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| | | | Year Ended December 31, 2023 Compared to Year Ended December 31, 2022
Operating loss increased for the year ended December 31, 2023 compared to the same period in 2022 primarily due to:
•higher functional spending of $106 million, primarily related to additional sites and employees gained through the M&M Acquisition;
partially offset by:
•lower merger and acquisition project spending of $66 million; and
•a favorable currency impact of $33 million.
Non-operating pension and other postretirement employee expense increased for the year ended December 31, 2023 compared to the same period in 2022 primarily due to:
•higher interest costs of $66 million and lower expected return on plan assets of $34 million, partially offset by a decrease in recognized actuarial loss of $15 million primarily as a result of a decrease in the weighted average discount rate used to determine benefit obligations from 4.9% to 4.5%. See Note 12 - Benefit Obligations in the accompanying consolidated financial statements for further information. Liquidity and Capital Resources
Our primary sources of liquidity are cash generated from operations, available cash and cash equivalents, dividends from our portfolio of strategic investments and available borrowings under our senior unsecured revolving credit facility. As of December 31, 2023, we have $1.75 billion available for borrowing under our senior U.S. unsecured revolving credit facility and $34 million available for borrowing under our separate China Revolving Credit Facility (defined below), if required, in meeting our working capital needs and other contractual obligations. In addition, we held cash and cash equivalents of $1.8 billion as of December 31, 2023. We are actively managing our business to maintain cash flow, and we believe that liquidity from the above-referenced sources will be sufficient to meet our operational and capital investment needs and financial obligations for the foreseeable future.
On October 31, 2023, we announced the planned closure of our Polyamide 66 ("PA66") and High-Performance Nylon ("HPN") polymerization units at our facility in Uentrop, Germany to optimize production costs across our global network. These operations are included in the Engineered Materials segment and we expect to complete the closure in 2024. We expect to incur additional exit and shutdown costs related to the closure of the PA66 and HPN polymerization units in Uentrop, Germany of approximately $70 million in 2024, inclusive of estimated employee termination costs.
On September 27, 2023, we formed a food ingredients joint venture with Mitsui & Co., Ltd. ("Mitsui") under the name Nutrinova. We contributed receivables, inventory, property, plant and equipment, certain other assets, liabilities, technology and employees of our food ingredients business while retaining a 30% interest in the joint venture. Mitsui acquired the remaining 70% interest in the food ingredients business for a purchase price of $503 million, subject to transaction adjustments. We accounted for our interest in the joint venture as an equity method investment, and our portion of the results will continue to be included in the Engineered Materials segment. For further information regarding the food ingredients joint venture, see Note 4 - Acquisitions, Dispositions and Plant Closures in the accompanying consolidated financial statements. On November 1, 2022, we acquired a majority of the M&M Business for a purchase price of $11.0 billion, subject to transaction adjustments, in an all-cash transaction. For further information regarding the acquisition and related financing
Our incurrence of debt to finance the purchase price for the M&M Acquisition has increased our leverage and our ratio of indebtedness to consolidated EBITDA as set forth in our senior unsecured credit facilities. We believe that cash flows from our operations, together with synergy opportunities from the M&M Acquisition and cost reduction initiatives, will support our deleveraging efforts over the next few years. In furtherance of these deleveraging efforts, we have paused our share repurchase program and are in the process of evaluating additional cash generation opportunities which may also include, in addition to the food ingredients joint venture described above, additional opportunistic dispositions or monetization of other product or business lines or other assets. We are committed to rapid deleveraging and to maintaining our investment grade debt rating.
While our contractual obligations, commitments and debt service requirements over the next several years are significant, we continue to believe we will have available resources to meet our liquidity requirements, including debt service, for the next twelve months. If our cash flow from operations is insufficient to fund our debt service and other obligations, we may be required to use other means available to us such as increasing our borrowings, reducing or delaying capital expenditures, seeking additional capital or seeking to restructure or refinance our indebtedness. There can be no assurance, however, that we will continue to generate cash flows at or above current levels.
Total capital expenditures were $568 million for the year ended December 31, 2023. We continue to prioritize projects that drive growth and productivity in the near term and expect total capital expenditures to be approximately $400 million in 2024, primarily due to certain investments in growth opportunities and productivity improvements. In Engineered Materials, at our Nanjing, China facility, our expansions of (1) the compounding plant and (2) the new liquid crystal polymer ("LCP") plant are on schedule and in construction, and at our Bishop, Texas facility, our debottleneck of the ultra-high molecular weight polyethylene ("UHMW-PE") unit is on schedule and in detailed engineering design/construction. Our energy optimization productivity project at our polyoxymethylene ("POM") unit in Frankfurt, Germany is in detailed engineering design. In the Acetyl Chain, our planned expansion of our acetic acid unit at Clear Lake, Texas is on track to be commissioned and started in the first quarter of 2024. The other major projects that support the Acetyl Chain are in various stages of construction or commissioning and on schedule. These projects include our planned expansions of (1) our vinyl acetate ethylene ("VAE") emulsions units in Nanjing, China, and (2) our VAE emulsion plant in Frankfurt, Germany. The sustainable production of methanol ("MeOH") through carbon capture utilization at our Fairway joint venture MeOH unit in Clear Lake, Texas, using captured carbon dioxide as feedstock, was successfully commissioned and started in December 2023. The announced expansion of our vinyl acetate monomer ("VAM") plant in Bay City, Texas is on temporary hold. We continue to see the incremental capacity from investments made in recent years strengthen the growth and reliability of our manufacturing network reliability to best serve our customers.
We did not repurchase any Common Stock during the year ended December 31, 2023.
On a stand-alone basis, Celanese and its immediate 100% owned subsidiary, Celanese U.S., have no independent external operations of their own. Accordingly, they generally depend on the cash flow of their subsidiaries and their ability to pay dividends and make other distributions to Celanese and Celanese U.S. in order to meet their obligations, including their obligations under senior credit facilities and senior notes, and to pay dividends on our Common Stock.
We are subject to capital controls and exchange restrictions imposed by the local governments in certain jurisdictions where we operate, such as China, South Korea, India and Indonesia. Capital controls impose limitations on our ability to exchange currencies, repatriate earnings or capital, lend via intercompany loans or create cross-border cash pooling arrangements. Our largest exposure to a country with capital controls is in China. Pursuant to applicable regulations, foreign-invested enterprises in China may pay dividends only out of their accumulated profits, if any, determined in accordance with Chinese accounting standards and regulations. In addition, the Chinese government imposes certain currency exchange controls on cash transfers out of China, puts certain limitations on duration, purpose and amount of intercompany loans, and restricts cross-border cash pooling. While it is possible that future tightening of these restrictions or application of new similar restrictions could impact us, these limitations do not currently restrict our operations.
We remain in compliance with the covenants in the existing Global Credit Agreements (defined below, and as amended to date) and expect to remain in compliance based on our current expectation of future results of operations and planned cash generation activities. If the actual future results of our operations and cash generation activities differ materially from these expectations, we may be required to seek an amendment to or waiver of any impacted covenants, which may increase our borrowing costs under the existing Global Credit Agreements.
Cash Flows
Cash and cash equivalents increased $297 million to $1.8 billion as of December 31, 2023 compared to December 31, 2022. As of December 31, 2023, $1.5 billion of the $1.8 billion of cash and cash equivalents was held by our foreign subsidiaries. Under the Tax Cuts and Jobs Act, we have incurred a prior year charge associated with the deemed repatriation of previously unremitted foreign earnings, including foreign held cash. These funds are largely accessible without additional material tax consequences, if needed in the U.S., to fund operations. See Note 15 - Income Taxes in the accompanying consolidated financial statements for further information. Year Ended December 31, 2023 Compared to Year Ended December 31, 2022
•Net Cash Provided by (Used in) Operating Activities
Net cash provided by operating activities increased $80 million to $1.9 billion for the year ended December 31, 2023 compared to $1.8 billion for the same period in 2022, primarily due to:
•favorable trade working capital of $642 million, primarily related to inventory reduction due to aligning inventory and production levels to demand and lower raw materials and inventory costs, and the timing of settlement of trade payables and collections of trade receivables during the year ended December 31, 2023; and
•cash receipts of non-trade receivables of $346 million, primarily related to the receivable balances arising from the M&M Acquisition and other transaction activities;
partially offset by:
•an increase in cash interest paid of $639 million related primarily to the debt incurred to finance the M&M Acquisition; and
•Net Cash Provided by (Used in) Investing Activities
Net cash used in investing activities decreased $11.0 billion to $134 million for the year ended December 31, 2023 compared to $11.1 billion for the same period in 2022, primarily due to:
•Net Cash Provided by (Used in) Financing Activities
Net cash used in financing activities increased $11.7 billion to $1.5 billion for the year ended December 31, 2023 compared to net cash provided by financing activities of $10.3 billion for the same period in 2022, primarily due to:
•a decrease in net proceeds of long-term debt, primarily due to the Tender Offer (defined below) of $2.25 billion, payment in full of the 3-year Term Loans (defined below) of $750 million, repayment at maturity of the 1.125% senior unsecured notes during the year ended December 31, 2023, and issuance of the Acquisition Notes (defined below), borrowings under the 3-year and 5-year Term Loans (defined below) during the year ended December 31, 2022 (see Note 11 - Debt in the accompanying consolidated financial statements for further information), which did not recur in the current year; and •an increase in net payments on short-term debt, primarily as a result of payments on our revolving credit facilities and payment in full of the 364-day Term Loans (defined below);
partially offset by:
•an increase in net proceeds of long-term debt, primarily due to the 2023 Offering (defined below) of $3.0 billion in principal amount during the year ended December 31, 2023 and repayment at maturity of the 4.625% senior unsecured notes during the year ended December 31, 2022; and
•a decrease in net payments on short-term debt, primarily due to borrowings on our revolving credit facilities and China Working Capital Term Loan Agreement (defined below) during the year ended December 31, 2023 and borrowing under the senior unsecured revolving credit facility related to the M&M Acquisition in November 2022.
