e10vq
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
20549
Form 10-Q
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þ
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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For the quarterly period ended
June 30,
2010
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Or
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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(Commission File Number)
001-32410
CELANESE CORPORATION
(Exact Name of Registrant as
Specified in its Charter)
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Delaware
(State or Other Jurisdiction of
Incorporation or Organization)
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98-0420726
(I.R.S. Employer
Identification No.)
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1601 West LBJ Freeway,
Dallas, TX
(Address of Principal Executive Offices)
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75234-6034
(Zip Code)
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(972) 443-4000
(Registrants telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been
subject to such filing requirements for the past
90 days. Yes þ No o
Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate Web site, if any,
every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of
Regulation S-T
(§ 232.405 of this chapter) during the preceding
12 months (or for such shorter period that the registrant
was required to submit and post such
files). Yes þ No o
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated
filer, or a smaller reporting company. See the definitions of
large accelerated filer, accelerated
filer and smaller reporting company in Rule
12b-2 of the
Exchange Act. (Check one):
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Large
accelerated
filer þ
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Accelerated
filer o
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Non-accelerated
filer o
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Smaller
reporting
company o
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(Do not check if a smaller reporting company)
Indicate by check mark whether the registrant is a shell company
(as defined in
Rule 12b-2
of the Exchange
Act). Yes o No þ
The number of outstanding shares of the registrants
Series A common stock, $0.0001 par value, as of
July 26, 2010 was 156,083,014.
CELANESE
CORPORATION
Form 10-Q
For the Quarterly Period Ended June 30, 2010
TABLE OF CONTENTS
2
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Item 1.
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Financial
Statements
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CELANESE
CORPORATION AND SUBSIDIARIES
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Three Months Ended June 30,
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Six Months Ended June 30,
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2010
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2009
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2010
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2009
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As Adjusted
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As Adjusted
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(Note 3)
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(Note 3)
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(In $ millions, except share and per share data)
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Net sales
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1,517
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1,244
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2,905
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2,390
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Cost of sales
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(1,214
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(996
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(2,384
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(1,942
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Gross profit
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303
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248
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521
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448
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Selling, general and administrative expenses
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(123
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)
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(114
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)
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(246
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(228
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)
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Amortization of intangible assets
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(15
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)
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(21
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(30
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(38
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Research and development expenses
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(18
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)
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(18
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)
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(37
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)
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(38
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)
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Other (charges) gains, net
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(6
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)
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(6
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(83
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)
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(27
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)
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Foreign exchange gain (loss), net
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-
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1
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2
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3
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Gain (loss) on disposition of businesses and assets, net
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15
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(1
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15
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(4
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Operating profit (loss)
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156
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89
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142
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116
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Equity in net earnings (loss) of affiliates
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45
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35
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94
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41
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Interest expense
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(49
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)
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(54
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)
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(98
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)
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(105
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)
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Interest income
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1
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2
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2
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5
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Dividend income cost investments
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72
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53
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72
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56
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Other income (expense), net
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(1
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)
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2
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5
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3
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Earnings (loss) from continuing operations before tax
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224
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127
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217
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116
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Income tax (provision) benefit
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(61
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)
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(17
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(41
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)
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(22
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Earnings (loss) from continuing operations
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163
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110
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176
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94
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Earnings (loss) from operation of discontinued operations
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(5
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(1
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(5
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-
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Gain (loss) on disposition of discontinued operations
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-
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-
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2
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-
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Income tax (provision) benefit from discontinued operations
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2
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-
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1
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-
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Earnings (loss) from discontinued operations
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(3
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(1
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)
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(2
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-
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Net earnings (loss)
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160
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109
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174
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94
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Net (earnings) loss attributable to noncontrolling interests
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-
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-
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-
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-
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Net earnings (loss) attributable to Celanese Corporation
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160
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109
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174
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94
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Cumulative preferred stock dividends
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-
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(2
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)
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(3
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(5
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Net earnings (loss) available to common shareholders
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160
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107
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171
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89
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Amounts attributable to Celanese Corporation
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Earnings (loss) from continuing operations
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163
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110
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176
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94
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Earnings (loss) from discontinued operations
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(3
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(1
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(2
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-
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Net earnings (loss)
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160
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109
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174
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94
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Earnings (loss) per common share basic
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Continuing operations
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1.04
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0.75
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1.13
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0.62
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Discontinued operations
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(0.02
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)
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(0.01
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)
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(0.01
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)
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-
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Net earnings (loss) basic
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1.02
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0.74
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1.12
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0.62
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Earnings (loss) per common share diluted
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Continuing operations
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1.03
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0.70
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1.11
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0.60
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Discontinued operations
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(0.02
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(0.01
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)
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(0.01
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)
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-
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Net earnings (loss) diluted
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1.01
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0.69
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1.10
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0.60
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Weighted average shares basic
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156,326,226
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143,528,126
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153,315,950
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143,517,588
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Weighted average shares diluted
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158,405,119
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157,077,970
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158,674,073
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156,355,049
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See the accompanying notes to the unaudited interim consolidated
financial statements.
3
CELANESE
CORPORATION AND SUBSIDIARIES
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As of
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As of
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June 30,
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December 31,
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2010
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2009
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As Adjusted
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(Note 3)
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(In $ millions, except share data)
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ASSETS
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Current assets
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Cash and cash equivalents
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1,081
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1,254
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Trade receivables third party and affiliates (net of
allowance for doubtful accounts 2010: $17;
2009: $18)
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862
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721
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Non-trade receivables
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244
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262
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Inventories
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522
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522
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Deferred income taxes
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41
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42
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Marketable securities, at fair value
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2
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3
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Assets held for sale
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-
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2
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Other assets
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70
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50
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Total current assets
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2,822
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2,856
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Investments in affiliates
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769
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792
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Property, plant and equipment (net of accumulated depreciation
2010: $1,111; 2009: $1,130)
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2,676
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2,797
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Deferred income taxes
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485
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484
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Marketable securities, at fair value
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75
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80
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Other assets
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273
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311
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Goodwill
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736
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798
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Intangible assets, net
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269
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294
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Total assets
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8,105
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8,412
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LIABILITIES AND SHAREHOLDERS EQUITY
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Current liabilities
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Short-term borrowings and current installments of long-term debt
third party and affiliates
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265
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242
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Trade payables third party and affiliates
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607
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|
649
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Other liabilities
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532
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|
611
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Deferred income taxes
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30
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|
33
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Income taxes payable
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|
76
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|
72
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Total current liabilities
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1,510
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1,607
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Long-term debt
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3,162
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3,259
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Deferred income taxes
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|
121
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|
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|
137
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Uncertain tax positions
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224
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|
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|
229
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Benefit obligations
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1,260
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1,288
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Other liabilities
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1,139
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1,306
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Commitments and contingencies
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Shareholders equity
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Preferred stock, $0.01 par value, 100,000,000 shares
authorized (2010: 0 issued and outstanding; 2009: 9,600,000
issued and outstanding)
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-
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-
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Series A common stock, $0.0001 par value,
400,000,000 shares authorized (2010: 177,352,475 issued and
156,072,197 outstanding; 2009: 164,995,755 issued and
144,394,069 outstanding)
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-
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|
-
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Series B common stock, $0.0001 par value,
100,000,000 shares authorized (2010 and 2009: 0 issued and
outstanding)
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|
-
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|
-
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Treasury stock, at cost (2010: 21,280,278; 2009: 20,601,686)
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(801
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)
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|
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(781
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)
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Additional paid-in capital
|
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|
535
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|
|
522
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Retained earnings
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|
1,664
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|
|
|
1,505
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Accumulated other comprehensive income (loss), net
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(709
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)
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|
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(660
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)
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|
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|
|
|
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Total Celanese Corporation shareholders equity
|
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|
689
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|
586
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Noncontrolling interests
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|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Total shareholders equity
|
|
|
689
|
|
|
|
586
|
|
|
|
|
|
|
|
|
|
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Total liabilities and shareholders equity
|
|
|
8,105
|
|
|
|
8,412
|
|
|
|
|
|
|
|
|
|
|
See the accompanying notes to the unaudited interim consolidated
financial statements.
4
CELANESE
CORPORATION AND SUBSIDIARIES
UNAUDITED
INTERIM CONSOLIDATED STATEMENTS OF
|
|
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|
|
|
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|
|
|
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Six Months Ended
|
|
|
|
June 30, 2010
|
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|
|
Shares
|
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|
Amount
|
|
|
|
|
|
|
As Adjusted
|
|
|
|
|
|
|
(Note 3)
|
|
|
|
(In $ millions, except share data)
|
|
|
Preferred stock
|
|
|
|
|
|
|
|
|
Balance as of the beginning of the period
|
|
|
9,600,000
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|
|
-
|
|
Redemption of preferred stock
|
|
|
(9,600,000
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Balance as of the end of the period
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Series A common stock
|
|
|
|
|
|
|
|
|
Balance as of the beginning of the period
|
|
|
144,394,069
|
|
|
|
-
|
|
Stock option exercises
|
|
|
213,568
|
|
|
|
-
|
|
Conversion of preferred stock
|
|
|
12,084,942
|
|
|
|
-
|
|
Redemption of preferred stock
|
|
|
7,437
|
|
|
|
-
|
|
Purchases of treasury stock
|
|
|
(678,592
|
)
|
|
|
-
|
|
Stock awards
|
|
|
50,773
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Balance as of the end of the period
|
|
|
156,072,197
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Treasury stock
|
|
|
|
|
|
|
|
|
Balance as of the beginning of the period
|
|
|
20,601,686
|
|
|
|
(781
|
)
|
Purchases of treasury stock, including related fees
|
|
|
678,592
|
|
|
|
(20
|
)
|
|
|
|
|
|
|
|
|
|
Balance as of the end of the period
|
|
|
21,280,278
|
|
|
|
(801
|
)
|
|
|
|
|
|
|
|
|
|
Additional paid-in capital
|
|
|
|
|
|
|
|
|
Balance as of the beginning of the period
|
|
|
|
|
|
|
522
|
|
Stock-based compensation, net of tax
|
|
|
|
|
|
|
10
|
|
Stock option exercises, net of tax
|
|
|
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
Balance as of the end of the period
|
|
|
|
|
|
|
535
|
|
|
|
|
|
|
|
|
|
|
Retained earnings
|
|
|
|
|
|
|
|
|
Balance as of the beginning of the period
|
|
|
|
|
|
|
1,505
|
|
Net earnings (loss) attributable to Celanese Corporation
|
|
|
|
|
|
|
174
|
|
Series A common stock dividends
|
|
|
|
|
|
|
(12
|
)
|
Preferred stock dividends
|
|
|
|
|
|
|
(3
|
)
|
|
|
|
|
|
|
|
|
|
Balance as of the end of the period
|
|
|
|
|
|
|
1,664
|
|
|
|
|
|
|
|
|
|
|
Accumulated other comprehensive income (loss), net
|
|
|
|
|
|
|
|
|
Balance as of the beginning of the period
|
|
|
|
|
|
|
(660
|
)
|
Unrealized gain (loss) on securities
|
|
|
|
|
|
|
1
|
|
Foreign currency translation
|
|
|
|
|
|
|
(59
|
)
|
Unrealized gain (loss) on interest rate swaps
|
|
|
|
|
|
|
3
|
|
Pension and postretirement benefits
|
|
|
|
|
|
|
6
|
|
|
|
|
|
|
|
|
|
|
Balance as of the end of the period
|
|
|
|
|
|
|
(709
|
)
|
|
|
|
|
|
|
|
|
|
Total Celanese Corporation shareholders equity
|
|
|
|
|
|
|
689
|
|
|
|
|
|
|
|
|
|
|
Noncontrolling interests
|
|
|
|
|
|
|
|
|
Balance as of the beginning of the period
|
|
|
|
|
|
|
-
|
|
Net earnings (loss) attributable to noncontrolling interests
|
|
|
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Balance as of the end of the period
|
|
|
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Total shareholders equity
|
|
|
|
|
|
|
689
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income (loss)
|
|
|
|
|
|
|
|
|
Net earnings (loss)
|
|
|
|
|
|
|
174
|
|
Other comprehensive income (loss), net of tax
|
|
|
|
|
|
|
|
|
Unrealized gain (loss) on securities
|
|
|
|
|
|
|
1
|
|
Foreign currency translation
|
|
|
|
|
|
|
(59
|
)
|
Unrealized gain (loss) on interest rate swaps
|
|
|
|
|
|
|
3
|
|
Pension and postretirement benefits
|
|
|
|
|
|
|
6
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income (loss), net of tax
|
|
|
|
|
|
|
125
|
|
|
|
|
|
|
|
|
|
|
Comprehensive (income) loss attributable to noncontrolling
interests
|
|
|
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income (loss) attributable to Celanese Corporation
|
|
|
|
|
|
|
125
|
|
|
|
|
|
|
|
|
|
|
See the accompanying notes to the unaudited interim consolidated
financial statements.
5
CELANESE
CORPORATION AND SUBSIDIARIES
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
|
|
|
|
June 30,
|
|
|
|
2010
|
|
|
2009
|
|
|
|
|
|
|
As Adjusted
|
|
|
|
|
|
|
(Note 3)
|
|
|
|
(In $ millions)
|
|
|
Operating activities
|
|
|
|
|
|
|
|
|
Net earnings (loss)
|
|
|
174
|
|
|
|
94
|
|
Adjustments to reconcile net earnings (loss) to net cash
provided by operating activities
|
|
|
|
|
|
|
|
|
Other charges (gains), net of amounts used
|
|
|
35
|
|
|
|
(6
|
)
|
Depreciation, amortization and accretion
|
|
|
159
|
|
|
|
156
|
|
Deferred income taxes, net
|
|
|
(10
|
)
|
|
|
3
|
|
(Gain) loss on disposition of businesses and assets, net
|
|
|
(15
|
)
|
|
|
3
|
|
Other, net
|
|
|
30
|
|
|
|
2
|
|
Operating cash provided by (used in) discontinued operations
|
|
|
2
|
|
|
|
1
|
|
Changes in operating assets and liabilities
|
|
|
|
|
|
|
|
|
Trade receivables third party and affiliates, net
|
|
|
(150
|
)
|
|
|
(70
|
)
|
Inventories
|
|
|
(32
|
)
|
|
|
75
|
|
Other assets
|
|
|
24
|
|
|
|
55
|
|
Trade payables third party and affiliates
|
|
|
28
|
|
|
|
35
|
|
Other liabilities
|
|
|
(26
|
)
|
|
|
(49
|
)
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) operating activities
|
|
|
219
|
|
|
|
299
|
|
Investing activities
|
|
|
|
|
|
|
|
|
Capital expenditures on property, plant and equipment
|
|
|
(78
|
)
|
|
|
(96
|
)
|
Acquisitions, net of cash acquired
|
|
|
(46
|
)
|
|
|
-
|
|
Proceeds from sale of businesses and assets, net
|
|
|
20
|
|
|
|
(1
|
)
|
Deferred proceeds on Ticona Kelsterbach plant relocation
|
|
|
-
|
|
|
|
412
|
|
Capital expenditures related to Ticona Kelsterbach plant
relocation
|
|
|
(151
|
)
|
|
|
(147
|
)
|
Proceeds from sale of marketable securities
|
|
|
-
|
|
|
|
15
|
|
Other, net
|
|
|
(20
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) investing activities
|
|
|
(275
|
)
|
|
|
183
|
|
Financing activities
|
|
|
|
|
|
|
|
|
Short-term borrowings (repayments), net
|
|
|
(9
|
)
|
|
|
6
|
|
Repayments of long-term debt
|
|
|
(38
|
)
|
|
|
(46
|
)
|
Refinancing costs
|
|
|
-
|
|
|
|
(3
|
)
|
Purchases of treasury stock, including related fees
|
|
|
(20
|
)
|
|
|
-
|
|
Stock option exercises
|
|
|
4
|
|
|
|
1
|
|
Series A common stock dividends
|
|
|
(12
|
)
|
|
|
(12
|
)
|
Preferred stock dividends
|
|
|
(3
|
)
|
|
|
(5
|
)
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities
|
|
|
(78
|
)
|
|
|
(59
|
)
|
Exchange rate effects on cash and cash equivalents
|
|
|
(39
|
)
|
|
|
46
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents
|
|
|
(173
|
)
|
|
|
469
|
|
Cash and cash equivalents at beginning of period
|
|
|
1,254
|
|
|
|
676
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period
|
|
|
1,081
|
|
|
|
1,145
|
|
|
|
|
|
|
|
|
|
|
See the accompanying notes to the unaudited interim consolidated
financial statements.
6
NOTES TO
THE UNAUDITED INTERIM CONSOLIDATED FINANCIAL
STATEMENTS
|
|
1.
|
Description
of the Company and Basis of Presentation
|
Description
of the Company
Celanese Corporation and its subsidiaries (collectively the
Company) is a leading, global technology and
specialty materials company. The Companys business
involves processing chemical raw materials, such as methanol,
carbon monoxide and ethylene, and natural products, including
wood pulp, into value-added chemicals, thermoplastic polymers
and other chemical-based products.
Basis
of Presentation
The unaudited interim consolidated financial statements for the
three and six months ended June 30, 2010 and 2009 contained
in this Quarterly Report on
Form 10-Q
(Quarterly Report) were prepared in accordance with
accounting principles generally accepted in the United States of
America (US GAAP) for all periods presented. The
unaudited interim consolidated financial statements and other
financial information included in this Quarterly Report, unless
otherwise specified, have been presented to separately show the
effects of discontinued operations. In this Quarterly Report,
the term Celanese US refers to the Companys
subsidiary, Celanese US Holdings LLC, a Delaware limited
liability company, and not its subsidiaries. The term
Purchaser refers to our subsidiary, Celanese Europe
Holding GmbH & Co. KG, and not its subsidiaries,
except where otherwise indicated.
In the opinion of management, the accompanying unaudited
consolidated balance sheets and related unaudited interim
consolidated statements of operations, cash flows and
shareholders equity and comprehensive income (loss)
include all adjustments, consisting only of normal recurring
items necessary for their fair presentation in conformity with
US GAAP. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with US
GAAP have been condensed or omitted in accordance with rules and
regulations of the Securities and Exchange Commission
(SEC). These unaudited interim consolidated
financial statements should be read in conjunction with the
Companys consolidated financial statements as of and for
the year ended December 31, 2009, as filed on
February 12, 2010 with the SEC as part of the
Companys Annual Report on
Form 10-K
(the 2009
Form 10-K).
Operating results for the three and six months ended
June 30, 2010 are not necessarily indicative of the results
to be expected for the entire year.
In the ordinary course of the business, the Company enters into
contracts and agreements relative to a number of topics,
including acquisitions, dispositions, joint ventures, supply
agreements, product sales and other arrangements. The Company
endeavors to describe those contracts or agreements that are
material to its business, results of operations or financial
position. The Company may also describe some arrangements that
are not material but in which the Company believes investors may
have an interest or which may have been subject to a
Form 8-K
filing. Investors should not assume the Company has described
all contracts and agreements relative to the Companys
business in this Quarterly Report.
