April 16, 2018 - 4:24 PM EDT
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Celanese Corporation Reports First Quarter 2018 Earnings; Increases 2018 Outlook

DALLAS

Celanese Corporation (NYSE: CE), a global technology and specialty materials company, today reported first quarter 2018 GAAP diluted earnings per share of $2.68, its second highest ever, and record adjusted earnings per share of $2.79. Net sales in the quarter expanded 26 percent year over year to $1.9 billion. Growth in both Engineered Materials and the Acetyl Chain contributed to a robust quarter. Engineered Materials expanded earnings through pipeline commercialization and successful integration of recent acquisitions. The Acetyl Chain's expansive network and ability to respond quickly to improved industry utilization rates enabled it to leverage regional momentum to grow earnings meaningfully.

First Quarter 2018 Financial Highlights:

    Three Months Ended
March 31,
2018       2017
            (As Adjusted)
(unaudited)
(In $ millions)
Operating Profit (Loss)
Engineered Materials 127 104
Acetate Tow 46 62
Acetyl Chain
Industrial Specialties 23 25
Acetyl Intermediates 231 27
Eliminations           (1 )    
Subtotal           253     52  
Other Activities           (83 )   (48 )
Total           343     170  
   
Three Months Ended
March 31,
  2018         2017  
(unaudited)
(In $ millions, except per share data)
Net Earnings (Loss) 365 184
 
Adjusted EBIT(1)(2)
Engineered Materials 182 150
Acetate Tow 78 93
Acetyl Chain
Industrial Specialties 23 25
Acetyl Intermediates 231 83
Eliminations   (1 )    
Subtotal   253     108  
Other Activities   (39 )   (18 )
Total   474     333  
 
Equity Earnings, Cost-Dividend Income, Other Income (Expense)
Engineered Materials 54 43
Acetate Tow 32 29
 
Operating EBITDA(1) 553 404
Diluted EPS - continuing operations $ 2.68 $ 1.30
Diluted EPS - total $ 2.66 $ 1.30
Adjusted EPS(1) $ 2.79 $ 1.81
 
Net cash provided by (used in) investing activities (235 ) (64 )
Net cash provided by (used in) financing activities (2 ) (270 )
Net cash provided by (used in) operating activities 143 192
Free cash flow(1) 55 126
______________________________

(1)

  See "Non-US GAAP Financial Measures" below.
 

(2)

The Company's discussion of adjusted earnings includes use of terms such as "segment income" and "core income". Those non-GAAP terms are defined below and reconciled in our Non-US GAAP Financial Measures and Supplemental Information document referenced below.
 
 

First Quarter 2018 Highlights:

  • Completed the acquisition of Omni Plastics and its subsidiaries. Omni specializes in custom compounding of various engineered thermoplastic materials with a compounding facility and headquarters in Evansville, Indiana.
  • Commercialized a record 742 projects in Engineered Materials in the first quarter of 2018, a 45 percent increase over the first quarter of last year. On-track to deliver approximately 3,000 project wins in 2018.
  • Began the final, large scale installation of critical processing equipment associated with the 150 kt expansion of the Clear Lake, Texas VAM unit.
  • Abandoned the joint venture agreement with Blackstone’s Rhodia Acetow business as parties were unable to reach an agreement with the European Commission on acceptable conditions.
  • Received the 2018 ENERGY STAR® Partner of the Year Sustained Excellence Award for continued leadership and superior contributions to ENERGY STAR.

First Quarter 2018 Business Segment Overview

Engineered Materials (EM)

Engineered Materials delivered record net sales of $665 million in the first quarter, 29 percent higher than the prior year. Both GAAP operating profit of $127 million and segment income of $182 million were all-time highs. Growth in adjusted earnings resulted from the success of the opportunity pipeline, growth in Asia, and recent acquisitions. A record 742 projects were commercialized in the quarter, 45 percent higher than the first quarter of 2017. Customers continue to value the project-based approach in EM that constantly matches Celanese's broad solution set and customer-specific needs to uncover opportunities for partnership. Volume in the first quarter of 2018 increased over last year primarily from the Nilit and Omni acquisitions. Operating profit and segment income margins were slightly lower than the same quarter last year, primarily due to acquisitions, while improving sequentially from the fourth quarter of 2017, and in-line with expectations for 2018. Affiliate earnings in Engineered Materials increased year over year to $54 million driven by Ibn Sina.

Acetate Tow

Acetate tow volume and price in the first quarter were lower than the same quarter last year due to unique positive carryovers from 2016 into the first quarter of 2017 as customers transitioned to new contracts that did not repeat in 2018. Affiliate earnings of $32 million were higher mainly due to favorable currency.

Acetyl Chain

The Acetyl Chain recorded its highest ever net sales of over $1 billion, a 32 percent increase year over year. GAAP operating profit and core income of $253 million each, were both records. Operating profit expanded $201 million compared to the first quarter in 2017, while core income was $145 million higher. The business leveraged progressively improving industry fundamentals in the quarter to deliver a step-change in earnings growth. More opportunities were pursued to activate the expansive network and drive growth than any other previous quarter. Price and Volume increased year-over-year as a result of the improved industry utilization rates regionally and globally. Record margins of 24.1 percent were driven by higher acetic acid and derivative prices globally, led by China.

Cash Flow

Operating cash flow in the first quarter was $143 million. Free cash flow was $55 million driven by timing of sales and collections, on-track for more than $900 million for 2018. Capital expenditures were $86 million in the quarter. Cash of $63 million was returned to shareholders in the quarter in the form of dividends.

