Form 8-K Celanese Corp For: Apr 16
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): April 16, 2018
CELANESE CORPORATION
(Exact name of registrant as specified in its charter)
Delaware | 001-32410 | 98-0420726 | ||
(State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No.) | ||
222 West Las Colinas Blvd. Suite 900N, Irving, TX 75039
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (972) 443-4000
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 or Rule 12b-2 of the Securities Exchange Act of 1934.
Emerging growth company o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
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Item 7.01 Regulation FD Disclosure
On April 17, 2018, Mark C. Rohr, Chairman and Chief Executive Officer of Celanese Corporation (the "Company"), will make a presentation to investors and analysts via a webcast hosted by the Company at 10:00 a.m. ET (9:00 a.m. CT). The webcast, press release, prepared remarks from Mark Rohr and a slide presentation may be accessed on our website at www.celanese.com under Investor Events & Presentations. A copy of the prepared remarks and a copy of the slide presentation posted for the webcast are attached to this Current Report on Form 8-K ("Current Report") as Exhibit 99.1(a) and Exhibit 99.1(b), respectively, and are incorporated herein solely for purposes of this Item 7.01 disclosure. During the webcast, management may make, and the attached slide presentation and management's prepared remarks contain, references to certain Non-US GAAP financial measures. Non-US GAAP financial measures appearing in the slide presentation and management's prepared remarks are accompanied by the most directly comparable US GAAP financial measure. In addition, those Non-US GAAP financial measures are defined and reconciled to the most comparable US GAAP financial measure in our Non-US GAAP Financial Measures and Supplemental Information document filed with this Current Report as Exhibit 99.2 (and available on our website) and is incorporated herein solely for purpose of this Item 7.01 disclosure.
Item 9.01 Financial Statements and Exhibits
(d) The following exhibits are being filed herewith:
Exhibit Number | ||
Description | ||
99.1(a) | ||
99.1(b) | ||
99.2 | ||
* In connection with the disclosure set forth in Item 7.01, the information in this Current Report, including the exhibits attached hereto, is being furnished and shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or otherwise subject to the liabilities of such section. The information in this Current Report, including the exhibits, shall not be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, regardless of any incorporation by reference language in any such filing. This Current Report will not be deemed an admission as to the materiality of any information in this Current Report that is required to be disclosed solely by Regulation FD.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
CELANESE CORPORATION | |||
By: | /s/ JAMES R. PEACOCK III | ||
Name: | James R. Peacock III | ||
Title: | Vice President, Deputy General Counsel and Corporate Secretary | ||
Date: | April 16, 2018 | ||
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Exhibit 99.1(a)
Q1 2018 Earnings Prepared Comments
Surabhi Varshney, Celanese Corporation, Vice President, Investor Relations
Welcome to the Celanese Corporation first quarter 2018 financial results recording. The date of this recording is April 16, 2018. Please note that no portion of this presentation may be rebroadcast or reproduced in any form without the prior consent of Celanese.
My name is Surabhi Varshney, Vice President of Investor Relations. Today you will hear from Mark Rohr, Chairman and Chief Executive Officer, Scott Sutton, Chief Operating Officer, and Scott Richardson, Chief Financial Officer.
The Celanese Corporation first quarter 2018 earnings release was distributed via Business Wire this afternoon and posted on our website, www.celanese.com, in the Investor Relations section, along with the slides. As a reminder, some of the matters discussed today and included in our presentations may include forward-looking statements concerning, for example, our future objectives and plans. Please note the cautionary language contained in the slides. Also, some of the matters discussed and presented include references to non-GAAP financial measures. Explanations of these measures and reconciliations to the comparable GAAP measures are included on our website in the Investor Relations section under Financial Information. The earnings release and non-GAAP information and the reconciliations are being furnished to the SEC in a Current Report on Form 8-K. These prepared comments and the slides are also being furnished to the SEC in a separate Current Report on Form 8-K.
Mark Rohr will review our consolidated first quarter results, followed by 2018 outlook. Scott Richardson will then comment on cash flow. On the earnings conference call tomorrow morning, management will be available to answer questions. I'd now like to turn it over to Mark.
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Mark Rohr, Celanese Corporation, Chairman of the Board of Directors and Chief Executive Officer
Thank you Surabhi, and welcome everyone listening in today.
Before I share our financial results, I'll start with a few highlights from the last quarter.
We are pleased to report that we closed the Omni Plastics acquisition and have reported modest volume and revenue benefits as a result. This business brings in technology and products that are a perfect fit with the Nilit portfolio and will speed up the translation of the full breadth of nylon-based technology to the North American market. The integration of Omni, our third acquisition over the last 13 months, has gone very well and the many contributions of the Omni Plastics teams are already making a difference.
Beyond Omni we have a full pipeline of opportunities under review and in some stage of evaluation or discussion which gives me confidence that we can continue to add technology, molecules, and incremental capacity to our portfolio over the next several years.
The Acetyl Chain has had a tremendous quarter and, to support our business growth, we continue to incrementally expand our asset base. As we discussed previously, the VAM unit at Clear Lake, Texas is being expanded to add another 150,000 tons of capacity which will position it as the largest unit in the Western Hemisphere. I am happy to report that the expansion is on track and we are installing the final large pieces of equipment with a targeted start up in the fourth quarter of this year.
We also received the 2018 ENERGY STAR® Partner of the Year Sustained Excellence Award. The recognition underlines our continued leadership in energy efficiency and commitment to the ENERGY STAR program. Since 2015, we have executed more than 140 projects saving more than $50 million and have additional projects in the pipeline.
Turning now to consolidated results for the quarter.
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Net sales rose 26 percent year over year and 16 percent sequentially to $1.85 billion. With strong pricing and volume support we are pleased to announce GAAP earnings of $2.68 per share and adjusted earnings of $2.79 per share. Engineered Materials, Acetate Tow, and the Acetyl Chain as well as our affiliates all reported strong results continuing a trend that has been underway for some time. This quarter our business models uncovered new opportunities, our global reach created incremental benefits, and our solutions- focus supported step-out performance in Engineered Materials and the Acetyl Chain. All this helped in expanding adjusted EBIT margins by 300 basis points, achieving record operating EBITDA of $553 million, and EBITDA margin of 30 percent. Great results for the quarter.
Before speaking to each segment, let me remind you of the recent re-segmentation of our businesses. The Advanced Engineered Materials business was renamed Engineered Materials and now also includes the project-based food ingredients business and the Consumer Specialties segment, less food ingredients, was renamed Acetate Tow. Our comments today will follow this new segmentation.
Engineered Materials reported net sales of $665 million, a 29 percent increase over last year. Segment income was reported as an all-time high of $182 million reflecting growth of $32 million year over year, driven by projects, acquisitions, and higher sales in Asia. Volume increased 19 percent year over year supported by project success and the addition of the Nilit and Omni acquisitions. Adjusted EBIT margin for Engineered Materials was 27 percent, almost a 300 basis point improvement sequentially and in line with our expectations for the year. Margins benefited from price and volume gains as well as improved affiliate performance. Affiliate earnings grew 26 percent over last year to $54 million benefiting from our recent POM expansion and higher ownership of the Ibn Sina joint venture. We have seen strong growth in Asia, particularly in China, which has grown double digits year over year. We commercialized over 740 new projects during the first quarter, a 45 percent improvement year over year and reflective of the urgent need of our customers to differentiate their product lines. The business has developed a robust model for identifying such needs and then matching them with a broad solution set of polymers, functionalities, and
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capabilities. Of emerging importance to us is the ability to translate these successes to other applications within a market.
One interesting example of this involves cosmetics where skin care and makeup formulations are becoming increasingly acidic to meet customer expectations. The materials used to make these parts need excellent chemical resistance along with dimensional stability and low-friction to support repeated dispensing. Celanese specialty and medical grade polymer solutions can withstand the aggressive chemistry while supporting the complex functionality and quality required of these commercial products. Our broad set of polymers with unique functionality has made it possible for Engineered Materials to partner with leading brand names in cosmetics to create a new demand for its polymers through the value chain.
At our upcoming Investor Day we will share a number of new and emerging applications that we are making possible through the power of translation.
Acetate Tow segment income in the first quarter was $78 million with segment income margin of 46.4 percent. Segment income declined year over year as you may recall the first quarter of 2017 had unique carryovers from the prior year contracts which did not repeat themselves. Affiliate earnings, benefiting from currency, increased 10 percent year over year to $32 million for the quarter.
As you know, in June of last year, we proposed a joint venture with Blackstone to create a global acetate tow supplier. This combination would have supported customers globally and created good value for shareholders over a four to five year period. We offered the European Commission (EC) a robust remedy with an integrated set of assets that would have created a strong new competitor in the market and an alternative supply source for customers. However, the commission insisted on a complete removal of overlap and such a deal would have destroyed the value of this venture for customers and shareholders. While we are disappointed in their approach, during the upcoming Investor Day we will share our plans to
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maintain a constant earnings profile through 2020 as well as opportunities to unlock further value before us in this business.
