Independent
Auditors Report
The Board of Directors and Shareholders
Celanese Corporation:
We have audited the accompanying consolidated balance sheets of
Celanese Corporation and subsidiaries (the Company)
as of December 31, 2009 and 2008, and the related
consolidated statements of operations, shareholders equity
and comprehensive income (loss), and cash flows for each of the
years in the three-year period ended December 31, 2009.
These consolidated financial statements are the responsibility
of the Companys management. Our responsibility is to
express an opinion on these consolidated financial statements
based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards as established by the Auditing Standards
Board (United States) and in accordance with the auditing
standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. The
Company is not required to have, nor were we engaged to perform,
an audit of its internal control over financial reporting. Our
audit included consideration of internal control over financial
reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Companys
internal control over financial reporting. Accordingly, we
express no such opinion. An audit also includes examining, on a
test basis, evidence supporting the amounts and disclosures in
the financial statements, 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 Celanese Corporation and subsidiaries as of
December 31, 2009 and 2008, and the results of their
operations and their cash flows for each of the years in the
three-year period ended December 31, 2009, in conformity
with U.S. generally accepted accounting principles.
As discussed in Note 15 to the consolidated financial
statements, the Company adopted Financial Accounting Standards
Board (FASB) Staff Position No. 132(R)-1,
Employers Disclosures about Postretirement Benefit Plan
Assets (included in FASB Accounting Standards Codification
(ASC) Subtopic
715-20,
Defined Benefit Plans), during the year ended
December 31, 2009.
As discussed in Note 23 to the consolidated financial
statements, the Company adopted FASB Statement of Financial
Accounting Standards No. 157, Fair Value Measurements
(included in FASB ASC Subtopic
820-10,
Fair Value Measurements and Disclosures), during the year
ended December 31, 2008.
As discussed in Note 19 to the consolidated financial
statements, the Company adopted FASB Interpretation No. 48,
Accounting for Uncertainty in Income Taxes (included in
FASB ASC Subtopic
740-10,
Income Taxes), during the year ended December 31,
2007.
/s/ KPMG LLP
Dallas, Texas
February 12, 2010, except as to Note 31
which is as of September 15, 2010
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
As Adjusted (Note 31)
|
|
|
|
(In $ millions, except for share and per share data)
|
|
|
Net sales
|
|
|
5,082
|
|
|
|
|
6,823
|
|
|
|
|
6,444
|
|
|
Cost of sales
|
|
|
(4,079
|
)
|
|
|
|
(5,567
|
)
|
|
|
|
(4,999
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
1,003
|
|
|
|
|
1,256
|
|
|
|
|
1,445
|
|
|
Selling, general and administrative expenses
|
|
|
(469
|
)
|
|
|
|
(540
|
)
|
|
|
|
(516
|
)
|
|
Amortization of intangible assets (primarily customer
relationships)
|
|
|
(77
|
)
|
|
|
|
(76
|
)
|
|
|
|
(72
|
)
|
|
Research and development expenses
|
|
|
(75
|
)
|
|
|
|
(80
|
)
|
|
|
|
(73
|
)
|
|
Other (charges) gains, net
|
|
|
(136
|
)
|
|
|
|
(108
|
)
|
|
|
|
(58
|
)
|
|
Foreign exchange gain (loss), net
|
|
|
2
|
|
|
|
|
(4
|
)
|
|
|
|
2
|
|
|
Gain (loss) on disposition of businesses and assets, net
|
|
|
42
|
|
|
|
|
(8
|
)
|
|
|
|
20
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit
|
|
|
290
|
|
|
|
|
440
|
|
|
|
|
748
|
|
|
Equity in net earnings (loss) of affiliates
|
|
|
99
|
|
|
|
|
172
|
|
|
|
|
150
|
|
|
Interest expense
|
|
|
(207
|
)
|
|
|
|
(261
|
)
|
|
|
|
(262
|
)
|
|
Refinancing expense
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
(256
|
)
|
|
Interest income
|
|
|
8
|
|
|
|
|
31
|
|
|
|
|
44
|
|
|
Dividend income cost investments
|
|
|
57
|
|
|
|
|
48
|
|
|
|
|
38
|
|
|
Other income (expense), net
|
|
|
4
|
|
|
|
|
3
|
|
|
|
|
(25
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) from continuing operations before tax
|
|
|
251
|
|
|
|
|
433
|
|
|
|
|
437
|
|
|
Income tax (provision) benefit
|
|
|
243
|
|
|
|
|
(63
|
)
|
|
|
|
(110
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) from continuing operations
|
|
|
494
|
|
|
|
|
370
|
|
|
|
|
327
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) from operation of discontinued operations
|
|
|
6
|
|
|
|
|
(120
|
)
|
|
|
|
40
|
|
|
Gain (loss) on disposal of discontinued operations
|
|
|
-
|
|
|
|
|
6
|
|
|
|
|
52
|
|
|
Income tax (provision) benefit from discontinued operations
|
|
|
(2
|
)
|
|
|
|
24
|
|
|
|
|
(2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) from discontinued operations
|
|
|
4
|
|
|
|
|
(90
|
)
|
|
|
|
90
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings (loss)
|
|
|
498
|
|
|
|
|
280
|
|
|
|
|
417
|
|
|
Net (earnings) loss attributable to noncontrolling interests
|
|
|
-
|
|
|
|
|
1
|
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings (loss) attributable to Celanese Corporation
|
|
|
498
|
|
|
|
|
281
|
|
|
|
|
416
|
|
|
Cumulative preferred stock dividends
|
|
|
(10
|
)
|
|
|
|
(10
|
)
|
|
|
|
(10
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings (loss) available to common shareholders
|
|
|
488
|
|
|
|
|
271
|
|
|
|
|
406
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts attributable to Celanese Corporation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) from continuing operations
|
|
|
494
|
|
|
|
|
371
|
|
|
|
|
326
|
|
|
Earnings (loss) from discontinued operations
|
|
|
4
|
|
|
|
|
(90
|
)
|
|
|
|
90
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings (loss)
|
|
|
498
|
|
|
|
|
281
|
|
|
|
|
416
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) per common share basic
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
|
3.37
|
|
|
|
|
2.44
|
|
|
|
|
2.05
|
|
|
Discontinued operations
|
|
|
0.03
|
|
|
|
|
(0.61
|
)
|
|
|
|
0.58
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings (loss) basic
|
|
|
3.40
|
|
|
|
|
1.83
|
|
|
|
|
2.63
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) per common share diluted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
|
3.14
|
|
|
|
|
2.27
|
|
|
|
|
1.90
|
|
|
Discontinued operations
|
|
|
0.03
|
|
|
|
|
(0.55
|
)
|
|
|
|
0.53
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings (loss) diluted
|
|
|
3.17
|
|
|
|
|
1.72
|
|
|
|
|
2.43
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares basic
|
|
|
143,688,749
|
|
|
|
|
148,350,273
|
|
|
|
|
154,475,020
|
|
|
Weighted average shares diluted
|
|
|
157,115,521
|
|
|
|
|
163,471,873
|
|
|
|
|
171,227,997
|
|
|
See the accompanying notes to the consolidated financial
statements.
2
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
As Adjusted (Note 31)
|
|
|
|
(In $ millions, except
|
|
|
|
share amounts)
|
|
|
ASSETS
|
Current assets
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
1,254
|
|
|
|
|
676
|
|
|
Trade receivables third party and affiliates (net of
allowance for doubtful accounts 2009: $18; 2008: $25)
|
|
|
721
|
|
|
|
|
631
|
|
|
Non-trade receivables (net of allowance for doubtful
accounts 2009: $0; 2008: $1)
|
|
|
262
|
|
|
|
|
281
|
|
|
Inventories
|
|
|
522
|
|
|
|
|
577
|
|
|
Deferred income taxes
|
|
|
42
|
|
|
|
|
24
|
|
|
Marketable securities, at fair value
|
|
|
3
|
|
|
|
|
6
|
|
|
Assets held for sale
|
|
|
2
|
|
|
|
|
2
|
|
|
Other assets
|
|
|
50
|
|
|
|
|
89
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
2,856
|
|
|
|
|
2,286
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments in affiliates
|
|
|
792
|
|
|
|
|
781
|
|
|
Property, plant and equipment (net of accumulated
depreciation 2009: $1,130; 2008: $1,051)
|
|
|
2,797
|
|
|
|
|
2,470
|
|
|
Deferred income taxes
|
|
|
484
|
|
|
|
|
27
|
|
|
Marketable securities, at fair value
|
|
|
80
|
|
|
|
|
94
|
|
|
Other assets
|
|
|
311
|
|
|
|
|
357
|
|
|
Goodwill
|
|
|
798
|
|
|
|
|
779
|
|
|
Intangible assets, net
|
|
|
294
|
|
|
|
|
364
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
|
8,412
|
|
|
|
|
7,158
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS EQUITY
|
Current liabilities
|
|
|
|
|
|
|
|
|
|
|
Short-term borrowings and current installments of long-term
debt third party and affiliates
|
|
|
242
|
|
|
|
|
233
|
|
|
Trade payables third party and affiliates
|
|
|
649
|
|
|
|
|
523
|
|
|
Other liabilities
|
|
|
611
|
|
|
|
|
574
|
|
|
Deferred income taxes
|
|
|
33
|
|
|
|
|
15
|
|
|
Income taxes payable
|
|
|
72
|
|
|
|
|
24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
1,607
|
|
|
|
|
1,369
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt
|
|
|
3,259
|
|
|
|
|
3,300
|
|
|
Deferred income taxes
|
|
|
137
|
|
|
|
|
122
|
|
|
Uncertain tax positions
|
|
|
229
|
|
|
|
|
218
|
|
|
Benefit obligations
|
|
|
1,288
|
|
|
|
|
1,167
|
|
|
Other liabilities
|
|
|
1,306
|
|
|
|
|
806
|
|
|
Commitments and contingencies
|
|
|
|
|
|
|
|
|
|
|
Shareholders equity
|
|
|
|
|
|
|
|
|
|
|
Preferred stock, $0.01 par value, 100,000,000 shares
authorized (2009 and 2008: 9,600,000 shares issued and
outstanding)
|
|
|
-
|
|
|
|
|
-
|
|
|
Series A common stock, $0.0001 par value,
400,000,000 shares authorized (2009:
164,995,755 shares issued and 144,394,069 outstanding;
2008: 164,107,394 shares issued and 143,505,708 outstanding)
|
|
|
-
|
|
|
|
|
-
|
|
|
Series B common stock, $0.0001 par value,
100,000,000 shares authorized (2009 and 2008: 0 shares
issued and outstanding)
|
|
|
-
|
|
|
|
|
-
|
|
|
Treasury stock, at cost (2009 and 2008:
20,601,686 shares)
|
|
|
(781
|
)
|
|
|
|
(781
|
)
|
|
Additional paid-in capital
|
|
|
522
|
|
|
|
|
495
|
|
|
Retained earnings
|
|
|
1,505
|
|
|
|
|
1,040
|
|
|
Accumulated other comprehensive income (loss), net
|
|
|
(660
|
)
|
|
|
|
(580
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Celanese Corporation shareholders equity
|
|
|
586
|
|
|
|
|
174
|
|
|
Noncontrolling interests
|
|
|
-
|
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total shareholders equity
|
|
|
586
|
|
|
|
|
176
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and shareholders equity
|
|
|
8,412
|
|
|
|
|
7,158
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See the accompanying notes to the consolidated financial
statements.
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
Shares
|
|
|
|
|
|
Shares
|
|
|
|
|
|
Shares
|
|
|
|
|
|
|
Outstanding
|
|
|
Amount
|
|
|
Outstanding
|
|
|
Amount
|
|
|
Outstanding
|
|
|
Amount
|
|
|
|
As Adjusted (Note 31)
|
|
|
|
(In $ millions, except share data)
|
|
|
Preferred stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of the beginning of the period
|
|
|
9,600,000
|
|
|
|
-
|
|
|
|
9,600,000
|
|
|
|
-
|
|
|
|
9,600,000
|
|
|
|
-
|
|
Issuance of preferred stock
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of the end of the period
|
|
|
9,600,000
|
|
|
|
-
|
|
|
|
9,600,000
|
|
|
|
-
|
|
|
|
9,600,000
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series A common stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of the beginning of the period
|
|
|
143,505,708
|
|
|
|
-
|
|
|
|
152,102,801
|
|
|
|
-
|
|
|
|
158,668,666
|
|
|
|
-
|
|
Issuance of Series A common stock
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
7,400
|
|
|
|
-
|
|
Stock option exercises
|
|
|
806,580
|
|
|
|
-
|
|
|
|
1,056,368
|
|
|
|
-
|
|
|
|
4,265,221
|
|
|
|
-
|
|
Purchases of treasury stock
|
|
|
-
|
|
|
|
-
|
|
|
|
(9,763,200
|
)
|
|
|
-
|
|
|
|
(10,838,486
|
)
|
|
|
-
|
|
Stock awards
|
|
|
81,781
|
|
|
|
-
|
|
|
|
109,739
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of the end of the period
|
|
|
144,394,069
|
|
|
|
-
|
|
|
|
143,505,708
|
|
|
|
-
|
|
|
|
152,102,801
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Treasury stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of the beginning of the period
|
|
|
20,601,686
|
|
|
|
(781
|
)
|
|
|
10,838,486
|
|
|
|
(403
|
)
|
|
|
-
|
|
|
|
-
|
|
Purchases of treasury stock, including related fees
|
|
|
-
|
|
|
|
-
|
|
|
|
9,763,200
|
|
|
|
(378
|
)
|
|
|
10,838,486
|
|
|
|
(403
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of the end of the period
|
|
|
20,601,686
|
|
|
|
(781
|
)
|
|
|
20,601,686
|
|
|
|
(781
|
)
|
|
|
10,838,486
|
|
|
|
(403
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional paid-in capital
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of the beginning of the period
|
|
|
|
|
|
|
495
|
|
|
|
|
|
|
|
469
|
|
|
|
|
|
|
|
362
|
|
Indemnification of demerger liability
|
|
|
|
|
|
|
-
|
|
|
|
|
|
|
|
2
|
|
|
|
|
|
|
|
4
|
|
Stock-based compensation, net of tax
|
|
|
|
|
|
|
13
|
|
|
|
|
|
|
|
15
|
|
|
|
|
|
|
|
15
|
|
Stock option exercises, net of tax
|
|
|
|
|
|
|
14
|
|
|
|
|
|
|
|
9
|
|
|
|
|
|
|
|
88
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of the end of the period
|
|
|
|
|
|
|
522
|
|
|
|
|
|
|
|
495
|
|
|
|
|
|
|
|
469
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retained earnings
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of the beginning of the period
|
|
|
|
|
|
|
1,040
|
|
|
|
|
|
|
|
793
|
|
|
|
|
|
|
|
398
|
|
Net earnings (loss) attributable to Celanese Corporation
|
|
|
|
|
|
|
498
|
|
|
|
|
|
|
|
281
|
|
|
|
|
|
|
|
416
|
|
Series A common stock dividends
|
|
|
|
|
|
|
(23
|
)
|
|
|
|
|
|
|
(24
|
)
|
|
|
|
|
|
|
(25
|
)
|
Preferred stock dividends
|
|
|
|
|
|
|
(10
|
)
|
|
|
|
|
|
|
(10
|
)
|
|
|
|
|
|
|
(10
|
)
|
Adoption of ASC
740(1)
|
|
|
|
|
|
|
-
|
|
|
|
|
|
|
|
-
|
|
|
|
|
|
|
|
14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of the end of the period
|
|
|
|
|
|
|
1,505
|
|
|
|
|
|
|
|
1,040
|
|
|
|
|
|
|
|
793
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated other comprehensive income (loss), net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of the beginning of the period
|
|
|
|
|
|
|
(580
|
)
|
|
|
|
|
|
|
196
|
|
|
|
|
|
|
|
30
|
|
Unrealized gain (loss) on securities
|
|
|
|
|
|
|
(3
|
)
|
|
|
|
|
|
|
(23
|
)
|
|
|
|
|
|
|
17
|
|
Foreign currency translation
|
|
|
|
|
|
|
5
|
|
|
|
|
|
|
|
(130
|
)
|
|
|
|
|
|
|
70
|
|
Unrealized gain (loss) on interest rate swaps
|
|
|
|
|
|
|
15
|
|
|
|
|
|
|
|
(79
|
)
|
|
|
|
|
|
|
(41
|
)
|
Pension and postretirement benefits
|
|
|
|
|
|
|
(97
|
)
|
|
|
|
|
|
|
(544
|
)
|
|
|
|
|
|
|
120
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of the end of the period
|
|
|
|
|
|
|
(660
|
)
|
|
|
|
|
|
|
(580
|
)
|
|
|
|
|
|
|
196
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Celanese Corporation shareholders equity
|
|
|
|
|
|
|
586
|
|
|
|
|
|
|
|
174
|
|
|
|
|
|
|
|
1,055
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noncontrolling interests
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of the beginning of the period
|
|
|
|
|
|
|
2
|
|
|
|
|
|
|
|
5
|
|
|
|
|
|
|
|
74
|
|
Purchase of remaining noncontrolling interests
|
|
|
|
|
|
|
-
|
|
|
|
|
|
|
|
-
|
|
|
|
|
|
|
|
(70
|
)
|
Divestiture of noncontrolling interests
|
|
|
|
|
|
|
(2
|
)
|
|
|
|
|
|
|
(2
|
)
|
|
|
|
|
|
|
-
|
|
Net earnings (loss) attributable to noncontrolling interests
|
|
|
|
|
|
|
-
|
|
|
|
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of the end of the period
|
|
|
|
|
|
|
-
|
|
|
|
|
|
|
|
2
|
|
|
|
|
|
|
|
5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total shareholders equity
|
|
|
|
|
|
|
586
|
|
|
|
|
|
|
|
176
|
|
|
|
|
|
|
|
1,060
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Adoption of ASC 740, Income Taxes related to uncertain
tax positions (Note 19). |
4
CELANESE
CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS
EQUITY AND COMPREHENSIVE INCOME (LOSS)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
Shares
|
|
|
|
|
|
Shares
|
|
|
|
|
|
Shares
|
|
|
|
|
|
|
Outstanding
|
|
|
Amount
|
|
|
Outstanding
|
|
|
Amount
|
|
|
Outstanding
|
|
|
Amount
|
|
|
|
As Adjusted (Note 31)
|
|
|
|
(In $ millions, except share data)
|
|
|
Comprehensive income (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings (loss)
|
|
|
|
|
|
|
498
|
|
|
|
|
|
|
|
280
|
|
|
|
|
|
|
|
417
|
|
Other comprehensive income (loss), net of tax:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gain (loss) on securities
|
|
|
|
|
|
|
(3
|
)
|
|
|
|
|
|
|
(23
|
)
|
|
|
|
|
|
|
17
|
|
Foreign currency translation
|
|
|
|
|
|
|
5
|
|
|
|
|
|
|
|
(130
|
)
|
|
|
|
|
|
|
70
|
|
Unrealized gain (loss) on interest rate swaps
|
|
|
|
|
|
|
15
|
|
|
|
|
|
|
|
(79
|
)
|
|
|
|
|
|
|
(41
|
)
|
Pension and postretirement benefits
|
|
|
|
|
|
|
(97
|
)
|
|
|
|
|
|
|
(544
|
)
|
|
|
|
|
|
|
120
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income (loss), net of tax
|
|
|
|
|
|
|
418
|
|
|
|
|
|
|
|
(496
|
)
|
|
|
|
|
|
|
583
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive (income) loss attributable to noncontrolling
interests
|
|
|
|
|
|
|
-
|
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income (loss) attributable to Celanese Corporation
|
|
|
|
|
|
|
418
|
|
|
|
|
|
|
|
(495
|
)
|
|
|
|
|
|
|
582
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See the accompanying notes to the consolidated financial
statements.
5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
As Adjusted (Note 31)
|
|
|
|
(In $ millions)
|
|
|
Operating activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings (loss)
|
|
|
498
|
|
|
|
280
|
|
|
|
417
|
|
Adjustments to reconcile net earnings (loss) to net cash
provided by operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Other charges (gains), net of amounts used
|
|
|
73
|
|
|
|
111
|
|
|
|
30
|
|
Depreciation, amortization and accretion
|
|
|
319
|
|
|
|
360
|
|
|
|
311
|
|
Deferred income taxes, net
|
|
|
(402
|
)
|
|
|
(69
|
)
|
|
|
23
|
|
(Gain) loss on disposition of businesses and assets, net
|
|
|
(40
|
)
|
|
|
1
|
|
|
|
(74
|
)
|
Refinancing expense
|
|
|
-
|
|
|
|
-
|
|
|
|
256
|
|
Other, net
|
|
|
12
|
|
|
|
37
|
|
|
|
8
|
|
Operating cash provided by (used in) discontinued operations
|
|
|
(2
|
)
|
|
|
3
|
|
|
|
(84
|
)
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade receivables third party and affiliates, net
|
|
|
(79
|
)
|
|
|
339
|
|
|
|
(69
|
)
|
Inventories
|
|
|
30
|
|
|
|
21
|
|
|
|
(27
|
)
|
Other assets
|
|
|
9
|
|
|
|
53
|
|
|
|
66
|
|
Trade payables third party and affiliates
|
|
|
104
|
|
|
|
(265
|
)
|
|
|
(11
|
)
|
Other liabilities
|
|
|
74
|
|
|
|
(285
|
)
|
|
|
(280
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
|
596
|
|
|
|
586
|
|
|
|
566
|
|
Investing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures on property, plant and equipment
|
|
|
(176
|
)
|
|
|
(274
|
)
|
|
|
(288
|
)
|
Acquisitions, net of cash acquired
|
|
|
( 9
|
)
|
|
|
-
|
|
|
|
(269
|
)
|
Proceeds from sale of businesses and assets, net
|
|
|
171
|
|
|
|
9
|
|
|
|
715
|
|
Deferred proceeds on Ticona Kelsterbach plant relocation
|
|
|
412
|
|
|
|
311
|
|
|
|
-
|
|
Capital expenditures related to Ticona Kelsterbach plant
relocation
|
|
|
(351
|
)
|
|
|
(185
|
)
|
|
|
(21
|
)
|
Proceeds from sale of marketable securities
|
|
|
15
|
|
|
|
202
|
|
|
|
69
|
|
Purchases of marketable securities
|
|
|
-
|
|
|
|
(91
|
)
|
|
|
(59
|
)
|
Changes in restricted cash
|
|
|
-
|
|
|
|
-
|
|
|
|
46
|
|
Settlement of cross currency swap agreements
|
|
|
-
|
|
|
|
(93
|
)
|
|
|
-
|
|
Other, net
|
|
|
(31
|
)
|
|
|
(80
|
)
|
|
|
(50
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) investing activities
|
|
|
31
|
|
|
|
(201
|
)
|
|
|
143
|
|
Financing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term borrowings (repayments), net
|
|
|
(9
|
)
|
|
|
(64
|
)
|
|
|
30
|
|
Proceeds from long-term debt
|
|
|
-
|
|
|
|
13
|
|
|
|
2,904
|
|
Repayments of long-term debt
|
|
|
(80
|
)
|
|
|
(47
|
)
|
|
|
(3,053
|
)
|
Refinancing costs
|
|
|
(3
|
)
|
|
|
-
|
|
|
|
(240
|
)
|
Purchases of treasury stock, including related fees
|
|
|
-
|
|
|
|
(378
|
)
|
|
|
(403
|
)
|
Stock option exercises
|
|
|
14
|
|
|
|
18
|
|
|
|
69
|
|
Series A common stock dividends
|
|
|
(23
|
)
|
|
|
(24
|
)
|
|
|
(25
|
)
|
Preferred stock dividends
|
|
|
(10
|
)
|
|
|
(10
|
)
|
|
|
(10
|
)
|
Other, net
|
|
|
(1
|
)
|
|
|
(7
|
)
|
|
|
14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in financing activities
|
|
|
(112
|
)
|
|
|
(499
|
)
|
|
|
(714
|
)
|
Exchange rate effects on cash and cash equivalents
|
|
|
63
|
|
|
|
(35
|
)
|
|
|
39
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents
|
|
|
578
|
|
|
|
(149
|
)
|
|
|
34
|
|
Cash and cash equivalents at beginning of period
|
|
|
676
|
|
|
|
825
|
|
|
|
791
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period
|
|
|
1,254
|
|
|
|
676
|
|
|
|
825
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See the accompanying notes to the consolidated financial
statements.
6
CELANESE
CORPORATION AND SUBSIDIARIES
|
|
1.
|
Description
of the Company and Basis of Presentation
|
Celanese Corporation and its subsidiaries (collectively the
Company) is a leading global integrated chemical and
advanced materials company. The Companys business involves
processing chemical raw materials, such as methanol, carbon
monoxide and ethylene, and natural products, including wood
pulp, into value-added chemicals, thermoplastic polymers and
other chemical-based products.
Definitions
The term Celanese refers to Celanese Corporation, a
Delaware corporation, and not its subsidiaries. The term
Celanese US refers to the Companys subsidiary,
Celanese US Holdings LLC, a Delaware limited liability company,
formerly known as BCP Crystal US Holdings Corp., a Delaware
corporation, and not its subsidiaries. The term
Purchaser refers to the Companys subsidiary,
BCP Holdings GmbH (successor by merger to Celanese Europe
Holding GmbH & Co. KG), and not its subsidiaries,
except where otherwise indicated. The term Original
Shareholders refers, collectively, to Blackstone Capital
Partners (Cayman) Ltd. 1, Blackstone Capital Partners (Cayman)
Ltd. 2, Blackstone Capital Partners (Cayman) Ltd. 3 and BA
Capital Investors Sidecar Fund, L.P. The term
Advisor refers to Blackstone Management Partners, an
affiliate of The Blackstone Group.
Basis
of Presentation
The consolidated financial statements contained herein were
prepared in accordance with accounting principles generally
accepted in the United States of America (US GAAP)
for all periods presented. The consolidated financial statements
and other financial information included herein, unless
otherwise specified, have been presented to separately show the
effects of discontinued operations.
In the ordinary course of the business, the Company enters into
contracts and agreements relative to a number of topics,
including acquisitions, dispositions, joint ventures, supply
agreements, product sales and other arrangements. The Company
endeavors to describe those contracts or agreements that are
material to its business, results of operations or financial
position. The Company may also describe some arrangements that
are not material but which the Company believes investors may
have an interest in or which may have been subject to a
Form 8-K
filing. Investors should not assume the Company has described
all contracts and agreements relative to the Companys
business in these financial statements.
|
|
2.
|
Summary
of Accounting Policies
|
Consolidation principles
The consolidated financial statements have been prepared in
accordance with US GAAP for all periods presented and include
the accounts of the Company and its majority owned subsidiaries
over which the Company exercises control. All significant
intercompany accounts and transactions have been eliminated in
consolidation.
Estimates and assumptions
The preparation of consolidated financial statements in
conformity with US GAAP requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities, disclosure of contingent assets and liabilities at
the date of the consolidated financial statements and the
reported amounts of revenues, expenses and allocated charges
during the reporting period. Significant estimates pertain to
impairments of goodwill, intangible assets and other long-lived
assets, purchase price
7
allocations, restructuring costs and other (charges) gains, net,
income taxes, pension and other postretirement benefits, asset
retirement obligations, environmental liabilities and loss
contingencies, among others. Actual results could differ from
those estimates.
Cash and cash equivalents
All highly liquid investments with original maturities of three
months or less are considered cash equivalents.
Inventories
Inventories, including stores and supplies, are stated at the
lower of cost or market. Cost for inventories is determined
using the
first-in,
first-out (FIFO) method. Cost includes raw
materials, direct labor and manufacturing overhead. Cost for
stores and supplies is primarily determined by the average cost
method.
Investments in marketable securities
The Company classifies its investments in debt and equity
securities as
available-for-sale
and reports those investments at their fair market values in the
consolidated balance sheets as Marketable Securities, at fair
value. Unrealized gains or losses, net of the related tax effect
on
available-for-sale
securities, are excluded from earnings and are reported as a
component of Accumulated other comprehensive income (loss), net
until realized. The cost of securities sold is determined by
using the specific identification method.
A decline in the market value of any
available-for-sale
security below cost that is deemed to be
other-than-temporary
results in a reduction in the carrying amount to fair value. The
impairment is charged to earnings and a new cost basis for the
security is established. To determine whether impairment is
other-than-temporary,
the Company considers whether it has the ability and intent to
hold the investment until a market price recovery and evidence
indicating the cost of the investment is recoverable outweighs
evidence to the contrary. Evidence considered in this assessment
includes the reasons for the impairment, the severity and
duration of the impairment, changes in value subsequent to year
end and forecasted performance of the investee.
Investments in affiliates
Financial Accounting Standards Board (FASB)
Accounting Standards Codification (FASB ASC) Topic
323, Investments Equity Method and Joint
Ventures, stipulates that the equity method should be used
to account for investments whereby an investor has the
ability to exercise significant influence over operating and
financial policies of an investee, but does not exercise
control. FASB ASC Topic 323 generally considers an investor to
have the ability to exercise significant influence when it owns
20% or more of the voting stock of an investee. FASB ASC Topic
323 lists circumstances under which, despite 20% ownership, an
investor may not be able to exercise significant influence.
Certain investments where the Company owns greater than a 20%
ownership and cannot exercise significant influence or control
are accounted for under the cost method (Note 8).
The Company assesses the recoverability of the carrying value of
its investments whenever events or changes in circumstances
indicate a loss in value that is other than a temporary decline.
A loss in value of an equity-method or cost-method investment
which is other than a temporary decline will be recognized as
the difference between the carrying amount of the investment and
its fair value.
The Companys estimates of fair value are determined based
on a discounted cash flow model. The Company periodically
engages third-party valuation consultants to assist with this
process.
8
Property, plant and equipment, net
Land is recorded at historical cost. Buildings, machinery and
equipment, including capitalized interest, and property under
capital lease agreements, are recorded at cost less accumulated
depreciation. The Company records depreciation and amortization
in its consolidated statements of operations as either Cost of
sales or Selling, general and administrative expenses consistent
with the utilization of the underlying assets. Depreciation is
calculated on a straight-line basis over the following estimated
useful lives of depreciable assets:
|
|
|
Land Improvements
|
|
20 years
|
Buildings and improvements
|
|
30 years
|
Machinery and Equipment
|
|
20 years
|
Leasehold improvements are amortized over ten years or the
remaining life of the respective lease, whichever is shorter.
Accelerated depreciation is recorded when the estimated useful
life is shortened. Ordinary repair and maintenance costs,
including costs for planned maintenance turnarounds, that do not
extend the useful life of the asset are charged to earnings as
incurred. Fully depreciated assets are retained in property and
depreciation accounts until sold or otherwise disposed. In the
case of disposals, assets and related depreciation are removed
from the accounts, and the net amounts, less proceeds from
disposal, are included in earnings.
The Company also leases property, plant and equipment under
operating and capital leases. Rent expense for operating leases,
which may have escalating rentals or rent holidays over the term
of the lease, is recorded on a straight-line basis over the
lease term. Amortization of capital lease assets is included as
a component of depreciation expense.
Assets acquired in business combinations are recorded at their
fair values and depreciated over the assets remaining
useful lives or the Companys policy lives, whichever is
shorter.
The Company assesses the recoverability of the carrying amount
of its property, plant and equipment whenever events or changes
in circumstances indicate that the carrying amount of an asset
or asset group may not be recoverable. An impairment loss would
be assessed when estimated undiscounted future cash flows from
the operation and disposition of the asset group are less than
the carrying amount of the asset group. Asset groups have
identifiable cash flows and are largely independent of other
asset groups. Measurement of an impairment loss is based on the
excess of the carrying amount of the asset group over its fair
value. Fair value is measured using discounted cash flows or
independent appraisals, as appropriate. Impairment losses are
recorded in depreciation expense or Other (charges) gains, net
depending on the facts and circumstances.
