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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
20549
_______________________________________________________
Form i 10-Q
|
| |
i ☑ | QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| For the quarterly period ended |
| |
| Or |
i ☐ | TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
(Exact Name of Registrant as Specified in its Charter)
|
| |
i Delaware | i 98-0420726 |
(State
or Other Jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification No.) |
i 222 W. Las Colinas Blvd., Suite 900N
(Address of Principal Executive Offices and zip code)
( i 972) i 443-4000
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: |
| | |
Title of Each Class | Trading Symbol(s) | Name of Each Exchange on Which Registered |
i Common
Stock, par value $0.0001 per share | i CE | i The New York Stock Exchange |
i 1.125%
Senior Notes due 2023 | i CE /23 | i The New York Stock Exchange |
i 1.250%
Senior Notes due 2025 | i CE /25 | i The New York Stock Exchange |
i 2.125%
Senior Notes due 2027 | i CE /27 | i The New York Stock Exchange |
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. i Yes ☑ No ☐ Indicate by check
mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). i Yes ☑ No ☐ Indicate by check mark whether the
registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
i Large accelerated filer þ Accelerated filer ☐ Non-accelerated
filer ☐ Smaller reporting company i ☐ Emerging growth company i ☐
If an emerging growth company, indicate
by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes i ☐ No ☑
Form 10-Q
Item 1. Financial Statements
UNAUDITED INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS
|
| | | | | |
| |
| 2020 | | 2019 |
| (In $ millions, except share and per share data) |
Net sales | i 1,460 |
| | i 1,687 |
|
Cost
of sales | ( i 1,112 | ) | | ( i 1,234 | ) |
Gross
profit | i 348 |
| | i 453 |
|
Selling,
general and administrative expenses | ( i 125 | ) | | ( i 120 | ) |
Amortization
of intangible assets | ( i 5 | ) | | ( i 6 | ) |
Research
and development expenses | ( i 17 | ) | | ( i 16 | ) |
Other
(charges) gains, net | ( i 6 | ) | | i 4 |
|
Foreign
exchange gain (loss), net | ( i 1 | ) | | i 5 |
|
Operating
profit (loss) | i 194 |
| | i 320 |
|
Equity
in net earnings (loss) of affiliates | i 57 |
| | i 50 |
|
Non-operating
pension and other postretirement employee benefit (expense) income | i 28 |
|
| i 17 |
|
Interest
expense | ( i 28 | ) | | ( i 31 | ) |
Interest
income | i 2 |
| | i 1 |
|
Dividend
income - equity investments | i 37 |
| | i 32 |
|
Other
income (expense), net | i 2 |
| | ( i 4 | ) |
Earnings
(loss) from continuing operations before tax | i 292 |
| | i 385 |
|
Income
tax (provision) benefit | ( i 65 | ) | | ( i 46 | ) |
Earnings
(loss) from continuing operations | i 227 |
| | i 339 |
|
Earnings
(loss) from operation of discontinued operations | ( i 7 | ) | | ( i 1 | ) |
Income
tax (provision) benefit from discontinued operations | i — |
| | i — |
|
Earnings
(loss) from discontinued operations | ( i 7 | ) | | ( i 1 | ) |
Net
earnings (loss) | i 220 |
| | i 338 |
|
Net
(earnings) loss attributable to noncontrolling interests | ( i 2 | ) | | ( i 1 | ) |
Net
earnings (loss) attributable to Celanese Corporation | i 218 |
| | i 337 |
|
Amounts
attributable to Celanese Corporation | |
| | |
|
Earnings (loss) from continuing operations | i 225 |
| | i 338 |
|
Earnings
(loss) from discontinued operations | ( i 7 | ) | | ( i 1 | ) |
Net
earnings (loss) | i 218 |
| | i 337 |
|
Earnings
(loss) per common share - basic | |
| | |
|
Continuing operations | i 1.89 |
| | i 2.65 |
|
Discontinued
operations | ( i 0.06 | ) | | ( i 0.01 | ) |
Net
earnings (loss) - basic | i 1.83 |
| | i 2.64 |
|
Earnings
(loss) per common share - diluted | |
| | |
|
Continuing operations | i 1.88 |
| | i 2.64 |
|
Discontinued
operations | ( i 0.06 | ) | | ( i 0.01 | ) |
Net
earnings (loss) - diluted | i 1.82 |
| | i 2.63 |
|
Weighted
average shares - basic | i 119,251,689 |
| | i 127,542,328 |
|
Weighted
average shares - diluted | i 119,899,844 |
| | i 128,215,700 |
|
See
the accompanying notes to the unaudited interim consolidated financial statements.
UNAUDITED INTERIM CONSOLIDATED STATEMENTS OF
COMPREHENSIVE INCOME (LOSS)
|
| | | | | |
| |
| 2020 | | 2019 |
| (In $ millions) |
Net earnings (loss) | i 220 |
| | i 338 |
|
Other
comprehensive income (loss), net of tax |
|
| |
|
|
Foreign currency translation gain (loss) | ( i 2 | ) | | i 7 |
|
Gain
(loss) on cash flow hedges | ( i 39 | ) | | ( i 3 | ) |
Total
other comprehensive income (loss), net of tax | ( i 41 | ) | | i 4 |
|
Total
comprehensive income (loss), net of tax | i 179 |
| | i 342 |
|
Comprehensive
(income) loss attributable to noncontrolling interests | ( i 2 | ) | | ( i 1 | ) |
Comprehensive
income (loss) attributable to Celanese Corporation | i 177 |
| | i 341 |
|
See
the accompanying notes to the unaudited interim consolidated financial statements.
UNAUDITED CONSOLIDATED BALANCE SHEETS
|
| | | | | |
| | | |
| (In $ millions, except share data) |
ASSETS | | | |
Current Assets | |
| | |
|
Cash
and cash equivalents (variable interest entity restricted - 2020: $37; 2019: $57) | i 570 |
| | i 463 |
|
Trade
receivables - third party and affiliates (net of allowance for doubtful accounts - 2020: $10; 2019: $9; variable interest entity restricted - 2020: $4; 2019: $6) | i 853 |
| | i 850 |
|
Non-trade
receivables, net | i 307 |
| | i 331 |
|
Inventories | i 1,036 |
| | i 1,038 |
|
Marketable
securities | i 38 |
| | i 40 |
|
Other
assets | i 51 |
| | i 43 |
|
Total
current assets | i 2,855 |
| | i 2,765 |
|
Investments
in affiliates | i 981 |
| | i 975 |
|
Property,
plant and equipment (net of accumulated depreciation - 2020: $3,001; 2019: $2,957; variable interest entity restricted - 2020: $619; 2019: $622) | i 3,678 |
| | i 3,713 |
|
Operating
lease right-of-use assets | i 201 |
| | i 203 |
|
Deferred
income taxes | i 91 |
| | i 96 |
|
Other
assets (variable interest entity restricted - 2020: $17; 2019: $9) | i 381 |
| | i 338 |
|
Goodwill | i 1,056 |
| | i 1,074 |
|
Intangible
assets (variable interest entity restricted - 2020: $22; 2019: $22) | i 302 |
| | i 312 |
|
Total
assets | i 9,545 |
| | i 9,476 |
|
LIABILITIES
AND EQUITY | | | |
Current Liabilities | |
| | |
|
Short-term borrowings and current installments of long-term debt - third party and affiliates | i 749 |
| | i 496 |
|
Trade
payables - third party and affiliates | i 724 |
| | i 780 |
|
Other
liabilities | i 422 |
| | i 461 |
|
Income
taxes payable | i 33 |
| | i 17 |
|
Total
current liabilities | i 1,928 |
| | i 1,754 |
|
Long-term
debt, net of unamortized deferred financing costs | i 3,356 |
| | i 3,409 |
|
Deferred
income taxes | i 258 |
| | i 257 |
|
Uncertain
tax positions | i 161 |
| | i 165 |
|
Benefit
obligations | i 568 |
| | i 589 |
|
Operating
lease liabilities | i 175 |
| | i 181 |
|
Other
liabilities | i 263 |
| | i 223 |
|
Commitments
and Contingencies | i
|
| | i
|
|
Stockholders'
Equity | |
| | |
|
Preferred stock, $0.01 par value, 100,000,000 shares authorized (2020 and 2019: 0 issued and outstanding) | i — |
| | i — |
|
Common
stock, $0.0001 par value, 400,000,000 shares authorized (2020: 169,356,294 issued and 118,228,898 outstanding; 2019: 168,973,172 issued and 119,555,207 outstanding) | i — |
| | i — |
|
Treasury
stock, at cost (2020: 51,127,396 shares; 2019: 49,417,965 shares) | ( i 3,996 | ) | | ( i 3,846 | ) |
Additional
paid-in capital | i 242 |
| | i 254 |
|
Retained
earnings | i 6,543 |
| | i 6,399 |
|
Accumulated
other comprehensive income (loss), net | ( i 341 | ) | | ( i 300 | ) |
Total
Celanese Corporation stockholders' equity | i 2,448 |
| | i 2,507 |
|
Noncontrolling
interests | i 388 |
| | i 391 |
|
Total
equity | i 2,836 |
| | i 2,898 |
|
Total
liabilities and equity | i 9,545 |
| | i 9,476 |
|
See
the accompanying notes to the unaudited interim consolidated financial statements.
UNAUDITED INTERIM CONSOLIDATED STATEMENTS OF EQUITY
|
| | | | | | | | | | | |
| |
| 2020 | | 2019 |
| Shares | | Amount | | Shares | | Amount |
| (In
$ millions, except share data) |
Common Stock | | | | | | | |
Balance as of the beginning of the period | i 119,555,207 |
| | i — |
| | i 128,095,849 |
| | i — |
|
Stock
option exercises | i — |
| | i — |
| | i 9,937 |
| | i — |
|
Purchases
of treasury stock | ( i 1,709,431 | ) | | i — |
| | ( i 1,972,291 | ) | | i — |
|
Stock
awards | i 383,122 |
| | i — |
| | i 478,997 |
| | i — |
|
Balance
as of the end of the period | i 118,228,898 |
| | i — |
| | i 126,612,492 |
| | i — |
|
Treasury
Stock | | | | | | | |
Balance as of the beginning of the period | i 49,417,965 |
| | ( i 3,846 | ) | | i 40,323,105 |
| | ( i 2,849 | ) |
Purchases
of treasury stock, including related fees | i 1,709,431 |
| | ( i 150 | ) | | i 1,972,291 |
| | ( i 200 | ) |
Issuance
of treasury stock under stock plans | i — |
| | i — |
| | ( i 9,937 | ) | | i 1 |
|
Balance
as of the end of the period | i 51,127,396 |
| | ( i 3,996 | ) | | i 42,285,459 |
| | ( i 3,048 | ) |
Additional
Paid-In Capital | | | | | | | |
Balance as of the beginning of the period | | | i 254 |
| | | | i 233 |
|
Stock-based
compensation, net of tax | | | ( i 12 | ) | | | | ( i 8 | ) |
Stock
option exercises, net of tax | | | i — |
| | | | ( i 1 | ) |
Balance
as of the end of the period | | | i 242 |
| | | | i 224 |
|
Retained
Earnings | | | | | | | |
Balance as of the beginning of the period | | | i 6,399 |
| | | | i 5,847 |
|
Net
earnings (loss) attributable to Celanese Corporation | | | i 218 |
| | | | i 337 |
|
Common
stock dividends | | | ( i 74 | ) | | | | ( i 70 | ) |
Balance
as of the end of the period | | | i 6,543 |
| | | | i 6,114 |
|
Accumulated
Other Comprehensive Income (Loss), Net | | | | | | | |
Balance as of the beginning of the period | | | ( i 300 | ) | | | | ( i 247 | ) |
Other
comprehensive income (loss), net of tax | | | ( i 41 | ) | | | | i 4 |
|
Balance
as of the end of the period | | | ( i 341 | ) | | | | ( i 243 | ) |
Total
Celanese Corporation stockholders' equity | | | i 2,448 |
| | | | i 3,047 |
|
Noncontrolling
Interests | | | | | | | |
Balance as of the beginning of the period | | | i 391 |
| | | | i 395 |
|
Net
earnings (loss) attributable to noncontrolling interests | | | i 2 |
| | | | i 1 |
|
Distributions
to noncontrolling interests | | | ( i 5 | ) | | | | ( i 4 | ) |
Balance
as of the end of the period | | | i 388 |
| | | | i 392 |
|
Total
equity | | | i 2,836 |
| | | | i 3,439 |
|
See
the accompanying notes to the unaudited interim consolidated financial statements.
UNAUDITED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
|
| | | | | |
| |
| 2020 | | 2019 |
| (In $ millions) |
Operating Activities | | | |
Net earnings (loss) | i 220 |
| | i 338 |
|
Adjustments
to reconcile net earnings (loss) to net cash provided by (used in) operating activities | | | |
Asset impairments | i 4 |
| | i — |
|
Depreciation,
amortization and accretion | i 86 |
| | i 84 |
|
Pension
and postretirement net periodic benefit cost | ( i 25 | ) | | ( i 15 | ) |
Pension
and postretirement contributions | ( i 12 | ) | | ( i 12 | ) |
Deferred
income taxes, net | ( i 7 | ) | | ( i 5 | ) |
Stock-based
compensation | i 10 |
| | i 14 |
|
Undistributed
earnings in unconsolidated affiliates | ( i 11 | ) | | i 21 |
|
Other,
net | i 4 |
| | i 6 |
|
Operating
cash provided by (used in) discontinued operations | i 5 |
| | i — |
|
Changes
in operating assets and liabilities | | | |
Trade receivables - third party and affiliates, net | ( i 11 | ) | | i 6 |
|
Inventories | ( i 11 | ) | | i 40 |
|
Other
assets | i 42 |
| | ( i 23 | ) |
Trade
payables - third party and affiliates | i 1 |
| | ( i 81 | ) |
Other
liabilities | ( i 36 | ) | | ( i 66 | ) |
Net
cash provided by (used in) operating activities | i 259 |
| | i 307 |
|
Investing
Activities | | | |
Capital expenditures on property, plant and equipment | ( i 119 | ) | | ( i 79 | ) |
Acquisitions,
net of cash acquired | i — |
| | ( i 91 | ) |
Other,
net | ( i 9 | ) | | ( i 7 | ) |
Net
cash provided by (used in) investing activities | ( i 128 | ) | | ( i 177 | ) |
Financing
Activities | | | |
Net change in short-term borrowings with maturities of 3 months or less | ( i 39 | ) | | i 197 |
|
Proceeds
from short-term borrowings | i 300 |
| | i — |
|
Repayments
of short-term borrowings | i — |
| | ( i 12 | ) |
Repayments
of long-term debt | ( i 9 | ) | | ( i 7 | ) |
Purchases
of treasury stock, including related fees | ( i 167 | ) | | ( i 212 | ) |
Common
stock dividends | ( i 74 | ) | | ( i 70 | ) |
Distributions
to noncontrolling interests | ( i 5 | ) | | ( i 4 | ) |
Other,
net | ( i 22 | ) | | ( i 22 | ) |
Net
cash provided by (used in) financing activities | ( i 16 | ) | | ( i 130 | ) |
Exchange
rate effects on cash and cash equivalents | ( i 8 | ) | | i 2 |
|
Net
increase (decrease) in cash and cash equivalents | i 107 |
| | i 2 |
|
Cash
and cash equivalents as of beginning of period | i 463 |
| | i 439 |
|
Cash
and cash equivalents as of end of period | i 570 |
| | i 441 |
|
See
the accompanying notes to the unaudited interim consolidated financial statements.
NOTES TO THE UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
1. i Description
of the Company and Basis of Presentation Celanese Corporation and its subsidiaries (collectively, the "Company") is a global chemical and specialty materials company. The Company produces high performance engineered polymers that are used in a variety of high-value applications, as well as acetyl products, which are intermediate chemicals, for nearly all major industries. The Company also engineers and manufactures
a wide variety of products essential to everyday living. The Company's broad product portfolio serves a diverse set of end-use applications including automotive, chemical additives, construction, consumer and industrial adhesives, consumer and medical, energy storage, filtration, food and beverage, paints and coatings, paper and packaging, performance industrial and textiles. Definitions
In this Quarterly Report on Form 10-Q ("Quarterly Report"), the term "Celanese" refers to Celanese Corporation, a Delaware corporation, and not its subsidiaries. The term "Celanese US" refers to the Company's subsidiary,
Celanese US Holdings LLC, a Delaware limited liability company, and not its subsidiaries. Basis of Presentation
The unaudited interim consolidated financial statements for the three months ended March 31, 2020 and 2019 contained in this Quarterly Report were prepared in accordance with accounting principles generally accepted in the United States of America ("US GAAP") for all periods presented and include the accounts of the Company, its majority owned subsidiaries
over which the Company exercises control and, when applicable, variable interest entities in which the Company is the primary beneficiary. The unaudited interim consolidated financial statements and other financial information included in this Quarterly Report, unless otherwise specified, have been presented to separately show the effects of discontinued operations. In the opinion of management, the accompanying unaudited consolidated balance sheets and related unaudited interim consolidated statements of operations, comprehensive income (loss), cash flows and equity include all adjustments, consisting only of normal recurring items necessary for their fair presentation in conformity with US GAAP. Certain information and footnote disclosures normally included
in financial statements prepared in accordance with US GAAP have been condensed or omitted in accordance with rules and regulations of the Securities and Exchange Commission ("SEC"). These unaudited interim consolidated financial statements should be read in conjunction with the Company's consolidated financial statements as of and for the year ended December 31, 2019, filed on February 6, 2020 with the SEC as part of the Company's Annual Report on Form 10-K. Operating results for the three months ended March 31,
2020 are not necessarily indicative of the results to be expected for the entire year. In the ordinary course of business, the Company enters into contracts and agreements relative to a number of topics, including acquisitions, dispositions, joint ventures, supply agreements, product sales and other arrangements. The Company endeavors to describe those contracts or agreements that are material to its business, results of operations or financial position. The Company
may also describe some arrangements that are not material but in which the Company believes investors may have an interest or which may have been included in a Form 8-K filing. Investors should not assume the Company has described all contracts and agreements relative to the Company's business in this Quarterly Report. For those consolidated ventures in which the Company owns or is exposed to less than 100% of the economics, the outside stockholders'
interests are shown as noncontrolling interests.
i Estimates and Assumptions
The preparation of unaudited interim consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent
assets and liabilities at the date of the unaudited interim consolidated financial statements and the reported amounts of Net sales, expenses and allocated charges during the reporting period. Significant estimates pertain to impairments of goodwill, intangible assets and other long-lived assets, purchase price allocations, restructuring costs and other (charges) gains, net, income taxes, pension and other postretirement benefits, asset retirement obligations, environmental liabilities and loss contingencies, among others. Actual results could differ from those estimates.