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 revenues,
expenses and allocated charges during the reporting period.
Significant estimates pertain to impairments of goodwill,
intangible assets and other long-lived assets, purchase price
allocations, restructuring costs and other (charges) gains, net,
income taxes, pension and other postretirement benefits, asset
retirement obligations, environmental liabilities and loss
contingencies, among others. Actual results could differ from
those estimates.
Reclassifications
The Company has reclassified certain prior period amounts to
conform to the current periods presentation.
7
|
|
2.
|
Recent
Accounting Pronouncements
|
In February 2010, the Financial Accounting Standards Board
(FASB) issued FASB Accounting Standards Update
2010-09,
Subsequent Events: Amendments to Certain Recognition and
Disclosure Requirements (ASU
2010-09),
which amends FASB Accounting Standards Codification
(ASC) Topic 855, Subsequent Events. The
update provides that SEC filers, as defined in ASU
2010-09, are
no longer required to disclose the date through which subsequent
events have been evaluated in originally issued and revised
financial statements. The update also requires SEC filers to
continue to evaluate subsequent events through the date the
financial statements are issued rather than the date the
financial statements are available to be issued. The Company
adopted ASU
2010-09 upon
issuance. This update had no impact on the Companys
financial position, results of operations or cash flows.
In January 2010, the FASB issued FASB Accounting Standards
Update
2010-06,
Fair Value Measurements and Disclosures: Improving
Disclosures about Fair Value Measurements (ASU
2010-06),
which amends FASB ASC Topic
820-10,
Fair Value Measurements and Disclosures. The update
provides additional disclosures for transfers in and out of
Levels 1 and 2 and for activity in Level 3 and
clarifies certain other existing disclosure requirements. The
Company adopted ASU
2010-06
beginning January 15, 2010. This update had no impact on
the Companys financial position, results of operations or
cash flows.
|
|
3.
|
Acquisitions,
Dispositions, Ventures and Plant Closures
|
Acquisitions
On May 5, 2010, the Company acquired two product lines,
Zenite®
liquid crystal polymer (LCP) and
Thermx®
polycyclohexylene-dimethylene terephthalate (PCT),
from DuPont Performance Polymers. The acquisition will continue
to build upon the Companys position as a global supplier
of high performance materials and technology-driven
applications. These two product lines broaden the Companys
Ticona Engineering Polymers offerings within its Advanced
Engineered Materials segment, enabling the Company to respond to
a globalizing customer base, especially in the high growth
electrical and electronics application markets. Pro forma
financial information since the acquisition date has not been
provided as the acquisition did not have a material impact on
the Companys financial information. The Company incurred
$1 million in direct transaction costs as a result of this
acquisition.
The Company allocated the purchase price of the acquisition to
identifiable intangible assets acquired based on their estimated
fair values. The excess of purchase price over the aggregate
fair values was recorded as goodwill. Intangible assets were
valued using the relief from royalty and discounted cash flow
methodologies which are considered a Level 3 measurement
under FASB Topic ASC 820, Fair Value Measurements and
Disclosures (FASB ASC Topic 820). The relief
from royalty method estimates the Companys theoretical
royalty savings from ownership of the intangible asset. Key
assumptions used in this model include discount rates, royalty
rates, growth rates, sales projections and terminal value rates.
Discount rates, royalty rates, growth rates and sales
projections are the assumptions most sensitive and susceptible
to change as they require significant management judgment. The
key assumptions used in the discounted cash flow valuation model
include discount rates, growth rates, cash flow projections and
terminal value rates. Discount rates, growth rates and cash flow
projections are the most sensitive and susceptible to change as
they require significant management judgment. The Company, with
the assistance of third-party valuation consultants, calculated
the fair value of the intangible assets acquired to allocate the
purchase price at the respective acquisition date.
8
The consideration paid for the product lines and the amounts of
the intangible assets acquired recognized at the acquisition
date are as follows:
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
Average Life
|
|
|
|
|
|
(In years)
|
|
(In $ millions)
|
|
|
Cash consideration
|
|
|
|
|
46
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intangible assets acquired
|
|
|
|
|
|
|
Trademarks and trade names
|
|
indefinite
|
|
|
9
|
|
Developed technology
|
|
10
|
|
|
7
|
|
Covenant not to compete and other
|
|
3
|
|
|
11
|
|
Customer-related intangible assets
|
|
10
|
|
|
6
|
|
Goodwill
|
|
|
|
|
13
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
46
|
|
|
|
|
|
|
|
|
In connection with the acquisition, the Company has committed to
purchase certain inventory at a future date valued at a range
between $12 million and $17 million.
In December 2009, the Company acquired the business and assets
of FACT GmbH (Future Advanced Composites Technology)
(FACT), a German company, for a purchase price of
5 million ($7 million). FACT develops, produces
and markets long-fiber reinforced thermoplastics. As part of the
acquisition, the Company entered into a ten year lease agreement
with the seller for the property and buildings on which the FACT
business is located with an option to purchase the property at
various times throughout the lease. The acquired business is
included in the Advanced Engineered Materials segment.
Dispositions
In July 2009, the Company completed the sale of its polyvinyl
alcohol (PVOH) business to Sekisui Chemical Co.,
Ltd. (Sekisui) for a net cash purchase price of
$168 million, resulting in a gain on disposition of
$34 million. The net cash purchase price excludes the
accounts receivable and payable retained by the Company. The
transaction includes long-term supply agreements between Sekisui
and the Company and therefore, does not qualify for treatment as
a discontinued operation. The PVOH business is included in the
Industrial Specialties segment.
Ventures
The Company indirectly owns a 25% interest in its National
Methanol Company (Ibn Sina) affiliate through CTE
Petrochemicals Company (CTE), a joint venture with
Texas Eastern Arabian Corporation Ltd. (which also indirectly
owns 25%). The remaining interest in Ibn Sina is held by Saudi
Basic Industries Corporation (SABIC). SABIC and CTE
entered into the Ibn Sina joint venture agreement in 1981. In
April 2010, the Company announced that Ibn Sina will construct a
50,000 ton polyacetal (POM) production facility in
Saudi Arabia and that the term of the joint venture agreement
was extended until 2032. Upon successful startup of the POM
facility, the Companys indirect economic interest in Ibn
Sina will increase from 25% to 32.5%. SABICs economic
interest will remain unchanged.
In connection with this transaction, the Company reassessed the
factors surrounding the accounting method for this investment
and changed the accounting from the cost method of accounting
for investments to the equity method of accounting for
investments beginning April 1, 2010. Financial information
relating to this investment for prior periods has been
retrospectively adjusted to apply the equity method of
accounting. Effective April 1, 2010, the Company moved its
investment in the Ibn Sina affiliate from its Acetyl
Intermediates segment to its Advanced Engineered Materials
segment to reflect the change in the affiliates business
dynamics and growth opportunities as a result of the future
construction of the POM facility. Business segment information
for prior periods included in Note 18 has been
retrospectively adjusted to reflect the change.
9
The retrospective effect of applying the equity method of
accounting to this investment to the unaudited interim
consolidated statements of operations is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, 2009
|
|
|
Six Months Ended June 30, 2009
|
|
|
|
As
|
|
|
As Adjusted for
|
|
|
|
|
|
As
|
|
|
As Adjusted for
|
|
|
|
|
|
|
Originally
|
|
|
Retrospective
|
|
|
Effect of
|
|
|
Originally
|
|
|
Retrospective
|
|
|
Effect of
|
|
|
|
Reported
|
|
|
Application
|
|
|
Change
|
|
|
Reported
|
|
|
Application
|
|
|
Change
|
|
|
|
(In $ millions, except per share data)
|
|
|
Equity in net earnings (loss) of affiliates
|
|
|
27
|
|
|
|
35
|
|
|
|
8
|
|
|
|
25
|
|
|
|
41
|
|
|
|
16
|
|
Dividend income cost investments
|
|
|
56
|
|
|
|
53
|
|
|
|
(3
|
)
|
|
|
62
|
|
|
|
56
|
|
|
|
(6
|
)
|
Earnings (loss) from continuing
operations before tax
|
|
|
122
|
|
|
|
127
|
|
|
|
5
|
|
|
|
106
|
|
|
|
116
|
|
|
|
10
|
|
Earnings (loss) from continuing operations
|
|
|
105
|
|
|
|
110
|
|
|
|
5
|
|
|
|
84
|
|
|
|
94
|
|
|
|
10
|
|
Net earnings (loss)
|
|
|
104
|
|
|
|
109
|
|
|
|
5
|
|
|
|
84
|
|
|
|
94
|
|
|
|
10
|
|
Net earnings (loss) attributable to
Celanese Corporation
|
|
|
104
|
|
|
|
109
|
|
|
|
5
|
|
|
|
84
|
|
|
|
94
|
|
|
|
10
|
|
Net earnings (loss) available to common shareholders
|
|
|
102
|
|
|
|
107
|
|
|
|
5
|
|
|
|
79
|
|
|
|
89
|
|
|
|
10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) per common share basic
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
|
0.72
|
|
|
|
0.75
|
|
|
|
0.03
|
|
|
|
0.55
|
|
|
|
0.62
|
|
|
|
0.07
|
|
Discontinued operations
|
|
|
(0.01
|
)
|
|
|
(0.01
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings (loss) basic
|
|
|
0.71
|
|
|
|
0.74
|
|
|
|
0.03
|
|
|
|
0.55
|
|
|
|
0.62
|
|
|
|
0.07
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) per common share diluted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
|
0.67
|
|
|
|
0.70
|
|
|
|
0.03
|
|
|
|
0.54
|
|
|
|
0.60
|
|
|
|
0.06
|
|
Discontinued operations
|
|
|
(0.01
|
)
|
|
|
(0.01
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings (loss) diluted
|
|
|
0.66
|
|
|
|
0.69
|
|
|
|
0.03
|
|
|
|
0.54
|
|
|
|
0.60
|
|
|
|
0.06
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The retrospective effect of applying the equity method of
accounting to this investment to the unaudited consolidated
balance sheet is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2009
|
|
|
|
|
As Adjusted for
|
|
|
|
|
As Originally
|
|
Retrospective
|
|
Effect of
|
|
|
Reported
|
|
Application
|
|
Change
|
|
|
(In $ millions)
|
|
Investments in affiliates
|
|
|
790
|
|
|
|
792
|
|
|
|
2
|
|
Total assets
|
|
|
8,410
|
|
|
|
8,412
|
|
|
|
2
|
|
Retained earnings
|
|
|
1,502
|
|
|
|
1,505
|
|
|
|
3
|
|
Accumulated other comprehensive income (loss), net
|
|
|
(659
|
)
|
|
|
(660
|
)
|
|
|
(1
|
)
|
Total Celanese Corporation shareholders equity
|
|
|
584
|
|
|
|
586
|
|
|
|
2
|
|
Total shareholders equity
|
|
|
584
|
|
|
|
586
|
|
|
|
2
|
|
Total liabilities and shareholders equity
|
|
|
8,410
|
|
|
|
8,412
|
|
|
|
2
|
|
The retrospective effect of applying the equity method of
accounting to this investment to the unaudited interim
consolidated statement of cash flows is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, 2009
|
|
|
As
|
|
As Adjusted for
|
|
|
|
|
Originally
|
|
Retrospective
|
|
Effect of
|
|
|
Reported
|
|
Application
|
|
Change
|
|
|
(In $ millions)
|
|
Net earnings (loss)
|
|
|
84
|
|
|
|
94
|
|
|
|
10
|
|
Adjustments to reconcile net earnings (loss) to net cash
provided by operating activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Other, net
|
|
|
12
|
|
|
|
2
|
|
|
|
(10
|
)
|
10
Plant
Closures
In April 2010, the Company announced it was considering a plan
to consolidate its global acetate manufacturing capabilities by
proposing the closure of its acetate flake and tow manufacturing
operations in Spondon, Derby, United Kingdom. The consolidation
is designed to strengthen the Companys competitive
position, reduce fixed costs and align future production
capacities with anticipated industry demand trends. The
consolidation is also driven by a global shift in product
consumption. The Company would expect to serve its acetate
customers under this proposal by optimizing its global
production network, which includes facilities in Lanaken,
Belgium; Narrows, Virginia; and Ocotlan, Mexico, as well as the
Companys acetate affiliate facilities in China.
During the first quarter of 2010, the Company concluded that
certain long-lived assets of the Spondon, Derby, United Kingdom
facility were partially impaired. Accordingly, during the six
months ended June 30, 2010, the Company recorded long-lived
asset impairment losses of $72 million
(Note 13) to Other (charges) gains, net in the
unaudited interim consolidated statements of operations. The
Spondon, Derby, United Kingdom facility is included in the
Consumer Specialties segment.
On July 27, 2010, the Company concluded the formal
consultation process with employees and their representatives
and is continuing to consider a plan to consolidate its global
acetate manufacturing capabilities by closing its acetate flake
and tow manufacturing operations in Spondon, Derby, United
Kingdom. The Company has made a final offer to the union
regarding severance and will continue to negotiate with the
labor unions other measures of assistance aimed at minimizing
the effects of the plants closing on the Spondon
workforce, including training and outplacement.
In July 2009, the Company announced that its wholly-owned French
subsidiary, Acetex Chimie, completed the consultation process
with the workers council on its Project of Closure
and social plan related to the Companys Pardies, France
facility pursuant to which the Company ceased all manufacturing
operations and associated activities in December 2009. The
Company agreed with the workers council on a set of measures of
assistance aimed at minimizing the effects of the plants
closing on the Pardies workforce, including training,
outplacement and severance. The Pardies, France facility is
included in the Acetyl Intermediates segment.
The exit costs and plant shutdown costs recorded in the
unaudited interim consolidated statements of operations related
to the Project of Closure (Note 13) are as follows:
|
|
|
|
|
|
|
|
|
|
|
Three Months
|
|
|
Six Months
|
|
|
|
Ended
|
|
|
Ended
|
|
|
|
June 30, 2010
|
|
|
June 30, 2010
|
|
|
|
(In $ millions)
|
|
|
Employee termination benefits
|
|
|
(1
|
)
|
|
|
(2
|
)
|
Asset impairments
|
|
|
-
|
|
|
|
(1
|
)
|
Contract termination costs
|
|
|
-
|
|
|
|
(3
|
)
|
Reindustrialization costs
|
|
|
-
|
|
|
|
(3
|
)
|
|
|
|
|
|
|
|
|
|
Total exit costs recorded to Other (charges) gains, net
|
|
|
(1
|
)
|
|
|
(9
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Environmental remediation reserves
|
|
|
2
|
|
|
|
-
|
|
Inventory write-offs
|
|
|
-
|
|
|
|
(4
|
)
|
Other
|
|
|
(2
|
)
|
|
|
(5
|
)
|
|
|
|
|
|
|
|
|
|
Total plant shutdown costs
|
|
|
-
|
|
|
|
(9
|
)
|
|
|
|
|
|
|
|
|
|
Assets held for sale in the unaudited consolidated balance
sheets includes an office building with a net book value of
$2 million as of December 31, 2009. As of
June 30, 2010, the Company sold the office building and
recorded a gain of $14 million in Gain (loss) on
disposition of businesses and assets, net, in the unaudited
interim consolidated statements of operations.
|
|
4.
|
Marketable
Securities, at Fair Value
|
The Companys captive insurance companies and
pension-related trusts hold
available-for-sale
securities for capitalization and funding requirements,
respectively. The Company received proceeds from sales of
marketable
11
securities and recorded realized gains (losses) to Other income
(expense), net, in the unaudited interim consolidated statements
of operations as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
|
|
|
|
|
(In $ millions)
|
|
|
|
|
|
Proceeds from sale of securities
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Realized gain on sale of securities
|
|
|
1
|
|
|
|
2
|
|
|
|
1
|
|
|
|
3
|
|
Realized loss on sale of securities
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net realized gain (loss) on sale of securities
|
|
|
1
|
|
|
|
2
|
|
|
|
1
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company reviews all investments for
other-than-temporary
impairment at least quarterly or as indicators of impairment
exist. Indicators of impairment include the duration and
severity of the decline in fair value below carrying value as
well as the intent and ability to hold the investment to allow
for a recovery in the market value of the investment. In
addition, the Company considers qualitative factors that
include, but are not limited to: (i) the financial
condition and business plans of the investee including its
future earnings potential, (ii) the investees credit
rating, and (iii) the current and expected market and
industry conditions in which the investee operates. If a decline
in the fair value of an investment is deemed by management to be
other-than-temporary,
the Company writes down the carrying value of the investment to
fair value, and the amount of the write-down is included in net
earnings. Such a determination is dependent on the facts and
circumstances relating to each investment. The Company did not
recognize any
other-than-temporary
impairment losses related to equity securities in the unaudited
interim consolidated statements of operations for the three and
six months ended June 30, 2010 and 2009.
