celanese 1q06_earnings_slides_-_final
TRANSCRIPT
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Dave Weidman, President and CEOJohn J. Gallagher III, Executive Vice President and CFO
Celanese 1Q 2006 Earnings
Conference Call / WebcastTuesday, May 9, 2006 3:30 p.m. CT
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Forward Looking Statements, Reconciliation and Use of Non-GAAP Measures to U.S. GAAP
This release may contain “forward-looking statements,” which include information concerning the company’s plans, objectives, goals, strategies, future revenues or performance, capital expenditures, financing needs and other information that is not historical information. When used in this release, the words “outlook,” “forecast,” “estimates,” “expects,” “anticipates,” “projects,” “plans,” “intends,” “believes,” and variations of such words or similar expressions are intended to identify forward-looking statements. All forward-looking statements are based upon current expectations and beliefs and various assumptions. There can be no assurance that the company will realize these expectations or that these beliefs will prove correct.
There are a number of risks and uncertainties that could cause actual results to differ materially from the forward-looking statements contained in this release. Numerous factors, many of which are beyond the company’s control, could cause actual results to differ materially from those expressed as forward-looking statements. Certain of these risk factors are discussed in the company’s filings with the Securities and Exchange Commission. Any forward-looking statement speaks only as of the date on which it is made, and the company undertakes no obligation to update any forward-looking statements to reflect events or circumstances after the date on which it is made or to reflect the occurrence of anticipated or unanticipated events or circumstances. This release reflects three performance measures, operating EBITDA, adjusted earnings per share and net debt as non-U.S. GAAP measures. The most directly comparable financial measure presented in accordance with U.S. GAAP in our consolidated financial statements for operating EBITDA is operating profit; for adjusted earnings per share is earnings per common share-diluted; and for net debt is total debt. Use of Non-U.S. GAAP Financial Information
� Operating EBITDA, a measure used by management to measure performance, is defined as operating profit from continuing operations, plus equity in net earnings from affiliates, other income and depreciation and amortization, and further adjusted for special charges and other adjustments. Our management believes operating EBITDA is useful to investors because it is one of the primary measures our management uses for its planning and budgeting processes and to monitor and evaluate financial and operating results. Operating EBITDA is not a recognized term under U.S. GAAP and does not purport to be an alternative to operating profit as a measure of operating performance or to cash flows from operating activities as a measure of liquidity. Because not all companies use identical calculations, this presentation of operating EBITDA may not be comparable to other similarly titled measures of other companies. Additionally, operating EBITDA is not intended to be a measure of free cash flow for management’s discretionary use, as it does not consider certain cash requirements such as interest payments, tax payments and debt service requirements nor does it represent the amount used in our debt covenants.
� Adjusted earnings per share is a measure used by management to measure performance. It is defined as net earnings (loss) available to common shareholders plus preferred dividends, adjusted for special charges and other adjustments, and divided by the number of basic common shares, diluted preferred shares, and options valued using the treasury method. We believe that the presentation of this non-U.S. GAAP measure provides useful information to management and investors regarding various financial and business trends relating to our financial condition and results of operations, and that when U.S. GAAP information is viewed in conjunction with non-U.S. GAAP information, investors are provided with a more meaningful understanding of our ongoing operating performance. This non-U.S. GAAP information is not intended to be considered in isolation or as a substitute for U.S. GAAP financial information.
� Net debt is defined as total debt less cash and cash equivalents. We believe that the presentation of this non-U.S. GAAP measure provides useful information to management and investors regarding changes to the company’s capital structure. Our management and credit analysts use net debt to evaluate the company's capital structure and assess credit quality. This non-U.S. GAAP information is not intended to be considered in isolation or as a substitute for U.S. GAAP financial information.