2. i Recent
Accounting Pronouncements
i The following table provides a brief description of recent Accounting Standard Updates ("ASU") issued by the Financial Accounting Standards Board ("FASB"): |
| | | | | | |
Standard | | Description | | Effective
Date | | Effect on the Financial Statements or Other Significant Matters |
| | | | | | |
In March 2020, the FASB issued ASU 2020-04, Facilitation of the Effects of Reference Rate Reform on Financial Reporting. | | The new
guidance provides optional expedients and exceptions for applying US GAAP to contracts, hedging relationships and other transactions affected by reference rate reform if certain criteria are met. The guidance applies only to contracts, hedging relationships and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. | | | | The
Company is currently evaluating the impact of adoption on its financial statements and related disclosures. |
| | | | | | |
In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes. | | The new guidance simplifies the accounting for income taxes by removing certain exceptions to the general principles
in FASB Accounting Standards Codification ("ASC") Topic 740, Income Taxes ("Topic 740"). The guidance also clarifies and amends existing guidance under Topic 740. | | | | The Company has completed its assessment and will adopt the new guidance effective January 1, 2021. The adoption of the new guidance will not have a material impact to the
Company. |
| | | | | | |
3. i Ventures
and Variable Interest Entities
Consolidated Variable Interest Entities
The Company has a joint venture, Fairway Methanol LLC ("Fairway"), with Mitsui & Co., Ltd., of Tokyo, Japan ("Mitsui"), in which the Company owns i 50%
of Fairway, for the production of methanol at the Company's integrated chemical plant in Clear Lake, Texas. The methanol unit utilizes natural gas in the US Gulf Coast region as a feedstock and benefits from the existing infrastructure at the Company's Clear Lake facility. Both Mitsui and the Company supply their own natural gas to Fairway in exchange for methanol tolling under a cost-plus off-take arrangement. Fairway is a variable interest entity ("VIE") in which the Company is the primary beneficiary. Under the terms of the joint venture agreements, the
Company provides site services and day-to-day operations for the methanol facility. In addition, the joint venture agreements provide that the Company indemnifies Mitsui for environmental obligations that exceed a specified threshold, as well as an equity option between the partners. Accordingly, the Company consolidates the venture and records a noncontrolling interest for the share of the venture owned by Mitsui. Fairway is included in the Company's Acetyl Chain segment.
The carrying amount of the assets and liabilities associated with Fairway included in the unaudited consolidated balance sheets are as follows: |
| | | | | |
| | | |
| (In
$ millions) |
Cash and cash equivalents | i 37 |
| | i 57 |
|
Trade
receivables, net - third party and affiliates | i 7 |
| | i 12 |
|
Non-trade
receivables, net | i 2 |
| | i — |
|
Property,
plant and equipment (net of accumulated depreciation - 2020: $185; 2019: $174) | i 619 |
| | i 622 |
|
Other
assets | i 17 |
| | i 9 |
|
Intangible
assets (net of accumulated amortization - 2020: $4; 2019: $4) | i 22 |
| | i 22 |
|
Total
assets(1) | i 704 |
| | i 722 |
|
| | | |
Trade
payables | i 8 |
| | i 24 |
|
Other
liabilities(2) | i 9 |
| | i 5 |
|
Total
debt | i 3 |
| | i 4 |
|
Deferred
income taxes | i 4 |
| | i 4 |
|
Total
liabilities | i 24 |
| | i 37 |
|
| |
(1) | Joint
venture assets can only be used to settle the obligations of Fairway. |
| |
(2) | Primarily represents amounts owed by Fairway to the Company for reimbursement of expenditures. |
Nonconsolidated Variable Interest Entities
The Company holds variable interests in entities that supply certain raw materials and services to the Company. The variable interests primarily relate
to cost-plus contractual arrangements with the suppliers and recovery of capital expenditures for certain plant assets plus a rate of return on such assets. Liabilities for such supplier recoveries of capital expenditures have been recorded as finance lease obligations. The entities are not consolidated because the Company is not the primary beneficiary of the entities as it does not have the power to direct the activities of the entities that most significantly impact the entities' economic performance. The Company's maximum exposure to loss as a result of its involvement with these VIEs as of March 31, 2020, relates primarily to the recovery of capital expenditures for certain property, plant and equipment. i The
carrying amount of the assets and liabilities associated with the obligations to nonconsolidated VIEs, as well as the maximum exposure to loss relating to these nonconsolidated VIEs are as follows: |
| | | | | |
| | | |
| (In
$ millions) |
Property, plant and equipment, net | i 28 |
| | i 31 |
|
| | | |
Trade
payables | i 29 |
| | i 30 |
|
Current
installments of long-term debt | i 16 |
| | i 16 |
|
Long-term
debt | i 36 |
| | i 41 |
|
Total
liabilities | i 81 |
| | i 87 |
|
| | | |
Maximum
exposure to loss | i 104 |
| | i 113 |
|
/ The
difference between the total liabilities associated with obligations to nonconsolidated VIEs and the maximum exposure to loss primarily represents take-or-pay obligations for services included in the Company's unconditional purchase obligations (Note 16).
4. i Inventories i |
| | | | | |
| | | |
| (In $ millions) |
Finished goods | i 720 |
| | i 718 |
|
Work-in-process | i 72 |
| | i 76 |
|
Raw
materials and supplies | i 244 |
| | i 244 |
|
Total | i 1,036 |
| | i 1,038 |
|
/ 5.
i Goodwill and Intangible Assets, Net
Goodwill i |
| | | | | | | | | | | |
| Engineered Materials | | Acetate
Tow | | Acetyl Chain | | Total |
| (In $ millions) |
| i 727 |
| | i 148 |
| | i 199 |
| | i 1,074 |
|
Exchange
rate changes | ( i 13 | ) | | ( i 1 | ) | | ( i 4 | ) | | ( i 18 | ) |
| i 714 |
| | i 147 |
| | i 195 |
| | i 1,056 |
|
| |
(1) | There
were $ i 0 million of accumulated impairment losses as of March 31, 2020. |
Intangible Assets, Net
i Finite-lived
intangible assets are as follows: |
| | | | | | | | | | | | | | |
| Licenses | | Customer- Related Intangible Assets | | Developed Technology | | Covenants Not
to Compete and Other | | Total |
| (In $ millions) |
Gross Asset Value | | | | | | | | | |
| i 42 |
| | i 667 |
| | i 44 |
| | i 56 |
| | i 809 |
|
Exchange
rate changes | ( i 1 | ) | | ( i 12 | ) | | i — |
| | i — |
| | ( i 13 | ) |
| i 41 |
| | i 655 |
| | i 44 |
| | i 56 |
| | i 796 |
|
Accumulated
Amortization | | | | | | | | | |
| ( i 35 | ) | | ( i 504 | ) | | ( i 35 | ) | | ( i 38 | ) | | ( i 612 | ) |
Amortization | i — |
| | ( i 4 | ) | | ( i 1 | ) | | i — |
| | ( i 5 | ) |
Exchange
rate changes | i 1 |
| | i 9 |
| | i — |
| | i — |
| | i 10 |
|
| ( i 34 | ) | | ( i 499 | ) | | ( i 36 | ) | | ( i 38 | ) | | ( i 607 | ) |
Net
book value | i 7 |
| | i 156 |
| | i 8 |
| | i 18 |
| | i 189 |
|
/ i Indefinite-lived
intangible assets are as follows: |
| | |
| Trademarks and Trade Names |
| (In $ millions) |
| i 115 |
|
Exchange
rate changes | ( i 2 | ) |
| i 113 |
|
/
i Estimated
amortization expense for the succeeding five fiscal years is as follows: |
| | |
| (In $ millions) |
2021 | i 20 |
|
2022 | i 19 |
|
2023 | i 17 |
|
2024 | i 16 |
|
2025 | i 16 |
|
/ 6.
C i urrent Other Liabilities i |
| | | | | |
| | | |
| (In $ millions) |
Asset retirement obligations | i 4 |
| | i 6 |
|
| i 28 |
| | i 28 |
|
Customer
rebates | i 35 |
| | i 63 |
|
| i 8 |
| | i 8 |
|
| i 19 |
| | i 12 |
|
Insurance | i 5 |
| | i 6 |
|
Interest | i 25 |
| | i 29 |
|
| i 94 |
| | i 105 |
|
Operating
leases | i 29 |
| | i 29 |
|
| i 13 |
| | i 13 |
|
Salaries
and benefits | i 72 |
| | i 89 |
|
Sales
and use tax/foreign withholding tax payable | i 58 |
| | i 35 |
|
Other | i 32 |
| | i 38 |
|
Total | i 422 |
| | i 461 |
|
/ 7.
i Noncurrent Other Liabilities i |
| | | | | |
| | | |
| (In $ millions) |
Asset retirement obligations | i 14 |
| | i 13 |
|
Deferred
proceeds | i 42 |
| | i 43 |
|
| i 6 |
| | i 6 |
|
| i 94 |
| | i 50 |
|
| i 45 |
| | i 49 |
|
Insurance | i 36 |
| | i 34 |
|
Other | i 26 |
| | i 28 |
|
Total | i 263 |
| | i 223 |
|
/
8. i Debt i |
| | | | | |
| | | |
| (In $ millions) |
Short-Term Borrowings and Current Installments of Long-Term Debt - Third Party and Affiliates | | | |
Current installments of long-term debt | i 26 |
| | i 28 |
|
Short-term
borrowings, including amounts due to affiliates(1) | i 361 |
| | i 81 |
|
Revolving
credit facility(2) | i 247 |
| | i 272 |
|
Accounts
receivable securitization facility(3) | i 115 |
| | i 115 |
|
Total | i 749 |
| | i 496 |
|
i |
| | | | | |
| | | |
| (In $ millions) |
Long-Term Debt | | | |
Senior unsecured notes due 2021, interest rate of 5.875% | i 400 |
| | i 400 |
|
Senior
unsecured notes due 2022, interest rate of 4.625% | i 500 |
| | i 500 |
|
Senior
unsecured notes due 2023, interest rate of 1.125% | i 821 |
| | i 841 |
|
Senior
unsecured notes due 2024, interest rate of 3.500% | i 499 |
| | i 499 |
|
Senior
unsecured notes due 2025, interest rate of 1.250% | i 329 |
| | i 337 |
|
Senior
unsecured notes due 2027, interest rate of 2.125% | i 544 |
| | i 558 |
|
Pollution
control and industrial revenue bonds due at various dates through 2030, interest rates ranging from 4.05% to 5.00% | i 167 |
| | i 167 |
|
Bank
loans due at various dates through 2026(1) | i 8 |
| | i 9 |
|
Obligations
under finance leases due at various dates through 2054 | i 132 |
| | i 144 |
|
Subtotal | i 3,400 |
| | i 3,455 |
|
Unamortized
debt issuance costs(2) | ( i 18 | ) | | ( i 18 | ) |
Current
installments of long-term debt | ( i 26 | ) | | ( i 28 | ) |
Total | i 3,356 |
| | i 3,409 |
|
| |
(2) | Related to the Company's long-term debt, excluding obligations under finance leases. |
Senior Credit Facilities
The
Company has a senior credit agreement (the "Credit Agreement") consisting of a $ i 1.25 billion senior unsecured revolving credit facility (with a letter of credit sublimit), maturing in 2024. The Credit Agreement is guaranteed by Celanese, Celanese US and substantially all of its domestic subsidiaries
("the Subsidiary Guarantors").
i The Company's debt balances
and amounts available for borrowing under its senior unsecured revolving credit facility are as follows: |
| | |
| |
| (In $ millions) |
Revolving Credit Facility | |
Borrowings outstanding(1) | i 247 |
|
Letters
of credit issued | i — |
|
Available for borrowing(2) | i 1,003 |
|
| |
(1) | The
Company borrowed $ i 355 million and repaid $ i 373
million under its senior unsecured revolving credit facility during the three months ended March 31, 2020. |
/ | |
(2) | The margin for borrowings under the senior unsecured revolving credit facility was i 1.25%
above LIBOR or EURIBOR at current Company credit ratings. |
Senior Notes
The Company has outstanding senior unsecured notes, issued in public offerings registered under the Securities Act of 1933 ("Securities Act"), as amended (collectively, the "Senior Notes"). The Senior Notes were issued by Celanese US and are guaranteed on a senior unsecured basis by Celanese and the Subsidiary Guarantors. Celanese US may redeem some or all of each of the Senior Notes, prior to their respective maturity dates, at a redemption price of i 100%
of the principal amount, plus a "make-whole" premium as specified in the applicable indenture, plus accrued and unpaid interest, if any, to the redemption date. Accounts Receivable Securitization Facility
The Company has a US accounts receivable securitization facility involving receivables of certain of its domestic subsidiaries of the Company transferred to a wholly-owned, "bankruptcy remote" special purpose subsidiary of the Company
("SPE"). The securitization facility, which permits cash borrowings and letters of credit, expires in July 2020. All of the SPE's assets have been pledged to the administrative agent in support of the SPE's obligations under the facility. i The Company's debt balances and amounts available for borrowing under its securitization facility are as follows: |
| | |
| |
| (In $ millions) |
Accounts Receivable Securitization Facility | |
Borrowings outstanding | i 115 |
|
Letters
of credit issued | i — |
|
Available for borrowing | i 5 |
|
Total
borrowing base | i 120 |
|
| |
Maximum borrowing base(1) | i 120 |
|
/ | |
(1) | Outstanding
accounts receivable transferred to the SPE was $ i 171 million. |
Other Financing Arrangements
The Company has a factoring agreement with a global financial institution to sell certain accounts receivable on a non-recourse basis. These transactions are treated as a sale and are accounted for as a reduction in accounts receivable because the agreement transfers effective control over and risk related to the receivables to the buyer. The Company has no continuing involvement in the transferred receivables, other than collection and administrative responsibilities and, once sold, the accounts receivable are no longer available to satisfy creditors in the event of bankruptcy. The
Company de-recognized $ i 69 million and $ i 257
million of accounts receivable under this factoring agreement as of March 31, 2020 and December 31, 2019, respectively. Covenants
The Company's material financing arrangements contain customary covenants, including the maintenance of certain financial ratios, events of default and change of control provisions. Failure to comply with these covenants, or the occurrence of any other event of default, could result in acceleration of the borrowings and other financial obligations. The Company is in
compliance with all of the covenants related to its debt agreements as of March 31, 2020. 9. i Benefit Obligations
i The
components of net periodic benefit cost are as follows: |
| | | | | | | | | | | |
| |
| 2020 | | 2019 |
| Pension
Benefits | | Post-retirement
Benefits | | Pension
Benefits | | Post-retirement
Benefits |
| (In $ millions) |
Service cost | i 3 |
| | i — |
| | i 2 |
| | i — |
|
Interest
cost | i 21 |
| | i 1 |
| | i 29 |
| | i — |
|
Expected
return on plan assets | ( i 50 | ) | | i — |
| | ( i 46 | ) | | i — |
|
Total | ( i 26 | ) | | i 1 |
| | ( i 15 | ) | | i — |
|
/ i Benefit
obligation funding is as follows: |
| | | | | |
| | | Total Expected 2020 |
| (In $ millions) |
Cash contributions to defined benefit
pension plans | i 6 |
| | i 23 |
|
Benefit
payments to nonqualified pension plans | i 5 |
| | i 20 |
|
Benefit
payments to other postretirement benefit plans | i 1 |
| | i 5 |
|
Cash
contributions to German multiemployer defined benefit pension plans(1) | i 2 |
| | i 8 |
|
/ | |
(1) | The
Company makes contributions based on specified percentages of employee contributions. |
The Company's estimates of its US defined benefit pension plan contributions reflect the provisions of the Pension Protection Act of 2006. 10. i Environmental
The
Company is subject to environmental laws and regulations worldwide that impose limitations on the discharge of pollutants into the air and water, establish standards for the treatment, storage and disposal of solid and hazardous wastes, and impose record keeping and notification requirements. Failure to timely comply with these laws and regulations may expose the Company to penalties. The Company believes that it is in substantial compliance with all applicable environmental laws and regulations and engages in an ongoing process of updating its controls to mitigate compliance risks. The Company is also subject to retained environmental obligations specified in various contractual agreements arising from the
divestiture of certain businesses by the Company or one of its predecessor companies.