The amortized cost, gross unrealized gain, gross unrealized loss
and fair value for
available-for-sale
securities by major security type are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
|
|
|
Gross
|
|
|
|
|
|
|
Amortized
|
|
|
Unrealized
|
|
|
Unrealized
|
|
|
Fair
|
|
|
|
Cost
|
|
|
Gain
|
|
|
Loss
|
|
|
Value
|
|
|
|
|
|
|
(In $ millions)
|
|
|
|
|
|
US government debt securities
|
|
|
25
|
|
|
|
5
|
|
|
|
-
|
|
|
|
30
|
|
US corporate debt securities
|
|
|
1
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total debt securities
|
|
|
26
|
|
|
|
5
|
|
|
|
-
|
|
|
|
31
|
|
Equity securities
|
|
|
52
|
|
|
|
-
|
|
|
|
(7
|
)
|
|
|
45
|
|
Money market deposits and other securities
|
|
|
1
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of June 30, 2010
|
|
|
79
|
|
|
|
5
|
|
|
|
(7
|
)
|
|
|
77
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
US government debt securities
|
|
|
26
|
|
|
|
2
|
|
|
|
-
|
|
|
|
28
|
|
US corporate debt securities
|
|
|
1
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total debt securities
|
|
|
27
|
|
|
|
2
|
|
|
|
-
|
|
|
|
29
|
|
Equity securities
|
|
|
55
|
|
|
|
-
|
|
|
|
(3
|
)
|
|
|
52
|
|
Money market deposits and other securities
|
|
|
2
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2009
|
|
|
84
|
|
|
|
2
|
|
|
|
(3
|
)
|
|
|
83
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12
Fixed maturities as of June 30, 2010 by contractual
maturity are shown below. Actual maturities could differ from
contractual maturities because borrowers may have the right to
call or prepay obligations, with or without call or prepayment
penalties.
|
|
|
|
|
|
|
|
|
|
|
Amortized
|
|
|
Fair
|
|
|
|
Cost
|
|
|
Value
|
|
|
|
(In $ millions)
|
|
|
Within one year
|
|
|
2
|
|
|
|
2
|
|
From one to five years
|
|
|
-
|
|
|
|
-
|
|
From six to ten years
|
|
|
-
|
|
|
|
-
|
|
Greater than ten years
|
|
|
25
|
|
|
|
30
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
27
|
|
|
|
32
|
|
|
|
|
|
|
|
|
|
|
Proceeds received from fixed maturities that mature within one
year are expected to be reinvested into additional securities
upon such maturity.
|
|
|
|
|
|
|
|
|
|
|
As of
|
|
|
As of
|
|
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
|
(In $ millions)
|
|
|
Finished goods
|
|
|
381
|
|
|
|
367
|
|
Work-in-process
|
|
|
27
|
|
|
|
28
|
|
Raw materials and supplies
|
|
|
114
|
|
|
|
127
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
522
|
|
|
|
522
|
|
|
|
|
|
|
|
|
|
|
|
|
6.
|
Goodwill
and Intangible Assets, Net
|
Goodwill
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Advanced
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Engineered
|
|
|
Consumer
|
|
|
Industrial
|
|
|
Acetyl
|
|
|
|
|
|
|
Materials
|
|
|
Specialties
|
|
|
Specialties
|
|
|
Intermediates
|
|
|
Total
|
|
|
|
(In $ millions)
|
|
|
As of December 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill
|
|
|
263
|
|
|
|
257
|
|
|
|
35
|
|
|
|
243
|
|
|
|
798
|
|
Accumulated impairment losses
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
263
|
|
|
|
257
|
|
|
|
35
|
|
|
|
243
|
|
|
|
798
|
|
Acquisition (Note 3)
|
|
|
13
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
13
|
|
Reallocation of Ibn Sina goodwill (Note 18)
|
|
|
34
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(34
|
)
|
|
|
-
|
|
Exchange rate changes
|
|
|
(22
|
)
|
|
|
(17
|
)
|
|
|
(2
|
)
|
|
|
(34
|
)
|
|
|
(75
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of June 30, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill
|
|
|
288
|
|
|
|
240
|
|
|
|
33
|
|
|
|
175
|
|
|
|
736
|
|
Accumulated impairment losses
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
288
|
|
|
|
240
|
|
|
|
33
|
|
|
|
175
|
|
|
|
736
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13
Intangible
Assets, Net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer-
|
|
|
|
|
|
Covenants
|
|
|
|
|
|
|
Trademarks
|
|
|
|
|
|
Related
|
|
|
|
|
|
Not to
|
|
|
|
|
|
|
and Trade
|
|
|
|
|
|
Intangible
|
|
|
Developed
|
|
|
Compete
|
|
|
|
|
|
|
Names
|
|
|
Licenses
|
|
|
Assets
|
|
|
Technology
|
|
|
and Other
|
|
|
Total
|
|
|
|
(In $ millions)
|
|
|
Gross Asset Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2009
|
|
|
83
|
|
|
|
29
|
|
|
|
552
|
|
|
|
13
|
|
|
|
12
|
|
|
|
689
|
|
Acquisition (Note 3)
|
|
|
9
|
|
|
|
-
|
|
|
|
6
|
|
|
|
7
|
|
|
|
11
|
|
|
|
33
|
|
Exchange rate changes
|
|
|
(8
|
)
|
|
|
-
|
|
|
|
(65
|
)
|
|
|
-
|
|
|
|
(1
|
)
|
|
|
(74
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of June 30, 2010
|
|
|
84
|
|
|
|
29
|
|
|
|
493
|
|
|
|
20
|
|
|
|
22
|
|
|
|
648
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated Amortization
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2009
|
|
|
(5
|
)
|
|
|
(6
|
)
|
|
|
(362
|
)
|
|
|
(11
|
)
|
|
|
(11
|
)
|
|
|
(395
|
)
|
Amortization
|
|
|
-
|
|
|
|
(2
|
)
|
|
|
(27
|
)
|
|
|
-
|
|
|
|
(1
|
)
|
|
|
(30
|
)
|
Exchange rate changes
|
|
|
-
|
|
|
|
-
|
|
|
|
45
|
|
|
|
1
|
|
|
|
-
|
|
|
|
46
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of June 30, 2010
|
|
|
(5
|
)
|
|
|
(8
|
)
|
|
|
(344
|
)
|
|
|
(10
|
)
|
|
|
(12
|
)
|
|
|
(379
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net book value
|
|
|
79
|
|
|
|
21
|
|
|
|
149
|
|
|
|
10
|
|
|
|
10
|
|
|
|
269
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated amortization expense for the succeeding five fiscal
years is as follows:
|
|
|
|
|
|
|
(In $ millions)
|
|
|
2011
|
|
|
63
|
|
2012
|
|
|
47
|
|
2013
|
|
|
29
|
|
2014
|
|
|
18
|
|
2015
|
|
|
8
|
|
The Companys trademarks and trade names have an indefinite
life.
As of June 30, 2010, the Company did not renew or extend
any intangible assets.
|
|
7.
|
Current
Other Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
As of
|
|
|
As of
|
|
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
|
(In $ millions)
|
|
|
Salaries and benefits
|
|
|
92
|
|
|
|
100
|
|
Environmental (Note 11)
|
|
|
15
|
|
|
|
13
|
|
Restructuring (Note 13)
|
|
|
53
|
|
|
|
99
|
|
Insurance
|
|
|
29
|
|
|
|
37
|
|
Asset retirement obligations
|
|
|
11
|
|
|
|
22
|
|
Derivatives
|
|
|
67
|
|
|
|
75
|
|
Current portion of benefit obligations
|
|
|
49
|
|
|
|
49
|
|
Interest
|
|
|
18
|
|
|
|
20
|
|
Sales and use tax/foreign withholding tax payable
|
|
|
13
|
|
|
|
15
|
|
Uncertain tax positions
|
|
|
5
|
|
|
|
5
|
|
Other
|
|
|
180
|
|
|
|
176
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
532
|
|
|
|
611
|
|
|
|
|
|
|
|
|
|
|
14
|
|
8.
|
Noncurrent
Other Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
As of
|
|
|
As of
|
|
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
|
(In $ millions)
|
|
|
Environmental (Note 11)
|
|
|
82
|
|
|
|
93
|
|
Insurance
|
|
|
88
|
|
|
|
85
|
|
Deferred revenue
|
|
|
43
|
|
|
|
49
|
|
Deferred proceeds (Note 20)
|
|
|
725
|
|
|
|
846
|
|
Asset retirement obligations
|
|
|
56
|
|
|
|
45
|
|
Derivatives
|
|
|
35
|
|
|
|
44
|
|
Income taxes payable
|
|
|
34
|
|
|
|
61
|
|
Other
|
|
|
76
|
|
|
|
83
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
1,139
|
|
|
|
1,306
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of
|
|
|
As of
|
|
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
|
(In $ millions)
|
|
|
Short-term borrowings and current installments of long-term
debt third party and affiliates
|
|
|
|
|
|
|
|
|
Current installments of long-term debt, interest rates ranging
from 2.31% to 25.73%
|
|
|
103
|
|
|
|
102
|
|
Short-term borrowings, including amounts due to affiliates,
interest rates ranging from 0.27% to 5.04%
|
|
|
162
|
|
|
|
140
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
265
|
|
|
|
242
|
|
|
|
|
|
|
|
|
|
|
Long-term debt
|
|
|
|
|
|
|
|
|
Senior credit facilities: Term loan facility due 2014
|
|
|
2,688
|
|
|
|
2,785
|
|
Pollution control and industrial revenue bonds, interest rates
ranging from 5.7% to 6.7%, due at various dates through 2030
|
|
|
181
|
|
|
|
181
|
|
Obligations under capital leases and other secured and unsecured
borrowings due at various dates through 2054
|
|
|
260
|
|
|
|
242
|
|
Other bank obligations, interest rates ranging from 2.3% to
5.3%, due at various dates through 2014
|
|
|
136
|
|
|
|
153
|
|
|
|
|
|
|
|
|
|
|
Subtotal
|
|
|
3,265
|
|
|
|
3,361
|
|
Less: Current installments of long-term debt
|
|
|
103
|
|
|
|
102
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
3,162
|
|
|
|
3,259
|
|
|
|
|
|
|
|
|
|
|
Senior
Credit Facilities
The Companys senior credit facility consists of
$2,280 million of US dollar-denominated and
400 million of Euro-denominated term loans due 2014,
a $600 million revolving credit facility terminating in
2013 and a $228 million credit-linked revolving facility
terminating in 2014. Borrowings under the senior credit
agreement bear interest at a variable interest rate based on
LIBOR (for US dollars) or EURIBOR (for Euros), as applicable,
or, for US dollar-denominated loans under certain circumstances,
a base rate, in each case plus an applicable margin. The
applicable margin for the term loans and any loans under the
credit-linked revolving facility is 1.75%, subject to potential
reductions as defined in the senior credit agreement. As of
June 30, 2010, the applicable margin was 1.75%. The term
loans under the senior credit agreement are subject to
amortization at 1% of the initial principal amount per annum,
payable quarterly. The remaining principal amount of the term
loans is due on April 2, 2014.
15
As of June 30, 2010, the balances available for borrowing
under the revolving credit facility and the credit-linked
revolving facility are as follows:
|
|
|
|
|
|
|
(In $ millions)
|
|
Revolving credit facility
|
|
|
|
|
Borrowings outstanding
|
|
|
-
|
|
Letters of credit issued
|
|
|
-
|
|
Available for borrowing
|
|
|
600
|
|
Credit-linked revolving facility
|
|
|
|
|
Letters of credit issued
|
|
|
91
|
|
Available for borrowing
|
|
|
137
|
|
In June 2009, the Company entered into an amendment to the
senior credit agreement. The amendment reduced the amount
available under the revolving credit facility from
$650 million to $600 million and increased the first
lien senior secured leverage ratio that is applicable when any
amount is outstanding under the revolving credit portion of the
senior credit agreement. The first lien senior secured leverage
ratio is calculated as the ratio of consolidated first lien
senior secured debt to earnings before interest, taxes,
depreciation and amortization, subject to adjustments identified
in the credit agreement.
As a condition to borrowing funds or requesting that letters of
credit be issued under that facility, the Companys first
lien senior secured leverage ratio (as calculated as of the last
day of the most recent fiscal quarter for which financial
statements have been delivered under the revolving facility)
cannot exceed the threshold as specified below. Further, the
Companys first lien senior secured leverage ratio must be
maintained at or below that threshold while any amounts are
outstanding under the revolving credit facility.
Prior to giving effect to the amendment, the maximum first lien
senior secured leverage ratio was 3.90 to 1.00. The
Companys amended maximum first lien senior secured
leverage ratios, estimated first lien senior secured leverage
ratios and the borrowing capacity under the revolving credit
facility as of June 30, 2010 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Lien Senior Secured Leverage Ratios
|
|
|
|
|
|
|
|
|
Estimate, If Fully
|
|
Borrowing
|
|
|
Maximum
|
|
Estimate
|
|
Drawn
|
|
Capacity
|
|
|
|
|
|
|
|
|
(In $ millions)
|
|
June 30, 2010
|
|
|
4.25 to 1.00
|
|
|
|
2.7 to 1.00
|
|
|
|
3.34 to 1.00
|
|
|
|
600
|
|
September 30, 2010
|
|
|
4.25 to 1.00
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2010 and thereafter
|
|
|
3.90 to 1.00
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Companys senior credit agreement also contains a
number of restrictions on certain of its subsidiaries,
including, but not limited to, restrictions on their ability to
incur indebtedness; grant liens on assets; merge, consolidate,
or sell assets; pay dividends or make other restricted payments;
make investments; prepay or modify certain indebtedness; engage
in transactions with affiliates; enter into sale-leaseback
transactions or certain hedge transactions; or engage in other
businesses. The senior credit agreement also contains a number
of affirmative covenants and events of default, including a
cross-default to other debt of certain of the Companys
subsidiaries in an aggregate amount equal to $40 million or
greater and the occurrence of a change of control. Failure to
comply with these covenants, or the occurrence of any other
event of default, could result in acceleration of the loans and
other financial obligations under the Companys senior
credit agreement.
The Company is in compliance with all of the covenants related
to its debt agreements as of June 30, 2010.
The senior credit agreement is guaranteed by Celanese Holdings
LLC, a subsidiary of Celanese Corporation, and certain domestic
subsidiaries of the Companys subsidiary, Celanese US, and
is secured by a lien on substantially all assets of Celanese US
and such guarantors, subject to certain agreed exceptions,
pursuant to the Guarantee and Collateral Agreement, dated as of
April 2, 2007, by and among Celanese Holdings LLC, Celanese
US, certain subsidiaries of Celanese US and Deutsche Bank AG,
New York Branch, as Administrative Agent and as Collateral Agent.
16
The components of net periodic benefit costs recognized are as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Postretirement
|
|
|
|
|
|
|
|
|
Postretirement
|
|
|
|
Pension Benefits
|
|
|
Benefits
|
|
|
Pension Benefits
|
|
|
Benefits
|
|
|
|
Three Months Ended June 30,
|
|
|
Six Months Ended June 30,
|
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
|
|
(In $ millions)
|
|
|
Service cost
|
|
|
8
|
|
|
|
7
|
|
|
|
1
|
|
|
|
1
|
|
|
|
16
|
|
|
|
14
|
|
|
|
1
|
|
|
|
1
|
|
Interest cost
|
|
|
48
|
|
|
|
48
|
|
|
|
3
|
|
|
|
4
|
|
|
|
96
|
|
|
|
95
|
|
|
|
7
|
|
|
|
8
|
|
Expected return on plan assets
|
|
|
(50
|
)
|
|
|
(52
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(100
|
)
|
|
|
(102
|
)
|
|
|
-
|
|
|
|
-
|
|
Recognized actuarial (gain) loss
|
|
|
2
|
|
|
|
1
|
|
|
|
(1
|
)
|
|
|
(2
|
)
|
|
|
4
|
|
|
|
1
|
|
|
|
(2
|
)
|
|
|
(3
|
)
|
Curtailment (gain) loss
|
|
|
(1
|
)
|
|
|
1
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(3
|
)
|
|
|
1
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
7
|
|
|
|
5
|
|
|
|
3
|
|
|
|
3
|
|
|
|
13
|
|
|
|
9
|
|
|
|
6
|
|
|
|
6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company expects to contribute $52 million to its
defined benefit pension plans in 2010. As of June 30, 2010,
$24 million of contributions have been made. The
Companys estimates of its US defined benefit pension plan
contributions reflect the provisions of the Pension Protection
Act of 2006.
The Company expects to make benefit contributions of
$27 million under the provisions of its other
postretirement benefit plans in 2010. As of June 30, 2010,
$14 million of benefit contributions have been made.
The Company participates in multiemployer defined benefit plans
in Europe covering certain employees. The Companys
contributions to the multiemployer defined benefit plans are
based on specified percentages of employee contributions and
totaled $3 million and $4 million for each of the six
months ended June 30, 2010 and 2009, respectively.
General
The Company is subject to environmental laws and regulations
worldwide that impose limitations on the discharge of pollutants
into the air and water and establish standards for the
treatment, storage and disposal of solid and hazardous wastes.
The Company believes that it is in substantial compliance with
all applicable environmental laws and regulations. The Company
is also subject to retained environmental obligations specified
in various contractual agreements arising from the divestiture
of certain businesses by the Company or one of its predecessor
companies.
The Companys environmental remediation reserves are
recorded in the unaudited consolidated balance sheets as follows:
|
|
|
|
|
|
|
|
|
|
|
As of
|
|
|
As of
|
|
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
|
(In $ millions)
|
|
|
Current other liabilities
|
|
|
15
|
|
|
|
13
|
|
Noncurrent other liabilities
|
|
|
82
|
|
|
|
93
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
97
|
|
|
|
106
|
|
|
|
|
|
|
|
|
|
|
Remediation
Due to its industrial history and through retained contractual
and legal obligations, the Company has the obligation to
remediate specific areas on its own sites as well as on
divested, orphan or US Superfund sites (as defined below). In
addition, as part of the demerger agreement between the Company
and Hoechst AG (Hoechst), a specified portion of the
responsibility for environmental liabilities from a number of
Hoechst divestitures was transferred to the Company. The Company
provides for such obligations when the event of loss is probable
and reasonably estimable. The Company believes that
environmental remediation costs will not have a material adverse
effect on
17
the financial position of the Company, but may have a material
adverse effect on the results of operations or cash flows in any
given accounting period.
US
Superfund Sites
In the US, the Company may be subject to substantial claims
brought by US federal or state regulatory agencies or private
individuals pursuant to statutory authority or common law. In
particular, the Company has a potential liability under the US
Federal Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended, and related state laws
(collectively referred to as Superfund) for
investigation and cleanup costs at approximately 40 sites. At
most of these sites, numerous companies, including certain
companies comprising the Company, or one of its predecessor
companies, have been notified that the Environmental Protection
Agency, state governing bodies or private individuals consider
such companies to be potentially responsible parties
(PRP) under Superfund or related laws. The
proceedings relating to these sites are in various stages. The
cleanup process has not been completed at most sites and the
status of the insurance coverage for most of these proceedings
is uncertain. Consequently, the Company cannot accurately
determine its ultimate liability for investigation or cleanup
costs at these sites.
As events progress at each site for which it has been named a
PRP, the Company accrues, as appropriate, a liability for site
cleanup. Such liabilities include all costs that are probable
and can be reasonably estimated. In establishing these
liabilities, the Company considers its shipment of waste to a
site, its percentage of total waste shipped to the site, the
types of wastes involved, the conclusions of any studies, the
magnitude of any remedial actions that may be necessary and the
number and viability of other PRPs. Often the Company joins with
other PRPs to sign joint defense agreements that settle, among
PRPs, each partys percentage allocation of costs at the
site. Although the ultimate liability may differ from the
estimate, the Company routinely reviews the liabilities and
revises the estimate, as appropriate, based on the most current
information available.
The Companys environmental remediation reserves are
recorded in the unaudited consolidated balance sheets as follows:
|
|
|
|
|
|
|
|
|
|
|
As of
|
|
|
As of
|
|
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
|
(In $ millions)
|
|
|
Demerger obligations (Note 17)
|
|
|
29
|
|
|
|
32
|
|
Divestiture obligations (Note 17)
|
|
|
30
|
|
|
|
32
|
|
US Superfund sites
|
|
|
11
|
|
|
|
10
|
|
Other environmental remediation reserves
|
|
|
27
|
|
|
|
32
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
97
|
|
|
|
106
|
|
|
|
|
|
|
|
|
|
|
Preferred
Stock
On February 1, 2010, the Company delivered notice to the
holders of its 4.25% Convertible Perpetual Preferred Stock
(the Preferred Stock) that it was calling for the
redemption of all 9.6 million outstanding shares of
Preferred Stock. Holders of the Preferred Stock were entitled to
convert each share of Preferred Stock into 1.2600 shares of
the Companys Series A Common Stock, par value $0.0001
per share (Common Stock), at any time prior to
5:00 p.m., New York City time, on February 19, 2010.
