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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
[Fee Required]
For the Fiscal Year ended December 31, 1993
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 [No Fee Required]
For the transition period from to ____________ to _____________
Commission File Number 33-13326
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HOECHST CELANESE CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 13-5568434
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1041 ROUTE 202-206
BRIDGEWATER, NEW JERSEY 08807
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (908) 231-2000
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
____ ____
State the aggregate market value of the voting stock held by non-affiliates of
the registrant. All voting stock is held by an affiliate of the registrant.
Indicate the number of shares outstanding of each of the registrant's classes
of common stock, as of the latest practicable date. As of March 1, 1994 there
were 10,000 shares of Hoechst Celanese Corporation common stock outstanding. All
of such shares are owned by the registrant's parent, Hoechst Corporation.
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NOTE: Unless the context otherwise requires, when used in this 1993 Annual
Report on Form 10-K ("10-K") "Hoechst Celanese" and the "Company" includes
the consolidated corporation or any one or more of its subsidiaries,
divisions or joint ventures, as applicable.
TABLE OF CONTENTS
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ITEM PAGE
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PART I
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1. Business........................................................... 1
2. Properties......................................................... 9
3. Legal Proceedings.................................................. 10
4. Submission of Matters to a Vote of Security Holders................ 13
PART II
5. Market for Registrant's Common Equity and Related
Stockholder Matters............................................... 14
6. Selected Financial Data............................................ 14
7. Management's Discussion and Analysis of Financial
Condition and Results of Operations............................... 14
8. Financial Statements and Supplementary Data........................ 21
9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure............................... 51
PART III
10. Directors and Executive Officers of the Registrant................ 51
11. Executive Compensation............................................ 54
12. Security Ownership of Certain Beneficial Owners and Management.... 57
13. Certain Relationships and Related Transactions.................... 57
PART IV
14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.. 58
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PART I
ITEM 1. BUSINESS
THE COMPANY
The Company was formed in 1918 and was renamed Hoechst Celanese Corporation in
February 1987. The Company manufactures and sells, principally to industrial
customers, a diversified line of products including textile and technical
fibers; acetate cigarette filter tow; specialty and bulk chemicals and
pharmaceuticals; prescription drugs; crop protection products; veterinary
pharmaceuticals and animal-feed additives; engineering plastics; polyethylene;
presensitized offset printing plates; dyes and pigments; and polyester film. The
Company's operations are currently segmented as follows: Chemicals; Fibers and
Film; Specialties and Advanced Materials (comprised of the Advanced Materials
Group and Specialty Chemicals Group); Life Sciences and Advanced Technology.
The Company is wholly owned by Hoechst Corporation, which in turn is wholly
owned by Hoechst Aktiengesellschaft ("Hoechst AG"), a large chemical company
headquartered in Frankfurt, Federal Republic of Germany. Hoechst AG and its
consolidated entities (the "Hoechst Group") consist of over 270 companies. The
Hoechst Group operates in more than 120 countries. The Hoechst Group's sales in
1993 were approximately $27.7 billion. See "Certain Relationships and Related
Transactions." The Hoechst Group is one of the largest manufacturers of
prescription drugs and one of the four largest producers and marketers of
chemicals and chemical-related products in the world.
Beginning January 1, 1991, the Company consolidated Celanese Mexicana, S.A.
("Celmex"), a 40-percent-owned affiliate, in its financial statements. Hoechst
Celanese with Hoechst AG owns 51 percent of the outstanding voting shares of
Celmex. The Company previously accounted for Celmex under the equity method.
In November 1993, the Company acquired 52.96 percent of the outstanding shares
of Copley Pharmaceutical, Inc. ("Copley"), a generic drug manufacturer, in a
tender offer for an aggregate purchase price of $546 million.
The Company's principal executive offices are located at 1041 Route 202-206,
Bridgewater, New Jersey 08807; its mailing address is Route 202-206, Post Office
Box 2500, Somerville, New Jersey 08876-1258; and its telephone number is (908)
231-2000.
DESCRIPTION OF BUSINESS SEGMENTS
CHEMICALS SEGMENT
This segment consists of Hoechst Celanese Chemical Group, Inc., the chemical
operations of Celmex and the chemical operations of Celanese Canada Inc.
("Celanese Canada"), approximately 56% owned by the Company. The Company entered
the petrochemical field in the United States in 1945, primarily to obtain
supplies of acetic acid and related chemical raw materials for its fibers
operations. As its internal chemical usage expanded and additional products were
developed, the segment began selling chemicals to others. This segment employs
approximately 4,100 people and produces more than 60 different chemicals.
The segment produces chemicals by upgrading hydrocarbons such as ethylene,
propylene, natural gas and butane. The hydrocarbon raw materials are purchased
on the open market, principally under long-term contracts.
The major chemicals produced fall into two broad product groups: (1) methyl
chemicals, oxo-alcohols and solvents; and (2) acetyl chemicals, monomers and
ethylene oxide/glycol. Methyl chemicals are principally used in
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plastics, polyesters, adhesives, solvents, synthetic lubricants, fuel additives
and coatings. Ethylene oxide/glycol, oxo-alcohols and solvents are principally
used in surfactants, coatings, rocket propellants, antifreeze, herbicides and
polyesters. Monomers and acetyl chemicals are primarily used in water-based
paints, adhesives, textile finishes, paper coatings, manufactured fibers,
pharmaceuticals, herbicides and plastics.
With respect to substantially all of its major products, this segment is
either the largest or second largest United States merchant market supplier.
Other major United States producers are: of methyl chemicals, Borden, Inc., E.I.
duPont de Nemours & Co., Inc. ("duPont"), Georgia-Pacific Corporation and
Hercules Incorporated; of alcohols, duPont, Eastman Chemical Products, Inc.
("Eastman"), Shell and Union Carbide Corporation; and of monomers and acetyl
chemicals, BASF, duPont, Eastman, Quantum Chemical Corporation, Rohm and Haas
Co. and Union Carbide Corporation.
Celmex is the sole or a major Mexican producer of a variety of products
including vinyl acetate, acetic acid, acetic anhydride, acrylates, and phthalic
anhydride. A substantial portion of the chemical production of Celmex is sold in
the export market, in competition with world producers.
Celanese Canada is the sole or a major Canadian producer of acetic acid,
acetic anhydride, formaldehyde, pentaerythritol and vinyl acetate monomer. A
substantial portion of the chemical production of Celanese Canada is sold in the
export market, in competition with world producers. Celanese Canada operates a
world scale methanol unit at its Edmonton plant site in Alberta. The methanol
operation is owned by Celanese Canada and the Company. Other major Canadian
producers of methanol are Nova Corporation of Alberta and Methanex Corporation
(formerly Ocelot Industries Ltd.).
Utilizing both acquired and internally developed technology, the segment is
continually working to upgrade its chemical processes to improve energy, raw
material and capital utilization. By producing a number of its major chemicals
at different plant locations, the segment attempts to avoid or minimize the
effect of production disruptions at any one location.
FIBERS AND FILM SEGMENT
This segment is comprised of the following business areas: Textile Fibers,
Technical Fibers and Polyester Resins and Films. The Fibers and Film segment
employs approximately 17,200 people and operates plants in the United States and
abroad. The major product lines include: polyester staple, filament, resins,
monofilament, spunbond and film; acetate filament and tow; purified terephthalic
acid ("PTA"); dimethylterephthalate ("DMT") and polybenzimidazole ("PBI"). The
Company is one of the largest producers of manufactured fibers in the United
States. It is also one of the leading producers of polyester film. The Company
conducts research and development, manufactures, markets and sells a combination
of branded and unbranded fibers and film products for a wide variety of end
uses. The Company sells most of its fibers and yarns directly to textile mills,
tire manufacturers, cigarette makers and other intermediate processors. Among
the internationally registered trademarks are: Trevira(R), Celebrate!(R),
Hostaphan(R) and Trespaphan(R).
Polyester staple and filament, commonly recognized by their Trevira(R)
trademark, are principally used in wearing apparel, upholstery, floor coverings,
home furnishings, and woven and non-woven fabrics. Polyester staple and filament
are also used in tires, belts, hoses, thread and plastic reinforcement.
The Company is one of the largest producers in the United States of cellulose
acetate products. Cellulose acetate flake is produced for sale or conversion to
acetate tow for use in cigarette filters and to filament used in apparel and
industrial applications. Polyester monofilament is used in zippers, conveyor
belting and dryer and forming screen applications in the paper industry. Roofing
and geotextile applications are the primary end uses for polyester spunbond.
Polyester resins are primarily used in beverage, pharmaceutical and other
containers and for the manufacture of polyester fibers.
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In 1991, the Company entered into a worldwide joint venture agreement with
Hoechst AG and certain Mitsubishi companies to establish a joint venture for the
production, marketing and sale of polyester film. The joint venture has regional
centers in the United States, Germany and Japan. As provided by the joint
venture agreement, the Company's polyester film business, in January 1992, was
transferred to a partnership, the partners of which are subsidiaries of the
Company and Mitsubishi.
Hostaphan(R) polyester film, manufactured by the Company, is used in many
consumer products including audio, video and computer tape; food packaging;
solar window film; labels and decals; graphic arts film; photoresist; and other
electronics applications. Trespaphan(R) polypropylene film is imported for
resale from other companies in the Hoechst Group and is used in packaging,
capacitors, pressure sensitive tape and electric motor insulators.
The key raw materials used by the Fibers and Film segment in production are
either supplied internally or purchased on the open market, generally under
long-term contracts. Polyester fibers are produced from PTA or DMT, which are
either purchased from other suppliers or produced by Cape Industries, 100% owned
by the Company, and ethylene glycol which is purchased from other suppliers and
is also produced by the Company. Acetate fibers are made principally from acetic
anhydride produced mainly by the Company and from wood pulp purchased by the
Company. See "Business-Raw Materials and Energy."
Major manufactured polyester and acetate fibers competitors include: Allied-
Signal, Inc., duPont, Eastman, ICI Americas, Inc. ("ICI"), Rhodia AG and
Wellman, Inc.
Major United States and foreign polyester film producers include: duPont, ICI,
Toray Industries (America), Inc. and Teijin America, Inc. Competing producers of
PTA and DMT in the United States are Amoco Chemicals Corporation and duPont,
respectively.
Celmex is the sole or a major Mexican producer of a variety of products
including polyester high denier industrial yarn, industrial staple, textile
staple and filament, carpet staple, textile nylon filament, industrial nylon
filament, cellulose acetate flake, yarn, and cigarette filter tow, polyester
bottle resin, laminated and printed film and bioriented polypropylene. Celanese
Canada is the sole or a major Canadian producer of a variety of products
including polyester, textile staple, carpet staple, cellulose acetate filament
yarn, cellulose acetate flake and cigarette filter tow. A substantial portion of
the fibers production of both Celmex and Celanese Canada is sold in export
markets in competition with world producers.
The Company (owning approximately a 30% interest) and China National Tobacco
Company are involved in a joint venture that manufactures cellulose acetate tow
for cigarette filters at a facility in Nantong, People's Republic of China. Two
more joint venture manufacturing sites for the same product are under
construction and expected to come on stream in late 1995. They are located at
Kunming and Zhuhai, People's Republic of China.
SPECIALTIES AND ADVANCED MATERIALS SEGMENT
This segment consists of the Advanced Materials Group and Specialty Chemicals
Group. This segment employs approximately 4,000 people and produces, imports and
sells a wide variety of specialty products.
Advanced Materials Group. The Advanced Materials Group produces a variety of
high-performance engineering thermoplastics, including acetal copolymer sold
under the trademarks Celcon(R) and Hostaform(R), Celanese(R) nylon 6/6 resins,
thermoplastic polyester sold under the trademarks Celanex(R) and Impet(R),
liquid crystal polymers sold under the trademark Vectra(R), long fiber-
reinforced thermoplastics sold under the trademark Celstran(R) and thermo-
plastic alloys sold under the trademark Vandar(R), as replacements for metals
and other plastics in a wide variety of end uses. The Group's product lines also
include Hostalen(R) GUR, ultra high molecular weight polyethylene. The Company
produces the basic raw materials for Celcon(R), Celanex(R), Impet(R) and
Vandar(R) resins and purchases them for Celanese(R) nylon 6/6 and Vectra(R) and
Celstran(R) resins. Other major United States producers of one or more similar
engineering thermoplastics are duPont, General Electric Company and BASF. The
Group also resells
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Hostaflon(R) fluoropolymers manufactured by Hoechst AG.The Company participates
in Fortron Industries, a joint venture (with a 50% interest; Kureha Chemical
Industry Co., Ltd. ("Kureha") having a 50% interest). The joint venture has
completed the construction of a plant to manufacture Fortron(R) polyphenylene
sulfide. Since 1987 the Company has marketed Fortron(R) which is manufactured by
Kureha.
The Company participates in Polyplastics Co., Ltd. (with a 45% interest;
Daicel Chemical Industries, Ltd. having a 55% interest) which produces and sells
acetal copolymer, thermoplastic polyester resins and other polymeric products
and in Ticona Polymerwerke GmbH (with a 41% interest; Hoechst AG having a 59%
interest) which produces acetal copolymer resins marketed by both Hoechst AG and
the Company. The Company also participates in Taiwan Engineering Plastics Co.,
Ltd. (with a 12% interest; Polyplastics Co., Ltd. having a 30% interest; Hoechst
AG a 32% interest; Hoechst Taiwan Co., Ltd. a 1% interest; and Chang Chun Group
a 25% interest) which produces and markets acetal copolymer resins.
Specialty Chemicals Group. This Group's product lines include: textile dyes,
organic pigments, colorant and additive masterbatches, resins, sodium
hydrosulfite, surfactants, and other specialty chemicals which are mainly used
in the textile, ink, pulp and paper, paint, coatings, plastics, personal care,
detergent and food processing industries; organic intermediates used for
synthesis of dyes, pigments, pharmaceuticals, cosmetics, agricultural chemicals,
photochemicals, plastics, adhesives, and other chemical products; inorganic
chemicals sold for broad industrial use, including pharmaceuticals, electrical
and battery equipment and oil drilling; superabsorbent polymers used in personal
care products; waxes and lubricants used for polish and plastics processing
applications; a complete range of color and liquid photoresists and ancillaries
used in the manufacture of internationally registered trademarks are: Remazol(R)
dyes; Genapol(R) and Hostapon(R) surfactants; Sanwet(R) superabsorbent polymers
(a registered trademark of Sanyo Chemical Industries, Ltd. licensed to the
Company); and AZ(R) liquid photoresist.
The Group also produces and sells Enco(R) printing systems which include
presensitized printing plates, pre-press color proofing films and a
complementary line of processing chemistry and equipment used by the graphic
arts industry. The Group is among the leading suppliers of presensitized offset
printing plates in the United States. Major U.S. competitors in offset printing
plates are Minnesota Mining and Manufacturing Company, Polychrome Corporation,
Eastman Kodak Co., duPont and Fuji Photo Film Company, Ltd. Aluminum for
printing plates is purchased on the open market from a limited number of
suppliers.
The Group's product lines also include Sunette(R) (acesulfame K) a new high-
intensity sweetener, Celgard(R) microporous membranes, Separex(R) gas membrane
systems, and ultra fine polyolefin powders.
LIFE SCIENCES SEGMENT
This segment consists of Hoechst-Roussel Pharmaceuticals Incorporated
("HRPI"), Bulk Pharmaceuticals and Intermediates ("BPI") which includes the
Pharmaceutical Production Division ("PPD"), Hoechst-Roussel Agri-Vet Company
("HRAVC") and Copley. This segment employs approximately 2,700 people. Its
operations encompass the research and development, production and marketing of
branded and generic prescription drugs, bulk pharmaceutical chemicals,
veterinary pharmaceutical products, animal-feed additives and crop protection
products.
HRPI. The Company's prescription drug business is conducted through HRPI, a
majority owned subsidiary. HRPI has two classes of common stock: Class R and
Class H Common Stock. Class R Common Stock has 20% of the total voting rights
and is owned entirely by Roussel-Uclaf, S.A. ("RU"), a French pharmaceutical
company which is majority owned by Hoechst AG. Class H Common Stock has 80% of
the total voting rights and is owned entirely by the Company. RU also owns
warrants which, if exercised, would increase RU's interest in HRPI to 50% by
1994.
The major products of HRPI are prescription drugs which are promoted by its
field sales force to health professionals in physicians' offices, pharmacies,
hospitals, group purchasing organizations and managed care organizations. Major
products include: Altace(TM) (ramipril), Claforan(R) (cefotaxime sodium),
DiaBeta(R) (glyburide), Lasix(R) (furosemide), Loprox(R) (ciclopirox olamine),
Topicort(R) (desoximetasone), Dermatop(R) (prednicarbate) and Trental(R)
(pentoxifylline).
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Altace(TM) is an ACE-inhibitor antihypertensive. Claforan(R) is an antibiotic
used in the treatment of serious infectious diseases. DiaBeta(R) is an oral
antidiabetic. Lasix(R) is a diuretic used for the mobilization of edema of
varied origin. Loprox(R) is a topical antifungal. Topicort(R) is a high potency
topical corticosteriod anti-inflammatory. Dermatop(R) is a mid-potency topical
corticosteroid anti-inflammatory. Trental(R) is a hemorrheologic agent to
relieve intermittent claudication (leg cramping pain associated with peripheral
arterial disease).
HRPI's major competitors include: for ACE-inhibitor antihypertensive, Merck &
Co., Inc. and Bristol Myers Squibb; for diuretics, Merck & Co., Inc., SmithKline
Beecham PLC and Hoffman-LaRoche Inc.; for oral antidiabetics, The Upjohn Company
and Pfizer Inc.; for vasotherapeutics, Sandoz Corporation; for third generation
cephalosporin antibiotics, Hoffman-LaRoche Inc., Glaxo, Inc., and Eli Lilly &
Company; and for dermatologicals, Syntex Laboratories, Inc. and Schering-Plough
Corporation.
Active ingredients for HRPI's major products are produced by PPD or imported
from Hoechst AG or RU. Formulation and packaging of most products are performed
in the United States by HRPI under strict manufacturing practices governed by
the United States Food and Drug Administration (the "FDA"). Other products are
imported from companies in the Hoechst Group and are subject to the same FDA
regulations.
HRPI conducts research concentrated on the discovery of compounds which act on
the central nervous system (e.g., Alzheimer's disease and schizophrenia) and
those which treat diseases of the skin. At this time, HRPI is awaiting approval
from the FDA of one new drug product. Approximately 22 additional products are
in clinical investigation under FDA Investigational New Drug Applications. In
addition, HRPI has the right of first refusal to market all future new Hoechst
AG and RU pharmaceutical products in the United States.
Copley. The company's generic drug business is conducted through its
participation in Copley. Copley develops, manufactures and markets a broad range
of off-patent prescription and over-the counter pharmaceuticals.
BPI is a supplier of bulk analgesics, pharmaceutical bulk actives and
pharmaceutical intermediates. The Company participates in BHC Company (with a
50% interest: Boots Company PLC having a 50% indirect interest) which
manufactures and markets bulk ibuprofen. BHC's major competitor is Ethyl
Corporation. BPI also manufactures acetaminophen for which its major competitors
include Mallinckrodt Corporation and Rhone-Poulenc Corporation. PPD produces and
supplies HRPI with active ingredients for DiaBeta(R), Lasix(R), Topicort(R) and
Trental(R) products.
HRAVC. HRAVC is a partnership between a wholly owned subsidiary of the Company
(50%) and Uclaf Corporation (50%), which is indirectly wholly owned by RU. HRAVC
is involved in developing and marketing animal health and crop protection
products. It is anticipated that in 1994 the crop protection activities of HRAVC
will be merged with NOR-AM Chemical Company, Inc. a wholly owned subsidiary of
Schering Berlin Inc. The resulting partnership will be 60% owned by a wholly
owned subsidiary of the Company.
HRAVC's animal health products consist primarily of veterinary pharmaceuticals
and animal-feed additives. HRAVC's crop protection products are used with four
of the five major United States crops: wheat, soybeans, cotton and rice.
HRAVC's products are promoted by a field sales force and primarily marketed
through distributors. Animal health products are manufactured under tolling
arrangements with HRPI and in some cases other toll manufacturers. The active
ingredients for these products are imported from other companies in the Hoechst
Group.
ADVANCED TECHNOLOGY SEGMENT
This segment consists of the Advanced Technology Group and includes research
and development costs to seed and develop new businesses. These costs are not
borne by any group and are shown separately beginning in 1993. Prior to 1993
this group was included in the Specialities and Advanced Materials segment.
Emerging businesses are primarily based on products or processes that have been
developed by the Company or other companies in the Hoechst Group. This segment
employs 1,000 people.
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RESEARCH AND DEVELOPMENT
The Company conducts research and development both independently and jointly
with Hoechst AG and, additionally, has been a party to a broad research and
development cost-sharing agreement with Hoechst AG since January 1, 1988.
The Company is continuing to expand its own research and development
activities in areas where specific developments for the United States market
increase the Company's competitiveness.
Research and development costs are included in expenses as incurred. The
Company's research and development costs for 1993, 1992 and 1991 were $258
million, $262 million and $261 million, respectively. Management intends to
maintain the Company's research and development expenditures in 1994 at
approximately the same level as 1993.
