivery has occurred or services have been rendered;
(3) the fee is fixed or determinable; and
(4) collectibility is reasonably assured. Should changes in
conditions cause the Company to determine revenue recognition
criteria are not met for certain transactions, revenue
recognition would be delayed until such time that the
transactions become realizable and fully earned. Payments
received in advance of meeting the above revenue recognition
criteria are recorded as deferred revenue.
Stock-based compensation
Effective January 1, 2006, the Successor adopted the fair
value recognition provisions of SFAS No. 123(R). The
Successor has elected the modified prospective transition method
as permitted by SFAS No. 123(R) and, accordingly,
prior periods have not been restated to reflect the impact of
SFAS No. 123(R). Under this transition method,
compensation cost recognized includes: (i) compensation
cost for all stock-based payments granted prior to, but not yet
vested as of, January 1, 2006 (based on the grant-date fair
value estimated in accordance with the original provisions of
SFAS No. 123 and previously presented in the pro forma
footnote disclosures), and (ii) compensation cost for all
stock-based payments granted subsequent to January 1, 2006
(based on the grant-date fair value estimated in accordance with
the new provisions of SFAS No. 123(R)).
As permitted by SFAS No. 123, Accounting for
Stock-Based Compensation
(SFAS No. 123), the Successor accounted
for employee stock-based compensation for the year ended
December 31, 2005 and the nine months ended
December 31, 2004 in accordance with APB Opinion
No. 25, Accounting for Stock Issued to Employees
(APB No. 25), using an intrinsic value
approach to measure compensation expense, if any.
For the three months ended March 31, 2004, the Predecessor
accounted for stock options and similar equity instruments under
the fair value method, which requires compensation cost to be
measured at the grant date based on the value of the award. The
fair value of stock options is determined using the
Black-Scholes option-pricing model that takes into account the
stock price at the grant date, the exercise price, the expected
life of the option, the volatility and the expected dividends of
the underlying stock, and the risk-free interest rate over the
expected life of the option. Compensation expense based on the
fair value of stock options is recorded over the vesting period
of the options and has been recognized in the Predecessors
consolidated financial statements. The CAG stock options did not
contain change in control provisions, which would have resulted
in accelerated vesting, as a result of the Acquisition (See
Note 22).
Research and development
The costs of research and development are charged as an expense
in the period in which they are incurred.
Insurance loss reserves
The Company has two wholly owned insurance companies (the
Captives) that are used as a form of self insurance
for property, liability and workers compensation risks. One of
the Captives also insures certain third party risks. The
liabilities recorded by the Captives relate to the estimated
risk of loss which is based on management estimates and
actuarial valuations, and unearned premiums, which represent the
portion of the third party premiums written applicable to the
unexpired terms of the policies in-force. Liabilities are
recognized for known claims when
F-18
CELANESE
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
sufficient information has been developed to indicate
involvement of a specific policy and the Company can reasonably
estimate its liability. In addition, liabilities have been
established to cover additional exposure on both known and
unasserted claims. Estimates of the liabilities are reviewed and
updated regularly. It is possible that actual results could
differ significantly from the recorded liabilities. Premiums
written are recognized as revenue based on the terms of the
policies. Capitalization of the Captives is determined by
regulatory guidelines. Total assets and liabilities for the
Captives after elimination of all intercompany activity was
$339 million and $171 million, respectively, as of
December 31, 2006 and $386 million and
$238 million, respectively, as of December 31, 2005.
Included in total liabilities are third party reserves of
$24 million and $31 million at December 31, 2006
and 2005, respectively. Third party premiums were
$22 million, $23 million, $29 million and
$6 million for the years ended December 31, 2006 and
2005, the nine months ended December 31, 2004 and the three
months ended March 31, 2004, respectively.
Reinsurance receivables
The Captives enter into reinsurance arrangements to reduce their
risk of loss. The reinsurance arrangements do not relieve the
Captives from their obligations to policyholders. Failure of the
reinsurers to honor their obligations could result in losses to
the Captives. The Captives evaluate the financial condition of
their reinsurers and monitor concentrations of credit risk to
minimize their exposure to significant losses from reinsurer
insolvencies and to establish allowances for amounts deemed
non-collectible.
Income taxes
The provision for income taxes has been determined using the
asset and liability approach of accounting for income taxes.
Under this approach, deferred income taxes reflect the net tax
effects of temporary differences between the carrying amounts of
assets and liabilities for financial reporting purposes and the
amounts used for income tax purposes and net operating loss and
tax credit carry forwards. The amount of deferred taxes on these
temporary differences is determined using the tax rates that are
expected to apply to the period when the asset is realized or
the liability is settled, as applicable, based on tax rates and
laws in the respective tax jurisdiction enacted as of the
balance sheet date.
The Company reviews its deferred tax assets for recoverability
and establishes a valuation allowance based on historical
taxable income, projected future taxable income, applicable tax
strategies, and the expected timing of the reversals of existing
temporary differences. A valuation allowance is provided when it
is more likely than not that some portion or all of the deferred
tax assets will not be realized.
Minority interests
Minority interests in the equity and results of operations of
the entities consolidated by the Company are shown as a separate
line item in the consolidated financial statements. The entities
included in the consolidated financial statements that have
minority interests are as follows:
|
|
|
|
|
|
|
|
|
|
|
Ownership Percentage
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
Celanese AG
|
|
|
98%
|
|
|
|
98%
|
|
InfraServ GmbH & Co.
Oberhausen KG
|
|
|
98%
|
|
|
|
98%
|
|
Celanese Polisinteza d.o.o
|
|
|
76%
|
|
|
|
76%
|
|
Synthesegasanlage Ruhr GmbH
|
|
|
50%
|
|
|
|
50%
|
|
The Company has a 60% voting interest and the right to appoint a
majority of the board of management of Synthesegasanlage Ruhr
GmbH, which results in the Company controlling this entity and,
accordingly, the Company is consolidating this entity in their
consolidated financial statements.
F-19
CELANESE
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Accounting for Sorbates Matters
On October 22, 1999, CAG was demerged from Hoechst AG
(Hoechst). In accordance with the demerger agreement
between Hoechst and CAG, CAG was assigned the obligation related
to the Sorbates matters. However, Hoechst agreed to indemnify
CAG for 80% of payments for such obligations. Expenses related
to this matter are recorded gross of any such recoveries from
Hoechst, and its legal successors, in the consolidated statement
of operations. Recoveries from Hoechst, and its legal
successors, which represent 80% of such expenses, are recorded
directly to Shareholders equity, net of tax, as a
contribution of capital in the consolidated balance sheet.
Accounting for purchasing agent agreements
CPO Celanese Aktiengesell Schaft & Co. Procurement
Olefin KG, Frankfurt Am Main (CPO), a subsidiary of
the Company, acts as a purchasing agent on behalf of the
Company, as well as third parties. CPO arranges sale and
purchase agreements for raw materials on a commission basis.
Accordingly, the commissions earned on these third party sales
are classified as a reduction to Selling, general and
administrative expense. Commissions amounted to $5 million,
$9 million, $6 million and $2 million for the
years ended December 31, 2006 and 2005, the nine months
ended December 31, 2004 and the three months ended
March 31, 2004, respectively. The raw material sales volume
commissioned by CPO for third parties amounted to
$937 million, $880 million, $512 million and
$149 million for the years ended December 31, 2006 and
2005, the nine months ended December 31, 2004 and the three
months ended March 31, 2004, respectively.
Functional and reporting currencies
For the Companys international operations where the
functional currency is other than the U.S. dollar, assets
and liabilities are translated using period-end exchange rates,
while the statement of operations amounts are translated using
the average exchange rates for the respective period.
Differences arising from the translation of assets and
liabilities in comparison with the translation of the previous
periods or from initial recognition during the period are
included as a separate component of Accumulated other
comprehensive income (loss), net.
As a result of the Purchasers acquisition of voting
control of CAG, the Predecessor financial statements are
reported in U.S. dollars to be consistent with
Successors reporting requirements. For CAG reporting
requirements, the euro was the reporting currency.
Reclassifications
The Company has reclassified certain prior period amounts to
conform to current years presentation. The
reclassifications had no effect on the consolidated statements
of operations, of cash flows or of shareholders equity as
previously reported.
Cash flows from discontinued operations
In 2005, the Company revised its presentation of cash flows
related to discontinued operations. The cash flows of continuing
operations and discontinued operations are presented together,
with separate captions for the operating, investing and
financing activities of discontinued operations. In periods
prior to 2005, the Company presented the cash flows of
discontinued operations within certain captions of operating,
investing and financing cash flows together with those of
continuing operations. Accordingly, the category totals for
operating, investing and financing activities were not impacted
by this revision.
|
|
5.
|
Recent
accounting pronouncements
|
In November 2004, the FASB issued SFAS No. 151,
Inventory Costs, amendment to ARB No. 43
Chapter 4, which clarifies the accounting for abnormal
amounts of idle facility expense, freight, handling costs and
wasted material and requires that such items be recognized as
current-period charges regardless of whether they meet the
F-20
CELANESE
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
so abnormal criterion outlined in ARB No. 43.
SFAS No. 151 also introduces the concept of
normal capacity and requires the allocation of fixed
production overheads to inventory based on the normal capacity
of the production facilities. Unallocated overheads must be
recognized as an expense in the period incurred. The Company
adopted SFAS No. 151 effective January 1, 2006.
The adoption of SFAS No. 151 did not have a material
impact on the Companys financial position, results of
operations or cash flows.
In December 2004, the FASB revised SFAS No. 123,
Accounting for Stock Based Compensation, which requires
that the cost from all share-based payment transactions be
recognized in the financial statements.
SFAS No. 123(R), Share Based Payment,
(SFAS No. 123(R)) requires companies to
measure all employee stock-based compensation awards using a
fair-value method and record such expense in their consolidated
financial statements. The adoption of SFAS No. 123(R)
requires additional accounting related to the income tax effects
and additional disclosure regarding the cash flow effects
resulting from share-based payment arrangements. Prior to
January 1, 2006, the Company accounted for its stock-based
compensation plans in accordance with Accounting Principles
Board Opinion No. 25, Accounting for Stock Issued to
Employees (APB 25) and related
interpretations. Under APB 25, no compensation expense was
recognized for stock option grants if the exercise price of the
Companys stock option grants was at or above the fair
market value of the underlying stock on the date of grant.
Effective January 1, 2006, the Company adopted the fair
value recognition provisions of SFAS No. 123(R) using
the modified-prospective transition method. Under this
transition method, compensation cost recognized includes:
(a) compensation cost for all share-based payments granted
prior to, but not yet vested as of January 1, 2006, based
on the grant-date fair value used for pro forma disclosures
under the provisions of SFAS No. 123 and
(b) compensation cost for all share-based payments granted
subsequent to January 1, 2006, based on the grant-date fair
value estimated in accordance with the provisions of
SFAS No. 123(R). Results for prior periods have not
been restated. See Note 22 for additional information
related to the impact of the adoption of
SFAS No. 123(R).
In December 2004, the FASB issued SFAS No. 153,
Exchanges of Nonmonetary Assets, an amendment of APB Opinion
No. 29, Accounting for Nonmonetary Transactions
(SFAS No. 153). The amendments made by
SFAS No. 153 are based on the principle that exchanges
of nonmonetary assets should be measured based on the fair value
of the assets exchanged. Further, the amendments eliminate the
narrow exception for nonmonetary exchanges of similar productive
assets and replace it with a broader exception for exchanges of
nonmonetary assets that do not have commercial substance. The
Company adopted SFAS No. 153 effective January 1,
2006. The adoption of SFAS No. 153 did not have a
material impact on the Companys financial position,
results of operations or cash flows.
In February 2006, the FASB issued SFAS No. 155,
Accounting for Certain Hybrid Financial Instruments
(SFAS No. 155). SFAS No. 155
amends FASB Statement No. 133 and FASB Statement
No. 140, and improves the financial reporting of certain
hybrid financial instruments by requiring more consistent
accounting that eliminates exemptions and provides a means to
simplify the accounting for these instruments. Specifically,
SFAS No. 155 allows financial instruments that have
embedded derivatives to be accounted for as a whole (eliminating
the need to bifurcate the derivative from its host) if the
holder elects to account for the whole instrument on a fair
value basis. The Company is required to adopt the provisions of
SFAS No. 155, as applicable, beginning in fiscal year
2007. The adoption of SFAS No. 155 did not have a
material impact on the Companys financial position,
results of operations or cash flows.
In September 2006, the FASB issued SFAS No. 158,
Employers Accounting for Defined Benefit Pension and
Other Postretirement Plans An Amendment of FASB
Statements No. 87, 88, 106 and 132(R)
(SFAS No. 158), which requires an
employer to recognize the overfunded or underfunded status of a
defined benefit postretirement plan as an asset or liability in
its statement of financial position and to recognize changes in
that funded status in the year in which the changes occur
through comprehensive income. This statement also requires an
employer to measure the funded status of a plan as of the date
of its year-end statement of financial position, with limited
exceptions. The Company has adopted the requirements of
SFAS No. 158 and has properly reflected them in the
consolidated financial statements. See Note 17 for
additional information.
F-21
CELANESE
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
In September 2006, the SEC issued Staff Accounting Bulletin
(SAB) Topic 1N, Financial Statements Considering
the Effects of Prior Year Misstatements when Quantifying
Misstatements in Current Year Financial Statements
(SAB 108). SAB 108 addresses how the
effects of prior-year uncorrected misstatements should be taken
into consideration when quantifying misstatements in
current-year financial statements. It requires quantification of
misstatements using both the balance sheet and income statement
approaches and evaluation of whether either approach results in
quantifying an error that is material in light of relevant
quantitative and qualitative factors. SAB 108 does not
change the SECs previous guidance on evaluating the
materiality of misstatements. When the effect of initial
adoption is determined to be material, the guidance allows
registrants to record that effect as a cumulative-effect
adjustment to
beginning-of-year
retained earnings. The requirements are effective for annual
financial statements covering the first fiscal year ending after
November 15, 2006. The adoption of SAB 108 did not
have a material impact on the Companys financial position,
results of operations or cash flows.
In July 2006, the FASB issued FASB Interpretation No. 48,
Accounting for Uncertainty in Income Taxes an
interpretation of FASB Statement No. 109
(FIN 48), which clarifies the accounting for
uncertainty in tax positions. FIN 48 requires that the
Company recognize in its financial statements, the impact of a
tax position, if that position is more likely than not of being
sustained upon examination, including resolution of any related
appeals or litigation processes, based on the technical merits
of the position. The Company is required to adopt the provisions
of FIN 48, as applicable, beginning in fiscal year 2007,
with the cumulative effect of the change in accounting principle
recorded as an adjustment to opening retained earnings. The
Company is currently evaluating the impact of adopting
FIN 48 on the Companys financial position, results of
operations and cash flows.
In September 2006, the FASB issued SFAS No. 157,
Fair Value Measurements
(SFAS No. 157), which defines fair value,
establishes guidelines for measuring fair value and expands
disclosures regarding fair value measurements.
SFAS No. 157 does not require any new fair value
measurements but rather eliminates inconsistencies in guidance
found in various prior accounting pronouncements.
SFAS No. 157 is effective for fiscal years beginning
after November 15, 2007. Earlier adoption is permitted,
provided the Company has not yet issued financial statements,
including interim periods, for that fiscal year. The Company is
currently evaluating the impact of adopting
SFAS No. 157 on the Companys financial position,
results of operations and cash flows.
On February 15, 2007, the FASB issued SFAS No. 159,
The Fair Value Option for Financial Assets and Financial
Liabilities Including an Amendment of FASB Statement
No. 115 (SFAS No. 159). This
standard permits companies to choose to measure many financial
assets and liabilities and certain other items at fair value. A
company will report unrealized gains and losses on items for
which the fair value option has been elected in earnings at each
subsequent reporting date. The fair value option may be applied
on an
instrument-by-instrument
basis, with several exceptions, such as those investments
accounted for by the equity method, and once elected, the option
is irrevocable unless a new election date occurs. The fair value
option can be applied only to entire instruments and not to
portions thereof. SFAS No. 159 is effective as of the
beginning of a companys first fiscal year beginning after
November 15, 2007. Early adoption is permitted as of the
beginning of the previous fiscal year provided that the company
makes that choice in the first 120 days of that fiscal year
and also elects to apply the provisions of
SFAS No. 157. The Company is currently
evaluating the impact of adopting SFAS No. 159 on the
Companys financial position, results of operations and
cash flows.
|
|
6.
|
Acquisitions,
divestitures and ventures
|
Acquisitions:
|
|
|
|
|
On April 6, 2004, the Company acquired 84% of CAG. During
2005, the Company acquired an additional 14% of CAG (See
Note 2). As a result of the effective registration of the
Squeeze-Out in the commercial register in December 2006, the
Company acquired the remaining 2% of CAG in January 2007.
|
|
|
|
In February 2005, the Company acquired Vinamul, the North
American and European emulsion polymer business of Imperial
Chemical Industries PLC (ICI) for $208 million,
in addition to direct acquisition costs of $9 million.
Vinamul operates manufacturing facilities in the United States,
Canada, the United Kingdom,
|
F-22
CELANESE
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
|
|
and the Netherlands. As part of the agreement, ICI will continue
to supply Vinamul with starch, dextrin and other specialty
ingredients following the acquisition. The Company will supply
ICI with vinyl acetate monomer and polyvinyl alcohols. The
supply agreements are for fifteen years, and the pricing is
based on market and other negotiated terms. The fair value of
the supply contract was approximately $11 million and was
recorded as deferred revenue to be amortized over the fifteen
year life of the agreement. The Company primarily financed this
acquisition through borrowings of $200 million under the
amended and restated senior credit facilities (See
Note 16). Pro forma financial information has not been
provided as the acquisition did not have a material impact on
the Companys results of operations.
|
|
|
|
|
|
In July 2005, the Company acquired Acetex Corporation
(Acetex) for $270 million, in addition to
direct acquisition costs of $16 million and assumed
Acetexs $247 million of debt, which is net of cash
acquired of $54 million. Acetex has two primary
businesses its Acetyls business and its Specialty
Polymers and Films business. The Acetyls business is operated in
Europe and the Polymers and Film businesses are operated in
North America. The Company acquired Acetex using existing cash.
Pro forma financial information has not been provided as the
acquisition did not have a material impact on the Companys
results of operations.
|
The following table presents the allocation of Vinamul and
Acetex acquisition costs, to the assets acquired and liabilities
assumed, based on their fair values:
|
|
|
|
|
|
|
|
|
|
|
Vinamul
|
|
|
Acetex
|
|
|
|
(In $ millions)
|
|
|
Cash
|
|
|
10
|
|
|
|
54
|
|
Inventories
|
|
|
24
|
|
|
|
79
|
|
Property, plant, and equipment
|
|
|
152
|
|
|
|
285
|
|
Goodwill
|
|
|
44
|
|
|
|
166
|
|
Intangible assets
|
|
|
22
|
|
|
|
62
|
|
Debt
|
|
|
|
|
|
|
(316
|
)
|
Pensions liabilities
|
|
|
(34
|
)
|
|
|
(28
|
)
|
Other current assets/liabilities
|
|
|
(1
|
)
|
|
|
(16
|
)
|
|
|
|
|
|
|
|
|
|
Net assets acquired
|
|
|
217
|
|
|
|
286
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In August 2006, the Company signed a definitive agreement to
purchase the cellulose acetate flake, tow and film business of
Acetate Products Limited for a purchase price of approximately
£57 million ($110 million), subject to certain
adjustments as defined in the agreement. The transaction closed
on January 31, 2007. See Note 32 for further
information.
|
Ventures:
|
|
|
|
|
In August 2005, the Company and Hatco Corporation agreed to wind
up Estech GmbH, its venture for neopropyl esters. The Company
recorded an impairment charge of $10 million, included in
Equity in net earnings of affiliates, related to this matter in
the year ended December 31, 2005.
|
|
|
|
In April 2004, the Company and a group of investors led by
Conduit Ventures Ltd. entered into a venture, which was named
Pemeas GmbH. This venture was formed in order to advance the
commercialization of the Companys fuel cell technology.
Pemeas GmbH was considered a variable interest entity as defined
under FIN No. 46. The Company was deemed the primary
beneficiary of this variable interest entity and, accordingly,
consolidated this entity in its consolidated financial
statements. In the period the Company adopted
FIN No. 46, the consolidation of this entity did not
have a material impact on the Companys financial position
or results of operations and cash flows. In December 2005, the
Company sold its common stock interest in Pemeas GmbH, which
resulted in the Company no longer being the primary beneficiary.
|
F-23
CELANESE
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
|
|
The Company recognized a gain of less than $1 million
related to this sale. In December 2006, the Company sold its
preferred interest in Pemeas GmbH to BASF, received net proceeds
from the sale of 9 million and recognized a gain of
8 million ($11 million). This amount is included
in Other income (expense), net in the consolidated statement of
operations.
|
|
|
|
|
|
On October 1, 2003, Celanese AG and Degussa AG
(Degussa) completed the combination of their
European oxo businesses. The venture, European Oxo GmbH
(EOXO), consists of both companies
propylene-based oxo chemical activities. CAG contributed net
assets with a carrying value of $12 million for a 50%
interest in the venture. CAG retained substantially all the
accounts receivable, accounts payable and accrued liabilities of
its contributed business existing on September 30, 2003. In
addition, CAG and Degussa each committed to fund the venture
equally. Under a multi-year agreement, Degussa has the option to
sell its share in EOXO to the Company beginning in January 2008
for a price based on a formula which considers the profitability
and net debt of the venture and the purchase price of rhodium.
On August 28, 2006, Celanese Chemicals Europe GmbH
(CCE), a wholly owned subsidiary of CAG, entered
into an agreement with Degussa pursuant to which Degussa granted
CCE an option to purchase Degussas interest in EOXO for a
purchase price not materially different than the previously
described formula and the assumption of certain liabilities. The
option is exercisable until June 30, 2007 and is subject to
certain conditions. Degussa has given notice that if CCE does
not exercise its option to purchase by June 30, 2007,
Degussa will exercise its right to sell its interest in EOXO to
the Company beginning in 2008 for a price based on the
aforementioned formula. In connection with the sale of the
Companys oxo products and derivatives business, the
Company anticipates giving notice to Degussa that it will
exercise the option, subject to certain conditions, to purchase
their 50% interest, which will be subsequently sold to Advent
International (See Note 32). The Companys European
oxo business is part of its Chemical Products segment. The
Company reports its investment in EOXO using the equity method
of accounting.
|
Divestitures:
The following tables summarize the results of the discontinued
operations for the years ended December 31, 2006 and 2005,
the nine months ended December 31, 2004 and the three
months ended March 31, 2004:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
|
Predecessor
|
|
|
|
|
|
|
|
|
|
Nine Months
|
|
|
|
Three Months
|
|
|
|
Year Ended
|
|
|
Year Ended
|
|
|
Ended
|
|
|
|
Ended
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
March 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
2004
|
|
|
|
|
|
|
(In $ millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Sales
|
|
|
12
|
|
|
|
82
|
|
|
|
131
|
|
|
|
|
67
|
|
Cost of sales
|
|
|
(14
|
)
|
|
|
(76
|
)
|
|
|
(115
|
)
|
|
|
|
(64
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit (loss)
|
|
|
(2
|
)
|
|
|
6
|
|
|
|
16
|
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit (loss)
|
|
|
(8
|
)
|
|
|
(3
|
)
|
|
|
3
|
|
|
|
|
1
|
|
Gain on disposal of discontinued
operations
|
|
|
5
|
|
|
|
|
|
|
|
2
|
|
|
|
|
13
|
|
Tax benefit from operation of
discontinued operations
|
|
|
2
|
|
|
|
4
|
|
|
|
|
|
|
|
|
13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) from discontinued
operations
|
|
|
(1
|
)
|
|
|
1
|
|
|
|
5
|
|
|
|
|
27
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
|
|
During the third quarter of 2006, the Company discontinued its
Pentaerythritol (PE) operations, which were included
in the Chemical Products segment. As a result, the earnings
(loss) from operations related to
|
F-24
CELANESE
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
|
|
the PE operations are reflected as a component of discontinued
operations in the consolidated statements of operations.
|
2005
|
|
|
|
|
In October 2004, the Company announced plans to implement a
strategic restructuring of its acetate business to increase
efficiency, reduce overcapacity in certain areas and to focus on
products and markets that provide long-term value. As part of
this restructuring, the Company announced its plans to
discontinue its filament operations, which were included in the
Acetate Products segment, prior to December 31, 2005 and to
consolidate its acetate flake and tow manufacturing operations.
During the fourth quarter of 2005, the Company discontinued its
filament operations. As a result, the earnings (loss) from
operations related to the filament operations are reflected as a
component of discontinued operations in the consolidated
statements of operations.
|
|
|
|
In July 2005, in connection with the Vinamul transaction, the
Company agreed to sell its emulsion powders business to ICI for
approximately $25 million. This transaction included a
supply agreement whereby the Company supplies product to ICI for
a period of up to fifteen years. In connection with the sale,
the Company reduced goodwill related to the acquisition of
Vinamul by $6 million. The transaction closed in September
2005.
|
|
|
|
In October 2005, the Company sold its Rock Hill, SC
manufacturing facility for $4 million in cash. As a result
the Company derecognized $12 million of asset retirement
obligations and $7 million of environmental liabilities
which were legally transferred to the buyer, and recorded a gain
of $23 million.
|
|
|
|
In December 2005, the Company sold its Cyclo-olefine Copolymer
(COC) business to a venture of Japans Daicel
Chemical Industries Ltd. (Daicel) and Polyplastics
Co. Ltd. (Polyplastics). Daicel holds a majority
stake in the venture with 55% interest and Polyplastics, which
itself is a venture between the Company and Daicel, owns the
remaining 45%. The transaction resulted in a loss of
approximately $35 million.
|
|
|
7.
|
Securities
Available for Sale
|
At December 31, 2006 and 2005, the Company had
$265 million and $280 million, respectively, of
securities available for sale, which were included as a
component of long-term and current other assets. The
Companys captive insurance companies and pension related
trusts hold these securities for capitalization and funding
requirements, respectively. The Successor recorded a net
realized gain (loss) of $(1) million, $(2) million and
$7 million for the years ended December 31, 2006 and
2005 and the nine months ended December 31, 2004,
respectively. The Predecessor recorded a net realized gain of
$0 million for the three months ended March 31, 2004.
F-25
CELANESE
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The amortized cost, gross unrealized gain, gross unrealized loss
and fair values for
available-for-sale
securities by major security type at December 31, 2006 and
2005, were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortized
|
|
|
Unrealized
|
|
|
Unrealized
|
|
|
Fair
|
|
|
|
Cost
|
|
|
Gain
|
|
|
Loss
|
|
|
Value
|
|
|
|
|
|
|
(In $ millions)
|
|
|
|
|
|
At December 31,
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. government
|
|
|
69
|
|
|
|
1
|
|
|
|
(1
|
)
|
|
|
69
|
|
Foreign government
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. municipal
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. corporate
|
|
|
54
|
|
|
|
|
|
|
|
(1
|
)
|
|
|
53
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total debt securities
|
|
|
123
|
|
|
|
1
|
|
|
|
(2
|
)
|
|
|
122
|
|
Bank certificates of deposit
|
|
|
10
|
|
|
|
|
|
|
|
|
|
|
|
10
|
|
Equity securities
|
|
|
59
|
|
|
|
11
|
|
|
|
|
|
|
|
70
|
|
Mortgage-backed securities
|
|
|
58
|
|
|
|
|
|
|
|
(1
|
)
|
|
|
57
|
|
Money markets deposits and other
securities
|
|
|
6
|
|
|
|
|
|
|
|
|
|
|
|
6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
256
|
|
|
|
12
|
|
|
|
(3
|
)
|
|
|
265
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31,
2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. government
|
|
|
77
|
|
|
|
|
|
|
|
(3
|
)
|
|
|
74
|
|
Foreign government
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. municipal
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. corporate
|
|
|
73
|
|
|
|
|
|
|
|
(1
|
)
|
|
|
72
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total debt securities
|
|
|
150
|
|
|
|
|
|
|
|
(4
|
)
|
|
|
146
|
|
Bank certificates of deposit
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
1
|
|
Equity securities
|
|
|
65
|
|
|
|
2
|
|
|
|
|
|
|
|
67
|
|
Mortgage-backed securities
|
|
|
63
|
|
|
|
|
|
|
|
(2
|
)
|
|
|
61
|
|
Money markets deposits and other
securities
|
|
|
5
|
|
|
|
|
|
|
|
|
|
|
|
5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
284
|
|
|
|
2
|
|
|
|
(6
|
)
|
|
|
280
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed maturities at December 31, 2006 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.
|
|
|
|
|
|
|
|
|
|
|
Amortized
|
|
|
|
|
|
|
Cost
|
|
|
Fair Value
|
|
|
|
(In $ millions)
|
|
|
Within one year(1)
|
|
|
30
|
|
|
|
30
|
|
From one to five years
|
|
|
56
|
|
|
|
55
|
|
From six to ten years
|
|
|
47
|
|
|
|
46
|
|
Greater than ten years
|
|
|
63
|
|
|
|
64
|
|
|
|
|
|
|
|
|
|
|
|
|
|
196
|
|
|
|
195
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Proceeds received from fixed maturities that mature within one
year are expected to be reinvested into additional securities
upon such maturity. |
During 2005, the Company contributed $54 million to the
pension related trusts as part of the Acquisition of CAG and
$9 million related to the demutualization of an insurance
company. In addition, the Captives liquidated $75 million
in debt securities to cash in 2005.
F-26
CELANESE
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
|
As of
|
|
|
As of
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
|
(In $ millions)
|
|
|
Trade receivables
third party and affiliates
|
|
|
1,017
|
|
|
|
935
|
|
Allowance for doubtful
accounts third party and affiliates
|
|
|
(16
|
)
|
|
|
(16
|
)
|
|
|
|
|
|
|
|
|
|
Subtotal
|
|
|
1,001
|
|
|
|
919
|
|
Reinsurance receivables
|
|
|
85
|
|
|
|
117
|
|
Other
|
|
|
390
|
|
|
|
364
|
|
|
|
|
|
|
|
|
|
|
Net receivables
|
|
|
1,476
|
|
|
|
1,400
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2006 and 2005, the Company had no
significant concentrations of credit risk since the
Companys customer base is dispersed across many different
industries and geographies.