Goodwill and other intangible assets
Trademarks and trade names, customer-related intangible assets
and other intangibles with finite lives are amortized on a
straight-line basis over their estimated useful lives. The
excess of the purchase price over fair value of net identifiable
assets and liabilities of an acquired business
(goodwill) and other indefinite-lived intangible
assets are not amortized, but rather tested for impairment, at
least annually. The Company tests for goodwill and
indefinite-lived intangible asset impairment during the third
quarter of its fiscal year using June 30 balances.
The Company assesses the recoverability of the carrying value of
goodwill at least annually or whenever events or changes in
circumstances indicate that the carrying amount of the goodwill
of a reporting unit may not be fully recoverable. Recoverability
is measured at the reporting unit level based on the provisions
of FASB ASC Topic 350, Intangibles Goodwill and
Other. The Companys estimates of fair value are
determined based on a discounted cash flow model. The Company
periodically engages third-party
9
valuation consultants to assist with this process. Impairment
losses are recorded in other operating expense or Other
(charges) gains, net depending on the facts and circumstances.
The Company assesses recoverability of other indefinite-lived
intangible assets at least annually or whenever events or
changes in circumstances indicate that the carrying amount of
the indefinite-lived intangible asset may not be fully
recoverable. Recoverability is measured by a comparison of the
carrying value of the indefinite-lived intangible asset over its
fair value. Any excess of the carrying value of the
indefinite-lived intangible asset over its fair value is
recognized as an impairment loss. The Companys estimates
of fair value are determined based on a discounted cash flow
model. The Company periodically engages third-party valuation
consultants to assist with this process. Impairment losses are
recorded in other operating expense or Other (charges) gains,
net depending on the facts and circumstances.
The Company assesses the recoverability of finite-lived
intangible assets in the same manner as for property, plant and
equipment as described above. Impairment losses are recorded in
amortization expense or Other (charges) gains, net depending on
the facts and circumstances.
Financial instruments
On January 1, 2008, the Company adopted the provisions of
FASB ASC Topic 820, Fair Value Measurements and Disclosures
(FASB ASC Topic 820) for financial assets and
liabilities. On January 1, 2009, the Company applied the
provisions of FASB ASC Topic 820 for non-recurring fair value
measurements of non-financial assets and liabilities, such as
goodwill, indefinite-lived intangible assets, property, plant
and equipment and asset retirement obligations. The adoptions of
FASB ASC Topic 820 did not have a material impact on the
Companys financial position, results of operations or cash
flows. FASB ASC Topic 820 defines fair value, and increases
disclosures surrounding fair value calculations.
The Company manages its exposures to currency exchange rates,
interest rates and commodity prices through a risk management
program that includes the use of derivative financial
instruments (Note 22). The Company does not use derivative
financial instruments for speculative trading purposes. The fair
value of all derivative instruments is recorded as assets or
liabilities at the balance sheet date. Changes in the fair value
of these instruments are reported in income or Accumulated other
comprehensive income (loss), net, depending on the use of the
derivative and whether it qualifies for hedge accounting
treatment under the provisions of FASB ASC Topic 815,
Derivatives and Hedging (FASB ASC Topic 815).
Gains and losses on derivative instruments qualifying as cash
flow hedges are recorded in Accumulated other comprehensive
income (loss), net, to the extent the hedges are effective,
until the underlying transactions are recognized in income. To
the extent effective, gains and losses on derivative and
non-derivative instruments used as hedges of the Companys
net investment in foreign operations are recorded in Accumulated
other comprehensive income (loss), net as part of the foreign
currency translation adjustment. The ineffective portions of
cash flow hedges and hedges of net investment in foreign
operations, if any, are recognized in income immediately.
Derivative instruments not designated as hedges are marked to
market at the end of each accounting period with the change in
fair value recorded in income.
Concentrations of credit risk
The Company is exposed to credit risk in the event of nonpayment
by customers and counterparties. The creditworthiness of
customers and counterparties is subject to continuing review,
including the use of master netting agreements, where the
Company deems appropriate. The Company minimizes concentrations
of credit risk through its global orientation in diverse
businesses with a large number of diverse customers and
suppliers. In addition, credit risks arising from derivative
instruments is not significant because the counterparties to
these contracts are primarily major international financial
institutions and, to a lesser extent, major chemical companies.
Where appropriate, the Company has diversified its selection of
counterparties. Generally, collateral is not required from
customers and counterparties and allowances are provided for
specific risks inherent in receivables.
10
Deferred financing costs
The Company capitalizes direct costs incurred to obtain debt
financings and amortizes these costs using a method that
approximates the effective interest rate method over the terms
of the related debt. Upon the extinguishment of the related
debt, any unamortized capitalized debt financing costs are
immediately expensed.
Environmental liabilities
The Company manufactures and sells a diverse line of chemical
products throughout the world. Accordingly, the Companys
operations are subject to various hazards incidental to the
production of industrial chemicals including the use, handling,
processing, storage and transportation of hazardous materials.
The Company recognizes losses and accrues liabilities relating
to environmental matters if available information indicates that
it is probable that a liability has been incurred and the amount
of loss can be reasonably estimated. Depending on the nature of
the site, the Company accrues through fifteen years, unless the
Company has government orders or other agreements that extend
beyond fifteen years. If the event of loss is neither probable
nor reasonably estimable, but is reasonably possible, the
Company provides appropriate disclosure in the notes to the
consolidated financial statements if the contingency is
considered material. The Company estimates environmental
liabilities on a
case-by-case
basis using the most current status of available facts, existing
technology, presently enacted laws and regulations and prior
experience in remediation of contaminated sites. Recoveries of
environmental costs from other parties are recorded as assets
when their receipt is deemed probable.
An environmental reserve related to cleanup of a contaminated
site might include, for example, a provision for one or more of
the following types of costs: site investigation and testing
costs, cleanup costs, costs related to soil and water
contamination resulting from tank ruptures and post-remediation
monitoring costs. These reserves do not take into account any
claims or recoveries from insurance. There are no pending
insurance claims for any environmental liability that are
expected to be material. The measurement of environmental
liabilities is based on the Companys periodic estimate of
what it will cost to perform each of the elements of the
remediation effort. The Company utilizes third parties to assist
in the management and development of cost estimates for its
sites. Changes to environmental regulations or other factors
affecting environmental liabilities are reflected in the
consolidated financial statements in the period in which they
occur (Note 16).
Legal fees
The Company accrues for legal fees related to loss contingency
matters when the costs associated with defending these matters
can be reasonably estimated and are probable of occurring. All
other legal fees are expensed as incurred.
Revenue recognition
The Company recognizes revenue when title and risk of loss have
been transferred to the customer, generally at the time of
shipment of products, and provided that four basic criteria are
met: (1) persuasive evidence of an arrangement exists;
(2) delivery has occurred or services have been rendered;
(3) the fee is fixed or determinable; and
(4) collectibility is reasonably assured. Should changes in
conditions cause the Company to determine revenue recognition
criteria are not met for certain transactions, revenue
recognition would be delayed until such time that the
transactions become realizable and fully earned. Payments
received in advance of meeting the above revenue recognition
criteria are recorded as deferred revenue.
Research and development
The costs of research and development are charged as an expense
in the period in which they are incurred.
11
Insurance loss reserves
The Company has two wholly owned insurance companies (the
Captives) that are used as a form of self insurance
for property, liability and workers compensation risks. One of
the Captives also insures certain third-party risks. The
liabilities recorded by the Captives relate to the estimated
risk of loss which is based on management estimates and
actuarial valuations, and unearned premiums, which represent the
portion of the third-party premiums written applicable to the
unexpired terms of the policies in-force. Liabilities are
recognized for known claims when sufficient information has been
developed to indicate involvement of a specific policy and the
Company can reasonably estimate its liability. In addition,
liabilities have been established to cover additional exposure
on both known and unasserted claims. Estimates of the
liabilities are reviewed and updated regularly. It is possible
that actual results could differ significantly from the recorded
liabilities. Premiums written are recognized as revenue based on
the terms of the policies. Capitalization of the Captives is
determined by regulatory guidelines.
Reinsurance receivables
The Captives enter into reinsurance arrangements to reduce their
risk of loss. The reinsurance arrangements do not relieve the
Captives from their obligations to policyholders. Failure of the
reinsurers to honor their obligations could result in losses to
the Captives. The Captives evaluate the financial condition of
their reinsurers and monitor concentrations of credit risk to
minimize their exposure to significant losses from reinsurer
insolvencies and to establish allowances for amounts deemed
non-collectible.
Income taxes
The provision for income taxes has been determined using the
asset and liability approach of accounting for income taxes.
Under this approach, deferred income taxes reflect the net tax
effects of temporary differences between the carrying amounts of
assets and liabilities for financial reporting purposes and the
amounts used for income tax purposes and net operating loss and
tax credit carry forwards. The amount of deferred taxes on these
temporary differences is determined using the tax rates that are
expected to apply to the period when the asset is realized or
the liability is settled, as applicable, based on tax rates and
laws in the respective tax jurisdiction enacted as of the
balance sheet date.
The Company reviews its deferred tax assets for recoverability
and establishes a valuation allowance based on historical
taxable income, projected future taxable income, applicable tax
strategies, and the expected timing of the reversals of existing
temporary differences. 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.
The Company considers many factors when evaluating and
estimating its tax positions and tax benefits, which may require
periodic adjustments and which may not accurately anticipate
actual outcomes. Tax positions are recognized only when it is
more likely than not (likelihood of greater than 50%), based on
technical merits, that the positions will be sustained upon
examination. Tax positions that meet the more-likely-than-not
threshold are measured using a probability weighted approach as
the largest amount of tax benefit that is greater than 50%
likely of being realized upon settlement. Whether the
more-likely-than-not recognition threshold is met for a tax
position is a matter of judgment based on the individual facts
and circumstances of that position evaluated in light of all
available evidence.
12
Noncontrolling interests
Noncontrolling interests in the equity and results of operations
of the entities consolidated by the Company are shown as a
separate line item in the consolidated financial statements. The
entities included in the consolidated financial statements that
have noncontrolling interests are as follows:
|
|
|
|
|
|
|
|
|
|
|
Ownership Percentage
|
|
|
as of December 31,
|
|
|
2009
|
|
2008
|
|
Celanese Polisinteza d.o.o.
|
|
|
76
|
%
|
|
|
76
|
%
|
Synthesegasanlage Ruhr GmbH
|
|
|
50
|
%
|
|
|
50
|
%
|
In December 2009, the Company paid a liquidating dividend
related to its ownership in Synthesegasanlage Ruhr GmbH in the
amount of 1 million. The Company is currently
liquidating its ownership in Synthesegasanlage Ruhr GmbH.
Accounting for purchasing agent agreements
A subsidiary of the Company acts as a purchasing agent on behalf
of the Company, as well as third parties. The entity arranges
sale and purchase agreements for raw materials on a commission
basis. Accordingly, the commissions earned on these third-party
sales are classified as a reduction to Selling, general and
administrative expenses.
Functional and reporting currencies
For the Companys international operations where the
functional currency is other than the US dollar, assets and
liabilities are translated using period-end exchange rates,
while the statement of operations amounts are translated using
the average exchange rates for the respective period.
Differences arising from the translation of assets and
liabilities in comparison with the translation of the previous
periods or from initial recognition during the period are
included as a separate component of Accumulated other
comprehensive income (loss), net.
Reclassifications
The Company has reclassified certain prior period amounts to
conform to the current year presentation.
|
|
3.
|
Recent
Accounting Pronouncements
|
In February 2010, the FASB issued FASB Accounting Standards
Update
2010-09,
Subsequent Events: Amendments to Certain Recognition and
Disclosure Requirements (ASU
2010-09),
which amends FASB ASC Topic 855, Subsequent Events. The
update provides that US Securities and Exchange Commission
(SEC) filers, as defined in ASU
2010-09, are
no longer required to disclose the date through which subsequent
events have been evaluated in originally issued and revised
financial statements. The update also requires SEC filers to
continue to evaluate subsequent events through the date the
financial statements are issued rather than the date the
financial statements are available to be issued. The Company
adopted ASU
2010-09 upon
issuance. This update had no impact on the Companys
financial position, results of operations or cash flows.
In January 2010, the FASB issued FASB Accounting Standards
Update
2010-06,
Fair Value Measurements and Disclosures: Improving
Disclosures about Fair Value Measurements (ASU
2010-06),
which amends FASB ASC Topic
820-10,
Fair Value Measurements and Disclosures. The update
provides additional disclosures for transfers in and out of
Levels 1 and 2 and for activity in Level 3 and
clarifies certain
13
other existing disclosure requirements. The Company adopted ASU
2010-06
beginning January 15, 2010. This update had no impact on
the Companys financial position, results of operations or
cash flows.
In January 2010, the FASB issued FASB Accounting Standards
Update
2010-02,
Accounting and Reporting for Decreases in Ownership of a
Subsidiary A Scope Clarification (ASU
2010-02),
which amends FASB ASC Topic
820-10
(FASB ASC Topic
820-10).
The update addresses implementation issues related to changes in
ownership provisions in the FASB ASC
820-10. The
Company adopted ASU
2010-02 on
December 31, 2009. This update had no impact on the
Companys financial position, results of operations or cash
flows.
In August 2009, the FASB issued FASB Accounting Standards Update
2009-05,
Fair Value Measurements and Disclosures (ASU
2009-05),
which amends FASB ASC Topic
820-10
(FASB ASC Topic
820-10).
The update provides clarification on the techniques for
measurement of fair value required of a reporting entity when a
quoted price in an active market for an identical liability is
not available. The Company adopted ASU
2009-05
beginning September 30, 2009. This update had no impact on
the Companys financial position, results of operations or
cash flows.
In June 2009, the FASB issued Statement of Financial Accounting
Standards (SFAS) 168, The FASB Accounting
Standards
Codificationtm
and the Hierarchy of Generally Accepted Accounting
Principles a replacement of FAS 162
(SFAS 168), which created FASB ASC Topic
105-10
(FASB ASC Topic
105-10).
FASB ASC Topic
105-10
identifies the sources of accounting principles and the
framework for selecting principles used in the preparation of
financial statements of nongovernmental entities that are
presented in conformity with US GAAP (the GAAP hierarchy). The
Company adopted FASB ASC Topic
105-10
beginning September 30, 2009. This standard had no impact
on the Companys financial position, results of operations
or cash flows.
In May 2009, the FASB issued SFAS 165, Subsequent Events
(SFAS 165), codified in FASB ASC Topic
855-10,
which establishes accounting and disclosure standards for events
that occur after the balance sheet date but before financial
statements are issued or are available to be issued. It defines
financial statements as available to be issued, requiring the
disclosure of the date through which an entity has evaluated
subsequent events and the basis for that date, whether it be the
date the financial statements were issued or the date they were
available to be issued. The Company adopted SFAS 165 upon
issuance. This standard had no impact on the Companys
financial position, results of operations or cash flows.
In April 2009, the FASB issued FASB Staff Position
(FSP)
SFAS 115-2
and
SFAS 124-2,
Recognition and Presentation of
Other-Than-Temporary
Impairments (FSP
SFAS 115-2
and
SFAS 124-2),
which is codified in FASB ASC Topic
320-10. FSP
SFAS 115-2
and
SFAS 124-2
provides guidance to determine whether the holder of an
investment in a debt security for which changes in fair value
are not regularly recognized in earnings should recognize a loss
in earnings when the investment is impaired. This FSP also
improves the presentation and disclosure of
other-than-temporary
impairments on debt and equity securities in the consolidated
financial statements. The Company adopted FSP
SFAS 115-2
and
SFAS 124-2
beginning April 1, 2009. This FSP had no material impact on
the Companys financial position, results of operations or
cash flows.
In April 2009, the FASB issued FSP
SFAS 107-1
and Accounting Principles Board (APB) Opinion APB
28-1,
Interim Disclosures about Fair Value of Financial Instruments
(FSP
SFAS 107-1
and APB
28-1).
FSP SFAS 107-1
and APB
28-1, which
is codified in FASB ASC Topic
825-10-50,
require disclosures about fair value of financial instruments
for interim reporting periods of publicly traded companies as
well as in annual financial statements. The Company adopted FSP
SFAS 107-1
and APB 28-1
beginning April 1, 2009. This FSP had no impact on the
Companys financial position, results of operations or cash
flows.
In April 2009, the FASB issued FSP
SFAS 157-4,
Determining Fair Value When the Volume and Level of Activity
for the Asset or Liability Have Significantly Decreased and
Identifying Transactions That Are
14
Not Orderly (FSP
SFAS 157-4).
FSP
SFAS 157-4,
which is codified in FASB ASC Topics
820-10-35-51
and
820-10-50-2,
provides additional guidance for estimating fair value and
emphasizes that even if there has been a significant decrease in
the volume and level of activity for the asset or liability and
regardless of the valuation technique(s) used, the objective of
a fair value measurement remains the same. The Company adopted
FSP
SFAS 157-4
beginning April 1, 2009. This FSP had no material impact on
the Companys financial position, results of operations or
cash flows.
In April 2009, the FASB issued FSP SFAS 141(R)-1,
Accounting for Assets Acquired and Liabilities Assumed in a
Business Combination That Arise from Contingencies
(FSP SFAS 141(R)-1). FSP
SFAS 141(R)-1, which is codified in FASB ASC Topic 805,
Business Combinations, addresses application issues
related to the measurement, accounting and disclosure of assets
and liabilities arising from contingencies in a business
combination. The Company adopted FSP SFAS 141(R)-1 upon
issuance. This FSP had no impact on the Companys financial
position, results of operations or cash flows.
In December 2008, the FASB issued FSP SFAS 132(R)-1,
Employers Disclosures about Postretirement Benefit Plan
Assets (FSP SFAS 132(R)-1), which is
codified in FASB ASC Topic
715-20-50.
FSP SFAS 132(R)-1 requires enhanced disclosures about the
plan assets of a Companys defined benefit pension and
other postretirement plans intended to provide financial
statement users with a greater understanding of: 1) how
investment allocation decisions are made; 2) the major
categories of plan assets; 3) the inputs and valuation
techniques used to measure the fair value of plan assets;
4) the effect of fair value measurements using significant
unobservable inputs on changes in plan assets for the period;
and 5) significant concentrations of risk within plan
assets. The Company adopted FSP SFAS 132(R)-1 on
January 1, 2009. This FSP had no impact on the
Companys financial position, results of operations or cash
flows.
|
|
4.
|
Acquisitions,
Ventures, Divestitures, Asset Sales and Plant Closures
|
Acquisitions
In December 2009, the Company acquired the business and assets
of FACT GmbH (Future Advanced Composites Technology)
(FACT), a German company, for a purchase price of
5 million ($7 million). FACT is in the business
of developing, producing and marketing long fiber reinforced
thermoplastics. As part of the acquisition, the Company has
entered into a ten year lease agreement with the seller for the
property and buildings on which the FACT business is located
with the option to purchase the property at various times
throughout the lease. The acquired business is included in the
Advanced Engineered Materials segment.
In January 2007, the Company acquired the cellulose acetate
flake, tow and film business of Acetate Products Limited
(APL), a subsidiary of Corsadi B.V. The purchase
price for the transaction was approximately
£57 million ($112 million), in addition to direct
acquisition costs of approximately £4 million
($7 million). As contemplated prior to the closing of the
acquisition, the Company closed the acquired tow production
plant at Little Heath, United Kingdom in September 2007. In
accordance with the Companys sponsor services agreement
dated January 26, 2005, as amended, the Company paid the
Advisor $1 million in connection with the acquisition. The
acquired business is included in the Companys Consumer
Specialties segment.
Ventures
In March 2007, the Company entered into a strategic partnership
with Accsys Technologies PLC (Accsys), and its
subsidiary, Titan Wood, to become the exclusive supplier of
acetyl products to Titan Woods technology licensees for
use in wood acetylation. In connection with this partnership, in
May 2007, the Company acquired 8,115,883 shares of
Accsys common stock representing approximately 5.45% of
the total voting shares of Accsys for 22 million
($30 million). The investment was treated as an
available-for-sale
security and was included in Marketable securities, at fair
value, on the Companys consolidated balance sheets. On
November 20, 2007, the Company and Accsys announced that
they agreed to amend their business
15
arrangements so that each company would have a nonexclusive
at-will trading and supply relationship to give both
companies greater flexibility. As part of this amendment, the
Company subsequently sold all of its shares of Accsys stock for
approximately 20 million ($30 million), which
resulted in a cumulative loss of $3 million.
Divestitures
In July 2009, the Company completed the sale of its polyvinyl
alcohol (PVOH) business to Sekisui Chemical Co.,
Ltd. (Sekisui) for a net cash purchase price of
$168 million, resulting in a gain on disposition of
$34 million. The net cash purchase price excludes the
accounts receivable and payable retained by the Company. The
transaction includes long-term supply agreements between Sekisui
and the Company and therefore, does not qualify for treatment as
a discontinued operation. The PVOH business is included in the
Industrial Specialties segment.
In July 2008, the Company sold its 55.46% interest in Derivados
Macroquimicos S.A. de C.V. (DEMACSA) for proceeds of
$3 million. DEMACSA produces cellulose ethers at an
industrial complex in Zacapu, Michoacan, Mexico and is included
in the Companys Acetyl Intermediates segment. In June
2008, the Company recorded a long-lived asset impairment loss of
$1 million to Cost of sales in the consolidated statements
of operations. As a result, the proceeds from the sale
approximated the carrying value of DEMACSA on the date of the
sale. The Company concluded the sale of DEMACSA is not a
discontinued operation due to certain forms of continuing
involvement between the Company and DEMACSA subsequent to the
sale.
In August 2007, the Company sold its Films business of EVA
Performance Polymers (f/k/a AT Plastics), located in Edmonton
and Westlock, Alberta, Canada, to British Polythene Industries
PLC (BPI) for $12 million. The Films business
manufactures products for the agricultural, horticultural and
construction industries. The Company recorded a loss on the sale
of $7 million during the year ended December 31, 2007.
The Company maintained ownership of the Polymers business of the
business formerly known as AT Plastics, which concentrates on
the development and supply of specialty resins and compounds.
EVA Performance Polymers is included in the Companys
Industrial Specialties segment. The Company concluded that the
sale of the Films business is not a discontinued operation due
to the level of continuing cash flows between the Films business
and EVA Performance Polymers Polymers business subsequent
to the sale.
In connection with the Companys strategy to optimize its
portfolio and divest non-core operations, the Company announced
in December 2006 its agreement to sell its Acetyl Intermediates
segments oxo products and derivatives businesses,
including European Oxo GmbH (EOXO), a 50/50 venture
between Celanese GmbH and Degussa AG (Degussa), to
Advent International, for a purchase price of
480 million ($636 million) subject to final
agreement adjustments and the successful exercise of the
Companys option to purchase Degussas 50% interest in
EOXO. On February 23, 2007, the option was exercised and
the Company acquired Degussas interest in the venture for
a purchase price of 30 million ($39 million), in
addition to 22 million ($29 million) paid to
extinguish EOXOs debt upon closing of the transaction. The
Company completed the sale of its oxo products and derivatives
businesses, including the acquired 50% interest in EOXO, on
February 28, 2007. The sale included the oxo and
derivatives businesses at the Oberhausen, Germany, and Bay City,
Texas facilities as well as portions of its Bishop, Texas
facility. Also included were EOXOs facilities within the
Oberhausen and Marl, Germany plants. The former oxo products and
derivatives businesses acquired by Advent International was
renamed Oxea. Taking into account agreed deductions by the buyer
for pension and other employee benefits and various costs for
separation activities, the Company received proceeds of
approximately 443 million ($585 million) at
closing. The transaction resulted in the recognition of a
$47 million pre-tax gain, recorded to Gain (loss) on
disposal of discontinued operations, which includes certain
working capital and other adjustments, in 2007. Due to certain
lease-back arrangements between the Company and the buyer and
related environmental obligations of the Company, approximately
$51 million of the transaction proceeds attributable to the
fair value of the underlying land at Bay City ($1 million)
and Oberhausen (36 million) is included in deferred
proceeds in noncurrent Other liabilities, and
16
divested land with a book value of $14 million
(10 million at Oberhausen and $1 million at Bay
City) remains in Property, plant and equipment, net in the
Companys consolidated balance sheets.
Subsequent to closing, the Company and Oxea have certain site
service and product supply arrangements. The site services
include, but are not limited to, administrative, utilities,
health and safety, waste water treatment and maintenance
activities for terms which range up to fifteen years. Product
supply agreements contain initial terms of up to fifteen years.
The Company has no contractual ability through these agreements
or any other arrangements to significantly influence the
operating or financial policies of Oxea. The Company concluded,
based on the nature and limited projected magnitude of the
continuing business relationship between the Company and Oxea,
the divestiture of the oxo products and derivatives businesses
should be accounted for as a discontinued operation.
Third-party net sales include $5 million to the divested
oxo products and derivative businesses for the year ended
December 31, 2007 that were eliminated upon consolidation.
In accordance with the Companys sponsor services agreement
dated January 26, 2005, as amended, the Company paid the
Advisor $6 million in connection with the sale of the oxo
products and derivatives businesses.
During the second quarter of 2007, the Company discontinued its
Edmonton, Alberta, Canada methanol operations, which were
included in the Acetyl Intermediates segment. As a result, the
earnings (loss) from operations related to Edmonton methanol are
accounted for as discontinued operations.
Asset
Sales
In May 2008, shareholders of the Companys Koper, Slovenia
legal entity voted to approve the April 2008 decision by the
Company to permanently shut down this emulsions production site.
The decision to shut down the site resulted in employee
severance of less than $1 million, which is included in
Other (charges) gains, net, in the consolidated statements of
operations during the year ended December 31, 2008.
Currently, the facility is idle and the existing fixed assets,
including machinery and equipment, buildings and land are being
marketed for sale. The Koper, Slovenia legal entity is included
in the Companys Industrial Specialties segment.
In December 2007, the Company sold the assets at its Edmonton,
Alberta, Canada facility to a real estate developer for
approximately $35 million. As part of the agreement, the
Company will retain certain environmental liabilities associated
with the site. The Company derecognized $16 million of
asset retirement obligations which were transferred to the
buyer. As a result of the sale, the Company recorded a gain of
$37 million for the year ended December 31, 2007, of
which a gain of $34 million was recorded to Gain (loss) on
disposition of businesses and assets, net in the consolidated
statements of operations.
In July 2007, the Company reached an agreement with
Babcock & Brown, a worldwide investment firm which
specializes in real estate and utilities development, to sell
the Companys Pampa, Texas facility. The Company ceased
operations at the site in December 2008. Proceeds received upon
certain milestone events are treated as deferred proceeds and
included in noncurrent Other liabilities in the Companys
consolidated balance sheets until the transaction is complete
(expected to be in 2010), as defined in the sales agreement.
These operations are included in the Companys Acetyl
Intermediates segment. During the second half of 2008, the
Company determined that two of the milestone events, which are
outside of the Companys control, were unlikely to be
achieved. The Company performed a discounted cash flow analysis
which resulted in a $23 million long-lived asset impairment
loss recorded to Other (charges) gains, net, in the consolidated
statements of operations during the year ended December 31,
2008 (Note 18).
17
Plant
Closures
In July 2009, the Companys wholly-owned French subsidiary,
Acetex Chimie, completed the consultation procedure with the
workers council on its Project of Closure and social
plan related to the Companys Pardies, France facility
pursuant to which the Company announced its formal plan to cease
all manufacturing operations and associated activities by
December 2009. The Company agreed with the workers council on a
set of measures of assistance aimed at minimizing the effects of
the plants closing on the Pardies workforce, including
training, outplacement and severance.
As a result of the Project of Closure, the Company recorded exit
costs of $89 million during the year ended
December 31, 2009, which included $60 million in
employee termination benefits, $17 million of contract
termination costs and $12 million of long-lived asset
impairment losses (see Note 18) to Other charges
(gains), net, in the consolidated statements of operations. The
fair value of the related held and used long-lived assets is
$4 million as of December 31, 2009. In addition, the
Company recorded $9 million of accelerated depreciation
expense for the year ended December 31, 2009 and
$8 million of environmental remediation reserves for the
year ended December 31, 2009 related to the shutdown of the
Companys Pardies, France facility. The Pardies, France
facility is included in the Acetyl Intermediates segment.
|
|
5.
|
Marketable
Securities, at Fair Value
|
The Companys captive insurance companies and
pension-related trusts hold
available-for-sale
securities for capitalization and funding requirements,
respectively. The Company recorded realized gains (losses) to
Other income (expense), net in the consolidated statements of
operations as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years ended December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
(In $ millions)
|
|
|
Realized gain on sale of securities
|
|
|
5
|
|
|
|
10
|
|
|
|
1
|
|
Realized loss on sale of securities
|
|
|
-
|
|
|
|
(10
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net realized gain (loss) on sale of securities
|
|
|
5
|
|
|
|
-
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The amortized cost, gross unrealized gain, gross unrealized loss
and fair values for
available-for-sale
securities by major security type were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
|
|
|
Gross
|
|
|
|
|
|
|
Amortized
|
|
|
Unrealized
|
|
|
Unrealized
|
|
|
Fair
|
|
|
|
Cost
|
|
|
Gain
|
|
|
Loss
|
|
|
Value
|
|
|
|
|
|
|
(In $ millions)
|
|
|
|
|
|
US government debt securities
|
|
|
26
|
|
|
|
2
|
|
|
|
-
|
|
|
|
28
|
|
US corporate debt securities
|
|
|
1
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total debt securities
|
|
|
27
|
|
|
|
2
|
|
|
|
-
|
|
|
|
29
|
|
Equity securities
|
|
|
55
|
|
|
|
-
|
|
|
|
(3
|
)
|
|
|
52
|
|
Money market deposits and other securities
|
|
|
2
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2009
|
|
|
84
|
|
|
|
2
|
|
|
|
(3
|
)
|
|
|
83
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
US government debt securities
|
|
|
35
|
|
|
|
17
|
|
|
|
-
|
|
|
|
52
|
|
US corporate debt securities
|
|
|
3
|
|
|
|
-
|
|
|
|
-
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total debt securities
|
|
|
38
|
|
|
|
17
|
|
|
|
-
|
|
|
|
55
|
|
Equity securities
|
|
|
55
|
|
|
|
-
|
|
|
|
(13
|
)
|
|
|
42
|
|
Money market deposits and other securities
|
|
|
3
|
|
|
|
-
|
|
|
|
-
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2008
|
|
|
96
|
|
|
|
17
|
|
|
|
(13
|
)
|
|
|
100
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18
Fixed maturities as of December 31, 2009 by contractual
maturity are shown below. Actual maturities could differ from
contractual maturities because borrowers may have the right to
call or prepay obligations, with or without call or prepayment
penalties.
|
|
|
|
|
|
|
|
|
|
|
Amortized
|
|
|
Fair
|
|
|
|
Cost
|
|
|
Value
|
|
|
|
(In $ millions)
|
|
|
Within one year
|
|
|
3
|
|
|
|
3
|
|
From one to five years
|
|
|
-
|
|
|
|
-
|
|
From six to ten years
|
|
|
-
|
|
|
|
-
|
|
Greater than ten years
|
|
|
26
|
|
|
|
28
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
29
|
|
|
|
31
|
|
|
|
|
|
|
|
|
|
|
Proceeds received from fixed maturities that mature within one
year are expected to be reinvested into additional securities
upon such maturity.
|
|
|
|
|
|
|
|
|
|
|
As of
|
|
|
|
December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
(In $ millions)
|
|
|
Trade receivables third party and affiliates
|
|
|
739
|
|
|
|
656
|
|
Allowance for doubtful accounts third party and
affiliates
|
|
|
(18
|
)
|
|
|
(25
|
)
|
|
|
|
|
|
|
|
|
|
Trade receivables third party and affiliates, net
|
|
|
721
|
|
|
|
631
|
|
|
|
|
|
|
|
|
|
|
Non-trade receivables
|
|
|
|
|
|
|
|
|
Reinsurance receivables
|
|
|
49
|
|
|
|
40
|
|
Income taxes receivable
|
|
|
64
|
|
|
|
88
|
|
Other
|
|
|
149
|
|
|
|
154
|
|
Allowance for doubtful accounts other
|
|
|
-
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
262
|
|
|
|
281
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2009 and 2008, the Company had no
significant concentrations of credit risk since the
Companys customer base is dispersed across many different
industries and geographies.
|
|
|
|
|
|
|
|
|
|
|
As of
|
|
|
|
December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
(In $ millions)
|
|
|
Finished goods
|
|
|
367
|
|
|
|
434
|
|
Work-in-process
|
|
|
28
|
|
|
|
24
|
|
Raw materials and supplies
|
|
|
127
|
|
|
|
119
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
522
|
|
|
|
577
|
|
|
|
|
|
|
|
|
|
|
The Company recorded charges of $0 million and
$14 million to reduce its inventories to the
lower-of-cost
or market for the years ended December 31, 2009 and 2008,
respectively.