As of such date, holders of Preferred Stock had elected to
convert 9,591,276 shares of Preferred Stock into an
aggregate of 12,084,942 shares of Common Stock. The
8,724 shares of Preferred Stock that remained outstanding
after such conversions were redeemed by the Company on
February 22, 2010 for 7,437 shares of Common Stock, in
accordance with the terms of the Preferred Stock. In addition to
the shares of Common Stock issued in respect of the shares of
Preferred Stock converted and redeemed, the Company paid cash in
lieu of fractional shares. The Company recorded expense of less
than $1 million in Additional paid-in capital in the
unaudited interim consolidated statements of shareholders
equity and comprehensive income (loss) for the six months ended
June 30, 2010 related to the conversion and redemption of
the Preferred Stock.
18
Treasury
Stock
In February 2008, the Companys Board of Directors
authorized the repurchase of up to $400 million of the
Companys Common Stock. This authorization was increased by
the Board of Directors to $500 million in October 2008. The
authorizations give management discretion in determining the
conditions under which shares may be repurchased. The number of
shares repurchased and the average purchase price paid per share
pursuant to this authorization are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
|
|
Total From
|
|
|
June 30,
|
|
Inception Through
|
|
|
2010
|
|
2009
|
|
June 30, 2010
|
|
Shares repurchased
|
|
|
678,592
|
|
|
|
-
|
|
|
|
10,441,792
|
|
Average purchase price per share
|
|
$
|
29.47
|
|
|
$
|
-
|
|
|
$
|
38.09
|
|
Amount spent on repurchased shares (in millions)
|
|
$
|
20
|
|
|
$
|
-
|
|
|
$
|
398
|
|
Purchases of treasury stock reduce the number of shares
outstanding and the repurchased shares may be used by the
Company for compensation programs utilizing the Companys
stock and other corporate purposes. The Company accounts for
treasury stock using the cost method and includes treasury stock
as a component of Shareholders equity.
Dividends
In April 2010, the Company announced that its Board of Directors
approved a 25% increase in the Companys quarterly Common
Stock cash dividend. The Board of Directors increased the
quarterly dividend rate from $0.04 to $0.05 per share of Common
Stock on a quarterly basis and $0.16 to $0.20 per share of
Common Stock on an annual basis. The new dividend rate will be
applicable to dividends payable beginning in August 2010.
Other
Comprehensive Income (Loss), Net
Adjustments to Net earnings (loss) used to calculate Other
comprehensive income (loss) are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
|
|
|
|
|
(In $ millions)
|
|
|
|
|
|
Adjustments to net earnings (loss)
|
|
|
(19
|
)
|
|
|
101
|
|
|
|
(44
|
)
|
|
|
(10
|
)
|
Income tax (provision) benefit
|
|
|
(3
|
)
|
|
|
1
|
|
|
|
(5
|
)
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments to net earnings (loss), net
|
|
|
(22
|
)
|
|
|
102
|
|
|
|
(49
|
)
|
|
|
(9
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13.
|
Other
(Charges) Gains, Net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
|
|
|
|
|
(In $ millions)
|
|
|
|
|
|
Employee termination benefits
|
|
|
(4
|
)
|
|
|
(5
|
)
|
|
|
(9
|
)
|
|
|
(29
|
)
|
Ticona Kelsterbach plant relocation (Note 20)
|
|
|
(4
|
)
|
|
|
(3
|
)
|
|
|
(10
|
)
|
|
|
(6
|
)
|
Plumbing actions
|
|
|
2
|
|
|
|
2
|
|
|
|
14
|
|
|
|
3
|
|
Insurance recoveries associated with Clear Lake, Texas
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
6
|
|
Asset impairments
|
|
|
-
|
|
|
|
-
|
|
|
|
(72
|
)
|
|
|
(1
|
)
|
Plant/office closures
|
|
|
-
|
|
|
|
-
|
|
|
|
(6
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
(6
|
)
|
|
|
(6
|
)
|
|
|
(83
|
)
|
|
|
(27
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
During the first quarter of 2010, the Company concluded that
certain long-lived assets were partially impaired at its acetate
flake and tow manufacturing operations in Spondon, Derby, United
Kingdom (Note 3). Accordingly, the
19
Company wrote down the related property, plant and equipment to
its fair value of $31 million, resulting in long-lived
asset impairment losses of $72 million for the six months
ended June 30, 2010. The Company calculated the fair value
using a discounted cash flow model incorporating discount rates
commensurate with the risks involved for the reporting unit
which is classified as a Level 3 measurement under FASB ASC
Topic 820. The key assumptions used in the discounted cash flow
valuation model include discount rates, growth rates, cash flow
projections and terminal value rates. Discount rates, growth
rates and cash flow projections are the most sensitive and
susceptible to change as they require significant management
judgment. The Spondon, Derby, United Kingdom facility is
included in the Consumer Specialties segment.
As a result of the Companys Pardies, France Project of
Closure (Note 3), the Company recorded exit costs of
$1 million in employee termination benefits for the three
months ended June 30, 2010. The Company recorded exit costs
of $9 million during the six months ended June 30,
2010, which consisted of $2 million in employee termination
benefits, $1 million of long-lived asset impairment losses,
$3 million of contract termination costs and
$3 million of reindustrialization costs. The Pardies,
France facility is included in the Acetyl Intermediates segment.
Other charges for the six months ended June 30, 2010 was
partially offset by $13 million of recoveries and a
$1 million decrease in legal reserves associated with
plumbing cases included in the Advanced Engineered Materials
segment.
2009
During the first quarter of 2009, the Company began efforts to
align production capacity and staffing levels with the
Companys view of an economic environment of prolonged
lower demand. For the six months ended June 30, 2009, Other
charges included employee termination benefits of
$28 million related to this endeavor. As a result of the
shutdown of the vinyl acetate monomer (VAM)
production unit in Cangrejera, Mexico, the Company recognized
employee termination benefits of $1 million and long-lived
asset impairment losses of $1 million during the six months
ended June 30, 2009. The VAM production unit in Cangrejera,
Mexico is included in the Acetyl Intermediates segment.
Other charges for the six months ended June 30, 2009 was
partially offset by $6 million of insurance recoveries in
satisfaction of claims the Company made related to the unplanned
outage of the Companys Clear Lake, Texas acetic acid
facility during 2007, a $2 million decrease in legal
reserves for plumbing claims for which the statute of
limitations has expired and $1 million of insurance
recoveries associated with plumbing cases.
The changes in the restructuring reserves by business segment
are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Advanced
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Engineered
|
|
|
Consumer
|
|
|
Industrial
|
|
|
Acetyl
|
|
|
|
|
|
|
|
|
|
Materials
|
|
|
Specialties
|
|
|
Specialties
|
|
|
Intermediates
|
|
|
Other
|
|
|
Total
|
|
|
|
(In $ millions)
|
|
|
Employee Termination Benefits
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reserve as of December 31, 2009
|
|
|
7
|
|
|
|
4
|
|
|
|
3
|
|
|
|
60
|
|
|
|
7
|
|
|
|
81
|
|
Additions
|
|
|
2
|
|
|
|
2
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2
|
|
|
|
6
|
|
Cash payments
|
|
|
(3
|
)
|
|
|
(3
|
)
|
|
|
(2
|
)
|
|
|
(19
|
)
|
|
|
(2
|
)
|
|
|
(29
|
)
|
Other changes
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(1
|
)
|
|
|
(1
|
)
|
Exchange rate changes
|
|
|
(1
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(7
|
)
|
|
|
(1
|
)
|
|
|
(9
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reserve as of June 30, 2010
|
|
|
5
|
|
|
|
3
|
|
|
|
1
|
|
|
|
34
|
|
|
|
5
|
|
|
|
48
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plant/Office Closures
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reserve as of December 31, 2009
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
17
|
|
|
|
1
|
|
|
|
18
|
|
Additions
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
6
|
|
|
|
-
|
|
|
|
6
|
|
Cash payments
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(17
|
)
|
|
|
-
|
|
|
|
(17
|
)
|
Exchange rate changes
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(2
|
)
|
|
|
-
|
|
|
|
(2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reserve as of June 30, 2010
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
4
|
|
|
|
1
|
|
|
|
5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
5
|
|
|
|
3
|
|
|
|
1
|
|
|
|
38
|
|
|
|
6
|
|
|
|
53
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20
The Companys effective income tax rate for the three
months ended June 30, 2010 was 27% compared to 13% for the
three months ended June 30, 2009. The increase in the
effective rate was primarily due to foreign losses not resulting
in tax benefits in the current period and increases in reserves
for uncertain tax positions and related interest. The
Companys effective income tax rate for the six months
ended June 30, 2010 was 19% compared to 19% for the six
months ended June 30, 2009. The 2010 effective rate was
favorably impacted by the effect of new tax legislation in
Mexico, offset by foreign losses not resulting in tax benefits
in the current period and the effect of healthcare reform in the
US.
In March 2010, the President of the United States signed into
law the Patient Protection and Affordable Care Act and the
Health Care and Education Reconciliation Act of 2010. Currently,
employers providing retiree prescription drug coverage that is
at least as valuable as the coverage offered under Medicare
Part D are entitled to a subsidy from the government. Prior
to the enactment of the new law, employers were entitled to
deduct the entire cost of providing the retiree prescription
drug coverage, even though a portion was offset by the subsidy.
Under the new law, in years subsequent to 2012, the tax
deductible prescription coverage is reduced by the amount of the
subsidy. As a result, the Company reduced its deferred tax asset
related to postretirement prescription drug coverage by the
amount of the subsidy to be received subsequent to 2012. This
reduction of $7 million to the Companys deferred tax
asset was charged to deferred tax expense during the three
months ended March 31, 2010.
On December 7, 2009, Mexico enacted the 2010 Mexican Tax
Reform Bill (Tax Reform Bill) effective
January 1, 2010. The estimated income tax impact to the
Company of the Tax Reform Bill at December 31, 2009 was
$73 million and was charged to tax expense during the three
months ended December 31, 2009.
On March 31, 2010, the Mexican tax authorities issued new
regulations clarifying various provisions in the 2010 Tax Reform
Bill, including certain aspects of the recapture rules related
to income tax loss carryforwards, intercompany dividends and
differences between consolidated and individual Mexican tax
earnings and profits. At March 31, 2010, the application of
the new regulations resulted in a reduction of $43 million
to the estimated income tax impact of the Tax Reform Bill that
was recorded by the Company during the three months ended
December 31, 2009. After inflation and exchange rate
changes, the Companys estimated tax liability at
June 30, 2010 related to the combined Tax Reform Bill and
the new regulations is as follows:
|
|
|
|
|
|
|
(In $ millions)
|
|
|
2010
|
|
|
-
|
|
2011
|
|
|
2
|
|
2012
|
|
|
3
|
|
2013
|
|
|
4
|
|
2014 and thereafter
|
|
|
23
|
|
|
|
|
|
|
Total
|
|
|
32
|
|
|
|
|
|
|
Liabilities for uncertain tax positions and related interest and
penalties are recorded in Uncertain tax positions and current
Other liabilities in the unaudited consolidated balance sheets.
For the six months ended June 30, 2010, the total
unrecognized tax benefits, interest and penalties related to
uncertain tax positions increased by $8 million for
interest and changes in unrecognized tax benefits in US and
foreign jurisdictions, and decreased $25 million due to
exchange rate changes. Currently, uncertain tax positions are
not expected to change significantly over the next
12 months.
|
|
15.
|
Derivative
Financial Instruments
|
Risk
Management
To reduce the interest rate risk inherent in the Companys
variable rate debt, the Company utilizes interest rate swap
agreements to convert a portion of its variable rate debt into a
fixed rate obligation. These interest rate swap agreements are
designated as cash flow hedges. If an interest rate swap
agreement is terminated prior to its maturity, the amount
previously recorded in Accumulated other comprehensive income
(loss), net is recognized into earnings over the period that the
hedged transaction impacts earnings. If the hedging relationship
is discontinued because it is probable that the forecasted
transaction will not occur according to the original strategy,
any related amounts
21
previously recorded in Accumulated other comprehensive income
(loss), net are recognized into earnings immediately.
The Company also enters into foreign currency forwards and swaps
to minimize its exposure to foreign currency fluctuations.
Through these instruments, the Company mitigates its foreign
currency exposure on transactions with third party entities as
well as intercompany transactions. The foreign currency forwards
and swaps are not designated as hedges under FASB ASC 815,
Derivatives and Hedging. Gains and losses on foreign
currency forwards and swaps entered into to offset foreign
exchange impacts on intercompany balances are classified as
Other income (expense), net, in the unaudited interim
consolidated statements of operations. Gains and losses on
foreign currency forwards and swaps entered into to offset
foreign exchange impacts on all other assets and liabilities are
classified as Foreign exchange gain (loss), net, in the
unaudited interim consolidated statements of operations.
The notional values of the Companys derivative
arrangements are as follows:
|
|
|
|
|
|
|
|
|
|
|
As of
|
|
As of
|
|
|
June 30,
|
|
December 31,
|
|
|
2010
|
|
2009
|
|
|
(In millions)
|
|
US dollar interest rate swap agreements
|
|
$
|
1,500
|
|
|
$
|
1,600
|
|
Euro interest rate swap agreements
|
|
|
150
|
|
|
|
150
|
|
Foreign currency forwards and swaps
|
|
$
|
900
|
|
|
$
|
1,500
|
|
Information regarding changes in the fair value of the
Companys derivative arrangements is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
June 30, 2010
|
|
|
June 30, 2010
|
|
|
|
Gain (Loss)
|
|
|
|
|
|
Gain (Loss)
|
|
|
|
|
|
|
Recognized in Other
|
|
|
Gain (Loss)
|
|
|
Recognized in Other
|
|
|
Gain (Loss)
|
|
|
|
Comprehensive
|
|
|
Recognized in
|
|
|
Comprehensive
|
|
|
Recognized in
|
|
|
|
Income
|
|
|
Income
|
|
|
Income
|
|
|
Income
|
|
|
|
(In $ millions)
|
|
|
Derivatives designated as cash flow hedging instruments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swaps
|
|
|
(7
|
) (2)
|
|
|
(17
|
) (1)
|
|
|
(23
|
) (3)
|
|
|
(35
|
) (1)
|
Derivatives not designated as hedging instruments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency forwards and swaps
|
|
|
-
|
|
|
|
13
|
|
|
|
-
|
|
|
|
38
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
(7
|
)
|
|
|
(4
|
)
|
|
|
(23
|
)
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Amount represents reclassification from Accumulated other
comprehensive income and is classified as Interest expense in
the unaudited interim consolidated statements of operations.
|
(2)
|
Amount excludes $3 million of losses associated with the
Companys equity method investments derivative
activity and $1 million of tax expense.
|
(3)
|
Amount excludes $5 million of losses associated with the
Companys equity method investments derivative
activity and $4 million of tax expense.
|
22
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
June 30, 2009
|
|
|
June 30, 2009
|
|
|
|
Gain (Loss)
|
|
|
|
|
|
Gain (Loss)
|
|
|
|
|
|
|
Recognized in Other
|
|
|
Gain (Loss)
|
|
|
Recognized in Other
|
|
|
Gain (Loss)
|
|
|
|
Comprehensive
|
|
|
Recognized in
|
|
|
Comprehensive
|
|
|
Recognized in
|
|
|
|
Income
|
|
|
Income
|
|
|
Income
|
|
|
Income
|
|
|
|
(In $ millions)
|
|
|
Derivatives designated as cash flow hedging instruments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swaps
|
|
|
2
|
|
|
|
(15
|
) (1)
|
|
|
(13
|
)
|
|
|
(27
|
) (1)
|
Derivatives designated as net investment hedging instruments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Euro-denominated term loan
|
|
|
(1
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Derivatives not designated as hedging instruments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency forwards and swaps
|
|
|
-
|
|
|
|
(6
|
)
|
|
|
-
|
|
|
|
(15
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
1
|
|
|
|
(21
|
)
|
|
|
(13
|
)
|
|
|
(42
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
Amount represents reclassification from Accumulated other
comprehensive income and is classified as Interest expense in
the unaudited interim consolidated statements of operations.
|
See Note 16 for additional information regarding the fair
value of the Companys derivative arrangements.
|
|
16.
|
Fair
Value Measurements
|
On January 1, 2009, the Company adopted the provisions of
FASB ASC Topic 820 for nonrecurring fair value measurements of
non-financial assets and liabilities, such as goodwill,
indefinite-lived intangible assets, property, plant and
equipment and asset retirement obligations. The adoption did not
have a material impact on the Companys financial position,
results of operations or cash flows.
FASB Topic ASC 820 establishes a three-tiered fair value
hierarchy that prioritizes inputs to valuation techniques used
in fair value calculations. The three levels of inputs are
defined as follows:
|
|
|
|
Level 1
|
unadjusted quoted prices for identical assets or liabilities in
active markets accessible by the Company
|
|
|
Level 2
|
inputs that are observable in the marketplace other than those
inputs classified as Level 1
|
|
|
Level 3
|
inputs that are unobservable in the marketplace and significant
to the valuation
|
FASB ASC Topic 820 requires the Company to maximize the use of
observable inputs and minimize the use of unobservable inputs.
If a financial instrument uses inputs that fall in different
levels of the hierarchy, the instrument will be categorized
based upon the lowest level of input that is significant to the
fair value calculation.
The Companys financial assets and liabilities are measured
at fair value on a recurring basis and include securities
available for sale and derivative financial instruments.
Securities available for sale include US government and
corporate bonds and equity securities. Derivative financial
instruments include interest rate swaps and foreign currency
forwards and swaps.
Marketable Securities. Where possible, the Company
utilizes quoted prices in active markets to measure debt and
equity securities; such items are classified as Level 1 in
the hierarchy and include equity securities and US government
bonds. When quoted market prices for identical assets are
unavailable, varying valuation techniques are used. Common
inputs in valuing these assets include, among others, benchmark
yields, issuer spreads and recently reported trades. Such assets
are classified as Level 2 in the hierarchy and typically
include corporate bonds and other US government securities.
Derivatives. Derivative financial instruments are
valued in the market using discounted cash flow techniques.
These techniques incorporate Level 1 and Level 2
inputs such as interest rates and foreign currency exchange
rates.
23
These market inputs are utilized in the discounted cash flow
calculation considering the instruments term, notional
amount, discount rate and credit risk. Significant inputs to the
derivative valuation for interest rate swaps and foreign
currency forwards and swaps are observable in the active markets
and are classified as Level 2 in the hierarchy.