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
|
As of
|
|
|
As of
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
|
(In $ millions)
|
|
|
Finished goods
|
|
|
500
|
|
|
|
504
|
|
Work-in-process
|
|
|
33
|
|
|
|
27
|
|
Raw materials and supplies
|
|
|
120
|
|
|
|
119
|
|
|
|
|
|
|
|
|
|
|
Total inventories
|
|
|
653
|
|
|
|
650
|
|
|
|
|
|
|
|
|
|
|
As a result of the acquisition of Vinamul (See Note 6), the
Company acquired inventory with a fair value of
$24 million, which included $1 million in capitalized
manufacturing profit in inventory. The inventory was sold prior
to December 31, 2005.
As a result of the acquisition of Acetex (See Note 6), the
Company acquired inventory with a fair value of
$79 million, which included $4 million in capitalized
manufacturing profit in inventory. The inventory was sold prior
to December 31, 2005.
F-27
CELANESE
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Equity
Method
The Companys equity investments and ownership interests
are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carrying
|
|
|
Share of Earnings (Loss)
|
|
|
|
|
|
Ownership Percentage
|
|
|
Value
|
|
|
Successor
|
|
|
|
Predecessor
|
|
|
|
|
|
Successor
|
|
|
Successor
|
|
|
|
|
|
|
|
|
Nine Months
|
|
|
|
Three Months
|
|
|
|
|
|
As of
|
|
|
As of
|
|
|
As of
|
|
|
As of
|
|
|
Year Ended
|
|
|
Year Ended
|
|
|
Ended
|
|
|
|
Ended
|
|
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
December 31,
|
|
|
December 31,
|
|
|
December 31,
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
March 31,
|
|
|
|
Segment
|
|
2006
|
|
|
2005
|
|
|
2006
|
|
|
2005
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
2004
|
|
|
|
|
|
|
|
|
|
|
|
(In $ millions)
|
|
Estech GmbH & Co. KG
|
|
Chemical Products
|
|
|
51.0
|
%
|
|
|
51.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(10
|
)
|
|
|
(3
|
)
|
|
|
|
|
|
European Oxo GmbH
|
|
Chemical Products
|
|
|
50.0
|
%
|
|
|
50.0
|
%
|
|
|
26
|
|
|
|
13
|
|
|
|
10
|
|
|
|
10
|
|
|
|
(5
|
)
|
|
|
|
(3
|
)
|
Erfei, A.I.E
|
|
Chemical Products
|
|
|
45.0
|
%
|
|
|
45.0
|
%
|
|
|
1
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fortron Industries
|
|
Technical Polymers Ticona
(Ticona)
|
|
|
50.0
|
%
|
|
|
50.0
|
%
|
|
|
63
|
|
|
|
57
|
|
|
|
14
|
|
|
|
11
|
|
|
|
6
|
|
|
|
|
2
|
|
Korea Engineering Plastics Co.,
Ltd.
|
|
Ticona
|
|
|
50.0
|
%
|
|
|
50.0
|
%
|
|
|
160
|
|
|
|
146
|
|
|
|
13
|
|
|
|
14
|
|
|
|
11
|
|
|
|
|
3
|
|
Polyplastics Co., Ltd.
|
|
Ticona
|
|
|
45.0
|
%
|
|
|
45.0
|
%
|
|
|
136
|
|
|
|
179
|
|
|
|
26
|
|
|
|
24
|
|
|
|
17
|
|
|
|
|
7
|
|
InfraServ GmbH & Co.
Gendorf KG
|
|
Other
|
|
|
39.0
|
%
|
|
|
39.0
|
%
|
|
|
26
|
|
|
|
23
|
|
|
|
4
|
|
|
|
4
|
|
|
|
3
|
|
|
|
|
1
|
|
InfraServ GmbH & Co.
Höchst KG
|
|
Other
|
|
|
31.2
|
%
|
|
|
31.2
|
%
|
|
|
136
|
|
|
|
115
|
|
|
|
14
|
|
|
|
7
|
|
|
|
5
|
|
|
|
|
2
|
|
InfraServ GmbH & Co.
Knapsack KG
|
|
Other
|
|
|
28.2
|
%
|
|
|
28.2
|
%
|
|
|
18
|
|
|
|
17
|
|
|
|
1
|
|
|
|
1
|
|
|
|
1
|
|
|
|
|
|
|
Sherbrooke Capital Health and
Wellness, L.P.
|
|
Performance Products
|
|
|
10.0
|
%
|
|
|
10.0
|
%
|
|
|
4
|
|
|
|
4
|
|
|
|
1
|
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
570
|
|
|
|
555
|
|
|
|
83
|
|
|
|
61
|
|
|
|
36
|
|
|
|
|
12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
|
Predecessor
|
|
|
|
|
|
|
|
|
|
Nine Months
|
|
|
|
Three Months
|
|
|
|
Year Ended
|
|
|
Year Ended
|
|
|
Ended
|
|
|
|
Ended
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
March 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
2004
|
|
|
|
(In $ millions)
|
|
Affiliates totals:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
|
197
|
|
|
|
138
|
|
|
|
94
|
|
|
|
|
27
|
|
Successor/Predecessors share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
|
83
|
(1)
|
|
|
61
|
|
|
|
36
|
|
|
|
|
12
|
|
Dividends and other distributions
|
|
|
109
|
|
|
|
66
|
|
|
|
22
|
|
|
|
|
16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Amount does not include a $3 million liquidating dividend
from Clear Lake Methanol Partners. |
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
|
As of
|
|
|
As of
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
|
(In $ millions)
|
|
|
Total assets
|
|
|
2,505
|
|
|
|
2,295
|
|
Total liabilities
|
|
|
1,411
|
|
|
|
1,183
|
|
Interests of others
|
|
|
675
|
|
|
|
679
|
|
|
|
|
|
|
|
|
|
|
Successors share of equity
|
|
|
419
|
|
|
|
433
|
|
Excess of cost over underlying
equity in net assets acquired
|
|
|
151
|
|
|
|
122
|
|
|
|
|
|
|
|
|
|
|
Successors carrying value of
investments
|
|
|
570
|
|
|
|
555
|
|
|
|
|
|
|
|
|
|
|
F-28
CELANESE
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The Company accounts for its 10% ownership interest in
Sherbrooke Capital Health and Wellness, L.P. under the equity
method of accounting because the Company is able to exercise
significant influence.
Cost
Investments
The Companys investments accounted for under the cost
method of accounting are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
Successor
|
|
|
|
Ownership
|
|
|
Ownership
|
|
|
Carrying Value
|
|
|
Carrying Value
|
|
|
|
% as of
|
|
|
% as of
|
|
|
As of
|
|
|
As of
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
2006
|
|
|
2005
|
|
|
|
|
|
|
|
|
|
(In $ millions)
|
|
|
National Methanol Company
(Ibn Sina)
|
|
|
25
|
%
|
|
|
25
|
%
|
|
|
54
|
|
|
|
54
|
|
Kunming Cellulose Fibers Co.
Ltd.
|
|
|
30
|
%
|
|
|
30
|
%
|
|
|
15
|
|
|
|
15
|
|
Nantong Cellulose Fibers Co.
Ltd.
|
|
|
31
|
%
|
|
|
31
|
%
|
|
|
77
|
|
|
|
77
|
|
Zhuhai Cellulose Fibers Co.
Ltd.
|
|
|
30
|
%
|
|
|
30
|
%
|
|
|
15
|
|
|
|
15
|
|
InfraServ GmbH & Co.
Wiesbaden KG
|
|
|
8
|
%
|
|
|
8
|
%
|
|
|
6
|
|
|
|
13
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
26
|
|
|
|
46
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
193
|
|
|
|
220
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost investments where the Company owns greater than a 20%
ownership interest are accounted for under the cost method of
accounting because the Company cannot exercise significant
influence over these entities. The Company determined that it
cannot exercise significant influence over these entities due to
local government investment in and influence over these
entities, limitations on the Companys involvement in the
day-to-day
operations and the present inability of the entities to provide
timely U.S. GAAP financial information.
The Successor recognized $79 million, $89 million and
$33 million of dividend income from investments accounted
for under the cost method for the years ended December 31,
2006 and 2005 and the nine months ended December 31, 2004,
respectively. The Predecessor recognized dividend income from
investments accounted for under the cost method of
$6 million for the three months ended March 31, 2004.
The amounts are included within Other income (expense), net in
the consolidated statement of operations.
|
|
11.
|
Property,
Plant and Equipment
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
|
As of
|
|
|
As of
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
|
(In $ millions)
|
|
|
Land
|
|
|
64
|
|
|
|
56
|
|
Land improvements
|
|
|
51
|
|
|
|
52
|
|
Buildings
|
|
|
353
|
|
|
|
335
|
|
Machinery and equipment
|
|
|
2,089
|
|
|
|
1,890
|
|
Construction in progress
|
|
|
285
|
|
|
|
173
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment,
gross
|
|
|
2,842
|
|
|
|
2,506
|
|
Less: accumulated depreciation
|
|
|
(687
|
)
|
|
|
(475
|
)
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment, net
|
|
|
2,155
|
|
|
|
2,031
|
|
|
|
|
|
|
|
|
|
|
F-29
CELANESE
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Assets under capital leases, net of accumulated amortization,
amounted to approximately $26 million and $18 million
at December 31, 2006 and 2005, respectively.
Interest costs capitalized were $6 million,
$4 million, $4 million and $3 million for the
years ended December 31, 2006 and 2005, the nine months
ended December 31, 2004 and the three months ended
March 31, 2004, respectively.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chemical
|
|
|
Acetate
|
|
|
|
|
|
Performance
|
|
|
|
|
|
|
|
|
|
Products
|
|
|
Products
|
|
|
Ticona
|
|
|
Products
|
|
|
Other
|
|
|
Total
|
|
|
|
(In $ millions)
|
|
|
Carrying value of goodwill
associated with the Acquisition (See Note 2) as of
December 31, 2004
|
|
|
193
|
|
|
|
180
|
|
|
|
290
|
|
|
|
84
|
|
|
|
|
|
|
|
747
|
|
Acquisition of CAG
|
|
|
(11
|
)
|
|
|
8
|
|
|
|
(16
|
)
|
|
|
(7
|
)
|
|
|
|
|
|
|
(26
|
)
|
Acquisition of Acetex
|
|
|
149
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17
|
|
|
|
166
|
|
Acquisition of Vinamul
|
|
|
44
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
44
|
|
Exchange rate changes
|
|
|
5
|
|
|
|
|
|
|
|
11
|
|
|
|
2
|
|
|
|
|
|
|
|
18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carrying value of goodwill as of
December 31, 2005
|
|
|
380
|
|
|
|
188
|
|
|
|
285
|
|
|
|
79
|
|
|
|
17
|
|
|
|
949
|
|
Acquisition of Acetex
adjustments
|
|
|
17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6
|
)
|
|
|
11
|
|
Acquisition of CAG
|
|
|
(27
|
)
|
|
|
(32
|
)
|
|
|
(26
|
)
|
|
|
(1
|
)
|
|
|
|
|
|
|
(86
|
)
|
Exchange rate changes
|
|
|
(2
|
)
|
|
|
|
|
|
|
(3
|
)
|
|
|
6
|
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carrying value of goodwill as of
December 31, 2006
|
|
|
368
|
|
|
|
156
|
|
|
|
256
|
|
|
|
84
|
|
|
|
11
|
|
|
|
875
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The adjustments recorded during the year ended December 31,
2006 related to CAG consist primarily of reversals of certain
pre-acquisition tax valuation allowances and resolution of
uncertainties.
During the year ended December 31, 2005, the Company
decreased Goodwill by $26 million as a result of purchase
accounting adjustments related to the Acquisition and the
acquisition of additional CAG shares. Included in this
adjustment is a $23 million increase to goodwill, and a
corresponding increase to the Companys minority interest
liability primarily associated with the Organizational
Restructuring that occurred in October 2004 (See Note 2).
The Company also increased Goodwill by $5 million, net, for
various purchase accounting adjustments related to the original
acquisition of CAG shares. As these represented immaterial
adjustments, individually and in the aggregate, prior periods
have not been restated. Also included in this adjustment is a
$54 million decrease to goodwill associated with the
additional CAG shares purchased based on the fair value of the
assets and liabilities acquired (See Note 2).
F-30
CELANESE
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
|
As of
|
|
|
As of
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
|
(In $ millions)
|
|
|
Trademarks and tradenames
|
|
|
74
|
|
|
|
73
|
|
Customer related intangible assets
|
|
|
526
|
|
|
|
474
|
|
Developed technology
|
|
|
12
|
|
|
|
12
|
|
Covenants not to compete
|
|
|
15
|
|
|
|
11
|
|
|
|
|
|
|
|
|
|
|
Total intangible assets, gross
|
|
|
627
|
|
|
|
570
|
|
Less: accumulated amortization
|
|
|
(164
|
)
|
|
|
(89
|
)
|
|
|
|
|
|
|
|
|
|
Total intangible assets, net
|
|
|
463
|
|
|
|
481
|
|
|
|
|
|
|
|
|
|
|
Estimated amortization expense for the succeeding five fiscal
years is approximately $66 million in 2007,
$64 million in 2008, $62 million in 2009,
$53 million in 2010 and $48 million in 2011. The
Companys trademarks and tradenames have an indefinite
life. Accordingly, no amortization is recorded on these
intangible assets.
In connection with the acquisition of Vinamul and Acetex, the
Company identified intangible assets with an estimated value of
$84 million, which were comprised primarily of customer
related intangible assets. Additionally, Intangible assets, net
increased by $65 million as a result of purchase accounting
allocations related to the additional CAG shares purchased
during 2005 (See Note 2).
In connection with the acquisition of Vinamul, the Company
entered into a five-year non-compete agreement with ICI. The
Company has assigned a fair value of $10 million to this
agreement.
As a result of the Companys annual impairment test on
intangible assets with indefinite useful lives, the Company
recorded an impairment loss of $2 million for the year
ended December 31, 2006.
|
|
14.
|
Other
Current Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
|
As of
|
|
|
As of
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
|
(In $ millions)
|
|
|
Accrued salaries and benefits
|
|
|
198
|
|
|
|
159
|
|
Environmental liabilities (See
Note 18)
|
|
|
26
|
|
|
|
25
|
|
Accrued restructuring (See
Note 20)
|
|
|
34
|
|
|
|
45
|
|
Insurance liabilities
|
|
|
68
|
|
|
|
141
|
|
Sorbates litigation
|
|
|
148
|
|
|
|
129
|
|
Other
|
|
|
313
|
|
|
|
288
|
|
|
|
|
|
|
|
|
|
|
Total other current liabilities
|
|
|
787
|
|
|
|
787
|
|
|
|
|
|
|
|
|
|
|
F-31
CELANESE
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
|
As of
|
|
|
As of
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
|
(In $ millions)
|
|
|
Environmental liabilities (See
Note 18)
|
|
|
88
|
|
|
|
99
|
|
Insurance liabilities
|
|
|
86
|
|
|
|
87
|
|
Other
|
|
|
269
|
|
|
|
254
|
|
|
|
|
|
|
|
|
|
|
Total other liabilities
|
|
|
443
|
|
|
|
440
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2006 and 2005, estimated liabilities for
asset retirement obligations were $59 million and
$54 million, respectively, of which $47 million in
2006 and $52 million in 2005 is included in the Other
caption above. The remainder of these liabilities are included
in Other current liabilities in the Other caption (See
Note 14). This amount primarily represents the
Companys estimated future liability for site demolition
and various landfill closures and the associated monitoring
costs at these operating sites.
Changes in asset retirement obligations are reconciled as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
|
Predecessor
|
|
|
|
|
|
|
|
|
|
Nine Months
|
|
|
|
Three Months
|
|
|
|
Year Ended
|
|
|
Year Ended
|
|
|
Ended
|
|
|
|
Ended
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
March 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
2004
|
|
|
|
|
|
|
(In $ millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at beginning of period
|
|
|
54
|
|
|
|
52
|
|
|
|
48
|
|
|
|
|
47
|
|
Additions
|
|
|
10
|
|
|
|
9
|
|
|
|
12
|
|
|
|
|
|
|
Accretion
|
|
|
3
|
|
|
|
4
|
|
|
|
1
|
|
|
|
|
1
|
|
Payments
|
|
|
(2
|
)
|
|
|
(9
|
)
|
|
|
(1
|
)
|
|
|
|
(1
|
)
|
Divestitures(1)
|
|
|
|
|
|
|
(12
|
)
|
|
|
|
|
|
|
|
|
|
Purchase accounting adjustments
|
|
|
|
|
|
|
9
|
|
|
|
(9
|
)
|
|
|
|
|
|
Revisions to cash flow estimates
|
|
|
(7
|
)
|
|
|
|
|
|
|
(1
|
)
|
|
|
|
1
|
|
Exchange rate changes
|
|
|
1
|
|
|
|
1
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at end of period
|
|
|
59
|
|
|
|
54
|
|
|
|
52
|
|
|
|
|
48
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Relates to sale of the Rock Hill plant (See Note 6). |
The Company has identified but not recognized asset retirement
obligations related to most of its existing operating
facilities. Examples of these types of obligations include
demolition, decommissioning, disposal and restoration
activities. Legal obligations exist in connection with the
retirement of these assets upon closure of the facilities or
abandonment of the existing operations. However, the Company
currently plans on continuing operations at these facilities
indefinitely and therefore a reasonable estimate of fair value
cannot be determined at this time. In the event the Company
considers plans to abandon or cease operations at these sites,
an asset retirement obligation will be reassessed at that time.
If certain operating facilities were to close, the related asset
retirement obligations could significantly affect the
Companys results of operations and cash flows.
F-32
CELANESE
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
|
As of
|
|
|
As of
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
|
(In $ millions)
|
|
|
Short-term borrowings and
current installments of long-term debt third party
and Affiliates
|
|
|
|
|
|
|
|
|
Current installments of long-term
debt
|
|
|
127
|
|
|
|
20
|
|
Short-term borrowings, principally
comprised of amounts due to Affiliates
|
|
|
182
|
|
|
|
135
|
|
|
|
|
|
|
|
|
|
|
Total short-term borrowings and
current installments of long-term debt third party
and Affiliates
|
|
|
309
|
|
|
|
155
|
|
|
|
|
|
|
|
|
|
|
Long-term
debt
|
|
|
|
|
|
|
|
|
Senior Credit Facilities: Term
Loan facility
|
|
|
1,622
|
|
|
|
1,708
|
|
Senior Subordinated
Notes 9.625%, due 2014
|
|
|
799
|
|
|
|
800
|
|
Senior Subordinated
Notes 10.375%, due 2014
|
|
|
171
|
|
|
|
153
|
|
Senior Discount Notes 10.5%,
due 2014
|
|
|
339
|
|
|
|
306
|
|
Senior Discount Notes 10%,
due 2014
|
|
|
81
|
|
|
|
73
|
|
Term notes 7.125%, due 2009
|
|
|
14
|
|
|
|
14
|
|
Pollution control and industrial
revenue bonds, interest rates ranging from 5.2% to 6.7%, due at
various dates through 2030
|
|
|
191
|
|
|
|
191
|
|
Obligations under capital leases
and other secured borrowings due at various dates through 2023
|
|
|
30
|
|
|
|
28
|
|
Other borrowings
|
|
|
69
|
|
|
|
29
|
|
|
|
|
|
|
|
|
|
|
Subtotal
|
|
|
3,316
|
|
|
|
3,302
|
|
Less: Current installments of
long-term debt
|
|
|
127
|
|
|
|
20
|
|
|
|
|
|
|
|
|
|
|
Total long-term debt
|
|
|
3,189
|
|
|
|
3,282
|
|
|
|
|
|
|
|
|
|
|
Interest
Expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
|
Predecessor
|
|
|
|
|
|
|
|
|
|
Nine Months
|
|
|
|
Three Months
|
|
|
|
Year Ended
|
|
|
Year Ended
|
|
|
Ended
|
|
|
|
Ended
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
March 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
2004
|
|
|
|
(In $ millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accelerated amortization of
deferred financing costs on early redemption and prepayment of
debt
|
|
|
1
|
|
|
|
28
|
|
|
|
89
|
|
|
|
|
|
|
Premium paid on early redemption
of debt
|
|
|
|
|
|
|
74
|
|
|
|
21
|
|
|
|
|
|
|
Other interest expense
|
|
|
293
|
|
|
|
285
|
|
|
|
190
|
|
|
|
|
6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest expense
|
|
|
294
|
|
|
|
387
|
|
|
|
300
|
|
|
|
|
6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Senior Credit Facilities. As of
December 31, 2006, the amended and restated (January
2005) senior credit facilities consist of a term loan
facility, a revolving credit facility and a credit-linked
revolving facility. The
F-33
CELANESE
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
revolving credit facility, through a syndication of banks,
provides for borrowings of up to $600 million, including
the availability of letters of credit in U.S. dollars and
euros and for borrowings on
same-day
notice. As of December 31, 2006, there were no outstanding
borrowings or letters of credit issued under the revolving
credit facility; accordingly $600 million remained
available for borrowing.
At December 31, 2006, the term loan facility includes
$1,288 million of U.S. dollar denominated loans and
253 million of euro denominated loans, both maturing
in 2011.
In addition, the Company has a $228 million credit-linked
revolving facility, which matures in 2009. The credit-linked
revolving facility includes borrowing capacity available for
letters of credit. As of December 31, 2006, there were
$218 million of letters of credit issued under the
credit-linked revolving facility and $10 million remained
available for borrowing.
Substantially all of the assets of Celanese Holdings LLC
(Celanese Holdings), the direct parent of
BCP Crystal US Holdings Corp. (BCP Crystal),
and, subject to certain exceptions, substantially all of its
existing and future U.S. subsidiaries, referred to as
U.S. Guarantors, secure these facilities. The borrowings
under the revolving senior credit facility bear interest at a
rate equal to an applicable margin plus, at the borrowers
option, either a base rate or a LIBOR rate. The applicable
margin for a revolving facility borrowing under the base rate
option is 1.50% and for the LIBOR option, 2.50% (in each case,
subject to a step-down based on a performance test, as defined).
In November 2005, the Company amended its senior credit
facilities which lowered the margin over LIBOR on the
U.S. dollar denominated portion of the term loan facility
from 2.25% to 2.00%. In addition, a further reduction of the
interest rate to LIBOR plus 1.75% is allowed if certain
conditions are met. The interest rate for the revolving senior
credit facility at December 31, 2006 was 7.61%.
BCP Crystal may voluntarily repay outstanding loans under the
senior credit facility at any time without premium or penalty,
other than customary breakage costs with respect to
LIBOR loans.
As stated in the prepayment requirements under the amended and
restated senior credit facilities, the Company is required to
prepay 50% of its excess cash flow against its senior term loan
facility. Based on the excess cash flow calculation, as defined
in the Companys amended and restated senior credit
facilities, at December 31, 2006, the Company will make a
prepayment of approximately $98 million on the senior term
loan facility in March 2007. In connection with the excess cash
flow prepayment, the Company will write off approximately
$1 million of unamortized deferred financing fees
associated with the senior term loan facility.
In July 2006, the Company made a $100 million equivalent
voluntary prepayment on its senior term loan facility. In
connection with the voluntary prepayment, the Company wrote off
approximately $1 million of unamortized deferred financing
fees associated with the senior term loan facility.
In the first quarter 2005, the Company borrowed an additional
$1,135 million under the amended and restated senior credit
facilities. A portion of these proceeds, coupled with the
proceeds from the initial public offering, were used to repay
the senior subordinated notes and senior discount notes, as
previously described, and the $350 million floating rate
term loan and related early redemption premiums of
$4 million, $19 million and $51 million,
respectively. In addition, $200 million was used to finance
the February 2005 acquisition of the Vinamul business (See
Note 6).
Senior Subordinated Notes. During June and
July 2004, the Company issued $1,225 million and
200 million in senior subordinated notes for proceeds
of $1,475 million, which included $4 million in
premiums. All of BCP Crystals U.S. domestic, wholly
owned subsidiaries that guarantee BCP Crystals obligations
under the senior credit facilities guarantee the senior
subordinated notes on an unsecured senior subordinated basis. In
February 2005, $521 million of the net proceeds of the
offering of the Companys Series A common stock were
used to redeem a portion of the senior subordinated notes and
$51 million was used to pay the premium associated with the
redemption.
Senior Discount Notes. In September 2004,
Crystal LLC and Crystal US Sub 3 Corp., a subsidiary of
Crystal LLC, issued $853 million aggregate principal
amount at maturity of the Companys senior discount notes
due 2014 consisting of $163 million principal amount at
maturity of the Companys 10% Series A senior discount
notes
F-34
CELANESE
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
due 2014 and $690 million principal amount at maturity of
the Companys
101/2%
Series B Senior Discount Notes due 2014 (collectively, the
senior discount notes). The gross proceeds of the
offering were $513 million. Approximately $500 million
of the proceeds were distributed to the Companys Original
Shareholders (See Note 19), with the remaining proceeds
used to pay fees associated with the refinancing. Until
October 1, 2009, interest on the senior discount notes will
accrue in the form of an increase in the accreted value of such
notes. Cash interest on the senior discount notes will accrue
commencing on October 1, 2009 and be payable semiannually
in arrears on April 1 and October 1. In February 2005,
the Company used $37 million of the net proceeds of the
offering of its Series A common stock to redeem a portion
of the Series A senior discount notes, $151 million to
redeem a portion of the Series B senior discount notes and
$19 million to pay the premium associated with such
redemption.
Mandatorily Redeemable Exchangeable Preferred
Stock. In April 2004, the Company issued
200,000 shares of Series A Cumulative Exchangeable
Preferred Shares due 2016 for gross proceeds of
$200 million, exclusive of $18 million of fees. The
non-voting shares of preferred stock had an initial liquidation
preference of $1,000 per share and a dividend rate of 13%.
The Company recorded associated interest expense of
$6 million for the nine months ended December 31,
2004. These shares of preferred stock were redeemed on
July 1, 2004 for $227 million, which included
$6 million in accrued interest and a redemption premium of
$21 million. Accordingly, the Company expensed
$18 million of unamortized deferred financing costs and the
redemption premium of $21 million, both of which are
included within interest expense in the nine months ended
December 31, 2004.
Other Financial Arrangements. As detailed in
Note 6, in July 2005, the Company acquired Acetex for
$270 million and assumed Acetexs $247 million of
net debt, which is net of cash acquired of $54 million. The
Company caused Acetex to exercise its option to redeem its
107/8% senior
notes due 2009 totaling $265 million. The redemption was
funded primarily with cash on hand. The redemption price was
$280 million, which represents 105.438% of the outstanding
principal amount, plus accrued and unpaid interest to
August 19, 2005. On August 25, 2005, the Company
repaid the remaining $36 million of assumed debt with
available cash.
Covenants. The senior credit facilities are
subject to prepayment requirements and contain covenants,
defaults and other provisions. The senior credit facilities
require BCP Crystal to prepay outstanding term loans, subject to
certain exceptions, with:
75% (such percentage will be reduced to 50% if
BCP Crystals leverage ratio is less than 3.00 to 1.00 for
any fiscal year ending on or after December 31,
2005) of BCP Crystals excess cash flow;
100% of the net cash proceeds of all
non-ordinary course asset sales and casualty and condemnation
events, unless BCP Crystal reinvests or contracts to reinvest
those proceeds in assets to be used in BCP Crystals
business or to make certain other permitted investments within
12 months, subject to certain limitations;
100% of the net cash proceeds of any
incurrence of debt other than debt permitted under the senior
credit facilities, subject to certain exceptions; and
50% of the net cash proceeds of issuances of
equity of Celanese Holdings, subject to certain exceptions.
The indentures governing the senior subordinated notes and the
senior discount notes limit the ability of the issuers of such
notes and the ability of their restricted subsidiaries to:
|
|
|
|
|
incur additional indebtedness or issue preferred stock;
|
|
|
|
pay dividends on or make other distributions or repurchase the
respective issuers capital stock;
|
|
|
|
make investments;
|
|
|
|
enter into certain transactions with affiliates;
|
|
|
|
limit dividends or other payments by BCP Crystals
restricted subsidiaries to it;
|
|
|
|
create liens or other pari passu on subordinated indebtedness
without securing the respective notes;
|
F-35
CELANESE
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
|
|
designate subsidiaries as unrestricted subsidiaries; and
|
|
|
|
sell certain assets or merge with or into other companies.
|
Subject to certain exceptions, the indentures governing the
senior subordinated notes and the senior discount notes permit
the issuers of the notes and their restricted subsidiaries to
incur additional indebtedness, including secured indebtedness.
In addition, the senior credit facilities require BCP Crystal to
maintain the following financial covenants: a maximum total
leverage ratio, a maximum bank debt leverage ratio, a minimum
interest coverage ratio and maximum capital expenditures
limitation. The maximum consolidated net bank debt to Adjusted
EBITDA ratio, as defined, previously required under the senior
credit facilities, was eliminated when the Company amended the
facilities in January 2005.
As of December 31, 2006, the Company was in compliance with
all of the financial covenants related to its debt agreements.
Principal payments scheduled to be made on the Companys
debt, including short term borrowings, is as follows:
|
|
|
|
|
|
|
Total
|
|
|
|
(In $ millions)
|
|
|
2007
|
|
|
309
|
|
2008
|
|
|
25
|
|
2009
|
|
|
50
|
|
2010
|
|
|
39
|
|
2011
|
|
|
1,485
|
|
Thereafter(1)
|
|
|
1,590
|
|
|
|
|
|
|
Total
|
|
|
3,498
|
|
|
|
|
|
|
|
|
|
(1) |
|
Includes $2 million purchase accounting adjustment to
assumed debt. |
Pension obligations. Pension obligations are
established for benefits payable in the form of retirement,
disability and surviving dependent pensions. The benefits
offered vary according to the legal, fiscal and economic
conditions of each country. The commitments result from
participation in defined contribution and defined benefit plans,
primarily in the U.S. Benefits are dependent on years of
service and the employees compensation. Supplemental
retirement benefits provided to certain employees are
non-qualified for U.S. tax purposes. Separate trusts have
been established for some non-qualified plans.