In addition, exchange rates had an unfavorable impact of $12 million on cash and cash equivalents and a favorable impact of $4 million on cash and cash equivalents for the years ended December 31, 2023 and 2022, respectively.
Debt and Other Obligations
•Senior Credit Facilities
In March 2022, we entered into a term loan credit agreement (the "March 2022 U.S. Term Loan Credit Agreement"), pursuant to which lenders provided a tranche of delayed-draw term loans due 364 days from issuance in an amount equal to $500 million (the "364-day Term Loans") and a tranche of delayed-draw term loans due 5 years from issuance in an amount equal to $1.0 billion (the "5-year Term Loans"). In September 2022, we entered into an additional term loan credit agreement (the "September 2022 U.S. Term Loan Credit Agreement" and, together with the March 2022 U.S. Term Loan Credit Agreement, the "U.S. Term Loan Credit Agreements"), pursuant to which lenders have provided delayed-draw term loans due 3 years from issuance in an amount equal to $750 million (the "3-year Term Loans" and collectively with the 364-day Term Loans and the 5-year Term Loans, the "U.S. Term Loan Facility"). The U.S. Term Loan Facility was fully drawn during the three months ended December 31, 2022. The 364-day Term Loans and 3-year Term Loans have been fully repaid.
Also in March 2022, we entered into a new revolving credit agreement (the "U.S. Revolving Credit Agreement" and, together with the U.S. Term Loan Credit Agreements the "U.S. Credit Agreements") consisting of a $1.75 billion senior unsecured revolving credit facility (with a letter of credit sublimit), maturing in 2027. The proceeds of a $365 million borrowing under the new senior unsecured revolving credit facility were used to repay and terminate our then-existing revolving credit facility.
On February 21, 2023 and February 16, 2024, we amended certain covenants in the U.S. Credit Agreements, including financial ratio maintenance covenants.
On August 9, 2023, we amended certain covenants in the March 2022 U.S. Term Loan Credit Agreement to permit refinancing certain senior notes without requiring a mandatory prepayment under the March 2022 U.S. Term Loan Credit Agreement.
The March 2022 U.S. Term Loan Credit Agreement and the U.S. Revolving Credit Agreement are, and the September 2022 U.S. Term Loan Credit Agreement was, guaranteed by Celanese, Celanese U.S. and domestic subsidiaries together representing substantially all of the Company's U.S. assets and business operations (the "Subsidiary Guarantors").
On January 4, 2023, Celanese (Shanghai) International Trading Co., Ltd ("CSIT"), a fully consolidated subsidiary, entered into a restatement of an existing credit facility agreement (the "China Revolving Credit Agreement") to upsize and modify the facility thereunder to consist of an aggregate CNY1.75 billion uncommitted senior unsecured revolving credit facility available under two tranches (with overdraft, bank guarantee and documentary credit sublimits) (the "China Revolving Credit Facility"). Obligations bear interest at certain fixed and floating rates. The China Revolving Credit Agreement is guaranteed by Celanese U.S.
On January 6, 2023, CSIT entered into a senior unsecured working capital loan contract for CNY800 million (the "China Working Capital Term Loan Agreement," together with the China Revolving Credit Agreement, the "China Credit Agreements," and the China Credit Agreements together with the U.S. Credit Agreements, the "Global Credit Agreements"), payable 12 months from withdrawal date and bearing interest at 0.5% less than certain interbank rates. The loan under the China Working Capital Term Loan Agreement was fully drawn on January 10, 2023 and was supported by a letter of comfort from us. We expect the China Credit Agreements will facilitate our efficient repatriation of cash to the U.S. to repay debt and effectively redomicile a portion of our U.S. debt to China at a lower average interest rate.
•Senior Notes
We have outstanding senior unsecured notes, issued in public offerings registered under the Securities Act of 1933 ("Securities Act"), as amended, as follows (collectively, the "Senior Notes"):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Senior Notes | | Issue Date | | Principal | | Interest Rate | | Interest Pay Dates | | Maturity Date |
| | | | (In millions) | | (In percentages) | | | | | | |
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| /s/ CHUCK B. KYRISH | Senior Vice President and Chief Financial Officer
(Principal Financial Officer) | February 23, 2024 |
| Chuck B. Kyrish |
| |
| |
|
| | |
| /s/ AARON M. MCGILVRAY | Vice President, Finance, Controller and
Chief Accounting Officer
(Principal Accounting Officer) | February 23, 2024 |
| Aaron M. McGilvray |
| | |
| /s/ JEAN S. BLACKWELL | Director | February 23, 2024 |
| Jean S. Blackwell |
| | |
| /s/ WILLIAM M. BROWN | Director | February 23, 2024 |
| William M. Brown |
| | |
| /s/ EDWARD G. GALANTE | Director | February 23, 2024 |
| Edward G. Galante |
| | |
| /s/ KATHRYN M. HILL | Director | February 23, 2024 |
| Kathryn M. Hill |
| | |
| /s/ DAVID F. HOFFMEISTER | Director | February 23, 2024 |
| David F. Hoffmeister |
| | | | | | | | | | | | | | |
| Signature | Title | Date |
| | |
| /s/ JAY V. IHLENFELD | Director | February 23, 2024 |
| Jay V. Ihlenfeld |
| | |
| /s/ DEBORAH J. KISSIRE | Director | February 23, 2024 |
| Deborah J. Kissire |
| | |
| /s/ MICHAEL KOENIG | Director | February 23, 2024 |
| Michael Koenig |
| | |
| /s/ GANESH MOORTHY | Director | February 23, 2024 |
| Ganesh Moorthy |
| | |
| /s/ KIM K.W. RUCKER | Director | February 23, 2024 |
| Kim K.W. Rucker |
CELANESE CORPORATION AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Directors
Celanese Corporation:
Opinions on the Consolidated Financial Statements and Internal Control Over Financial Reporting
We have audited the accompanying consolidated balance sheets of Celanese Corporation and subsidiaries (the Company) as of December 31, 2023 and 2022, the related consolidated statements of operations, comprehensive income (loss), equity, and cash flows for each of the years in the three-year period ended December 31, 2023, and the related notes (collectively, the consolidated financial statements). We also have audited the Company's internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2023, in conformity with U.S. generally accepted accounting principles. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023 based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
Basis for Opinions
The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Report of Management on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company's consolidated financial statements and an opinion on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
Definition and Limitations of Internal Control Over Financial Reporting
A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Evaluation of the Company's application of multinational income tax regulations
As discussed in Note 15 to the consolidated financial statements, the Company recorded $790 million of income tax benefit for the year ended December 31, 2023. Because of the multinational presence, the Company's effective income tax rate and related income tax attributes are significantly impacted by tax regulations in certain operating locations. As a result, the Company continuously monitors, evaluates, and responds to these impacts. We identified the evaluation of the Company's ongoing assessment and application of multinational income tax regulations as a critical audit matter. This was due to the complex, subjective and evolving nature of tax regulations, the steps taken by the Company to interpret and respond to changes in the tax environment, and taxing authorities' collective impacts on the Company's consolidated income tax computations. As a result, a high degree of auditor judgment and the use of income tax professionals with specialized skills and knowledge were required to 1) evaluate significant income tax regulations, including changes thereto, 2) assess the application of the taxing authorities' regulations of the Company's business operations, and 3) evaluate the Company's accounting for income taxes pertaining to significant transactions and restructurings.
The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls related to the critical audit matter. This included controls related to 1) the application of tax regulations, 2) the execution of certain significant transactions and restructurings, and 3) their collective impacts on consolidated income tax computations. We involved income tax professionals with specialized skills and knowledge, who assisted in evaluating the Company's interpretation and application of tax regulations, including tax regulation changes, and the associated income tax consequences. They also assisted in assessing certain significant transactions and restructurings, including reviewing the underlying documentation and evaluating the impact on the Company's global tax rate.