The following fair value hierarchy tables present information
about the Companys assets and liabilities measured at fair
value on a recurring basis:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurement Using
|
|
|
|
|
|
|
Quoted Prices in
|
|
|
|
|
|
|
|
|
|
Active Markets for
|
|
|
Significant Other
|
|
|
|
|
|
|
Identical Assets
|
|
|
Observable Inputs
|
|
|
|
|
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
Total
|
|
|
|
(In $ millions)
|
|
|
Marketable securities, at fair value
|
|
|
|
|
|
|
|
|
|
|
|
|
US government debt securities
|
|
|
-
|
|
|
|
30
|
|
|
|
30
|
|
US corporate debt securities
|
|
|
-
|
|
|
|
1
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total debt securities
|
|
|
-
|
|
|
|
31
|
|
|
|
31
|
|
Equity securities
|
|
|
45
|
|
|
|
-
|
|
|
|
45
|
|
Money market deposits and other securities
|
|
|
-
|
|
|
|
1
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives not designated as hedging instruments
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency forwards and swaps
|
|
|
-
|
|
|
|
3
|
|
|
|
3
|
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets as of June 30, 2010
|
|
|
45
|
|
|
|
35
|
|
|
|
80
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives designated as cash flow hedging instruments
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swaps
|
|
|
-
|
|
|
|
(63
|
)
|
|
|
(63
|
) (2)
|
Interest rate swaps
|
|
|
-
|
|
|
|
(35
|
)
|
|
|
(35
|
) (3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives not designated as hedging instruments
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency forwards and swaps
|
|
|
-
|
|
|
|
(4
|
)
|
|
|
(4
|
) (2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities as of June 30, 2010
|
|
|
-
|
|
|
|
(102
|
)
|
|
|
(102
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marketable securities, at fair value
|
|
|
|
|
|
|
|
|
|
|
|
|
US government debt securities
|
|
|
-
|
|
|
|
28
|
|
|
|
28
|
|
US corporate debt securities
|
|
|
-
|
|
|
|
1
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total debt securities
|
|
|
-
|
|
|
|
29
|
|
|
|
29
|
|
Equity securities
|
|
|
52
|
|
|
|
-
|
|
|
|
52
|
|
Money market deposits and other securities
|
|
|
-
|
|
|
|
2
|
|
|
|
2
|
|
Derivatives not designated as hedging instruments
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency forwards and swaps
|
|
|
-
|
|
|
|
12
|
|
|
|
12
|
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets as of December 31, 2009
|
|
|
52
|
|
|
|
43
|
|
|
|
95
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives designated as cash flow hedging instruments
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swaps
|
|
|
-
|
|
|
|
(68
|
)
|
|
|
(68
|
) (2)
|
Interest rate swaps
|
|
|
-
|
|
|
|
(44
|
)
|
|
|
(44
|
) (3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives not designated as hedging instruments
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency forwards and swaps
|
|
|
-
|
|
|
|
(7
|
)
|
|
|
(7
|
) (2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities as of December 31, 2009
|
|
|
-
|
|
|
|
(119
|
)
|
|
|
(119
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Included in current Other assets in the unaudited consolidated
balance sheets.
|
|
(2)
|
Included in current Other liabilities in the unaudited
consolidated balance sheets.
|
|
(3)
|
Included in noncurrent Other liabilities in the unaudited
consolidated balance sheets.
|
24
Summarized below are the carrying values and estimated fair
values of financial instruments that are not carried at fair
value in the Companys unaudited consolidated balance
sheets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of
|
|
|
As of
|
|
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
|
Carrying
|
|
|
Fair
|
|
|
Carrying
|
|
|
Fair
|
|
|
|
Amount
|
|
|
Value
|
|
|
Amount
|
|
|
Value
|
|
|
|
|
|
|
(In $ millions)
|
|
|
|
|
|
Cost investments (As adjusted, Note 3)
|
|
|
132
|
|
|
|
-
|
|
|
|
129
|
|
|
|
-
|
|
Insurance contracts in nonqualified pension trusts
|
|
|
70
|
|
|
|
70
|
|
|
|
66
|
|
|
|
66
|
|
Long-term debt, including current installments of long-term debt
|
|
|
3,265
|
|
|
|
3,104
|
|
|
|
3,361
|
|
|
|
3,246
|
|
In general, the cost investments included in the table above are
not publicly traded and their fair values are not readily
determinable; however, the Company believes the carrying values
approximate or are less than the fair values.
As of June 30, 2010 and December 31, 2009, the fair
values of cash and cash equivalents, receivables, trade
payables, short-term debt and the current installments of
long-term debt approximate carrying values due to the short-term
nature of these instruments. These items have been excluded from
the table with the exception of the current installments of
long-term debt. Additionally, certain noncurrent receivables,
principally insurance recoverables, are carried at net
realizable value.
The fair value of long-term debt is based on valuations from
third-party banks and market quotations.
|
|
17.
|
Commitments
and Contingencies
|
The Company is involved in legal and regulatory proceedings,
lawsuits and claims incidental to the normal conduct of
business, relating to such matters as product liability,
contract, antitrust, intellectual property, workers
compensation, chemical exposure, prior acquisitions and
divestitures, past waste disposal practices and release of
chemicals into the environment. While it is impossible at this
time to determine with certainty the ultimate outcome of these
proceedings, lawsuits and claims, the Company is actively
defending those matters where the Company is named as a
defendant. Additionally, the Company believes, based on the
advice of legal counsel, that adequate reserves have been made
and that the ultimate outcomes of all such litigation and claims
will not have a material adverse effect on the financial
position of the Company; however, the ultimate outcome of any
given matter may have a material impact on the results of
operations or cash flows of the Company in any given reporting
period.
Plumbing
Actions
CNA Holdings LLC (CNA Holdings), a US subsidiary of
the Company, which included the US business now conducted by the
Ticona business that is included in the Advanced Engineered
Materials segment, along with Shell Oil Company
(Shell), E.I. DuPont de Nemours and Company
(DuPont) and others, has been a defendant in a
series of lawsuits, including a number of class actions,
alleging that plastics manufactured by these companies that were
utilized in the production of plumbing systems for residential
property were defective or caused such plumbing systems to fail.
Based on, among other things, the findings of outside experts
and the successful use of Ticonas acetal copolymer in
similar applications, CNA Holdings does not believe
Ticonas acetal copolymer was defective or caused the
plumbing systems to fail. In many cases CNA Holdings
potential future exposure may be limited by invocation of the
statute of limitations since CNA Holdings ceased selling the
resin for use in the plumbing systems in site-built homes during
1986 and in manufactured homes during 1990.
In November 1995, CNA Holdings, DuPont and Shell entered into
national class action settlements that called for the
replacement of plumbing systems of claimants who have had
qualifying leaks, as well as reimbursements for certain leak
damage. In connection with such settlement, the three companies
had agreed to fund these replacements and reimbursements up to
an aggregate amount of $950 million. As of June 30,
2010, the aggregate funding is $1,111 million due to
additional contributions and funding commitments made primarily
by other parties. The time to file claims for this class has now
expired. Accordingly, the court has approved dissolution of the
class with
25
termination anticipated by the end of 2010. During the period
between 1995 and 2001, CNA Holdings was also named as a
defendant in the following putative class actions:
n Cox,
et al. v. Hoechst Celanese Corporation, et al.,
No. 94-0047
(Chancery Ct., Obion County, Tennessee) (class was certified).
n Couture,
et al. v. Shell Oil Company, et al.,
No. 200-06-000001-985
(Quebec Superior Court, Canada).
n Dilday,
et al. v. Hoechst Celanese Corporation, et al.,
No. 15187 (Chancery Ct., Weakley County, Tennessee).
n Furlan v.
Shell Oil Company, et al., No. C967239 (British
Columbia Supreme Court, Vancouver Registry, Canada).
n Gariepy,
et al. v. Shell Oil Company, et al., No. 30781/99
(Ontario Court General Division, Canada).
n Shelter
General Insurance Co., et al. v. Shell Oil Company, et
al., No. 16809 (Chancery Ct., Weakley County,
Tennessee).
n St.
Croix Ltd., et al. v. Shell Oil Company, et al.,
No. 1997/467 (Territorial Ct., St. Croix Division, the
US Virgin Islands).
n Tranter v.
Shell Oil Company, et al., No. 46565/97 (Ontario Court
General Division, Canada).
In addition, between 1994 and 2008 CNA Holdings was named as a
defendant in numerous non-class actions filed in Arizona,
Florida, Georgia, Louisiana, Mississippi, New Jersey, Tennessee
and Texas, the US Virgin Islands and Canada of which eight are
currently pending. In all of these actions, the plaintiffs have
sought recovery for alleged damages caused by leaking
polybutylene plumbing. Damage amounts have generally not been
specified but these cases generally do not involve (either
individually or in the aggregate) a large number of homes.
The Companys remaining plumbing action accruals recorded
in the unaudited consolidated balance sheets as of June 30,
2010 and December 31, 2009 are $54 million and
$55 million, respectively. The Company recorded recoveries
and reductions in legal reserves related to plumbing actions
(Note 13) to Other (charges) gains, net in the
unaudited interim consolidated statements of operations as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
|
|
|
|
|
(In $ millions)
|
|
|
|
|
|
Recoveries
|
|
|
2
|
|
|
|
1
|
|
|
|
13
|
|
|
|
2
|
|
Legal reserve reductions
|
|
|
-
|
|
|
|
1
|
|
|
|
1
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
2
|
|
|
|
2
|
|
|
|
14
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plumbing
Insurance Indemnifications
Celanese GmbH entered into agreements with insurance companies
related to product liability settlements associated with
Celcon®
plumbing claims. These agreements, except those with insolvent
insurance companies, require the Company to indemnify
and/or
defend these insurance companies in the event that third parties
seek additional monies for matters released in these agreements.
The indemnifications in these agreements do not provide for time
limitations.
In certain of the agreements, Celanese GmbH received a fixed
settlement amount. The indemnities under these agreements
generally are limited to, but in some cases are greater than,
the amount received in settlement from the insurance company.
The maximum exposure under some of these indemnifications is
$95 million, while other settlement agreements with fixed
settlement amounts have no stated indemnification limits.
There are other agreements whereby the settling insurer agreed
to pay a fixed percentage of claims that relate to that
insurers policies. The Company has provided
indemnifications to the insurers for amounts paid in excess of
the settlement percentage. These indemnifications do not provide
for monetary or time limitations.
Sorbates
Antitrust Actions
In 2004 a civil antitrust action styled Freeman Industries
LLC v. Eastman Chemical Co., et al. (No. C34355),
was filed against Hoechst, Nutrinova, Inc. and others in the Law
Court for Sullivan County in Kingsport, Tennessee. The
26
plaintiff sought monetary damages and other relief for alleged
violations of Tennessee state antitrust laws involving the
sorbates industry. The trial court dismissed the
plaintiffs claims and upon appeal the Supreme Court of
Tennessee affirmed the dismissal of the plaintiffs claims.
In December 2005, the plaintiff lost an attempt to amend its
complaint and the entire action was dismissed with prejudice.
Plaintiffs counsel subsequently filed a new complaint with
new class representatives in the same Tennessee court. The
defendants motion to strike the class allegations was
granted in May 2008 and the plaintiffs request to appeal
the ruling remains pending.
Polyester
Staple Antitrust Litigation
CNA Holdings, the successor in interest to Hoechst Celanese
Corporation (HCC), Celanese Americas Corporation and
Celanese GmbH (collectively, the Celanese Entities)
and Hoechst, the former parent of HCC, were named as defendants
in two actions (involving 25 individual participants) filed in
September 2006 by US purchasers of polyester staple fibers
manufactured and sold by HCC. The actions allege that the
defendants participated in a conspiracy to fix prices, rig bids
and allocate customers of polyester staple sold in the United
States. These actions were consolidated in a proceeding by a
Multi-District Litigation Panel in the United States District
Court for the Western District of North Carolina styled In re
Polyester Staple Antitrust Litigation, MDL 1516. On
June 12, 2008 the court dismissed these actions against all
Celanese Entities in consideration of a payment by the Company
of $107 million. This proceeding related to sales by the
polyester staple fibers business which Hoechst sold to KoSa,
Inc. in 1998. Accordingly, the impact of this settlement was
reflected within discontinued operations in the consolidated
statements of operations for the year ended December 31,
2008. The Company also previously entered into tolling
arrangements with four other alleged US purchasers of polyester
staple fibers manufactured and sold by the Celanese Entities.
These purchasers were not included in the settlement and one
such company filed suit against the Company in December 2008 in
the Western District of North Carolina entitled
Milliken & Company v. CNA Holdings, Inc.,
Celanese Americas Corporation and Hoechst AG
(No. 8-CV-00578).
The Company is actively defending this matter and has filed a
motion to dismiss, which is pending with the court.
In December 1998, HCC sold its polyester staple business (the
1998 Sale) to KoSa B.V., f/k/a Arteva B.V., a
subsidiary of Koch Industries, Inc. (KoSa), under an
asset purchase agreement (APA). In August of 2002,
Arteva Specialties, S.a.r.l., a subsidiary of KoSa (Arteva
Specialties), pled guilty to a criminal violation of the
Sherman Act relating to anti-competitive conduct following the
1998 Sale. Shortly thereafter, various polyester staple
customers filed approximately 50 civil anti-trust lawsuits
against KoSa and Arteva Specialties, some of which alleged
anti-competitive conduct prior to the 1998 Sale. In a complaint
filed on November 3, 2003 in the United States
District Court for the Southern District of New York, Koch
Industries, Inc. et al. v. Hoechst Aktiengellschaft et
al.,
No. 03-cv-8679,
Koch Industries, Inc., KoSa, Arteva Specialties and Arteva
Services S.a.r.l. sought recovery from Hoechst and the Celanese
Entities exceeding $371 million. In the complaint, the
plaintiffs alleged claims of fraud, unjust enrichment and
indemnification for retained liabilities and for breach of
contractual representations and warranties under the APA. Both
parties filed motions for summary judgment in 2009. On
July 19, 2010, the court granted in part and denied in part
the pending motions. The court dismissed the plaintiffs
claims for fraud and unjust enrichment, which also eliminated
plaintiffs claims for punitive damages. The court also
held that the plaintiffs cannot recover damages for liabilities
arising out of the operation of the polyester staple business
incurred after the 1998 Sale. The plaintiffs can recover damages
for the costs of defending and settling civil antitrust actions
brought against them to the extent such damages arose out of the
operation of the polyester staple business prior to the 1998
Sale (i.e., Retained Liabilities as defined in the
APA). The plaintiffs have alleged that they paid approximately
$135 million for the costs of settling and defending both
pre- and post-1998 Sale civil antitrust actions. The court
reserved for trial the calculation and allocation of any damages
to which the plaintiffs would be entitled under the relevant
sections of the APA. Because of insufficient information,
including that contained in the record, we are unable to
estimate the amount of the Companys loss for this matter.
The court also preserved for trial the plaintiffs claim
for breach of contractual representations and warranties under
the APA. No date has been set for trial. The Company is actively
defending this matter.
Acetic
Acid Patent Infringement Matters
On May 9, 1999, Celanese International Corporation filed a
private criminal action styled Celanese International
Corporation v. China Petrochemical Development Corporation
against China Petrochemical Development Corporation
(CPDC) in the Taiwan Kaoshiung District Court
alleging that CPDC infringed Celanese
27
International Corporations patent covering the manufacture
of acetic acid. Celanese International Corporation also filed a
supplementary civil brief that, in view of changes in Taiwanese
patent laws, was subsequently converted to a civil action
alleging damages against CPDC based on a period of infringement
of ten years,
1991-2000,
and based on CPDCs own data that was reported to the
Taiwanese securities and exchange commission. Celanese
International Corporations patent was held valid by the
Taiwanese patent office. On August 31, 2005, the District
Court held that CPDC infringed Celanese International
Corporations acetic acid patent and awarded Celanese
International Corporation approximately $28 million (plus
interest) for the period of 1995 through 1999. In October 2008,
the High Court, on appeal, reversed the District Courts
$28 million award to the Company. The Company appealed to
the Superior Court in November 2008, and the court remanded the
case to the Intellectual Property Court on June 4, 2009. On
January 16, 2006, the District Court awarded Celanese
International Corporation $800,000 (plus interest) for the year
1990. In January 2009, the High Court, on appeal, affirmed the
District Courts award and CPDC appealed on
February 5, 2009 to the Supreme Court. During the quarter
ended March 31, 2010, ended this case was remanded to the
Intellectual Property Court. On June 29, 2007, the District
Court awarded Celanese International Corporation
$60 million (plus interest) for the period of 2000 through
2005. CPDC appealed this ruling and on July 21, 2009, the
High Court ruled in CPDCs favor. The Company appealed to
the Supreme Court and in December 2009, the case was remanded to
the Intellectual Property Court. All three cases remain pending
in the Intellectual Property Court.
Workers
Compensation Claims
The Company has been provided with notices of claims filed with
the South Carolina Workers Compensation Commission and the
North Carolina Industrial Commission. The notices of claims
identify various alleged injuries to current and former
employees arising from alleged exposure to undefined chemicals
at current and former plant sites in South Carolina and North
Carolina. As of June 30, 2010, there were 1,308 claims
pending. The Company has reserves for defense costs related to
these matters.
Asbestos
Claims
As of June 30, 2010, the Company and several of its US
subsidiaries are defendants in asbestos cases. During the six
months ended June 30, 2010, asbestos case activity is as
follows:
|
|
|
|
|
|
|
Asbestos Cases
|
|
|
As of December 31, 2009
|
|
|
526
|
|
Case adjustments
|
|
|
2
|
|
New cases filed
|
|
|
22
|
|
Resolved cases
|
|
|
(43
|
)
|
|
|
|
|
|
As of June 30, 2010
|
|
|
507
|
|
|
|
|
|
|
Because many of these cases involve numerous plaintiffs, the
Company is subject to claims significantly in excess of the
number of actual cases. The Company has reserves for defense
costs related to claims arising from these matters.
Award
Proceedings in relation to Domination Agreement and
Squeeze-Out
On October 1, 2004, a Domination Agreement between Celanese
GmbH and the Purchaser became operative, pursuant to which the
Purchaser became obligated to offer to acquire all outstanding
Celanese GmbH shares from the minority shareholders of Celanese
GmbH in return for payment of fair cash compensation
(Squeeze-Out). The amount of this fair cash
compensation was determined to be 41.92 per share, plus
interest, in accordance with applicable German law. Until the
Squeeze-Out was registered in the commercial register in Germany
on December 22, 2006, any minority shareholder who elected
not to sell its shares to the Purchaser was entitled to remain a
shareholder of Celanese GmbH and to receive from the Purchaser a
gross guaranteed annual payment on its shares of 3.27 per
Celanese GmbH share less certain corporate taxes in lieu of any
dividend.