The Company sponsors defined benefit pension plans in North
America, Europe and Asia. As of December 31, 2006, the
Companys U.S. qualified pension plan represented
greater than 84% and 76% of Celaneses pension plan assets
and liabilities, respectively. Independent trusts or insurance
companies administer the majority of these plans. Pension costs
under the Companys retirement plans are actuarially
determined.
The Company sponsors various defined contribution plans in North
America, Europe, and Asia covering certain employees. Employees
may contribute to these plans and the Company will match these
contributions in varying amounts. The Companys matching
contribution to the defined contribution plans are based on
specified percentages of employee contributions and aggregated
$11 million, $12 million, $8 million and
$3 million for the years ended December 31, 2006 and
2005, the nine months ended December 31, 2004 and the three
months ended March 31, 2004, respectively.
F-36
CELANESE
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
In connection with the acquisition of CAG, the Purchaser agreed
to pre-fund certain pension obligations. The Company contributed
an additional $54 million to the non-qualified pension
plans rabbi trusts in February 2005.
In connection with the Companys acquisition of Vinamul and
Acetex in 2005, the Company assumed certain assets and
obligations related to the acquired pension plans. The Company
recorded liabilities of $128 million for these pension
plans. Total pension assets acquired amounted to
$85 million.
As part of a restructuring program announced in October 2004,
the Company closed certain plants related to its acetate
filament production and consolidated its acetate flake and tow
operations from five locations to three. This resulted in the
reduction of nearly 600 U.S. employees triggering a plan
curtailment. The curtailment resulted in an increase in the
projected benefit obligation and a corresponding curtailment
loss of $1 million for the U.S. pension plan during
the year ended December 31, 2005.
Other postretirement obligations. Certain
retired employees receive postretirement healthcare and life
insurance benefits under plans sponsored by the Company, which
has the right to modify or terminate these plans at any time.
The cost for coverage is shared between the Company and the
employee. The cost of providing retiree health care and life
insurance benefits is actuarially determined and accrued over
the service period of the active employee group. The
companys policy is to fund benefits as claims and premiums
are paid. The U.S. plan was closed to new participants
effective January 1, 2006.
In connection with the Companys acquisition of Vinamul and
Acetex in 2005, the Company assumed certain assets and
obligations related to the acquired entities
postretirement benefit plans. The Company recorded liabilities
of $24 million for these postretirement benefit plans.
In 2003, the U.S. postretirement medical plan was
amended to introduce defined dollar caps for
pre-1993
retirees. These changes were approved in June 2003 and resulted
in a reduction in the accumulated postretirement benefit
obligation which was set up as a $67 million negative prior
service cost base as these changes become effective July 1,
2004.
F-37
CELANESE
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Impact of SFAS No. 158. On
December 31, 2006, the Company adopted the recognition and
disclosure provisions of SFAS No. 158, which caused the
Company to recognize the funded status (i.e., the difference
between the fair value of plan assets and the projected benefit
obligations) of its benefit plans in the December 31, 2006
consolidated balance sheet, with a corresponding adjustment to
Accumulated other comprehensive income (loss), net of tax. Based
on the funded status of the defined benefit pension and
postretirement benefit plans as of December 31, 2006, the
Company reported a total unfunded amount of $884 million of
pension and postretirement benefit obligations. The net impact
of the adoption of SFAS No. 158 was an increase in pension
and postretirement benefit obligations of $113 million with
an offset to Accumulated other comprehensive income (loss), net
of tax. The Companys adoption of SFAS No. 158 on
December 31, 2006 had no impact on the Companys
earnings. The following tables present details about the
Companys pension plans:
Incremental
Effect of Applying SFAS No. 158 on Individual Line Items in
the Consolidated Balance Sheet at December 31,
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in $ millions)
|
|
|
|
|
|
|
Adjustments
|
|
|
|
|
|
|
|
|
|
Before
|
|
|
to reduce
|
|
|
|
|
|
After
|
|
|
|
Application of
|
|
|
Minimum
|
|
|
SFAS No. 158
|
|
|
Application of
|
|
|
|
SFAS No. 158
|
|
|
Liability
|
|
|
Adjustments
|
|
|
SFAS No. 158
|
|
|
Deferred income taxes
|
|
|
41
|
|
|
|
(19
|
)
|
|
|
|
|
|
|
22
|
|
Total assets
|
|
|
7,914
|
|
|
|
(19
|
)
|
|
|
|
|
|
|
7,895
|
|
Other current liabilities
|
|
|
731
|
|
|
|
|
|
|
|
56
|
|
|
|
787
|
|
Benefit obligations
|
|
|
832
|
|
|
|
(156
|
)
|
|
|
213
|
|
|
|
889
|
|
Total liabilities
|
|
|
6,995
|
|
|
|
(156
|
)
|
|
|
269
|
|
|
|
7,108
|
|
Accumulated other comprehensive
income (loss), net
|
|
|
163
|
|
|
|
137
|
|
|
|
(269
|
)
|
|
|
31
|
|
Total shareholders equity
|
|
|
919
|
|
|
|
137
|
|
|
|
(269
|
)
|
|
|
787
|
|
F-38
CELANESE
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Benefits
|
|
|
Postretirement Benefits
|
|
|
|
Successor
|
|
|
Successor
|
|
|
|
As of December 31,
|
|
|
As of December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
2006
|
|
|
2005
|
|
|
|
(In $ millions)
|
|
|
|
|
|
Change in projected benefit
obligation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Projected benefit obligation at
beginning of period
|
|
|
3,407
|
|
|
|
3,122
|
|
|
|
377
|
|
|
|
421
|
|
Service cost
|
|
|
40
|
|
|
|
40
|
|
|
|
2
|
|
|
|
3
|
|
Interest cost
|
|
|
183
|
|
|
|
181
|
|
|
|
20
|
|
|
|
23
|
|
Participant contributions
|
|
|
1
|
|
|
|
1
|
|
|
|
18
|
|
|
|
15
|
|
Plan amendments
|
|
|
1
|
|
|
|
(2
|
)
|
|
|
(1
|
)
|
|
|
|
|
Actuarial losses (gains)(1)
|
|
|
(115
|
)
|
|
|
163
|
|
|
|
(14
|
)
|
|
|
(44
|
)
|
Acquisitions
|
|
|
|
|
|
|
128
|
|
|
|
|
|
|
|
24
|
|
Special termination benefits
|
|
|
3
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
Divestitures
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Settlements
|
|
|
(9
|
)
|
|
|
(12
|
)
|
|
|
|
|
|
|
|
|
Benefits paid
|
|
|
(205
|
)
|
|
|
(189
|
)
|
|
|
(59
|
)
|
|
|
(63
|
)
|
Transfers
|
|
|
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
Curtailments
|
|
|
|
|
|
|
(1
|
)
|
|
|
(1
|
)
|
|
|
(3
|
)
|
Foreign currency exchange rate
changes
|
|
|
32
|
|
|
|
(24
|
)
|
|
|
1
|
|
|
|
1
|
|
Other
|
|
|
6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Projected benefit obligation at end
of period
|
|
|
3,343
|
|
|
|
3,407
|
|
|
|
343
|
|
|
|
377
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in plan assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of plan assets at
beginning of period
|
|
|
2,603
|
|
|
|
2,486
|
|
|
|
|
|
|
|
|
|
Actual return on plan assets
|
|
|
332
|
|
|
|
201
|
|
|
|
|
|
|
|
|
|
Employer contributions
|
|
|
53
|
|
|
|
44
|
|
|
|
41
|
|
|
|
48
|
|
Participant contributions
|
|
|
1
|
|
|
|
1
|
|
|
|
18
|
|
|
|
15
|
|
Acquisitions
|
|
|
|
|
|
|
85
|
|
|
|
|
|
|
|
|
|
Settlements
|
|
|
(9
|
)
|
|
|
(12
|
)
|
|
|
|
|
|
|
|
|
Benefits paid
|
|
|
(205
|
)
|
|
|
(189
|
)
|
|
|
(59
|
)
|
|
|
(63
|
)
|
Foreign currency exchange rate
changes
|
|
|
20
|
|
|
|
(13
|
)
|
|
|
|
|
|
|
|
|
Other
|
|
|
7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of plan assets at end of
period
|
|
|
2,802
|
|
|
|
2,603
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Funded status and net amounts
recognized
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plan assets less than benefit
obligation
|
|
|
(541
|
)
|
|
|
(804
|
)
|
|
|
(343
|
)
|
|
|
(377
|
)
|
Unrecognized prior service cost
|
|
|
(1
|
)
|
|
|
(2
|
)
|
|
|
(1
|
)
|
|
|
|
|
Unrecognized actuarial (gain) loss
|
|
|
64
|
|
|
|
302
|
|
|
|
(44
|
)
|
|
|
(31
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net amount recognized in the
consolidated balance sheets
|
|
|
(478
|
)
|
|
|
(504
|
)
|
|
|
(388
|
)
|
|
|
(408
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts recognized in the
accompanying consolidated balance sheets consist of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued benefit liability
|
|
|
(541
|
)
|
|
|
(660
|
)
|
|
|
(343
|
)
|
|
|
(408
|
)
|
Other comprehensive income(2)
|
|
|
63
|
|
|
|
156
|
|
|
|
(45
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net amount recognized in the
consolidated balance sheets
|
|
|
(478
|
)
|
|
|
(504
|
)
|
|
|
(388
|
)
|
|
|
(408
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-current assets
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
(22
|
)
|
|
|
|
|
|
|
(38
|
)
|
|
|
|
|
Non-current liabilities
|
|
|
(523
|
)
|
|
|
(660
|
)
|
|
|
(305
|
)
|
|
|
(408
|
)
|
|
|
|
(1) |
|
Primarily relates to change in discount rates. |
|
(2) |
|
Amount shown net of tax in the consolidated statements of
shareholders equity. See Note 21 for the related tax
associated with the pension and postretirement benefit
obligations. |
F-39
CELANESE
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Benefits
|
|
|
Postretirement Benefits
|
|
|
|
Successor
|
|
|
Successor
|
|
|
|
As of December 31,
|
|
|
As of December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
2006
|
|
|
2005
|
|
|
Weighted-average assumptions
used to determine benefit obligations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discount rate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. plans
|
|
|
5.88
|
%
|
|
|
5.63
|
%
|
|
|
5.88
|
%
|
|
|
5.63
|
%
|
International plans
|
|
|
4.70
|
%
|
|
|
4.54
|
%
|
|
|
4.80
|
%
|
|
|
4.97
|
%
|
Combined
|
|
|
5.68
|
%
|
|
|
5.46
|
%
|
|
|
5.79
|
%
|
|
|
5.57
|
%
|
Rate of compensation increase:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. plans
|
|
|
4.00
|
%
|
|
|
4.00
|
%
|
|
|
4.00
|
%
|
|
|
4.00
|
%
|
International plans
|
|
|
3.18
|
%
|
|
|
3.26
|
%
|
|
|
3.53
|
%
|
|
|
3.26
|
%
|
Combined
|
|
|
3.73
|
%
|
|
|
3.81
|
%
|
|
|
3.92
|
%
|
|
|
3.81
|
%
|
The projected benefit obligation, accumulated benefit
obligation, and fair value of plan assets for all defined
benefit pension plans with accumulated benefit obligations in
excess of plan assets at the end of 2006 and 2005 were as
follows:
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
|
As of December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
|
(In $ millions)
|
|
|
Projected benefit obligation
|
|
|
3,264
|
|
|
|
3,367
|
|
Accumulated benefit obligation
|
|
|
3,124
|
|
|
|
3,204
|
|
Fair value of plan assets
|
|
|
2,723
|
|
|
|
2,563
|
|
The accumulated benefit obligation for all defined benefit
pension plans was $3,192 million and $3,235 million at
December 31, 2006 and 2005, respectively.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
|
Predecessor
|
|
|
|
Successor
|
|
|
|
Predecessor
|
|
|
|
Pension Benefits
|
|
|
|
Postretirement Benefits
|
|
|
|
|
|
|
|
|
|
Nine Months
|
|
|
|
Three Months
|
|
|
|
|
|
|
|
|
|
Nine Months
|
|
|
|
Three Months
|
|
|
|
Year Ended
|
|
|
Year Ended
|
|
|
Ended
|
|
|
|
Ended
|
|
|
|
Year Ended
|
|
|
Year Ended
|
|
|
Ended
|
|
|
|
Ended
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
March 31,
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
March 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
2004
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
2004
|
|
|
|
(In $ millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Components of net periodic
benefit cost
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service cost
|
|
|
40
|
|
|
|
40
|
|
|
|
30
|
|
|
|
|
9
|
|
|
|
|
2
|
|
|
|
3
|
|
|
|
2
|
|
|
|
|
1
|
|
Interest cost
|
|
|
183
|
|
|
|
181
|
|
|
|
131
|
|
|
|
|
40
|
|
|
|
|
20
|
|
|
|
23
|
|
|
|
19
|
|
|
|
|
6
|
|
Expected return on plan assets
|
|
|
(207
|
)
|
|
|
(200
|
)
|
|
|
(131
|
)
|
|
|
|
(40
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of prior service cost
(benefit)
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
(1
|
)
|
|
|
|
(1
|
)
|
Recognized actuarial loss
|
|
|
2
|
|
|
|
1
|
|
|
|
2
|
|
|
|
|
6
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
|
|
|
|
2
|
|
Curtailment (gain) loss
|
|
|
1
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1
|
)
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
Settlement loss
|
|
|
|
|
|
|
1
|
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Special termination benefits
|
|
|
3
|
|
|
|
1
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic benefit cost
|
|
|
23
|
|
|
|
26
|
|
|
|
39
|
|
|
|
|
16
|
|
|
|
|
21
|
|
|
|
25
|
|
|
|
21
|
|
|
|
|
8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-40
CELANESE
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
|
Predecessor
|
|
|
|
Successor
|
|
|
|
Predecessor
|
|
|
|
Pension Benefits
|
|
|
|
Postretirement Benefits
|
|
|
|
|
|
|
|
|
|
Nine Months
|
|
|
|
Three Months
|
|
|
|
|
|
|
|
|
|
Nine Months
|
|
|
|
Three Months
|
|
|
|
Year Ended
|
|
|
Year Ended
|
|
|
Ended
|
|
|
|
Ended
|
|
|
|
Year Ended
|
|
|
Year Ended
|
|
|
Ended
|
|
|
|
Ended
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
March 31,
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
March 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
2004
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
2004
|
|
|
|
(In $ millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes in other comprehensive
income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic cost
|
|
|
23
|
|
|
|
26
|
|
|
|
39
|
|
|
|
|
16
|
|
|
|
|
21
|
|
|
|
25
|
|
|
|
21
|
|
|
|
|
8
|
|
Other changes in plan assets and
benefit obligations
|
|
|
(155
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current year actuarial
loss/(gain)
|
|
|
64
|
|
|
|
117
|
|
|
|
19
|
|
|
|
|
|
|
|
|
|
(44
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current year prior service benefit
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of net (loss)/gain
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total recognized in other
comprehensive income
|
|
|
(92
|
)
|
|
|
117
|
|
|
|
19
|
|
|
|
|
|
|
|
|
|
(45
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
(69
|
)
|
|
|
143
|
|
|
|
58
|
|
|
|
|
16
|
|
|
|
|
(24
|
)
|
|
|
25
|
|
|
|
21
|
|
|
|
|
8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Benefits
|
|
|
Postretirement Benefits
|
|
|
|
Successor
|
|
|
Successor
|
|
|
|
As of December 31,
|
|
|
As of December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
2006
|
|
|
2005
|
|
|
Amounts recognized in
Accumulated other comprehensive income (loss), net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net actuarial loss/(gain)(1)
|
|
|
64
|
|
|
|
156
|
|
|
|
(44
|
)
|
|
|
|
|
Prior service cost (benefit)(1)
|
|
|
(1
|
)
|
|
|
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total recognized in Accumulated
other comprehensive (income) loss, net
|
|
|
63
|
|
|
|
156
|
|
|
|
(45
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Amount shown net of tax in the consolidated statement of
shareholders equity. |
|
|
|
|
|
|
|
|
|
|
|
Pension
|
|
|
Postretirement
|
|
|
|
Benefits
|
|
|
Benefits
|
|
|
2007 estimated amounts
amortized from Accumulated other comprehensive income (loss),
net into net periodic cost
|
|
|
|
|
|
|
|
|
Actuarial (gains)/loss
|
|
|
1
|
|
|
|
(2
|
)
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
1
|
|
|
|
(2
|
)
|
|
|
|
|
|
|
|
|
|
F-41
CELANESE
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The Company uses the corridor approach in the valuation of the
defined benefit plans and other postretirement benefits. The
corridor approach defers all actuarial gains and losses
resulting from variances between actual results and economic
estimates or actuarial assumptions. For defined benefit pension
plans, these unrecognized gains and losses are amortized when
the net gains and losses exceed 10% of the greater of the
market-related value of plan assets or the projected benefit
obligation at the beginning of the year. For other post
retirement benefits, amortization occurs when the net gains and
losses exceed 10% of the accumulated postretirement benefit
obligation at the beginning of the year. The amount in excess of
the corridor is amortized over the average remaining service
period to retirement date active plan participants or, for
retired participants, the average remaining life expectancy.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
|
Predecessor
|
|
|
|
Successor
|
|
|
|
Predecessor
|
|
|
|
Pension Benefits
|
|
|
|
Postretirement Benefits
|
|
|
|
|
|
|
|
|
|
Nine Months
|
|
|
|
Three Months
|
|
|
|
|
|
|
|
|
|
Nine Months
|
|
|
|
Three Months
|
|
|
|
Year Ended
|
|
|
Year Ended
|
|
|
Ended
|
|
|
|
Ended
|
|
|
|
Year Ended
|
|
|
Year Ended
|
|
|
Ended
|
|
|
|
Ended
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
March 31,
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
March 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
2004
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average assumptions
used to determine net cost
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discount rate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. plans
|
|
|
5.63
|
%
|
|
|
5.88
|
%
|
|
|
6.25
|
%
|
|
|
|
6.25
|
%
|
|
|
|
5.63
|
%
|
|
|
5.88
|
%
|
|
|
6.25
|
%
|
|
|
|
6.25
|
%
|
International plans
|
|
|
4.54
|
%
|
|
|
5.50
|
%
|
|
|
6.00
|
%
|
|
|
|
5.70
|
%
|
|
|
|
4.97
|
%
|
|
|
5.68
|
%
|
|
|
6.00
|
%
|
|
|
|
6.00
|
%
|
Combined
|
|
|
5.46
|
%
|
|
|
5.85
|
%
|
|
|
6.20
|
%
|
|
|
|
6.20
|
%
|
|
|
|
5.57
|
%
|
|
|
5.86
|
%
|
|
|
6.25
|
%
|
|
|
|
6.25
|
%
|
Expected return on plan assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. plans
|
|
|
8.50
|
%
|
|
|
8.50
|
%
|
|
|
8.50
|
%
|
|
|
|
8.50
|
%
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
|
N/A
|
|
International plans
|
|
|
6.30
|
%
|
|
|
6.25
|
%
|
|
|
7.35
|
%
|
|
|
|
7.35
|
%
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
|
N/A
|
|
Combined
|
|
|
8.17
|
%
|
|
|
8.19
|
%
|
|
|
8.40
|
%
|
|
|
|
8.40
|
%
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
|
N/A
|
|
Rate of compensation increase:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
|
N/A
|
|
U.S. plans
|
|
|
4.00
|
%
|
|
|
4.00
|
%
|
|
|
4.00
|
%
|
|
|
|
4.00
|
%
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
|
N/A
|
|
International plans
|
|
|
3.26
|
%
|
|
|
3.25
|
%
|
|
|
3.25
|
%
|
|
|
|
3.25
|
%
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
|
N/A
|
|
Combined
|
|
|
3.81
|
%
|
|
|
3.80
|
%
|
|
|
3.80
|
%
|
|
|
|
3.80
|
%
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
|
N/A
|
|
On January 1, 2005, the Companys health care cost
trend assumption for U.S. postretirement medical
plans net periodic benefit cost was 10% per year
grading down 1% per year to an ultimate rate of 5%. On
January 1, 2006, the health care cost trend rate was
9% per year grading down 1% per year to an ultimate
rate of 5%.
Included in the pension obligations above are accrued
liabilities relating to supplemental retirement plans for
certain employees amounting to $232 million and
$235 million as of December 31, 2006 and 2005,
respectively. Pension expense relating to these plans included
in net periodic benefit cost totaled $15 million,
$15 million, $11 million, and $5 million for the
years ended December 31, 2006 and 2005, the nine months
ended December 31, 2004, and the three months ended
March 31, 2004, respectively. To fund these obligations,
non-qualified trusts were established, included within other
non-current assets, which held marketable securities valued at
$183 million and $181 million at December 31,
2006 and 2005, respectively, and recognized income (loss),
excluding appreciation of insurance contracts, of
$5 million, $6 million, $6 million and
$(1) million for the years ended December 31, 2006 and
2005, the nine months ended December 31, 2004 and the three
months ended March 31, 2004, respectively. In addition to
holding marketable securities, the non-qualified trust holds
investments in insurance contracts of $66 million and
$68 million as of December 31, 2006 and 2005,
respectively. In 2005, the Successor contributed $9 million
to these trusts from proceeds received from the demutualization
of an insurance company.
F-42
CELANESE
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Plan
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
Percentage of
|
|
|
|
Target
|
|
|
Plan Assets at
|
|
|
|
Allocation
|
|
|
December 31,
|
|
Asset Category US
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
Equity securities
|
|
|
70
|
%
|
|
|
69
|
%
|
|
|
77
|
%
|
Debt securities
|
|
|
30
|
%
|
|
|
31
|
%
|
|
|
22
|
%
|
Real estate and other
|
|
|
0
|
%
|
|
|
0
|
%
|
|
|
1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
Average
|
|
|
Percentage of
|
|
|
|
Target
|
|
|
Plan Assets at
|
|
|
|
Allocation
|
|
|
December 31,
|
|
Asset Category International
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
Equity securities
|
|
|
45
|
%
|
|
|
50
|
%
|
|
|
49
|
%
|
Debt securities
|
|
|
53
|
%
|
|
|
49
|
%
|
|
|
46
|
%
|
Real estate and other
|
|
|
2
|
%
|
|
|
1
|
%
|
|
|
5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The financial objectives of the qualified pension plans are
established in conjunction with a comprehensive review of each
plans liability structure. The Companys asset
allocation policy is based on a detailed asset/liability
analysis. In developing investment policy and financial goals,
consideration is given to the plans demographics, the
returns and risks associated with alternative investment
strategies, and the current and projected cash, expense and
funding ratios of the plan. The investment policy must also
comply with local statutory requirements as determined by each
country. A formal asset/liability mix study of the plan is
undertaken every 3 to 5 years or whenever there has been a
material change in plan demographics, benefit structure or
funding status and investment market. The Company has adopted a
long-term investment horizon such that the risk and duration of
investment losses are weighed against the long-term potential
for appreciation of assets. Although there cannot be complete
assurance that these objectives will be realized, it is believed
that the likelihood for their realization is reasonably high,
based upon the asset allocation chosen and the historical and
expected performance of the asset classes utilized by the plans.
The intent is for investments to be broadly diversified across
asset classes, investment styles, investment managers, developed
and emerging markets, business sectors and securities in order
to moderate portfolio volatility and risk. Investments may be in
separate accounts, commingled trusts, mutual funds and other
pooled asset portfolios provided they all conform to fiduciary
standards.
External investment managers are hired to manage the pension
assets. An investment consultant assists with the screening
process for each new manager hired. Over the long-term, the
investment portfolio is expected to earn returns that exceed a
composite of market indices that are weighted to match each
plans target asset allocation. Long-term is considered 3
to 5 years; however, incidences of underperformance are
analyzed. The portfolio return should also (over the long-term)
meet or exceed the return used for actuarial calculations in
order to minimize future pension contributions and escalation in
pension expense.
The expected rate of return assumptions for plan assets are
based mainly on historical performance achieved over a long
period of time (15 to 20 years) encompassing many business
and economic cycles. Adjustments, upward and downward, may be
made to those historical returns to reflect future capital
market expectations; these expectations are typically derived
from expert advice from the investment community and surveys of
peer company assumptions.
F-43
CELANESE
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The Company determines its assumption for the discount rates to
be used for the purposes of computing annual service and
interest costs for its U.S. plans based on the yields of
high quality corporate/government bonds of with a duration
appropriate to the duration of the plan obligations.
The Company determines its discount rates in the Euro zone using
the iBoxx Euro Corporate AA Bond indices with appropriate
adjustments for the duration of the plan obligations.
The tables below reflect employer contributions expected to be
contributed and the pension benefits expected to be paid from
the plan or from the Companys assets. The postretirement
benefits represent the Companys share of the benefit cost.
|
|
|
|
|
|
|
|
|
|
|
Pension
|
|
|
Postretirement
|
|
Employer Contributions
|
|
Benefits
|
|
|
Benefits
|
|
|
|
(In $ millions)
|
|
|
2007
|
|
|
49
|
|
|
|
38
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Postretirement
|
|
|
|
|
|
|
Benefit
|
|
|
|
Pension
|
|
|
|
|
|
Expected
|
|
|
|
Benefit
|
|
|
|
|
|
Federal
|
|
|
|
Payments(1)
|
|
|
Payments
|
|
|
Subsidy
|
|
|
|
(In $ millions)
|
|
|
2007
|
|
|
239
|
|
|
|
38
|
|
|
|
9
|
|
2008
|
|
|
201
|
|
|
|
35
|
|
|
|
7
|
|
2009
|
|
|
197
|
|
|
|
32
|
|
|
|
7
|
|
2010
|
|
|
197
|
|
|
|
30
|
|
|
|
8
|
|
2011
|
|
|
199
|
|
|
|
36
|
|
|
|
|
|
2012-2016
|
|
|
1,066
|
|
|
|
154
|
|
|
|
|
|
|
|
|
(1) |
|
Payments are expected to be made primarily from plan assets. |
Assumed health care cost trend rates have a significant effect
on the amounts reported for the health care plans. A
one-percentage-point change in assumed health care cost trend
rates would have the following effects:
|
|
|
|
|
|
|
|
|
|
|
One Percent
|
|
|
One Percent
|
|
|
|
Increase
|
|
|
Decrease
|
|
|
|
(In $ millions)
|
|
|
Effect on postretirement obligation
|
|
|
4
|
|
|
|
(3
|
)
|
The effect of a one percent increase or decrease in the assumed
health care cost trend rate would have less than a
$1 million impact on service and interest cost.
The following table represents additional benefit liabilities
and other similar obligations:
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
|
As of
|
|
|
As of
|
|
|
|
December 31,
|
|
|
December 31,
|
|
Other Obligations
|
|
2006
|
|
|
2005
|
|
|
|
(In $ millions)
|
|
|
Long-term disability
|
|
|
40
|
|
|
|
49
|
|
Other
|
|
|
21
|
|
|
|
9
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
61
|
|
|
|
58
|
|
|
|
|
|
|
|
|
|
|
In 2004, Celanese amended its long-term disability plan to align
the benefit levels with the retiree medical plan. As a result of
this change, the employee contribution for the long-term
disability medical coverage increased substantially for current
participants in the disability plan. Subsequent to the adoption
of the change, enrollment in
F-44
CELANESE
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
the plan has been trending downward, with 20% of the
participants declining coverage. Accordingly, the Company
reduced the disability accrual by $9 million at
December 31, 2005 as a result of the lower enrollment
experience. In addition, medical claims assumptions were lowered
to reflect actual plan experience and the percentage of
long-term disability medical payments paid for by Medicare. This
change lowered the long-term disability accrual by an additional
$9 million in 2005.
General The Company is subject to
environmental laws and regulations worldwide which 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 divestiture of certain
businesses by the Company or one of its predecessor companies.
For the years ended December 31, 2006 and 2005 and for the
nine months ended December 31, 2004, the Successors
worldwide expenditures, including expenditures for legal
compliance, internal environmental initiatives and remediation
of active, orphan, divested and U.S. Superfund sites were
$71 million, $84 million and $66 million,
respectively. The Predecessors worldwide expenditures for
the three months ended March 31, 2004 were
$22 million. The Successors capital project related
environmental expenditures for the years ended December 31,
2006 and 2005 and the nine months ended December 31, 2004,
and the Predecessors for the three months ended
March 31, 2004, included in worldwide expenditures, were
$5 million, $8 million, $6 million and
$2 million, respectively. Environmental reserves for
remediation matters were $114 million and $124 million
as of December 31, 2006 and 2005, respectively, which
represents the Companys best estimate of its liability.
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 U.S. Superfund sites. In
addition, as part of the demerger agreement between the
Predecessor and Hoechst, a specified portion of the
responsibility for environmental liabilities from a number of
Hoechst divestitures was transferred to the Predecessor. The
Company provides for such obligations when the event of loss is
probable and reasonably estimable.
For the years ended December 31, 2006 and 2005, the nine
months ended December 31, 2004 and the three months ended
March 31, 2004, the total remediation efforts charged to
earnings before tax were $6 million, $14 million,
$3 million and $0 million, respectively. These charges
were offset by reversals of previously established environmental
reserves due to favorable trends in estimates at unrelated sites
of $0 million, $10 million, $2 million and
$2 million during the years ended December 31, 2006
and 2005, the nine months ended December 31, 2004 and the
three months ended March 31, 2004, respectively. In 2005,
the Company also recorded a $7 million reduction to
previously established environmental reserves due to the sale of
the Rock Hill plant (See Note 6). 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.
The Company did not record any insurance recoveries related to
these matters for the reported periods. There are no receivables
for recoveries as of December 31, 2006 and 2005.
German InfraServs On January 1, 1997,
coinciding with a reorganization of the Hoechst businesses in
Germany, real estate service companies (InfraServs)
were created to own directly the land and property and to
provide various technical and administrative services at each of
the manufacturing locations. The Company has manufacturing
operations at three InfraServ locations in Germany: Oberhausen,
Frankfurt am Main-Hoechst and Kelsterbach, and holds interests
in the companies which own and operate the former Hoechst sites
in Gendorf, Knapsack and Wiesbaden.