The Acetyl Chain grew 32 percent year over year and 18 percent sequentially to report net sales of $1 billion for the quarter and record income of $253 million for the quarter. Modest but consistent demand growth and tight regional supply dynamics helped lift pricing and generate this significant growth in earnings. Margins expanded more than 1,000 basis points over the prior year and more than 400 basis points sequentially with strong acid and derivative pricing globally. For the quarter we reported core income margins of 24 percent, supportive of a margin range that should average around 20 percent for the year. Increasing margins supported by demand growth and global efficiency highlights progressively improving industry fundamentals that reflect the power we believe is yet to be unlocked in this business.
Looking forward we are focused on those efforts needed to maintain momentum through 2018 while also taking steps to invest in the foundational elements of Strategy 3.0, which is our 2020 plan. Through this year, we expect Engineered Materials to build on its success and develop opportunities that connect customer needs with our unmatched solutions set. There has been a strong acceptance by customers for our customized approach as indicated by the growing project wins each quarter. In 2018, more than 3,000 projects are expected to be commercialized along with additional bolt-on acquisitions and stronger growth in Asia. We would also expect affiliate earnings for the year to remain strong. Earnings in Acetate Tow should step down slightly next quarter and remain at that level for the rest of the year. By our math, the Acetyl Chain's quarterly results reflect an instantaneous global utilization rate of approximately 85%, or about 5% higher than our estimate of last year's average. Planned and unplanned industry outages helped push the utilization rates higher. As industry outages are resolved and curtailments ease, we expect this utilization rate to pull back a bit as some of the impacted production returns. Longer term demand growth and business fundamentals should however remain strong with gradually increasing average industry utilization rates from resets in China due to environmental reforms.
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Given the strong performance in all of these businesses, our capability to drive value beyond base business growth, steadily growing demand around the globe, and optionality to address unforeseen challenges leads us to increase our 2018 earnings guidance to the range of 20 to 25 percent growth over the prior year.
Let me close by reminding you that our Investor Day is scheduled for May 1st in New York. We look forward to sharing our growth plans with you through 2020 and the intrinsic optionality built therein. I hope you can join us.
With that, I'll now turn it over to Scott Richardson.
Scott Richardson, Celanese Corporation, Chief Financial Officer
Thanks Mark.
As you heard, we expect robust growth in our business this year following the record first quarter results. To support the commercial strategy we expect higher working capital, higher capex, and longer terms in growth areas like China for the year. Even with these considerations, free cash flow for 2018 will be above $900 million. Operating cash flow in the first quarter was $143 million and free cash flow was $55 million. Free cash flow is typically lighter in the first quarter and this year there was additional impacts from acquisitions, the timing of sales and collections, and higher capex. Capex was $86 million in the quarter and is expected it to be in the $300-350 million range to support growth projects like the Acetyl VAM expansion in Clear Lake, Texas and previously-announced capacity expansions in Engineered Materials. We returned $63 million of cash to shareholders through dividends during the first
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quarter. We will discuss our planned uses of cash, including share buybacks, during our Investor Day in a few weeks.
On taxes, the effective US GAAP tax rate for the first quarter of 2018 was 15 percent compared to 23 percent in the first quarter of 2017. The lower effective rate for the quarter resulted from a reduction in the US corporate tax rate. Net cash income taxes paid were $40 million, $15 million higher year over year. The tax rate for adjusted EPS was 14 percent, 2 percent lower than the same quarter in 2017, due to lower US tax rate partially offset by lost deductions. We continue to track interpretations on guidance to US tax reform and could have some upside from the tax rate as we work through the year and will keep you posted.
Finally, let me point you to a recent change in the reporting of pension earnings in addition to the changes to the reportable segments that Mark discussed. An Accounting Standards Update requires that pension costs, excluding service cost, be reported below income from operations in the income statement. Previously, these pension accounting impacts were included in our income statement primarily in selling, general and administrative expenses. They will now be reflected separately as non-operating pension and postretirement employee benefit or expense income. Full year results from 2014 through 2017 and quarterly results for 2017 were restated to reflect the pension and re-segmentation changes in a Form 8-K report earlier this month. There was no impact on previously reported earnings per share.
This concludes our prepared remarks. We look forward to discussing the quarterly results and addressing your questions on the earnings call.
Thank you.
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© Celanese Celanese Corporation 1
Celanese Q1 2018 Earnings
Monday, April 16, 2018
Conference Call / Webcast
Tuesday, April 17, 2018 10:00 a.m. Eastern Time
Mark Rohr, Chairman and Chief Executive Officer
Scott Richardson, SVP and Chief Financial Officer
Exhibit 99.1(b)
© Celanese Celanese Corporation 2
Forward-Looking Statements
This presentation contains "forward-looking statements," which include information concerning the Company's plans, objectives, goals, strategies, future revenues,
synergies, performance, capital expenditures, financing needs and other information that is not historical information. All forward-looking statements are based upon current
expectations and beliefs and various assumptions. There can be no assurance that the Company will realize these expectations or that these beliefs will prove correct.
There are a number of risks and uncertainties that could cause actual results to differ materially from the results expressed or implied in the forward-looking statements
contained in this presentation. These risks and uncertainties include, among other things: changes in general economic, business, political and regulatory conditions in the
countries or regions in which we operate; the length and depth of product and industry business cycles, particularly in the automotive, electrical, textiles, electronics and
construction industries; changes in the price and availability of raw materials, particularly changes in the demand for, supply of, and market prices of ethylene, methanol,
natural gas, wood pulp and fuel oil and the prices for electricity and other energy sources; the ability to pass increases in raw material prices on to customers or otherwise
improve margins through price increases; the ability to maintain plant utilization rates and to implement planned capacity additions and expansions; the ability to reduce or
maintain current levels of production costs and to improve productivity by implementing technological improvements to existing plants; the ability to identify desirable
potential acquisition targets and to consummate acquisition or investment transactions consistent with the Company's strategy; increased price competition and the
introduction of competing products by other companies; market acceptance of our technology; the ability to obtain governmental approvals and to construct facilities on
terms and schedules acceptable to the Company; changes in tariffs, tax rates or legislation; changes in the degree of intellectual property and other legal protection afforded
to our products or technologies, or the theft of such intellectual property; compliance and other costs and potential disruption or interruption of production or operations due
to accidents, interruptions in sources of raw materials, cyber security incidents, terrorism or political unrest or other unforeseen events or delays in construction or operation
of facilities, including as a result of geopolitical conditions, the occurrence of acts of war or terrorist incidents or as a result of weather or natural disasters; potential liability
for remedial actions and increased costs under existing or future environmental regulations, including those relating to climate change; potential liability resulting from
pending or future 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; our level of indebtedness, which could diminish our ability to raise additional capital to fund operations or limit our
ability to react to changes in the economy or the chemicals industry; and various other factors discussed from time to time in the Company's filings with the Securities and
Exchange Commission. Any forward-looking statement speaks only as of the date on which it is made, and the Company undertakes no obligation to update any forward-
looking statements to reflect events or circumstances after the date on which it is made or to reflect the occurrence of anticipated or unanticipated events or circumstances.
Results Unaudited
The results in this document, together with the adjustments made to present the results on a comparable basis, have not been audited and are based on internal financial
data furnished to management. Quarterly results should not be taken as an indication of the results of operations to be reported for any subsequent period or for the full
fiscal year.
Presentation
This document presents the Company's four business segments Engineered Materials, Acetate Tow, Industrial Specialties and Acetyl Intermediates, with one subtotal
reflecting our core, the Acetyl Chain, which is based on similarities among customers, business models and technical processes. The Acetyl Chain includes the Company's
Industrial Specialties segment and Acetyl Intermediates segment.
Non-GAAP Financial Measures
This presentation, and statements made in connection with this presentation, refer to non-GAAP financial measures. For more information on the non-GAAP financial
measures used by the Company, including the most directly comparable GAAP financial measure for each non-GAAP financial measures used, including definitions and
reconciliations of the differences between such non-GAAP financial measures and the comparable GAAP financial measures, please refer to the Non-US GAAP Financial
Measures and Supplemental Information document available on our website, www.celanese.com, under Investor Relations/Financial Information/Non-GAAP Financial
Measures.
Important Information
© Celanese Celanese Corporation 3
• Completed the acquisition of Omni Plastics and its subsidiaries. Omni specializes
in custom compounding of various engineered thermoplastic materials.
• Commercialized a record 742 projects in Engineered Materials in the first quarter
of 2018, a 45 percent increase over the first quarter of last year.
