<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 OF
THE SECURITIES EXCHANGE ACT OF 1934
For the month of March 2000
CELANESE AG
(Exact name of registrant as specified in its charter)
CELANESE CORPORATION
(Translation of registrant's name into English)
D-65926 Frankfurt am Main, Germany
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual
reports under cover Form 20-F or Form 40-F
Form 20-F X Form 40-F
--- ---
Indicate by check mark whether the registrant by furnishing the information
contained in this Form is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
Yes No X
--- ---
If "Yes" is marked, indicate below the file number assigned to the
registrant in connection with Rule 12g3-2(b): 82-________.
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CELANESE AG
On March 20, 2000 Celanese AG, a stock corporation organized under the laws of
the Federal Republic of Germany, issued Celanese AG 1999 Annual Report and
Celanese AG 1999 Financial Report, which Reports are respectively attached as
Exhibits 99.1 and 99.2 hereto and incorporated by reference herein.
Page 2
<PAGE> 3
EXHIBITS
Exhibit No. Exhibit
----------- --------
99.1 Celanese AG 1999 Annual Report
Page 3
<PAGE> 4
EXHIBITS
Exhibit No. Exhibit
----------- -------
99.2 Celanese AG 1999 Financial Report
Page 4
<PAGE> 5
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
CELANESE AG
(Registrant)
By: /s/ P. W. Premdas
-----------------------------
Name: Perry W. Premdas
Title: Member of the Management Board
(Chief Financial Officer)
Date: March 20, 2000
Page 5
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EXHIBIT INDEX
Exhibit No. Exhibit
---------- -------
99.1 Celanese AG 1999 Annual Report
99.2 Celanese AG 1999 Financial Report
<PAGE> 1
[Celanese Logo]
Annual Report 1999
[START]
<PAGE> 2
FINANCIAL HIGHLIGHTS >>
[GRAPHIC]
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
1999 1998 CHANGE 1999
in (euro) m in (euro) m in % in US$(3)
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
> Net sales 4,318 4,344 -1 4,348
> EBITDA(1) excluding special charges 377 580 -35 380
> Special charges (559) (100) > 100 (563)
> Operating profit (loss) (521) 168 n.m. (524)
> Profit (loss) before taxes (592) 93 n.m. (596)
> Net loss:
continuing operations (502) (56) n.m. (505)
continuing and discontinued operations (207) (44) n.m. (208)
> Capital expenditures and investments 659 345 91 664
> Average shares outstanding (thousands) 55,915 55,915 0 55,915
- -----------------------------------------------------------------------------------------------------
> Loss per share (in (euro)/US$):
continuing operations (8.98) (1.00) n.m. (9.04)
continuing and discontinued operations (3.70) (0.79) n.m. (3.72)
- -----------------------------------------------------------------------------------------------------
in (euro) millions as of December 31
- -----------------------------------------------------------------------------------------------------
> Net financial debt(2) 570 1,479 -61 574
> Shareholders' equity 2,866 2,736 5 2,886
> Total assets 7,527 7,358 2 7,581
- -----------------------------------------------------------------------------------------------------
> Average number of employees 16,700 18,400 -9 16,700
- -----------------------------------------------------------------------------------------------------
</TABLE>
(1)Earnings before interest, taxes, depreciation and amortization
(2)Short- and long-term debt less cash and cash equivalents
(3)All dollar figures translated solely for the convenience of the reader at the
year-end exchange rate US$ 1.007 per euro
n.m. = not meaningful
<PAGE> 3
CONTENTS >>
<TABLE>
<S> <C>
Letter to Shareholders ................................................. 3
Program 2000 ........................................................... 5
The Board of Management ................................................ 6
Segment Overview ....................................................... 7
Claudio Sonder - Business Developments in 1999 ......................... 12
Perry W. Premdas - Financial Results ................................... 18
Knut Zeptner - Basic Chemicals and Acetate Products .................... 24
Edward H. Munoz - Technical Polymers Ticona ............................ 30
Ernst Schadow - Personnel, Environment,
Technology and Performance Products .................................... 36
The Celanese AG Share .................................................. 42
Report of the Supervisory Board ........................................ 46
Consolidated Statements of Operations* ................................. 50
Consolidated Balance Sheets* ........................................... 51
Consolidated Statements of Cash Flows* ................................. 52
Imprint and Contacts ................................................... 53
</TABLE>
*Condensed
1
<PAGE> 4
[We're ready for the future. Start]
<PAGE> 5
LETTER TO SHAREHOLDERS >>
[PHOTO OF CLAUDIO SONDER]
Claudio Sonder -
Chairman
DEAR SHAREHOLDER,
Our first business year was short, but eventful. Celanese AG was demerged
from Hoechst AG on October 22, 1999. Three days later we were listed on the New
York and Frankfurt stock exchanges. In March 2000 we were included in the M-Dax,
the index of medium-capitalized companies in Germany.
Our company is young - but the Celanese name has been known for over 80 years
in the world of industrial chemicals. Positioning Celanese successfully in a
changing competitive environment worldwide is no easy task. The first steps we
have taken in that direction are encouraging.
> We focus on basic chemicals, acetate products, technical polymers,
polypropylene films and food ingredients. Speed and flexibility are for
us the key success factors. In just a few months we sold most of our
non-core activities, and with the proceeds we have improved our
financial flexibility and gained room to maneuver. We need this freedom
in order to strengthen our core businesses, as shown by our acquisition
of the minority shareholdings in Celanese Canada and Ticona's strategic
investment in Korean Engineering Plastics Company Ltd.
> Our business success depends on cost leadership and reliability as
well as having the ability to offer our customers individual solutions.
We have restructured our logistics, research and development
accordingly, and in the future we will tap the potential of e-commerce.
We are also extending our market and technology leadership, for
example, through our new acetic acid and acetate ester plants in
Singapore.
> Our employees have demonstrated great personal commitment to the very
rapid realignment process at Celanese AG. My colleagues on the Board of
Management and I would like to thank them warmly for their efforts. To
enable all our employees to share in the company's success we have set
up performance-related compensation and an equity participation plan.
> Our goal is long-term value creation for our shareholders. That is
only possible if we are a strong innovator and adapt quickly to the
rapid changes in our industry. More efficient catalysts and new
products like Topas(R), a high-performance plastic, are steps in the
right direction. Environmental protection and safety as well as regular
communication with the communities where we operate will remain
important priorities for us.
At our Annual General Meeting, we are recommending a dividend in our
first year. I invite you to take a look at our first Annual Report and to get to
know Celanese better. My Board colleagues and I look forward to a regular
dialogue with you.
Sincerely,
Claudio Sonder
3
<PAGE> 6
[Celanese poster graphic]
<PAGE> 7
PROGRAM 2000 >>
[FOCUS]
We are concentrating our resources on a few selected product lines in our
core areas to maintain our position in global markets.
[VALUE CREATION]
By vigorously implementing our strategy, we continually increase the value of
our company.
[MARKET AND
TECHNOLOGY LEADERSHIP]
Our competitiveness depends on the efficiency of our chemical processes and
the individual solutions we offer our customers.
[INNOVATIVE STRENGTHS]
The steady realignment of the company and the introduction of new
technologies and products are the drivers of long-term success.
[SUSTAINABLE
DEVELOPMENT]
The future viability of Celanese depends on how we meet the challenges posed
by social, environmental and business developments.
[ARROW GRAPHICS]
5
<PAGE> 8
THE BOARD OF MANAGEMENT OF CELANESE AG >>
> ERNST SCHADOW
Personnel,
Environment,
Technology,
Performance Products
> EDWARD H. MUNOZ
Technical Polymers
Ticona
> KNUT ZEPTNER
Acetyl Products,
Chemical Intermediates,
Acetate Products
> CLAUDIO SONDER
Chairman
> PERRY W. PREMDAS
Chief Financial
Officer
[PHOTO OF BOARD OF MANAGEMENT OF CELANESE]
<PAGE> 9
SEGMENT OVERVIEW >>
[CELANESE LOGO]
PORTFOLIO AND MARKET PRESENCE
We provide chemicals to a wide variety of manufacturing companies. These
products make up an integrated value chain ranging from upgraded raw materials
through intermediate products to technical polymers. As a result of economies of
scale, our global presence and comprehensive know-how in process and production
technologies, Celanese has a competitive cost structure. We are a world market
leader in our key products.
Our operating business consists of five segments, which are managed as
independent businesses.
<TABLE>
<S> <C>
ACETYL BUSINESSES
PRODUCTS
[CELANESE CHEMICALS LOGO]
CHEMICAL [CELANESE CHEMICALS LOGO]
INTERMEDIATES
ACETATE [CELANESE ACETATE LOGO]
PRODUCTS
TECHNICAL [TICONA LOGO]
POLYMERS
PERFORMANCE [NUTRINOVA LOGO]
PRODUCTS [TRESPAPHAN LOGO]
</TABLE>
<PAGE> 10
SEGMENT OVERVIEW >>
[CELANESE CHEMICALS LOGO]
ACETYL PRODUCTS
Acetyl Products accounts for the largest share of the business of Celanese,
with 36 percent of total segment sales. The main products in this segment are
methanol, acetic acid, vinyl acetate monomer, acetic anhydride and acetate
esters. Celanese is a market leader in most of these areas. Acetyl products are
the starting materials for a large number of chemical and pharmaceutical
products and are used in almost all processing industries.
[PHOTO]
Efficient processes, large plants and global presence make Celanese a leading
producer of basic chemicals
[CELANESE CHEMICALS LOGO]
CHEMICAL INTERMEDIATES
This segment, which makes up 20 percent of the total segment sales of
Celanese AG, consists of acrylic acid, acrylates, oxo products and specialties.
Many of the products are subsequently processed within Celanese AG. External
customers include the paint and coatings industry, the building sector,
agrochemicals and the textile and hygiene sectors. An innovative portfolio and
customer-specific solutions are factors that contribute to the success of this
segment.
[PHOTO]
Acrylic acid is an important component in high-quality paints and coatings
[CELANESE ACETATE LOGO]
ACETATE PRODUCTS
This segment accounts for 17 percent of total segment sales and consists of
acetate filament that is processed by our customers into fashion apparel and
linings, and acetate tow, used in filter materials. Celanese is a market leader
in both areas. Acetate Products serves as an example of our integrated value
chain: from acetic acid we produce acetic anhydride that in turn is used to make
acetate flake, which is then processed into fibers and tow. Because of the
structural changes under way in our customer industries, great flexibility is
necessary in this area.
[PHOTO]
Acetate filament is the first choice for many fashion designers
8
<PAGE> 11
[GRAPHIC]
<TABLE>
<CAPTION>
in (euro) millions
<S> <C> <C>
SALES > 1999 1,561
> 1998 1,518
OPERATING > 1999 (65)
RESULT > 1998 152
EBITDA* > 1999 89
> 1998 246
</TABLE>
*excluding special charges
Sales of Acetyl Products rose by around 3 percent in 1999. The sharp increase in
raw material costs combined with predominantly falling selling prices brought
margins under pressure. The operating result was affected by special charges
amounting to (euro) 53 million.
We are strengthening our cost leadership through the restructuring
already initiated and by investing in our most efficient plants while
rationalizing our high cost facilities. We are expanding our presence in Asia
with the new acetic acid complex in Singapore.
[GRAPHIC]
<TABLE>
<CAPTION>
in (euro) millions
<S> <C> <C>
SALES > 1999 884
> 1998 920
OPERATING > 1999 (47)
RESULT > 1998 54
EBITDA* > 1999 84
> 1998 111
</TABLE>
*excluding special charges
Sales of Chemical Intermediates fell by an overall 4 percent, with the decline
in selling prices playing a major part. However, Acrylates and Specialties
increased in volume terms. The special charges of (euro) 57 million had a major
impact on operating results.
In cooperation with Dow Chemical, we opened an acrylic acid plant in
Boehlen, Germany, in order to expand our position in this growing market.
[GRAPHIC]
<TABLE>
<CAPTION>
in (euro) millions
<S> <C> <C>
SALES > 1999 739
> 1998 839
OPERATING > 1999 (46)
RESULT > 1998 94
EBITDA* > 1999 95
> 1998 154
</TABLE>
*excluding special charges
The structural changes among its customers and the after-effects of the Asia
crisis created a difficult environment for Acetate Products in 1999. To improve
our competitive position, we spent (euro) 81 million on restructuring.
Our strategy is twofold: to increase the efficiency of our plants and
organization, and to broaden the applications of Acetate Products, for example
in wound dressings.
9
<PAGE> 12
SEGMENT OVERVIEW >>
[TICONA LOGO]
TECHNICAL POLYMERS
We produce and market technical polymers under the name Ticona (18 percent of
total segment sales). The main customers are the automotive and
electrical/electronics industries. Ticona is a world market leader in key
high-performance plastics like polyacetal and ultra high molecular weight
polyethylene. The success factors are innovation and the development of
individual formulations for customers.
[PHOTO]
Technical polymers are used in demanding automotive applications
[NUTRINOVA LOGO]
[TRESPAPHAN LOGO]
PERFORMANCE PRODUCTS
This segment (9 percent of total segment sales) consists of Trespaphan, which
manufactures polypropylene films (OPP) for food packaging, films for cigarette
packs, labels and capacitors; and Nutrinova, which produces the high-intensity
sweetener Sunett(R) and the food preservatives sorbic acid, potassium sorbate
and calcium sorbate. Both businesses occupy leading positions in their markets.
[PHOTO]
Soft drink producers are increasingly using Sunett(R)
10
<PAGE> 13
[graphic]
<TABLE>
<CAPTION>
in (euro) millions
<S> <C> <C>
SALES > 1999 788
> 1998 750
OPERATING > 1999 (96)
RESULT > 1998 53
EBITDA* > 1999 123
> 1998 115
</TABLE>
*excluding special charges
Sales in this segment rose by 5 percent in 1999. Demand was strong from the
automotive, telecommunication and electrical appliance industries. Special
charges totaled (euro) 154 million, mainly relating to product liability claims
stemming from the 1980s. EBITDA excluding special charges increased by 7
percent.
Ticona continues to address innovation and growth by starting the first
large-scale production unit of Topas(R) in Oberhausen, Germany and buying a 50
percent shareholding in Korean Engineering Plastics Company Ltd.
<TABLE>
<CAPTION>
in (euro) millions
<S> <C> <C>
SALES > 1999 397
> 1998 407
OPERATING > 1999 (93)
RESULT > 1998 (12)
EBITDA* > 1999 42
> 1998 52
</TABLE>
*excluding special charges
While sales of food ingredients increased, a decline in OPP films led to a fall
in overall sales of the segment by 2 percent. The (euro) 93 million operating
loss is mainly due to special charges of (euro) 99 million, most of which relate
to antitrust proceedings against sorbates producers in the United States, and
restructuring.
Trespaphan is improving its cost structure through site streamlining
and specialization. Nutrinova is consolidating its core competencies through
growth and greater efficiency.
11
<PAGE> 14
[PHOTO - OF CLAUDIO SONDER]
<PAGE> 15
CLAUDIO SONDER - BUSINESS DEVELOPMENTS IN 1999 >>
THE FUTURE MEANS CHANGE - THAT'S THE KEY TO GROWTH.
[CLAUDIO SONDER, BRAZILIAN, CHEMICAL ENGINEER AND ECONOMIST]
1942 > born in Sao Paulo, Brazil
1966 > Head of Sales at Hoechst do Brasil
1983 > Chairman of the Board
of Management of Hoechst do Brasil
1996 > Member of the Board
of Management of Hoechst AG
1999 > Chairman of the Board
of Management of Celanese AG
13
<PAGE> 16
CLAUDIO SONDER - BUSINESS DEVELOPMENTS IN 1999 >>
SETTING THE COMPANY'S FUTURE COURSE
> WE HAVE SET UP A GLOBAL COMPANY THAT HAS AN EXCELLENT MARKET AND
TECHNOLOGY POSITION IN ITS CORE BUSINESSES
> WE HAVE ACHIEVED OUR STRATEGIC GOALS FOR 1999 FASTER THAN EXPECTED
> WE ARE SHIFTING OUR FOCUS MORE TOWARD GROWTH AND
PRODUCTIVITY ENHANCEMENT
OUR VISION - VALUE CREATION THROUGH CHANGE AND GROWTH
Our company was set up with our vision of growing faster than the sector. It
is our goal to be a global leader in the industry in terms of value creation for
our shareholders. Speed is essential in this process - for anticipating our
customers' needs, implementing innovative ideas and participating in the
structural change in our sector.
Core Businesses of Celanese AG
(Share of total sales)
<TABLE>
<S> <C>
Acetyl Products 36%
- ----------------------------
Chemical
Intermediates 20%
- ----------------------------
Acetate Products 17%
- ----------------------------
Technical Polymers
Ticona 18%
- ----------------------------
Performance Products 9%
- ----------------------------
</TABLE>
OUR STRENGTHS - COST EFFICIENCY, CUSTOMER-SPECIFIC SOLUTIONS, HIGH MARKET SHARES
IN CORE AREAS
We have an excellent starting position relative to our global competitors.
Our core businesses are Acetyl Products, Chemical Intermediates, Acetate
Products, Technical Polymers and Performance Products, consisting of specialty
films and food ingredients.
Our products and services are used in major growth sectors, like the
automotive, electrical, telecommunication and food industries, and also by major
processors in all branches of the chemical, textile and consumer goods
industries. More than 75 percent of our sales are derived from products in which
we are the leading or second-largest supplier in the market.
Celanese has placed great emphasis on providing its customers with excellent
service and in-depth solutions to address their requirements. As a result, we
have
14
<PAGE> 17
achieved leading market positions in our core businesses. Thanks to our
considerable experience in process technology, we are also one of the most
efficient producers in the industry.
THE STEPS WE ARE TAKING
To achieve our vision and to increase the profitability of our businesses, it
is necessary to take swift and systematic action to anticipate market
developments. We have decided:
> TO BUILD ON OUR STRENGTHS
We have focused our portfolio in a very short time on those activities in which
we have significant market shares and high expertise. We will continue to
evaluate our businesses to create a more balanced mix of basic chemicals and
specialty products, thereby reducing our vulnerability to the chemical cycle,
and we have already found future-oriented solutions for most of our non-core
businesses.
> TO INCREASE OUR COST EFFICIENCY
We are improving our technical processes, streamlining our organization and
optimizing our infrastructure in order to enhance our cost leadership position.
> TO IMPROVE INNOVATIVE CAPABILITIES
We must think in a whole new way about what innovation means to us. It is not
just an issue for research and technology, for new production processes and
product developments. Innovation also deals with the way people work with each
other. In working partnerships with our customers, for example, we find
completely new solutions to their needs.
> TO EXPAND IN GROWTH MARKETS
We will continue to leverage our existing positions around the globe.
Additionally, Celanese is actively investing both on its own and together with
strong local partners in highly dynamic regions, such as Asia.
> TO CREATE A PERFORMANCE CULTURE
We want to give all of our employees incentives to perform in the best interests
of our shareholders, to be measured appropriately and then to be rewarded for
that performance. We are encouraging openness, responsibility, mobility,
commitment and creativity.
15
<PAGE> 18
CLAUDIO SONDER - BUSINESS DEVELOPMENTS IN 1999 >>
BUSINESS DEVELOPMENT AND RESTRUCTURING IN 1999
While we are working very hard to improve our prospects for the future, we
are doing this against the backdrop of what has been a most difficult time for
our new company. Although the economic environments in our key markets gradually
improved last year, we experienced intense competition worldwide in many of our
product lines. Furthermore, our raw material costs were adversely affected by
rising oil prices during most of 1999. These forces combined to restrain our
earnings and operating cash flow.
> In the first phase of our strategic restructuring we started to divest
non-core activities. We virtually completed this process by year-end, faster
than planned. The proceeds from sales to date amounted to more than (euro) 900
million.
> Thanks to the divestments we reduced the net financial debt burden that we
took on as part of the demerger and thus improved the conditions for future
growth.
> In the second stage we took steps to improve our structure and increase the
efficiency of our core businesses. Some of these measures also involved plant
and site closures. Here, too, we have made rapid and systematic progress. My
Board of Management colleagues will report on this in the sections that follow.
It was our declared aim at the time of the demerger to resolve the greater part
of these internal issues during our first year as a public company.
> In line with our strategy of innovation- and customer-oriented growth, we
acquired at year-end a 50-percent holding in Korean Engineering Plastics Company
Ltd., a very strong partner in the technical polymers field in Asia. In Boehlen
(Germany), we opened an acrylic acid plant in a cooperative venture with The Dow
Chemical Company.
16
<PAGE> 19
LOOKING AHEAD
Celanese's results of operations for 1999 have been adversely affected by the
market conditions in the chemical industry as well as by special charges
principally relating to restructuring and two legal actions. These challenging
market conditions are expected to persist in 2000. The changes in the chemical
industry will continue. Celanese has undertaken a number of cost-cutting and
restructuring measures to increase its innovative strengths and competitiveness.
We are confident that we will be able to act quickly and effectively to take
advantage of the possibilities for growth in today's competitive marketplace.
THE PATH TO VALUE CREATION
[CELANESE CHEMICALS LOGO]
[CELANESE ACETATE LOGO]
[TICONA LOGO]
> Focus
> Innovation
> Cost Leadership
> Growth
[TRESPAPHAN LOGO]
[NUTRINOVA LOGO]
> Realignment
> Growth
1999 > > > >
CELGARD
COPLEY
DYNEON
TARGOR
THERMPHOS
VINNOLIT
> Divestments
In 1999 we reorganized our businesses and improved our innovative strengths.
Most of our non-core businesses were successfully divested. With the cash
generated by our divestiture program, we improved our financial situation and
our chances for growth.
17
<PAGE> 20
[PHOTO OF PERRY W. PREMDAS]
<PAGE> 21
PERRY W. PREMDAS - FINANCIAL RESULTS >>
IN A DIFFICULT YEAR, WE TOOK MAJOR STEPS TOWARD CREATING FUTURE VALUE.
[PERRY W. PREMDAS, AMERICAN, MASTER OF BUSINESS ADMINISTRATION]
[ARROW GRAPHIC]
1952 > born in Washington, D.C., USA
1976 > Treasury, Controlling and Planning at Celanese Corporation and Celanese
Mexicana
1990 > Vice President Finance and Administration, Specialty Products, Hoechst
Celanese
1995 > Vice President and General Manager, Printing Products Division, Hoechst
Celanese
1998 > Senior Executive Vice President and Chief Financial Officer, Centeon LLC
1999 > Chief Financial Officer, Celanese AG
19
<PAGE> 22
PERRY W. PREMDAS - FINANCIAL RESULTS >>
FINANCIAL BASIS STRENGTHENED MORE QUICKLY THAN EXPECTED
> THE SUCCESSFUL DIVESTITURE OF NON-CORE BUSINESSES SIGNIFICANTLY REDUCED DEBT
> ALL OF OUR SEGMENTS HAVE IMPLEMENTED STRICT PROGRAMS TO REDUCE COSTS
AND INCREASE CASH FLOW
> HIGH SPECIAL CHARGES AND LOW PROFITABILITY RESULTED IN AN OPERATING LOSS
Last year was a difficult one. Not only were we creating a new company and
managing the demerger, but we were attempting to accomplish this at a time when
competition in our businesses was very intense and margins for our products came
under pressure.
We report below on the development of our continuing operations; we cover our
discontinued businesses in the financial report, a separate publication.
Although volumes increased 1 percent in 1999 and currency effects were
favorable by 3 percent, selling prices were down 5 percent on average, resulting
in slightly lower sales ( -1 percent). When combined with the higher production
costs, primarily due to raw material costs, our gross profit declined 22
percent, and our gross margin was only 16 percent versus 20 percent in 1998.
EBITDA (earnings before interest, taxes, depreciation & amortization)
excluding special charges is our key measure of profitability and is a good
approximation of the amount of cash our segments generate. This figure dropped
last year to (euro) 377 million from (euro) 580 million in 1998 mainly because
of the severe margin squeeze.
REDUCTION OF OPERATING COSTS WILL CONTINUE
In early 2000 as well, we are facing an intense competitive situation. We
have a number of programs underway to increase our profitability. Most
importantly, we are working extremely hard to cut costs throughout the company.
Several specific projects are ongoing in the operating businesses, such as
projects to reduce overheads and slim down our management structure.
20
<PAGE> 23
SPECIAL CHARGES
<TABLE>
<CAPTION>
in (euro) millions 1999
- ------------------------------------------
<S> <C>
> Personnel reduction costs 116
> Plant and office closures 102
> Litigation (product liability,
antitrust) 203
> Asset impairments 56
> Demerger costs 28
> Environmental and other 52
> Miscellaneous 2
- ------------------------------------------
Total 559
- ------------------------------------------
</TABLE>
At this point, we believe that the bulk of restructuring measures is behind
us. However, it will remain our most important goal to improve our productivity
and therefore special charges could arise in the future. The special charges of
(euro) 559 million include reserves of (euro) 457 million which will lead to
cash outflows in 2000.
In combination, the sharp drop in operating results and the high level of
special charges resulted in an operating loss of (euro) 521 million. Below the
operating profit line, interest expense declined significantly in 1999, and
there was a modest tax benefit.
The negative results of continuing operations deepened from (euro) 56 million
in 1998 to (euro) 502 million in 1999, mainly because of a decrease in operating
margins and the significant increase in special charges. The divestiture program
generated (euro) 298 million in after-tax gains from disposals of discontinued
operations, and this helped to offset the decline in net earnings.
CASH FLOW BOOSTED BY DIVESTITURES
Mainly because of the drop in operating margin and net results, cash flow
from operations declined by (euro) 147 million to (euro) 183 million in 1999.
However, as noted above, the divestiture program has made a significant
positive contribution. We vigorously pursued this effort and progress has
exceeded our expectations. As of the end of last year, divestitures generated
net cash of (euro) 913 million.
21
<PAGE> 24
PERRY W. PREMDAS - FINANCIAL RESULTS >>
DIVESTITURES
<TABLE>
<CAPTION>
Closing date
- -----------------------------------------
<S> <C>
> Copley Sept 1999
> Celgard Dec 1999
> Millhaven Dec 1999
> Targor Dec 1999
> Dyneon Dec 1999
> EO/EG Dec 1999
> Thermphos Jan 2000
> Vintron Expected by year end 2000
> Vinnolit Expected by year end 2000
- -----------------------------------------
</TABLE>
In addition, we tightened the reins on capital expenditures on property,
plant and equipment, which declined from (euro) 345 million in 1998 to (euro)
262 million. We spent (euro) 397 million on strategic acquisitions in 1999. The
company is rigorously reviewing all proposed investments with the aim of
selecting only those that will rapidly contribute to earnings and to cash flow.
The combined effect of these efforts led to a substantial improvement in our
cash flow from investing activities from an outflow of (euro) 297 million in
1998 to a net inflow of (euro) 257 million in 1999. We used the bulk of the cash
generated in 1999 to reduce our debt. We will focus on projects - including
selected acquisitions - that will enhance the competitive positions of our core
businesses.
OUR BALANCE SHEET HAS STRENGTHENED
At the start of 1999, Celanese had net financial debt of about (euro) 1.5
billion. As noted above, a key element of our financial strategy was to pay down
debt with proceeds from the disposal of non-core assets, and this was the key
factor leading to the decrease in net financial debt to (euro) 570 million as of
December 31.
Also, in order to be able to operate Celanese as a company independent from
Hoechst, it was necessary to refinance most of the demerged debt. This was
successfully achieved under favorable conditions. We received a positive
investment grade rating from the agency Moody's Investors Service of "Baa2." As
a result, we believe that our cost of borrowing is very competitive and that we
are well positioned to participate in the debt markets in the future.
Operating receivables and inventories at the end of the year were (euro) 2.1
billion or 48 percent of sales. One of our top priorities is to reduce the
amount we have committed in these assets. All operations are actively trimming
and optimizing their working capital. Our goal over the next few years is a
continued reduction of working capital.
22
<PAGE> 25
PROGRESS TOWARDS OUR FINANCIAL GOALS
We stand committed to achieving the following key financial performance
targets over the whole of the cycle:
TARGETS OVER THE CYCLE (IN %)
<TABLE>
<CAPTION>
TARGET STATUS QUO
- --------------------------------------------------------------------
<S> <C> <C>
> EBITDA margin excluding special charges 15 - 20 8.7
> Return on Capital Employed 10 - 11
> Total debt/Total capitalization 30 - 40 25.7
</TABLE>
It is clear that our results have fallen short of our EBITDA margin
objectives. This is mainly because of the adverse competitive environment but
also because we still have to significantly improve our core activities. As of
the end of 1999, our degree of debt had improved more than expected. This will
be to our advantage since we will have substantial cash outflows relating to our
current restructuring program in the near future.
OUTLOOK
The current business environment is extremely challenging. Accordingly, we
are intensifying our efforts to improve profitability and cash flow throughout
the company.
As we divested a majority of our non-core activities earlier than expected,
we were able to record a positive net income at the parent company level by
year-end. Accordingly we are in a position to consider a dividend payment for
1999. We will recommend a dividend payment of (euro) 0.11 cents per share,
totaling around (euro) 6 million, at this year's annual general meeting.
23
<PAGE> 26
[PHOTO OF KNUT ZEPTNER]
<PAGE> 27
KNUT ZEPTNER - BASIC CHEMICALS AND ACETATE PRODUCTS
COST LEADERSHIP AND
STRONG GLOBAL CORE
BUSINESSES PROVIDE
OUR POTENTIAL FOR
GROWTH.
[KNUT ZEPTNER, GERMAN, BUSINESS MANAGEMENT GRADUATE]
1944 > born in Teuplitz, Germany
1965 > Head of Sales, Technical Films, Hoechst UK
1990 > Member of management team, Hoechst Japan
1993 > General manager, Hoechst Diafoil
1996 > Head of Plastics Division, Hoechst AG
1999 > Member of the Board of Management of Celanese AG
and CEO of Celanese Chemicals and Acetate
25
<PAGE> 28
KNUT ZEPTNER - BASIC CHEMICALS AND ACETATE PRODUCTS >>
MAINTAINING COST LEADERSHIP IN A DIFFICULT COMPETITIVE ENVIRONMENT
> WE ARE MARKET LEADERS IN MOST OF OUR CORE BUSINESSES
> IN 1999, WE TOOK DECISIVE ACTION TO INCREASE THE EFFICIENCY OF OUR OPERATIONS
BY RESTRUCTURING AND BY IMPROVING OUR TECHNOLOGIES
> STRONG RISE IN RAW MATERIAL COSTS IMPACTED MARGINS AND THE RESULTS IN 1999
MARKET POSITION AND GLOBAL PRESENCE
In the Acetyl Products segment, we are the world's largest manufacturer of
acetic acid and vinyl acetate. We also are the largest North American producer
of methanol, a strategic raw material for these products. In acetate filament
and tow, we are the global leader. Our production plants are among the most
efficient in the world.
[PIE CHART]
SALES BY SEGMENT
<TABLE>
<S> <C>
Acetyl Products 36 %
- --------------------------------
Chemical Intermediates 20 %
- --------------------------------
Acetate Products 17 %
- --------------------------------
Technical Polymers
Ticona 18 %
- --------------------------------
Performance Products 9 %
- --------------------------------
</TABLE>
[PIE CHART]
SALES BY REGION*
<TABLE>
<S> <C>
North America 50 %
- --------------------------------
Europe 27 %
- --------------------------------
Asia 17 %
- --------------------------------
Other 6 %
- --------------------------------
</TABLE>
* for the segments Acetyl Products, Chemical Intermediates, Acetate Products
THE MAIN AREAS OF OUR BUSINESS
> WE PROCESS RAW MATERIALS IN AN INTEGRATED VALUE CHAIN
We transform the petrochemical raw materials natural gas, ethylene and propylene
into higher-value organic basic chemicals that are the building blocks of many
everyday products, ranging from paints, plastics, adhesives and synthetic fibers
to agrochemicals and pharmaceuticals. Our basic chemicals include methanol,
acetic acid, oxo alcohols and acrylic acid. These chemicals are either used as
starting materials, e.g. acrylic acid for superabsorbents in disposable diapers,
or are converted into other chemicals, e.g. vinyl acetate, acetate esters,
cellulose ester, polyols and amines.
A good example of value creation at Celanese is acetic acid. Celanese
sells acetic acid directly to processors, but also uses it as an intermediate
for higher-value products like vinyl acetate monomer, which is a component of
paints, adhesives and films; acetate esters, used in coatings and printing inks;
and acetic anhydride. This is used in analgesics and in acetate filament for
high-quality fashion apparel and household fabrics.
26
<PAGE> 29
> WE WORK IN A DIFFICULT COMPETITIVE ENVIRONMENT
Raw material prices are a key factor in our production costs. These costs rose
dramatically in 1999, pushed up by increasing crude oil prices, which more than
doubled over 12 months. Unfortunately, we were not able to raise the selling
prices of our products to the same extent. This caused our margins to come under
severe pressure. Moreover, the markets for some of our products suffer from
global overcapacities, e.g. in oxo products, acetate esters, and acetate
filament. These conditions were mainly the results of new plants in Asia and, in
the case of acetate filament, changing demand patterns.