At December 31, 1993, approximately 2,000 employees, including approximately
1,000 professionals, were engaged in basic and applied research and development
at the Company. These individuals work in coordination with the Hoechst Group's
research and development personnel in the Federal Republic of Germany and other
parts of the world. The Hoechst Group in turn has access to a significant
portion of the Company's technology, know-how and patent rights. The Hoechst
Group is one of the leading research-oriented chemical companies in the world,
employing approximately 15,300 persons in its various research and development
laboratories. Research and development expenditures of the Hoechst Group
amounted to approximately $1.8 billion in 1993. Based on individual license
agreements and the cost-sharing agreement, the Company has access to a
significant portion of the Hoechst Group's technology, know-how and patent
rights for the United States and other markets, including licenses for new
developments.
The Company's United States research and development facilities are located in
Auburn Hills, Michigan (automotive plastic applications); Branchburg, New Jersey
(photoresists); Bridgewater, New Jersey (pharmaceuticals); Charlotte, North
Carolina (textile and technical fibers, specialty chemicals, separations
products and polyester resins); Corpus Christi, Texas (chemicals, pharmaceutical
intermediates and bulk actives); Coventry, Rhode Island (organic intermediates,
dyes, pigments and specialty chemicals); Greer, South Carolina (polyester film);
Winona, Minnesota (advanced materials); Florence, Kentucky (advanced materials);
Portsmouth, Virginia (superabsorbent polymers) and Summit, New Jersey (advanced
materials, polymers and engineering plastics).
MARKETING AND COMPETITION
The Company's products are generally sold in the United States directly or
through distributors or agents. Foreign subsidiaries and affiliates sell
principally through local sales personnel or agents. With the exception of
products sold by the Life Sciences segment, the principal customers worldwide
are other manufacturers which use the Company's products in a wide variety of
industrial and consumer products. Products sold by the Life Sciences segment are
primarily sold through wholesalers and distributors.
In general, the Company sells its products in highly competitive worldwide
markets. The number of competitors in a market or country and the Company's
competitive position vary widely with the products and countries involved. See
specific discussion of competitors in "Description of Business Segments" above.
There is growing competition from private and state-owned industries in certain
foreign countries in which there is an abundance of low-cost labor or raw
materials. This competition has a direct or indirect effect on many product
lines. For example, in the area of textile fibers, business is impacted by
fabric and apparel imports into the United States, Canada and Mexico,
particularly from the Far East. Depending upon the characteristics of the
particular market, the Company competes on the basis of price, product quality
and performance, technical support and customer service. Within the Chemicals
and Fibers and Film segments, the Company competes primarily on the basis of
price, product quality and performance. In general, Specialties and Advanced
Materials products are sold based on product performance, technical support and,
to a lesser extent, price. Life Sciences products compete based on product
performance as well as technical support and expertise. The Company's business
is affected to some degree by seasonality in the industries of its customers
such as automotive, housing, agriculture, printing and textiles.
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The business is also sensitive to changes in the world economy, including
changes in currency exchange rates. Operations outside the United States are
subject to the economic and political risks inherent in the countries in which
they operate. Additionally, the export and domestic markets can be affected
significantly by import laws and regulations and energy cost differentials.
During 1993, the Company's export sales from the United States were 12.3% of
consolidated net sales.
Indirect marketing activities of the Company are extended through technical
and educational services, advertising and promotion. These activities reach each
level of the manufacturing and distribution system, as well as consumers of
apparel, home furnishings and industrial products. Product development and
technical service personnel supplement direct sales efforts by assisting
customers in using existing products and developing new ones.
RAW MATERIALS AND ENERGY
Most of the Company's products are made by chemically processing and upgrading
several basic types of raw materials including petroleum hydrocarbons and
derivatives, natural gas, wood pulp and aluminum. These derivatives include
ethylene and paraxylene, which are primarily supplied by major United States and
Canadian oil companies. Raw materials are purchased from affiliated and non-
affiliated suppliers throughout the world.
The Company's production facilities rely largely on coal, fuel oil, natural
gas and electricity for energy.
The Company currently has adequate supplies or access to sources of all
purchased raw materials and energy for the foreseeable future. The Company does
not consider itself dependent upon any one supplier for a material amount of its
raw material or fuel purchases. However, in the United States, wood pulp (a raw
material for cellulosics) is largely obtained from two suppliers, and Cape
Industries is the sole supplier of DMT and is one of two suppliers of PTA used
in the production of polyester. Celmex purchases the majority of its raw
materials from Petroleos de Mexico.
In addition, some active ingredients and other raw materials used by the Life
Sciences segment, as well as the Specialty Chemicals and Advanced Technology
Groups, are supplied by other companies in the Hoechst Group.
GOVERNMENT REGULATIONS
The pharmaceutical, agricultural and veterinary industries in the United
States have for many years been subject to extensive regulations by the Federal
government and to an increasing extent by state agencies, primarily as to
product efficacy, safety, advertising and labeling. The general trend is toward
more stringent regulations. Such regulations affect the cost of developing and
marketing products.
The Company believes it is in substantial compliance with all environmental,
health and safety regulations and continues to devote attention to the health
and safety of its employees and the protection of the public health and the
environment in the regions where it operates. Such compliance has not had an
adverse effect on the Company's competitive position or business. The Company
cannot predict the effect of regulations which may be adopted in the future by
governmental bodies responsible for air, water and solid waste pollution
controls and employee and community health and safety.
In November 1990, Congress passed, as part of the Omnibus Budget
Reconciliation Act, legislation requiring pharmaceutical manufacturers to extend
rebates to state Medicaid agencies based on each state's reimbursement of
pharmaceutical products under the Medicaid program effective January 1, 1991.
Medicaid rebates and related state programs reduced net sales and operating
income by $26 million in 1993, $24 million in 1992 and $12 million in 1991.
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PATENTS AND LICENSES
The Company owns, or is licensed under, more than 4,500 patents relating to
its products and manufacturing processes, some of which are important to
specific commercial operations. No single patent or group of patents is
considered material to the business as a whole. The Company's principal licenses
are either continuing licenses from third parties or relate to patents and know-
how owned by other companies in the Hoechst Group. Generally in the latter
cases, the licenses require no specific payment because, overall, the research
and development costs have been shared. In cases where license fees are involved
with the Hoechst Group, they are generally based on percentages of sales and do
not require minimum payments. Management believes that the terms of such license
agreements are similar to those competitively negotiated between unrelated
parties.
The Company has developed and acquired technical information and owns patents
in the chemicals, fibers, life sciences, specialties and advanced materials
fields, some of which have been licensed to affiliates and others worldwide.
EMPLOYEES
At December 31, 1993, worldwide employment for the Company was approximately
29,900. The Company employed about 9,000 persons outside the United States. In
the United States, fewer than one-fourth of the plants and employees are
organized by labor unions. Most labor agreements are for terms of three years.
The Company offers comprehensive benefit plans for employees and their families
and believes relations with employees are satisfactory.
ENVIRONMENT
The Company's worldwide operations are subject to environmental laws and
regulations which impose limitations on the discharge of pollutants into the air
and water and establish standards for the treatment, storage and disposal of
solid and hazardous wastes. The Company believes that it is in substantial
compliance with all applicable environmental laws and regulations.
In 1993, combined worldwide expenditures, including third party and divested
sites, for compliance with environmental control regulations and internal
Company initiatives totaled $294 million, of which $149 million was for capital
projects. In both 1994 and 1995, total annual environmental expenditures are
expected to be approximately $300 million, of which $125 million is for capital
projects. It is anticipated that stringent environmental regulations will
continue to be imposed on the Company and the industry in general. Although the
Company cannot predict expenditures beyond 1995, management believes that the
current spending trends will continue.
The Company may be subject to claims brought by Federal or state regulatory
agencies or private individuals pursuant to statutory authority or common law.
In particular, the Company has a potential liability under the Federal
Comprehensive Environmental Response Compensation 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
either the Company or one of its predecessor companies, have been notified that
the United States Environmental Protection Agency ("EPA"), state governing body
or private individuals consider such companies to be potentially responsible
parties under Superfund or related laws. The proceedings relating to these sites
are in various stages. The cleanup process has not been completed at most sites
and the status of the insurance coverage for most of these proceedings is in
litigation. The Company has accrued its best estimate of its ultimate liability
for investigation or cleanup costs, but, due to the many variables involved in
such estimation, the ultimate liability may vary. Expenditures for
investigation, clean up and related activities have been $31 million for the
three years ended December 31, 1993 with expenditures in no year greater than
$13 million.
SEGMENT AND GEOGRAPHICAL INFORMATION
See Note (14) of Notes to Consolidated Financial Statements for Segment and
Geographical Information.
8
<PAGE>
ITEM 2. PROPERTIES
The Company owns and operates various manufacturing facilities within the
United States and abroad. It also owns or leases facilities related to its
operations such as warehouses, pipelines, tolling operations, research and
development and sales offices.
The Company's principal manufacturing facilities, which are owned by the
Company (unless otherwise indicated), are summarized below:
CHEMICALS SEGMENT:
<TABLE>
<CAPTION>
U.S.
<S> <C>
Bay City, Texas.............. Vinyl acetate, acetaldehyde, butanol, propanol,
synthetic fatty acids
Bishop, Texas................ Methanol, formaldehyde, pentaerythritol,
trimethylolpropane, butyl acetate
Bucks, Alabama............... Amines
Clear Lake, Texas............ Acetic acid, ethylene oxide and glycol, vinyl
acetate, acrylic acid and esters
Pampa, Texas................. Acetic acid, acetic anhydride, ethyl acetate,
methyl ethyl ketone, acrylic esters
Portsmouth, Virginia......... Specialty amines
Rock Hill, South Carolina.... Formaldehyde
NON-U.S.
Celanese Canada:
Edmonton, Alberta........... Acetic acid, acetic anhydride, formaldehyde,
methanol*, pentaerythritol, vinyl acetate
Celmex:
Cangrejera, Veracruz........ Acetic acid, vinyl acetate, dimethyl formamide,
methyl amines, acetic anhydride and acrylic acid
Celaya, Guanajuato.......... Ketones, acetic acid esters, solvents, acetic
anhydride
Cosoleacaque, Veracruz...... Acrylic acid esters
FIBERS AND FILM SEGMENT:
U.S.
Greer, South Carolina**...... Polyester film and resins
Narrows, Virginia............ Acetate filament and flake, cigarette filter tow
Rock Hill, South Carolina.... Acetate filament and flake, PBI
Salisbury, North Carolina.... Technical and textile polyester staple and
filament fibers and polyester resins
Shelby, North Carolina....... Technical and textile polyester filament fibers
Spartanburg, South Carolina.. Technical and textile polyester staple, polyester
resins, spunbond and monofilament
Wilmington, North Carolina... PTA, DMT and terate resins
</TABLE>
- ----------
*The methanol operation is owned by Celanese Canada and the Company.
**Polyester film assets are owned by a partnership. See "Business--Description
of Business Segments"(Item 1).
9
<PAGE>
<TABLE>
<CAPTION>
NON-U.S.
<S> <C>
Hoechst Celanese S.A.:
Lanaken, Belgium............ Acetate and triacetate filament fibers, cigarette
filter tow
Celanese Canada:
Drummondville, Quebec....... Acetate filament fibers
Edmonton, Alberta........... Cellulose acetate flake and cigarette filter tow
Millhaven, Ontario.......... Polyester staple fibers
Celmex:
Ocotlan, Jalisco............ Nylon, cellulose acetate flake, filament and
cigarette filter tow and polyester filament and
resins
Queretaro, Queretaro........ High denier nylon, polyester staple and filament
Toluca, Mexico.............. Polyester staple and high denier polyester and
nylon filaments
Zacapu, Michoacan........... Bioriented polypropylene film, laminated printed
films and cellulosic casings
SPECIALTIES AND ADVANCED
MATERIALS SEGMENT:
Bayport, Texas*.............. Ultra high molecular weight polyethylene
Bishop, Texas................ Engineering plastics, acetaminophen and ibuprofen
Branchburg, New Jersey....... Presensitized offset printing plates, proofing
films, liquid photoresist
Bucks, Alabama............... Sodium hydrosulfite, sulfur dioxide, sodium
bisulfite solution
Charlotte, North Carolina*... Microporous membranes
Chester Township, Pennsylvania Compounded fluoropolymers
Coventry, Rhode Island....... Dyes, pigments, organic intermediates
Florence, Kentucky........... Engineering plastics
Leeds, South Carolina........ Sodium bisulfite solution, sodium hydrosulfite,
sodium hydrosulfite solution, specialty blended
products
Mount Holly, North Carolina.. Dyes, resins, surfactants and other specialty
chemicals
Portsmouth, Virginia......... Superabsorbent materials
Shelby, North Carolina....... Engineering plastics
Wilmington, North Carolina... Polyphenylene sulfide
Winona, Minnesota............ Engineering plastics
LIFE SCIENCES SEGMENT:
Bridgewater, New Jersey...... Prescription and proprietary drugs for human use
and veterinary pharmaceuticals
Coventry, Rhode Island....... Bulk pharmaceutical chemicals
Canton, Massachusetts........ Generic pharmaceuticals
</TABLE>
Management believes that the Company's properties are suitable for its
business and have adequate productive capacities to meet current and future
business requirements.
ITEM 3. LEGAL PROCEEDINGS
The Company is a defendant in a number of lawsuits, including environmental,
product liability and personal injury actions. Certain of these lawsuits are or
purport to be class actions. In some of these cases, claimed damages are
substantial. 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 for probable
- ----------
* This facility is leased.
10
<PAGE>
losses with respect thereto and that the ultimate outcome will not have a
material adverse effect on the financial position of the Company, but may have a
material effect upon the results of operations in any given year.
The Company was named in 1986, 1987, 1988 and 1991 as one of numerous
defendants in fourteen lawsuits in the Twenty-First Judicial District Court,
Parish of Livingston, Louisiana. These lawsuits arose out of shipments of
allegedly toxic waste to a waste oil processing site in Livingston Parish,
Louisiana. Claims totalling approximately $20 billion are being made against the
defendants for property damages, personal injury and psychological and other
damages. While a class consisting of approximately 3,000 plaintiffs has been
certified by the court, it is difficult to assess the extent to which the
Company may be liable, if at all, since individualized claims of class members
are involved. However, considering the number of potentially responsible parties
(over 80 defendants in each case), many of which are substantial corporations,
and the Company's small proportion of the total volume of waste sent to the site
(well under one percent), management believes, based on the advice of legal
counsel, that its portion of such liability (including any site clean up costs)
would not have a material adverse effect on the financial position of the
Company or results of operations. Trial is expected to begin in late 1994. The
Company is defending itself vigorously in these proceedings.
In February 1990, Region IV of the EPA issued a notice of violation to the
Company at its Rock Hill, South Carolina plant alleging that the plant is
subject to the benzene fugitive emission standard promulgated by the EPA under
the Clean Air Act in 1984. The Company learned in September 1990 that Region IV
referred the matter to the United States Department of Justice ("DOJ") for
consideration of the appropriateness of enforcement. Although the Company has
voluntarily agreed to meet the fugitive emissions standard at this facility as
soon as possible, it is the Company's position that the facility properly
determined in 1984 that it qualified for an exemption from the standard and,
therefore, enforcement and sanctions are not appropriate. The DOJ and the EPA
filed a complaint in July, 1992 in U.S. District Court in Columbia, South
Carolina, asking the Court to set a penalty of not more than $25,000 per
violation per day. The Company asked the EPA and the DOJ to consider an
Alternate Dispute Resolution ("ADR") and they rejected ADR. The Company is
defending itself vigorously.
In November 1993, the DOJ filed a complaint similar to the complaint described
above with regard to the Company's plant in Narrows, Virginia. It is the
Company's position that the Narrows plant also qualified for the same exemption
that applied to the Rock Hill plant. The Company is defending itself vigorously.
During the second quarter of 1991, it was discovered that the Aston,
Pennsylvania facility of Custom Compounding, Inc., a company acquired in
December 1990, required an air permit. The Company in December 1993 voluntarily
entered into an Administrative Consent Order with the Pennsylvania Department of
Environmental Resources that would require the payment over a period of time of
a penalty of $300 thousand.
In late June 1991, the Company entered into an agreement with the EPA to
participate in a voluntary program known as the "Toxic Substances Control Act -
Section 8 (e) CAP Program." Under this program, the EPA is allowing
participating companies to conduct voluntary, retrospective self-audits, to
submit newly discovered 8 (e) studies to the EPA and to pay a penalty of $6
thousand for each unreported study. Under the program, however, the total
penalties to the Company cannot exceed $1 million. Based on the number of
studies the Company's self-audit had identified by the end of August, 1992, it
is now clear the Company's penalty, which is expected to be payable in mid to
late 1995, will be the program's $1 million maximum amount.
Under the terms of a December 1991 consent order with the City of Mount Holly,
North Carolina (the "Consent Order"), the Company agreed with respect to its
Mount Holly plant to meet certain effluent limits for its discharges to the
City's water treatment plant and to upgrade its Mount Holly plant's pretreatment
facility. The Consent Order establishes a date to "begin construction" of the
pretreatment facility upgrade and requires the Company to pay a stipulated sum
for each day it fails to comply with the schedule. The City has taken the
position that the Company began construction late and has requested payment of
$137 thousand. The Company disagrees with this position and, therefore, has not
made such payment.
11
<PAGE>
The Company is a named defendant in twenty putative class actions, two of
which have been certified as class actions as well as defendant in other non-
class actions filed in nine states ("the Plumbing Actions"). In these lawsuits
the plaintiffs typically seek recovery for alleged property damage to housing
units, mental anguish from the alleged failure of plumbing systems, punitive
damages, and, in certain cases, additional damages under the Texas Deceptive
Trade Practices Act. The other defendants include United States Brass
Corporation ("U.S. Brass")(formerly a wholly owned subsidiary of Household
International, Inc.), Vanguard Plastics, Inc. ("Vanguard"), Shell Oil Company
("Shell") and E.I. duPont deNemours & Co., Inc. ("duPont"). Damage amounts are
not specified. The plumbing systems were designed and manufactured primarily by
U.S. Brass and Vanguard. The pipe was made from polybutylene resin supplied by
Shell. The Company sold acetal copolymer resin and duPont sold acetal polymer
resin to other companies who manufactured the fittings used in the plumbing
systems. The class actions and the purported class actions are in the Superior
Court of the State of Arizona in and for the County of Maricopa (two cases), in
the Superior Court of the State of California for the Counties of San Diego
(thirteen cases) and Stanislaus (one case), in the District Court of Clark
County, Nevada (one case) and in the 2nd Judicial District Court of Washoe
County, Nevada (one case), in the 164th Judicial District Court, Harris County,
Texas (one case) and in the United States District Court for the Southern
District of Texas (one case; filed, but not served). The Company does not
believe its acetal copolymer was defective or caused the plumbing systems to
fail. In many cases the Company's exposure may be limited by the fact that the
other defendants and other responsible parties may be found liable in whole or
substantial part or by invocation of the statute of limitations. The Company is
defending itself vigorously in these actions. The Company has also commenced
litigation against Household International, Inc. to recover, among other things,
the portion of Plumbing Action judgements, settlements and expenses that are
attributable to its former subsidiary, U.S. Brass.
The Company and certain of its codefendants are currently involved in a
nonbinding voluntary mediation effort relating to the plumbing claims with
attorneys representing substantially all the plaintiffs in Texas cases and two
uncertified nationwide class actions. This mediation seeks to settle the
individual claims currently asserted in these Texas cases and to establish a
nationwide framework for resolving future claims. However, it is currently too
early to determine whether there will be any settlement of any of these pending
or future claims, and, if there is a settlement, the manner in which it will be
finally allocated among all the potentially responsible parties.
Management believes that the Plumbing Actions are substantially covered by
insurance. In September 1989, after being sued by one of its insurers in New
York, the Company filed suit in the Superior Court of the State of Delaware in
and for New Castle County against National Union Fire Insurance Co. of
Pittsburgh, Pennsylvania, the primary general liability insurance carrier for
the Company from April 1985 to May 1989 and a majority of the excess/umbrella
carriers insuring the Company from 1978 to 1989, seeking a declaration that
insurance coverage exists for these product liability claims. The insurers' New
York action has been stayed and the Company's Delaware suit is proceeding.
Negotiations with several of the carriers have resulted in settlement or
agreements in principle to settle, resulting in substantial continuing coverage
of the plumbing actions or cash payments for claims. There are ongoing
discussions with several of the remaining insurers. Outside counsel believes
that the Company has a substantial probability of prevailing in its litigation
against the carriers.
Management believes that the Plumbing Actions will not have a material adverse
effect on the financial position of the Company, but may have a material effect
upon the results of operations in any given year. See Note (15) of Notes to the
Consolidated Financial Statements.