• Began the final, large scale installation of critical processing equipment
associated with the 150 kt expansion of the Clear Lake, Texas VAM unit.
• Abandoned the JV agreement with Blackstone's Rhodia Acetow business as
parties were unable to reach an agreement with the European Commission.
Recent Highlights
© Celanese Celanese Corporation 4
Opportunity Pipeline Examples
Solid Wheel Applications Cosmetic Pumps & Dispensers
• Solid wheel applications require durable and
customizable materials
• Celanese high-strength elastomers achieve good load
performance, high adhesion to polymers, and
resistance to chemicals, aging, and weathering
• Celanese solutions can be extruded, injection- and
blow-molded and are easily colorable
• Cosmetic formulations increasingly contain acidic
ingredients which can degrade polymers used in valves
and dispensers
• Beyond chemical resistance, Celanese polymers offer
required dimensional stability and resistance to cracking
necessary to support repeated dispensing
• In addition, the low emission properties of Celanese
polymers are a critical differentiator in this space
© Celanese Celanese Corporation 5
Net sales (in millions)
Factors Affecting Net Sales
$2,000
$1,500
$1,000
$500
$0
30%
20%
10%
0%
Q1 2017 Q4 2017 Q1 2018
22.6% 22.1%
25.6%
$1,471 $1,593
$1,851
Q1 Performance
• Adjusted earnings per share of $2.79, an all-time record
• Net sales of $1.9 billion, a 26% increase year over year
• Adjusted EBIT of $474 million and adjusted EBIT margin of 25.6%
• Operating cash flow of $143 million
• Free cash flow of $55 million
*QoQ represents Q1 2018 as compared to Q4 2017; YoY represents Q1 2018 as compared to Q1 2017.
GAAP
Diluted EPS
Adjusted
EPS
Q1 2018 $2.68 $2.79
Q4 2017 $1.50 $1.98
Q1 2017 $1.30 $1.81
Total segment income margin
Celanese Corporation Q1 2018 Highlights
QoQ* YoY*
26%
22%
18%
14%
10%
6%
2%
-2%
Volume Price Currency Other Total
© Celanese Celanese Corporation 6
Net sales (in millions)
Q1 Performance Factors Affecting Net Sales
$800
$600
$400
$200
$0
40%
20%
0%
Q1 2017 Q4 2017 Q1 2018
29.2%
24.5% 27.4%
$514
$580
$665
Total segment income margin
YoY Segment income highlights
• Volume growth mainly from the Nilit and Omni
acquisitions, growth in Asia, and new project wins.
• Margin dilution primarily due to recent acquisitions and
growth in Asia.
QoQ Segment income highlights
• Volume growth mainly from the Omni acquisition, growth
in Asia, and new project wins.
• Margin expansion due to higher pricing.
Engineered Materials
QoQ YoY
30%
25%
20%
15%
10%
5%
0%
Volume Price Currency Other Total
© Celanese Celanese Corporation 7
Net sales (in millions)
Q1 Performance Factors Affecting Net Sales
$200
$100
$0
60%
40%
20%
0%
Q1 2017 Q4 2017 Q1 2018
48.7%
43.3% 46.4%
$191
$157 $168
Total segment income margin
Acetate Tow
QoQ YoY
10%
5%
0%
-5%
-10%
-15%
Volume Price Currency Other Total
QoQ Segment income highlights
• Pricing has stabilized between 2017 and 2018. Volume
higher on seasonality.
YoY Segment income highlights
• Lower volume and price as unique carryovers from 2016
into the first quarter of 2017 did not repeat this year.
© Celanese Celanese Corporation 8
Q1 Performance Factors Affecting Net Sales
YoY Core income highlights
• Pricing expanded due to higher industry utilization rates,
which impacted pricing for most products.
• Volume growth due to higher sales of acetic acid in China.
QoQ Core income highlights
• Pricing expanded, mainly in acetic acid and derivatives in
Asia, driven by commercial actions and improving acetyls
fundamentals.
• Volume growth due to higher sales of both acetic acid
and VAM.
Net sales (in millions) Total core income margin
$900
$600
$300
$0
30%
20%
10%
0%
Q1 2017 Q4 2017 Q1 2018
13.6%
20.0%
24.1%$794
$888
$1,051
QoQ YoY
35%
25%
15%
5%
-5%
Volume Price Currency Other Total
Acetyl Chain
© Celanese Celanese Corporation 9
• Operating cash flow of $143 million
• Free cash flow of $55 million driven by
timing of sales and collections; expect
above $900 million for the year
• Net capital expenditures of $86 million;
expect 2018 to be $300-350 million
• Returned $63 million to shareholders in
dividends in Q1 2018
Free Cash Flow
(in millions)
Cash flow from operations
Free cash flow
$400
$300
$200
$100
$0
Q1 2015 Q1 2016 Q1 2017 Q1 2018
$270
$287
$192
$143
$188
$217
$126
$55
Cash Flow
Exceeding the 2016-2018 free cash flow target of $2.5 billion
Q1 2018
Exhibit 99.2
Non-US GAAP Financial Measures and Supplemental Information
April 16, 2018
In this document, the terms the "Company," "we" and "our" refer to Celanese Corporation and its subsidiaries on a consolidated basis.
Purpose
The purpose of this document is to provide information of interest to investors, analysts and other parties including supplemental financial information and reconciliations and other information concerning our use of non-US GAAP financial measures. This document is updated quarterly.
Presentation
This document presents the Company's four business segments, Engineered Materials, Acetate Tow, Industrial Specialties and Acetyl Intermediates, with one subtotal reflecting our core, the Acetyl Chain, which is based on similarities among customers, business models and technical processes. The Acetyl Chain includes the Company's Industrial Specialties segment and Acetyl Intermediates segment.
Use of Non-US GAAP Financial Measures
From time to time, management may publicly disclose certain numerical "non-GAAP financial measures" in the course of our earnings releases, financial presentations, earnings conference calls, investor and analyst meetings and otherwise. For these purposes, the Securities and Exchange Commission ("SEC") defines a "non-GAAP financial measure" as a numerical measure of historical or future financial performance, financial position or cash flows that excludes amounts, or is subject to adjustments that effectively exclude amounts, included in the most directly comparable measure calculated and presented in accordance with US GAAP, and vice versa for measures that include amounts, or are subject to adjustments that effectively include amounts, that are excluded from the most directly comparable US GAAP measure so calculated and presented. For these purposes, "GAAP" refers to generally accepted accounting principles in the United States.
Non-GAAP financial measures disclosed by management are provided as additional information to investors, analysts and other parties because the Company believes them to be important supplemental measures for assessing our financial and operating results and as a means to evaluate our financial condition and period-to-period comparisons. These non-GAAP financial measures should be viewed as supplemental to, and should not be considered in isolation or as alternatives to, net earnings (loss), operating profit (loss), operating margin, cash flow from operating activities (together with cash flow from investing and financing activities), earnings per share or any other US GAAP financial measure. These non-GAAP financial measures should be considered within the context of our complete audited and unaudited financial results for the given period, which are available on the Investor Relations/Financial Information/SEC Filings page of our website, www.celanese.com. The definition and method of calculation of the non-GAAP financial measures used herein may be different from other companies' methods for calculating measures with the same or similar titles. Investors, analysts and other parties should understand how another company calculates such non-GAAP financial measures before comparing the other company's non-GAAP financial measures to any of our own. These non-GAAP financial measures may not be indicative of the historical operating results of the Company nor are they intended to be predictive or projections of future results.
Pursuant to the requirements of SEC Regulation G, whenever we refer to a non-GAAP financial measure, we will also present in this document, in the presentation itself or on a Form 8-K in connection with the presentation on the Investor Relations/Financial Information/Non-GAAP Financial Measures page of our website, www.celanese.com, to the extent practicable, the most directly comparable financial measure calculated and presented in accordance with GAAP, along with a reconciliation of the differences between the non-GAAP financial measure we reference and such comparable GAAP financial measure.
This document includes definitions and reconciliations of non-GAAP financial measures used from time to time by the Company.
Specific Measures Used
This document provides information about the following non-GAAP measures: adjusted EBIT, adjusted EBIT margin, operating EBITDA, operating EBITDA margin, operating profit (loss) attributable to Celanese Corporation, adjusted earnings per share, net debt, free cash flow and return on invested capital (adjusted). The most directly comparable financial measure presented in accordance with US GAAP in our consolidated financial statements for adjusted EBIT and operating EBITDA is net earnings (loss) attributable to Celanese Corporation; for adjusted EBIT margin and operating EBITDA margin is operating margin; for operating profit (loss) attributable to Celanese Corporation is operating profit (loss); for adjusted earnings per share is earnings (loss) from continuing operations attributable to Celanese Corporation per common share-diluted; for net debt is total debt; for free
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cash flow is net cash provided by (used in) operations; and for return on invested capital (adjusted) is net earnings (loss) attributable to Celanese Corporation divided by the sum of the average of beginning and end of the year short- and long-term debt and Celanese Corporation stockholders' equity.