OUR STRATEGY
Rapid implementation of our strategic decisions is essential. Speed is
important for all our structural changes, targeted growth and technical
innovations. Within the segment we are aiming:
> TO ENHANCE THE EFFICIENCY OF OUR OPERATIONS
We will continue to rationalize less competitive plants and cut costs. In 1999
we closed our acetic acid plant in Frankfurt, Germany, and our acetaldehyde
plant in Lillebonne, France. We announced plans to close our acetate filament
plant in Drummondville, Canada, and we began the process of reducing acetate
filament capacity at Rock Hill, South Carolina. We also announced the planned
shutdown of Acetyl Products units at our site in Celaya, Mexico, as well as a
capacity reduction at our filter products operation in Ocotlan, Mexico. We
continued to cut administrative costs, closing the headquarters of Celanese
Canada in Montreal and restructuring our administrative offices in Dallas,
Texas.
> TO PURSUE GROWTH OPPORTUNITIES
We plan to grow by enhancing our current market position and through
acquisitions. We are expanding our presence in Asia, which we regard as a major
growth region. In Singapore, we have recently started up an acetate ester plant
and we plan to bring on stream one of the world's most efficient acetic acid
plants by mid-2000. We also entered the growing European market for acrylic acid
through a cooperative venture with Dow Chemical in Germany. Furthermore, we are
striving for a forward-integrated portfolio expansion in selected markets over
the medium term.
> TO IMPROVE OUR TECHNOLOGY POSITION
We continuously seek to strengthen our technology to maintain cost leadership.
Our technology centers in Corpus Christi (Texas) and Oberhausen (Germany) are
focusing on the development of improved catalysts, debottlenecking and cost
reduction efforts and following up new business opportunities. Our research and
development efforts have enhanced our competitiveness. A good example is our
optimization of the methanol carbonylation technology for the production of
acetic acid. Celanese considerably improved the catalyst system, lowered energy
costs and overcame existing capacity limits. Our
27
<PAGE> 30
KNUT ZEPTNER - BASIC CHEMICALS AND ACETATE PRODUCTS >>
acetic acid plant at Clear Lake (Texas) is now one of the largest and most
efficient in the world. Our new acetic acid plant in Singapore will also use
this leading technology.
> TO DEVELOP SOLUTIONS THAT IMPROVE OUR CUSTOMERS' COMPETITIVENESS
Strengthening our customers' competitiveness is a priority. That's why we also
talk with our customers' customers, e.g. in our "Innovate Acetate" program.
Here, our marketing people are in close touch with leading designers and
trendsetters to determine what will be fashionable in the coming seasons. Our
production and sales specialists then work closely with our customers to
determine which fibers, processing and dyeing methods etc. are needed to meet
the specifications. When the solution has been identified and solved, we support
our customers in the marketing of their Celanese textiles.
BUSINESS DEVELOPMENT AND RESULTS
Sales of Acetyl Products increased 3 percent in 1999 compared with the
previous year. Volume growth of 5 percent was, however, partially offset by
price declines. The sharp rise in raw material costs and the decline in selling
prices impacted this segment. The cost of natural gas, for example, rose by 10
percent, and ethylene by 32 percent, while the price of acetic acid fell by 15
percent. The special charges amounting to (euro) 53 million are attributable
mainly to plant closures in Europe and Mexico as well as global rationalization.
The increase in capital expenditures is primarily due to construction of our
acetic acid plant in Singapore, which will strengthen our presence in Asia.
ACETYL PRODUCTS
<TABLE>
<CAPTION>
in (euro) millions 1999 1998 Change
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
> Sales 1,561 1,518 3%
> EBITDA excluding special charges 89 246 - 64%
> EBITDA excluding
special charges/sales 5.7% 16.2%
> Operating profit (loss) (65) 152 n.m.
> Depreciation & amortization 101 85 19%
> Capital expenditures 127 70 81%
- -------------------------------------------------------------------------------
</TABLE>
Sales at Chemical Intermediates declined by 4 percent, with selling prices
falling by 6 percent and volumes by 2 percent. Currency factors and license
revenue yielded a plus of 4 percent. Within the segment, sales and results
CHEMICAL INTERMEDIATES
<TABLE>
<CAPTION>
in (euro) millions 1999 1998 Change
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
> Sales 884 920 - 4%
> EBITDA excluding special charges 84 111 - 24%
> EBITDA excluding
special charges/sales 9.5% 12.1%
> Operating profit (loss) (47) 54 n.m.
> Depreciation & amortization 74 56 32%
> Capital expenditures 46 97 - 53%
- -------------------------------------------------------------------------------
</TABLE>
28
<PAGE> 31
showed a mixed picture, with volumes rising and prices falling to very different
degrees, e.g. in acrylates and specialties. The Oxo business, which experienced
declines in volumes due to operating difficulties at two plants and declining
prices, depressed the segment's overall result. The special charges in Chemical
Intermediates amounted to (euro) 57 million, mainly due to asset writedowns and
restructuring in Europe. After excluding special charges EBITDA fell to (euro)
84 million.
ACETATE PRODUCTS
<TABLE>
<CAPTION>
IN (EURO) MILLIONS 1999 1998 CHANGE
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
> Sales 739 839 - 12%
> EBITDA excluding special charges 95 154 - 38%
> EBITDA excluding
special charges/sales 12.9% 18.4%
> Operating profit (loss) (46) 94 n.m.
> Depreciation & amortization 60 54 11%
> Capital expenditures 30 69 - 57%
- -------------------------------------------------------------------------------
</TABLE>
Sales at Acetate Products declined 12 percent to (euro) 739 million. This
was mainly because of a decline in volumes (12 percent) and prices (4 percent).
Positive currency factors offset the fall in prices. The segment had
restructuring charges of (euro) 81 million, owing to plant closures in North
America. EBITDA (excluding special charges) fell to (euro) 95 million.
OUTLOOK
Our three segments constitute the largest share of Celanese sales and are
vital drivers of value creation. We will play an active part in the industry's
consolidation. Our goals are to maintain our regional presence, meet the growing
needs of our customers and strengthen our cost leadership in a difficult
competitive environment.
[PHOTO OF WORKERS AT SINGAPORE VINYL ACETATE PLANT]
Celanese has operated a vinyl acetate plant in Jurong Island industrial park
near Singapore since July 1997. This year an acetate ester plant and an acetic
acid unit will be added. The three plants form a chain. Acetic acid is the
starting product for vinyl acetate and acetate esters. Demand for these basic
chemicals is rising well above average in Asia.
29
<PAGE> 32
[PHOTO OF EDWARD H. MUNOZ]
<PAGE> 33
EDWARD H. MUNOZ - TECHNICAL POLYMERS TICONA >
INNOVATION IS OUR
STRENGTH - IN THE
PRODUCTS AND
SOLUTIONS WE OFFER
OUR CUSTOMERS.
[EDWARD H. MUNOZ, AMERICAN, CHEMIST AND
MASTER OF BUSINESS ADMINISTRATION]
1944 > born in Brownsville, Texas
1967 > Head of production at Celanese Ltd.
1990 > Head of plastics division at Hoechst Celanese
1993 > Head of Celanese Mexicana
1999 > Member of the Board of Management
of Celanese AG and CEO of Ticona
31
<PAGE> 34
EDWARD H. MUNOZ - TECHNICAL POLYMERS TICONA >
COMPETITIVE ADVANTAGE THROUGH INNOVATIVE POLYMERS
- - WE ARE EXPERIENCING STRONG DEMAND FOR HIGH-QUALITY PLASTICS
- - WE HAVE FURTHER EXPANDED OUR PRESENCE IN ASIA
- - BY WORKING CLOSELY WITH OUR CUSTOMERS, WE ARE OPENING UP NEW MARKETS
MARKET POSITION AND GLOBAL PRESENCE
Ticona is a major global supplier of technical polymers. We are a market
leader in polyacetal (Hostaform(R), Celcon(R)), ultra high molecular weight
polyethylene (GUR(R)), liquid crystal polymers (Vectra(R)), and long fiber
reinforced thermoplastics (Celstran(R), Compel(R) and Fiberod(R)). Our main
customers are the automotive, electrical/electronics and consumer goods
industries.
[ PIE CHART ]
<TABLE>
<CAPTION>
CONSUMER MARKETS FOR
TICONA PRODUCTS AND SOLUTIONS
<S> <C>
Automotive .................... 47%
Consumer goods ................ 19%
Electrical and
electronics industry .......... 15%
Industrial goods .............. 12%
Medical/laboratory
equipment ..................... 5%
Other ......................... 2%
</TABLE>
[ PIE CHART ]
<TABLE>
<CAPTION>
SALES BY REGION
<S> <C>
Americas .................... 38%
Europe ...................... 36%
Asia-Pacific
(including Polyplastics) .... 26%
</TABLE>
Ticona is well positioned in all regions. Our business in Asia is mainly
conducted by Polyplastics, in which we have a 45% holding.
THE CUSTOMER AS PARTNER - WAYS TO NEW SOLUTIONS AND NEW MARKETS
In today's markets it's not only new, high-quality products that are in
demand. Customers are constantly looking for new solutions to their problems.
Ticona's strengths in both these areas are recognized. In addition to making
high-quality plastics, we work closely with our customers to give them
competitive advantages by devising innovative solutions to their specific
problems. Cooperation is close from the development phase of a new component
onwards. Customers indicate their requirements and then together we specify the
material requirements, the design and processing technologies. An efficient
development partnership results and opens up new markets and applications for
both sides.
VERSATILE, STRONG,
ENVIRONMENTALLY FRIENDLY
Compared with more traditional materials like glass or metal, plastics offer
some important advantages. Due to their lower weight they are more flexible
during the molding process. The molding
32
<PAGE> 35
versatility of plastics that results from a number of different processing
technologies permits production of complex, single-shot components with little
waste and high cycle times. By mixing additives with basic grades (compounds),
plastics can be tailor-made to customer specifications. The comparatively low
processing temperatures have a positive effect on energy consumption. Thanks to
these properties, Ticona's high-quality plastics meet the performance
requirements of a wide range of applications.
<TABLE>
<CAPTION>
TECHNICAL POLYMERS VALUE CHAIN
<S> <C> <C> <C> <C> <C>
Development
Ticona partnerships Customers
Service
Raw materials/ Polymers Compounding Injection OEM system Consumers
Monomers molders suppliers (1)
Process development Product development Technical service
Technology leadership Application development CAE (2)
Quality improvement Quality assurance
Efficiency improvements Polymer testing
</TABLE>
Our services contribute to the value chain at various levels and extend well
beyond the development and production of technical polymers.
(1) OEM = Original equipment manufacturer
(2) Computer-aided engineering
A FIRST-CLASS EXAMPLE -
PLASTICS IN THE AUTOMOTIVE INDUSTRY
In the global automotive industry, plastic demonstrates its versatility well.
Various extremely demanding product characteristics need to be met, such as
toughness, impact strength, heat resistance, elasticity, electrical
conductivity, resistance to chemicals, noise insulation and color fastness.
Plastics are, therefore, used in a large number of automotive applications, e.g.
fuel pump rotors, filter housings, spark plug connectors, windshield wiper
housings, sunroofs, loudspeaker grilles, dashboard housings and airbag covers.
Because of their special properties like toughness, flexural and breaking
strength, plastics play a vital part in saving lives, for example, in safety
belt systems.
They also make an important environmental contribution: the lower weight of
plastics compared with metals and glass has helped vehicles significantly reduce
their energy consumption.
33
<PAGE> 36
A SIGN OF THE FUTURE - TOPAS(R)
Topas(R) - cycloolefin copolymers made with the help of metallocene catalysts
- - points the way to the next generation of technical polymers. It combines such
different properties as low water absorption, low density, chemical resistance,
high transparency, variable deflection temperatures, and high rigidity in a very
versatile way. Topas(R) is not so much a single product as a platform for a
range of applications. At present, this mainly consists of transparent films
that protect medicines from moisture and damage, transparent optical systems
like lenses, toner binder grades for high-resolution laser color printing as
well as capacitor films. Another advantage of Topas(R) is that it can be
processed in various ways, e.g. by injection molding and extrusion. This
advantage offers our customers a wide variety of new application areas.
RECYCLING - LESS WASTE AND LOWER COSTS
Ticona has developed several programs for the recycling of production waste
and used moldings, e.g. for polyacetal and polyester products. In one program,
we upgrade plastic recyclate from, for example, scrapped cars by adding
Celstran(R), a long fiber reinforced thermoplastic. This helps customers reduce
their raw material and disposal costs and comply with legal requirements.
STRATEGY
Customer orientation and innovation are the pillars of our business. They are
at the same time the driving force behind our strategy, which aims for
above-average growth. We take a twin-track approach here.
> INTERNAL GROWTH
With all our existing products, we grow through continuous process, product and
application development and by devising new solutions to meet emerging needs and
demands. This allows us to open up new markets and market segments as well as to
win additional customers. At the same time we are looking for completely new
products. The formulation and production of innovative products like Topas(R)
and our ability to commercialize these will secure our long-term success. To
complement these activities, our New Business Development group aims to
establish new business platforms and to develop the core activities of the
future.
> GROWTH THROUGH STRATEGIC ALLIANCES
In view of the rapid changes and globalization taking place in the chemical
industry, alliances and partnerships are increasingly important for our future
growth. This is how we want to play an active part in the reshaping of our
industry. We also want to expand our geographic presence, especially in growth
markets like Asia. Cooperation with strategically chosen partners promotes a
faster and more effective transfer of knowledge - the basis of future
innovation.
One example of this strategy is our long-term partnership with the Japanese
plastics manufacturer Polyplastics in the Asia-Pacific region. Its strong
position there has significantly expanded our geographic presence. In December,
we consolidated our presence in Asia still further by acquiring a 50 percent
holding in Korea Engineering Plastics Company Ltd. This
34
<PAGE> 37
company is a leading manufacturer of polyacetal in Korea and has a good
technology and cost position.
BUSINESS DEVELOPMENT AND RESULTS
Our sales rose by over 5 percent to (euro) 788 million in 1999. Volume growth
(6 percent) and favorable currency factors (3 percent) were responsible for this
increase. Demand was strong from the automotive industry, especially in the
United States and from the telecommunications industry in Europe. We also made
progress in the electrical appliances market. Our standard products came under
strong pressure, especially in Europe. Overall, the business developed better in
the second half of the year than in the first.
Our operating result was impacted by a special charge of (euro) 128 million
relating to product liability cases dating from the 1980s involving a number of
manufacturers of raw materials for plumbing systems. Excluding special charges,
the operating result increased to (euro) 58 million in 1999 from (euro) 53
million in the previous year and EBITDA (also excluding special charges) rose by
a total of 7 percent to (euro) 123 million.
BUSINESS DEVELOPMENT AND RESULTS
<TABLE>
<CAPTION>
in (euro) millions 1999 1998 Change
<S> <C> <C> <C>
- - Net sales 788 750 5%
- - EBITDA excluding special charges 123 115 7%
- - EBITDA excluding
special charges/sales 15.6% 15.3%
- - Operating profit (loss) (96) 53 n.m.
- - Depreciation & amortization 65 62 5%
- - Capital expenditures 40 66 -39%
</TABLE>
OUTLOOK
We will continue our strategy of growth through innovation. As part of our
build-up of new core businesses, we will start production of Topas(R) at our
new COC plant in Oberhausen, Germany, in summer 2000. We plan to extend our
investments in the strategically important Asian market. Our cost-cutting
efforts in production and administration will be intensified.
[PHOTO OF MOBILE PHONES]
Our technical polymers meet the requirements of numerous applications. Technical
polymers are used inside many devices, e.g. mobile phones, electric razors,
kitchen appliances and camcorders through to medical devices, such as inhalers.
35
<PAGE> 38
[PHOTO OF ERNST SCHADOW]
<PAGE> 39
ERNST SCHADOW - SUSTAINABLE DEVELOPMENT >>
Innovation, responsibility and long-term success - those are the values of our
employees.
[ERNST SCHADOW, GERMAN, ENGINEER AND CHEMIST]
[Graphic]
<TABLE>
<S> <C>
1942 > born in Mankendorf, Germany
1974 > Joined Hoechst AG: Process engineering,
production and technology, Hoechst AG
1985 > Head of chemicals division
1988 > Member of the Board
of Management of Hoechst AG
1999 > Member of the Board
of Management of Celanese AG
</TABLE>
37
<PAGE> 40
ERNST SCHADOW - SUSTAINABLE DEVELOPMENT >>
Sustainable Development - responsibility for social,
ecological and economic developments
> Motivated and skilled employees form the foundation for progress in a
difficult business climate
> Comprehensive environmental protection and safety are top-priority
issues for Celanese
> Being innovative is essential to our future as a commercial enterprise
Social responsibility means investing in employee skills
Social responsibility at Celanese starts with a focus on employees and
includes training programs that meet both the individual's and the company's
needs. Management development is a key task of the Board of Management. Managers
have to tackle a wide range of challenges to help the company progress in its
rapidly changing competitive environment.
Celanese has created stock-price-based compensation programs as an incentive
to employees to add value to the company. For example, managers who voluntarily
invest a specific sum in shares of Celanese are granted stock appreciation
rights in return, from which they benefit if the share price rises at an
above-average rate. The members of the Board of Management and the Global
Management Team have committed themselves to investing a sum equivalent to one
year's gross salary in Celanese shares. Other employees can acquire shares
subsidized by the company.
The rapid implementation of the company's strategy since the public listing
has also affected personnel levels. In 1999 700* jobs in continuing operations
were shed, mainly through early retirement and normal attrition. In addition,
the disposal of discontinued operations resulted in the reduction of 1,100*
employees. Our social responsibility will remain an important factor in future
personnel developments.
Respecting environmental and social concerns
Sustainable development means being open to the demands of society and
recognizing our responsibilities. Celanese supports Responsible Care(R), the
worldwide initiative of the chemical industry, and has committed itself to
continuously
Criteria for management development
<TABLE>
<CAPTION>
Shaping the Focus Winning Commitment Building Success
- ----------------- ------------------ ----------------
<S> <C> <C>
> Entrepreneurship > Relations & Networks > Develop Capabilities
> Strategic Thinking > Change Leadership > Multicultural
> Broad Scanning > Courage > Teamwork & Cooperation
> Customer Focus
</TABLE>
* Number at year-end
38
<PAGE> 41
improving its performance in environmental protection and safety.
In 1999 Celanese spent (euro) 116.4 million on environmental protection, of
which (euro) 13.9 million was for capital expenditures and (euro) 102.5 million
was for operating expenses. Compared with 1998, this represented a decline of
around 16 percent. Environmental protection contributes to commercial success
and has the following strategic goals:
> TO PREVENT POLLUTION
We prevent pollution and reduce costs by using production-integrated
environmental protection.
> TO INTEGRATE SUSTAINABLE DEVELOPMENT INTO EVERYDAY OPERATIONS
We integrate environmental protection, safety and occupational health in all
plant operations via management systems.
> TO RAISE AWARENESS OF
ENVIRONMENTAL PROTECTION AND SAFETY
We raise employees' awareness in these fields and enable them to commit
themselves actively to environmental protection and safety through appropriate
training measures.
We acknowledge our responsibility to make prudent use of raw materials and
energy. We can make significant savings, reduce production costs and improve our
competitiveness by adopting process changes and new processes that more
efficiently utilize raw materials and energy.
A good example here is the production of polyacetal - our most important
technical polymer. It is used mainly in automotive engineering and helps save
both weight and energy. The energy needs of the plant where it is produced have
fallen steadily thanks to process improvements and modifications. In the last
four years, for example, average savings in specific energy consumption of
around 15 percent have been achieved.
AMOUNT OF STEAM REQUIRED FOR POLYACETAL PRODUCTION
Index (Steam/Production)
[LINE GRAPH]
Sustainable development at Celanese also means facing up responsibly to our
industrial history. Contamination from chemical production at all sites will be
carefully kept to a minimum or - where necessary - remediated. We spent (euro)
78 million in this area in 1999.
39
<PAGE> 42
ERNST SCHADOW - SUSTAINABLE DEVELOPMENT/PERFORMANCE PRODUCTS >>
INNOVATION - A FOUNDATION STONE OF OUR CORPORATE CULTURE
It is technological innovation and a new way of thinking by individuals and
organizations that primarily make sustainable development a reality. Celanese
has already set course for a new innovation culture, for instance, through
partnerships with external research organizations.
COOPERATION WITH SYMYX
> CELANESE Specifies search areas
> SYMYX Tests and identifies new potential catalysts
> CELANESE Optimizes catalysts and introduces them into mini-plants and
production
Symyx, a young Californian company, uses the methods of combinatorial
chemistry to identify new compounds with catalytic properties. Celanese has
entered into an exclusive partnership with Symyx in the development of new
routes to the oxidation of various hydrocarbons. The cooperation combines the
ability of Symyx to investigate the catalytic effects of a large number of
compounds in a very short time with our ability to optimize such catalysts and
to integrate them into production.
RESEARCH STRATEGY - BUSINESS-DRIVEN AND FORWARD-LOOKING
Our research strategy directly supports the business activities of the
individual segments and also reflects the company's long-term, strategic
interests. Business-driven research consists of:
> PROCESS ENHANCEMENTS, for example, the steady optimization of our acetic acid
process.
> NEW APPLICATIONS for existing products. For example, acetate filaments were
launched on the Chinese market as dressing material for burns. Dressings made
of acetate filaments promote healing even when they are changed only at
irregular intervals.
> PRODUCT DEVELOPMENTS, for example, new environmentally sound solvents and
Topas(R), a technical polymer of the next generation that is used for medical
and food packaging, toner binding resins, optical systems and other
applications.
In 1999 Celanese spent (euro) 79 million on research and development.
Compared with 1998, that represents a decline of 22 percent. The reason for this
was the strategic realignment of our research activities, most of which are now
conducted decentrally in the segments.
In two areas research is conducted commonly for all businesses:
> CATALYSIS is a key technology for the chemical industry. Celanese is
investing in catalysts to retain long-term technology and cost leadership.
> BIOTECHNOLOGY will result in new raw materials, processes and products.
Celanese has entered into cooperative ventures with various biotech companies
and institutes in order to tap this new potential.
40
<PAGE> 43
PERFORMANCE PRODUCTS -
TRESPAPHAN AND NUTRINOVA
The Performance Products segment consists of Trespaphan, one of the leading
manufacturers of oriented polypropylene (OPP) films for the packaging of
foodstuffs and cigarettes, labels and capacitors; and Nutrinova, the producer of
the high-intensity sweetener Sunett(R) (acesulfame K) and the food preservatives
sorbic acid, potassium and calcium sorbates. In 1999, sales in the segment fell
by 2 percent to (euro) 397 million, mainly because of a decline in sales of OPP
films. In contrast, the food ingredient business developed positively. Overall,
the segment reported an operating loss of (euro) 93 million in 1999, due
primarily to special charges of (euro) 99 million, related to antitrust actions
in the sorbates market in the United States, and restructuring.
Trespaphan is concentrating increasingly on special films and applications
and will reduce the size of its conventional transparent film business.
Nutrinova is strengthening its leading position in its core competencies -
sweeteners and food preservatives - and aims over the long term to broaden its
food ingredients portfolio.
PERFORMANCE PRODUCTS
<TABLE>
<CAPTION>
in (euro) millions 1999 1998 Changes
- ------------------ ---- ---- -------
<S> <C> <C> <C>
> Net sales 397 407 - 2%
> EBITDA excluding special charges 42 52 - 19%
> EBITDA excluding
special charges/sales 11% 13%
> Operating profit (loss) (93) (12) n.m.
> Depreciation & amortization 36 34 6%
> Capital expenditures 12 35 - 66%
</TABLE>
[ GRAPHIC ]
In the search for new catalysts we combine catalysis know-how with combinatorial
chemistry and high-throughput screening. In the prototypes shown many potential
catalysts are tested simultaneously under inert conditions. Promising catalysts
and processes can now be developed from the micro-reactor through to production
much more quickly than was possible just a few years ago.
41
<PAGE> 44
The CELANESE AG Share >>
[ GRAPHIC ]
The Swiss brothers Henri and Camille Dreyfus laid the foundation for today's
Celanese with the process developed in 1912 for the production of cellulose
acetate. The share certificate features the two brothers as well as the
structural formulas of the company's most important products.
<PAGE> 45
THE CELANESE AG SHARE - A SYMBOL OF YOUR TRUST
A BRIGHTER FUTURE AS AN INDEPENDENT COMPANY
We are certain that as an independent and more focused company Celanese is
better positioned than as part of a conglomerate to use its capital resources to
improve its competitiveness. It can thus respond more quickly and flexibly to
changes in global markets.
GLOBAL REGISTERED SHARES
On October 22, 1999, 55.92 million shares of Celanese AG were distributed to
Hoechst shareholders in the demerger. The shares are global registered shares,
which means that the same shares can be traded on the New York Stock Exchange
(NYSE) and in Frankfurt. The decision in favor of registered shares as opposed
to bearer shares provides shareholders with a number of advantages. It opens up
a wider market for the shares and enables the company to directly contact more
of its shareholders through the data in its share register. In addition, it
reduces transaction costs for international shareholders and makes the market
more transparent.
TRADING STARTED ON OCTOBER 25, 1999
In the fall of 1999 macroeconomic factors and capital market activities of
individual competitors created a difficult environment for new issues in the
chemical industry. The Celanese AG share made its debut on October 25, 1999, in
Frankfurt and New York.
TAX FREE FOR SHAREHOLDERS
The distribution of Celanese shares was tax free for German shareholders
according to the Finance Ministry of the State of Hesse. Most non-German
shareholders (including our shareholders in the United Kingdom and in the United
States) can expect the transaction to be tax neutral as well. Details can be
found on the internet at www.celanese.com.
[graphic omitted]
SHAREHOLDER STRUCTURE
<TABLE>
<S> <C>
Kuwait Petroleum Corporation 26%
Others (mainly private investors
in Germany) 21%
Germany (institutional investors) 17%
North America 14%
U.K., Ireland 8%
Employees 8%
Continental Europe 6%
</TABLE>
43
<PAGE> 46
THE CELANESE AG SHARE >>
<TABLE>
<CAPTION>
CELANESE - KEY FIGURES 1999
- ---------------------------
<S> <C>
> Number of shares outstanding 55,915,369
> Trading volume on the German exchanges (1) 18,420,484
> Trading volume on the NYSE (2) 830,500
> Share price high (euro/share) (3) 18.43
> Share price low (euro/share) (3) 14.20
> Closing price at year end (euro/share) (3) 18.00
> EPS (euro/share) (3.70)
> Dividend (euro/share) 0.11
> EBITDA* excl. special charges (euro/share) 6.74
> Cash provided by operating activities (euro/share) 3.27
</TABLE>
(1) Source: Deutsche Borse AG
(2) Source: New York Stock Exchange
(3) Closing price: Frankfurt Stock Exchange
* Earnings before Interest, Taxes, Depreciation and Amortization
MEMBER OF M-DAX
Since March 20, Celanese AG has been included in the M-DAX index. This
broadens the group of potential buyers of our stock and permits a performance
comparison with an established index.
A SUCCESSFUL START WITH THE REDISTRIBUTION
As part of the demerger of Celanese, a consortium of eight banks (4) was
appointed to match supply and demand for the new Celanese shares prior to the
beginning of trading. The redistribution was supported by intensive marketing
activities and it played a part in the change in the shareholder structure at
Celanese.
(4) Credit Suisse First Boston, Dresdner Kleinwort Benson, Bayerische Landesbank
Girozentrale, Deutsche Bank, DG Bank, Goldman Sachs International, J.P.
Morgan Securities Ltd., Landesbank Hessen-Thueringen
A NEW SHAREHOLDER STRUCTURE
A recent study shows that Celanese shareholders are globally spread as
follows: 46 percent in Germany, 14 percent in the rest of Europe (including
U.K./Ireland), 14 percent in North America and 26 percent in the Middle East - a
Kuwait Petroleum Corporation (KPC) holding. In addition to this largest single
holding, institutional shareholders own roughly 44 percent, and the remainder is
mainly held by private investors.
INCENTIVES FOR VALUE CREATION
To help employees identify with the company more closely and to create
incentives, we have set up several stock-price-based compensation programs. To
limit the financial exposure under these programs, Celanese started to offset
these by purchasing share options in December 1999.
A key element of these employee programs are stock appreciation rights for
selected managers at Celanese AG. The stock appreciation rights grant a claim to
the payment of the difference between a base price and the share price at the
time of exercising the right. Under one of these programs, the Board of
Management and the Global Management Team (GMT) will invest a sum equal to their
annual salary in Celanese shares at market conditions. In return, the company
will grant two stock appreciation rights per share.
> STOCK APPRECIATION RIGHTS
WAITING PERIOD: until October 25, 2001
EXERCISE HURDLE: at the time of exercise, the Celanese share on the Frankfurt
stock exchange must have outperformed the median of a peer group.
PEER GROUP: The Dow Chemical Company/Union Carbide Corporation, DSM NV, Eastman
Chemical Company, Georgia Gulf Corporation, Lyondell Chemical Corporation,
Imperial Chemical Industries PLC, Methanex Corporation, Rhodia SA and Millennium
Chemicals Inc.
44
<PAGE> 47
BASE PRICE: Average of the first 20 days of trading on the Frankfurt stock
exchange =(euro) 16.3705
ACTIVE INVESTOR RELATIONS
Open and transparent communication with shareholders, financial analysts and
potential investors is a high priority for the Board of Management of Celanese
AG. We are convinced that a continuous dialogue with market participants
promotes an appropriate valuation of the Celanese share. For this reason the
Board of Management has maintained regular and intensive contact with the global
capital market since the listing. This was preceded by road shows in Europe and
in North America. Celanese management also explained the company's strategy and
development at two international chemical conferences in 1999. The report on the
third quarter was discussed in a telephone conference with investors and
financial analysts from North America and Europe. Investor Relations'
representatives in the United States and Europe can be contacted by
shareholders, potential investors and analysts. An important tool for our global
work is the timely information made available to the capital markets via the
Internet under the key word "Investor" at the Celanese website.
RESEARCH ON CELANESE AG
The following firms published in-depth studies (more than 10 pages) on Celanese
in 1999:
a) As part of the redistribution: Bayerische Landesbank, Credit Suisse
First Boston, Deutsche Bank, DG Bank, Dresdner Kleinwort Benson,
Goldman Sachs, J.P. Morgan
b) After the listing debut: Commerzbank, Goldman Sachs, J.P. Morgan,
Lehman Brothers
RELATIVE PRICE DEVELOPMENT
[LINE GRAPH]
Comparison of closing prices of Celanese, M-Dax and C-Dax Chemie (figures in %)
<PAGE> 48
REPORT OF THE SUPERVISORY BOARD >>
[PHOTO]
Guenter Metz
Chairman of the
Supervisory Board
DEAR SHAREHOLDER,
Celanese AG came into being in 1999. The demerger of the industrial
chemicals businesses of Hoechst AG -- Celanese Chemicals & Acetate, Ticona,
Nutrinova and Trespaphan -- into Celanese AG on October 22, 1999, and the
listing of the new company on the New York and Frankfurt stock exchanges on
October 25, 1999, were the key milestones last year.
Prior to the actual demerger of the industrial chemicals businesses from
Hoechst AG, Celanese AG was, until October 22, 1999, known as Diogenes Erste
Vermoegensverwaltungs AG. The Supervisory Board was constituted on September 1,
1999, and elected Guenter Metz as Chairman. The Supervisory Board additionally
formed at this inaugural meeting a Personnel and Compensation Committee, a
Financial and Audit Committee and a Strategy Committee. The Supervisory Board
appointed Mr. Claudio Sonder as Chairman of the Board of Management with effect
from September 1, 1999, through October 22, 2002.
Messrs. Edward H. Munoz, Perry W. Premdas, Ernst Schadow and Knut Zeptner
were appointed members of the Board of Management with effect from September 1,
1999, through October 22, 2002.
Messrs. Khaled S. Buhamrah, Alan R. Hirsig, Joannes C. M. Hovers, Guenter
Metz, Alfons Titzrath and Kendrick R. Wilson were elected to the Supervisory
Board by a resolution of the General Meeting of Diogenes Erste
Vermoegensverwaltungs AG on July 29, 1999.
Ms. Ute Sturm and Messrs. Hanswilhelm Bach, Gerd Decker, Reiner Nause,
Ralf Sikorski and Werner Zwoboda were appointed by the court as employees'
representatives on the Supervisory Board with effect from October 22, 1999, the
date of demerger. At its meeting on December 14, 1999, the Supervisory Board
elected Mr. Reiner Nause as Deputy Chairman. In addition, the Supervisory Board,
pursuant to Article 27 paragraph 3 of the German Co-Determination Act, set up a
Mediating Committee.
The Board of Management and other managers took important steps in the
year under review to focus the business portfolio consistently and rapidly on
the core activities and thus to open up new perspectives and the way to growth,
innovation and higher profitability. With the goal being to restructure the
business portfolio, the Board of Management first of all undertook the necessary
divestments: the sale of the approximately 52 percent shareholding in the
generic pharmaceuticals producer Copley which was transferred as part of the
demerger to Celanese AG; the sale of the 50 percent holding in Targor, the
polypropylene joint venture with BASF; the sale of the 46 percent holding in
Dyneon, the fluoropolymer joint venture with 3M, the sale of the separation
products business Celgard in the United States and Japan; the sale of the
phosphorus chemical business Thermphos, which was closed in 2000; and the sale
of the polyester plant in Millhaven, Canada. The acquisition of full ownership
of Celanese Canada through an offer to minority shareholders and the purchase of
50 percent of Korean Engineering Plastics Company Ltd. by Ticona both mark
important steps in an ongoing, active growth strategy in the company's core
businesses.