Outlook

"The first quarter of 2018 represents a combination of stronger industry fundamentals and the strength of our commercial models. In Engineered Materials, there is a continued need for customized solutions to reduce complexity for customers. The breadth of polymers and customer enabling competencies have made the business an important partner for our customers. In the Acetyl Chain, improving global supply and demand dynamics in the industry led by China, have raised base profitability levels. A very responsive commercial structure coupled with a global manufacturing footprint will continue to enable the Acetyl Chain in translating this momentum into earnings growth around the world. We believe that the improvement in the acetyls industry will be sustained in the longer term but expect some moderation in instantaneous utilization rates as we go through the year. The on-going success in our businesses gives us confidence that we can grow adjusted earnings per share by 20-25 percent in 2018," said Mark Rohr, chairman and chief executive officer.

We are unable to reconcile forecasted adjusted earnings per share growth to US GAAP diluted earnings per share without unreasonable efforts because a forecast of Certain Items, such as mark-to-market pension gains/losses, is not practical.

The Company's earnings presentation and prepared remarks related to the first quarter results will be posted on its website at www.celanese.com under Investor Relations/Events and Presentations after market close on April 16, 2018. Information about Non-US GAAP measures is included in a Non-US GAAP Financial Measures and Supplemental Information document posted on the website and available at the link below. See "Non-GAAP Financial Measures" below.

Celanese Corporation is a global technology leader in the production of differentiated chemistry solutions and specialty materials used in most major industries and consumer applications. Our businesses use the full breadth of Celanese's global chemistry, technology and commercial expertise to create value for our customers, employees, shareholders and the corporation. As we partner with our customers to solve their most critical business needs, we strive to make a positive impact on our communities and the world through The Celanese Foundation. Based in Dallas, Celanese employs approximately 7,700 employees worldwide and had 2017 net sales of $6.1 billion. For more information about Celanese Corporation and its product offerings, visit www.celanese.com or our blog at www.celaneseblog.com.

Forward-Looking Statements

This release may contain "forward-looking statements," which include information concerning the Company's plans, objectives, goals, strategies, future revenues, synergies, performance, capital expenditures, financing needs and other information that is not historical information. All forward-looking statements are based upon current expectations and beliefs and various assumptions. There can be no assurance that the Company will realize these expectations or that these beliefs will prove correct. There are a number of risks and uncertainties that could cause actual results to differ materially from the results expressed or implied in the forward-looking statements contained in this release. These risks and uncertainties include, among other things: changes in general economic, business, political and regulatory conditions in the countries or regions in which we operate; the length and depth of product and industry business cycles, particularly in the automotive, electrical, textiles, electronics and construction industries; changes in the price and availability of raw materials, particularly changes in the demand for, supply of, and market prices of ethylene, methanol, natural gas, wood pulp and fuel oil and the prices for electricity and other energy sources; the ability to pass increases in raw material prices on to customers or otherwise improve margins through price increases; the ability to maintain plant utilization rates and to implement planned capacity additions and expansions; the ability to reduce or maintain current levels of production costs and to improve productivity by implementing technological improvements to existing plants; the ability to identify desirable potential acquisition targets and to consummate acquisition or investment transactions consistent with the Company's strategy; increased price competition and the introduction of competing products by other companies; market acceptance of our technology; the ability to obtain governmental approvals and to construct facilities on terms and schedules acceptable to the Company; changes in tariffs, tax rates or legislation; changes in the degree of intellectual property and other legal protection afforded to our products or technologies, or the theft of such intellectual property; compliance and other costs and potential disruption or interruption of production or operations due to accidents, interruptions in sources of raw materials, cyber security incidents, terrorism or political unrest or other unforeseen events or delays in construction or operation of facilities, including as a result of geopolitical conditions, the occurrence of acts of war or terrorist incidents or as a result of weather or natural disasters; potential liability for remedial actions and increased costs under existing or future environmental regulations, including those relating to climate change; potential liability resulting from pending or future litigation, or from changes in the laws, regulations or policies of governments or other governmental activities in the countries in which we operate; changes in currency exchange rates and interest rates; our level of indebtedness, which could diminish our ability to raise additional capital to fund operations or limit our ability to react to changes in the economy or the chemicals industry; and various other factors discussed from time to time in the Company's filings with the Securities and Exchange Commission. Any forward-looking statement speaks only as of the date on which it is made, and the Company undertakes no obligation to update any forward-looking statements to reflect events or circumstances after the date on which it is made or to reflect the occurrence of anticipated or unanticipated events or circumstances.

Non-GAAP Financial Measures

Presentation

This document presents the Company's four business segments, Engineered Materials, Acetate Tow, Industrial Specialties and Acetyl Intermediates, with one subtotal reflecting our core, the Acetyl Chain, which is based on similarities among customers, business models and technical processes. The Acetyl Chain includes the Company's Acetyl Intermediates segment and the Industrial Specialties segment.

Use of Non-US GAAP Financial Information

This release uses the following Non-US GAAP measures: adjusted EBIT, adjusted EBIT margin, operating EBITDA, adjusted earnings per share and free cash flow. These measures are not recognized in accordance with US GAAP and should not be viewed as an alternative to US GAAP measures of performance or liquidity. The most directly comparable financial measure presented in accordance with US GAAP in our consolidated financial statements for adjusted EBIT and operating EBITDA is net earnings (loss) attributable to Celanese Corporation; for adjusted EBIT margin is operating margin; for adjusted earnings per share is earnings (loss) from continuing operations attributable to Celanese Corporation per common share-diluted; and for free cash flow is net cash provided by (used in) operations.