Definitions
• | Adjusted EBIT is a performance measure used by the Company and is defined by the Company as net earnings (loss) attributable to Celanese Corporation, plus (earnings) loss from discontinued operations, less interest income, plus interest expense, plus refinancing expense and taxes, and further adjusted for Certain Items (refer to Table 8). We believe that adjusted EBIT provides transparent and useful information to management, investors, analysts and other parties in evaluating and assessing our primary operating results from period-to-period after removing the impact of unusual, non-operational or restructuring-related activities that affect comparability. Our management recognizes that adjusted EBIT has inherent limitations because of the excluded items. Adjusted EBIT is one of the measures management uses for planning and budgeting, monitoring and evaluating financial and operating results and as a performance metric in the Company's incentive compensation plan. We do not provide reconciliations for adjusted EBIT on a forward-looking basis (including those contained in this document) when we are unable to provide a meaningful or accurate calculation or estimation of reconciling items and the information is not available without unreasonable effort. This is due to the inherent difficulty of forecasting the timing and amount of Certain Items, such as mark-to-market pension gains and losses, that have not yet occurred, are out of our control and/or cannot be reasonably predicted. For the same reasons, we are unable to address the probable significance of the unavailable information. Adjusted EBIT margin is defined by the Company as adjusted EBIT divided by net sales. Adjusted EBIT margin has the same uses and limitations as Adjusted EBIT. |
• | Adjusted EBIT by core (i.e. the Acetyl Chain) may also be referred to by management as core income. Adjusted EBIT margin by core may also be referred to by management as core income margin. Adjusted EBIT by business segment may also be referred to by management as segment income. Adjusted EBIT margin by business segment may also be referred to by management as segment income margin. |
• | Operating EBITDA is a performance measure used by the Company and is defined by the Company as net earnings (loss) attributable to Celanese Corporation, plus (earnings) loss from discontinued operations, less interest income, plus interest expense, plus refinancing expense, taxes and depreciation and amortization, and further adjusted for Certain Items, which Certain Items include accelerated depreciation and amortization expense. Operating EBITDA is equal to adjusted EBIT plus depreciation and amortization. We believe that Operating EBITDA provides transparent and useful information to investors, analysts and other parties in evaluating our operating performance relative to our peer companies. Operating EBITDA margin is defined by the Company as Operating EBITDA divided by net sales. Operating EBITDA margin has the same uses and limitations as Operating EBITDA. |
• | Operating profit (loss) attributable to Celanese Corporation is defined by the Company as operating profit (loss), less earnings (loss) attributable to noncontrolling interests ("NCI"). We believe that operating profit (loss) attributable to Celanese Corporation provides transparent and useful information to management, investors, analysts and other parties in evaluating our core operational performance. Operating margin attributable to Celanese Corporation is defined by the Company as operating profit (loss) attributable to Celanese Corporation divided by net sales. Operating margin attributable to Celanese Corporation has the same uses and limitations as Operating profit (loss) attributable to Celanese Corporation. |
• | Adjusted earnings per share is a performance measure used by the Company and is defined by the Company as earnings (loss) from continuing operations attributable to Celanese Corporation, adjusted for income tax (provision) benefit, Certain Items, and refinancing and related expenses, divided by the number of basic common shares and dilutive restricted stock units and stock options calculated using the treasury method. We believe that adjusted earnings per share provides transparent and useful information to management, investors, analysts and other parties in evaluating and assessing our primary operating results from period-to-period after removing the impact of the above stated items that affect comparability and as a performance metric in the Company's incentive compensation plan. We do not provide reconciliations for adjusted earnings per share on a forward-looking basis (including those contained in this document) when we are unable to provide a meaningful or accurate calculation or estimation of reconciling items and the information is not available without unreasonable effort. This is due to the inherent difficulty of forecasting the timing and amount of Certain Items, such as mark-to-market pension gains and losses, that have not yet occurred, are out of our control and/or cannot be reasonably predicted. For the same reasons, we are unable to address the probable significance of the unavailable information. |
Note: The income tax expense (benefit) on Certain Items ("Non-GAAP adjustments") is determined using the applicable rates in the taxing jurisdictions in which the Non-GAAP adjustments occurred and includes both current and deferred income tax expense (benefit). The income tax rate used for adjusted earnings per share approximates the midpoint in a range of forecasted tax rates for the year. This range may include certain partial or full-year forecasted tax opportunities and related costs, where applicable, and specifically excludes changes in uncertain tax positions, discrete recognition of GAAP items on a quarterly basis, other pre-tax items adjusted out of our GAAP earnings for adjusted earnings per share purposes and changes in management's assessments regarding the ability to realize deferred tax assets for GAAP. In determining the adjusted earnings per share tax rate, we reflect the impact of foreign tax credits when utilized, or expected to be utilized, absent discrete events impacting the timing of foreign tax credit utilization. We analyze this rate quarterly and adjust it if there is a material change in the range of forecasted tax rates; an updated forecast would not necessarily result in a change to our tax rate used for adjusted earnings per share. The adjusted tax rate is an estimate and may differ from the actual tax rate used for GAAP reporting in any given reporting period. Table 3a summarizes the reconciliation of our estimated GAAP effective tax rate to the adjusted tax rate. The
2
estimated GAAP rate excludes discrete recognition of GAAP items due to our inability to forecast such items. As part of the year-end reconciliation, we will update the reconciliation of the GAAP effective tax rate to the adjusted tax rate for actual results.
• | Free cash flow is a liquidity measure used by the Company and is defined by the Company as net cash provided by (used in) operations, less capital expenditures on property, plant and equipment, and adjusted for capital contributions from or distributions to Mitsui & Co., Ltd. ("Mitsui") related to our methanol joint venture, Fairway Methanol LLC ("Fairway"). We believe that free cash flow provides useful information to management, investors, analysts and other parties in evaluating the Company's liquidity and credit quality assessment because it provides an indication of the long-term cash generating ability of our business. Although we use free cash flow as a measure to assess the liquidity generated by our business, the use of free cash flow has important limitations, including that free cash flow does not reflect the cash requirements necessary to service our indebtedness, lease obligations, unconditional purchase obligations or pension and postretirement funding obligations. |
• | Net debt is defined by the Company as total debt less cash and cash equivalents. We believe that net debt provides useful information to management, investors, analysts and other parties in evaluating changes to the Company's capital structure and credit quality assessment. |
• | Return on invested capital (adjusted) is defined by the Company as adjusted EBIT, tax effected using the adjusted tax rate, divided by the sum of the average of beginning and end of the year short- and long-term debt and Celanese Corporation stockholders' equity. We believe that return on invested capital (adjusted) provides useful information to management, investors, analysts and other parties in order to assess our income generation from the point of view of our stockholders and creditors who provide us with capital in the form of equity and debt and whether capital invested in the Company yields competitive returns. In addition, achievement of certain predetermined targets relating to return on invested capital (adjusted) is one of the factors we consider in determining the amount of performance-based compensation received by our management. |
Supplemental Information
Supplemental Information we believe to be of interest to investors, analysts and other parties includes the following:
• | Net sales for the Acetyl Chain and each of our business segments and the percentage increase or decrease in net sales attributable to price, volume, currency and other factors for the Acetyl Chain and each of our business segments. |
• | Cash dividends received from our equity and cost investments. |
• | For those consolidated ventures in which the Company owns or is exposed to less than 100% of the economics, the outside stockholders' interests are shown as NCI. Beginning in 2014, this includes Fairway for which the Company's ownership percentage is 50%. Amounts referred to as "attributable to Celanese Corporation" are net of any applicable NCI. |
Recent Developments
Effective January 1, 2018, we reorganized our operating and reportable segments to align with recent structural and management reporting changes. The change reflects the movement of our food ingredients business from the Consumer Specialties reportable segment into the Engineered Materials reportable segment. The former Consumer Specialties reportable segment is being renamed the Acetate Tow segment and the former Advanced Engineered Materials reportable segment is being renamed the Engineered Materials segment. This reorganization better reflects how we manage our food ingredients' related products commercially. Engineered Materials and food ingredients are both project-based models which focus on delivering customized solutions and are led by the same senior management team. These changes in operating and reportable segments were applied retrospectively to prior periods through 2014.
Results Unaudited
The results in this document, together with the adjustments made to present the results on a comparable basis, have not been audited and are based on internal financial data furnished to management. Quarterly results should not be taken as an indication of the results of operations to be reported for any subsequent period or for the full fiscal year.