The amounts of the fair cash compensation and of the guaranteed
annual payment offered under the Domination Agreement as well as
the Squeeze-Out compensation are under court review in two
separate special award proceedings. The amounts of the fair cash
compensation and of the guaranteed annual payment offered under
the
28
Domination Agreement may be increased in special award
proceedings initiated by minority shareholders, which may
further reduce the funds the Purchaser can otherwise make
available to the Company. As of March 30, 2005, several
minority shareholders of Celanese GmbH had initiated special
award proceedings seeking the courts review of the amounts
of the fair cash compensation and of the guaranteed annual
payment offered under the Domination Agreement. As a result of
these proceedings, the amount of the fair cash consideration and
the guaranteed annual payment offered under the Domination
Agreement could be increased by the court so that all minority
shareholders, including those who have already tendered their
shares into the mandatory offer and have received the fair cash
compensation could claim the respective higher amounts. The
court dismissed all of these proceedings in March 2005 on the
grounds of inadmissibility. Thirty-three plaintiffs appealed the
dismissal, and in January 2006, twenty-three of these appeals
were granted by the court. They were remanded back to the court
of first instance, where the valuation will be further reviewed.
On December 12, 2006, the court of first instance appointed
an expert to help determine the value of Celanese GmbH. In the
first quarter of 2007, certain minority shareholders that
received 66.99 per share as fair cash compensation also
filed award proceedings challenging the amount they received as
fair cash compensation. The case remains pending before the
court of the first instance.
The Company received applications for the commencement of award
proceedings filed by 79 shareholders against the Purchaser
with the Frankfurt District Court requesting the court to set a
higher amount for the Squeeze-Out compensation. The motions are
based on various alleged shortcomings and mistakes in the
valuation of Celanese GmbH done for purposes of the Squeeze-Out.
On May 11, 2007, the court of first instance appointed a
common representative for those shareholders that have not filed
an application on their own.
Should the court set a higher value for the Squeeze-Out
compensation, former Celanese GmbH shareholders who ceased to be
shareholders of Celanese GmbH due to the Squeeze-Out are
entitled, pursuant to a settlement agreement between the
Purchaser and certain former Celanese GmbH shareholders, to
claim for their shares the higher of the compensation amounts
determined by the court in these different proceedings. Payments
these shareholders already received as compensation for their
shares will be offset so that those shareholders who ceased to
be shareholders of Celanese GmbH due to the Squeeze-Out are not
entitled to more than the higher of the amount set in the two
court proceedings.
Guarantees
The Company has agreed to guarantee or indemnify third parties
for environmental and other liabilities pursuant to a variety of
agreements, including asset and business divestiture agreements,
leases, settlement agreements and various agreements with
affiliated companies. Although many of these obligations contain
monetary
and/or time
limitations, others do not provide such limitations.
As indemnification obligations often depend on the occurrence of
unpredictable future events, the future costs associated with
them cannot be determined at this time.
The Company has accrued for all probable and reasonably
estimable losses associated with all known matters or claims
that have been brought to its attention. These known obligations
include the following:
Demerger Obligations
The Company agreed to indemnify Hoechst, and its legal
successors, for various liabilities under the Demerger
Agreement, including for environmental liabilities associated
with contamination arising under 19 divestiture agreements
entered into by Hoechst prior to the demerger.
The Companys obligation to indemnify Hoechst, and its
legal successors, is subject to the following thresholds:
n The
Company will indemnify Hoechst, and its legal successors,
against those liabilities up to 250 million;
n Hoechst,
and its legal successors, will bear those liabilities exceeding
250 million; provided, however, that the Company will
reimburse Hoechst, and its legal successors, for one-third of
liabilities exceeding 750 million in the aggregate.
The aggregate maximum amount of environmental indemnifications
under the remaining divestiture agreements that provide for
monetary limits is approximately 750 million. Three
of the divestiture agreements do not provide for monetary limits.
29
Based on the estimate of the probability of loss under this
indemnification, the Company had reserves of $29 million
and $32 million as of June 30, 2010 and
December 31, 2009, respectively, for this contingency.
Where the Company is unable to reasonably determine the
probability of loss or estimate such loss under an
indemnification, the Company has not recognized any related
liabilities.
The Company has also undertaken in the Demerger Agreement to
indemnify Hoechst and its legal successors for
(i) one-third of any and all 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 relates 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 provided for any reserves associated with
this indemnification as it is not probable or estimable. The
Company has not made any payments to Hoechst or its legal
successors during the six months ended June 30, 2010 and
2009, respectively, in connection with this indemnification.
Divestiture Obligations
The Company and its predecessor companies agreed to indemnify
third-party purchasers of former businesses and assets for
various pre-closing conditions, as well as for breaches of
representations, warranties and covenants. Such liabilities also
include environmental liability, product liability, antitrust
and other liabilities. These indemnifications and guarantees
represent standard contractual terms associated with typical
divestiture agreements and, other than environmental
liabilities, the Company does not believe that they expose the
Company to any significant risk. As of June 30, 2010 and
December 31, 2009, the Company had reserves in the
aggregate of $30 million and $32 million,
respectively, for these matters.
The Company has divested numerous businesses, investments and
facilities through agreements containing indemnifications or
guarantees to the purchasers. Many of the obligations contain
monetary
and/or time
limitations, ranging from one year to thirty years. The
aggregate amount of guarantees provided for under these
agreements is approximately $1.9 billion as of
June 30, 2010. Other agreements do not provide for any
monetary or time limitations.
Purchase
Obligations
In the normal course of business, the Company enters into
commitments to purchase goods and services over a fixed period
of time. The Company maintains a number of
take-or-pay contracts for purchases of raw materials
and utilities. As of June 30, 2010, there were outstanding
future commitments of $1.7 billion under take-or-pay
contracts. The Company recognized $0 and $3 million of
losses related to take-or-pay contract termination costs for the
three and six months ended June 30, 2010, respectively,
related to the Companys Pardies, France Project of Closure
(Note 3 and Note 13). The Company does not expect to
incur any material losses under take-or-pay contractual
arrangements. Additionally, as of June 30, 2010, there were
other outstanding commitments of $659 million representing
maintenance and service agreements, energy and utility
agreements, consulting contracts and software agreements.
During March 2010, the Company successfully completed an amended
raw material purchase agreement with a supplier who had filed
for bankruptcy. Under the original contract, the Company made
advance payments in exchange for preferential pricing on certain
volumes of material purchases over the life of the contract. The
cancellation of the original contract and the terms of the
subsequent amendment resulted in the Company accelerating
amortization on the unamortized prepayment balance of $0 and
$22 million during the three and six months ended
June 30, 2010, respectively. The accelerated amortization
was recorded to Cost of sales in the unaudited interim
consolidated statements of operations as follows:
$20 million was recorded in the Acetyl Intermediates
segment and $2 million was recorded in the Advanced
Engineered Materials segment.
Effective April 1, 2010, the Company moved its Ibn Sina
affiliate from its Acetyl Intermediates segment to its Advanced
Engineered Materials segment to reflect the change the
affiliates business dynamics and growth opportunities. The
Company has retrospectively adjusted its reportable segments for
its Advanced Engineered
30
Materials segment and its Acetyl Intermediates segment for the
three and six months ended June 30, 2009 to conform to the
three and six months ended June 30, 2010 presentation.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Advanced
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Engineered
|
|
|
Consumer
|
|
|
Industrial
|
|
|
Acetyl
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
Materials
|
|
|
Specialties
|
|
|
Specialties
|
|
|
Intermediates
|
|
|
Activities
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
(In $ millions)
|
|
|
Three months ended June 30, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
|
282
|
|
|
|
291
|
(1)
|
|
|
269
|
|
|
|
782
|
(1)
|
|
|
1
|
|
|
|
(108
|
)
|
|
|
1,517
|
|
Other (charges) gains, net
|
|
|
(3
|
)
|
|
|
(1
|
)
|
|
|
-
|
|
|
|
(1
|
)
|
|
|
(1
|
)
|
|
|
-
|
|
|
|
(6
|
)
|
Equity in net earnings (loss) of affiliates
|
|
|
39
|
|
|
|
1
|
|
|
|
-
|
|
|
|
1
|
|
|
|
4
|
|
|
|
-
|
|
|
|
45
|
|
Earnings (loss) from continuing operations before tax
|
|
|
79
|
|
|
|
137
|
|
|
|
16
|
|
|
|
70
|
|
|
|
(78
|
)
|
|
|
-
|
|
|
|
224
|
|
Depreciation and amortization
|
|
|
18
|
|
|
|
9
|
|
|
|
10
|
|
|
|
24
|
|
|
|
3
|
|
|
|
-
|
|
|
|
64
|
|
Capital
expenditures (2)
|
|
|
8
|
|
|
|
9
|
|
|
|
13
|
|
|
|
9
|
|
|
|
1
|
|
|
|
-
|
|
|
|
40
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(As Adjusted, Note 3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended June 30, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
|
184
|
|
|
|
280
|
|
|
|
267
|
|
|
|
622
|
(1)
|
|
|
1
|
|
|
|
(110
|
)
|
|
|
1,244
|
|
Other (charges) gains, net
|
|
|
(4
|
)
|
|
|
(3
|
)
|
|
|
(1
|
)
|
|
|
-
|
|
|
|
2
|
|
|
|
-
|
|
|
|
(6
|
)
|
Equity in net earnings (loss) of affiliates
|
|
|
31
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1
|
|
|
|
3
|
|
|
|
-
|
|
|
|
35
|
|
Earnings (loss) from continuing operations before tax
|
|
|
31
|
|
|
|
119
|
|
|
|
19
|
|
|
|
41
|
|
|
|
(83
|
)
|
|
|
-
|
|
|
|
127
|
|
Depreciation and amortization
|
|
|
19
|
|
|
|
12
|
|
|
|
14
|
|
|
|
32
|
|
|
|
2
|
|
|
|
-
|
|
|
|
79
|
|
Capital
expenditures (2)
|
|
|
6
|
|
|
|
10
|
|
|
|
16
|
|
|
|
9
|
|
|
|
1
|
|
|
|
-
|
|
|
|
42
|
|
|
|
(1)
|
Includes $108 million and $110 million of intersegment
sales eliminated in consolidation for the three months ended
June 30, 2010 and 2009, respectively.
|
(2)
|
Excludes expenditures related to the relocation of the
Companys Ticona plant in Kelsterbach
(Note 20) and includes increase of accrued capital
expenditures of $6 million and $2 million for the
three months ended June 30, 2010 and 2009, respectively.
|
31
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Advanced
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Engineered
|
|
|
Consumer
|
|
|
Industrial
|
|
|
Acetyl
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
Materials
|
|
|
Specialties
|
|
|
Specialties
|
|
|
Intermediates
|
|
|
Activities
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
(In $ millions)
|
|
|
Six months ended June 30, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
|
564
|
|
|
|
529
|
(1)
|
|
|
511
|
|
|
|
1,506
|
(1)
|
|
|
1
|
|
|
|
(206
|
)
|
|
|
2,905
|
|
Other (charges) gains, net
|
|
|
2
|
|
|
|
(74
|
)
|
|
|
-
|
|
|
|
(8
|
)
|
|
|
(3
|
)
|
|
|
-
|
|
|
|
(83
|
)
|
Equity in net earnings (loss) of affiliates
|
|
|
83
|
|
|
|
1
|
|
|
|
-
|
|
|
|
2
|
|
|
|
8
|
|
|
|
-
|
|
|
|
94
|
|
Earnings (loss) from continuing operations before tax
|
|
|
171
|
|
|
|
107
|
|
|
|
28
|
|
|
|
71
|
|
|
|
(160
|
)
|
|
|
-
|
|
|
|
217
|
|
Depreciation and amortization
|
|
|
38
|
(3)
|
|
|
20
|
|
|
|
20
|
|
|
|
69
|
(3)
|
|
|
6
|
|
|
|
-
|
|
|
|
153
|
|
Capital
expenditures (2)
|
|
|
13
|
|
|
|
15
|
|
|
|
18
|
|
|
|
14
|
|
|
|
3
|
|
|
|
-
|
|
|
|
63
|
|
Goodwill and intangible assets
|
|
|
420
|
|
|
|
275
|
|
|
|
54
|
|
|
|
256
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,005
|
|
Total assets
|
|
|
2,380
|
|
|
|
1,051
|
|
|
|
765
|
|
|
|
1,951
|
|
|
|
1,958
|
|
|
|
-
|
|
|
|
8,105
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(As Adjusted, Note 3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended June 30, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
|
349
|
|
|
|
546
|
|
|
|
509
|
|
|
|
1,194
|
(1)
|
|
|
1
|
|
|
|
(209
|
)
|
|
|
2,390
|
|
Other (charges) gains, net
|
|
|
(13
|
)
|
|
|
(3
|
)
|
|
|
(3
|
)
|
|
|
(1
|
)
|
|
|
(7
|
)
|
|
|
-
|
|
|
|
(27
|
)
|
Equity in net earnings (loss) of affiliates
|
|
|
31
|
|
|
|
1
|
|
|
|
-
|
|
|
|
3
|
|
|
|
6
|
|
|
|
-
|
|
|
|
41
|
|
Earnings (loss) from continuing operations before tax
|
|
|
13
|
|
|
|
188
|
|
|
|
29
|
|
|
|
53
|
|
|
|
(167
|
)
|
|
|
-
|
|
|
|
116
|
|
Depreciation and amortization
|
|
|
36
|
|
|
|
24
|
|
|
|
27
|
|
|
|
59
|
|
|
|
4
|
|
|
|
-
|
|
|
|
150
|
|
Capital
expenditures (2)
|
|
|
10
|
|
|
|
18
|
|
|
|
26
|
|
|
|
17
|
|
|
|
1
|
|
|
|
-
|
|
|
|
72
|
|
Goodwill and intangible assets as of December 31, 2009
|
|
|
385
|
|
|
|
299
|
|
|
|
62
|
|
|
|
346
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,092
|
|
Total assets as of December 31, 2009
|
|
|
2,268
|
|
|
|
1,083
|
|
|
|
740
|
|
|
|
1,984
|
|
|
|
2,337
|
|
|
|
-
|
|
|
|
8,412
|
|
|
|
(1)
|
Includes $206 million and $209 million of intersegment
sales eliminated in consolidation for the six months ended
June 30, 2010 and 2009, respectively.
|
|
(2)
|
Excludes expenditures related to the relocation of the
Companys Ticona plant in Kelsterbach
(Note 20) and includes decrease of accrued capital
expenditures of $15 million and $24 million for the
six months ended June 30, 2010 and 2009, respectively.
|
|
(3)
|
Includes $2 million for Advanced Engineered Materials and
$20 million for Acetyl Intermediates for the accelerated
amortization of the unamortized prepayment related to a raw
material purchase agreement (Note 17).
|
32
|
|
19.
|
Earnings
(Loss) Per Share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
|
|
2010
|
|
|
2009
|
|
|
|
Basic
|
|
|
Diluted
|
|
|
Basic
|
|
|
Diluted
|
|
|
|
|
|
|
|
|
|
As Adjusted
|
|
|
|
|
|
|
|
|
|
(Note 3)
|
|
|
|
(In $ millions, except share and per share data)
|
|
|
Amounts attributable to Celanese Corporation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) from continuing operations
|
|
|
163
|
|
|
|
163
|
|
|
|
110
|
|
|
|
110
|
|
Earnings (loss) from discontinued operations
|
|
|
(3
|
)
|
|
|
(3
|
)
|
|
|
(1
|
)
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings (loss)
|
|
|
160
|
|
|
|
160
|
|
|
|
109
|
|
|
|
109
|
|
Less: Cumulative preferred stock dividends
|
|
|
-
|
|
|
|
-
|
|
|
|
(2
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings (loss) available to common shareholders
|
|
|
160
|
|
|
|
160
|
|
|
|
107
|
|
|
|
109
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average shares basic
|
|
|
156,326,226
|
|
|
|
156,326,226
|
|
|
|
143,528,126
|
|
|
|
143,528,126
|
|
Dilutive stock options
|
|
|
|
|
|
|
1,787,983
|
|
|
|
|
|
|
|
1,020,493
|
|
Dilutive restricted stock units
|
|
|
|
|
|
|
290,910
|
|
|
|
|
|
|
|
445,014
|
|
Assumed conversion of preferred stock
|
|
|
|
|
|
|
-
|
|
|
|
|
|
|
|
12,084,337
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average shares diluted
|
|
|
|
|
|
|
158,405,119
|
|
|
|
|
|
|
|
157,077,970
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) from continuing operations
|
|
|
1.04
|
|
|
|
1.03
|
|
|
|
0.75
|
|
|
|
0.70
|
|
Earnings (loss) from discontinued operations
|
|
|
(0.02
|
)
|
|
|
(0.02
|
)
|
|
|
(0.01
|
)
|
|
|
(0.01
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings (loss)
|
|
|
1.02
|
|
|
|
1.01
|
|
|
|
0.74
|
|
|
|
0.69
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30,
|
|
|
|
2010
|
|
|
2009
|
|
|
|
Basic
|
|
|
Diluted
|
|
|
Basic
|
|
|
Diluted
|
|
|
|
|
|
|
|
|
|
As Adjusted
|
|
|
|
|
|
|
|
|
|
(Note 3)
|
|
|
|
(In $ millions, except share and per share data)
|
|
|
Amounts attributable to Celanese Corporation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) from continuing operations
|
|
|
176
|
|
|
|
176
|
|
|
|
94
|
|
|
|
94
|
|
Earnings (loss) from discontinued operations
|
|
|
(2
|
)
|
|
|
(2
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings (loss)
|
|
|
174
|
|
|
|
174
|
|
|
|
94
|
|
|
|
94
|
|
Less: Cumulative preferred stock dividends
|
|
|
(3
|
)
|
|
|
-
|
|
|
|
(5
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings (loss) available to common shareholders
|
|
|
171
|
|
|
|
174
|
|
|
|
89
|
|
|
|
94
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average shares basic
|
|
|
153,315,950
|
|
|
|
153,315,950
|
|
|
|
143,517,588
|
|
|
|
143,517,588
|
|
Dilutive stock options
|
|
|
|
|
|
|
1,854,552
|
|
|
|
|
|
|
|
510,246
|
|
Dilutive restricted stock units
|
|
|
|
|
|
|
369,966
|
|
|
|
|
|
|
|
242,878
|
|
Assumed conversion of preferred stock
|
|
|
|
|
|
|
3,133,605
|
|
|
|
|
|
|
|
12,084,337
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average shares diluted
|
|
|
|
|
|
|
158,674,073
|
|
|
|
|
|
|
|
156,355,049
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) from continuing operations
|
|
|
1.13
|
|
|
|
1.11
|
|
|
|
0.62
|
|
|
|
0.60
|
|
Earnings (loss) from discontinued operations
|
|
|
(0.01
|
)
|
|
|
(0.01
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings (loss)
|
|
|
1.12
|
|
|
|
1.10
|
|
|
|
0.62
|
|
|
|
0.60
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
33
Securities that were not included in the computation of diluted
net earnings per share as their effect would have been
antidilutive are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
|
|
|
Six Months
|
|
|
|
Ended June 30,
|
|
|
Ended June 30,
|
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
|
Stock options
|
|
|
582,500
|
|
|
|
1,583,113
|
|
|
|
596,875
|
|
|
|
4,262,531
|
|
Restricted stock units
|
|
|
-
|
|
|
|
88,250
|
|
|
|
-
|
|
|
|
358,127
|
|
Convertible preferred stock
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
582,500
|
|
|
|
1,671,363
|
|
|
|
596,875
|
|
|
|
4,620,658
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20.
|
Ticona
Kelsterbach Plant Relocation
|
In November 2006, the Company finalized a settlement agreement
with the Frankfurt, Germany Airport (Fraport) to
relocate the Kelsterbach, Germany Ticona business, included in
the Advanced Engineered Materials segment, resolving several
years of legal disputes related to the planned Fraport
expansion. As a result of the settlement, the Company will
transition Ticonas operations from Kelsterbach to the
Hoechst Industrial Park in the Rhine Main area in Germany by
mid-2011. Under the original agreement, Fraport agreed to pay
Ticona a total of 670 million over a five-year period
to offset the costs associated with the transition of the
business from its current location and the closure of the
Kelsterbach plant. In February 2009, the Company announced the
Fraport supervisory board approved the acceleration of the 2009
and 2010 payments of 200 million and
140 million, respectively, required by the settlement
agreement signed in June 2007. In February 2009, the Company
received a discounted amount of 322 million
($412 million) under this agreement. In addition, the
Company received 59 million ($75 million) in
value-added tax from Fraport which was remitted to the tax
authorities in April 2009. Amounts received from Fraport are
accounted for as deferred proceeds and are included in
noncurrent Other liabilities in the unaudited consolidated
balance sheets.