i The components of environmental remediation liabilities are as follows: |
| | | | | |
| | | |
| (In $ millions) |
| i 28 |
| | i 23 |
|
| i 11 |
| | i 12 |
|
Active
sites | i 12 |
| | i 13 |
|
US
Superfund sites | i 11 |
| | i 11 |
|
Other
environmental remediation liabilities | i 2 |
| | i 2 |
|
Total | i 64 |
| | i 61 |
|
/ 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, demerger, orphan or US Superfund sites (as defined below). In addition, as part of the demerger agreement between the Company and Hoechst AG ("Hoechst"), a specified portion of the responsibility for environmental liabilities from a number of Hoechst divestitures was transferred to the Company (Note 16). Certain of these sites, at which the
Company maintains continuing involvement, were and continue to be designated as discontinued operations when closed. The Company provides for such obligations when the event of loss is probable and reasonably estimable. The Company believes that environmental remediation costs will not have a material adverse effect on the financial position of the Company, but may have a material adverse effect on the results of operations or cash flows in any given period. US Superfund Sites
In the US, the Company may be subject to substantial claims
brought by US federal or state regulatory agencies or private individuals pursuant to statutory authority or common law. In particular, the Company has a potential liability under the US Federal Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, and related state laws (collectively referred to as "Superfund") for investigation and cleanup costs at certain sites. At most of these sites, numerous companies, including the Company, or one of its predecessor companies, have been notified that the US Environmental Protection Agency ("EPA"), 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 some of these proceedings is uncertain. Consequently, the Company cannot accurately determine its ultimate liability for investigation or cleanup costs at these sites. As events progress at each site for which it has been named a PRP, the Company accrues any probable and reasonably estimable liabilities. In establishing these liabilities, the Company considers the contaminants of concern, the potential impact thereof, the relationship of the contaminants of concern to its current and historic operations, its shipment of waste to a site, its percentage of total waste shipped
to the site, the types of wastes involved, the conclusions of any studies, the magnitude of any remedial actions that may be necessary and the number and viability of other PRPs. Often the Company joins with other PRPs to sign joint defense agreements that settle, among PRPs, each party's 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. One such site is the Diamond Alkali Superfund Site, which is comprised of a number of sub-sites, including the Lower Passaic River Study Area ("LPRSA"), which is the lower 17-mile stretch of the Passaic River ("Lower Passaic
River Site"), and the Newark Bay Area. The Company and i 70 other companies are parties to a May 2007 Administrative Order on Consent with the EPA to perform a Remedial Investigation/Feasibility Study ("RI/FS") at the Lower Passaic River Site in order to identify the levels of contaminants and potential cleanup actions, including the potential migration of contaminants
between the Lower Passaic River Site and the Newark Bay Area. Work on the RI/FS is ongoing.
In March 2016, the EPA issued its final Record of Decision concerning the remediation of the lower 8.3 miles of the Lower Passaic River Site ("Lower 8.3 Miles"). Pursuant to the EPA's Record of Decision, the Lower 8.3 Miles must be dredged bank to bank and an engineered cap must be installed at an EPA estimated cost of approximately $ i 1.4 billion.
The Company owned and/or operated facilities in the vicinity of the Lower 8.3 Miles, but has found no evidence that it contributed any of the contaminants of concern to the Passaic River. On June 30, 2018, Occidental Chemical Corporation ("OCC"), the successor to the Diamond Alkali Company, sued a subsidiary of the Company and 119 other parties alleging claims for joint and several damages, contribution and declaratory relief under Section 107 and 113 of Superfund for costs to clean up the LPRSA portion of the Diamond Alkali Superfund Site, Occidental Chemical Corporation v. 21st Century Fox America, Inc., et al, No. 2:18-CV-11273-JLL-JAD (U.S. District
Court New Jersey), alleging that each of the defendants owned or operated a facility that contributed contamination to the LPRSA. With respect to the Company, the OCC lawsuit is limited to the former Celanese facility that Essex County, New Jersey has agreed to indemnify the Company for and does not change the Company's estimated liability for LPRSA cleanup costs. The Company is vigorously defending these matters and currently believes that its ultimate allocable share of the cleanup costs with respect to the Lower Passaic River Site, estimated at less than i 1%,
will not be material to the Company's results of operations, cash flows or financial position. 11. i Stockholders' Equity
Common Stock
The Company's Board of Directors
follows a policy of declaring, subject to legally available funds, a quarterly cash dividend on each share of the Company's Common Stock, unless the Company's Board of Directors, in its sole discretion, determines otherwise. The amount available to the Company to pay cash dividends is not currently restricted by its existing senior credit facility and its indentures governing its senior unsecured notes. Any decision to declare and pay dividends in the future will be made at the discretion of the Company's Board of Directors and will depend
on, among other things, the results of operations, cash requirements, financial condition, contractual restrictions and other factors that the Company's Board of Directors may deem relevant. i The Company's Board of Directors approved increases in the Company's Common Stock cash dividend rates as follows: |
| | | | | | | |
| Increase | | Quarterly
Common Stock Cash Dividend | | Annual Common Stock Cash Dividend | | Effective Date |
| (In percentages) | | (In $ per share) | | |
April 2019 | i 15 | | i 0.62 | | i 2.48 | | May
2019 |
/ Treasury Stock
The Company's Board of Directors authorizes repurchases of Common
Stock from time to time. These authorizations give management discretion in determining the timing and conditions under which shares may be repurchased. This repurchase program does not have an expiration date. i |
| | | | | | | | | | | |
| Three
Months Ended
March 31, | | |
| 2020 | | 2019 | |
Shares repurchased | i 1,709,431 |
| | i 1,972,291 |
| | i 58,588,409 |
|
Average
purchase price per share | $ | i 87.87 |
| | $ | i 101.41 |
| | $ | i 73.44 |
|
Shares
repurchased (in $ millions) | $ | i 150 |
| | $ | i 200 |
| | $ | i 4,303 |
|
Aggregate
Board of Directors repurchase authorizations during the period (in $ millions) | $ | i — |
| | $ | i — |
| | $ | i 5,366 |
|
/ The
purchase of treasury stock reduces the number of shares outstanding. The repurchased shares may be used by the Company for compensation programs utilizing the Company's stock and other corporate purposes. The Company accounts for treasury stock using the cost method and includes treasury stock as a component of stockholders' equity.
Other Comprehensive
Income (Loss), Net
i |
| | | | | | | | | | | | | | | | | |
| |
| 2020 | | 2019 |
| Gross Amount | | Income Tax (Provision) Benefit | | Net Amount | | Gross Amount | | Income Tax (Provision) Benefit | | Net
Amount |
| (In
$ millions) |
Foreign currency translation gain (loss) | i 10 |
| | ( i 12 | ) | | ( i 2 | ) | | i 13 |
| | ( i 6 | ) | | i 7 |
|
Gain
(loss) on cash flow hedges | ( i 51 | ) | | i 12 |
| | ( i 39 | ) | | ( i 3 | ) | | i — |
| | ( i 3 | ) |
Total | ( i 41 | ) | | i — |
| | ( i 41 | ) | | i 10 |
| | ( i 6 | ) | | i 4 |
|
Adjustments
to Accumulated other comprehensive income (loss), net, are as follows: |
| | | | | | | | | | | |
| Foreign Currency Translation Gain (Loss) | | Gain (Loss) on Cash Flow Hedges | | Pension and Postretirement Benefits Gain (Loss) | | Accumulated Other Comprehensive Income (Loss), Net |
| (In
$ millions) |
| ( i 252 | ) | | ( i 38 | ) | | ( i 10 | ) | | ( i 300 | ) |
Other
comprehensive income (loss) before reclassifications | i 10 |
| | ( i 51 | ) | | i — |
| | ( i 41 | ) |
Income
tax (provision) benefit | ( i 12 | ) | | i 12 |
| | i — |
| | i — |
|
| ( i 254 | ) | | ( i 77 | ) | | ( i 10 | ) | | ( i 341 | ) |
/ 12.
i Other (Charges) Gains, Net i |
| | | | | |
| |
| 2020 | | 2019 |
| (In $ millions) |
Restructuring | ( i 6 | ) | | i 1 |
|
Asset
impairments | ( i 4 | ) | | i — |
|
Plant/office
closures | ( i 1 | ) | | ( i 1 | ) |
Commercial
disputes | i 5 |
| | i 4 |
|
Total | ( i 6 | ) | | i 4 |
|
/ During
the three months ended March 31, 2020, the Company recorded $ i 6 million of employee termination benefits primarily related to Company-wide business optimization projects. During the three months ended March 31,
2020, the Company recorded a $ i 4 million long-lived asset impairment loss related to the closure of its manufacturing operations in Lebanon, Tennessee. The long-lived asset impairment loss was measured at the date of impairment to write-down the related property, plant and equipment and was included in the Company's Engineered Materials segment. During
the three months ended March 31, 2020, the Company recorded a $ i 5 million gain within commercial disputes related to the receipt of a settlement claim from a previous acquisition that was included within the Company's
Engineered Materials segment. During the three months ended March 31, 2019, the Company recorded a $ i 15 million gain within commercial disputes related to a settlement from a previous acquisition that was included within the
Company's Engineered Materials segment. The Company also recorded an $ i 11 million loss within commercial disputes related to a settlement with a former third-party customer, which was included within the Company's Other Activities segment.
i The changes in the restructuring liabilities by business segment are as follows: |
| | | | | | | | | | | | | | |
| Engineered Materials | | Acetate
Tow | | Acetyl Chain | | Other | | Total |
| (In $ millions) |
Employee Termination Benefits | | | | | | | | | |
| i 5 |
| | i 3 |
| | i — |
| | i 5 |
| | i 13 |
|
Additions | i 1 |
| | i — |
| | i — |
| | i 5 |
| | i 6 |
|
Cash
payments | ( i 2 | ) | | ( i 2 | ) | | i — |
| | ( i 2 | ) | | ( i 6 | ) |
| i 4 |
| | i 1 |
| | i — |
| | i 8 |
| | i 13 |
|
/ 13.
i Income Taxes i |
| | | |
| |
| 2020 | | 2019 |
| (In percentages) |
Effective income tax rate | i 22 | | i 12 |
/ The
higher effective income tax rate for the three months ended March 31, 2020 compared to the same period in 2019 was primarily due to the impact of functional currency differences in offshore jurisdictions and changes in the jurisdictional mix of earnings. Due to the Tax Cuts and Jobs Act ("TCJA") and uncertainty as to future foreign source income, the Company previously recorded a valuation allowance on a substantial portion of its foreign tax credits. The Company is currently evaluating tax planning strategies that would
allow utilization of the Company's foreign tax credit carryforwards. Implementation of these strategies in future periods could reduce the level of valuation allowance that is needed, thereby decreasing the Company's effective tax rate. The US Treasury issued additional final and proposed guidance supplementing the TCJA provisions in 2019, which the Company does not expect to have a material impact on current or future income tax expense. As a result, the Company will continue to monitor its expected impacts on the
Company's filing positions and will record the impacts as discrete income tax expense adjustments in the period that the guidance is finalized. In response to the global pandemic related to the outbreak of a novel coronavirus ("COVID-19"), various global taxing authorities passed or are considering relief initiatives to aid tax payers from an effective tax rate or cash flow perspective. For example, on March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act") was enacted in the US in response to the global pandemic. The CARES Act provides numerous tax provisions and other stimulus measures, including temporary changes regarding the prior and future utilization of net operating losses, temporary changes to the prior and future limitations on interest deductions, temporary suspension of certain payment requirements for the employer
portion of social security taxes, technical corrections from prior tax legislation for tax depreciation of certain qualified improvement property and the creation of certain refundable employee retention credits. The Company does not currently expect the CARES Act to have a material impact on its tax expense. In Germany, taxpayers are allowed to apply for a deferral of corporate income tax payments for 2020. The Company will continue to monitor global legislative and regulatory developments related to COVID-19 and will record the associated tax impacts as discrete events in the periods that guidance is finalized or the Company is able to estimate an impact. The
Company's 2013 through 2015 tax years are under joint examination by the US, German and Dutch taxing authorities. The examinations are in the preliminary data gathering phase.
14. i Derivative
Financial Instruments
Derivatives Designated As Hedges
Net Investment Hedges
i The total notional amount of foreign currency denominated debt and cross-currency swaps designated as net investment hedges are as follows: |
| | | | | |
| | | |
| (In € millions) |
Total | i 1,578 |
| | i 1,578 |
|
/
Cash
Flow Hedges
i The total notional amount of the forward-starting interest rate swap designated as a cash flow hedge is as follows: |
| | | | | |
| | | |
| (In $ millions) |
Total | i 400 |
| | i 400 |
|
/ Derivatives
Not Designated As Hedges
Foreign Currency Forwards and Swaps
i Gross notional values of the foreign currency forwards and swaps not designated as hedges are as follows: |
| | | | | |
| | | |
| (In $ millions) |
Total | i 575 |
| | i 692 |
|
/
i Information regarding changes in the fair value of the Company's derivative and non-derivative instruments is
as follows: |
| | | | | | | | | | | | | |
| Gain (Loss) Recognized in Other Comprehensive Income (Loss) | | Gain (Loss) Recognized in Earnings (Loss) | | |
| Three
Months Ended March 31, | | Statement of Operations Classification |
| 2020 | | 2019 | | 2020 | | 2019 | |
| (In
$ millions) | | |
Designated as Cash Flow Hedges | | | | | | | | | |
Commodity swaps | i — |
| | i 10 |
| | i — |
| | i 2 |
| | Cost
of sales |
Interest rate swaps | ( i 51 | ) | | ( i 11 | ) | | i — |
| | i — |
| | Interest
expense |
Total | ( i 51 | ) | | ( i 1 | ) | | i — |
| | i 2 |
| | |
| | | | | | | | | |
Designated
as Net Investment Hedges | | | | | | | | | |
Foreign currency denominated debt (Note 8) | i 37 |
| | i 39 |
| | i — |
| | i — |
| | N/A |
Cross-currency
swaps | i 30 |
| | i — |
| | i — |
| | i — |
| | N/A |
Total | i 67 |
| | i 39 |
| | i — |
| | i — |
| | |
| | | | | | | | | |
Not
Designated as Hedges | | | | | | | | | |
Foreign currency forwards and swaps | i — |
| | i — |
| | i 19 |
| | ( i 3 | ) | | Foreign
exchange gain (loss), net; Other income (expense), net |
Total | i — |
| | i — |
| | i 19 |
| | ( i 3 | ) | | |
/ See
Note 15 for additional information regarding the fair value of the Company's derivative instruments. Certain of the Company's commodity swaps, interest rate swaps, cross-currency swaps and foreign currency forwards and swaps permit the Company to net settle all contracts with the counterparty through a single payment in an agreed upon currency in the event of default or early termination of the contract,
similar to a master netting arrangement. i Information regarding the gross amounts of the Company's derivative instruments and the amounts offset in the unaudited consolidated balance sheets is as follows: |
| | | | | |
| | | |
| (In $ millions) |
Derivative Assets | | | |
Gross amount recognized | i 55 |
| | i 16 |
|
Gross
amount offset in the consolidated balance sheets | i 8 |
| | i 1 |
|
Net
amount presented in the consolidated balance sheets | i 47 |
| | i 15 |
|
Gross
amount not offset in the consolidated balance sheets | i 2 |
| | i 8 |
|
Net
amount | i 45 |
| | i 7 |
|
|
| | | | | |
| | | |
| (In $ millions) |
Derivative Liabilities | | | |
Gross amount recognized | i 110 |
| | i 59 |
|
Gross
amount offset in the consolidated balance sheets | i 8 |
| | i 1 |
|
Net
amount presented in the consolidated balance sheets | i 102 |
| | i 58 |
|
Gross
amount not offset in the consolidated balance sheets | i 2 |
| | i 8 |
|
Net
amount | i 100 |
| | i 50 |
|
/
15. i Fair Value Measurements
The Company's financial assets and
liabilities are measured at fair value on a recurring basis as follows: Derivatives. Derivative financial instruments include interest rate swaps, commodity swaps, cross-currency swaps and foreign currency forwards and swaps and are valued in the market using discounted cash flow techniques. These techniques incorporate Level 1 and Level 2 fair value measurement inputs such as interest rates and foreign currency exchange rates. These market inputs are utilized in the discounted cash flow calculation considering the instrument's term, notional amount, discount rate and credit risk. Significant inputs to the derivative valuation for interest rate swaps, commodity swaps, cross-currency swaps and foreign currency forwards and swaps are observable in the active markets and are classified as Level 2 in the fair value measurement hierarchy.