3
Table 1
Adjusted EBIT and Operating EBITDA - Reconciliation of Non-GAAP Measures - Unaudited
Q1 '18 | 2017 | Q4 '17 | Q3 '17 | Q2 '17 | Q1 '17 | ||||||||||||
(In $ millions) | |||||||||||||||||
Net earnings (loss) attributable to Celanese Corporation | 363 | 843 | 203 | 226 | 231 | 183 | |||||||||||
(Earnings) loss from discontinued operations | 2 | 13 | 1 | 4 | 8 | — | |||||||||||
Interest income | (2 | ) | (2 | ) | — | (1 | ) | (1 | ) | — | |||||||
Interest expense | 33 | 122 | 31 | 32 | 30 | 29 | |||||||||||
Refinancing expense | — | — | — | — | — | — | |||||||||||
Income tax provision (benefit) | 65 | 213 | 60 | 57 | 40 | 56 | |||||||||||
Certain Items attributable to Celanese Corporation (Table 8) | 13 | 167 | 57 | 27 | 18 | 65 | |||||||||||
Adjusted EBIT | 474 | 1,356 | 352 | 345 | 326 | 333 | |||||||||||
Depreciation and amortization expense(1) | 79 | 303 | 79 | 78 | 75 | 71 | |||||||||||
Operating EBITDA | 553 | 1,659 | 431 | 423 | 401 | 404 | |||||||||||
Q1 '18 | 2017 | Q4 '17 | Q3 '17 | Q2 '17 | Q1 '17 | ||||||||||||
(In $ millions) | |||||||||||||||||
Engineered Materials | — | — | — | — | — | — | |||||||||||
Acetate Tow | — | — | — | — | — | — | |||||||||||
Industrial Specialties | — | 2 | — | 2 | — | — | |||||||||||
Acetyl Intermediates | — | — | — | — | — | — | |||||||||||
Other Activities(2) | — | — | — | — | — | — | |||||||||||
Accelerated depreciation and amortization expense | — | 2 | — | 2 | — | — | |||||||||||
Depreciation and amortization expense(1) | 79 | 303 | 79 | 78 | 75 | 71 | |||||||||||
Total depreciation and amortization expense | 79 | 305 | 79 | 80 | 75 | 71 | |||||||||||
(1) | Excludes accelerated depreciation and amortization expense as detailed in the table above, which amounts are included in Certain Items above. |
(2) | Other Activities includes corporate Selling, general and administrative ("SG&A") expenses, the results of captive insurance companies and certain components of net periodic benefit cost (interest cost, expected return on plan assets and net actuarial gains and losses). |
4
Table 2 - Supplemental Segment Data and Reconciliation of Segment Adjusted EBIT and Operating EBITDA - Non-GAAP Measures - Unaudited |  | |
Q1 '18 | 2017 | Q4 '17 | Q3 '17 | Q2 '17 | Q1 '17 | ||||||||||||||||||||||||||||||
(In $ millions, except percentages) | |||||||||||||||||||||||||||||||||||
Operating Profit (Loss) / Operating Margin | |||||||||||||||||||||||||||||||||||
Engineered Materials | 127 | 19.1 | % | 412 | 18.6 | % | 98 | 16.9 | % | 105 | 18.3 | % | 105 | 19.2 | % | 104 | 20.2 | % | |||||||||||||||||
Acetate Tow | 46 | 27.4 | % | 189 | 28.3 | % | 41 | 26.1 | % | 45 | 28.7 | % | 41 | 25.2 | % | 62 | 32.5 | % | |||||||||||||||||
Acetyl Chain(1) | 253 | 24.1 | % | 509 | 15.1 | % | 175 | 19.7 | % | 147 | 17.0 | % | 135 | 16.3 | % | 52 | 6.5 | % | |||||||||||||||||
Other Activities(2) | (83 | ) | (253 | ) | (74 | ) | (68 | ) | (63 | ) | (48 | ) | |||||||||||||||||||||||
Total | 343 | 18.5 | % | 857 | 14.0 | % | 240 | 15.1 | % | 229 | 14.6 | % | 218 | 14.4 | % | 170 | 11.6 | % | |||||||||||||||||
Less: Net Earnings (Loss) Attributable to NCI(1) | 2 | 6 | 1 | 2 | 2 | 1 | |||||||||||||||||||||||||||||
Operating Profit (Loss) Attributable to Celanese Corporation | 341 | 18.4 | % | 851 | 13.9 | % | 239 | 15.0 | % | 227 | 14.5 | % | 216 | 14.3 | % | 169 | 11.5 | % | |||||||||||||||||
Operating Profit (Loss) / Operating Margin Attributable to Celanese Corporation | |||||||||||||||||||||||||||||||||||
Engineered Materials | 127 | 19.1 | % | 412 | 18.6 | % | 98 | 16.9 | % | 105 | 18.3 | % | 105 | 19.2 | % | 104 | 20.2 | % | |||||||||||||||||
Acetate Tow | 46 | 27.4 | % | 189 | 28.3 | % | 41 | 26.1 | % | 45 | 28.7 | % | 41 | 25.2 | % | 62 | 32.5 | % | |||||||||||||||||
Industrial Specialties | 23 | 8.4 | % | 85 | 8.3 | % | 15 | 6.0 | % | 19 | 7.2 | % | 26 | 9.9 | % | 25 | 10.2 | % | |||||||||||||||||
Acetyl Intermediates(1) | 229 | 26.3 | % | 418 | 15.7 | % | 159 | 22.2 | % | 126 | 18.4 | % | 107 | 16.5 | % | 26 | 4.2 | % | |||||||||||||||||
Eliminations | (1 | ) | — | — | — | — | — | ||||||||||||||||||||||||||||
Acetyl Chain | 251 | 23.9 | % | 503 | 14.9 | % | 174 | 19.6 | % | 145 | 16.8 | % | 133 | 16.1 | % | 51 | 6.4 | % | |||||||||||||||||
Other Activities(2) | (83 | ) | (253 | ) | (74 | ) | (68 | ) | (63 | ) | (48 | ) | |||||||||||||||||||||||
Total | 341 | 18.4 | % | 851 | 13.9 | % | 239 | 15.0 | % | 227 | 14.5 | % | 216 | 14.3 | % | 169 | 11.5 | % | |||||||||||||||||
Equity Earnings, Cost-Dividend Income, Other Income (Expense) Attributable to Celanese Corporation | |||||||||||||||||||||||||||||||||||
Engineered Materials | 54 | 171 | 43 | 47 | 38 | 43 | |||||||||||||||||||||||||||||
Acetate Tow | 32 | 107 | 26 | 24 | 28 | 29 | |||||||||||||||||||||||||||||
Industrial Specialties | — | — | — | — | — | — | |||||||||||||||||||||||||||||
Acetyl Intermediates | 2 | 6 | 2 | 1 | 2 | 1 | |||||||||||||||||||||||||||||
Acetyl Chain | 2 | 6 | 2 | 1 | 2 | 1 | |||||||||||||||||||||||||||||
Other Activities(2) | 6 | 10 | 8 | (4 | ) | 2 | 4 | ||||||||||||||||||||||||||||
Total | 94 | 294 | 79 | 68 | 70 | 77 | |||||||||||||||||||||||||||||
Non-Operating Pension and Other Post-Retirement Employee Benefit (Expense) Income Attributable to Celanese Corporation | |||||||||||||||||||||||||||||||||||
Engineered Materials | — | — | — | — | — | — | |||||||||||||||||||||||||||||
Acetate Tow | — | — | — | — | — | — | |||||||||||||||||||||||||||||
Industrial Specialties | — | 2 | 1 | 1 | — | — | |||||||||||||||||||||||||||||
Acetyl Intermediates | — | — | — | — | — | — | |||||||||||||||||||||||||||||
Acetyl Chain | — | 2 | 1 | 1 | — | — | |||||||||||||||||||||||||||||
Other Activities(2) | 26 | 42 | (24 | ) | 22 | 22 | 22 | ||||||||||||||||||||||||||||
Total | 26 | 44 | (23 | ) | 23 | 22 | 22 | ||||||||||||||||||||||||||||
Certain Items Attributable to Celanese Corporation (Table 8) | |||||||||||||||||||||||||||||||||||
Engineered Materials | 1 | 16 | 1 | 5 | 7 | 3 | |||||||||||||||||||||||||||||
Acetate Tow | — | 5 | 1 | — | 2 | 2 | |||||||||||||||||||||||||||||
Industrial Specialties | — | 3 | — | 3 | — | — | |||||||||||||||||||||||||||||
Acetyl Intermediates | — | 61 | 1 | 7 | (3 | ) | 56 | ||||||||||||||||||||||||||||
Acetyl Chain | — | 64 | 1 | 10 | (3 | ) | 56 | ||||||||||||||||||||||||||||
Other Activities(2) | 12 | 82 | 54 | 12 | 12 | 4 | |||||||||||||||||||||||||||||
Total | 13 | 167 | 57 | 27 | 18 | 65 | |||||||||||||||||||||||||||||
(1) | Net earnings (loss) attributable to NCI is included within the Acetyl Intermediates segment. |