Below is a summary of the financial statement impact associated
with the Ticona Kelsterbach plant relocation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
|
|
|
Total From
|
|
|
|
June 30,
|
|
|
Inception Through
|
|
|
|
2010
|
|
|
2009
|
|
|
June 30, 2010
|
|
|
|
(In $ millions)
|
|
|
Proceeds received from Fraport
|
|
|
-
|
|
|
|
412
|
|
|
|
749
|
|
Costs expensed
|
|
|
10
|
|
|
|
6
|
|
|
|
43
|
|
Costs
capitalized (1)
|
|
|
131
|
|
|
|
162
|
|
|
|
747
|
|
|
|
|
(1) |
|
Includes decrease in accrued
capital expenditures of $20 million and increase in accrued
capital expenditures of $17 million for the six months
ended June 30, 2010 and 2009, respectively.
|
On July 1, 2010, the Company declared a cash dividend of
$0.05 per share on its Common Stock amounting to
$8 million. The cash dividends are for the period from
May 1, 2010 to July 31, 2010 and will be paid on
August 2, 2010 to holders of record as of July 15,
2010.
34
|
|
Item 2.
|
Managements 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.
Forward-Looking
Statements May Prove Inaccurate
Managements Discussion and Analysis of Financial Condition
and Results of Operations (MD&A) and other
parts of this Quarterly Report contain certain forward-looking
statements and information relating to us that are based on the
beliefs of our management as well as assumptions made by, and
information currently available to, us. When used in this
document, words such as anticipate,
believe, estimate, expect,
intend, plan and project and
similar expressions, as they relate to us are intended to
identify forward-looking statements. These statements reflect
our current views with respect to future events, are not
guarantees of future performance and involve risks and
uncertainties that are difficult to predict. Further, certain
forward-looking statements are based upon assumptions as to
future events that may not prove to be accurate.
The following discussion should be read in conjunction with the
Celanese Corporation and Subsidiaries consolidated financial
statements as of and for the year ended December 31, 2009,
as filed on February 12, 2010 with the Securities and
Exchange Commission (SEC) as part of the
Companys Annual Report on
Form 10-K
(the 2009
Form 10-K)
and the unaudited interim consolidated financial statements and
notes thereto included elsewhere in this Quarterly Report. We
assume no obligation to revise or update any forward-looking
statements for any reason, except as required by law.
See Part I - Item 1A. Risk Factors of our 2009
Form 10-K
for a description of risk factors that could significantly
affect our financial results. In addition, the following factors
could cause our actual results to differ materially from those
results, performance or achievements that may be expressed or
implied by such forward-looking statements. These factors
include, among other things:
|
|
|
|
|
changes in general economic, business, political and regulatory
conditions in the countries or regions in which we operate;
|
|
|
|
the length and depth of product and industry business cycles
particularly in the automotive, electrical, electronics and
construction industries;
|
|
|
|
changes in the price and availability of raw materials,
particularly changes in the demand for, supply of, and market
prices of ethylene, methanol, natural gas, wood pulp, fuel oil
and electricity;
|
|
|
|
the ability to pass increases in raw material prices on to
customers or otherwise improve margins through price increases;
|
|
|
|
the ability to maintain plant utilization rates and to implement
planned capacity additions and expansions;
|
|
|
|
the ability to reduce production costs and improve productivity
by implementing technological improvements to existing plants;
|
|
|
|
increased price competition and the introduction of competing
products by other companies;
|
|
|
|
changes in the degree of intellectual property and other legal
protection afforded to our products;
|
|
|
|
compliance costs and potential disruption or interruption of
production due to accidents or other unforeseen events or delays
in construction of facilities;
|
|
|
|
potential liability for remedial actions and increased costs
under existing or future environmental regulations, including
those relates to climate change;
|
|
|
|
potential liability resulting from pending or future litigation,
or from changes in the laws, regulations or policies of
governments or other governmental activities in the countries in
which we operate;
|
|
|
|
changes in currency exchange rates and interest rates; and
|
|
|
|
various other factors, both referenced and not referenced in
this Quarterly Report.
|
35
Many of these factors are macroeconomic in nature and are,
therefore, beyond our control. Should one or more of these risks
or uncertainties materialize, or should underlying assumptions
prove incorrect, our actual results, performance or achievements
may vary materially from those described in this Quarterly
Report as anticipated, believed, estimated, expected, intended,
planned or projected. We neither intend nor assume any
obligation to update these forward-looking statements, which
speak only as of their dates.
Overview
We are a leading, global technology and specialty materials
company. We are one of the worlds largest producers of
acetyl products, which are intermediate chemicals for nearly all
major industries, as well as a leading global producer of
high-performance engineered polymers that are used in a variety
of high-value end-use applications. As an industry leader, we
hold geographically balanced global positions and participate in
diversified end-use markets. Our operations are primarily
located in North America, Europe and Asia. We combine a
demonstrated track record of execution, strong performance built
on shared principles and objectives, and a clear focus on growth
and value creation.
2010 Significant Events:
We concluded the formal
consultation process with employees and their representatives
and are continuing to consider a plan to close our acetate flake
and tow manufacturing operations in Spondon, Derby, United
Kingdom in the latter part of 2011.
We acquired two product
lines,
Zenite®
liquid crystal polymer (LCP) and
Thermx®
polycyclohexylene-dimethylene terephthalate (PCT),
from DuPont Performance Polymers.
We announced five-year
Environmental Health and Safety sustainability goals for
occupational safety performance, energy intensity, greenhouse
gases and waste management for the year 2015.
We received American
Chemistry Councils (ACC) 2010 Responsible Care
Initiative of the Year Award. This award recognizes companies
that demonstrate leadership in the areas of employee health and
safety, security or environmental protection in the chemical
industry.
We announced the
construction of a 50,000 ton polyacetal (POM)
production facility by our National Methanol Company affiliate
(Ibn Sina) in Saudi Arabia and extended the term of
the joint venture, which will now run until 2032. Upon
successful startup of the POM facility, our indirect economic
interest in Ibn Sina will increase from 25% to a total of 32.5%.
We received formal approval
of our previously announced plans to expand flake and tow
capacities, each by 30,000 tons, at our affiliate facility in
Nantong, China, with our affiliate partner, China National
Tobacco Corporation.
We announced a 25% increase
in our quarterly common stock cash dividend beginning August
2010. The annual dividend rate will increase from $0.16 to $0.20
per share of common stock and the quarterly rate will increase
from $0.04 to $0.05 per share of common stock.
Results
of Operations
We indirectly own a 25% interest in Ibn Sina through CTE
Petrochemicals Company (CTE), a joint venture with
Texas Eastern Arabian Corporation Ltd. (which also indirectly
owns 25%). The remaining interest in Ibn Sina is held by Saudi
Basic Industries Corporation (SABIC). SABIC and CTE
entered into the Ibn Sina joint venture agreement in 1981. In
April 2010, we announced that Ibn Sina will construct a 50,000
ton POM production facility in Saudi Arabia and that the term of
the joint venture agreement was extended until 2032. Upon
successful startup of the POM facility, our indirect economic
interest in Ibn Sina will increase from 25% to 32.5%.
SABICs economic interest will remain unchanged.
In connection with this transaction, we reassessed the factors
surrounding the accounting method for this investment and
changed the accounting from the cost method of accounting for
investments to the equity method of accounting
36
for investments beginning April 1, 2010. Financial
information relating to this investment for prior periods has
been retrospectively adjusted to apply the equity method of
accounting.
Effective April 1, 2010, we moved our Ibn Sina affiliate
from our Acetyl Intermediates segment to our Advanced Engineered
Materials segment to reflect the change in the affiliates
business dynamics and growth opportunities. Business segment
information for prior periods included below has been
retrospectively adjusted to reflect the change.
Financial
Highlights
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
|
Six Months Ended June 30,
|
|
|
|
|
|
|
|
|
|
|
% of
|
|
|
|
|
|
% of
|
|
|
|
|
|
% of
|
|
|
|
|
|
% of
|
|
|
|
2010
|
|
|
Net Sales
|
|
|
2009
|
|
|
Net Sales
|
|
|
2010
|
|
|
Net Sales
|
|
|
2009
|
|
|
Net Sales
|
|
|
|
|
|
|
|
|
|
(As Adjusted)
|
|
|
|
|
|
|
|
|
(As Adjusted)
|
|
|
|
(unaudited)
|
|
|
|
(In $ millions, except percentages)
|
|
|
Net sales
|
|
|
1,517
|
|
|
|
100.0
|
|
|
|
1,244
|
|
|
|
100.0
|
|
|
|
2,905
|
|
|
|
100.0
|
|
|
|
2,390
|
|
|
|
100.0
|
|
Gross profit
|
|
|
303
|
|
|
|
20.0
|
|
|
|
248
|
|
|
|
19.9
|
|
|
|
521
|
|
|
|
17.9
|
|
|
|
448
|
|
|
|
18.7
|
|
Selling, general and administrative expenses
|
|
|
(123
|
)
|
|
|
(8.1
|
)
|
|
|
(114
|
)
|
|
|
(9.2
|
)
|
|
|
(246
|
)
|
|
|
(8.5
|
)
|
|
|
(228
|
)
|
|
|
(9.5
|
)
|
Other (charges) gains, net
|
|
|
(6
|
)
|
|
|
(0.4
|
)
|
|
|
(6
|
)
|
|
|
(0.5
|
)
|
|
|
(83
|
)
|
|
|
(2.9
|
)
|
|
|
(27
|
)
|
|
|
(1.1
|
)
|
Operating profit (loss)
|
|
|
156
|
|
|
|
10.3
|
|
|
|
89
|
|
|
|
7.2
|
|
|
|
142
|
|
|
|
4.9
|
|
|
|
116
|
|
|
|
4.9
|
|
Equity in net earnings (loss) of affiliates
|
|
|
45
|
|
|
|
3.0
|
|
|
|
35
|
|
|
|
2.8
|
|
|
|
94
|
|
|
|
3.2
|
|
|
|
41
|
|
|
|
1.7
|
|
Interest expense
|
|
|
(49
|
)
|
|
|
(3.2
|
)
|
|
|
(54
|
)
|
|
|
(4.3
|
)
|
|
|
(98
|
)
|
|
|
(3.4
|
)
|
|
|
(105
|
)
|
|
|
(4.4
|
)
|
Dividend income cost investments
|
|
|
72
|
|
|
|
4.7
|
|
|
|
53
|
|
|
|
4.3
|
|
|
|
72
|
|
|
|
2.5
|
|
|
|
56
|
|
|
|
2.3
|
|
Earnings (loss) from continuing operations before tax
|
|
|
224
|
|
|
|
14.8
|
|
|
|
127
|
|
|
|
10.2
|
|
|
|
217
|
|
|
|
7.5
|
|
|
|
116
|
|
|
|
4.9
|
|
Amounts attributable to Celanese Corporation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) from continuing operations
|
|
|
163
|
|
|
|
10.7
|
|
|
|
110
|
|
|
|
8.9
|
|
|
|
176
|
|
|
|
6.0
|
|
|
|
94
|
|
|
|
3.9
|
|
Earnings (loss) from discontinued operations
|
|
|
(3
|
)
|
|
|
(0.2
|
)
|
|
|
(1
|
)
|
|
|
(0.1
|
)
|
|
|
(2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings (loss)
|
|
|
160
|
|
|
|
10.5
|
|
|
|
109
|
|
|
|
8.8
|
|
|
|
174
|
|
|
|
6.0
|
|
|
|
94
|
|
|
|
3.9
|
|
Depreciation and amortization
|
|
|
64
|
|
|
|
4.2
|
|
|
|
79
|
|
|
|
6.4
|
|
|
|
153
|
|
|
|
5.3
|
|
|
|
150
|
|
|
|
6.3
|
|
|
|
|
|
|
|
|
|
|
|
|
As of
|
|
|
As of
|
|
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
|
(unaudited)
|
|
|
|
(In $ millions)
|
|
|
Short-term borrowings and current installments of long-term
debt third party and affiliates
|
|
|
265
|
|
|
|
242
|
|
Long-term debt
|
|
|
3,162
|
|
|
|
3,259
|
|
|
|
|
|
|
|
|
|
|
Total debt
|
|
|
3,427
|
|
|
|
3,501
|
|
|
|
|
|
|
|
|
|
|
Summary
of Consolidated Results for the Three and Six Months Ended
June 30, 2010 Compared to the Three and Six Months Ended
June 30, 2009
Net sales increased 22% during the three and six months ended
June 30, 2010 compared to the same periods in 2009
primarily due to increased volumes across most business segments
as a result of the gradual recovery of the global economy. Net
sales also increased due to increases in selling prices across
the majority of our business segments. The increase in net sales
resulting from our acquisition of FACT GmbH (Future Advanced
Composites Technology) (FACT) in December 2009
within our Advanced Engineered Materials segment only slightly
offset the decrease in net sales due to the sale of our
polyvinyl alcohol (PVOH) business in July 2009
within our Industrial Specialties segment. Unfavorable foreign
currency impacts only slightly offset the increase in net sales.
Gross profit increased during the three and six months ended
June 30, 2010 compared to the same periods in 2009 due to
higher net sales. Gross profit as a percentage of sales was
consistent for three months ended June 30, 2010 as
37
compared to the three months ended June 30, 2009. Gross
profit as a percentage of sales declined during the six months
ended June 30, 2010 as compared to June 30, 2009 due
to overall increased raw material and energy costs which were
only partially offset by increased prices. The write-off of
other productive assets of $17 million related to our
Singapore and Nanjing, China facilities and increased
depreciation and amortization also contributed to a lower gross
profit percentage. The increase in amortization was a result of
$22 million of accelerated amortization to write-off the
asset associated with a raw material purchase agreement with a
supplier who filed for bankruptcy during 2009. The accelerated
amortization was recorded as $20 million to our Acetyl
Intermediates segment and $2 million to our Advanced
Engineered Materials segment.
Selling, general and administrative expenses increased for the
three and six months ended June 30, 2010 compared to the
same period in 2009 primarily due to the increase in operations.
As a percentage of sales, selling, general and administrative
expenses declined due to our fixed spending reduction efforts
and restructuring efficiencies.
The components of Other (charges) gains, net are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
|
|
(unaudited)
|
|
|
|
(In $ millions)
|
|
|
Employee termination benefits
|
|
|
(4
|
)
|
|
|
(5
|
)
|
|
|
(9
|
)
|
|
|
(29
|
)
|
Ticona Kelsterbach plant relocation
|
|
|
(4
|
)
|
|
|
(3
|
)
|
|
|
(10
|
)
|
|
|
(6
|
)
|
Plumbing actions
|
|
|
2
|
|
|
|
2
|
|
|
|
14
|
|
|
|
3
|
|
Insurance recoveries associated with Clear Lake, Texas
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
6
|
|
Asset impairments
|
|
|
-
|
|
|
|
-
|
|
|
|
(72
|
)
|
|
|
(1
|
)
|
Plant/office closures
|
|
|
-
|
|
|
|
-
|
|
|
|
(6
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
(6
|
)
|
|
|
(6
|
)
|
|
|
(83
|
)
|
|
|
(27
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
During the first quarter of 2010, we concluded that certain
long-lived assets were partially impaired at our acetate flake
and tow manufacturing operations in Spondon, Derby, United
Kingdom (see Note 3 to the accompanying unaudited interim
consolidated financial statements). Accordingly, we wrote down
the related property, plant and equipment to its fair value of
$31 million, resulting in long-lived asset impairment
losses of $72 million for the six months ended
June 30, 2010. The Spondon, Derby, United Kingdom facility
is included in our Consumer Specialties segment.
As a result of our Pardies, France Project of Closure (see
Note 3 to the accompanying unaudited interim consolidated
financial statements), we recorded $1 million in employee
termination benefits for the three months ended June 30,
2010. We recorded exit costs of $9 million during the six
months ended June 30, 2010, which consisted of
$2 million in employee termination benefits,
$1 million of long-lived asset impairment losses,
$3 million of contract termination costs and
$3 million of reindustrialization costs. The Pardies,
France facility is included in our Acetyl Intermediates segment.
Other charges for the six months ended June 30, 2010 was
partially offset by $13 million of recoveries and a
$1 million decrease in legal reserves associated with
plumbing cases which is included in our Advanced Engineered
Materials segment.
During the first quarter of 2009, we began efforts to align
production capacity and staffing levels given the potential for
an economic environment of prolonged lower demand. For the six
months ended June 30, 2009, we recorded employee
termination benefits of $28 million related to this
endeavor. As a result of the shutdown of the vinyl acetate
monomer (VAM) production unit in Cangrejera, Mexico,
we recognized employee termination benefits of $1 million
and long-lived asset impairment losses of $1 million during
the six months ended June 30, 2009. The VAM production unit
in Cangrejera, Mexico is included in our Acetyl Intermediates
segment.