Definitions of Non-US GAAP Financial Measures

  • Adjusted EBIT is a performance measure used by the Company and is defined by the Company as net earnings (loss) attributable to Celanese Corporation, plus (earnings) loss from discontinued operations, less interest income, plus interest expense, plus refinancing expense and taxes, and further adjusted for Certain Items (refer to Table 8 of our Non-US GAAP Financial Measures and Supplemental Information document). We do not provide reconciliations for adjusted EBIT on a forward-looking basis (including those contained in this document) when we are unable to provide a meaningful or accurate calculation or estimation of reconciling items and the information is not available without unreasonable effort. This is due to the inherent difficulty of forecasting the timing and amount of Certain Items, such as mark-to-market pension gains and losses, that have not yet occurred, are out of our control and/or cannot be reasonably predicted. For the same reasons, we are unable to address the probable significance of the unavailable information. Adjusted EBIT margin is defined by the Company as adjusted EBIT divided by net sales.
  • Adjusted EBIT by core (i.e., the Acetyl Chain) may also be referred to by management as core income. Adjusted EBIT margin by core may also be referred to by management as core income margin. Adjusted EBIT by business segment may also be referred to by management as segment income. Adjusted EBIT margin by business segment may also be referred to by management as segment income margin.
  • Operating EBITDA is a performance measure used by the Company and is defined by the Company as net earnings (loss) attributable to Celanese Corporation, plus (earnings) loss from discontinued operations, less interest income, plus interest expense, plus refinancing expense, taxes and depreciation and amortization, and further adjusted for Certain Items, which Certain Items include accelerated depreciation and amortization expense. Operating EBITDA is equal to adjusted EBIT plus depreciation and amortization.
  • Adjusted earnings per share is a performance measure used by the Company and is defined by the Company as earnings (loss) from continuing operations attributable to Celanese Corporation, adjusted for income tax (provision) benefit, Certain Items, and refinancing and related expenses, divided by the number of basic common shares and dilutive restricted stock units and stock options calculated using the treasury method. We do not provide reconciliations for adjusted earnings per share on a forward-looking basis (including those contained in this document) when we are unable to provide a meaningful or accurate calculation or estimation of reconciling items and the information is not available without unreasonable effort. This is due to the inherent difficulty of forecasting the timing and amount of Certain Items, such as mark-to-market pension gains and losses, that have not yet occurred, are out of our control and/or cannot be reasonably predicted. For the same reasons, we are unable to address the probable significance of the unavailable information.

    Note: The income tax expense (benefit) on Certain Items ("Non-GAAP adjustments") is determined using the applicable rates in the taxing jurisdictions in which the Non-GAAP adjustments occurred and includes both current and deferred income tax expense (benefit). The income tax rate used for adjusted earnings per share approximates the midpoint in a range of forecasted tax rates for the year. This range may include certain partial or full-year forecasted tax opportunities and related costs, where applicable, and specifically excludes changes in uncertain tax positions, discrete recognition of GAAP items on a quarterly basis, other pre-tax items adjusted out of our GAAP earnings for adjusted earnings per share purposes and changes in management's assessments regarding the ability to realize deferred tax assets for GAAP. In determining the adjusted earnings per share tax rate, we reflect the impact of foreign tax credits when utilized, or expected to be utilized, absent discrete events impacting the timing of foreign tax credit utilization. We analyze this rate quarterly and adjust it if there is a material change in the range of forecasted tax rates; an updated forecast would not necessarily result in a change to our tax rate used for adjusted earnings per share. The adjusted tax rate is an estimate and may differ from the actual tax rate used for GAAP reporting in any given reporting period. Table 3a of our Non-US GAAP Financial Measures and Supplemental Information document summarizes the reconciliation of our estimated GAAP effective tax rate to the adjusted tax rate. The estimated GAAP rate excludes discrete recognition of GAAP items due to our inability to forecast such items. As part of the year-end reconciliation, we will update the reconciliation of the GAAP effective tax rate to the adjusted tax rate for actual results.
  • Free cash flow is a liquidity measure used by the Company and is defined by the Company as cash flow from operations, less capital expenditures on property, plant and equipment, and adjusted for capital contributions from or distributions to Mitsui & Co., Ltd. ("Mitsui") related to our methanol joint venture, Fairway Methanol LLC ("Fairway").

Reconciliation of Non-US GAAP Financial Measures

Reconciliations of the Non-US GAAP financial measures used in this press release to the comparable US GAAP financial measure, together with information about the purposes and uses of Non-US GAAP financial measures, are included in our Non-US GAAP Financial Measures and Supplemental Information document filed as an exhibit to our Current Report on Form 8-K filed with the SEC on or about April 16, 2018 and also available on our website at www.celanese.com under Financial Information, Non-GAAP Financial Measures, or at this link: http://investors.celanese.com/interactive/lookandfeel/4103411/Non-GAAP.PDF.

Results Unaudited

The results in this document, together with the adjustments made to present the results on a comparable basis, have not been audited and are based on internal financial data furnished to management. Quarterly results should not be taken as an indication of the results of operations to be reported for any subsequent period or for the full fiscal year.

Supplemental Information

Additional information about our prior period performance is included in our Quarterly Reports on Form 10-Q and in our Non-US GAAP Financial Measures and Supplemental Information document.

 
 

Consolidated Statements of Operations - Unaudited

 
    Three Months Ended
March 31,
2018     2017
(As Adjusted)

(In $ millions, except share and per
share data)