In 1988 the Company was sued in Texas State Court by persons alleging injuries
as a result of an explosion at the Pampa plant in November 1987. At various
times since then the suit has been amended to add additional plaintiffs and to
allege injuries resulting from exposure to chemicals either at the plant or in
the surrounding environment as a result of plant activities. All explosion
claims were settled in December 1990, but there remain approximately 900
"exposure" plaintiffs. Although many plaintiffs have not specified their alleged
damages, those that have done so total in excess of $1.3 billion (including
exemplary damages). The Santa Fe Railroad, also named as a defendant, has
settled with plaintiffs for an undisclosed amount. The parties agreed on a case
management order which provided for an initial trial of the claims of three
families, chosen by plaintiffs as test cases, but with the agreement that any
factual decisions in those cases would not have any effect on later cases. The
claims of those families were abandoned by plaintiffs
12
<PAGE>
during a trial in the fall of 1993. A similar suit was filed by approximately
100 individuals ("Kingsmill" case) including many of the same plaintiffs, making
similar exposure claims and claiming unspecified damages in Texas State court in
Sweetwater (Nolan County) in September 1992. An agreement in principle to settle
the remaining claims along with the Kingsmill claims has been negotiated with
plaintiffs' lawyers. Management is of the opinion that any potential liability
ultimately will be covered by insurance. The Company's insurance coverage for
environmental matters is currently in litigation. A suit instituted by the
Company, in February 1989, against certain of the Company's insurance carriers
in the Superior Court, Somerset County, of the State of New Jersey, seeking
coverage for environmental matters has been stayed in favor of a March 1989 suit
in the Superior Court, Cleveland County, of the State of North Carolina,
initiated by such insurance carriers. Both suits seek a determination whether
certain of the Company's environmental liabilities are covered by insurance.
Management believes that the Texas actions will not have a material adverse
effect on the financial position of the Company or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
13
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
Not applicable.
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------
1993 1992 1991 1990 1989
------ ------ ------ ------ ------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Net sales............................ $6,899 $7,044 $6,794 $5,881 $6,016
Operating income..................... 360 398 473 405 502
Earnings before cumulative effect of
accounting change................... 140 134 172 201 267
Total assets......................... 7,917 7,044 6,630 6,082 6,062
Long-term debt....................... 879 830 752 741 803
Dividends declared................... 70 85 90 100 115
</TABLE>
Note: This table should be read in conjunction with Management's Discussion
and Analysis of Financial Condition and Results of Operations and the
Financial Statements and Supplementary Schedules.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following sections should be read in conjunction with Note (14) of Notes
to Consolidated Financial Statements for Segment and Geographical Information.
RESULTS OF OPERATIONS
1993 COMPARED TO 1992
Net sales of $6,899 million in 1993 were 2%, or $145 million, below 1992
sales. Life Sciences sales were slightly higher than in 1992, but sales declined
in all other operating segments.
Chemicals segment sales were lower than 1992 as increased volumes were offset
by lower selling prices as a result of continued overcapacity. Fibers and Film
segment sales declined from 1992 as reduced export volumes and selling prices
were slightly offset by improved domestic volumes. Textile Fibers sales were
level compared to 1992. Higher acetate filament sales volumes and prices reflect
continuing strength in the fashion industry. These improvements were offset by
lower volumes in North American polyester filament and lower selling prices for
polyester staple that resulted from increased competitive pressures. In
Technical Fibers, sales volumes and prices were lower than in 1992 as filter
product shipments to the Far East decreased and overall selling prices declined
due to excess worldwide capacity and the strengthening of the dollar in Europe.
Tire and MRG (mechanical rubber goods) volumes were lower as a result of the
weak European economy, while increased spunbond sales reflected a stronger
domestic roofing market.
14
<PAGE>
Polyester Resins and Films sales increased marginally over 1992 as packaging
resin volumes increased due to higher demand, particularly in the Mexican
market. After adjusting for the disposition of the high density polyethylene
("HDPE") business in 1992, Specialties and Advanced Materials sales improved as
increased volumes offset lower selling prices. Specialty Chemicals sales were
virtually unchanged as reduced selling prices, due to worldwide competitive
pressures, and lower volumes, primarily in fine chemicals and printing products,
were offset by increased selling prices and improved product mix for pigments
and improved volumes for surfactants, electronic products, waxes, and
superabsorbent materials. Within Advanced Materials, sales were higher as
volumes increased for both high performance polymers and engineering
thermoplastics due to general economic growth in their end use markets. Life
Sciences sales were slightly higher as both price and volume improvements in
crop protection and animal health, in part the result of new product
introductions, offset lower full year pharmaceutical volumes. Fourth quarter
pharmaceutical sales were higher than the prior 1993 quarters due to wholesaler
purchases that normally would have occurred in the first quarter of 1994.
Selling, General and Administrative expenses ("SG&A") for 1993 remained
virtually the same as 1992 as improvements in Chemicals, Specialty Chemicals,
and Advanced Materials offset unfavorable expenses in Fibers and Film. In
addition, Fibers and Film SG&A includes a $50 million receipt in settlement of a
litigation. Research and Development expenses of $258 million were slightly
lower than in 1992.
During 1993, the Company charged $29 million to operating income for
restructuring (principally Mexican chemical operations), $19 million of which
related to the write-down of property, plant and equipment. As part of an
ongoing Fibers and Film Segment North American strategy, the company
restructured its North American polyester fibers operations. During 1992, the
Company charged $87 million to operating income for restructuring, $34 million
of which related to the write-down of property, plant and equipment. An
additional $15 million was charged to operations in 1992 for restructuring and
regionalization of certain other businesses.
Operating income of $360 million was $38 million, or 10%, lower than 1992.
Improvements in the Fibers and Film and the Specialty and Advanced Materials
segments were offset by lower Chemicals and Life Sciences segments operating
income. Chemicals segment operating income declined from $210 million in 1992 to
$88 million in 1993 due to several nonrecurring items. Operating income from
continuing operations improved as manufacturing costs and product mix were
favorable compared to the prior year. Operating income was reduced, however, due
to 1993 restructuring charges and costs associated with a toxic tort suit
involving the Pampa, Texas plant. Also, during 1992, Chemicals segment recorded
income of $68 million related to the settlement of its Pampa insurance claims.
Fibers and Film operating income improved by $117 million from $298 million in
1992 to $415 million in 1993. Textile Fibers operating income was relatively
flat compared to 1992 as an increase in sales volume was offset by higher
manufacturing costs. Technical Fibers operating income was lower than in 1992
primarily due to reduced shipments and lower selling prices of filter products.
The decrease in Polyester Resins and Films operating income was due to increased
manufacturing costs and higher raw material costs principally in Mexico. In
addition, Fibers and Film 1993 operating income includes a $50 million receipt
in settlement of a litigation while 1992 operating income included $87 million
in restructuring costs. The Specialties and Advanced Materials segment operating
income improved from $26 million to $58 million primarily due to higher volumes
and lower selling and marketing expenses. Specialty Chemicals operating income
was lower primarily due to increased manufacturing costs. Operating income
increased significantly for Advanced Materials due to improved volumes and
favorable manufacturing costs resulting from higher efficiencies and reduced
maintenance expenses. Operating income in Life Sciences declined from $60
million in 1992 to $17 million in 1993 primarily due to reduced pharmaceutical
sales and to research and development expenditures associated with strategic
initiatives within the pharmaceuticals business.
Beginning in 1993, the Company has segregated sales and costs associated with
the Advanced Technology segment from segment sales and operating income of its
operating segments. The Advanced Technology segment represents research and
development costs to seed and develop new businesses. Prior to 1993 this group
was included in the Specialties and Advanced Materials segment.These costs and
results have not been borne by any operating group. When projects and/or
businesses become viable, they are transferred to the appropriate operating
segment.
15
<PAGE>
Equity in Net (Loss) Earnings of Affiliates declined by $12 million compared
to 1992 primarily due to lower earnings by Japanese and German affiliates which
reflect the continued sluggish economic conditions in those countries.
Interest expense decreased $5 million, or 6%, primarily due to lower interest
rates, particularly in Mexico. Interest and Other Income, net, was $22 million
lower than in 1992 primarily due to lower interest income in 1993, the result of
lower interest rates. In 1992, Interest and Other Income included a gain on the
sale of the HDPE facility.
The effective tax rate decreased to 35% in 1993 compared to 47% in 1992. The
decrease is mainly attributable to the accounting change required by the
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes" ("FAS 109").
The Company implemented Statement of Financial Accounting Standards No. 106,
"Employers' Accounting for Postretirement Benefits Other Than Pensions" ("FAS
106"), effective January 1, 1992, and FAS 109 and Statement of Financial
Accounting Standards No. 112, "Employers' Accounting for Postemployment
Benefits" (FAS 112), January 1, 1993. FAS 106, requires the Company to accrue
the current cost of those benefits and resulted in a net after-tax cumulative
charge of $141 million in the first quarter of 1992. FAS 109, which requires the
asset and liability method of accounting for income taxes and the calculation of
deferred taxes using enacted tax rates, resulted in a net after-tax cumulative
charge of $31 million in 1993. In addition, by applying FAS 109, pre-tax
operating income was reduced by $40 million due to the increase in depreciation
and amortization expense resulting from the increased carrying amounts of assets
and liabilities acquired in a purchase business combination. The increase in
operating expense was offset by a lower deferred tax provision. FAS 112 requires
recognition of postemployment benefits on an accrual basis and resulted in a net
after-tax cumulative charge of $8 million in 1993. The effect of this change on
1993 earnings before the cumulative effect of accounting changes was not
material.
On November 11,1993, the Company purchased 52.96% of the outstanding shares of
Copley Pharmaceutical, Inc. ("Copley") for approximately $546 million. Copley
develops, manufactures and markets a broad range of off-patent prescription and
over-the-counter pharmaceuticals. The acquisition was accounted for under the
purchase method of accounting. Accordingly, the purchase price will be allocated
to the assets acquired and liabilities assumed based on their estimated
respective fair values as of the date of acquisition. The allocation of the
purchase price will be finalized during 1994. The excess of cost over net assets
acquired was approximately $510 million and is being amortized over its
estimated life. The Company financed the acquisition through a revolving credit
agreement with its parent, Hoechst Corporation. Copley's results of operations
have been included in the Company's consolidated financial statements as of the
date of acquisition. Copley's operations are not material in relation to the
Company's consolidated financial statements and pro forma financial information,
therefore, has not been presented. Copley is included in the Life Sciences
segment.
The following discussions and analyses of "1992 Compared to 1991" and "1991
Compared to 1990" have been restated to reflect Advanced Technology as a
separate segment.
1992 COMPARED TO 1991
Net sales of $7,044 million for 1992 represented an increase of 3.7%, or $250
million, over 1991. Improvements in the Fibers and Film, Specialties and
Advanced Materials and Life Sciences segments more than offset a decline in the
Chemicals segment.
Chemicals segment sales declined due to continued unfavorable selling prices,
principally methanol and ethylene glycol/oxide, partially offset by domestic and
export volume improvements, mostly acrylates and vinyl acetate monomer. In the
Fibers and Film segment, 1992 full year sales increased due to improved volumes
and, to a lesser extent, higher selling prices. Textile fibers sales were higher
due to an increase in polyester staple, acetate filament and polyester textile
filament prices. Volume improvements, primarily in polyester staple and
spunbond, were partially offset by unfavorable acetate filament export volumes.
Spunbond prices were lower due to increased
16
<PAGE>
competitive pressures. Strong fourth quarter sales contributed to 1992 increases
in Technical Fibers. The improvement is attributable to higher sales volumes
from filter products and the polyester high denier industrial fibers business
units resulting from increased market demands. In Film and Fiber Intermediates,
sales increased as a result of favorable pricing and higher volumes in
polyethylene terephthalate film and packaging resins. Specialties and Advanced
Materials segment sales were slightly higher, primarily due to volume
improvements in superabsorbents, dyes and pigments, the last two increasing due
to stronger apparel and automotive markets. Advanced Materials sales increased
due to higher volumes in engineering thermoplastics and high performance
polymers, the result of a general strengthening of the U.S. economy. These
volume increases were partially offset by unfavorable selling prices due to
competitive pressures. Life Sciences segment sales increased due to a strong
fourth quarter. The heavy sales volumes were the result of significant
wholesaler purchases which normally would have occurred in the first quarter of
1993. New product introductions in the crop protection and animal health area
also contributed to the increase.
Selling, general and administrative expenses were $946 million, an increase of
$56 million, or 6.3%, from 1991. Selling, general and administrative expenses
were higher as increased expenses within Life Sciences were partially offset by
declines in the Fibers and Film and Specialties and Advanced Materials segments.
Life Sciences expenses increased due to a field force expansion and higher costs
to support new marketing programs. Research and Development expenses of $262
million were flat across all segments and unchanged from 1991 levels.
The Company is restructuring its North American polyester fibers operations.
As part of an ongoing North American strategy, Hoechst Celanese will install
additional staple fiber capacity within Celanese Mexicana, S.A. This expansion
should not result in a net increase in North American staple fiber capacity. The
realignment of other polyester facilities in Canada and the United States is
currently being studied. During 1992, $87 million has been charged to Fibers and
Film operating income for restructuring, $34 million of which related to the
write-down of property, plant and equipment. An additional $15 million has been
established for restructuring and regionalization of certain other businesses.
Operating income was $398 million, a decrease of $75 million, or 15.9%, from
1991. Excluding the effects of restructuring costs, all business areas within
the Fibers and Film segment showed improvements in operating income and offset a
decline in the Chemicals segment operating income. The favorability in operating
income experienced by Textile Fibers was mainly due to sales improvements.
Technical Fibers registered a modest improvement in operating income from
increased sales. Film and Fiber Intermediates operating income was higher due to
substantially improved sales volumes and, to a lesser extent, favorable raw
materials costs (paraxylene and ethylene glycol). Although raw material costs
were somewhat lower, Chemicals segment operating income declined as competitive
pressures in the commodity chemicals market continued to have an adverse impact
on selling prices and profit margins. Specialties and Advanced Materials segment
operating income improved primarily due to higher sales volumes. In Specialty
Chemicals, strong sales volumes were the main contributor to improved operating
income. Improvements were also realized in Advanced Materials, which was aided
by a strengthening in the automotive and electronics markets. Life Sciences
segment operating income was relatively flat as fourth quarter sales volume
improvements were offset by higher selling, general and administrative expenses.
In addition to higher volumes of Trental(R) (pentoxifylline), Diabeta
(R)(glyburide) and Altace(TM) (ramipril), earnings benefited from improved
performance in the animal health and crop protection businesses.
Equity in Net Earnings of Affiliates was $4 million, a decline of $14 million
from the comparable 1991 period. The reduction is due, in part, to start up
costs related to the Company's participation in a joint venture to manufacture
and market bulk ibuprofen. In addition, lower volumes and increased price
competition contributed to lower earnings by Japanese and German affiliates
reflecting continued sluggish economic conditions in those countries.
Interest expense declined $13 million to $81 million due primarily to lower
interest rates, particularly in Mexico. Interest and other income, net, rose
slightly to $74 million. The increase is predominantly due to gains realized on
the sale of the HDPE facility and certain other cost investments, partially
offset by lower 1992 interest income, the result of lower interest rates.
17
<PAGE>
The effective tax rate was 47.1% and 47.4% for 1992 and 1991, respectively.
In November 1987, an explosion and fire caused severe damage resulting in the
shutdown of the Chemical segment's Pampa, Texas plant. Rebuilding of the plant
production facilities was completed in April 1989 with ancillary and support
facilities completed in June of 1991. In 1989, the Company established a
valuation allowance for any potential shortfall between the insurance claims and
the ultimate insurance settlement. During the fourth quarter of 1992, the
Company agreed to a settlement with its insurance carriers covering the
explosion and business interruption claims. As a result of the settlement,
approximately $68 million was credited to operating income.
Effective January 1, 1992, the Company adopted the provisions of Statement of
Financial Accounting Standards No. 106 "Employers' Accounting for Postretirement
Benefits Other than Pensions" ("FAS 106") which decreased net income by $141
million, net of tax. See Note (12) of Notes to Consolidated Financial
Statements.
In the following discussion and analysis of "1991 Compared to 1990," 1990 is
presented on a pro forma basis as if Celmex had been consolidated at January 1,
1990.
1991 COMPARED TO PRO FORMA 1990 FOR THE INCLUSION OF CELMEX
Net sales of $6,794 million for 1991 increased $262 million, or 4%, from 1990
net sales. Sales increased in the Chemicals and Life Sciences segments, but were
flat in the Fibers and Film and Specialties and Advanced Materials segments.
Chemical segment sales improved due to higher selling prices and strong
export sales volumes. However, sales prices have generally declined throughout
the year, influenced by the decline in prices for purchased hydrocarbon
feedstocks. Full year sales volumes were level as export volume improvement
offset a decline in the domestic area. In the Fibers and Film segment, sales
increased marginally as higher volumes offset lower selling prices. In Textile
Fibers, polyester staple and filament volumes increased versus the prior year
reflecting improved market conditions. Acetate filament and Trevira(R) Spunbond
polyester geotextile and roofing products continued to operate at capacity
levels. However, polyester staple selling prices were lower due to competitive
and recessionary market conditions. Technical Fibers sales were level as higher
filter products sales were offset by reductions in other product lines,
particularly tire yarn and fabrics. Filter products sales improved in 1991 as
strong worldwide demand for cigarette tow and acetate flake resulted in both
higher sales prices and volumes. Although pricing improved marginally, sales
volumes were lower for tire yarn and fabrics due to the continued sluggish
economy, particularly in the automotive sector. In Film and Fiber
Intermediates, higher volumes for polyester intermediates and packaging resins
were offset by lower volumes for polyester film. Prices were lower for both film
and intermediates. Specialty and Advanced Materials 1991 segment sales
increased primarily due to increased sales in Specialty Chemicals. Specialty
Chemicals experienced strong demand for fiber reactive dyes, superabsorbent
materials and specialty and paper chemicals. Advanced Materials sales were
slightly higher than the prior year due to higher sales of fluoropolymers. This
increase was partially offset by slightly lower Engineering Plastics sales
resulting from a weak domestic economy especially in the depressed automotive,
electrical/electronics and housing industries. Life Sciences segment sales
increased due predominantly to the continued strong sales of Diabeta(R)
(glyburide), Trental(R) (pentoxifylline) and Claforan(R) (cefotaxime sodium) as
well as sales from new products Altace/TM/ (ramipril) and Prokine/TM/
(sargramostim).
Selling, general and administrative expenses (including research and
development) were $1,151 million, an increase of $94 million, or 8.9%, from the
comparable 1990 period. Selling, general and administrative expenses increased
in all segments, but predominantly within Life Sciences and Specialties and
Advanced Materials. Life Sciences expenses increased due to higher advertising
and marketing expenses related to new products, Altace/TM /and Prokine/TM/, as
well as additional personnel costs to support higher sales levels. Specialty and
Advanced Materials segments expenses increased due to new business development
and higher development costs.
Operating income was $473 million, an increase of $37 million, or 8.5%, from
the comparable 1990 period. Operating income improved significantly for the
Chemicals and Life Sciences segments, remained flat for the Fibers and Film
segment and declined in the Specialties and Advanced Materials segment.
Chemicals segment operating
18
<PAGE>
income increased as higher sales and lower hydrocarbon feedstock costs more than
offset higher manufacturing costs. Fibers and Film segment operating income was
virtually unchanged from the prior year as improvement in the Celmex fibers and
film businesses offset declines in the domestic businesses. Textile Fibers
operating income declined as higher sales revenue was offset by higher
manufacturing costs. Technical Fibers operating income was off slightly as
unfavorable tire yarn results and higher manufacturing costs offset improvements
in the filter products business. Film and Fiber Intermediates operating income
improved due principally to lower hydrocarbon feedstock costs. Specialty and
Advanced Materials segment operating income declined due to increased
manufacturing costs. Life Sciences segment operating income improved as net
sales more than offset increased selling, general and administrative and
manufacturing costs.
Equity in Net Earnings of Affiliates ($18 million) was virtually unchanged
from 1990. Interest expense decreased $8 million to $94 million due primarily to
a decline in Celmex's debt. Interest and other income, net, of $69 million
represents a decrease of $62 million from 1990. The decrease resulted
predominantly from a $20 million gain on the sales of businesses recognized
during 1990 and a $28 million decrease in Celmex interest income in 1991.
The effective tax rate for the full year 1991 was 47.4% compared to 45.8% for
the comparable 1990 period.
ENVIRONMENTAL
In 1993, combined worldwide expenditures, including third party and divested
sites, for compliance with environmental regulations and internal Company
initiatives totaled $294 million of which $149 million was for capital projects.
In both 1994 and 1995 total annual environmental expenditures are expected to be
approximately $300 million of which $125 million is for capital projects. It is
anticipated that stringent environmental regulations will continue to be imposed
on the Company and the industry in general. Although the Company cannot predict
expenditures beyond 1995, management believes that the current spending trends
will continue.
In 1993, 1992 and 1991 the total environmental costs charged to operations for
remediation efforts amounted to $34 million, $46 million and $24 million,
respectively. As of December 31, 1993 and 1992 the Company's total environmental
liability recognized in the financial statements is $149 million and $156
million, respectively. The amounts are neither reduced for anticipated insurance
recovery nor discounted from the anticipated payment date.