/s/ KPMG LLP
We have served as the Company's auditor since 2004.
Dallas, Texas
February 23, 2024
CELANESE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
| | | | | | | | | | | | | | | | | |
| Year Ended December 31, |
| 2023 | | 2022 | | 2021 |
| (In $ millions, except share and per share data) |
| Net sales | | | | | | | | |
| Cost of sales | () | | | () | | | () | |
| Gross profit | | | | | | | | |
| Selling, general and administrative expenses | () | | | () | | | () | |
| Amortization of intangible assets | () | | | () | | | () | |
| Research and development expenses | () | | | () | | | () | |
| Other (charges) gains, net | () | | | () | | | | |
| Foreign exchange gain (loss), net | | | | () | | | | |
| Gain (loss) on disposition of businesses and assets, net | | | | | | | | |
| Operating profit (loss) | | | | | | | | |
| Equity in net earnings (loss) of affiliates | | | | | | | | |
Non-operating pension and other postretirement employee benefit (expense) income | () | | | | | | | |
| Interest expense | () | | | () | | | () | |
| Refinancing expense | () | | | | | | () | |
| Interest income | | | | | | | | |
| Dividend income - equity investments | | | | | | | | |
| | | | |
| Other income (expense), net | | | | | | | () | |
| Earnings (loss) from continuing operations before tax | | | | | | | | |
| Income tax (provision) benefit | | | | | | | () | |
| Earnings (loss) from continuing operations | | | | | | | | |
| Earnings (loss) from operation of discontinued operations | () | | | () | | | () | |
| | | | |
| Income tax (provision) benefit from discontinued operations | | | | | | | | |
| Earnings (loss) from discontinued operations | () | | | () | | | () | |
| Net earnings (loss) | | | | | | | | |
| Net (earnings) loss attributable to noncontrolling interests | () | | | () | | | () | |
| | | | |
| | | | |
| Net earnings (loss) available to Celanese Corporation | | | | | | | | |
| Amounts attributable to Celanese Corporation | | | | | |
| Earnings (loss) from continuing operations | | | | | | | | |
| Earnings (loss) from discontinued operations | () | | | () | | | () | |
| Net earnings (loss) | | | | | | | | |
| Earnings (loss) per common share - basic | | | | | |
| Continuing operations | | | | | | | | |
| Discontinued operations | () | | | () | | | () | |
| Net earnings (loss) - basic | | | | | | | | |
| Earnings (loss) per common share - diluted | | | | | |
| Continuing operations | | | | | | | | |
| Discontinued operations | () | | | () | | | () | |
| Net earnings (loss) - diluted | | | | | | | | |
| Weighted average shares - basic | | | | | | | | |
| Weighted average shares - diluted | | | | | | | | |
| | | | |
See the accompanying notes to the consolidated financial statements.
CELANESE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
| | | | | | | | | | | | | | | | | |
| Year Ended December 31, |
| 2023 | | 2022 | | 2021 |
| (In $ millions) |
| Net earnings (loss) | | | | | | | | |
| Other comprehensive income (loss), net of tax | | | | | |
| | | | |
| Foreign currency translation gain (loss) | () | | | () | | | () | |
| Gain (loss) on derivative hedges | () | | | | | | | |
| Pension and postretirement benefits | () | | | | | | () | |
| Total other comprehensive income (loss), net of tax | () | | | () | | | () | |
| Total comprehensive income (loss), net of tax | | | | | | | | |
Comprehensive (income) loss attributable to noncontrolling interests | () | | | () | | | () | |
Comprehensive income (loss) attributable to Celanese Corporation | | | | | | | | |
See the accompanying notes to the consolidated financial statements.
CELANESE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
| | | | | | | | | | | |
| As of December 31, |
| 2023 | | 2022 |
| (In $ millions, except share data) |
| ASSETS | | | |
| Current Assets | | | |
| Cash and cash equivalents | | | | | |
| Trade receivables - third party and affiliates | | | | | |
| Non-trade receivables, net | | | | | |
| Inventories | | | | | |
| | |
| | |
| | |
| Other assets | | | | | |
| Total current assets | | | | | |
| Investments in affiliates | | | | | |
Property, plant and equipment (net of accumulated depreciation - 2023: $; 2022: $) | | | | | |
| Operating lease right-of-use assets | | | | | |
| Deferred income taxes | | | | | |
| Other assets | | | | | |
| Goodwill | | | | | |
| Intangible assets, net | | | | | |
| Total assets | | | | | |
| LIABILITIES AND EQUITY | | | |
| Current Liabilities | | | |
Short-term borrowings and current installments of long-term debt - third party and affiliates | | | | | |
| Trade payables - third party and affiliates | | | | | |
| Other liabilities | | | | | |
| | |
| Income taxes payable | | | | | |
| Total current liabilities | | | | | |
| Long-term debt, net of unamortized deferred financing costs | | | | | |
| Deferred income taxes | | | | | |
| Uncertain tax positions | | | | | |
| Benefit obligations | | | | | |
| Operating lease liabilities | | | | | |
| Other liabilities | | | | | |
| Commitments and Contingencies | | | |
| Shareholders' Equity | | | |
Preferred stock, $ par value, shares authorized (2023 and 2022: issued and outstanding) | | | | | |
Common stock, $ par value, shares authorized (2023: issued and outstanding; 2022: issued and outstanding) | | | | | |
| | |
Treasury stock, at cost (2023: shares; 2022: shares) | () | | | () | |
| Additional paid-in capital | | | | | |
| Retained earnings | | | | | |
| Accumulated other comprehensive income (loss), net | () | | | () | |
| Total Celanese Corporation shareholders' equity | | | | | |
| Noncontrolling interests | | | | | |
| Total equity | | | | | |
| Total liabilities and equity | | | | | |
See the accompanying notes to the consolidated financial statements.
CELANESE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EQUITY
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Year Ended December 31, |
| 2023 | | 2022 | | 2021 |
| Shares | | Amount | | Shares | | Amount | | Shares | | Amount |
| (In $ millions, except share data) |
|
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| Common Stock | | | | | | | | | | | |
| Balance as of the beginning of the period | | | | | | | | | | | | | | | | | |
| Stock option exercises | | | | | | | | | | | | | | | | | |
| Purchases of treasury stock | | | | | | | | | | | | | () | | | | |
| Stock awards | | | | | | | | | | | | | | | | | |
| Balance as of the end of the period | | | | | | | | | | | | | | | | | |
| Treasury Stock | | | | | | | | | | | |
| Balance as of the beginning of the period | | | | () | | | | | | () | | | | | | () | |
| Purchases of treasury stock, including related fees | | | | | | | | | | | | | | | | () | |
| Issuance of treasury stock under stock plans | () | | | | | | () | | | | | | () | | | | |
|
| Balance as of the end of the period | | | | () | | | | | | () | | | | | | () | |
| Additional Paid-In Capital | | | | | | | | | | | |
| Balance as of the beginning of the period | | | | | | | | | | | | | | |
|
| Stock-based compensation, net of tax | | | | | | | | | | | | | | |
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| Balance as of the end of the period | | | | | | | | | | | | | | |
| Retained Earnings | | | | | | | | | | | |
| Balance as of the beginning of the period | | | | | | | | | | | | | | |
| Net earnings (loss) attributable to Celanese Corporation | | | | | | | | | | | | | | |
| Common stock dividends | | | () | | | | | () | | | | | () | |
|
| Balance as of the end of the period | | | | | | | | | | | | | | |
| Accumulated Other Comprehensive Income (Loss), Net | | | | | | | | | | | |
| Balance as of the beginning of the period | | | () | | | | | () | | | | | () | |
| Other comprehensive income (loss), net of tax | | | () | | | | | () | | | | | () | |
| Balance as of the end of the period | | | () | | | | | () | | | | | () | |
| Total Celanese Corporation shareholders' equity | | | | | | | | | | | | | | |
| Noncontrolling Interests | | | | | | | | | | | |
| Balance as of the beginning of the period | | | | | | | | | | | | | | |
| Net earnings (loss) attributable to noncontrolling interests | | | | | | | | | | | | | | |
|
| Distributions/dividends to noncontrolling interests | | | () | | | | | () | | | | | () | |
Acquisition of noncontrolling interests | | | | | | | | | | | | | | |
| Balance as of the end of the period | | | | | | | | | | | | | | |
| Total equity | | | | | | | | | | | | | | |
See the accompanying notes to the consolidated financial statements.