Net sales 1,851 1,471
Cost of sales (1,336 ) (1,121 )
Gross profit 515 350
Selling, general and administrative expenses (147 ) (103 )
Amortization of intangible assets (6 ) (4 )
Research and development expenses (18 ) (17 )
Other (charges) gains, net (55 )
Foreign exchange gain (loss), net (1 )
Gain (loss) on disposition of businesses and assets, net   (1 )
Operating profit (loss) 343 170
Equity in net earnings (loss) of affiliates 58 47
Non-operating pension and other postretirement employee benefit (expense) income 26 22
Interest expense (33 ) (29 )
Interest income 2
Dividend income - cost investments 32 29
Other income (expense), net 4   1  
Earnings (loss) from continuing operations before tax 432 240
Income tax (provision) benefit (65 ) (56 )
Earnings (loss) from continuing operations 367   184  
Earnings (loss) from operation of discontinued operations (2 )
Income tax (provision) benefit from discontinued operations    
Earnings (loss) from discontinued operations (2 )  
Net earnings (loss) 365 184
Net (earnings) loss attributable to noncontrolling interests (2 ) (1 )
Net earnings (loss) attributable to Celanese Corporation 363   183  
Amounts attributable to Celanese Corporation
Earnings (loss) from continuing operations 365 183
Earnings (loss) from discontinued operations (2 )  
Net earnings (loss) 363   183  
Earnings (loss) per common share - basic
Continuing operations 2.69 1.30
Discontinued operations (0.02 )  
Net earnings (loss) - basic 2.67   1.30  
Earnings (loss) per common share - diluted
Continuing operations 2.68 1.30
Discontinued operations (0.02 )  
Net earnings (loss) - diluted 2.66   1.30  
Weighted average shares (in millions)
Basic 135.9 140.6
Diluted 136.4 141.0
 
 

Consolidated Balance Sheets - Unaudited

 
    As of     As of
March 31, December 31,
2018 2017
(In $ millions)
ASSETS
Current Assets
Cash and cash equivalents 490 576
Trade receivables - third party and affiliates, net 1,205 986
Non-trade receivables, net 271 244
Inventories 955 900
Marketable securities, at fair value 32 32
Other assets 53   54  
Total current assets 3,006   2,792  
Investments in affiliates 979 976
Property, plant and equipment, net 3,801 3,762
Deferred income taxes 182 366
Other assets 369 338
Goodwill 1,107 1,003
Intangible assets, net 336   301  
Total assets 9,780   9,538  
LIABILITIES AND EQUITY
Current Liabilities
Short-term borrowings and current installments of long-term debt - third party and affiliates 425 326
Trade payables - third party and affiliates 797 807
Other liabilities 266 354
Income taxes payable 114   72  
Total current liabilities 1,602   1,559  
Long-term debt, net of unamortized deferred financing costs 3,343 3,315
Deferred income taxes 219 211
Uncertain tax positions 152 156
Benefit obligations 582 585
Other liabilities 217 413
Commitments and Contingencies
Stockholders' Equity
Preferred stock
Common stock
Treasury stock, at cost (2,031 ) (2,031 )
Additional paid-in capital 192 175
Retained earnings 5,220 4,920
Accumulated other comprehensive income (loss), net (128 ) (177 )
Total Celanese Corporation stockholders' equity 3,253 2,887
Noncontrolling interests 412   412  
Total equity 3,665   3,299  
Total liabilities and equity 9,780   9,538  
 
 
 

Non-US GAAP Financial Measures and Supplemental Information

April 16, 2018

In this document, the terms the "Company," "we" and "our" refer to Celanese Corporation and its subsidiaries on a consolidated basis.

Purpose

The purpose of this document is to provide information of interest to investors, analysts and other parties including supplemental financial information and reconciliations and other information concerning our use of non-US GAAP financial measures. This document is updated quarterly.

Presentation

This document presents the Company's four business segments, Engineered Materials, Acetate Tow, Industrial Specialties and Acetyl Intermediates, with one subtotal reflecting our core, the Acetyl Chain, which is based on similarities among customers, business models and technical processes. The Acetyl Chain includes the Company's Industrial Specialties segment and Acetyl Intermediates segment.

Use of Non-US GAAP Financial Measures

From time to time, management may publicly disclose certain numerical "non-GAAP financial measures" in the course of our earnings releases, financial presentations, earnings conference calls, investor and analyst meetings and otherwise. For these purposes, the Securities and Exchange Commission ("SEC") defines a "non-GAAP financial measure" as a numerical measure of historical or future financial performance, financial position or cash flows that excludes amounts, or is subject to adjustments that effectively exclude amounts, included in the most directly comparable measure calculated and presented in accordance with US GAAP, and vice versa for measures that include amounts, or are subject to adjustments that effectively include amounts, that are excluded from the most directly comparable US GAAP measure so calculated and presented. For these purposes, "GAAP" refers to generally accepted accounting principles in the United States.

Non-GAAP financial measures disclosed by management are provided as additional information to investors, analysts and other parties because the Company believes them to be important supplemental measures for assessing our financial and operating results and as a means to evaluate our financial condition and period-to-period comparisons. These non-GAAP financial measures should be viewed as supplemental to, and should not be considered in isolation or as alternatives to, net earnings (loss), operating profit (loss), operating margin, cash flow from operating activities (together with cash flow from investing and financing activities), earnings per share or any other US GAAP financial measure. These non-GAAP financial measures should be considered within the context of our complete audited and unaudited financial results for the given period, which are available on the Investor Relations/Financial Information/SEC Filings page of our website, www.celanese.com. The definition and method of calculation of the non-GAAP financial measures used herein may be different from other companies' methods for calculating measures with the same or similar titles. Investors, analysts and other parties should understand how another company calculates such non-GAAP financial measures before comparing the other company's non-GAAP financial measures to any of our own. These non-GAAP financial measures may not be indicative of the historical operating results of the Company nor are they intended to be predictive or projections of future results.

Pursuant to the requirements of SEC Regulation G, whenever we refer to a non-GAAP financial measure, we will also present in this document, in the presentation itself or on a Form 8-K in connection with the presentation on the Investor Relations/Financial Information/Non-GAAP Financial Measures page of our website, www.celanese.com, to the extent practicable, the most directly comparable financial measure calculated and presented in accordance with GAAP, along with a reconciliation of the differences between the non-GAAP financial measure we reference and such comparable GAAP financial measure.

This document includes definitions and reconciliations of non-GAAP financial measures used from time to time by the Company.