19
|
|
8.
|
Investments
in Affiliates
|
Equity
Method
The Companys equity investments and ownership interests
are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ownership
|
|
|
|
|
|
Share of Earnings (Loss)
|
|
|
|
|
|
Percentage
|
|
|
Carrying Value
|
|
|
Year Ended
|
|
|
|
|
|
as of December 31,
|
|
|
as of December 31,
|
|
|
December 31,
|
|
|
|
Segment
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
|
|
(In percentages)
|
|
|
(In $ millions)
|
|
|
European Oxo
GmbH(1)
|
|
Acetyl Intermediates
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2
|
|
Erfei,
A.I.E.(3)
|
|
Acetyl Intermediates
|
|
|
-
|
|
|
|
45
|
|
|
|
-
|
|
|
|
1
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(1
|
)
|
National Methanol Company (Ibn Sina)
|
|
Advanced Engineered
Materials
|
|
|
25
|
|
|
|
25
|
|
|
|
56
|
|
|
|
46
|
|
|
|
51
|
|
|
|
118
|
|
|
|
68
|
|
Fortron Industries LLC
|
|
Advanced Engineered
Materials
|
|
|
50
|
|
|
|
50
|
|
|
|
74
|
|
|
|
77
|
|
|
|
(3
|
)
|
|
|
4
|
|
|
|
16
|
|
Korea Engineering Plastics Co., Ltd.
|
|
Advanced Engineered
Materials
|
|
|
50
|
|
|
|
50
|
|
|
|
159
|
|
|
|
145
|
|
|
|
14
|
|
|
|
12
|
|
|
|
14
|
|
Polyplastics Co., Ltd.
|
|
Advanced Engineered
Materials
|
|
|
45
|
|
|
|
45
|
|
|
|
175
|
|
|
|
189
|
|
|
|
15
|
|
|
|
19
|
|
|
|
25
|
|
Una SA
|
|
Advanced Engineered
Materials
|
|
|
50
|
|
|
|
50
|
|
|
|
2
|
|
|
|
2
|
|
|
|
-
|
|
|
|
2
|
|
|
|
-
|
|
InfraServ GmbH & Co. Gendorf KG
|
|
Other Activities
|
|
|
39
|
|
|
|
39
|
|
|
|
27
|
|
|
|
28
|
|
|
|
3
|
|
|
|
4
|
|
|
|
5
|
|
InfraServ GmbH & Co. Hoechst KG
|
|
Other Activities
|
|
|
32
|
|
|
|
31
|
|
|
|
142
|
|
|
|
137
|
|
|
|
15
|
|
|
|
10
|
|
|
|
18
|
|
InfraServ GmbH & Co. Knapsack KG
|
|
Other Activities
|
|
|
27
|
|
|
|
27
|
|
|
|
24
|
|
|
|
22
|
|
|
|
5
|
|
|
|
4
|
|
|
|
4
|
|
Sherbrooke Capital Health and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wellness,
L.P.(2)
|
|
Consumer Specialties
|
|
|
10
|
|
|
|
10
|
|
|
|
4
|
|
|
|
4
|
|
|
|
(1
|
)
|
|
|
(1
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total (As Adjusted, Note 31)
|
|
|
|
|
|
|
|
|
|
|
|
|
663
|
|
|
|
651
|
|
|
|
99
|
|
|
|
172
|
|
|
|
151
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
The Company divested this investment in February 2007
(Note 4). The share of earnings (loss) for this investment
is included in Earnings (loss) from operation of discontinued
operations in the consolidated statements of operations. |
|
(2) |
|
The Company accounts for its 10% ownership interest in
Sherbrooke Capital Health and Wellness, L.P. under the equity
method of accounting because the Company is able to exercise
significant influence. |
|
(3) |
|
The Company divested this investment in July 2009 as part of the
sale of PVOH (Note 4). |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
As Adjusted (Note 32)
|
|
|
|
(In $ millions)
|
|
|
Affiliate net earnings
|
|
|
335
|
|
|
|
633
|
|
|
|
503
|
|
Companys share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
|
99
|
|
|
|
172
|
|
|
|
150
|
(1)
|
Dividends and other distributions
|
|
|
78
|
|
|
|
183
|
|
|
|
135
|
|
20
|
|
|
(1) |
|
Amount does not include a $1 million liquidating dividend
from Clear Lake Methanol Partners for the year ended
December 31, 2007. |
Cost
Method
The Companys investments accounted for under the cost
method of accounting are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ownership
|
|
|
|
|
|
|
|
|
|
|
|
Percentage as of
|
|
|
Carrying Value as of
|
|
|
Dividend Income for the years
|
|
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
ended December 31,
|
|
|
|
Segment
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
|
|
(In percentages)
|
|
|
(In $ millions)
|
|
|
Kunming Cellulose Fibers Co. Ltd.
|
|
Consumer Specialties
|
|
|
30
|
|
|
|
30
|
|
|
|
14
|
|
|
|
14
|
|
|
|
10
|
|
|
|
8
|
|
|
|
7
|
|
Nantong Cellulose Fibers Co. Ltd.
|
|
Consumer Specialties
|
|
|
31
|
|
|
|
31
|
|
|
|
77
|
|
|
|
77
|
|
|
|
38
|
|
|
|
32
|
|
|
|
24
|
|
Zhuhai Cellulose Fibers Co. Ltd.
|
|
Consumer Specialties
|
|
|
30
|
|
|
|
30
|
|
|
|
14
|
|
|
|
14
|
|
|
|
8
|
|
|
|
6
|
|
|
|
6
|
|
InfraServ GmbH & Co. Wiesbaden KG
|
|
Other Activities
|
|
|
8
|
|
|
|
8
|
|
|
|
6
|
|
|
|
6
|
|
|
|
1
|
|
|
|
2
|
|
|
|
1
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
18
|
|
|
|
19
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total As Adjusted (Note 31)
|
|
|
|
|
|
|
|
|
|
|
|
|
129
|
|
|
|
130
|
|
|
|
57
|
|
|
|
48
|
|
|
|
38
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Certain investments where the Company owns greater than a 20%
ownership interest are accounted for under the cost method of
accounting because the Company cannot exercise significant
influence over these entities. The Company determined that it
cannot exercise significant influence over these entities due to
local government investment in and influence over these
entities, limitations on the Companys involvement in the
day-to-day
operations and the present inability of the entities to provide
timely financial information prepared in accordance with US GAAP.
During 2007, the Company wrote-off its remaining
1 million ($1 million) cost investment in
European Pipeline Development Company B.V. (EPDC)
and expensed 7 million ($9 million), included in
Other income (expense), net, associated with contingent
liabilities that became payable due to the Companys
decision to exit the pipeline development project. In June 2008,
the outstanding contingent liabilities were resolved and the
Company recognized a gain of 2 million
($2 million), included in Other income (expense), net, in
the consolidated statements of operations to remove the
remaining accrual.
During 2007, the Company fully impaired its $5 million cost
investment in Elemica Corporation (Elemica). Elemica
is a network for the global chemical industry developed by 22 of
the leading chemical companies in the world for the benefit of
the entire industry. The impairment was included in Other income
(expense), net in the consolidated statements of operations.
|
|
9.
|
Property,
Plant and Equipment, Net
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
(In $ millions)
|
|
|
Land
|
|
|
62
|
|
|
|
61
|
|
Land improvements
|
|
|
44
|
|
|
|
44
|
|
Buildings and building improvements
|
|
|
360
|
|
|
|
358
|
|
Machinery and equipment
|
|
|
2,669
|
|
|
|
2,615
|
|
Construction in progress
|
|
|
792
|
|
|
|
443
|
|
|
|
|
|
|
|
|
|
|
Gross asset value
|
|
|
3,927
|
|
|
|
3,521
|
|
Less: accumulated depreciation
|
|
|
(1,130
|
)
|
|
|
(1,051
|
)
|
|
|
|
|
|
|
|
|
|
Net book value
|
|
|
2,797
|
|
|
|
2,470
|
|
|
|
|
|
|
|
|
|
|
21
Assets under capital leases amounted to $272 million and
$233 million, less accumulated amortization of
$55 million and $38 million, as of December 31,
2009 and 2008, respectively. Interest costs capitalized were
$2 million, $6 million and $9 million during the
years ended December 31, 2009, 2008 and 2007, respectively.
Depreciation expense was $213 million, $255 million
and $209 million during the years ended December 31,
2009, 2008 and 2007, respectively.
During 2008 and 2009, certain long-lived assets were impaired
(Note 18).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Advanced
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Engineered
|
|
|
Consumer
|
|
|
Industrial
|
|
|
Acetyl
|
|
|
|
|
|
|
Materials
|
|
|
Specialties
|
|
|
Specialties
|
|
|
Intermediates
|
|
|
Total
|
|
|
|
(In $ millions)
|
|
|
As of December 31, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill
|
|
|
277
|
|
|
|
264
|
|
|
|
53
|
|
|
|
278
|
|
|
|
872
|
|
Accumulated impairment losses
|
|
|
-
|
|
|
|
-
|
|
|
|
(6)
|
|
|
|
-
|
|
|
|
(6)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
277
|
|
|
|
264
|
|
|
|
47
|
|
|
|
278
|
|
|
|
866
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments to preacquisition tax uncertainties
|
|
|
(9)
|
|
|
|
2
|
|
|
|
(12)
|
|
|
|
(30)
|
|
|
|
(49)
|
|
Exchange rate changes
|
|
|
(10)
|
|
|
|
(14)
|
|
|
|
(1)
|
|
|
|
(13)
|
|
|
|
(38)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill
|
|
|
258
|
|
|
|
252
|
|
|
|
40
|
|
|
|
235
|
|
|
|
785
|
|
Accumulated impairment losses
|
|
|
-
|
|
|
|
-
|
|
|
|
(6)
|
|
|
|
-
|
|
|
|
(6)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
258
|
|
|
|
252
|
|
|
|
34
|
|
|
|
235
|
|
|
|
779
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sale of
PVOH(1)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Exchange rate changes
|
|
|
5
|
|
|
|
5
|
|
|
|
1
|
|
|
|
8
|
|
|
|
19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill
|
|
|
263
|
|
|
|
257
|
|
|
|
35
|
|
|
|
243
|
|
|
|
798
|
|
Accumulated impairment losses
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
263
|
|
|
|
257
|
|
|
|
35
|
|
|
|
243
|
|
|
|
798
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Fully impaired goodwill of $6 million was written off
related to the sale of PVOH. |
Recoverability of goodwill is measured using a discounted cash
flow model incorporating discount rates commensurate with the
risks involved for each reporting unit which is classified as a
Level 3 measurement under FASB ASC Topic 820. The key
assumptions used in the discounted cash flow valuation model
include discount rates, growth rates, cash flow projections and
terminal value rates. Discount rates, growth rates and cash flow
projections are the most sensitive and susceptible to change as
they require significant management judgment. If the calculated
fair value is less than the current carrying value, impairment
of the reporting unit may exist. When the recoverability test
indicates potential impairment, the Company, or in certain
circumstances, a third-party valuation consultant, will
calculate an implied fair value of goodwill for the reporting
unit. The implied fair value of goodwill is determined in a
manner similar to how goodwill is calculated in a business
combination. If the implied fair value of goodwill exceeds the
carrying value of goodwill assigned to the reporting unit, there
is no impairment. If the carrying value of goodwill assigned to
a reporting unit exceeds the implied fair value of the goodwill,
an impairment charge is recorded to write down the carrying
value. An impairment loss cannot exceed the carrying value of
goodwill assigned to a reporting unit but may indicate certain
long-lived and amortizable intangible assets associated with the
reporting unit may require additional impairment testing.
22
In connection with the Companys annual goodwill impairment
test performed during the three months ended September 30,
2009 using June 30 balances, the Company did not record an
impairment loss related to goodwill as the estimated fair value
for each of the Companys reporting units exceeded the
carrying value of the underlying assets by a substantial margin.
No events or changes in circumstances occurred during the three
months ended December 31, 2009 that would indicate that the
carrying amount of the assets may not be fully recoverable, as
such, no additional impairment analysis was performed during
that period.
|
|
11.
|
Intangible
Assets, Net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer-
|
|
|
|
|
|
Covenants
|
|
|
|
|
|
|
Trademarks
|
|
|
|
|
|
Related
|
|
|
|
|
|
not to
|
|
|
|
|
|
|
and
|
|
|
|
|
|
Intangible
|
|
|
Developed
|
|
|
Compete
|
|
|
|
|
|
|
Trade names
|
|
|
Licenses
|
|
|
Assets
|
|
|
Technology
|
|
|
and Other
|
|
|
Total
|
|
|
|
(In $ millions)
|
|
|
Gross Asset Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2007
|
|
|
85
|
|
|
|
|
-
|
|
|
|
|
562
|
|
|
|
|
12
|
|
|
|
|
12
|
|
|
|
|
671
|
|
|
Acquisitions
|
|
|
-
|
|
|
|
|
28(1
|
)
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
28
|
|
|
Exchange rate changes
|
|
|
(3
|
)
|
|
|
|
1
|
|
|
|
|
(25
|
)
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
(27
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2008
|
|
|
82
|
|
|
|
|
29
|
|
|
|
|
537
|
|
|
|
|
12
|
|
|
|
|
12
|
|
|
|
|
672
|
|
|
Acquisitions
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
1
|
|
|
|
|
-
|
|
|
|
|
1
|
|
|
Exchange rate changes
|
|
|
1
|
|
|
|
|
-
|
|
|
|
|
15
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2009
|
|
|
83
|
|
|
|
|
29
|
|
|
|
|
552
|
|
|
|
|
13
|
|
|
|
|
12
|
|
|
|
|
689
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated Amortization
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2007
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
(228
|
)
|
|
|
|
(9
|
)
|
|
|
|
(9
|
)
|
|
|
|
(246
|
)
|
|
Amortization
|
|
|
-
|
|
|
|
|
(3
|
)
|
|
|
|
(71
|
)
|
|
|
|
(1
|
)
|
|
|
|
(1
|
)
|
|
|
|
(76
|
)
|
|
Exchange rate changes
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
14
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2008
|
|
|
-
|
|
|
|
|
(3
|
)
|
|
|
|
(285
|
)
|
|
|
|
(10
|
)
|
|
|
|
(10
|
)
|
|
|
|
(308
|
)
|
|
Amortization
|
|
|
(5
|
)
|
|
|
|
(3
|
)
|
|
|
|
(67
|
)
|
|
|
|
(1
|
)
|
|
|
|
(1
|
)
|
|
|
|
(77
|
)
|
|
Exchange rate changes
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
(10
|
)
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
(10
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2009
|
|
|
(5
|
)
|
|
|
|
(6
|
)
|
|
|
|
(362
|
)
|
|
|
|
(11
|
)
|
|
|
|
(11
|
)
|
|
|
|
(395
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net book value
|
|
|
78
|
|
|
|
|
23
|
|
|
|
|
190
|
|
|
|
|
2
|
|
|
|
|
1
|
|
|
|
|
294
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Acquisition of a sole and exclusive license to patents and
patent applications related to acetic acid. The license is being
amortized over 10 years. |
Aggregate amortization expense for intangible assets with finite
lives during the years ended December 31, 2009, 2008 and
2007 was $72 million, $76 million, and
$72 million, respectively. In addition, during the year
ended December 31, 2009 the Company recorded accelerated
amortization expense of $5 million related to the AT
Plastics trade name which was discontinued August 1, 2009.
The trade name is now fully amortized.
Estimated amortization expense for the succeeding five fiscal
years is approximately $62 million in 2010,
$57 million in 2011, $43 million in 2012,
$26 million in 2013, and $15 million in 2014. The
Companys trademarks and trade names have an indefinite
life. Accordingly, no amortization is recorded on these
intangible assets.
Management tests indefinite-lived intangible assets utilizing
the relief from royalty method to determine the estimated fair
value for each indefinite-lived intangible asset which is
classified as a Level 3 measurement under FASB ASC Topic
820. The relief from royalty method estimates the Companys
theoretical royalty savings from ownership of the intangible
asset. Key assumptions used in this model include discount
rates, royalty rates, growth rates, sales projections and
terminal value rates. Discount rates, royalty rates,
23
growth rates and sales projections are the assumptions most
sensitive and susceptible to change as they require significant
management judgment. Discount rates used are similar to the
rates estimated by the weighted-average cost of capital
(WACC) considering any differences in
Company-specific risk factors. Royalty rates are established by
management and are periodically substantiated by third-party
valuation consultants. Operational management, considering
industry and Company-specific historical and projected data,
develops growth rates and sales projections associated with each
indefinite-lived intangible asset. Terminal value rate
determination follows common methodology of capturing the
present value of perpetual sales estimates beyond the last
projected period assuming a constant WACC and low long-term
growth rates.
In connection with the Companys annual indefinite-lived
intangible assets impairment test performed during the three
months ended September 30, 2009 using June 30 balances, the
Company recorded an impairment loss of less than $1 million
to certain indefinite-lived intangible assets. The fair value of
such indefinite-lived intangible assets is $2 million as of
December 31, 2009. No events or changes in circumstances
occurred during the three months ended December 31, 2009
that would indicate that the carrying amount of the assets may
not be fully recoverable, as such, no additional impairment
analysis was performed during that period.
For the year ended December 31, 2009, the Company did not
renew or extend any intangible assets.
|
|
12.
|
Current
Other Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
(In $ millions)
|
|
|
Salaries and benefits
|
|
|
100
|
|
|
|
107
|
|
Environmental (Note 16)
|
|
|
13
|
|
|
|
19
|
|
Restructuring (Note 18)
|
|
|
99
|
|
|
|
32
|
|
Insurance
|
|
|
37
|
|
|
|
34
|
|
Asset retirement obligations
|
|
|
22
|
|
|
|
9
|
|
Derivatives
|
|
|
75
|
|
|
|
67
|
|
Current portion of benefit obligations (Note 15)
|
|
|
49
|
|
|
|
57
|
|
Sales and use tax/foreign withholding tax payable
|
|
|
15
|
|
|
|
16
|
|
Interest
|
|
|
20
|
|
|
|
54
|
|
Uncertain tax positions (Note 19)
|
|
|
5
|
|
|
|
-
|
|
Other
|
|
|
176
|
|
|
|
179
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
611
|
|
|
|
574
|
|
|
|
|
|
|
|
|
|
|
|
|
13.
|
Noncurrent
Other Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
(In $ millions)
|
|
|
Environmental (Note 16)
|
|
|
93
|
|
|
|
79
|
|
Insurance
|
|
|
85
|
|
|
|
85
|
|
Deferred revenue
|
|
|
49
|
|
|
|
55
|
|
Deferred proceeds (Note 4, Note 29)
|
|
|
846
|
|
|
|
371
|
|
Asset retirement obligations
|
|
|
45
|
|
|
|
40
|
|
Derivatives
|
|
|
44
|
|
|
|
76
|
|
Income taxes payable
|
|
|
61
|
|
|
|
-
|
|
Other
|
|
|
83
|
|
|
|
100
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
1,306
|
|
|
|
806
|
|
|
|
|
|
|
|
|
|
|
24
Changes in asset retirement obligations are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
(In $ millions)
|
|
|
Balance at beginning of year
|
|
|
49
|
|
|
|
47
|
|
|
|
59
|
|
Additions
|
|
|
14
|
(1)
|
|
|
6
|
(2)
|
|
|
-
|
|
Accretion
|
|
|
2
|
|
|
|
3
|
|
|
|
5
|
|
Payments
|
|
|
(14
|
)
|
|
|
(6
|
)
|
|
|
(6
|
)
|
Divestitures
|
|
|
-
|
|
|
|
-
|
|
|
|
(16
|
) (3)
|
Purchase accounting adjustments
|
|
|
-
|
|
|
|
-
|
|
|
|
3
|
|
Revisions to cash flow estimates
|
|
|
15
|
(4)
|
|
|
1
|
|
|
|
(2
|
)
|
Exchange rate changes
|
|
|
1
|
|
|
|
(2
|
)
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at end of year
|
|
|
67
|
|
|
|
49
|
|
|
|
47
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Relates to a site for which management no longer considers to
have an indeterminate life. |
|
(2) |
|
Relates to long-lived assets impaired (Note 18) for
which management no longer considers to have an indeterminate
life. |
|
(3) |
|
Relates to the sale of the Edmonton, Alberta, Canada plant
(Note 4). |
|
(4) |
|
Primarily relates to long-lived assets impaired
(Note 18) based on triggering events assessed by the
Company in 2008 and decisions made by the Company in 2009. |
Included in the asset retirement obligations for each of the
years ended December 31, 2009 and 2008 is $10 million
related to a business acquired in 2005. The Company has a
corresponding receivable of $3 million and $7 million
included in current Other assets and noncurrent Other assets in
the consolidated balance sheets, respectively, as of
December 31, 2009.
Based on long-lived asset impairment triggering events assessed
by the Company in December 2008 and decisions made by the
Company in 2009, the Company concluded several sites no longer
have an indeterminate life. Accordingly, the Company recorded
asset retirement obligations associated with these sites. The
Company uses the expected present value technique to measure the
fair value of the asset retirement obligations which is
classified as a Level 3 measurement under FASB ASC Topic
820. The expected present value technique uses a set of cash
flows that represent the probability-weighted average of all
possible cash flows based on the Companys judgment. The
Company uses the following inputs to determine the fair value of
the asset retirement obligations based on the Companys
experience with fulfilling obligations of this type and the
Companys knowledge of market conditions: a) labor
costs; b) allocation of overhead costs; c) profit on
labor and overhead costs; d) effect of inflation on
estimated costs and profits; e) risk premium for bearing
the uncertainty inherent in cash flows, other than inflation;
f) time value of money represented by the risk-free
interest rate commensurate with the timing of the associated
cash flows; and g) nonperformance risk relating to the
liability which includes the Companys own credit risk.
The Company has identified but not recognized asset retirement
obligations related to certain of its existing operating
facilities. Examples of these types of obligations include
demolition, decommissioning, disposal and restoration
activities. Legal obligations exist in connection with the
retirement of these assets upon closure of the facilities or
abandonment of the existing operations. However, the Company
currently plans on continuing operations at these facilities
indefinitely and therefore a reasonable estimate of fair value
cannot be determined at this time. In the event the Company
considers plans to abandon or cease operations at these sites,
an asset retirement obligation will be reassessed at that time.
If certain operating facilities were to close, the related asset
retirement obligations could significantly affect the
Companys results of operations and cash flows.
25
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
(In $ millions)
|
|
|
Short-term borrowings and current installments of long-term
debt third party and affiliates
|
|
|
|
|
|
|
|
|
Current installments of long-term debt
|
|
|
102
|
|
|
|
81
|
|
Short-term borrowings, principally comprised of amounts due to
affiliates
|
|
|
140
|
|
|
|
152
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
242
|
|
|
|
233
|
|
|
|
|
|
|
|
|
|
|
Long-term debt
|
|
|
|
|
|
|
|
|
Senior credit facilities: Term loan facility due 2014
|
|
|
2,785
|
|
|
|
2,794
|
|
Term notes 7.125%, due 2009
|
|
|
-
|
|
|
|
14
|
|
Pollution control and industrial revenue bonds, interest rates
ranging from 5.7% to 6.7%, due at various dates through 2030
|
|
|
181
|
|
|
|
181
|
|
Obligations under capital leases and other secured borrowings
due at various dates through 2054
|
|
|
242
|
|
|
|
211
|
|
Other bank obligations, interest rates ranging from 2.3% to
5.3%, due at various dates through 2014
|
|
|
153
|
|
|
|
181
|
|
|
|
|
|
|
|
|
|
|
Subtotal
|
|
|
3,361
|
|
|
|
3,381
|
|
Less: Current installments of long-term debt
|
|
|
102
|
|
|
|
81
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
3,259
|
|
|
|
3,300
|
|
|
|
|
|
|
|
|
|
|
Senior
Credit Facilities
The Companys senior credit agreement consists of
$2,280 million of US dollar-denominated and
400 million of Euro-denominated term loans due 2014,
a $600 million revolving credit facility terminating in
2013 and a $228 million credit-linked revolving facility
terminating in 2014. Borrowings under the senior credit
agreement bear interest at a variable interest rate based on
LIBOR (for US dollars) or EURIBOR (for Euros), as applicable,
or, for US dollar-denominated loans under certain circumstances,
a base rate, in each case plus an applicable margin. The
applicable margin for the term loans and any loans under the
credit-linked revolving facility is 1.75%, subject to potential
reductions as defined in the senior credit agreement. As of
December 31, 2009, the applicable margin was 1.75%. The
term loans under the senior credit agreement are subject to
amortization at 1% of the initial principal amount per annum,
payable quarterly. The remaining principal amount of the term
loans is due on April 2, 2014.
As of December 31, 2009, there were no outstanding
borrowings or letters of credit issued under the revolving
credit facility. As of December 31, 2009, there were
$88 million of letters of credit issued under the
credit-linked revolving facility and $140 million remained
available for borrowing.
On June 30, 2009, the Company entered into an amendment to
the senior credit agreement. The amendment reduced the amount
available under the revolving credit facility from
$650 million to $600 million and increased the first
lien senior secured leverage ratio covenant that is applicable
when any amount is outstanding under the revolving credit
portion of the senior credit agreement at set forth below. Prior
to giving
26
effect to the amendment, the maximum first lien senior secured
leverage ratio was 3.90 to 1.00. As amended, the maximum senior
secured leverage ratio for the following trailing four-quarter
periods is as follows:
|
|
|
|
|
|
|
First Lien Senior
|
|
|
Secured Leverage Ratio
|
|
December 31, 2009
|
|
|
5.25 to 1.00
|
|
March 31, 2010
|
|
|
4.75 to 1.00
|
|
June 30, 2010
|
|
|
4.25 to 1.00
|
|
September 30, 2010
|
|
|
4.25 to 1.00
|
|
December 31, 2010 and thereafter
|
|
|
3.90 to 1.00
|
|
As a condition to borrowing funds or requesting that letters of
credit be issued under that facility, the Companys first
lien senior secured leverage ratio (as calculated as of the last
day of the most recent fiscal quarter for which financial
statements have been delivered under the revolving facility)
cannot exceed a certain threshold as specified above. Further,
the Companys first lien senior secured leverage ratio must
be maintained at or below that threshold while any amounts are
outstanding under the revolving credit facility. The first lien
senior secured leverage ratio is calculated as the ratio of
consolidated first lien senior secured debt to earnings before
interest, taxes, depreciation and amortization, subject to
adjustment identified in the credit agreement.
Based on the estimated first lien senior secured leverage ratio
for the trailing four quarters at December 31, 2009, the
Companys borrowing capacity under the revolving credit
facility is currently $600 million. As of December 31,
2009, the Company estimates its first lien senior secured
leverage ratio to be 3.39 to 1.00 (which would be 4.11 to 1.00
were the revolving credit facility fully drawn). The maximum
first lien senior secured leverage ratio under the revolving
credit facility for such period is 5.25 to 1.00.
The Companys senior credit agreement also contains a
number of restrictions on certain of its subsidiaries,
including, but not limited to, restrictions on their ability to
incur indebtedness; grant liens on assets; merge, consolidate,
or sell assets; pay dividends or make other restricted payments;
make investments; prepay or modify certain indebtedness; engage
in transactions with affiliates; enter into sale-leaseback
transactions or certain hedge transactions; or engage in other
businesses. The senior credit agreement also contains a number
of affirmative covenants and events of default, including a
cross default to other debt of certain of the Companys
subsidiaries in an aggregate amount equal to more than
$40 million and the occurrence of a change of control.
Failure to comply with these covenants, or the occurrence of any
other event of default, could result in acceleration of the
loans and other financial obligations under the Companys
senior credit agreement.
The senior credit agreement is guaranteed by Celanese Holdings
LLC, a subsidiary of Celanese Corporation, and certain domestic
subsidiaries of the Companys subsidiary, Celanese US
Holdings LLC (Celanese US), a Delaware limited
liability company, and is secured by a lien on substantially all
assets of Celanese US and such guarantors, subject to certain
agreed exceptions, pursuant to the Guarantee and Collateral
Agreement, dated as of April 2, 2007, by and among Celanese
Holdings LLC, Celanese US, certain subsidiaries of Celanese US
and Deutsche Bank AG, New York Branch, as Administrative Agent
and as Collateral Agent.
The Company is in compliance with all of the covenants related
to its debt agreements as of December 31, 2009.
Debt
Refinancing
In April 2007, the Company, through certain of its subsidiaries,
entered into a new senior credit agreement. Proceeds from the
new senior credit agreement, together with available cash, were
used to retire the Companys $2,454 million amended
and restated (January 2005) senior credit facilities, which
consisted of
27
$1,626 million in term loans due 2011, a $600 million
revolving credit facility terminating in 2009 and a
$228 million credit-linked revolving facility terminating
in 2009, and to retire all of the Companys
9.625% senior subordinated notes due 2014 and
10.375% senior subordinated notes due 2014 (the
Senior Subordinated Notes) and 10% senior
discount notes due 2014 and 10.5% senior discount notes due
2014 (the Senior Discount Notes) as discussed below.
Substantially all of the Senior Discount Notes and Senior
Subordinated Notes were tendered in the first quarter of 2007.
The remaining outstanding Senior Discount Notes and Senior
Subordinated Notes not tendered in conjunction with the Tender
Offers were redeemed by the Company in May 2007 through optional
redemption allowed in the indentures.
As a result of the refinancing, the Company incurred premiums
paid on early redemption of debt of $207 million,
accelerated amortization of premiums and deferred financing
costs of $33 million and other refinancing expenses of
$16 million.
In connection with the refinancing, the Company recorded
deferred financing costs of $39 million related to the
senior credit agreement, which are included in noncurrent Other
assets on the consolidated balance sheets and are being
amortized over the term of the new senior credit agreement. The
deferred financing costs consist of $23 million of costs
incurred to acquire the new senior credit agreement and
$16 million of debt issue costs existing prior to the
refinancing.
For the years ended December 31, 2009, 2008 and 2007, the
Company recorded amortization of deferred financing costs, which
is classified in Interest expense, in the consolidated
statements of operations of $7 million, $7 million,
and $8 million, respectively. As of December 31, 2009
and 2008, respectively, the Company had $27 million and
$32 million of net deferred financing costs.
Principal payments scheduled to be made on the Companys
debt, including short-term borrowings, are as follows:
|
|
|
|
|
|
|
(In $ millions)
|
|
|
2010
|
|
|
242
|
|
2011
|
|
|
89
|
|
2012
|
|
|
65
|
|
2013
|
|
|
73
|
|
2014
|
|
|
2,699
|
|
Thereafter
|
|
|
333
|
|
|
|
|
|
|
Total
|
|
|
3,501
|
|
|
|
|
|
|
Pension obligations. Pension obligations are
established for benefits payable in the form of retirement,
disability and surviving dependent pensions. The commitments
result from participation in defined contribution and defined
benefit plans, primarily in the US. Benefits are dependent on
years of service and the employees compensation.