CELANESE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
| | | | | | | | | | | | | | | | | |
| Year Ended December 31, |
| 2023 | | 2022 | | 2021 |
| (In $ millions) |
| Operating Activities | | | | | |
| Net earnings (loss) | | | | | | | | |
| Adjustments to reconcile net earnings (loss) to net cash provided by (used in) operating activities | | | | | |
| Asset impairments | | | | | | | | |
| Depreciation, amortization and accretion | | | | | | | | |
| Pension and postretirement net periodic benefit cost | | | | () | | | () | |
| Pension and postretirement contributions | () | | | () | | | () | |
| Actuarial (gain) loss on pension and postretirement plans | | | | | | | | |
| Pension curtailments and settlements, net | | | | | | | | |
| Deferred income taxes, net | () | | | () | | | | |
| (Gain) loss on disposition of businesses and assets, net | () | | | () | | | () | |
| | | | |
| Stock-based compensation | | | | | | | | |
| Undistributed earnings in unconsolidated affiliates | | | | () | | | () | |
| | | | |
| Other, net | | | | | | | | |
| Operating cash provided by (used in) discontinued operations | () | | | () | | | | |
| Changes in operating assets and liabilities | | | | | |
| Trade receivables - third party and affiliates, net | | | | | | | () | |
| Inventories | | | | () | | | () | |
| Other assets | | | | () | | | () | |
| Trade payables - third party and affiliates | | | | () | | | | |
| Other liabilities | () | | | | | | | |
| Net cash provided by (used in) operating activities | | | | | | | | |
| Investing Activities | | | | | |
| Capital expenditures on property, plant and equipment | () | | | () | | | () | |
| Acquisitions, net of cash acquired | | | | () | | | () | |
| Proceeds from sale of businesses and assets, net | | | | | | | | |
| | | | |
| | | | |
| | | | |
| Proceeds from sale of marketable securities | | | | | | | | |
| | | | |
| Other, net | () | | | () | | | () | |
| Net cash provided by (used in) investing activities | () | | | () | | | () | |
| Financing Activities | | | | | |
| Net change in short-term borrowings with maturities of 3 months or less | () | | | | | | | |
| Proceeds from short-term borrowings | | | | | | | | |
| Repayments of short-term borrowings | () | | | | | | () | |
| Proceeds from long-term debt | | | | | | | | |
| Repayments of long-term debt | () | | | () | | | () | |
| | | | |
| Purchases of treasury stock, including related fees | | | | () | | | () | |
| | | | |
| Common stock dividends | () | | | () | | | () | |
| Distributions/dividends to noncontrolling interests | () | | | () | | | () | |
| Settlement of forward-starting interest rate swaps | | | | | | | () | |
| Issuance cost of bridge facility | | | | () | | | | |
| Other, net | () | | | () | | | () | |
| Net cash provided by (used in) financing activities | () | | | | | | () | |
| Exchange rate effects on cash and cash equivalents | () | | | | | | () | |
| Net increase (decrease) in cash and cash equivalents | | | | | | | () | |
| Cash and cash equivalents as of beginning of period | | | | | | | | |
| Cash and cash equivalents as of end of period | | | | | | | | |
See the accompanying notes to the consolidated financial statements.
CELANESE CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1.
% of the economics, the outside shareholders' interests are shown as noncontrolling interests.2.
Aa-grade non-callable bonds at the measurement date. 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.Outside of the U.S., a similar approach of discounting pension and other postretirement benefit plan liabilities is used based on the high quality corporate bonds available in each market. There are some exceptions to this methodology, namely in locations where there is a sparse corporate bond market, and in such cases the discount rate takes into account yields of government bonds at the appropriate duration.
•Expected Long-Term Rate of Return on Assets
The Company determines the long-term expected rate of return on plan assets by considering the current target asset allocation, as well as the historical and expected rates of return on various asset categories in which the plans are invested. A single long-term expected rate of return on plan assets is then calculated for each plan as the weighted average of the target asset allocation and the long-term expected rate of return assumptions for each asset category within each plan. The expected rate of return is assessed annually.
•Investment Policies and Strategies
The investment objectives for the Company's pension plans are to earn, over a moving 20-year period, a long-term expected rate of return, net of investment fees and transaction costs, sufficient to satisfy the benefit obligations of the plan, while at the same time maintaining adequate liquidity to pay benefit obligations and proper expenses, and meet any other cash needs, in the short- to medium-term.
The equity and debt securities objectives are to provide diversified exposure across the U.S. and global equity and fixed income markets, and to manage the risks and returns of the plans through the use of multiple managers and strategies. The fixed income strategies are designed to reduce liability-related interest rate risk by investing in bonds that match the duration and credit quality of the plan liabilities.
The financial objectives of the qualified pension plans are established in conjunction with a comprehensive review of each plan's liability structure. The Company's asset allocation policy is based on detailed asset/liability analysis. In developing investment policy and financial goals, consideration is given to each plan's demographics, the returns and risks associated with current and 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 approximately every three to five 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 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 plan's 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.
Other Accounting Policies
% of Fairway, for the production of methanol at the Company's integrated chemical plant in Clear Lake, Texas. Fairway is a VIE in which the Company is the primary beneficiary. Accordingly, the Company consolidates the venture and records a noncontrolling interest for the share of the venture owned by Mitsui. Fairway is included in the Company's Acetyl Chain segment. As of December 31, 2023 and 2022, the carrying amount of the total assets associated with
million and $ million, respectively, made up primarily of $ million and $ million, respectively, of property, plant and equipment.The Company holds variable interests in entities that supply certain raw materials and services to the Company. The variable interests primarily relate to cost-plus contractual arrangements with the suppliers and recovery of capital expenditures for certain plant assets plus a rate of return on such assets. Liabilities for such supplier recoveries of capital expenditures have been recorded as finance lease obligations. The entities are not consolidated because the Company is not the primary beneficiary of the entities as it does not have the power to direct the activities of the entities that most significantly impact the entities' economic performance. The Company's maximum exposure to loss as a result of its involvement with these VIEs as of December 31, 2023 and 2022 were $ million and $ million, respectively, related primarily to the recovery of capital expenditures for certain property, plant and equipment.
years| Buildings and improvements | years |
| Machinery and equipment | years |
Leasehold improvements are amortized over 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 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. The Company calculates the fair value using a discounted cash flow model incorporating discount rates commensurate with the risks involved for the asset group, which is classified as a Level 3 fair value measurement. The key assumptions used in the discounted cash flow valuation model include discount rates, growth rates, tax rates, cash flow projections and terminal value rates. Discount rates, growth rates and cash flow projections involve significant judgment and are based on management's estimate of current and forecasted market conditions and cost structure. Impairment losses are generally recorded in Other (charges) gains, net in the consolidated statements of operations.
years.
, unless the Company has government orders or other agreements that extend beyond . 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 liability 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 undiscounted liabilities do not take into account any claims or recoveries from insurance. The measurement of environmental liabilities is based on the Company's 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.
billion of remaining performance obligations related to take-or-pay contracts. The Company expects to recognize approximately $ million of its remaining performance obligations as Net sales in 2024, $ million in 2025, $ million in 2026 and the balance thereafter.The Company has certain contracts which contain performance obligations which are immaterial in the context of the contract with the customer. The Company has elected the practical expedient not to assess whether these promised goods or services are performance obligations.
•Contract Balances
Contract liabilities primarily relate to advances or deposits received from the Company's customers before revenue is recognized. These amounts are recorded as deferred revenue and are included in Noncurrent Other liabilities in the consolidated balance sheets.
The Company does not have any material contract assets as of December 31, 2023.
years. The exercise of a lease renewal option typically occurs at the discretion of both parties. Certain leases also include options to purchase the leased property. For purposes of calculating operating lease liabilities, lease terms are deemed not to include options to extend the lease termination until it is reasonably certain that the Company will exercise that option. Certain of the Company's lease agreements include payments adjusted periodically for inflation based on the consumer price index. The Company's lease agreements do not contain any material residual value guarantees or material restrictive covenants.
3.
4.
billion in an all-cash transaction. The Company acquired the Santoprene™, Dytron™ and Geolast™ trademarks and product portfolios, customer and supplier contracts and agreements, both production facilities producing TPV, the TPV intellectual property portfolio with associated technical and R&D assets and employees of the TPV elastomer business. The acquisition of Santoprene substantially strengthens the Company's existing elastomers portfolio, allowing the Company to bring a wider range of functionalized solutions into targeted growth areas including future mobility, medical and sustainability. The acquisition was accounted for as a business combination and the acquired operations are included in the Engineered Materials segment.