Specific Measures Used

This document provides information about the following non-GAAP measures: adjusted EBIT, adjusted EBIT margin, operating EBITDA, operating EBITDA margin, operating profit (loss) attributable to Celanese Corporation, adjusted earnings per share, net debt, free cash flow and return on invested capital (adjusted). The most directly comparable financial measure presented in accordance with US GAAP in our consolidated financial statements for adjusted EBIT and operating EBITDA is net earnings (loss) attributable to Celanese Corporation; for adjusted EBIT margin and operating EBITDA margin is operating margin; for operating profit (loss) attributable to Celanese Corporation is operating profit (loss); for adjusted earnings per share is earnings (loss) from continuing operations attributable to Celanese Corporation per common share-diluted; for net debt is total debt; for free cash flow is net cash provided by (used in) operations; and for return on invested capital (adjusted) is net earnings (loss) attributable to Celanese Corporation divided by the sum of the average of beginning and end of the year short- and long-term debt and Celanese Corporation stockholders' equity.

Definitions

  • Adjusted EBIT is a performance measure used by the Company and is defined by the Company as net earnings (loss) attributable to Celanese Corporation, plus (earnings) loss from discontinued operations, less interest income, plus interest expense, plus refinancing expense and taxes, and further adjusted for Certain Items (refer to Table 8). We believe that adjusted EBIT provides transparent and useful information to management, investors, analysts and other parties in evaluating and assessing our primary operating results from period-to-period after removing the impact of unusual, non-operational or restructuring-related activities that affect comparability. Our management recognizes that adjusted EBIT has inherent limitations because of the excluded items. Adjusted EBIT is one of the measures management uses for planning and budgeting, monitoring and evaluating financial and operating results and as a performance metric in the Company's incentive compensation plan. We do not provide reconciliations for adjusted EBIT on a forward-looking basis (including those contained in this document) when we are unable to provide a meaningful or accurate calculation or estimation of reconciling items and the information is not available without unreasonable effort. This is due to the inherent difficulty of forecasting the timing and amount of Certain Items, such as mark-to-market pension gains and losses, that have not yet occurred, are out of our control and/or cannot be reasonably predicted. For the same reasons, we are unable to address the probable significance of the unavailable information. Adjusted EBIT margin is defined by the Company as adjusted EBIT divided by net sales. Adjusted EBIT margin has the same uses and limitations as Adjusted EBIT.
  • Adjusted EBIT by core (i.e. the Acetyl Chain) may also be referred to by management as core income. Adjusted EBIT margin by core may also be referred to by management as core income margin. Adjusted EBIT by business segment may also be referred to by management as segment income. Adjusted EBIT margin by business segment may also be referred to by management as segment income margin.
  • Operating EBITDA is a performance measure used by the Company and is defined by the Company as net earnings (loss) attributable to Celanese Corporation, plus (earnings) loss from discontinued operations, less interest income, plus interest expense, plus refinancing expense, taxes and depreciation and amortization, and further adjusted for Certain Items, which Certain Items include accelerated depreciation and amortization expense. Operating EBITDA is equal to adjusted EBIT plus depreciation and amortization. We believe that Operating EBITDA provides transparent and useful information to investors, analysts and other parties in evaluating our operating performance relative to our peer companies. Operating EBITDA margin is defined by the Company as Operating EBITDA divided by net sales. Operating EBITDA margin has the same uses and limitations as Operating EBITDA.
  • Operating profit (loss) attributable to Celanese Corporation is defined by the Company as operating profit (loss), less earnings (loss) attributable to noncontrolling interests ("NCI"). We believe that operating profit (loss) attributable to Celanese Corporation provides transparent and useful information to management, investors, analysts and other parties in evaluating our core operational performance. Operating margin attributable to Celanese Corporation is defined by the Company as operating profit (loss) attributable to Celanese Corporation divided by net sales. Operating margin attributable to Celanese Corporation has the same uses and limitations as Operating profit (loss) attributable to Celanese Corporation.
  • Adjusted earnings per share is a performance measure used by the Company and is defined by the Company as earnings (loss) from continuing operations attributable to Celanese Corporation, adjusted for income tax (provision) benefit, Certain Items, and refinancing and related expenses, divided by the number of basic common shares and dilutive restricted stock units and stock options calculated using the treasury method. We believe that adjusted earnings per share provides transparent and useful information to management, investors, analysts and other parties in evaluating and assessing our primary operating results from period-to-period after removing the impact of the above stated items that affect comparability and as a performance metric in the Company's incentive compensation plan. We do not provide reconciliations for adjusted earnings per share on a forward-looking basis (including those contained in this document) when we are unable to provide a meaningful or accurate calculation or estimation of reconciling items and the information is not available without unreasonable effort. This is due to the inherent difficulty of forecasting the timing and amount of Certain Items, such as mark-to-market pension gains and losses, that have not yet occurred, are out of our control and/or cannot be reasonably predicted. For the same reasons, we are unable to address the probable significance of the unavailable information.