The strategy of Celanese AG, its consistent implementation and further
development were also key issues in discussions between the Board of Management
and the Supervisory
<PAGE> 49
Board, as were the individual transactions. Other important issues were the
planned investments, divestments, operating and strategic planning,
implementation of a corporate governance system in line with international best
practice (including an efficient risk management system), the introduction of a
demanding overall compensation system and company-wide management development,
as well as Y2K preparations at Celanese AG.
In addition, the Board of Management informed the Supervisory Board in
detail at its meetings on September 1, 1999, December 14, 1999, and March 15,
2000, as well as during preparations for the current report, about the company's
business developments and situation. The Chairman of the Supervisory Board was
kept updated in regular, individual talks with the Board of Management; he was
in constant contact especially with the Chairman of the Board of Management. The
Supervisory Board performed the tasks incumbent upon it according to the law and
the Articles of Association, namely, as supervisor of and advisor to the Board
of Management in its conduct of business. The Supervisory Board was satisfied
that the Board of Management properly exercised its guiding and monitoring
functions with respect to the affiliates of Celanese AG and their executive
bodies.
The approvals required from the Supervisory Board with respect to certain
business decisions of the Board of Management and in compliance with the rules
of procedure were granted in each case unanimously by the Supervisory Board. In
its decision making it took into account not only business and strategic
considerations but also important social aspects.
At its meeting on December 13, 1999, the Strategy Committee considered in
particular the strategic planning of the Chemicals and Acetate and Ticona
business segments. Other issues for the Strategy Committee were technology
focuses, the further development of environmental protection and safety as well
as efficient management development in line with the needs of a global company.
At its meeting on December 13, 1999, the Financial and Audit Committee
considered the business developments in 1999 and the outlook for the year 2000.
As part of the reporting on the financial situation of the company, capital
market themes and the Y2K issue were also discussed. An overview of the 1999
external auditing program and the auditing program of Corporate Auditing for
1999 and 2000 took place in the presence of the auditor. One reason for the
overview and discussion was the planned share buy-back program in the year 2000.
The Personnel and Compensation Committee sat twice in the year under
review.
The 1999 annual financial statements of Celanese AG and the management's
discussion and analysis were produced in accordance with the German Commercial
Code and the German Corporation Act, and audited by KPMG Deutsche
Treuhand-Gesellschaft Aktiengesellschaft Wirtschaftspruefungsgesellschaft, which
issued an unqualified opinion. This also applies to the consolidated financial
statements based on U.S. GAAP. The annual financial statements of Celanese AG
and the consolidated financial statements were drawn up in Euro. The
consolidated financial statements were supplemented by a Group management report
and further explanations pursuant to Article 292 of the German Com-
47
<PAGE> 50
REPORT OF THE SUPERVISORY BOARD >>
mercial Code. The existing U.S. GAAP consolidated financial statements provide
an exemption under Article 292 of the German Commercial Code from the obligation
to draw up consolidated financial statements according to German law.
All financial report documents and the appropriation of earnings proposed
by the Board of Management as well as the auditors' reports were available to
the Supervisory Board on time. They were checked by the Financial and Audit
Committee and the Supervisory Board; for this reason the auditor attended the
meeting of the Financial and Audit Committee. The Supervisory Board concurred
with the results of the auditing by the auditors and concluded from its own
examination that no objections should be raised. At its meeting on March 15,
2000, the Supervisory Board noted the consolidated financial statements for
1999, approved the annual financial statements for 1999 of Celanese AG and also
approved the appropriation of earnings proposed by the Board of Management.
Pursuant to Article 312 of the German Stock Corporation Act, the Board of
Management produced a report on relations with affiliated companies (dependence
report) because Celanese AG in the financial year 1999 was a dependent company
of Hoechst AG until October 22, 1999. The legally required key statement is
given in the management's discussion and analysis.
The dependence report was audited by KPMG Deutsche Treuhand-Gesellschaft
Aktiengesellschaft Wirtschaftspruefungsgesellschaft, which issued the following
opinion: "Following our dutiful audit and evaluation we confirm that
1. the actual details in the Report are correct and
2. with the legal transactions given in the Report the consideration given
by the company was not inappropriately high."
The Financial and Audit Committee and the Supervisory Board checked the
dependence report and saw no reason for objection. The dependence report and
audit report were discussed by the Financial and Audit Committee and the
Supervisory Board at their meetings on March 14 and 15, 2000. Following the
final result of the review by the Supervisory Board, no objections to the
statement of the Board of Management at the end of the dependence report can be
raised.
The company management, staff and employees' representatives worked
together in full awareness of their responsibilities and with high personal
commitment in 1999-initially as part of the Hoechst Group and as of October
22, 1999, at Celanese AG. The Supervisory Board recognizes this fact and wishes
to thank them.
Frankfurt am Main, March 2000
/S/ GUENTER METZ,
- -----------------
Guenter Metz,
Chairman of the Supervisory Board
48
<PAGE> 51
THE SUPERVISORY BOARD >>
THE SUPERVISORY BOARD
(AS AT DECEMBER 31, 1999)
DR. GUENTER METZ (since September 1, 1999) Chairman, Former Deputy Chairman of
the Board of Management of Hoechst AG (1), (2), (3), (4)
Member of the Supervisory Board: Aventis S.A., Hoechst AG, Schenker AG,
Walter Bau AG, Zurich Agrippina AG
REINER NAUSE
(since October 22, 1999)
Deputy Chairman, Technician, Chairman of the Central Workers' Council of
Celanese Chemicals Europe GmbH, Chairman of the Group Workers' Council of
Celanese AG (1), (2), (4)
DR. HANSWILHELM BACH
(since October 22, 1999)
Graduate chemist, Chairman of the Senior Executives' Committee of Celanese
Chemicals Europe GmbH, Ruhrchemie site, Chairman of the Group Senior Executives'
Committee of Celanese AG (3)
KHALED SALEH BUHAMRAH
(since September 1, 1999)
Chairman and Managing Director of Petrochemical Industries Co., Kuwait (4)
Member of the Board of Directors of Kuwait Petroleum Corporation
GERD DECKER
(since October 22, 1999)
Electrician, Chairman of the Workers' Council of Trespaphan GmbH, member of the
Group Workers' Council of Celanese AG (3)
ALAN R. HIRSIG
(since September 1, 1999)
Former Chief Executive Officer of ARCO Chemical Company, USA (2), (4)
Member of the Board of Directors of Hercules Inc., Checkpoint Systems Inc. and
Philadelphia Suburban Corporation
DR. JOANNES C. M. HOVERS
(since September 1, 1999)
Former Chief Executive Officer of Oce N.V., Netherlands (1), (4)
Member of the Supervisory Board: Ericsson Telecommunicatie B.V., De
Nederlandsche Bank N.V., Hoechst AG, Koninklijke Grolsch N.V., Mignoz en De
Block N.V., Randstad Holding N.V.
RALF SIKORSKI
(since October 22, 1999)
Labor union secretary, Deputy Regional Head of the IG BCE in Hesse (4)
UTE STURM
(since October 22, 1999)
Office worker, representative of the DAG (German white-collar workers' union),
Deputy Chairman of the Workers' Council of Celanese Chemicals Europe GmbH,
Frankfurt site (1)
DR. ALFONS TITZRATH
(since September 1, 1999)
Chairman of the Supervisory Board of Dresdner Bank AG (3)
Member of the Supervisory Board: Allianz AG (Deputy Chairman), Hoechst AG,
Muenchener Rueckversicherungs-Gesellschaft AG, RWE Aktiengesellschaft, VAW
aluminium AG
KENDRICK R. WILSON III
(since September 1, 1999)
Managing Director of Goldman Sachs & Co., USA (3)
Member of the Board of Directors of Bank United Corp., Anthracite Capital Corp.
LLC and American Marine Holdings Corp.
WERNER ZWOBODA
(since October 22, 1999)
Mechanic, Chairman of the Central Workers' Council of Ticona GmbH, member of the
Group Workers' Council of Celanese AG (4)
(1) Committee in accordance with Art. 27 MitbestG (German Co-Determination
Act),
(2) Personnel and Compensation Committee,
(3) Financial and Audit Committee,
(4) Strategy Committee
<PAGE> 52
CONSOLIDATED STATEMENTS OF OPERATIONS >>
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
in (euro) millions 1999 1998 Chg. in %
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
NET SALES 4,318 4,344 -1
> Cost of sales (3,621) (3,454) 5
- --------------------------------------------------------------------------------
GROSS PROFIT 697 890 -22
- --------------------------------------------------------------------------------
> Selling, general & administrative
expenses (570) (535) 7
> Research & development expenses (79) (101) -22
> Special charges (559) (100) n.m.
> Other operating income (expenses) (10) 14 n.m.
- --------------------------------------------------------------------------------
OPERATING PROFIT (LOSS) (521) 168 n.m.
- --------------------------------------------------------------------------------
> Equity in net earnings of affiliates 7 11 -36
> Interest expenses (111) (133) -17
> Interest & other income, net 33 47 -30
- --------------------------------------------------------------------------------
Earnings (loss) before income taxes
from continuing operations (592) 93 n.m.
- --------------------------------------------------------------------------------
> Income tax benefit (expense) (83) (109) n.m.
> Minority interests (7) 40 n.m.
- --------------------------------------------------------------------------------
(Loss) from continuing operations (502) (56) > 100
- --------------------------------------------------------------------------------
> Earnings from discontinued
operations 310 12 --
> Extraordinary expenses (15) -- > 100
- --------------------------------------------------------------------------------
NET (LOSS) (207) (44) > 100
- --------------------------------------------------------------------------------
</TABLE>
<PAGE> 53
CONSOLIDATED BALANCE SHEETS >>
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
in (euro)millions
- ----------------------------------------------------------------------------------
ASSETS
Dec.31, 1999 Dec.31, 1998
- ----------------------------------------------------------------------------------
<S> <C> <C>
CURRENT ASSETS:
> Cash and cash equivalents 378 0
> Receivables 1,598 1,896
> Inventories 588 586
> Other current assets 136 734
- ----------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 2,700 3,216
- ----------------------------------------------------------------------------------
> Investments 580 455
> Property, plant and equipment, net 1,932 1,677
> Other assets 2,315 2,010
- ----------------------------------------------------------------------------------
TOTAL ASSETs 7,527 7,358
- ----------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
- ----------------------------------------------------------------------------------
CURRENT LIABILITIES:
> Short-term borrowings and current
installments of long-term debt 429 400
> Other current liabilities 2,362 1,721
- ----------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 2,791 2,121
- ----------------------------------------------------------------------------------
> Long-term debt 519 1,079
> Other liabilities and minority interests 1,351 1,422
> Shareholders' equity 2,866 2,736
- ----------------------------------------------------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 7,527 7,358
- ----------------------------------------------------------------------------------
</TABLE>
51
<PAGE> 54
CONSOLIDATED STATEMENTS OF CASH FLOWS >>
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
in (euro) millions 1999 1998
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
OPERATING ACTIVITIES OF CONTINUING OPERATIONS:
> Net loss (207) (44)
> Earnings from operations of discontinued operations (12) (12)
> Special charges, net of amounts used 482 6
> Depreciation & amortization 339 312
> Gain on disposal of discontinued businesses (503) 0
> Other, net 84 68
- ------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 183 330
- ------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES OF CONTINUING OPERATIONS:
> Capital expenditures and investments (659) (345)
> Proceeds from sales of assets and businesses 923 42
> Other, net (7) 6
- ------------------------------------------------------------------------------------------------------
NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES 257 (297)
- ------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES OF CONTINUING OPERATIONS:
> Borrowings, net (773) (381)
> Other activity with Hoechst 706 336
> Other, net (5) 0
- ------------------------------------------------------------------------------------------------------
NET CASH (USED) IN FINANCING ACTIVITIES (72) (45)
- ------------------------------------------------------------------------------------------------------
> Exchange rate effects on cash 10 2
- ------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 378 (10)
- ------------------------------------------------------------------------------------------------------
NET CASH (USED) BY DISCONTINUED OPERATIONS (5) (8)
- ------------------------------------------------------------------------------------------------------
</TABLE>
52
<PAGE> 55
Celanese is required to file an annual report on Form 20-F with the U.S.
Securities and Exchange Commission (SEC). The SEC maintains a website
(www.sec.gov) that contains these reports and other information filed
electronically.
Forward-looking statements: Any statements contained in this report that are
not historical facts are forward-looking statements as defined in the U.S.
Private Securities Litigation Reform Act of 1995. Words such as "believe",
"estimate", "intend", "may", "will", "expect", and "project" and similar
expressions as they relate to Celanese or its management are intended to
identify such forward-looking statements. Investors are cautioned that
forward-looking statements in this report are subject to various risks and
uncertainties that could cause actual results to differ materially from
expectations. Important factors include, among others, changes in general
economic, business and political conditions, fluctuating exchange rates, the
length and depth of product and industry business cycles, changes in the price
and availability of raw materials, actions which may be taken by competitors and
by regulatory authorities, changes in the degree of patent and other legal
protection afforded to Celanese's products, potential disruption or interruption
of production due to accidents or other unforeseen events, delays in the
construction of facilities, potential liability for remedial actions under
existing or future environmental regulations and potential liability resulting
from pending or future litigation, and other factors discussed above. Many of
the factors are macroeconomic in nature and are therefore beyond the control of
management. The factors that could affect Celanese's future financial results
are discussed more fully in its filings with the SEC, including its Form F-1
Registration Statement filed with the SEC on October 25, 1999. Celanese does
not assume any obligation to update these forward-looking statements, which
speak only as of their dates.
CELANESE AG
65926 FRANKFURT am MAIN
GERMANY
MEDIA RELATIONS &
EMPLOYEE COMMUNICATIONS
Wilfried Sauer
E-Mail: [email protected]
Telephone: + 49/69/305-20525
Telefax: + 49/69/305-84160
MEDIA RELATIONS
Dr. Hans-Bernd Heier
E-Mail: [email protected]
Telephone: + 49/69/305-7112
Phillip Elliott
E-Mail: [email protected]
Telephone: + 49/69/305-33480
Telefax: + 49/69/305-84160
INVESTOR RELATIONS
Joerg Hoffmann
E-Mail: [email protected]
Telephone: + 49/69/305-4508
Telefax: + 49/69/305-83195
INVESTOR RELATIONS AND PUBLIC AFFAIRS
CELANESE AMERICAS CORPORATION
Andrea Stine
86 Morris Avenue
Summit, NJ 07901, USA
E-Mail: [email protected]
Telephone: + 1/908/522-7784
Telefax: + 1/908/522-7583
This Annual Report is also available in German.
It is supplemented by a separate Financial Report, which consists of the
complete financial statements of Celanese AG (Notes, Management's Discussion and
Analysis, Outlook and the auditors' report). On request, we will be pleased to
send you a copy of these reports in either language:
Telephone: + 49/69/75306-999
Telefax: + 49/69/75336-949
or you can order it at: www.celanese.com
REGISTRAR TRANSFER AGENTS
Registrar Services GmbH
Mergenthaler Allee 79-81
65760 Eschborn
Germany
ChaseMellon Shareholder Services, L.L.C.
Overpeck Centre
85 Challenger Road
Ridgefield Park, NJ 07660 U.S.A.
AUDITORS OF THE CONSOLIDATED
FINANCIAL STATEMENTS
KPMG Deutsche Treuhand-Gesellschaft AG Wirtschaftspruefungsgesellschaft
Marie-Curie-Strasse 30
60439 Frankfurt am Main
Germany
IMPRINT
PUBLISHED BY
Celanese AG
65926 Frankfurt am Main
Germany
EDITING
Corporate Communications
Corporate Accounting
DESIGN CONCEPT/LAYOUT
Winkel Design GmbH, Cologne
LITHOGRAPHY
Keim Klischees, Langen
PRINTING
Rhein Main Druck, Mainz
DATES IN 2000
May 9 Report on the 1st Quarter 2000
May 10 Annual General Meeting
August 7 Report on the 2nd Quarter
November 2 Report on the 3rd Quarter
<PAGE> 56
[Celanese Logo]
Celanese AG
D-65926 Frankfurt am Main
www.celanese.com
<PAGE> 1
CONTENTS [GRAPHIC OMITTED]
<TABLE>
<S> <C>
Management Report...................................... 2
Report of the Board of Management...................... 24
Auditor's Report....................................... 25
Consolidated Statements of Operations.................. 26
Consolidated Balance Sheets............................ 27
Consolidated Statements of Shareholders' Equity.........28
Consolidated Statements of Cash Flows.................. 29
Notes to Consolidated Financial Statements..............31
Report of the Supervisory Board........................ 78
The Supervisory Board.................................. 82
The Board of Management................................ 84
Five-Year Summary of Financial Data.................... 85
</TABLE>
1
<PAGE> 2
MANAGEMENT REPORT [GRAPHIC OMITTED]
Management's Discussion and Analysis
of Financial Condition and Results of Operations
You should read the following discussion and analysis of the financial
condition and the results of operations of Celanese together with Celanese's
Consolidated Financial Statements and the notes to those financial statements,
which were prepared in accordance with U.S. GAAP.
Introduction
On October 22, 1999, the effective date of the demerger, Celanese became
an independent company. Celanese was formed through the demerger of the
principal industrial chemicals businesses and some other businesses and
activities from Hoechst as part of Hoechst's realignment as a life sciences
company. Prior to the effective date of the demerger, Celanese conducted the
worldwide operations of Hoechst's basic chemicals, acetates, technical polymer
and several other industrial businesses. Hoechst distributed all the outstanding
shares of Celanese to existing Hoechst shareholders at a rate of one Celanese
share for every ten Hoechst shares outstanding. In connection with the demerger
and pursuant to the demerger agreement between Celanese and Hoechst, Celanese
assumed all of the assets and liabilities (including contractual rights and
obligations related to other current and former Hoechst businesses) of the
demerged businesses.
The Consolidated Financial Statements reflect, for the periods indicated,
the financial condition, results of operations and cash flows of the businesses
transferred from Hoechst and have been presented to exclude the effects of
discontinued operations. See "Discontinued Operations". The Consolidated
Financial Statements, for the periods prior to the effective date of the
demerger, assume that Celanese had existed as a separate legal entity with five
business segments: Acetyl Products, Chemical Intermediates, Acetate Products,
Ticona and Performance Products, as well as the other businesses and activities
of Hoechst transferred to Celanese in the demerger. The financial results of
Celanese, prior to the effective date of the demerger, have been carved out
from the Consolidated Financial Statements of Hoechst using the historical
results of operations and assets and liabilities of these businesses and
activities and reflect the accounting policies adopted by Hoechst in the
preparation of its financial statements and thus do not necessarily reflect the
accounting policies which Celanese might have adopted had it been an
independent company during those periods. Some costs have been reflected in the
Consolidated Financial Statements which are not necessarily indicative of the
costs that Celanese would have incurred had it operated as an independent,
stand-alone entity for all periods presented. These costs include allocated
Hoechst corporate overhead, interest expense and income taxes. Prior to the
effective date of the demerger, the businesses and activities demerged to
Celanese were not managed as a single strategic business entity. These
businesses and activities were operated by separate management teams which
coordinated with strategic management at the Hoechst holding company level.
Subsequent to the effective date of the demerger, Celanese has been managed as
a single strategic entity.
2
<PAGE> 3
Effective January 1, 1999, Germany and 10 other member states of the
European Union introduced the euro as their common currencies and established
fixed conversion rates between their existing sovereign currency and the euro.
The Consolidated Financial Statements for each period presented on or before
December 31, 1998 have been prepared using the Deutsche Mark or DM and have
been restated into euro using the official fixed conversion rate between the
euro and the Deutsche Mark of DM 1.95583 per (euro)1.00. Accordingly, the
Consolidated Financial Statements for all periods prior to December 31, 1998
depict the trends that would have been presented had they been using the
Deutsche Mark. Because the consolidated financial information for those periods
was originally prepared using the Deutsche Mark, it is not necessarily
comparable to financial statements of other companies which originally prepared
financial statements in a European currency other than the Deutsche Mark and
subsequently converted that other currency into euro. See Note 1 to the
Consolidated Financial Statements. Since January 1, 1999, Celanese's financial
statements have been prepared in euro and are no longer restated from Deutsche
Mark into euro.
Condensed Consolidated Statements of Operations
<TABLE>
<CAPTION>
in (euro) millions 1999 1998
===============================================================================
<S> <C> <C>
Net sales 4,318 4,344
Cost of sales (3,621) (3,454)
- -------------------------------------------------------------------------------
Gross profit 697 890
Selling, general & administrative expense (570) (535)
Research & development expense (79) (101)
Special charges (559) (100)
Other operating income(expense) (1) (10) 14
- -------------------------------------------------------------------------------
Operating profit (loss) (521) 168
Equity in net earnings of affiliates 7 11
Interest expense (111) (133)
Interest & other income, net 33 47
- -------------------------------------------------------------------------------
Earnings (loss) before taxes
from continuing operations (592) 93
Income tax benefit (expense) 83 (109)
Minority interests 7 (40)
- -------------------------------------------------------------------------------
(Loss) from continuing operations (502) (56)
Earnings from discontinued operations, net 310 12
Extraordinary expense, net (15) -
- -------------------------------------------------------------------------------
Net (loss) (207) (44)
Supplementary financial data:
Total assets 7,527 7,358
Net financial debt (2) 570 1,479
===============================================================================
</TABLE>
(1) Other operating income (expense) represents foreign exchange losses and
gain on disposition of assets
(2) Total debt less cash and cash equivalents
3
<PAGE> 4
MANAGEMENT REPORT [GRAPHIC OMITTED]
Selected segment data
The following table presents the segment results for Celanese's
continuing operations for 1999 and 1998. Earnings before interest, taxes,
depreciation, and amortization (EBITDA), excluding special charges, is,
believed by management to be a useful measure for evaluating the operating
performance of Celanese's businesses as it eliminates the effect of
depreciation and amortization of tangible and intangible assets, most of which
were from acquisitions accounted for under the purchase method of accounting,
as well as the effects of special charges, which unusually affect the operating
results. However, EBITDA, excluding special charges, should be considered in
addition to, not as a substitute for, operating earnings, net earnings, cash
flows, and other measures of financial performance reported in accordance with
generally accepted accounting principles. EBITDA differs from cash flows from
operating activities primarily because it does not consider changes in assets
and liabilities from period to period, and it does not include cash flows for
interest and taxes.
<TABLE>
<CAPTION>
Year Ended December 31,
1999 1998
in (euro) millions, except percentages Total (1) % of Segment Total (1) % of Segment
=====================================================================================================
<S> <C> <C> <C> <C>
Net Sales (2)
Acetyl Products 1,561 36 1,518 34
Chemical Intermediates 884 20 920 21
Acetate Products 739 17 839 19
Ticona 788 18 750 17
Performance Products 397 9 407 9
- -----------------------------------------------------------------------------------------------------
Segment Total 4,369 100 4,434 100
Other Activities 60 60
Intersegment Eliminations (111) (150)
- -----------------------------------------------------------------------------------------------------
Total Net Sales 4,318 4,344
=====================================================================================================
EBITDA Excluding Special Charges (3)
Acetyl Products 89 21 246 36
Chemical Intermediates 84 19 111 16
Acetate Products 95 22 154 23
Ticona 123 28 115 17
Performance Products 42 10 52 8
- -----------------------------------------------------------------------------------------------------
Segment Total 433 100 678 100
Other Activities (56) (98)
- -----------------------------------------------------------------------------------------------------
Total EBITDA Excluding Special Charges 377 580
=====================================================================================================
Operating Profit (Loss) (2)
Acetyl Products (65) 19 152 45
Chemical Intermediates (47) 13 54 16
Acetate Products (46) 13 94 28
Ticona (96) 28 53 15
Performance Products (93) 27 (12) (4)
- -----------------------------------------------------------------------------------------------------
Segment Total (347) 100 341 100
Other Activities (174) (173)
- -----------------------------------------------------------------------------------------------------
Total Operating Profit (Loss) (521) 168
=====================================================================================================
</TABLE>
(1) The percentages in this column represent the percentage contribution of
each segment to the total of all segments.
(2) Derived from the accompanying audited Consolidated Financial Statements.
(3) For a further discussion of special charges, see "Results of Operations -
1999 Compared with 1998 - Special Charges"
4
<PAGE> 5
Overview
For a description of factors affecting Celanese's financial performance,
see "Risks" contained in the sections below.
Net sales declined 1% to (euro)4,318 million in 1999 as compared to
(euro)4,344 million in 1998 primarily as a result of lower selling prices which
were partially offset by favorable currency movements and slightly higher
volumes. Lower selling prices were experienced in all segments due largely to
industry overcapacity in most segments. Favorable currency movements were
primarily due to the strengthening of the U.S. dollar versus the euro. Volume
increases were reported in the Acetyl Products, Ticona and Performance Products
segments, while Acetate Products and Chemical Intermediates experienced volume
declines.
EBITDA, excluding special charges, totaled (euro)377 million in 1999
compared to (euro)580 million in 1998. Acetyl Products decreased mainly due to
higher raw material costs. Chemical Intermediates and Acetate Products decreased
primarily as a result of lower volumes and prices as well as higher raw material
costs in Chemical Intermediates. Performance Products decreased primarily due to
a decrease in sales of oriented polypropylene (OPP) films, partially offset by
increased sales in food ingredients. Ticona's favorable development was mainly
due to higher sales volumes, as raw material prices remained relatively stable.
An operating loss of (euro)521 million was sustained in 1999 compared to
an operating profit in 1998 of (euro)168 million. The principal cause for the
operating loss was special charges of (euro)559 million incurred as a result of
restructuring as well as other unusual expenses, primarily related to litigation
incurred outside the ordinary course of business. In the Acetyl Products,
Chemical Intermediates and Acetate Products segments, these charges were
approximately (euro)191 million mainly consisting of restructuring charges
relating to the shift of production capacity to other facilities in order to
increase production efficiency and reduce administration overhead. Special
charges in the Ticona segment amounted to (euro)154 million and related mainly
to the plumbing cases (see Note 23 to the Consolidated Financial Statements).
The Performance Products segment recorded special charges of (euro)99 million of
which (euro)75 million arose from antitrust actions in the sorbates industry
(see Note 23 to the Consolidated Financial Statements) and the remainder is
primarily attributable to restructuring expenses in the OPP films business
related to the closure of a higher cost production facility. Pursuant to the
demerger agreement, Hoechst has agreed to indemnify Celanese for 80% of any
costs Celanese may incur for the antitrust actions in the sorbates industry. The
remainder of the special charges primarily relate to environmental and other
costs associated with previously divested entities of Hoechst ((euro)52 million)
(see Note 24 to the Consolidated Financial Statements), demerger costs ((euro)28
million) as well as to restructuring charges related to the closure of two
administrative facilities. The restructuring measures initiated in 1999 are
expected to result in the elimination of approximately 2,000 positions upon
completion.
5
<PAGE> 6
MANAGEMENT REPORT [GRAPHIC OMITTED]
The results of discontinued operations of (euro)310 million in 1999
include a net gain of (euro)298 million on the divestment of non-core businesses
during the year and to other businesses to be sold in 2000. See "Discontinued
Operations".
Total assets increased mainly as a result of the strengthening of the U.S.
dollar against the euro. During 1999, Celanese acquired the minority interests
in Celanese Canada and a 50% interest in Korea Engineering Plastics Company Ltd.
Net receivables due from Hoechst of (euro)706 million were collected, mostly in
the fourth quarter. Divestitures generated liquidity exceeding (euro)900
million. Cash and cash equivalents increased significantly due to proceeds from
divestitures late in the fourth quarter.
Net financial debt decreased significantly, as the majority of the
divestiture proceeds and the receivables collected from Hoechst were used to
repay debt.
Results of Operations
1999 Compared with 1998
Net Sales
Acetyl Products - Net sales for the Acetyl Products segment increased by
3% to (euro)1,561 million in 1999 from (euro)1,518 million in 1998 as a result
of volume increases (5%) and favorable currency movements (3%) which were
partially offset by lower selling prices (5%). The year was characterized by a
very difficult pricing environment. Despite average cost increases of 10% for
natural gas and 32% for ethylene, selling prices for this segment actually
declined. For example, average selling prices for two key products, acetic acid
and vinyl acetate, were down 15% and 5%, respectively. Excess industry capacity
made it difficult to pass on higher costs to customers, and it was necessary to
reduce selling prices in order to maintain market positions. The typical time
lag between changes in both raw material costs and product selling prices has
been extended by the severe competitive situation in the industry.
Chemical Intermediates - Net sales for the Chemical Intermediates segment
decreased by 4% to (euro)884 million in 1999 from (euro)920 million in 1998.
Excluding the receipt in 1999 of a license fee of (euro)13 million related to an
acrylates project in Germany, net sales decreased by 5% primarily as a result of
price decreases (6%) and volume decreases (2%), which were partially offset by
favorable currency movements (3%). Prices throughout the segment declined. For
example, prices decreased for butanol (7%), butyl acrylate (12%), acrylic acid
(12%) and 2-ethyl-hexanol (3%). The decline in sales prices reflects the adverse
effects of global industry capacity outpacing market growth. Higher butyl
acrylate volumes reflected additional capacity at the Clear Lake plant while
lower butanol volumes reflected production difficulties at both the Bay City and
Oberhausen plants in the first half of 1999. The principal currency movement
favorably affecting net sales was the appreciation of the U.S. dollar against
the euro.
6
<PAGE> 7
Acetate Products - Net sales for the Acetate Products segment decreased by
12% to (euro)739 million in 1999 from (euro)839 million in 1998 as a result of
volume decreases (12%) and price decreases (4%), which were partially offset by
favorable currency movements (4%). Acetate tow sales volumes were lower as
compared to 1998 due to continuing competitive pressure, and pricing continued
to suffer due to industry overcapacity. Cellulose acetate filament experienced a
sharp decline in volumes and weaker pricing as a result of declines in the
demand for acetate filament driven by a shift in fashion away from
filament-based fabrics, inter-fiber substitution and Asian competition. In
response to the difficult market conditions, Celanese has announced plans to
reduce capacity in acetate filament by 39,000 tons over the next two years.
Ticona - Net sales for the Ticona segment increased by 5% to (euro)788
million in 1999 from (euro)750 million in 1998 as a result of higher volumes
(6%) and favorable currency movements (3%), which were partly offset by price
erosion (4%). The higher volumes were mainly a result of higher demand for new
applications in the automotive and telecommunication industries. The price
declines were mainly attributable to pricing pressure in standard grade
products, particularly in Europe. However, in the fourth quarter of 1999, the
European trend began to improve as price increases were announced and partly
implemented. The results of the fourth quarter were significantly above
expectations due to unusually high demand resulting from the strong economy in
the U.S. and Europe as well as pre-buying by customers ahead of an announced
price increase.
Performance Products - Net sales for the Performance Products segment
decreased by 2% to (euro)397 million in 1999 from (euro)407 million in 1998. OPP
film sales for 1999, which represented 71% of net sales in this segment,
decreased by 7% primarily because of lower selling prices in most product lines
resulting from worldwide overcapacity and the pass-through of lower raw material
prices to customers. Food ingredients sales for 1999, which represented 29% of
total segment net sales, increased by 11% because of higher volumes of the high
intensity sweetener - Sunett (R)- in part because of a July 1998 approval by the
U.S. Food and Drug Administration for the use of Sunett in liquid beverages. A
volume increase in sorbates was offset by lower prices resulting from global
overcapacity and pricing pressure from Japanese and Chinese competitors.
Other Activities - Net sales of Other Activities were (euro)60 million in
1999 and 1998. Other Activities includes revenues associated with Celanese's
captive insurance companies in addition to the research activities previously
conducted by Hoechst Research & Technology in the U.S., as well as several
service companies which do not have significant sales.
Cost of Sales and Other Operating Expenses
Cost of Sales - Cost of sales increased by 5% to (euro)3,621 million in
1999 compared with (euro)3,454 million in 1998. Cost of sales as a percentage of
sales increased to 84% in 1999 from 80% in 1998 which reflects generally higher
raw material costs and lower selling prices. Apart from the effect of volume
changes noted above, raw material price
7
<PAGE> 8
MANAGEMENT REPORT [GRAPHIC OMITTED]
increases were experienced primarily in the Acetyl Products and Chemical
Intermediates segments as raw material prices in the Ticona and Acetate Products
segments remained relatively stable. Cost of sales in the Performance Products
segment increased slightly due to higher volumes in food ingredients as volumes
in OPP films remained relatively flat.
Selling, General and Administrative Expense - Selling, general and
administrative expense increased by 7% to (euro)570 million in 1999 from
(euro)535 million in 1998. Selling, general and administrative expense as a
percentage of sales increased to 13% in 1999 from 12% in 1998. In 1999, Celanese
received an insurance claim settlement of (euro)17 million for damages
associated with an acrylic acid reactor as well as an (euro)18 million insurance
settlement related to environmental claims, which were partially offset by
additional goodwill amortization expense of (euro)30 million. The increase in
goodwill amortization is directly related to the additional goodwill
amortization resulting from Hoechst acquiring substantially all the minority
interest in Grupo Celanese and subsequently contributing this interest to
Celanese in December 1998 and Celanese acquiring the minority interest in
Celanese Canada in the third quarter 1999 as well as the change in the remaining
estimated life of the 1987 Celanese merger goodwill from 27 to 20 years. In
1998, Celanese received a settlement in connection with a patent infringement
lawsuit of (euro)46 million. Excluding the effects of the items noted above,
selling, general and administrative expense decreased to (euro)575 million in
1999 from (euro)581 million in 1998.