(2) | Other Activities includes corporate SG&A expenses, the results of captive insurance companies and certain components of net periodic benefit cost (interest cost, expected return on plan assets and net actuarial gains and losses). |
5
Table 2 - Supplemental Segment Data and Reconciliation of Segment Adjusted EBIT and Operating EBITDA - Non-GAAP Measures - Unaudited (cont.) |  | |
Q1 '18 | 2017 | Q4 '17 | Q3 '17 | Q2 '17 | Q1 '17 | ||||||||||||||||||||||||||||||
(In $ millions, except percentages) | |||||||||||||||||||||||||||||||||||
Adjusted EBIT / Adjusted EBIT Margin | |||||||||||||||||||||||||||||||||||
Engineered Materials | 182 | 27.4 | % | 599 | 27.1 | % | 142 | 24.5 | % | 157 | 27.4 | % | 150 | 27.5 | % | 150 | 29.2 | % | |||||||||||||||||
Acetate Tow | 78 | 46.4 | % | 301 | 45.1 | % | 68 | 43.3 | % | 69 | 43.9 | % | 71 | 43.6 | % | 93 | 48.7 | % | |||||||||||||||||
Industrial Specialties | 23 | 8.4 | % | 90 | 8.8 | % | 16 | 6.3 | % | 23 | 8.7 | % | 26 | 9.9 | % | 25 | 10.2 | % | |||||||||||||||||
Acetyl Intermediates | 231 | 26.5 | % | 485 | 18.2 | % | 162 | 22.6 | % | 134 | 19.6 | % | 106 | 16.3 | % | 83 | 13.4 | % | |||||||||||||||||
Eliminations | (1 | ) | — | — | — | — | — | ||||||||||||||||||||||||||||
Acetyl Chain | 253 | 24.1 | % | 575 | 17.1 | % | 178 | 20.0 | % | 157 | 18.2 | % | 132 | 16.0 | % | 108 | 13.6 | % | |||||||||||||||||
Other Activities(2) | (39 | ) | (119 | ) | (36 | ) | (38 | ) | (27 | ) | (18 | ) | |||||||||||||||||||||||
Total | 474 | 25.6 | % | 1,356 | 22.1 | % | 352 | 22.1 | % | 345 | 22.0 | % | 326 | 21.6 | % | 333 | 22.6 | % | |||||||||||||||||
Depreciation and Amortization Expense(1) | |||||||||||||||||||||||||||||||||||
Engineered Materials | 32 | 111 | 29 | 30 | 27 | 25 | |||||||||||||||||||||||||||||
Acetate Tow | 10 | 41 | 11 | 10 | 10 | 10 | |||||||||||||||||||||||||||||
Industrial Specialties | 9 | 36 | 10 | 8 | 10 | 8 | |||||||||||||||||||||||||||||
Acetyl Intermediates | 26 | 105 | 27 | 26 | 26 | 26 | |||||||||||||||||||||||||||||
Acetyl Chain | 35 | 141 | 37 | 34 | 36 | 34 | |||||||||||||||||||||||||||||
Other Activities(2) | 2 | 10 | 2 | 4 | 2 | 2 | |||||||||||||||||||||||||||||
Total | 79 | 303 | 79 | 78 | 75 | 71 | |||||||||||||||||||||||||||||
Operating EBITDA / Operating EBITDA Margin | |||||||||||||||||||||||||||||||||||
Engineered Materials | 214 | 32.2 | % | 710 | 32.1 | % | 171 | 29.5 | % | 187 | 32.6 | % | 177 | 32.4 | % | 175 | 34.0 | % | |||||||||||||||||
Acetate Tow | 88 | 52.4 | % | 342 | 51.2 | % | 79 | 50.3 | % | 79 | 50.3 | % | 81 | 49.7 | % | 103 | 53.9 | % | |||||||||||||||||
Industrial Specialties | 32 | 11.7 | % | 126 | 12.3 | % | 26 | 10.3 | % | 31 | 11.7 | % | 36 | 13.7 | % | 33 | 13.5 | % | |||||||||||||||||
Acetyl Intermediates | 257 | 29.5 | % | 590 | 22.1 | % | 189 | 26.4 | % | 160 | 23.4 | % | 132 | 20.3 | % | 109 | 17.6 | % | |||||||||||||||||
Eliminations | (1 | ) | — | — | — | — | — | ||||||||||||||||||||||||||||
Acetyl Chain | 288 | 27.4 | % | 716 | 21.2 | % | 215 | 24.2 | % | 191 | 22.1 | % | 168 | 20.3 | % | 142 | 17.9 | % | |||||||||||||||||
Other Activities(2) | (37 | ) | (109 | ) | (34 | ) | (34 | ) | (25 | ) | (16 | ) | |||||||||||||||||||||||
Total | 553 | 29.9 | % | 1,659 | 27.0 | % | 431 | 27.1 | % | 423 | 27.0 | % | 401 | 26.6 | % | 404 | 27.5 | % | |||||||||||||||||
___________________________
(1) | Excludes accelerated depreciation and amortization expense, which amounts are included in Certain Items above. See Table 1 for details. |
(2) | Other Activities includes corporate SG&A expenses, the results of captive insurance companies and certain components of net periodic benefit cost (interest cost, expected return on plan assets and net actuarial gains and losses). |
6
Table 3
Adjusted Earnings (Loss) per Share - Reconciliation of a Non-GAAP Measure - Unaudited
Q1 '18 | 2017 | Q4 '17 | Q3 '17 | Q2 '17 | Q1 '17 | ||||||||||||||||||||||||||||||
per share | per share | per share | per share | per share | per share | ||||||||||||||||||||||||||||||
Earnings (loss) from continuing operations attributable to Celanese Corporation | 365 | 2.68 | 856 | 6.19 | 204 | 1.50 | 230 | 1.68 | 239 | 1.72 | 183 | 1.30 | |||||||||||||||||||||||
Income tax provision (benefit) | 65 | 213 | 60 | 57 | 40 | 56 | |||||||||||||||||||||||||||||
Earnings (loss) from continuing operations before tax | 430 | 1,069 | 264 | 287 | 279 | 239 | |||||||||||||||||||||||||||||
Certain Items attributable to Celanese Corporation (Table 8) | 13 | 167 | 57 | 27 | 18 | 65 | |||||||||||||||||||||||||||||
Adjusted earnings (loss) from continuing operations before tax | 443 | 1,236 | 321 | 314 | 297 | 304 | |||||||||||||||||||||||||||||
Income tax (provision) benefit on adjusted earnings(1) | (62 | ) | (198 | ) | (51 | ) | (50 | ) | (48 | ) | (49 | ) | |||||||||||||||||||||||
Adjusted earnings (loss) from continuing operations(2) | 381 | 2.79 | 1,038 | 7.51 | 270 | 1.98 | 264 | 1.93 | 249 | 1.79 | 255 | 1.81 | |||||||||||||||||||||||
Diluted shares (in millions)(3) | |||||||||||||||||||||||||||||||||||
Weighted average shares outstanding | 135.9 | 137.9 | 135.8 | 136.6 | 138.6 | 140.6 | |||||||||||||||||||||||||||||
Incremental shares attributable to equity awards | 0.5 | 0.4 | 0.5 | 0.4 | 0.4 | 0.4 | |||||||||||||||||||||||||||||
Total diluted shares | 136.4 | 138.3 | 136.3 | 137.0 | 139.0 | 141.0 | |||||||||||||||||||||||||||||
______________________________
(1) | Calculated using adjusted effective tax rates (Table 3a) as follows: |
Q1 '18 | 2017 | Q4 '17 | Q3 '17 | Q2 '17 | Q1 '17 | ||||||||||||||||||
(In percentages) | |||||||||||||||||||||||
Adjusted effective tax rate | 14 | 16 | 16 | 16 | 16 | 16 | |||||||||||||||||
(2) | Excludes the immediate recognition of actuarial gains and losses and the impact of actual vs. expected plan asset returns. |
Actual Plan Asset Returns | Expected Plan Asset Returns | |||||
(In percentages) | ||||||
2017 | 10.5 | 7.3 | ||||
(3) | Potentially dilutive shares are included in the adjusted earnings per share calculation when adjusted earnings are positive. |
7
Table 3a
Adjusted Tax Rate - Reconciliation of a Non-GAAP Measure - Unaudited
Estimated | Actual | ||||
2018 | 2017 | ||||
(In percentages) | |||||
US GAAP annual effective tax rate | 14 | 20 | |||
Discrete quarterly recognition of GAAP items(1) | — | (11 | ) | ||
Tax impact of other charges and adjustments(2) | (2 | ) | 1 | ||
Utilization of foreign tax credits | — | 20 | |||
Changes in valuation allowances, excluding impact of other charges and adjustments(3) | 1 | (13 | ) | ||
Other(4) | 1 | (1 | ) | ||
Adjusted tax rate | 14 | 16 | |||
______________________________
Note: As part of the year-end reconciliation, we will update the reconciliation of the GAAP effective tax rate for actual results.