In the opinion of management, environmental expenditures will not have a
material adverse effect upon the Company's competitive position.
INFLATION
In recent years, inflation has not had a material impact on the Company's
costs due principally to price competition among suppliers of raw materials.
However, in certain segments of the Company's businesses, changes in the prices
of raw materials, particularly petroleum derivatives, could have a significant
impact on the Company's costs, which the Company may not be able to reflect
fully in its pricing structure.
RATIO OF EARNINGS TO FIXED CHARGES
Ratio of earnings to fixed charges for 1993 was 3.6 compared to 4.0 for 1992.
The ratio declined due to the decrease in operating income. For the purpose of
calculating the ratio of earnings to fixed charges, earnings consist of earnings
from operations before fixed charges, minority interests, income taxes and
cumulative effect of accounting changes. Fixed charges consist of interest and
debt expense, capitalized interest, interest on obligations under capital
leases, the estimated interest portion of rents under operating leases and the
majority-owned preferred stock dividend requirement.
19
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES OF THE COMPANY
Cash and cash equivalents of $171 million at December 31, 1993 represented a
decrease of $42 million from 1992. The decrease primarily resulted from net
cash used in investing activities of $978 million, partially offset by net cash
provided by operating and financing activities of $537 million and $400 million,
respectively.
Investing activities in 1993 included expenditures for capital projects of
$556 million compared with $592 million in 1992. In addition, as discussed
above, the Company acquired 52.96% of the outstanding shares of Copley for
approximately $546 million. The Company funded the purchase price with a loan
under a revolving credit agreement with Hoechst Corporation ("Parent").
In 1993, the Company increased its commercial paper program from $250 million
to $600 million to provide an additional source of financing flexibility. At
December 31, 1993, there was no commercial paper outstanding. The Company has
$600 million of committed domestic credit facilities, all of which were unused
at December 31, 1993. These credit lines provide backup to the Company's
commercial paper program. The Company also has a $750 million revolving credit
agreement with its Parent. At December 31, 1993, the outstanding balance on this
credit facility was $679 million, primarily the result of the Copley
acquisition. In addition, the Company prepaid its 13% senior promissory notes
and 8% notes in the amounts of $15 million and $7 million, respectively.
In February 1993, the Company paid its Parent an $85 million dividend. The
Company also declared a 1993 dividend of $70 million which was paid during the
first quarter of 1994. The Company intends to continue its practice of paying a
dividend to its Parent at the discretion of the Company's Board of Directors.
On January 10, 1994, the Securities and Exchange Commission declared effective
the Company's registration statement covering the offer and sale from time to
time of its unsecured debt securities at an aggregate initial public offering
price of not more than $650 million. On January 26, 1994, the Company issued
$250 million of 6-1/8% Notes due February 2004. In March 1994, the Company also
sold $100 million of its medium-term notes. The net proceeds from these
transactions were used to repay a portion of the amount borrowed by the Company
from its Parent. The Company may sell from time to time up to an additional $300
million of medium-term notes. The proceeds from any medium-term notes to be sold
will be used for general corporate purposes.
The Company expects that its capital expenditures, investments and working
capital requirements will continue to be met primarily from internally generated
funds from operations. However, the Company may, due to the timing of funding
requirements or investments supplement its liquidity from external or affiliated
sources. Such sources include the Company's medium-term note shelf registration,
its commercial paper program or loans from its Parent or Hoechst AG and
affiliates.
20
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY SCHEDULES
Index to Consolidated Financial Statements
<TABLE>
<CAPTION>
Page
----
<S> <C>
Consolidated Balance Sheets as of December 31, 1993 and 1992.............. 22
Consolidated Statements of Earnings for the three years ended December 31,
1993..................................................................... 23
Consolidated Statements of Stockholder's Equity for the three years ended
December 31, 1993........................................................ 24
Statements of Cash Flows for the three years ended December 31, 1993...... 25
Notes to Consolidated Financial Statements................................ 26
Supplementary Schedules................................................... 46
Report of Independent Auditors............................................ 50
</TABLE>
21
<PAGE>
HOECHST CELANESE CORPORATION
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
---------------
1993 1992
------ ------
(IN MILLIONS)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................... $ 171 $ 213
Marketable securities, at cost (approximates market).... 75 48
Net receivables (notes 2 and 5)......................... 1,336 1,361
Inventories (note 6).................................... 1,024 931
Prepaid expenses........................................ 37 36
------ ------
Total current assets.................................. 2,643 2,589
------ ------
Investments in affiliates (note 3)....................... 342 287
Property, plant and equipment, net (notes 7, 13 and 16)... 3,001 2,696
Deferred tax asset (note 4)............................... -- 31
Other assets.............................................. 298 278
Excess of cost over fair value of net assets of
businesses acquired...................................... 1,633 1,163
------ ------
Total assets.......................................... $7,917 $7,044
====== ======
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Commercial paper, notes payable and current
installments of long-term debt (notes 2 and 9)......... $ 20 $ 158
Accounts payable and accrued liabilities (note 8)....... 1,029 1,010
Dividend payable to parent.............................. 70 85
Notes and accounts payable, parent and
affiliates (note 2).................................... 809 222
Income taxes payable (note 4)........................... 333 271
------ ------
Total current liabilities............................ 2,261 1,746
------ ------
Long-term debt (notes 2 and 9)............................ 879 830
Deferred income taxes (note 4)............................ 52 --
Minority interests........................................ 512 453
Other liabilities (note 10)............................... 731 561
Stockholder's equity (note 9):
Common stock............................................ -- --
Additional paid-in capital (note 13).................... 2,769 2,769
Retained earnings....................................... 655 641
Cumulative translation adjustments...................... 58 44
------ ------
Total stockholder's equity.............................. 3,482 3,454
------ ------
Commitments and contingencies (notes 13 and 15)
Total liabilities and stockholder's equity.............. $7,917 $7,044
====== ======
</TABLE>
See accompanying notes to consolidated financial statements.
22
<PAGE>
HOECHST CELANESE CORPORATION
CONSOLIDATED STATEMENTS OF EARNINGS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------
1993 1992 1991
------ ------ ------
(IN MILLIONS)
<S> <C> <C> <C>
Net sales (note 2).................................................. $6,899 $7,044 $6,794
Cost of sales (note 2).............................................. 5,316 5,336 5,170
------ ------ ------
Gross profit...................................................... 1,583 1,708 1,624
Selling, general and administrative expenses (note 2)............... 936 946 890
Research and development expenses................................... 258 262 261
Restructuring costs (note 16)....................................... 29 102 --
------ ------ ------
Operating income.................................................. 360 398 473
Equity in net (loss) earnings of affiliates (note 3)................ (8) 4 18
Interest expense (note 2)........................................... (76) (81) (94)
Interest and other income, net (note 2)............................. 52 74 69
------ ------ ------
Earnings before income taxes, minority interests and cumulative
effect of accounting changes..................................... 328 395 466
Income taxes (note 4)............................................... 116 186 221
------ ------ ------
Earnings before minority interests and cumulative effect
of accounting changes............................................ 212 209 245
Minority interests.................................................. 72 75 73
------ ------ ------
Earnings before cumulative effect of accounting changes........... 140 134 172
Cumulative effect of accounting changes, net of tax (notes 4 and 12) 39 141 --
------ ------ ------
Net earnings (loss)............................................... $ 101 $ (7) $ 172
====== ====== ======
</TABLE>
See accompanying notes to consolidated financial statements.
23
<PAGE>
HOECHST CELANESE CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------
1993 1992 1991
------ ------ ------
(IN MILLIONS)
<S> <C> <C> <C>
COMMON STOCK
Par value $.10 per share (authorized and issued
10,000 shares)
Balance at beginning of year...................... $ -- $ -- $ --
====== ====== ======
Balance at end of year............................ $ -- $ -- $ --
====== ====== ======
ADDITIONAL PAID-IN CAPITAL
Balance at beginning of year...................... $2,769 $2,720 $2,720
Investment by Parent (note 13).................... -- 49 --
------ ------ ------
Balance at end of year............................ $2,769 $2,769 $2,720
====== ====== ======
RETAINED EARNINGS
Balance at beginning of year...................... $ 641 $ 735 $ 653
Net earnings (loss)............................... 101 (7) 172
Dividends - cash.................................. (70) (85) (90)
- net assets of subsidiaries............ (17) (2) --
------ ------ ------
Balance at end of year............................ $ 655 $ 641 $ 735
====== ====== ======
CUMULATIVE TRANSLATION ADJUSTMENTS
Balance at beginning of year...................... $ 44 $ 48 $ 40
Current year translation adjustments.............. 14 (4) 8
------ ------ ------
Balance at end of year............................ $ 58 $ 44 $ 48
====== ====== ======
</TABLE>
See accompanying notes to consolidated financial statements.
24
<PAGE>
HOECHST CELANESE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------
1993 1992 1991
-------- -------- --------
(IN MILLIONS)
<S> <C> <C> <C>
Operating activities:
Net earnings (loss)............................................ $ 101 $ (7) $ 172
Adjustments to reconcile net earnings (loss) to net cash
provided by operating activities:
Restructuring costs, net..................................... 20 94 --
Cumulative effect of accounting changes, net of tax.......... 39 141 --
Change in equity of affiliates............................... 16 5 (3)
Depreciation and amortization................................ 476 402 389
Tax provision less taxes paid................................ 10 12 1
Loss (gain) on sale of businesses and assets, net............ 2 (15) --
Changes in operating assets and liabilities, net of effect
of businesses acquired and sold:
Net receivables............................................ (132) (27) (16)
Inventories................................................ (63) (66) (28)
Accounts payable and accrued liabilities................... (11) 14 (14)
Other, net................................................. 79 31 (9)
------- ------- -------
Net cash provided by operating activities................ 537 584 492
------- ------- -------
Investing activities:
Capital expenditures........................................... (556) (592) (498)
Loan to parent................................................. 176 (176) --
Proceeds from sale of businesses and assets.................... 2 105 4
Proceeds from sale of marketable securities.................... 52 47 75
Purchases of marketable securities............................. (53) (53) (77)
Purchases of and investments in businesses and assets, net..... (599) (61) (49)
------- ------- -------
Net cash used in investing activities.................... (978) (730) (545)
------- ------- -------
Financing activities:
Proceeds from long-term debt/(a)/.............................. 107 142 31
Proceeds from short-term borrowings............................ 2,977 2,065 2,249
Payments on long-term debt..................................... (69) (29) (25)
Payments on short-term borrowings.............................. (2,530) (1,956) (2,279)
Dividends paid................................................. (85) (90) (100)
------- ------- -------
Net cash provided by (used in) financing activities...... 400 132 (124)
------- ------- -------
Exchange rate changes on cash.................................... (1) (12) 2
Celanese Mexicana, S.A. cash and cash equivalents at beginning of
period.......................................................... -- -- 184
------- ------- -------
Net (decrease) increase in cash and cash equivalents..... (42) (26) 9
Cash and cash equivalents at beginning of year................... 213 239 230
------- ------- -------
Cash and cash equivalents at end of year......................... $ 171 $ 213 $ 239
======= ======= =======
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION:
Cash paid during the period for: Interest, net of amounts
capitalized................... $ 86 $ 89 $ 95
Income taxes................... 106 174 220
SUPPLEMENTAL DISCLOSURE OF NONCASH FINANCING ACTIVITIES:
/(a)/ In 1992, excludes $34 million of funds held by trustee related to
pollution control bond financing arrangement.
</TABLE>
See accompanying notes to consolidated financial statements.
25
<PAGE>
HOECHST CELANESE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A) PRINCIPLES OF CONSOLIDATION
Hoechst Celanese Corporation (the "Company") is wholly owned by Hoechst
Corporation ("Parent"), a holding company, itself a wholly owned subsidiary
of Hoechst Aktiengesellschaft ("Hoechst AG"). The consolidated financial
statements include the accounts of the Company and its majority owned
subsidiaries, Celanese Mexicana, S.A. ("Celmex"), joint ventures and
partnerships. All significant intercompany balances and transactions have
been eliminated in consolidation. Certain reclassifications have been made
in the 1992 consolidated financial statements to conform to the
classifications used in 1993.
Substantially all of the Company's minority interests are comprised of
Celmex, Celanese Canada Inc. and Copley Pharmaceutical, Inc.
On November 11, 1993, the Company purchased 52.96% of the outstanding
shares of Copley Pharmaceutical, Inc. ("Copley") for approximately $546
million. Copley develops, manufactures and markets a broad range of off-
patent prescription and over-the-counter pharmaceuticals. The acquisition
has been accounted for under the purchase method of accounting.
Accordingly, the Company will allocate the purchase price to the assets
acquired and liabilities assumed based on their estimated respective fair
values as of the date of acquisition. The allocation of the purchase price
will be completed during 1994. The excess of costs over net assets acquired
was approximately $510 million and is being amortized over its estimated
life. The Company financed the acquisition through a revolving credit
agreement with its Parent. Copley's results of operations have been
included in the Company's consolidated financial statements as of the date
of acquisition. Copley's operations are not material in relation to the
Company's consolidated financial statements and pro forma financial
information has therefore not been presented.
(B) CASH EQUIVALENTS
The Company considers all highly liquid investments with a maturity of
three months or less to be cash equivalents.
(C) INVENTORIES
Inventories are stated at the lower of cost (first-in, first-out
["FIFO"] or last-in, first-out ["LIFO"]) or market.
(D) INVESTMENTS AND EQUITY IN NET (LOSS) EARNINGS OF AFFILIATES
In general, the Company's share of net earnings or losses of companies
in which it owns at least 20% and less than a majority, and does not
exercise management control, is included in the Consolidated Statements of
Earnings as "Equity in net (loss) earnings of affiliates."
(E) PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is stated at cost. Depreciation and
amortization are computed on a straight-line basis over estimated useful
lives.
26
<PAGE>
HOECHST CELANESE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(E) PROPERTY, PLANT AND EQUIPMENT (CONTINUED)
Amortization of leasehold improvements is provided on a straight-line
basis over the estimated useful lives of the related assets or lease terms,
whichever is shorter.
Expenditures for maintenance and repairs are charged against operations;
major replacements, renewals and significant improvements are capitalized.
(F) INTANGIBLES
Excess of cost over fair value of net assets of businesses acquired
("Goodwill") is being amortized using the straight-line method principally
over periods of twenty-five and forty years. It is the Company's policy to
review that the forecast cumulative, undiscounted cash flow of those
acquired businesses is greater than the carrying value of the Goodwill.
Amortization expense charged against operations amounted to $39 million in
1993, $37 million in 1992 and $38 million in 1991.
Patents and trademarks are being amortized on a straight-line basis over
their estimated useful or legal lives, whichever is shorter. Amortization
expense charged against operations amounted to $15 million in 1993, $11
million in 1992 and $12 million in 1991.
(G) INCOME TAXES
The Company's consolidated results of operations are included in the
consolidated Federal income tax return of its Parent. The Company's Parent
allocates a provision for Federal income taxes equivalent to the tax effect
on the operations of the Company as if a separate return were filed.
Deferred income taxes have been provided to recognize the effect of
temporary differences between financial statement and income tax
accounting.
The Company implemented Statement of Financial Accounting Standards No.
109, "Accounting for Income Taxes" ("FAS 109"), effective January 1, 1993,
which requires the asset and liability method of accounting for income
taxes and the calculation of deferred taxes using the enacted tax rates in
effect at the implementation date.
27
<PAGE>
HOECHST CELANESE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(H) BENEFIT PLANS
Pension costs for defined-benefit pension plans are computed in
accordance with Statement of Financial Accounting Standards No. 87,
"Employers' Accounting for Pensions" ("FAS 87").
Effective January 1, 1992, the Company adopted the provisions of
Statement of Financial Accounting Standards No. 106, "Employers' Accounting
for Postretirement Benefits Other Than Pensions" ("FAS 106"), which
requires the Company to accrue the current cost of those benefits.
Effective January 1, 1993, the Company adopted the provisions of
Statement of Financial Accounting Standards No. 112, "Employers' Accounting
for Postemployment Benefits" ("FAS 112"). FAS 112 requires recognition of
postemployment benefits on an accrual basis.
(I) RESEARCH AND DEVELOPMENT COSTS
Research and development costs are included in expenses as incurred.
(J) FUNCTIONAL CURRENCIES
In general, local currencies have been designated as the functional
currencies for the Company's foreign operations. In Mexico, prior to 1993,
the United States dollar was the functional currency.
(K) NEW ACCOUNTING PRONOUNCEMENT
Effective for years beginning after December 15, 1993, the Company is
required to adopt the provisions of Statement of Financial Accounting
Standards No. 115, "Accounting for Certain Investments in Marketable Equity
and Debt Securities" ("FAS 115"). FAS 115 establishes standards of
financial accounting and reporting for investments in equity securities
that have readily determinable market values and for all investments in
debt securities. The Company does not believe that the adoption of this
standard will have a material impact on its financial position or results
of operations.
(2) RELATED PARTY TRANSACTIONS
Purchases from Hoechst AG and its affiliates aggregated $495 million in
1993, $516 million in 1992 and $421 million in 1991. Net sales to Hoechst AG
and its affiliates aggregated $216 million in 1993, $217 million in 1992 and
$186 million in 1991.
The Company's principal licenses are under patents owned by Hoechst AG and
its affiliates. License fees, relating to license agreements between the
Company and Hoechst AG and its affiliates, charged to operations, aggregated
$48 million in 1993, $48 million in 1992 and $41 million in 1991.
The Company has a revolving credit agreement with its Parent under which it
may borrow up to $750 million. The Company has agreed to pay interest at 30
day LIBOR plus .0625 of 1%. During 1993 and 1992,
28
<PAGE>
HOECHST CELANESE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(2) RELATED PARTY TRANSACTIONS (CONTINUED)
respectively, the Company borrowed $768 million and $90 million under this
agreement. Repayments on the revolving credit agreements for 1993 and 1992,
respectively, were $89 million and $90 million. Interest charges related to
such borrowings aggregated $2 million in 1993 and $1 million in 1992. The
outstanding balance on this credit facility was $679 million at December 31,
1993. There was no outstanding balance under this credit facility at December
31, 1992 and 1991.
Note obligations payable to Parent aggregated $156 million at December 31,
1993 and $86 million at December 31, 1992. In 1991, the Company had note
obligations payable to an affiliate of Hoechst AG which aggregated $8 million
at December 31, 1991. Interest expense on these obligations aggregated $7
million in 1993, $2 million in 1992 and $1 million in 1991.
Short-term note obligations payable to Parent aggregated $100 million at
December 31, 1992. This obligation was repaid during 1993. No such
obligations were outstanding at December 31, 1993. Interest expense on this
obligation aggregated $6 million in 1993 and $2 million in 1992.
As of December 31, 1992, the Company had an outstanding short-term loan to
its Parent in the amount of $176 million. No such loan existed at December
31, 1993. Interest income on this loan was not material in 1992.
(3) INVESTMENTS AND EQUITY IN NET EARNINGS (LOSS) OF AFFILIATES
(IN MILLIONS, EXCEPT NUMBER OF AFFILIATES)
<TABLE>
<CAPTION>
1993 1992 1991
-------- -------- --------
<S> <C> <C> <C>
Total:
Net sales....................................... $ 546 $ 575 $ 582
Net (loss) earnings............................. (8) 9 40
===== ===== =====
The Company's share:
Net (loss) earnings............................. $ (8) $ 4 $ 18
Dividends....................................... 8 9 15
===== ===== =====
Total assets...................................... $ 855 $ 755 $ 827
Total liabilities................................. (265) (214) (314)
Interests of others............................... (320) (298) (293)
----- ----- -----
The Company's equity............................ 270 243 220
Excess of cost over underlying equity in net
assets acquired.................................. 72 44 45
----- ----- -----
The Company's investment........................ $ 342 $ 287 $ 265
===== ===== =====
Number of affiliates.............................. 7 7 8
===== ===== =====
</TABLE>
29
<PAGE>
HOECHST CELANESE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(4) INCOME TAXES
Effective January 1, 1993, the Company adopted FAS 109 which requires the
asset and liability method of accounting for income taxes, and deferred taxes
are calculated using enacted tax rates. In addition, FAS 109 significantly
changes the accounting for purchase business combinations. The provisions of
FAS 109 have been applied without restating prior years' financial
statements.
Prior to FAS 109, acquired assets and liabilities in a purchase business
combination were shown net of tax. Under FAS 109, these assets and
liabilities are assigned their fair value and deferred taxes are provided on
the difference between such value and their tax bases. Accordingly, in
adopting FAS 109, the Company adjusted the carrying amount of the assets
acquired and liabilities assumed in connection with the 1987 Celanese
Corporation acquisition. The noncash effects from the application of FAS 109
were to increase Property, plant and equipment, $178 million; Investments in
affiliates, $34 million; Other assets, $10 million and Other liabilities, $64
million. Pretax operating income for the year ended December 31, 1993 was
reduced by $40 million due to the increase in depreciation and amortization
expense resulting from the higher carrying amounts. The increase in operating
expense was offset by a lower deferred tax provision.