Research and Development Expense - Research and development expense
decreased by 22% to (euro)79 million in 1999 from (euro)101 million in 1998,
principally as a result of the continuing impact of a strategic reorientation of
research, according to which most research activity is now undertaken by the
operating businesses themselves instead of by a separate research unit. This
decision led to lower personnel and overall research and development expense
from the former Hoechst Research & Technology in the United States, which did
not have any expenses in 1999 as compared to (euro)39 million in 1998.
Accordingly, the segments experienced increased costs in 1999 as compared to
1998 due to the assumption of some of the research activities previously
performed by Hoechst Research & Technology in the United States. Research and
development expense as a percentage of sales remained flat at 2% for both 1999
and 1998.
Special Charges
The financial condition and results of operations of Celanese have been,
and may in the future be, affected by special charges. Special charges include
provisions for restructuring and other unusual expenses incurred outside the
ordinary course of business. See Note 25 to the Consolidated Financial
Statements.
The restructuring measures for which provisions have been taken, in the
periods presented, were undertaken to achieve cost efficiencies through
rationalization and to optimize Celanese's portfolio. The restructuring is
expected to benefit Celanese through reduction of
8
<PAGE> 9
its fixed cost base. Further restructuring provisions relating to the cost of
employee terminations, the cost of facility closures and other restructuring
costs may be incurred in the future, but their timing or extent cannot yet be
quantified.
In 1999, Celanese recorded special charges totaling (euro)559 million.
This amount consists of non-restructuring special charges of (euro)341 million
relating primarily to the plumbing cases ((euro)128 million; see Note 23 to the
Consolidated Financial Statements), the U.S. antitrust actions in the sorbates
industry ((euro)75 million; see Note 23 to the Consolidated Financial
Statements), asset impairments ((euro)56 million), environmental and other costs
associated with previously divested Hoechst entities ((euro)52 million) and
demerger costs ((euro)28 million). The remaining amount of (euro)218 million
relates to restructuring charges of which (euro)116 million represents personnel
severance costs and (euro)102 million is associated with plant and office
closures. The personnel severance costs are associated with the expected
elimination of approximately 2,000 positions.
The Acetyl Products segment recorded (euro)53 million of special charges
primarily related to the closure of an acetaldehyde unit in Europe and an acetyl
and acetyl derivatives unit in Mexico as well as costs related to downsizing
across all operations. The Chemical Intermediates segment recorded special
charges totaling (euro)57 million, of which (euro)40 million was related to an
asset impairment charge associated with a European facility, as well as
restructuring charges associated with general downsizing in the business. The
Acetate Products segment recorded (euro)81 million of special charges, of which
(euro)66 million related primarily to restructuring charges associated with the
closures of acetate filament units in the U.S. and Canada and the partial
shutdown of a filter products unit in Mexico as well as severance costs
associated with downsizing across the business. The remainder is related to an
asset impairment charge in acetate filament. Ticona recorded (euro)154 million
of special charges of which (euro)128 million was related to the plumbing cases
(see Note 23 to the Consolidated Financial Statements). The remainder related
mainly to restructuring charges associated with employee severance costs. The
Performance Products segment recorded (euro)99 million of special charges, of
which (euro)75 million related to antitrust actions in the sorbates industry
(see Note 23 to the Consolidated Financial Statements). The remainder related
mainly to restructuring charges associated with the closure of an OPP films unit
in the United Kingdom.
Other Activities recorded (euro)115 million of special charges, of which
(euro)52 million related to environmental and other costs associated with
previously divested entities of Hoechst and (euro)28 million to demerger costs.
The remainder relates to restructuring charges associated with the closure of an
administrative facility in the U.S. and Canada as well as final closure costs
related to Hoechst Research & Technology in the United States.
Annual cost savings from all of the 1999 restructuring initiatives are
estimated to be in excess of (euro)130 million upon completion.
In 1998, Celanese recorded special charges totaling (euro)100 million.
This amount consists of restructuring charges ((euro)73 million) and antitrust
actions in the sorbates
9
<PAGE> 10
MANAGEMENT REPORT [GRAPHIC OMITTED]
industry ((euro)27 million). The restructuring charges related primarily to
personnel severance costs ((euro)34 million) and other plant and office closure
costs ((euro)39 million). The Acetyl Products segment recorded (euro)9 million
of special charges associated with the closure of an acetic acid unit in Europe.
The Chemical Intermediates segment recorded (euro)1 million of personnel
severance costs associated with a plant in Germany. The Acetate Products segment
recorded (euro)6 million of severance costs associated with downsizing across
the business. The Performance Products segment recorded (euro)3 million
associated with the shutdown of an OPP production line in the United Kingdom.
Other Activities recorded (euro)54 million of special charges primarily related
to the discontinuation of Hoechst Research & Technology in the U.S. ((euro)21
million) as well as the shutdown of the former U.S. corporate headquarters
((euro)29 million). Annual cost savings from the 1998 restructuring are
estimated to be approximately (euro)24 million upon completion of these
initiatives.
Other Operating Income (Expense) - Other operating income (expense)
decreased to a loss of (euro)10 million in 1999 from income of (euro)14 million
in 1998. This change is primarily attributable to lower gains on the disposition
of assets ((euro)16 million), primarily related to the sale of facilities in the
United States, and increased losses on foreign exchange transactions of (euro)8
million. The loss on foreign exchange transactions is primarily due to an
increase in net U.S. dollar-denominated assets in Mexico compounded by the
appreciation of the peso against the U.S. dollar for the affected period.
Operating Profit and EBITDA, excluding Special Charges
Acetyl Products - Operating profit for the Acetyl Products segment
declined to an operating loss of (euro)65 million in 1999 from an operating
profit of (euro)152 million in 1998. Operating profit in 1999 was negatively
affected by (euro)53 million of special charges together with an increase in
amortization of goodwill and incremental depreciation of (euro)16 million
resulting primarily from the acquisitions of the minority interests in Grupo
Celanese and Celanese Canada. EBITDA, excluding special charges, decreased to
(euro)89 million in 1999 as compared to (euro)246 million in 1998, primarily as
a result of price declines and raw material price increases, which were
slightly offset by cost reduction efforts. In addition, 1998 was positively
affected by a (euro)46 million settlement of a patent infringement lawsuit.
Chemical Intermediates - Operating profit for the Chemical Intermediates
segment decreased to an operating loss of (euro)47 million in 1999 from an
operating profit of (euro)54 million in 1998. In 1999, the Chemical
Intermediates segment was negatively affected by special charges of (euro)57
million, primarily related to an asset impairment, compounded by an increase in
goodwill amortization and incremental depreciation of (euro)18 million resulting
primarily from the acquisitions of the minority interests of Grupo Celanese and
Celanese Canada. In addition, the effects of a full year of depreciation,
related to the acrylates expansion at Clear Lake and the butanol expansion at
Bay City, further affected operating results. EBITDA, excluding special charges,
of (euro)84 million in 1999 as compared to (euro)111 million in 1998 decreased
primarily as a result of price
10
<PAGE> 11
and volume changes, compounded by higher propylene costs, which increased by
approximately 7%. These factors were partially offset by the receipt in 1999 of
an insurance claim settlement of (euro)17 million for damages associated with an
acrylic acid reactor as well as a (euro)13 million license fee associated with
the successful start up of an acrylates project in Germany.
Acetate Products - Operating profit for the Acetate Products segment
declined to an operating loss of (euro)46 million in 1999 from an operating
profit of (euro)94 million in 1998. The Acetate Products segment was negatively
affected in 1999 by special charges of (euro)81 million, compounded by an
increase in amortization of goodwill and incremental depreciation of (euro)6
million resulting primarily from the acquisition of the minority interests in
Grupo Celanese and Celanese Canada. EBITDA, excluding special charges, of
(euro)95 million in 1999 as compared to (euro)154 million in 1998 decreased
primarily as a result of the price and volume declines discussed above, offset
in part by cost reduction efforts at all locations.
Ticona - Ticona's operating profit declined to an operating loss of
(euro)96 million in 1999 from an operating profit of (euro)53 million in 1998.
The Ticona segment was negatively affected in 1999 by (euro)154 million of
special charges which mainly reflected a charge of (euro)128 million relating to
the plumbing cases (see Note 23 to the Consolidated Financial Statements). The
year was also negatively affected by restructuring charges. EBITDA, excluding
special charges, of (euro)123 million in 1999 as compared to (euro)115 million
in 1998, increased primarily as a result of higher volumes as raw material
pricing remained relatively stable.
Performance Products - Operating profit of the Performance Products
segment decreased to an operating loss of (euro)93 million in 1999 as compared
to an operating loss of (euro)12 million in 1998. The Performance Products
segment was negatively affected by special charges of (euro)99 million in 1999
as compared to (euro)30 million in 1998. The majority of these special charges
are related to antitrust actions in the sorbates industry (see Note 23 to the
Consolidated Financial Statements), of which (euro)75 million was recorded in
1999 as compared to (euro)27 million in 1998. The remainder of these special
charges related to restructuring. EBITDA, excluding special charges, decreased
to (euro)42 million in 1999 compared to (euro)52 million in 1998. The lower
results in the OPP films business was mainly a result of depressed sales prices
for all products and increased expenses associated with the expansion of the
Mexican OPP facility. Improved results in the food ingredients business were
mainly due to higher gross profit in the high intensity sweetener product line
resulting from increased volumes reinforced by the positive effects of cost
reduction efforts.
Other Activities - Operating profit of Other Activities declined slightly
to an operating loss of (euro)174 million in 1999 from an operating loss of
(euro)173 million in 1998. Other Activities was negatively affected by special
charges in 1999 of (euro)115 million, including demerger costs and environmental
and other costs associated with previously divested entities of Hoechst as
discussed above. This compares with (euro)54 million of special charges in 1998.
EBITDA, excluding special charges, improved to a loss of (euro)56 million in
1999
11
<PAGE> 12
MANAGEMENT REPORT [GRAPHIC OMITTED]
as compared to a loss of (euro)98 million in 1998. The lower loss is principally
attributable to a reduction of the costs associated with the discontinuation of
Hoechst Research & Technology in the U.S. and to the receipt of an (euro)18
million insurance settlement related to environmental claims.
Equity in Net Earnings of Affiliates
Equity in net earnings of affiliates decreased to (euro)7 million in 1999
from (euro)11 million in 1998. This decrease was mainly attributable to a
reduction in earnings of InfraServ Hoechst, in which Celanese owns a 27%
interest. Earnings in Polyplastics and the other equity investments remained
relatively flat.
Interest Expense
Interest expense decreased by 17% to (euro)111 million in 1999 from
(euro)133 million in 1998. This decrease was mainly a result of lower net
average debt outstanding during 1999 compared to 1998, significantly affected by
a debt reduction in the fourth quarter of 1999. This was partially offset by an
increase in average interest rates as well as the impact of the appreciation of
the U.S. dollar against the euro as the majority of Celanese's debt is
denominated in U.S. dollars.
Interest and Other Income, Net
Interest and other income, net decreased to (euro)33 million in 1999 from
(euro)47 million in 1998. Interest and other income was mainly generated from
interest and dividend income earned by Celanese's captive insurance
subsidiaries. Additionally, transaction gains and losses were recorded relating
to intercompany foreign currency transactions.
Income Taxes
Income taxes was a benefit of (euro)83 million in 1999 as compared to an
expense of (euro)109 million in 1998. The effective tax rate was 117% in 1998 as
compared to 14% in 1999. The effective tax rate in 1999 was impacted by goodwill
amortization, new tax consolidation rules in Mexico and losses in Germany for
which no benefit was recognized.
The net deferred tax asset at December 31, 1999 and 1998 totaled (euro)271
million and (euro)184 million, respectively. At December 31, 1999, the
significant sources of the net deferred tax asset were the cumulative net
temporary differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax purposes
representing future net income tax deductions.
12
<PAGE> 13
These temporary differences relate to obligations for postretirement
benefits, reserves for the plumbing cases, environmental, restructuring and
other matters. The tax effects of these temporary differences are shown in Note
12 to the Consolidated Financial Statements. Management believes that Celanese
will have future taxable income to make it more likely than not that the net
deferred tax asset will be realized.
Minority Interests
Earnings attributable to minority interests increased to income of (euro)7
million in 1999 from expense of (euro)40 million in 1998. This increase was
principally attributable to net losses incurred in Celanese Canada in 1999. In
September 1999, Celanese acquired all the remaining interest of Celanese Canada,
thereby giving Celanese 100% ownership of Celanese Canada. In addition, Hoechst
acquired substantially all the remaining interest in Grupo Celanese and
contributed this interest to Celanese in December 1998.
Discontinued Operations
In 1999, Celanese completed the sales of a number of its non-core
businesses, including its interest in Copley Pharmaceuticals Inc., its Ethylene
Oxide/Ethylene Glycol business, its U.S. and Japanese separation products
business, Celgard, its polyester fiber and bottle resin business in Millhaven,
Ontario, Canada and its interests in the Dyneon fluoropolymer and Targor
polypropylene joint ventures.
Celanese received gross proceeds of (euro)1,001 million from the sales of
these discontinued operations, which led to a net cash inflow of (euro)913
million in 1999. As a result of these sales, Celanese recognized a net gain, net
of taxes, of (euro)452 million on disposals of discontinued operations in the
Consolidated Statements of Operations and recorded (euro)14 million in earnings
from operations of discontinued operations relating to these divested businesses
in 1999 (see Note 5 to the Consolidated Financial Statements).
As part of its strategy to optimize its portfolio, Celanese continues to
evaluate its businesses. In January 2000, Celanese sold its phosphorus and
phosphorus derivatives business and expects to divest its remaining interests
in inorganic chemicals, including Vinnolit and Vintron, in 2000. Letters of
intent for the sale of these businesses were signed with Advent International
Corporation during February 2000 with respect to Vinnolit and Vintron. In 1999,
Celanese recorded a loss of (euro)154 million, of which Vintron represents
(euro) 138 million for the expected loss associated with these transactions in
gain on disposal of discontinued operations and a loss of (euro)2 million in
earnings from operations of discontinued operations relating to these
additional discontinued operations.
Earnings from discontinued operations, net of tax, in 1999 of (euro)310
million consists of the net gain associated with the sales discussed above of
(euro)452 million, the expected loss on the transactions associated with the
businesses to be divested in 2000 of (euro)154 million and the earnings from
operations of discontinued operations of (euro)12 million.
13
<PAGE> 14
MANAGEMENT REPORT [GRAPHIC OMITTED]
The following table summarizes the results of the discontinued operations
for the years ended December 31, 1999 and 1998.
<TABLE>
<CAPTION>
Operating Equity in Net
Sales Profit (Loss) Earnings of Affiliates
in (euro) millions, Year Ended December 31, 1999 1998 1999 1998 1999 1998
==========================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Discontinued operations of Performance Products 54 50 10 6 -- --
Discontinued operations of Other Activities 649 765 (38) 9 -- --
Discontinued operations of Equity Investments -- -- -- -- 36 9
- --------------------------------------------------------------------------------------------------------------------------
Total Discontinued Operations 703 815 (28) 15 36 9
==========================================================================================================================
</TABLE>
Extraordinary Item
Celanese incurred extraordinary expenses of (euro)15 million in 1999 for
early termination costs relating to the extinguishment of debt and the
associated interest rate swaps. No extraordinary expense was incurred in 1998.
Net Loss
As a result of the factors mentioned above, the net loss of Celanese
increased by (euro)163 million to (euro)207 million in 1999 from (euro)44
million in 1998.
Liquidity and Capital Resources
Net Cash Provided by Operating Activities
Net cash provided by operating activities decreased to (euro)183 million
in 1999 compared to (euro)330 million in 1998. The decrease is primarily
attributable to the weaker operating results in 1999. The special charges
recorded in 1999 include (euro)102 million of non cash items and cash items
amounting to (euro)457 million of which only a small amount was paid out during
1999. The changes in operating assets and liabilities also affected cash flow.
An increase in receivables due from reinsurance companies was offset by a
corresponding increase in loss reserves by Celanese's captive insurance
companies. Inventories decreased and trade receivables increased. Income tax
payables decreased due to payments made for previous periods. Income tax
liabilities did not increase as a result of lower taxable income in 1999.
For the year 2000, it is expected that nearly all of the remaining cash
items of the special charges will be paid, which will lead to respective cash
outflows.
14
<PAGE> 15
Net Cash Provided by/(Used in) Investing Activities
Net cash provided by/(used in) investing activities increased by (euro)554
million to a net cash inflow of (euro)257 million in 1999 from a use of cash of
(euro)297 million in 1998.
Net cash provided by investing activities in 1999 was positively affected
by significant cash proceeds from the sale of discontinued businesses amounting
to (euro)913 million (see Note 5 to the Consolidated Financial Statements). This
inflow was partially offset by the acquisition of the minority interest in
Celanese Canada as well as the acquisition of a 50% interest in Korea
Engineering Plastics Company Ltd., amounting to (euro)397 million.
Capital expenditures on property, plant & equipment decreased to (euro)262
million in 1999, compared to (euro)345 million in 1998. This decrease was
reflected in all segments, except for the Acetyl Products segment due to the
acetic acid and acetate esters expansions in Singapore.
Net Cash Used in Financing Activities
Net cash used in financing activities increased by (euro)27 million to
(euro)72 million in 1999 from (euro)45 million in 1998.
The net cash flow from financing activities in 1999 was significantly
affected by the collection of demerged receivables and other financing
receivables from Hoechst amounting to (euro)706 million. The majority of this
cash inflow, as well as the cash inflows from the divestiture program amounting
to (euro)913 million, were used to repay debt in the fourth quarter of 1999. The
debt level peaked in the third quarter, primarily as a result of the financing
of the acquisition of the minority interests in Celanese Canada. Amounts which
could not be used to repay debt increased the cash balance to (euro)378 million.
In connection with the refinancing of certain portions of external debt,
triggered by the demerger, early extinguishment charges amounting to (euro)15
million, net of tax, were reported as extraordinary expense.
In 1998, net cash used in financing activities of (euro)45 million was a
result of payments to reduce debt of (euro)381 million, offset by contributions
of (euro)336 million received from Hoechst.
Short-Term and Long-Term Borrowings
Celanese's combined debt primarily consists of commercial paper, bank
loans, notes with affiliates, term notes, and pollution control and industrial
revenue bonds. Celanese had a U.S. $700 million ((euro)697 million) commercial
paper program at December 31, 1999. At December 31, 1999, there were no
borrowings against the commercial paper program. Celanese maintains committed
revolving credit lines and term loans with several banks aggregating (euro)2,041
million; the aggregate unused part thereof amounts to
15
<PAGE> 16
MANAGEMENT REPORT [GRAPHIC OMITTED]
(euro)1,752 million, of which U.S. $700 million ((euro)697 million) are used as
credit backup for Celanese's commercial paper program. Celanese had outstanding
letters of credit amounting to (euro)109 million at December 31, 1999 and
(euro)231 million at December 31, 1998. The loans are principally denominated in
U.S. dollars, euro, South African rand, and British pound sterling. In
connection with the demerger, Celanese incurred refinancing costs and other fees
associated with the refinancing of third party debt. Total debt decreased to
(euro)948 million at December 31, 1999 from (euro)1,479 million at December 31,
1998. This decrease is primarily attributable to the repayment of long-term debt
from the proceeds of the recent divestitures and the collection of receivables
from Hoechst.
Total Shareholders' Equity
Prior to the effective date of the demerger, combined equity represented
Celanese's historical equity in the businesses and activities which were
demerged to form Celanese. (see Note 4 to the Consolidated Financial Statements)
At December 31, 1999, shareholders' equity amounted to (euro)2,866 million,
compared to (euro)2,736 million at December 31, 1998. The increase was primarily
attributable to the positive impact of foreign currency translations.
Environmental Matters
In 1999, Celanese's worldwide expenditures, including expenditures for
third party and divested sites, for compliance with environmental regulations
and internal company initiatives totaled (euro)116 million, of which (euro)14
million was for capital projects. In 2000, total annual environmental
expenditures are expected to be approximately (euro)122 million, of which
(euro)16 million is for capital projects. It is anticipated that stringent
environmental regulations will continue to be imposed on Celanese and the
industry in general. Although Celanese cannot predict with certainty future
environmental expenditures, especially expenditures beyond 2000, management
believes that the current spending trends will continue.
The total environmental costs charged to operations for remediation
efforts amounted to (euro)77 million in 1999 and (euro)94 million in 1998. The
(euro)94 million recorded in 1998 is net of (euro)56 million, as a result of
discounting future outlays for fixed period remediation projects using a 6%
discount rate.
Market Risk
The information provided below contains forward-looking statements that
involve inherent risks and uncertainties, principally with respect to
unanticipated changes in
16
<PAGE> 17
foreign exchange or interest rates and changes in the level of Celanese's
exposure to such market risks. Actual results may differ from those set forth in
these forward-looking statements.
Derivative Financial Instruments
Celanese is exposed to market risk through commercial and financial
operations. Celanese's market risk consists principally of exposure to currency
exchange rates and interest rates. Celanese has in place policies of hedging
against changes in currency exchange rates and interest rates as described
below.
Foreign Exchange Risk Management
Prior to January 1, 1999, Celanese's functional currency was the DM, but
since the adoption of the euro by Germany and the other euro zone countries on
that date, Celanese's functional currency has been the euro. Celanese has
receivables and payables denominated in currencies other than the functional
currencies of the various subsidiaries of Celanese, which create foreign
exchange risk. With the introduction of the euro on January 1, 1999, the
exposure to exchange rate fluctuations is eliminated in relation to the euro
zone countries that have adopted the euro as their common currency, leaving the
U.S. dollar, South African rand, Belgian franc and Mexican peso as the most
significant sources of currency risk. Accordingly, Celanese enters into foreign
currency forwards and options to minimize its exposure to certain foreign
currency fluctuations. The foreign currency contracts are designated for firm
commitments and anticipated transactions. The terms of these contracts are
generally under one year. Celanese will implement a centralized hedging strategy
in which foreign currency de nominated receivables or liabilities booked by the
operating entities will be hedged on a consolidated basis.
Interest-Rate Risk Management
Celanese is primarily exposed to changes in interest rates in the U.S.
dollar and the euro. To manage these risks, Celanese enters into interest rate
swap agreements to reduce the exposure of interest rate risk inherent in
Celanese's debt portfolio. Celanese uses swaps for hedging purposes only. The
maturities of these swaps depend on the underlying debt portfolio.
Equity Risk Management
Celanese has two Stock Appreciation Rights Plans (see Note 20 to the
Consolidated Financial Statements). To limit financial exposure under these
plans, Celanese has purchased call options on Celanese AG shares.
17
<PAGE> 18
MANAGEMENT REPORT [GRAPHIC OMITTED]
General Risks
Factors affecting Celanese's financial condition, cash flows and results
of operations are described below.
General Economic Conditions
Celanese operates in the global market and has customers in many
countries. Celanese has major facilities located throughout North America,
Europe and the Pacific Rim, including facilities in China, Japan, Korea and
Saudi Arabia operated through joint ventures. Its principal customers are
similarly global in scope, and the prices of its most significant products are
typically world market prices. Consequently, Celanese's business and financial
results are affected directly and indirectly by world economic and political
conditions. In recent years the financial turmoil in Asia has adversely affected
volumes sold by Celanese to its Asian customers and has adversely affected
selling prices achievable in Asian and other markets.
Historical Cyclicality in Parts of the Industrial Chemicals Industry
Consumption of the basic chemicals which Celanese manufactures in the
commodity portions of the acetyl and acrylic chains, principally methanol,
formaldehyde, acetic acid and acrylic acid, has increased significantly over the
past 30 years. Despite this growth in consumption, producers have experienced
alternating periods of inadequate capacity and excess capacity for these
products. Periods of inadequate capacity, including some due to raw material
shortages, have usually resulted in increased selling prices and operating
margins. This has often been followed by periods of capacity additions, which
have resulted in declining capacity utilization rates, selling prices and
operating margins.
Celanese expects that these cyclical trends in selling prices and
operating margins relating to capacity shortfalls and additions will likely
persist in the future, principally due to the continuing combined impact of five
factors:
o Significant capacity additions, whether through plant expansion or
construction, can take two to three years to come on-stream and are therefore
necessarily based upon estimates of future demand.
o When demand is rising, competition to build new capacity may be heightened be
cause new capacity tends to be more profitable, with a lower marginal cost of
production. This tends to amplify upswings in capacity.
o When demand is falling, the high fixed cost structure of the capital intensive
chemicals industry leads producers to compete aggressively on price in order to
maximize capacity utilization.
18
<PAGE> 19
o As competition in these products is focused on price, being a low-cost
producer is critical to profitability. This favors the construction of larger
plants, which maximize economies of scale, but which also lead to major
increases in capacity which can out strip current growth in demand.
o Cyclical trends in general business and economic activity produce swings in
demand for chemicals.
Celanese believes that the basic chemicals industry, particularly in the
commodity portions of the products manufactured by Celanese's Acetyl Products
and Chemical Intermediates segments, is currently characterized by overcapacity,
and that there may be further capacity additions in the next few years.
Cost of Raw Materials
Celanese purchases significant amounts of natural gas, ethylene and
propylene from third parties for use in its production of basic chemicals in the
acetyl and acrylic products, principally methanol, formaldehyde, acetic acid and
acrylic acid, as well as acrylates and oxo products. Celanese uses a portion of
its output of these chemicals, in turn, as inputs in the production of further
products in the Acetyl Products, Chemical Intermediates and Acetate Products
segments, as well as some products in the Ticona and Performance Products
segments. Celanese also purchases significant amounts of cellulose or wood pulp
for use in its production of cellulose acetate in the Acetate Products segment.
Celanese purchases significant amounts of natural gas, electricity, coal and
fuel oil to supply the energy required in its production processes.
While Celanese has agreements providing for the supply of natural gas,
ethylene, propylene, woodpulp, electricity, coal and fuel oil, the contractual
prices for these raw materials and energy vary with market conditions and may be
highly volatile. Factors which have caused volatility in Celanese's raw material
prices in the past and which may do so in the future include:
o Shortages of raw materials due to increasing demand, e.g., from growing
uses or new uses;
o Capacity constraints, e.g., due to construction delays, strike action or
involuntary shutdowns;
o The general level of business and economic activity; and
o The direct or indirect effect of governmental regulation.
Celanese typically does not enter into hedging arrangements with respect
to prices of raw materials. While Celanese seeks to balance increases in raw
material prices with
19
<PAGE> 20
MANAGEMENT REPORT [GRAPHIC OMITTED]
corresponding increases in the prices of its products, there have been in the
past, and may be in the future, periods during which there is a time lag before
raw material price increases are passed on to customers.
Variations in Exchange Rates
Celanese's Consolidated Financial Statements for periods prior to January
1, 1999 have been prepared using the Deutsche Mark or DM and are restated from
DM to euro using the official fixed conversion rate between the DM and the euro
of DM 1.95583 per (euro)1.00. Beginning January 1, 1999, Celanese's financial
statements have been prepared in euro. A substantial portion of Celanese's
assets, liabilities, revenues and expenses is denominated in currencies other
than the euro-zone currencies, principally the U.S. dollar. Fluctuations in
these currencies' values against the euro, and in the past against the DM,
particularly the value of the U.S. dollar, can have, and in the past have had, a
direct and material impact on Celanese's business and financial results. For
example, a decline in the value of the U.S. dollar versus the euro, results in a
decline in the euro value of Celanese's sales denominated in U.S. dollars and
earnings due to translation effects. Likewise, an increase in the value of the
U.S. dollar versus the euro would result in an opposite effect. As noted above,
for periods prior to January 1, 1999, Celanese's Consolidated Financial
Statements have been restated from DM into euro. Celanese estimates that the
translation effects of changes in the value of other currencies against the euro
reduced the fall in net sales by approximately 3% in 1999 and that the
translation effects of changes in the value of other currencies against the DM
reduced the fall in net sales by approximately 1% in 1998. Celanese estimates
that the translation effects of changes in the value of other currencies against
the euro increased total assets by approximately 12% in 1999. Celanese's
exposure to transactional effects of variations in exchange rates is greatly
reduced by a high degree of overlap between the currencies in which sales are
denominated and the currencies in which the raw material and other costs of
goods sold are denominated.
Celanese's policy with respect to limiting its exposure to transactional
effects of variations in exchange rates is to use financial instruments that
reduce such exposure. The principal instruments used are forward exchange
contracts generally with terms of less than one year. See "Market Risk" and Note
22 to the Consolidated Financial Statements.
Year 2000
The "Year 2000" or Y2K issue arose due to a date related problem
programmed into many computer software systems and hardware components. Computer
hardware and software may experience problems as the year code changed from "99"
to "00".
20
<PAGE> 21
As of the date of this Annual Report, none of the applications or
information technology systems critical to Celanese has experienced Y2K
failures. Celanese is also not aware of any Y2K problems affecting its
customers, suppliers or key business partners that might materially disrupt
Celanese's business.
Although Y2K risks remain, indications are that Celanese operated
successfully through this transition period and that it did not incur any
material financial loss as a result of the event. The total amount expended on
programs through December 31, 1999 was approximately (euro)32 million. These
costs include the direct costs incurred or expected to be incurred for all
consolidated entities, including the internal costs of personnel dedicated to
the Y2K programs, and have been funded from operating cash flows. These costs do
not include internal costs of personnel who monitor Celanese's programs but who
are not dedicated entirely to achieving Y2K compliance. No projects material to
Celanese's business or its financial results have been deferred or delayed as a
result of the Y2K compliance programs.
Introduction of the euro
On January 1, 1999, the euro became a currency in its own right. Until
January 1, 2002, the euro can only be used as transaction currency. Beginning on
January 1, 2002, the euro will be the official currency of all euro zone
countries. There will be a transition period ending July 1, 2002 during which
the local currencies of participating countries may still be used alongside the
euro. Beginning January 1, 1999, Celanese has adopted the euro as the currency
in which it presents its financial statements.
Every Celanese company has examined the risks of the euro for its
businesses and markets. Celanese does not expect the euro to lead to short-term
changes in business-specific cost structures or its market positions, although
Celanese believes that the euro may contribute to the ongoing convergence of
prices in Europe over the longer term.
Celanese does not expect its exposure to currency risk to change
materially as a result of the introduction of the euro. The impact of exchange
rate changes of a non-euro currency such as the U.S. dollar, the British pound
sterling or the Japanese yen versus the euro will continue to depend on the
actual exposure at the time of the risk assessment.
Outlook
Celanese's results of operations for 1999 have been adversely affected by
difficult market conditions in the chemicals industry as well as by special
charges, principally relating to restructuring and litigation which totaled
(euro)559 million in 1999. The difficult market conditions are expected to
persist in 2000.
21
<PAGE> 22
MANAGEMENT REPORT [GRAPHIC OMITTED]
Celanese has taken measures to reduce costs. In 1999, restructuring
charges totaling (euro)218 million were recorded under special charges. These
restructuring measures, which include the planned elimination of approximately
2000 positions and the closure of 6 production facilities worldwide, are
expected to reduce our cost base significantly. No assurance can be given,
however, that the cost reduction measures taken are sufficient to improve
Celanese's margins or that additional special charges will not be required in
the future.
In January 2000, Celanese sold its phosphorous activities, conducted by
the Thermphos Group, to the management of Thermphos. Celanese expects to sell
its chlorine and chlorine derivatives business lines (including Vintron) in
2000. Letters of intent were signed with a third party during February 2000.
The sale of these inorganic businesses are expected to generate a loss of
(euro)154 million of which Vintron represents (euro)138 million, which is fully
accrued for and recorded in gain on disposal of discontinued operations in 1999.
In connection with this transaction, Celanese expects to sell its 50% share in
Vinnolit, a leading PVC producer in Europe. The Vinnotil sale is expected to
generate a significant book gain in 2000. The Vinnolit and Vintron transactions
are subject to the completion of negotiations and satisfaction of conditions,
and no assurance can be given, that these sales will be consummated on the
terms outlined in the letters of intent or will occur at all.
The operating performance in the Ticona segment is showing signs of
improvement whereas the cyclical situation in the Acetyl Products, Chemical
Intermediates and Acetate Products segments remain difficult and the outlook for
the Performance Products segments is mixed.
Dividend
By virtue of divesting a majority of our non-core activities earlier than
expected, the company generated positive net income at the parent company level.
Accordingly, Celanese is in a position to propose a dividend. Management intends
to recommend a dividend of (euro)0.11 per share, totaling (euro)6 million, at
this year's annual shareholders' meeting to be held in May 2000.
Risk management
The corporate governance structure of Celanese AG was codified in 1999.
Corporate governance covers the management structure of the company and the
responsibilities arising from it. Important aspects of corporate governance are
the monitoring and controlling of company-specific risks. The board of
management of a German stock corporation is obliged to ensure appropriate risk
management. This responsibility is
22
<PAGE> 23
carried out at Celanese AG through the use of the appropriate tools and relevant
organizational procedures. This enables the Board of Management to identify
potential risks as early as possible and to take appropriate action. The
management tools and organizational regulations of Celanese AG ensure the
inclusion of Celanese AG and its subsidiaries and important businesses into the
process of risk management. In addition to that, the risk management procedures
required for Celanese AG and its subsidiaries are governed by standards set by
Celanese AG and specific guidelines for the early identification of risks in the
Celanese AG and its subsidiaries. The risk management system is monitored by
Corporate Auditing and is within the scope of the audit of financial statements
according to Art. 317, para 4 of the German Commercial Code.