Other charges for the six months ended June 30, 2009 was
partially offset by $6 million of insurance recoveries in
satisfaction of claims we made related to the unplanned outage
of our Clear Lake, Texas acetic acid facility during 2007, a
$2 million decrease in legal reserves for plumbing claims
for which the statute of limitations has expired and
$1 million of insurance recoveries associated with plumbing
cases.
38
Operating profit increased for the three and six months ended
June 30, 2010 as compared to the same periods in 2009. The
increase in operating profit is a result of increased gross
profit.
Earnings (loss) from continuing operations before tax increased
during the three and six months ended June 30, 2010
compared to the same period in 2009 primarily due to increased
equity in net earnings of affiliates and increased dividend
income from cost investments in addition to the increase in
operating profit.
Our effective income tax rate for the three months ended
June 30, 2010 was 27% compared to 13% for the three months
ended June 30, 2009. The increase in our effective rate was
primarily due to foreign losses not resulting in tax benefits in
the current period and increases in reserves for uncertain tax
positions and related interest. Our effective income tax rate
for the six months ended June 30, 2010 was 19% compared to
19% for the six months ended June 30, 2009. Our 2010
effective rate was favorably impacted by the effect of new tax
legislation in Mexico, offset by foreign losses not resulting in
tax benefits in the current period and the effect of healthcare
reform in the US.
39
Selected
Data by Business Segment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
|
|
|
|
|
|
Change
|
|
|
|
|
|
|
|
|
Change
|
|
|
|
2010
|
|
|
2009
|
|
|
in $
|
|
|
2010
|
|
|
2009
|
|
|
in $
|
|
|
|
|
|
|
(As Adjusted)
|
|
|
|
|
|
|
|
|
(As Adjusted)
|
|
|
|
|
|
|
(unaudited)
|
|
|
|
(In $ millions)
|
|
|
Net sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Advanced Engineered Materials
|
|
|
282
|
|
|
|
184
|
|
|
|
98
|
|
|
|
564
|
|
|
|
349
|
|
|
|
215
|
|
Consumer Specialties
|
|
|
291
|
|
|
|
280
|
|
|
|
11
|
|
|
|
529
|
|
|
|
546
|
|
|
|
(17
|
)
|
Industrial Specialties
|
|
|
269
|
|
|
|
267
|
|
|
|
2
|
|
|
|
511
|
|
|
|
509
|
|
|
|
2
|
|
Acetyl Intermediates
|
|
|
782
|
|
|
|
622
|
|
|
|
160
|
|
|
|
1,506
|
|
|
|
1,194
|
|
|
|
312
|
|
Other Activities
|
|
|
1
|
|
|
|
1
|
|
|
|
-
|
|
|
|
1
|
|
|
|
1
|
|
|
|
-
|
|
Inter-segment eliminations
|
|
|
(108
|
)
|
|
|
(110
|
)
|
|
|
2
|
|
|
|
(206
|
)
|
|
|
(209
|
)
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
1,517
|
|
|
|
1,244
|
|
|
|
273
|
|
|
|
2,905
|
|
|
|
2,390
|
|
|
|
515
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other (charges) gains, net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Advanced Engineered Materials
|
|
|
(3
|
)
|
|
|
(4
|
)
|
|
|
1
|
|
|
|
2
|
|
|
|
(13
|
)
|
|
|
15
|
|
Consumer Specialties
|
|
|
(1
|
)
|
|
|
(3
|
)
|
|
|
2
|
|
|
|
(74
|
)
|
|
|
(3
|
)
|
|
|
(71
|
)
|
Industrial Specialties
|
|
|
-
|
|
|
|
(1
|
)
|
|
|
1
|
|
|
|
-
|
|
|
|
(3
|
)
|
|
|
3
|
|
Acetyl Intermediates
|
|
|
(1
|
)
|
|
|
-
|
|
|
|
(1
|
)
|
|
|
(8
|
)
|
|
|
(1
|
)
|
|
|
(7
|
)
|
Other Activities
|
|
|
(1
|
)
|
|
|
2
|
|
|
|
(3
|
)
|
|
|
(3
|
)
|
|
|
(7
|
)
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
(6
|
)
|
|
|
(6
|
)
|
|
|
-
|
|
|
|
(83
|
)
|
|
|
(27
|
)
|
|
|
(56
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Advanced Engineered Materials
|
|
|
40
|
|
|
|
1
|
|
|
|
39
|
|
|
|
88
|
|
|
|
(17
|
)
|
|
|
105
|
|
Consumer Specialties
|
|
|
64
|
|
|
|
66
|
|
|
|
(2
|
)
|
|
|
34
|
|
|
|
132
|
|
|
|
(98
|
)
|
Industrial Specialties
|
|
|
16
|
|
|
|
19
|
|
|
|
(3
|
)
|
|
|
28
|
|
|
|
29
|
|
|
|
(1
|
)
|
Acetyl Intermediates
|
|
|
68
|
|
|
|
39
|
|
|
|
29
|
|
|
|
68
|
|
|
|
50
|
|
|
|
18
|
|
Other Activities
|
|
|
(32
|
)
|
|
|
(36
|
)
|
|
|
4
|
|
|
|
(76
|
)
|
|
|
(78
|
)
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
156
|
|
|
|
89
|
|
|
|
67
|
|
|
|
142
|
|
|
|
116
|
|
|
|
26
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) from continuing operations before tax Advanced
Engineered Materials
|
|
|
79
|
|
|
|
31
|
|
|
|
48
|
|
|
|
171
|
|
|
|
13
|
|
|
|
158
|
|
Consumer Specialties
|
|
|
137
|
|
|
|
119
|
|
|
|
18
|
|
|
|
107
|
|
|
|
188
|
|
|
|
(81
|
)
|
Industrial Specialties
|
|
|
16
|
|
|
|
19
|
|
|
|
(3
|
)
|
|
|
28
|
|
|
|
29
|
|
|
|
(1
|
)
|
Acetyl Intermediates
|
|
|
70
|
|
|
|
41
|
|
|
|
29
|
|
|
|
71
|
|
|
|
53
|
|
|
|
18
|
|
Other Activities
|
|
|
(78
|
)
|
|
|
(83
|
)
|
|
|
5
|
|
|
|
(160
|
)
|
|
|
(167
|
)
|
|
|
7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
224
|
|
|
|
127
|
|
|
|
97
|
|
|
|
217
|
|
|
|
116
|
|
|
|
101
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Advanced Engineered Materials
|
|
|
18
|
|
|
|
19
|
|
|
|
(1
|
)
|
|
|
38
|
|
|
|
36
|
|
|
|
2
|
|
Consumer Specialties
|
|
|
9
|
|
|
|
12
|
|
|
|
(3
|
)
|
|
|
20
|
|
|
|
24
|
|
|
|
(4
|
)
|
Industrial Specialties
|
|
|
10
|
|
|
|
14
|
|
|
|
(4
|
)
|
|
|
20
|
|
|
|
27
|
|
|
|
(7
|
)
|
Acetyl Intermediates
|
|
|
24
|
|
|
|
32
|
|
|
|
(8
|
)
|
|
|
69
|
|
|
|
59
|
|
|
|
10
|
|
Other Activities
|
|
|
3
|
|
|
|
2
|
|
|
|
1
|
|
|
|
6
|
|
|
|
4
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
64
|
|
|
|
79
|
|
|
|
(15
|
)
|
|
|
153
|
|
|
|
150
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
40
Factors
Affecting Business Segment Net Sales
The charts below set forth the percentage increase (decrease) in
net sales from the period ended June 30, 2009 to the period
ended June 30, 2010 attributable to each of the factors
indicated for the following business segments.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Volume
|
|
Price
|
|
Currency
|
|
Other (1)
|
|
Total
|
|
|
(unaudited)
|
|
|
(In percentages)
|
|
Three Months Ended June 30, 2010 Compared to Three Months
Ended June 30, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Advanced Engineered Materials
|
|
|
52
|
|
|
|
|
2
|
|
|
|
|
(5
|
)
|
|
|
|
4
|
(2)
|
|
|
|
53
|
|
|
Consumer Specialties
|
|
|
6
|
|
|
|
|
(1
|
)
|
|
|
|
(1
|
)
|
|
|
|
-
|
|
|
|
|
4
|
|
|
Industrial Specialties
|
|
|
13
|
|
|
|
|
9
|
|
|
|
|
(3
|
)
|
|
|
|
(18
|
)
(3)
|
|
|
|
1
|
|
|
Acetyl Intermediates
|
|
|
14
|
|
|
|
|
15
|
|
|
|
|
(3
|
)
|
|
|
|
-
|
|
|
|
|
26
|
|
|
Total Company
|
|
|
19
|
|
|
|
|
9
|
|
|
|
|
(3
|
)
|
|
|
|
(3
|
)
|
|
|
|
22
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, 2010 Compared to Six Months Ended
June 30, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Advanced Engineered Materials
|
|
|
61
|
|
|
|
|
(4
|
)
|
|
|
|
-
|
|
|
|
|
5
|
(2)
|
|
|
|
62
|
|
|
Consumer Specialties
|
|
|
(3
|
)
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
(3
|
)
|
|
Industrial Specialties
|
|
|
14
|
|
|
|
|
3
|
|
|
|
|
-
|
|
|
|
|
(17
|
)
(3)
|
|
|
|
-
|
|
|
Acetyl Intermediates
|
|
|
14
|
|
|
|
|
12
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
26
|
|
|
Total Company
|
|
|
19
|
|
|
|
|
6
|
|
|
|
|
-
|
|
|
|
|
(3
|
)
|
|
|
|
22
|
|
|
|
|
|
(1) |
|
Includes the effects of the captive
insurance companies and the impact of fluctuations in
intersegment eliminations.
|
|
(2) |
|
2010 includes the effects of the
FACT acquisition.
|
|
(3) |
|
2010 does not include the effects
of the PVOH business, which was sold on July 1, 2009.
|
Summary
by Business Segment for the Three and Six Months Ended
June 30, 2010 compared to the Three and Six Months Ended
June 30, 2009
Advanced
Engineered Materials
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
|
|
June 30,
|
|
June 30,
|
|
|
|
|
|
|
Change
|
|
|
|
|
|
Change
|
|
|
2010
|
|
2009
|
|
in $
|
|
2010
|
|
2009
|
|
in $
|
|
|
|
|
(As Adjusted)
|
|
|
|
|
|
(As Adjusted)
|
|
|
|
|
(unaudited)
|
|
|
(In $ millions, except percentages)
|
|
Net sales
|
|
|
282
|
|
|
|
|
184
|
|
|
|
|
98
|
|
|
|
|
564
|
|
|
|
|
349
|
|
|
|
|
215
|
|
|
Net sales variance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Volume
|
|
|
52
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
61
|
|
%
|
|
|
|
|
|
|
|
|
|
|
Price
|
|
|
2
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
(4
|
)
|
%
|
|
|
|
|
|
|
|
|
|
|
Currency
|
|
|
(5
|
)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
%
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
4
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
5
|
|
%
|
|
|
|
|
|
|
|
|
|
|
Other (charges) gains, net
|
|
|
(3
|
)
|
|
|
|
(4
|
)
|
|
|
|
1
|
|
|
|
|
2
|
|
|
|
|
(13
|
)
|
|
|
|
15
|
|
|
Operating profit (loss)
|
|
|
40
|
|
|
|
|
1
|
|
|
|
|
39
|
|
|
|
|
88
|
|
|
|
|
(17
|
)
|
|
|
|
105
|
|
|
Operating margin
|
|
|
14.2
|
|
%
|
|
|
0.5
|
|
%
|
|
|
|
|
|
|
|
15.6
|
|
%
|
|
|
(4.9
|
)
|
%
|
|
|
|
|
|
Earnings (loss) from continuing operations before tax
|
|
|
79
|
|
|
|
|
31
|
|
|
|
|
48
|
|
|
|
|
171
|
|
|
|
|
13
|
|
|
|
|
158
|
|
|
Depreciation and amortization
|
|
|
18
|
|
|
|
|
19
|
|
|
|
|
(1
|
)
|
|
|
|
38
|
|
|
|
|
36
|
|
|
|
|
2
|
|
|
Our Advanced Engineered Materials segment develops, produces and
supplies a broad portfolio of high performance technical
polymers for application in automotive and electronics products,
as well as other consumer and industrial applications. Together
with our strategic affiliates, we are a leading participant in
the global technical polymers industry. The primary products of
Advanced Engineered Materials are POM, polyphenylene sulfide
(PPS), long-fiber reinforced thermoplastics
(LFT), polybutylene terephthalate (PBT),
polyethylene terephthalate (PET), ultra-high
molecular weight polyethylene
(GUR®)
and liquid crystal polymers (LCP). POM, PPS, LFT,
PBT and PET are used in a broad range of products including
automotive components, electronics, appliances and industrial
applications.
GUR®
is used in battery separators,
41
conveyor belts, filtration equipment, coatings and medical
devices. Primary end markets for LCP are electrical and
electronics.
Advanced Engineered Materials net sales increased
$98 million and $215 million for the three and six
months ended June 30, 2010, respectively, compared to the
same periods in 2009. The increase in net sales is primarily
related to significant increases in volume which is due to the
gradual recovery in the global economy, continued success in the
innovation and commercialization of new products and
applications and the acquisition of FACT in December 2009.
Advanced Engineered Materials reported their lowest net
sales during the three months ended March 31, 2009. Since
then, the business segment has continued to see sequential
volume improvement each quarter. The current quarter increase in
net sales for the three months ended June 30, 2010 as
compared to the same period in 2009 was positively impacted by
increases in average pricing as a result of implemented price
increases and product mix which was partially offset by
unfavorable foreign currency impacts.
Operating profit increased $39 million and
$105 million for the three and six months ended
June 30, 2010, respectively, as compared to the same
periods in 2009. The positive impact from higher sales volumes,
increased pricing for our high performance polymers and
inventory restocking was only partially offset by higher raw
material and energy costs. Other charges positively impacted
operating profit for the six months ended June 30, 2010 by
decreasing from an expense of $13 million for the six
months ended June 30, 2009 to income of $2 million for
the six months ended June 30, 2010. Other charges decreased
primarily as a result of plumbing recoveries and lower employee
severance. Depreciation and amortization includes
$2 million of accelerated amortization for the six months
ended June 30, 2010 to write-off the asset associated with
a raw material purchase agreement with a supplier who filed for
bankruptcy during 2009.
Our equity affiliates, including Ibn Sina, have experienced
similar volume increases due to increased demand during the
three and six months ended June 30, 2010. As a result, our
proportional share of net earnings of these affiliates increased
$52 million compared to the same period in 2009.
Consumer
Specialties
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
Six Months Ended
|
|
|
|
|
June 30,
|
|
|
|
June 30,
|
|
|
|
|
|
|
|
|
|
|
|
|
Change
|
|
|
|
|
|
|
|
|
|
|
|
Change
|
|
|
|
|
2010
|
|
|
|
2009
|
|
|
|
in $
|
|
|
|
2010
|
|
|
|
2009
|
|
|
|
in $
|
|
|
|
|
(unaudited)
|
|
|
|
|
(In $ millions, except percentages)
|
|
|
|
Net sales
|
|
|
291
|
|
|
|
|
280
|
|
|
|
|
11
|
|
|
|
|
529
|
|
|
|
|
546
|
|
|
|
|
(17
|
)
|
|
Net sales variance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Volume
|
|
|
6
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
(3
|
)
|
%
|
|
|
|
|
|
|
|
|
|
|
Price
|
|
|
(1
|
)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
%
|
|
|
|
|
|
|
|
|
|
|
Currency
|
|
|
(1
|
)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
%
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
-
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
%
|
|
|
|
|
|
|
|
|
|
|
Other (charges) gains, net
|
|
|
(1
|
)
|
|
|
|
(3
|
)
|
|
|
|
2
|
|
|
|
|
(74
|
)
|
|
|
|
(3
|
)
|
|
|
|
(71
|
)
|
|
Operating profit (loss)
|
|
|
64
|
|
|
|
|
66
|
|
|
|
|
(2
|
)
|
|
|
|
34
|
|
|
|
|
132
|
|
|
|
|
(98
|
)
|
|
Operating margin
|
|
|
22.0
|
|
%
|
|
|
23.6
|
|
%
|
|
|
|
|
|
|
|
6.4
|
|
%
|
|
|
24.2
|
|
%
|
|
|
|
|
|
Earnings (loss) from continuing operations before tax
|
|
|
137
|
|
|
|
|
119
|
|
|
|
|
18
|
|
|
|
|
107
|
|
|
|
|
188
|
|
|
|
|
(81
|
)
|
|
Depreciation and amortization
|
|
|
9
|
|
|
|
|
12
|
|
|
|
|
(3
|
)
|
|
|
|
20
|
|
|
|
|
24
|
|
|
|
|
(4
|
)
|
|
Our Consumer Specialties segment consists of our Acetate
Products and Nutrinova businesses. Our Acetate Products business
primarily produces and supplies acetate tow, which is used in
the production of filter products. We also produce acetate
flake, which is processed into acetate tow and acetate film. Our
Nutrinova business produces and sells
Sunett®,
a high intensity sweetener, and food protection ingredients,
such as sorbates, for the food, beverage and pharmaceuticals
industries.
The decrease in net sales for the six months ended June 30,
2010 as compared to the same period in 2009 is due to decreased
volumes in our Acetate business and in
Sunett®
which were only partially offset by an increase in demand in
sorbates. Decreased volumes were primarily due to softening in
consumer demand in
Sunett®
and the timing of sales related to an electrical disruption and
subsequent production outage at our manufacturing facility in
Narrows,
42
Virginia in our Acetate business. The facility resumed normal
operations during the quarter and we expect to recover the
impacted volume throughout the remainder of the year.
Operating profit decreased for the six month period ended
June 30, 2010 as compared to the same period in 2009. Our
fixed spending reduction efforts were not able to offset the
lower volumes, higher energy and raw material costs, and
additional expenditures related to the outage at our Narrows,
Virginia facility. An increase in other charges for the six
months ended June 30, 2010 had the most significant impact
on operating profit as it was unfavorably impacted by long-lived
asset impairment losses of $72 million associated with
managements assessment of the potential closure of our
acetate flake and tow production operations in Spondon, Derby,
United Kingdom.
During the six month period ended June 30, 2010, earnings
from continuing operations before tax decreased due to lower
operating profit, which was partially offset by higher dividends
from our China ventures of $15 million compared to 2009.
Industrial
Specialties
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
|
|
June 30,
|
|
June 30,
|
|
|
|
|
|
|
Change
|
|
|
|
|
|
Change
|
|
|
2010
|
|
2009
|
|
in $
|
|
2010
|
|
2009
|
|
in $
|
|
|
(unaudited)
|
|
|
(In $ millions, except percentages)
|
|
Net sales
|
|
|
269
|
|
|
|
|
267
|
|
|
|
|
2
|
|
|
|
|
511
|
|
|
|
|
509
|
|
|
|
|
2
|
|
|
Net sales variance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
&nb |