(1) | Such as changes in tax laws (including US tax reform), deferred taxes on outside basis differences, changes in uncertain tax positions and prior year audit adjustments. |
(2) | Reflects the tax impact on pre-tax adjustments presented in Certain Items (Table 8), which are excluded from pre-tax income for adjusted earnings per share purposes. |
(3) | Reflects changes in valuation allowances related to changes in judgment regarding the realizability of deferred tax assets or current year operations, excluding other charges and adjustments. |
(4) | Tax impacts related to full-year forecasted tax opportunities and related costs. |
8
Table 4
Net Sales by Segment - Unaudited
Q1 '18 | 2017 | Q4 '17 | Q3 '17 | Q2 '17 | Q1 '17 | ||||||||||||
(In $ millions) | |||||||||||||||||
Engineered Materials | 665 | 2,213 | 580 | 573 | 546 | 514 | |||||||||||
Acetate Tow | 168 | 668 | 157 | 157 | 163 | 191 | |||||||||||
Industrial Specialties | 274 | 1,023 | 252 | 264 | 262 | 245 | |||||||||||
Acetyl Intermediates | 871 | 2,669 | 717 | 684 | 649 | 619 | |||||||||||
Eliminations(1) | (94 | ) | (321 | ) | (81 | ) | (85 | ) | (85 | ) | (70 | ) | |||||
Acetyl Chain | 1,051 | 3,371 | 888 | 863 | 826 | 794 | |||||||||||
Other Activities(2) | — | — | — | — | — | — | |||||||||||
Intersegment eliminations(1) | (33 | ) | (112 | ) | (32 | ) | (27 | ) | (25 | ) | (28 | ) | |||||
Net sales | 1,851 | 6,140 | 1,593 | 1,566 | 1,510 | 1,471 | |||||||||||
___________________________
(1) | Includes intersegment sales as follows: |
Q1 '18 | 2017 | Q4 '17 | Q3 '17 | Q2 '17 | Q1 '17 | ||||||||||||
(In $ millions) | |||||||||||||||||
Acetate Tow | — | (2 | ) | (2 | ) | — | — | — | |||||||||
Industrial Specialties | (2 | ) | (4 | ) | (1 | ) | (1 | ) | (1 | ) | (1 | ) | |||||
Acetyl Intermediates | (125 | ) | (427 | ) | (110 | ) | (111 | ) | (109 | ) | (97 | ) | |||||
Intersegment eliminations | (127 | ) | (433 | ) | (113 | ) | (112 | ) | (110 | ) | (98 | ) | |||||
(2) | Other Activities includes corporate SG&A expenses, the results of captive insurance companies and certain components of net periodic benefit cost (interest cost, expected return on plan assets and net actuarial gains and losses). |
9
Table 4a
Factors Affecting Segment Net Sales Sequentially - Unaudited
Three Months Ended March 31, 2018 Compared to Three Months Ended December 31, 2017
Volume | Price | Currency | Other | Total | |||||||
(In percentages) | |||||||||||
Engineered Materials | 10 | 3 | 2 | — | 15 | (1) | |||||
Acetate Tow | 8 | — | — | — | 8 | ||||||
Industrial Specialties | 5 | 1 | 3 | — | 9 | ||||||
Acetyl Intermediates | 9 | 11 | 2 | — | 22 | ||||||
Acetyl Chain | 8 | 9 | 3 | (2 | ) | 18 | |||||
Total Company | 9 | 6 | 2 | (1 | ) | 16 | |||||
Three Months Ended December 31, 2017 Compared to Three Months Ended September 30, 2017
Volume | Price | Currency | Other | Total | |||||||||
(In percentages) | |||||||||||||
Engineered Materials | (8 | ) | 9 | — | — | 1 | |||||||
Acetate Tow | 2 | (2 | ) | — | — | — | |||||||
Industrial Specialties | (6 | ) | 1 | — | — | (5 | ) | ||||||
Acetyl Intermediates | (4 | ) | 9 | — | — | 5 | |||||||
Acetyl Chain | (5 | ) | 7 | — | 1 | 3 | |||||||
Total Company | (5 | ) | 7 | — | — | 2 | |||||||
Three Months Ended September 30, 2017 Compared to Three Months Ended June 30, 2017
Volume | Price | Currency | Other | Total | |||||||||
(In percentages) | |||||||||||||
Engineered Materials | 1 | 1 | 3 | — | 5 | ||||||||
Acetate Tow | (5 | ) | 1 | — | — | (4 | ) | ||||||
Industrial Specialties | (4 | ) | 2 | 3 | — | 1 | |||||||
Acetyl Intermediates | 3 | (1 | ) | 3 | — | 5 | |||||||
Acetyl Chain | 1 | — | 3 | — | 4 | ||||||||
Total Company | — | 1 | 3 | — | 4 | ||||||||
Three Months Ended June 30, 2017 Compared to Three Months Ended March 31, 2017
Volume | Price | Currency | Other | Total | ||||||||||
(In percentages) | ||||||||||||||
Engineered Materials | 4 | — | 2 | — | 6 | (2) | ||||||||
Acetate Tow | (12 | ) | (3 | ) | — | — | (15 | ) | ||||||
Industrial Specialties | 2 | 3 | 2 | — | 7 | |||||||||
Acetyl Intermediates | (1 | ) | 5 | 1 | — | 5 | ||||||||
Acetyl Chain | — | 5 | 1 | (2 | ) | 4 | ||||||||
Total Company | — | 3 | 1 | (1 | ) | 3 | ||||||||
Three Months Ended March 31, 2017 Compared to Three Months Ended December 31, 2016
___________________________
Volume | Price | Currency | Other | Total | ||||||||||
(In percentages) | ||||||||||||||
Engineered Materials | 33 | — | (1 | ) | — | 32 | (3) | |||||||
Acetate Tow | 2 | (6 | ) | — | — | (4 | ) | |||||||
Industrial Specialties | 11 | 1 | — | — | 12 | |||||||||
Acetyl Intermediates | (2 | ) | 6 | — | — | 4 | ||||||||
Acetyl Chain | 2 | 5 | (1 | ) | — | 6 | ||||||||
Total Company | 11 | 2 | (1 | ) | — | 12 | ||||||||
(1) | 2018 includes the effect of the acquisition of Omni Plastics, L.L.C. |
(2) | 2017 includes the effect of the acquisition of the nylon compounding division of Nilit Group. |
(3) | 2017 includes the effect of the SO.F.TER. S.p.A. acquisition. |
10
Table 4b
Factors Affecting Segment Net Sales Year Over Year - Unaudited
Three Months Ended March 31, 2018 Compared to Three Months Ended March 31, 2017
Volume | Price | Currency | Other | Total | |||||||||
(In percentages) | |||||||||||||
Engineered Materials | 19 | 3 | 7 | — | 29 | ||||||||
Acetate Tow | (9 | ) | (4 | ) | 1 | — | (12 | ) | |||||
Industrial Specialties | (3 | ) | 7 | 8 | — | 12 | |||||||
Acetyl Intermediates | 5 | 30 | 6 | — | 41 | ||||||||
Acetyl Chain | 3 | 25 | 7 | (3 | ) | 32 | |||||||
Total Company | 7 | 14 | 6 | (1 | ) | 26 | |||||||
Three Months Ended December 31, 2017 Compared to Three Months Ended December 31, 2016
Volume | Price | Currency | Other | Total | |||||||||
(In percentages) | |||||||||||||
Engineered Materials | 45 | — | 4 | — | 49 | ||||||||
Acetate Tow | (14 | ) | (9 | ) | 1 | 1 | (21 | ) | |||||
Industrial Specialties | 3 | 7 | 5 | — | 15 | ||||||||
Acetyl Intermediates | (4 | ) | 21 | 3 | — | 20 | |||||||
Acetyl Chain | (2 | ) | 19 | 4 | (2 | ) | 19 | ||||||
Total Company | 10 | 10 | 3 | (1 | ) | 22 | |||||||
Three Months Ended September 30, 2017 Compared to Three Months Ended September 30, 2016
Volume | Price | Currency | Other | Total | |||||||||
(In percentages) | |||||||||||||
Engineered Materials | 45 | (2 | ) | 2 | — | 45 | |||||||
Acetate Tow | (12 | ) | (8 | ) | 1 | — | (19 | ) | |||||
Industrial Specialties | 2 | 4 | 2 | — | 8 | ||||||||
Acetyl Intermediates | (1 | ) | 16 | 1 | — | 16 | |||||||
Acetyl Chain | — | 13 | 2 | (2 | ) | 13 | |||||||