Forward-Looking Information
This section covers the current performance and outlook of the company and
each of its operating segments. The forward-looking statements contained in this
section and in other parts of this document involve risks and uncertainties that
may affect the company's operations, markets, products, services, prices and
other factors as more fully discussed elsewhere and in filings with the U.S.
Securities and Exchange Commission. These risks and uncertainties include, but
are not limited to, economic, competitive, legal, governmental and technological
factors, as well as issues related to year 2000. Accordingly, there is no
assurance that the company's expectations will be realized.
23
<PAGE> 24
REPORT OF THE BOARD OF MANAGEMENT [GRAPHIC OMITTED]
Report of the Board of Management
The Board of Management of Celanese AG is responsible for the preparation,
the completeness, and the integrity of the consolidated financial statements as
well as for the information contained in the management report of the Group.
The Financial Statements have been prepared in accordance with U.S. GAAP.
The exemption of article 292a HGB has been applied.
The companies included in the consolidated financial statements are
required to maintain orderly accounting records and to establish effective
control systems. These control systems which are reviewed by corporate auditing
for their reliability and effectiveness, are intended to enable the Board of
Management to recognize the potential impact of negative factors on the Group's
assets and developments in a timely fashion. This ensures that all business
developments are correctly reflected and that a reliable basis for the
consolidated financial statements is created.
The Board of Management runs the company in the interests of its
stockholders and in awareness of its responsibility towards employees and
society. Our declared aim is to employ the resources entrusted to us so as to
increase the value of Celanese.
Pursuant to a resolution passed at the last General Meeting, the
Supervisory Board has engaged KPMG Deutsche Treuhand-Gesellschaft
Aktiengesellschaft Wirtschaftspruefungsgesellschaft as independent auditors to
audit the consolidated financial statements. A separate long-form audit report
in accordance with German requirements is being prepared by the independent
auditors. The Financial and Audit Committee of the Supervisory Board will
examine the consolidated financial statements including the management report as
well as the audit report during its meeting on the annual financial statements,
which will be attended by the Board of Management members and the independent
auditors. Thereafter the Supervisory Board will review the information relating
to the consolidated financial statements. The results of this review can be
inferred from the report of the Supervisory Board.
Frankfurt am Main, February 24, 2000
The Board of Management
/s/ Claudio Sonder
Claudio Sonder
/s/ Edward H. Munoz /s/ Perry W. Premdas
Edward H. Munoz Perry W. Premdas
/s/ Ernst Schadow /s/ Knut Zeptner
Ernst Schadow Knut Zeptner
24
<PAGE> 25
AUDITOR'S REPORT [GRAPHIC OMITTED]
Auditor's Report
We have audited the consolidated financial statements, consisting of the
balance sheet, the income statement and the statements of changes in
shareholders' equity and cash flows as well as the notes to the financial
statements prepared by Celanese AG for the business year from January 1 to
December 31, 1999. The preparation and the content of the consolidated financial
statements are the responsibility of the Company's executive board. Our
responsibility is to express an opinion, whether the consolidated financial
statements are in accordance with US-GAAP based on our audit.
We conducted our audit of the consolidated annual financial statements in
accordance with German auditing regulations and generally accepted standards for
the audit of financial statements promulgated by the Institut der
Wirtschaftspruefer (IDW) as well as in accordance with the US Standards on
Auditing (US-GAAP). Those standards require that we plan and perform the audit
such that it can be assessed with reasonable assurance whether the consolidated
financial statements are free of material misstatements. Knowledge of the
business activities and the economic and legal environment of the Group and
evaluations of possible misstatements are taken into account in the
determination of audit procedures. The evidence supporting the amounts and
disclosures in the consolidated financial statements are examined on a test
basis within the framework of the audit. The audit includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall presentation of the consolidated financial statements.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements give a true and fair
view of the net assets, financial position, results of operations and cash flows
of the Group for the business year in accordance with US-GAAP.
Our audit, which also extends to the group management report prepared by
the executive board for the business year from January 1 to December 31, 1999,
has not led to any reservations. In our opinion on the whole the group
management report provides a suitable understanding of the Group's position and
suitably presents the risks of future development. In addition, we confirm that
the consolidated financial statements and the group management report for the
business year from January 1 to December 31, 1999 satisfy the conditions
required for the Company's exemption from its duty to prepare consolidated
financial statements and the group management report in accordance with
accounting law.
Frankfurt am Main
KPMG Deutsche Treuhand-Gesellschaft Aktiengesellschaft
Wirtschaftspruefungsgesellschaft
signed signed
/s/ D. Kuhn /s/ Dr. B. Boettcher
Wirtschaftspruefer Wirtschaftspruefer
25
<PAGE> 26
Consolidated Statements of Operations
for the years ended December 31,
<TABLE>
<CAPTION>
(in (euro) millions except for per share data) See Note 1999 1998 (1)
===========================================================================================================================
<S> <C> <C> <C>
Net sales 26 4,318 4,344
Cost of sales (3,621) (3,454)
Selling, general and administrative expenses (570) (535)
Research and development expenses (79) (101)
Special charges 25, 26 (559) (100)
Foreign exchange losses (12) (4)
Gain on disposition of assets 2 18
- ---------------------------------------------------------------------------------------------------------------------------
Operating profit (loss) 26 (521) 168
Equity in net earnings of affiliates 9 7 11
Interest expense (111) (133)
Interest and other income, net 33 47
- ---------------------------------------------------------------------------------------------------------------------------
Earnings (loss) before income taxes, minority interests,
discontinued operations and extraordinary expense (592) 93
Income tax benefit (expense) 12 83 (109)
- ---------------------------------------------------------------------------------------------------------------------------
Loss before minority interests, discontinued operations
and extraordinary expense (509) (16)
Minority interests 7 (40)
- ---------------------------------------------------------------------------------------------------------------------------
Loss from continuing operations (502) (56)
Discontinued operations, net of income tax of (euro)77 million
Earnings from operations of discontinued operations 5 12 12
Gain on disposal of discontinued operations 5 298 --
- ---------------------------------------------------------------------------------------------------------------------------
Earnings from discontinued operations 310 12
Extraordinary expense, net of income tax (15) --
- ---------------------------------------------------------------------------------------------------------------------------
Net loss (207) (44)
===========================================================================================================================
Earnings (loss) per common share - basic and diluted:
Continuing operations (8.98) (1.00)
Discontinued operations, net of income tax 5.55 0.21
Extraordinary item, net of income tax (0.27) --
- ---------------------------------------------------------------------------------------------------------------------------
Net loss (3.70) (0.79)
===========================================================================================================================
Weighted average shares - basic and diluted 55,915,369 55,915,369
===========================================================================================================================
</TABLE>
(1) All balances have been restated from Deutsche Mark into euro using the
Official Fixed Exchange Rate as of January 1, 1999.
See the accompanying notes to the consolidated financial statements.
26
<PAGE> 27
Consolidated Balance Sheets
as of December 31,
<TABLE>
<CAPTION>
in (euro) millions See Note 1999 1998 (1)
=======================================================================================
<S> <C> <C> <C>
Assets
Current assets:
Cash and cash equivalents 378 --
Receivables, net 7 1,475 1,073
Receivables from Hoechst and affiliates 4 123 823
Inventories 8 588 586
Deferred income taxes 12 126 133
Other assets 52 60
Net assets (liabilities) of discontinued operations 5 (42) 541
- ---------------------------------------------------------------------------------------
Total current assets 2,700 3,216
Investments 9 580 455
Property, plant and equipment, net 10 1,932 1,677
Deferred income taxes 12 230 140
Other assets 703 653
Intangible assets, net 11 1,382 1,217
- ---------------------------------------------------------------------------------------
Total assets 7,527 7,358
=======================================================================================
Liabilities and Shareholders' equity
Current liabilities:
Short-term borrowings and current
installments of long-term debt 14 429 400
Accounts payable and accrued liabilities 13 2,096 1,333
Liabilities to Hoechst 4 15 74
Deferred income taxes 12 16 16
Income taxes payable 235 298
- ---------------------------------------------------------------------------------------
Total current liabilities 2,791 2,121
Long-term debt 14 519 1,079
Deferred income taxes 12 69 73
Other liabilities 15 1,259 1,192
Minority interests 23 157
Shareholders' equity : 19
Common stock, no par value, (euro) 143 million aggregate
registered value, 55,915,369 shares authorized, issued
and outstanding 143 --
Additional paid-in capital 2,500 --
Call options 4 --
Retained earnings 40 --
Accumulated other comprehensive income (loss) 179 (115)
Combined equity, exclusive of accumulated other
comprehensive loss -- 2,851
- ---------------------------------------------------------------------------------------
Total shareholders' equity 2,866 2,736
- ---------------------------------------------------------------------------------------
Total liabilities and shareholders' equity 7,527 7,358
=======================================================================================
</TABLE>
(1) All balances have been restated from Deutsche Mark into euro using the
Official Fixed Exchange Rate as of January 1, 1999.
See the accompanying notes to the consolidated financial statements.
27
<PAGE> 28
Consolidated Statements of Shareholders' Equity
for the years ended December 31, 1999 and 1998
<TABLE>
<CAPTION>
Accumulated
Other Total
Additional Comprehen- Pre- Share-
Common Paid-in Call Retained sive In- Distribution holders'
in (euro) millions Stock Capital Options Earnings come (Loss) Equity Equity
===================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1998 -- -- -- -- (28) 1,278 1,250
Comprehensive loss, net of tax:
Net loss -- -- -- -- -- (44) (44)
Other comprehensive income (loss)
Unrealized gains (losses) on securities -- -- -- -- 9 -- 9
Foreign currency translation -- -- -- -- (45) -- (45)
Minimum pension liability -- -- -- -- (51) -- (51)
----- -----
Other comprehensive loss -- -- -- -- (87) -- (87)
-----
Comprehensive loss -- -- -- -- -- -- (131)
-----
Net activity with Hoechst -- -- -- -- -- 1,617 1,617
----- -----
Balance at December 31, 1998 -- -- -- -- (115) 2,851 2,736
Comprehensive loss, net of tax:
Net earnings (loss) -- -- -- 40 -- (247) (207)
Other comprehensive income (loss)
Unrealized (losses) on securities -- -- -- -- (11) -- (11)
Foreign currency translation -- -- -- -- 261 -- 261
Minimum pension liability -- -- -- -- 44 -- 44
---- -----
Other comprehensive income -- -- -- -- 294 -- 294
-----
Comprehensive income -- -- -- -- -- -- 87
-----
Net activity with Hoechst -- -- -- -- -- 39 39
Issuance of common stock on the effective date
of the demerger 143 2,500 -- -- -- (2,643) --
Call options -- -- 4 -- -- -- 4
- -----------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1999 143 2,500 4 40 179 -- 2,866
===================================================================================================================================
</TABLE>
(1) All balances through December 31, 1998 have been restated from Deutsche
Mark into euro using the Official Fixed Exchange Rate as of January 1,
1999.
See the accompanying notes to the consolidated financial statements.
28
<PAGE> 29
Consolidated Statements of Cash Flow
for the years ended December 31,
<TABLE>
<CAPTION>
in (euro) millions See Note 1999 1998 (1)
=======================================================================================
<S> <C> <C> <C>
Operating activities from continuing operations:
Net loss (207) (44)
Earnings from operations of discontinued operations 5 (12) (12)
Special charges, net of amounts used 482 6
Depreciation and amortization 26 339 312
Change in equity of affiliates 7 4
Deferred income taxes 2 (97)
Gain on disposition of assets, net (2) (18)
Gain on disposal of discontinued operations, net (503) --
Changes in operating assets and liabilities:
Receivables, net (110) (49)
Inventories 68 (18)
Accounts payable, accrued liabilities and other liabilities 232 164
Income taxes payable (110) 65
Other, net (3) 17
- ---------------------------------------------------------------------------------------
Net cash provided by operating activities 183 330
- ---------------------------------------------------------------------------------------
Investing activities from continuing operations:
Capital expenditures on property, plant and equipment (262) (345)
Acquisitions of businesses and purchase of investment (397) --
Proceeds from disposition of assets 10 42
Proceeds from disposal of discontinued operations 5 913 --
Proceeds from sale of marketable securities 54 311
Purchases of marketable securities (60) (305)
Other, net (1) --
- ---------------------------------------------------------------------------------------
Net cash provided by (used in) investing activities 257 (297)
=======================================================================================
</TABLE>
(1) All balances have been restated from the Deutsche Mark into euro using the
Official Fixed Exchange Rate as of January 1, 1999.
See the accompanying notes to the consolidated financial statements.
29
<PAGE> 30
Consolidated Statements of Cash Flow
for the years ended December 31,
<TABLE>
<CAPTION>
in (euro) millions See Note 1999 1998 (1)
==========================================================================================
<S> <C> <C> <C>
Financing activities from continuing operations:
Short-term borrowings with third parties, net (143) 27
Proceeds from long-term debt due to third parties 164 48
Payments of long-term debt due to third parties (845) (506)
Short-term borrowings from Hoechst, net (251) 50
Short-term borrowings from affiliates 302 --
Other net activities with Hoechst 706 336
Other (5) --
- ------------------------------------------------------------------------------------------
Net cash used in financing activities (72) (45)
- ------------------------------------------------------------------------------------------
Exchange rate effects on cash 10 2
- ------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents 378 (10)
Cash and cash equivalents at beginning of year -- 10
Cash and cash equivalents at end of year 378 --
==========================================================================================
Net cash provided by (used in) discontinued operations:
Operating activities 18 25
Investing activities (38) (38)
Financing activities 15 5
- ------------------------------------------------------------------------------------------
Net cash used in discontinued operations (5) (8)
==========================================================================================
</TABLE>
(1) All balances have been restated from the Deutsche Mark into euro using the
Official Fixed Exchange Rate as of January 1, 1999.
See the accompanying notes to the consolidated financial statements.
30
<PAGE> 31
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS [GRAPHIC OMITTED]
1. Basis of Consolidation and Presentation
On October 22, 1999 (the "Effective Date"), Celanese AG ("Celanese"),
formerly a subsidiary of Hoechst AG ("Hoechst"), was demerged from Hoechst and
became an independent publicly traded company. In the demerger, Hoechst
distributed all of the outstanding shares of Celanese's common stock to existing
Hoechst shareholders at a rate of one share of Celanese's common stock for every
ten shares of Hoechst common stock outstanding. Prior to the Effective Date,
Celanese conducted the worldwide operations of Hoechst's basic chemicals,
acetates, technical polymer and certain other industrial businesses
(collectively, the "Businesses"). In connection with the demerger and pursuant
to the Demerger Agreement between Celanese and Hoechst, Celanese assumed all of
the assets and liabilities of the Businesses as well as certain contractual
rights and obligations related to other current and former Hoechst businesses.
The financial statements have been prepared in accordance with United
States ("U.S.") generally accepted accounting principles ("U.S. GAAP") for all
periods presented. The presented information may differ from the information
given in our Annual Report on Form 20-F with respect to the number of periods
stated. The historical consolidated results of operations, financial position,
changes in equity and cash flows of the Businesses for periods prior to the
Effective Date presented in the accompanying financial statements were prepared
on a basis as if Celanese had been a separate legal entity during these periods.
All transactions between and among Celanese's Businesses have been eliminated.
In 1998, Hoechst allocated a portion of its corporate expenses to the
Businesses. These expenses, totaling (euro)36 million in 1998, include, but were
not limited to, benefit administration, risk management administration, tax
services, finance services, treasury management services, environmental
services, litigation support services, intellectual property management services
and executive functions. Allocations and charges were based on either a direct
identification or an allocation for such services based on factors such as
employment levels or floor space. Management believes that the basis used for
the allocation of corporate services was reasonable and that the terms of these
transactions would not have materially differed from those among unrelated
parties. The income tax provision was calculated based on each Business's
contributions to the total provision for income taxes of the multiactivity legal
entity within a tax jurisdiction. As such, the financial results for 1998, may
not necessarily reflect the financial position and results of operations that
would have occurred had the Businesses operated as a stand-alone entity on the
dates, and for the periods, indicated. In 1999, Celanese incurred direct
corporate expenses of approximately (euro)40 million.
With the introduction of the European Monetary Union euro ("(euro)") on
January 1, 1999, Celanese has elected to present the accompanying financial
statements in euro. Accordingly, the consolidated financial statements as of and
for the year ended December 31, 1998, have been restated into euro using the
euro/Deutsche Mark ("DM") exchange rate as of January 1, 1999 of DM 1.95583 to
one (1) euro. The restated euro
31
<PAGE> 32
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS [GRAPHIC OMITTED]
financial statements depict the same trends as would have been presented had
Celanese continued to present its consolidated financial statements and notes
thereto in DM. The financial statements for periods prior to January 1, 1999 are
not comparable to those of other companies reporting in euro which have restated
amounts from currencies other than the DM. All amounts in the accompanying
financial statements are shown in millions of euro.
2. Summary of Accounting Policies
o Revenue recognition
Revenues are recorded at the time of shipment of products.
o Cash and cash equivalents
All highly liquid investments with maturities of three months or less from the
date of acquisition are considered cash equivalents.
o Investments in marketable securities
Celanese has classified its investments in debt and equity securities as
"available-for-sale" and has reported those investments at their fair or market
value in the balance sheet as other assets. Unrealized gains or losses net of
the related tax effect on available- for-sale securities are excluded from
earnings and are reported as a component of accumulated other comprehensive loss
until realized.
o Financial instruments
As a matter of principle, Celanese does not use derivative financial instruments
for trading purposes. Celanese is party to interest rate swaps as well as
foreign currency forward contracts in the management of its interest rate and
exchange rate exposures. Celanese generally utilizes interest rate derivative
contracts in order to fix or limit the interest paid on existing variable rate
debt. Celanese utilizes currency derivative financial instruments to eliminate
or reduce the exposure of its foreign currency denominated receivables and
payables.
Differences between amounts paid or received on interest rate swap
agreements are recognized as adjustments to interest expense over the life of
each swap, thereby adjusting the effective interest rate on the hedged
obligation. Realized gains and losses and unrealized losses on instruments not
meeting the criteria for hedge accounting treatment, or that cease to meet hedge
accounting criteria, are included as income or expense currently.
Foreign exchange contracts relating to accounts receivable or accounts
payable are accounted for as hedges. The gain or loss arising from the
settlement of the contracts is recognized as income or expense at the same time
the transaction being hedged is settled.
Financial instruments which potentially subject Celanese to concentrations
of credit
32
<PAGE> 33
risks are primarily receivables concentrated in various geographic locations and
cash equivalents. Celanese performs ongoing credit evaluations of its customers'
financial condition. Generally, collateral is not required from customers.
Allowances are provided for specific risks inherent in receivables.
Celanese purchases call options from various financial institutions to
reduce the exposure of its stock appreciation rights related to the Long Term
Incentive Plan ("LTIP") and Equity Participation Plan ("EPP"). (See Note 22)
o Inventories
Inventories held for resale are stated at the lower of cost or market. Cost is
primarily determined using the first-in, first-out or FIFO method, although
certain locations, primarily in the U.S., have opted to utilize the last-in,
first-out or LIFO method. Cost includes raw materials, direct labor and
manufacturing overhead.
The cost of stores and supplies are valued at cost or market, whichever is
lower. Cost is generally determined by the average cost method.
o Investments and equity in net earnings of affiliates
Investments in which Celanese owns a voting interest of between 20 percent and
50 percent are accounted for using the equity method. Investments in which
Celanese holds a voting interest of less than 20 percent are carried at cost.
The excess of cost over underlying equity in net assets acquired is amortized
over the anticipated life of the investment, not to exceed 20 years.
o Long-lived assets
Long-lived assets include:
Property, plant and equipment - Property, plant and equipment are
capitalized at cost. Depreciation is calculated on a straight-line basis over
the following estimated useful lives of the assets:
<TABLE>
<S> <C>
Land Improvements 20 years
Buildings 30 years
Building and Leasehold Improvements 10 years
Machinery and Equipment 10 years
</TABLE>
Leasehold improvements are amortized over 10 years or the remaining life
of the respective lease, whichever is shorter.
Repair costs that do not extend the useful life of the asset are charged
against earnings as incurred. Major replacements, renewals and significant
improvements are capitalized.
33
<PAGE> 34
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS [GRAPHIC OMITTED]
Interest costs incurred during the construction period of assets are
estimated using a weighted average percentage applied to the average value of
constructed assets. The interest capitalized is amortized over the life of the
asset.
Intangible assets - The excess of purchase price over fair value of net
identifiable assets and liabilities acquired ("Goodwill") is amortized on a
straight line basis over the expected periods to be benefited, not to exceed 20
years. Patents and trademarks are amortized on a straight line basis over their
estimated economic or legal life, which ever is shorter. (See Note 11)
Subsequent to the demerger, Celanese undertook a review of its ac counting
policies which included goodwill lives. This process resulted in a review of the
goodwill associated with the 1987 merger of Celanese and American Hoechst which
was originally assigned a 40 year life, of which 27 years remain. Based upon its
review of the business operations associated with this goodwill, Celanese
management has concluded that the remaining life is 20 years. Therefore, as of
the Effective Date, Celanese has begun amortizing the remaining goodwill over 20
years. This change in amortization period will result in an increase of
approximately (euro)9 million of amortization expense annually.
Impairment of long-lived assets - Celanese assesses the recoverability of
the carrying value of its long-lived assets, including goodwill, whenever events
or changes in circumstances indicate that the carrying amount of the asset may
not be fully recoverable. Recoverability of assets to be held and used is
measured by a comparison of the carrying amount of an asset to future net
undiscounted cash flows expected to be generated by the asset. If assets are
considered to be impaired, the impairment to be recognized is measured by the
amount by which the carrying value of the assets exceeds the fair value of the
assets.
o Income taxes
The provision for income taxes has been determined using the asset and liability
approach of accounting for income taxes. Under this approach, deferred income
taxes reflect the net tax effects of temporary differences between the carrying
amounts of assets and liabilities for financial reporting purposes and the
amounts used for income tax purposes, net operating loss and tax credit
carryforwards. The amount of deferred taxes on these temporary differences is
determined using the tax rates that are expected to apply to the period when the
asset is realized or the liability is settled, as applicable, based on tax
rates, and tax laws, in the respective tax jurisdiction then in effect.
Subsequent to the Effective Date, Celanese is responsible for its income
taxes and files its own income tax returns. In 1999, prior to the Effective
Date, Celanese was an operating business of Hoechst and was included as part of
the tax returns filed by Hoechst. However, Celanese's tax provisions for these
periods were computed as if it had been a separate company.
34
<PAGE> 35
o Environmental liabilities
Celanese manufactures and sells a highly diversified line of chemical products
throughout the world. Accordingly, Celanese's operations are subject to various
hazards incidental to the production of industrial chemicals including the use,
handling, processing, storage and transportation of hazardous materials.
Celanese recognizes losses and accrues liabilities relating to environmental
matters if available information indicates that the event of loss is probable
and reasonably estimable. If the event of loss is neither probable nor
reasonably estimable, but is reasonably possible, Celanese provides appropriate
disclosure in the notes to its consolidated financial statements if the
contingency is material. Celanese estimates environmental liabilities on a case
by case basis using available information. Environmental liabilities in which
the remediation period is fixed and associated costs are readily determinable
are recorded at their net present value. It is Celanese's policy not to record
as an asset any anticipated recoveries from third parties relating to
environmental matters. (See Note 24)
o Minority interests
Minority interests in the equity and results of operations of the entities
controlled by Celanese are shown as a separate item in the consolidated
financial statements. The entities included in the consolidated financial
statements that have minority interests at December 31, 1999 are as follows:
<TABLE>
<CAPTION>
Ownership Percentage
<S> <C>
InfraServ GmbH & Co. Oberhausen KG 84%
Synthesegasanlage Ruhr GmbH 50%
</TABLE>
As of December 31, 1998, Celanese owned 56 percent of the outstanding
voting shares of Celanese Canada, Inc., and exercised management control. In the
third quarter of 1999, Celanese acquired the remaining interest in Celanese
Canada, Inc., thereby giving Celanese 100 percent ownership. In connection with
this transaction, Celanese also acquired the remaining 24 percent minority
interest of Edmonton Methanol Company. (See Note 5)
As of December 31, 1998, Celanese owned 51 percent of the outstanding
voting shares of Copley Pharmaceuticals Inc., and exercised management control.
In September 1999, Teva Pharmaceutical Industries, Ltd., acquired all the
outstanding shares of Copley Pharmaceuticals Inc. (See Note 5)
As of December 31, 1998, Celanese owned 79 percent of the outstanding
voting shares of InfraServ GmbH & Co. Munchsmunster KG. During 1999, Celanese
sold 30 percent of its interest in this company to SKW Trostberg. (See Note 9)
As of December 31, 1997, Celanese owned 51 percent of the outstanding
voting shares of Grupo Celanese, S.A. and exercised management control. In
December 1998, Hoechst acquired the remaining interest in Grupo Celanese, S.A.
and subsequently contributed this interest to Celanese. (See Note 4)
35
<PAGE> 36
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS [GRAPHIC OMITTED]
As of December 31, 1997, Celanese owned 72 percent of the outstanding
voting shares of Trespaphan GmbH. During 1998, Hoechst acquired the remaining 28
percent interest in Trespaphan GmbH and subsequently contributed the interest to
Celanese. (See Note 4)
Celanese has a 60 percent voting interest and the right to appoint a
majority of the management board of Synthesegasanlage Ruhr GmbH, which results
in Celanese controlling this entity, and, accordingly, Celanese consolidates
this entity in its consolidated financial statements.
o Research and development
The costs of research and development are charged as an expense in the period in
which they are incurred.
o Functional currencies
For most of Celanese's international operations where the functional currency is
other than euro, assets and liabilities are generally translated using
period-end exchange rates, while the statement of operations is translated using
the average exchange rates for the respective year. Differences arising from the
translation of assets and liabilities in comparison with the translation of the
previous periods are included as a separate component of accumulated other
comprehensive loss.
o Earnings per share
Basic earnings (loss) per share is based on the net earnings (loss) divided by
the weighted average number of common shares outstanding during the period. On
the Effective Date, Hoechst issued 55,915,369 shares of Celanese to existing
Hoechst shareholders, which are deemed to be outstanding for all periods
presented. Celanese had 55,915,369 shares outstanding and no common stock
equivalents at December 31, 1999.
o Stock-based compensation
Celanese applies the intrinsic value-based method of accounting prescribed by
Accounting Principles Board ("APB") Opinion No. 25, Accounting for Stock Issued
to Employees, and related interpretations, in accounting for stock based
compensation. Celanese also applies the provisions of Statement of Financial
Accounting Standards ("SFAS") No. 123, Accounting for Stock-based Compensation,
which allows entities to continue to apply the provisions of APB Opinion No. 25
and provide pro forma net earnings disclosures for employee stock based
compensation grants as if the fair value based method defined in SFAS No. 123
had been applied. Compensation expense for stock appreciation rights is re
corded based on the difference between the base unit price at the date of grant
and the quoted market price of the Celanese's common stock at the end of the
period through the time of vesting.
o Estimates and assumptions
The preparation of consolidated financial statements in conformity with U.S.
GAAP requires management to make estimates and assumptions that affect the
reported
36
<PAGE> 37
amounts of assets and liabilities, allocated balances and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues, expenses and allocated charges during the
reporting period. Actual results could differ from those estimates.
o Presentation
Certain amounts in prior years have been reclassified to conform to the current
year presentation.
o New accounting pronouncements
In December 1999, the staff of the Securities and Exchange Commission issued
Staff Accounting Bulletin No. 101, Revenue Recognition in Financial Statements
("SAB 101"). SAB 101 summarizes the staff's views in applying generally accepted
accounting principles to revenue recognition in financial statements, including
the recognition of non-refundable fees received upon entering into arrangements.
We are in the process of evaluating SAB 101 and the effect it will have on our
financial statements and current revenue recognition policy.
In June 1998, the Financial Accounting Standards Board issued SFAS No.
133, Accounting for Derivative Instruments and Hedging Activities. This
statement standardizes the accounting for derivative instruments including
certain derivative instruments embedded in other contracts. The effective date
of SFAS No. 133 was delayed to fiscal year 2001 by the issuance of SFAS No. 137.
Celanese will adopt this statement as of January 1, 2001. Celanese has not
determined the impact this statement will have on its Consolidated Financial
Statements and believes that such determination will not be meaningful until
closer to the date of adoption.
3. Supplemental Cash Flow Information
<TABLE>
<CAPTION>
in (euro) millions 1999 1998
- ------------------------------------------------------------------------------------------
<S> <C> <C>
Cash paid during the year for:
Taxes 140 245
Interest, net of amounts capitalized 113 151
Noncash investing and financing activities:
Contribution by Hoechst of net receivables to Celanese (See Note 4) -- 384
Contribution by Hoechst of Grupo Celanese S.A
minority interest (See Note 4) -- 643
Contribution by Hoechst of Trespaphan GmbH
minority interest (See Note 4) -- 24
Contribution by Hoechst of investments (See Note 4) -- 7
Contribution by Hoechst of Dyneon GmbH
deferred tax asset (See Note 4) -- 109
Recognition (reduction) of additional minimum pension liability,
net of tax (See Note 18) (113) 116
Acquisition of plant and equipment through capital leases -- 3
Fair value adjustment to securities available for sale,
net of tax (See Note 6) (11) 9
- ------------------------------------------------------------------------------------------
</TABLE>
37
<PAGE> 38
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS [GRAPHIC OMITTED]
4. Transactions and Relationship with Affiliates
Celanese is a party to various transactions with Affiliated companies.
Companies for which Celanese has investments under the equity method of
accounting are considered affiliates; any transactions or balances with such
companies are considered affiliate transactions. Additionally, transactions and
balances with Hoechst prior to the effective date are also considered related
party transactions. Transactions and balances with Hoechst after the Effective
Date are considered third-party transactions. The following table represents
Celanese's transactions with affiliated companies, as defined above, for the
periods presented.
<TABLE>
<CAPTION>
in (euro) millions 1999 1998
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
Income Statement Transactions
Purchases from Affiliates (1) 19 54
Sales to Affiliates (1) 128 172
Interest income from Affiliates 22 8
Interest expense paid to Affiliates 5 9
Expenses allocated from Affiliates (2) -- 36
Balance Sheet Transactions
Trade and other receivables from Affiliates (3) 118 798
Current notes receivable (including interest) from Affiliates 5 25
Long-term notes receivable from Affiliates 20 23
- ---------------------------------------------------------------------------------------------
Total receivables with Affiliates 143 846
Accounts payable and other liabilities due Affiliates 15 72
Accrued interest payable due Affiliates -- 2
Short-term borrowings from Affiliates (4) 302 238
- ---------------------------------------------------------------------------------------------
Total due Affiliates 317 312
- ---------------------------------------------------------------------------------------------
Net receivables from Affiliates (174) 534
- ---------------------------------------------------------------------------------------------
Equity Transactions (5)
Contribution of net receivables to Celanese (3) (11) 97 384
Contribution of Grupo Celanese S.A. minority interest (6) -- 643
Contribution of Trespaphan GmbH minority interest (7) -- 24
Contribution of investments (8) -- 13
Transfer of certain other activities from Celanese to Hoechst(9) (58) 350
Contribution of Dyneon GmbH deferred tax asset(10) -- 109
Net other activities with Hoechst -- 94
- ---------------------------------------------------------------------------------------------
Net transfers from Hoechst 39 1,617
- ---------------------------------------------------------------------------------------------
</TABLE>
38
<PAGE> 39
(1) Purchases/Sales from/to Affiliates
Purchases and sales from/to Affiliates are accounted for at prices
approximating those charged to third party customers for similar goods. Celanese
made purchases from Hoechst amounting to (euro)17 million and (euro)49 million
in 1999 and 1998, respectively. Celanese had sales with Hoechst of (euro)45
million in 1999 and (euro)95 million in 1998, respectively.
(2) Expenses allocated from Affiliates
Hoechst provided certain services to Celanese including, but not limited
to, benefit administration, risk management administration, tax services,
finance services, treasury management services, environmental services,
litigation support services, intellectual property management services and
executive functions. Fees were based on either a direct identification or an
allocation for such services based on factors such as employment levels or floor
space. Expenses allocated to Celanese from Hoechst totaled (euro)36 million in
1998. In 1999, these expenses were incurred directly and amounted to
approximately (euro)40 million.
(3) Trade and other receivables from Affiliates
Trade and other receivables from Affiliates amounted to (euro)118 million
and (euro)798 million at December 31, 1999 and December 31, 1998, respectively.
In both years the majority of these amounts was outstanding from Hoechst. The
decrease in 1999 is due to payments made by Hoechst in the fourth quarter of
1999. Hoechst contributed to Celanese net receivables totaling (euro)97 million
during 1999 and (euro)384 million during 1998. At December 31, 1999, included in
receivables due from Hoechst are (euro)81 million related to reimbursement for
the sorbates litigation. See Demerger Agreement below and Note 23 for further
discussion. Also included in receivables due from Hoechst are (euro)11 million
relating to reimbursement for demerger costs and certain taxes. See Demerger
Agreement below. Remaining receivables with Affiliates are considered short-term
and will be settled through net cash payments to Celanese within one year. The
prior year balance contains deposits of liquid funds with Hoechst as a result
of the Businesses participation in the centralized cash management programs of
Hoechst. Under these programs, excess cash was invested, and disbursements were
funded, by Hoechst on behalf of the Businesses. Subsequent to the demerger,
Celanese assumed the responsibility for the cash management of the Businesses.