Supplemental retirement benefits provided to certain employees
are nonqualified for US tax purposes. Separate trusts have been
established for some nonqualified plans. Pension costs under the
Companys retirement plans are actuarially determined.
The Company sponsors defined benefit pension plans in North
America, Europe and Asia. Independent trusts or insurance
companies administer the majority of these plans.
The Company sponsors various defined contribution plans in North
America, Europe and Asia covering certain employees. Employees
may contribute to these plans and the Company will match these
contributions in varying amounts. The Companys matching
contribution to the defined contribution plans are
28
based on specified percentages of employee contributions and
aggregated $11 million, $13 million and
$12 million for the years ended December 31, 2009,
2008 and 2007, respectively.
The Company participates in multiemployer defined benefit
pension plans in Europe covering certain employees. The
Companys contributions to the multiemployer defined
benefit pension plans are based on specified percentages of
employee contributions and aggregated $6 million,
$7 million and $7 million, for the years ended
December 31, 2009, 2008 and 2007, respectively.
Other postretirement obligations. Certain retired
employees receive postretirement healthcare and life insurance
benefits under plans sponsored by the Company, which has the
right to modify or terminate these plans at any time. The cost
for coverage is shared between the Company and the retiree. The
cost of providing retiree health care and life insurance
benefits is actuarially determined and accrued over the service
period of the active employee group. The Companys policy
is to fund benefits as claims and premiums are paid. The US plan
was closed to new participants effective January 1, 2006.
29
The following tables set forth the benefit obligations, the fair
value of the plan assets and the funded status of the
Companys pension and postretirement benefit plans; and the
amounts recognized in the Companys consolidated financial
statements:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Benefits
|
|
|
Postretirement Benefits
|
|
|
|
as of December 31,
|
|
|
as of December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
(In $ millions)
|
|
|
|
|
|
Change in projected benefit obligation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Projected benefit obligation at beginning of period
|
|
|
3,073
|
|
|
|
|
3,264
|
|
|
|
|
275
|
|
|
|
|
306
|
|
|
Service cost
|
|
|
29
|
|
|
|
|
31
|
|
|
|
|
1
|
|
|
|
|
2
|
|
|
Interest cost
|
|
|
193
|
|
|
|
|
195
|
|
|
|
|
17
|
|
|
|
|
17
|
|
|
Participant contributions
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
25
|
|
|
|
|
22
|
|
|
Plan amendments
|
|
|
5
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
2
|
|
|
Actuarial (gain)
loss(1)
|
|
|
230
|
|
|
|
|
(107
|
)
|
|
|
|
12
|
|
|
|
|
(14
|
)
|
|
Special termination benefits
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
Divestitures
|
|
|
(3
|
)
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
Settlements
|
|
|
(1
|
)
|
|
|
|
(19
|
)
|
|
|
|
-
|
|
|
|
|
-
|
|
|
Benefits paid
|
|
|
(222
|
)
|
|
|
|
(222
|
)
|
|
|
|
(59
|
)
|
|
|
|
(58
|
)
|
|
Federal subsidy on Medicare Part D
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
6
|
|
|
|
|
6
|
|
|
Curtailments
|
|
|
(2
|
)
|
|
|
|
(1
|
)
|
|
|
|
-
|
|
|
|
|
(2
|
)
|
|
Foreign currency exchange rate changes
|
|
|
40
|
|
|
|
|
(68
|
)
|
|
|
|
4
|
|
|
|
|
(6
|
)
|
|
Other
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Projected benefit obligation at end of period
|
|
|
3,342
|
|
|
|
|
3,073
|
|
|
|
|
281
|
|
|
|
|
275
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in plan assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of plan assets at beginning of period
|
|
|
2,170
|
|
|
|
|
2,875
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
Actual return on plan assets
|
|
|
306
|
|
|
|
|
(448
|
)
|
|
|
|
-
|
|
|
|
|
-
|
|
|
Employer contributions
|
|
|
44
|
|
|
|
|
48
|
|
|
|
|
34
|
|
|
|
|
35
|
|
|
Participant contributions
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
25
|
|
|
|
|
23
|
|
|
Divestitures
|
|
|
(2
|
)
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
Settlements
|
|
|
(3
|
)
|
|
|
|
(22
|
)
|
|
|
|
-
|
|
|
|
|
-
|
|
|
Benefits paid
|
|
|
(222
|
)
|
|
|
|
(222
|
)
|
|
|
|
(59
|
)
|
|
|
|
(58
|
)
|
|
Foreign currency exchange rate changes
|
|
|
36
|
|
|
|
|
(61
|
)
|
|
|
|
-
|
|
|
|
|
-
|
|
|
Other
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of plan assets at end of period
|
|
|
2,329
|
|
|
|
|
2,170
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Funded status and net amounts recognized
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plan assets less than benefit obligation
|
|
|
(1,013
|
)
|
|
|
|
(903
|
)
|
|
|
|
(281
|
)
|
|
|
|
(275
|
)
|
|
Unrecognized prior service cost
|
|
|
6
|
|
|
|
|
1
|
|
|
|
|
1
|
|
|
|
|
1
|
|
|
Unrecognized actuarial (gain) loss
|
|
|
630
|
|
|
|
|
502
|
|
|
|
|
(63
|
)
|
|
|
|
(80
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net amount recognized in the consolidated balance sheets
|
|
|
(377
|
)
|
|
|
|
(400
|
)
|
|
|
|
(343
|
)
|
|
|
|
(354
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts recognized in the consolidated balance sheets consist of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noncurrent Other assets
|
|
|
5
|
|
|
|
|
8
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
Current Other liabilities
|
|
|
(22
|
)
|
|
|
|
(22
|
)
|
|
|
|
(27
|
)
|
|
|
|
(35
|
)
|
|
Pension obligations
|
|
|
(996
|
)
|
|
|
|
(889
|
)
|
|
|
|
(254
|
)
|
|
|
|
(240
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued benefit liability
|
|
|
(1,013
|
)
|
|
|
|
(903
|
)
|
|
|
|
(281
|
)
|
|
|
|
(275
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net actuarial (gain) loss
|
|
|
630
|
|
|
|
|
502
|
|
|
|
|
(63
|
)
|
|
|
|
(80
|
)
|
|
Prior service (benefit) cost
|
|
|
6
|
|
|
|
|
1
|
|
|
|
|
1
|
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive (income)
loss(2)
|
|
|
636
|
|
|
|
|
503
|
|
|
|
|
(62
|
)
|
|
|
|
(79
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net amount recognized in the consolidated balance sheets
|
|
|
(377
|
)
|
|
|
|
(400
|
)
|
|
|
|
(343
|
)
|
|
|
|
(354
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30
|
|
|
(1) |
|
Primarily relates to change in discount rates. |
|
(2) |
|
Amount shown net of tax of $54 million and $1 million
as of December 31, 2009 and 2008, respectively, in the
consolidated statements of shareholders equity and
comprehensive income (loss). See Note 17 for the related
tax associated with the pension and postretirement benefit
obligations. |
The percentage of US and international projected benefit
obligation at the end of the period is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Benefits
|
|
Postretirement Benefits
|
|
|
as of December 31,
|
|
as of December 31,
|
|
|
2009
|
|
2008
|
|
2009
|
|
2008
|
|
|
|
|
(In percentages)
|
|
|
|
US plans
|
|
|
85
|
%
|
|
|
86
|
%
|
|
|
90
|
%
|
|
|
91
|
%
|
International plans
|
|
|
15
|
%
|
|
|
14
|
%
|
|
|
10
|
%
|
|
|
9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The percentage of US and international fair value of plan assets
at the end of the period is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Benefits
|
|
|
|
as of December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
(In percentages)
|
|
|
US plans
|
|
|
83
|
%
|
|
|
|
84
|
%
|
|
International plans
|
|
|
17
|
%
|
|
|
|
16
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
100
|
%
|
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
A summary of pension plans with projected benefit obligations in
excess of plan assets is shown below:
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
|
2009
|
|
2008
|
|
|
(In $ millions)
|
|
Projected benefit obligation
|
|
|
3,280
|
|
|
|
2,924
|
|
Fair value of plan assets
|
|
|
2,262
|
|
|
|
2,014
|
|
Included in the above table are pension plans with accumulated
benefit obligations in excess of plan assets as detailed below:
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
|
2009
|
|
2008
|
|
|
(In $ millions)
|
|
Accumulated benefit obligation
|
|
|
3,169
|
|
|
|
2,797
|
|
Fair value of plan assets
|
|
|
2,249
|
|
|
|
1,985
|
|
The accumulated benefit obligation for all defined benefit
pension plans was $3,218 million and $2,967 million as
of December 31, 2009 and 2008, respectively.
31
The following table sets forth the Companys net periodic
pension cost:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Benefits
|
|
|
Postretirement Benefits
|
|
|
|
Year Ended
|
|
|
Year Ended
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
(In $ millions)
|
|
|
|
|
|
|
|
|
Service cost
|
|
|
29
|
|
|
|
|
31
|
|
|
|
|
38
|
|
|
|
|
1
|
|
|
|
|
1
|
|
|
|
|
2
|
|
|
Interest cost
|
|
|
193
|
|
|
|
|
195
|
|
|
|
|
187
|
|
|
|
|
17
|
|
|
|
|
17
|
|
|
|
|
19
|
|
|
Expected return on plan assets
|
|
|
(207
|
)
|
|
|
|
(218
|
)
|
|
|
|
(216
|
)
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
Amortization of prior service cost
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
Recognized actuarial (gain) loss
|
|
|
1
|
|
|
|
|
1
|
|
|
|
|
1
|
|
|
|
|
(5
|
)
|
|
|
|
(4
|
)
|
|
|
|
(2
|
)
|
|
Curtailment (gain) loss
|
|
|
(1
|
)
|
|
|
|
(2
|
)
|
|
|
|
(1
|
)
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
(1
|
)
|
|
Settlement (gain) loss
|
|
|
-
|
|
|
|
|
3
|
|
|
|
|
(12
|
)
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
Special termination benefits
|
|
|
2
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic benefit cost
|
|
|
17
|
|
|
|
|
10
|
|
|
|
|
(3
|
)
|
|
|
|
13
|
|
|
|
|
14
|
|
|
|
|
18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of the actuarial (gain) loss into net periodic cost
in 2010 is expected to be $8 million and $(4) million
for pension benefits and postretirement benefits, respectively.
Included in the pension obligations above are accrued
liabilities relating to supplemental retirement plans for
certain US employees amounting to $235 million and
$224 million as of December 31, 2009 and 2008,
respectively. Pension expense relating to these plans included
in net periodic benefit cost totaled $15 million,
$15 million and $14 million for the years ended
December 31, 2009, 2008 and 2007, respectively. To fund
these obligations, nonqualified trusts were established which
hold marketable securities valued at $82 million and
$97 million as of December 31, 2009 and 2008,
respectively. In addition to holding marketable securities, the
nonqualified trusts hold investments in insurance contracts of
$66 million and $67 million as of December 31,
2009 and 2008, respectively, which are included in noncurrent
Other assets in the consolidated balance sheets.
Valuation
The Company uses the corridor approach in the valuation of its
defined benefit plans and other postretirement benefits. The
corridor approach defers all actuarial gains and losses
resulting from variances between actual results and economic
estimates or actuarial assumptions. For defined benefit pension
plans, these unrecognized gains and losses are amortized when
the net gains and losses exceed 10% of the greater of the
market-related value of plan assets or the projected benefit
obligation at the beginning of the year. For other
postretirement benefits, amortization occurs when the net gains
and losses exceed 10% of the accumulated postretirement benefit
obligation at the beginning of the year. The amount in excess of
the corridor is amortized over the average remaining service
period to retirement date for active plan participants or, for
retired participants, the average remaining life expectancy.
32
The following table set forth the principal weighted-average
assumptions used to determine benefit obligation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Benefits
|
|
Postretirement Benefits
|
|
|
as of December 31,
|
|
as of December 31,
|
|
|
2009
|
|
2008
|
|
2009
|
|
2008
|
|
|
|
|
(In percentages)
|
|
|
|
Discount rate obligations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
US plans
|
|
|
5.90
|
|
|
|
6.50
|
|
|
|
5.50
|
|
|
|
6.40
|
|
International plans
|
|
|
5.41
|
|
|
|
5.84
|
|
|
|
5.49
|
|
|
|
6.11
|
|
Combined
|
|
|
5.83
|
|
|
|
6.41
|
|
|
|
5.50
|
|
|
|
6.37
|
|
Rate of compensation increase
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
US plans
|
|
|
4.00
|
|
|
|
4.00
|
|
|
|
N/A
|
|
|
|
N/A
|
|
International plans
|
|
|
2.94
|
|
|
|
3.24
|
|
|
|
N/A
|
|
|
|
N/A
|
|
Combined
|
|
|
3.84
|
|
|
|
3.90
|
|
|
|
N/A
|
|
|
|
N/A
|
|
The following table set forth the principal weighted-average
assumptions used to determine benefit cost:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Benefits
|
|
Postretirement Benefits
|
|
|
Year Ended December 31,
|
|
Year Ended December 31,
|
|
|
2009
|
|
2008
|
|
2007
|
|
2009
|
|
2008
|
|
2007
|
|
|
(In percentages)
|
|
Discount rate obligations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
US plans
|
|
|
6.50
|
|
|
|
6.30
|
|
|
|
5.88
|
|
|
|
6.40
|
|
|
|
6.00
|
|
|
|
5.88
|
|
International plans
|
|
|
5.84
|
|
|
|
5.42
|
|
|
|
4.70
|
|
|
|
6.11
|
|
|
|
5.31
|
|
|
|
4.80
|
|
Combined
|
|
|
6.41
|
|
|
|
6.16
|
|
|
|
5.86
|
|
|
|
6.37
|
|
|
|
5.93
|
|
|
|
5.79
|
|
Expected return on plan assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
US plans
|
|
|
8.50
|
|
|
|
8.50
|
|
|
|
8.50
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
International plans
|
|
|
5.29
|
|
|
|
5.68
|
|
|
|
6.59
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
Combined
|
|
|
7.94
|
|
|
|
8.05
|
|
|
|
8.20
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
Rate of compensation increase
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
US plans
|
|
|
4.00
|
|
|
|
4.00
|
|
|
|
4.00
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
International plans
|
|
|
3.24
|
|
|
|
3.15
|
|
|
|
3.18
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
Combined
|
|
|
3.90
|
|
|
|
3.66
|
|
|
|
3.73
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
The expected rate of return is assessed annually and is based on
long-term relationships among major asset classes and the level
of incremental returns that can be earned by the successful
implementation of different active investment management
strategies. Equity returns are based on estimates of long-term
inflation rate, real rate of return,
10-year
Treasury bond premium over cash and equity risk premium. Fixed
income returns are based on maturity, long-term inflation, real
rate of return and credit spreads. The US qualified defined
benefit plans actual return on assets for the year ended
December 31, 2009 was 18% versus an expected long-term rate
of asset return assumption of 8.5%.
In the US, the rate used to discount pension and other
postretirement benefit plan liabilities was based on a yield
curve developed from market data of over 300 Aa-grade
non-callable bonds at December 31, 2009. This yield curve
has discount rates that vary based on the duration of the
obligations. The estimated future cash flows for the pension and
other benefit obligations were matched to the corresponding
rates on the yield curve to derive a weighted average discount
rate.
The Company determines its discount rates in the Euro zone using
the iBoxx Euro Corporate AA Bond indices with appropriate
adjustments for the duration of the plan obligations. In other
international
33
locations, the Company determines its discount rates based on
the yields of high quality government bonds with a duration
appropriate to the duration of the plan obligations.
On January 1, 2009, the Companys health care cost
trend assumption for US postretirement medical plans net
periodic benefit cost was 9% for the first year declining 0.5%
per year to an ultimate rate of 5%. On January 1, 2008, the
Companys health care cost trend assumption for US
postretirement medical plans net periodic benefit cost was
9% for the first two years declining 0.5% per year to an
ultimate rate of 5%. On January 1, 2007, the health care
cost trend rate was 8.5% per year declining 1% per year to an
ultimate rate of 5%.
Assumed health care cost trend rates have a significant effect
on the amounts reported for the health care plans. A
one-percentage-point increase or decrease in the assumed health
care cost trend rate would impact postretirement obligations by
$4 million and $(3) million, respectively. The effect
of a one percent increase or decrease in the assumed health care
cost trend rate would have a less than $1 million impact on
service and interest cost.
Plan
Assets
The investment objective for the plans are to earn, over moving
twenty-year periods, the long-term expected rate of return, net
of investment fees and transaction costs, to satisfy the benefit
obligations of the plan, while at the same time maintaining
sufficient liquidity to pay benefit obligations and proper
expenses, and meet any other cash needs, in the short- to
medium-term.
The following tables set forth the weighted average target asset
allocations for the Companys pension plans:
|
|
|
|
|
|
Asset Category US
|
|
2010
|
|
|
US equity securities
|
|
|
26
|
%
|
|
Global equity
|
|
|
20
|
%
|
|
High yield fixed income/other
|
|
|
4
|
%
|
|
Liability hedging bonds
|
|
|
50
|
%
|
|
|
|
|
|
|
|
Total
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset Category International
|
|
2010
|
|
|
Equity securities
|
|
|
21
|
%
|
|
Debt securities
|
|
|
73
|
%
|
|
Real estate and other
|
|
|
6
|
%
|
|
|
|
|
|
|
|
Total
|
|
|
100
|
%
|
|
|
|
|
|
|
|
The equity and debt securities objectives are to provide
diversified exposure across the US and Global equity markets and
to manage the plans risks and returns through the use of
multiple managers and strategies. The fixed income portfolio
objectives are to hedge a portion of the interest rate risks
associated with the plans funding target liabilities. The
goal of the liability hedging bond is to reduce surplus
volatility and provide a liquidity reserve for paying off
benefits. The strategy is designed to reduce liability-related
interest rate risk by investing in bonds that match the duration
and credit quality of the projected plan liabilities.
Derivatives based strategies may be used to improve the
effectiveness of the hedges. Other types of investments include
investments in real estate and insurance contracts that follow
several different strategies.
As discussed in Note 3, the Company adopted certain
provisions of FASB ASC Topic
715-20-50 on
January 1, 2009. FASB ASC Topic
715-20-50
requires enhanced disclosures about the plan assets of a
companys defined benefit pension and other postretirement
plans intended to provide financial statement
34
users with a greater understanding of the inputs and valuation
techniques used to measure the fair value of plan assets and the
effect of fair value measurements using significant unobservable
inputs on changes in plan assets for the period using the
framework established under FASB ASC Topic 820, Fair Value
Measurements and Disclosures. FASB ASC Topic 820 establishes
a fair value hierarchy that prioritizes the inputs used to
measure fair value. The hierarchy gives the highest priority to
unadjusted quoted prices in active markets for identical assets
or liabilities (Level 1 measurement) and the lowest
priority to unobservable inputs (Level 3 measurement). This
hierarchy requires entities to maximize the use of observable
inputs and minimize the use of unobservable inputs. If a
financial instrument uses inputs that fall in different levels
of the hierarchy, the instrument will be categorized based upon
the lowest level of input that is significant to the fair value
calculation. The three levels of inputs used to measure fair
value are as follows:
Level 1 unadjusted quoted prices for identical
assets or liabilities in active markets accessible by the Company
Level 2 inputs that are observable in the
marketplace other than those inputs classified as Level 1
Level 3 inputs that are unobservable in the
marketplace and significant to the valuation
The Companys defined benefit plan assets are measured at
fair value on a recurring basis and include the following items:
Cash and Cash Equivalents: Foreign and
domestic currencies as well as short term securities are valued
at cost plus accrued interest, which approximates fair value.
Common/Collective Trusts: Composed of various
funds whose diversified portfolio is comprised of foreign and
domestic equities, fixed income securities, and short term
investments. Investments are valued at the net asset value of
units held by the plan at year-end.
Corporate stock and government and corporate
debt: Valued at the closing price reported on the
active market in which the individual securities are traded.
Automated quotes are provided by multiple pricing services and
validated by the plan custodian. These securities are traded on
exchanges as well as in the over the counter market.
Registered Investment Companies: Composed of
various mutual funds and other investment companies whose
diversified portfolio is comprised of foreign and domestic
equities, fixed income securities, and short term investments.
Investments are valued at the net asset value of units held by
the plan at year-end.
Mortgage Backed Securities: Fair value is
estimated based on valuations obtained from third-party pricing
services for identical or comparable assets. Mortgage Backed
Securities are traded in the over the counter broker/dealer
market.
Derivatives: Derivative financial instruments
are valued in the market using discounted cash flow techniques.
These techniques incorporate Level 1 and Level 2
inputs such as interest rates and foreign currency exchange
rates. These market inputs are utilized in the discounted cash
flow calculation considering the instruments term,
notional amount, discount rate and credit risk. Significant
inputs to the derivative valuation for interest rate swaps,
foreign currency forwards and swaps, and options are observable
in the active markets and are classified as Level 2 in the
hierarchy.
Insurance contracts: Valued at contributions
made, plus earnings, less participant withdrawals and
administrative expenses, which approximates fair value.
35
The following table sets forth the fair values of the
Companys pension plans assets as of December 31, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurement Using
|
|
|
|
|
|
|
Quoted Prices in
|
|
|
|
|
|
Significant
|
|
|
|
|
|
|
Active Markets for
|
|
|
Significant Other
|
|
|
Unobservable
|
|
|
|
|
|
|
Identical Assets
|
|
|
Observable Inputs
|
|
|
Inputs
|
|
|
|
|
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
|
|
Total
|
|
|
|
|
|
|
(In $ millions)
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash & cash equivalents
|
|
|
2
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
2
|
|
|
Collateralized mortgage obligations
|
|
|
-
|
|
|
|
|
16
|
|
|
|
|
-
|
|
|
|
|
16
|
|
|
Common/collective trusts
|
|
|
-
|
|
|
|
|
210
|
|
|
|
|
19
|
|
|
|
|
229
|
|
|
Corporate debt
|
|
|
-
|
|
|
|
|
831
|
|
|
|
|
-
|
|
|
|
|
831
|
|
|
Corporate stock-common & preferred
|
|
|
522
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
522
|
|
|
Derivatives
|
|
|
14
|
|
|
|
|
244
|
|
|
|
|
-
|
|
|
|
|
258
|
|
|
Government debt
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Treasuries, other debt
|
|
|
88
|
|
|
|
|
212
|
|
|
|
|
-
|
|
|
|
|
300
|
|
|
Mortgage backed securities
|
|
|
-
|
|
|
|
|
53
|
|
|
|
|
-
|
|
|
|
|
53
|
|
|
Real estate
|
|
|
-
|
|
|
|
|
7
|
|
|
|
|
-
|
|
|
|
|
7
|
|
|
Registered investment companies
|
|
|
-
|
|
|
|
|
298
|
|
|
|
|
-
|
|
|
|
|
298
|
|
|
Short-term investments
|
|
|
-
|
|
|
|
|
65
|
|
|
|
|
-
|
|
|
|
|
65
|
|
|
Other
|
|
|
3
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
3
|
|
|
Insurance contracts
|
|
|
-
|
|
|
|
|
28
|
|
|
|
|
-
|
|
|
|
|
28
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
|
629
|
|
|
|
|
1,964
|
|
|
|
|
19
|
|
|
|
|
2,612
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives
|
|
|
(15
|
)
|
|
|
|
(268
|
)
|
|
|
|
-
|
|
|
|
|
(283
|
)
|
|
Total liabilities
|
|
|
(15
|
)
|
|
|
|
(268
|
)
|
|
|
|
-
|
|
|
|
|
(283
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net assets
|
|
|
614
|
|
|
|
|
1,696
|
|
|
|
|
19
|
|
|
|
|
2,329
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Companys Level 3 investment in common/collective
trusts was valued using significant unobservable inputs. Inputs
to this valuation include characteristics and quantitative data
relating to the asset, investment cost, position size,
liquidity, current financial condition of the company and other
relevant market data. The following table sets forth fair value
measurements using significant unobservable inputs:
|
|
|
|
|
|
|
Common/Collective Trust
|
|
|
|
(In $ millions)
|
|
|
Balance, beginning of period
|
|
|
7
|
|
Unrealized gains (losses)
|
|
|
10
|
|
Purchases, sales, issuances and settlements, net
|
|
|
2
|
|
|
|
|
|
|
Balance, end of period
|
|
|
19
|
|
|
|
|
|
|
The financial objectives of the qualified pension plans are
established in conjunction with a comprehensive review of each
plans liability structure. The Companys asset
allocation policy is based on detailed asset/liability analyses.
In developing investment policy and financial goals,
consideration is given to each plans demographics, the
returns and risks associated with alternative investment
strategies and the current and projected cash, expense and
funding ratios of each plan. Investment policies must also
comply with local statutory requirements as determined by each
country. A formal asset/liability study of each plan is
undertaken every 3 to 5 years or whenever there has been a
material change in plan demographics, benefit structure or
funding status and investment market. The Company has adopted a
long-term investment horizon such that the risk and duration of
investment losses are weighed against the long-term potential
for
36
appreciation of assets. Although there cannot be complete
assurance that these objectives will be realized, it is believed
that the likelihood for their realization is reasonably high,
based upon the asset allocation chosen and the historical and
expected performance of the asset classes utilized by the plans.
The intent is for investments to be broadly diversified across
asset classes, investment styles, market sectors, investment
managers, developed and emerging markets and securities in order
to moderate portfolio volatility and risk. Investments may be in
separate accounts, commingled trusts, mutual funds and other
pooled asset portfolios provided they all conform to fiduciary
standards.
External investment managers are hired to manage pension assets.
Investment consultants assist with the screening process for
each new manager hired. Over the long-term, the investment
portfolio is expected to earn returns that exceed a composite of
market indices that are weighted to match each plans
target asset allocation. The portfolio return should also (over
the long-term) meet or exceed the return used for actuarial
calculations in order to meet the future needs of each plan.
Employer contributions for pension benefits and postretirement
benefits are preliminarily estimated to be $46 million and
$27 million, respectively, in 2010. The table below
reflects pension benefits expected to be paid from the plan or
from the Companys assets. The postretirement benefits
represent the Companys share of the benefit cost.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Postretirement
|
|
|
|
|
|
|
Benefit
|
|
|
|
Pension
|
|
|
|
|
|
Expected
|
|
|
|
Benefit
|
|
|
|
|
|
Federal
|
|
|
|
Payments(1)
|
|
|
Payments
|
|
|
Subsidy
|
|
|
|
|
|
|
(In $ millions)
|
|
|
|
|
|
2010
|
|
|
224
|
|
|
|
61
|
|
|
|
7
|
|
2011
|
|
|
222
|
|
|
|
63
|
|
|
|
7
|
|
2012
|
|
|
221
|
|
|
|
64
|
|
|
|
7
|
|
2013
|
|
|
223
|
|
|
|
65
|
|
|
|
8
|
|
2014
|
|
|
224
|
|
|
|
66
|
|
|
|
3
|
|
2015-2019
|
|
|
1,187
|
|
|
|
332
|
|
|
|
13
|
|
|
|
|
(1) |
|
Payments are expected to be made primarily from plan assets. |
Other
Obligations
The following table represents additional benefit liabilities
and other similar obligations:
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
(In $ millions)
|
|
|
Long-term disability
|
|
|
30
|
|
|
|
33
|
|
Other
|
|
|
8
|
|
|
|
5
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
38
|
|
|
|
38
|
|
|
|
|
|
|
|
|
|
|
37
General
The Company is subject to environmental laws and regulations
worldwide which impose limitations on the discharge of
pollutants into the air and water and establish standards for
the treatment, storage and disposal of solid and hazardous
wastes. The Company believes that it is in substantial
compliance with all applicable environmental laws and
regulations. The Company is also subject to retained
environmental obligations specified in various contractual
agreements arising from the divestiture of certain businesses by
the Company or one of its predecessor companies.
For the years ended December 31, 2009, 2008 and 2007, the
Companys expenditures, including expenditures for legal
compliance, internal environmental initiatives and remediation
of active, orphan, divested and US Superfund sites (as defined
below) were $78 million, $78 million, and
$83 million, respectively. The Companys capital
project-related environmental expenditures for the years ended
December 31, 2009, 2008 and 2007 were $22 million,
$13 million, and $14 million, respectively.
Environmental reserves for remediation matters were
$106 million and $98 million as of December 31,
2009 and 2008, respectively, which represents the Companys
best estimate of its liability.
Remediation
Due to its industrial history and through retained contractual
and legal obligations, the Company has the obligation to
remediate specific areas on its own sites as well as on
divested, orphan or US Superfund sites. In addition, as part of
the demerger agreement between the Company and Hoechst, a
specified portion of the responsibility for environmental
liabilities from a number of Hoechst divestitures was
transferred to the Company. The Company provides for such
obligations when the event of loss is probable and reasonably
estimable.
For the years ended December 31, 2009, 2008 and 2007, the
total remediation efforts charged to Cost of sales in the
consolidated statements of operations were $9 million,
$3 million and $4 million, respectively. The Company
believes that environmental remediation costs will not have a
material adverse effect on the financial position of the
Company, but may have a material adverse effect on the results
of operations or cash flows in any given accounting period.
The Company did not record any insurance recoveries related to
these matters for the reported periods and there are no
receivables for insurance recoveries as of December 31,
2009. As of December 31, 2009 and 2008, there were
receivables of $9 million and $9 million,
respectively, from the former owner APL, which was acquired in
2007 (see Note 4).
German
InfraServs
On January 1, 1997, coinciding with a reorganization of the
Hoechst businesses in Germany, real estate service companies
(InfraServs) were created to own directly the land
and property and to provide various technical and administrative
services at each of the manufacturing locations. The Company has
manufacturing operations at the InfraServ location in Frankfurt
am Main-Hoechst, Germany and holds interests in the companies
which own and operate the former Hoechst sites in Gendorf,
Knapsack and Wiesbaden.
InfraServs are liable for any residual contamination and other
pollution because they own the real estate on which the
individual facilities operate. In addition, Hoechst, and its
legal successors, as the responsible party under German public
law, is liable to third parties for all environmental damage
that
38
occurred while it was still the owner of the plants and real
estate. The contribution agreements entered into in 1997 between
Hoechst and the respective operating companies, as part of the
divestiture of these companies, provide that the operating
companies will indemnify Hoechst, and its legal successors,
against environmental liabilities resulting from the transferred
businesses. Additionally, the InfraServs have agreed to
indemnify Hoechst, and its legal successors, against any
environmental liability arising out of or in connection with
environmental pollution of any site. Likewise, in certain
circumstances the Company could be responsible for the
elimination of residual contamination on a few sites that were
not transferred to InfraServ companies, in which case Hoechst,
and its legal successors, must reimburse the Company for
two-thirds of any costs so incurred.
The InfraServ partnership agreements provide that, as between
the partners, each partner is responsible for any contamination
caused predominantly by such partner. Any liability, which
cannot be attributed to an InfraServ partner and for which no
third party is responsible, is required to be borne by the
InfraServ partnership. In view of this potential obligation to
eliminate residual contamination, the InfraServs, primarily
relating to equity and cost affiliates which are not
consolidated by the Company, have reserves of $94 million
and $84 million as of December 31, 2009 and 2008,
respectively.