i |
| | | | | | | | | | |
| Fair
Value Measurement | | |
| Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1) | | Significant
Other
Observable
Inputs
(Level 2) | | Total | | Balance Sheet Classification |
| (In
$ millions) | | |
| | | | | | | |
Designated as Net Investment Hedges | | | | | | | |
Cross-currency
swaps | i — |
| | i 14 |
| | i 14 |
| | Current
Other assets |
Cross-currency swaps | i — |
| | i 26 |
| | i 26 |
| | Noncurrent
Other assets |
Derivatives Not Designated as Hedges | | | | |
|
| | |
Foreign currency forwards and swaps | i — |
| | i 7 |
| | i 7 |
| | Current
Other assets |
Total assets | i — |
| | i 47 |
| | i 47 |
| | |
Derivatives
Designated as Cash Flow Hedges | | | | | | | |
Interest rate swaps | i — |
| | ( i 91 | ) | | ( i 91 | ) | | Noncurrent
Other liabilities |
Commodity swaps | i — |
| | ( i 4 | ) | | ( i 4 | ) | | Current
Other liabilities |
Commodity swaps | i — |
| | ( i 3 | ) | | ( i 3 | ) | | Noncurrent
Other liabilities |
Derivatives Designated as Net Investment Hedges | | | | | | | |
Cross-currency swaps | i — |
| | ( i 2 | ) | | ( i 2 | ) | | Current
Other liabilities |
Derivatives Not Designated as Hedges | | | | | | | |
Foreign currency forwards and swaps | i — |
| | ( i 2 | ) | | ( i 2 | ) | | Current
Other liabilities |
Total liabilities | i — |
| | ( i 102 | ) | | ( i 102 | ) | | |
|
| | | | | | | | | | |
| Fair Value Measurement | | |
| Quoted
Prices
in Active
Markets for
Identical
Assets
(Level 1) | | Significant
Other
Observable
Inputs
(Level 2) | | Total | | Balance Sheet Classification |
| (In $ millions) | | |
| | | | | | | |
Derivatives Designated as Net Investment Hedges | | | | | | | |
Cross-currency
swaps | i — |
| | i 13 |
| | i 13 |
| | Current
Other assets |
Derivatives Not Designated as Hedges | | | | | | | |
Foreign currency forwards and swaps | i — |
| | i 2 |
| | i 2 |
| | Current
Other assets |
Total assets | i — |
| | i 15 |
| | i 15 |
| | |
Derivatives
Designated as Cash Flow Hedges | | | | | | | |
Interest rate swaps | i — |
| | ( i 40 | ) | | ( i 40 | ) | | Noncurrent
Other liabilities |
Commodity swaps | i — |
| | ( i 4 | ) | | ( i 4 | ) | | Current
Other liabilities |
Commodity swaps | i — |
| | ( i 3 | ) | | ( i 3 | ) | | Noncurrent
Other liabilities |
Derivatives Designated as Net Investment Hedges | | | | | | | |
Cross-currency swaps | i — |
| | ( i 1 | ) | | ( i 1 | ) | | Current
Other liabilities |
Cross-currency swaps | i — |
| | ( i 7 | ) | | ( i 7 | ) | | Noncurrent
Other liabilities |
Derivatives Not Designated as Hedges | | | | | | | |
Foreign currency forwards and swaps | i — |
| | ( i 3 | ) | | ( i 3 | ) | | Current
Other liabilities |
Total liabilities | i — |
| | ( i 58 | ) | | ( i 58 | ) | | |
Carrying
values and fair values of financial instruments that are not carried at fair value are as follows: |
| | | | | | | | | | | |
| | | Fair Value Measurement |
| Carrying Amount | | Significant
Other Observable Inputs (Level 2) | | Unobservable Inputs (Level 3) | | Total |
| (In $ millions) |
| | | | | | | |
Equity
investments without readily determinable fair values | i 170 |
| | i — |
| | i — |
| | i — |
|
| i 36 |
| | i 36 |
| | i — |
| | i 36 |
|
Long-term
debt, including current installments of long-term debt | i 3,400 |
| | i 3,180 |
| | i 132 |
| | i 3,312 |
|
| | | | | | | |
Equity investments without readily determinable fair values | i 170 |
| | i — |
| | i — |
| | i — |
|
| i 35 |
| | i 35 |
| | i — |
| | i 35 |
|
Long-term
debt, including current installments of long-term debt | i 3,455 |
| | i 3,456 |
| | i 144 |
| | i 3,600 |
|
/ In
general, the equity investments included in the table above are not publicly traded and their fair values are not readily determinable. The Company believes the carrying values approximate fair value. Insurance contracts in nonqualified trusts consist of long-term fixed income securities, which are valued using independent vendor pricing models with observable inputs in the active market and therefore represent a Level 2 fair value measurement. The fair value of long-term debt is based on valuations from third-party banks and market quotations and is classified as Level 2 in the fair value measurement hierarchy. The fair value of obligations under finance leases, which are included in long-term debt, is based on lease payments and discount rates, which are not observable in the market and therefore
represents a Level 3 fair value measurement.
As of March 31, 2020, and December 31, 2019, the fair values of cash and cash equivalents, receivables, marketable securities, trade payables, short-term borrowings and the current installments of long-term debt approximate carrying values due to the short-term nature of these instruments. These items have been excluded from the table with the exception of the current
installments of long-term debt. 16. i Commitments and Contingencies
Commitments
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. These known obligations include the following: In connection with the Hoechst demerger, the Company agreed to indemnify
Hoechst, and its legal successors, for various liabilities under the demerger agreement, including for environmental liabilities associated with contamination arising either from environmental damage in general ("Category A") or under i 19 divestiture agreements entered into by Hoechst prior to the demerger ("Category B") (Note 10). The
Company's obligation to indemnify Hoechst, and its legal successors, is capped under Category B at € i 250 million. If and to the extent the environmental damage should exceed € i 750
million in aggregate, the Company's obligation to indemnify Hoechst and its legal successors applies, but is then limited to i 33.33% of the remediation cost without further limitations. Cumulative payments under the divestiture agreements as of March 31,
2020 are $ i 93 million. Though the Company is significantly under its obligation cap under Category B, most of the divestiture agreements have become time barred and/or any notified environmental damage claims have been partially settled. The
Company has also undertaken in the demerger agreement to indemnify Hoechst and its legal successors for (i) i 33.33% of any and all Category A liabilities that result from Hoechst being held as the responsible party pursuant to public law or current or future environmental law or by third parties pursuant to private or public law related to contamination and (ii) liabilities that Hoechst is required to discharge, including tax liabilities, which are associated
with businesses that were included in the demerger but were not demerged due to legal restrictions on the transfers of such items. These indemnities do not provide for any monetary or time limitations. The Company has not been requested by Hoechst to make any payments in connection with this indemnification. Accordingly, the Company has not made any payments to Hoechst and its legal successors. Based on the Company's evaluation of currently available information, including the lack of requests for indemnification, the Company cannot estimate the remaining demerger obligations, if any,
in excess of amounts accrued. 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 significant risk (Note 10). The Company has divested numerous businesses, investments and facilities through agreements containing indemnifications or guarantees to the purchasers. Many of the obligations contain monetary and/or time limitations, which extend through 2037. The aggregate amount of outstanding indemnifications and guarantees provided for under these agreements is $ i 116
million as of March 31, 2020. Other agreements do not provide for any monetary or time limitations. Based on the Company's evaluation of currently available information, including the number of requests for indemnification or other payment received by the Company, the Company cannot estimate the remaining divestiture obligations, if any, in excess of amounts accrued.
Purchase Obligations
In the normal course of business, the Company enters into various purchase commitments for goods and services. The Company maintains a number of "take-or-pay" contracts for purchases of raw materials, utilities and other services. Certain of the contracts contain a contract termination buy-out provision that allows for the
Company to exit the contracts for amounts less than the remaining take-or-pay obligations. Additionally, the Company has other outstanding commitments representing maintenance and service agreements, energy and utility agreements, consulting contracts and software agreements. As of March 31, 2020, the Company had unconditional purchase obligations of $ i 1.1 billion,
which extend through 2036. Contingencies
The Company is involved in legal and regulatory proceedings, lawsuits, claims and investigations incidental to the normal conduct of business, relating to such matters as product liability, land disputes, insurance coverage disputes, contracts, employment, antitrust or competition compliance, intellectual property, personal injury and other actions in tort, workers' compensation, chemical exposure, asbestos exposure, taxes, trade compliance, acquisitions and divestitures, claims of current and legacy stockholders, past waste disposal practices and release of chemicals into the environment. The
Company is actively defending those matters where the Company is named as a defendant and, based on the current facts, does not believe the outcomes from these matters would be material to the Company's results of operations, cash flows or financial position. European Commission Investigation
In May 2017, the Company learned that the European Commission opened a competition law investigation involving certain subsidiaries of the Company with respect
to certain past ethylene purchases. Based on information learned from the European Commission regarding its investigation, Celanese recorded a reserve of $ i 89 million in 2019. The Company is continuing to cooperate with the European Commission.
17. i Segment Information
i |
| | | | | | | | | | | | | | | | | | |
|
Engineered Materials | | Acetate
Tow | | Acetyl Chain | | Other Activities | | Eliminations | | Consolidated | |
| (In $ millions) | |
| | |
Net sales | i 563 |
| | i 129 |
| | i 799 |
| | i — |
| | ( i 31 | ) | (1) | i 1,460 |
| |
Other
(charges) gains, net (Note 12) | i — |
| | ( i 1 | ) | | i — |
| | ( i 5 | ) | | i — |
| | ( i 6 | ) | |
Operating
profit (loss) | i 102 |
| | i 27 |
| | i 135 |
| | ( i 70 | ) | | i — |
| | i 194 |
| |
Equity
in net earnings (loss) of affiliates | i 53 |
| | i — |
| | i 1 |
| | i 3 |
| | i — |
| | i 57 |
| |
Depreciation
and amortization | i 34 |
| | i 8 |
| | i 39 |
| | i 4 |
| | i — |
| | i 85 |
| |
Capital
expenditures | i 24 |
| | i 10 |
| | i 43 |
| | i 9 |
| | i — |
| | i 86 |
| (2) |
| | |
Goodwill and intangible assets, net | i 977 |
| | i 152 |
| | i 229 |
| | i — |
| | i — |
| | i 1,358 |
| |
Total
assets | i 4,112 |
| | i 947 |
| | i 3,457 |
| | i 1,029 |
| | i — |
| | i 9,545 |
| |
| | |
Net sales | i 663 |
| | i 166 |
|
| i 889 |
|
| i — |
| | ( i 31 | ) | (1) | i 1,687 |
| |
Other
(charges) gains, net (Note 12) | i 15 |
| | i — |
| | i — |
| | ( i 11 | ) | | i — |
| | i 4 |
| |
Operating
profit (loss) | i 144 |
| | i 40 |
| | i 202 |
| | ( i 66 | ) | | i — |
| | i 320 |
| |
Equity
in net earnings (loss) of affiliates | i 46 |
| | i — |
| | i 1 |
| | i 3 |
| | i — |
| | i 50 |
| |
Depreciation
and amortization | i 32 |
| | i 10 |
| | i 38 |
| | i 3 |
| | i — |
| | i 83 |
| |
Capital
expenditures | i 16 |
| | i 8 |
| | i 26 |
| | i 4 |
| | i — |
| | i 54 |
| (2) |
| | |
Goodwill and intangible assets, net | i 999 |
| | i 153 |
| | i 234 |
| | i — |
| | i — |
| | i 1,386 |
| |
Total
assets | i 4,125 |
| | i 977 |
| | i 3,489 |
| | i 885 |
| | i — |
| | i 9,476 |
| |
| |
(1) | Includes
intersegment sales primarily related to the Acetyl Chain. |
/ | |
(2) | Includes a decrease in accrued capital expenditures of $ i 33
million and $ i 25 million for the three months ended March 31, 2020 and 2019, respectively. |
18.
i Revenue Recognition
The Company has certain contracts that represent take-or-pay revenue arrangements in which the Company's performance obligations extend over multiple years. As of March 31, 2020,
the Company had $ i 662 million of remaining performance obligations related to take-or-pay contracts. The Company expects to recognize approximately $ i 156 million
of its remaining performance obligations as Net sales in 2020, $ i 185 million in 2021, $ i 115
million in 2022 and the balance thereafter. Contract liabilities primarily relate to advances or deposits received from the Company's customers before revenue is recognized. These amounts are recorded as deferred revenue and are included in Noncurrent Other liabilities in the unaudited consolidated balance sheets (Note 7). Disaggregated Revenue
In general, the Company's business segmentation is aligned according to the nature and economic characteristics of its products and customer relationships and provides meaningful disaggregation of each business segment's results of operations.