% ownership of entities and assets consisting of a majority of the Mobility & Materials business ("M&M") of DuPont de Nemours, Inc. ("DuPont") (the "M&M Acquisition") for a purchase price of $ billion, subject to transaction adjustments, in an all-cash transaction. The Company acquired a global production network of facilities, including compounding and polymerization, customer and supplier contracts and agreements, an intellectual property portfolio, including approximately patents with associated technical and R&D assets, and approximately employees across the manufacturing, technical, and commercial organizations. This acquisition of M&M enhances the engineered materials product portfolio by adding new polymers, brands, product technology, and backward integration in critical polymers, allowing the Company to accelerate growth in high-value applications including future mobility, connectivity and medical. The acquisition was accounted for as a business combination and the acquired operations are included in the Engineered Materials segment.The Company allocated the purchase price of the acquisition to identifiable assets acquired and liabilities assumed based on their estimated fair values as of the acquisition date. The excess of the purchase price over the aggregate fair values was recorded as goodwill. During the measurement period, there were no adjustments that materially impacted the Company's goodwill initially recorded.
The following unaudited pro forma financial information presents the consolidated results of operations as if the M&M Acquisition had occurred at the beginning of 2021. M&M's pre-acquisition results have been added to the Company's historical results. The pro forma results contained in the table below include adjustments for (i) increased depreciation expense as a result of acquisition date fair value adjustments, (ii) amortization of acquired intangibles, (iii) interest expense and amortization of debt issuance costs of $ million and $ million related to borrowings under the U.S. Term Loan Facility (defined below) and the issuance of Acquisition Notes (defined below) as if these had taken place at the beginning of 2021 for the years ended December 31, 2022 and 2021, respectively and (iv) net total inventory step up of inventory amortized to Cost of sales of $ million for the years ended December 31, 2022 and 2021.
These pro forma results have been prepared for comparative purposes only and are not necessarily indicative of the results of operations as they would have been had the acquisition occurred on the assumed date, nor are they necessarily an indication of future operating results.
| | | | Proforma Earnings (loss) from continuing operations before tax | | | | | |
The amount of M&M Net sales and Earnings (loss) from continuing operations before tax consolidated by the Company since the acquisition date through December 31, 2022 were $ million and $() million, respectively.
During the year ended December 31, 2022, transaction related costs of $ million were expensed as incurred to Selling, general and administrative expenses in the consolidated statements of operations.
•Nutrinova Joint Venture
On September 27, 2023, the Company formed a food ingredients joint venture with Mitsui under the name Nutrinova. The Company contributed receivables, inventory, property, plant and equipment, certain other assets, liabilities, technology and employees of its food ingredients business while retaining a % interest in the joint venture. Mitsui acquired the remaining % interest in the food ingredients business for a purchase price of $ million, subject to transaction adjustments. The Company accounted for its interest in the joint venture as an equity method investment, and its portion of the results will continue to be included in the Engineered Materials segment. A gain on the transaction of $ million is included in Gain
% by the Company and % by Mitsubishi Gas Chemical Company, Inc. KEPCO was first formed in 1987 to manufacture and market polyoxymethylene ("POM") in Asia, with a particular focus on serving domestic demand in South Korea. KEPCO will now focus solely on manufacturing and supplying high quality products to its shareholders, who will independently market them globally. As part of the restructuring of KEPCO, the Company paid KEPCO $ million and will have paid equal annual installments of € million on October 1 of each year from 2022 to 2026. This resulted in an increase to the Company's investment in KEPCO of $ million. The Company's joint venture partner has made and will make similar payments to KEPCO. The restructuring did not result in a change in ownership percentage of KEPCO, nor a change in control, and KEPCO will continue to be accounted for as an equity method investment.Plant Closures
•Uentrop, Germany
On October 31, 2023, the Company announced the planned closure of its Polyamide 66 ("PA66") and High-Performance Nylon ("HPN") polymerization units at its facility in Uentrop, Germany to optimize production costs across its global network. These operations are included in the Company's Engineered Materials segment. The Company expects to complete the closure in 2024.
| | | Loss on disposition of assets, net | | | |
| | |
| Total | | | | The Company expects to incur additional exit and shutdown costs related to the closure of the PA66 and HPN polymerization units in Uentrop, Germany of approximately $ million in 2024, inclusive of estimated employee termination costs.
5.
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| Allowance for doubtful accounts - third party and affiliates | () | | | () | |
| Trade receivables - third party and affiliates, net | | | | | |
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| Income taxes receivable | | | | | |
Other(1) | | | | | |
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Transactions with Affiliates
The Company owns manufacturing facilities at the InfraServ location in Frankfurt am Main-Hoechst, Germany and has contractual agreements with the InfraServ Entities and certain other equity affiliates and investees accounted for at cost less impairment, adjusted for observable price changes for an identical or similar investment of the same issuer. These contractual agreements primarily relate to energy purchases, site services and purchases of product for consumption and resale.
| | | | | | | | Sales and other credits | | | | | | | | |
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) | | | |
______________________________
(1)
(2) accumulated impairment losses as of December 31, 2023.
In connection with the Company's annual goodwill impairment assessment, the Company did record an impairment loss to goodwill during the nine months ended September 30, 2023, as the estimated fair value for each of the Company's reporting units exceeded the carrying amount of the underlying assets by a substantial margin (Note 2). No events or changes in circumstances occurred during the three months ended December 31, 2023 that indicated the carrying amount of the assets may not be fully recoverable. Accordingly, no additional impairment analysis was performed during that period.
| | | | | | | | | | | | | Acquisitions(1) | | | | | | | | | | | | | |
| Disposition | | | | () | | | | | | | | | () | |
| Accumulated impairment losses | | | | () | | | | | | | | | () | |
| Exchange rate changes | () | | | () | | | | | | | | | () | |
| As of December 31, 2022 | | | | | | | | | | | | | | |
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Disposition(2) | | | | () | | | () | | | | | | () | |
| Exchange rate changes | () | | | | | | | | | | | | | |
| As of December 31, 2023 | | | | | | | | | | | | | | |
| Accumulated Amortization | | | | | | | | | |
| As of December 31, 2021 | () | | | () | | | () | | | () | | | () | |
| Amortization | () | | | () | | | () | | | () | | | () | |
| Disposition | | | | | | | | | | | | | | |
| Accumulated impairment losses | | | | | | | | | | | | | | |
| Exchange rate changes | | | | | | | | | | | | | | |
| As of December 31, 2022 | () | | | () | | | () | | | () | | | () | |
| Amortization | | | | () | | | () | | | () | | | () | |
| | | | | | | | |
Disposition(2) | | | | | | | | | | | | | | |
| Exchange rate changes | | | | () | | | () | | | () | | | () | |
| As of December 31, 2023 | () | | | () | | | () | | | () | | | () | |
| Net book value | | | | | | | | | | | | | | |
______________________________
(1) billion of customer-related intangible assets and $ million of developed technology acquired as part of the M&M Acquisition with weighted average amortization periods of years and years, respectively, and years in total (
Note 4). (2)
| | | |
|
| Exchange rate changes | () | |
| As of December 31, 2022 | | |
Dispositions(1) | () | |
| Exchange rate changes | | |
| As of December 31, 2023 | | |
______________________________(1)
record an impairment loss during the nine months ended September 30, 2023, as the estimated fair value for each of the Company's indefinite-lived intangible assets exceeded the carrying value of the underlying asset by a substantial margin (Note 2). No events or changes in circumstances occurred during the three months ended December 31, 2023 that indicated the carrying amount of the assets may not be fully recoverable. Accordingly, no additional impairment analysis was performed during that period.During the year ended December 31, 2023, the Company did renew or extend any intangible assets.
| | 2025 | | |
| 2026 | | |
| 2027 | | |
| 2028 | | |
10.
| | | | | Customer rebates | | | | | |
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Investment in affiliates (Note 7) | | | | | |
Other(1) | | | | | |
| Total | | | | | |
____________________________
(1) million and $ million payable to DuPont related to the M&M Acquisition and transition activities as of December 31, 2023 and December 31, 2022, respectively.
11.
| | | | Short-term borrowings, including amounts due to affiliates(1) | | | | | |
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Revolving credit facility(2) | | | | | |
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| Total | | | | | |
______________________________
(1)% and % as of December 31, 2023 and 2022, respectively.
(2)% and % as of December 31, 2023 and 2022, respectively.
% | | | | | Senior unsecured notes due 2024, interest rate of % | | | | | |
Senior unsecured notes due 2024, interest rate of % | | | | | |
Senior unsecured notes due 2025, interest rate of % | | | | | |
Senior unsecured notes due 2025, interest rate of % | | | | | |
Senior unsecured term loan due 2025(1) | | | | | |
Senior unsecured notes due 2026, interest rate of % | | | | | |
Senior unsecured notes due 2026, interest rate of % | | | | | |
Senior unsecured notes due 2027, interest rate of % | | | | | |
Senior unsecured notes due 2027, interest rate of % | | | | | |
Senior unsecured term loan due 2027(1) | | | | | |
Senior unsecured notes due 2028, interest rate of % | | | | | |
Senior unsecured notes due 2028, interest rate of % | | | | | |
Senior unsecured notes due 2029, interest rate of % | | | | | |
Senior unsecured notes due 2029, interest rate of % | | | | | |
Senior unsecured notes due 2030, interest rate of % | | | | | |
Senior unsecured notes due 2032, interest rate of % | | | | | |
Senior unsecured notes due 2033, interest rate of % | | | | | |
Pollution control and industrial revenue bonds due at various dates through 2030(2) | | | | | |
Bank loans due at various dates through 2030(3) | | | | | |
Obligations under finance leases due at various dates through 2054 | | | | | |
| Subtotal | | | | | |
Unamortized deferred financing costs(4) | () | | | () | |
| Current installments of long-term debt | () | | | () | |
| Total | | | | | |
______________________________
(1)% and % as of December 31, 2023 and 2022, respectively.