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Dave Weidman
President and Chief Executive Officer
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Celanese Corporation Q1 2006 Highlights
* Based on diluted shares of 171.5 million as of Mar. 31, 2006, and a 28% effective tax rate** Including 5 cents per share for discontinued operations
≥ Net sales increase 12% from prior year
≥ Operating profit rises 26% on strong business performance, fewer _special charges and cost improvement
≥ Diluted adjusted EPS up 16% to $0.72
≥ Operating EBITDA increases 7% to $304 million
285
$0.62
1478
1stQtr 2005
2.24**$0.72Diluted Adjusted EPS*
1,053304Operating EBITDA
6,0701,652Net Sales
FY 20051stQtr 2006in $ millions (except EPS)
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Our Strategy for Success
1) Attractive hybrid business model
2) Clear advantage in technology and costs
3) Positive industry fundamentals
4) Strong leading global producer positions
5) Celanese specific opportunities
6) Strong cash generation
≥ Nearly 50% of Operating EBITDA generated in downstream businesses
≥ New VAntage PlusTM technology in Cangrejera
≥ Several competitor capacity increases delayed
≥ Benefit in Ticona from divesting COC
≥ S&A costs down to 9.2% of sales from 10.8%
≥ Strong underlying performance of business
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John J. Gallagher III
Executive Vice President and Chief Financial Officer
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Celanese Corporation Financial Highlights
* Based on diluted shares of 171.5 million as of Mar. 31, 2006, and a 28% effective tax rate** Including 5 cents per share for discontinued operations
285
$0.62
(10)
(38)
(10)
156
(159)
1478
1stQtr 2005
2.24**$0.72Diluted Adjusted EPS*
1,053304Operating EBITDA
(86)(10)Other Adjustments
(73) -Special Charges
Special Items
277117Net Earnings
561197Operating Profit
(562)(152)SG&A
6,0701,652Net Sales
FY 20051stQtr 2006in $ millions (except EPS)
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First Quarter 2006:
> Strong earnings on continued high utilization across industry,
however, down versus record Q1 2005
> Margin recovery in downstream businesses
> Reduced dividends from Saudi cost investment (IBN Sina)
Strong integrated chain of acetyl products
$812$208 down 8%Operating EBITDA
$4,336$1,169 up 12%Net Sales
FY 20051stQtr 2006in $ millions
Chemical Products
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First Quarter 2006:
> Increased penetration in key customer segments
> Operating margins expanded on increased sales and reduced spending
> Improved demand in European market
Focus on increased growth through innovation
$204$69 up 3%Operating EBITDA
$887$231 down 3%Net Sales
FY 20051stQtr 2006in $ millions
Ticona Technical Polymers
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> Revitalization still on track
> China venture tow expansion complete, moving forward on flake expansion
> Dividends from China affiliate expected to resume in Q2 2006
Performance Products
> Stable earnings on continued strong sweetener demand
> Pricing declines consistent with strategy of sales to large-volume customers
Attractive, cash generating businesses
Acetate Products
$86$30 up 50%Operating EBITDA
$659$167 up 1%Net Sales
FY 20051stQtr 2006in $ millions
$64$21 up 31%Operating EBITDA
$180$49 up 4%Net Sales
FY 20051stQtr 2006in $ millions
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Capitalization
Cash
Senior Credit Term LoanSenior Credit RevolverFloating Rate Term Loan
Total Senior DebtSenior Sub Notes ($)Senior Sub Notes (€*)Other Debt
Total Cash Pay DebtDiscount Notes Series ADiscount Notes Series B
Total Debt
Shareholders' Equity
Total Capitalization
Net Debt(Total Debt Less Cash)
838
624-
350974
1,231272383
2,860103424
3,387
(112)
3,275
2,549
December 31, 2004
(in $ millions)
390
1,708--
1,708800153397
3,05873
306
3,437
219
3,656
3,047
December 31, 2005
* Translated at 1.1797 - effective date December 31, 2005
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2006 Business Outlook
► Planned margin compression continues
► Moving toward specialty-chemical performance
Performance Products
► Improving earnings with progress on restructuring
► Resumption of dividends from affiliates
► On path to targeted profitability levels
Acetate Products
► Increasing penetration in key customer segments
► Improved global demand
► Positive impact of COC sale
Ticona
► Favorable industry dynamics
► Continued strong global demand
Chemical Products
2006 Adjusted EPS Guidance
$2.50 to $2.90
> Includes $25 - $30
million lower D&A
> Higher forecast tax rate for 2006 of 28%
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2006 Guidance
► Adjusted EPS: $2.50 to $2.90
► Depreciation/Amortization
• $275 - $300 million
► Cash Interest Expense
• $230 - $250 million
► Effective Tax Rate
• 28%
► Capital Expenditures
• $200 - $250 million
► CE Equity
• 158.6 million shares common stock outstanding
• 1.0 million stock option grants*
• 12 million shares convertible preferred
* Based on total of 11 million stock option grants valued using the Treasury Method as of Mar 31, 2006.