The Company manages its Engineered Materials business segment through its project management pipeline, which is comprised of a broad range of projects which are solutions-based and are tailored to each customers' unique needs. Projects are identified and selected based on success rate and may involve a number of different polymers per project for use in multiple end-use applications. Therefore, the Company is agnostic toward products and end-use markets for the Engineered Materials business segment. Within the Acetate Tow business segment, the Company's primary product is acetate tow, which
is managed through contracts with a few major tobacco companies and accounts for a significant amount of filters used in cigarette production worldwide. The Company manages its Acetyl Chain business segment by leveraging its ability to sell chemicals externally to end-use markets or downstream to its emulsion polymers business. Decisions to sell externally and geographically or downstream and along the Acetyl Chain are based on market demand, trade flows and maximizing the value of its chemicals. Therefore, the Company's strategic focus is on executing within this integrated chain model and less on driving product-specific revenue. i Further
disaggregation of Net sales by business segment and geographic destination is as follows: |
| | | | | |
| |
| 2020 | | 2019 |
| (In $ millions) |
Engineered
Materials | | | |
North America | i 162 |
| | i 196 |
|
Europe
and Africa | i 260 |
| | i 302 |
|
Asia-Pacific | i 123 |
| | i 148 |
|
South
America | i 18 |
| | i 17 |
|
Total | i 563 |
| | i 663 |
|
| | | |
Acetate
Tow | | | |
North America | i 21 |
| | i 34 |
|
Europe
and Africa | i 71 |
| | i 63 |
|
Asia-Pacific | i 32 |
| | i 60 |
|
South
America | i 5 |
| | i 9 |
|
Total | i 129 |
| | i 166 |
|
| | | |
Acetyl
Chain | | | |
North America | i 274 |
| | i 286 |
|
Europe
and Africa | i 266 |
| | i 294 |
|
Asia-Pacific | i 207 |
| | i 256 |
|
South
America | i 21 |
| | i 22 |
|
Total(1) | i 768 |
| | i 858 |
|
/ | |
(1) | Excludes
intersegment sales of $ i 31 million and $ i 31
million for the three months ended March 31, 2020 and 2019, respectively. |
19. i Earnings
(Loss) Per Share i |
| | | | | |
| |
| 2020 | | 2019 |
| (In
$ millions, except share data) |
Amounts attributable to Celanese Corporation | | | |
Earnings (loss) from continuing operations | i 225 |
| | i 338 |
|
Earnings
(loss) from discontinued operations | ( i 7 | ) | | ( i 1 | ) |
Net
earnings (loss) | i 218 |
| | i 337 |
|
| | | |
Weighted
average shares - basic | i 119,251,689 |
| | i 127,542,328 |
|
Incremental
shares attributable to equity awards(1) | i 648,155 |
| | i 673,372 |
|
Weighted
average shares - diluted | i 119,899,844 |
| | i 128,215,700 |
|
| |
(1) | Excludes
i 63,384 and i 0
equity awards shares for the three months ended March 31, 2020 and 2019, respectively, as their effect would have been antidilutive. |
20. i Consolidating Guarantor Financial Information
The
Senior Notes were issued by Celanese US ("Issuer") and are guaranteed by Celanese Corporation ("Parent Guarantor") and the Subsidiary Guarantors (Note 8). The Issuer and Subsidiary Guarantors are i 100% owned subsidiaries of the Parent Guarantor. The
Parent Guarantor and Subsidiary Guarantors have guaranteed the Notes fully and unconditionally and jointly and severally. For cash management purposes, the Company transfers cash between the Parent Guarantor, Issuer, Subsidiary Guarantors and non-guarantors through intercompany financing arrangements, contributions or declaration of dividends between the respective parent and its subsidiaries. The transfer of cash under these activities facilitates the ability of the recipient to make specified third-party payments for principal and interest on the Company's outstanding debt, Common Stock dividends and Common Stock repurchases. The unaudited interim consolidating
statements of cash flows for the three months ended March 31, 2020 and 2019 present such intercompany financing activities, contributions and dividends consistent with how such activity would be presented in a stand-alone statement of cash flows. The Company has not presented separate financial information and other disclosures for each of its Subsidiary Guarantors because it believes such financial information and other disclosures would not provide investors with any additional information that would be material in evaluating the sufficiency of the guarantees. The
unaudited interim consolidating financial statements for the Parent Guarantor, the Issuer, the Subsidiary Guarantors and the non-guarantors are as follows:
i UNAUDITED
INTERIM CONSOLIDATING STATEMENT OF OPERATIONS
|
| | | | | | | | | | | | | | | | | |
| |
| Parent Guarantor | | Issuer | | Subsidiary Guarantors | | Non- Guarantors | | Eliminations | | Consolidated |
| (In
$ millions) |
Net sales | i — |
| | i — |
| | i 560 |
| | i 1,203 |
| | ( i 303 | ) | | i 1,460 |
|
Cost
of sales | i — |
| | i — |
| | ( i 460 | ) | | ( i 946 | ) | | i 294 |
| | ( i 1,112 | ) |
Gross
profit | i — |
| | i — |
| | i 100 |
| | i 257 |
| | ( i 9 | ) | | i 348 |
|
Selling,
general and administrative expenses | i — |
| | i — |
| | ( i 54 | ) | | ( i 71 | ) | | i — |
| | ( i 125 | ) |
Amortization
of intangible assets | i — |
| | i — |
| | ( i 2 | ) | | ( i 3 | ) | | i — |
| | ( i 5 | ) |
Research
and development expenses | i — |
| | i — |
| | ( i 7 | ) | | ( i 10 | ) | | i — |
| | ( i 17 | ) |
Other
(charges) gains, net | i — |
| | i — |
| | ( i 8 | ) | | i 2 |
| | i — |
| | ( i 6 | ) |
Foreign
exchange gain (loss), net | i — |
| | i — |
| | ( i 1 | ) | | i — |
| | i — |
| | ( i 1 | ) |
Gain
(loss) on disposition of businesses and assets, net | i — |
| | i — |
| | ( i 2 | ) | | i 2 |
| | i — |
| | i — |
|
Operating
profit (loss) | i — |
| | i — |
| | i 26 |
| | i 177 |
| | ( i 9 | ) | | i 194 |
|
Equity
in net earnings (loss) of affiliates | i 226 |
| | i 222 |
| | i 188 |
| | i 51 |
| | ( i 630 | ) | | i 57 |
|
Non-operating
pension and other postretirement employee benefit (expense) income | i — |
| | i — |
| | i 25 |
| | i 3 |
| | i — |
| | i 28 |
|
Interest
expense | ( i 8 | ) | | ( i 9 | ) | | ( i 30 | ) | | ( i 5 | ) | | i 24 |
| | ( i 28 | ) |
Interest
income | i — |
| | i 13 |
| | i 10 |
| | i 4 |
| | ( i 25 | ) | | i 2 |
|
Dividend
income - equity investments | i — |
| | i — |
| | i — |
| | i 36 |
| | i 1 |
| | i 37 |
|
Other
income (expense), net | i — |
| | i 8 |
| | i 1 |
| | ( i 7 | ) | | i — |
| | i 2 |
|
Earnings
(loss) from continuing operations before tax | i 218 |
| | i 234 |
| | i 220 |
| | i 259 |
| | ( i 639 | ) | | i 292 |
|
Income
tax (provision) benefit | i — |
| | ( i 8 | ) | | i 5 |
| | ( i 63 | ) | | i 1 |
| | ( i 65 | ) |
Earnings
(loss) from continuing operations | i 218 |
| | i 226 |
| | i 225 |
| | i 196 |
| | ( i 638 | ) | | i 227 |
|
Earnings
(loss) from operation of discontinued operations | i — |
| | i — |
| | i — |
| | ( i 7 | ) | | i — |
| | ( i 7 | ) |
Income
tax (provision) benefit from discontinued operations | i — |
| | i — |
| | i — |
| | i — |
| | i — |
| | i — |
|
Earnings
(loss) from discontinued operations | i — |
| | i — |
| | i — |
| | ( i 7 | ) | | i — |
| | ( i 7 | ) |
Net
earnings (loss) | i 218 |
| | i 226 |
| | i 225 |
| | i 189 |
| | ( i 638 | ) | | i 220 |
|
Net
(earnings) loss attributable to noncontrolling interests | i — |
| | i — |
| | i — |
| | ( i 2 | ) | | i — |
| | ( i 2 | ) |
Net
earnings (loss) attributable to Celanese Corporation | i 218 |
| | i 226 |
| | i 225 |
| | i 187 |
| | ( i 638 | ) | | i 218 |
|
UNAUDITED INTERIM CONSOLIDATING STATEMENT OF OPERATIONS
|
| | | | | | | | | | | | | | | | | |
| |
| Parent Guarantor | | Issuer | | Subsidiary Guarantors | | Non- Guarantors | | Eliminations | | Consolidated |
| (In
$ millions) |
Net sales | i — |
| | i — |
| | i 624 |
| | i 1,373 |
| | ( i 310 | ) | | i 1,687 |
|
Cost
of sales | i — |
| | i — |
| | ( i 458 | ) | | ( i 1,077 | ) | | i 301 |
| | ( i 1,234 | ) |
Gross
profit | i — |
| | i — |
| | i 166 |
| | i 296 |
| | ( i 9 | ) | | i 453 |
|
Selling,
general and administrative expenses | i — |
| | i — |
| | ( i 40 | ) | | ( i 80 | ) | | i — |
| | ( i 120 | ) |
Amortization
of intangible assets | i — |
| | i — |
| | ( i 2 | ) | | ( i 4 | ) | | i — |
| | ( i 6 | ) |
Research
and development expenses | i — |
| | i — |
| | ( i 6 | ) | | ( i 10 | ) | | i — |
| | ( i 16 | ) |
Other
(charges) gains, net | i — |
| | i — |
| | i — |
| | i 4 |
| | i — |
| | i 4 |
|
Foreign
exchange gain (loss), net | i — |
| | i — |
| | i — |
| | i 5 |
| | i — |
| | i 5 |
|
Gain
(loss) on disposition of businesses and assets, net | i — |
| | i — |
| | ( i 2 | ) | | i 2 |
| | i — |
| | i — |
|
Operating
profit (loss) | i — |
| | i — |
| | i 116 |
| | i 213 |
| | ( i 9 | ) | | i 320 |
|
Equity
in net earnings (loss) of affiliates | i 337 |
| | i 337 |
| | i 217 |
| | i 43 |
| | ( i 884 | ) | | i 50 |
|
Non-operating
pension and other postretirement employee benefit (expense) income | i — |
| | i — |
| | i 15 |
| | i 2 |
| | i — |
| | i 17 |
|
Interest
expense | i — |
| | ( i 10 | ) | | ( i 31 | ) | | ( i 7 | ) | | i 17 |
| | ( i 31 | ) |
Interest
income | i — |
| | i 13 |
| | i 2 |
| | i 3 |
| | ( i 17 | ) | | i 1 |
|
Dividend
income - equity investments | i — |
| | i — |
| | i — |
| | i 32 |
| | i — |
| | i 32 |
|
Other
income (expense), net | i — |
| | i 1 |
| | i — |
| | ( i 5 | ) | | i — |
| | ( i 4 | ) |
Earnings
(loss) from continuing operations before tax | i 337 |
| | i 341 |
| | i 319 |
| | i 281 |
| | ( i 893 | ) | | i 385 |
|
Income
tax (provision) benefit | i — |
| | ( i 4 | ) | | ( i 7 | ) | | ( i 36 | ) | | i 1 |
| | ( i 46 | ) |
Earnings
(loss) from continuing operations | i 337 |
| | i 337 |
| | i 312 |
| | i 245 |
| | ( i 892 | ) | | i 339 |
|
Earnings
(loss) from operation of discontinued operations | i — |
| | i — |
| | ( i 1 | ) | | i — |
| | i — |
| | ( i 1 | ) |
Income
tax (provision) benefit from discontinued operations | i — |
| | i — |
| | i — |
| | i — |
| | i — |
| | i — |
|
Earnings
(loss) from discontinued operations | i — |
| | i — |
| | ( i 1 | ) | | i — |
| | i — |
| | ( i 1 | ) |
Net
earnings (loss) | i 337 |
| | i 337 |
| | i 311 |
| | i 245 |
| | ( i 892 | ) | | i 338 |
|
Net
(earnings) loss attributable to noncontrolling interests | i — |
| | i — |
| | i — |
| | ( i 1 | ) | | i — |
| | ( i 1 | ) |
Net
earnings (loss) attributable to Celanese Corporation | i 337 |
| | i 337 |
| | i 311 |
| | i 244 |
| | ( i 892 | ) | | i 337 |
|
i UNAUDITED INTERIM CONSOLIDATING STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
|
| | | | | | | | | | | | | | | | | |
| |
| Parent Guarantor | | Issuer | | Subsidiary Guarantors | | Non- Guarantors | | Eliminations | | Consolidated |
| (In
$ millions) |
Net earnings (loss) | i 218 |
| | i 226 |
| | i 225 |
| | i 189 |
| | ( i 638 | ) | | i 220 |
|
Other
comprehensive income (loss), net of tax | | | | | | | | | | | |
Foreign currency translation gain (loss) | ( i 2 | ) | | ( i 2 | ) | | ( i 44 | ) | | ( i 54 | ) | | i 100 |
| | ( i 2 | ) |
Gain
(loss) on cash flow hedges | ( i 39 | ) | | ( i 39 | ) | | ( i 1 | ) | | i — |
| | i 40 |
| | ( i 39 | ) |
Total
other comprehensive income (loss), net of tax | ( i 41 | ) | | ( i 41 | ) | | ( i 45 | ) | | ( i 54 | ) | | i 140 |
| | ( i 41 | ) |
Total
comprehensive income (loss), net of tax | i 177 |
| | i 185 |
| | i 180 |
| | i 135 |
| | ( i 498 | ) | | i 179 |
|
Comprehensive
(income) loss attributable to noncontrolling interests | i — |
| | i — |
| | i — |
| | ( i 2 | ) | | i — |
| | ( i 2 | ) |
Comprehensive
income (loss) attributable to Celanese Corporation | i 177 |
| | i 185 |
| | i 180 |
| | i 133 |
| | ( i 498 | ) | | i 177 |
|
|
| | | | | | | | | | | | | | | | | |
| |
| Parent Guarantor | | Issuer | | Subsidiary Guarantors | | Non- Guarantors | | Eliminations | | Consolidated |
| (In
$ millions) |
Net earnings (loss) | i 337 |
| | i 337 |
| | i 311 |
| | i 245 |
| | ( i 892 | ) | | i 338 |
|
Other
comprehensive income (loss), net of tax | | | | | | | | | | | |
Foreign currency translation gain (loss) | i 7 |
| | i 7 |
| | ( i 18 | ) | | ( i 24 | ) | | i 35 |
| | i 7 |
|
Gain
(loss) on cash flow hedges | ( i 3 | ) | | ( i 3 | ) | | i 6 |
| | i 8 |
| | ( i 11 | ) | | ( i 3 | ) |
Total
other comprehensive income (loss), net of tax | i 4 |
| | i 4 |
| | ( i 12 | ) | | ( i 16 | ) | | i 24 |
| | i 4 |
|
Total
comprehensive income (loss), net of tax | i 341 |
| | i 341 |
| | i 299 |
| | i 229 |
| | ( i 868 | ) | | i 342 |
|
Comprehensive
(income) loss attributable to noncontrolling interests | i — |
| | i — |
| | i — |
| | ( i 1 | ) | | i — |
| | ( i 1 | ) |
Comprehensive
income (loss) attributable to Celanese Corporation | i 341 |
| | i 341 |
| | i 299 |
| | i 228 |
| | ( i 868 | ) | | i 341 |
|
/
i UNAUDITED CONSOLIDATING BALANCE SHEET
|
| | | | | | | | | | | | | | | | | |
| |
| Parent Guarantor | | Issuer | | Subsidiary Guarantors | | Non- Guarantors | | Eliminations | | Consolidated |
| (In
$ millions) |
ASSETS | | | | | | | | | | | |
Current Assets | | | | | | | | | | | |
Cash
and cash equivalents | i — |
| | i 20 |
| | i 21 |
| | i 529 |
| | i — |
| | i 570 |
|
Trade
receivables - third party and affiliates | i — |
| | i — |
| | i 131 |
| | i 866 |
| | ( i 144 | ) | | i 853 |
|
Non-trade
receivables, net | i 57 |
| | i 1,521 |
| | i 2,136 |
| | i 786 |
| | ( i 4,193 | ) | | i 307 |
|
Inventories,
net | i — |
| | i — |
| | i 366 |
| | i 725 |
| | ( i 55 | ) | | i 1,036 |
|
Marketable
securities | i — |
| | i — |
| | i 22 |
| | i 16 |
| | i — |
| | i 38 |
|
Other
assets | i — |
| | i 43 |
| | i 14 |
| | i 55 |
| | ( i 61 | ) | | i 51 |
|
Total
current assets | i 57 |
| | i 1,584 |
| | i 2,690 |
| | i 2,977 |
| | ( i 4,453 | ) | | i 2,855 |
|
Investments
in affiliates | i 4,236 |
| | i 5,375 |
| | i 4,316 |
| | i 851 |
| | ( i 13,797 | ) | | i 981 |
|
Property,
plant and equipment, net | i — |
| | i — |
| | i 1,476 |
| | i 2,202 |
| | i — |
| | i 3,678 |
|
Operating
lease right-of-use assets | i — |
| | i — |
| | i 51 |
| | i 150 |
| | i — |
| | i 201 |
|
Deferred
income taxes | i — |
| | i — |
| | i — |
| | i 96 |
| | ( i 5 | ) | | i 91 |
|
Other
assets | i — |
| | i 1,683 |
| | i 224 |
| | i 435 |
| | ( i 1,961 | ) | | i 381 |
|
Goodwill | i — |
| | i — |
| | i 399 |
| | i 657 |
| | i — |
| | i 1,056 |
|
Intangible
assets, net | i — |
| | i — |
| | i 123 |
| | i 179 |
| | i — |
| | i 302 |
|
Total
assets | i 4,293 |
| | i 8,642 |
| | i 9,279 |
| | i 7,547 |
| | ( i 20,216 | ) | | i 9,545 |
|
LIABILITIES
AND EQUITY | | | | | | | | | | | |
Current Liabilities | | | | | | | | | | | |
Short-term
borrowings and current installments of long-term debt - third party and affiliates | i 1,845 |
| | i 720 |
| | i 1,384 |
| | i 361 |
| | ( i 3,561 | ) | | i 749 |
|
Trade
payables - third party and affiliates | i — |
| | i — |
| | i 299 |
| | i 569 |
| | ( i 144 | ) | | i 724 |
|
Other
liabilities | i — |
| | i 70 |
| | i 162 |
| | i 383 |
| | ( i 193 | ) | | i 422 |
|
Income
taxes payable | i — |
| | i — |
| | i 436 |
| | i 97 |
| | ( i 500 | ) | | i 33 |
|
Total
current liabilities | i 1,845 |
| | i 790 |
| | i 2,281 |
| | i 1,410 |
| | ( i 4,398 | ) | | i 1,928 |
|
Noncurrent
Liabilities | | | | | | | | | | | |
Long-term debt | i — |
| | i 3,516 |
| | i 1,677 |
| | i 90 |
| | ( i 1,927 | ) | | i 3,356 |
|
Deferred
income taxes | i — |
| | i 7 |
| | i 101 |
| | i 155 |
| | ( i 5 | ) | | i 258 |
|
Uncertain
tax positions | i — |
| | i 2 |
| | i — |
| | i 169 |
| | ( i 10 | ) | | i 161 |
|
Benefit
obligations | i — |
| | i — |
| | i 252 |
| | i 316 |
| | i — |
| | i 568 |
|
Operating
lease liabilities | i — |
| | i — |
| | i 41 |
| | i 134 |
| | i — |
| | i 175 |
|
Other
liabilities | i — |
| | i 91 |
| | i 90 |
| | i 115 |
| | ( i 33 | ) | | i 263 |
|
Total
noncurrent liabilities | i — |
| | i 3,616 |
| | i 2,161 |
| | i 979 |
| | ( i 1,975 | ) | | i 4,781 |
|
Total
Celanese Corporation stockholders' equity | i 2,448 |
| | i 4,236 |
| | i 4,837 |