(2)% to %.
(3)% and % as of December 31, 2023 and 2022, respectively.
(4)
-day $ billion senior unsecured bridge term loan facility (the "Bridge Facility"). Subsequently, commitments in respect of the Bridge Facility were syndicated to additional financial institutions as contemplated thereby.In March 2022, Celanese, Celanese U.S. and certain subsidiaries entered into a term loan credit agreement (the "March 2022 U.S. Term Loan Credit Agreement"), pursuant to which lenders provided a tranche of delayed-draw term loans due days from issuance in an amount equal to $ million (the "364-day Term Loans") and a tranche of delayed-draw term loans due years from issuance in an amount equal to $ billion (the "5-year Term Loans"). In September 2022, Celanese, Celanese U.S. and certain subsidiaries entered into an additional term loan credit agreement (the "September 2022 U.S. Term Loan Credit Agreement" and, together with the March 2022 U.S. Term Loan Credit Agreement, the "U.S. Term Loan Credit Agreements"), pursuant to which lenders provided delayed-draw term loans due years from issuance in an amount equal to $ million (the "3-year Term Loans" and collectively with the 364-day Term Loans and the 5-year Term Loans, the "U.S. Term Loan Facility"). The U.S. Term Loan Facility was fully drawn during the three months ended December 31, 2022.
Amounts outstanding under the -year Term Loans of the U.S. Term Loan Facility will accrue interest at a rate equal to Secured Overnight Financing Rate with an interest period of one or three months ("Term SOFR") plus a margin of % to % per annum, or the base rate plus a margin of % to %, in each case, based on the Company's senior unsecured debt rating. The 364-day Term Loans and 3-year Term Loans have been fully repaid.
The entry into the U.S. Term Loan Credit Agreements and offerings of USD- and euro-denominated notes (as described below) reduced availability under the Bridge Facility to and the Company terminated the Bridge Facility.
Also in March 2022, Celanese, Celanese U.S. and certain subsidiaries entered into a new revolving credit agreement (the "U.S. Revolving Credit Agreement" and, together with the March 2022 U.S. Term Loan Credit Agreement, the "U.S. Credit Agreements") consisting of a $ billion senior unsecured revolving credit facility (with a letter of credit sublimit), maturing in 2027 (the "U.S. Revolving Credit Facility"). The margin for borrowings under the U.S. Revolving Credit Facility was % to % above certain interbank rates at current Company credit ratings. The proceeds of a $ million borrowing under the new senior unsecured revolving credit facility were used to repay and terminate the Company's existing revolving credit facility.
During the year ended December 31, 2022, the Company paid $ million in fees related to the Bridge Facility commitment, amortizing these fees to interest expense in the year ended December 31, 2022.
On February 21, 2023 and February 16, 2024, the Company amended certain covenants in the U.S. Credit Agreements, including financial ratio maintenance covenants.
On August 9, 2023, the Company amended certain covenants in the March 2022 U.S. Term Loan Credit Agreement to permit refinancing certain senior notes without requiring a mandatory prepayment under the March 2022 U.S. Term Loan Credit Agreement.
The March 2022 U.S. Term Loan Credit Agreement and the U.S. Revolving Credit Agreement are, and the September 2022 U.S. Term Loan Credit Agreement was, guaranteed by Celanese, Celanese U.S. and domestic subsidiaries together representing substantially all of the Company's U.S. assets and business operations (the "Subsidiary Guarantors"). The Subsidiary Guarantors are listed in Exhibit 22.1 to this Annual Report. On January 4, 2023, Celanese (Shanghai) International Trading Co., Ltd ("CSIT"), a fully consolidated subsidiary, entered into a restatement of an existing credit facility agreement (the "China Revolving Credit Agreement") to upsize and modify the facility thereunder to consist of an aggregate CNY billion uncommitted senior unsecured revolving credit facility available under two tranches (with overdraft, bank guarantee and documentary credit sublimits) (the "China Revolving Credit Facility"). Obligations bear interest at certain fixed and floating rates. The China Revolving Credit Agreement is guaranteed by Celanese U.S.
million (the "China Working Capital Term Loan Agreement," together with the China Revolving Credit Agreement, the "China Credit Agreements," and the China Credit Agreements together with the U.S. Credit Agreements, the "Global Credit Agreements"), payable months from withdrawal date and bearing interest at % less than certain interbank rates. The loan under the China Working Capital Term Loan Agreement was fully drawn on January 10, 2023 and was supported by a letter of comfort from the Company. The Company expects that the China Credit Agreements will facilitate its efficient repatriation of cash to the U.S. to repay debt and effectively redomicile a portion of its U.S. debt to China at a lower average interest rate. | |
| Available for borrowing | | |
| China Revolving Credit Facility | |
| Borrowings outstanding | | |
| Available for borrowing | | |
Senior Notes
The Company has outstanding senior unsecured notes, issued in public offerings registered under the Securities Act of 1933, as amended (the "Securities Act") (collectively, the "Senior Notes"). The Senior Notes were issued by Celanese U.S. and are guaranteed on a senior unsecured basis by Celanese and the Subsidiary Guarantors. Celanese U.S. may redeem some or all of each of the Senior Notes, prior to their respective maturity dates, at a redemption price of % of the principal amount, plus a "make-whole" premium as specified in the applicable indenture, plus accrued and unpaid interest, if any, to the redemption date.
| | % | | % | | March 15, 2025 | | $ | | | | % | | % |
| July 19, 2026 | | € | | | | % | | % |
| July 15, 2027 | | $ | | | | % | | % |
| January 19, 2029 | | € | | | | % | | % |
| July 15, 2029 | | $ | | | | % | | % |
| July 15, 2032 | | $ | | | | % | | % |
Fees and expenses related to the offering of the Acquisition Notes, including underwriting discounts, were $ million for the year ended December 31, 2022 and are being amortized to Interest expense in the consolidated statements of operations over the terms of the applicable notes.
| | % | | % | | November 15, 2030 | | | | | % | | % |
| November 15, 2033 | | | | | % | | % | Fees and expenses related to the 2023 Offering, including underwriting discounts, were $ million for the year ended December 31, 2023 and are being amortized to Interest expense in the consolidated statements of operations over the terms of the applicable notes.
billion in aggregate principal amount (the "Tender Offer") as follows: | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
|
| June 30, 2024 | | | | | $ | | | | | | | | |
| March 15, 2025 | | | | | $ | | | | | | | | |
| April 30, 2024 | | | | | $ | | | | | | | | |
The net proceeds from the 2023 Offering were used (i) to fund the Tender Offer and (ii) for the repayment of other outstanding indebtedness, including the payment in full of the 364-day Term Loans and the 3-year Term Loans.
|
| 2025 | | |
| 2026 | | |
| 2027 | | |
| 2028 | | |
| Thereafter | | |
| Total | | |
Accounts Receivable Purchasing Facility
On June 1, 2023, the Company entered into an amendment to the amended and restated receivables purchase agreement (the "Amended Receivables Purchase Agreement") under its U.S. accounts receivable purchasing facility among certain of the Company's subsidiaries, its wholly-owned, "bankruptcy remote" special purpose subsidiary ("SPE") and certain global financial institutions ("Purchasers"). The Amended Receivables Purchase Agreement extends the term of the accounts receivable purchasing facility such that the SPE may sell certain receivables until June 18, 2025. Under the Amended Receivables Purchase Agreement, transfers of U.S. accounts receivable from the SPE are treated as sales and are accounted for as a reduction in accounts receivable because the agreement transfers effective control over and risk related to the U.S. accounts receivable to the SPE. The Company and related subsidiaries have no continuing involvement in the transferred U.S. accounts receivable, other than collection and administrative responsibilities and, once sold, the U.S. accounts receivable are no longer available to satisfy creditors of the Company or the related subsidiaries. These sales are transacted at % of the face value of the relevant U.S. accounts receivable, resulting in derecognition of the U.S. accounts receivables from the Company's consolidated balance sheet. The Company de-recognized $ billion and $ billion of accounts receivable under this agreement for the years ended December 31, 2023 and 2022, respectively, and collected $ billion and $ billion of accounts receivable sold under this agreement during the same periods. Unsold U.S. accounts receivable of $ million were pledged by the SPE as collateral to the Purchasers as of December 31, 2023.