(4) Short term borrowings from Affiliates (See Note 14)
The 1999 balance reflects Celanese's short term borrowings from
Affiliates. In 1998, the amounts were due to Hoechst, which were settled during
the fourth quarter of 1999. For all periods, interest rates were adjusted
monthly to reflect market conditions.
(5) Shareholders' Equity
Prior to the Effective Date, shareholders' equity represented the
historical equity of the Businesses and activities combined as Celanese.
Shareholders' equity represented combined equity less accumulated other
comprehensive loss items of the combined
39
<PAGE> 40
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS [GRAPHIC OMITTED]
Businesses and the effects of transfers between Celanese and Hoechst which did
not give rise to receivables or payables intended to be settled between these
two groups of companies.
Upon the Effective Date, Hoechst shareholders received a special dividend
from Hoechst in the form of Celanese shares. Each Hoechst shareholder received
one (1) share of Celanese for every ten (10) shares of Hoechst they held.
Hoechst did not retain any Celanese shares following the special dividend.
(6) Investment in Grupo Celanese, S.A.
During the year ended December 31, 1997, Celanese owned 51 percent of the
outstanding voting shares of Grupo Celanese, S.A. and exercised management
control. On December 10, 1998, Hoechst exchanged substantially all of its
polyester fiber and bottle resin businesses in the U.S., Europe and Mexico for
the 49 percent minority interest in Grupo Celanese, S.A., which was not already
owned by Celanese. On December 10, 1998, Hoechst contributed this interest to
Celanese. As a result of the acquisition of the minority interest in Grupo
Celanese, S.A., the unallocated purchase price over the net assets acquired and
liabilities assumed related to the acquisition totaled (euro)592 million.
Celanese performed an appraisal of the underlying assets and liabilities of
Grupo Celanese, S.A. to determine the amount of the unallocated purchase price
pertaining to these items. This process has been finalized.
This transaction was reflected as a capital contribution, totaling
(euro)643 million, net of a (euro)51 million tax benefit, from Hoechst.
Accordingly, the historical results of operations of the polyester fiber and
bottle resin businesses have been excluded from the accompanying consolidated
financial statements. Celanese would have recognized additional amortization
expense of (euro)30 million for fiscal 1998 had this capital contribution been
made on January 1, 1998.
(7) Investment in Trespaphan GmbH
On March 31, 1998, Hoechst acquired the remaining 28 percent interest in
Trespaphan GmbH and contributed the interest to Celanese in connection with the
demerger. The unallocated purchase price over the net assets acquired and
liabilities assumed related to the acquisition totaled (euro)10 million. This
transaction is reflected as a capital contribution, totaling (euro)24 million,
net of an (euro)11 million tax benefit, from Hoechst.
(8) Contribution of investments
During 1998, Hoechst contributed cost investments totaling (euro)13
million to Celanese. In July 1997, Hoechst acquired a 50 percent interest in
Targor GmbH and contributed its (euro)57 million equity investment to Celanese.
All investments have been contributed at their historical basis. Celanese sold
its investments in Targor and Dyneon in December 1999 (See Note 5). For
presentation purposes, entities which have been discontinued are shown on the
consolidated balance sheets as net assets (liabilities) of discontinued
operations.
40
<PAGE> 41
(9) Non-Celanese activities transferred to Hoechst
During 1998, in anticipation of the demerger, Celanese transferred other
activities to Hoechst. These activities were not managed or controlled by
Celanese. As a result of this transfer, Celanese received capital contributions
totaling (euro)350 million in 1998 which are included as a transfer from Hoechst
in the consolidated statement of shareholders' equity and as net activity with
Hoechst in the financing section of the consolidated statement of cash flows. In
1999, prior to the demerger, Celanese incurred (euro)58 million in charges
associated with the non-Celanese activities, which were treated as a capital
distribution to Hoechst.
(10) Dyneon GmbH deferred tax asset
At December 31, 1998, included in net assets of discontinued operations in
Celanese's consolidated financial statements is an investment in Dyneon GmbH,
the worldwide fluoropolymer joint venture between Hoechst and 3 M. The
contribution of this investment to Celanese resulted in a step-up to the tax
basis of the investment. The differential in tax basis versus book basis
resulted in a deferred tax asset totaling (euro)109 million. This deferred tax
asset was contributed to Celanese in 1998 and is shown as an increase to
combined equity. The contribution of this deferred tax asset is a non-cash item
in the supplemental cash flow information. Celanese sold its investment in
Dyneon GmbH in 1999. (See Note 5)
(11) Demerger Agreement
In connection with the demerger, Celanese and Hoechst executed and
delivered the Demerger Agreement. The Demerger Agreement, among other things,
provided for the following:
Demerger Costs
Demerger costs were shared equally between Celanese and Hoechst. Such
amount totaled (euro)28 million in 1999 and is recorded as a component of
special charges on the statement of operations. Celanese did not incur any
demerger costs in 1998.
Antitrust Actions Related to Sorbates Industry
Pursuant to the Demerger Agreement, Hoechst has agreed to indemnify
Celanese for 80 percent of any costs Celanese may incur for the anti-trust
actions related to the sorbates industry.
Environmental Liabilities
As part of the Demerger Agreement, Celanese has agreed to indemnify
Hoechst for the first (euro)250 million of future environmental liabilities
arising from certain previously divested Hoechst entities. If these future
environmental liabilities exceed (euro)250 million, Hoechst will bear the excess
up to an additional (euro)500 million. Thereafter, Celanese will bear one third
and Hoechst will bear two-thirds of any further environmental liabilities.
Celanese has established total reserves of (euro)158 million related to these
potential liabilities, of which (euro)40 million was recorded in 1999.
41
<PAGE> 42
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS [GRAPHIC OMITTED]
Other Matters
Consolidation of Hoechst Procurement Olefin
Hoechst Procurement Olefin ("HPO"), a wholly-owned subsidiary of Celanese,
acts as a purchasing agent on behalf of Celanese and on behalf of third parties.
HPO enters into sale and purchase agreements for raw materials on a commission
type. Accordingly, the commission fee on these sales is classified as other
operating income. This income amounted to (euro)4 million in 1999 and (euro)1
million in 1998, respectively. The raw material sales volume commissioned by HPO
between refineries and third parties and Celanese amounted to (euro)482 million
and (euro)444 million in 1999 and 1998, respectively.
5. Acquisitions and Disposals
Celanese made the following acquisitions of businesses during 1999:
In the third quarter of 1999, Celanese acquired all the outstanding shares
of Celanese Canada, Inc., not previously owned by Celanese. Celanese paid CAD
486 million ((euro)303 million) for this 44 percent minority interest, resulting
in goodwill of (euro)154 being recorded.
In December 1999, Ticona, the Engineering Polymers Business of Celanese
AG, acquired a 50 percent ownership in Korea Engineering Plastics Company Ltd.
(KEP), for approximately 110 billion Korean Won ((euro)94 million). Celanese's
interest in KEP is accounted for under the equity method. (See Note 9)
As part of Celanese's plan to shed its non-core businesses, Celanese
divested the following businesses during 1999. These divestitures were
classified as discontinued operations in accordance with APB Opinion No. 30,
"Reporting the Results of Operations - Reporting the Effects of Disposal of a
Segment of a Business, and Extraordinary, Unusual, and Infrequently Occurring
Events and Transactions":
In September 1999, Celanese sold its approximate 52 percent interest in
Copley Pharmaceuticals Inc. to Teva Pharmaceutical Industries, Ltd.
In December 1999, Celanese sold the following businesses and investments:
o its polyester fiber and bottle resin business in Millhaven, Ontario, Canada,
to KoSa, a company owned by a consortium between Koch Industries, a U.S.
company, and a Mexican company owned by Mr. Isaac Saba.
o its Ethylene Oxide/Ethylene Glycol business to Old World Industries, Inc.
o its U.S. and Japanese separation products businesses, Celgard, to Daramic
Inc., a wholly-owned sub sidiary of Polypore Inc. Celgard manufactures and
markets flat
42
<PAGE> 43
sheet separators for use in batteries, disposable lighters and blood
oxygenators, and hollow fiber membranes for degassing liquids. Celanese expects
to sell the remaining portion of this business, which had net sales of (euro)7
million in 1999, during 2000.
o its 46 percent holding in the fluoropolymer manufacturer Dyneon to 3M.
Dyneon, a joint venture founded in 1996, was created to integrate the
fluoropolymer businesses of 3M and Celanese.
o its 50 percent share in the polypropylene joint venture Targor to BASF AG.
Founded in 1997, Targor was created to integrate the polypropylene businesses of
BASF and Celanese.
Celanese received gross proceeds of (euro)1,001 million from the sale of
these discontinued operations, which led to a net cash inflow of (euro)913
million in 1999. Celanese recognized a gain, net of taxes, of (euro)452 million
in gain on disposal of discontinued operations in the consolidated statements of
operations in 1999. Celanese recorded earnings of (euro)14 million in net
earnings from operations of discontinued operations relating to these divested
businesses in 1999.
Celanese made the following decisions regarding its plans to divest
businesses during 2000. These divestitures were classified as discontinued
operations in accordance with APB Opinion No. 30:
In December 1999, Celanese signed an agreement for the sale of its
phosphorous and phosphorous derivatives business, conducted by the Thermphos
Group, to the Thermphos Group's management. The sale was completed in January
2000. The loss was fully accrued at December 31, 1999 and was included as a
component of net assets (liabilities) of discontinued operations.
During 1999, Celanese decided to sell its 50 percent interest in Vinnolit
Kunstoff GmbH, its joint venture with Wacker Chemie GmbH, a leading European
producer of high performance polyvinyl chloride or PVC products. In February
2000, Celanese entered into a letter of intent, with Advent International
Corporation, to sell its ownership interest in Vinnolit. Celanese expects to
recognize a book gain on this sale.
During 1999, Celanese decided to sell Vintron, a wholly owned subsidiary
of Celanese and a manufacturer of polyvinyl chloride. In February 2000, Celanese
entered into a letter of intent, with Advent International Corporation, to
sell Vintron. Celanese expects to complete this transaction during 2000 and
recognize a book loss of (euro)138 million related to this transaction which
was fully accrued for in 1999.
During 1999, Celanese announced its intention to shut down its bulk active
pharmaceutical business line, which supplies pharmaceutical raw materials to
Pharmacyclics, Inc. The shutdown was completed by the end of 1999.
43
<PAGE> 44
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS [GRAPHIC OMITTED]
Celanese recorded a loss, net of taxes, of (euro)154 million in gain on
disposal of discontinued operations and a loss of (euro)2 million in earnings
from operations of discontinued operations relating to these additional
discontinued operations.
6. Securities Available for Sale
At December 31, 1999 and 1998, Celanese had (euro)160 million and (euro)137
million of marketable securities available for sale, respectively. These
marketable securities were included as a component of other assets at December
31, 1999 and 1998. These securities are held by Celanese's captive insurance
businesses. There were no realized gains or losses in 1999 and 1998. The
amortized cost, gross unrealized gains, gross unrealized losses and fair values
for available-for-sale securities by major security type at December 31, 1999
and 1998, were as follows:
<TABLE>
<CAPTION>
Amortized Unrealized Unrealized Fair
in (euro) millions Cost Gains Losses Value
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
At December 31, 1999
Debt Securities
U.S. Government 28 -- 2 26
U.S. municipal 3 -- -- 3
Other government 6 -- -- 6
U.S. corporate 98 -- 2 96
- --------------------------------------------------------------------------------
Total debt securities 135 -- 4 131
Bank certificates of deposit 8 -- -- 8
Equity securities 5 1 -- 6
Mortgage-backed securities 15 -- -- 15
- --------------------------------------------------------------------------------
163 1 4 160
- --------------------------------------------------------------------------------
At December 31, 1998
Debt Securities
U.S. Government 20 -- -- 20
U.S. municipal 3 -- -- 3
Other government 8 -- -- 8
U.S. corporate 73 2 -- 75
- --------------------------------------------------------------------------------
Total debt securities 104 2 -- 106
Bank certificates of deposit 10 -- -- 10
Equity securities 6 1 -- 7
Mortgage-backed securities 14 -- -- 14
- --------------------------------------------------------------------------------
134 3 -- 137
- --------------------------------------------------------------------------------
</TABLE>
44
<PAGE> 45
Fixed maturities at December 31, 1999 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.
<TABLE>
<CAPTION>
Amortized Fair Value
in (euro) millions Cost
- --------------------------------------------------------------------------------
<S> <C> <C>
Within one year 21 21
From one to five years 55 54
From six to ten years 55 53
Greater than ten years 27 26
- --------------------------------------------------------------------------------
158 154
- --------------------------------------------------------------------------------
</TABLE>
7. Receivables, net
<TABLE>
<CAPTION>
in (euro) millions 1999 1998
- --------------------------------------------------------------------------------
<S> <C> <C>
Trade 873 702
Reinsurance receivables 402 204
Other 240 202
- --------------------------------------------------------------------------------
Subtotal 1,515 1,108
Allowance for doubtful accounts (40) (35)
- --------------------------------------------------------------------------------
Net receivables 1,475 1,073
- --------------------------------------------------------------------------------
</TABLE>
As of December 31, 1999 and 1998, Celanese had no significant
concentrations of credit risk since Celanese's customer base is dispersed across
many different industries and geographies.
8. Inventories
<TABLE>
<CAPTION>
in (euro) millions 1999 1998
- --------------------------------------------------------------------------------
<S> <C> <C>
Finished goods 450 478
Work-in-process 20 24
Raw materials and supplies 105 85
- --------------------------------------------------------------------------------
Subtotal 575 587
LIFO reserve 13 (1)
- --------------------------------------------------------------------------------
Total inventories 588 586
- --------------------------------------------------------------------------------
</TABLE>
At December 31, 1999 and 1998, (euro)229 million and (euro)251 million,
respectively, of total inventories were valued by the LIFO method. Celanese
realized (euro)14 million and (euro)19 million for the fiscal years ended
December 31, 1999 and 1998, respectively, from the liquidation of LIFO reserves.
45
<PAGE> 46
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS [GRAPHIC OMITTED]
9. Investments
Celanese has investments in a number of affiliates, which are accounted
for under the equity method. Significant equity affiliates include:
<TABLE>
<CAPTION>
Percent Ownership
- -------------------------------------------------------------------------------------
<S> <C>
Affiliate
Clear Lake Methanol Co., LLC 50.0%
Fortron Industries 50.0%
Korean Engineering Plastics Co., Ltd. 50.0%
InfraServ GmbH & Co. Muenchsmuenster KG 49.0%
Polyplastics Co., Ltd 45.0%
InfraServ GmbH & Co. Gendorf KG 39.0%
InfraServ GmbH & Co. Hoechst KG 27.2%
InfraServ GmbH & Co. Knapsack KG 27.0%
</TABLE>
<TABLE>
<CAPTION>
in (euro) millions 1999 1998
- -------------------------------------------------------------------------------------
<S> <C> <C>
Affiliates totals:
Net sales 1,935 1,958
Net earnings 40 52
Celanese's share:
Net earnings 7 11
Dividends 15 9
Total assets 1,976 1,876
Total liabilities 771 762
Interests of others 739 706
- -------------------------------------------------------------------------------------
Celanese's equity 466 408
Write-down of Celanese's investment (15) --
Excess of cost over underlying equity in net assets acquired 129 47
- -------------------------------------------------------------------------------------
Celanese's investment 580 455
- -------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Acquisition Write Net Book
in (euro) millions Cost Downs Value
- -------------------------------------------------------------------------------------
<S> <C> <C> <C>
January 1, 1999 (1) 455 -- 455
Additions -- (15) (15)
Disposals (7) -- (7)
Reclassifications (13) -- (13)
Exchange rate changes 73 -- 73
Acquisitions and divestitures 94 -- 94
Celanese's share of equity method investee earnings (7) -- (7)
- -------------------------------------------------------------------------------------
December 31, 1999 595 (15) 580
- -------------------------------------------------------------------------------------
</TABLE>
(1) Amounts reclassified to show only continued operations.
46
<PAGE> 47
In December 1999, Celanese sold its investments in Dyneon GmbH and Targor
GmbH. A decision was made to sell Vinnolit GmbH, therefore, this investment is
included on the balance sheet as a component of net assets (liabilities) of
discontinued operations. (See Note 5)
In December 1999, Celanese sold a portion of its investment in InfraServ
GmbH & Co. Wiesbaden KG. As a result, Celanese's investment percentage decreased
from 29 percent to 18.9 percent. Therefore, Celanese changed its method of
accounting for this investment from the equity method to the cost method. This
activity is shown as a reclassification in the above schedule.
During the fourth quarter of 1999, events occurring in the methanol
industry indicated that an other than temporary decrease in the value in
Celanese's investment in the Clear Lake Methanol Joint Venture ("CLMV") had
occurred, resulting in Celanese writing down its investment in CLMV by (euro)15
million.
10. Property, Plant and Equipment
<TABLE>
<CAPTION>
Building,
Building
Land Improvements Machinery
and Land and Leasehold and Construction Capitalized
in (euro) millions Improvements Improvements Equipment in Progress Interest Total
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Acquisition or construction cost
January 1, 1999 (1) 139 288 2,313 242 98 3,080
Additions 4 1 31 213 13 262
Disposals -- (11) (118) (5) (16) (150)
Book transfers 6 12 218 (236) -- --
Acquisition and divestitures -- 3 27 -- -- 30
Reclassifications -- 41 77 -- -- 118
Exchange rate changes 22 24 205 29 16 296
- ------------------------------------------------------------------------------------------------------------------------------------
December 31, 1999 171 358 2,753 243 111 3,636
- ------------------------------------------------------------------------------------------------------------------------------------
Depreciation
January 1, 1999 (1) (59) (86) (1,206) -- (52) (1,403)
Additions (4) (35) (320) -- (8) (367)
Disposals -- 4 128 -- 13 145
Book transfers -- -- -- -- -- --
Acquisitions and divestitures -- -- -- -- -- --
Exchange rate changes (11) 3 (63) -- (8) (79)
- ------------------------------------------------------------------------------------------------------------------------------------
December 31, 1999 (74) (114) (1,461) -- (55) (1,704)
- ------------------------------------------------------------------------------------------------------------------------------------
Book value at December 31, 1999 97 244 1,292 243 56 1,932
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Amounts reclassified to show only continued operations.
47
<PAGE> 48
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS [GRAPHIC OMITTED]
Included in reclassifications is the purchase price allocation from goodwill to
fixed assets and current assets, relating to Grupo Celanese, S.A.
The total investment in property, plant and equipment was (euro)262
million and (euro)345 million in 1999 and 1998, respectively. Scheduled
depreciation totaled (euro)275 million and (euro)280 million in 1999 and 1998,
respectively. Write-downs due to asset impairment amounting to (euro)92 million
and (euro)8 million were recorded to special charges in 1999 and 1998,
respectively. The asset impairment write-downs are included in additions to
depreciation.
Assets under capital leases amounted to (euro)37 million in both 1999 and
1998.
Interest costs capitalized were (euro)13 million in 1999 and (euro)8
million in 1998.
11. Intangible Assets
<TABLE>
<CAPTION>
Patents,licenses,
trademarks and
in (euro) millions similar rights Goodwill Total
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Acquisition cost
January 1, 1999 (1) 17 1,543 1,560
Additions 1 -- 1
Disposals (1) -- (1)
Exchange rate changes 1 253 254
Acquisitions and divestitures -- 154 154
Reclassifications -- (123) (123)
- --------------------------------------------------------------------------------
December 31, 1999 18 1,827 1,845
- --------------------------------------------------------------------------------
Amortization
January 1, 1999 (1) (11) (332) (343)
Additions (2) (62) (64)
Disposals 1 -- 1
Exchange rate changes (1) (56) (57)
Acquisitions and divestitures -- -- --
- --------------------------------------------------------------------------------
December 31, 1999 (13) (450) (463)
- --------------------------------------------------------------------------------
Book value on December 31, 1999 5 1,377 1,382
- --------------------------------------------------------------------------------
</TABLE>
(1) Amounts reclassified to show only continued operations.
Intangible assets arising from acquisitions of companies are included in
acquisitions and divestitures, whereas intangible assets acquired as individual
assets are included in additions.
Included in reclassifications is the purchase price allocation from
goodwill to fixed assets and current assets, relating to Grupo Celanese, S.A.
48
<PAGE> 49
12. Income Taxes
Celanese is headquartered in Germany. Germany has both a corporate tax and
a trade income tax, the latter of which varies based upon location. German
corporate tax law applies a split rate computation with regard to the taxation
of the income of a corporation. Retained corporate income is initially subject
to a German federal corporation tax of 40 percent in 1999 and 45 percent in 1998
plus a solidarity surcharge of 5.5 percent on the German corporate tax payable.
Including the impact of the surcharge, the German corporate tax rate amounted to
42 percent in 1999 and 47 percent in 1998. Upon distribution of a dividend to
shareholders, the corporate income tax rate on those earnings is adjusted to 30
percent plus the solidarity surcharge of 5.5 percent in both years. Including
the impact of the surcharge, the German federal corporate distribution tax rate
amounted to 32 percent in both years. Upon distribution of retained earnings in
the form of a dividend, shareholders who are taxpayers in Germany are entitled
to a tax credit in the amount of German corporation tax paid by the corporation.
<TABLE>
<CAPTION>
in (euro) millions 1999 1998
- --------------------------------------------------------------------------------
<S> <C> <C>
Earnings (loss) before income taxes, minority interests
and extraordinary expense:
Germany (216) (65)
United States (290) 22
Other (86) 136
- --------------------------------------------------------------------------------
Total (592) 93
- --------------------------------------------------------------------------------
Provision (benefit) for income taxes:
Current:
Germany 3 6
United States (17) 158
Other 36 44
- --------------------------------------------------------------------------------
Total current 22 208
- --------------------------------------------------------------------------------
Deferred:
Germany (50) (15)
United States (41) (89)
Other (14) 5
- --------------------------------------------------------------------------------
Total deferred (105) (99)
- --------------------------------------------------------------------------------
Income tax provision (benefit) (83) 109
- --------------------------------------------------------------------------------
</TABLE>
49
<PAGE> 50
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS [GRAPHIC OMITTED]
<TABLE>
<CAPTION>
in (euro) millions 1999 1998
- -------------------------------------------------------------------------------
<S> <C> <C>
Effective income tax rate reconciliation:
Income tax computed at statutory tax rates (266) 42
Increase (decrease) in taxes resulting from:
Change in valuation allowance 83 34
Equity income (5) (6)
Non-deductible depreciation and amortization 15 5
Settlement of open tax years -- --
Investments 1 7
Import/export activities 5 12
Additional U.S. tax provision 10 13
United States foreign tax credit (6) --
United States tax rate differentials 29 (2)
Other foreign tax rate differentials 37 (3)
Other 14 7
- -------------------------------------------------------------------------------
Income tax provision (benefit) (83) 109
- -------------------------------------------------------------------------------
</TABLE>
The tax effects of the temporary differences which give rise to a
significant portion of deferred tax assets and liabilities as of December 31,
1999 and 1998 are as follows:
<TABLE>
<CAPTION>
in (euro) millions 1999 1998
- -------------------------------------------------------------------------------
<S> <C> <C>
Postretirement obligations 216 229
Accrued expenses 265 196
Net operating loss carryforwards 314 97
Investments 5 15
Other 41 35
- -------------------------------------------------------------------------------
Subtotal 841 572
Valuation allowance (278) (70)
- -------------------------------------------------------------------------------
Deferred tax assets 563 502
- -------------------------------------------------------------------------------
Depreciation 238 226
Interest 8 4
Inventory 26 48
Other 20 40
- -------------------------------------------------------------------------------
Deferred tax liabilities 292 318
- -------------------------------------------------------------------------------
Net deferred tax assets 271 184
- -------------------------------------------------------------------------------
</TABLE>
A valuation allowance is provided when it is more likely than not that
some portion or all of the deferred tax assets will not be realized. Celanese
has established val uation allowances primarily for U.S. state and German net
operating loss carryforwards which may not be realizable. Based on the
Celanese's historical and current pretax earnings, management believes it is
more likely than not that Celanese will realize the benefit of the remaining
deferred tax assets existing at December 31, 1999 and 1998.
50
<PAGE> 51
At December 31, 1999, the Celanese has net operating loss carryforwards of
approximately (euro)434 million, primarily in Germany and Mexico with varying
expiration dates. In addition, Celanese has capital loss carryforwards of
(euro)345 million which will expire in 2004.
13. Accounts Payable and Accrued Liabilities
<TABLE>
<CAPTION>
in (euro) millions 1999 1998
- --------------------------------------------------------------------------------
<S> <C> <C>
Accounts payable trade 451 422
Accrued salaries and benefits 134 133
Accrued environmental 78 54
Accrued restructuring 188 46
Insurance loss reserves 595 315
Accrued legal 359 125
Other 291 238
- --------------------------------------------------------------------------------
Total accounts payable and accrued liabilities 2,096 1,333
- --------------------------------------------------------------------------------
</TABLE>
14. Debt
Short-term borrowings and current installments of long-term debt
<TABLE>
<CAPTION>
Weighted Average
At December 31, Interest Rates
in (euro) millions 1999 1998 1999 1998
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Current installments of long-term debt 2 16 5.3% 7.3%
Bank loans 125 146 7.7% 11.0%
Notes and revolver with Hoechst (See Note 4) -- 238 -- 6.0%
Notes with affiliates 302 -- 3.3% --
- ------------------------------------------------------------
Total short-term borrowings and current
installments of long-term debt 429 400
- ---------------------------------------------------------------------------------
</TABLE>
Celanese has a U.S. $ 700 million ((euro)697 million) commercial paper
program at December 31, 1999. At December 31, 1999, there were no borrowings
against the commercial paper program. Celanese maintains committed revolving
credit lines and term loans with several banks aggregating (euro)2,041 million
at December 31, 1999; the aggregate unused part thereof amounts to (euro)1,752
million, of which U.S. $700 million ((euro)697 million) were used as credit
backup for Celanese's commercial paper program. Celanese had outstanding letters
of credit amounting to (euro)109 million at December 31, 1999 and (euro)231
million at December 31, 1998. The bank loans are principally denominated in U.S.
dollars, euro, South African rand, Mexican pesos and British pound sterling.
51
<PAGE> 52
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS [GRAPHIC OMITTED]
Long-term borrowings
<TABLE>
<CAPTION>
At December 31
in (euro) millions 1999 1998
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
Term notes:
6.125% notes, due 2004 25 213
8.23% notes, due 2002 -- 103
7.125% medium-term notes, due 2009 14 85
7.39% bank loan, due 1999-2004 -- 60
7.86% notes, due 2001 -- 43
8.24% notes, due 2002 -- 26
7.5% medium-term notes, due 2004 -- 26
8.48% senior promissory notes, due 1999-2002 -- 17
9.8% medium-term notes, due 2013 and 2018 -- 21
Variable rate loans with interest rates as of December 31, 1999, adjusted
periodically:
Due in 2000 -- 85
Due in 2001 -- 128
Due in 2002 -- 85
Due in 2003, interest rate of 6.50% 50 --
Due in 2003, interest rate of 6.60% 174 --
Pollution control and industrial revenue bonds, interest rates ranging
from 5.2% to 9.0%, due at various dates through 2026 218 187
Obligations under capital leases, due at various dates through 2012 20 20
Other 20 19
Amounts to be settled with Hoechst -- (23)
- -----------------------------------------------------------------------------------------------
Subtotal 521 1,095
Less: Current installments of long-term debt 2 16
- -----------------------------------------------------------------------------------------------
Total long-term debt 519 1,079
- -----------------------------------------------------------------------------------------------
</TABLE>
Substantially all the above long-term borrowings are denominated in U.S.
dollars. Certain of Celanese's loan agreements, which are legally held by
certain Celanese subsidiaries, include tangible net worth and other covenants
that limit their ability to enter into certain transactions. During December
1999, Celanese Canada sold its Millhaven plant assets for cash. This resulted in
an unusually high level of cash, which represented more than 45 percent of the
total assets of the company at year end, resulting in non-compliance with the
equity to total assets debt covenant. In January 2000, a waiver through June 30,
2000, was obtained for this non-compliance. All other subsidiaries were in
compliance with all debt covenants at December 31, 1999.
Upon the demerger, Celanese used the proceeds it received from the
collection of the net receivables from Hoechst as well as proceeds from
divestitures to pay down its long-term debt.
Due to majority ownership clauses in the third party debt instruments,
certain instruments had to be terminated by Celanese in connection with the
demerger. Accordingly, Celanese incurred early termination costs of (euro)15
million, net of (euro)10 million in taxes, which are included as an
extraordinary item in 1999 in the accompanying consolidated statements of
operations.
52
<PAGE> 53
The maturities in 2000 and thereafter are as follows:
<TABLE>
<CAPTION>
in (euro) millions Total
- -----------------------------------------------------------------
<S> <C>
2000 429
2001 22
2002 8
2003 230
2004 42
Thereafter 217
- -----------------------------------------------------------------
Total 948
- -----------------------------------------------------------------
</TABLE>
15. Other Liabilities
<TABLE>
<CAPTION>
in (euro) millions 1999 1998
- -------------------------------------------------------------------------------------
<S> <C> <C>
Pension and postretirement medical and life obligations (See Note 18) 752 717
Environmental liabilities (See Note 24) 317 252
Other 190 223
- -------------------------------------------------------------------------------------
Total other liabilities 1,259 1,192
- -------------------------------------------------------------------------------------
</TABLE>
16. Cost of Raw Materials and Supplies
The following cost of raw materials and supplies reflect total costs
incurred by continuing and discontinued operations in the respective periods:
<TABLE>
<CAPTION>
in (euro) millions 1999 1998
- -------------------------------------------------------------------------------------
<S> <C> <C>
Cost of raw materials, supplies and merchandise 3,160 3,135
Cost of services purchased (primarily energy) 348 344
- -------------------------------------------------------------------------------------
Total Cost of Raw Materials and Supplies 3,508 3,479
- -------------------------------------------------------------------------------------
</TABLE>
17. Personnel Expenses
The following personnel expenses reflect total costs incurred by
continuing and discontinued operations in the respective periods:
<TABLE>
<CAPTION>
in (euro) millions 1999 1998
- -------------------------------------------------------------------------------------
<S> <C> <C>
Wages and salaries 814 775
Compulsory social security contributions 87 89
Other 67 60
- -------------------------------------------------------------------------------------
Personnel expenses excluding pensions and similar benefits 968 924
Pensions and similar benefits 122 132
- -------------------------------------------------------------------------------------
Total Cost of Personnel Expenses 1,090 1,056
- -------------------------------------------------------------------------------------
</TABLE>
53
<PAGE> 54
ANHANG CELANESE KONZERN [GRAPHIC OMITTED]
The average number of employees totaled 16,700 including the discontinued
operations and 15,500 on a continuing basis in 1999 as compared to 18,400 and
17,000, respectively, in 1998.
18. Benefit Obligations
Pension obligations - Provisions for pension obligations are established
for benefits payable in the form of retirement, disability and surviving
dependent pensions. The benefits offered vary according to the legal, fiscal and
economic conditions of each country. The commitment results from participation
in defined contribution and defined benefit plans, primarily in the United
States Benefits are dependent on years of service and the employee's
compensation. Supplemental retirement benefits provided to certain employees are
nonqualified for U.S. tax purposes. Separate trusts are sometimes established
for nonqualified plans.
Defined benefit pension plans also exist at certain locations in Europe
and North America. Independent trusts or insurance companies administer the
majority of these benefit plans. Actuarial valuations for these plans are
generally prepared annually. The remaining plans are valued at least every three
years.
Celanese sponsors various defined contribution plans in the United States,
Mexico, Canada and Europe covering certain employees. Employees may contribute
to these plans and the Company may match these contributions in varying amounts.
Celanese's contributions to the defined contribution plans are based on
specified percentages of employee contributions and aggregated (euro)14 million
in both 1999 and 1998.
Other postretirement benefit plans - Certain retired employees receive
postretirement health care and life insurance benefits under plans established
by Celanese. Nearly all Celanese employees in the United States and Canada are
eligible to receive such benefits after reaching normal retirement age with a
minimum of 10 years of service. Generally, the medical plans pay a stated
percentage, based upon years of service, of qualifying medical expenses reduced
for any deductible and payments made by government programs and other group
coverage. Celanese is generally self-insured for these costs and the plans are
not funded. Provisions of the plans include caps which limit future
contributions for medical coverage.