| | i 4,770 |
| | ( i 13,843 | ) | | i 2,448 |
|
Noncontrolling
interests | i — |
| | i — |
| | i — |
| | i 388 |
| | i — |
| | i 388 |
|
Total
equity | i 2,448 |
| | i 4,236 |
| | i 4,837 |
| | i 5,158 |
| | ( i 13,843 | ) | | i 2,836 |
|
Total
liabilities and equity | i 4,293 |
| | i 8,642 |
| | i 9,279 |
| | i 7,547 |
| | ( i 20,216 | ) | | i 9,545 |
|
UNAUDITED CONSOLIDATING BALANCE SHEET
|
| | | | | | | | | | | | | | | | | |
| |
| Parent Guarantor | | Issuer | | Subsidiary Guarantors | | Non- Guarantors | | Eliminations | | Consolidated |
| (In
$ millions) |
ASSETS | | | | | | | | | | | |
Current Assets | | | | | | | | | | | |
Cash
and cash equivalents | i — |
| | i — |
| | i 16 |
| | i 447 |
| | i — |
| | i 463 |
|
Trade
receivables - third party and affiliates | i — |
| | i — |
| | i 122 |
| | i 851 |
| | ( i 123 | ) | | i 850 |
|
Non-trade
receivables, net | i 56 |
| | i 1,188 |
| | i 1,925 |
| | i 743 |
| | ( i 3,581 | ) | | i 331 |
|
Inventories,
net | i — |
| | i — |
| | i 360 |
| | i 725 |
| | ( i 47 | ) | | i 1,038 |
|
Marketable
securities | i — |
| | i — |
| | i 24 |
| | i 16 |
| | i — |
| | i 40 |
|
Other
assets | i — |
| | i 36 |
| | i 11 |
| | i 38 |
| | ( i 42 | ) | | i 43 |
|
Total
current assets | i 56 |
| | i 1,224 |
| | i 2,458 |
| | i 2,820 |
| | ( i 3,793 | ) | | i 2,765 |
|
Investments
in affiliates | i 4,064 |
| | i 5,217 |
| | i 4,206 |
| | i 841 |
| | ( i 13,353 | ) | | i 975 |
|
Property,
plant and equipment, net | i — |
| | i — |
| | i 1,461 |
| | i 2,252 |
| | i — |
| | i 3,713 |
|
Operating
lease right-of-use assets | i — |
| | i — |
| | i 50 |
| | i 153 |
| | i — |
| | i 203 |
|
Deferred
income taxes | i — |
| | i — |
| | i — |
| | i 101 |
| | ( i 5 | ) | | i 96 |
|
Other
assets | i — |
| | i 1,661 |
| | i 195 |
| | i 445 |
| | ( i 1,963 | ) | | i 338 |
|
Goodwill | i — |
| | i — |
| | i 399 |
| | i 675 |
| | i — |
| | i 1,074 |
|
Intangible
assets, net | i — |
| | i — |
| | i 125 |
| | i 187 |
| | i — |
| | i 312 |
|
Total
assets | i 4,120 |
| | i 8,102 |
| | i 8,894 |
| | i 7,474 |
| | ( i 19,114 | ) | | i 9,476 |
|
LIABILITIES
AND EQUITY | | | | | | | | | | | |
Current Liabilities | | | | | | | | | | | |
Short-term
borrowings and current installments of long-term debt - third party and affiliates | i 1,596 |
| | i 374 |
| | i 1,089 |
| | i 385 |
| | ( i 2,948 | ) | | i 496 |
|
Trade
payables - third party and affiliates | i 17 |
| | i — |
| | i 333 |
| | i 553 |
| | ( i 123 | ) | | i 780 |
|
Other
liabilities | i — |
| | i 49 |
| | i 188 |
| | i 397 |
| | ( i 173 | ) | | i 461 |
|
Income
taxes payable | i — |
| | i — |
| | i 439 |
| | i 80 |
| | ( i 502 | ) | | i 17 |
|
Total
current liabilities | i 1,613 |
| | i 423 |
| | i 2,049 |
| | i 1,415 |
| | ( i 3,746 | ) | | i 1,754 |
|
Noncurrent
Liabilities | | | | | | | | | | | |
Long-term debt | i — |
| | i 3,565 |
| | i 1,677 |
| | i 101 |
| | ( i 1,934 | ) | | i 3,409 |
|
Deferred
income taxes | i — |
| | i 3 |
| | i 101 |
| | i 158 |
| | ( i 5 | ) | | i 257 |
|
Uncertain
tax positions | i — |
| | i — |
| | i — |
| | i 169 |
| | ( i 4 | ) | | i 165 |
|
Benefit
obligations | i — |
| | i — |
| | i 257 |
| | i 332 |
| | i — |
| | i 589 |
|
Operating
lease liabilities | i — |
| | i — |
| | i 40 |
| | i 140 |
| | i 1 |
| | i 181 |
|
Other
liabilities | i — |
| | i 47 |
| | i 93 |
| | i 118 |
| | ( i 35 | ) | | i 223 |
|
Total
noncurrent liabilities | i — |
| | i 3,615 |
| | i 2,168 |
| | i 1,018 |
| | ( i 1,977 | ) | | i 4,824 |
|
Total
Celanese Corporation stockholders' equity | i 2,507 |
| | i 4,064 |
| | i 4,677 |
| | i 4,650 |
| | ( i 13,391 | ) | | i 2,507 |
|
Noncontrolling
interests | i — |
| | i — |
| | i — |
| | i 391 |
| | i — |
| | i 391 |
|
Total
equity | i 2,507 |
| | i 4,064 |
| | i 4,677 |
| | i 5,041 |
| | ( i 13,391 | ) | | i 2,898 |
|
Total
liabilities and equity | i 4,120 |
| | i 8,102 |
| | i 8,894 |
| | i 7,474 |
| | ( i 19,114 | ) | | i 9,476 |
|
i UNAUDITED INTERIM CONSOLIDATING STATEMENT OF CASH FLOWS
|
| | | | | | | | | | | | | | | | | |
| |
| Parent Guarantor | | Issuer | | Subsidiary Guarantors | | Non- Guarantors | | Eliminations | | Consolidated |
| (In
$ millions) |
Net cash provided by (used in) operating activities | i 241 |
| | ( i 280 | ) | | i 129 |
| | i 169 |
| | i — |
| | i 259 |
|
Investing
Activities | | | | | | | | | | | |
Capital expenditures on property, plant and equipment | i — |
| | i — |
| | ( i 69 | ) | | ( i 50 | ) | | i — |
| | ( i 119 | ) |
Return
of capital from subsidiary | i — |
| | i — |
| | i 5 |
| | i — |
| | ( i 5 | ) | | i — |
|
Intercompany
loan receipts (disbursements) | i — |
| | i — |
| | ( i 19 | ) | | i — |
| | i 19 |
| | i — |
|
Other,
net | i — |
| | i — |
| | i — |
| | ( i 9 | ) | | i — |
| | ( i 9 | ) |
Net
cash provided by (used in) investing activities | i — |
| | i — |
| | ( i 83 | ) | | ( i 59 | ) | | i 14 |
| | ( i 128 | ) |
Financing
Activities | | | | | | | | | | | |
Net change in short-term borrowings with maturities of 3 months or less | i — |
| | i — |
| | ( i 20 | ) | | i — |
| | ( i 19 | ) | | ( i 39 | ) |
Proceeds
from short-term borrowings | i — |
| | i 300 |
| | i — |
| | i — |
| | i — |
| | i 300 |
|
Repayments
of long-term debt | i — |
| | i — |
| | ( i 1 | ) | | ( i 8 | ) | | i — |
| | ( i 9 | ) |
Purchases
of treasury stock, including related fees | ( i 167 | ) | | i — |
| | i — |
| | i — |
| | i — |
| | ( i 167 | ) |
Common
stock dividends | ( i 74 | ) | | i — |
| | i — |
| | i — |
| | i — |
| | ( i 74 | ) |
Return
of capital to parent | i — |
| | i — |
| | i — |
| | ( i 5 | ) | | i 5 |
| | i — |
|
Distributions
to noncontrolling interests | i — |
| | i — |
| | i — |
| | ( i 5 | ) | | i — |
| | ( i 5 | ) |
Other,
net | i — |
| | i — |
| | ( i 20 | ) | | ( i 2 | ) | | i — |
| | ( i 22 | ) |
Net
cash provided by (used in) financing activities | ( i 241 | ) | | i 300 |
| | ( i 41 | ) | | ( i 20 | ) | | ( i 14 | ) | | ( i 16 | ) |
Exchange
rate effects on cash and cash equivalents | i — |
| | i — |
| | i — |
| | ( i 8 | ) | | i — |
| | ( i 8 | ) |
Net
increase (decrease) in cash and cash equivalents | i — |
| | i 20 |
| | i 5 |
| | i 82 |
| | i — |
| | i 107 |
|
Cash
and cash equivalents as of beginning of period | i — |
| | i — |
| | i 16 |
| | i 447 |
| | i — |
| | i 463 |
|
Cash
and cash equivalents as of end of period | i — |
| | i 20 |
| | i 21 |
| | i 529 |
| | i — |
| | i 570 |
|
UNAUDITED INTERIM CONSOLIDATING STATEMENT OF CASH FLOWS
|
| | | | | | | | | | | | | | | | | |
| |
| Parent Guarantor | | Issuer | | Subsidiary Guarantors | | Non- Guarantors | | Eliminations | | Consolidated |
| (In
$ millions) |
Net cash provided by (used in) operating activities | i 282 |
| | i 26 |
| | i 1,032 |
| | i 528 |
| | ( i 1,561 | ) | | i 307 |
|
Investing
Activities | | | | | | | | | | | |
Capital expenditures on property, plant and equipment | i — |
| | i — |
| | ( i 42 | ) | | ( i 37 | ) | | i — |
| | ( i 79 | ) |
Acquisitions,
net of cash acquired | i — |
| | i — |
| | ( i 31 | ) | | ( i 60 | ) | | i — |
| | ( i 91 | ) |
Return
of capital from subsidiary | i — |
| | i — |
| | i 4 |
| | i — |
| | ( i 4 | ) | | i — |
|
Intercompany
loan receipts (disbursements) | i — |
| | i — |
| | ( i 646 | ) | | i — |
| | i 646 |
| | i — |
|
Other,
net | i — |
| | i — |
| | i 2 |
| | ( i 9 | ) | | i — |
| | ( i 7 | ) |
Net
cash provided by (used in) investing activities | i — |
| | i — |
| | ( i 713 | ) | | ( i 106 | ) | | i 642 |
| | ( i 177 | ) |
Financing
Activities | | | | | | | | | | | |
Net change in short-term borrowings with maturities of 3 months or less | i — |
| | i 246 |
| | ( i 9 | ) | | ( i 4 | ) | | ( i 36 | ) | | i 197 |
|
Proceeds
from short-term borrowings | i — |
| | i — |
| | i — |
| | i 610 |
| | ( i 610 | ) | | i — |
|
Repayments
of short-term borrowings | i — |
| | i — |
| | i — |
| | ( i 12 | ) | | i — |
| | ( i 12 | ) |
Repayments
of long-term debt | i — |
| | i — |
| | i — |
| | ( i 7 | ) | | i — |
| | ( i 7 | ) |
Purchases
of treasury stock, including related fees | ( i 212 | ) | | i — |
| | i — |
| | i — |
| | i — |
| | ( i 212 | ) |
Dividends
to parent | i — |
| | ( i 272 | ) | | ( i 251 | ) | | ( i 1,038 | ) | | i 1,561 |
| | i — |
|
Common
stock dividends | ( i 70 | ) | | i — |
| | i — |
| | i — |
| | i — |
| | ( i 70 | ) |
Return
of capital to parent | i — |
| | i — |
| | i — |
| | ( i 4 | ) | | i 4 |
| | i — |
|
Distributions
to noncontrolling interests | i — |
| | i — |
| | i — |
| | ( i 4 | ) | | i — |
| | ( i 4 | ) |
Other,
net | i — |
| | i — |
| | ( i 20 | ) | | ( i 2 | ) | | i — |
| | ( i 22 | ) |
Net
cash provided by (used in) financing activities | ( i 282 | ) | | ( i 26 | ) | | ( i 280 | ) | | ( i 461 | ) | | i 919 |
| | ( i 130 | ) |
Exchange
rate effects on cash and cash equivalents | i — |
| | i — |
| | i — |
| | i 2 |
| | i — |
| | i 2 |
|
Net
increase (decrease) in cash and cash equivalents | i — |
| | i — |
| | i 39 |
| | ( i 37 | ) | | i — |
| | i 2 |
|
Cash
and cash equivalents as of beginning of period | i — |
| | i — |
| | i 30 |
| | i 409 |
| | i — |
| | i 439 |
|
Cash
and cash equivalents as of end of period | i — |
| | i — |
| | i 69 |
| | i 372 |
| | i — |
| | i 441 |
|
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
In this Quarterly Report on Form 10-Q ("Quarterly Report"), the term "Celanese" refers to Celanese Corporation, a Delaware corporation, and not its subsidiaries. The terms the "Company," "we," "our" and "us," refer to Celanese and its subsidiaries
on a consolidated basis. The term "Celanese US" refers to the Company's subsidiary, Celanese US Holdings LLC, a Delaware limited liability company, and not its subsidiaries. The following discussion should be read in conjunction with the Celanese Corporation and Subsidiaries consolidated financial statements as of and for the year ended December 31, 2019 filed on February 6, 2020 with the Securities and Exchange Commission ("SEC") as part of the
Company's Annual Reporting on Form 10-K ("2019 Form 10-K") and the unaudited interim consolidated financial statements and notes to the unaudited interim consolidated financial statements, which are prepared in accordance with accounting principles generally accepted in the United States of America ("US GAAP"). Investors are cautioned that the forward-looking statements contained in this section and other parts of this Quarterly Report 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 Statements" below and at the beginning of our 2019 Form 10-K.
Forward-Looking
Statements
Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") and other parts of this Quarterly Report contain certain forward-looking statements and information relating to us that are based on the beliefs of our management as well as assumptions made by, and information currently available to, us. Generally, words such as "believe," "expect," "intend," "estimate," "anticipate," "project," "plan," "may," "can," "could," "might," and "will," and similar expressions, as they relate to us are intended to identify forward-looking statements. These statements reflect our current views and beliefs with respect to future events at the time that the statements are made, are not historical facts or guarantees of future performance and involve risks and uncertainties that are difficult to predict
and many of which are outside of our control. Further, certain forward-looking statements are based upon assumptions as to future events that may not prove to be accurate. All forward-looking statements made in this Quarterly Report are made as of the date hereof, and the risk that actual results will differ materially from expectations expressed in this Quarterly Report will increase with the passage of time. We undertake no obligation, and disclaim any duty, to publicly update or revise any forward-looking statements, whether as a result of new information, future events, changes in our expectations or otherwise.
COVID-19 Update
On March 11, 2020, the World Health Organization declared the outbreak of a novel coronavirus ("COVID-19") as a pandemic, which continues to spread throughout the world, creating a dynamic and challenging
situation worldwide. COVID-19 originated in China and has spread to other countries where we have offices and production facilities as well as customers and suppliers. The COVID-19 pandemic is evolving, and to date has led to the implementation of various responses, including government-imposed quarantines, stay-at-home restrictions, travel restrictions and other public health safety measures. Our employees' health and well-being continue to be of vital importance. We have implemented contingency planning, and employees who can work remotely are doing so from their homes. For employees who are considered essential and are working in plants, we have implemented government recommended protocols and best practices related to social distancing and best hygiene practices, including the use of additional personal protective equipment, where appropriate. We have a global crisis team in place monitoring the rapidly evolving situation
and recommending risk mitigation actions, including the implementation of travel restrictions. Our presence in China provided us with an advance view of how COVID-19 scenarios can unfold as well as the importance of taking early action.
We operate within a geographically-balanced global footprint and have the ability to utilize different production and distribution strategies depending on the business and product to satisfy customer demands. We continue to pursue our existing operational strategy. Since our industry is considered essential by the local government in the majority of the areas we operate, most of our plants continue to be operational, and we have been able to maintain a largely consistent supply chain. However, as customer demand has weakened, we have temporarily reduced run rates at certain of our plants to reduce costs and inventory levels. During the three months ended
March 31, 2020, the effects of COVID-19 and related actions to control its spread had a negative impact on our operating results, primarily in the Acetyl Chain segment, as discussed in more detail in the individual reporting segment sections below. We expect the declines in consumer demand, particularly in the Western Hemisphere, to work through the relevant value chains in the second fiscal quarter of 2020. In Engineered Materials, our most impacted end markets reflect a significant decrease in big-ticket discretionary spending among consumers for items such as automobiles,
electronics
and appliances. Other application areas including food and beverage, medical, pharma and 5G infrastructure are more resilient. In the Acetyl Chain, we benefit from a highly diversified set of end-uses with less exposure, relative to others in the industry, to end markets that are more acutely impacted by COVID-19, like automotive. At the same time, we see resiliency and even growth in some applications including water bottles, packaging, hygiene products, disinfectants, pharma and cigarettes. However, the historically low acetic acid pricing, along with the recent developments with global oil markets, continue to present a deflationary environment for the Acetyl Chain business. We anticipate that our operations will continue to be negatively impacted through at least our second fiscal quarter of 2020, as the economies in which we operate hopefully begin to recover from COVID-19. We currently anticipate that customer demand and our results of our operations should begin
to normalize in the second half of fiscal 2020, absent a similar resurgence of COVID-19. The extent to which COVID-19 will adversely impact our business, financial condition and results of operations will depend on numerous evolving factors, which are highly uncertain, rapidly changing and cannot be predicted. For further information regarding the impact COVID-19 could have on our business, financial condition and results of operations, see Part II - Item 1A. Risk Factors.