% and % of certain accounts receivable, respectively, on a non-recourse basis. These transactions are treated as sales and are accounted for as reductions in accounts receivable because the agreements transfer effective control over and risk related to the receivables to the buyer. The Company has no continuing involvement in the transferred receivables, other than collection and administrative responsibilities and, once sold, the accounts receivable are no longer available to satisfy creditors in the event of bankruptcy. The Company de-recognized $ million and $ million of accounts receivable under these factoring agreements for the years ended December 31, 2023 and 2022, respectively, and collected $ million and $ million of accounts receivable sold under these factoring agreements during the same periods.In March 2021, the Company entered into an agreement in Singapore with a financial institution to discount, on a non-recourse basis, documentary credits or other documents recorded as accounts receivable. These transactions are treated as a sale and are accounted for as a reduction in accounts receivable because the agreement transfers effective control over and risk related to the receivables to the buyer. The Company has no continuing involvement in the transferred receivables and, once sold, the accounts receivable are no longer available to satisfy creditors in the event of bankruptcy. The Company de-recognized $ million and $ million of accounts receivable under this agreement for the years ended December 31, 2023 and 2022, respectively.
On December 15, 2023, the Company entered into a Master Discounting Agreement (the "Master Discounting Agreement") with a financial institution in China to discount, on a non-recourse basis, banker's acceptance drafts ("BADs"), classified as accounts receivable. Under the Master Discounting Agreement, the transfer of BADs are treated as sales and are accounted for as a reduction in accounts receivable because the Master Discounting Agreement transfers effective control over and risk related to the transferred BADs to the financial institution. The Company has no continuing involvement in the transferred BADs and the BADs are no longer available to satisfy creditors in the event of a bankruptcy. The Company received $ million from the accounts receivable transferred under the Master Discounting Agreement as of December 31, 2023. The impacts of discounting are not material to the Company's results of operations, cash flows or financial position.
Covenants
The Company's material financing arrangements contain customary covenants, such as events of default and change of control provisions, and in the case of the existing U.S. Credit Agreements the maintenance of certain financial ratios (subject to adjustment following certain qualifying acquisitions and dispositions, as set forth in the existing U.S. Credit Agreements, as amended). Failure to comply with these covenants, or the occurrence of any other event of default, could result in acceleration of the borrowings and other financial obligations. The Company is in compliance with the covenants in its material financing arrangements as of December 31, 2023.
12.
| | | | | | | | | | | |
| | | | |
| | | | | | | | | |
| Service cost | | | | | | | | | | | |
| Interest cost | | | | | | | | | | | |
| | | | | | | |
| | | | | | | |
Net actuarial (gain) loss(1) | | | | () | | | | | | () | |
Acquisitions(2) | | | | | | | | | | | |
Divestiture(3) | () | | | | | | | | | | |
| Settlements | () | | | | | | | | | | |
| Benefits paid | () | | | () | | | () | | | () | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| Exchange rate changes | | | | () | | | | | | () | |
| | | | | | | |
| Projected benefit obligation as of end of period | | | | | | | | | | | |
| Change in Plan Assets | | | | | | | |
| Fair value of plan assets as of beginning of period | | | | | | | | | | | |
| Actual return on plan assets | | | | () | | | | | | | |
| Employer contributions | | | | | | | | | | | |
| | | | | | | |
Acquisitions(2) | | | | | | | | | | | |
Divestiture(3) | () | | | | | | | | | | |
| Settlements | () | | | | | | | | | | |
Benefits paid(4) | () | | | () | | | () | | | () | |
| | | | | | | |
| Exchange rate changes | | | | () | | | | | | | |
| Fair value of plan assets as of end of period | | | | | | | | | | | |
| Funded status as of end of period | () | | | () | | | () | | | () | |
Amounts Recognized in the Consolidated Balance Sheets Consist of: | | | | | | | |
| Noncurrent Other assets | | | | | | | | | | | |
| Current Other liabilities | () | | | () | | | () | | | () | |
| Benefit obligations | () | | | () | | | () | | | () | |
| Net amount recognized | () | | | () | | | () | | | () | |
Amounts Recognized in Accumulated Other Comprehensive Income Consist of: | | | | | | | |
Net actuarial (gain) loss(5) | | | | | | | | | | | |
| Prior service (benefit) cost | | | | | | | () | | | () | |
| Net amount recognized | | | | | | | () | | | () | | ______________________________
(1)
(2)
(3)
(4) million and $ million as of December 31, 2023 and 2022, respectively.
(5)
| | | | | | | | | |
| International plans | | | | | | | | | | | |
| Total | | | | | | | | | | | |
| | | | | International plans | | | | | |
| Total | | | | | |
| | | | | Fair value of plan assets | | | | | |
| | | | | Fair value of plan assets | | | | | |
| | | | | | |
| | | |
| | | | | | | | | | | | | | | | | Interest cost | | | | | | | | | | | | | | | | | |
| Expected return on plan assets | () | | | () | | | () | | | | | | | | | | |
|
| Recognized actuarial (gain) loss | | | | | | | | | | | | | () | | | () | |
|
| Settlement (gain) loss | | | | | | | | | | | | | | | | | |
|
| Total | | | | | | | () | | | | | | () | | | () | |
| | | | | Noncurrent Other assets, consisting of insurance contracts | | | | | |
| Nonqualified Pension Obligations | | | |
| Current Other liabilities | | | | | |
| Benefit obligations | | | | | |
| | () | | | | |
| | | | | | | | | | | International plans | | | | | | | | | | | |
| Combined | | | | | | | | | | | |
| Rate of Compensation Increase | | | | | | | |
| U.S. plans | N/A | | N/A | | | | |
| International plans | | | | | | | | | |
| Combined | | | | | | | | | |
The principal weighted average assumptions used to determine net periodic benefit cost are as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Pension Benefits
Year Ended December 31, | | Postretirement Benefits
Year Ended December 31, |
| 2023 | | 2022 | | 2021 | | 2023 | | 2022 | | 2021 |
| (In percentages) |
| Discount Rate Obligations | | | | | | | | | | | |
| U.S. plans | | | | | | | | | | | | | | | | | |
| International plans | | | | | | | | | | | | | | | | | |
| Combined | | | | | | | | | | | | | | | | | |
| Discount Rate Service Cost | | | | | | | | | | | |
| U.S. plans | N/A | | N/A | | N/A | | | | | | | | N/A |
| International plans | | | | | | | | | | | | | | | | | |
| Combined | | | | | | | | | | | | | | | | | |
| Discount Rate Interest Cost | | | | | | | | | | | |
| U.S. plans | | | | | | | | | | | | | | | | | |
| International plans | | | | | | | | | | | | | | | | | |
| Combined | | | | | | | | | | | | | | | | | |
| Expected Return on Plan Assets | | | | | | | | | | | |
| U.S. plans | | | | | | | | | | | | | | |
| International plans | | | | | | | | | | | | | | |
| Combined | | | | | | | | | | | | | | |
| Rate of Compensation Increase | | | | | | | | | | | |
| U.S. plans | N/A | | N/A | | N/A | | | | | | |
| International plans | | | | | | | | | | | | | | |
| Combined | | | | | | | | | | | | | | |
| Interest Crediting Rate | | | | | | | | | | | |
| U.S. plans | | | | | | | | | | | | | | |
| International plans | | | | | | | | | | | | | | |
| Combined | | | | | | | | | | | | | | |
| | | | | | | | Health care cost trend ultimate rate | | | | | | | | |
| Health care cost trend ultimate rate year | | | | | |
Plan Assets
| | | | | Equities - domestic to plans | | | | | |
| Equities - international to plans | | | | | |
| Other | | | | | |
| Total | | | | | |
On average, the actual return on the U.S. qualified defined pension plans' assets over the long-term (20 years) has exceeded the expected long-term rate of asset return assumption. The U.S. qualified defined benefit plans' actual return on assets for the year ended December 31, 2023 was % versus an expected long-term rate of asset return assumption of %. The expected long-term rate of asset return assumption used to determine 2024 net periodic benefit cost is % for the U.S. qualified defined benefit plans.
The Company's defined benefit plan assets are measured at fair value on a recurring basis (Note 2) as follows: 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.
Equity securities, treasuries 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.
Pooled-type investments: 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.
Derivatives: Derivative financial instruments are valued in the market using discounted cash flow techniques. These techniques incorporate Level 1 and Level 2 fair value measurement inputs such as interest rates and foreign currency exchange rates. These market inputs are utilized in the discounted cash flow calculation considering the instrument's 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 fair value measurement hierarchy.
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.