Total Company | 11 | 6 | 2 | (1 | ) | 18 | |||||||
Three Months Ended June 30, 2017 Compared to Three Months Ended June 30, 2016
Volume | Price | Currency | Other | Total | ||||||||||
(In percentages) | ||||||||||||||
Engineered Materials | 42 | (2 | ) | (1 | ) | — | 39 | |||||||
Acetate Tow | (13 | ) | (9 | ) | — | — | (22 | ) | ||||||
Industrial Specialties | (1 | ) | 3 | (2 | ) | — | — | |||||||
Acetyl Intermediates | (4 | ) | 14 | (1 | ) | 1 | 10 | |||||||
Acetyl Chain | (3 | ) | 12 | (2 | ) | (1 | ) | 6 | ||||||
Total Company | 8 | 5 | (1 | ) | — | 12 | ||||||||
Three Months Ended March 31, 2017 Compared to Three Months Ended March 31, 2016
Volume | Price | Currency | Other | Total | |||||||||
(In percentages) | |||||||||||||
Engineered Materials | 43 | (4 | ) | (2 | ) | — | 37 | ||||||
Acetate Tow | (6 | ) | (7 | ) | — | — | (13 | ) | |||||
Industrial Specialties | 1 | (2 | ) | (2 | ) | — | (3 | ) | |||||
Acetyl Intermediates | (12 | ) | 7 | (2 | ) | — | (7 | ) | |||||
Acetyl Chain | (9 | ) | 5 | (2 | ) | 1 | (5 | ) | |||||
Total Company | 5 | 1 | (2 | ) | 1 | 5 | |||||||
11
Table 4c
Factors Affecting Segment Net Sales Year Over Year - Unaudited
Year Ended December 31, 2017 Compared to Year Ended December 31, 2016
Volume | Price | Currency | Other | Total | ||||||||
(In percentages) | ||||||||||||
Engineered Materials | 44 | (2 | ) | 1 | — | 43 | ||||||
Acetate Tow | (11 | ) | (8 | ) | — | — | (19 | ) | ||||
Industrial Specialties | 1 | 3 | — | — | 4 | |||||||
Acetyl Intermediates | (5 | ) | 14 | — | — | 9 | ||||||
Acetyl Chain | (4 | ) | 12 | — | — | 8 | ||||||
Total Company | 9 | 5 | — | — | 14 | |||||||
12
Table 5
Free Cash Flow - Reconciliation of a Non-GAAP Measure - Unaudited
Q1 '18 | 2017 | Q4 '17 | Q3 '17 | Q2 '17 | Q1 '17 | ||||||||||||
(In $ millions) | |||||||||||||||||
Net cash provided by (used in) investing activities | (235 | ) | (549 | ) | (92 | ) | (68 | ) | (325 | ) | (64 | ) | |||||
Net cash provided by (used in) financing activities | (2 | ) | (351 | ) | 145 | (247 | ) | 21 | (270 | ) | |||||||
Net cash provided by (used in) operating activities | 143 | 803 | 58 | 255 | 298 | 192 | |||||||||||
Capital expenditures on property, plant and equipment | (86 | ) | (267 | ) | (87 | ) | (64 | ) | (54 | ) | (62 | ) | |||||
Capital (distributions to) contributions from NCI | (2 | ) | (27 | ) | (9 | ) | (10 | ) | (4 | ) | (4 | ) | |||||
Free cash flow(1)(2) | 55 | 509 | (38 | ) | 181 | 240 | 126 | ||||||||||
Net sales | 1,851 | 6,140 | 1,593 | 1,566 | 1,510 | 1,471 | |||||||||||
Free cash flow as % of Net sales | 3.0 | % | 8.3 | % | (2.4 | )% | 11.6 | % | 15.9 | % | 8.6 | % | |||||
______________________________
(1) | Free cash flow is a liquidity measure used by the Company and is defined by the Company as net cash provided by (used in) operating activities, less capital expenditures on property, plant and equipment, and adjusted for capital contributions from or distributions to Mitsui & Co., Ltd. ("Mitsui") related to our joint venture, Fairway Methanol LLC ("Fairway"). |
(2) | Excludes required debt service and capital lease payments of $63 million and $27 million for the years ending December 31, 2018 and 2017, respectively. |
13
Table 6
Cash Dividends Received - Unaudited
Q1 '18 | 2017 | Q4 '17 | Q3 '17 | Q2 '17 | Q1 '17 | ||||||||||||
(In $ millions) | |||||||||||||||||
Dividends from equity method investments | 82 | 131 | 17 | 5 | 59 | 50 | |||||||||||
Dividends from cost method investments | 32 | 108 | 26 | 24 | 29 | 29 | |||||||||||
Total | 114 | 239 | 43 | 29 | 88 | 79 | |||||||||||
Table 7
Net Debt - Reconciliation of a Non-GAAP Measure - Unaudited
Q1 '18 | 2017 | Q4 '17 | Q3 '17 | Q2 '17 | Q1 '17 | ||||||||||||
(In $ millions) | |||||||||||||||||
Short-term borrowings and current installments of long-term debt - third party and affiliates | 425 | 326 | 326 | 435 | 384 | 107 | |||||||||||
Long-term debt, net of unamortized deferred financing costs | 3,343 | 3,315 | 3,315 | 2,954 | 2,931 | 2,851 | |||||||||||
Total debt | 3,768 | 3,641 | 3,641 | 3,389 | 3,315 | 2,958 | |||||||||||
Cash and cash equivalents | (490 | ) | (576 | ) | (576 | ) | (461 | ) | (511 | ) | (501 | ) | |||||
Net debt | 3,278 | 3,065 | 3,065 | 2,928 | 2,804 | 2,457 | |||||||||||
14
Table 8
Certain Items - Unaudited
The following Certain Items attributable to Celanese Corporation are included in Net earnings (loss) and are adjustments to non-GAAP measures:
Q1 '18 | 2017 | Q4 '17 | Q3 '17 | Q2 '17 | Q1 '17 | Income Statement Classification | |||||||||||||
(In $ millions) | |||||||||||||||||||
Plant/office closures | — | 58 | 2 | 2 | (3 | ) | 57 | Cost of sales / SG&A / R&D / Other charges (gains), net | |||||||||||
Mergers and acquisitions | 13 | 35 | 9 | 10 | 7 | 9 | Cost of sales / SG&A / Other income (expense), net | ||||||||||||
Impact from natural disasters(1) | — | 11 | — | 11 | — | — | Cost of sales | ||||||||||||
InfraServ ownership change | — | 8 | — | — | 8 | — | Other charges (gains), net / Equity in net earnings (loss) of affiliates | ||||||||||||
Actuarial (gain) loss on pension and postretirement plans | — | 46 | 46 | — | — | — | Cost of sales / SG&A / R&D | ||||||||||||
Restructuring | — | 9 | — | 4 | 3 | 2 | Cost of sales / SG&A / R&D / Other charges (gains), net | ||||||||||||
Other | — | — | — | — | 3 | (3 | ) | (Gain) loss on disposition, net / Equity in net earnings (loss) of affiliates | |||||||||||
Certain Items attributable to Celanese Corporation | 13 | 167 | 57 | 27 | 18 | 65 | |||||||||||||
______________________________
(1) | Primarily associated with Hurricane Harvey. |
15
Table 9
Return on Invested Capital (Adjusted) - Presentation of a Non-GAAP Measure - Unaudited
2017 | ||||||||
(In $ millions, except percentages) | ||||||||
Net earnings (loss) attributable to Celanese Corporation | 843 | |||||||
Adjusted EBIT (Table 1) | 1,356 | |||||||
Adjusted effective tax rate (Table 3a) | 16 | % | ||||||
Adjusted EBIT tax effected | 1,139 | |||||||
2017 | 2016 | Average | ||||||
(In $ millions, except percentages) | ||||||||
Short-term borrowings and current installments of long-term debt - third parties and affiliates | 326 | 118 | 222 | |||||
Long-term debt, net of unamortized deferred financing costs | 3,315 | 2,890 | 3,103 | |||||
Celanese Corporation stockholders' equity | 2,887 | 2,588 | 2,738 | |||||
Invested capital | 6,063 | |||||||
Return on invested capital (adjusted) | 18.8 | % | ||||||
Net earnings (loss) attributable to Celanese Corporation as a percentage of invested capital | 13.9 | % | ||||||
16