    Note: The income tax expense (benefit) on Certain Items ("Non-GAAP adjustments") is determined using the applicable rates in the taxing jurisdictions in which the Non-GAAP adjustments occurred and includes both current and deferred income tax expense (benefit). The income tax rate used for adjusted earnings per share approximates the midpoint in a range of forecasted tax rates for the year. This range may include certain partial or full-year forecasted tax opportunities and related costs, where applicable, and specifically excludes changes in uncertain tax positions, discrete recognition of GAAP items on a quarterly basis, other pre-tax items adjusted out of our GAAP earnings for adjusted earnings per share purposes and changes in management's assessments regarding the ability to realize deferred tax assets for GAAP. In determining the adjusted earnings per share tax rate, we reflect the impact of foreign tax credits when utilized, or expected to be utilized, absent discrete events impacting the timing of foreign tax credit utilization. We analyze this rate quarterly and adjust it if there is a material change in the range of forecasted tax rates; an updated forecast would not necessarily result in a change to our tax rate used for adjusted earnings per share. The adjusted tax rate is an estimate and may differ from the actual tax rate used for GAAP reporting in any given reporting period. Table 3a summarizes the reconciliation of our estimated GAAP effective tax rate to the adjusted tax rate. The estimated GAAP rate excludes discrete recognition of GAAP items due to our inability to forecast such items. As part of the year-end reconciliation, we will update the reconciliation of the GAAP effective tax rate to the adjusted tax rate for actual results.
  • Free cash flow is a liquidity measure used by the Company and is defined by the Company as net cash provided by (used in) operations, less capital expenditures on property, plant and equipment, and adjusted for capital contributions from or distributions to Mitsui & Co., Ltd. ("Mitsui") related to our methanol joint venture, Fairway Methanol LLC ("Fairway"). We believe that free cash flow provides useful information to management, investors, analysts and other parties in evaluating the Company's liquidity and credit quality assessment because it provides an indication of the long-term cash generating ability of our business. Although we use free cash flow as a measure to assess the liquidity generated by our business, the use of free cash flow has important limitations, including that free cash flow does not reflect the cash requirements necessary to service our indebtedness, lease obligations, unconditional purchase obligations or pension and postretirement funding obligations.

Supplemental Information

Supplemental Information we believe to be of interest to investors, analysts and other parties includes the following:

  • For those consolidated ventures in which the Company owns or is exposed to less than 100% of the economics, the outside stockholders' interests are shown as NCI. Beginning in 2014, this includes Fairway for which the Company's ownership percentage is 50%. Amounts referred to as "attributable to Celanese Corporation" are net of any applicable NCI.

Recent Developments

Effective January 1, 2018, we reorganized our operating and reportable segments to align with recent structural and management reporting changes. The change reflects the movement of our food ingredients business from the Consumer Specialties reportable segment into the Engineered Materials reportable segment. The former Consumer Specialties reportable segment is being renamed the Acetate Tow segment and the former Advanced Engineered Materials reportable segment is being renamed the Engineered Materials segment. This reorganization better reflects how we manage our food ingredients' related products commercially. Engineered Materials and food ingredients are both project-based models which focus on delivering customized solutions and are led by the same senior management team. These changes in operating and reportable segments were applied retrospectively to prior periods through 2014.

Results Unaudited

The results in this document, together with the adjustments made to present the results on a comparable basis, have not been audited and are based on internal financial data furnished to management. Quarterly results should not be taken as an indication of the results of operations to be reported for any subsequent period or for the full fiscal year.

 

Table 1
Adjusted EBIT and Operating EBITDA - Reconciliation of Non-GAAP Measures - Unaudited

 
    Q1 '18     2017     Q4 '17     Q3 '17     Q2 '17     Q1 '17
(In $ millions)
Net earnings (loss) attributable to Celanese Corporation 363 843 203 226 231 183
(Earnings) loss from discontinued operations 2 13 1 4 8
Interest income (2 ) (2 ) (1 ) (1 )
Interest expense 33 122 31 32 30 29
Refinancing expense
Income tax provision (benefit) 65 213 60 57 40 56

Certain Items attributable to Celanese Corporation (Table 8)

13   167   57   27   18   65
Adjusted EBIT 474 1,356 352 345 326 333
Depreciation and amortization expense(1) 79   303   79   78   75   71

Operating EBITDA

553   1,659   431   423   401   404
 
 

Q1 '18

2017

Q4 '17

Q3 '17

Q2 '17

Q1 '17

(In $ millions)
Engineered Materials
Acetate Tow
Industrial Specialties 2 2
Acetyl Intermediates
Other Activities(2)          
Accelerated depreciation and amortization expense 2 2
Depreciation and amortization expense(1) 79   303   79   78   75   71
Total depreciation and amortization expense 79   305   79   80   75   71
______________________________
 
(1)   Excludes accelerated depreciation and amortization expense as detailed in the table above, which amounts are included in Certain Items above.
(2) Other Activities includes corporate Selling, general and administrative ("SG&A") expenses, the results of captive insurance companies and certain components of net periodic benefit cost (interest cost, expected return on plan assets and net actuarial gains and losses).
 
 
 

Table 2 - Supplemental Segment Data and Reconciliation of Segment Adjusted EBIT and Operating EBITDA - Non-GAAP Measures - Unaudited