F-45
CELANESE
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
InfraServs are liable for any residual contamination and other
pollution because they own the real estate on which the
individual facilities operate. In addition, Hoechst, as the
responsible party under German public law, is liable to third
parties for all environmental damage that occurred while it was
still the owner of the plants and real estate. The contribution
agreements entered into in 1997 between Hoechst and the
respective operating companies, as part of the divestiture of
these companies, provide that the operating companies will
indemnify Hoechst against environmental liabilities resulting
from the transferred businesses. Additionally, the InfraServs
have agreed to indemnify Hoechst against any environmental
liability arising out of or in connection with environmental
pollution of any site. Likewise, in certain circumstances the
Company could be responsible for the elimination of residual
contamination on a few sites that were not transferred to
InfraServ companies, in which case Hoechst must reimburse the
Company for two-thirds of any costs so incurred.
The InfraServ partnership agreements provide that, as between
the partners, each partner is responsible for any contamination
caused predominantly by such partner. Any liability, which
cannot be attributed to an InfraServ partner and for which no
third party is responsible, is required to be borne by the
InfraServ Partnership. In view of this potential obligation to
eliminate residual contamination, the InfraServs, primarily
relating to equity and cost affiliates which are not
consolidated by the Company, have reserves of $78 million
and $69 million as of December 31, 2006 and 2005,
respectively.
If an InfraServ partner defaults on its respective
indemnification obligations to eliminate residual contamination,
the owners of the remaining participation in the InfraServ
companies have agreed to fund such liabilities, subject to a
number of limitations. To the extent that any liabilities are
not satisfied by either the InfraServs or their owners, these
liabilities are to be borne by the Company in accordance with
the demerger agreement. However, Hoechst will reimburse the
Company for two-thirds of any such costs. Likewise, in certain
circumstances the Company could be responsible for the
elimination of residual contamination on several sites that were
not transferred to InfraServ companies, in which case Hoechst
must also reimburse the Company for two-thirds of any costs so
incurred. The German InfraServs are owned partially by the
Company, as noted below, and the remaining ownership is held by
various other companies. The Companys ownership interest
and environmental liability participation percentages for such
liabilities which cannot be attributed to an InfraServ partner
were as follows as of December 31, 2006:
|
|
|
|
|
|
|
|
|
Company
|
|
Ownership %
|
|
|
Liability %
|
|
|
InfraServ GmbH & Co.
Gendorf KG
|
|
|
39.0
|
%
|
|
|
10.0
|
%
|
InfraServ GmbH & Co.
Oberhausen KG
|
|
|
98.0
|
%
|
|
|
96.0
|
%
|
InfraServ GmbH & Co.
Knapsack KG
|
|
|
28.2
|
%
|
|
|
22.0
|
%
|
InfraServ GmbH & Co.
Kelsterbach KG
|
|
|
100.0
|
%
|
|
|
100.0
|
%
|
InfraServ GmbH & Co.
Höchst KG
|
|
|
31.2
|
%
|
|
|
40.0
|
%
|
InfraServ GmbH & Co.
Wiesbaden KG
|
|
|
7.9
|
%
|
|
|
0.0
|
%
|
InfraServ Verwaltungs GmbH
|
|
|
100.0
|
%
|
|
|
0.0
|
%
|
U.S. Superfund Sites In the U.S., the
Company may be subject to substantial claims brought by
U.S. 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
U.S. 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 50 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 determine
accurately its ultimate liability for investigation or cleanup
costs at these sites. As of December 31, 2006 and 2005, the
Company had
F-46
CELANESE
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
provisions totaling $15 million and $15 million,
respectively, for U.S. Superfund sites and utilized
$1 million, $2 million, $2 million and less than
$1 million of these reserves during the years ended
December 31, 2006 and 2005, the nine months ended
December 31, 2004 and the three months ended March 31,
2004, respectively. Additional provisions and adjustments
recorded during the years ended December 31, 2006 and 2005,
the nine months ended December 31, 2004 and the three
months ended March 31, 2004 approximately offset these
expenditures.
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 will join
with other PRPs to sign joint defense agreements that will
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.
Hoechst Liabilities In connection with the
Hoechst demerger, Celanese agreed to indemnify Hoechst for the
first 250 million (approximately $330 million)
of future remediation liabilities for environmental damages
arising from 19 specified divested Hoechst entities. As of
December 31, 2006 and 2005, reserves of $33 million
and $33 million, respectively, for these matters are
included as a component of the total environmental reserves. As
of December 31, 2006 and 2005, the Company, has made total
cumulative payments of $44 million and $41 million,
respectively. If such future liabilities exceed
250 million (approximately $330 million),
Hoechst will bear such excess up to an additional
500 million (approximately $660 million).
Thereafter, the Company will bear one-third and Hoechst will
bear two-thirds of any further environmental remediation
liabilities. Where the Company is unable to reasonably determine
the probability of loss or estimate such loss under this
indemnification, the Company has not recognized any liabilities
relative to this indemnification.
Number
of Shares Issued
See table below for share activity:
|
|
|
|
|
|
|
|
|
|
|
Preferred
|
|
|
Common
|
|
|
|
Stock
|
|
|
Stock
|
|
|
|
(In whole shares)
|
|
|
Shares issued upon formation of
the Company as of December 31, 2004
|
|
|
|
|
|
|
99,377,884
|
|
Conversion of Series B common
stock to Series A common stock
|
|
|
|
|
|
|
(99,377,884
|
)
|
Issuance of preferred stock
|
|
|
9,600,000
|
|
|
|
|
|
Issuance of Series A common
stock
|
|
|
|
|
|
|
151,062,161
|
|
Series A stock dividend
|
|
|
|
|
|
|
7,500,000
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2005
|
|
|
9,600,000
|
|
|
|
158,562,161
|
|
Issuance of common stock related
to the exercise of stock options
|
|
|
|
|
|
|
106,505
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2006
|
|
|
9,600,000
|
|
|
|
158,668,666
|
|
|
|
|
|
|
|
|
|
|
On December 31, 2004, the capital structure of the Company
consisted of 650,494 shares of Series B common stock,
par value $0.01 per share. In January 2005, the Company
amended its certificate of incorporation and increased its
authorized common stock to 500,000,000 shares and the
Company effected a 152.772947 for 1 stock split for the
outstanding shares of the Series B common stock.
Accordingly, all Successor share information is effected for
such stock split.
F-47
CELANESE
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Preferred
Stock
As a result of the initial public offering in January 2005 (See
Note 3), the Company now has $240 million aggregate
liquidation preference of outstanding preferred stock. Holders
of the preferred stock are entitled to receive, when, as and if,
declared by the Companys board of directors, out of funds
legally available therefore, cash dividends at the rate of
4.25% per annum of liquidation preference, payable
quarterly in arrears, commencing on May 1, 2005. Dividends
on the preferred stock are cumulative from the date of initial
issuance. Accumulated but unpaid dividends accumulate at an
annual rate of 4.25%. The preferred stock is convertible, at the
option of the holder, at any time into approximately
1.25 shares of Series A common stock, subject to
adjustments, per $25.00 liquidation preference of preferred
stock and upon conversion will be recorded in Shareholders
equity. As of December 31, 2006, the Company had
$2 million of accumulated but undeclared and unpaid
dividends, which were declared on January 5, 2007 and paid
on February 1, 2007.
Additional
Paid-in Capital
In connection with the demerger and pursuant to the Demerger
Agreement executed and delivered by the Predecessor and Hoechst,
the Predecessor assumed certain Hoechsts businesses as
well as certain contractual rights, including indemnifications.
For the years ended December 31, 2006 and 2005 and the nine
months ended December 31, 2004, the Successor recorded
$3 million, $5 million and $3 million,
respectively, increases in Additional paid-in capital related to
recoveries due from Hoechst for the antitrust matters in the
sorbates industry. During the three months ended March 31,
2004, the Predecessor received no recoveries from Hoechst for
the antitrust matters in the sorbates industry (See
Note 25).
During the year ended December 31, 2005, Additional paid-in
capital was increased by $1 million related to stock
options that were subject to variable plan accounting. Also,
Additional paid-in capital was increased by $1 million and
$14 million for the year ended December 31, 2005 and
the nine months ended December 31, 2004, respectively,
related to the Companys discounted share program (See
Note 22). As a result of adopting SFAS No. 123(R)
in 2006, there was no impact to Additional paid-in capital
related to stock options that were subject to variable plan
accounting.
Funding for the Acquisition included an initial equity
investment of $641 million from Blackstone Capital Partners
(Cayman) Ltd. 1, Blackstone Capital Partners (Cayman) Ltd.
2 and Blackstone Capital Partners (Cayman) Ltd. 3 (collectively,
Blackstone) and BA Capital Investors Sidecar Fund,
L.P. (and together with Blackstone, the Original
Shareholders).
Original
Shareholders Sale of Series A Common Stock
On May 9, 2006, the Company filed with the SEC a universal
shelf registration statement on
Form S-3,
thus registering shares of its Series A common stock,
shares of its preferred stock and depository shares. On
May 10, 2006, the Original Shareholders agreed to sell
35,000,000 shares of Series A common stock through a
registered public secondary offering and granted to the
underwriter an over-allotment option to purchase up to an
additional 5,250,000 shares of the Companys
Series A common stock. The underwriter did not exercise the
over-allotment option. The Company did not receive any of the
proceeds from the offering. The transaction closed on
May 15, 2006. The Company incurred and expensed
approximately $2 million of fees related to this
transaction.
On November 7, 2006, the Original Shareholders sold an
additional 30,000,000 shares of Series A common stock
in a registered public secondary offering pursuant to the
universal shelf registration statement on
Form S-3
filed with the SEC on May 9, 2006. The Company did not
receive any of the proceeds from the offering.
Accumulated
Other Comprehensive Income (Loss), net
Comprehensive income (loss), which is displayed in the
consolidated statement of shareholders equity, represents
net earnings (loss) plus the results of certain
shareholders equity changes not reflected in the
F-48
CELANESE
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
consolidated statements of operations. Such items include
unrealized gains/losses on marketable securities, foreign
currency translation, additional minimum pension liabilities and
unrealized gains/losses on derivative contracts.
The after-tax components of Accumulated other comprehensive
income (loss), net are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
Unrealized
|
|
|
|
|
|
Pension and
|
|
|
Unrealized
|
|
|
Other
|
|
|
|
Gain (Loss) on
|
|
|
Foreign
|
|
|
Postretirement
|
|
|
Gain/(Loss)
|
|
|
Comprehensive
|
|
|
|
Marketable
|
|
|
Currency
|
|
|
Benefit
|
|
|
on Derivative
|
|
|
Income
|
|
|
|
Securities
|
|
|
Translation
|
|
|
Obligation
|
|
|
Contracts
|
|
|
(Loss), Net
|
|
|
|
(In $ millions)
|
|
|
Predecessor
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2003
|
|
|
10
|
|
|
|
243
|
|
|
|
(448
|
)
|
|
|
(3
|
)
|
|
|
(198
|
)
|
Current-period change
|
|
|
7
|
|
|
|
(46
|
)
|
|
|
|
|
|
|
|
|
|
|
(39
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at March 31, 2004
|
|
|
17
|
|
|
|
197
|
|
|
|
(448
|
)
|
|
|
(3
|
)
|
|
|
(237
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current-period change
|
|
|
(7
|
)
|
|
|
7
|
|
|
|
(19
|
)
|
|
|
2
|
|
|
|
(17
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2004
|
|
|
(7
|
)
|
|
|
7
|
|
|
|
(19
|
)
|
|
|
2
|
|
|
|
(17
|
)
|
Current-period change
|
|
|
3
|
|
|
|
5
|
|
|
|
(117
|
)
|
|
|
|
|
|
|
(109
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2005
|
|
|
(4
|
)
|
|
|
12
|
|
|
|
(136
|
)
|
|
|
2
|
|
|
|
(126
|
)
|
Current-period change
|
|
|
13
|
|
|
|
5
|
|
|
|
137
|
|
|
|
2
|
|
|
|
157
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2006
|
|
|
9
|
|
|
|
17
|
|
|
|
1
|
|
|
|
4
|
|
|
|
31
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends
During 2005, the Companys board of directors adopted a
policy of declaring, subject to legally available funds, a
quarterly cash dividend on each share of the Companys
Series A common stock at an annual rate of $0.16 per share
unless the Companys board of directors, in its sole
discretion, determines otherwise. Further, such dividends
payable to holders of the Companys Series A common
stock cannot be declared or paid nor can any funds be set aside
for the payment thereof, unless the Company has paid or set
aside funds for the payment of all accumulated and unpaid
dividends with respect to the shares of the Companys
preferred stock, as described above.
In September 2004, the Company issued senior discount notes for
gross proceeds of $513 million and distributed
$500 million of the proceeds to the Original Shareholders
in the form of a dividend.
On March 8, 2005, the Company declared a special cash
dividend to holders of the Companys Series B common
stock of $804 million, which was paid on April 7,
2005. Upon payment of the $804 million dividend, all of the
outstanding shares of Series B common stock converted
automatically to shares of Series A common stock.
On March 9, 2005, the Company issued 7,500,000 shares
of Series A common stock in the form of a stock dividend to
the Original Shareholders of its Series B common stock.
During 2006 and 2005, the Company declared and paid dividends to
holders of its Series A common shares of $26 million
and $13 million, respectively. The 2005 dividends were
recorded to Additional paid-in capital as the Company had an
accumulated deficit until the fourth quarter of 2005.
F-49
CELANESE
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
During 2006 and 2005, the Company declared and paid cash
dividends on its 4.25% convertible preferred stock
amounting to $10 million and $8 million, respectively.
The 2005 dividends were recorded to Additional paid-in capital
as the Company had an accumulated deficit until the fourth
quarter of 2005.
|
|
20.
|
Other
(Charges) Gains, Net
|
Other (charges) gains, net includes provisions for restructuring
and other expenses and income incurred outside the normal course
of operations. Restructuring provisions represent costs related
to severance and other benefit programs related to major
activities undertaken to fundamentally redesign the business
operations, as well as costs incurred in connection with
decisions to exit non-strategic businesses. These measures are
based on formal management decisions, establishment of
agreements with employees representatives or individual
agreements with affected employees, as well as the public
announcement of the restructuring plan. The related reserves
reflect certain estimates, including those pertaining to
separation costs, settlements of contractual obligations and
other closure costs. The Company reassesses the reserve
requirements to complete each individual plan under existing
restructuring programs at the end of each reporting period.
Actual experience may be different from these estimates.
The components of other (charges) gains, net for the years ended
December 31, 2006 and 2005, the nine months ended
December 31, 2004 and the three months ended March 31,
2004 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
|
Predecessor
|
|
|
|
|
|
|
|
|
|
Nine Months
|
|
|
|
Three Months
|
|
|
|
Year Ended
|
|
|
Year Ended
|
|
|
Ended
|
|
|
|
Ended
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
March 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
2004
|
|
|
|
(In $ millions)
|
|
Employee termination benefits
|
|
|
(12
|
)
|
|
|
(23
|
)
|
|
|
(8
|
)
|
|
|
|
(2
|
)
|
Plant/office closures
|
|
|
1
|
|
|
|
(4
|
)
|
|
|
(45
|
)
|
|
|
|
|
|
Restructuring adjustments
|
|
|
|
|
|
|
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Restructuring
|
|
|
(11
|
)
|
|
|
(27
|
)
|
|
|
(50
|
)
|
|
|
|
(2
|
)
|
Environmental related plant
closures
|
|
|
|
|
|
|
(12
|
)
|
|
|
|
|
|
|
|
|
|
Plumbing actions
|
|
|
5
|
|
|
|
34
|
|
|
|
1
|
|
|
|
|
|
|
Asset impairments
|
|
|
|
|
|
|
(25
|
)
|
|
|
(32
|
)
|
|
|
|
|
|
Other
|
|
|
(4
|
)
|
|
|
(36
|
)
|
|
|
(1
|
)
|
|
|
|
(26
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other (charges) gains, net
|
|
|
(10
|
)
|
|
|
(66
|
)
|
|
|
(82
|
)
|
|
|
|
(28
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
Other (charges) gains, net includes charges related to severance
associated with the relocation of corporate offices of
$4 million, severance payments in connection with the
lockout settlement at the Meredosia plant of $5 million and
severance and relocation expenses related to restructuring at AT
Plastics of $4 million.
These charges were offset by $5 million of income related
to insurance recoveries associated with plumbing actions.
2005
In connection with the completion of the initial public offering
in January 2005, the parties amended and restated the
transaction and monitoring fee agreement to terminate the
monitoring services and all obligations to pay future monitoring
fees and paid Blackstone Management Partners (the
Advisor) $35 million, which is included in
other (charges) gains, net in the table above. In addition, the
Company also paid $10 million to the
F-50
CELANESE
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Advisor for the 2005 monitoring fee, which is included in
Selling, general and administrative expense on the consolidated
statement of operations (See Note 28).
Asset impairments in 2005 and 2004 primarily relate to the
Companys decision to divest its COC business (See
Note 6).
Other (charges) gains, net also includes charges related to a
change in environmental remediation strategy related to the
closure of the Edmonton methanol plant, as well as severance
primarily associated with the same closure of $8 million
and severance related to the relocation of corporate offices of
$10 million.
These charges were offset by $34 million of income related
to insurance recoveries associated with plumbing actions.
2004
In October 2004, the Company announced plans to consolidate its
tow production to fewer sites by 2007. In the third quarter of
2004, the Company recorded restructuring charges of
$43 million related to asset impairment of the
Companys acetate business. The restructuring was
implemented to increase efficiency, reduce overcapacity and to
focus on products and markets that provide long-term value.
During the nine months ended December 31, 2004, the Company
continued with its redesign initiatives. The Chemical Products
segment recorded $4 million of severance and organizational
redesign costs, which included $2 million related to the
shutdown of an obsolete synthesis gas unit in Germany. Ticona
recorded $6 million similarly for severance, relocation and
employee related expenses, primarily associated with
managements initiative to relocate the segments
administrative and research and development functions from
Summit, New Jersey to Florence, Kentucky.
For the three months ended March 31, 2004, the Predecessor
recorded other (charges) gains, net of $26 million for
advisory services related to the Acquisition.
The components of the December 31, 2006 and 2005
restructuring reserves were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee
|
|
|
|
|
|
|
|
|
|
Termination
|
|
|
Plant/Office
|
|
|
|
|
|
|
Benefits
|
|
|
Closures
|
|
|
Total
|
|
|
|
(In $ millions)
|
|
|
Restructuring reserve at
December 31, 2004
|
|
|
72
|
|
|
|
14
|
|
|
|
86
|
|
Currency translation adjustments
|
|
|
(2
|
)
|
|
|
1
|
|
|
|
(1
|
)
|
Restructuring additions
|
|
|
27
|
|
|
|
8
|
|
|
|
35
|
|
Cash and non-cash uses
|
|
|
(44
|
)
|
|
|
(9
|
)
|
|
|
(53
|
)
|
Other changes
|
|
|
(2
|
)
|
|
|
|
|
|
|
(2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring reserve at
December 31, 2005
|
|
|
51
|
|
|
|
14
|
|
|
|
65
|
|
Currency translation adjustments
|
|
|
2
|
|
|
|
|
|
|
|
2
|
|
Restructuring additions
|
|
|
12
|
|
|
|
5
|
|
|
|
17
|
|
Cash uses
|
|
|
(37
|
)
|
|
|
(6
|
)
|
|
|
(43
|
)
|
Other
|
|
|
|
|
|
|
(6
|
)
|
|
|
(6
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring reserve at
December 31, 2006
|
|
|
28
|
|
|
|
7
|
|
|
|
35
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Included in the above restructuring reserve of $35 million
and $65 million at December 31, 2006 and 2005,
respectively, are $1 million and $20 million,
respectively, of long-term reserves included in Other
liabilities.
F-51
CELANESE
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
For the years ended December 31, 2006 and 2005 and the nine
months ended December 31, 2004, the Company has been
headquartered in the U.S. Under U.S. tax law,
U.S. corporations are subject to a 35% federal corporate
income tax. In addition, U.S. corporations are generally
subject to state income taxes at various rates based on
location. The blended state income tax rate, after federal
benefit, is approximately 2%.
For the three months ended March 31, 2004, the Predecessor
was headquartered in Germany. Under German tax law, German
corporations are subject to both a corporate income tax and a
trade income tax, the latter of which varies based upon
location. The German corporate income tax rate for the three
months ended March 31, 2004 was 25%. Combined with a
solidarity surcharge of 5.5% on the corporate tax, and the
blended trade income tax rate after corporate tax benefit, the
statutory tax rate in Germany was 40%.
Deferred taxes are being provided at a 37% rate for the
U.S. companies as of December 31, 2006. Deferred taxes
for non-U.S. companies are being provided at the tax rate that
will be in effect in the local tax jurisdictions at the time the
temporary differences are expected to reverse, with applicable
rates ranging from 0% to 42%.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
|
Predecessor
|
|
|
|
|
|
|
|
|
|
Nine Months
|
|
|
|
Three Months
|
|
|
|
Year Ended
|
|
|
Year Ended
|
|
|
Ended
|
|
|
|
Ended
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
March 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
2004
|
|
|
|
(In $ millions)
|
|
Earnings (loss) from continuing
operations before income tax and minority interests:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
|
|
|
153
|
|
|
|
(83
|
)
|
|
|
(106
|
)
|
|
|
|
(10
|
)
|
Germany
|
|
|
183
|
|
|
|
58
|
|
|
|
(117
|
)
|
|
|
|
14
|
|
Other
|
|
|
328
|
|
|
|
399
|
|
|
|
43
|
|
|
|
|
62
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
664
|
|
|
|
374
|
|
|
|
(180
|
)
|
|
|
|
66
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision (benefit) for income
taxes:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
|
|
|
51
|
|
|
|
4
|
|
|
|
2
|
|
|
|
|
(2
|
)
|
Germany
|
|
|
33
|
|
|
|
41
|
|
|
|
19
|
|
|
|
|
17
|
|
Other
|
|
|
33
|
|
|
|
55
|
|
|
|
36
|
|
|
|
|
7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current
|
|
|
117
|
|
|
|
100
|
|
|
|
57
|
|
|
|
|
22
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
|
|
|
80
|
|
|
|
7
|
|
|
|
|
|
|
|
|
2
|
|
Germany
|
|
|
48
|
|
|
|
(43
|
)
|
|
|
(12
|
)
|
|
|
|
(5
|
)
|
Other
|
|
|
8
|
|
|
|
(3
|
)
|
|
|
25
|
|
|
|
|
(4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deferred
|
|
|
136
|
|
|
|
(39
|
)
|
|
|
13
|
|
|
|
|
(7
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax provision
|
|
|
253
|
|
|
|
61
|
|
|
|
70
|
|
|
|
|
15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-52
CELANESE
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
A reconciliation of income tax provision (benefit) for the years
ended December 31, 2006 and 2005, the nine months ended
December 31, 2004 and the three months ended March 31,
2004 determined by using the applicable U.S. statutory rate
of 35% for the year ended December 31, 2006, 35% for the
year and nine months ended December 31, 2005 and 2004,
respectively, and the applicable German statutory rate of 40%
for the three months ended March 31, 2004, is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
|
Predecessor
|
|
|
|
|
|
|
|
|
|
Nine Months
|
|
|
|
Three Months
|
|
|
|
Year Ended
|
|
|
Year Ended
|
|
|
Ended
|
|
|
|
Ended
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
March 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
2004
|
|
|
|
(In $ millions)
|
|
Income tax provision (benefit)
computed at statutory tax rates
|
|
|
232
|
|
|
|
131
|
|
|
|
(63
|
)
|
|
|
|
27
|
|
Increase (decrease) in taxes
resulting from:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in valuation allowance
|
|
|
(3
|
)
|
|
|
(8
|
)
|
|
|
115
|
|
|
|
|
|
|
Equity income and dividends
|
|
|
5
|
|
|
|
12
|
|
|
|
10
|
|
|
|
|
(2
|
)
|
Expenses not resulting in tax
benefits
|
|
|
15
|
|
|
|
10
|
|
|
|
51
|
|
|
|
|
|
|
Subpart F income
|
|
|
28
|
|
|
|
12
|
|
|
|
4
|
|
|
|
|
1
|
|
Other foreign tax rate
differentials(1)
|
|
|
(58
|
)
|
|
|
(104
|
)
|
|
|
(43
|
)
|
|
|
|
(19
|
)
|
State income taxes, net
|
|
|
9
|
|
|
|
3
|
|
|
|
2
|
|
|
|
|
2
|
|
Other taxes
|
|
|
16
|
|
|
|
10
|
|
|
|
6
|
|
|
|
|
2
|
|
Other
|
|
|
9
|
|
|
|
(5
|
)
|
|
|
(12
|
)
|
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax provision
|
|
|
253
|
|
|
|
61
|
|
|
|
70
|
|
|
|
|
15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Includes impact of earnings from Singapore subject to tax
holidays, which expire between 2007 and 2013. |
The effective tax rate for the years ended December 31,
2006 and 2005 and the nine months ended December 31, 2004
was 38%, 16% and negative 39%, respectively. The effective tax
rate for the three months ended March 31, 2004 was 23%.
For the year ended December 31, 2006, and as compared to
the statutory rate, the effective tax rate was favorably
impacted by unrepatriated low taxed earnings, primarily in
Singapore and Bermuda. The effective tax rate was unfavorably
affected by (1) passive income inclusions from foreign
subsidiaries, (2) dividends in excess of equity earnings from
equity investments, (3) net increases in reserves for tax
contingencies, and (4) higher tax rates in certain foreign
jurisdictions, primarily Germany. The effective rate also
reflects a partial benefit for the reversal of valuation
allowance on earnings in the U.S. Reversals of the valuation
allowance established at the Acquisition resulting from positive
earnings or a change in judgment regarding the realizability of
the net deferred tax asset are primarily reflected as a
reduction of goodwill. Therefore the effective tax rate reflects
only a partial benefit for reversal of valuation allowance of
approximately $5 million offset by increases in valuation
allowance in certain foreign jurisdictions. A valuation
allowance is provided when it is more likely than not that a
deferred tax asset, all or in part, will not be realized.
For the year ended December 31, 2005, and as compared to
the statutory rate, the effective tax rate was favorably
affected by unrepatriated low-taxed earnings, primarily in
Singapore and Bermuda. The effective tax rate was also favorably
affected by the reversal of valuation allowance on certain
German deferred tax assets of $31 million, primarily net
operating loss carryforwards, partially offset by increasing
valuation allowances on losses in other countries.
For the nine months ended December 31, 2004, and as
compared to the statutory rate, the effective tax rate was
unfavorably affected primarily by the application of full
valuation allowances against post-acquisition net
U.S. deferred tax assets, Canadian deferred tax assets due
to post-acquisition restructuring and certain German deferred
tax assets. The effective rate was also unfavorably affected by
the non-recognition of tax benefits
F-53
CELANESE
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
associated with acquisition related expenses. The unfavorable
effects were partially offset by unrepatriated low taxed
earnings, primarily in Singapore. In the nine months ended
December 31, 2004, the Company finalized certain tax audits
related to the pre-acquisition period which resulted in a
reduction to Income taxes payable of approximately
$113 million with a corresponding reduction to Goodwill.
The effective tax rate for the three months ended March 31,
2004 was based on a 24% annualized effective rate which was
primarily attributable to projected unrepatriated low taxed
earnings in Singapore.
The tax effects of the temporary differences which give rise to
a significant portion of deferred tax assets and liabilities are
as follows:
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
|
As of
|
|
|
As of
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
|
(In $ millions)
|
|
|
Pension and postretirement
obligations
|
|
|
331
|
|
|
|
393
|
|
Accrued expenses
|
|
|
95
|
|
|
|
103
|
|
Net operating loss and tax credit
carryforwards
|
|
|
270
|
|
|
|
475
|
|
Investments
|
|
|
34
|
|
|
|
11
|
|
Other
|
|
|
10
|
|
|
|
27
|
|
|
|
|
|
|
|
|
|
|
Subtotal
|
|
|
740
|
|
|
|
1,009
|
|
Valuation allowance(1)
|
|
|
(460
|
)
|
|
|
(710
|
)
|
|
|
|
|
|
|
|
|
|
Deferred tax assets
|
|
|
280
|
|
|
|
299
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
436
|
|
|
|
376
|
|
Interest
|
|
|
26
|
|
|
|
26
|
|
Inventory
|
|
|
(8
|
)
|
|
|
8
|
|
Other
|
|
|
43
|
|
|
|
34
|
|
|
|
|
|
|
|
|
|
|
Deferred tax liabilities
|
|
|
497
|
|
|
|
444
|
|
|
|
|
|
|
|
|
|
|
Net deferred tax assets
(liabilities)
|
|
|
(217
|
)
|
|
|
(145
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Includes deferred tax asset valuation allowances primarily for
the Companys deferred tax assets in the U.S., Mexico,
France and certain Canadian entities, as well as other foreign
jurisdictions. These valuation allowances relate to net
operating loss carryforward benefits and other net deferred tax
assets, all of which may not be realizable. |
For the year ended December 31, 2006, valuation allowance
had a net decrease of $250 million. Of this amount, a
decrease of approximately $54 million was allocated to
Accumulated other comprehensive income (loss), net for pension
and other post retirement benefits associated with the adoption
of SFAS 158. Valuation allowance on state deferred tax
assets related to net operating losses decreased approximately
$27 million due to changes in apportionment and
pre-acquisition losses that expired unused. Valuation allowance
decreased approximately $74 million related to resolution
of uncertainties in net tax basis associated with the
pre-acquisition period accounted for pursuant to
EITF 93-7,
Uncertainties Related to Income Taxes in a Purchase Business
Combination. Finally, valuation allowance decreased related
to realization of pre-acquisition deferred tax assets as
discussed below.
At December 31, 2006, the Company had U.S. federal net
operating loss carryforwards of approximately $225 million,
which will begin to expire in 2023. Of this amount,
approximately $46 million relates to the pre-Acquisition
period and is subject to significant limitation. The remaining
amount of $179 million is subject to limitation as a result
of the change in stock ownership in May 2006. However, this
limitation is not expected to have a material impact on
utilization of the net operating loss. The acquisition and
corresponding tax law governing the utilization of acquired net
operating losses triggered these limitations.