If an InfraServ partner defaults on its respective
indemnification obligations to eliminate residual contamination,
the owners of the remaining participation in the InfraServ
companies have agreed to fund such liabilities, subject to a
number of limitations. To the extent that any liabilities are
not satisfied by either the InfraServs or their owners, these
liabilities are to be borne by the Company in accordance with
the demerger agreement. However, Hoechst, and its legal
successors, will reimburse the Company for two-thirds of any
such costs. Likewise, in certain circumstances the Company could
be responsible for the elimination of residual contamination on
several sites that were not transferred to InfraServ companies,
in which case Hoechst, and its legal successors, must also
reimburse the Company for two-thirds of any costs so incurred.
The German InfraServs are owned partially by the Company, as
noted below, and the remaining ownership is held by various
other companies. The Companys ownership interest and
environmental liability participation percentages for such
liabilities which cannot be attributed to an InfraServ partner
were as follows as of December 31, 2009:
|
|
|
|
|
|
|
|
|
Company
|
|
Ownership %
|
|
Liability %
|
|
InfraServ GmbH & Co. Gendorf KG
|
|
|
39
|
%
|
|
|
10
|
%
|
InfraServ GmbH & Co. Knapsack KG
|
|
|
27
|
%
|
|
|
22
|
%
|
InfraServ GmbH & Co. Hoechst KG
|
|
|
32
|
%
|
|
|
40
|
%
|
InfraServ GmbH & Co. Wiesbaden KG
|
|
|
8
|
%
|
|
|
0
|
%
|
InfraServ Verwaltungs GmbH
|
|
|
100
|
%
|
|
|
0
|
%
|
US
Superfund Sites
In the US, the Company may be subject to substantial claims
brought by US federal or state regulatory agencies or private
individuals pursuant to statutory authority or common law. In
particular, the Company has a potential liability under the US
Federal Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended, and related state laws
(collectively referred to as Superfund) for
investigation and cleanup costs at approximately 50 sites. At
most of these sites, numerous companies, including certain
companies comprising the Company, or one of its predecessor
companies, have been notified that the Environmental Protection
Agency, state governing bodies or private individuals consider
such companies to be potentially responsible parties
(PRP) under Superfund or related laws. The
proceedings relating to these sites are in various stages. The
cleanup process has not been completed at most sites and the
status of the insurance coverage for most of these proceedings
is uncertain. Consequently, the Company cannot accurately
determine its ultimate liability for investigation or cleanup
costs at these sites.
39
As events progress at each site for which it has been named a
PRP, the Company accrues, as appropriate, a liability for site
cleanup. Such liabilities include all costs that are probable
and can be reasonably estimated. In establishing these
liabilities, the Company considers its shipment of waste to a
site, its percentage of total waste shipped to the site, the
types of wastes involved, the conclusions of any studies, the
magnitude of any remedial actions that may be necessary and the
number and viability of other PRPs. Often the Company will join
with other PRPs to sign joint defense agreements that will
settle, among PRPs, each partys percentage allocation of
costs at the site. Although the ultimate liability may differ
from the estimate, the Company routinely reviews the liabilities
and revises the estimate, as appropriate, based on the most
current information available. As of December 31, 2009 and
2008, the Company had provisions totaling $10 million and
$11 million, respectively, for US Superfund sites and
utilized $1 million, $2 million and $1 million of
these reserves during the years ended December 31, 2009,
2008 and 2007, respectively. Additional provisions and
adjustments recorded during the years ended December 31,
2009, 2008 and 2007 approximately offset these expenditures.
Hoechst
Liabilities
In connection with the Hoechst demerger, the Company agreed to
indemnify Hoechst, and its legal successors, for the first
250 million of future remediation liabilities for
environmental damages arising from 19 specified divested Hoechst
entities. As of December 31, 2009 and 2008, reserves of
$32 million and $27 million, respectively, for these
matters are included as a component of the total environmental
reserves. As of December 31, 2009 and 2008, the Company,
has made total cumulative payments of $51 million and
$48 million, respectively. If such future liabilities
exceed 250 million, Hoechst, and its legal
successors, will bear such excess up to an additional
500 million. Thereafter, the Company will bear
one-third and Hoechst, and its legal successors, will bear
two-thirds of any further environmental remediation liabilities.
Where the Company is unable to reasonably determine the
probability of loss or estimate such loss under this
indemnification, the Company has not recognized any liabilities
relative to this indemnification.
Preferred
Stock
The Company has $240 million aggregate liquidation
preference of outstanding 4.25% convertible perpetual preferred
stock (Preferred Stock). Holders of the Preferred
Stock are entitled to receive, when, as and if, declared by the
Companys Board of Directors, out of funds legally
available, cash dividends at the rate of 4.25% per annum of
liquidation preference, payable quarterly in arrears, commencing
on May 1, 2005. Dividends on the Preferred Stock are
cumulative from the date of initial issuance. Accumulated but
unpaid dividends accumulate at an annual rate of 4.25%. The
Preferred Stock is convertible, at the option of the holder, at
any time into approximately 1.26 shares of Series A
common stock, subject to adjustments, per $25.00 liquidation
preference of Preferred Stock and upon conversion will be
recorded in the consolidated statements of shareholders
equity and comprehensive income (loss). On February 1,
2010, the Company announced its intention to redeem its
Preferred Stock (Note 31).
During 2009, 2008 and 2007, the Company declared and paid
$10 million of cash dividends in each period on its
Preferred Stock.
Dividends
The Companys Board of Directors follows a policy of
declaring, subject to legally available funds, a quarterly cash
dividend on each share of the Companys Series A
common stock at an annual rate of $0.16 per share unless the
Companys Board of Directors, in its sole discretion,
determines otherwise. Further, such
40
dividends payable to holders of the Companys Series A
common stock cannot be declared or paid nor can any funds be set
aside for the payment thereof, unless the Company has paid or
set aside funds for the payment of all accumulated and unpaid
dividends with respect to the shares of the Companys
Preferred Stock, as described above. Additionally, the amount
available to pay cash dividends is restricted by the
Companys senior credit agreement.
During 2009, 2008 and 2007, the Company declared and paid cash
dividends of $23 million, $24 million and
$25 million, respectively, to holders of its Series A
common stock.
Treasury
Stock
In conjunction with the April 2007 debt refinancing
(Note 14), the Company, through its wholly-owned subsidiary
Celanese International Holdings Luxembourg S.à.r.l.
(CIH), formerly Celanese Caylux Holdings Luxembourg
S.C.A., repurchased 2,021,775 shares of its outstanding
Series A common stock in a modified Dutch
Auction tender offer from public shareholders, which
expired on April 3, 2007, at a purchase price of $30.50 per
share. The total price paid for these shares was
$62 million. The Company also separately purchased, through
its wholly-owned subsidiary CIH, 329,011 shares of the
Companys Series A common stock at $30.50 per share
from the investment funds associated with The Blackstone Group
L.P. The total price paid for these shares was $10 million.
In June 2007, the Companys Board of Directors authorized
the repurchase of up to $330 million of its Series A
common stock. During 2007, the Company repurchased
8,487,700 shares of its Series A common stock at an
average purchase price of $38.88 per share for a total of
$330 million pursuant to this authorization. The Company
completed repurchasing shares related to this authorization
during July 2007.
In February 2008, the Companys Board of Directors
authorized the repurchase of up to $400 million of the
Companys Series A common stock. This authorization
was increased to $500 million in October 2008. The
authorization gives management discretion in determining the
conditions under which shares may be repurchased.
During the year ended December 31, 2008, the Company
repurchased 9,763,200 shares of its Series A common
stock at an average purchase price of $38.68 per share for a
total of $378 million pursuant to this authorization.
These purchases reduced the number of shares outstanding and the
repurchased shares may be used by the Company for compensation
programs utilizing the Companys stock and other corporate
purposes. The Company accounts for treasury stock using the cost
method.
Accumulated
Other Comprehensive Income (Loss), Net
Accumulated other comprehensive income (loss), net, which is
displayed in the consolidated statements of shareholders
equity, represents net earnings (loss) plus the results of
certain shareholders equity changes not reflected in the
consolidated statements of operations. Such items include
unrealized gain (loss) on marketable securities, foreign
currency translation, certain pension and postretirement benefit
obligations and unrealized gain (loss) on interest rate swaps.
41
The components of Accumulated other comprehensive income (loss),
net are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
Unrealized
|
|
|
|
|
|
Unrealized
|
|
|
|
|
|
Other
|
|
|
|
Gain (Loss) on
|
|
|
Foreign
|
|
|
Gain (Loss)
|
|
|
Pension and
|
|
|
Comprehensive
|
|
|
|
Marketable
|
|
|
Currency
|
|
|
on Interest
|
|
|
Postretirement
|
|
|
Income
|
|
|
|
Securities
|
|
|
Translation
|
|
|
Rate Swaps
|
|
|
Benefits
|
|
|
(Loss), Net
|
|
|
|
As Adjusted (Note 31)
|
|
|
|
(In $ millions)
|
|
|
Balance as of December 31, 2006
|
|
|
9
|
|
|
|
|
17
|
|
|
|
|
4
|
|
|
|
|
-
|
|
|
|
|
30
|
|
|
Current-period change
|
|
|
17
|
|
|
|
|
70
|
|
|
|
|
(41
|
)
|
|
|
|
124
|
|
|
|
|
170
|
|
|
Tax benefit (expense)
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
(4
|
)
|
|
|
|
(4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2007
|
|
|
26
|
|
|
|
|
87
|
|
|
|
|
(37
|
)
|
|
|
|
120
|
|
|
|
|
196
|
|
|
Current-period change
|
|
|
(23
|
)
|
(1)
|
|
|
(130
|
)
|
|
|
|
(79
|
)
|
|
|
|
(549
|
)
|
|
|
|
(781
|
)
|
|
Tax benefit (expense)
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
5
|
|
|
|
|
5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2008
|
|
|
3
|
|
|
|
|
(43
|
)
|
|
|
|
(116
|
)
|
|
|
|
(424
|
)
|
|
|
|
(580
|
)
|
|
Current-period change
|
|
|
(5
|
)
|
|
|
|
10
|
|
|
|
|
23
|
|
|
|
|
(150
|
)
|
|
|
|
(122
|
)
|
|
Tax benefit (expense)
|
|
|
2
|
|
|
|
|
(5
|
)
|
|
|
|
(8
|
)
|
|
|
|
53
|
|
|
|
|
42
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2009
|
|
|
-
|
|
|
|
|
(38
|
)
|
|
|
|
(101
|
)
|
|
|
|
(521
|
)
|
|
|
|
(660
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Includes a net reclassification adjustment of
($2) million to the consolidated statements of operations. |
|
|
18.
|
Other
(Charges) Gains, Net
|
The components of Other (charges) gains, net are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
(In $ millions)
|
|
|
Employee termination benefits
|
|
|
(105
|
)
|
|
|
(21
|
)
|
|
|
(32
|
)
|
Plant/office closures
|
|
|
(17
|
)
|
|
|
(7
|
)
|
|
|
(11
|
)
|
Deferred compensation triggered by Exit Event (Note 20)
|
|
|
-
|
|
|
|
-
|
|
|
|
(74
|
)
|
Plumbing actions
|
|
|
10
|
|
|
|
-
|
|
|
|
4
|
|
Insurance recoveries associated with Clear Lake, Texas
(Note 30)
|
|
|
6
|
|
|
|
38
|
|
|
|
40
|
|
Resolution of commercial disputes with a vendor
|
|
|
-
|
|
|
|
-
|
|
|
|
31
|
|
Asset impairments
|
|
|
(14
|
)
|
|
|
(115
|
)
|
|
|
(9
|
)
|
Ticona Kelsterbach plant relocation (Note 29)
|
|
|
(16
|
)
|
|
|
(12
|
)
|
|
|
(5
|
)
|
Sorbates antitrust actions (Note 24)
|
|
|
-
|
|
|
|
8
|
|
|
|
-
|
|
Other
|
|
|
-
|
|
|
|
1
|
|
|
|
(2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
(136
|
)
|
|
|
(108
|
)
|
|
|
(58
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
During the first quarter of 2009, the Company began efforts to
align production capacity and staffing levels with the
Companys view of an economic environment of prolonged
lower demand. For the year ended December 31, 2009, Other
charges included employee termination benefits of
$40 million related to this endeavor. As a result of the
shutdown of the vinyl acetate monomer (VAM)
production unit in Cangrejera, Mexico, the Company recognized
employee termination benefits of $1 million and long-lived
asset impairment
42
losses of $1 million during the year ended
December 31, 2009. The VAM production unit in Cangrejera,
Mexico is included in the Companys Acetyl Intermediates
segment.
As a result of the Project of Closure (Note 4), Other
charges for the Company included exit costs of $89 million
during the year ended December 31, 2009, which consisted of
$60 million in employee termination benefits,
$17 million of contract termination costs and
$12 million of long-lived asset impairment losses related
to capitalized costs associated with asset retirement
obligations (Note 13). The Pardies, France facility is
included in the Acetyl Intermediates segment.
Due to continued declines in demand in automotive and electronic
sectors, the Company announced plans to reduce capacity by
ceasing polyester polymer production at its Ticona manufacturing
plant in Shelby, North Carolina. Other charges for the year
ended December 31, 2009 included employee termination
benefits of $2 million and long-lived asset impairment
losses of $1 million related to this event. The Shelby,
North Carolina facility is included in the Advanced Engineered
Materials segment.
Other charges for the year ended December 31, 2009 was
partially offset by $6 million of insurance recoveries in
satisfaction of claims the Company made related to the unplanned
outage of the Companys Clear Lake, Texas acetic acid
facility during 2007, a $9 million decrease in legal
reserves for plumbing claims due to the Companys ongoing
assessment of the likely outcome of the plumbing actions and the
expiration of the statute of limitation.
2008
Other (charges) gains, net for asset impairments includes
long-lived asset impairment losses of $92 million related
to the potential closure of the Companys acetic acid and
VAM production facility in Pardies, France, the VAM production
unit in Cangrejera, Mexico (which the Company subsequently
decided to shut down effective at the end of February
2009) and certain other facilities. Of the $92 million
recorded in December 2008, $76 million relates to the
Acetyl Intermediates segment and $16 million relates to the
Advanced Engineered Materials segment. Consideration of this
potential capacity reduction was necessitated by the significant
change in the global economic environment and anticipated lower
customer demand.
Additionally, the Company recognized $23 million of
long-lived asset impairment losses related to the shutdown of
the Companys Pampa, Texas facility (Acetyl Intermediates
segment).
Other (charges) gains, net for employee termination benefits
includes severance and retention charges of $13 million
related to the sale of the Companys Pampa, Texas facility
and $8 million of severance and retention charges related
to other business optimization plans undertaken by the Company.
2007
Other (charges) gains, net for employee termination benefits and
plant/office closures include charges related to the
Companys plan to simplify and optimize its Emulsions and
PVOH businesses (Industrial Specialties segment) to become a
leader in technology and innovation and grow in both new and
existing markets. Other (charges) gains, net for employee
termination benefits and plant/office closures also includes
charges related to the sale of the Companys Pampa, Texas
facility. In addition, the Company recorded an impairment of
long-lived assets of $3 million during the year ended
December 31, 2007.
In December 2007, the Company received a one-time payment in
resolution of commercial disputes with a vendor.
43
For the year ended December 31, 2007, asset impairments
included $6 million of goodwill impairment related to the
PVOH business.
The changes in the restructuring reserves by business segment
are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Advanced
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Engineered
|
|
|
Consumer
|
|
|
Industrial
|
|
|
Acetyl
|
|
|
|
|
|
|
|
|
|
Materials
|
|
|
Specialties
|
|
|
Specialties
|
|
|
Intermediates
|
|
|
Other
|
|
|
Total
|
|
|
|
(In $ millions)
|
|
|
Employee Termination Benefits
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reserve as of December 31, 2007
|
|
|
2
|
|
|
|
5
|
|
|
|
12
|
|
|
|
16
|
|
|
|
2
|
|
|
|
37
|
|
Additions
|
|
|
1
|
|
|
|
2
|
|
|
|
1
|
|
|
|
13
|
|
|
|
4
|
|
|
|
21
|
|
Cash payments
|
|
|
(1
|
)
|
|
|
(5
|
)
|
|
|
(6
|
)
|
|
|
(12
|
)
|
|
|
(3
|
)
|
|
|
(27
|
)
|
Currency translation adjustment
|
|
|
-
|
|
|
|
-
|
|
|
|
(1
|
)
|
|
|
-
|
|
|
|
(1
|
)
|
|
|
(2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reserve as of December 31, 2008
|
|
|
2
|
|
|
|
2
|
|
|
|
6
|
|
|
|
17
|
|
|
|
2
|
|
|
|
29
|
|
Additions
|
|
|
12
|
|
|
|
9
|
|
|
|
6
|
|
|
|
66
|
|
|
|
12
|
|
|
|
105
|
|
Cash payments
|
|
|
(8
|
)
|
|
|
(7
|
)
|
|
|
(9
|
)
|
|
|
(23
|
)
|
|
|
(7
|
)
|
|
|
(54
|
)
|
Currency translation adjustment
|
|
|
1
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reserve as of December 31, 2009
|
|
|
7
|
|
|
|
4
|
|
|
|
3
|
|
|
|
60
|
|
|
|
7
|
|
|
|
81
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plant/Office Closures
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reserve as of December 31, 2007
|
|
|
1
|
|
|
|
3
|
|
|
|
1
|
|
|
|
2
|
|
|
|
1
|
|
|
|
8
|
|
Additions
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Cash payments
|
|
|
(1
|
)
|
|
|
-
|
|
|
|
(1
|
)
|
|
|
(2
|
)
|
|
|
-
|
|
|
|
(4
|
)
|
Currency translation adjustment
|
|
|
-
|
|
|
|
(1
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reserve as of December 31, 2008
|
|
|
-
|
|
|
|
2
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1
|
|
|
|
3
|
|
Additions
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
17
|
|
|
|
-
|
|
|
|
17
|
|
Transfers
|
|
|
-
|
|
|
|
(2
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(2
|
)
|
Cash payments
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reserve as of December 31, 2009
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
17
|
|
|
|
1
|
|
|
|
18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
7
|
|
|
|
4
|
|
|
|
3
|
|
|
|
77
|
|
|
|
8
|
|
|
|
99
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) from continuing operations before tax by
jurisdiction are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
|
December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
As Adjusted (Note 31)
|
|
|
|
(In $ millions)
|
|
|
US
|
|
|
294
|
|
|
|
135
|
|
|
|
(111
|
)
|
International
|
|
|
(43
|
)
|
|
|
298
|
|
|
|
548
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
251
|
|
|
|
433
|
|
|
|
437
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
44
The income tax provision (benefit) consists of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
|
December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
(In $ millions)
|
|
|
Current
|
|
|
|
|
|
|
|
|
|
|
|
|
US
|
|
|
11
|
|
|
|
62
|
|
|
|
(9
|
)
|
International
|
|
|
148
|
|
|
|
92
|
|
|
|
163
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
159
|
|
|
|
154
|
|
|
|
154
|
|
Deferred
|
|
|
|
|
|
|
|
|
|
|
|
|
US
|
|
|
(404
|
)
|
|
|
(37
|
)
|
|
|
17
|
|
International
|
|
|
2
|
|
|
|
(54
|
)
|
|
|
(61
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
(402
|
)
|
|
|
(91
|
)
|
|
|
(44
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax provision (benefit)
|
|
|
(243
|
)
|
|
|
63
|
|
|
|
110
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts
used for income tax purposes. Significant components of the
consolidated deferred tax assets and liabilities were as follows:
|
|
|
|
|
|
|
|
|
|
|
As of
|
|
|
|
December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
(In $ millions)
|
|
|
Deferred tax assets
|
|
|
|
|
|
|
|
|
Pension and postretirement obligations
|
|
|
361
|
|
|
|
304
|
|
Accrued expenses
|
|
|
195
|
|
|
|
195
|
|
Inventory
|
|
|
10
|
|
|
|
8
|
|
Net operating loss and tax credit carryforwards
|
|
|
375
|
|
|
|
279
|
|
Other
|
|
|
220
|
|
|
|
192
|
|
|
|
|
|
|
|
|
|
|
Subtotal
|
|
|
1,161
|
|
|
|
978
|
|
Valuation allowance
|
|
|
(334
|
)
|
|
|
(652
|
) (1)
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
827
|
|
|
|
326
|
|
|
|
|
|
|
|
|
|
|
Deferred tax liabilities
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
336
|
|
|
|
322
|
|
Investments
|
|
|
45
|
|
|
|
41
|
|
Other
|
|
|
90
|
|
|
|
49
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
471
|
|
|
|
412
|
|
|
|
|
|
|
|
|
|
|
Net deferred tax assets (liabilities)
|
|
|
356
|
|
|
|
(86
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Includes deferred tax asset valuation allowances primarily
for the Companys deferred tax assets in the US,
Luxembourg, France and Germany, as well as other foreign
jurisdictions. These valuation allowances relate primarily to
net operating loss carryforward benefits and other net deferred
tax assets, all of which may not be realizable. |
Since 2004, the Company has maintained a valuation allowance
against its US net deferred tax assets. FASB ASC Topic 740,
Income Taxes, requires the Company to continually assess
all available positive and negative evidence to determine
whether it is more likely than not that the net deferred tax
assets will be realized. During 2009, the Company concluded that
due to cumulative profitability, it is more likely than not that
it will realize its net US deferred tax assets with the
exception of certain state net operating loss
45
carryforwards. Accordingly, during the year ended
December 31, 2009, the Company recorded a deferred tax
benefit of $492 million for the release of the
beginning-of-the-year
US valuation allowance associated with those US net deferred tax
assets expected to be realized in 2009 and subsequent years.
For the year ended December 31, 2009, the valuation
allowance decreased by $318 million consisting of:
(1) income tax benefits, net, of $314 million,
(2) an increase of $1 million allocated to Accumulated
other comprehensive income, (3) an increase of
$11 million related to foreign currency translation
adjustments and (4) $16 million of other decreases
related to unrecognized tax benefits and other adjustments to
deferred taxes. The charge to Accumulated other comprehensive
income relates to deferred tax assets associated with the
Companys pension and postretirement obligations. The
change in valuation allowance associated with foreign currency
translation adjustments is related to changes in deferred tax
assets for unrealized foreign exchange gains and losses on
effective hedges and on foreign income previously taxed but not
yet received in the US. The charge also relates to foreign
currency translation adjustments for deferred tax assets
recorded in various foreign jurisdictions. The decrease related
to unrecognized tax benefits and other adjustments to deferred
taxes includes adjustments to temporary differences and net
operating loss carryforwards due to changes in uncertain tax
positions.
A reconciliation of the significant differences between the US
federal statutory tax rate of 35% and the effective income tax
rate on income from continuing operations is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
|
December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
As Adjusted (Note 31)
|
|
|
|
(In $ millions)
|
|
|
Income tax provision computed at US federal statutory tax rate
|
|
|
88
|
|
|
|
152
|
|
|
|
153
|
|
Increase (decrease) in taxes resulting from:
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in valuation allowance
|
|
|
(314
|
)
|
|
|
(5
|
)
|
|
|
9
|
|
Equity income and dividends
|
|
|
(20
|
)
|
|
|
(17
|
)
|
|
|
8
|
|
Expenses not resulting in tax benefits
|
|
|
4
|
|
|
|
18
|
|
|
|
38
|
|
US tax effect of foreign earnings and dividends
|
|
|
10
|
|
|
|
(5
|
)
|
|
|
27
|
|
Other foreign tax rate differentials
(1)
|
|
|
(15
|
)
|
|
|
(84
|
)
|
|
|
(95
|
)
|
Legislative changes
|
|
|
71
|
|
|
|
3
|
|
|
|
(21
|
)
|
Tax-deductible interest on foreign equity instruments &
other related items
|
|
|
(76
|
)
|
|
|
-
|
|
|
|
(19
|
)
|
State income taxes and other
|
|
|
9
|
|
|
|
1
|
|
|
|
10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax provision (benefit)
|
|
|
(243
|
)
|
|
|
63
|
|
|
|
110
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Includes impact of earnings from China and Singapore
subject to tax holidays which expire between 2008 and 2013 and
favorable tax rates in other jurisdictions. |
Federal and state income taxes have not been provided on
accumulated but undistributed earnings of $2.8 billion as
of December 31, 2009 as such earnings have been permanently
reinvested in the business. The determination of the amount of
the unrecognized deferred tax liability related to the
undistributed earnings is not practicable.
The effective tax rate for continuing operations for the year
ended December 31, 2009 was (97)% compared to 15% for the
year ended December 31, 2008. The effective tax rate for
2009 was favorably impacted by the release of US valuation
allowance, partially offset by lower earnings in jurisdictions
participating in tax holidays, increases in valuation allowances
on certain foreign net deferred tax assets and the effect of new
tax legislation in Mexico.
46
The Company operates under tax holidays in various countries
which are effective through December 2013. In China, one of the
Companys entities has a tax holiday that provided for a
zero percent tax rate in 2007 and 2008. For 2009 through 2011,
the Companys tax rate is 50% of the statutory rate, or
12.5% based on the 2009 statutory rate of 25%. In Singapore, one
of the Companys entities has a tax holiday that provides
for a zero percent tax rate through 2010. For 2011 through 2013,
the Companys tax rate will be 10% based on the current
statutory rate of 17%. The impact of these tax holidays
decreased foreign taxes $2 million for the year ended
December 31, 2009.
The Corporate Tax Reform Act of 2008 was signed by the German
Federal President in August 2007. The Act reduced the
Companys combined corporate statutory tax rate from 40% to
30% while imposing limitations on the deductibility of certain
expenses, including interest expense. The Company recognized a
tax benefit of $39 million in 2007 related to the statutory
rate reduction on its German net deferred tax liabilities.
Mexico enacted the 2008 Fiscal Reform Bill on October 1,
2007. Effective January 1, 2008, the bill repealed the
existing asset-based tax and established a dual income tax
system consisting of a new minimum flat tax (the
IETU) and the existing regular income tax system.
The IETU system taxes companies on cash basis net income,
consisting only of certain specified items of revenue and
expense, at a rate of 16.5%, 17% and 17.5% for 2008, 2009 and
2010 forward, respectively. In general, companies must pay the
higher of the income tax or the IETU, although unlike the
previous asset tax, the IETU is not creditable against future
income tax liabilities. The Company has determined that it will
primarily be subject to the IETU in future periods, and as such
it has recorded tax expense (benefit) of $(5) million,
$7 million and $20 million in 2009, 2008 and 2007,
respectively, for the tax effects of the IETU system.
On December 7, 2009, Mexico enacted the 2010 Mexican Tax
Reform Bill (Tax Reform Bill) to be effective
January 1, 2010. Under this new legislation, the corporate
income tax rate will be temporarily increased from 28% to 30%
for 2010 through 2012, then reduced to 29% in 2013, and finally
reduced back to 28% in 2014 and future years. These rate changes
would impact the Company in the event that it reverts to paying
taxes on a regular income tax basis versus an IETU basis.
Further, under current law, income tax loss carryforwards
reported in the tax consolidation that were not utilized on an
individual company basis within 10 years were subject to
recapture. The Tax Reform Bill as enacted accelerates this
recapture period from 10 years to 5 years and
effectively requires payment of taxes even if no benefit was
obtained through the tax consolidation regime. Finally,
significant modifications were also made to the rules for income
taxes previously deferred on intercompany dividends, as well as
to income taxes related to differences between consolidated and
individual Mexican tax earnings and profits. The estimated
income tax impact to the Company of this new legislation at
December 31, 2009 is $73 million, payable
$12 million in 2010, $14 million in 2012,
$12 million in 2013 and $35 million in 2014 and
thereafter.
As of December 31, 2009, the Company had US federal net
operating loss carryforwards of $41 million that are
subject to limitation. These net operating loss carryforwards
begin to expire in 2021.
The Company also had foreign net operating loss carryforwards as
of December 31, 2009 of $1 billion for Luxembourg,
Canada, China, Germany, Mexico and other foreign jurisdictions
with various expiration dates. Net operating losses in China
have various carryforward periods and begin expiring in 2011.
Net operating losses in Luxembourg, Canada and Germany have no
expiration date. Net operating losses in Mexico have a ten year
carryforward period and began to expire in 2009. However, these
losses are not available for use under the new IETU tax
regulations in Mexico. As the IETU is the primary system upon
which the Company will be subject to tax in future periods, no
deferred tax asset has been reflected in the consolidated
balance sheets as of December 31, 2009 for these income tax
loss carryforwards.
The Company adopted the provisions of FASB ASC Topic
740-10
effective January 1, 2007. FASB ASC Topic
740-10
clarifies the accounting for income taxes by prescribing a
minimum recognition threshold a tax benefit is required to meet
before being recognized in the financial statements. FASB ASC
Topic 740-10
also provides guidance on derecognition, measurement,
classification, interest and penalties, accounting in
47
interim periods, disclosure and transition. As a result of the
implementation of FASB ASC Topic
740-10, the
Company increased Retained earnings by $14 million and
decreased Goodwill by $2 million as included in the
consolidated balance sheets. In addition, certain tax
liabilities for unrecognized tax benefits, as well as related
potential penalties and interest, were reclassified from current
liabilities to noncurrent liabilities. Liabilities for
unrecognized tax benefits as of December 31, 2009 relate to
various US and foreign jurisdictions.
A reconciliation of the amount of unrecognized tax benefits is
as follows:
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
(In $ millions)
|
|
|
As of the beginning of the year
|
|
|
195
|
|
|
|
200
|
|
Increases in tax positions for the current year
|
|
|
19
|
|
|
|
-
|
|
Increases in tax positions for prior years
|
|
|
39
|
|
|
|
7
|
|
Decreases in tax positions of prior years
|
|
|
(38
|
)
|
|
|
(10
|
)
|
Settlements
|
|
|
(7
|
)
|
|
|
(2
|
)
|
|
|
|
|
|
|
|
|
|
As of the end of the year
|
|
|
208
|
|
|
|
195
|
|
|
|
|
|
|
|
|
|
|
Included in the unrecognized tax benefits as of
December 31, 2009 are $208 million of tax benefits
that, if recognized, would reduce the Companys effective
tax rate.
The Company recognizes interest and penalties related to
unrecognized tax benefits in the provision for income taxes. As
of December 31, 2009 and 2008, the Company has recorded a
liability of $45 million and $38 million,
respectively, for interest and penalties. This amount includes
an increase of $7 million and $2 million for the years
ended December 31, 2009 and 2008, respectively. As of
December 31, 2009, $5 million of unrecognized tax
benefits are included in current Other liabilities
(Note 12).
The Company operates in the US (including multiple state
jurisdictions), Germany and approximately 40 other foreign
jurisdictions including Canada, China, France, Mexico and
Singapore. Examinations are ongoing in a number of those
jurisdictions including, most significantly, in Germany for the
years 2001 to 2004 and 2005 to 2007. The Companys US
federal income tax returns for 2003 and beyond are open for
examination under statute. The US tax years 2006 to 2008 were
selected for audit in 2010. Currently, unrecognized tax benefits
are not expected to change significantly over the next
12 months.
|
|
20.
|
Stock-Based
and Other Management Compensation Plans
|
In December 2004, the Company approved a stock incentive plan
for executive officers, key employees and directors, a deferred
compensation plan for executive officers and key employees as
well as other management incentive programs.
The stock incentive plan allows for the issuance or delivery of
up to 16,250,000 shares of the Companys Series A
common stock through the award of stock options, restricted
stock units (RSUs) and other stock-based awards as
may be approved by the Companys Compensation Committee of
the Board of Directors. At the Companys discretion under
the 2004 incentive plan, the Company has the right to award
dividend equivalents on RSU grants which are earned in
accordance with the Companys common stock dividend policy
and are reinvested in additional RSUs. Dividend equivalents on
these RSUs are forfeited if vesting conditions are not met.