Risk Factors
See Part I - Item 1A. Risk Factors of our 2019 Form 10-K and subsequent periodic filings we make with the SEC for a description of certain risk factors that you should consider which could significantly affect our financial results. In addition, the following factors could cause our actual
results to differ materially from those results, performance or achievements that may be expressed or implied by such forward-looking statements. These factors include, among other things:
| |
• | changes in general economic, business, political and regulatory conditions in the countries or regions in which we operate; |
| |
• | the length and depth of product and industry business cycles particularly in the automotive, electrical, textiles, electronics and construction industries; |
| |
• | changes
in the price and availability of raw materials, particularly changes in the demand for, supply of, and market prices of ethylene, methanol, natural gas, wood pulp and fuel oil and the prices for electricity and other energy sources; |
| |
• | 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, expansions and maintenance; |
| |
• | the
ability to reduce or maintain current levels of production costs and to improve productivity by implementing technological improvements to existing plants; |
| |
• | increased price competition and the introduction of competing products by other companies; |
| |
• | the ability to identify desirable potential acquisition targets and to consummate acquisition or investment transactions, including obtaining regulatory approvals, consistent with our strategy; |
| |
• | market
acceptance of our technology; |
| |
• | the ability to obtain governmental approvals and to construct facilities on terms and schedules acceptable to us; |
| |
• | changes in applicable tariffs, duties and trade agreements, tax rates or legislation throughout the world including, but not limited to, adjustments, changes in estimates or interpretations that may impact recorded or future tax impacts associated with the Tax Cuts and Jobs Act (the "TCJA"); |
| |
• | changes
in the degree of intellectual property and other legal protection afforded to our products or technologies, or the theft of such intellectual property; |
| |
• | compliance and other costs and potential disruption or interruption of production or operations due to accidents, interruptions in sources of raw materials, cyber security incidents, terrorism or political unrest, public health crises (including, but not limited to, the coronavirus outbreak), or other unforeseen events or delays in construction or operation of facilities, including as a result of geopolitical conditions, the occurrence of acts of war or terrorist incidents or as a result of weather, natural disasters, or other crises including public health crises; |
| |
• | potential
liability for remedial actions and increased costs under existing or future environmental regulations, including those relating to climate change; |
| |
• | potential liability resulting from pending or future claims or litigation, including investigations or enforcement actions, or from changes in the laws, regulations or policies of governments or other governmental activities, in the countries in which we operate; |
| |
• | changes
in currency exchange rates and interest rates; |
| |
• | our level of indebtedness, which could diminish our ability to raise additional capital to fund operations or limit our ability to react to changes in the economy or the chemicals industry; and |
| |
• | various other factors, both referenced and not referenced in this Quarterly Report. |
Many of these factors are macroeconomic in nature and are, therefore, beyond our control. In addition, COVID-19 and responses to the
pandemic by governments and businesses, have significantly increased financial and economic volatility and uncertainty, exacerbating the risks and potential impact of these factors. Should one or more of these risks or uncertainties materialize, affect us in ways or to an extent that we currently do not expect or consider to be significant, or should underlying assumptions prove incorrect, our actual results, performance or achievements may vary materially from those described in this Quarterly Report as anticipated, believed, estimated, expected, intended, planned or projected. We neither intend nor assume any obligation to update these forward-looking statements, which speak only as of their dates.
Overview
We are a global chemical and specialty materials company. We are a leading global producer of high performance engineered polymers that are used in a variety of high-value applications,
as well as one of the world's largest producers of acetyl products, which are intermediate chemicals, for nearly all major industries. As a recognized innovator in the chemicals industry, we engineer and manufacture a wide variety of products essential to everyday living. Our broad product portfolio serves a diverse set of end-use applications including automotive, chemical additives, construction, consumer and industrial adhesives, consumer and medical, energy storage, filtration, food and beverage, paints and coatings, paper and packaging, performance industrial and textiles. Our products enjoy leading global positions due to our differentiated business models, large global production capacity, operating efficiencies, proprietary technology and competitive cost structures.
Our large and diverse global customer base primarily consists of major companies across a broad array of industries. We hold geographically balanced global
positions and participate in diversified end-use applications. We combine a demonstrated track record of execution, strong performance built on differentiated business models and a clear focus on growth and value creation. Known for operational excellence, reliability and execution of our business strategies, we partner with our customers around the globe to deliver best-in-class technologies and solutions.
Results of Operations
Financial Highlights
|
| | | | | | | | |
| | | |
| 2020 | | 2019 | | Change |
| (unaudited) |
| (In $ millions, except percentages) |
Statement
of Operations Data | | | | | |
Net sales | 1,460 |
| | 1,687 |
| | (227 | ) |
Gross
profit | 348 |
| | 453 |
| | (105 | ) |
Selling, general and administrative ("SG&A") expenses | (125 | ) | | (120 | ) | | (5 | ) |
Other
(charges) gains, net | (6 | ) | | 4 |
| | (10 | ) |
Operating profit (loss) | 194 |
| | 320 |
| | (126 | ) |
Equity
in net earnings (loss) of affiliates | 57 |
| | 50 |
| | 7 |
|
Non-operating pension and other postretirement employee benefit (expense) income | 28 |
|
| 17 |
| | 11 |
|
Interest
expense | (28 | ) | | (31 | ) | | 3 |
|
Dividend income - equity investments | 37 |
| | 32 |
| | 5 |
|
Earnings
(loss) from continuing operations before tax | 292 |
| | 385 |
| | (93 | ) |
Earnings (loss) from continuing operations | 227 |
| | 339 |
| | (112 | ) |
Earnings
(loss) from discontinued operations | (7 | ) | | (1 | ) | | (6 | ) |
Net earnings (loss) | 220 |
| | 338 |
| | (118 | ) |
Net
earnings (loss) attributable to Celanese Corporation | 218 |
| | 337 |
| | (119 | ) |
Other Data | | | | | |
Depreciation
and amortization | 85 |
| | 83 |
| | 2 |
|
SG&A expenses as a percentage of Net sales | 8.6 | % | | 7.1 | % | | |
Operating
margin(1) | 13.3 | % | | 19.0 | % | |
|
|
Other (charges) gains, net | | | | | |
Restructuring | (6 | ) | | 1 |
| | (7 | ) |
Asset
impairments | (4 | ) | | — |
| | (4 | ) |
Plant/office closures | (1 | ) | | (1 | ) | | — |
|
Commercial
disputes | 5 |
| | 4 |
| | 1 |
|
Total Other (charges) gains, net | (6 | ) | | 4 |
| | (10 | ) |
| |
(1) | Defined
as Operating profit (loss) divided by Net sales. |
|
| | | | | |
| | | |
| (unaudited) |
| (In
$ millions) |
Balance Sheet Data | | | |
Cash and cash equivalents | 570 |
| | 463 |
|
| | | |
Short-term
borrowings and current installments of long-term debt - third party and affiliates | 749 |
| | 496 |
|
Long-term debt, net of unamortized deferred financing costs | 3,356 |
| | 3,409 |
|
Total debt | 4,105 |
| | 3,905 |
|
Factors Affecting Business Segment Net Sales
The percentage increase (decrease) in Net sales attributable to each of the factors indicated for each of our business segments is as follows:
|
| | | | | | | | | | | | | |
| Volume | | Price | | Currency | | Other | | Total |
| (unaudited) |
| (In
percentages) |
Engineered Materials | (9 | ) | | (5 | ) | | (1 | ) | | — | | (15 | ) |
Acetate
Tow | (17 | ) | | (5 | ) | | — |
| | — | | (22 | ) |
Acetyl Chain | (3 | ) | | (7 | ) | | (1 | ) | | 1 | | (10 | ) |
Total
Company | (7 | ) | | (6 | ) | | (1 | ) | | 1 | | (13 | ) |
Consolidated Results
Net sales decreased $227 million, or 13%, for the three months ended March 31, 2020 compared to the same period in 2019, primarily due to: | |
• | lower volume across all of our segments,
primarily driven by a continued reduction in the customer demand environment in Asia, which was impacted by the COVID-19 pandemic, in our Acetyl Chain segment, as well as continued deterioration of global economic conditions in our Engineered Materials segment; |
| |
• | lower pricing in our Acetyl Chain and Engineered Materials segments; and |
| |
• | an unfavorable currency impact in our Acetyl Chain and Engineered Materials segments. |
Operating profit decreased
$126 million, or 39%, for the three months ended March 31, 2020 compared to the same period in 2019, primarily due to: | |
• | lower Net sales across all of our segments; and |
| |
• | higher spending in our Engineered Materials and Acetyl Chain segments; |
partially
offset by:
| |
• | lower raw material costs within our Engineered Materials and Acetyl Chain segments. |
Equity in net earnings (loss) of affiliates increased $7 million for the three months ended March 31, 2020 compared to the same period in 2019, primarily due to: | |
• | an
increase in equity investment in earnings of $8 million from our Ibn Sina strategic affiliate, primarily as a result of decreased plant turnaround activity. |
Our effective income tax rate for the three months ended March 31, 2020 was 22% compared to 12% for the same period in 2019. The higher effective income tax rate for the three months ended March 31, 2020 compared to the same period in 2019
was primarily due to the impact of functional currency differences in offshore jurisdictions and changes in the jurisdictional mix of earnings. See Note 13 - Income Taxes in the accompanying unaudited interim consolidated financial statements for further information.
Business Segments
Engineered
Materials |
| | | | | | | | | | | |
| Three Months Ended March 31, | | Change | | % Change |
| 2020 | | 2019 | | |
| (unaudited) |
| (In
$ millions, except percentages) |
Net sales | 563 |
| | 663 |
| | (100 | ) | | (15.1 | )% |
Net Sales Variance | | | | | | | |
Volume | (9 | )% | | | | | | |
Price | (5 | )% | | | | | | |
Currency | (1 | )% | | | | | | |
Other | — | % | | | | | | |
Other
(charges) gains, net | — |
| | 15 |
| | (15 | ) | | (100.0 | )% |
Operating profit (loss) | 102 |
| | 144 |
| | (42 | ) | | (29.2 | )% |
Operating
margin | 18.1 | % | | 21.7 | % | | | |
|
|
Equity in net earnings (loss) of affiliates | 53 |
| | 46 |
| | 7 |
| | 15.2 | % |
Depreciation
and amortization | 34 |
| | 32 |
| | 2 |
| | 6.3 | % |
Our Engineered Materials segment includes our engineered materials business, our food ingredients business and certain strategic affiliates. Our engineered
materials business develops, produces and supplies a broad portfolio of high performance specialty polymers for automotive and medical applications, as well as industrial products and consumer electronics. Together with our strategic affiliates, our engineered materials business is a leading participant in the global specialty polymers industry. Our food ingredients business is a leading global supplier of acesulfame potassium for the food and beverage industry and is a leading producer of food protection ingredients, such as potassium sorbate and sorbic acid.
The pricing of products within the Engineered Materials segment is primarily based on the value of the material we produce and is generally independent of changes in the cost of raw materials. Therefore, in general, margins may expand or contract in response to changes in raw material
costs. Net sales decreased for the three months ended March 31, 2020 compared to the same period in 2019, primarily due to: | |
• | lower volume for most of our products driven by continued deterioration of global economic conditions; |
| |
• | lower
pricing for most of our products, primarily due to a continued reduction in customer demand, as well as customer and product mix; and |
| |
• | an unfavorable currency impact resulting from a weaker Euro relative to the US dollar. |
Operating profit decreased for the three months ended March 31, 2020 compared to the same period in 2019, primarily due to: | |
• | an unfavorable impact to Other (charges) gains, net. During the three months ended March 31, 2019, we recorded a $15 million gain related to a settlement of a commercial dispute from a previous acquisition, which did not recur in the current year. See Note 12 - Other (Charges) Gains, Net in the accompanying unaudited interim consolidated financial statements for further information; and |
| |
• | higher
spending costs of $11 million, primarily as a result of higher maintenance costs and plant turnaround activity; |
partially offset by:
| |
• | lower raw material costs for most of our products. |
Equity in net earnings (loss) of affiliates increased for the three
months ended March 31, 2020 compared to the same period in 2019, primarily due to: | |
• | an increase in equity investment in earnings of $8 million from our Ibn Sina strategic affiliate, primarily as a result of decreased plant turnaround activity. |
Acetate Tow |
| | | | | | | | | | | |
| Three
Months Ended March 31, | | Change | | % Change |
| 2020 | | 2019 | | |
| (unaudited) |
| (In
$ millions, except percentages) |
Net sales | 129 |
| | 166 |
| | (37 | ) | | (22.3 | )% |
Net Sales Variance | | | | | | | |
Volume | (17 | )% | | | | | | |
Price | (5 | )% | | | | | | |
Currency | — | % | | | | | | |
Other | — | % | | | | | | |
Other
(charges) gains, net | (1 | ) | | — |
| | (1 | ) | | (100.0 | )% |
Operating profit (loss) | 27 |
| | 40 |
| | (13 | ) | | (32.5 | )% |
Operating
margin | 20.9 | % | | 24.1 | % | | | | |
Dividend income - equity investments | 37 |
| | 32 |
| | 5 |
| | 15.6 | % |
Depreciation
and amortization | 8 |
| | 10 |
| | (2 | ) | | (20.0 | )% |
Our Acetate Tow segment serves consumer-driven applications. We are a leading global producer and supplier of acetate tow and acetate flake, primarily used
in filter products applications.
The pricing of products within the Acetate Tow segment is sensitive to demand and is primarily based on the value of the product we produce. Many sales in this business are conducted under contracts with pricing for one or more years. As a result, margins may expand or contract in response to changes in market conditions over these similar periods, and we may be unable to adjust pricing also due to other factors, such as the intense level of competition in the industry. Net sales decreased for the three months ended March 31, 2020 compared to the same period in 2019, primarily due to: | |
• | lower acetate flake volume, primarily due to the expiration of an acetate flake contract; |
| |
• | lower
acetate tow volume, consistent with global demand reduction; and |
| |
• | lower acetate tow pricing, primarily due to customer mix. |
Operating profit decreased for the three months ended March 31, 2020 compared to the same period in 2019, primarily due to: partially offset by:
| |
• | lower energy costs of $7 million, primarily related to the closure of our acetate flake manufacturing unit in Ocotlán, Mexico in the prior year. |
Acetyl Chain |
| | | | | | | | | | | |
| Three
Months Ended March 31, | | Change | | % Change |
| 2020 | | 2019 | | |
| (unaudited) |
| (In
$ millions, except percentages) |
Net sales | 799 |
| | 889 |
| | (90 | ) | | (10.1 | )% |
Net Sales Variance | | | | | | | |
Volume | (3 | )% | | | | | | |
Price | (7 | )% | | | | | | |
Currency | (1 | )% | | | | | | |
Other | 1 | % | | | | | | |
Operating
profit (loss) | 135 |
| | 202 |
| | (67 | ) | | (33.2 | )% |
Operating margin | 16.9 | % | | 22.7 | % | | |
| | |
Depreciation
and amortization | 39 |
| | 38 |
| | 1 |
| | 2.6 | % |
Our Acetyl Chain segment includes the integrated chain of intermediate chemistry, emulsion polymers and ethylene vinyl acetate ("EVA") polymers
businesses. Our intermediate chemistry business produces and supplies acetyl products, including acetic acid, vinyl acetate monomer ("VAM"), acetic anhydride and acetate esters. These products are generally used as starting materials for colorants, paints, adhesives, coatings and pharmaceuticals. It also produces organic solvents and intermediates for pharmaceutical, agricultural and chemical products. Our emulsion polymers business is a leading global producer of vinyl acetate-based emulsions and develops products and application technologies to improve performance, create value and drive innovation in applications such as paints and coatings, adhesives, construction, glass fiber, textiles and paper. Our EVA polymers business is a leading North American manufacturer of a full range of specialty EVA resins and compounds, as well as select grades of low-density polyethylene. Our EVA polymers products are used in many applications, including flexible packaging films,
lamination film products, hot melt adhesives, automotive parts and carpeting.
The pricing of products within the Acetyl Chain is influenced by industry utilization rates and changes in the cost of raw materials. Therefore, in general, there is a directional correlation between these factors and our Net sales for most Acetyl Chain products. This impact to pricing typically lags changes in raw material costs over months or quarters.
Net sales decreased for the three months ended March 31,
2020 compared to the same period in 2019, primarily due to: | |
• | lower pricing for most of our products, primarily due to an overall deflationary environment for raw materials and a continued reduction in the customer demand environment, which was also impacted by the COVID-19 pandemic; |
| |
• | lower volume for most of our products due to a continued reduction in the customer demand environment in Asia, which was also impacted by the COVID-19 pandemic, partially offset by
higher volume for VAM due to increased customer demand and focus on downstream products in the Western Hemisphere; and |
| |
• | an unfavorable currency impact resulting from a weaker Euro relative to the US dollar. |
Operating profit decreased for the three months ended March 31, 2020 compared to the same period in 2019, primarily due to: | |
• | higher plant turnaround costs of $14 million related to our joint venture, Fairway Methanol LLC ("Fairway"); and |
| |
• | higher costs of $10 million, primarily related to plant operating costs and expansion projects; |
partially offset by:
| |
• | lower
raw material costs, primarily for ethylene, carbon monoxide and methanol. |
Other Activities |
| | | | | | | | | | | |
| Three
Months Ended March 31, | | Change | | % Change |
| 2020 | | 2019 | | |
| (unaudited) |
| (In
$ millions, except percentages) |
Other (charges) gains, net | (5 | ) | | (11 | ) | | 6 |
| | 54.5 | % |
Operating profit (loss) | (70 | ) | | (66 | ) | | (4 | ) | | (6.1 | )% |
Equity
in net earnings (loss) of affiliates | 3 |
| | 3 |
| | — |
| | — | % |
Non-operating pension and other postretirement employee benefit (expense) income | 28 |
| | 17 |
| | 11 |
| | 64.7 | % |
Depreciation
and amortization | 4 |
| | 3 |
| | 1 |
| | 33.3 | % |
Other Activities primarily consists of corporate center costs, including administrative activities such as finance, information technology and human resource
functions, interest income and expense associated with financing activities and results of our captive insurance companies. Other Activities also includes the components of net periodic benefit cost (interest cost, expected return on assets and net actuarial gains and losses) for our defined benefit pension plans and other postretirement plans not allocated to our business segments.