The Company has net operating loss carryforwards of
approximately $432 million for Germany, Mexico, France and
other foreign jurisdictions with various expiration dates. Net
operating losses in Germany and France
F-54
CELANESE
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
have no expiration date. Net operating losses in Mexico have a
ten year carryforward and begin to expire in 2009. Net operating
losses in Canada have various carryforward periods and begin to
expire in 2007.
The U.S. net deferred tax assets as of March 31, 2004
were $439 million. As a result of the Acquisition, a full
valuation allowance was applied against these net assets with a
corresponding increase in Goodwill. In addition, there was
approximately $63 million of valuation allowance associated
with pre-acquisition net deferred tax assets in Mexico, Canada
and France. Subsequent recognition of any tax benefit related to
these temporary differences
and/or
certain pre-acquisition net operating losses will be a decrease
to Goodwill. In 2006, the valuation allowance decreased
approximately $84 million due to realization of
pre-acquisition net deferred tax assets and net operating losses
in the U.S. and Spain.
The Company had U.S. capital loss carryforwards of
$104 million, which expired in October 2004 and accordingly
are not reflected in the 2004 deferred tax assets and valuation
allowance amounts above.
Provisions have not been made for income taxes or foreign
withholding taxes on cumulative earnings of foreign subsidiaries
of approximately $847 million because such earnings will
either not be subject to any such taxes or are intended to be
indefinitely reinvested in those operations. In addition, the
Company has not provided taxes on approximately
$413 million of temporary differences attributable to
investments in foreign subsidiaries and corporate ventures
because such differences are essentially permanent in duration.
It is not practical to determine the tax liability, if any, that
would be payable if such amounts were not reinvested
indefinitely or were not permanent in duration.
The Tax Increase Prevention and Reconciliation Act of 2005
(TIPRA), which was signed in to law in May 2006,
provides for a new temporary exception to certain U.S. tax
foreign passive income inclusion rules for 2006 to 2008. This
change significantly reduced the expected amount of foreign
income taxed currently in the U.S.
The American Jobs Creation Act of 2004 (the Act),
which was signed into law in October 2004, introduced a special
one-time dividends received deduction on the repatriation of
certain foreign earnings to a U.S. taxpayer, provided
certain criteria are met. This provision was applicable to the
last tax year that began before the enactment date, or that
begins in the one-year period beginning on the enactment date.
The Company did not utilize this provision.
The income tax (benefit) expense for the years ended
December 31, 2006 and 2005, the nine months ended
December 31, 2004 and the three months ended March 31,
2004 was allocated to continuing operations and Accumulated
other comprehensive income (loss), net. The aggregate tax
expense (benefit) amounts allocated to Accumulated other
comprehensive income (loss), net, for unrealized gains (losses)
on securities, pension and postretirement benefits associated
with the adoption of SFAS No. 158 and unrealized gains
(losses) on derivative contracts was $3 million,
$(21) million, $(2) million and $2 million for
the years ended December 31, 2006 and 2005, the nine months
ended December 31, 2004 and the three months ended
March 31, 2004, respectively. The income tax (benefit)
expense associated with Accumulated other comprehensive income
(loss), net is dependent upon the tax jurisdiction in which the
items arise and accordingly could result in an effective tax
rate that is different from the overall consolidated effective
income tax rate on the statement of operations.
|
|
22.
|
Stock-Based
and Other Management Compensation Plans
|
In December 2004, the Company approved a stock incentive plan
for executive officers, key employees and directors, a deferred
compensation plan for executive officers and key employees as
well as other management incentive programs.
These plans allow for the issuance or delivery of up to
16,250,000 shares of the Companys Series A
common stock through a discounted share program and stock
options.
Deferred
compensation
The deferred compensation plan has an aggregate maximum amount
payable of $196 million. The initial component of the
deferred compensation plan vested in 2004 and was paid in the
first quarter of 2005. The remaining aggregate maximum amount
payable of $142 million is subject to downward adjustment
if the price of
F-55
CELANESE
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
the Companys Series A common stock falls below the
initial public offering price of $16 per share and vests
subject to both (1) continued employment or the achievement
of certain performance criteria and (2) the disposition by
three of the four Original Shareholders of at least 90% of their
equity interest in the Company with at least a 25% cash internal
rate of return on their equity interest. During the years ended
December 31, 2006 and 2005 and the nine months ended
December 31, 2004, the Company recorded compensation
expense of $19 million, $1 million and
$27 million, respectively, associated with this plan.
During the three months ended March 31, 2004, the Company
did not record any compensation expense associated with this
plan. Upon the occurrence of a qualifying sale, as defined, the
amount vested and payable under the plan as of December 31,
2006 would be approximately $75 million, exclusive of the
$19 million accrued in 2006 and payable in 2007 due to the
accelerated vesting of certain plan participants.
Long-term
incentive plan
Effective January 1, 2004, the Company adopted a long-term
incentive plan (the LTIP Plan) which covers certain
members of management and other key employees of the Company.
The LTIP Plan is a three-year cash based plan in which awards
will be based on annual and three-year cumulative targets (as
defined in the LTIP Plan). Payouts to employees could be
considerably increased if the annual and three-year cumulative
targets are significantly exceeded. The Company has determined
that these targets will be significantly exceeded. Payout under
the LTIP Plan will occur following the end of year three of the
LTIP Plan. On February 16, 2007, approximately $26 million was
paid to the LTIP plan participants. During the years ended
December 31, 2006 and 2005, the nine months ended
December 31, 2004 and the three months ended March 31,
2004, the Company recorded expense of $19 million,
$5 million, $1 million and less than $1 million,
respectively, related to the LTIP Plan.
Discounted
Shares
In December 2004, the Company granted rights to executive
officers and key employees to purchase up to
1,797,386 shares of Series A common stock at a
discount of $8.80 per share. As of December 31, 2006,
1,684,277 shares have been purchased. As a result of this
discounted share offering, the Company recorded a pre-tax
non-cash charge of $14 million, with a corresponding
adjustment to Additional paid-in capital within
Shareholders equity in the fourth quarter 2004.
Compensation expense associated with the discounted shares was
approximately $0 million and $1 million for the years
ended December 31, 2006 and 2005.
Stock-based
compensation
The Company has a stock-based compensation plan that makes
awards of stock options to certain employees. Prior to
January 1, 2006, the Company accounted for awards granted
under this plan using the intrinsic value method of expense
recognition, which follows the recognition and measurement
principles of APB No. 25 and related interpretations.
Compensation cost, if any, was recorded based on the excess of
the quoted market price at grant date over the amount an
employee must pay to acquire the stock. Under the provisions of
APB No. 25, there was no compensation expense resulting
from the issuance of the stock options as the exercise price was
equivalent to the fair market value at the date of grant.
Effective January 1, 2006, the Company adopted the fair
value recognition provisions of SFAS No. 123(R). The
Company has elected the modified prospective transition method
as permitted by SFAS No. 123(R) and, accordingly,
prior periods have not been restated to reflect the impact of
SFAS No. 123(R). Under this transition method,
compensation cost recognized for the year ended
December 31, 2006 includes: (i) compensation cost for
all stock-based payments granted prior to, but not yet vested as
of, January 1, 2006 (based on the grant-date fair value
estimated in accordance with the original provisions of
SFAS No. 123 and previously presented in the pro forma
footnote disclosures), and (ii) compensation cost for all
stock-based payments granted subsequent to January 1, 2006
(based on the grant-date fair value estimated in accordance with
the new provisions of SFAS No. 123(R)).
F-56
CELANESE
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
It is the Companys policy to grant options with an
exercise price equal to the price of the Companys
Series A common stock on the grant date. The options issued
have a ten-year term with vesting terms pursuant to a schedule,
with all vesting to occur no later than the eighth anniversary
of the date of the grant. Accelerated vesting depends on meeting
specified performance targets. The estimated value of the
Companys stock-based awards less expected forfeitures is
amortized over the awards respective vesting period on the
applicable graded or straight-line basis, subject to
acceleration as discussed above. As a result of adopting
SFAS No. 123(R), the Companys net earnings for
the year ended December 31, 2006, was $13 million (net
of tax of $7 million) lower than it would have been if the
Company had continued to account for share-based compensation
under APB No. 25. These amounts are included in selling,
general and administrative expenses.
The fair value of each option granted is estimated on the date
of grant using the Black-Scholes option pricing method. The
weighted average assumptions used in the model are outlined in
the following table:
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
|
Year Ended December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
Risk free interest rate
|
|
|
5.0
|
%
|
|
|
4.0
|
%
|
Estimated life in years
|
|
|
7.2
|
|
|
|
7.5
|
|
Dividend yield
|
|
|
0.81
|
%
|
|
|
0.78
|
%
|
Volatility
|
|
|
31.2
|
%
|
|
|
26.2
|
%
|
Expected annual forfeiture rate
|
|
|
5.9
|
%
|
|
|
0.5
|
%
|
The computation of the expected volatility assumption used in
the Black-Scholes calculations for new grants is based on
historical volatilities and volatilities of peer companies. When
establishing the expected life assumptions, the Company reviews
annual historical employee exercise behavior of option grants
with similar vesting periods and the expected life assumptions
of peer companies. The Company utilized the review of peer
companies based on its own lack of extensive history.
A summary of changes in stock options outstanding during the
year ended December, 2006 is presented below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2006
|
|
|
|
|
|
|
|
|
|
Weighted-
|
|
|
|
|
|
|
|
|
|
Weighted-
|
|
|
Average
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
Remaining
|
|
|
Aggregate
|
|
|
|
Number of
|
|
|
Grant
|
|
|
Contractual
|
|
|
Intrinsic
|
|
|
|
Options
|
|
|
Price in $
|
|
|
Term
|
|
|
Value
|
|
|
|
(In millions)
|
|
|
|
|
|
|
|
|
(In $ millions)
|
|
|
Outstanding at beginning of year
|
|
|
12
|
|
|
|
16.15
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
2
|
|
|
|
20.87
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
|
|
|
|
16.30
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
(1
|
)
|
|
|
16.14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at end of year
|
|
|
13
|
|
|
|
16.81
|
|
|
|
7.0
|
|
|
|
113
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable and expected to
exercise in the future at December 31, 2006
|
|
|
8
|
|
|
|
16.92
|
|
|
|
7.0
|
|
|
|
71
|
|
Options exercisable at end of year
|
|
|
7
|
|
|
|
16.09
|
|
|
|
6.6
|
|
|
|
72
|
|
The weighted-average grant-date fair value of stock options
granted during the years ended December 31, 2006 and 2005
was $8.19 and $5.28, respectively, per option. At
December 31, 2006, the Company had approximately
$27 million of total unrecognized compensation expense, net
of the estimated forfeitures, related to stock options to be
recognized over the remaining vesting periods of the options.
Cash received from stock option exercises was approximately
$2 million during the year ended December 31, 2006.
F-57
CELANESE
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Prior
Period Pro Forma Presentations
Under the modified prospective transition method, results for
prior periods have not been restated to reflect the effects of
implementing SFAS No. 123(R). The following pro forma
information, as required by SFAS No. 148,
Accounting for Stock-Based Compensation
Transition and Disclosure, an amendment of FASB Statement
No. 123, is presented for comparative purposes and
illustrates the pro forma effect on Net earnings and Earnings
per common share for each period presented as if the Company had
applied the fair value recognition provisions of
SFAS No. 123 to stock-based employee compensation
prior to January 1, 2006:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2005
|
|
|
Nine Months Ended December 31, 2004
|
|
|
|
|
|
|
Basic
|
|
|
Diluted
|
|
|
|
|
|
Basic
|
|
|
Diluted
|
|
|
|
|
|
|
Earnings
|
|
|
Earnings
|
|
|
|
|
|
Earnings (Loss)
|
|
|
Earnings (Loss)
|
|
|
|
Net
|
|
|
per Common
|
|
|
per Common
|
|
|
Net
|
|
|
per Common
|
|
|
per Common
|
|
|
|
Earnings
|
|
|
Share
|
|
|
Share
|
|
|
Earnings (Loss)
|
|
|
Share
|
|
|
Share
|
|
|
|
(In $ millions, except per share information)
|
|
|
Net earnings available to common
shareholders, as reported
|
|
|
267
|
|
|
|
1.73
|
|
|
|
1.67
|
|
|
|
(253
|
)
|
|
|
(2.55
|
)
|
|
|
(2.55
|
)
|
Add: stock-based employee
compensation expense included in reported net earnings, net of
the related tax effects
|
|
|
1
|
|
|
|
0.01
|
|
|
|
0.01
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: stock-based compensation
under SFAS No. 123, net of the related tax effects
|
|
|
(9
|
)
|
|
|
(0.06
|
)
|
|
|
(0.05
|
)
|
|
|
(6
|
)
|
|
|
(0.06
|
)
|
|
|
(0.06
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro forma net earnings available
to common shareholders
|
|
|
259
|
|
|
|
1.68
|
|
|
|
1.63
|
|
|
|
(259
|
)
|
|
|
(2.61
|
)
|
|
|
(2.61
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total rent expense charged to operations under all operating
leases was $109 million, $93 million, $63 million
and $21 million for the years ended December 31, 2006
and 2005, the nine months ended December 31, 2004 and the
three months ended March 31, 2004, respectively. Future
minimum lease payments under non-cancelable rental and lease
agreements which have initial or remaining terms in excess of
one year at December 31, 2006 are as follows:
|
|
|
|
|
|
|
|
|
|
|
Capital
|
|
|
Operating
|
|
|
|
(In $ millions)
|
|
|
2007
|
|
|
5
|
|
|
|
75
|
|
2008
|
|
|
5
|
|
|
|
70
|
|
2009
|
|
|
4
|
|
|
|
51
|
|
2010
|
|
|
4
|
|
|
|
42
|
|
2011
|
|
|
4
|
|
|
|
33
|
|
Later years
|
|
|
19
|
|
|
|
68
|
|
Sublease income
|
|
|
|
|
|
|
(2
|
)
|
|
|
|
|
|
|
|
|
|
Minimum lease commitments
|
|
|
41
|
|
|
|
337
|
|
|
|
|
|
|
|
|
|
|
Less amounts representing interest
|
|
|
16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Present value of net minimum lease
obligations
|
|
|
25
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The related assets for capital leases are included in buildings
and machinery and equipment in the consolidated balance sheet
(See Note 11).
F-58
CELANESE
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The Company expects that, in the normal course of business,
leases that expire will be renewed or replaced by other leases.
|
|
24.
|
Financial
Instruments
|
Interest
Rate Risk Management
At both December 31, 2006 and 2005, the Company had
interest rate swap agreements, designated as cash flow hedges,
with a notional value of $300 million in place.
Differences between amounts paid or received on interest rate
swap agreements are recognized as adjustments to interest
expense over the life of each interest rate swap, thereby
adjusting the effective interest rate on the hedged obligation.
The Successor recognized interest expense (income) from hedging
activities relating to interest rate swaps of $(1) million,
$3 million and $1 million for the years ended
December 31, 2006 and 2005 and the nine months ended
December 31, 2004, respectively. The Predecessor recognized
interest expense from hedging activities relating to interest
rate swaps of $2 million for the three months ended
March 31, 2004.
Gains and losses on instruments not meeting the criteria for
cash flow hedge accounting treatment, or that cease to meet
hedge accounting criteria, are included as Other income
(expense), net. The Successor recorded a net loss of less than
$1 million in Other income (expense), net for the
ineffective portion of the interest rate swaps for each of the
years ended December 31, 2006 and 2005 and the nine months
ended December 31, 2004. The Predecessor recorded a net
loss of less than $1 million in Other income (expense), net
for the ineffective portion of the interest rate swaps, during
the three months ended March 31, 2004. During the nine
months ended December 31, 2004, the Successor recorded a
loss of less than $1 million in Other income (expense),
net, associated with the early termination of its
$200 million interest rate swap.
If an interest rate swap is terminated prior to its maturity,
the gain or loss is recorded in Other income (expense), net and
recognized over the remaining original life of the swap if the
item hedged remains outstanding, or immediately, if the item
hedged does not remain outstanding. If the interest rate swap is
not terminated prior to maturity, but the underlying hedged item
is no longer outstanding, the interest rate swap is marked to
market and any unrealized gain or loss is recognized immediately.
Foreign
Exchange Risk Management
Certain entities have receivables and payables denominated in
currencies other than their respective functional currencies,
which creates foreign exchange risk. The Company may enter into
foreign currency forwards and swaps to minimize its exposure to
foreign currency fluctuations. The foreign currency contracts
are mainly for booked exposure and, in some cases, cash flow
hedges for anticipated exposure associated with sales from the
Performance Products segment.
The Company has foreign currency contracts with notional amounts
totaling approximately $713 million and $564 million
at December 31, 2006 and 2005, respectively, that are
predominantly in U.S. dollars, British pound sterling,
Japanese yen, and Canadian dollars. Most of the Companys
foreign currency forward contracts do not meet the criteria of
SFAS No. 133 to qualify for hedge accounting. The
Company recognizes net foreign currency transaction gains or
losses on the underlying transactions, which are offset by
losses and gains related to foreign currency forward contracts.
At December 31, 2006 and 2005, these contracts, in addition
to natural hedges, hedged approximately 90% and 100%,
respectively, of the Companys net receivables held in
currencies other than the entities functional currency.
Related to the unhedged portion, a net gain (loss) of
approximately $1 million, $20 million,
($2) million and $4 million from foreign exchange
gains or losses was recorded to Other income (expense), net for
the years ended December 31, 2006 and 2005, the nine months
ended December 31, 2004 and the three months ended
March 31, 2004, respectively.
F-59
CELANESE
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
In June 2004, to protect the foreign currency exposure of a net
investment in a foreign operation, the Company entered into
cross currency swaps with certain financial institutions. Under
the terms of the cross currency swap arrangements, the Company
will pay approximately 13 million in interest and
receive approximately $16 million in interest on each June
15 and December 15. Upon maturity of the cross currency
swap agreements in June 2008, the Company will pay approximately
276 million and receive approximately
$333 million. The Company designated the cross currency
swaps, part of its senior euro term loan and the euro senior
subordinated note as a net investment hedge (for accounting
purposes) in the fourth quarter of 2004. The effective portion
of the gain (loss) on the derivative (cross currency swaps) and
the foreign currency gain (loss) on the non-derivative financial
instruments is recorded in Accumulated other comprehensive
income (loss), net. For the years ended December 31, 2006
and 2005 and the nine months ended December 31, 2004, the
amount charged to Accumulated other comprehensive income (loss),
net was $(23) million, $30 million and
$(22) million, respectively. The gain (loss) related to the
ineffectiveness of the cross currency swap is recorded in Other
income (expense), net. For the years ended December 31,
2006 and 2005 and the nine months ended December 31, 2004,
the amount charged to Other income (expense), net was
$5 million, $3 million and $(21) million,
respectively.
Commodity
Risk Management
The Companys policy for the majority of its commodity raw
materials requirements allows the Company to enter into supply
agreements and forward purchase swap contracts. The Company
regularly assesses its practice of purchasing a portion of its
commodity requirements forward and the utilization of a variety
of other raw material hedging instruments, in addition to
forward purchase contracts, in accordance with changes in market
conditions. The commodity raw material forward purchase and swap
contracts are principally settled through actual delivery of the
physical commodity. Although these forward purchase and swap
contracts were structured to limit exposure to increases in
commodity prices, they may also limit the potential benefit the
Company might have otherwise received from decreases in
commodity prices. The Company has elected to apply the normal
purchases provision to the forward purchase and swap contracts
that qualify as derivative instruments as it was probable at the
inception and throughout the term of the contract that they
would not settle net and would result in physical delivery. As
such, realized gains and losses on these contracts are included
in the cost of the commodity upon the settlement of the contract.
Occasionally the Company will enter into cash settled financial
derivatives to hedge a component of a commodity raw material or
energy source. Typically these types of transactions do not
qualify for hedge accounting. These instruments are marked to
market at each reporting period and gains (losses) are included
in Cost of sales. The Successor recognized losses of less than
$1 million from these types of contracts during each of the
years ended December 31, 2006 and 2005 and the nine months
ended December 31, 2004, respectively. The Predecessor
recognized a loss of $1 million from these types of
contracts for the three months ended March 31, 2004. As of
December 31, 2006 and 2005, the Company did not have any
open commodity financial derivative contracts.
F-60
CELANESE
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Fair
Value of Financial Instruments
Summarized below are the carrying values and estimated fair
values of financial instruments as of December 31, 2006 and
2005, respectively. For these purposes, the fair value of a
financial instrument is the amount at which the instrument could
be exchanged in a current transaction between willing parties.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
|
As of
|
|
|
As of
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
|
Carrying
|
|
|
Fair
|
|
|
Carrying
|
|
|
Fair
|
|
|
|
Amount
|
|
|
Value
|
|
|
Amount
|
|
|
Value
|
|
|
|
(In $ millions)
|
|
|
Cost investments
|
|
|
193
|
|
|
|
193
|
|
|
|
220
|
|
|
|
220
|
|
Marketable securities
|
|
|
265
|
|
|
|
265
|
|
|
|
280
|
|
|
|
280
|
|
Insurance contracts in Rabbi Trusts
|
|
|
72
|
|
|
|
72
|
|
|
|
75
|
|
|
|
75
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|
Long-term debt
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|
|
3,189
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|
|
|
3,359
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|
|
|
3,282
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|
|
|
3,452
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Cross currency swap
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|
|
(37
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)
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|
|
(37
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)
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(4
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)
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|
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(4
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)
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Interest rate swap
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|
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3
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|
|
|
3
|
|
|
|
1
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|
|
|
1
|
|
Foreign currency forward contracts
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|
|
(5
|
)
|
|
|
(5
|
)
|
|
|
3
|
|
|
|
3
|
|
At December 31, 2006 and 2005, the fair values of cash and
cash equivalents, receivables, notes payable, 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. Additionally, certain long-term receivables, principally
insurance recoverables, are carried at net realizable value (See
Note 25).
Included in other assets are long-term marketable securities
classified as
available-for-sale.
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 that the carrying
value approximates or is less than the fair value.
The fair value of long-term debt and debt-related financial
instruments is estimated based upon the respective implied
forward rates as of December 31, 2006 and 2005, as well as
quotations from investment bankers and on current rates of debt
for similar type instruments.
|
|
25.
|
Commitments
and Contingencies
|
The Company is involved in a number of legal proceedings,
lawsuits and claims incidental to the normal conduct of
business, relating to such matters as product liability,
antitrust, 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 believes, based on
the advice of legal counsel, that adequate provisions have been
made and that the ultimate outcomes 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.
Plumbing
Actions
CNA Holdings, Inc. (CNA Holdings), a
U.S. subsidiary of the Company, which included the
U.S. business now conducted by the Ticona 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
F-61
CELANESE
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
CNA Holdings 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.
CNA Holdings has been named a defendant in ten putative class
actions, as well as a defendant in other
non-class
actions filed in ten states, the U.S. Virgin Islands and
Canada. In these actions, the plaintiffs typically have sought
recovery for alleged property damages and, in some cases,
additional damages under the Texas Deceptive Trade Practices Act
or similar type statutes. Damage amounts have not been specified.
In November 1995, CNA Holdings, DuPont and Shell entered into
national class action settlements, which have been approved by
the courts. The settlements call for the replacement of plumbing
systems of claimants who have had qualifying leaks, as well as
reimbursements for certain leak damage. Furthermore, the three
companies had agreed to fund these replacements and
reimbursements up to $950 million. As of December 31,
2006, the aggregate funding is $1,093 million due to
additional contributions and funding commitments made primarily
by other parties. There are additional pending lawsuits in
approximately ten jurisdictions, not covered by this settlement;
however, these cases do not involve (either individually or in
the aggregate) a large number of homes, and the Company does not
expect the obligations arising from these lawsuits to have a
material adverse effect on its financial position, results of
operations or cash flows.
In addition, a lawsuit filed in November 1989 in Delaware
Chancery Court, between CNA Holdings and various of its
insurance companies relating to all claims incurred and to be
incurred for the product liability exposure led to a partial
declaratory judgment in CNA Holdings favor.
CNA Holdings has accrued its best estimate of its share of the
plumbing actions. At December 31, 2006 and 2005, the
Company had remaining accruals of $66 million and
$68 million, respectively, for this matter, of which
$4 million and $6 million, respectively, is included
in current liabilities. The Company believes that the plumbing
actions are adequately provided for in the Companys
consolidated financial statements and that they will not have a
material adverse effect on our financial position. However, if
the Company were to incur an additional charge for this matter,
such a charge would not be expected to have a material adverse
effect on our financial position, but may have a material
adverse effect on the results of operations or cash flows in any
given accounting period.
The Company has reached settlements with CNA Holdings
insurers specifying their responsibility for these claims; as a
result, the Company has recorded receivables relating to the
anticipated recoveries from certain third party insurance
carriers. These receivables are based on the probability of
collection, an opinion of external counsel, the settlement
agreements with the Companys insurance carriers whose
coverage level exceeds the receivables and the status of current
discussions with other insurance carriers. As of
December 31, 2006 and 2005, the Company has
$23 million and $37 million, respectively, of
receivables related to a settlement with an insurance carrier.
This receivable is recorded within other assets.
Sorbates
Antitrust Actions
In May 2002, the European Commission informed Hoechst of its
intent to investigate officially the sorbates industry. In early
January 2003, the European Commission served Hoechst, Nutrinova,
Inc., a U.S. subsidiary of Nutrinova Nutrition
Specialties & Food Ingredients GmbH, previously a
wholly owned subsidiary of Hoechst, and a number of competitors
with a statement of objections alleging unlawful,
anticompetitive behavior affecting the European sorbates market.
In October 2003, the European Commission ruled that Hoechst,
Chisso Corporation, Daicel Chemical Industries Ltd., The Nippon
Synthetic Chemical Industry Co. Ltd. and Ueno Fine Chemicals
Industry Ltd. operated a cartel in the European sorbates market
between 1979 and 1996. The European Commission imposed a total
fine of 138 million, of which 99 million
was assessed against Hoechst. The case against Nutrinova was
closed. The fine against Hoechst is based on the European
Commissions finding that Hoechst does not qualify under
the leniency policy, is a repeat violator and, together with
Daicel, was a co-conspirator. In Hoechsts favor, the
F-62
CELANESE
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
European Commission gave a discount for cooperating in the
investigation. Hoechst appealed the European Commissions
decision in December 2003, and that appeal is still pending.
In addition, several civil antitrust actions by sorbates
customers, seeking monetary damages and other relief for alleged
conduct involving the sorbates industry, have been filed in
U.S. state and federal courts naming Hoechst, Nutrinova,
and our other subsidiaries, as well as other sorbates
manufacturers, as defendants. These actions have all been either
settled or dismissed. The only other private action previously
pending, Freeman v. Daicel et al., had
been dismissed. The plaintiffs lost their appeal to the Supreme
Court of Tennessee in August 2005 and have since filed a motion
for leave.
In July 2001, Hoechst and Nutrinova entered into an agreement
with the Attorneys General of 33 states, pursuant to which
the statutes of limitations were tolled pending the states
investigations. This agreement expired in July 2003. Since
October 2002, the Attorneys General for New York, Illinois,
Ohio, Nevada, Utah and Idaho filed suit on behalf of indirect
purchasers in their respective states. The Utah, Nevada and
Idaho actions have been dismissed as to Hoechst, Nutrinova and
the Company. A motion for reconsideration is pending in Nevada.
The Ohio and Illinois actions have been settled and the Idaho
action was dismissed in February 2005. The New York action,
New York v. Daicel Chemical Industries Ltd.,
et al. which was pending in the New York State Supreme
Court, New York County was dismissed in August 2005. The
New York Attorney General appealed the decision to dismiss the
case, which is currently pending.
Based on the advice of external counsel and a review of the
existing facts and circumstances relating to the sorbates
antitrust matters, including the status of government
investigations, as well as civil claims filed and settled, the
Company has remaining accruals at December 31, 2006 of
$148 million. This amount is included in current
liabilities for the estimated loss relative to this matter. At
December 31, 2005, the accrual was $129 million. The
change in the accrual amounts is primarily due to fluctuations
in the currency exchange rate between the U.S. dollar and
the euro. Although the outcome of this matter cannot be
predicted with certainty, the Companys best estimate of
the range of possible additional future losses and fines (in
excess of amounts already accrued), including any that may
result from the above noted governmental proceedings, as of
December 31, 2006 is between $0 million and
$9 million. The estimated range of such possible future
losses is the Companys best estimate based on the advice
of external counsel taking into consideration potential fines
and claims, both civil and criminal that may be imposed or made
in other jurisdictions.
Pursuant to the Demerger Agreement with Hoechst, Celanese AG was
assigned the obligation related to the sorbates antitrust
matter. However, Hoechst agreed to indemnify Celanese AG for 80%
of any costs Celanese may incur relative to this matter.
Accordingly, Celanese AG has recognized a receivable from
Hoechst and a corresponding contribution of capital, net of tax,
from this indemnification. As of December 31, 2006 and
2005, the Company has receivables, recorded within current
assets, relating to the sorbates indemnification from Hoechst
totaling $118 million and $103 million, respectively.
The Company believes that any resulting liabilities, net of
amounts recoverable from Hoechst, will not, in the aggregate,
have a material adverse effect on its financial position, but
may have a material adverse effect on the results of operations
or cash flows in any given period.
Acetic
Acid Patent Infringement Matters
Celanese International Corporation v. China
Petrochemical Development Corporation Taiwan
Kaohsiung District Court. On May 9, 1999,
Celanese International Corporation filed a private criminal
action for patent infringement against China Petrochemical
Development Corporation, or CPDC, alleging that CPDC infringed
Celanese International Corporations patent covering the
manufacture of acetic acid. Celanese International Corporation
also filed a supplementary civil brief which, 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 and as reported to the
Taiwanese securities and exchange commission. Celanese
International Corporations patent was held valid by the
Taiwanese patent office. On August 31, 2005 a Taiwanese
court held that CPDC infringed Celanese International
Corporations acetic acid
F-63
CELANESE
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
patent and awarded Celanese International Corporation
approximately $28 million (plus interest of
$10 million) for the period of 1995 through 1999. The
judgment has been appealed. The Company will not record income
associated with this favorable judgment until cash is received.