30
<PAGE>
HOECHST CELANESE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(4) INCOME TAXES (CONTINUED)
<TABLE>
<CAPTION>
1993 1992 1991
----- ----- -----
(IN MILLIONS)
<S> <C> <C> <C>
Earnings before income taxes, minority interests and cumulative
effect of accounting changes consist of the following:
United States................................................... $166 $236 $295
Non-U.S......................................................... 162 159 171
---- ---- ----
$328 $395 $466
==== ==== ====
The provision for income taxes consists of the following:
Current: United States (Federal and state)...................... $123 $ 87 $142
Non-U.S. .............................................. 72 56 54
---- ---- ----
Total current.................................................. 195 243 196
---- ---- ----
Deferred: United States (Federal and state)..................... (48) (52) 18
Non-U.S. ............................................. (31) (5) 7
---- ---- ----
Total deferred................................................. (79) (57) 25
---- ---- ----
Income tax provision............................................. $116 $186 $221
==== ==== ====
United States income taxes at Federal statutory tax rate........... $115 $134 $159
Increase (decrease) in taxes resulting from:
Non-deductible depreciation and amortization................... 10 28 28
State income taxes, net of Federal income tax benefit.......... 4 8 9
Non-U.S. earnings taxed at different rates..................... (10) 2 9
Non-U.S. investments........................................... 9 5 6
Foreign tax credits............................................ (19) (15) (13)
Import/export activities....................................... 3 14 9
Additional tax provision....................................... 4 5 9
Other.......................................................... -- 5 5
---- ---- ----
Income tax provision............................................. $116 $186 $221
==== ==== ====
</TABLE>
31
<PAGE>
HOECHST CELANESE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(4) INCOME TAXES (CONTINUED)
The tax effects of the temporary differences which give rise to a
significant portion of deferred tax assets and liabilities as of December 31,
1993 are as follows:
<TABLE>
<CAPTION>
(IN MILLIONS)
<S> <C>
Depreciation............................... $381
Interest................................... 6
Inventory.................................. 65
Non-U.S. investments....................... 33
Other...................................... 14
----
Gross deferred tax liabilities........... 499
----
Post retirement obligations................ 237
Accrued expenses........................... 143
State income taxes......................... 12
Alternative minimum tax carryforward....... 15
Other...................................... 40
----
Gross deferred tax assets................ 447
----
Net deferred tax liability............... $ 52
====
</TABLE>
The cumulative effect of adopting FAS 109 as of January 1, 1993 amounted to
$31 million and is included as part of the increase to deferred income taxes
on the Consolidated Balance Sheets and a charge to the Consolidated Statement
of Earnings as of December 31, 1993. The net adjustment represents the
establishment of deferred taxes primarily due to differences between the book
and tax bases of LIFO inventories and the adjustment of deferred taxes to
reflect the currently enacted tax rate.
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. Based on the
Company's historical and current pretax earnings, management believes it is
more likely than not that the Company will realize the benefit of the
deferred tax assets existing at December 31, 1993. Further, management
believes the existing deductible temporary differences will reverse during
periods in which the Company generates net taxable income.
The financial reporting basis of investments in certain non-U.S.
subsidiaries differs from their tax basis. In accordance with FAS 109, a
deferred tax liability is not recorded on this temporary difference because
the investments are essentially permanent in duration. A reversal of the
Company's plans to permanently reinvest in these operations would cause such
temporary differences to become taxable. At December 31, 1993 these temporary
differences were approximately $424 million. A determination of the amount of
unrecognized deferred tax liability related to these investments is not
practicable.
32
<PAGE>
HOECHST CELANESE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(5) NET RECEIVABLES
<TABLE>
<CAPTION>
1993 1992
------ ------
(IN MILLIONS)
<S> <C> <C>
Trade..................................................... $1,126 $ 986
Parent and affiliates..................................... 63 249
Pampa insurance claims.................................... -- 21
Other..................................................... 180 141
------ ------
Subtotal................................................ 1,369 1,397
Allowance for doubtful accounts........................... (33) (36)
------ ------
Net receivables......................................... $1,336 $1,361
====== ======
</TABLE>
As of December 31, 1993 and 1992, the Company had no significant
concentrations of credit risk. Concentrations of credit risk with respect to
trade receivables are limited since the Company's customer base is dispersed
across many different industries and geographies.
In November 1987, an explosion and fire caused severe damage resulting in
the shutdown of the Company's Pampa, Texas plant. Rebuilding of the plant
production facilities was completed in April, 1989 with ancillary and support
facilities completed in June, 1991. In 1992, as part of the rebuilding
process, approximately $46 million was capitalized for safety and
environmental enhancements.
In 1989, the Company established a valuation allowance for any potential
shortfall between the insurance claims and the ultimate insurance settlement.
During the fourth quarter of 1992, the Company agreed to a settlement with its
insurance carriers covering the explosion and business interruption claims. As
a result of the settlement, approximately $68 million was credited to the
operations of the Chemicals segment in the accompanying Consolidated Financial
Statements.
(6) INVENTORIES
<TABLE>
<CAPTION>
1993 1992
------ ------
(IN MILLIONS)
<S> <C> <C>
Finished goods.............................................. $ 600 $ 569
Work-in-process............................................. 144 125
Raw materials and supplies.................................. 340 331
------ ------
Subtotal.................................................. 1,084 1,025
Excess of current costs over stated values.................. (60) (94)
------ ------
Total inventories......................................... $1,024 $ 931
====== ======
</TABLE>
At December 31, 1993, $518 million ($566 million at December 31, 1992) of
total inventories were valued by the LIFO method.
During the first quarter of 1993, the Company changed its method of
accounting for Celmex inventory from LIFO to FIFO. The impact of this change
was to reduce the LIFO reserve by $16 million and increase net earnings by $4
million. The effect of this change is not material and prior years' financial
statements have, therefore, not been restated.
33
<PAGE>
HOECHST CELANESE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(7) PROPERTY, PLANT AND EQUIPMENT, NET
<TABLE>
<CAPTION>
1993 1992
------ ------
(IN MILLIONS)
<S> <C> <C>
Land and improvements................................. $ 241 $ 226
Buildings, improvements and leasehold improvements.... 616 520
Machinery and equipment............................... 3,178 2,937
Construction in progress.............................. 590 534
Capitalized interest.................................. 137 132
------ ------
Subtotal............................................ 4,762 4,349
Accumulated depreciation and amortization............. (1,761) (1,653)
------ ------
Property, plant and equipment, net.................... $3,001 $2,696
====== ======
</TABLE>
Interest costs capitalized in 1993, 1992 and 1991 were $21 million, $14 million
and $10 million, respectively.
(8) ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
<TABLE>
<CAPTION> 1993 1992
------ ------
(IN MILLIONS)
<S> <C> <C>
Accounts payable.................................... $ 322 $ 344
Accrued salaries and benefits....................... 150 119
Accrued environmental costs......................... 102 113
Other............................................... 455 434
------ ------
Total accounts payable and accrued liabilities.... $1,029 $1,010
====== ======
</TABLE>
(9) NOTES PAYABLE AND LONG-TERM DEBT
<TABLE>
<CAPTION>
1993 1992
------ ------
(IN MILLIONS)
<S> <C> <C>
Term notes and revolving credit agreements:
9.45% notes, due 1997.............................. $250 $250
9.625% notes, due 1999............................. 250 250
8.48% senior promissory notes, due 1993-2002....... 40 45
9.8% medium-term notes, due 2013 and 2018.......... 25 25
13% senior promissory notes, due 1993-1998......... -- 13
8% notes, due 1995................................. -- 7
8.25% term note payable to Parent, due 1997........ 80 80
6.89% term note payable to Parent, due 1998........ 70 --
Pollution control bonds, interest rates ranging
from 6.25% to 9% (as adjusted annually), due at
various dates through 2022......................... 146 147
Other............................................... 18 13
---- ----
$879 $830
==== ====
</TABLE>
34
<PAGE>
HOECHST CELANESE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(9) NOTES PAYABLE AND LONG-TERM DEBT (CONTINUED)
The Company has a commercial paper program aggregating $600 million.
Included in "Commercial paper, notes payable and current installments of
long-term debt" in the Consolidated Balance Sheet at December 31, 1992 is
$135 million due to holders of commercial paper. There was no balance due at
December 31, 1993.
The Company has revolving credit agreements with banks that provide for
loans up to $50 million through October, 1996. Under these agreements, the
Company pays a commitment fee of 3/16 of 1% per annum based on unused
amounts. The Company has additional revolving credit agreements with several
banks that provide for loans up to $550 million for a renewable term of 364
days. The Company pays a commitment fee of 1/16 of 1% per annum on unused
amounts. The above described credit lines provide the credit backup for the
Company's commercial paper program. The credit lines were unused at December
31, 1993 and 1992. The Company had standby and trade letters of credit
outstanding amounting to $105 million at December 31, 1993 and $101 million
at December 31, 1992.
The Company periodically enters into forward exchange contracts as hedges
against foreign currency transactions and does not engage in speculative
contracts. There were no significant foreign exchange contracts outstanding
at December 31, 1993 and 1992.
The Company has an interest rate conversion agreement. Under the terms of
the agreement, the Company has fixed the interest rate on $12 million of debt
at 6.27% through 1996.
The Company's debt instruments include covenants, as defined in the loan
agreements, that require maintenance of consolidated net worth of not less
than $2.3 billion, and the limitation of dividends and other restricted
payments. At December 31, 1993, $688 million was available for dividends or
other restricted payments under existing loan agreements. The Company intends
to continue its current policy to pay dividends to its Parent at the
discretion of the Company's Board of Directors. Such dividends will be used
by the Parent to service acquisition debt pertaining to the acquisition of
Celanese Corporation.
Annual maturities of long-term debt each year for the next five years are:
$7 million in 1994; $10 million in 1995; $6 million in 1996; $336 million in
1997; and $76 million in 1998.
(10) OTHER LIABILITIES
<TABLE>
<CAPTION>
1993 1992
----- -----
(IN MILLIONS)
<S> <C> <C>
Pension and benefit obligations................................ $ 664 $ 501
Other.......................................................... 67 60
----- -----
Total other liabilities...................................... $ 731 $ 561
===== =====
</TABLE>
35
<PAGE>
HOECHST CELANESE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(11) BENEFIT PLANS
The Company has several defined-benefit pension plans covering
substantially all employees. Benefit formulas are based on years of service
and compensation levels or years of service and negotiated benefits. The
pension plans in the United States are being funded in accordance with the
requirements of the Employee Retirement Income Security Act of 1974.
Net periodic pension cost for defined-benefit pension plans consists of
the following:
<TABLE>
<CAPTION>
1993 1992 1991
----- ----- -----
<S> <C> <C> <C>
(IN MILLIONS)
Service cost--benefits earned during the period.......... $ 57 $ 51 $ 47
Interest cost on projected benefit obligations........... 108 99 86
Actual return on plan assets............................. (137) (74) (107)
Net amortization and deferral............................ 48 (8) 40
----- ----- -----
Net periodic pension cost.............................. $ 76 $ 68 $ 66
===== ===== =====
</TABLE>
The actuarial computations, based on the projected unit credit method,
assumed a discount rate of 7.5%, 8.5% and 8.5% in 1993, 1992 and 1991,
respectively. The assumed rate of return was 9.0%, 8.5% and 8.5% in 1993,
1992 and 1991, respectively. The assumed rate of increase in compensation
levels was 4.5%, 5.6% and 6.0% in 1993, 1992 and 1991, respectively.
The following table sets forth the funded status of the Company's qualified
plans and the amounts recognized in the Company's Consolidated Balance
Sheets at December 31, 1993 and 1992:
<TABLE>
<CAPTION>
PLANS WITH ASSETS
IN EXCESS OF
ACCUMULATED BENEFITS
--------------------
1993 1992
------- -------
(IN MILLIONS)
<S> <C> <C>
Actuarial present value of benefit obligation:
Vested benefit obligation............................ $ 991 $ 787
====== ======
Accumulated benefit obligation....................... $1,043 $ 830
====== ======
Projected benefit obligation........................... $1,301 $1,144
Plan assets at fair value.............................. 1,043 975
------ ------
Projected benefit obligation in excess of plan assets.. 258 169
Unrecognized prior service cost........................ (34) (50)
Unrecognized net loss from past experience different
from that assumed..................................... (95) (65)
Unrecognized net asset being recognized over
7 to 18 years......................................... 54 64
------ ------
Accrued pension obligations included in the
consolidated balance sheets........................... $ 183 $ 118
====== ======
</TABLE>
36
<PAGE>
HOECHST CELANESE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(11) BENEFIT PLANS (CONTINUED)
Assets of the Company's pension plans consist of equity and fixed income
securities, real estate and deposit administration contracts maintained in
master trust funds, which are managed by various investment managers
appointed by the Company.
The Company has various investment savings plans for certain employees,
some of which qualify under Section 401(k) of the Internal Revenue Code. The
Company's contributions to the plans are based on specified percentages of
employee contributions and aggregated $33 million in 1993, $31 million in
1992 and $30 million in 1991.
The Company provides certain of its employees with non-qualified
supplemental retirement benefits. The accumulated benefit obligation of these
benefits totalled $96 million in 1993 and $87 million in 1992.
(12) OTHER POSTRETIREMENT BENEFITS
Under various employer sponsored plans, the Company provides certain health
care and life insurance benefits for retired employees and their dependents.
Substantially all of the Company's employees are eligible for health care
benefits after reaching normal retirement age with 10 years of service.
Benefits, eligibility and cost sharing provisions for union employees vary by
location. Generally, the medical plans pay a stated percentage, based upon
years of service, of most medical expenses reduced for any deductible and
payments made by government programs and other group coverage. The Company is
generally self-insured for these costs and has no plan assets. The plans'
provisions include a cap which limits future Company contributions for
medical coverage under these plans. It was the Company's policy to fund and
account for these benefits on a cash basis. Amounts paid related to such
benefits aggregated $19 million in 1993, $17 million in 1992 and $16 million
in 1991.
Effective January 1, 1992, the Company adopted the provisions of FAS 106
for all its plans. Under this statement, the Company accrues the current cost
of those benefits. The Company previously had expensed the cost of these
benefits as claims were paid, except for the portion related to unfunded
actuarial liability of retiree health care benefits accrued as part of the
acquisition of Celanese Corporation in 1987. In addition, the Company elected
to recognize immediately the transition obligation measured as of January 1,
1992. This resulted in a one-time after-tax charge of $141 million (after a
reduction for income taxes of $90 million and the effect of minority
interests of $3 million). The effect of this change on operating results,
after recording the cumulative effect for years prior to 1992, was to
recognize an additional pretax expense of $23 million. The pro forma effect
of the change on years prior to 1992 was not determinable.
37
<PAGE>
HOECHST CELANESE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(12) OTHER POSTRETIREMENT BENEFITS (CONTINUED)
Net Periodic Postretirement Benefit Cost included the following components:
<TABLE>
<CAPTION>
1993 1992
----- -----
(IN MILLIONS)
<S> <C> <C>
Service cost on benefits earned................................ $ 5 $ 5
Interest cost on accumulated postretirement benefit obligation. 28 27
--- ---
Net periodic postretirement benefit cost..................... $33 $32
=== ===
</TABLE>
The following table sets forth the unfunded status of the plans, which
represents the accrued postretirement benefit cost recognized in the
Company's Consolidated Balance Sheets at December 31, 1993 and 1992:
<TABLE>
<CAPTION>
1993 1992
----- -----
(IN MILLIONS)
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees....................................................... $271 $222
Active plan participants....................................... 132 112
---- ----
Accumulated postretirement benefit obligation.................. 403 334
Unrecognized net loss.......................................... (59) --
---- ----
Accrued postretirement benefit cost.......................... $344 $334
==== ====
</TABLE>
For measuring the expected postretirement benefit obligation, the Company
assumed a 10.6 percent rate of increase in the per capita claims cost in 1993
and assumed that the rate would decrease gradually over an eight year period
to 6.0 percent and remain at that level thereafter. The weighted-average
discount rate used in determining the accumulated postretirement benefit
obligation was 7.5 and 8.5 percent at December 31, 1993 and December 31,
1992, respectively.
If the health care cost trend were increased 1.0 percent, the accumulated
postretirement benefit obligation as of December 31, 1993 would have
increased by approximately $27 million, or 6.7 percent. The effect of the
change on the aggregate of service and interest cost for 1993 would be an
increase of approximately $2 million, or 6.1 percent.
Effective January 1, 1993, the Company adopted the provisions of Statement
of Financial Accounting Standards No. 112, "Employers' Accounting for
Postemployment Benefits" ("FAS 112"). This Statement requires an accrual
method of recognizing postemployment benefits such as disability-related
benefits.
The cumulative effect at January 1, 1993 of adopting FAS 112 reduced net
income by $8 million, net of $4 million of income tax benefits. The effect of
this change on 1993 income before cumulative effect of accounting changes was
not material.
38
<PAGE>
HOECHST CELANESE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(13) LEASED ASSETS AND LEASE COMMITMENTS
At December 31, 1993, minimum lease commitments under long-term operating
leases are as follows:
<TABLE>
<CAPTION>
(IN MILLIONS)
<S> <C>
1994.......................................................... $ 52
1995.......................................................... 44
1996.......................................................... 41
1997.......................................................... 37
1998.......................................................... 36
Later years................................................... 47
Sublease income............................................... (9)
----
Net minimum lease commitments............................... $248
====
</TABLE>
Total minimum rent charged to operations under all operating leases was
$68 million in 1993, $64 million in 1992 and $66 million in 1991.
Effective December 31, 1992, the Parent increased its investment in the
Company by contributing to the Company property, plant and equipment that had
been leased under capital leases from its Parent. Rental payments made under
such lease obligations amounted to $10 million for the period ended December
31, 1992, and $13 million for the period ended December 31, 1991. The effect
of the transaction was to increase additional paid-in capital by $49 million,
reverse $10 million of previously existing deferred income taxes and decrease
debt (obligations under capital leases) by $59 million.
Management expects that, in the normal course of business, leases that
expire will be renewed or replaced by other leases.
39
<PAGE>
HOECHST CELANESE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(14) SEGMENT AND GEOGRAPHICAL INFORMATION
<TABLE>
<CAPTION>
TOTALS AS
SPECIALTIES SHOWN IN
AND CORPORATE/ CONSOLIDATED
FIBERS ADVANCED LIFE ADVANCED ELIMINATIONS FINANCIAL
CHEMICALS AND FILM MATERIALS SCIENCES TECHNOLOGY/(a)/ & OTHER STATEMENTS
--------- -------- ----------- -------- --------------- ------------ ------------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
1993:
Net sales.................. $1,774 $3,104 $1,469 $ 757 $ 2 $(207) $6,899
Operating income........... 88 415 58 17 (88) (130) 360
Depreciation/
amortization/(b)/......... 165 154 107 42 14 13 495
Capital expenditures....... 98 322 97 57/(c)/ 11 3 588
Total assets............... 2,599 2,582 1,413 1,170 100 53 7,917
1992:
Net sales.................. $1,810 $3,191 $1,489 $ 749 $ 5 $(200) $7,044
Operating income........... 210 298 26 60 (90) (106) 398
Depreciation/amortization.. 127 170/(d)/ 88 18 13 16 432
Capital expenditures....... 149 293 87 33 22 8 592
Total assets............... 2,420 2,465 1,414 372 83 290 7,044
1991:
Net sales.................. $1,930 $3,004 $1,392 $ 635 $ 21 $(188) $6,794
Operating income........... 250 325 14 63 (82) (97) 473
Depreciation/amortization.. 128 128 90 15 13 15 389
Capital expenditures....... 104 236 103 18 14 23 498
Total assets............... 2,372 2,248 1,562 272 42 134 6,630
</TABLE>
/(a)/ Beginning in 1993, the Company segregated amounts associated with
Advanced Technology. This new segment represents research and development
costs to seed and develop new businesses. When projects or businesses
become viable, they are transferred to the appropriate operating segment.
The prior years' segment results have been restated to reflect this
change.
/(b)/ Includes $15 million of depreciation and a $4 million reserve for asset
impairment related to the 1993 restructuring program (see note 16).
/(c)/ Includes $29 million of assets related to the purchase of Copley and
$3 million of assets related to the purchase of certain other businesses
(see note (1)(a)).
/(d)/ Includes a $30 million reserve for asset impairment related to 1992
restructuring program for North American Fibers (see note 16).