54
<PAGE> 55
<TABLE>
<CAPTION>
Pension Benefits Other Benefits
in (euro) millions 1999 1998 1999 1998
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Change in benefit obligations
Benefit obligations at beginning of year 2,082 1,957 352 346
Service cost 36 49 4 6
Interest cost 142 146 26 28
Participant contributions 1 1 5 4
Actuarial losses 3 213 14 30
Acquisitions -- 2 -- --
Divestitures (313) (1) (10) --
Settlements (7) (16) (4) --
Curtailments 4 (11) -- --
Benefits paid (117) (107) (34) (33)
Foreign currency exchange rate changes 324 (151) 63 (29)
- -------------------------------------------------------------------------------------------
Benefit obligations at end of year 2,155 2,082 416 352
- -------------------------------------------------------------------------------------------
Change in plan assets
Fair value of plan assets at beginning of year 1,578 1,738 -- --
Actual return (loss) on plan assets 285 (59) -- --
Company contributions 19 149 39 29
Participant contributions 1 1 5 4
Divestitures (253) (1) (10) --
Settlements (7) (17) -- --
Benefits paid (117) (107) (34) (33)
Foreign currency exchange rate changes 259 (126) -- --
- -------------------------------------------------------------------------------------------
Fair value of plan assets at end of year 1,765 1,578 -- --
- -------------------------------------------------------------------------------------------
Funded status (390) (504) (416) (352)
Unrecognized prior service cost 16 80 -- --
Unrecognized actuarial loss 69 280 67 54
Unrecognized net transition obligation (asset) 32 (12) -- --
Contributions 3 2 8 6
Curtailment recognized -- (19) -- --
Settlement recognized -- (23) -- (7)
- -------------------------------------------------------------------------------------------
Net amount recognized (270) (196) (341) (299)
- -------------------------------------------------------------------------------------------
Amounts recognized
in the accompanying consolidated balance sheets
Accrued benefit cost (305) (328) (341) (299)
Intangible assets (1) 35 57 -- --
Accumulated other comprehensive income -- 75 -- --
- -------------------------------------------------------------------------------------------
Net amount recognized (270) (196) (341) (299)
- -------------------------------------------------------------------------------------------
Weighted-average assumptions as of September 30,
Discount rate 7.50% 6.75% 7.50% 6.75%
Expected long-term rate of return on plan assets 9.25% 9.25%
Rate of increase in future compensation levels 3.40% 3.40%
- -------------------------------------------------------------------------------------------
</TABLE>
55
<PAGE> 56
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS [GRAPHIC OMITTED]
For measurement purposes, a 6.8 percent annual rate of increase in the per
capita cost of covered health care benefits was assumed in 1999. The rate was
assumed to decrease gradually to 5.5 percent in 2001 and remain at that level
thereafter.
(1) Amount is classified as other assets on the consolidated balance sheets.
<TABLE>
<CAPTION>
Pension Benefits Other Benefits
in (euro) millions 1999 1998 1999 1998
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Components of net periodic benefit cost
Service cost 36 49 4 4
Interest cost 142 146 26 25
Expected return on plan assets (129) (117) -- --
Amortization of prior service cost 9 11 -- --
Recognized actuarial loss 10 3 1 --
Amortization of the unamortized obligation (2) (2) -- --
Curtailment loss (gain) 5 15 (3) --
Settlement loss -- 24 -- --
- -------------------------------------------------------------------------------------
Net periodic benefit cost 71 129 28 29
- -------------------------------------------------------------------------------------
</TABLE>
The projected benefit obligation, accumulated benefit obligation, and fair
value of plan assets for the pension plans with accumulated benefit obligations
in excess of plan assets were (euro)1,983 million, (euro)1,901 million, and
(euro)1,585 million as of December 31, 1999, and (euro)1,971 million,
(euro)1,790 million, and (euro)1,453 million, respectively, as of December 31,
1998.
Assumed health care cost trend rates have a significant effect on the
amounts reported for the health care plans. A one-percentage-point change in
assumed health care cost trend rates would have the following effects:
<TABLE>
<CAPTION>
One Percent One Percent
in (euro) millions Increase Decrease
- -------------------------------------------------------------------------------------
<S> <C> <C>
Effect on total of service and interest cost components 2 (1)
Effect on postretirement obligation 20 (19)
- -------------------------------------------------------------------------------------
</TABLE>
The following table represents other postretirement liabilities and
similar obligations:
<TABLE>
<CAPTION>
One Percent One Percent
in (euro) millions 1999 1998
- -------------------------------------------------------------------------------------
<S> <C> <C>
Other obligations
Long-term disability 77 69
Other 29 21
- -------------------------------------------------------------------------------------
106 90
- -------------------------------------------------------------------------------------
</TABLE>
56
<PAGE> 57
19. Shareholders' Equity
Prior to the Effective Date, shareholders' equity represented the
historical equity of the Businesses and activities combined as Celanese.
Combined equity represented equity less accumulated other comprehensive loss
items of the combined Businesses and the effects of transfers between Celanese
and Hoechst which do not give rise to normal receivables or payables intended to
be settled between these two groups of companies. Considering the net income at
the parent company level, management will be recommending a nominal dividend of
(euro)0.11 per share aggregating (euro)6 million at this year's annual
shareholders' meeting to be held in May 2000. (See Note 4)
20. Stock-based Compensation
In connection with the demerger, Celanese assumed obligations associated
with the Hoechst 1997 Stock Appreciation Rights Plan (the "1997 Hoechst SAR
Plan") and the Hoechst 1998 Stock Option Plan (the "1998 Hoechst Option Plan")
for participating Celanese employees under these compensation programs. As a
result of the merger of Hoechst and Rhone-Poulenc to form Aventis in December
1999, it became necessary to modify the terms and conditions of these
compensation programs to take into account the changed circumstances.
During 1997, Celanese employees participating in the 1997 Hoechst SAR Plan
were granted 168,500 stock appreciation rights ("Rights"). These Rights have a
five-year term and generally were exercisable in whole or in part, subject to
certain limitations, at any time during the period between September 9, 1999 and
September 9, 2002, provided that at the time of exercise, the closing price of
an ordinary share of Hoechst on the Frankfurt Stock Exchange was at least 125
percent of the grant price. The grant price of these Rights was (euro)37.73.
Rights remaining unexercised as of September 9, 2002 will automatically be
exercised as of that date only if the closing price of the shares is at least
125 percent of the grant price. Following the demerger and the creation of
Aventis, the terms of the 1997 Hoechst SAR Plan have been modified to take into
consideration the conversion of Hoechst shares into Aventis shares. The grant
price of (euro)37.73 per Hoechst share has been converted to (euro)45.43 per
Aventis share. As a result of this modification, the number of rights granted
was converted to 139,922 from 168,500, of which 101,372 Rights remain
outstanding as of December 31, 1999. The creation of Aventis triggered a change
of control provision contained in the 1997 Hoechst SAR Plan and accordingly,
these rights are now considered fully vested. Additionally, all hurdles for the
exercise of the Rights were eliminated. In 1999, Celanese recognized expense of
(euro)1 million for the 1997 Hoechst SAR Plan. As part of the demerger, Hoechst
has agreed to indemnify Celanese for all expenses associated with the 1997
Hoechst SAR Plan.
During 1998, Celanese employees participating in the 1998 Hoechst Option
Plan were granted 97,600 options. These options have a five-year term and
generally will be exercisable in whole or in part, subject to certain
limitations, at any time during the
57
<PAGE> 58
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS [GRAPHIC OMITTED]
period between September 30, 2001 until September 30, 2003, provided that, at
the time of exercise, the closing price of an ordinary share of Hoechst on the
Frankfurt Stock Exchange must meet the following hurdles, such as, the closing
price must be at least 125 percent of the grant price and the Hoechst share
price must exceed the performance of the share price of eight out of seventeen
peer group companies as defined by the Board of Management of Hoechst. As a
result of the demerger and the creation of Aventis, the terms of the 1998
Hoechst Option Plan were modified to take into consideration the conversion of
Hoechst shares into Aventis shares. The grant price of these options was
(euro)34.88. Options remaining unexercised as of September 30, 2003 will be
forfeited as of that date. In 1999, Celanese recognized expense of (euro)0.6
million for the 1998 Hoechst Option Plan.
Celanese employees that were covered under the 1998 Hoechst Stock Option
Plan had the option to continue the plan as the Aventis Option Plan or convert
it into a form of Celanese Rights or to receive a cash distribution. In the case
of continuing the plan as the Aventis Option Plan, the grant price was converted
to (euro)42.01 per Aventis share. The creation of Aventis triggered a change of
control provision contained in the 1998 Hoechst Option Plan and accordingly,
these rights are now considered fully vested. Additionally, all hurdles for the
exercise of options were eliminated. As of December 31, 1999, 45,354 Aventis
options remain outstanding. As a result of elections by Celanese employees, the
number of shares under option were converted to 36,750 Celanese Rights, all of
which remain outstanding as of December 31, 1999. The conditions for the
exercise of these Celanese Rights are based on the same requirements as those in
the 1999 Celanese Equity Participation Plan discussed below. The base price of
the Rights was fixed at (euro)15.30.
Celanese has adopted the disclosure-only provisions of SFAS No. 123 and
applies APB Opinion No. 25 and related interpretations in accounting for options
granted to employees. The weighted average per share fair value of the options
referred to above was (euro)20.11 on the date of grant using the Black Scholes
option-pricing model with the following assumptions: dividend yield of 3
percent, risk-free interest rate of 4.75 percent, a life of 3 years and
volatility of 36 percent. Had Celanese determined the compensation cost based on
the fair value at the grant date for these options under SFAS No. 123,
Celanese's net loss would have been as follows:
<TABLE>
<CAPTION>
in (euro) millions 1999 1998
- -------------------------------------------------------------------------------------
<S> <C> <C>
Net loss-as reported (207) (44)
Net loss-Proforma (208) (46)
Net loss per basic and dilutive share - as reported (3.70) (0.79)
Net loss per basic and dilutive share - Proforma (3.72) (0.82)
- -------------------------------------------------------------------------------------
</TABLE>
During 1999, Celanese adopted the Equity Participation Plan (the "EPP") and
the Long-Term Incentive Plan (the "LTIP"). The EPP covers the Board of
Management and executives of Celanese. The participants in the EPP must purchase
a defined value of Celanese stock over a one or two year period. The Rights
granted under the EPP are based on the required amount of money invested in
Celanese shares by the participant,
58
<PAGE> 59
divided by the base price of the stock and multiplied by two. Rights granted
under the EPP have a ten-year term and generally will be exercisable in whole or
in part, subject to certain limitations, at any time during the period between
October 25, 2001 and October 25, 2009, provided at the time of exercise, the
performance of an ordinary share of Celanese on the Frankfurt Stock Exchange
must exceed the performance of the median of the share prices of Celanese's peer
group companies as defined by the Board of Management of Celanese. Under the
EPP, the participant will receive the cash difference between the base price and
the Celanese share price on the day of exercise. During 1999, Celanese granted
approximately 2.5 millions Rights to the EPP participants, all of which remain
outstanding at December 31, 1999. Rights remaining un exercised as of October
26, 2009 will be deemed to have been forfeited as of that date. The grant price
of these Rights was (euro)16.37. Celanese recognized expense of (euro)0.4
million for the EPP during 1999.
The LTIP covers the Board of Management and senior executives of Celanese.
Rights granted under the LTIP have a ten-year term and generally will be
exercisable in whole or in part, subject to certain limitations, at any time
during the period between October 25, 2001 and October 25, 2009, provided at the
time of exercise, the performance of an ordinary share of Celanese on the
Frankfurt Stock Exchange must exceed the performance of the median of the share
prices of Celanese's peer group companies as defined by the Board of Management
of Celanese. Under the LTIP, the participant will receive the cash difference
between the base price and the share price of Celanese on the day of exercise.
During 1999, Celanese granted approximately 2.5 million Rights to the
participants under the LTIP, all of which remain outstanding at December 31,
1999. Rights remaining unexercised as of October 26, 2009 will be deemed to have
been forfeited as of that date. The grant price of these Rights was (euro)16.37.
In 1999, Celanese recognized expense of (euro)0.4 million for the LTIP.
21. Leases
Total minimum rent charged to operations under all operating leases was
(euro)67 million and (euro)58 million in 1999 and 1998, respectively. Future
minimum lease payments under rental and lease agreements which have initial or
remaining terms in excess of one year at December 31, 1999 are as follows:
<TABLE>
<CAPTION>
in (euro) millions Capital Operating
- -----------------------------------------------------------------------------
<S> <C> <C>
2000 4 68
2001 3 56
2002 3 53
2003 3 51
2004 3 50
Later years 13 150
Sublease income -- (10)
- -----------------------------------------------------------------------------
Minimum lease commitments 29 418
Less amounts representing interest 7 -------
- ---------------------------------------------------------------
Present value of net minimum lease obligations 22
- -----------------------------------------------------------------------------
</TABLE>
59
<PAGE> 60
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS [GRAPHIC OMITTED]
The related assets for capital leases are included in machinery and
equipment in the consolidated balance sheets.
Management expects that, in the normal course of business, leases that
expire will be renewed or replaced by other leases.
22. Financial Instruments
In the normal course of business, Celanese uses various financial
instruments, including derivative financial instruments, to cover interest rate
or currency exposures. Celanese does not use derivative financial instruments
for speculative purposes.
Interest Rate Risk Management
Celanese entered into interest rate swap agreements to reduce the exposure
of interest rate risk inherent in Celanese's debt portfolio. Celanese's
derivative policy provides the ability to lock in borrowing rates and promotes
the achievement of a desired level of fixed/floating rate mix. Celanese had open
interest rate swaps with a notional amount of (euro)319 million and (euro)936
million at December 31, 1999 and 1998, respectively. Celanese's credit risk
exposure related to counterparty default on instruments is not material.
Celanese recognized total interest expense associated with its interest rate
swaps of (euro)8 million in 1999 and (euro)5 million in 1998.
For periods prior to the Effective Date, Hoechst managed its interest rate
risk exposure on a worldwide basis, of which Celanese was a component, for the
periods presented in the accompanying Consolidated Financial Statements.
Pursuant to the Demerger Agreement, Celanese maintained interest rate swaps that
were used to hedge variable rate debt of Celanese as well as other Hoechst
affiliates. In the periods prior to the Effective Date, the excess notional
values of these swaps over the variable rate debt being maintained by Celanese
had not been marked to market in the accompanying Consolidated Financial
Statements. On the Effective Date, Celanese recognized a mark ed to market
adjustment of (euro)1 million, associated with these excess swaps, as an equity
adjustment and a corresponding deferred credit to be amortized over the
remaining life of the swaps. Additionally, Celanese unwound the excess swaps
that previously hedged the Hoechst related debt, which resulted in a (euro)1
million charge to the consolidated statements of operations in 1999.
During the second half of 1999, Celanese tendered a portion of its
variable rate debt portfolio. As a result, Celanese unwound the related interest
rate swaps associated with this variable rate debt and recorded the related
costs as a component of extraordinary expense on the consolidated statements of
operations in 1999.
60
<PAGE> 61
Foreign Exchange Risk Management
As a result of the introduction of the euro, outstanding currency derivatives
between currencies of the countries that have adopted the euro as their common
currency are risk neutral as of January 1, 1999.
Certain Celanese entities have receivables and payables denominated in
currencies other than the respective functional currencies of Celanese, which
create foreign exchange risk. Accordingly, Celanese enters into foreign currency
forwards and options to minimize its exposure to foreign currency fluctuations.
The foreign currency contracts are designated mainly for booked exposure. In
some cases, anticipated exposure is hedged as well. Contracts totaling
approximately (euro)688 million at December 31, 1999, are predominantly in U.S.
dollars and British pounds. Contracts totaling approximately (euro)273 million
at December 31, 1998 were in various currencies.
Fair Value of Financial Instruments
Summarized below are the carrying values and estimated fair values of
Celanese's financial instruments as of December 31, 1999 and 1998. For these
purposes, the fair value of a financial instrument is the amount at which the
instrument could be exchanged in a current transaction between willing parties.
<TABLE>
<CAPTION>
1999 1998
Carrying Fair Carrying Fair
in (euro) millions Amount Value Amount Value
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Other assets - investments 268 268 272 272
Long-term debt 519 503 1,079 1,193
Debt-related derivative instruments -- 17 -- (27)
Foreign exchange-related derivative instruments -- (8) -- 4
- ------------------------------------------------------------------------------------------------
</TABLE>
At December 31, 1999 and 1998, the fair values of cash and cash
equivalents, receivables, notes payable, trade payables, short-term debt and the
current installments of long-term debt approximate carrying values due to the
short-term nature of these instruments. Accordingly, these items have been
excluded from the table.
Included in other assets are certain investments accounted for under the
cost method and long-term marketable securities classified as available for
sale. In general, the cost investments are not publicly traded; however,
Celanese believes that the carrying value approximates the fair value.
The fair value of long-term debt and debt-related financial instruments is
estimated based upon the respective implied forward rates as of December 31,
1999, as well as quotations from investment bankers and on current rates of
debt for similar type instruments.
61
<PAGE> 62
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS [GRAPHIC OMITTED]
Equity Risk Management
As of December 31, 1999, Celanese had purchased 1.2 million call options
to offset its exposure of the LTIP and EPP. These options have a maturity of six
months, a strike price of (euro)16.3705 per share and an average premium of
(euro)3.16 per share so that the total premium paid through December 31, 1999
amounted to (euro)3.8 million. The market value of these options is (euro)3.8
million. As the options allow settlement in either cash or stock, at the choice
of Celanese, (euro)3.8 million was recorded as a credit to additional paid in
capital.
23. Commitments and Contingencies
Celanese is involved in a number of legal proceedings and claims
incidental to the normal conduct of its business, relating to such matters as
product liability, competition, 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 lawsuits, management believes,
based on the advice of legal counsel, that adequate provisions have been made
and that the ultimate outcome will not have a material adverse effect on the
financial position of Celanese, but may have a material adverse effect on the
results of operations or cash flows in any given accounting period. (See Note
24)
Plumbing Actions
CNA Holdings, Inc. ("CNA Holdings"), formerly known as HNA Holdings, Inc.
and Hoechst Celanese Corporation, is a U.S. subsidiary of Celanese and currently
serves as the North American holding company, for Celanese's businesses
including the U.S. business now conducted by Ticona. CNA Holdings along with
Shell Chemical Company ("Shell") and E. I. du Pont de Nemours ("DuPont") among
others have been the defendants in a series of lawsuits, 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 Ticona's acetal copolymer in similar applications, CNA
Holdings does not believe Ticona's acetal copolymer was defective or caused the
plumbing systems to fail. In many cases CNA Holdings' exposure may be limited by
invocation of the statute of limitations since CNA Holdings ceased selling the
resin for use in the plumbing systems in site built homes during 1986 and in
manufactured homes during 1990.
62
<PAGE> 63
CNA Holdings has been named a defendant in nine putative class actions as
well as a defendant in other non-class actions filed in thirteen states and
Canada. In these actions, the plaintiffs typically have sought recovery for
alleged property damages, and, in certain cases, additional damages under the
Texas Deceptive Trade Practices Act or similar type statutes. Damage amounts
have not been specified. The putative class actions are pending in the Ninth
Judicial Circuit Court of Common Pleas of South Ca rolina, Charleston County,
the Territorial Court of the Virgin Islands, St. Croix Division, the Supreme
Court of British Columbia, Canada, Superior Court, Province of Quebec, Canada,
the Ontario Canada Court, General division and the U.S. District Court for the
eastern district of Texas, Texarkana Division.
A conditionally certified class action (of recreational vehicle owners) is
pending in the Chancery Court of Tennessee, Weakley County. A putative class
action (of insurance companies with respect to subrogation claims), as well as
an individual action (by Prudential Property & Casualty Insurance Company with
respect to its subrogation claims), are pending in the United States District
Court for the District of New Jersey and in the Superior Court of New Jersey,
Camden. Celanese's appeal to deny a certification in a putative class action
pending in the Circuit Court of the Fifth Judicial Circuit, Florida, Marion
County that had been certified on behalf of homeowners who claim to have opted
out of the national settlement described below, was granted in February 2000. An
appeal from the order certifying that action is pending.
In November 1995, CNA Holdings, DuPont and Shell entered into national
class action settlements, which have been approved by the courts. The
settlements call for the replacement of plumbing systems of claimants who have
had qualifying leaks, as well as reimbursements for certain leak damage.
Furthermore, the three companies have agreed to fund such replacements and
reimbursements up to U.S. $950 million ((euro)944 million). There are additional
pending lawsuits in approximately 20 jurisdictions not covered by this
settlement; however, these cases do not involve (either individually or in the
aggregate) a large number of homes, and management does not expect the
obligations arising from these lawsuits to have a material adverse effect on CNA
Holdings. The allocation of certain payments already made to the claimants and
certain future payments was subject to a binding arbitration between CNA
Holdings and Shell, which was completed in June 1999. During the fourth quarter
of 1999, appeals from the arbitration decision were filed in the Supreme Court
of the State of New York, New York County, and in the Superior Court of the
District of Columbia. In February 2000, CNA Holdings and Shell reached an
agreement which, among other things, resolved the appeals and other claims
between the parties and pursuant to which Celanese paid an amount which was
fully accrued for in prior periods.
In 1995, CNA Holdings and Shell settled the claims of certain individuals,
owning 110,000 property units, who are represented by a Texas law firm for an
amount not to exceed U.S. $170 million ((euro)169 million). These claimants are
also eligible for a replumb of their homes in accordance with the terms similar
to those of the national class action settlement. CNA Holdings' and Shell's
contributions under this settlement were subject
63
<PAGE> 64
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS [GRAPHIC OMITTED]
to allocation in the above binding arbitration. In addition, a lawsuit filed in
November 1989, in Delaware Chancery Court between CNA Holdings and certain of
its insurance companies relating to all claims incurred and to be incurred for
the product liability exposure resulted in a partial declaratory judgment in CNA
Holdings' favor. As a result, settlements have been reached with a majority of
CNA Holdings' insurers specifying their responsibility for such claims.
CNA Holdings has accrued its best estimate of its share of the plumbing
actions. At December 31, 1999, Celanese had accrued (euro)351 million for this
matter, of which (euro)260 million is included in current liabilities.
Management believes that the plumbing actions are provided for in the
Consolidated Financial Statements. However, if Celanese were to incur an
additional charge for this matter, such a charge will not have a material
adverse effect on the financial position, but may have a material adverse effect
on the results of operations or cash flows of Celanese in any given accounting
period. Celanese has recorded receivables relating to the anticipated recoveries
from third party insurance carriers relating to this product liability matter.
These receivables are based on the probability of collection, an opinion of
external counsel, the settlement agreements reached with a majority of
Celanese's insurance carriers whose coverage level exceeds the receivables and
the status of current discussions with other insur ance carriers. As of December
31, 1999, Celanese had recorded (euro)179 million in outstanding insurance claim
receivables that are expected to be collected within the next five years.
Collectability could vary depending on the financial status of the insurance
carriers.
Fugitive Emissions Standards
In 1990, the United States Environmental Protection Agency ("EPA") issued
a notice of violation alleging that CNA Holdings' Rock Hill, South Carolina
plant, located in the U.S., was subject to fugitive emissions standard for
benzene under the Clean Air Act based upon the volume of benzene used at the
facility. CNA Holdings contested the notice of violation because it believed it
had correctly determined in 1984 that the calculation of benzene usage for
determining applicability of the standard did not include amounts recirculated
within the process after initial use. By 1991, CNA Holdings met the fugitive
emissions standard as interpreted by the EPA for its three U.S. facilities that
used benzene.
In 1992, 1993 and 1995, the U.S. Department of Justice, on behalf of the
EPA, filed enforcement actions against CNA Holdings regarding the three plants
in federal district courts in South Carolina, Virginia and Texas seeking
penalties of up to U.S. $25,000 per day. The Virginia and Texas cases were, for
most of the time, stayed by consent of the parties while the South Carolina case
was litigated through denial of a petition for certiorari to the U.S. Supreme
Court. The appellate court in that case upheld the EPA's interpretation of the
standard but affirmed that CNA Holdings did not have notice of that
interpretation prior to August 1989; thus no penalties could be assessed prior
to that date. The appellate court remanded the case to the district court for a
determination of what penalty, if any, should be assessed for the period from
August 1989, when CNA Holdings received actual notice of the EPA's
interpretation,
64
<PAGE> 65
through the plant's achievement of compliance in September 1991. The parties
have agreed to nonbinding mediation to aid settlement negotiations before
resuming litigation in the district court and are currently discussing the
timetable for this nonbinding mediation. Management believes a material loss
from this matter is remote.
Generic Pharmaceutical Litigation
In September 1998, Great Neck Capital Appreciation Partnership filed a
complaint derivatively on behalf of the directors of Copley Pharmaceuticals Inc.
("Copley"), a former subsidiary of Celanese Americas Corporation, formerly known
as Hoechst Corporation, in a Massachusetts Superior Court against six of
Copley's directors which was thereafter amended to add Celanese Americas as a
defendant. The amended complaint alleged that Celanese Americas used Copley for
its own benefit, injured Copley's ability to compete and compromised the
independence of Copley's independent directors. The complaint also alleged that
the six directors allowed Celanese Americas to use Copley and otherwise breached
their fiduciary duties to Copley. In 1999, the parties filed a joint motion to
dismiss the case, and in February 2000, a final judgement dismissing the case
was entered with no cost or damages being awarded to the plaintiffs.
Antitrust
In 1998, Nutrinova Inc., a U.S. subsidiary of Nutrinova Nutrition
Specialties & Food Ingredients GmbH, then a wholly-owned subsidiary of Hoechst,
received a grand jury subpoena from the U.S. District Court for the Northern
District of California in connection with a U.S. criminal antitrust
investigation of the sorbates industry. On May 3, 1999, Hoechst and the
Government of the United States of America entered into an agreement under which
Hoechst pled guilty to a one-count indictment charging Hoechst with
participating in a conspiracy to fix prices and allocate market shares of
sorbates sold in the United States. Hoechst and the U.S. Government agreed to
recommend that the U.S. District Court fine Hoechst (euro)31 million (U.S. $36
million). Hoechst also agreed to cooperate with the Government's investigation
and prosecutions related to the sorbates industry. The U.S. District Court
accepted this plea on June 18, 1999 and imposed a penalty as recommended in the
plea agreement. In addition, during 1999, fifteen civil antitrust actions,
seeking monetary damages and other relief for alleged conduct involving the
sorbates industry were filed in Federal and various state courts. These actions
are in the early stages of litigation. Based on the advice of external counsel
and a review of the existing facts and circumstances relating to the matter,
including new claims filed and the penalty related to the U.S. criminal case
imposed in June 1999, Celanese has accrued liabilities of (euro)90 million at
December 31, 1999 for the estimated loss relative to this matter including
potential risks in other jurisdictions. Of this accrued amount, Celanese
recorded (euro)75 million during 1999. Although the outcome of this matter
cannot be predicted with certainty, management's best estimate of the range of
possible future losses (in addition to the amounts already recorded in the
65
<PAGE> 66
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS [GRAPHIC OMITTED]
financial statements) as of December 31, 1999 is between (euro)0 and (euro)65
million. The estimated range of such possible future losses is management's best
estimate based on the advice of external counsel taking into consideration
potential fines and claims that may be imposed or made in other jurisdictions.
Pursuant to the Demerger Agreement, Hoechst has agreed to indemnify Celanese for
80 percent of any costs Celanese may incur relative to this matter. Accordingly,
Celanese has recognized a receivable from Hoechst and a corresponding
contribution of capital from this indemnification. The additional reserve
recognized during 1999 and the estimated range of possible future losses, noted
above, for this matter are gross of any recovery from Hoechst. Celanese believes
that any resulting liabilities, net of amounts recoverable from Hoechst, will
not, in the aggregate, have a material adverse effect on Celanese's financial
position.
Other Matters
In 1998, Celanese received a substantial settlement in connection with a
patent infringement lawsuit. This is included as a component of selling, general
and administrative expenses.
In December 1999, Celanese has signed a letter of intent to acquire Axiva
GmbH from Aventis Research and Technologies GmbH & Co. KG, a subsidiary of
Hoechst, during the second quarter of 2000. The estimated purchase price is
expected to be less than (euro)40 million.
In the normal course of business, Celanese enters into commitments to
purchase goods and services over a fixed period of time. Celanese maintains a
number of "take-or-pay" contracts for the purchase of raw materials and
utilities. At December 31, 1999, Celanese does not expect to incur any losses
under these contractual arrangements. Additionally, at December 31, 1999, there
were outstanding commitments relating to capital projects of approximately
(euro)57 million.
24. Environmental
General - Celanese is subject to environmental laws and regulations
worldwide which impose limitations on the discharge of pollutants into the air
and water and establish standards for the treatment, storage and disposal of
solid and hazardous wastes. Celanese believes that it is in substantial
compliance with all applicable environmental laws and regulations.
Hoechst Liabilities - As part of the demerger, Celanese will indemnify
Hoechst for the first (euro)250 million of future environmental liabilities
arising from certain previously divested Hoechst entities of which the Company
has reserved approximately ((euro)150 million) that is included as a component
of the total environmental reserves discussed
66
<PAGE> 67
below. If such future liabilities exceed (euro)250 million, Hoechst will bear
such excess up to an additional (euro)500 million. Thereafter, Celanese will
bear one third and Hoechst will bear two-thirds of any further liabilities.
Where Celanese is unable to reasonably determine the probability of loss or
estimate such loss under this indemnification, Celanese has not recognized any
accrued liabilities relative to this indemnification.
U.S. Superfund Sites - In the United States, Celanese may be subject to
substantial claims brought by U.S. Federal or state regulatory agencies or
private individuals pursuant to statutory authority or common law. In
particular, Celanese has a potential liability under the U.S. Federal
Comprehensive and Liability Act ("Superfund") and related state laws for
investigation and cleanup costs at approximately 100 sites. At most of these
sites, numerous companies, including certain companies comprising Celanese, or
one of its predecessor companies, have been notified that the EPA, state
governing bodies or private individuals consider such companies to be
potentially responsible parties ("PRP") under Superfund or related laws. The
proceedings relating to these sites are in various stages. The cleanup process
has not been completed at most sites and the status of the insurance coverage
for most of these proceeds is uncertain. Consequently, Celanese cannot determine
accurately its ultimate liability for investigation or cleanup costs at these
sites. At December 31, 1999 and 1998, Celanese had provisions totaling (euro)16
million and (euro)17 million, respectively, for U.S. Superfund sites and
utilized (euro)1 and (euro)5 million million of these reserves in December 1999
and 1998, respectively. There were no additional provisions recorded during 1999
or 1998.
As events progress at each site for which it has been named a PRP,
Celanese 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, Celanese 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
Celanese will join with other PRPs to sign joint defense agreements that will
settle, among PRPs, each party's percentage allocation of costs at the site.
Although the ultimate liability may differ from the estimate, Celanese routinely
reviews the liabilities and revises the estimate, as appropriate, based on the
most current information available.
German InfraServs - Celanese has manufacturing operations at five
locations in Germany: Oberhausen, Hoechst, Wiesbaden, Kelsterbach and Knapsack.
On January 1, 1997, coinciding with a reorganization of the Hoechst businesses
in Germany, real estate service companies ("InfraServs") were created to own
directly the land and property and to provide various technical and
administrative services at each of the manufacturing locations.
InfraServs are liable for any residual contamination and other pollution
because they own the real estate on which the individual facilities operate. In
addition, Hoechst, as the responsible party under German public law, is liable
to third parties for all environmental damage that occurred while it was still
the owner of the plants and real estate. The contribution agreements entered
into in 1997 between Hoechst and the
67
<PAGE> 68
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS [GRAPHIC OMITTED]
respective operating companies, as part of the carving out of these companies,
provide that the operating companies will indemnify Hoechst against
environmental liabilities resulting from the transferred businesses.
Additionally, the InfraServs have agreed to indemnify Hoechst against any
environmental liability arising out of or in connection with environmental
pollution of any site. The partnership agreements provide that, as between the
partners, each partner is responsible for any contamination caused predominantly
by such partner. Any liability which cannot be attributed to an InfraServ
partner is required to be borne by the InfraServ in question. In view of this
potential obligation to eliminate residual contamination, the InfraServs have
recorded provisions totaling about (euro)262 million as of December 31, 1999, of
which (euro)55 million has been included in the consolidated reserves for
environmental liabilities of Celanese. The provision of (euro)55 million was
recorded for measures ordered by German authorities, mainly for landfill and
land reclamation activities of InfraServ GmbH & Co. Deponie Knapsack KG. Those
measures were verified by third-party appraisals determining the amount of
provision. Based on the facts and circumstances at December 31, 1999, no
additional charges are expected. If the InfraServ companies default on their
respective indemnification obligations to eliminate residual contamination, the
owners of the remaining participation in the InfraServ companies have agreed to
fund such liabilities, subject to a number of limitations. To the extent that
any liabilities are not satisfied by either the InfraServs or their owners,
these liabilities are to be borne by Celanese in accordance with the Demerger
Agreement. However, Hoechst will reimburse Celanese for two-thirds of any such
costs.
The German InfraServs are owned partially by Celanese, as noted below, and
the remaining ownership is held by various other companies. Celanese's ownership
interest and environmental liability participation percentages for such
liabilities which cannot be attributed to an InfraServ partner were as follows
at December 31, 1999:
<TABLE>
<CAPTION>
Company Ownership % Liability %
- -------------------------------------------------------------------------------------
<S> <C> <C>
InfraServ GmbH & Co. Gendorf KG 39.0% 10.0%
InfraServ GmbH & Co. Oberhausen KG 84.0% 75.0%
InfraServ GmbH & Co. Knapsack KG* 42.0% 47.0%
InfraServ GmbH & Co. Deponie Knapsack KG 100.0% 100.0%
InfraServ GmbH & Co. Kelsterbach KG 100.0% 100.0%
InfraServ GmbH & Co. Hoechst KG 27.2% 33.0%
InfraServ GmbH & Co. Muenchmunster KG 49.0% 49.0%
InfraServ GmbH & Co. Wiesbaden KG 18.9% 10.0%
InfraServ Verwaltungs GmbH 100.0% --
- -------------------------------------------------------------------------------------
</TABLE>
* Includes the 15 percent interest owned by Vintron which is shown as
discontinued operations.