CPDC has recently filed three patent cancellation actions
seeking decisions to revoke the patents that are at issue in the
litigation. The Company believes that these actions are without
merit and intends to vigorously oppose such actions.
Shareholder
Litigation
A number of minority shareholders of CAG have filed lawsuits in
the Frankfurt District Court that, among other things, request
the court to set aside shareholder resolutions passed at the
extraordinary general meeting held on July 30 and 31,
2004, as well as the confirmatory resolutions passed at the
annual general meeting held on May 19 and 20, 2005. On
March 6, 2006, the Purchaser and CAG signed a settlement
agreement with eleven minority shareholders who had filed such
lawsuits (the Settlement Agreement I). Pursuant to
the Settlement Agreement, the plaintiffs agreed to withdraw the
actions to which they were a party and to recognize the validity
of the Domination Agreement in exchange for the Purchaser to
offer least 51.00 per share as cash consideration to
each shareholder who would cease to be a shareholder in the
context of the Squeeze-Out. The Purchaser further agreed to make
early payment of the guaranteed annual payment pursuant to the
Domination Agreement for the financial year 2005/2006, ending on
September 30, 2006. Such guaranteed annual payment normally
would have come due following the annual general meeting in
2007; however, pursuant to Settlement Agreement I, it was
made on the first banking day following CAGs annual
general meeting that commenced on May 30, 2006 (See
Note 2). In exchange for the early compensation payment,
the respective minority shareholder had to declare that
(i) their claim for payment of compensation for the
financial year 2005/2006 pursuant to the Domination Agreement is
settled by such early payment and that (ii) in this
respect, they indemnify the Purchaser against compensation
claims by any legal successors to their shares.
Of the twenty-seven lawsuits contesting the shareholder
resolutions passed at the annual general meeting held May
19-20, 2005,
two were withdrawn in conjunction with the Purchasers
acquisition of 5.9 million CAG shares from two shareholders
in August 2005 and another ten have been withdrawn pursuant to
Settlement Agreement I (See Note 2). In February 2006, the
Frankfurt District Court ruled to dismiss all challenges
contesting the confirmatory resolutions and upheld only the
challenge regarding the ratification of the acts of the members
of the board of management and the supervisory board. CAG
appealed the decision with respect to the ratification. Three
plaintiff shareholders appealed the decision on the confirmatory
resolutions, however, two plaintiff shareholders agreed in
Settlement Agreement II (see below) to withdraw their
actions.
CAG is also a defendant in four actions filed in the Frankfurt
District Court requesting that the court declare some or all of
the shareholder resolutions passed at the extraordinary general
meeting on July 30 and 31, 2004 null and void, based
on allegations that certain formal requirements necessary in
connection with the invitation to the extraordinary general
meeting had been violated. The Frankfurt District Court has
suspended the proceedings regarding the resolutions passed at
the
July 30-31,
2004 extraordinary general meeting described above as long as
the lawsuits contesting the confirmatory resolutions are pending.
Based upon the information available as of February 20,
2007, the outcome of the foregoing proceedings cannot be
predicted with certainty.
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 CAG 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
F-64
CELANESE
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
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 CAG.
The shareholders resolution approving the Squeeze-Out
passed at the shareholders meeting on May 30, 2006
was challenged in June 2006 by seventeen actions to set aside
such resolution. In addition, a null and void action was served
upon CAG in November 2006. The Squeeze-Out, required
registration in the commercial register and such registration
was not possible while the lawsuits were pending. Therefore, CAG
initiated fast track release proceedings asking the court to
find that the lawsuits did not prevent registration of the
Squeeze-Out. The court of first instance granted the motion
regarding the actions to set aside the shareholders
resolution in a ruling dated October 10, 2006 that was
appealed by plaintiff shareholders. In a ruling dated
November 30, 2006, the court of first instance also granted
the motion with respect to the null and void action.
On December 22, 2006, the Purchaser and CAG signed a
settlement agreement with the plaintiff shareholders challenging
the shareholders resolution approving the Squeeze-Out
(Settlement Agreement II). Pursuant to
Settlement Agreement II, the plaintiffs agreed to withdraw
their actions and to drop their complaints in exchange for the
Purchaser agreeing to pay the guaranteed dividend for the fiscal
year ended on September 30, 2006 to those minority
shareholders who had not yet requested early payment of such
dividend and to pay a pro rata share of the guaranteed dividend
for the first five months of the fiscal year ending on
September 30, 2007 to all minority shareholders. The
Purchaser further agreed to make a donation in the amount of
0.5 million to a charity, to introduce, upon request
by plaintiffs, into the award proceedings regarding the cash
compensation and the guaranteed dividend under the Domination
Agreement the prospectus governing the January 20, 2005,
listing on the NYSE of the shares of the Company and to accord
the squeezed-out minority shareholders preferential treatment
if, within three years after effectiveness of the Squeeze-Out,
the shares of CAG were to be listed on a stock exchange again.
As a result of the effective registration of the Squeeze-Out in
the commercial register in December 2006, the Company acquired
the remaining 2% of CAG in January 2007.
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.
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 (See Note 18).
These known obligations include the following:
Demerger
Obligations
The Company has obligations to indemnify Hoechst for various
liabilities under the Demerger Agreement as follows:
|
|
|
|
|
The Company agreed to indemnify Hoechst for environmental
liabilities associated with contamination arising under 19
divestiture agreements entered into by Hoechst prior to the
demerger.
|
The Companys obligation to indemnify Hoechst is subject to
the following thresholds:
|
|
|
|
|
The Company will indemnify Hoechst against those liabilities up
to 250 million;
|
F-65
CELANESE
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
|
|
Hoechst will bear those liabilities exceeding
250 million, however the Company will reimburse
Hoechst for one-third of those liabilities for amounts that
exceed 750 million in the aggregate.
|
The aggregate maximum amount of environmental indemnifications
under the remaining divestiture agreements that provide for
monetary limits is approximately 750 million. Three
of the divested agreements do not provide for monetary limits.
Based on the estimate of the probability of loss under this
indemnification, the Company had reserves of $33 million
and $33 million as of December 31, 2006 and 2005,
respectively, for this contingency. Where the Company is unable
reasonably to determine the probability of loss or estimate such
loss under an indemnification, the Company has not recognized
any related liabilities (See Note 18).
The Company has also undertaken in the Demerger Agreement to
indemnify Hoechst to the extent that Hoechst is required to
discharge liabilities, including tax liabilities, associated
with businesses that were included in the demerger where such
liabilities 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. There
were no payments made to Hoechst during the years ended
December 31, 2006 and 2005, the nine months ended
December 31, 2004 and the three months ended March 31,
2004 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.
The Company and the Predecessor have 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 $2.3 billion as of
December 31, 2006. Other agreements do not provide for any
monetary or time limitations.
Based on historical claims experience and its knowledge of the
sites and businesses involved, the Company believes that it is
adequately reserved for these matters. As of December 31,
2006 and 2005, the Company has reserves in the aggregate of
$44 million and $54 million, respectively, for
environmental matters.
Plumbing
Insurance Indemnifications
CAG 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, CAG 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.
F-66
CELANESE
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
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.
The Company has reserves associated with these product liability
claims. See Plumbing Actions above.
Polyester
Staple Antitrust Litigation
CNA Holdings, the successor in interest to Hoechst Celanese
Corporation (HCC), CAC and CAG (collectively, the
Celanese Entities) and Hoechst AG (HAG),
the former parent of HCC, were named as defendants in two
actions (involving 25 individual participants) filed in
September 2006 by U.S. 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 have been consolidated for pre-trial
discovery by a Multi-District Litigation Panel in the United
States District Court for the Western District of North Carolina
and are styled In re Polyester Staple Antitrust Litigation, MDL
1516. Already pending in that consolidated proceeding are five
other actions commenced by five other alleged
U.S. purchasers of polyester staple fibers manufactured and
sold by the Celanese Entities, which also allege
defendants participation in the conspiracy.
In 1998 HCC sold its polyester staple business as part of its
sale of its Film & Fibers Division to KoSa, Inc. In a
complaint now pending against the Celanese Entities and HAG in
the United States District Court for the Southern District of
New York, Koch Industries, Inc., Kosa B.V. (KoSa),
Arteva Specialties, S.A.R.L. (Arteva Specialties)
and Arteva Services, S.A.R.L. seek, among other things,
indemnification under the asset purchase agreement pursuant to
which KoSa and Arteva Specialties agreed to purchase
defendants polyester business for all damages related to
the defendants participation in, and failure to disclose,
the alleged conspiracy, or alternatively, rescission of the
agreement.
Celanese does not believe that the Celanese Entities engaged in
any conduct that should result in liability in these actions.
However, the outcome of the foregoing actions cannot be
predicted with certainty. We believe that any resulting
liabilities from an adverse result will not, in the aggregate,
have a material adverse effect on our financial position, but
may have a material adverse effect on the results of operations
in any given period.
Other
Obligations
|
|
|
|
|
The Company is secondarily liable under a lease agreement
pursuant to which the Company has assigned a direct obligation
to a third party. The lease assumed by the third party expires
on April 30, 2012. The lease liability for the period from
January 1, 2007 to April 30, 2012 is estimated to be
approximately $41 million.
|
|
|
|
The Company has agreed to indemnify various insurance carriers,
for amounts not in excess of the settlements received, from
claims made against these carriers subsequent to the settlement.
The aggregate amount of guarantees under these settlements is
approximately $10 million, which is unlimited in term.
|
As indemnification obligations often depend on the occurrence of
unpredictable future events, the future costs associated with
them cannot be determined at this time. However, the Company
were to incur additional charges for these matters, such charges
may have a material adverse effect on the financial position,
results of operations or cash flows of the Company in any given
accounting period.
Other
Matters
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 the purchase of raw
materials and utilities. As of December 31, 2006, there
were outstanding future commitments of approximately
$2,229 million under
take-or-pay
contracts. The Company does not expect to incur any losses under
these contractual arrangements
F-67
CELANESE
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
and historically has not incurred any material losses related to
these contracts. Additionally, as of December 31, 2006,
there were outstanding commitments relating to capital projects
of approximately $61 million.
As of December 31, 2006, Celanese Ltd. and/or CNA Holdings,
Inc., both U.S. subsidiaries of the Company, are defendants
in approximately 647 asbestos cases. During the year ended
December 31, 2006, 90 new cases were filed against the
Company and 79 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 not
significant exposure related to these matters.
During the year ended December 31, 2005, the Company
recorded a gain of $36 million from the settlement of
transportation-related antitrust matters. This amount was
recorded against cost of sales.
Under the transaction and monitoring fee agreement/sponsor
services agreement, the Company has agreed to indemnify the
Advisor and its affiliates and their respective partners,
members, directors, officers, employees, agents and
representatives for any and all losses relating to services
contemplated by these agreements and the engagement of the
Advisor pursuant to, and the performance by the Advisor or the
services contemplated by, these agreements. The Company has also
agreed under the transaction and monitoring fee
agreement/sponsor services agreement to reimburse the Advisor
and its affiliates for their expenses incurred in connection
with the services provided under these agreements or in
connection with their ownership or subsequent sale of Celanese
Corporation stock (See Note 28).
The Company entered into an agreement with Goldman,
Sachs & Co. oHG, an affiliate of Goldman, Sachs and
Co., on December 15, 2003 (the Goldman Sachs
Engagement Letter), pursuant to which Goldman Sachs acted
as the Companys financial advisor in connection with the
tender offer. Pursuant to the terms of the Goldman Sachs
Engagement Letter, in March 2004, CAG paid Goldman Sachs a
financial advisory fee equal to $13 million and a
discretionary bonus equal to $5 million, upon consummation
of the tender offer. In addition, CAG agreed to reimburse
Goldman Sachs for all its reasonable expenses and to indemnify
Goldman Sachs and related persons for all direct damages arising
in connection with Goldman Sachs Engagement Letter.
Export
Control Investigation
From time to time, certain of the Companys foreign
subsidiaries made sales of acetate, sweeteners and polymer
products to customers in countries that are or have previously
been subject to sanctions and embargoes imposed by the
U.S. government. These countries include Cuba, Iran, Sudan
and Syria, four countries currently identified by the
U.S. State Department as terrorist-sponsoring states and
other countries that previously have been identified by the
U.S. State Department as terrorist-sponsoring states, or
countries to which sales have been regulated in connection with
other foreign policy concerns. In September 2005, the Company
began an investigation of these transactions and initially
identified approximately $10 million of sales by its
foreign subsidiaries to the above-referenced countries. The
Company now believes that approximately $5 million of these
sales were in violation of U.S. law or regulation. The
violations uncovered by the investigation include approximately
$180,000 of sales of emulsions to Cuba by two of the
Companys foreign subsidiaries. Sales to Cuba are
violations of the U.S. Treasury Departments Office of
Foreign Assets Control, or OFAC, regulations. In addition, the
Company determined that its sales office in Turkey sold polymer
products to companies in Iran and Syria, including indirectly
selling product through other companies located in non-embargoed
countries. Certain of these transactions involved an intentional
violation of the Companys policies and federal regulations
by employees of a subsidiary in Turkey.
The Company voluntarily disclosed these matters to the
U.S. Treasury Department and the U.S. Department of
Commerce. The Company immediately took corrective actions,
including dismissal of responsible individuals, directives to
senior business leaders prohibiting such sales, enhancement of
the business conduct policy training in the area of export
control, as well as modifications to its accounting systems that
are intended to prevent the initiation of sales to countries
that are subject to the U.S. Treasury Department or the
U.S. Department of Commerce
F-68
CELANESE
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
restrictions. The Company, in conjunction with outside counsel,
concluded an internal investigation of the facts and
circumstances surrounding the illegal export issues. As a result
of this investigation, the Company has terminated an employee
and liquidated its subsidiary in Turkey. The Company
communicated the results of its investigation to the federal
authorities responsible for these matters.
By letter dated December 12, 2006, the U.S. Department
of Commerce, Bureau of Industry and Security, Office of Export
Enforcement (OEE) informed the Company that it had
completed its investigation and issued a warning with respect to
one of the transactions that the Company voluntarily disclosed.
OEE confirmed in the warning letter that it would be closing the
matter and decided not to assess any fines or monetary penalties
or refer the matter for criminal or administrative prosecution.
While neither the OEE nor the Office of Foreign Assets Controls
(OFAC) has issued, or is likely to issue, a formal
decision on all of the transactions that we disclosed to them,
based on the advice of outside counsel we believe that OEE and
OFAC do not intend to continue their investigations of these
other transactions and we may consider the matters to be closed.
|
|
26.
|
Supplemental
Cash Flow Information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
|
Predecessor
|
|
|
|
|
|
|
|
|
|
Nine Months
|
|
|
|
Three Months
|
|
|
|
Year Ended
|
|
|
Year Ended
|
|
|
Ended
|
|
|
|
Ended
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
March 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
2004
|
|
|
|
(In $ millions)
|
|
Cash paid for:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Taxes, net of refunds
|
|
|
101
|
|
|
|
65
|
|
|
|
25
|
|
|
|
|
14
|
|
Interest, net of amounts
capitalized
|
|
|
239
|
|
|
|
309
|
|
|
|
184
|
|
|
|
|
48
|
|
Noncash investing and financing
activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value adjustment to
securities
available-for-sale,
net of tax
|
|
|
13
|
|
|
|
3
|
|
|
|
(7
|
)
|
|
|
|
7
|
|
Settlement of demerger liability,
net of tax
|
|
|
3
|
|
|
|
5
|
|
|
|
3
|
|
|
|
|
|
|
F-69
CELANESE
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
27.
|
Business
and Geographical Segments
|
Information with respect to the industry segments is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chemical
|
|
|
Acetate
|
|
|
|
|
|
Performance
|
|
|
Total
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
Products
|
|
|
Products
|
|
|
Ticona
|
|
|
Products
|
|
|
Segments
|
|
|
Activities
|
|
|
Reconciliation
|
|
|
Consolidated
|
|
|
|
(In $ millions)
|
|
|
Successor
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of and for the year ended
December 31, 2006:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales to external customers
|
|
|
4,608
|
|
|
|
700
|
|
|
|
915
|
|
|
|
176
|
|
|
|
6,399
|
|
|
|
257
|
|
|
|
|
|
|
|
6,656
|
|
Inter-segment revenues
|
|
|
134
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
134
|
|
|
|
|
|
|
|
(134
|
)
|
|
|
|
|
Earnings (loss) from continuing
operations before tax and minority interests
|
|
|
709
|
|
|
|
128
|
|
|
|
201
|
|
|
|
49
|
|
|
|
1,087
|
|
|
|
(423
|
)
|
|
|
|
|
|
|
664
|
|
Depreciation and Amortization
|
|
|
155
|
|
|
|
24
|
|
|
|
65
|
|
|
|
15
|
|
|
|
259
|
|
|
|
24
|
|
|
|
|
|
|
|
283
|
|
Capital expenditures
|
|
|
142
|
|
|
|
73
|
|
|
|
27
|
|
|
|
2
|
|
|
|
244
|
|
|
|
8
|
|
|
|
|
|
|
|
252
|
|
Other charges (gains), net
|
|
|
7
|
|
|
|
(1
|
)
|
|
|
(6
|
)
|
|
|
|
|
|
|
|
|
|
|
10
|
|
|
|
|
|
|
|
10
|
|
Goodwill and intangible assets
|
|
|
557
|
|
|
|
183
|
|
|
|
429
|
|
|
|
140
|
|
|
|
1,309
|
|
|
|
29
|
|
|
|
|
|
|
|
1,338
|
|
Total assets
|
|
|
3,489
|
|
|
|
711
|
|
|
|
1,584
|
|
|
|
361
|
|
|
|
6,145
|
|
|
|
1,750
|
|
|
|
|
|
|
|
7,895
|
|
As of and for the year ended
December 31, 2005:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales to external customers
|
|
|
4,163
|
|
|
|
659
|
|
|
|
887
|
|
|
|
180
|
|
|
|
5,889
|
|
|
|
144
|
|
|
|
|
|
|
|
6,033
|
|
Inter-segment revenues
|
|
|
136
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
136
|
|
|
|
|
|
|
|
(136
|
)
|
|
|
|
|
Earnings (loss) from continuing
operations before tax and minority interests
|
|
|
667
|
|
|
|
71
|
|
|
|
116
|
|
|
|
46
|
|
|
|
900
|
|
|
|
(526
|
)
|
|
|
|
|
|
|
374
|
|
Depreciation and Amortization
|
|
|
167
|
|
|
|
29
|
|
|
|
60
|
|
|
|
13
|
|
|
|
269
|
|
|
|
17
|
|
|
|
|
|
|
|
286
|
|
Capital expenditures
|
|
|
111
|
|
|
|
35
|
|
|
|
54
|
|
|
|
3
|
|
|
|
203
|
|
|
|
9
|
|
|
|
|
|
|
|
212
|
|
Other charges (gains), net
|
|
|
18
|
|
|
|
9
|
|
|
|
(8
|
)
|
|
|
|
|
|
|
19
|
|
|
|
47
|
|
|
|
|
|
|
|
66
|
|
Goodwill and intangible assets
|
|
|
569
|
|
|
|
218
|
|
|
|
466
|
|
|
|
140
|
|
|
|
1,393
|
|
|
|
37
|
|
|
|
|
|
|
|
1,430
|
|
Total assets
|
|
|
3,280
|
|
|
|
691
|
|
|
|
1,583
|
|
|
|
342
|
|
|
|
5,896
|
|
|
|
1,549
|
|
|
|
|
|
|
|
7,445
|
|
F-70
CELANESE
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chemical
|
|
|
Acetate
|
|
|
|
|
|
Performance
|
|
|
Total
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
Products
|
|
|
Products
|
|
|
Ticona
|
|
|
Products
|
|
|
Segments
|
|
|
Activities
|
|
|
Reconciliation
|
|
|
Consolidated
|
|
|
|
(In $ millions)
|
|
|
For the nine months ended
December 31, 2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales to external customers
|
|
|
2,465
|
|
|
|
441
|
|
|
|
636
|
|
|
|
131
|
|
|
|
3,673
|
|
|
|
45
|
|
|
|
|
|
|
|
3,718
|
|
Inter-segment revenues
|
|
|
82
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
82
|
|
|
|
|
|
|
|
(82
|
)
|
|
|
|
|
Earnings (loss) from continuing
operations before tax and minority interests
|
|
|
265
|
|
|
|
(13
|
)
|
|
|
26
|
|
|
|
15
|
|
|
|
293
|
|
|
|
(473
|
)
|
|
|
|
|
|
|
(180
|
)
|
Depreciation and Amortization
|
|
|
89
|
|
|
|
30
|
|
|
|
48
|
|
|
|
10
|
|
|
|
177
|
|
|
|
4
|
|
|
|
|
|
|
|
181
|
|
Capital expenditures
|
|
|
59
|
|
|
|
31
|
|
|
|
64
|
|
|
|
3
|
|
|
|
157
|
|
|
|
3
|
|
|
|
|
|
|
|
160
|
|
Other charges (gains), net
|
|
|
3
|
|
|
|
41
|
|
|
|
37
|
|
|
|
|
|
|
|
81
|
|
|
|
1
|
|
|
|
|
|
|
|
82
|
|
|
|
Predecessor
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended
March 31, 2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales to external customers
|
|
|
780
|
|
|
|
147
|
|
|
|
227
|
|
|
|
44
|
|
|
|
1,198
|
|
|
|
11
|
|
|
|
|
|
|
|
1,209
|
|
Inter-segment revenues
|
|
|
29
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29
|
|
|
|
|
|
|
|
(29
|
)
|
|
|
|
|
Earnings (loss) from continuing
operations before tax and minority interests
|
|
|
63
|
|
|
|
4
|
|
|
|
45
|
|
|
|
11
|
|
|
|
123
|
|
|
|
(57
|
)
|
|
|
|
|
|
|
66
|
|
Depreciation and Amortization
|
|
|
39
|
|
|
|
11
|
|
|
|
16
|
|
|
|
2
|
|
|
|
68
|
|
|
|
2
|
|
|
|
|
|
|
|
70
|
|
Capital expenditures
|
|
|
15
|
|
|
|
8
|
|
|
|
20
|
|
|
|
|
|
|
|
43
|
|
|
|
1
|
|
|
|
|
|
|
|
44
|
|
Other charges (gains), net
|
|
|
1
|
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
2
|
|
|
|
26
|
|
|
|
|
|
|
|
28
|
|
Business
Segments
Chemical Products primarily produces and supplies acetyl
products, including acetic acid, vinyl acetate monomer and
polyvinyl alcohol; specialty and oxo products, including organic
solvents and other intermediates;
Acetate Products primarily produces and supplies acetate
filament and acetate tow;
Ticona, the technical polymers segment, develops and
supplies a broad portfolio of high performance technical
polymers; and
Performance Products consists of Nutrinova, the high
intensity sweetener and food protection ingredients business.
The segment management reporting and controlling systems are
based on the same accounting policies as those described in the
summary of significant accounting policies in Note 4. The
Company evaluates performance based on operating profit, net
earnings (loss), cash flows and other measures of financial
performance reported in accordance with U.S. GAAP.
Sales and revenues related to transactions between segments are
generally recorded at values that approximate third-party
selling prices. Capital expenditures represent the purchase of
property, plant and equipment.
F-71
CELANESE
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The other activities column includes (a) operations of
certain other operating entities and their related assets,
liabilities, revenues and expenses, (b) ancillary
businesses as well as companies which provide infrastructure
services, (c) assets and liabilities not allocated to a
segment, (d) corporate center costs for support services
such as legal, accounting and treasury functions and
(e) interest income or expense associated with financing
activities of the Company.
Geographical
Segments
Revenues and long-term assets are allocated to countries based
on the location of the business. The following table presents
financial information based on the geographic location of
Celaneses facilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
|
Predecessor
|
|
|
|
As of and for the
|
|
|
As of and for the
|
|
|
For the Nine
|
|
|
|
For the Three
|
|
|
|
Year Ended
|
|
|
Year Ended
|
|
|
Months Ended
|
|
|
|
Months Ended
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
March 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
2004
|
|
|
|
(In $ millions)
|
|
Net sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States
|
|
|
2,148
|
|
|
|
2,046
|
|
|
|
1,252
|
|
|
|
|
413
|
|
Non-United
States
|
|
|
4,508
|
|
|
|
3,987
|
|
|
|
2,466
|
|
|
|
|
796
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
6,656
|
|
|
|
6,033
|
|
|
|
3,718
|
|
|
|
|
1,209
|
|
Significant
Non-United
States net sales sources include:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Germany
|
|
|
2,251
|
|
|
|
1,897
|
|
|
|
1,256
|
|
|
|
|
416
|
|
Singapore
|
|
|
771
|
|
|
|
696
|
|
|
|
419
|
|
|
|
|
123
|
|
Canada
|
|
|
535
|
|
|
|
438
|
|
|
|
211
|
|
|
|
|
66
|
|
Mexico
|
|
|
303
|
|
|
|
306
|
|
|
|
221
|
|
|
|
|
65
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
|
Predecessor
|
|
|
|
As of and for the
|
|
|
As of and for the
|
|
|
For the Nine
|
|
|
|
For the Three
|
|
|
|
Year Ended
|
|
|
Year Ended
|
|
|
Months Ended
|
|
|
|
Months Ended
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
March 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
2004
|
|
|
|
(In $ millions)
|
|
Property, plant and equipment,
net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States
|
|
|
861
|
|
|
|
870
|
|
|
|
|
|
|
|
|
|
|
Non-United
States
|
|
|
1,294
|
|
|
|
1,161
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
2,155
|
|
|
|
2,031
|
|
|
|
|
|
|
|
|
|
|
Significant
Non-United
States property, plant and equipment, net sources include:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Germany
|
|
|
530
|
|
|
|
480
|
|
|
|
|
|
|
|
|
|
|
Singapore
|
|
|
98
|
|
|
|
103
|
|
|
|
|
|
|
|
|
|
|
Canada
|
|
|
149
|
|
|
|
165
|
|
|
|
|
|
|
|
|
|
|
Mexico
|
|
|
130
|
|
|
|
97
|
|
|
|
|
|
|
|
|
|
|
F-72
CELANESE
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
28.
|
Transactions
and Relationships with Affiliates and Related Parties
|
The Company is a party to various transactions with affiliated
companies. Companies in which the Company has an investment
accounted for under the cost or equity method of accounting, are
considered Affiliates; any transactions or balances with such
companies are considered Affiliate transactions. The following
tables represent the Companys transactions with Affiliates
for the periods presented:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
|
Predecessor
|
|
|
|
|
|
|
|
|
|
Nine Months
|
|
|
|
Three Months
|
|
|
|
Year Ended
|
|
|
Year Ended
|
|
|
Ended
|
|
|
|
Ended
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
March 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
2004
|
|
|
|
(In $ millions)
|
|
Statements of
Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases from Affiliates(1)
|
|
|
274
|
|
|
|
290
|
|
|
|
232
|
|
|
|
|
77
|
|
Sales to Affiliates(1)
|
|
|
128
|
|
|
|
157
|
|
|
|
135
|
|
|
|
|
42
|
|
Interest income from Affiliates
|
|
|
1
|
|
|
|
1
|
|
|
|
1
|
|
|
|
|
|
|
Interest expense to Affiliates
|
|
|
5
|
|
|
|
3
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
|
As of
|
|
|
As of
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
|
(In $ millions)
|
|
|
Balance Sheets
|
|
|
|
|
|
|
|
|
Trade and other receivables from
Affiliates
|
|
|
28
|
|
|
|
31
|
|
Current notes receivable
(including interest) from Affiliates
|
|
|
41
|
|
|
|
39
|
|
|
|
|
|
|
|
|
|
|
Total receivables from Affiliates
|
|
|
69
|
|
|
|
70
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and other
liabilities due Affiliates
|
|
|
24
|
|
|
|
55
|
|
Short-term borrowings from
Affiliates(2)
|
|
|
182
|
|
|
|
135
|
|
|
|
|
|
|
|
|
|
|
Total due Affiliates
|
|
|
206
|
|
|
|
190
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Purchases/Sales from/to Affiliates |
|
|
|
Purchases and sales from/to Affiliates are accounted for at
prices which, in the opinion of the Company, approximate those
charged to third party customers for similar goods or services. |
|
(2) |
|
Short-term borrowings from Affiliates (See Note 16) |
The Company has agreements with certain Affiliates, primarily
Infraserv entities, whereby excess Affiliate cash is lent to and
managed by the Company, at variable interest rates governed by
those agreements.
Upon closing of the Acquisition, the Company entered into a
transaction and monitoring fee agreement with the Advisor, an
affiliate of the Blackstone Group (the Sponsor).
Under the agreement, the Advisor agreed to provide monitoring
services to the Company for a 12 year period. Also, the
Advisor may receive additional compensation for providing
investment banking or other advisory services provided to the
Company by the Advisor or any of its affiliates, and may be
reimbursed for certain expenses, in connection with any specific
acquisition, divestiture, refinancing, recapitalization, or
similar transaction. In connection with the completion of the
initial public offering, the parties amended and restated the
transaction and monitoring fee agreement to terminate the
monitoring services and all obligations to pay future monitoring
fees and paid the Advisor $35 million. The Company also
paid $10 million to the Advisor for the 2005 monitoring
fee. The transaction based agreement remains in effect.
F-73
CELANESE
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Also in connection with the Acquisition, the Company issued
$200 million mandatorily redeemable preferred stock to an
affiliate of Banc of America Securities LLC. The mandatorily
redeemable preferred shares were redeemed using the proceeds
from the senior subordinated notes issued July 1, 2004.
Banc of America Securities LLC was also an initial purchaser of
the senior subordinated notes and the senior discount notes and
is an affiliate of a lender under the amended and restated
senior credit facilities. Banc of America Securities LLC is an
affiliate of BA Capital Investors Fund, L.P., one of the
Original Shareholders (See Note 16).
In connection with the acquisition of Vinamul, the Company paid
the Advisor a fee of $2 million, which was included in the
computation of the purchase price for the acquisition. In
connection with the acquisition of Acetex, the Company paid the
Advisor an initial fee of $1 million. Additional fees of
$3 million were paid in August 2005 to the Advisor upon the
successful completion of this acquisition. In addition, the
Company has paid the Advisor aggregate fees of approximately
3 million (approximately $4 million) in
connection with the Companys acquisition of
5.9 million additional CAG shares in August 2005 (See
Note 2).