40
<PAGE>
HOECHST CELANESE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(14) SEGMENT AND GEOGRAPHICAL INFORMATION (CONTINUED)
The following table presents financial information based on the geographic
location of the manufacturing facilities of the Company:
<TABLE>
<CAPTION>
UNITED OTHER REGIONS/
STATES MEXICO CANADA EUROPE ELIMINATIONS TOTAL
------ ------ ------ ------ -------------- ------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
1993:
Net sales/(a)/........................... $5,574 $675 $293 $340 $ 17 $6,899
Transfers between geographic areas/(b)/.. 198 121 160 1 (480) --
------ ---- ---- ---- ----- ------
Total.................................. $5,772 $796 $453 $341 $(463) $6,899
====== ==== ==== ==== ===== ======
Operating income......................... $ 234 $ 36 $ 81 $ 14 $ (5) $ 360
Total assets............................. $7,285 $938 $260 $139 $(705) $7,917
1992:
Net sales/(a)/........................... $5,598 $766 $280 $381 $ 19 $7,044
Transfers between geographic areas/(b)/.. 195 95 190 2 (482) --
------ ---- ---- ---- ----- ------
Total.................................. $5,793 $861 $470 $383 $(463) $7,044
====== ==== ==== ==== ===== ======
Operating income......................... $ 278 $ 60 $ 42 $ 19 $ (1) $ 398
Total assets............................. $6,241 $908 $260 $134 $(499) $7,044
1991:
Net sales/(a)/........................... $5,328 $770 $262 $411 $ 23 $6,794
Transfers between geographic areas/(b)/.. 226 94 224 2 (546) --
------ ---- ---- ---- ----- ------
Total.................................. $5,554 $864 $486 $413 $(523) $6,794
====== ==== ==== ==== ===== ======
Operating income......................... $ 348 $ 66 $ 47 $ 19 $ (7) $ 473
Total assets............................. $5,982 $735 $306 $161 $(554) $6,630
</TABLE>
- ----------
/(a)/ Included in United States net sales are export sales of $845 million in
1993, $877 million in 1992 and $932 million in 1991.
/(b)/ Product transfers between geographic areas are priced on a basis
intended to reflect, as nearly as practicable, the prevailing market
value of the products transferred.
41
<PAGE>
HOECHST CELANESE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(15) COMMITMENTS AND CONTINGENCIES
The Company is a defendant in a number of lawsuits, including
environmental, product liability and personal injury actions (see footnote 18
for discussion of environmental). Certain of these lawsuits are or purport to
be class actions. In some of these cases, claimed damages are substantial.
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 for probable losses with
respect thereto and that the ultimate outcome will not have a material
adverse effect on the financial position of the Company, but may have a
material effect upon the results of operations in any given year.
The Company is named a defendant in twenty putative class actions, two of
which have been certified as class actions as well as a defendant in other
non-class actions filed in nine states ("the Plumbing Actions"). In these
lawsuits the plaintiffs typically seek recovery for alleged property damage
to housing units, mental anguish from the alleged failure of plumbing
systems, and punitive damages and, in certain cases, additional damages under
the Texas Deceptive Trade Practices Act. The other defendants include United
States Brass Corporation ("U.S. Brass")(formerly a wholly owned subsidiary of
Household International, Inc.), Vanguard Plastics, Inc. ("Vanguard"), Shell
Oil Company ("Shell") and E.I. duPont deNemours & Co., Inc ("duPont"). Damage
amounts are not specified. The plumbing systems were designed and
manufactured primarily by U.S. Brass and Vanguard. The pipe was made from
polybutylene resin supplied by Shell. The Company sold acetal copolymer resin
and duPont sold acetal polymer resin to other companies who manufactured the
fittings used in the plumbing systems. Based on, among other things, the
findings of outside experts and the successful use of the Company's acetal
copolymer in similar applications, the Company does not believe that its
acetal copolymer was defective or caused the plumbing systems to fail. In
many cases the Company's exposure may be limited by the fact that the other
defendants and other responsible parties may be found liable in whole or
substantial part or by invocation of the statute of limitations since the
Company ceased selling the resin for use in the plumbing systems in site
built homes during 1986 and in manufactured homes during 1989.
In order to mitigate the potential exposure to and cost of litigation, the
Company, together with Shell and duPont, has established a company, Plumbing
Claims Group ("PCG"), to assess individual repair requests and pay for
certain repairs. The amount that each company contributes toward those
repairs will ultimately be determined based on an allocation mechanism which
the companies are currently negotiating. The Company believes that PCG
repairs limit its exposure to future litigation.
The Company has accrued its best estimate of its liability, asserted and
unasserted, for the plumbing product liability and repair claims, taking into
consideration anticipated insurance recoveries, but excluding other
recoveries that may result from lawsuits against other parties to the
Plumbing Actions. The Company has commenced litigation against Household
International, Inc. to recover, among other things, the portion of Plumbing
Action judgements, settlements and expenses that are attributable to its
former subsidiary, U.S. Brass. Due to the many variables involved in the
estimation process, as facts and circumstances change, the estimate will be
adjusted. Since the Company was one of the suppliers of the resin used in the
plumbing systems and not a manufacturer or marketer of these systems, the
Company does not know the number of units that contain the plumbing fittings,
the number of systems that will fail, if any, or the extent of any failures.
Accordingly, it is impossible to estimate with any degree of certainty the
level of unasserted plumbing claims. Due to the many variables, the timing of
payments, which will be offset by any insurance proceeds, cannot be predicted
with any certainty.
42
<PAGE>
HOECHST CELANESE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(15) COMMITMENTS AND CONTINGENCIES (CONTINUED)
The Company and certain of its codefendants are currently involved in a
nonbinding voluntary mediation effort relating to the plumbing claims with
attorneys representing substantially all the plaintiffs in Texas cases and
two uncertified nationwide class actions. This mediation seeks to settle the
individual claims currently asserted in these Texas cases and to establish a
nationwide framework for resolving future claims. However, it is currently
too early to determine whether there will be any settlement of any of these
pending or future claims, and, if there is a settlement, the manner in which
it will be finally allocated among all the potentially responsible parties.
Management believes that the Plumbing Actions, legal expenses and the
Company's contributions to the PCG repair payments are substantially covered
by insurance. The Company has initiated litigation seeking a declaration that
insurance coverage exists for these product liability claims. Negotiations
with several of the carriers have resulted in settlements or agreements in
principle to settle, resulting in substantial continuing coverage of the
Plumbing Actions or cash payments for claims. There are ongoing discussions
with several of the remaining insurers. Outside counsel believes that the
Company has a substantial probability of prevailing in its litigation against
the carriers.
Management believes that the plumbing claims will not have a material
adverse effect on the financial position of the Company, but may have a
material effect upon the results of operations in any given year.
Copley is a defendant in numerous lawsuits alleging injury from the use
of Albuterol Sulfate Inhalation Solution 0.5%. On January 5, 1994 Copley
announced a voluntary nationwide recall of the product. Although the
ultimate outcome of these lawsuits cannot be determined, in the opinion of
the Company's management, these actions will not have a material adverse
effect on the financial position of the Company or results of operations.
At December 31, 1993, there were outstanding commitments relating to
capital projects of approximately $118 million.
(16) RESTRUCTURING
The Company is restructuring its North American, principally Mexican,
chemicals operations. During 1993, $29 million has been charged to Chemical
operating income for restructuring, $19 million of which related to the
write-down of property, plant and equipment.
The Company is restructuring its North American polyester fibers
operations. As part of an ongoing North American strategy, the Company will
install additional staple fiber capacity within Celmex. This expansion should
not result in a net increase in North American staple fiber capacity. The
realignment of other polyester facilities in Canada and the United States is
currently being studied. During 1992, $87 million was charged to Fibers and
Film operating income for restructuring, $34 million of which related to the
write-down of property, plant and equipment. An additional $15 million was
established for restructuring and regionalization of certain other
businesses.
(17) FAIR VALUE OF FINANCIAL INSTRUMENTS
In accordance with the provisions of Statement of Financial Accounting
Standards No. 107, "Disclosures about Fair Value of Financial Instruments"
("FAS 107"), the Company is required to disclose the fair value of certain
financial instruments as of the balance sheet dates.
The fair value represents the Company's estimate and, therefore, should not
be construed as the value that the Company would receive or give up for a
financial instrument. The fair values of the Company's significant financial
instruments are discussed below.
43
<PAGE>
HOECHST CELANESE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(17) FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
The book value of cash and cash equivalents, marketable securities, net
receivables, commercial paper, notes payable, and trade payables approximates
fair market value due to the short maturity of these instruments.
Included in other assets are certain investments accounted for under the
cost method. In general, the investments are not publicly traded and,
therefore, fair market values are not readily determinable. The Company
believes that the carrying value of $43 million approximates the fair market
value.
The fair value of the Company's long-term debt is estimated based on
quotations from investment bankers and on current rates of debt for similar
types of issues. At December 31, 1993, the estimated fair value was $946
million versus the carrying value of $879 million. At December 31, 1992, the
estimated fair value was $900 million versus the carrying value of $830
million. The carrying value of the current installments of long-term debt
approximates the fair value.
(18) ENVIRONMENTAL
The Company's worldwide operations are subject to environmental laws and
regulations which impose limitations on the discharge of pollutants into the
air and water and establish standards for the treatment, storage and disposal
of solid and hazardous wastes. The Company believes that it is in substantial
compliance with all applicable environmental laws and regulations.
The Company reviews the effects of any new laws and regulations on each of
its locations; determines whether a liability exists based on that review;
and records a liability, as appropriate. The company expenses all
expenditures mandated by law or Company policy to ameliorate existing
conditions. Liabilities that are established represent the company's best
estimate based on all the available facts and are adjusted as facts and
circumstances change.
The Company may be subject to substantial claims brought by Federal or
state regulatory agencies or private individuals pursuant to statutory
authority or common law. In particular, the Company has a potential liability
under the Federal Comprehensive Environmental Response compensation 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 either the Company or one of its predecessor companies,
have been notified that the United States Environmental Protection Agency
("EPA"), state governing body or private individuals consider such companies
to be potentially responsible parties (PRPs) under Superfund or related laws.
The proceedings relating to these sites are in various stages. The cleanup
process has not been completed at most sites and the status of the insurance
coverage for most of these proceedings is uncertain. Consequently, the
Company cannot determine accurately its ultimate liability for investigation
or cleanup costs at these sites. Expenditures (including third party and
divested sites) for investigation, clean up and related activities have been
$31 million for the three years ended December 31, 1993 with expenditures in
no year greater than $13 million.
As events progress at each site for which it has been named a PRP, the
Company accrues, as appropriate, a liability for site cleanup. Such
liabilities include all costs that are probable and can be reasonably
estimated. In establishing these liabilities, the Company considers: its
shipments 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 HCC will join with other PRPs to sign joint
defense agreements that will settle, among the PRPs, each party's percent
allocation of
44
<PAGE>
HOECHST CELANESE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(18) ENVIRONMENTAL (CONTINUED)
costs at the site. Although the ultimate liability may differ from the
estimate, the Company routinely reviews the liabilities and revises the
estimate, as appropriate, based on the most current information available.
In 1993, 1992 and 1991 the total environmental costs charged to operations
for remediation efforts amounted to $34 million, $46 million and $24 million,
respectively. As of December 31, 1993 and 1992 the Company's total
environmental liability recognized in the financial statements is $149
million and $156 million. The amounts are neither reduced for anticipated
insurance recovery nor discounted from the anticipated payment date.
Moreover, environmental liabilities are paid over an extended period and the
timing of such payments cannot be predicted with certainty.
Management believes that environmental costs will not have a material
adverse effect on the financial position of the Company or results of
operations.
(19) OTHER MATTERS
Fibers and Film 1993 operating income includes a $50 million receipt in
settlement of a litigation. The amount has been included in selling, general
and administrative expenses.
45
<PAGE>
HOECHST CELANESE CORPORATION
SCHEDULE V--PROPERTY, PLANT AND EQUIPMENT
AT DECEMBER 31, 1993, 1992 AND 1991
<TABLE>
<CAPTION>
BALANCE OTHER BALANCE
BEGINNING ADDITIONS CHANGES END OF
OF YEAR AT COST RETIREMENTS ADD (DEDUCT) YEAR
--------- --------- ------------ ------------ -------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C>
1993--Land and improvements..... $ 226 $ 3 $ (6) $ 18 $ 241
Buildings, improvements
and leasehold
improvements............. 520 12 (22) 106 616
Machinery and equipment... 2,937 58 (303) 486 3,178
Construction in progress.. 534 494 -- (438) 590
Capitalized interest...... 132 21 (16) -- 137
------ ---- ----- ----- ------
Total................... $4,349 $588/(a)/ $(347)/(b)/ $ 172 $4,762
====== ==== ===== ===== ======
1992--Land and improvements..... $ 247 $ 2 $ (38) $ 15 $ 226
Buildings, improvements
and leasehold
improvements............. 493 2 (36) 61 520
Machinery and equipment... 2,740 50 (179) 326 2,937
Construction in progress.. 423 528 (7) (410) 534
Capitalized interest...... 127 10 (7) 2 132
------ ---- ----- ----- ------
Total................... $4,030 $592 $(267)/(c)/ $ (6)/(d)/ $4,349
====== ==== ===== ===== ======
1991--Land and improvements..... $ 196 $ 4 $ -- $ 47 $ 247
Buildings, improvements
and leasehold
improvements............. 404 10 (17) 96 493
Machinery and equipment... 2,174 38 (118) 646 2,740
Construction in progress.. 328 436 -- (341) 423
Capitalized interest...... 117 10 -- -- 127
------ ---- ----- ----- ------
Total................... $3,219 $498 $(135) $ 448/(e)/ $4,030
====== ==== ===== ===== ======
</TABLE>
- ----------
/(a)/ Includes $29 million of assets related to the purchase of Copley and $3
million of assets related to the purchase of certain other businesses (see
note (1)(a)).
/(b)/ Includes $92 million of assets related to the 1993 restructuring program
(see note 16).
/(c)/ Includes $20 million of assets related to the 1992 restructuring program
for North American Fibers (see note 16).
/(d)/ Includes $46 million of additions related to Pampa settlement (see note
5).
/(e)/ Includes Celmex opening balances of $42 million in "Land and
improvements," $55 million in "Buildings, improvements and leasehold
improvements," $279 million in "Machinery and equipment," and $62 million
in "Construction in progress." (see note (1)(a)).
46
<PAGE>
HOECHST CELANESE CORPORATION
SCHEDULE VI--ACCUMULATED DEPRECIATION AND AMORTIZATION OF
PROPERTY, PLANT AND EQUIPMENT
AT DECEMBER 31, 1993, 1992 AND 1991
<TABLE>
<CAPTION>
ADDITIONS
BALANCE CHARGED OTHER BALANCE
BEGINNING TO COST & CHANGES END OF
OF YEAR EXPENSES RETIREMENTS ADD (DEDUCT) YEAR
--------- --------- ----------- ------------ -------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C>
1993--Land improvements.......... $ 83 $ 9 $ (3) $ -- $ 89
Buildings, improvements and
leasehold improvements.... 111 32 (14) 1 130
Machinery and equipment.... 1,400 386 (298) (2) 1,486
Capitalized interest....... 59 14 (16) (1) 56
------ ---- ----- ---- ------
Total.................... $1,653 $441/(a)/ $(331)/(b)/ $ (2) $1,761
====== ==== ===== ==== ======
1992--Land improvements.......... $ 91 $ 8 $ (16) $ -- $ 83
Buildings, improvements and
leasehold improvements.... 108 25 (18) (4) 111
Machinery and equipment.... 1,238 338 (144) (32) 1,400
Capitalized interest....... 53 13 (6) (1) 59
------ ---- ----- ---- ------
Total.................... $1,490 $384/(c)/ $(184)/(d)/ $(37)/(e)/ $1,653
====== ==== ===== ==== ======
1991--Land improvements.......... $ 74 8 $ -- 9 $ 91
Buildings, improvements and
leasehold improvements.... 88 24 (12) 8 108
Machinery and equipment.... 825 293 (112) 232 1,238
Capitalized interest....... 39 14 -- -- 53
------ ---- ----- ---- ------
Total.................... $1,026 $339 $(124) $249/(f)/ $1,490
====== ==== ===== ==== ======
</TABLE>
- ----------
/(a)/ Includes $15 million of depreciation and a $4 million reserve for asset
impairment related to the 1993 restructuring program (see note 16).
/(b)/ Includes $92 million of assets related to the 1993 restructuring program
(see note 16).
/(c)/ Includes $30 million reserve for asset impairment related to the 1992
restructuring program for North American Fibers (see note 16).
/(d)/ Includes $16 million of assets related to the 1992 restructuring program
for North American Fibers (see note 16).
/(e)/ Includes $5 million of additions related to Pampa settlement (see note 5).
/(f)/ Includes Celmex opening balances of $9 million in "Land improvements," $9
million in "Buildings, improvements and leasehold improvements," and $221
million in "Machinery and equipment." (see note (1)(a)),
47
<PAGE>
HOECHST CELANESE CORPORATION
SCHEDULE IX--SHORT-TERM BORROWINGS
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
<TABLE>
<CAPTION>
WEIGHTED
WEIGHTED MAXIMUM AVERAGE AVERAGE
BALANCE AVERAGE AMOUNT AMOUNT INTEREST
AT END INTEREST OUTSTANDING OUTSTANDING RATE DURING
OF YEAR RATE DURING THE YEAR/(b)/ DURING THE YEAR/(c)/ THE YEAR/(d)/
------- -------- -------------------- -------------------- -------------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Year Ended December 31, 1993:
Payable to banks/(a)/....... $698 3.7% $698 $253 5.1%
Commercial paper............ 0 N/A 242 180 3.2%
----
698
====
Year Ended December 31, 1992:
Payable to banks/(a)/....... $ 23 7.4% $166 $ 79 7.0%
Commercial paper............ 135 3.3% 247 205 3.6%
----
158
====
Year Ended December 31, 1991:
Payable to banks/(a)/....... $ 37 10.0% $113 $ 72 8.7%
Commercial paper............ 102 4.8% 230 195 5.6%
----
139
====
</TABLE>
- ----------
/(a)/ Payable to banks consists predominantly of obligations of non-U.S.
operations with a variety of interest rates and maturities. In 1993,
includes $679 million payable to Parent.
/(b)/ Amounts for payable to banks represents the maximum aggregate outstanding
at any quarter end. Amounts for commercial paper represent the maximum
outstanding at any time during the year.
/(c)/ Represents the average quarterly amount outstanding for payable to banks
and the average monthly outstanding for commercial paper.
/(d)/ Computed by dividing appropriate interest expense by the weighted average
amounts outstanding.
48
<PAGE>
HOECHST CELANESE CORPORATION
SCHEDULE X--SUPPLEMENTARY INCOME STATEMENT INFORMATION
YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
<TABLE>
<CAPTION>
CHARGED TO COSTS AND EXPENSES
-----------------------------
1993 1992 1991
------ ------ ------
<S> <C> <C> <C>
Maintenance and repairs.......................... $448 $531 $499
Advertising...................................... 81 91 98
</TABLE>
49
<PAGE>
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT AUDITORS
- --------------------------------------------------------------------------------
The Board of Directors
Hoechst Celanese Corporation:
We have audited the accompanying consolidated balance sheets of Hoechst
Celanese Corporation as of December 31, 1993 and 1992, and the related
consolidated statements of earnings, stockholder's equity, and cash flows for
each of the years in the three-year period ended December 31, 1993. In
connection with our audits of the consolidated financial statements, we also
have audited the financial statement schedules listed in Item 14(a)(2) as of and
for each of the years in the three-year period ended December 31, 1993. These
consolidated financial statements and financial statement schedules are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements and financial statement
schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Hoechst
Celanese Corporation as of December 31, 1993 and 1992, and the results of its
operations and its cash flows for each of the years in the three-year period
ended December 31, 1993, in conformity with generally accepted accounting
principles. Also in our opinion, the related financial statement schedules, when
considered in relation to the basic consolidated financial statements taken as a
whole, present fairly, in all material respects, the information set forth
therein.
As discussed in Notes 4 and 12 to the consolidated financial statements, the
Company adopted the provisions of the Financial Accounting Standards Board's
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes" and No. 112, "Employers' Accounting for Postemployment Benefits" in 1993.
As discussed in Note 12 to the consolidated financial statements, the Company
adopted the provisions of the Financial Accounting Standards No. 106,
"Employers' Accounting for Postretirement Benefits Other Than Pensions" in 1992.
KPMG PEAT MARWICK
Short Hills, New Jersey
January 28, 1994
50
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There has been no change of accountants or reported disagreement on any matter
of accounting principles or procedures or financial statement disclosure in
1993.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The directors and executive officers of Hoechst Celanese are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION(S) WITH THE COMPANY
---- --- ----------------------------
<S> <C> <C>
Juergen Dormann............ 54 Chairman of the Board of Directors
Ernest H. Drew/(1)/........ 56 President, Chief Executive Officer and Director
Harry R. Benz/(1)/......... 56 Senior Vice President--Finance, Chief Financial
Officer and Director
Karl G. Engels/(1)/........ 50 Senior Vice President and Director
Thomas F. Kennedy/(1)/..... 51 Executive Vice President and Director
Joseph H. Patterson/(1)/... 54 Executive Vice President and Director
William B. Harris.......... 47 Vice President and President of Textile Fibers
Group
David A. Jenkins........... 53 Vice President--General Counsel and Director
Charles M. Langston........ 44 Vice President--Human Resources
Klaus Schmieder............ 45 Vice President and Treasurer
Alban W. Schuele........... 49 Vice President--Canadian Operations
Raymond W. Smedley......... 53 Vice President and Controller
</TABLE>
- ----------
/(1)/ Member of Executive Committee, a committee of the Board of Directors.
All directors of the Company have been appointed for a term commencing
November 23, 1993. All terms of directors will end on the date of the next
annual stockholder meeting.