Operating loss increased for the three months ended March 31, 2020 compared to the same period
in 2019, primarily due to: | |
• | an unfavorable currency impact of $5 million resulting from a weaker Euro relative to the US dollar; and |
| |
• | higher functional spending of $3 million; |
largely offset by:
| |
• | a favorable impact of $6 million
to Other (charges) gains, net. During the three months ended March 31, 2019 we recorded an $11 million loss related to a settlement by our captive insurer with a former third-party customer, which did not recur in the current year. This was partially offset by $5 million in employee termination benefits during the three months ended March 31, 2020, primarily related to business optimization projects. See Note 12 - Other (Charges) Gains, Net in the accompanying unaudited interim consolidated financial statements for further information. |
Non-operating
pension and other postretirement employee benefit income increased for the three months ended March 31, 2020 compared to the same period in 2019, primarily due to: | |
• | lower interest cost and higher expected return on plan assets. |
Liquidity and Capital Resources
Our primary source of liquidity is cash generated from operations, available cash and cash equivalents and dividends from our portfolio of strategic investments. In addition, as of March 31, 2020, we have $1.0 billion available for borrowing under our senior unsecured revolving credit facility and $5 million available under our accounts receivable securitization facility to assist, if required, in meeting our working capital needs and other contractual obligations. While our contractual obligations, commitments and debt service requirements over the next several years are significant, we
continue to believe we will have available resources to meet our liquidity requirements, including debt service, for the next twelve months. If our cash flow from operations is insufficient to fund our debt service and other obligations, we may be required to use other means available to us such as increasing our borrowings, reducing or delaying capital expenditures, seeking additional capital or seeking to restructure or refinance our indebtedness. There can be no assurance, however, that we will continue to generate cash flows at or above current levels.
Total cash outflows for capital expenditures are expected to be in the range of $325 million to $350 million in 2020, primarily due to additional investments in growth opportunities and productivity improvements primarily in our Engineered
Materials and Acetyl Chain segments.
On a stand-alone basis, Celanese and its immediate 100% owned subsidiary, Celanese US, have no material assets other than the stock of their subsidiaries and no independent external operations of their own. Accordingly, they generally depend on the cash flow of their subsidiaries and their ability to pay dividends and make other distributions to Celanese and Celanese US in order to meet their obligations, including their obligations under senior credit facilities and senior notes and to pay dividends on our Common stock, par value $0.0001 per share ("Common Stock"). We are subject to capital controls and exchange
restrictions imposed by the local governments in certain jurisdictions where we operate, such as China, India and Indonesia. Capital controls impose limitations on our ability to exchange currencies, repatriate earnings or capital, lend via intercompany loans or create cross-border cash pooling arrangements. Our largest exposure to a country with capital controls is in China. Pursuant to applicable regulations, foreign-invested enterprises in China may pay dividends only out of their accumulated profits, if any, determined in accordance with Chinese accounting standards and regulations. In addition, the Chinese government imposes certain currency exchange controls on cash transfers out of China, puts certain limitations on duration, purpose and amount of intercompany loans, and restricts cross-border cash pooling.
Cash Flows
Cash and cash equivalents increased
$107 million to $570 million as of March 31, 2020 compared to December 31, 2019. As of March 31, 2020, $492 million of the $570 million of cash and cash equivalents was held by our foreign subsidiaries. Under the TCJA, we have incurred a prior year charge associated with the deemed repatriation of previously unremitted foreign earnings, including foreign held cash. These funds are largely accessible without additional
material tax consequences, if needed in the US, to fund operations. See Note 13 - Income Taxes in the accompanying unaudited interim consolidated financial statements for further information. | |
• | Net Cash Provided by (Used in) Operating Activities |
Net cash provided by operating activities decreased $48 million to $259 million for the three months ended
March 31, 2020 compared to $307 million for the same period in 2019. Net cash provided by operating activities for the three months ended March 31, 2020 decreased, primarily due to: | |
• | a decrease in net earnings; |
partially offset by:
| |
• | a
decrease in incentive compensation payouts of $42 million; and |
| |
• | favorable trade working capital of $14 million, primarily due to an increase in trade payables related to higher capital expenditures in the current year, partially offset by an increase in inventory as a result of inventory build-up for plant turnarounds in the current year. |
| |
• | Net
Cash Provided by (Used in) Investing Activities |
Net cash used in investing activities decreased $49 million to $128 million for the three months ended March 31, 2020 compared to $177 million for the same period in 2019, primarily due to: | |
• | a net cash outflow of $91 million
related to the acquisition of Next Polymers Ltd. in January 2019; |
partially offset by:
| |
• | an increase of $40 million in capital expenditures related to growth and productivity improvements in our Engineered Materials and Acetyl Chain segments. |
| |
• | Net Cash Provided by (Used in) Financing Activities |
Net cash used
in financing activities decreased $114 million to $16 million for the three months ended March 31, 2020 compared to $130 million for the same period in 2019, primarily due to: | |
• | an increase in net borrowings on short-term debt of $76 million, due to higher borrowings during the three months ended
March 31, 2020 related to us entering into an aggregate of $300 million in short-term, bilateral term loans, which were primarily used to repay borrowings under our outstanding senior unsecured revolving credit facility; and |
| |
• | lower share repurchases of our Common Stock of $45 million during the three months ended March 31, 2020. |
Debt and Other Obligations
There
have been no material changes to our debt or other obligations described in our 2019 Form 10-K other than those disclosed above and in Note 8 - Debt in the accompanying unaudited interim consolidated financial statements. Other Financing Arrangements
We have a factoring agreement with a global financial institution to sell certain accounts receivable on a non-recourse basis. These transactions are treated as a sale and are accounted for as a reduction in accounts receivable because the agreement transfers effective control over and risk related to the receivables to the buyer. We have no continuing involvement in the transferred receivables, other than collection and administrative responsibilities and,
once sold, the accounts receivable are no longer available to satisfy creditors in the event of bankruptcy. We de-recognized $69 million and $257 million of accounts receivable as of March 31, 2020 and December 31, 2019, respectively. Share Capital
We declared a quarterly cash dividend of $0.62 per share on our Common Stock on April 15, 2020, amounting to $73 million. There have been no material changes to our share capital
described in our 2019 Form 10-K other than those disclosed in Note 11 - Stockholders' Equity in the accompanying unaudited interim consolidated financial statements. Contractual Obligations
Except as otherwise described in this report, there have been no material revisions outside the ordinary course of business to our contractual obligations as described in our 2019 Form 10-K.
Off-Balance Sheet Arrangements
We have not entered into any material off-balance sheet arrangements.
Critical Accounting Policies and Estimates
Our unaudited interim consolidated financial statements are based on the selection and application of significant accounting policies. The preparation of unaudited interim consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the unaudited interim consolidated financial statements and the reported amounts of net sales, expenses and allocated charges during the reporting period. Actual results could differ from those estimates. However, we are not currently aware of any reasonably likely events or circumstances that would result in materially different results.
We describe our significant
accounting policies in Note 2 - Summary of Accounting Policies, of the Notes to the Consolidated Financial Statements included in our 2019 Form 10-K. We discuss our critical accounting policies and estimates in MD&A in our 2019 Form 10-K.
Recent Accounting Pronouncements
See Note 2 - Recent Accounting Pronouncements in the accompanying unaudited interim consolidated financial statements included in this Quarterly Report for information regarding recent accounting pronouncements. Item 3. Quantitative
and Qualitative Disclosures about Market Risk
Market risk for the Company has not changed materially from the foreign exchange, interest rate and commodity risks disclosed in Item 7A. Quantitative and Qualitative Disclosures about Market Risk in our 2019 Form 10-K. See also Note 14 - Derivative Financial Instruments in the accompanying unaudited interim consolidated financial statements for further discussion of our market risk management and the related impact on the Company's financial position and results of operations. Item 4.
Controls and Procedures
Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including the Chief Executive Officer and Chief Financial Officer, we have evaluated the effectiveness of our disclosure controls and procedures pursuant to Rule 13a-15(b) under the Securities Exchange Act of 1934, as amended, as of the end of the period covered by this report. Based on that evaluation, as of March 31, 2020, the Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures are effective. Changes in Internal Control Over Financial Reporting
During the period covered by this report, 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.
PART II — OTHER INFORMATION
Item 1. Legal Proceedings
The
Company is involved in legal and regulatory proceedings, lawsuits, claims and investigations incidental to the normal conduct of its business, relating to such matters as product liability, land disputes, insurance coverage disputes, contracts, employment, antitrust and competition, intellectual property, personal injury and other actions in tort, workers' compensation, chemical exposure, asbestos exposure, taxes, trade compliance, acquisitions and divestitures, claims of current and legacy stockholders, past waste disposal practices and release of chemicals into the environment. The Company is actively defending those matters where it is named as a defendant. Due to the inherent subjectivity of assessments and unpredictability of outcomes of legal proceedings, the
Company's litigation accruals and estimates of possible loss or range of possible loss may not represent the ultimate loss to the Company from legal proceedings. See Note 10 - Environmental and Note 16 - Commitments and Contingencies in the accompanying unaudited interim consolidated financial statements for a discussion of material environmental matters and material commitments and contingencies related to legal and regulatory proceedings. There have been no significant developments in the "Legal Proceedings" described in our 2019 Form 10-K other than those
disclosed in Note 10 - Environmental and Note 16 - Commitments and Contingencies in the accompanying unaudited interim consolidated financial statements. See Part I - Item 1A. Risk Factors of our 2019 Form 10-K for certain risk factors relating to these legal proceedings. Item 1A. Risk Factors
The Company
is supplementing the risk factors previously disclosed in the Company's Annual Report on Form 10-K for the year ended December 31, 2019, filed with the Securities and Exchange Commission on February 6, 2020 (the "2019 Form 10-K"), to include the following risk factor under the heading "Risks Related to Our Business." The extent to which the novel coronavirus ("COVID-19") pandemic or similar public health crises will adversely impact our business, financial condition and results of operations is highly uncertain and cannot be predicted.
Public health crises such as pandemics or similar outbreaks could adversely impact our business. In December 2019, a novel strain of a virus named
SARS-CoV-2 (severe acute respiratory syndrome coronavirus 2), or coronavirus, which causes coronavirus disease 2019, or COVID-19, surfaced in Wuhan, China and has reached multiple other regions and countries where we and our customers and suppliers have offices and production facilities. The COVID-19 pandemic is evolving, and to date has led to the implementation of various responses, including government-imposed quarantines, stay-at-home restrictions, travel restrictions and other public health safety measures, as well as reported adverse impacts on healthcare resources, facilities and providers. The extent to which COVID-19 impacts our operations or those of our customers or suppliers will depend on future developments and numerous factors, which are highly uncertain and cannot be predicted with confidence, including the duration of the outbreak, additional or modified government actions, new information that will emerge concerning the severity and impact of COVID-19
and the actions to contain COVID-19 or address its impact in the short and long term, among others.
The extent to which COVID-19 will adversely impact our business, financial condition and results of operations will depend on numerous evolving factors, which are highly uncertain, rapidly changing and cannot be predicted, including:
| |
• | the duration and scope of the outbreak; |
| |
• | governmental, business and individual actions that have been and continue to be taken in response to the outbreak, including
social distancing, work-at-home, stay-at-home and shelter-in-place orders and shutdowns, travel restrictions and quarantines; |
| |
• | the effect of the outbreak on our customers, suppliers, supply chain and other business partners; |
| |
• | our ability during the outbreak to provide our products and services, including the health and well-being of our employees; |
| |
• | business
disruptions caused by actual or potential plant, workplace and office closures, and an increased reliance on employees working from home, disruptions to or delays in ongoing laboratory and product testing, experiments and operations, staffing shortages, travel limitations, cyber security and data accessibility, or communication or mass transit disruptions, any of which could adversely impact our business operations or delay necessary interactions with local regulators, manufacturing sites and other important agencies and contractors; |
| |
• | the
ability of our customers to pay for our products and services during and following the outbreak; |
| |
• | the impact of the outbreak on the financial markets and economic activity generally; |
| |
• | our ability to access usual sources of liquidity on reasonable terms; and |
| |
• | our ability to comply with the financial
covenant in our Credit Agreement if a material economic downturn results in increased indebtedness or substantially lower EBITDA. |
The COVID-19 pandemic has significantly increased financial and economic volatility and uncertainty. A continued slowdown or downturn in the economy has begun to have, and we expect will continue to have, a negative impact on many of our customers. Our operations and financial results could be materially adversely impacted to the extent that the decline in certain customer orders are materially greater than we have experienced to date during the COVID-19 pandemic, or our expenses increase due to the impact of the pandemic, including as a result of impacts on our labor costs or productivity, supply chain disruptions or future actions by governments or businesses.
The COVID-19 pandemic continues to rapidly evolve, and it is unknown how long
disruptions to our business operations resulting from the COVID-19 pandemic, including any disruptions relating to the ultimate geographic spread of the disease. However, any prolonged disruption could have a material adverse impact our business, financial condition and results of operations, and we will continue to monitor the situation closely.
In addition, the trading prices for our common stock and other chemical companies have been highly volatile as a result of the COVID-19 pandemic. As a result, we may face difficulties raising capital through equity or debt financings, or such financing transactions may be on unfavorable terms.
Please also refer to the complete Item 1A of the 2019 Form 10-K filed for additional risks and uncertainties facing the Company that may have a material adverse effect
on the Company's business prospects, financial condition and results of operations. The COVID-19 pandemic, and responses to the pandemic by governments and businesses, have exacerbated many of the risks and potential impact of the factors addressed in Item 1A of the 2019 Form 10-K, and may affect us in additional ways or to an extent that we currently do not expect or consider to be significant. Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Repurchases of our Common Stock during the three months ended March 31, 2020 are as follows: |
| | | | | | | | | | | | | | |
Period | | Total
Number
of Shares Purchased(1) | | Average
Price Paid per Share | | Total Number of
Shares Purchased as
Part of Publicly Announced Program | | Approximate Dollar
Value of Shares
Remaining that may be
Purchased Under the Program(2) |
| | (unaudited) |
January
1-31, 2020 | | — |
| | $ | — |
| | — |
| | $ | 1,213,000,000 |
|
February
1-29, 2020 | | 479,761 |
| | $ | 94.16 |
| | 479,761 |
| | $ | 1,168,000,000 |
|
March
1-31, 2020 | | 1,229,670 |
| | $ | 85.41 |
| | 1,229,670 |
| | $ | 1,063,000,000 |
|
Total | | 1,709,431 |
| | | | 1,709,431 |
| | |
| |
(1) | May
include shares withheld from employees to cover their withholding requirements for personal income taxes related to the vesting of restricted stock. |
| |
(2) | As of March 31, 2020, our Board of Directors has authorized the repurchase of $5.4 billion of our Common Stock since February 2008. |
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
None.
Item 5.
Other Information
None.
Item 6. Exhibits(1)
|
| | |
Exhibit Number | | |
| Description |
| | |
3.1 | | |
| | |
3.1(a) | | |
| | |
3.1(b) | | |
| | |
3.1(c) | | |
| | |
3.2 | | |
| | |
10.1*‡ | | |
| | |
10.2*‡ | | |
| | |
10.3*‡ | | |
| | |
10.4*‡ | | |
| | |
10.5*‡ | | |
| | |
10.6*‡ | | |
| | |
10.7*‡ | | |
| | |
10.8*‡ | | |
| | |
10.9*‡ | | |
| | |
31.1* | | |
| | |
31.2* | | |
| | |
32.1* | | |
| | |
32.2* | | |
| | |
101.INS* | | Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. |
| | |
101.SCH* | | Inline
XBRL Taxonomy Extension Schema Document. |
| | |
101.CAL* | | Inline XBRL Taxonomy Extension Calculation Linkbase Document. |
| | |
101.DEF* | | Inline XBRL Taxonomy Extension Definition Linkbase Document. |
| | |
101.LAB* | | Inline
XBRL Taxonomy Extension Label Linkbase Document. |
| | |
101.PRE* | | Inline XBRL Taxonomy Extension Presentation Linkbase Document. |
| | |
104 | | The cover page from the
Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2020 has been formatted in Inline XBRL. |
| |
‡ | Indicates
a management contract or compensatory plan or arrangement. |
| |
(1) | The Company and its subsidiaries have in the past issued, and may in the future issue from time to time, long-term debt. The Company may not file with the applicable report copies of the instruments defining the rights of holders of long-term debt to the extent that the aggregate principal amount of the debt
instruments of any one series of such debt instruments for which the instruments have not been filed has not exceeded or will not exceed 10% of the assets of the Company at any pertinent time. The Company hereby agrees to furnish a copy of any such instrument(s) to the SEC upon request. |
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. |
| | | | |
| CELANESE CORPORATION |
| | | | |
| | By: | |
| | | |
| | | Chairman of the Board of Directors, |
| | | Chief
Executive Officer and President |
| | | | |
| | | Date: | |
|
| | | | |
| | By: | |
| | | |
| | | Executive Vice President and |
| | | Chief
Financial Officer |
| | | | |
| | | Date: | |