During the year ended December 31, 2006 and 2005, the
Company reimbursed the Advisor approximately $0 million and
$2 million, respectively, for other costs.
Commencing in September 2005, the Company filed a Registration
Statement on
Form S-1
and amendments to that Registration Statement with the SEC on
behalf of the Original Shareholders (the Resale
Offering) pursuant to the terms of the Amended and
Restated Registration Rights Agreement (Registration
Rights Agreement) dated as of January 26, 2005,
between the Company and the Original Shareholders. Pursuant to
the terms of the Registration Rights Agreement, the Company paid
certain fees and expenses incurred in connection with the Resale
Offering, which amounted to approximately $1 million.
|
|
29.
|
Consolidating
Guarantor Financial Information
|
In September 2004, Crystal US Holdings 3 LLC and Crystal US Sub
3 Corp (the Issuers) both wholly owned subsidiaries
of Celanese Corporation issued senior discount notes (the
Notes) for gross proceeds of $513 million (See
Note 16). Effective March 2005, Celanese Corporation (the
Parent Guarantor) guaranteed the Notes in order that
the financial information required to be filed under the
indenture can be filed by the Company rather than the Issuers.
No other subsidiaries guaranteed these notes.
The Parent Guarantor was formed on February 24, 2004, and
the Issuers were formed in September 2004. The Parent Guarantor
and the Issuers held no assets and conducted no operations prior
to the acquisition of the CAG Shares. Prior to the Acquisition,
the Parent Guarantor had no independent assets or operations.
Accordingly, there is no financial information for the Parent
Guarantor or the Issuers for the periods prior to the nine
months ended December 31, 2004.
The following consolidating financial statements are presented
in the provided form because:
(i) the Issuers are wholly owned subsidiaries of the Parent
Guarantor; (ii) the guarantee is considered to be full and
unconditional, that is, if the Issuers fail to make a scheduled
payment, the Parent Guarantor is obligated to make the scheduled
payment immediately and, if they do not, any holder of notes may
immediately bring suit directly against the Parent Guarantor for
payment of all amounts due and payable.
Separate financial statements and other disclosures concerning
the Parent Guarantor are not presented because the Company does
not believe that such information is material to investors.
F-74
CELANESE
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Consolidating
Statement of Operations Information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
|
For the Year Ended December 31, 2006
|
|
|
|
Parent
|
|
|
|
|
|
Non-
|
|
|
|
|
|
|
|
|
|
Guarantor
|
|
|
Issuer
|
|
|
Guarantors
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
(In $ millions)
|
|
|
Net sales
|
|
|
|
|
|
|
|
|
|
|
6,656
|
|
|
|
|
|
|
|
6,656
|
|
Cost of sales
|
|
|
|
|
|
|
|
|
|
|
(5,214
|
)
|
|
|
|
|
|
|
(5,214
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
|
|
|
|
|
|
|
|
1,442
|
|
|
|
|
|
|
|
1,442
|
|
Selling, general and
administrative expenses
|
|
|
(6
|
)
|
|
|
|
|
|
|
(532
|
)
|
|
|
|
|
|
|
(538
|
)
|
Amortization of intangible assets
(customer related)
|
|
|
|
|
|
|
|
|
|
|
(66
|
)
|
|
|
|
|
|
|
(66
|
)
|
Research and development expenses
|
|
|
|
|
|
|
|
|
|
|
(70
|
)
|
|
|
|
|
|
|
(70
|
)
|
Other (charges) gains, net:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Insurance recoveries associated
with plumbing cases
|
|
|
|
|
|
|
|
|
|
|
5
|
|
|
|
|
|
|
|
5
|
|
Restructuring, impairment and
other (charges) gains
|
|
|
|
|
|
|
|
|
|
|
(15
|
)
|
|
|
|
|
|
|
(15
|
)
|
Foreign exchange loss, net
|
|
|
|
|
|
|
|
|
|
|
(2
|
)
|
|
|
|
|
|
|
(2
|
)
|
Loss on disposition of assets, net
|
|
|
|
|
|
|
|
|
|
|
(9
|
)
|
|
|
|
|
|
|
(9
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit (loss)
|
|
|
(6
|
)
|
|
|
|
|
|
|
753
|
|
|
|
|
|
|
|
747
|
|
Equity in net earnings of
affiliates
|
|
|
414
|
|
|
|
438
|
|
|
|
86
|
|
|
|
(852
|
)
|
|
|
86
|
|
Interest expense
|
|
|
|
|
|
|
(41
|
)
|
|
|
(253
|
)
|
|
|
|
|
|
|
(294
|
)
|
Interest income
|
|
|
|
|
|
|
|
|
|
|
37
|
|
|
|
|
|
|
|
37
|
|
Other income (expense), net
|
|
|
(2
|
)
|
|
|
|
|
|
|
90
|
|
|
|
|
|
|
|
88
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings from continuing
operations before tax and minority interests
|
|
|
406
|
|
|
|
397
|
|
|
|
713
|
|
|
|
(852
|
)
|
|
|
664
|
|
Income tax (provision) benefit
|
|
|
|
|
|
|
17
|
|
|
|
(270
|
)
|
|
|
|
|
|
|
(253
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings from continuing
operations before minority interests
|
|
|
406
|
|
|
|
414
|
|
|
|
443
|
|
|
|
(852
|
)
|
|
|
411
|
|
Minority interests
|
|
|
|
|
|
|
|
|
|
|
(4
|
)
|
|
|
|
|
|
|
(4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings from continuing operations
|
|
|
406
|
|
|
|
414
|
|
|
|
439
|
|
|
|
(852
|
)
|
|
|
407
|
|
Loss from discontinued operations
|
|
|
|
|
|
|
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
|
406
|
|
|
|
414
|
|
|
|
438
|
|
|
|
(852
|
)
|
|
|
406
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-75
CELANESE
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Consolidating
Statement of Operations Information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
|
For the Year Ended December 31, 2005
|
|
|
|
Parent
|
|
|
|
|
|
Non-
|
|
|
|
|
|
|
|
|
|
Guarantor
|
|
|
Issuer
|
|
|
Guarantors
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
(In $ millions)
|
|
|
Net sales
|
|
|
|
|
|
|
|
|
|
|
6,033
|
|
|
|
|
|
|
|
6,033
|
|
Cost of sales
|
|
|
|
|
|
|
|
|
|
|
(4,731
|
)
|
|
|
|
|
|
|
(4,731
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
|
|
|
|
|
|
|
|
1,302
|
|
|
|
|
|
|
|
1,302
|
|
Selling, general and
administrative expenses
|
|
|
(5
|
)
|
|
|
|
|
|
|
(506
|
)
|
|
|
|
|
|
|
(511
|
)
|
Amortization of intangible assets
(customer related)
|
|
|
|
|
|
|
|
|
|
|
(51
|
)
|
|
|
|
|
|
|
(51
|
)
|
Research and development expenses
|
|
|
|
|
|
|
|
|
|
|
(91
|
)
|
|
|
|
|
|
|
(91
|
)
|
Other (charges) gains, net:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Insurance recoveries associated
with plumbing cases
|
|
|
|
|
|
|
|
|
|
|
34
|
|
|
|
|
|
|
|
34
|
|
Restructuring, impairment and
other (charges) gains
|
|
|
|
|
|
|
|
|
|
|
(100
|
)
|
|
|
|
|
|
|
(100
|
)
|
Loss on disposition of assets, net
|
|
|
|
|
|
|
|
|
|
|
(10
|
)
|
|
|
|
|
|
|
(10
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit (loss)
|
|
|
(5
|
)
|
|
|
|
|
|
|
578
|
|
|
|
|
|
|
|
573
|
|
Equity in net earnings of
affiliates
|
|
|
278
|
|
|
|
343
|
|
|
|
61
|
|
|
|
(621
|
)
|
|
|
61
|
|
Interest expense
|
|
|
|
|
|
|
(65
|
)
|
|
|
(322
|
)
|
|
|
|
|
|
|
(387
|
)
|
Interest income
|
|
|
5
|
|
|
|
|
|
|
|
33
|
|
|
|
|
|
|
|
38
|
|
Other income (expense), net
|
|
|
(1
|
)
|
|
|
|
|
|
|
90
|
|
|
|
|
|
|
|
89
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings from continuing
operations before tax and minority interests
|
|
|
277
|
|
|
|
278
|
|
|
|
440
|
|
|
|
(621
|
)
|
|
|
374
|
|
Income tax provision
|
|
|
|
|
|
|
|
|
|
|
(61
|
)
|
|
|
|
|
|
|
(61
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings from continuing
operations before minority interests
|
|
|
277
|
|
|
|
278
|
|
|
|
379
|
|
|
|
(621
|
)
|
|
|
313
|
|
Minority interests
|
|
|
|
|
|
|
|
|
|
|
(37
|
)
|
|
|
|
|
|
|
(37
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings from continuing operations
|
|
|
277
|
|
|
|
278
|
|
|
|
342
|
|
|
|
(621
|
)
|
|
|
276
|
|
Earnings from discontinued
operations
|
|
|
|
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
|
277
|
|
|
|
278
|
|
|
|
343
|
|
|
|
(621
|
)
|
|
|
277
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-76
CELANESE
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Consolidating
Statement of Operations Information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
|
For the Nine Months Ended December 31, 2004
|
|
|
|
Parent
|
|
|
|
|
|
Non-
|
|
|
|
|
|
|
|
|
|
Guarantor
|
|
|
Issuer
|
|
|
Guarantors
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
(In $ millions)
|
|
|
Net sales
|
|
|
|
|
|
|
|
|
|
|
3,718
|
|
|
|
|
|
|
|
3,718
|
|
Cost of sales
|
|
|
|
|
|
|
|
|
|
|
(3,000
|
)
|
|
|
|
|
|
|
(3,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
|
|
|
|
|
|
|
|
718
|
|
|
|
|
|
|
|
718
|
|
Selling, general and
administrative expenses
|
|
|
|
|
|
|
|
|
|
|
(454
|
)
|
|
|
|
|
|
|
(454
|
)
|
Amortization of intangible assets
(customer related)
|
|
|
|
|
|
|
|
|
|
|
(43
|
)
|
|
|
|
|
|
|
(43
|
)
|
Research and development expenses
|
|
|
|
|
|
|
|
|
|
|
(67
|
)
|
|
|
|
|
|
|
(67
|
)
|
Other (charges) gains, net:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Insurance recoveries associated
with plumbing cases
|
|
|
|
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
1
|
|
Restructuring, impairment and
other (charges) gains
|
|
|
|
|
|
|
|
|
|
|
(83
|
)
|
|
|
|
|
|
|
(83
|
)
|
Foreign exchange loss, net
|
|
|
|
|
|
|
|
|
|
|
(3
|
)
|
|
|
|
|
|
|
(3
|
)
|
Gain on disposition of assets, net
|
|
|
|
|
|
|
|
|
|
|
3
|
|
|
|
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit
|
|
|
|
|
|
|
|
|
|
|
72
|
|
|
|
|
|
|
|
72
|
|
Equity in net earnings (loss) of
affiliates
|
|
|
(203
|
)
|
|
|
(71
|
)
|
|
|
36
|
|
|
|
274
|
|
|
|
36
|
|
Interest expense
|
|
|
(47
|
)
|
|
|
(16
|
)
|
|
|
(239
|
)
|
|
|
2
|
|
|
|
(300
|
)
|
Interest income
|
|
|
|
|
|
|
|
|
|
|
26
|
|
|
|
(2
|
)
|
|
|
24
|
|
Other income (expense), net
|
|
|
(3
|
)
|
|
|
|
|
|
|
(9
|
)
|
|
|
|
|
|
|
(12
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations
before tax
|
|
|
(253
|
)
|
|
|
(87
|
)
|
|
|
(114
|
)
|
|
|
274
|
|
|
|
(180
|
)
|
Income tax provision
|
|
|
|
|
|
|
|
|
|
|
(70
|
)
|
|
|
|
|
|
|
(70
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations
before minority interests
|
|
|
(253
|
)
|
|
|
(87
|
)
|
|
|
(184
|
)
|
|
|
274
|
|
|
|
(250
|
)
|
Minority interests
|
|
|
|
|
|
|
|
|
|
|
(8
|
)
|
|
|
|
|
|
|
(8
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations
|
|
|
(253
|
)
|
|
|
(87
|
)
|
|
|
(192
|
)
|
|
|
274
|
|
|
|
(258
|
)
|
Earnings from discontinued
operations
|
|
|
|
|
|
|
|
|
|
|
5
|
|
|
|
|
|
|
|
5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
(253
|
)
|
|
|
(87
|
)
|
|
|
(187
|
)
|
|
|
274
|
|
|
|
(253
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-77
CELANESE
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Consolidating
Statement of Operations Information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Predecessor
|
|
|
|
For the Three Months Ended March 31, 2004
|
|
|
|
Parent
|
|
|
|
|
|
Non-
|
|
|
|
|
|
|
|
|
|
Guarantor
|
|
|
Issuer
|
|
|
Guarantors
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
(In $ millions)
|
|
|
Net sales
|
|
|
|
|
|
|
|
|
|
|
1,209
|
|
|
|
|
|
|
|
1,209
|
|
Cost of sales
|
|
|
|
|
|
|
|
|
|
|
(975
|
)
|
|
|
|
|
|
|
(975
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
|
|
|
|
|
|
|
|
234
|
|
|
|
|
|
|
|
234
|
|
Selling, general and
administrative expenses
|
|
|
|
|
|
|
|
|
|
|
(136
|
)
|
|
|
|
|
|
|
(136
|
)
|
Research and development expenses
|
|
|
|
|
|
|
|
|
|
|
(23
|
)
|
|
|
|
|
|
|
(23
|
)
|
Other (charges) gains, net:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring, impairment and
other (charges) gains
|
|
|
|
|
|
|
|
|
|
|
(28
|
)
|
|
|
|
|
|
|
(28
|
)
|
Loss on disposition of assets, net
|
|
|
|
|
|
|
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit
|
|
|
|
|
|
|
|
|
|
|
46
|
|
|
|
|
|
|
|
46
|
|
Equity in net earnings of
affiliates
|
|
|
|
|
|
|
|
|
|
|
12
|
|
|
|
|
|
|
|
12
|
|
Interest expense
|
|
|
|
|
|
|
|
|
|
|
(6
|
)
|
|
|
|
|
|
|
(6
|
)
|
Interest income
|
|
|
|
|
|
|
|
|
|
|
5
|
|
|
|
|
|
|
|
5
|
|
Other income (expense), net
|
|
|
|
|
|
|
|
|
|
|
9
|
|
|
|
|
|
|
|
9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings from continuing
operations before tax
|
|
|
|
|
|
|
|
|
|
|
66
|
|
|
|
|
|
|
|
66
|
|
Income tax provision
|
|
|
|
|
|
|
|
|
|
|
(15
|
)
|
|
|
|
|
|
|
(15
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings from continuing operations
|
|
|
|
|
|
|
|
|
|
|
51
|
|
|
|
|
|
|
|
51
|
|
Earnings from discontinued
operations
|
|
|
|
|
|
|
|
|
|
|
27
|
|
|
|
|
|
|
|
27
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
|
|
|
|
|
|
|
|
|
78
|
|
|
|
|
|
|
|
78
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-78
CELANESE
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Consolidating
Balance Sheet Information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
|
As of December 31, 2006
|
|
|
|
Parent
|
|
|
|
|
|
Non-
|
|
|
|
|
|
|
|
|
|
Guarantor
|
|
|
Issuer
|
|
|
Guarantors
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
(In $ millions)
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
1
|
|
|
|
|
|
|
|
790
|
|
|
|
|
|
|
|
791
|
|
Restricted cash
|
|
|
|
|
|
|
|
|
|
|
46
|
|
|
|
|
|
|
|
46
|
|
Receivables:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade receivables, net
|
|
|
|
|
|
|
|
|
|
|
1,001
|
|
|
|
|
|
|
|
1,001
|
|
Other receivables
|
|
|
1
|
|
|
|
|
|
|
|
488
|
|
|
|
(14
|
)
|
|
|
475
|
|
Inventories
|
|
|
|
|
|
|
|
|
|
|
653
|
|
|
|
|
|
|
|
653
|
|
Deferred income taxes
|
|
|
|
|
|
|
|
|
|
|
76
|
|
|
|
|
|
|
|
76
|
|
Other assets
|
|
|
|
|
|
|
|
|
|
|
69
|
|
|
|
|
|
|
|
69
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
2
|
|
|
|
|
|
|
|
3,123
|
|
|
|
(14
|
)
|
|
|
3,111
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments
|
|
|
798
|
|
|
|
1,195
|
|
|
|
763
|
|
|
|
(1,993
|
)
|
|
|
763
|
|
Property, plant and equipment, net
|
|
|
|
|
|
|
|
|
|
|
2,155
|
|
|
|
|
|
|
|
2,155
|
|
Deferred income taxes
|
|
|
|
|
|
|
|
|
|
|
22
|
|
|
|
|
|
|
|
22
|
|
Other assets
|
|
|
|
|
|
|
6
|
|
|
|
500
|
|
|
|
|
|
|
|
506
|
|
Goodwill
|
|
|
|
|
|
|
|
|
|
|
875
|
|
|
|
|
|
|
|
875
|
|
Intangible assets, net
|
|
|
|
|
|
|
|
|
|
|
463
|
|
|
|
|
|
|
|
463
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
|
800
|
|
|
|
1,201
|
|
|
|
7,901
|
|
|
|
(2,007
|
)
|
|
|
7,895
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND
SHAREHOLDERS EQUITY
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term borrowings and current
installments of long-term debt third party and
affiliates
|
|
|
|
|
|
|
|
|
|
|
309
|
|
|
|
|
|
|
|
309
|
|
Trade payables third
party and affiliates
|
|
|
|
|
|
|
|
|
|
|
823
|
|
|
|
|
|
|
|
823
|
|
Other current liabilities
|
|
|
13
|
|
|
|
|
|
|
|
788
|
|
|
|
(14
|
)
|
|
|
787
|
|
Deferred income taxes
|
|
|
|
|
|
|
|
|
|
|
18
|
|
|
|
|
|
|
|
18
|
|
Income taxes payable
|
|
|
|
|
|
|
(17
|
)
|
|
|
296
|
|
|
|
|
|
|
|
279
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
13
|
|
|
|
(17
|
)
|
|
|
2,234
|
|
|
|
(14
|
)
|
|
|
2,216
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt
|
|
|
|
|
|
|
420
|
|
|
|
2,769
|
|
|
|
|
|
|
|
3,189
|
|
Deferred income taxes
|
|
|
|
|
|
|
|
|
|
|
297
|
|
|
|
|
|
|
|
297
|
|
Benefit obligations
|
|
|
|
|
|
|
|
|
|
|
889
|
|
|
|
|
|
|
|
889
|
|
Other liabilities
|
|
|
|
|
|
|
|
|
|
|
443
|
|
|
|
|
|
|
|
443
|
|
Minority interests
|
|
|
|
|
|
|
|
|
|
|
74
|
|
|
|
|
|
|
|
74
|
|
Commitments and contingencies
Shareholders equity
|
|
|
787
|
|
|
|
798
|
|
|
|
1,195
|
|
|
|
(1,993
|
)
|
|
|
787
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and
shareholders equity
|
|
|
800
|
|
|
|
1,201
|
|
|
|
7,901
|
|
|
|
(2,007
|
)
|
|
|
7,895
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-79
CELANESE
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Consolidating
Balance Sheet Information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
|
As of December 31, 2005
|
|
|
|
Parent
|
|
|
|
|
|
Non-
|
|
|
|
|
|
|
|
|
|
Guarantor
|
|
|
Issuer
|
|
|
Guarantors
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
(In $ millions)
|
|
|
ASSETS
|
Current assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
1
|
|
|
|
|
|
|
|
389
|
|
|
|
|
|
|
|
390
|
|
Receivables:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade receivables, net
|
|
|
|
|
|
|
|
|
|
|
919
|
|
|
|
|
|
|
|
919
|
|
Other receivables
|
|
|
|
|
|
|
|
|
|
|
486
|
|
|
|
(5
|
)
|
|
|
481
|
|
Inventories
|
|
|
|
|
|
|
|
|
|
|
650
|
|
|
|
|
|
|
|
650
|
|
Deferred income taxes
|
|
|
|
|
|
|
|
|
|
|
37
|
|
|
|
|
|
|
|
37
|
|
Other assets
|
|
|
|
|
|
|
|
|
|
|
91
|
|
|
|
|
|
|
|
91
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
1
|
|
|
|
|
|
|
|
2,572
|
|
|
|
(5
|
)
|
|
|
2,568
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments
|
|
|
238
|
|
|
|
610
|
|
|
|
775
|
|
|
|
(848
|
)
|
|
|
775
|
|
Property, plant and equipment, net
|
|
|
|
|
|
|
|
|
|
|
2,031
|
|
|
|
|
|
|
|
2,031
|
|
Deferred income taxes
|
|
|
|
|
|
|
|
|
|
|
139
|
|
|
|
|
|
|
|
139
|
|
Other assets
|
|
|
|
|
|
|
8
|
|
|
|
494
|
|
|
|
|
|
|
|
502
|
|
Goodwill
|
|
|
|
|
|
|
|
|
|
|
949
|
|
|
|
|
|
|
|
949
|
|
Intangible assets, net
|
|
|
|
|
|
|
|
|
|
|
481
|
|
|
|
|
|
|
|
481
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
|
239
|
|
|
|
618
|
|
|
|
7,441
|
|
|
|
(853
|
)
|
|
|
7,445
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND
SHAREHOLDERS EQUITY
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term borrowings and current
installments of long-term debt third party and
affiliates
|
|
|
|
|
|
|
|
|
|
|
155
|
|
|
|
|
|
|
|
155
|
|
Trade payables third
party and affiliates
|
|
|
|
|
|
|
|
|
|
|
811
|
|
|
|
|
|
|
|
811
|
|
Other current liabilities
|
|
|
4
|
|
|
|
1
|
|
|
|
787
|
|
|
|
(5
|
)
|
|
|
787
|
|
Deferred income taxes
|
|
|
|
|
|
|
|
|
|
|
36
|
|
|
|
|
|
|
|
36
|
|
Income taxes payable
|
|
|
|
|
|
|
|
|
|
|
224
|
|
|
|
|
|
|
|
224
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
4
|
|
|
|
1
|
|
|
|
2,013
|
|
|
|
(5
|
)
|
|
|
2,013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt
|
|
|
|
|
|
|
379
|
|
|
|
2,903
|
|
|
|
|
|
|
|
3,282
|
|
Deferred income taxes
|
|
|
|
|
|
|
|
|
|
|
285
|
|
|
|
|
|
|
|
285
|
|
Benefit obligations
|
|
|
|
|
|
|
|
|
|
|
1,126
|
|
|
|
|
|
|
|
1,126
|
|
Other liabilities
|
|
|
|
|
|
|
|
|
|
|
440
|
|
|
|
|
|
|
|
440
|
|
Minority interests
|
|
|
|
|
|
|
|
|
|
|
64
|
|
|
|
|
|
|
|
64
|
|
Commitments and contingencies
Shareholders equity
|
|
|
235
|
|
|
|
238
|
|
|
|
610
|
|
|
|
(848
|
)
|
|
|
235
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and
shareholders equity
|
|
|
239
|
|
|
|
618
|
|
|
|
7,441
|
|
|
|
(853
|
)
|
|
|
7,445
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-80
CELANESE
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Consolidating
Statement of Cash Flows Information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
|
For the Year Ended December 31, 2006
|
|
|
|
Parent
|
|
|
|
|
|
Non-
|
|
|
|
|
|
|
|
|
|
Guarantor
|
|
|
Issuer
|
|
|
Guarantors
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
(In $ millions)
|
|
|
Net cash provided by operating
activities
|
|
|
|
|
|
|
|
|
|
|
751
|
|
|
|
|
|
|
|
751
|
|
Investing activities from
continuing operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures on property,
plant and equipment
|
|
|
|
|
|
|
|
|
|
|
(252
|
)
|
|
|
|
|
|
|
(252
|
)
|
Purchases of other long-term assets
|
|
|
|
|
|
|
|
|
|
|
(43
|
)
|
|
|
|
|
|
|
(43
|
)
|
Net proceeds from sale of
businesses and assets
|
|
|
|
|
|
|
|
|
|
|
23
|
|
|
|
|
|
|
|
23
|
|
Advances to (from) affiliates, net
|
|
|
|
|
|
|
|
|
|
|
(8
|
)
|
|
|
|
|
|
|
(8
|
)
|
Deferred proceeds on Ticona plant
relocation
|
|
|
|
|
|
|
|
|
|
|
26
|
|
|
|
|
|
|
|
26
|
|
Proceeds from sale of marketable
securities
|
|
|
|
|
|
|
|
|
|
|
95
|
|
|
|
|
|
|
|
95
|
|
Purchases of marketable securities
|
|
|
|
|
|
|
|
|
|
|
(65
|
)
|
|
|
|
|
|
|
(65
|
)
|
Increase in restricted cash
|
|
|
|
|
|
|
|
|
|
|
(42
|
)
|
|
|
|
|
|
|
(42
|
)
|
Other, net
|
|
|
|
|
|
|
|
|
|
|
(2
|
)
|
|
|
|
|
|
|
(2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing
activities
|
|
|
|
|
|
|
|
|
|
|
(268
|
)
|
|
|
|
|
|
|
(268
|
)
|
Financing activities from
continuing operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Repayments of long-term debt
|
|
|
|
|
|
|
|
|
|
|
(125
|
)
|
|
|
|
|
|
|
(125
|
)
|
Proceeds from long-term debt
|
|
|
|
|
|
|
|
|
|
|
38
|
|
|
|
|
|
|
|
38
|
|
Short-term borrowings
(repayments), net
|
|
|
|
|
|
|
|
|
|
|
13
|
|
|
|
|
|
|
|
13
|
|
Dividends from subsidiary
|
|
|
34
|
|
|
|
34
|
|
|
|
|
|
|
|
(68
|
)
|
|
|
|
|
Dividends to parent
|
|
|
|
|
|
|
(34
|
)
|
|
|
(34
|
)
|
|
|
68
|
|
|
|
|
|
Stock option exercises
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2
|
|
Dividend payments on Series A
common stock and preferred stock
|
|
|
(36
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(36
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in financing
activities
|
|
|
|
|
|
|
|
|
|
|
(108
|
)
|
|
|
|
|
|
|
(108
|
)
|
Exchange rate effects on cash
|
|
|
|
|
|
|
|
|
|
|
26
|
|
|
|
|
|
|
|
26
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase in cash and cash
equivalents
|
|
|
|
|
|
|
|
|
|
|
401
|
|
|
|
|
|
|
|
401
|
|
Cash and cash equivalents at
beginning of period
|
|
|
1
|
|
|
|
|
|
|
|
389
|
|
|
|
|
|
|
|
390
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end
of period
|
|
|
1
|
|
|
|
|
|
|
|
790
|
|
|
|
|
|
|
|
791
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-81
CELANESE
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Consolidating
Statement of Cash Flows Information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
|
For the Year Ended December 31, 2005
|
|
|
|
Parent
|
|
|
|
|
|
Non-
|
|
|
|
|
|
|
|
|
|
Guarantor
|
|
|
Issuer
|
|
|
Guarantors
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
(In $ millions)
|
|
|
Net cash provided by operating
activities
|
|
|
9
|
|
|
|
1
|
|
|
|
691
|
|
|
|
|
|
|
|
701
|
|
Investing activities from
continuing operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures on property,
plant and equipment
|
|
|
|
|
|
|
|
|
|
|
(212
|
)
|
|
|
|
|
|
|
(212
|
)
|
Investments in subsidiaries, net
|
|
|
(180
|
)
|
|
|
27
|
|
|
|
|
|
|
|
153
|
|
|
|
|
|
Acquisitions and related fees, net
of cash acquired
|
|
|
|
|
|
|
|
|
|
|
(918
|
)
|
|
|
|
|
|
|
(918
|
)
|
Net proceeds from sale of
businesses and assets
|
|
|
|
|
|
|
|
|
|
|
48
|
|
|
|
|
|
|
|
48
|
|
Advances to (from) affiliates, net
|
|
|
|
|
|
|
|
|
|
|
21
|
|
|
|
|
|
|
|
21
|
|
Net proceeds from disposal of
discontinued operations
|
|
|
|
|
|
|
|
|
|
|
75
|
|
|
|
|
|
|
|
75
|
|
Proceeds from sale of marketable
securities
|
|
|
|
|
|
|
|
|
|
|
221
|
|
|
|
|
|
|
|
221
|
|
Purchases of marketable securities
|
|
|
|
|
|
|
|
|
|
|
(149
|
)
|
|
|
|
|
|
|
(149
|
)
|
Other, net
|
|
|
|
|
|
|
|
|
|
|
7
|
|
|
|
|
|
|
|
7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in)
investing activities
|
|
|
(180
|
)
|
|
|
27
|
|
|
|
(907
|
)
|
|
|
153
|
|
|
|
(907
|
)
|
Financing activities from
continuing operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividend to Original
Shareholders/parent
|
|
|
(804
|
)
|
|
|
(599
|
)
|
|
|
(599
|
)
|
|
|
1,198
|
|
|
|
(804
|
)
|
Proceeds from issuance of
Series A common stock, net
|
|
|
764
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
764
|
|
Proceeds from issuance of
preferred stock, net
|
|
|
233
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
233
|
|
Contribution from parent
|
|
|
|
|
|
|
779
|
|
|
|
572
|
|
|
|
(1,351
|
)
|
|
|
|
|
Repayments of long-term debt
|
|
|
|
|
|
|
(207
|
)
|
|
|
(1,242
|
)
|
|
|
|
|
|
|
(1,449
|
)
|
Proceeds from long-term debt
|
|
|
|
|
|
|
|
|
|
|
16
|
|
|
|
|
|
|
|
16
|
|
Borrowings under senior credit
facilities, net
|
|
|
|
|
|
|
|
|
|
|
1,135
|
|
|
|
|
|
|
|
1,135
|
|
Short-term borrowings
(repayments), net
|
|
|
|
|
|
|
|
|
|
|
22
|
|
|
|
|
|
|
|
22
|
|
Settlement of lease obligations
|
|
|
|
|
|
|
|
|
|
|
(31
|
)
|
|
|
|
|
|
|
(31
|
)
|
Fees associated with financing
|
|
|
|
|
|
|
(1
|
)
|
|
|
(8
|
)
|
|
|
|
|
|
|
(9
|
)
|
Dividend payments on Series A
common stock and preferred stock
|
|
|
(21
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(21
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in)
financing activities
|
|
|
172
|
|
|
|
(28
|
)
|
|
|
(135
|
)
|
|
|
(153
|
)
|
|
|
(144
|
)
|
Exchange rate effects on cash
|
|
|
|
|
|
|
|
|
|
|
(98
|
)
|
|
|
|
|
|
|
(98
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash
and cash equivalents
|
|
|
1
|
|
|
|
|
|
|
|
(449
|
)
|
|
|
|
|
|
|
(448
|
)
|
Cash and cash equivalents at
beginning of period
|
|
|
|
|
|
|
|
|
|
|
838
|
|
|
|
|
|
|
|
838
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end
of period
|
|
|
1
|
|
|
|
|
|
|
|
389
|
|
|
|
|
|
|
|
390
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-82
CELANESE
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Consolidating
Statement of Cash Flows Information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
|
For the Nine Months Ended December 31, 2004
|
|
|
|
Parent
|
|
|
|
|
|
Non-
|
|
|
|
|
|
|
|
|
|
Guarantor
|
|
|
Issuers
|
|
|
Guarantors
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
(In $ millions)
|
|
|
Net cash used in operating
activities
|
|
|
(2
|
)
|
|
|
|
|
|
|
(60
|
)
|
|
|
|
|
|
|
(62
|
)
|
Investing activities of continuing
operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures on property,
plant and equipment
|
|
|
|
|
|
|
|
|
|
|
(160
|
)
|
|
|
|
|
|
|
(160
|
)
|
Acquisitions and related fees, net
of cash acquired
|
|
|
|
|
|
|
|
|
|
|
(1,633
|
)
|
|
|
|
|
|
|
(1,633
|
)
|
Net proceeds on sales of
businesses and assets
|
|
|
|
|
|
|
|
|
|
|
31
|
|
|
|
|
|
|
|
31
|
|
Advances to (from) affiliates, net
|
|
|
|
|
|
|
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
(1
|
)
|
Proceeds from sale of marketable
securities
|
|
|
|
|
|
|
|
|
|
|
132
|
|
|
|
|
|
|
|
132
|
|
Purchases of marketable securities
|
|
|
|
|
|
|
|
|
|
|
(173
|
)
|
|
|
|
|
|
|
(173
|
)
|
Investing cash flows used in
discontinued operations
|
|
|
|
|
|
|
|
|
|
|
(6
|
)
|
|
|
|
|
|
|
(6
|
)
|
Other, net
|
|
|
|
|
|
|
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing
activities
|
|
|
|
|
|
|
|
|
|
|
(1,811
|
)
|
|
|
|
|
|
|
(1,811
|
)
|
Financing activities of continuing
operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Initial capitalization
|
|
|
|
|
|
|
|
|
|
|
641
|
*
|
|
|
|
|
|
|
641
|
|
Dividend to Original Shareholders
|
|
|
(500
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(500
|
)
|
Distribution from subsidiary
|
|
|
500
|
|
|
|
(500
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of mandatorily redeemable
preferred shares
|
|
|
|
|
|
|
|
|
|
|
200
|
*
|
|
|
|
|
|
|
200
|
|
Repayment of mandatorily
redeemable preferred shares
|
|
|
(221
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(221
|
)
|
Repayments of long-term debt
|
|
|
|
|
|
|
|
|
|
|
(254
|
)
|
|
|
|
|
|
|
(254
|
)
|
Proceeds from long-term debt
|
|
|
|
|
|
|
513
|
|
|
|
1,825
|
|
|
|
|
|
|
|
2,338
|
|
Borrowings under senior credit
facilities, net
|
|
|
|
|
|
|
|
|
|
|
608
|
|
|
|
|
|
|
|
608
|
|
Short-term borrowings
(repayments), net
|
|
|
18
|
|
|
|
|
|
|
|
18
|
|
|
|
|
|
|
|
36
|
|
Issuance/(purchase) of CAG
treasury stock
|
|
|
|
|
|
|
|
|
|
|
29
|
|
|
|
|
|
|
|
29
|
|
Fees associated with financing
|
|
|
(25
|
)
|
|
|
(13
|
)
|
|
|
(167
|
)
|
|
|
|
|
|
|
(205
|
)
|
Loan to shareholder
|
|
|
227
|
|
|
|
|
|
|
|
(227
|
)
|
|
|
|
|
|
|
|
|
Other, net
|
|
|
|
|
|
|
|
|
|
|
14
|
|
|
|
|
|
|
|
14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by
financing activities
|
|
|
(1
|
)
|
|
|
|
|
|
|
2,687
|
|
|
|
|
|
|
|
2,686
|
|
Exchange rate effects on cash
|
|
|
3
|
|
|
|
|
|
|
|
22
|
|
|
|
|
|
|
|
25
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase in cash and cash
equivalents
|
|
|
|
|
|
|
|
|
|
|
838
|
|
|
|
|
|
|
|
838
|
|
Cash and cash equivalents at
beginning of period
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end
of period
|
|
|
|
|
|
|
|
|
|
|
838
|
|
|
|
|
|
|
|
838
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
|
Amounts included in Non-Guarantors column represent proceeds
received directly by the Non-Guarantors, on behalf of the Parent
Guarantor. The legal issuer of the mandatorily redeemable
preferred stock is the Parent Guarantor. |
F-83
CELANESE
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Predecessor
|
|
|
|
For the Three Months Ended March 31, 2004
|
|
|
|
Parent
|
|
|
|
|
|
Non-
|
|
|
|
|
|
|
|
|
|
Guarantor
|
|
|
Issuers
|
|
|
Guarantors
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
(In $ millions)
|
|
|
Net cash used in operating
activities
|
|
|
|
|
|
|
|
|
|
|
(102
|
)
|
|
|
|
|
|
|
(102
|
)
|
Investing activities of continuing
operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures on property,
plant and equipment
|
|
|
|
|
|
|
|
|
|
|
(44
|
)
|
|
|
|
|
|
|
(44
|
)
|
Advances to (from) affiliates, net
|
|
|
|
|
|
|
|
|
|
|
(5
|
)
|
|
|
|
|
|
|
(5
|
)
|
Net proceeds from disposal of
discontinued operations
|
|
|
|
|
|
|
|
|
|
|
139
|
|
|
|
|
|
|
|
139
|
|
Proceeds from sale of marketable
securities
|
|
|
|
|
|
|
|
|
|
|
42
|
|
|
|
|
|
|
|
42
|
|
Purchases of marketable securities
|
|
|
|
|
|
|
|
|
|
|
(42
|
)
|
|
|
|
|
|
|
(42
|
)
|
Other, net
|
|
|
|
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by investing
activities
|
|
|
|
|
|
|
|
|
|
|
91
|
|
|
|
|
|
|
|
91
|
|
Financing activities of continuing
operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Repayments of long-term debt
|
|
|
|
|
|
|
|
|
|
|
(27
|
)
|
|
|
|
|
|
|
(27
|
)
|
Short-term borrowings
(repayments), net
|
|
|
|
|
|
|
|
|
|
|
(16
|
)
|
|
|
|
|
|
|
(16
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in financing
activities
|
|
|
|
|
|
|
|
|
|
|
(43
|
)
|
|
|
|
|
|
|
(43
|
)
|
Exchange rate effects on cash
|
|
|
|
|
|
|
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net decrease in cash and cash
equivalents
|
|
|
|
|
|
|
|
|
|
|
(55
|
)
|
|
|
|
|
|
|
(55
|
)
|
Cash and cash equivalents at
beginning of period
|
|
|
|
|
|
|
|
|
|
|
148
|
|
|
|
|
|
|
|
148
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end
of period
|
|
|
|
|
|
|
|
|
|
|
93
|
|
|
|
|
|
|
|
93
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-84
CELANESE
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
30.