In April 2009, the Company approved a global incentive plan
which replaces the Companys 2004 stock incentive plan. The
2009 global incentive plan enables the Compensation Committee of
the Board of
48
Directors to award incentive and nonqualified stock options,
stock appreciation rights, shares of common stock, restricted
stock, restricted stock units and incentive bonuses (which may
be paid in cash or stock or a combination thereof), any of which
may be performance-based, with vesting and other award
provisions that provide effective incentive to Company employees
(including officers), non-management directors and other service
providers. Under the 2009 global incentive plan, the company no
longer has the option to grant RSUs with the right to
participate in dividends or dividend equivalents.
The maximum number of shares that may be issued under the 2009
global incentive plan is equal to 5,350,000 shares plus
(a) any shares of Common Stock that remain available for
issuance under the 2004 stock incentive plan (not including any
shares of Common Stock that are subject to outstanding awards
under the 2004 stock incentive plan or any shares of Common
Stock that were issued pursuant to awards under the 2004 stock
incentive plan) and (b) any awards under the 2004 stock
incentive plan that remain outstanding that cease for any reason
to be subject to such awards (other than by reason of exercise
or settlement of the award to the extent that such award is
exercised for or settled in vested and non-forfeitable shares).
As of December 31, 2009, a total of 3,812,359 shares
remained available for awards under the 2009 stock incentive
plan. A total of 7,185,959 and 1,481,886 shares were subject to
outstanding awards under the 2004 stock incentive plan and 2009
global incentive plan, respectively.
Deferred
Compensation
The 2004 deferred compensation plan provides an aggregate
maximum amount payable of $196 million. The initial
component of the deferred compensation plan vested in 2004 and
was paid in the first quarter of 2005. In May 2007, the Original
Shareholders sold their remaining equity interest in the Company
triggering an Exit Event, as defined by the plan. Cash
compensation of $74 million, representing the
participants 2005 and 2006 contingent benefits, was paid
to the participants during the year ended December 31,
2007. Participants continuing in the 2004 deferred compensation
plan (see below for discussion regarding certain
participants decision to participate in a revised program)
continue to vest in their 2008 and 2009 time-based and
performance-based entitlements as defined in the deferred
compensation plan. During the years ended December 31,
2009, 2008 and 2007, the Company recorded compensation expense
of $1 million, $3 million and $84 million,
respectively, associated with this plan. As of December 31,
2009, there was no deferred compensation payable remaining
associated with this plan.
On April 2, 2007, certain participants in the
Companys deferred compensation plan elected to participate
in a revised program, which includes both cash awards and
restricted stock units (see Restricted Stock Units below). Under
the revised program, participants relinquished their cash awards
of up to $30 million that would have contingently accrued
from
2007-2009
under the original plan. In lieu of these awards, the revised
deferred compensation program provides for a future cash award
in an amount equal to 90% of the maximum potential payout under
the original plan, plus growth pursuant to one of three
participant-selected notional investment vehicles, as defined in
the associated agreements. Participants must remain employed
through 2010 to vest in the new award. The Company will
recognize expense through December 31, 2010 and make award
payments under the revised program in the first quarter of 2011,
unless participants elect to further defer the payment of their
individual awards. Based on participation in the revised
program, the Company expensed $10 million, $8 million
and $6 million during the years ended December 31,
2009, 2008 and 2007, respectively, related to the revised
program.
In December 2007, the Company adopted a deferred compensation
plan whereby certain of the Companys senior employees and
directors were offered the opportunity to defer a portion of
their compensation in exchange for a future payment amount equal
to their deferments plus or minus certain amounts based upon the
market performance of specified measurement funds selected by
the participant. Participants are required to make deferral
elections under the plan prior to January 1 of the year such
deferrals will be withheld from their compensation. The Company
expensed less than $1 million and $1 million during
the years ended December 31, 2009 and 2008, respectively,
related to this plan.
49
Long-Term
Incentive Plan
Effective January 1, 2004, the Company adopted a long-term
incentive plan (the LTIP Plan) which covers certain
members of management and other key employees of the Company.
The LTIP Plan is a three-year cash based plan in which awards
are based on annual and three-year cumulative targets (as
defined in the LTIP Plan). In February 2007, $26 million
was paid to the LTIP plan participants. There are no additional
amounts due under the LTIP Plan.
In December 2008, the Company granted time-vesting cash awards
of $22 million to the Companys executive officers and
certain other key employees. Each award of cash vests 30% on
October 14, 2009, 30% on October 14, 2010 and 40% on
October 14, 2011. In its sole discretion, the compensation
committee of the Board of Directors may at any time convert all
or a portion of the cash award to an award of time-vesting
restricted stock units. The liability cash awards are being
accrued and expensed over the term of the agreements outlined
above. During the year ended December 31, 2009, less than
$1 million was paid to participants who left the Company.
In October 2009, the Company paid cash awards totaling
$6 million to active employees, representing 30% of the
remaining outstanding cash awards. During the years ended
December 31, 2009 and 2008, the Company expensed
$7 million and less than $1 million, respectively,
related to the cash awards.
Stock
Options
The Company has a stock-based compensation plan that makes
awards of stock options to the Companys executives and
certain employees. It is the Companys policy to grant
options with an exercise price equal to the average of the high
and low price of the Companys Series A common stock
on the grant date. The options issued have a ten-year term and
vest on a graded basis over periods ranging from one to five
years. The estimated value of the Companys stock-based
awards less expected forfeitures is recognized over the
awards respective vesting period on a straight-line basis.
The fair value of each option granted is estimated on the grant
date using the Black-Scholes option pricing method. The weighted
average assumptions used in the model are outlined in the
following table:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Risk-free interest rate
|
|
|
1
|
.90
|
%
|
|
|
3
|
.30
|
%
|
|
|
4
|
.60
|
%
|
Estimated life in years
|
|
|
5
|
.20
|
|
|
|
7
|
.70
|
|
|
|
6
|
.80
|
|
Dividend yield
|
|
|
0
|
.96
|
%
|
|
|
0
|
.38
|
%
|
|
|
0
|
.42
|
%
|
Volatility
|
|
|
54
|
.30
|
%
|
|
|
31
|
.40
|
%
|
|
|
27
|
.50
|
%
|
The computation of the expected volatility assumption used in
the Black-Scholes calculations for new grants is based on the
Companys historical volatilities. When establishing the
expected life assumptions, the Company reviews annual historical
employee exercise behavior of option grants with similar vesting
periods.
50
A summary of changes in stock options outstanding is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2009
|
|
|
|
|
|
|
|
|
|
Weighted-
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
|
|
|
Weighted-
|
|
|
Remaining
|
|
|
Aggregate
|
|
|
|
Number of
|
|
|
Average
|
|
|
Contractual
|
|
|
Intrinsic
|
|
|
|
Options
|
|
|
Exercise Price
|
|
|
Term
|
|
|
Value
|
|
|
|
(In millions)
|
|
|
(In $)
|
|
|
(In years)
|
|
|
(In $ millions)
|
|
|
As of December 31, 2008
|
|
|
7.0
|
|
|
|
19.35
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
0.1
|
|
|
|
17.17
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(0.8
|
)
|
|
|
17.79
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
(0.3
|
)
|
|
|
34.06
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2009
|
|
|
6.0
|
|
|
|
19.01
|
|
|
|
5.6
|
|
|
|
79
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options exercisable at end of year
|
|
|
5.0
|
|
|
|
17.09
|
|
|
|
5.3
|
|
|
|
75
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The weighted-average grant-date fair value of stock options
granted during the years ended December 31, 2009, 2008, and
2007 was $7.46, $16.78, and $14.42, respectively, per option.
The total intrinsic value of options exercised during the years
ended December 31, 2009, 2008, and 2007 was
$9 million, $27 million, and $84 million,
respectively. As of December 31, 2009, the Company had
approximately $7 million of total unrecognized compensation
expense related to stock options, excluding estimated
forfeitures, expected to be recognized over a weighted-average
period of 1.3 years. Cash received from stock option
exercises was $14 million, $18 million, and
$69 million during the years ended December 31, 2009,
2008, and 2007, respectively. There was no tax benefit realized
from stock option exercises during the year ended
December 31, 2009. During the year ended December 31,
2008 the Company reversed $8 million of the
$19 million tax benefit that was realized during the year
ended December 31, 2007.
During 2009, the Company extended the contractual life of
4 million fully vested share options held by
6 employees. As a result of that modification, the Company
recognized additional compensation expense of $1 million
for the year ended December 31, 2009.
Restricted
Stock Units (RSUs)
Performance-based RSUs. The Company grants
performance-based RSUs to the Companys executive officers
and certain employees once per year. The Company may also grant
performance-based RSUs to certain new employees or to employees
who assume positions of increasing responsibility at the time
those events occur. The number of performance-based RSUs that
ultimately vest is dependent on one or both of the following as
per the terms of the specific award agreement: The achievement
of 1) internal profitability targets (performance
condition) and 2) market performance targets measured by
the comparison of the Companys stock performance versus a
defined peer group (market condition).
The performance-based RSUs generally cliff-vest during the
Companys quarter-end September 30 black-out period three
years from the date of grant. The ultimate number of shares of
the Companys Series A common stock issued will range
from zero to stretch, with stretch defined individually under
each award, net of personal income taxes withheld. The market
condition is factored into the estimated fair value per unit and
compensation expense for each award will be based on the
probability of achieving internal profitability targets, as
applicable, and recognized on a straight-line basis over the
term of the respective grant, less estimated forfeitures. For
performance-based RSUs granted without a performance condition,
compensation expense is based on the fair value per unit
recognized on a straight-line basis over the term of the grant,
less estimated forfeitures.
51
In April 2007, the Company granted performance-based RSUs to
certain employees that vest annually in equal tranches beginning
October 1, 2008 through October 1, 2011 and include a
market condition. The performance-based RSUs awarded include a
catch-up
provision that provides for an additional year of vesting of
previously unvested amounts, subject to certain maximums.
Compensation expense is based on the fair value per unit
recognized on a straight-line basis over the term of the grant,
less estimated forfeitures.
A summary of changes in performance-based RSUs outstanding is as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
Number of
|
|
|
Average
|
|
|
|
Units
|
|
|
Fair Value
|
|
|
|
(In thousands)
|
|
|
(In $)
|
|
|
Nonvested at December 31, 2008
|
|
|
1,188
|
|
|
|
19.65
|
|
Granted
|
|
|
420
|
|
|
|
38.16
|
|
Vested
|
|
|
(79
|
)
|
|
|
21.30
|
|
Forfeited
|
|
|
(114
|
)
|
|
|
17.28
|
|
|
|
|
|
|
|
|
|
|
Nonvested at December 31, 2009
|
|
|
1,415
|
|
|
|
25.24
|
|
|
|
|
|
|
|
|
|
|
The fair value of shares vested for performance-based RSUs
during the years ended December 31, 2009 and 2008 was
$2 million and $3 million, respectively. There were no
vestings that occurred during the year ended December 31,
2007.
Fair value for the Companys performance-based RSUs was
estimated at the grant date using a Monte Carlo simulation
approach. Monte Carlo simulation was utilized to randomly
generate future stock returns for the Company and each company
in the defined peer group for each grant based on
company-specific dividend yields, volatilities and stock return
correlations. These returns were used to calculate future
performance-based RSU vesting percentages and the simulated
values of the vested performance-based RSUs were then discounted
to present value using a risk-free rate, yielding the expected
value of these performance-based RSUs.
The range of assumptions used in the Monte Carlo simulation
approach is outlined in the following table:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Risk-free interest rate
|
|
|
1.11%
|
|
|
|
1.05%
|
|
|
|
4.53 - 4.55%
|
|
Dividend yield
|
|
|
0.00 - 4.64%
|
|
|
|
0.00 - 12.71%
|
|
|
|
0.00 - 2.76%
|
|
Volatility
|
|
|
25 - 75%
|
|
|
|
20 - 70%
|
|
|
|
20 - 45%
|
|
In December 2008, the Company granted 200,000 performance units
to be settled in cash to the Companys Chief Executive
Officer. The terms of the performance units are substantially
similar to the performance-based RSUs granted in December 2008
and include a performance condition and a market condition. The
value of the performance units is equivalent to the value of one
share of the Companys Series A common stock and any
amounts that may vest under the performance unit award agreement
are to be settled in cash rather than shares of the
Companys Series A common stock. The compensation
committee of the Board of Directors may elect to convert all or
any portion of the performance units award to an award of an
equivalent value of performance-based RSUs.
Time-based RSUs. The Company grants non-employee
Directors time-based RSUs annually that generally vest one year
after grant. The fair value of the time-based RSUs is equal to
the closing price of the Companys Series A common
stock on the grant date.
52
The Company also grants time-based RSUs to the Companys
executives and certain employees that vest ratably over time
intervals ranging from two to four years. The fair value of the
time-based RSUs is equal to the average of the high and low
price of the Companys Series A common stock on the
grant date.
A summary of changes in time-based RSUs outstanding is as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee Time-based RSUs
|
|
|
Director Time-Based RSUs
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
Weighted
|
|
|
|
Number of
|
|
|
Average
|
|
|
Number of
|
|
|
Average
|
|
|
|
Units
|
|
|
Fair Value
|
|
|
Units
|
|
|
Fair Value
|
|
|
|
(In thousands)
|
|
|
(In $)
|
|
|
(In thousands)
|
|
|
(In $)
|
|
|
Nonvested at December 31, 2008
|
|
|
105
|
|
|
|
39.34
|
|
|
|
15
|
|
|
|
44.02
|
|
Granted
|
|
|
421
|
|
|
|
23.13
|
|
|
|
41
|
|
|
|
16.58
|
|
Vested
|
|
|
(23
|
)
|
|
|
37.60
|
|
|
|
(15
|
)
|
|
|
44.02
|
|
Forfeited
|
|
|
(1
|
)
|
|
|
39.53
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonvested at December 31, 2009
|
|
|
502
|
|
|
|
25.57
|
|
|
|
41
|
|
|
|
16.58
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2009, there was approximately
$35 million of unrecognized compensation cost related to
RSUs, excluding estimated forfeitures, expected to be recognized
over a weighted-average period of 2.3 years. The fair value
of shares vested for time-based RSUs during the years ended
December 31, 2009 and 2008 was $2 million and
$1 million, respectively. No RSUs vested during the year
ended December 31, 2007.
Total rent expense charged to operations under all operating
leases was $148 million, $141 million and
$122 million for the years ended December 31, 2009,
2008 and 2007, respectively. Future minimum lease payments under
non-cancelable rental and lease agreements which have initial or
remaining terms in excess of one year as of December 31,
2009 are as follows:
|
|
|
|
|
|
|
|
|
|
|
Capital
|
|
|
Operating
|
|
|
|
(In $ millions)
|
|
|
2010
|
|
|
63
|
|
|
|
50
|
|
2011
|
|
|
39
|
|
|
|
36
|
|
2012
|
|
|
38
|
|
|
|
31
|
|
2013
|
|
|
35
|
|
|
|
24
|
|
2014
|
|
|
35
|
|
|
|
16
|
|
Later years
|
|
|
276
|
|
|
|
46
|
|
Sublease income
|
|
|
-
|
|
|
|
(29
|
)
|
|
|
|
|
|
|
|
|
|
Minimum lease commitments
|
|
|
486
|
|
|
|
174
|
|
|
|
|
|
|
|
|
|
|
Less amounts representing interest
|
|
|
244
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Present value of net minimum lease obligations
|
|
|
242
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company expects that, in the normal course of business,
leases that expire will be renewed or replaced by other leases.
53
|
|
22.
|
Derivative
Financial Instruments
|
Interest
Rate Risk Management
To reduce the interest rate risk inherent in the Companys
variable rate debt, the Company utilizes interest rate swap
agreements to convert a portion of the variable rate debt to a
fixed rate obligation. These interest rate swap agreements are
designated as cash flow hedges. If an interest rate swap
agreement is terminated prior to its maturity, the amount
previously recorded in Accumulated other comprehensive income
(loss), net is recognized into earnings over the period that the
hedged transaction impacts earnings. If the hedging relationship
is discontinued because it is probable that the forecasted
transaction will not occur according to the original strategy,
any related amounts previously recorded in Accumulated other
comprehensive income (loss), net are recognized into earnings
immediately.
As of December 31, 2006, the Company had an interest rate
swap agreement in place with a notional value of
$300 million. On March 29, 2007, in connection with
the April 2007 debt refinancing, the Company terminated this
interest rate swap agreement and recognized a gain of
$2 million related to amounts previously recorded in
Accumulated other comprehensive income (loss), net.
In March 2007, in anticipation of the April 2007 debt
refinancing, the Company entered into various US dollar and Euro
interest rate swap agreements, which became effective on
April 2, 2007, with notional amounts of $1.6 billion
and 150 million, respectively. The notional amount of
the $1.6 billion US dollar interest rate swaps decreased by
$400 million effective January 2, 2008 and decreased
by another $200 million effective January 2, 2009. To
offset the declines, the Company entered into US dollar interest
rate swaps with a combined notional amount of $400 million
which became effective on January 2, 2008 and an additional
US dollar interest rate swap with a notional amount of
$200 million which became effective April 2, 2009. The
notional amount of the interest rate swaps decreased by
$100 million effective January 4, 2010. No new swaps
were entered into to offset the declines.
The Company recognized interest (expense) income from hedging
activities relating to interest rate swaps of
($63) million, ($18) million and $6 million for
the years ended December 31, 2009, 2008 and 2007,
respectively. The Company recorded a net loss of $0 million
for the year ended December 31, 2009 and less than
$1 million for each of the years ended December 31,
2008 and 2007, to Other income (expense), net in the
consolidated statements of operations for the ineffective
portion of the interest rate swap agreements. The Company
recorded an unrealized gain (loss) on interest rate swaps of
$15 million and ($79) million during the years ended
December 31, 2009 and 2008, respectively.
Foreign
Exchange Risk Management
Certain entities have receivables and payables denominated in
currencies other than their respective functional currencies,
which creates foreign exchange risk. The Company enters into
foreign currency forwards and swaps to minimize its exposure to
foreign currency fluctuations. Through these instruments, the
Company mitigates its foreign currency exposure on transactions
with third party entities as well as intercompany transactions.
The currently outstanding foreign currency contracts are hedging
booked exposure, however the Company may from time to time hedge
its currency exposure related to forecasted transactions.
Forward contracts are not designated as hedges under FASB ASC
Topic 815.
54
The following table indicates the total US dollar equivalents of
net foreign exchange exposure related to (short) long foreign
exchange forward contracts outstanding by currency. All of the
contracts included in the table below will have approximately
offsetting effects from actual underlying payables, receivables,
intercompany loans or other assets or liabilities subject to
foreign exchange remeasurement.
|
|
|
|
|
|
|
2010 Maturity
|
|
|
|
(In $ millions)
|
|
|
Currency
|
|
|
|
|
Euro
|
|
|
(372
|
)
|
British pound sterling
|
|
|
(90
|
)
|
Chinese renminbi
|
|
|
(200
|
)
|
Mexican peso
|
|
|
(5
|
)
|
Singapore dollar
|
|
|
27
|
|
Canadian dollar
|
|
|
(48
|
)
|
Japanese yen
|
|
|
8
|
|
Brazilian real
|
|
|
(11
|
)
|
Swedish krona
|
|
|
15
|
|
Other
|
|
|
(1
|
)
|
|
|
|
|
|
Total
|
|
|
(677
|
)
|
|
|
|
|
|
To protect the foreign currency exposure of a net investment in
a foreign operation, the Company entered into cross currency
swaps with certain financial institutions in 2004. The cross
currency swaps and the Euro-denominated portion of the senior
term loan were designated as a hedge of a net investment of a
foreign operation. The Company dedesignated the net investment
hedge due to the debt refinancing in April 2007 and redesignated
the cross currency swaps and new senior Euro term loan in July
2007. As a result, the Company recorded $26 million of
mark-to-market
losses related to the cross currency swaps and the new senior
Euro term loan during this period.
Under the terms of the cross currency swap arrangements, the
Company paid approximately 13 million in interest and
received approximately $16 million in interest on June 15
and December 15 of each year. The fair value of the net
obligation under the cross currency swaps was included in
current Other liabilities in the consolidated balance sheets as
of December 31, 2007. Upon maturity of the cross currency
swap agreements in June 2008, the Company owed
276 million ($426 million) and was owed
$333 million. In settlement of the obligation, the Company
paid $93 million (net of interest of $3 million) in
June 2008.
During the year ended December 31, 2008, the Company
dedesignated 385 million of the 400
Euro-denominated portion of the term loan, previously designated
as a hedge of a net investment of a foreign operation. The
remaining 15 million Euro-denominated portion of the
term loan was dedesignated as a hedge of a net investment of a
foreign operation in June 2009. Prior to the dedesignations, the
Company had been using external derivative contracts to offset
foreign currency exposures on certain intercompany loans. As a
result of the dedesignations, the foreign currency exposure
created by the Euro-denominated term loan is expected to offset
the foreign currency exposure on certain intercompany loans,
decreasing the need for external derivative contracts and
reducing the Companys exposure to external counterparties.
The effective portion of the gain (loss) on the derivative
(cross currency swaps) is recorded in Accumulated other
comprehensive income (loss), net. For the years ended
December 31, 2009, 2008 and 2007, the amount charged to
Accumulated other comprehensive income (loss), net was
$0 million, $(19) million and $(19) million,
respectively. The gain (loss) related to items excluded from the
assessment of hedge effectiveness of the cross currency swaps
are recorded to Other income (expense), net in the consolidated
statements of operations. For the years ended December 31,
2009, 2008 and 2007, the amount charged to
55
Other income (expense), net in the consolidated statements of
operations was $0 million, $1 million and
$(6) million, respectively.
Commodity
Risk Management
The Company has exposure to the prices of commodities in its
procurement of certain raw materials. The Company manages its
exposure primarily through the use of long-term supply
agreements and derivative instruments. The Company regularly
assesses its practice of purchasing a portion of its commodity
requirements forward and utilization of other raw material
hedging instruments, in addition to forward purchase contracts,
in accordance with changes in market conditions. Forward
purchases and swap contracts for raw materials are principally
settled through actual delivery of the physical commodity. For
qualifying contracts, the Company has elected to apply the
normal purchases and normal sales exception of FASB ASC Topic
815, as it was probable at the inception and throughout the term
of the contract that they would not settle net and would result
in physical delivery. As such, realized gains and losses on
these contracts are included in the cost of the commodity upon
the settlement of the contract.
In addition, the Company occasionally enters into financial
derivatives to hedge a component of a raw material or energy
source. Typically, these types of transactions do not qualify
for hedge accounting. These instruments are marked to market at
each reporting period and gains (losses) are included in Cost of
sales in the consolidated statements of operations. The Company
recognized no gain or loss from these types of contracts during
the years ended December 31, 2009 and 2008 and less than
$1 million during the year ended December 31, 2007. As
of December 31, 2009, the Company did not have any open
financial derivative contracts for commodities.
The following table presents information regarding changes in
the fair value of the Companys derivative arrangements:
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, 2009
|
|
|
|
Gain (Loss)
|
|
|
|
|
|
|
Recognized
|
|
|
|
|
|
|
in Other
|
|
|
Gain (Loss)
|
|
|
|
Comprehensive
|
|
|
Recognized
|
|
|
|
Income
|
|
|
in Income
|
|
|
|
(In $ millions)
|
|
|
Derivatives designated as cash flow hedging instruments
|
|
|
|
|
|
|
|
|
Interest rate swaps
|
|
|
(40
|
)
|
|
|
(63
|
) (1)
|
Derivatives designated as net investment hedging instruments
|
|
|
|
|
|
|
|
|
Euro-denominated term loan
|
|
|
|
|
|
|
|
|
Derivatives not designated as hedging instruments
|
|
|
|
|
|
|
|
|
Foreign currency forwards and swaps
|
|
|
|
|
|
|
(20
|
)
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
(40
|
)
|
|
|
(83
|
)
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
Amount represents reclassification from Accumulated other
comprehensive income and is classified as interest expense in
the consolidated statement of operations.
|
See Note 23, Fair Value Measurements, for additional
information regarding the fair value of the Companys
derivative arrangements.
56
|
|
23.
|
Fair
Value Measurements
|
As discussed in Note 2, the Company adopted certain
provisions of FASB ASC Topic 820 on January 1, 2008 and
2009. FASB ASC Topic 820 establishes a three-tiered fair value
hierarchy that prioritizes inputs to valuation techniques used
in fair value calculations. The three levels of inputs are
defined as follows:
Level 1 unadjusted quoted prices for identical
assets or liabilities in active markets accessible by the Company
Level 2 inputs that are observable in the
marketplace other than those inputs classified as Level 1
Level 3 inputs that are unobservable in the
marketplace and significant to the valuation
FASB ASC Topic 820 requires the Company to maximize the use of
observable inputs and minimize the use of unobservable inputs.
If a financial instrument uses inputs that fall in different
levels of the hierarchy, the instrument will be categorized
based upon the lowest level of input that is significant to the
fair value calculation.
The Companys financial assets and liabilities are measured
at fair value on a recurring basis and include marketable
securities and derivative financial instruments. Marketable
securities include US government and corporate bonds,
mortgage-backed securities and equity securities. Derivative
financial instruments include interest rate swaps and foreign
currency forwards and swaps.
Marketable Securities. Where possible, the Company
utilizes quoted prices in active markets to measure debt and
equity securities; such items are classified as Level 1 in
the hierarchy and include equity securities and US government
bonds. When quoted market prices for identical assets are
unavailable, varying valuation techniques are used. Common
inputs in valuing these assets include, among others, benchmark
yields, issuer spreads, forward mortgage-backed securities trade
prices and recently reported trades. Such assets are classified
as Level 2 in the hierarchy and typically include
mortgage-backed securities, corporate bonds and other US
government securities.
Derivative Financial Instruments. Derivative
financial instruments are valued in the market using discounted
cash flow techniques. These techniques incorporate Level 1
and Level 2 inputs such as interest rates and foreign
currency exchange rates. These market inputs are utilized in the
discounted cash flow calculation considering the
instruments term, notional amount, discount rate and
credit risk. Significant inputs to the derivative valuation for
interest rate swaps and foreign currency forwards and swaps are
observable in the active markets and are classified as
Level 2 in the hierarchy.
57
The following fair value hierarchy table presents information
about the Companys assets and liabilities measured at fair
value on a recurring basis:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurement Using
|
|
|
|
|
|
|
Quoted Prices
|
|
|
Significant
|
|
|
|
|
|
|
in Active
|
|
|
Other
|
|
|
|
|
|
|
Markets for
|
|
|
Observable
|
|
|
|
|
|
|
Identical Assets
|
|
|
Inputs
|
|
|
|
|
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
Total
|
|
|
|
(In $ millions)
|
|
|
Marketable securities, at fair value
|
|
|
|
|
|
|
|
|
|
|
|
|
US government debt securities
|
|
|
|
|
|
|
28
|
|
|
|
28
|
|
US corporate debt securities
|
|
|
|
|
|
|
1
|
|
|
|
1
|
|
Equity securities
|
|
|
52
|
|
|
|
|
|
|
|
52
|
|
Money market deposits and other securities
|
|
|
|
|
|
|
2
|
|
|
|
2
|
|
Derivatives not designated as hedging instruments
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency forwards and swaps
|
|
|
|
|
|
|
12
|
|
|
|
12(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets as of December 31, 2009
|
|
|
52
|
|
|
|
43
|
|
|
|
95
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives designated as cash flow hedging instruments
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swaps
|
|
|
|
|
|
|
(68
|
)
|
|
|
(68
|
) (2)
|
Interest rate swaps
|
|
|
|
|
|
|
(44
|
)
|
|
|
(44
|
) (3)
|
Derivatives not designated as hedging instruments
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency forwards and swaps
|
|
|
|
|
|
|
(7
|
)
|
|
|
(7
|
) (2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities as of December 31, 2009
|
|
|
|
|
|
|
(119
|
)
|
|
|
(119
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marketable securities
|
|
|
|
|
|
|
|
|
|
|
|
|
US government debt securities
|
|
|
|
|
|
|
52
|
|
|
|
52
|
|
US corporate debt securities
|
|
|
|
|
|
|
3
|
|
|
|
3
|
|
Equity securities
|
|
|
42
|
|
|
|
|
|
|
|
42
|
|
Money market deposits and other securities
|
|
|
|
|
|
|
3
|
|
|
|
3
|
|
Derivatives not designated as hedging instruments
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency forwards and swaps
|
|
|
|
|
|
|
54
|
|
|
|
54
|
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets as of December 31, 2008
|
|
|
42
|
|
|
|
112
|
|
|
|
154
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives designated as cash flow hedging instruments
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swaps
|
|
|
|
|
|
|
(42
|
)
|
|
|
(42
|
) (2)
|
Interest rate swaps
|
|
|
|
|
|
|
(76
|
)
|
|
|
(76
|
) (3)
|
Derivatives not designated as hedging instruments
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency forwards and swaps
|
|
|
|
|
|
|
(25
|
)
|
|
|
(25
|
) (2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities as of December 31, 2008
|
|
|
|
|
|
|
(143
|
)
|
|
|
(143
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Included in current Other assets in the consolidated balance
sheets. |
|
(2) |
|
Included in current Other liabilities in the consolidated
balance sheets. |
|
(3) |
|
Included in noncurrent Other liabilities in the consolidated
balance sheets. |
58
Summarized below are the carrying values and estimated fair
values of financial instruments that are not carried at fair
value on the Companys consolidated balance sheets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
|
As of December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
Carrying
|
|
|
Fair
|
|
|
Carrying
|
|
|
Fair
|
|
|
|
Amount
|
|
|
Value
|
|
|
Amount
|
|
|
Value
|
|
|
|
(In $ millions)
|
|
|
Cost investments (As Adjusted, Note 8 and Note 31)
|
|
|
129
|
|
|
|
|
|
|
|
130
|
|
|
|
|
|
Insurance contracts in nonqualified pension trusts
|
|
|
66
|
|
|
|
66
|
|
|
|
67
|
|
|
|
67
|
|
Long-term debt, including current installments of long-term debt
|
|
|
3,361
|
|
|
|
3,246
|
|
|
|
3,381
|
|
|
|
2,404
|
|
In general, the cost investments included in the table above are
not publicly traded and their fair values are not readily
determinable; however, the Company believes the carrying values
approximate or are less than the fair values.
As of December 31, 2009 and 2008, the fair values of cash
and cash equivalents, receivables, trade payables, short-term
debt and the current installments of long-term debt approximate
carrying values due to the short-term nature of these
instruments. These items have been excluded from the table with
the exception of the current installments of long-term debt.
Additionally, certain noncurrent receivables, principally
insurance recoverables, are carried at net realizable value.
The fair value of long-term debt is based on valuations from
third-party banks and market quotations.
|
|
24.
|
Commitments
and Contingencies
|
The Company is involved in a number of legal and regulatory
proceedings, lawsuits and claims incidental to the normal
conduct of business, relating to such matters as product
liability, antitrust, intellectual property, workers
compensation, prior acquisitions and divestitures, past waste
disposal practices and release of chemicals into the
environment. While it is impossible at this time to determine
with certainty the ultimate outcome of these proceedings,
lawsuits and claims, the Company is actively defending those
matters where the Company is named as a defendant. Additionally,
the Company believes, based on the advice of legal counsel, that
adequate reserves have been made and that the ultimate outcomes
of all such litigation and claims will not have a material
adverse effect on the financial position of the Company;
however, the ultimate outcome of any given matter may have a
material impact on the results of operations or cash flows of
the Company in any given reporting period.
Plumbing
Actions
CNA Holdings LLC. (CNA Holdings), a US subsidiary of
the Company, which included the US business now conducted by the
Ticona business which is included in the Advanced Engineered
Materials segment, along with Shell Oil Company
(Shell), E.I. DuPont de Nemours and Company
(DuPont) and others, has been a defendant in a
series of lawsuits, including a number of class actions,
alleging that plastics manufactured by these companies that were
utilized in the production of plumbing systems for residential
property were defective or caused such plumbing systems to fail.