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14
2005 Operating EBITDA by Segment
14
250
(32)
17
17
50
198
3rdQtr
257
(13)
13
28
32
197
4thQtr
261
(24)
18
21
55
191
2ndQtr
1,053285Total
(113)(44)Other Activities
6416Performance Products
8620Acetate Products
20467Technical Polymers Ticona
812226Chemical Products
Full Year1stQtrin $ millions
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Appendix
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Table 6
Adjusted Earnings Per Share - Reconciliation of a Non-U.S. GAAP Measure
Q1 2006 Q1 2005(in $ millions, except per share data) Adjusted Adjusted
Earnings from continuing operations before tax and minority interests 161 13Non-GAAP Adjustments: Special charges and other adjustments * 10 48 Refinancing costs - 102Adjusted earnings from continuing operations before tax and minority interests 171 163Income tax provision on adjusted earnings ** (48) (42)Minority interests - (25)Earnings from discontinued operations 1 10Preferred dividends (3) (2)Adjusted net earnings available to common shareholders 121 104Add back: Preferred dividends 3 2Adjusted net earnings for diluted adjusted EPS 124 106
Diluted shares (millions)Weighted average shares outstanding 158.6 158.5Assumed conversion of Preferred Shares 12.0 12.0 Assumed conversion of stock options 0.9 0.4 Total diluted shares 171.5 170.9Adjusted EPS from continuing operations 0.72 0.56
Earnings per common share from discontinued operations 0.00 0.06Adjusted EPS 0.72 0.62
* See Table 7 for details
** The effective tax rate applicable to adjusted earnings from continuing operations before tax and minority interests is 28% in 2006 and 25%
in 2005.
Reg G: Reconciliation of Diluted Adjusted EPS
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Reg G: Reconciliation of Net Debt
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Table 5
Net Debt - Reconcilation of a Non-U.S. GAAP MeasureMarch 31 Dec 31
(in $ millions) 2006 2005 Short-term borrowings and current installments of long-term debt - third party and affiliates 212 155Plus: Long-term debt 3,306 3,282Total debt 3,518 3,437Less: Cash and cash equivalents 312 390Net Debt 3,206 3,047
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Reg G: Reconciliation of Special Charges
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Table 7
Reconciliation of Special Charges to Total Special Charges and Other Adjustments
Special Charges:
(in $ millions) Q1 2006 Q1 2005Employee termination benefits 2 2Plant/office closures (2) 1 Total restructuring - 3Plumbing actions (1) - Other 1 35 * Total - 38
Other Adjustments: **
(in $ millions) Q1 2006 Q1 2005Celanese Germany restructuring 10 - Advisor monitoring fee - 10 Total 10 10
Total special charges and other adjustments 10 48 * Termination of advisor monitoring fee