|
Earnings
(Loss) Per Share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
|
Year Ended December 31, 2006
|
|
|
Year Ended December 31, 2005
|
|
|
|
Continuing
|
|
|
Discontinued
|
|
|
Net
|
|
|
Continuing
|
|
|
Discontinued
|
|
|
Net
|
|
|
|
Operations
|
|
|
Operations
|
|
|
Earnings
|
|
|
Operations
|
|
|
Operations
|
|
|
Earnings
|
|
|
|
(In $ millions, except for share and per share data)
|
|
|
Net earnings
|
|
|
407
|
|
|
|
(1
|
)
|
|
|
406
|
|
|
|
276
|
|
|
|
1
|
|
|
|
277
|
|
Less: cumulative undeclared and
declared preferred stock dividends
|
|
|
(10
|
)
|
|
|
|
|
|
|
(10
|
)
|
|
|
(10
|
)
|
|
|
|
|
|
|
(10
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings available to common
shareholders
|
|
|
397
|
|
|
|
(1
|
)
|
|
|
396
|
|
|
|
266
|
|
|
|
1
|
|
|
|
267
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per common share
|
|
|
2.51
|
|
|
|
(0.01
|
)
|
|
|
2.50
|
|
|
|
1.72
|
|
|
|
0.01
|
|
|
|
1.73
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per common share
|
|
|
2.37
|
|
|
|
(0.01
|
)
|
|
|
2.36
|
|
|
|
1.66
|
|
|
|
0.01
|
|
|
|
1.67
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average
shares basic
|
|
|
158,597,424
|
|
|
|
158,597,424
|
|
|
|
158,597,424
|
|
|
|
154,402,575
|
|
|
|
154,402,575
|
|
|
|
154,402,575
|
|
Dilutive stock options
|
|
|
1,205,413
|
|
|
|
1,205,413
|
|
|
|
1,205,413
|
|
|
|
645,655
|
|
|
|
645,655
|
|
|
|
645,655
|
|
Assumed conversion of preferred
stock
|
|
|
12,004,762
|
|
|
|
12,004,762
|
|
|
|
12,004,762
|
|
|
|
11,151,818
|
|
|
|
11,151,818
|
|
|
|
11,151,818
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average
shares diluted
|
|
|
171,807,599
|
|
|
|
171,807,599
|
|
|
|
171,807,599
|
|
|
|
166,200,048
|
|
|
|
166,200,048
|
|
|
|
166,200,048
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-85
CELANESE
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
|
Predecessor
|
|
|
|
Nine Months Ended December 31, 2004
|
|
|
|
Three Months Ended March 31, 2004
|
|
|
|
Continuing
|
|
|
Discontinued
|
|
|
Net
|
|
|
|
Continuing
|
|
|
Discontinued
|
|
|
Net
|
|
|
|
Operations
|
|
|
Operations
|
|
|
Earnings (Loss)
|
|
|
|
Operations
|
|
|
Operations
|
|
|
Earnings
|
|
|
|
(In $ millions, except for share and per share data)
|
|
Net earnings (loss)
|
|
|
(258
|
)
|
|
|
5
|
|
|
|
(253
|
)
|
|
|
|
51
|
|
|
|
27
|
|
|
|
78
|
|
Less: cumulative undeclared and
declared preferred stock dividends
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) available to
common shareholders
|
|
|
(258
|
)
|
|
|
5
|
|
|
|
(253
|
)
|
|
|
|
51
|
|
|
|
27
|
|
|
|
78
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings (loss) per common
share
|
|
|
(2.60
|
)
|
|
|
0.05
|
|
|
|
(2.55
|
)
|
|
|
|
1.03
|
|
|
|
0.55
|
|
|
|
1.58
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings (loss) per common
share
|
|
|
(2.60
|
)
|
|
|
0.05
|
|
|
|
(2.55
|
)
|
|
|
|
1.03
|
|
|
|
0.54
|
|
|
|
1.57
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average
shares basic
|
|
|
99,377,884
|
|
|
|
99,377,884
|
|
|
|
99,377,884
|
|
|
|
|
49,321,468
|
|
|
|
49,321,468
|
|
|
|
49,321,468
|
|
Dilutive stock options
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
390,953
|
|
|
|
390,953
|
|
|
|
390,953
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average
shares diluted
|
|
|
99,377,884
|
|
|
|
99,377,884
|
|
|
|
99,377,884
|
|
|
|
|
49,712,421
|
|
|
|
49,712,421
|
|
|
|
49,712,421
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prior to the completion of the initial public offering of
Celanese Corporation Series A common stock in January 2005,
the Company effected a 152.772947 for 1 stock split of
outstanding shares of common stock (See Note 19).
Accordingly, basic and diluted shares for the year ended
December 31, 2005 and the nine months ended
December 31, 2004 have been calculated based on the
weighted average shares outstanding, adjusted for the stock
split. Earnings (loss) per share for the Predecessor periods has
been calculated by dividing net income available to common
shareholders by the historical weighted average shares
outstanding of the Predecessor. As the capital structure of the
Predecessor and Successor are different, the reported earnings
(loss) per share are not comparable.
For the years ended December 31, 2006 and 2005,
11,063,000 million and 911,000 thousand stock options,
respectively, were excluded from the calculation of diluted
earnings per share because their effect is antidilutive.
Shares issuable pursuant to outstanding common stock options
under the Predecessors Stock Option Plans of 544,750 have
been excluded from the computation of diluted earnings (loss)
per share for the nine months ended December 31, 2004
because their effect is antidilutive.
31. Relocation
of Ticona Plant in Kelsterbach
On November 29, 2006, the Company reached a settlement with
the Frankfurt, Germany, Airport (Fraport) to
relocate its Kelsterbach, Germany, business, resolving several
years of legal disputes related to the planned Frankfurt airport
expansion. As a result of the settlement, the Company will
transition Ticonas administration and operations from
Kelsterbach to another location in Germany by mid-2011. Over a
five-year period, Fraport will pay Ticona a total of
650 million to offset the costs associated with the
transition of the business from its current location and the
closure of the Kelsterbach plant. As of December 31, 2006,
Fraport has paid the Company a total of 20 million
($26 million) towards the transition. The amount has been
accounted for as deferred income and is included in Other
liabilities in the consolidated balance sheet as of
December 31, 2006.
F-86
CELANESE
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
32. Subsequent
Events
On January 5, 2007, the Company declared a cash dividend on
its 4.25% convertible perpetual preferred stock amounting to
$2 million and a cash dividend of $0.04 per share on
its Series A common stock amounting to $6 million.
Both cash dividends are for the period November 1, 2006 to
January 31, 2007 and were paid on February 1, 2007 to
holders of record as of January 15, 2007.
Sale
of Oxo Products and Derivatives businesses
On December 13, 2006, the Company signed a definitive
agreement to sell its oxo products and derivatives businesses,
including EOXO, a joint venture between CAG and Degussa (see
Note 6), to Advent International, for a purchase price of
480 million subject to final agreement adjustments
and successful exercise of the Companys option to purchase
Degussas interest. The Company anticipates the sale to be
completed in the first quarter of 2007. During the year ended
December 31, 2006, the Company recorded approximately
$8 million of expense to Gain (loss) on disposition of
assets, net for incremental costs associated with this pending
divestiture.
Acquisition
of Acetate Products Limited
On January 31, 2007, the Company announced the completion
of the acquisition of the cellulose acetate flake, tow and film
business of Acetate Products Limited (APL), a
subsidiary of Corsadi B.V. The transaction excludes the limited
business activity in Romania as regulatory review continues and
is expected to be completed by the end of the first quarter of
2007. The purchase price for the transaction was
£57 million ($110 million). The Company
previously announced its intent to purchase APL in August 2006.
This acquisition will not be material to the Companys
financial position or results of operations.
F-87
INDEX TO
EXHIBITS
Exhibits will be furnished upon request for a nominal fee,
limited to reasonable expenses.
|
|
|
|
|
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 on January 28, 2005)
|
|
3
|
.2*
|
|
Amended and Restated By-laws,
effective as of February 8, 2007
|
|
3
|
.3
|
|
Certificate of Designations of
4.25% Convertible Perpetual Preferred Stock (Incorporated
by reference to Exhibit 3.2 to the Current Report on
Form 8-K
filed on January 28, 2005)
|
|
4
|
.1
|
|
Form of certificate of
Series A Common Stock (Incorporated by reference to
Exhibit 4.1 to the Registration Statement on
Form S-1
(File
No. 333-120187),
filed on January 13, 2005)
|
|
4
|
.2
|
|
Form of certificate of
4.25% Convertible Perpetual Preferred Stock (Incorporated
by reference to Exhibit 4.2 to the Registration Statement
on
Form S-1
(File
No. 333-120187)
filed on January 13, 2005)
|
|
4
|
.3
|
|
Indenture, dated as of
June 8, 2004, among BCP Caylux Holdings Luxembourg S.C.A.,
as Issuer, and BCP Crystal Holdings Ltd. 2, as Parent
Guarantor, and The Bank of New York, as Trustee (Incorporated by
reference to Exhibit 10.15 to the Registration Statement on
Form S-1
(File
No. 333-120187)
filed on November 3, 2004)
|
|
4
|
.4
|
|
Supplemental Indenture, dated as
of October 5, 2004, among BCP Crystal US Holdings Corp.,
BCP Caylux Holdings Luxembourg S.C.A., BCP Crystal Holdings Ltd.
2 and The Bank of New York, as trustee (Incorporated by
reference to the Exhibit 10.16 to the Registration Statement on
Form S-1
(File
No. 333-120187
filed) on November 3, 2004)
|
|
4
|
.5
|
|
Supplemental Indenture, dated as
of October 5, 2004, among BCP Crystal US Holdings Corp.,
the New Guarantors and The Bank of New York, as trustee
Incorporated by reference to Exhibit 10.17 to the
Registration Statement on the Form
S-1 (File
No. 333-120187)
filed on November 3, 2004)
|
|
4
|
.6
|
|
Indenture, dated as of
September 24, 2004, among Crystal US Holdings 3 L.L.C.,
Crystal US Sub 3 Corp., as Issuers, and The Bank of New York, as
Trustee (Incorporated by reference to Exhibit 10.18 to the
Registration Statement on
Form S-1
(File
No. 333-120187)
filed on November 3, 2004)
|
|
4
|
.7
|
|
Supplemental Indenture, dated as
of March 30, 2005, among Crystal US Holdings 3 L.L.C.,
Crystal US Sub 3 Corp., Celanese Corporation and The Bank of New
York, as Trustee (Incorporated by reference to
Exhibit 10.15 to the Annual Report on
Form 10-K
filed on March 31, 2005)
|
|
4
|
.8
|
|
Amended and Restated Registration
Rights Agreement, dated as of January 26, 2005, by and
among Blackstone Capital Partners (Cayman) Ltd. 1,
Blackstone Capital Partners (Cayman) Ltd. 2, Blackstone
Capital Partners (Cayman) Ltd. 3 and BA Capital Investors
Sidecar Fund, L.P. (Incorporated by reference to
Exhibit 10.2 to the Current Report on
Form 8-K
filed on January 28, 2005)
|
|
4
|
.9
|
|
Third Amended and Restated
Shareholders Agreement, dated as of October 31, 2005, by
and among Celanese Corporation, Blackstone Capital Partners
(Cayman) Ltd. 1, Blackstone Capital Partners (Cayman)
Ltd. 2, Blackstone Capital Partners (Cayman) Ltd. 3 and BA
Capital Investors Sidecar Fund, L.P. (Incorporated by reference
to Exhibit 4.3 to the Registration Statement on
Form S-1
(File
No. 333-127902)
filed on November 1, 2005)
|
|
4
|
.10
|
|
Amendment No. 1 to the Third
Amended and Restated Shareholders Agreement, dated
November 14, 2005, by and among Celanese Corporation,
Blackstone Capital Partners (Cayman) Ltd. 1, Blackstone
Capital Partners (Cayman) Ltd. 2, Blackstone Capital
Partners (Cayman) Ltd. 3 and BA Capital Investors Sidecar Fund,
L.P. (Incorporated by reference to Exhibit 99.1 to the
Current Report on
Form 8-K
filed on November 18, 2005)
|
|
4
|
.11
|
|
Amendment No. 2 to the Third
Amended and Restated Shareholders Agreement, dated
March 30, 2006, by and among Celanese Corporation,
Blackstone Capital Partners (Cayman) Ltd. 1, Blackstone
Capital Partners (Cayman) Ltd. 2, Blackstone Capital
Partners (Cayman) Ltd. 3 and BA Capital Investors Sidecar Fund,
L.P. (Incorporated by reference to Exhibit 4.6 of Annual
Report on
Form 10-K
filed on March 31, 2006.)
|
|
|
|
|
|
Exhibit
|
|
|
Number
|
|
Description
|
|
|
10
|
.1
|
|
Amended and Restated Credit
Agreement, dated as of January 26, 2005, among BCP Crystal
US Holdings Corp., Celanese Holdings LLC, Celanese Americas
Corporation, the lenders thereto, Deutsche Bank AG, New York
Branch, as administrative agent, Deutsche Bank Securities Inc.
and Morgan Stanley Senior Funding, Inc., as joint lead
arrangers, Deutsche Bank Securities Inc., Morgan Stanley Senior
Funding, Inc. and Banc of America Securities LLC, as joint book
runners, Morgan Stanley Senior Funding, Inc., as syndication
agent, and Bank of America, N.A. as documentation agent
(Incorporated by reference to Exhibit 10.1 to Current
Report on
Form 8-K
filed on February 1, 2005)
|
|
10
|
.2
|
|
First Amendment to Credit
Agreement, dated as of November 28, 2005, among Celanese
Holdings LLC, BCP Crystal US Holdings Corp., Celanese Americas
Corporation, the lenders from time to time party thereto, and
Deutsche Bank AG, New York Branch, as administrative agent
(Incorporated by reference to Exhibit 10.1 to Current
Report on
Form 8-K
filed on December 2, 2005 )
|
|
10
|
.3
|
|
Celanese Corporation 2004 Stock
Incentive Plan (Incorporated by reference to Exhibit 10.7
to the Current Report on
Form 8-K
filed on January 28, 2005)
|
|
10
|
.4
|
|
Celanese Corporation Deferred
Compensation Plan (Incorporated by reference to
Exhibit 10.21 to the Registration Statement on
Form S-1
(File
No. 333-120187)
filed on January 3, 2005)
|
|
10
|
.5
|
|
Sponsor Services Agreement, dated
as of January 26, 2005, among Celanese Corporation,
Celanese Holdings LLC and Blackstone Management Partners IV
L.L.C. (Incorporated by reference to Exhibit 10.3 to the
Current Report on
Form 8-K
filed on January 28, 2005)
|
|
10
|
.6
|
|
Employee Stockholders Agreement,
dated as of January 21, 2005, among Celanese Corporation,
Blackstone Capital Partners (Cayman) Ltd., Blackstone Capital
Partners (Cayman) Ltd. 2, Blackstone Capital Partners
(Cayman) Ltd. 3 and employee stockholders parties thereto from
time to time (Incorporated by reference to Exhibit 10.20 to
the Annual Report of
Form 10-K
filed on March 31, 2005)
|
|
10
|
.7
|
|
Form of Nonqualified Stock Option
Agreement (for employees) (Incorporated by reference to
Exhibit 10.5 to the Current Report on
Form 8-K
filed on January 28, 2005)
|
|
10
|
.8
|
|
Form of Nonqualified Stock Option
Agreement (for non-employee directors) (Incorporated by
reference to Exhibit 10.6 to the Current Report on
Form 8-K
filed on January 28, 2005)
|
|
10
|
.9
|
|
Bonus Plan for fiscal year ended
2005 for named executive officers (Incorporated by reference to
Exhibit 10.24 to the Annual Report of
Form 10-K
filed on March 31, 2005)
|
|
10
|
.10
|
|
Employment Agreement, dated as of
February 23, 2005, between David N. Weidman and Celanese
Corporation (Incorporated by reference to Exhibit 10.25 to
the Annual Report of
Form 10-K
filed on March 31, 2005)
|
|
10
|
.11
|
|
Bonus Award Letter, dated as of
February 23, 2005, between David N. Weidman and Celanese
Corporation (Incorporated by reference to Exhibit 10.29 to
the Annual Report of
Form 10-K
filed on March 31, 2005)
|
|
10
|
.12
|
|
Summary of pension benefits for
David N. Weidman (Incorporated by reference to
Exhibit 10.34 to the Annual Report of
Form 10-K
filed on March 31, 2005)
|
|
10
|
.13
|
|
Employment Agreement dated as of
February 17, 2005 between Lyndon B. Cole and Celanese
Corporation (Incorporated by reference to Exhibit 10.26 to
the Annual Report of
Form 10-K
filed on March 31, 2005)
|
|
10
|
.14
|
|
Bonus Award Letter, dated as of
February 23, 2005 between Lyndon B. Cole and Celanese
Corporation (Incorporated by reference to Exhibit 10.31 to
the Annual Report of
Form 10-K
filed on March 31, 2005)
|
|
10
|
.15
|
|
English Translation of Service
Agreement, dated as of November 1, 2004, between Lyndon B.
Cole and Celanese AG (Incorporated by reference to
Exhibit 10.32 to the Annual Report of
Form 10-K
filed on March 31, 2005)
|
|
10
|
.16
|
|
Employment Agreement, dated as of
February 23, 2005, between Andreas Pohlmann and Celanese
Corporation (Incorporated by reference to Exhibit 10.28 to
the Annual Report of
Form 10-K
filed on March 31, 2005)
|
|
10
|
.17
|
|
Bonus Award Letter, dated as of
February 23, 2005 between Andreas Pohlmann and Celanese
Corporation (Incorporated by reference to Exhibit 10.30 to
the Annual Report of
Form 10-K
filed on March 31, 2005)
|
|
|
|
|
|
Exhibit
|
|
|
Number
|
|
Description
|
|
|
10
|
.18
|
|
English Translation of Service
Agreement, dated as of November 1, 2004, between Andreas
Pohlmann and Celanese AG (Incorporated by reference to
Exhibit 10.33 to the Annual Report of
Form 10-K
filed on March 31, 2005)
|
|
10
|
.19
|
|
Letter of Understanding, dated as
of October 27, 2004, between Andreas Pohlmann and Celanese
Americas Corporation (Incorporated by reference to
Exhibit 10.35 to the Annual Report of
Form 10-K
filed on March 31, 2005)
|
|
10
|
.20
|
|
Separation Agreement, dated
June 30, 2006, between Andreas Pohlmann and Celanese
Corporation (Incorporated by reference to Exhibit 10.1 to
Current Report on
Form 8-K
filed on June 30, 2006)
|
|
10
|
.21
|
|
Offer letter agreement, effective
April 18, 2005 between Curtis S. Shaw and Celanese
Corporation (Incorporated by reference to Exhibit 10.23 to
the Quarterly Report on
Form 10-Q
filed on May 16, 2005)
|
|
10
|
.22
|
|
Employment Agreement, dated as of
August 31, 2005 between John J. Gallagher III and
Celanese Corporation (Incorporated by reference to
Exhibit 10.1 to the Current Report on
Form 8-K
filed on August 31, 2005)
|
|
10
|
.23
|
|
Offer letter agreement, effective
as of August 31, 2005 between John J. Gallagher III
and Celanese Corporation (Incorporated by reference to
Exhibit 10.2 to the Current Report on
Form 8-K
filed on August 31, 2005)
|
|
10
|
.24
|
|
Nonqualified Stock Option
Agreement, dated as of January 25, 2005, between Celanese
Corporation and Blackstone Management Partners IV L.L.C.
(Incorporated by reference from Exhibit 10.23 to the Annual
Report on
Form 10-K
filed on March 31, 2005)
|
|
10
|
.25
|
|
Share Purchase and Transfer
Agreement and Settlement Agreement, dated August 19, 2005
between Celanese Europe Holding GmbH & Co. KG, as
purchaser, and Paulson & Co. Inc., and Arnhold and S.
Bleichroeder Advisers, LLC, each on behalf of its own and with
respect to shares owned by the investment funds and separate
accounts managed by it, as the sellers (Incorporated by
reference to Exhibit 10.1 to the Current Report on
Form 8-K
filed on August 19, 2005)
|
|
10
|
.26
|
|
Translation of Letter of Intent,
dated November 29, 2006, among Celanese AG, Ticona GmbH and
Fraport AG (Incorporated by reference to Exhibit 99.2 to
the Current Report on
Form 8-K
filed November 29, 2006)
|
|
10
|
.27*
|
|
Purchase Agreement dated as of
December 12, 2006 by and among Celanese Ltd. and certain of
its affiliates named therein and Advent Oxo (Cayman) Limited,
Oxo Titan US Corporation, Drachenfelssee 520. V V GMBH and
Drachenfelssee 521. V V GMBH
|
|
12
|
*
|
|
Computation of ratio of earnings
to fixed charges
|
|
21
|
.1*
|
|
List of significant subsidiaries
|
|
23
|
.1*
|
|
Report on Financial Statement
Schedule and Consent of Independent Registered Public Accounting
Firm, KPMG LLP
|
|
23
|
.2*
|
|
Report on Financial Statement
Schedule and Consent of Independent Registered Public Accounting
Firm, KPMG Deutsche Treuhand-Gesellschaft Aktieguesellschaft
Wirtschaflsprufungsgesellschaft
|
|
31
|
.1*
|
|
Certification of Chief Executive
Officer pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002
|
|
31
|
.2*
|
|
Certification of Chief Financial
Officer pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002
|
|
32
|
.1*
|
|
Certification of Chief Executive
Officer pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002
|
|
32
|
.2*
|
|
Certification of Chief Financial
Officer pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002
|
|
99
|
.3*
|
|
Financial Statement schedule
regarding Valuation and Qualifying Accounts
|
|
|
|
* |
|
Filed herewith |
|
|
|
Portions of this exhibit have been omitted pursuant to a request
for confidential treatment filed with the Securities and
Exchange Commission under
Rule 24b-2
of the Securities Exchange Act of 1934, as amended. The omitted
portions of this exhibit have been separately filed with the
Securities and Exchange Commission. |