Based on, among other things, the findings of outside experts
and the successful use of Ticonas acetal copolymer in
similar applications, CNA Holdings does not believe
Ticonas acetal copolymer was defective or caused the
plumbing systems to fail. In many cases CNA Holdings
potential future exposure may be limited by invocation of the
statute of limitations since CNA Holdings ceased selling the
resin for use in the plumbing systems in site-built homes during
1986 and in manufactured homes during 1990.
59
In November 1995, CNA Holdings, DuPont and Shell entered into
national class action settlements that called for the
replacement of plumbing systems of claimants who have had
qualifying leaks, as well as reimbursements for certain leak
damage. In connection with such settlement, the three companies
had agreed to fund these replacements and reimbursements up to
an aggregate amount of $950 million. As of
December 31, 2009, the aggregate funding is
$1,109 million, due to additional contributions and funding
commitments made primarily by other parties.
During the period between 1995 and 2001, CNA Holdings was also
named as a defendant in the following putative class actions:
Cox, et al. v. Hoechst Celanese
Corporation, et al.,
No. 94-0047
(Chancery Ct., Obion County, Tennessee) (class was certified).
Couture, et al. v. Shell Oil
Company, et al.,
No. 200-06-000001-985
(Quebec Superior Court, Canada).
Dilday, et al. v. Hoechst
Celanese Corporation, et al., No. 15187 (Chancery Ct.,
Weakley County, Tennessee).
Furlan v. Shell Oil
Company, et al., No. C967239 (British Columbia Supreme
Court, Vancouver Registry, Canada).
Gariepy, et al. v. Shell Oil
Company, et al., No. 30781/99 (Ontario Court General
Division, Canada).
Shelter General Insurance Co.,
et al. v. Shell Oil Company, et al., No. 16809
(Chancery Ct., Weakley County, Tennessee).
St. Croix Ltd., et al. v.
Shell Oil Company, et al., No. 1997/467 (Territorial
Ct., St. Croix Division, the US Virgin Islands).
Tranter v. Shell Oil
Company, et al., No. 46565/97 (Ontario Court General
Division, Canada).
In addition, between 1994 and 2008 CNA Holdings was named as a
defendant in numerous
non-class
actions filed in Arizona, Florida, Georgia, Louisiana,
Mississippi, New Jersey, Tennessee and Texas, the US Virgin
Islands and Canada of which ten are currently pending. In all of
these actions, the plaintiffs have sought recovery for alleged
damages caused by leaking polybutylene plumbing. Damage amounts
have generally not been specified but these cases generally do
not involve (either individually or in the aggregate) a large
number of homes.
As of December 31, 2009, the Company had remaining accruals
of $55 million, of which $1 million is included in
current Other liabilities in the consolidated balance sheets. As
of December 31, 2008, the Company had remaining accruals of
$64 million, of which $2 million was included in
current Other liabilities in the consolidated balance sheets.
The Company reached settlements with CNA Holdings insurers
specifying their responsibility for these claims. During the
year ended December 31, 2007, the Company received
$23 million of insurance proceeds from various CNA
Holdings insurers as full satisfaction for their
responsibility for these claims. During the year ended
December 31, 2008, the Company received less than
$1 million from insurers. During the year ended
December 31, 2009, the Company recognized a $9 million
decrease in legal reserves for plumbing claims due to the
Companys ongoing assessment of the likely outcome of the
plumbing actions and the expiration of the statute of limitation.
60
Plumbing
Insurance Indemnifications
Celanese GmbH entered into agreements with insurance companies
related to product liability settlements associated with
Celcon®
plumbing claims. These agreements, except those with insolvent
insurance companies, require the Company to indemnify
and/or
defend these insurance companies in the event that third parties
seek additional monies for matters released in these agreements.
The indemnifications in these agreements do not provide for time
limitations.
In certain of the agreements, Celanese GmbH received a fixed
settlement amount. The indemnities under these agreements
generally are limited to, but in some cases are greater than,
the amount received in settlement from the insurance company.
The maximum exposure under these indemnifications is
$95 million. Other settlement agreements have no stated
limits.
There are other agreements whereby the settling insurer agreed
to pay a fixed percentage of claims that relate to that
insurers policies. The Company has provided
indemnifications to the insurers for amounts paid in excess of
the settlement percentage. These indemnifications do not provide
for monetary or time limitations.
Sorbates
Antitrust Actions
In May 2002, the European Commission informed Hoechst AG
(Hoechst) of its intent to officially investigate
the sorbates industry. In early January 2003, the European
Commission served Hoechst, Nutrinova, Inc., a US subsidiary of
Nutrinova Nutrition Specialties & Food Ingredients
GmbH and previously a wholly owned subsidiary of Hoechst
(Nutrinova), and a number of competitors of
Nutrinova with a statement of objections alleging unlawful,
anticompetitive behavior affecting the European sorbates market.
In October 2003, the European Commission ruled that Hoechst,
Chisso Corporation, Daicel Chemical Industries Ltd.
(Daicel), The Nippon Synthetic Chemical Industry Co.
Ltd. and Ueno Fine Chemicals Industry Ltd. operated a cartel in
the European sorbates market between 1979 and 1996. The European
Commission imposed a total fine of 138 million on
such companies, of which 99 million was assessed
against Hoechst and its legal successors. The case against
Nutrinova was closed. Pursuant to the Demerger Agreement with
Hoechst, Celanese GmbH was assigned the obligation related to
the sorbates antitrust matter; however, Hoechst, and its legal
successors, agreed to indemnify Celanese GmbH for 80% of any
costs Celanese GmbH incurred relative to this matter.
Accordingly, Celanese GmbH recognized a receivable from Hoechst
from this indemnification. In June 2008, the Court of First
Instance of the European Communities (Fifth Chamber) reduced the
fine against Hoechst to 74.25 million and in July
2008, Hoechst paid the 74.25 million fine. In August
2008, the Company paid Hoechst 17 million, including
interest of 2 million, in satisfaction of its 20%
obligation with respect to the fine.
Based on the advice of external counsel and a review of the
existing facts and circumstances relating to the sorbates
antitrust matters, including the settlement of the European
Unions investigation, as well as civil claims filed and
settled, the Company released its accruals related to the
settled sorbates antitrust matters and the indemnification
receivables resulting in a gain of $8 million, net,
included in Other (charges) gains, net, in the consolidated
statements of operations for the year ended December 31,
2008.
In addition, in 2004 a civil antitrust action styled Freeman
Industries LLC v. Eastman Chemical Co., et. al. was
filed against Hoechst and Nutrinova, Inc. in the Law Court for
Sullivan County in Kingsport, Tennessee. The plaintiff sought
monetary damages and other relief for alleged conduct involving
the sorbates industry. The trial court dismissed the
plaintiffs claims and upon appeal the Supreme Court of
Tennessee affirmed the dismissal of the plaintiffs claims.
In December 2005, the plaintiff lost an attempt to amend its
complaint and the entire action was dismissed with prejudice.
Plaintiffs counsel subsequently filed a new complaint with
new class representatives in the District Court of the District
of Tennessee. The Companys
61
motion to strike the class allegations was granted in April 2008
and the plaintiffs request to appeal the ruling remains
pending.
Polyester
Staple Antitrust Litigation
CNA Holdings, the successor in interest to Hoechst Celanese
Corporation (HCC), Celanese Americas Corporation and
Celanese GmbH (collectively, the Celanese Entities)
and Hoechst, the former parent of HCC, were named as defendants
in two actions (involving 25 individual participants) filed in
September 2006 by US purchasers of polyester staple fibers
manufactured and sold by HCC. The actions allege that the
defendants participated in a conspiracy to fix prices, rig bids
and allocate customers of polyester staple sold in the United
States. These actions were consolidated in a proceeding by a
Multi-District Litigation Panel in the United States District
Court for the Western District of North Carolina styled In re
Polyester Staple Antitrust Litigation, MDL 1516. On
June 12, 2008 the court dismissed these actions against all
Celanese Entities in consideration of a payment by the Company
of $107 million. This proceeding related to sales by the
polyester staple fibers business which Hoechst sold to KoSa,
Inc. in 1998. Accordingly, the impact of this settlement is
reflected within discontinued operations in the consolidated
statements of operations for the year ended December 31, 2008.
The Company also previously entered into tolling arrangements
with four other alleged US purchasers of polyester staple fibers
manufactured and sold by the Celanese Entities. These purchasers
were not included in the settlement and one such company filed
suit against the Company in December 2008 in the Western
District of North Carolina entitled Milliken &
Company v. CNA Holdings, Inc., Celanese Americas
Corporation and Hoechst AG
(No. 8-CV-00578).
The Company is actively defending this matter and has filed a
motion to dismiss, which is pending with the court.
In December 1998, HCC sold its polyester staple business (the
1998 Sale) to KoSa B.V., f/k/a Arteva B.V., a
subsidiary of Koch Industries, Inc. (KoSa), under an
asset purchase agreement (APA). In August of 2002,
Arteva Specialties, S.a.r.l., a subsidiary of KoSa (Arteva
Specialties), pled guilty to a criminal violation of the
Sherman Act relating to anti-competitive conduct following the
1998 Sale. Shortly thereafter, various polyester staple
customers filed approximately 50 civil anti-trust lawsuits
against KoSa and Arteva Specialties, some of which alleged
anti-competitive conduct prior to the 1998 Sale. In a complaint
filed on November 3, 2003 in the United States District
Court for the Southern District of New York, Koch Industries,
Inc. et al. v. Hoechst Aktiengellschaft et al.,
No. 03-cv-8679,
Koch Industries, Inc., KoSa, Arteva Specialties and Arteva
Services S.a.r.l. sought recovery from Hoechst and the Celanese
Entities exceeding $371 million. In the complaint, the
plaintiffs alleged claims of fraud, unjust enrichment and
indemnification for retained liabilities and for breach of
contractual representations and warranties under the APA. Both
parties filed motions for summary judgment in 2009. On
July 19, 2010, the court granted in part and denied in part
the pending motions. The court dismissed the plaintiffs
claims for fraud and unjust enrichment, which also eliminated
plaintiffs claims for punitive damages. The court also
held that the plaintiffs cannot recover damages for liabilities
arising out of the operation of the polyester staple business
incurred after the 1998 Sale. The plaintiffs can recover damages
for the costs of defending and settling civil antitrust actions
brought against them to the extent such damages arose out of the
operation of the polyester staple business prior to the 1998
Sale (i.e., Retained Liabilities as defined in the
APA). The plaintiffs have alleged that they paid approximately
$135 million for the costs of settling and defending both
pre- and post-1998 Sale civil antitrust actions. The court
reserved for trial the calculation and allocation of any damages
to which the plaintiffs would be entitled under the relevant
sections of the APA. Because of insufficient information,
including that contained in the record, we are unable to
estimate the amount of the Companys loss for this matter.
The court also preserved for trial the plaintiffs claim
for breach of contractual representations and warranties under
the APA. No date has been set for trial. The Company is actively
defending this matter.
62
Acetic
Acid Patent Infringement Matters
On May 9, 1999, Celanese International Corporation filed a
private criminal action styled Celanese International
Corporation v. China Petrochemical Development Corporation
against China Petrochemical Development Corporation
(CPDC) in the Taiwan Kaoshiung District Court
alleging that CPDC infringed Celanese International
Corporations patent covering the manufacture of acetic
acid. Celanese International Corporation also filed a
supplementary civil brief that, in view of changes in Taiwanese
patent laws, was subsequently converted to a civil action
alleging damages against CPDC based on a period of infringement
of ten years,
1991-2000,
and based on CPDCs own data that was reported to the
Taiwanese securities and exchange commission. Celanese
International Corporations patent was held valid by the
Taiwanese patent office. On August 31, 2005, the District
Court held that CPDC infringed Celanese International
Corporations acetic acid patent and awarded Celanese
International Corporation approximately $28 million (plus
interest) for the period of 1995 through 1999. In October 2008,
the High Court, on appeal, reversed the District Courts
$28 million award to the Company. The Company appealed to
the Superior Court in November 2008, and the court remanded the
case to the Intellectual Property Court on June 4, 2009. On
January 16, 2006, the District Court awarded Celanese
International Corporation $800,000 (plus interest) for the year
1990. In January 2009, the High Court, on appeal, affirmed the
District Courts award and CPDC appealed on
February 5, 2009 to the Supreme Court. On June 29,
2007, the District Court awarded Celanese International
Corporation $60 million (plus interest) for the period of
2000 through 2005. CPDC appealed this ruling and on
July 21, 2009, the High Court ruled in CPDCs favor.
The Company appealed to the Supreme Court and in December 2009,
the case was remanded to the Intellectual Property Court.
Workers
Compensation Claims
The Company has been provided with notices of claims filed with
the South Carolina Workers Compensation Commission and the
North Carolina Industrial Commission. The notices of claims
identify various alleged injuries to current and former
employees arising from alleged exposure to undefined chemicals
at current and former plant sites in South Carolina and North
Carolina. As of December 31, 2009, there were 950 claims
pending. The Company has reserves for defense costs related to
these matters.
Asbestos
Claims
As of December 31, 2009, Celanese Ltd. and/or CNA Holdings,
Inc., both US subsidiaries of the Company, are defendants in
approximately 526 asbestos cases. During the year ended
December 31, 2009, 56 new cases were filed against the
Company, 90 cases were resolved, and 1 case was added after
further analysis by outside counsel. Because many of these cases
involve numerous plaintiffs, the Company is subject to claims
significantly in excess of the number of actual cases. The
Company has reserves for defense costs related to claims arising
from these matters. The Company believes that there is no
material exposure related to these matters.
Award
Proceedings in relation to Domination Agreement and
Squeeze-Out
On October 1, 2004, a Domination Agreement between Celanese
GmbH and the Purchaser became operative, pursuant to which the
Purchaser became obligated to offer to acquire all outstanding
Celanese GmbH shares from the minority shareholders of Celanese
GmbH in return for payment of fair cash compensation
(Squeeze-Out). The amount of this fair cash
compensation was determined to be 41.92 per share, plus
interest, in accordance with applicable German law. Until the
Squeeze-Out was registered in the commercial register in Germany
on December 22, 2006, any minority shareholder who elected
not to sell its shares to the Purchaser was entitled to remain a
shareholder of Celanese GmbH and to receive from the
63
Purchaser a gross guaranteed annual payment on its shares of
3.27 per Celanese GmbH share less certain corporate taxes
in lieu of any dividend.
The amounts of the fair cash compensation and of the guaranteed
annual payment offered under the Domination Agreement as well as
the Squeeze-Out compensation are under court review in two
separate special award proceedings. The amounts of the fair cash
compensation and of the guaranteed annual payment offered under
the Domination Agreement may be increased in special award
proceedings initiated by minority shareholders, which may
further reduce the funds the Purchaser can otherwise make
available to the Company. As of March 30, 2005, several
minority shareholders of Celanese GmbH had initiated special
award proceedings seeking the courts review of the amounts
of the fair cash compensation and of the guaranteed annual
payment offered under the Domination Agreement. As a result of
these proceedings, the amount of the fair cash consideration and
the guaranteed annual payment offered under the Domination
Agreement could be increased by the court so that all minority
shareholders, including those who have already tendered their
shares into the mandatory offer and have received the fair cash
compensation could claim the respective higher amounts. The
court dismissed all of these proceedings in March 2005 on the
grounds of inadmissibility. Thirty-three plaintiffs appealed the
dismissal, and in January 2006, twenty-three of these appeals
were granted by the court. They were remanded back to the court
of first instance, where the valuation will be further reviewed.
On December 12, 2006, the court of first instance appointed
an expert to help determine the value of Celanese GmbH. In the
first quarter of 2007, certain minority shareholders that
received 66.99 per share as fair cash compensation also
filed award proceedings challenging the amount they received as
fair cash compensation. The case remains pending before the
court of the first instance.
The Company received applications for the commencement of award
proceedings filed by 79 shareholders against the Purchaser
with the Frankfurt District Court requesting the court to set a
higher amount for the Squeeze-Out compensation. The motions are
based on various alleged shortcomings and mistakes in the
valuation of Celanese GmbH done for purposes of the Squeeze-Out.
On May 11, 2007, the court of first instance appointed a
common representative for those shareholders that have not filed
an application on their own.
Should the court set a higher value for the Squeeze-Out
compensation, former Celanese GmbH shareholders who ceased to be
shareholders of Celanese GmbH due to the Squeeze-Out are
entitled, pursuant to a settlement agreement between the
Purchaser and certain former Celanese GmbH shareholders, to
claim for their shares the higher of the compensation amounts
determined by the court in these different proceedings. Payments
these shareholders already received as compensation for their
shares will be offset so that those shareholders who ceased to
be shareholders of Celanese GmbH due to the Squeeze-Out are not
entitled to more than the higher of the amount set in the two
court proceedings.
The Purchaser and Celanese GmbH have entered into a new
domination agreement on March 26, 2010 which became
effective on April 9, 2010 (the Domination Agreement
II). Under the Domination Agreement II, the Purchaser is
required, among other things, to compensate Celanese GmbH for
any annual loss incurred, determined in accordance with German
accounting requirements, by Celanese GmbH at the end of the
fiscal year in which the loss was incurred. This obligation to
compensate Celanese GmbH for annual losses will apply during the
entire term of the Domination Agreement II. If Celanese GmbH
incurs losses during any period of the operative term of the
Domination Agreement II and if such losses lead to an
annual loss of Celanese GmbH at the end of any given fiscal year
during the term of the Domination Agreement II, the Purchaser
will be obligated to make a corresponding cash payment to
Celanese GmbH to the extent that the respective annual loss is
not fully compensated for by the dissolution of profit reserves
accrued at the level of Celanese GmbH during the term of the
Domination Agreement II. The Purchaser may be able to reduce or
avoid cash payments to Celanese GmbH by off-setting against such
loss compensation claims by Celanese GmbH any valuable
counterclaims against Celanese GmbH that the Purchaser may have.
If the Purchaser is obligated to make cash payments to Celanese
GmbH to cover an annual loss, we may not have sufficient funds
to make payments on our indebtedness when due and, unless the
Purchaser is able to obtain funds from a
64
source other than annual profits of Celanese GmbH, The Purchaser
may not be able to satisfy its obligation to fund such shortfall.
Guarantees
The Company has agreed to guarantee or indemnify third parties
for environmental and other liabilities pursuant to a variety of
agreements, including asset and business divestiture agreements,
leases, settlement agreements and various agreements with
affiliated companies. Although many of these obligations contain
monetary
and/or time
limitations, others do not provide such limitations.
As indemnification obligations often depend on the occurrence of
unpredictable future events, the future costs associated with
them cannot be determined at this time.
The Company has accrued for all probable and reasonably
estimable losses associated with all known matters or claims
that have been brought to its attention. These known obligations
include the following:
Demerger Obligations
The Company has obligations to indemnify Hoechst, and its legal
successors, for various liabilities under the Demerger
Agreement, including for environmental liabilities associated
with contamination arising under 19 divestiture agreements
entered into by Hoechst prior to the demerger.
The Companys obligation to indemnify Hoechst, and its
legal successors, is subject to the following thresholds:
The Company will indemnify
Hoechst, and its legal successors, against those liabilities up
to 250 million;
Hoechst, and its legal successors,
will bear those liabilities exceeding 250 million,
however the Company will reimburse Hoechst, and its legal
successors, for one-third of those liabilities for amounts that
exceed 750 million in the aggregate.
The aggregate maximum amount of environmental indemnifications
under the remaining divestiture agreements that provide for
monetary limits is approximately 750 million. Three
of the divestiture agreements do not provide for monetary limits.
Based on the estimate of the probability of loss under this
indemnification, the Company had reserves of $32 million
and $27 million as of December 31, 2009 and 2008,
respectively, for this contingency. Where the Company is unable
to reasonably determine the probability of loss or estimate such
loss under an indemnification, the Company has not recognized
any related liabilities.
The Company has also undertaken in the Demerger Agreement to
indemnify Hoechst and its legal successors for liabilities that
Hoechst is required to discharge, including tax liabilities,
which are associated with businesses that were included in the
demerger but were not demerged due to legal restrictions on the
transfers of such items. These indemnities do not provide for
any monetary or time limitations. The Company has not provided
for any reserves associated with this indemnification as it is
not probable or estimable. The Company has not made any payments
to Hoechst or its legal successors during the years ended
December 31, 2009 and 2008, respectively, in connection
with this indemnification.
65
Divestiture Obligations
The Company and its predecessor companies agreed to indemnify
third-party purchasers of former businesses and assets for
various pre-closing conditions, as well as for breaches of
representations, warranties and covenants. Such liabilities also
include environmental liability, product liability, antitrust
and other liabilities. These indemnifications and guarantees
represent standard contractual terms associated with typical
divestiture agreements and, other than environmental
liabilities, the Company does not believe that they expose the
Company to any significant risk. As of December 31, 2009
and 2008, the Company has reserves in the aggregate of
$32 million and $33 million, respectively, for these
matters.
The Company has divested numerous businesses, investments and
facilities through agreements containing indemnifications or
guarantees to the purchasers. Many of the obligations contain
monetary
and/or time
limitations, ranging from one year to thirty years. The
aggregate amount of guarantees provided for under these
agreements is approximately $1.9 billion as of
December 31, 2009. Other agreements do not provide for any
monetary or time limitations.
Purchase
Obligations
In the normal course of business, the Company enters into
commitments to purchase goods and services over a fixed period
of time. The Company maintains a number of
take-or-pay
contracts for purchases of raw materials and utilities. As of
December 31, 2009, there were outstanding future
commitments of $1.7 billion under
take-or-pay
contracts. The Company recognized $17 million of losses
related to
take-or-pay
contract termination costs for the year ended December 31,
2009 related to the Companys Pardies, France Project of
Closure (see Note 18). The Company does not expect to incur
any material losses under
take-or-pay
contractual arrangements unrelated to the Pardies, France
Project of Closure. Additionally, as of December 31, 2009,
there were other outstanding commitments of $713 million
representing maintenance and service agreements, energy and
utility agreements, consulting contracts and software agreements.
In April 2007, Southern Chemical Corporation
(Southern) filed a petition in the
190th
Judicial District Court of Harris County, Texas styled Southern
Chemical Corporation v. Celanese Ltd. (Cause
No. 2007-25490),
seeking declaratory judgment relating to the terms of a
multi-year supply contract. The trial court granted the
Companys motion for summary judgment in March 2008
dismissing Southerns claims. In September 2009, the
intermediate Texas appellate court reversed the trial court
decision and remanded the case to the trial court. The Texas
Supreme Court subsequently declined both parties requests
that it hear the case. On August 15, 2010, Southern filed a
second amended petition adding a claim for breach of contract
and seeking damages in an unspecified amount from the Company.
Trial has been set for August 2011. The Company does not believe
the contractual interpretations set forth by Southern have merit
and is vigorously defending the matter.
66
|
|
25.
|
Supplemental
Cash Flow Information
|
The following table represents supplemental cash flow
information for cash and non-cash activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
(In $ millions)
|
|
|
Taxes, net of refunds
|
|
|
17
|
|
|
|
98
|
|
|
|
181
|
|
Interest, net of amounts capitalized
|
|
|
208
|
|
|
|
259
|
|
|
|
414
|
(1)
|
Noncash investing and financing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value adjustment to securities available for sale, net of
tax
|
|
|
(3
|
)
|
|
|
(25
|
)
|
|
|
17
|
|
Capital lease obligations
|
|
|
38
|
|
|
|
103
|
|
|
|
80
|
|
Accrued capital expenditures
|
|
|
(9
|
)
|
|
|
(7
|
)
|
|
|
18
|
|
Asset retirement obligations
|
|
|
30
|
|
|
|
8
|
|
|
|
4
|
|
Accrued Ticona Kelsterbach plant relocation costs
|
|
|
22
|
|
|
|
17
|
|
|
|
19
|
|
|
|
|
(1) |
|
Amount includes premiums paid on early redemption of debt and
related issuance costs, net of amounts capitalized, of
$217 million for the year ended December 31, 2007. |
|
|
26.
|
Business
and Geographical Segments
|
Business
Segments
The Company operates through the following business segments:
Advanced
Engineered Materials
The Companys Advanced Engineered Materials segment
develops, produces and supplies a broad portfolio of high
performance technical polymers for application in automotive and
electronics products as well as other consumer and industrial
applications. The Company and its strategic affiliates are a
leading participant in the global technical polymers industry.
The primary products of Advanced Engineered Materials are used
in a broad range of products including automotive components,
electronics, appliances, industrial applications, battery
separators, conveyor belts, filtration equipment, coatings,
medical devices, electrical and electronics.
Consumer
Specialties
The Companys Consumer Specialties segment consists of the
Acetate Products and Nutrinova businesses. The Acetate Products
business primarily produces and supplies acetate tow, which is
used in the production of filter products. The Company also
produces acetate flake which is processed into acetate fiber in
the form of a tow band. The Companys Nutrinova business
produces and sells
Sunett®,
a high intensity sweetener, and food protection ingredients,
such as sorbates, for the food, beverage and pharmaceuticals
industries.
Industrial
Specialties
The Companys Industrial Specialties segment includes the
Emulsions, PVOH and EVA Performance Polymers businesses. The
Companys Emulsions business is a global leader which
produces a broad product
67
portfolio, specializing in vinyl acetate ethylene emulsions, and
is a recognized authority on low VOC (volatile organic
compounds), an environmentally-friendly technology. As a global
leader, the Companys PVOH business produced a broad
portfolio of performance PVOH chemicals engineered to meet
specific customer requirements. The Companys emulsions and
PVOH products are used in a wide array of applications including
paints and coatings, adhesives, building and construction, glass
fiber, textiles and paper. EVA Performance Polymers offers a
complete line of low-density polyethylene and specialty ethylene
vinyl acetate resins and compounds. EVA Performance
Polymers products are used in many applications including
flexible packaging films, lamination film products, hot melt
adhesives, medical tubing and devices, automotive carpet and
solar cell encapsulation films.
In July 2009, the Company completed the sale of its PVOH
business to Sekisui (Note 4).
Acetyl
Intermediates
The Companys Acetyl Intermediates segment produces and
supplies acetyl products, including acetic acid, VAM, acetic
anhydride and acetate esters. These products are generally used
as starting materials for colorants, paints, adhesives,
coatings, medicines and more. Other chemicals produced in this
business segment are organic solvents and intermediates for
pharmaceutical, agricultural and chemical products.
Other
Activities
Other Activities primarily consists of corporate center costs,
including financing and administrative activities such as legal,
accounting and treasury functions and interest income or expense
associated with financing activities of the Company, and the
captive insurance companies.
The business segment management reporting and controlling
systems are based on the same accounting policies as those
described in the summary of significant accounting policies in
Note 2. The Company evaluates performance based on
operating profit, net earnings (loss), cash flows and other
measures of financial performance reported in accordance with US
GAAP.
Sales and revenues related to transactions between business
segments are generally recorded at values that approximate
third-party selling prices.
68
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Advanced
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Engineered
|
|
|
Consumer
|
|
|
Industrial
|
|
|
Acetyl
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
Materials
|
|
|
Specialties
|
|
|
Specialties
|
|
|
Intermediates
|
|
|
Activities
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
(In $ millions)
|
|
|
As Adjusted (Note 31)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
|
808
|
|
|
|
1,084
|
(1)
|
|
|
974
|
|
|
|
2,603
|
(1)
|
|
|
2
|
|
|
|
(389
|
)
|
|
|
5,082
|
|
Other (charges) gains, net
|
|
|
(18
|
)
|
|
|
(9
|
)
|
|
|
4
|
|
|
|
(91
|
)
|
|
|
(22
|
)(3)
|
|
|
|
|
|
|
(136
|
)
|
Equity in net earnings (loss) of affiliates
|
|
|
78
|
|
|
|
1
|
|
|
|
|
|
|
|
5
|
|
|
|
15
|
|
|
|
|
|
|
|
99
|
|
Earnings (loss) from continuing operations before tax
|
|
|
114
|
|
|
|
288
|
|
|
|
89
|
|
|
|
102
|
|
|
|
(342
|
)
|
|
|
|
|
|
|
251
|
|
Depreciation and amortization
|
|
|
73
|
|
|
|
50
|
|
|
|
51
|
|
|
|
123
|
|
|
|
11
|
|
|
|
|
|
|
|
308
|
|
Capital expenditures
|
|
|
27
|
|
|
|
50
|
|
|
|
45
|
|
|
|
36
|
|
|
|
9
|
|
|
|
|
|
|
|
167
|
(2)
|
Goodwill and intangible assets
|
|
|
385
|
|
|
|
299
|
|
|
|
62
|
|
|
|
346
|
|
|
|
|
|
|
|
|
|
|
|
1,092
|
|
Total assets
|
|
|
2,268
|
|
|
|
1,083
|
|
|
|
740
|
|
|
|
1,985
|
|
|
|
2,336
|
|
|
|
|
|
|
|
8,412
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As Adjusted (Note 31)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
|
1,061
|
|
|
|
1,155
|
|
|
|
1,406
|
|
|
|
3,875
|
(1)
|
|
|
2
|
|
|
|
(676
|
)
|
|
|
6,823
|
|
Other (charges) gains, net
|
|
|
(29
|
)
|
|
|
(2
|
)
|
|
|
(3
|
)
|
|
|
(78
|
)
|
|
|
4
|
|
|
|
|
|
|
|
(108
|
)
|
Equity in net earnings (loss) of affiliates
|
|
|
155
|
|
|
|
|
|
|
|
|
|
|
|
3
|
|
|
|
14
|
|
|
|
|
|
|
|
172
|
|
Earnings (loss) from continuing operations before tax
|
|
|
190
|
|
|
|
237
|
|
|
|
47
|
|
|
|
312
|
|
|
|
(353
|
)
|
|
|
|
|
|
|
433
|
|
Depreciation and amortization
|
|
|
76
|
|
|
|
53
|
|
|
|
62
|
|
|
|
150
|
|
|
|
9
|
|
|
|
|
|
|
|
350
|
|
Capital expenditures
|
|
|
55
|
|
|
|
49
|
|
|
|
67
|
|
|
|
86
|
|
|
|
10
|
|
|
|
|
|
|
|
267
|
(2)
|
Goodwill and intangible assets
|
|
|
398
|
|
|
|
309
|
|
|
|
73
|
|
|
|
363
|
|
|
|
|
|
|
|
|
|
|
|
1,143
|
|
Total assets
|
|
|
1,916
|
|
|
|
995
|
|
|
|
903
|
|
|
|
2,194
|
|
|
|
1,150
|
|
|
|
|
|
|
|
7,158
|
|
|
|
|
(1) |
|
Includes $389 million, $676 million and
$660 million of intersegment sales eliminated in
consolidation for the years ended December 31, 2009, 2008
and 2007, respectively. |
|
(2) |
|
Excludes expenditures related to the relocation of the
Companys Ticona plant in Kelsterbach
(Note 29) and includes a decrease in accrued capital
expenditures of $9 million and $7 million for the
years ended December 31, 2009 and 2008, respectively (see
Note 25). |
|
(3) |
|
Includes $10 million of insurance recoveries received from
the Companys captive insurance companies related to the
Edmonton, Alberta, Canada facility that eliminates in
consolidation. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Advanced
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Engineered
|
|
|
Consumer
|
|
|
Industrial
|
|
|
Acetyl
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
Materials
|
|
|
Specialties
|
|
|
Specialties
|
|
|
Intermediates
|
|
|
Activities
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
(In $ millions)
|
|
|
As Adjusted (Note 31)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
|
1,030
|
|
|
|
1,111
|
|
|
|
1,346
|
|
|
|
3,615
|
(1)
|
|
|
2
|
|
|
|
(660
|
)
|
|
|
6,444
|
|
Other (charges) gains, net
|
|
|
(4
|
)
|
|
|
(4
|
)
|
|
|
(23
|
)
|
|
|
72
|
|
|
|
(99
|
)(3)
|
|
|
|
|
|
|
(58
|
)
|
Equity in net earnings (loss) of affiliates
|
|
|
123
|
|
|
|
3
|
|
|
|
|
|
|
|
6
|
|
|
|
18
|
|
|
|
|
|
|
|
150
|
|
Earnings (loss) from continuing operations before tax
|
|
|
260
|
|
|
|
235
|
|
|
|
28
|
|
|
|
613
|
|
|
|
(699
|
)
|
|
|
|
|
|
|
437
|
|
Depreciation and amortization
|
|
|
69
|
|
|
|
51
|
|
|
|
59
|
|
|
|
106
|
|
|
|
6
|
|
|
|
|
|
|
|
291
|
|
Capital expenditures
|
|
|
59
|
|
|
|
43
|
|
|
|
63
|
|
|
|
130
|
|
|
|
11
|
|
|
|
|
|
|
|
306
|
(2)
|
69
|
|
|
(1) |
|
Includes $389 million, $676 million and
$660 million of intersegment sales eliminated in
consolidation for the years ended December 31, 2009, 2008
and 2007, respectively. |
|
(2) |
|
Excludes expenditures related to the relocation of the
Companys Ticona plant in Kelsterbach
(Note 29) and includes a decrease in accrued capital
expenditures of $9 million and $7 million for the
years ended December 31, 2009 and 2008, respectively (see
Note 25). |
|
(3) |
|
Includes $35 million of insurance recoveries received from
the Companys captive insurance companies related to the
Clear Lake, Texas facility (Note 30) that eliminates
in consolidation. |
Geographical
Segments
Revenues and noncurrent assets are presented based on the
location of the business. The following table presents net sales
based on the geographic location of the Companys
facilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
2009
|
|
2008
|
|
2007
|
|
|
(In $ millions)
|
|
Net sales
|
|
|
|
|
|
|
|
|
|
|
|
|
US
|
|
|
1,262
|
|
|
|
1,719
|
|
|
|
1,754
|
|
International
|
|
|
3,820
|
|
|
|
5,104
|
|
|
|
4,690
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
5,082
|
|
|
|
6,823
|
|
|
|
6,444
|
|
Significant international net sales sources include
|
|
|
|
|
|
|
|
|
|
|
|
|
Germany
|
|
|
1,733
|
|
|
|
2,469
|
|
|
|
2,348
|
|
China
|
|
|
460
|
|
|
|
393
|
|
|
|
182
|
|
Singapore
|
|
|
513
|
|
|
|
783
|
|
|
|
762
|
|
Belgium
|
|
|
459
|
|
|
|
478
|
|
|
|
295
|
|
Canada
|
|
|
173
|
|
|
|
276
|
|
|
|
266
|
|
Mexico
|
|
|
277
|
|
|
|
391
|
|
|
|
349
|
|
The following table presents property, plant and equipment, net
based on the geographic location of the Companys
facilities:
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
|
2009
|
|
2008
|
|
|
(In $ millions)
|
|
Property, plant and equipment, net
|
|
|
|
|
|
|
|
|
US
|
|
|
634
|
|
|
|
733
|
|
International
|
|
|
2,163
|
|
|
|
1,737
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
2,797
|
|
|
|
2,470
|
|
Significant international property, plant and equipment, net
sources include
|
|
|
|
|
|
|
|
|
Germany
|
|
|
1,075
|
|
|
|
682
|
|
China
|
|
|
516
|
|
|
|
493
|
|
Singapore
|
|
|
98
|
|
|
|
111
|
|
Belgium
|
|
|
27
|
|
|
|
24
|
|
Canada
|
|
|
131
|
|
|
|
117
|
|
Mexico
|
|
|
103
|
|
|
|
105
|
|
70
|
|
27.