All executive officers were appointed for a term commencing December 6, 1993.
All terms of executive officers will end at the first meeting of the Board
following the next annual stockholder meeting.
Mr. Dormann has been a Director and Chairman of the Company since January 1,
1990. Mr. Dormann has also served as Chairman of the Board of Directors of
Hoechst Corporation since March 31, 1987 and from February 1987 until January
1988 he served as Chairman and Chief Executive Officer of the Company. Prior to
that, he served as Director of American Hoechst Corporation ("AHC") from 1980 to
February 1987 and as Chairman of AHC from October 1984 to February 1987. He is a
member of the Board of Management and Chief Financial Officer of Hoechst AG and
is responsible for all Hoechst Group activities in North America. Mr. Dormann
has been with Hoechst AG for 31 years and is a resident of the Federal Republic
of Germany.
51
<PAGE>
Dr. Drew has been President and Chief Executive Officer of the Company since
January 1988. Prior to that, he was President and Chief Operating Officer from
February 1987 until January 1988. He has been a Director of the Company since
February 1987. He was formerly a Group Vice President with Celanese Corporation
("Celanese") from June 1985 to February 1987. He served as President of Celanese
Fibers Operations and a Vice President of Celanese from June 1984 until June
1985 and was President and Chief Executive Officer of Celanese Canada Inc. from
May 1982 until June 1984. Dr. Drew was a Director of Celanese from April 1986 to
February 1987. He is also Director of Manville Corporation, Riverwood
International Corporation, Thomas & Betts Corporation and Public Service
Enterprise Group Incorporated. On January 1, 1991, Dr. Drew also assumed
management responsibility within the Hoechst Group for certain areas of the Far
East, including China, Hong Kong, Taiwan and Singapore.
Mr. Benz has been Senior Vice President--Finance and Chief Financial Officer
of the Company since April 1992 and Director of the Company since February 1987.
From February 1987 to March 1992 he was Vice President--Finance and Chief
Financial Officer of the Company. He was a Director and Chief Financial Officer
with AHC from October 1980 to February 1987. Prior to 1980 he served as AHC's
Treasurer for nine years. He also had responsibility for AHC's Petrochemicals
and Plastics Group. Prior to joining AHC, he was employed by Peat, Marwick,
Mitchell & Co. for 10 years.
Mr. Engels has been Senior Vice President of the Company since April 1992 and
director of the Company since September 1991. From September 1991 to March 1992
he was Vice President of the Company. He was Vice President--Marketing and Sales
of the Fibers Division of Hoechst AG from November 1986 until August 1991. From
January 1985 to October 1986 he was Director of Personnel and Social Policies
for the Hoechst Group. From 1981 to December 1984, he was Divisional Director
and head of the Staff Department of Hoechst AG, coordinating the Hoechst Group
affiliates outside the Federal Republic of Germany. Mr. Engels has been with
Hoechst AG for 21 years.
Mr. Kennedy has been Executive Vice President of the Company since April 1992
and Director of the Company since March 1989. He was Group President of the
Chemical Group from July 1989 to March 1992. From March 1989 to March 1992 he
was Vice President of the Company. Prior to that, he was President of the
Chemical Group from March 1989 to June 1989, Executive Vice President of the
Chemical Group from January 1988 to February 1989 and Executive Vice President
of Celanese Chemical Company, Inc. from September 1986 until December 1987. He
previously served as Vice President and General Manager of Filter Products from
October 1984 to September 1986. Prior to that, he was Business Director of
Celanese Chemical Company, Inc.
Dr. Patterson has been Executive Vice President of the Company since April
1992 and Director of the Company since January 1988. He has also been Chairman
of the Board of Directors of HRPI since December 1992. From January 1988 to
March 1992 he was Vice President of the Company. He was Group President of the
Advanced Materials Group from November 1991 to March 1992, Group President of
the Advanced Technology Group from May 1991 to March 1992 and Group President of
the Fibers and Film Group form June 1989 to March 1992. Prior to that, he was
President of Technical Fibers from March 1988 to May 1989, President of
Industrial Fibers from January 1988 to March 1988, Vice President and General
Manager of Celanese Industrial Fibers from December 1984 until January 1988 and
Vice President, Technical of Celanese Fibers Operations from May 1984 until
December 1984. He was Corporate Director of Planning of Celanese from March 1982
to May 1984. Dr. Patterson is a Director of Copley since November 1993.
Mr. Harris has been Vice President of the Company since January 1988 and
President, Textile Fibers Group since January 1990. He served as Treasurer of
the Company from January 1988 until March 1989 and Executive Vice President,
Textile Fibers Group from April 1989 until December 1989. He was formerly
President of Celanese Fibers Operations, Ltd. from September 1986 until January
1988 and Vice President and General Manager of Polymer and Filter Products from
September 1986 until December 1987. He served as Vice President, Administration
of Celanese Fibers from November 1984 until August 1986. From May 1984 he was
Executive Vice President of Celanese Canada Inc. and from November 1982 until
April 1984 he was Vice President, Finance of Celanese Canada Inc.
52
<PAGE>
Mr. Jenkins has been Vice President--General Counsel of the Company since
January 1989 and a Director since April 1989. Prior to that, he was Senior Vice
President and General Counsel of The Pullman Company from January 1988 to
December 1988. He served as Deputy General Counsel of the Company from June 1987
to December 1987 and as Vice President and General Counsel of the Hoechst
Celanese Advanced Technology Company from August 1986 to June 1987. He was
Secretary of Celanese from June 1984 to August 1986 and General Attorney of
Celanese from September 1976 to August 1986.
Dr. Langston has been Vice President of the Company since January 1991. Prior
to that, he was Vice President, Human Resources of the Life Sciences Group from
March 1989 to December 1990. From July 1987 to February 1989 he was the
Company's Director of Compensation. From September 1982 to June 1987 he was
Director, Human Resources of the Specialty Chemicals Group.
Mr. Schmieder has been Vice President and Treasurer of the Company since
January 1, 1992. He was Regional Manager for the Asia/Pacific Region of Hoechst
AG from January 1990 to December 1991. From 1987 to December 1989 he worked on
various assignments in the Central Staff and Legal Departments of Hoechst AG.
From 1977 to 1987 he was in the Legal Department of Hoechst AG. Mr. Schmieder
has been with Hoechst AG for 17 years.
Mr. Schuele has been Vice President of the Company since February 1987 and
responsible for Canadian Operations since May 1991. Prior to that, he was
President of Specialty Products Group from February 1989 to April 1991 and Vice
President--Quality and Communications from January 1988 to January 1989. He
served as Treasurer from 1981 until January 1988 and became a Vice President in
1985. He joined AHC in 1980 as Assistant Treasurer after having been with The
Chase Manhattan Bank, N.A. for 10 years.
Mr. Smedley has been Vice President and Controller of the Company since
February 1987. Prior to that, he served as Controller of AHC from 1975 and Vice
President and Controller from 1980. Prior to joining AHC in 1972, he was with
Price Waterhouse & Co. for 10 years. He is a Certified Public Accountant.
53
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION
The following tables set forth the compensation paid during the past three
years and, in the case of pensions, payable in the future to the Chief Executive
Officer and the four next most highly compensated executive officers of the
Company.
COMPENSATION TABLE
The following table sets forth the total amount of cash compensation paid to
the named executives in 1993, 1992 and 1991.
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
NAME AND -------------------- ------------ ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS/(1)/ LTIP PAYOUTS COMPENSATION/(2)/
- ------------------ ---- -------- ---------- ------------ -----------------
<S> <C> <C> <C> <C> <C>
Ernest H. Drew 1993 $588,269 $620,000 $ 32,000 $15,000
President, Chief Executive Officer 1992 559,231 200,000 48,000 15,000
1991 523,077 295,000 208,333 15,000
Joseph H. Patterson 1993 357,789 325,000 267,200 15,000
Executive Vice President 1992 339,616 170,000 72,800 15,000
1991 276,923 180,000 119,000 13,846
Thomas F. Kennedy 1993 355,885 285,000 239,200 15,000
Executive Vice President 1992 337,423 170,000 72,800 15,000
1991 270,769 185,000 119,000 13,539
Harry R. Benz 1993 308,596 225,000 216,400 15,000
Senior Vice President--Finance, 1992 293,962 95,000 61,600 14,698
Chief Financial Officer 1991 278,384 130,000 85,000 13,949
Karl G. Engels 1993 261,923 230,000 140,000 13,096
Senior Vice President 1992 233,269 80,000 -- 11,663
1991/(3)/ 70,288 25,000 -- 2,067
</TABLE>
- ----------
/(1)/ Bonus paid early in the following year for services rendered in each of
the listed years.
/(2)/ Company contribution to Savings Plan.
/(3)/ Amounts for 1991 reflect compensation for services performed from
September through December of that year.
54
<PAGE>
1993 LONG-TERM INCENTIVE AWARDS TABLE
The following table sets forth the awards made under the Company's Long-Term
Incentive Award Plan to the named executives in 1993.
LONG-TERM INCENTIVE PLANS - AWARDS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
ESTIMATED FUTURE PAYOUTS
NUMBER OF PERIOD UNTIL -----------------------------
NAME UNITS PAYOUT THRESHOLD TARGET MAXIMUM
---- --------- ------------ --------- -------- --------
<S> <C> <C> <C> <C> <C>
Ernest H. Drew 0 -- 0 0 0
Joseph H. Patterson 3500 3 Years $87,500 $350,000 $525,000
Thomas F. Kennedy 3500 3 Years 87,500 350,000 525,000
Harry R. Benz 2500 3 Years 62,500 250,000 375,000
Karl G. Engels 2500 3 Years 62,500 250,000 375,000
</TABLE>
Payments and awards are tied to achieving specified levels of Return on
Capital Employed (ROCE), both absolute and relative to a competitive group of
other companies. The target amount will be earned if 100% of the targeted ROCE
is achieved. If threshold levels are not achieved, no payments will be made from
the Plan. If threshold levels are achieved but target levels are not achieved,
payments as low as 25% of the target amounts will be made. If certain stretch
goals beyond target levels are achieved, payments as high as 150% of the target
amounts will be made.
55
<PAGE>
PENSION TABLE
The following table sets forth estimated annual retirement benefits for the
named executives under the Hoechst Celanese Retirement Plan and the Hoechst
Celanese Executive Pension Plan.
PENSION PLAN TABLE/(1)/
BENEFITS FOR REPRESENTATIVE YEARS OF CREDITED SERVICE/(2)/
-----------------------------------------------------------
<TABLE>
<CAPTION>
FINAL AVERAGE EARNINGS/(3)/ 15 20 25 30 35
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
$ 100,000................... $ 55,050 $ 60,000 $ 60,000 $ 60,000 $ 60,000
200,000................... 110,000 120,000 120,000 120,000 120,000
300,000................... 165,000 180,000 180,000 180,000 180,000
400,000................... 220,000 240,000 240,000 240,000 240,000
500,000................... 275,000 300,000 300,000 300,000 300,000
600,000................... 330,000 360,000 360,000 360,000 360,000
700,000................... 385,000 420,000 420,000 420,000 420,000
800,000................... 440,000 480,000 480,000 480,000 480,000
900,000................... 495,000 540,000 540,000 540,000 540,000
1,000,000................... 550,000 600,000 600,000 600,000 600,000
1,100,000................... 605,000 660,000 660,000 660,000 660,000
1,200,000................... 660,000 720,000 720,000 720,000 720,000
</TABLE>
- ----------
/(1)/ This table represents total benefits payable from both the Hoechst
Celanese Retirement Plan and the Hoechst Celanese Executive Pension Plan.
Drs. Drew and Patterson and Messrs. Kennedy and Benz are participants in
both these plans. Mr. Engels is covered by the Hoechst AG Pension Plan.
Benefits from the Executive Pension Plan are only payable in the event the
executive retires directly from employment with the Company.
/(2)/ Amounts shown assume the executive retires at age 65 (or earlier if
certain years of service requirements with the Company are met) and are
paid annually for the remainder of the executive's life regardless of
marital status. Benefits listed in the table are not subject to any
deduction for Social Security.
/(3)/ Final Average Earnings are defined in the plans as the average of the
three highest years' earnings (base salary plus bonus) out of the last 10
years before retirement. The current Final Average Earnings for Dr. Drew,
Dr. Patterson, Mr. Kennedy and Mr. Benz are approximately $1,043,000;
$504,700; $501,700 and $473,400, respectively. The approximate years of
Credited Service of the executives covered by the plans are: Dr. Drew, 27
years; Dr. Patterson, 26 years; Mr. Kennedy, 27 years; Mr. Benz 22 years.
Employment contract with Hoechst AG. Mr. Engels has a special contract with
Hoechst AG that covers certain aspects of his assignment in the United States in
the nature of foreign relocation allowances, such as moving and travel expenses,
vacation, home leaves, contributions to the German health insurance system while
employed in the United States, emergency home leaves, etc. His salary and
benefits are provided by the Company as long as he is employed in the United
States by the Company.
56
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Collectively, the directors and executive officers of the Company beneficially
own less than 1% of the outstanding capital stock of Hoechst AG. Each of Messrs.
Benz, Harris, Kennedy, Schuele and Mr. John A. Downard, President of Technical
Fibers Group, serves on the Board of Directors of Celanese Canada Inc. Each of
Messrs. Benz, Downard, Drew, Harris, Kennedy and Schuele owns 100 shares of its
common stock.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
RELATIONSHIP WITH HOECHST AG
The Company is wholly owned by Hoechst Corporation, which in turn is wholly
owned by Hoechst AG, a large chemical company headquartered in Frankfurt,
Federal Republic of Germany. Hoechst AG is a publicly held company whose shares
are listed and traded on the Tokyo stock exchange in Japan and on a number of
major stock exchanges in Europe including the Frankfurt, Federal Republic of
Germany; London, United Kingdom; and Geneva, Switzerland stock exchanges.
The Company and Hoechst AG are parties to a broad research and development
cost-sharing agreement. In most cases, licenses between the Company and Hoechst
AG under patents owned by Hoechst AG require no specific payment because overall
research and development costs have been shared. However, when license
agreements are negotiated and utilized between the Company and Hoechst AG, they
are on terms that are as favorable to the Company as could be obtained by third
parties from Hoechst AG.
The Company, from time to time, has entered into various financing agreements
with its parent, Hoechst Corporation, and affiliates of Hoechst AG at
competitive rates. See Note (2) of Notes to Consolidated Financial Statements.
The Company has, from time to time, contracted for various plant and equipment
design and consulting services from companies in the Hoechst Group on terms at
least as favorable as could be obtained from third parties.
The Company purchases from companies in the Hoechst Group many chemical raw
materials at competitive prices for use in manufacturing chemically-related
products. Several finished chemicals, which are resold in the United States, are
also purchased from companies in the Hoechst Group. See Note (2) of Notes to
Consolidated Financial Statements.
The Company intends to continue its current policy of paying dividends to
Hoechst Corporation at the discretion of the Company's Board of Directors.
Payment of dividends by the Company is restricted by its public debt
instruments, when there is, or a payment would result in, a default under these
instruments or if the payments (when aggregated with other "Restricted Payments"
as defined therein) would exceed a formula amount based on the total of $250
million plus Consolidated Net Income (as defined therein) plus certain Net Cash
Proceeds from the sale, conversion or exchange of stock (as specified therein).
Certain of the Company's employees, including a director, have employment
contracts with Hoechst AG. See "Executive Compensation."
57
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(A)(1) FINANCIAL STATEMENTS
The Consolidated Financial Statements of the Company and the Report of
Independent Auditors of KPMG Peat Marwick are set forth in the Financial
Statements and Supplementary Data (Item 8) and are filed as part of this
report.
(A)(2) FINANCIAL STATEMENT SCHEDULES
The following additional financial information is filed as part of this
report and should be read in conjunction with the Consolidated Financial
Statements:
<TABLE>
<CAPTION>
10-K PAGE
<S> <C> <C>
Report of Independent Auditors 50
SCHEDULE
V Property, Plant and Equipment 46
VI Accumulated Depreciation and Amortization of Property,
Plant and Equipment 47
IX Short-term Borrowings 48
X Supplementary Income Statement Information 49
</TABLE>
Schedules not included with this additional financial information have
been omitted either because they are not applicable or because the required
information is shown in the financial statements or notes thereto.
(A)(3) EXHIBITS
The following Exhibits are filed as part of this report:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C>
3.1 Restated Certificate of Incorporation of the Company (filed as a part
of Exhibit 3 to the Company's Form S-1 Registration Statement No. 33-
13326 filed April 10, 1987, and incorporated herein by reference).
3.2 Bylaws of the Company as amended December 15, 1989 (filed as an
Exhibit to the Company's Annual Report on Form 10-K for the year ended
December 31, 1989, and incorporated herein by reference).
4.1 Form of Indenture between the Company and The Bank of New York
relating to the 9.45% Notes due 1997, and the form of such notes
(filed as Exhibits to the Company's Quarterly Report on Form 10-Q for
the interim period ended June 30, 1987, and incorporated herein by
reference).
</TABLE>
58
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C>
4.2 Form of Indenture between the Company and The Bank of New York
relating to the 9 5/8% Notes due 1999, and the form of such notes
(filed as Exhibits to the Company's Quarterly Report on Form 10-Q for
the interim period ended September 30, 1987, and incorporated herein
by reference).
4.3 Form of Indenture between the Company and Chemical Bank relating to
medium-term notes and the form of such notes (filed as Exhibits to the
Company's Quarterly Report on Form 10-Q for the interim period ended
September 30, 1988, and incorporated herein by reference).
4.4 Form of First Supplemental Indenture between the Company and Chemical
Bank relating to medium-term notes and the form of such notes (filed
as Exhibits to the Company's Form S-3 Registration Statement No. 33-
23628 filed April 24, 1991, and incorporated herein by reference).
4.5 Form of Indenture between the Company and Chemical Bank relating to
debt securities and medium-term notes and the form of such securities
and notes (filed as Exhibits to the Company's Form S-3 Registration
Statement Nos. 33-23628 and 33-51675 filed December 22, 1993 and
incorporated herein by reference).
4.6 The Company agrees to furnish the Commission upon request a copy of
any other instrument with respect to long-term debt of the Company
and any subsidiary for which consolidated or unconsolidated financial
statements are required to be filed and as to which the amount of
securities author-ized thereunder does not exceed 10% of the total
assets of the Company and its subsidiaries on a consolidated basis.
10.1 Memorandum of Cooperation, dated October 20, 1983, between AHC and
Roussel-Uclaf S.A., relating to Hoechst-Roussel Pharmaceuticals
Incorporated (filed as an Exhibit to the Company's Form S-1
Registration Statement No. 33-13326 filed April 10, 1987, and
incorporated herein by reference).
10.2 Agreement containing Consent Order and Agreement to Hold Separate,
dated February 19, 1987, among Hoechst AG, AHC, Celanese and the
United States Federal Trade Commission (filed as an Exhibit to the
Company's Form S-1 Registration Statement No. 33-13326 filed April 10,
1987, and incorporated herein by reference).
10.3 Technology Cooperation and License Agreement between Hoechst AG and
the Company as of January 1, 1988 (filed as an Exhibit to the
Company's Annual Report on Form 10-K for the year ended December 31,
1987, and incorporated herein by reference).
10.4 Summary of AHC Medical Program Policy provisions applicable to
former members of the AHC Executive Committee (filed as an Exhibit to
the Company's Form S-1 Registration Statement No. 33-13326 filed April
10, 1987, and incorporated herein by reference).
10.5 Summary of AHC Executive Retiree Life Insurance Program (filed as
an Exhibit to the Company's Form S-1 Registration Statement No. 33-
13326 filed April 10, 1987, and incorporated herein by reference).
10.6 The Hoechst Celanese Executive Pension Plan, as amended, as of
November 1, 1991 (filed as an Exhibit to the Company's Annual Report
on Form 10-K for the year ended December 31, 1991, and incorporated
herein by reference).
10.7 Supplemental Pension Plan to Retirement Plan (formerly the
Celanese Supplemental Pension Plan to the Celanese Retirement Income
Plan) (filed as an Exhibit to the Celanese Annual Report on Form 10-K
(File No. 1-1308) for the fiscal year ended December 31, 1977, and
incorporated herein by reference).
</TABLE>
59
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C>
10.8 Grantor Trust Agreement, between Celanese and Bankers Trust Company
dated December 27, 1985, for payment of benefits under the Executive
Pension Plan (filed as an Exhibit to the Celanese Annual Report on
Form 10-K (File No. 1-1308) for the fiscal year ended December 31,
1985, and incorporated herein by reference).
10.9 The Hoechst Celanese Executive Medical and Dental Plan, effective
January 1, 1989 (filed as an Exhibit to the Company's Annual Report on
Form 10-K for the year ended December 31, 1988, and incorporated
herein by reference).
10.10 Employment Agreement, dated January 21, 1987, between Celanese and
Joseph H. Patterson (filed as an Exhibit to the Company's Annual
Report on Form 10-K for the year ended December 31, 1987, and
incorporated herein by reference).
10.11 Summary of Management Incentive Plan (filed as an Exhibit to the
Company's Annual Report on Form 10-K for the year ended December 31,
1987, and incorporated herein by reference).