68
<PAGE> 69
Celanese also has obligations related to previously divested entities,
including the Hoechst related liabilities discussed above, and has provided for
such obligations, when the event of loss is probable and reasonably estimable.
(See Note 4)
In 1999 and 1998, the total environmental costs charged to operations for
remediation efforts amounted to (euro)77 million and (euro)94 million,
respectively. The (euro)94 million recorded in 1998 is net of (euro)56 million,
as a result of discounting future outlays for certain fixed period remediation
projects using a 6 percent discount rate. Celanese recognized (euro)3 million of
accretion in 1999, related to the discounted liability. Celanese has no other
discounted environmental reserves.
Management believes that the environmental costs will not have a material
adverse effect on the financial position of Celanese, but may have a material
adverse effect on the results of operations or cash flows in any given year.
25. Special Charges
Special charges on the accompanying consolidated statements of operations
in clude provisions for restructuring which represent costs related to severance
and other benefit programs, as well as costs incurred in connection with a
decision to exit non-strategic businesses and the related closure of facilities.
These measures are based on formal management decisions, establishment of
agreements with the employees' representatives or individual agreements with the
affected employees as well as the public announcement of the restructuring plan.
The components of the 1999 and 1998 restructuring charges were as follows:
<TABLE>
<CAPTION>
Employee Plant/Office
in (euro) millions Termination Benefits Closures Total
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Restructuring reserve at December 31, 1997 10 33 43
Restructuring expense recorded in 1998 34 39 73
Other additions 12 -- 12
Cash and noncash uses during 1998 (27) (42) (69)
Currency translation adjustments during 1998 (3) -- (3)
- -----------------------------------------------------------------------------------------
Restructuring reserve at December 31, 1998 26 30 56
Restructuring expense recorded in 1999 116 102 218
Other additions 2 -- 2
Cash and noncash uses during 1999 (44) (49) (93)
Currency translation adjustments during 1999 8 4 12
- -----------------------------------------------------------------------------------------
Restructuring reserve at December 31, 1999 108 87 195
- -----------------------------------------------------------------------------------------
</TABLE>
Included in the above restructuring reserves of (euro)195 million and
(euro)56 million at December 31, 1999 and December 31, 1998, respectively, are
(euro)7 million and (euro)10 million of long-term reserves included in other
liabilities at December 31, 1999 and December 31, 1998, respectively.
69
<PAGE> 70
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS [GRAPHIC OMITTED]
In 1999, Celanese recorded special charges totaling (euro)559 million, of
which (euro)218 million was recorded as an addition to the restructuring
reserve. The increase to the re structuring reserve pertained primarily to
employee termination severance costs of (euro)116 million. The (euro)116 million
was comprised mainly of (euro)15 million for the re structuring of Mexican
production facilities, (euro)23 million related to the Ticona business, (euro)13
million was due to the restructuring of Canadian production facilities, (euro)22
million pertained to the Acetate business in both the U.S. and Europe, (euro)15
million for both U.S. and European chemical businesses, (euro)10 million for the
shutdown of an oriented polypropylene ("OPP") production line at a European
chemical plant, and (euro)5 million resulted from Hoechst's reorientation of
basic research. In addition, (euro)12 million was recorded due to the closure of
administrative facilities in Canada and Mexico.
In 1999, Celanese also recognized (euro)102 million of restructuring costs
for plant and office closures, of which (euro)29 million related to 3 facilities
in Mexico, (euro)30 million pertained to closure costs associated with
administrative facilities in the U. S. and Canada, (euro)15 million for
contractual losses and other closure costs associated with the shutdown of an
acetaldehyde unit in Europe, and (euro)12 million for the impairment of fixed
assets and other closure costs associated with the shutdown of an OPP production
line at a European plant. In addition, (euro)16 million was recorded for fixed
asset im pairments and closure costs associated with the shutdown of an acetate
facility in Canada.
Special charges of (euro)341 million in 1999 pertained primarily to the
recognition of a (euro)128 million charge as a result of the plumbing cases (See
Note 23), (euro)75 million related to the antitrust actions related to the
sorbates industry (See Note 23), (euro)56 million for fixed asset impairments
which related primarily to the Acetate and Chemical Intermediates businesses,
(euro)28 million for costs associated with the demerger, (euro)52 million for
costs associated with previously divested Hoechst entities of which (euro)40
million related to environmental.
In 1999, new restructuring initiatives identified approximately 2,000
positions to be eliminated, of which 200 positions had been eliminated as of
December 31, 1999. At December 31, 1999, the remaining employee termination
benefits reserve of (euro)108 million pertained primarily to employee severance
payments related to (euro)13 million for the restructuring of Mexican production
facilities, (euro)21 million related to the Ticona busi ness, (euro)12 million
was due to the restructuring of Canadian production facilities, (euro)18 million
pertained to the Acetate business in both the U.S. and Europe, (euro)16 million
for both U.S. and European chemical businesses, (euro)9 million for the shutdown
of an OPP production line in Europe, and (euro)3 million resulted from Hoechst's
reorientation of basic research. In addition, (euro)16 million was due to the
closure of administrative facilities in the U.S., Canada, and Mexico.
70
<PAGE> 71
The remaining plant/office closures reserve of (euro)87 million at
December 31, 1999 pertained primarily to a reserve for (euro)9 million related
to 3 facilities in Mexico, (euro)48 million related to the closure of
administrative facilities in the U.S. and Canada, (euro)12 million for the
shutdown of an acetaldehyde unit in Europe, (euro)2 million for the shutdown of
an OPP production line at a European plant and (euro)8 million for the shutdown
of an acetate facility in Canada. In addition, (euro)8 million related to
estimated contractual losses on a long-term service agreement associated with
the 1998 shutdown of an acetic acid unit in Europe.
In 1998, Celanese recorded special charges totaling (euro)100 million, of
which (euro)73 million was recorded as an addition to the restructuring
reserve. The increase to the restructuring reserve of (euro)73 million pertained
primarily to employee termination severance costs of (euro)34 million, of which
(euro)33 million related to downsizing in the businesses. The (euro)33 million
was comprised of (euro)21 million resulting from Hoechst's reorientation of
basic research, (euro)6 million associated with two U.S. acetate facilities,
(euro)5 million associated with the U.S. corporate headquarters and (euro)2
million related to two European plant facilities. Additionally, Celanese
recognized (euro)39 million of restructuring costs for plant and office
closures, of which (euro)24 million pertained to the estimated loss on the lease
and asset impairments related to the U.S. corporate headquarters, (euro)9
million of estimated contractual losses on a service agreement associated with
the shutdown of an acetic acid unit in Europe, (euro)4 million for the closure
of a European chlorine plant and (euro)2 million for the impairment of fixed
assets associated with the shutdown of an OPP production line at a European
plant. The remaining special charge in 1998 of (euro)27 million pertained to the
Nutrinova antitrust actions. (See Note 23)
Additionally, in 1998 Celanese recorded other additions of (euro)12
million associated with Hoechst's exchange of substantially all of its polyester
fiber and bottle resins busi ness in the U.S., Europe and Mexico for the 49
percent minority interest in Grupo Celanese, S.A., which was not already owned
by Celanese. As a result of this transaction, Celanese is responsible for the
payment of severance and other benefits associated with the elimination of
polyester fiber and bottle resin business employees. This transaction was
reflected as a capital contribution in 1998. (See Note 4)
In 1998 and 1997, employee termination benefits primarily represented
severance and other benefits associated with the elimination of approximately
675 positions worldwide, of which approximately 625 positions had been
eliminated as of December 31, 1999.
71
<PAGE> 72
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS [GRAPHIC OMITTED]
26. Business and Geographical Segments
Effective January 1, 1998, Celanese adopted SFAS No. 131, Disclosures
about Segments of an Enterprise and Related Information. Information with
respect to Celanese's in dustry segments follows:
Business Segments
Acetyl Products, the methyls, acetyls and acetyl derivatives segment,
primarily produces and supplies methanol, formaldehyde, polyols, acetic acid,
vinyl acetate monomer, acetic anhydride and acetate esters;
Chemical Intermediates, the acrylates, oxo products and specialties
segment, produces and supplies acrylic acid, acrylates, amines, carboxylic acids
and oxo alcohols;
Acetate Products produces and supplies cellulose acetate filament and
staple, acetate filter products and advanced fiber material;
Ticona, the technical polymers segment, develops and supplies a broad
portfolio of high performance technical polymers products; and
Performance Products includes Trespaphan, the oriented polypropylene film
business and Nutrinova, the high intensity sweetener and food protection
ingredients business.
The segment management reporting and controlling systems are based on the
same accounting policies as those described in the summary of significant
accounting policies in Note 1. Celanese evaluates performance based on earnings
before interest, taxes, depreciation and amortization (EBITDA), excluding
special charges, EBITDA is calculated by adding depreciation and amortization
expense back to operating profit. Management believes that EBITDA, excluding
special charges, is an appropriate measure for evaluating the performance of its
operating segments as it closely reflects cash flow management. Celanese
excludes special charges from EBITDA for better comparability between periods.
EBITDA eliminates the effect of depreciation and amortization of tangible and
intangible assets. EBITDA, excluding special charges, should be considered in
addition to, not as a substitute for, operating profit, net earnings, cash flows
and other measures of financial performance reported in accordance with U.S.
GAAP.
72
<PAGE> 73
Sales and revenues related to transactions between segments are generally
recorded at values that approximate third-party selling prices. Revenues and
long-term assets are allocated to countries based on the location of the
business. Capital expenditures represent the purchase of property, plant and
equipment.
<TABLE>
<CAPTION>
Chemical Perfor-
Acetyl Inter- Acetate mance- Total Recon- Consoli-
in (euro) millions Products mediates Products Ticona Products Segments ciliation dated
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1999:
Sales to external customers 1,487 847 739 788 397 4,258 60 4,318
Inter-segment revenues 74 37 -- -- -- 111 (111) --
Operating (loss) (65) (47) (46) (96) (93) (347) (174) (521)
EBITDA excluding special charges 89 84 95 123 42 433 (56) 377
Depreciation and Amortization 101 74 60 65 36 336 3 339
Capital expenditures 127 46 30 40 12 255 7 262
Special charges 53 57 81 154 99 444 115 559
Total assets 1,805 1,221 916 1,493 518 5,953 1,574 7,527
- -----------------------------------------------------------------------------------------------------------------------------------
1998:
Sales to externalCustomers 1,438 850 839 750 407 4,284 60 4,344
Inter-segment revenues 80 70 -- -- -- 150 (150) --
Operating profit (loss) 152 54 94 53 (12) 341 (173) 168
EBITDA excluding special charges 246 111 154 115 52 678 (98) 580
Depreciation and Amortization 85 56 54 62 34 291 21 312
Capital expenditures 70 97 69 66 35 337 8 345
Special charges 9 1 6 -- 30 46 54 100
Total assets 1,541 1,070 808 1,352 406 5,177 2,181 7,358
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The reconciliation column includes (a) operations of certain other
operating entities and their related assets, liabilities, revenues and expenses,
(b) the elimination of inter-segment sales and net receivables and payables, (c)
assets and liabilities not allocated to a segment, (d) corporate center costs
for support services such as legal, accounting and treasury functions and (e)
net assets (liabilities) of discontinued operations. Additionally, Celanese
recognized special charges in 1999 and 1998 related to restructuring costs,
write-off of fixed assets, shutdown of a facility, and impairment of goodwill.
(See Note 25) Other operating entities consist primarily of companies which
provide infrastructure and procurement services.
73
<PAGE> 74
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS [GRAPHIC OMITTED]
The following table presents financial information based on the geographic
location of the manufacturing facilities of Celanese:
<TABLE>
<CAPTION>
North Thereof Thereof Thereof Thereof Rest of Consoli-
in (euro) millions America USA Canada Mexico Europe Germany Asia World dated
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1999:
Total assets 5,394 4,042 335 1,017 1,611 1,265 259 263 7,527
Long-lived assets 1,349 1,031 86 232 362 297 212 9 1,932
Operating profit (loss) (117) (32) (29) (56) (411) (353) 5 2 (521)
Net sales 2,572 2,189 127 256 1,593 1,183 103 50 4,318
Depreciation and amortization 246 174 14 58 82 69 10 1 339
Capital expenditures 98 82 4 12 66 52 98 -- 262
- -----------------------------------------------------------------------------------------------------------------------------------
1998:
Total assets 4,945 3,656 328 961 2,074 1,794 131 208 7,358
Long-lived assets 1,150 964 63 123 415 347 101 11 1,677
Operating profit (loss) 246 114 77 55 (80) (81) 4 (2) 168
Net sales 2,573 2,137 179 257 1,618 1,063 91 62 4,344
Depreciation and amortization 221 193 11 17 79 64 10 2 312
Capital expenditures 231 179 12 40 96 78 16 2 345
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
27. Information Relating to the Board of Management and Supervisory Board of
Celanese AG
<TABLE>
<CAPTION>
in (euro) millions 1999
- ---------------------------------------------------------------------------
<S> <C>
Supervisory Board compensation 0.3
Board of Management compensation 10.0
Pensions for former members of the Board of
Management or their surviving dependents --
Pension provisions for former members of the Board
of Management or their surviving dependents --
- ---------------------------------------------------------------------------
</TABLE>
74
<PAGE> 75
28. Framework for Accounting Policies in Accordance with U.S. GAAP and
Explanation of Major Differences
Compared with German Accounting Policies
The 1999 consolidated Financial Statements for Celanese have been prepared
in accordance with United States Generally Accepted Accounting Principles or
U.S. GAAP. The financial statements meet the requirements of German law as set
out in ss. 292a HGB for an exemption of preparing the financial statements in
accordance with German GAAP. The consolidated financial statements and the
Management's Discussion and Analysis of Financial Condition and Results of
Operations (MD&A) are compatible with the European accounting directives.
The accounting policies of entities in accordance with U.S. GAAP are based
on the objective of providing investors with decision-relevant information. It
is thus not possible to show lower profits for the protection of creditors or
influence results by using tax-based values (requirement for income and expenses
to be recorded in the commercial financial statements in order to be accepted
for tax purposes).
Based on the assumption that decision-relevant information should be
provided to investors, it follows that accounting policies should be aimed at
showing an entity's operating results, rather than determining the amount of
distributable profits whilst bearing in mind the need for protection of
creditors.
As a rule, accounting policies in accordance with U.S. GAAP have a lower
level of prudence than German accounting policies, which leads to the following
major differences:
o economic substance has precedence over legal form.
The principle of substance over form has a stronger influence in
accounting policies in accordance with U.S. GAAP than in Germany. The principle
states that the economic substance of a transaction is of greater importance
than the formal (legal) form.
o the consistency requirement (recognition, valuation, classification,
consolidation) is to be strictly followed; changes in accounting policies are
only permitted if it can be proven that the change leads to an improvement in
the fair presentation of the financial statements;
o the acquisition cost and realisation principles are generally valid, however
"unrealized" profits are to be included in the profit and loss account in
specific cases in order to determine the actual profit for the period;
o minimization of possibilities of setting up and releasing hidden reserves;
75
<PAGE> 76
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS [GRAPHIC OMITTED]
Consolidated financial statements in accordance with U.S. GAAP consist of the
following:
o consolidated balance sheet,
o consolidated statement of income,
o consolidated changes of shareholders' equity
o consolidated statement of cash flows,
o notes to the consolidated financial statements
There are no specific rules setting out the way in which individual items
should be laid out in the balance sheet and statement of income. The balance
sheet is set out in order of liquidity. The format of the consolidated statement
of income is the cost of sales classification method.
The notes to the consolidated financial statements include all disclosures
required as set out in article 266 and article 275 HGB. Minority interests may
not be included as part of group shareholders' equity in the consolidated
balance sheet. They must be shown as a separate item between third-party capital
and shareholders' equity. The consolidated statement of income concludes with a
disclosure of earnings per share. Minority interests' share in earnings is not
included in earnings per share. Description of major differences in accounting
policies compared with German accounting policies
General comments
The consolidation is presented on a basis as if Celanese has been a legal
group during all periods presented.
The major differences in accounting policies in accordance with U.S. GAAP
compared with German accounting policies in the consolidated financial
statements of Celanese AG are as follows:
(1) Discontinued operations
Assets and liabilities of discontinued operations are shown net in the balance
sheet. Losses from discontinued operations, net of taxes are shown below
operating results in the statement of income.
(2) Impairment of assets
The recoverability of the carrying amount of long lived assets is assessed by
comparison of the carrying amount of the asset to future net undiscounted cash
flows generated by such assets. This fair value is the basis for potential
impairment write-offs.
(3) Unrealized profits included in the statement of income, which is a breach of
the realization principle as understood in Germany Although the realization
principle is a specific part of U.S. GAAP, in contrast to German accounting
policies "unrealized" profits must be included in the statement of income in
certain specific cases. The following balance sheet items are translated at
foreign
76
<PAGE> 77
exchange rates ruling at the end of the year even if this leads to an
"unrealized" profit compared with using the exchange rate at the booking date:
o foreign currency receivables and liabilities;
o derivative financial instruments to the extent they do not represent a hedge;
o short-term securities.
(4) Deferred taxes
Deferred tax assets must be included to their full extent. This also applies to
tax loss carry forwards which can be offset against future profits for tax
purposes and which are thus to be reflected as deferred tax assets. Deferred tax
assets are to be reviewed for their realization regularly and are to be written
down if appropriate.
(5) Definition of "production costs"
U.S. GAAP requires the use of "full" production costs, consisting of cost of
materials and production wages (direct and indirect) together with a proportion
of depreciation of property, plant and equipment. It is not permitted to limit
the calculation of production costs merely to direct costs.
(6) Pension provisions
Pension provisions are to be calculated actuarially using the projected unit
credit method. Use of the German tax-based entry-age-normal method (para 6a
Income Tax Act) is not permitted.
Expected wage and salary increases until pensionable age are to be
considered when calculating the pension liability to beneficiaries under the
scheme. Capital market interest rates are to be used to discount the amounts,
which can partly offset this increase, as the rate can be higher than the 6
percent used for tax purposes in Germany (article 6a EStG). Pension provisions
are to be calculated for beneficiaries immediately they become scheme members
(not only as from their 30th. birthday). Appropriate fluctuation rates should be
used when considering the provisions needed for this group of beneficiaries.
Overall, the U.S. GAAP calculation methods lead to a higher pension
provision than using the German entry-age-normal method.
(7) Other provisions and accruals
Provisions and accruals may only be set up to cover obligations to third
parties. Internal accruals are not permitted.
(8) Accounting for leases
In contrast to the use of German tax-based leasing provisions, U.S. GAAP
requirements more often lead to leased items being recognized in the balance
sheet of the lessee rather than of the lessor. U.S. GAAP requires the
contractual party which is the economic owner and which thus has the major share
of risks and opportunities arising from use of the item being leased to
recognize the lease in its balance sheet.
77
<PAGE> 78
REPORT OF THE SUPERVISORY BOARD [GRAPHIC OMITTED]
Dear Shareholder,
Celanese AG came into being in 1999. The demerger of the industrial
chemicals of Hoechst AG - Celanese Chemicals & Acetate, Ticona, Nutrinova and
Trespaphan - into Celanese AG on October 22, 1999, and the listing of the new
company on the New York and Frankfurt stock exchanges on October 25, 1999, were
the key milestones last year.
Prior to the actual demerger of the industrial chemicals of Hoechst AG to
Celanese AG, which until October 22, 1999, was known as Diogenes Erste
Vermogensverwaltungs AG, the Supervisory Board was constituted at its meeting on
September 1, 1999 and elected Mr. Gunter Metz as Chairman. The Supervisory Board
additionally formed at this inaugural meeting a Personnel and Compensation
Committee, a Financial and Audit Committee and a Strategy Committee. The
Supervisory Board appointed Mr. Claudio Sonder Chairman of the Board of
Management with effect from September 1, 1999 through October 22, 2002. Messrs.
Edward Munoz, Perry W. Premdas, Ernst Schadow and Knut Zeptner were appointed
members of the Board of Management with effect from September 1, 1999 through
October 22, 2002.
Messrs. Khaled S. Buhamrah, Alan R. Hirsig, Joannes C.M. Hovers, Gunter
Metz, Alfons Titzrath and Kendrick R. Wilson were elected to the Supervisory
Board by a resolution of the General Meeting of Diogenes Erste
Vermogensverwaltungs AG on July 29, 1999.Ms. Ute Sturm and Messrs. Hanswilhelm
Bach, Gerd Decker, Reiner Nause, Ralf Sikorski and Werner Zwoboda were appointed
by the court as employees' representatives on the Supervisory Board with effect
from October 22, 1999, the date of demerger. At its meeting on December 14,
1999, the Supervisory Board elected Mr. Reiner Nause Deputy Chairman. In
addition, the Supervisory Board, pursuant to Article 27 para 3 of the German
Co-Determination Act, set up a Mediating Committee.
The Board of Management and other managers took important steps in the
year under review to focus the business portfolio consistently and rapidly on
the core activities and thus to open up new perspectives and the way to growth,
innovation and higher profitability. With the goal being to restructure the
business portfolio, the Board of Management first of all undertook the necessary
divestments: the sale of the 51 percent shareholding in the generics producer
Copley which was transferred as part of the demerger to Celanese AG, the sale of
the 50 percent holding in Targor, the polypropylene joint venture with BASF, the
sale of the 46 percent holding in Dyneon, the fluoropolymer joint venture with 3
M, the sale of the membrane business Celgard in the United States and Japan, the
sale of the phosphorus chemical business Thermphos and the sale of the polyester
bottle chip plant in Millhaven, Canada. The gaining of full ownership of
Celanese Canada through an offer to minority shareholders and the acquisition of
Korean Engineering Plastics Corp. by Ticona mark at the same time important
steps in an active growth strategy in the company's core businesses that will
continue.
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The strategy of Celanese AG, its consistent implementation and further
development were also key issues in discussions between the Board of Management
and the Supervisory Board, as were the individual transactions. Other important
issues were the planned investments, divestments, operating and strategic
planning, implementation of a corporate governance system in line with
international best practice (including an efficient risk management system), the
introduction of a demanding overall compensation system and Group-wide
management development, as well as Y2K preparations at Celanese AG.
In addition, the Board of Management informed the Supervisory Board in
detail at its meetings on September 1, 1999, December 14, 1999, and March 15,
2000, as well as during the current reporting, about the company's business
developments and situation. The Chairman of the Supervisory Board was kept
updated in regular, individual talks with the Board of Management; he was in
constant contact especially with the Chairman of the Board of Management. The
Supervisory Board performed the tasks incumbent upon it according to the law and
the Articles of Association, namely, as supervisor of, and advisor to, the Board
of Management in its conduct of business. The Supervisory Board was satisfied
that the Board of Management properly exercised its guiding and monitoring
functions in respect of the affiliates of Celanese AG and their executive
bodies.
The approvals required from the Supervisory Board in respect of certain
business decisions of the Board of Management and in compliance with the rules
of procedure were granted in each case unanimously by the Supervisory Board. In
its decision making it took into account not only business and strategic
considerations but also important social aspects.
At its meeting on December 13, 1999, the Strategy Committee considered in
particular the strategic planning of the Chemicals & Acetate and Ticona business
segments. Other issues for the Strategy Committee were technology focuses, the
further development of environmental protection and safety as well as efficient
management development in the Group in line with the needs of a global company.
At its meeting on December 13, 1999, the Financial and Audit Committee
considered the business developments in 1999 and the outlook for the year 2000.
As part of the reporting on the financial situation of the company, capital
market themes and the Y2K issue were also discussed. An overview of the 1999
external auditing program and the auditing program of the Corporate Auditing for
1999 and 2000 took place in the presence of the auditor. One reason for the
overview and discussion was the planned share buy-back program in the year 2000.
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<PAGE> 80
REPORT OF THE SUPERVISORY BOARD [GRAPHIC OMITTED]
The Personnel and Compensation Committee sat twice in the year under
review.
The 1999 annual Financial Statements of Celanese AG and the management's
discussion & analysis were produced in accordance with the German Commercial
Code and the German Stock Corporation Law and audited by the KPMG Deutsche
Treuhand-Gesellschaft Aktiengesellschaft Wirtschaftsprufungsgesellschaft, which
issued an unqualified opinion. This also applies to the Group Financial
Statements based on U.S. GAAP. The annual Financial Statements of Celanese AG
and the Group Financial Statements were drawn up in Euro. The Group Financial
Statements were supplemented by a Group management report and further
explanations pursuant to Article 292 a of the German Commercial Code. The
existing U.S. GAAP Group Financial Statement provides an exemption under Article
292 a of the German Commercial Code from the obligation to draw up a Group
Financial Statement according to German law.
All financial report documents and the appropriation of earnings proposed
by the Board of Management as well as the auditor's reports were available to
the Supervisory Board on time. They were checked by the Financial and Audit
Committee and the Su-pervisory Board; for this reason the auditors attended the
meeting of the Financial and Audit Committee. The Supervisory Board concurred
with the results of the auditing by the auditors and concluded from its own
examination that no objections should be raised. At its meeting on March 15,
2000, the Supervisory Board noted the Group financial statements for 1999,
approved the annual financial statements for 1999 of Celanese AG and also
approved the appropriation of earnings proposed by the Board of Management.
Pursuant to Article 312 of the German Stock Corporation Act, the Board of
Management produced a report on relations with affiliated companies (dependence
report) because Celanese AG in the financial year 1999 was a dependent company
of Hoechst AG until October 22, 1999. The legally required key statement is
given in the management's discussion & analysis.
The dependence report was audited by the KPMG Deutsche
Treuhand-Gesellschaft Aktiengesellschaft Wirtschaftsprufungsgesellschaft, which
issued the following unqualified opinion:
"Following our dutiful audit and evaluation we confirm that
1. the actual details in the Report are correct,
2. with the legal transactions indicated in the Report the consideration
given by the company was not inappropriately high."
80
<PAGE> 81
The Financial and Audit Committee and the Supervisory Board checked the
dependence report and saw no reason for objection. The dependence report and
audit report were discussed by the Financial and Audit Committee and the
Supervisory Board at their meetings on March 14 and 15, 2000. Following the
final result of the review by the Supervisory Board, no objections to the
statement of the Board of Management at the end of the dependence report are to
be raised.
The company management, staff and employees' representatives worked
together in full awareness of their responsibilities and with high personal
commitment in 1999 - initially as part of the Hoechst Group and as of October
22, 1999, at Celanese AG. The Supervisory Board recognizes this fact and wishes
to thank them.
Frankfurt am Main, March 2000
The Supervisory Board
/s/ Guenter Metz
Guenter Metz
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<PAGE> 82
THE SUPERVISORY BOARD [GRAPHIC OMITTED]
The Supervisory Board
(as of December 31, 1999)
Dr. Guenter Metz
(since September 1, 1999)
Chairman, Former Deputy Chairman of the
Board of Management of Hoechst AG (1), (2), (3), (4)
Member of the Supervisory Board:
Aventis S.A., Hoechst AG, Schenker AG, Walter
Bau AG, Zurich Agrippina AG
Reiner Nause
(since October 22, 1999)
Deputy Chairman, Technician, Chairman of the
Central Workers' Council of
Celanese Chemicals
Europe GmbH, Chairman of the Group Workers'
Council of Celanese AG (1), (2), (4)
Dr. Hanswilhelm Bach
(since October 22, 1999)
Graduate chemist, Chairman of the Senior
Executives' Committee of Celanese Chemicals
Europe GmbH, Ruhrchemie site, Chairman of the
Group Senior Executives' Committee of Celanese AG (3)
Khaled Saleh Buhamrah
(since September 1, 1999)
Chairman and Managing Director of
Petrochemical Industries Co., Kuwait (4)
Member of the Board of Directors
of Kuwait Petroleum Corporation
Gerd Decker
(since October 22, 1999)
Electrician, Chairman of the Workers' Council of
Trespaphan GmbH, member of the Group Workers'
Council of Celanese AG (3)
Alan R. Hirsig
(since September 1, 1999)
Former Chief Executive Officer
of ARCO Chemical Company, USA (2), (4)
Member of the Board of Directors of Hercules Inc.,
Checkpoint Systems Inc. and
Philadelphia Suburban Corporation
Dr. Joannes C. M. Hovers
(since September 1, 1999)
Former Chief Executive Officer of Oce N.V.,
Netherlands (1), (4)
Member of the Supervisory Board:
Ericsson Telecommunicatie B.V.,
De Nederlandsche Bank N.V., Hoechst AG,
Koninklijke Grolsch N.V., Mignoz en De Block N.V.,
Randstad Holding N.V.
Ralf Sikorski
(since October 22, 1999)
Labor union secretary,
Deputy Regional Head of the IG BCE in
Hesse (4)
Ute Sturm
(since October 22, 1999)
Office worker, representative of the DAG
(German white-collar workers' union),
Deputy Chairman of the Workers' Council of
Celanese Chemicals Europe GmbH, Frankfurt site (1)
Dr. Alfons Titzrath
(since September 1, 1999)
Chairman of the Supervisory Board
of Dresdner Bank AG (3)
Member of the Supervisory Board:
Allianz AG (Deputy Chairman), Hoechst AG,
Muenchener Rueckversicherungs-Gesellschaft AG,
RWE Aktiengesellschaft, VAW aluminium AG
Kendrick R. Wilson III
(since September 1, 1999)
Managing Director
of Goldman Sachs & Co., USA (3)
Member of the Board of Directors of Bank United Corp.,
Anthracite Capital Corp. LLC and
American Marine Holdings Corp.
Werner Zwoboda
(since October 22, 1999)
Mechanic, Chairman of the Central Workers'
Council of Ticona GmbH, member of the
Group Workers' Council of Celanese AG (4)
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Status December 31, 1999
(1) Committee in accordance with Art. 27 MitbestG (German Co-Determination Act),
(2) Personnel and Compensation Committee,
(3) Financial and Audit Committee,
(4) Strategy Committee
Dr. Dirk Oldenburg
(until August 31, 1999)
Chairman,
Former Chief Legal Officer of Hoechst AG
Dr. Guenther Falcke
(until August 31, 1999)
Deputy Chairman,
Former company lawyer of Hoechst AG
Dr. Joachim Kaffanke
(until August 31, 1999)
Former company lawyer of Hoechst AG
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THE BOARD OF MANAGEMENT [GRAPHIC OMITTED]
Board of Management
Claudio Sonder
(since September 1, 1999)
Chairman
Member of the Supervisory Board of Dresdner
Bank Lateinamerika AG,
Member of the Board of Directors of Clariant AG
Edward Munoz
(since September 1, 1999)
Member of the Board of Directors
of Polyplastics Company Ltd.
Perry Premdas
(since September 1, 1999)
Ernst Schadow
(since September 1, 1999)
Member of the Supervisory Board of
Gerling-Konzern Allgemeine Versicherungs-AG
and of the TUV Sueddeutschland Holding AG
Knut Zeptner
(since September 1, 1999)
Member of the Supervisory Board
of Klockner Pentaplast GmbH
Member of the Board of Directors
of the Chemical Manufacturers' Association
and of Messer Griesheim Industries Inc.
Helmut Kloes
(until August 31, 1999)
Former Head of Corporate Accounting of Hoechst AG
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FIVE-YEAR SUMMARY OF FINANCIAL DATA [GRAPHIC OMITTED]
<TABLE>
<CAPTION>
in (euro) millions, except net income per ordinary share, 1999 1998 1997 1996 1995
percentages and number of employees (audited) (audited) (audited) (unaudited) (unaudited)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Statement of Operations Data
(for period):
Net sales 4,318 4,344 4,951 4,325 4,395
Cost of sales (3,621) (3,454) (3,862) (3,392) (3,251)
Gross profit 697 890 1,089 933 1,144
Selling, general and administrative
Expenses (570) (535) (575) (329) (233)
Research and development expenses (79) (101) (133) (128) (114)
Special charges (559) (100) (103) (119) (266)
Operating profit (loss) (521) 168 267 347 587
Interest and other income, net (1) 71 75 83 93 109
Income tax benefit(expense) 83 (109) (83) (148) (177)
Minority interests 7 (40) (63) (61) (88)
Earnings (loss) from continuing operations (502) (56) 38 46 212
Earnings (loss) from discontinuing operations 310 12 9 (128) (210)
Net earnings (loss) (207) (44) 47 (82) 2
Basic net earnings (loss) per
ordinary share (3.70) (0.79) 0.84 (1.47) 0.04
Balance Sheet Data (end of period):
Total assets 7,527 7,358 6,185 5,657 5,254
Debt 948 1,479 1,888 1,903 1,844
Shareholders' equity 2,866 2,736 1,250 1,024 936
Other Data:
Operating margin (%) (12.06) 3.87 5.39 8.02 13.36
Depreciation and amortization of
tangible and intangible assets 339 312 290 195 256
Capital expenditures on tangible fixed Assets 262 345 368 338 306
Number of employees on a continuing basis
(end of period) in thousands 14.9 15.8 17.5 17.9 17.2
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Interest and other income, net represents equity in net earnings of
affiliates, interest expense, and interest and other income, net, as
defined in Celanese's Consolidated Financial Statements.
<PAGE> 86
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