|
Transactions
and Relationships with Affiliates and Related Parties
|
The Company is a party to various transactions with affiliated
companies. Entities in which the Company has an investment
accounted for under the cost or equity method of accounting, are
considered affiliates; any transactions or balances with such
companies are considered affiliate transactions. The following
table represents the Companys transactions with affiliates
for the periods presented:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
2009
|
|
2008
|
|
2007
|
|
|
(In $ millions)
|
|
Purchases from
affiliates(1)(2)
|
|
|
143
|
|
|
|
143
|
|
|
|
126
|
|
Sales to
affiliates(1)
|
|
|
6
|
|
|
|
36
|
|
|
|
126
|
|
Interest income from affiliates
|
|
|
1
|
|
|
|
2
|
|
|
|
1
|
|
Interest expense to affiliates
|
|
|
1
|
|
|
|
9
|
|
|
|
7
|
|
|
|
|
(1) |
|
Purchases and sales from/to affiliates are accounted for at
prices which, in the opinion of the Company, approximate those
charged to third-party customers for similar goods or services. |
|
(2) |
|
Primarily includes utilities and services purchased from
InfraServ Hoechst. |
Refer to Note 8 for additional information related to
dividends received from affiliates.
The following table represents the Companys balances with
affiliates for the periods presented:
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
|
2009
|
|
2008
|
|
|
(In $ millions)
|
|
Trade and other receivables from affiliates
|
|
|
|
|
|
|
8
|
|
Current notes receivable (including interest) from affiliates
|
|
|
12
|
|
|
|
9
|
|
Noncurrent notes receivable (including interest) from affiliates
|
|
|
7
|
|
|
|
9
|
|
|
|
|
|
|
|
|
|
|
Total receivables from affiliates
|
|
|
19
|
|
|
|
26
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and other liabilities due affiliates
|
|
|
15
|
|
|
|
18
|
|
Short-term borrowings from affiliates
|
|
|
85
|
|
|
|
103
|
|
|
|
|
|
|
|
|
|
|
Total due affiliates
|
|
|
100
|
|
|
|
121
|
|
|
|
|
|
|
|
|
|
|
The Company has agreements with certain affiliates, primarily
InfraServ entities, whereby excess affiliate cash is lent to and
managed by the Company, at variable interest rates governed by
those agreements.
For the year ended 2007, the Company made payments to the
Advisor of $7 million in accordance with the sponsor
services agreement dated January 26, 2005, as amended.
These payments were related to the sale of the oxo products and
derivatives businesses and the acquisition of APL (Note 4).
71
|
|
28.
|
Earnings
(Loss) Per Share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
Basic
|
|
|
Diluted
|
|
|
Basic
|
|
|
Diluted
|
|
|
Basic
|
|
|
Diluted
|
|
|
|
As Adjusted (Note 31)
|
|
|
|
(In $ millions, except for share and per share data)
|
|
|
Amounts attributable to Celanese Corporation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) from continuing operations
|
|
|
494
|
|
|
|
494
|
|
|
|
371
|
|
|
|
371
|
|
|
|
326
|
|
|
|
326
|
|
Earnings (loss) from discontinued operations
|
|
|
4
|
|
|
|
4
|
|
|
|
(90
|
)
|
|
|
(90
|
)
|
|
|
90
|
|
|
|
90
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings (loss)
|
|
|
498
|
|
|
|
498
|
|
|
|
281
|
|
|
|
281
|
|
|
|
416
|
|
|
|
416
|
|
Less: cumulative preferred stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
dividend
|
|
|
(10
|
)
|
|
|
|
|
|
|
(10
|
)
|
|
|
|
|
|
|
(10
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings (loss) available to common shareholders
|
|
|
488
|
|
|
|
498
|
|
|
|
271
|
|
|
|
281
|
|
|
|
406
|
|
|
|
416
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares basic
|
|
|
143,688,749
|
|
|
|
143,688,749
|
|
|
|
148,350,273
|
|
|
|
148,350,273
|
|
|
|
154,475,020
|
|
|
|
154,475,020
|
|
Dilutive stock options
|
|
|
|
|
|
|
1,167,922
|
|
|
|
|
|
|
|
2,559,268
|
|
|
|
|
|
|
|
4,344,644
|
|
Dilutive restricted stock units
|
|
|
|
|
|
|
172,246
|
|
|
|
|
|
|
|
504,439
|
|
|
|
|
|
|
|
362,130
|
|
Assumed conversion of preferred stock
|
|
|
|
|
|
|
12,086,604
|
|
|
|
|
|
|
|
12,057,893
|
|
|
|
|
|
|
|
12,046,203
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares diluted
|
|
|
143,688,749
|
|
|
|
157,115,521
|
|
|
|
148,350,273
|
|
|
|
163,471,873
|
|
|
|
154,475,020
|
|
|
|
171,227,997
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) from continuing operations
|
|
|
3.37
|
|
|
|
3.14
|
|
|
|
2.44
|
|
|
|
2.27
|
|
|
|
2.05
|
|
|
|
1.90
|
|
Earnings (loss) from discontinued operations
|
|
|
0.03
|
|
|
|
0.03
|
|
|
|
(0.61
|
)
|
|
|
(0.55
|
)
|
|
|
0.58
|
|
|
|
0.53
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings (loss)
|
|
|
3.40
|
|
|
|
3.17
|
|
|
|
1.83
|
|
|
|
1.72
|
|
|
|
2.63
|
|
|
|
2.43
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following securities were not included in the computation of
diluted net earnings per share as their effect would have been
antidilutive:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Stock options
|
|
|
2,433,515
|
|
|
|
2,298,159
|
|
|
|
336,133
|
|
Restricted stock units
|
|
|
302,635
|
|
|
|
90,625
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
2,736,150
|
|
|
|
2,388,784
|
|
|
|
336,133
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29.
|
Ticona
Kelsterbach Plant Relocation
|
In November 2006, the Company finalized a settlement agreement
with the Frankfurt, Germany, Airport (Fraport) to
relocate the Kelsterbach, Germany Ticona business, included in
the Advanced Engineered Materials segment, resolving several
years of legal disputes related to the planned Fraport
expansion. As a result of the settlement, the Company will
transition Ticonas operations from Kelsterbach to the
Hoechst Industrial Park in the Rhine Main area in Germany by
mid-2011. Under the original agreement, Fraport agreed to pay
Ticona a total of 670 million over a five-year period
to offset the costs associated with the transition of the
business from its current location and the closure of the
Kelsterbach plant. In February 2009, the Company announced the
Fraport supervisory board approved the acceleration of the 2009
and 2010 payments of 200 million and
140 million, respectively, required by the settlement
agreement signed in June 2007. In February 2009, the Company
received a discounted amount of 322 million
($412 million) under this
72
agreement. In addition, the Company received
59 million ($75 million) in value-added tax from
Fraport which was remitted to the tax authorities in April 2009.
In June 2008, the Company received 200 million
($311 million) from Fraport under this agreement. Amounts
received from Fraport are accounted for as deferred proceeds and
are included in noncurrent Other liabilities in the consolidated
balance sheets.
Below is a summary of the financial statement impact associated
with the Ticona Kelsterbach plant relocation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total From
|
|
|
|
Year Ended December 31,
|
|
|
Inception Through
|
|
|
|
2009
|
|
|
2008
|
|
|
December 31, 2009
|
|
|
|
(In $ millions)
|
|
|
Proceeds received from Fraport
|
|
|
412
|
|
|
|
311
|
|
|
|
749
|
|
Costs expensed
|
|
|
16
|
|
|
|
12
|
|
|
|
33
|
|
Costs capitalized
|
|
|
373
|
(1)
|
|
|
202
|
(1)
|
|
|
616
|
|
|
|
|
(1) |
|
Includes increase in accrued capital expenditures of
$22 million and $17 million for the years ended
December 31, 2009 and 2008, respectively. |
In May 2007, the Company announced that it had an unplanned
outage at its Clear Lake, Texas acetic acid facility. At that
time, the Company originally expected the outage to last until
the end of May. Upon restart of the facility, additional
operating issues were identified which necessitated an extension
of the outage for further, more extensive repairs. In July 2007,
the Company announced that the further repairs were unsuccessful
on restart of the unit. All repairs were completed in early
August 2007 and normal production capacity resumed. During the
years ended December 31, 2009 and 2008, the Company
recorded $6 million and $38 million, respectively, of
insurance recoveries from its reinsurers in partial satisfaction
of claims that the Company made based on losses resulting from
the outage. These insurances recoveries are included in Other
(charges) gains, net in the consolidated statements of
operations (Note 18).
In October 2008, the Company declared force majeure on its
specialty polymers products produced at its EVA Performance
Polymers facility in Edmonton, Alberta, Canada as a result of
certain events and subsequent cessation of production. The
Company replaced damaged long-lived assets during 2009. Any
contingent liabilities associated with the outage may be
mitigated by the Companys insurance policies.
Dividends
On January 5, 2010, the Company declared a cash dividend of
$0.265625 per share on its Preferred Stock amounting to
$3 million and a cash dividend of $0.04 per share on its
Series A common stock amounting to $6 million. Both
cash dividends are for the period from November 2, 2009 to
January 31, 2010 and were paid on February 1, 2010 to
holders of record as of January 15, 2010.
On April 5, 2010, the Company declared a cash dividend of
$0.04 per share on its Common Stock amounting to
$6 million. The cash dividends are for the period from
February 1, 2010 to April 30, 2010 and were paid on
May 1, 2010 to holders of record as of April 15, 2010.
On April 26, 2010, the Company announced that its Board of
Directors approved a 25% increase in the Companys
quarterly Common Stock cash dividend. The Directors increased
the quarterly dividend rate
73
from $0.04 to $0.05 per share of Common Stock on a quarterly
basis and $0.16 to $0.20 per share of Common Stock on an annual
basis. The new dividend rate is applicable to dividends payable
beginning in August 2010.
On July 1, 2010, the Company declared a cash dividend of
$0.05 per share on its Common Stock amounting to
$8 million. The cash dividends are for the period from
May 1, 2010 to July 31, 2010 and were paid on
August 2, 2010 to holders of record as of July 15,
2010.
Preferred
Stock
On February 1, 2010, the Company delivered notice to the
holders of its 4.25% Convertible Perpetual Preferred Stock
(the Preferred Stock) that it was calling for the
redemption of all 9.6 million outstanding shares of
Preferred Stock. Holders of the Preferred Stock were entitled to
convert each share of Preferred Stock into 1.2600 shares of
the Companys Series A Common Stock, par value $0.0001
per share (Common Stock), at any time prior to
5:00 p.m., New York City time, on February 19, 2010.
As of such date, holders of Preferred Stock had elected to
convert 9,591,276 shares of Preferred Stock into an
aggregate of 12,084,942 shares of Common Stock. The
8,724 shares of Preferred Stock that remained outstanding
after such conversions were redeemed by the Company on
February 22, 2010 for 7,437 shares of Common Stock, in
accordance with the terms of the Preferred Stock. In addition to
the shares of Common Stock issued in respect of the shares of
Preferred Stock converted and redeemed, the Company paid cash in
lieu of fractional shares. The Company recorded expense of less
than $1 million in 2010 in Additional paid-in capital
related to the conversion and redemption of the Preferred Stock
Treasury
Stock
During 2010, the Company repurchased a total of
1,473,492 shares of its Series A common stock at an
average purchase price of $27.82 per share for a total of
$41 million. The Company has the ability to repurchase an
additional $81 million of Series A common stock based
on the Board of Directors authorization of
$500 million.
Purchase
Obligations
During the first quarter of 2010, the Company successfully
completed an amended raw material purchase agreement with a
supplier who had filed for bankruptcy. Under the original
contract, the Company made advance payments in exchange for
preferential pricing on certain volumes of material purchases
over the life of the contract. The cancellation of the original
contract and the terms of the subsequent amendment resulted in
the Company accelerating amortization in 2010 on the unamortized
prepayment balance of $22 million. The accelerated
amortization was recorded in 2010 to Cost of sales as follows:
$20 million was recorded in the Acetyl Intermediates
segment and $2 million was recorded in the Advanced
Engineered Materials segment.
Ventures
The Company indirectly owns a 25% interest in its National
Methanol Company (Ibn Sina) affiliate through CTE
Petrochemicals Company (CTE), a joint venture with
Texas Eastern Arabian Corporation Ltd. (which also indirectly
owns 25%). The remaining interest in Ibn Sina is held by Saudi
Basic Industries Corporation (SABIC). SABIC and CTE
entered into the Ibn Sina joint venture agreement in 1981. In
April 2010, the Company announced that Ibn Sina will construct a
50,000 ton polyacetal (POM) production facility in
Saudi Arabia and that the term of the joint venture agreement
was extended until 2032. Upon
74
successful startup of the POM facility, the Companys
indirect economic interest in Ibn Sina will increase from 25% to
32.5%. SABICs economic interest will remain unchanged.
In connection with this transaction, the Company reassessed the
factors surrounding the accounting method for this investment
and changed the accounting from the cost method of accounting
for investments to the equity method of accounting for
investments beginning April 1, 2010. Financial information
relating to this investment for prior periods has been
retrospectively adjusted to apply the equity method of
accounting. Effective April 1, 2010, the Company moved its
investment in the Ibn Sina affiliate from its Acetyl
Intermediates segment to its Advanced Engineered Materials
segment to reflect the change in the affiliates business
dynamics and growth opportunities as a result of the future
construction of the POM facility. Business segment information
for prior periods included in Note 26 has been
retrospectively adjusted to reflect the change.
The retrospective effect of applying the equity method of
accounting to this investment to the consolidated statements of
operations is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
As
|
|
|
As Adjusted for
|
|
|
Effect
|
|
|
As
|
|
|
As Adjusted for
|
|
|
Effect
|
|
|
As
|
|
|
As Adjusted for
|
|
|
Effect
|
|
|
|
Originally
|
|
|
Retrospective
|
|
|
of
|
|
|
Originally
|
|
|
Retrospective
|
|
|
of
|
|
|
Originally
|
|
|
Retrospective
|
|
|
of
|
|
|
|
Reported
|
|
|
Application
|
|
|
Change
|
|
|
Reported
|
|
|
Application
|
|
|
Change
|
|
|
Reported
|
|
|
Application
|
|
|
Change
|
|
|
|
(In $ millions, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity in net earnings (loss) of affiliates
|
|
|
48
|
|
|
|
99
|
|
|
|
51
|
|
|
|
54
|
|
|
|
172
|
|
|
|
118
|
|
|
|
82
|
|
|
|
150
|
|
|
|
68
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividend income cost investments
|
|
|
98
|
|
|
|
57
|
|
|
|
(41
|
)
|
|
|
167
|
|
|
|
48
|
|
|
|
(119
|
)
|
|
|
116
|
|
|
|
38
|
|
|
|
(78
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) from continuing operations before tax
|
|
|
241
|
|
|
|
251
|
|
|
|
10
|
|
|
|
434
|
|
|
|
433
|
|
|
|
(1
|
)
|
|
|
447
|
|
|
|
437
|
|
|
|
(10
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) from continuing operations
|
|
|
484
|
|
|
|
494
|
|
|
|
10
|
|
|
|
371
|
|
|
|
370
|
|
|
|
(1
|
)
|
|
|
337
|
|
|
|
327
|
|
|
|
(10
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings (loss)
|
|
|
488
|
|
|
|
498
|
|
|
|
10
|
|
|
|
281
|
|
|
|
280
|
|
|
|
(1
|
)
|
|
|
427
|
|
|
|
417
|
|
|
|
(10
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings (loss) attributable to Celanese Corporation
|
|
|
488
|
|
|
|
498
|
|
|
|
10
|
|
|
|
282
|
|
|
|
281
|
|
|
|
(1
|
)
|
|
|
426
|
|
|
|
416
|
|
|
|
(10
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings (loss) available to common shareholders
|
|
|
478
|
|
|
|
488
|
|
|
|
10
|
|
|
|
272
|
|
|
|
271
|
|
|
|
(1
|
)
|
|
|
416
|
|
|
|
406
|
|
|
|
(10
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) per common share basic
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
|
3.30
|
|
|
|
3.37
|
|
|
|
0.07
|
|
|
|
2.44
|
|
|
|
2.44
|
|
|
|
-
|
|
|
|
2.11
|
|
|
|
2.05
|
|
|
|
(0.06
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discontinued operations
|
|
|
0.03
|
|
|
|
0.03
|
|
|
|
-
|
|
|
|
(0.61
|
)
|
|
|
(0.61
|
)
|
|
|
-
|
|
|
|
0.58
|
|
|
|
0.58
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings (loss) basic
|
|
|
3.33
|
|
|
|
3.40
|
|
|
|
0.07
|
|
|
|
1.83
|
|
|
|
1.83
|
|
|
|
-
|
|
|
|
2.69
|
|
|
|
2.63
|
|
|
|
(0.06
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) per common share diluted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
|
3.08
|
|
|
|
3.14
|
|
|
|
0.06
|
|
|
|
2.28
|
|
|
|
2.27
|
|
|
|
(0.01
|
)
|
|
|
1.96
|
|
|
|
1.90
|
|
|
|
(0.06
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discontinued operations
|
|
|
0.03
|
|
|
|
0.03
|
|
|
|
-
|
|
|
|
(0.55
|
)
|
|
|
(0.55
|
)
|
|
|
-
|
|
|
|
0.53
|
|
|
|
0.53
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings (loss) diluted
|
|
|
3.11
|
|
|
|
3.17
|
|
|
|
0.06
|
|
|
|
1.73
|
|
|
|
1.72
|
|
|
|
(0.01
|
)
|
|
|
2.49
|
|
|
|
2.43
|
|
|
|
(0.06
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
75
The retrospective effect of applying the equity method of
accounting to this investment to the consolidated balance sheet
is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
As
|
|
|
As Adjusted for
|
|
|
Effect
|
|
|
As
|
|
|
As Adjusted for
|
|
|
Effect
|
|
|
|
Originally
|
|
|
Retrospective
|
|
|
of
|
|
|
Originally
|
|
|
Retrospective
|
|
|
of
|
|
|
|
Reported
|
|
|
Application
|
|
|
Change
|
|
|
Reported
|
|
|
Application
|
|
|
Change
|
|
|
|
(In $ millions)
|
|
|
Investments in affiliates
|
|
|
790
|
|
|
|
792
|
|
|
|
2
|
|
|
|
789
|
|
|
|
781
|
|
|
|
(8
|
)
|
Total assets
|
|
|
8,410
|
|
|
|
8,412
|
|
|
|
2
|
|
|
|
7,166
|
|
|
|
7,158
|
|
|
|
(8
|
)
|
Retained earnings
|
|
|
1,502
|
|
|
|
1,505
|
|
|
|
3
|
|
|
|
1,047
|
|
|
|
1,040
|
|
|
|
(7
|
)
|
Accumulated other comprehensive income (loss), net
|
|
|
(659
|
)
|
|
|
(660
|
)
|
|
|
(1
|
)
|
|
|
(579
|
)
|
|
|
(580
|
)
|
|
|
(1
|
)
|
Total Celanese Corporation shareholders equity
|
|
|
584
|
|
|
|
586
|
|
|
|
2
|
|
|
|
182
|
|
|
|
174
|
|
|
|
(8
|
)
|
Total shareholders equity
|
|
|
584
|
|
|
|
586
|
|
|
|
2
|
|
|
|
184
|
|
|
|
176
|
|
|
|
(8
|
)
|
Total liabilities and shareholders equity
|
|
|
8,410
|
|
|
|
8,412
|
|
|
|
2
|
|
|
|
7,166
|
|
|
|
7,158
|
|
|
|
(8
|
)
|
The retrospective effect of applying the equity method of
accounting to this investment to the consolidated statement of
cash flows is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
As
|
|
|
As Adjusted for
|
|
|
Effect
|
|
|
As
|
|
|
As Adjusted for
|
|
|
Effect
|
|
|
As
|
|
|
As Adjusted for
|
|
|
Effect
|
|
|
|
Originally
|
|
|
Retrospective
|
|
|
of
|
|
|
Originally
|
|
|
Retrospective
|
|
|
of
|
|
|
Originally
|
|
|
Retrospective
|
|
|
of
|
|
|
|
Reported
|
|
|
Application
|
|
|
Change
|
|
|
Reported
|
|
|
Application
|
|
|
Change
|
|
|
Reported
|
|
|
Application
|
|
|
Change
|
|
|
|
(In $ millions)
|
|
|
Net earnings (loss)
|
|
|
488
|
|
|
|
498
|
|
|
|
10
|
|
|
|
281
|
|
|
|
280
|
|
|
|
(1
|
)
|
|
|
427
|
|
|
|
417
|
|
|
|
(10
|
)
|
Adjustments to reconcile net earnings (loss) to net cash
provided by operating activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other, net
|
|
|
22
|
|
|
|
12
|
|
|
|
(10
|
)
|
|
|
36
|
|
|
|
37
|
|
|
|
1
|
|
|
|
(2
|
)
|
|
|
8
|
|
|
|
10
|
|
76
The retrospective effect of applying the equity method of
accounting to this investment to the business segment financial
information (Note 26) is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
|
|
|
|
As Adjusted
|
|
|
|
|
|
2008
|
|
|
|
|
|
As Adjusted
|
|
|
|
|
|
|
As
|
|
|
for
|
|
|
Effect
|
|
|
As
|
|
|
As Adjusted for
|
|
|
Effect
|
|
|
As
|
|
|
for
|
|
|
Effect
|
|
|
|
Originally
|
|
|
Retrospective
|
|
|
of
|
|
|
Originally
|
|
|
Retrospective
|
|
|
of
|
|
|
Originally
|
|
|
Retrospective
|
|
|
of
|
|
|
|
Reported
|
|
|
Application
|
|
|
Change
|
|
|
Reported
|
|
|
Application
|
|
|
Change
|
|
|
Reported
|
|
|
Application
|
|
|
Change
|
|
|
|
(In $ millions)
|
|
|
Advanced Engineered Materials Earnings (loss) from continuing
operations before tax
|
|
|
62
|
|
|
|
114
|
|
|
|
52
|
|
|
|
69
|
|
|
|
190
|
|
|
|
121
|
|
|
|
189
|
|
|
|
260
|
|
|
|
71
|
|
Acetyl Intermediates Earnings (loss) from continuing operations
before tax
|
|
|
144
|
|
|
|
102
|
|
|
|
(42
|
)
|
|
|
434
|
|
|
|
312
|
|
|
|
(122
|
)
|
|
|
694
|
|
|
|
613
|
|
|
|
(81
|
)
|
Plant
Closures
In April 2010, the Company announced it was considering a plan
to consolidate its global acetate manufacturing capabilities by
proposing the closure of its acetate flake and tow manufacturing
operations in Spondon, Derby, United Kingdom. The consolidation
is designed to strengthen the Companys competitive
position, reduce fixed costs and align future production
capacities with anticipated industry demand trends. The
consolidation is also driven by a global shift in product
consumption. The Company would expect to serve its acetate
customers under this proposal by optimizing its global
production network, which includes facilities in Lanaken,
Belgium; Narrows, Virginia; and Ocotlan, Mexico, as well as the
Companys acetate affiliate facilities in China.
During the first quarter of 2010, the Company concluded that
certain long-lived assets of the Spondon, Derby, United Kingdom
facility were partially impaired. Accordingly, in 2010 the
Company recorded long-lived asset impairment losses of
$72 million to Other (charges) gains, net. The Spondon,
Derby, United Kingdom facility is included in the Consumer
Specialties segment.
On August 24, 2010 the Company announced it had concluded
it will consolidate its global acetate manufacturing
capabilities by closing its acetate flake and tow manufacturing
operations in Spondon, Derby, United Kingdom. The Company has
been consulting with employees and their representatives since
the announced proposed cessation of operations at the Spondon
plant made on April 27, 2010. These consultations did not
result in a demonstrated basis for viable continuing operations
for acetate flake and tow operations at the site and therefore,
the Company intends to cease operations in the latter part of
2011.
Acquisitions
On May 5, 2010, the Company acquired two product lines,
Zenite®
liquid crystal polymer (LCP) and
Thermx®
polycyclohexylene-dimethylene terephthalate (PCT),
from DuPont Performance Polymers. The acquisition will continue
to build upon the Companys position as a global supplier
of high performance materials and technology-driven
applications. These two product lines broaden the Companys
Ticona Engineering Polymers offerings within its Advanced
Engineered Materials segment, enabling the Company to respond to
a globalizing customer base, especially in the high growth
electrical and electronics application markets. Pro forma
financial information since the acquisition date has not been
provided as the acquisition
77
did not have a material impact on the Companys financial
information. During 2010, the Company incurred $1 million
in direct transaction costs as a result of this acquisition.
The Company allocated the purchase price of the acquisition to
identifiable intangible assets acquired based on their estimated
fair values. The excess of purchase price over the aggregate
fair values was recorded as goodwill. Intangible assets were
valued using the relief from royalty and discounted cash flow
methodologies which are considered a Level 3 measurement
under FASB ASC Topic 820. The relief from royalty method
estimates the Companys theoretical royalty savings from
ownership of the intangible asset. Key assumptions used in this
model include discount rates, royalty rates, growth rates, sales
projections and terminal value rates. Discount rates, royalty
rates, growth rates and sales projections are the assumptions
most sensitive and susceptible to change as they require
significant management judgment. The key assumptions used in the
discounted cash flow valuation model include discount rates,
growth rates, cash flow projections and terminal value rates.
Discount rates, growth rates and cash flow projections are the
most sensitive and susceptible to change as they require
significant management judgment. The Company, with the
assistance of third-party valuation consultants, calculated the
fair value of the intangible assets acquired to allocate the
purchase price at the respective acquisition date.
The consideration paid for the product lines and the amounts of
the intangible assets acquired recognized at the acquisition
date are as follows:
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
Average Life
|
|
|
|
|
|
|
(In years)
|
|
|
(In $ millions)
|
|
|
Cash consideration
|
|
|
|
|
|
|
46
|
|
|
|
|
|
|
|
|
|
|
Intangible assets acquired
|
|
|
|
|
|
|
|
|
Trademarks and trade names
|
|
|
indefinite
|
|
|
|
9
|
|
Developed technology
|
|
|
10
|
|
|
|
7
|
|
Covenant not to compete and other
|
|
|
3
|
|
|
|
11
|
|
Customer-related intangible assets
|
|
|
10
|
|
|
|
6
|
|
Goodwill
|
|
|
|
|
|
|
13
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
46
|
|
|
|
|
|
|
|
|
|
|
In connection with the acquisition, the Company has committed to
purchase certain inventory at a future date valued at a range
between $12 million and $17 million.
Commitments
and Contingencies
During 2010, the following litigation matters
(Note 24) were updated to reflect new facts: Polyester
Staple Antitrust Litigation; Award Proceedings in relation to
Domination Agreement and Squeeze-Out; and Purchase Obligations.
Interest
Rate Risk Management
On August 27, 2010 the Company executed an interest rate
swap with a notional amount of $1.1 billion. As a result of
the swap, the Company has fixed the LIBOR portion of
$1.1 billion of the Companys floating rate debt at
1.7125% effective January 2, 2012 through January 2,
2014.
78
Debt
Refinancing
On September 7, 2010, the Company announced it is in the
process of issuing $400 million of senior unsecured notes
due in 2018 (the Notes) through its wholly-owned
subsidiary Celanese US. The Notes will be senior unsecured
obligations of Celanese US and the Company. The proceeds from
this offering will be used for general corporate purposes,
including the repayment of existing senior secured credit
facility indebtedness. In connection with this offering, the
Company is seeking to amend its existing senior credit facility,
which consists of $2,280 million of US dollar denominated
and 400 million of Euro-denominated term loans due in
2014, a $600 million revolving credit facility terminating
in 2013 and a $228 million credit-linked revolving facility
terminating in 2014. The proposed amendment would, among other
things, amend certain terms and conditions of the credit
facilities and extend the maturity of portions of the
facilities. The proposed transaction would extend (i) the
maturity of a portion of the existing term loan to October 2016
and (ii) the maturity of a portion of the existing
revolving credit facility to October 2015. The Company also
intends to repay approximately $200 million of its term
loans using cash on hand. The extended facilities will be
subject to modified interest rates.
79