10.12 Hoechst Celanese Long-Term Incentive Plan, effective January 1,
1989 (filed as an Exhibit to the Company's Annual Report on Form 10-K
for the year ended December 31, 1988, and incorporated herein by
reference).
10.13 A description of the Hoechst Celanese Executive Benefits
Reimbursement Program (filed as an Exhibit to the Company's Annual
Report on Form 10-K for the year ended December 31, 1988, and
incorporated herein by reference).
12 Computation of Ratio of Earnings to Fixed Charges.
21 Subsidiaries.
WHERE
NAME INCORPORATED
Hoechst Celanese Chemical Group, Inc. Texas
23 Consent of Independent Accountants.
24.1 Powers of attorney, dated March 18, 1994, for directors and officers
of the Company authorizing Harry R. Benz, Ernest H. Drew and/or David
A. Jenkins to sign this 10-K on their behalf.
24.2 Certified copy of resolution adopted by the Board of Directors of
the Company on March 2, 1994, authorizing officers to sign this 10-K
on behalf of the Company pursuant to powers of attorney.
</TABLE>
(B) REPORTS ON FORM 8-K
During the quarter ended December 31, 1993, no reports on Form 8-K were filed.
60
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 15(d) of the Securities Exchange Act
of 1934, Hoechst Celanese has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
Hoechst Celanese Corporation
By: /s/ Ernest H. Drew
-------------------------------------
Ernest H. Drew
President and Chief Executive Officer
March 28, 1994
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed on March 28, 1994, by the following persons on behalf of
the registrant and in the capacities indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- --------- -----
<S> <C>
Principal Executive Officer:
/s/ Ernest H. Drew Director, President and Chief Executive Officer
- ----------------------
Ernest H. Drew
Principal Financial Officer:
/s/ Harry R. Benz Director, Senior Vice President--Finance and
- ---------------------- Chief Financial Officer
Harry R. Benz
Principal Accounting Officer:
/s/ Raymond W. Smedley Vice President and Controller
- ----------------------
Raymond W. Smedley
Directors:
Juergen Dormann* Director
Karl G. Engels* Director
David A. Jenkins* Director
Thomas F. Kennedy* Director
Joseph H. Patterson* Director
</TABLE>
- ----------
* Ernest H. Drew, by signing his name hereto, does sign this document on behalf
of each of the persons indicated above pursuant to powers of attorney duly
executed by such persons, filed with the Securities and Exchange Commission.
By: /s/ Ernest H. Drew
-------------------------------------
Ernest H. Drew
Attorney-in-Fact
61
<PAGE>
SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO
SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (THE "ACT") BY REGISTRANTS
WHICH HAVE NOT REGISTERED SECURITIES PURSUANT TO SECTION 12 OF THE ACT:
Hoechst Celanese Corporation is a wholly owned subsidiary of Hoechst
Corporation. Accordingly, no annual report or proxy material has been sent to
security holders.
62
<PAGE>
EXHIBITS TO 1993 ANNUAL REPORT ON FORM 10-K
-------------------------------------------
<TABLE>
<S> <C>
3.1 Restated Certificate of Incorporation of the Company (filed as a part
of Exhibit 3 to the Company's Form S-1 Registration Statement No. 33-
13326 filed April 10, 1987, and incorporated herein by reference).
3.2 Bylaws of the Company as amended December 15, 1989 (filed as an
Exhibit to the Company's Annual Report on Form 10-K for the year ended
December 31, 1989, and incorporated herein by reference).
4.1 Form of Indenture between the Company and The Bank of New York
relating to the 9.45% Notes due 1997, and the form of such notes
(filed as Exhibits to the Company's Quarterly Report on Form 10-Q for
the interim period ended June 30, 1987, and incorporated herein by
reference).
4.2 Form of Indenture between the Company and The Bank of New York
relating to the 9 5/8% Notes due 1999, and the form of such notes
(filed as Exhibits to the Company's Quarterly Report on Form 10-Q for
the interim period ended September 30, 1987, and incorporated herein
by reference).
4.3 Form of Indenture between the Company and Chemical Bank relating to
medium-term notes and the form of such notes (filed as Exhibits to the
Company's Quarterly Report on Form 10-Q for the interim period ended
September 30, 1988, and incorporated herein by reference).
4.4 Form of First Supplemental Indenture between the Company and Chemical
Bank relating to medium-term notes and the form of such notes (filed
as Exhibits to the Company's Form S-3 Registration Statement No. 33-
23628 filed April 24, 1991, and incorporated herein by reference).
4.5 Form of Indenture between the Company and Chemical Bank relating to
debt securities and medium-term notes and the form of such securities
and notes (filed as Exhibits to the Company's Form S-3 Registration
Statement Nos. 33-23628 and 33-51675 filed December 22, 1993 and
incorporated herein by reference).
4.6 The Company agrees to furnish the Commission upon request a copy of
any other instrument with respect to long-term debt of the Company and
any subsidiary for which consolidated or unconsolidated financial
statements are
</TABLE>
<PAGE>
<TABLE>
<S> <C>
required to be filed and as to which the amount of securities
authorized thereunder does not exceed 10% of the total assets of the
Company and its subsidiaries on a consolidated basis.
10.1 Memorandum of Cooperation, dated October 20, 1983, between AHC and
Roussel-Uclaf S.A., relating to Hoechst-Roussel Pharmaceuticals
Incorporated (filed as an Exhibit to the Company's Form S-1
Registration Statement No. 33-13326 filed April 10, 1987, and
incorporated herein by reference).
10.2 Agreement containing Consent Order and Agreement to Hold Separate,
dated February 19, 1987, among Hoechst AG, AHC, Celanese and the
United States Federal Trade Commission (filed as an Exhibit to the
Company's Form S-1 Registration Statement No. 33-13326 filed April 10,
1987, and incorporated herein by reference).
10.3 Technology Cooperation and License Agreement between Hoechst AG and
the Company as of January 1, 1988 (filed as an Exhibit to the
Company's Annual Report on Form 10-K for the year ended December 31,
1987, and incorporated herein by reference).
10.4 Summary of AHC Medical Program Policy provisions applicable to former
members of the AHC Executive Committee (filed as an Exhibit to the
Company's Form S-1 Registration Statement No. 33-13326 filed April 10,
1987, and incorporated herein by reference).
10.5 Summary of AHC Executive Retiree Life Insurance Program (filed as an
Exhibit to the Company's Form S-1 Registration Statement No. 33-13326
filed April 10, 1987, and incorporated herein by reference).
10.6 The Hoechst Celanese Executive Pension Plan, as amended, as of
November 1, 1991 (filed as an Exhibit to the Company's Annual Report
on Form 10-K for the year ended December 31, 1991, and incorporated by
reference).
10.7 Supplemental Pension Plan to Retirement Plan (formerly the Celanese
Supplemental Pension Plan to the Celanese Retirement Income Plan)
(filed as an Exhibit to the Celanese Annual Report on Form 10-K (File
No. 1-1308) for the fiscal year ended December 31, 1977, and
incorporated herein by reference).
10.8 Grantor Trust Agreement, between Celanese and Bankers Trust Company
dated December 27, 1985, for payment of benefits under the Executive
Pension Plan (filed as an Exhibit to the Celanese Annual Report on
Form 10-K (File No. 1-1308) for the fiscal year ended December 31,
1985, and incorporated herein by reference).
</TABLE>
<PAGE>
<TABLE>
<S> <C>
10.9 The Hoechst Celanese Executive Medical and Dental Plan, effective
January 1, 1989 (filed as an Exhibit to the Company's Annual Report on
Form 10-K for the year ended December 31, 1988, and incorporated
herein by reference).
10.10 Employment Agreement, dated January 21, 1987, between Celanese and
Joseph H. Patterson (filed as an Exhibit to the Company's Annual
Report on Form 10-K for the year ended December 31, 1987, and
incorporated herein by reference).
10.11 Summary of Management Incentive Plan (filed as an Exhibit to the
Company's Annual Report on Form 10-K for the year ended December 31,
1987, and incorporated herein by reference).
10.12 Hoechst Celanese Long-Term Incentive Plan, effective January 1, 1989
(filed as an Exhibit to the Company's Annual Report on Form 10-K for
the year ended December 31, 1988, and incorporated herein by
reference).
10.13 A description of the Hoechst Celanese Executive Benefits Reimbursement
Program (filed as an Exhibit to the Company's Annual Report on Form
10-K for the year ended December 31, 1988, and incorporated herein by
reference).
12 Computation of Ratio of Earnings to Fixed Charges.
21 Subsidiaries.
WHERE
NAME INCORPORATED
Hoechst Celanese Chemical Group, Inc. Texas
23 Consent of Independent Accountants.
24.1 Powers of attorney, dated March 18, 1994, for directors and officers
of the Company authorizing Harry R. Benz, Ernest H. Drew and/or David
A. Jenkins to sign this 10-K on their behalf.
24.2 Certified copy of resolution adopted by the Board of Directors of the
Company on March 2, 1994, authorizing officers to sign this 10-K on
behalf of the Company pursuant to powers of attorney.
</TABLE>
<PAGE>
EXHIBIT 12
HOECHST CELANESE CORPORATION
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(IN MILLIONS, EXCEPT RATIOS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------
1993 1992 1991/(a)/ 1990 1989
------ ------ --------- ------ ------
<S> <C> <C> <C> <C> <C>
Earnings as defined in the Rules
and Definitions specified in
Regulation S-K, Section 229.503:
Earnings from operations before
income taxes/(b)/................ $328 $395 $466 $432 $558
Add--
Fixed charges as computed on
bottom half of table............. 122 130 139 113 128
Amortization of capitalized
interest......................... 14 13 14 12 11
Affiliate dividends/(a)/.......... 2 9 15 33 33
Deduct--
Affiliate income/(a)/............. (9) (17) (22) (51) (63)
Majority-owned preferred stock
dividend requirement............. 0 (1) (1) (1) (1)
Capitalized interest.............. (21) (14) (10) (12) (23)
---- ---- ---- ---- ----
Earnings as defined............... $436 $515 $601 $526 $643
==== ==== ==== ==== ====
Fixed charges as defined in the
Rules and Definitions specified in
Regulation S-K, Section 229.503:
Interest and debt expense......... $ 76 $ 81 $ 94 $ 68 $ 73
Capitalized interest.............. 21 14 10 12 23
Interest factor of rentals/(c)/... 25 26 26 25 24
Interest on obligations under
capital leases................... 0 8 8 7 7
Majority-owned preferred stock
dividend requirement............. 0 1 1 1 1
---- ---- ---- ---- ----
Fixed charges as defined.......... $122 $130 $139 $113 $128
==== ==== ==== ==== ====
Ratio of earnings to fixed charges.. 3.6 4.0 4.3 4.7 5.0
==== ==== ==== ==== ====
</TABLE>
- ----------
/(a)/ Effective 1/1/91 , the Company consolidated Celanese Mexicana, S.A.
("Celmex") in its financial statements. Prior to 1991, the Company
accounted for Celmex under the equity method and included Celmex with
"Investments in affiliates."
/(b)/ Excludes reduction for minority interests and cumulative effect of
accounting change.
/(c)/ Represents one-third of rent expense, which is deemed to be
representative of the interest factor of operating leases.
<PAGE>
EXHIBIT 23
- --------------------------------------------------------------------------------
CONSENT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
The Board of Directors
Hoechst Celanese Corporation:
We consent to the incorporation by reference in Registration Statement (No.
33-51675) on Form S-3 which also constitutes Post Effective Amendment No. 4 on
Form S-3 to Registration Statement (No. 33-23628) on Form S-1 of Hoechst
Celanese Corporation of our report dated January 28, 1994, relating to the
consolidated balance sheets of Hoechst Celanese Corporation as of December 31,
1993 and 1992, and the related consolidated statements of earnings,
stockholder's equity, and cash flows and related schedules for each of the years
in the three-year period ended December 31, 1993, which report appears in the
December 31, 1993 annual report on Form 10-K of Hoechst Celanese Corporation.
Our report refers to the adoption of Financial Accounting Standards No. 109.
"Accounting for Income Taxes," and No. 112, "Employers' Accounting for
Postemployment Benefits," in 1993 and Financial Accounting Standards No. 106,
"Employers' Accounting for Postretirement Benefits Other Than Pensions" in 1992.
KPMG PEAT MARWICK
Short Hills, New Jersey
March 28, 1994
<PAGE>
EXHIBIT 24.1
POWER OF ATTORNEY
-----------------
As a Director and/or Officer of Hoechst Celanese Corporation, which will file
with the Securities and Exchange Commission, Washington, D.C., its Annual Report
on Form 10-K for the year of 1993 pursuant to the provisions of the Securities
Exchange Act of 1934, I do hereby constitute and appoint Harry R. Benz, Ernest
H. Drew and David A. Jenkins, and each of them (with full power to each of them
to act alone) my true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution for me and in my name, place, and stead, in my
offices and capacities as aforesaid and on behalf of the Corporation, to execute
and file the said Annual Report on Form 10-K, any amendment thereto and any and
all other documents to be signed and filed with the Securities and Exchange
Commission in connection therewith; granting unto said attorneys-in-fact and
agents and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the premises
as fully to all intents and purposes as I might or could do in person hereby
ratifying and confirming all that said attorneys-in-fact and agents or any of
them or their substitutes may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, I have executed this instrument on March 18, 1994.
/s/Harry R. Benz
--------------------------------
Harry R. Benz
<PAGE>
POWER OF ATTORNEY
-----------------
As a Director and/or Officer of Hoechst Celanese Corporation, which will file
with the Securities and Exchange Commission, Washington, D.C., its Annual Report
on Form 10-K for the year of 1993 pursuant to the provisions of the Securities
Exchange Act of 1934, I do hereby constitute and appoint Harry R. Benz, Ernest
H. Drew and David A. Jenkins, and each of them (with full power to each of them
to act alone) my true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution for me and in my name, place, and stead, in my
offices and capacities as aforesaid and on behalf of the Corporation, to execute
and file the said Annual Report on Form 10-K, any amendment thereto and any and
all other documents to be signed and filed with the Securities and Exchange
Commission in connection therewith; granting unto said attorneys-in-fact and
agents and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the premises
as fully to all intents and purposes as I might or could do in person hereby
ratifying and confirming all that said attorneys-in-fact and agents or any of
them or their substitutes may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, I have executed this instrument on March 18, 1994.
/s/J. Dormann
-----------------------------
J. Dormann
<PAGE>
POWER OF ATTORNEY
-----------------
As a Director and/or Officer of Hoechst Celanese Corporation, which will file
with the Securities and Exchange Commission, Washington, D.C., its Annual Report
on Form 10-K for the year of 1993 pursuant to the provisions of the Securities
Exchange Act of 1934, I do hereby constitute and appoint Harry R. Benz, Ernest
H. Drew and David A. Jenkins, and each of them (with full power to each of them
to act alone) my true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution for me and in my name, place, and stead, in my
offices and capacities as aforesaid and on behalf of the Corporation, to execute
and file the said Annual Report on Form 10-K, any amendment thereto and any and
all other documents to be signed and filed with the Securities and Exchange
Commission in connection therewith; granting unto said attorneys-in-fact and
agents and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the premises
as fully to all intents and purposes as I might or could do in person hereby
ratifying and confirming all that said attorneys-in-fact and agents or any of
them or their substitutes may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, I have executed this instrument on March 18, 1994.
/s/Ernest H. Drew
---------------------------------
Ernest H. Drew
<PAGE>
POWER OF ATTORNEY
-----------------
As a Director and/or Officer of Hoechst Celanese Corporation, which will file
with the Securities and Exchange Commission, Washington, D.C., its Annual Report
on Form 10-K for the year of 1993 pursuant to the provisions of the Securities
Exchange Act of 1934, I do hereby constitute and appoint Harry R. Benz, Ernest
H. Drew and David A. Jenkins, and each of them (with full power to each of them
to act alone) my true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution for me and in my name, place, and stead, in my
offices and capacities as aforesaid and on behalf of the Corporation, to execute
and file the said Annual Report on Form 10-K, any amendment thereto and any and
all other documents to be signed and filed with the Securities and Exchange
Commission in connection therewith; granting unto said attorneys-in-fact and
agents and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the premises
as fully to all intents and purposes as I might or could do in person hereby
ratifying and confirming all that said attorneys-in-fact and agents or any of
them or their substitutes may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, I have executed this instrument on March 18, 1994.
/s/Karl G. Engels
---------------------------------
Karl G. Engels
<PAGE>
POWER OF ATTORNEY
-----------------
As a Director and/or Officer of Hoechst Celanese Corporation, which will file
with the Securities and Exchange Commission, Washington, D.C., its Annual Report
on Form 10-K for the year of 1993 pursuant to the provisions of the Securities
Exchange Act of 1934, I do hereby constitute and appoint Harry R. Benz, Ernest
H. Drew and David A. Jenkins, and each of them (with full power to each of them
to act alone) my true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution for me and in my name, place, and stead, in my
offices and capacities as aforesaid and on behalf of the Corporation, to execute
and file the said Annual Report on Form 10-K, any amendment thereto and any and
all other documents to be signed and filed with the Securities and Exchange
Commission in connection therewith; granting unto said attorneys-in-fact and
agents and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the premises
as fully to all intents and purposes as I might or could do in person hereby
ratifying and confirming all that said attorneys-in-fact and agents or any of
them or their substitutes may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, I have executed this instrument on March 18, 1994.
/s/David A. Jenkins
----------------------------------
David A. Jenkins
<PAGE>
POWER OF ATTORNEY
-----------------
As a Director and/or Officer of Hoechst Celanese Corporation, which will file
with the Securities and Exchange Commission, Washington, D.C., its Annual Report
on Form 10-K for the year of 1993 pursuant to the provisions of the Securities
Exchange Act of 1934, I do hereby constitute and appoint Harry R. Benz, Ernest
H. Drew and David A. Jenkins, and each of them (with full power to each of them
to act alone) my true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution for me and in my name, place, and stead, in my
offices and capacities as aforesaid and on behalf of the Corporation, to execute
and file the said Annual Report on Form 10-K, any amendment thereto and any and
all other documents to be signed and filed with the Securities and Exchange
Commission in connection therewith; granting unto said attorneys-in-fact and
agents and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the premises
as fully to all intents and purposes as I might or could do in person hereby
ratifying and confirming all that said attorneys-in-fact and agents or any of
them or their substitutes may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, I have executed this instrument on March 18, 1994.
/s/Thomas F. Kennedy
-----------------------------------
Thomas F. Kennedy
<PAGE>
POWER OF ATTORNEY
-----------------
As a Director and/or Officer of Hoechst Celanese Corporation, which will file
with the Securities and Exchange Commission, Washington, D.C., its Annual Report
on Form 10-K for the year of 1993 pursuant to the provisions of the Securities
Exchange Act of 1934, I do hereby constitute and appoint Harry R. Benz, Ernest
H. Drew and David A. Jenkins, and each of them (with full power to each of them
to act alone) my true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution for me and in my name, place, and stead, in my
offices and capacities as aforesaid and on behalf of the Corporation, to execute
and file the said Annual Report on Form 10-K, any amendment thereto and any and
all other documents to be signed and filed with the Securities and Exchange
Commission in connection therewith; granting unto said attorneys-in-fact and
agents and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the premises
as fully to all intents and purposes as I might or could do in person hereby
ratifying and confirming all that said attorneys-in-fact and agents or any of
them or their substitutes may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, I have executed this instrument on March 18, 1994.
/s/Joseph H. Patterson
--------------------------------
Joseph H. Patterson
<PAGE>
EXHIBIT 24.2
CERTIFICATE
-----------
HOECHST CELANESE CORPORATION
----------------------------
TO WHOM IT MAY CONCERN:
I, Edmond A. Collins, certify that I am the duly certified and
qualified Corporate Secretary of Hoechst Celanese Corporation (the
"Corporation"), a Delaware corporation, and that the following is a true,
correct and complete copy of a resolution passed by the Board of Directors of
the Corporation by Unanimous Consent Resolution on March 2, 1994, and said
resolution has not been amended or rescinded and is in full force and effect:
RESOLVED, that each officer and director who is authorized under law
to sign (on behalf of the Corporation or as an officer or director thereof)
the Corporation's documents that are filed with the Securities and Exchange
Commission during 1994 is hereby authorized to execute a power of attorney
appointing Harry R. Benz, Ernest H. Drew or David A. Jenkins as his true
and lawful attorney to execute in his name, place and stead in any such
capacity and on behalf of the Corporation such documents and all amendments
and other papers in connection therewith, and to file the same with the
Securities and Exchange Commission, each of said attorneys to have full
power to act without the others, and to do and perform, in the name and on
behalf of the officers and directors who shall have executed such power-of-
attorney, every act necessary to be done as such officer or director could
do in person; such documents shall include but not be limited to the Annual
Report on Form 10-K for fiscal year 1993 that is filed pursuant to the
Securities Exchange Act of 1934.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal of
this Corporation this 15th day of March, 1994.
/s/E. A. Collins
---------------------------------
E. A. Collins
Secretary
[SEAL]