 
    Q1 '18     2017     Q4 '17     Q3 '17     Q2 '17     Q1 '17
(In $ millions, except percentages)
Operating Profit (Loss) / Operating Margin                        
Engineered Materials 127 19.1 % 412 18.6 % 98 16.9 % 105 18.3 % 105 19.2 % 104 20.2 %
Acetate Tow 46 27.4 % 189 28.3 % 41 26.1 % 45 28.7 % 41 25.2 % 62 32.5 %
Acetyl Chain(1) 253 24.1 % 509 15.1 % 175 19.7 % 147 17.0 % 135 16.3 % 52 6.5 %
Other Activities(2) (83 ) (253 ) (74 ) (68 ) (63 ) (48 )
Total 343   18.5 % 857   14.0 % 240   15.1 % 229   14.6 % 218   14.4 % 170   11.6 %
Less: Net Earnings (Loss) Attributable to NCI(1) 2   6   1   2   2   1  
Operating Profit (Loss) Attributable to Celanese Corporation 341   18.4 % 851   13.9 % 239   15.0 % 227   14.5 % 216   14.3 % 169   11.5 %
Operating Profit (Loss) / Operating Margin Attributable to Celanese Corporation
Engineered Materials 127 19.1 % 412 18.6 % 98 16.9 % 105 18.3 % 105 19.2 % 104 20.2 %
Acetate Tow 46 27.4 % 189 28.3 % 41 26.1 % 45 28.7 % 41 25.2 % 62 32.5 %
Industrial Specialties 23 8.4 % 85 8.3 % 15 6.0 % 19 7.2 % 26 9.9 % 25 10.2 %
Acetyl Intermediates(1) 229 26.3 % 418 15.7 % 159 22.2 % 126 18.4 % 107 16.5 % 26 4.2 %
Eliminations (1 )          
Acetyl Chain 251   23.9 % 503   14.9 % 174   19.6 % 145   16.8 % 133   16.1 % 51   6.4 %
Other Activities(2) (83 ) (253 ) (74 ) (68 ) (63 ) (48 )
Total 341   18.4 % 851   13.9 % 239   15.0 % 227   14.5 % 216   14.3 % 169   11.5 %
Equity Earnings, Cost-Dividend Income, Other Income (Expense) Attributable to Celanese Corporation
Engineered Materials 54 171 43 47 38 43
Acetate Tow 32 107 26 24 28 29
Industrial Specialties
Acetyl Intermediates 2   6   2   1   2   1  
Acetyl Chain 2   6   2   1   2   1  
Other Activities(2) 6   10   8   (4 ) 2   4  
Total 94   294   79   68   70   77  
Non-Operating Pension and Other Post-Retirement Employee Benefit (Expense) Income Attributable to Celanese Corporation
Engineered Materials
Acetate Tow
Industrial Specialties 2 1 1
Acetyl Intermediates            
Acetyl Chain   2   1   1      
Other Activities(2) 26   42   (24 ) 22   22   22  
Total 26   44   (23 ) 23   22   22  
Certain Items Attributable to Celanese Corporation (Table 8)
Engineered Materials 1 16 1 5 7 3
Acetate Tow 5 1 2 2
Industrial Specialties 3 3
Acetyl Intermediates   61   1   7   (3 ) 56  
Acetyl Chain   64   1   10   (3 ) 56  
Other Activities(2) 12   82   54   12   12   4  
Total 13   167   57   27   18   65  
___________________________
(1)   Net earnings (loss) attributable to NCI is included within the Acetyl Intermediates segment.
(2) Other Activities includes corporate SG&A expenses, the results of captive insurance companies and certain components of net periodic benefit cost (interest cost, expected return on plan assets and net actuarial gains and losses).
 
 
 

Table 2 - Supplemental Segment Data and Reconciliation of Segment Adjusted EBIT and Operating EBITDA - Non-GAAP Measures - Unaudited (cont.)

 
    Q1 '18     2017     Q4 '17     Q3 '17     Q2 '17     Q1 '17
(In $ millions, except percentages)
Adjusted EBIT / Adjusted EBIT Margin            
Engineered Materials 182 27.4 % 599 27.1 % 142 24.5 % 157 27.4 % 150 27.5 % 150 29.2 %
Acetate Tow 78 46.4 % 301 45.1 % 68 43.3 % 69 43.9 % 71 43.6 % 93 48.7 %
Industrial Specialties 23 8.4 % 90 8.8 % 16 6.3 % 23 8.7 % 26 9.9 % 25 10.2 %
Acetyl Intermediates 231 26.5 % 485 18.2 % 162 22.6 % 134 19.6 % 106 16.3 % 83 13.4 %
Eliminations (1 )          
Acetyl Chain 253   24.1 % 575   17.1 % 178   20.0 % 157   18.2 % 132   16.0 % 108   13.6 %
Other Activities(2) (39 ) (119 ) (36 ) (38 ) (27 ) (18 )
Total 474   25.6 % 1,356   22.1 % 352   22.1 % 345   22.0 % 326   21.6 % 333   22.6 %
Depreciation and Amortization Expense(1)
Engineered Materials 32 111 29 30 27 25
Acetate Tow 10 41 11 10 10 10
Industrial Specialties 9 36 10 8 10 8
Acetyl Intermediates 26   105   27   26   26   26  
Acetyl Chain 35   141   37   34   36   34  
Other Activities(2) 2   10   2   4   2   2  
Total 79   303   79   78   75   71  
Operating EBITDA / Operating EBITDA Margin
Engineered Materials 214 32.2 % 710 32.1 % 171 29.5 % 187 32.6 % 177 32.4 % 175 34.0 %
Acetate Tow 88 52.4 % 342 51.2 % 79 50.3 % 79 50.3 % 81 49.7 % 103 53.9 %
Industrial Specialties 32 11.7 % 126 12.3 % 26 10.3 % 31 11.7 % 36 13.7 % 33 13.5 %
Acetyl Intermediates 257 29.5 % 590 22.1 % 189 26.4 % 160 23.4 % 132 20.3 % 109 17.6 %
Eliminations (1 )          
Acetyl Chain 288   27.4 % 716   21.2 % 215   24.2 % 191   22.1 % 168   20.3 % 142   17.9 %
Other Activities(2) (37 ) (109 ) (34 ) (34 ) (25 ) (16 )
Total 553   29.9 % 1,659   27.0 % 431   27.1 % 423   27.0 % 401   26.6 % 404   27.5 %
___________________________
(1)   Excludes accelerated depreciation and amortization expense, which amounts are included in Certain Items above. See Table 1 for details.
(2) Other Activities includes corporate SG&A expenses, the results of captive insurance companies and certain components of net periodic benefit cost (interest cost, expected return on plan assets and net actuarial gains and losses).
 