** These items are included in net earnings (loss) but not included in special charges.
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RegG: R
econcilia
tion of O
peratin
g EBITDA
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Table 1
Segment Data and Reconciliation of Operating Profit (Loss) to Operating EBITDA - a Non-U.S. GAAP Measure. *
(in $ millions) Q1 2006 Q1 2005Net Sales Chemical Products 1,169 1,044 Technical Polymers Ticona 231 239 Acetate Products 167 165 Performance Products 49 47 Other Activities 61 12 Intersegment eliminations (25) (29)Total 1,652 1,478
Operating Profit (Loss) Chemical Products 162 177 Technical Polymers Ticona 41 39 Acetate Products 23 10 Performance Products 17 13 Other Activities (46) (83)
Total 197 156
Equity Earnings and Other Income/(Expense) ** Chemical Products 9 14 Technical Polymers Ticona 14 12 Acetate Products - - Performance Products - - Other Activities 4 (8)Total 27 18
Special Charges and Other Adjustments *** Chemical Products (1) 1 Technical Polymers Ticona (2) 1 Acetate Products - 1 Performance Products - - Other Activities 13 45
Total 10 48
Depreciation and Amortization Expense Chemical Products 38 34 Technical Polymers Ticona 16 15 Acetate Products 7 9 Performance Products 4 3 Other Activities 5 2
Total 70 63
Operating EBITDA Chemical Products 208 226 Technical Polymers Ticona 69 67 Acetate Products 30 20 Performance Products 21 16 Other Activities (24) (44)
Total 304 285
* Other Activities primarily includes corporate selling, general and administrative expenses
and the results from AT Plastics and captive insurance companies.
** Includes equity earnings from affiliates and other income/(expense), which is primarily dividends
from cost investments.
*** Excludes adjustments to minority interest, net interest, taxes, depreciation and amortization.
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2005 Operating EBITDA by Segment
20
250
(32)
17
17
50
198
3rdQtr
257
(13)
13
28
32
197
4thQtr
261
(24)
18
21
55
191
2ndQtr
1,053285Total
(113)(44)Other Activities
6416Performance Products
8620Acetate Products
20467Technical Polymers Ticona
812226Chemical Products
Full Year1stQtrin $ millions
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RegG: R
econcilia
tion of 2005 Operatin
g EBITDA
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Q1 2006 Q1 2005 Q2 2005 Q3 2005 Q4 2005 FY 2005Net Sales Chemical Products 1,044 1,085 1,100 1,107 4,336 Technical Polymers Ticona 239 223 212 213 887 Acetate Products 165 172 162 160 659 Performance Products 47 47 46 40 180 Other Activities 12 8 55 69 144 Intersegment eliminations (29) (29) (40) (38) (136)1652 1,478 1,506 1,535 1,551 6,070
Operating Profit (Loss) Chemical Products 177 155 98 143 573 Technical Polymers Ticona 39 5 18 (2) 60 Acetate Products 10 10 5 42 67 Performance Products 13 15 13 10 51 Other Activities (83) (33) (41) (33) (190)197 156 152 93 160 561
Equity Earnings and Other Income/(Expense) ** Chemical Products 14 (6) 36 36 80 Technical Polymers Ticona 12 16 15 10 53 Acetate Products - 2 - 2 4 Performance Products - - (1) - (1) Other Activities (8) 17 (3) 7 13165 18 29 47 55 149
Special Charges and Other Adjustments *** Chemical Products 1 3 19 (31) (8) Technical Polymers Ticona 1 20 4 6 31 Acetate Products 1 - 9 (24) (14) Performance Products - - 1 - 1 Other Activities 45 (10) 7 5 4710 48 13 40 (44) 57
Depreciation and Amortization Expense Chemical Products 34 39 45 49 167 Technical Polymers Ticona 15 14 13 18 60 Acetate Products 9 9 3 8 29 Performance Products 3 3 4 3 13 Other Activities 2 2 5 8 17 70 63 67 70 86 286
Operating EBITDA Chemical Products 226 191 198 197 812 Technical Polymers Ticona 67 55 50 32 204 Acetate Products 20 21 17 28 86 Performance Products 16 18 17 13 64 Other Activities (44) (24) (32) (13) (113)304 285 261 250 257 1,053