 
 

Table 3
Adjusted Earnings (Loss) per Share - Reconciliation of a Non-GAAP Measure - Unaudited

 
    Q1 '18     2017     Q4 '17     Q3 '17     Q2 '17     Q1 '17
   

per
share

   

per
share

   

per
share

   

per
share

   

per
share

   

per
share

 
Earnings (loss) from continuing operations attributable to Celanese Corporation 365 2.68 856 6.19 204 1.50 230 1.68 239 1.72 183 1.30
Income tax provision (benefit) 65   213   60   57   40   56  
Earnings (loss) from continuing operations before tax 430 1,069 264 287 279 239

Certain Items attributable to Celanese Corporation (Table 8)

13   167   57   27   18   65  
Adjusted earnings (loss) from continuing operations before tax 443 1,236 321 314 297 304
Income tax (provision) benefit on adjusted earnings(1) (62 ) (198 ) (51 ) (50 ) (48 ) (49 )
Adjusted earnings (loss) from continuing operations(2) 381   2.79   1,038   7.51   270   1.98   264   1.93   249   1.79   255   1.81
Diluted shares (in millions)(3)
Weighted average shares outstanding 135.9 137.9 135.8 136.6 138.6 140.6
Incremental shares attributable to equity awards 0.5   0.4   0.5   0.4   0.4   0.4  
Total diluted shares 136.4   138.3   136.3   137.0   139.0   141.0  
 

______________________________

(1) Calculated using adjusted effective tax rates (Table 3a) as follows:

 

Q1 '18

2017

Q4 '17

Q3 '17

Q2 '17

Q1 '17

(In percentages)
Adjusted effective tax rate 14 16 16 16 16 16
 

(2) Excludes the immediate recognition of actuarial gains and losses and the impact of actual vs. expected plan asset returns.

 
 
   

Actual Plan
Asset Returns

   

Expected
Plan Asset
Returns

(In percentages)

     2017

10.5 7.3
 

(3) Potentially dilutive shares are included in the adjusted earnings per share calculation when adjusted earnings are positive.

 
 

Table 3a
Adjusted Tax Rate - Reconciliation of a Non-GAAP Measure - Unaudited

 
    Estimated     Actual
2018 2017
(In percentages)
US GAAP annual effective tax rate 14 20
Discrete quarterly recognition of GAAP items(1) (11 )
Tax impact of other charges and adjustments(2) (2 ) 1
Utilization of foreign tax credits 20
Changes in valuation allowances, excluding impact of other charges and adjustments(3) 1 (13 )
Other(4) 1   (1 )
Adjusted tax rate 14   16  
______________________________

Note: As part of the year-end reconciliation, we will update the reconciliation of the GAAP effective tax rate for actual results.

(1)   Such as changes in tax laws (including US tax reform), deferred taxes on outside basis differences, changes in uncertain tax positions and prior year audit adjustments.
(2) Reflects the tax impact on pre-tax adjustments presented in Certain Items (Table 8), which are excluded from pre-tax income for adjusted earnings per share purposes.
(3) Reflects changes in valuation allowances related to changes in judgment regarding the realizability of deferred tax assets or current year operations, excluding other charges and adjustments.
(4) Tax impacts related to full-year forecasted tax opportunities and related costs.
 
 
 

Table 5
Free Cash Flow - Reconciliation of a Non-GAAP Measure - Unaudited

 
    Q1 '18     2017     Q4 '17     Q3 '17     Q2 '17     Q1 '17
(In $ millions)
Net cash provided by (used in) investing activities (235 ) (549 ) (92 ) (68 ) (325 ) (64 )
Net cash provided by (used in) financing activities (2 ) (351 ) 145 (247 ) 21 (270 )
 
Net cash provided by (used in) operating activities 143 803 58 255 298 192
Capital expenditures on property, plant and equipment (86 ) (267 ) (87 ) (64 ) (54 ) (62 )
Capital (distributions to) contributions from NCI (2 ) (27 ) (9 ) (10 ) (4 ) (4 )
Free cash flow(1)(2) 55   509   (38 ) 181   240   126  
 
Net sales 1,851   6,140   1,593   1,566   1,510   1,471  
 
Free cash flow as % of Net sales 3.0 % 8.3 % (2.4 )% 11.6 % 15.9 % 8.6 %
______________________________
(1)   Free cash flow is a liquidity measure used by the Company and is defined by the Company as net cash provided by (used in) operating activities, less capital expenditures on property, plant and equipment, and adjusted for capital contributions from or distributions to Mitsui & Co., Ltd. ("Mitsui") related to our joint venture, Fairway Methanol LLC ("Fairway").
(2) Excludes required debt service and capital lease payments of $63 million and $27 million for the years ending December 31, 2018 and 2017, respectively.
 
 

Table 8
Certain Items - Unaudited

 

The following Certain Items attributable to Celanese Corporation are included in Net earnings (loss) and are adjustments to non-GAAP measures:

 
    Q1 '18     2017     Q4 '17     Q3 '17     Q2 '17     Q1 '17     Income Statement Classification
(In $ millions)
Plant/office closures 58 2 2 (3 ) 57 Cost of sales / SG&A / R&D / Other charges (gains), net
Mergers and acquisitions 13 35 9 10 7 9 Cost of sales / SG&A / Other income (expense), net
Impact from natural disasters(1) 11 11 Cost of sales
InfraServ ownership change 8 8 Other charges (gains), net / Equity in net earnings (loss) of affiliates
Actuarial (gain) loss on pension and postretirement plans 46 46 Cost of sales / SG&A / R&D
Restructuring 9 4 3 2 Cost of sales / SG&A / R&D / Other charges (gains), net
Other         3   (3 ) (Gain) loss on disposition, net / Equity in net earnings (loss) of affiliates
Certain Items attributable to Celanese Corporation 13   167   57   27   18   65  
______________________________
(1)   Primarily associated with Hurricane Harvey.
 

Celanese Corporation
Investor Relations
Surabhi Varshney, +1-972-443-3078
[email protected]
or
Media - U.S.
Travis Jacobsen, +1-972-443-3750
[email protected]
or
Media - Europe
Jens Kurth, +49(0)69 45009 1574
[email protected]


Source: Business Wire (April 16, 2018 - 4:24 PM EDT)

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