Insurance contracts: Valued at contributions made, plus earnings, less participant withdrawals and administrative expenses, which approximates fair value.
| | | | | | | | | | | | | | | | | Derivatives | | | | | | | | | | | |
| Swaps | | | | | | | | | | | | | | | | | |
|
| Equity securities | | | | | | | | | | | |
| U.S. companies | | | | | | | | | | | | | | | | | |
| International companies | | | | | | | | | | | | | | | | | |
| Fixed income | | | | | | | | | | | |
| Corporate debt | | | | | | | | | | | | | | | | | |
| Treasuries, other debt | | | | | | | | | | | | | | | | | |
| Mortgage backed securities | | | | | | | | | | | | | | | | | |
|
| Insurance contracts | | | | | | | | | | | | | | | | | |
| Other | | | | | | | | | | | | | | | | | |
Total investments, at fair value(1) | | | | | | | | | | | | | | | | | |
| Liabilities | | | | | | | | | | | |
|
|
| Derivatives | | | | | | | | | | | |
| Swaps | | | | | | | | | | | | | | | | | |
|
|
|
| Total liabilities | | | | | | | | | | | | | | | | | |
Total net assets(2) | | | | | | | | | | | | | | | | | |
______________________________
(1) million, $ million and $ million, respectively. Total investments, at fair value, for the year ended December 31, 2022 excludes investments in pooled-type investments, registered investment companies and short-term investment funds with fair values of $ million, $ million and $ million, respectively.
(2) million and $ million, respectively, as of December 31, 2023 and $ million and $ million, respectively, as of December 31, 2022. Non-financial items include due to/from broker, interest receivables and accrued expenses.
| | Benefit payments to nonqualified pension plans | | |
| Benefit payments to other postretirement benefit plans | | |
The Company's estimates of its U.S. defined benefit pension plan contributions reflect the provisions of the Pension Protection Act of 2006.
| | | | | 2025 | | | | | |
| 2026 | | | | | |
| 2027 | | | | | |
| 2028 | | | | | |
| 2029-2033 | | | | | | ______________________________
(1)
(2)
13.
| | | |
| | | | | |
| Active sites | | | | | |
| U.S. Superfund sites | | | | | |
| Other environmental remediation liabilities | | | | | |
| Total | | | | | |
| | | | | | | | InfraServ GmbH & Co. Hoechst KG | | | | | | | | |
| Yncoris GmbH & Co. KG | | | | | | | | |
______________________________
(1)
other companies are parties to a May 2007 Administrative Order on Consent with the EPA to perform a Remedial Investigation/Feasibility Study ("RI/FS") at the Lower Passaic River Site in order to identify the levels of contaminants and potential cleanup actions, including the potential migration of contaminants between the LPRSA and the Newark Bay Study Area.In March 2016, the EPA issued its final Record of Decision concerning the remediation of the lower 8.3 miles of the Lower Passaic River Site ("Lower 8.3 Miles"). Pursuant to the EPA's Record of Decision, the Lower 8.3 Miles must be dredged bank to bank and an engineered cap must be installed at an EPA estimated cost of approximately $ billion. In September 2021, the EPA issued a Record of Decision selecting an interim remedial plan for the upper 9 miles of the Lower Passaic River ("Upper 9 Miles"). Pursuant to the EPA's Record of Decision, targeted dredging will be conducted in the Upper 9 Miles to address surface sediments with elevated contamination followed by the installation of an engineered cap at an EPA estimated cost of $ million.
The Company owned and/or operated facilities in the vicinity of the Lower 8.3 Miles, but has found no evidence that it contributed any of the contaminants of concern to the Passaic River. In June 2018, Occidental Chemical Corporation ("OCC"), the successor to the Diamond Alkali Company, sued a subsidiary of the Company and 119 other parties alleging claims for joint and several damages, contribution and declaratory relief under Section 107 and 113 of Superfund for costs to clean up the LPRSA portion of the Diamond Alkali Superfund Site, Occidental Chemical Corporation v. 21st Century Fox America, Inc., et al, No. 2:18-CV-11273 (MCA) (LDW) (U.S. District Court New Jersey) (the "2018 OCC Lawsuit"), alleging that each of the defendants owned or operated a facility that contributed contamination to the LPRSA. With respect to the Company, the 2018 OCC lawsuit is limited to the former Celanese facility that Essex County, New Jersey has agreed to indemnify the Company for and does not change the Company's estimated liability for LPRSA cleanup costs.
Separately, the United States lodged a Consent Decree in U.S. District Court for the District of New Jersey on December 16, 2022 that will resolve the Company's liability (and that of more than 80 other settling defendants) to the EPA for costs to clean up both the Lower 8.3 Miles and Upper 9 Miles of the Lower Passaic River Site in exchange for a collective payment of $ million, United States v. Alden Leeds, Inc., No. 2:22-7326 (MCA) (LDW) (U.S. District Court New Jersey) ("Consent Decree Action"). The Consent Decree also will provide the Company protection from contribution claims by others for costs incurred to clean up both the Lower 8.3 Miles and Upper 9 Miles of the Lower Passaic River Site. The Company's proposed payment toward the $ million collective settlement payment is not material to the Company's results of operations, cash flows or financial position. The Consent Decree is still subject to public comment and court approval.
On March 7, 2023, the U.S. District Court for the District of New Jersey entered an order staying and administratively terminating the 2018 OCC Lawsuit, pending resolution of the request for judicial approval of the Consent Decree in the Consent Decree Action. On March 24, 2023, OCC filed a new lawsuit against parties, including a subsidiary of the
million, Occidental Chemical Corporation v. Givaudan Fragrances Corporation, No. 2:23-cv-1699 (U.S. District Court New Jersey) (the "2023 OCC Lawsuit"). Like the earlier lawsuit, the 2023 OCC Lawsuit concerns the facility Essex County, New Jersey purchased and for which Essex County, New Jersey has agreed to defend and indemnify the Company. This new lawsuit does not change the Company's estimated liability for LPRSA cleanup costs.In the interim, the Company continues to vigorously defend these matters and continues to believe that its ultimate allocable share of the cleanup costs with respect to the Lower Passaic River Site, previously estimated at less than %, will not be material.
Other Environmental Matters
In April 2022, a methanol leak on a pipeline to the Company's Bishop, Texas facility was discovered. The release has been contained, the leak has been repaired and the pipeline has resumed operation. The Company promptly disclosed the incident to state and federal authorities, including the Texas Commission on Environmental Quality and the EPA, and remediation activities are now completed. While the Company has not received a notice of violation nor been assessed any fines or penalties to date, the Company recorded a reserve in Other current liabilities based on anticipated clean-up costs and possible penalties to state or federal authorities. The Company does not believe that resolution of this matter will have a material impact on its financial condition or results of operations.
14.
per share ("Common Stock"), unless the Company's Board of Directors, in its sole discretion, determines otherwise. The amount available to the Company to pay cash dividends is not currently restricted by its existing Global Credit Agreements and its indentures governing its senior unsecured notes. Any decision to declare and pay dividends in the future will be made at the discretion of the Company's Board of Directors and will depend on, among other things, the results of operations, cash requirements, financial condition, contractual restrictions and other factors that the Company's Board of Directors may deem relevant.The Company declared a quarterly cash dividend of $ per share on its Common Stock on February 7, 2024, amounting to approximately $ million. The cash dividend will be paid on March 5, 2024 to holders of record as of February 20, 2024.
Treasury Stock
The Company's Board of Directors authorizes repurchases of Common Stock from time to time. These authorizations give management discretion in determining the timing and conditions under which shares may be repurchased. This repurchase program does not have an expiration date.
|
| | | | | | | | | | Average purchase price per share | $ | | | | $ | | | | $ | | | | $ | | |
| Amount spent on repurchased shares (in $ millions) | $ | | | | $ | | | | $ | | | | $ | | |
| Aggregate Board of Directors repurchase authorizations during the period (in $ millions) | $ | | | | $ | | | | $ | | | | $ | | |
The purchase of treasury stock reduces the number of shares outstanding. The repurchased shares may be used by the Company for compensation programs utilizing the Company's stock and other corporate purposes. The Company accounts for treasury stock using the cost method and includes treasury stock as a component of shareholders' equity.
| | () | | | | | | | | | | | | | |
))) )) ) | | () | | | () | | | () | |
15.
) | | () | | | | | | International | | | | | | | | |
| Total | | | | | | | | |
| | | | | | | | International | | | | | | | | |
| Total | | | | | | | | |
| Deferred | | | | | |
| U.S. | () | | | () | | | () | |
| International | () | | | () | | | | |
| Total | () | | | () | | | | |
| Total | () | | | () | | | | |
| | | | | | | | Change in valuation allowance | () | | | () | | | () | |
| Equity income and dividends | () | | | () | | | () | |
| (Income) expense not resulting in tax impact, net | () | | | | | | () | |
| U.S. tax effect of foreign earnings and dividends | | | | | | | | |
| Foreign tax credits | () | | | () | | | () | |
Other foreign tax rate differentials | () | | | () | | | () | |
| Legislative changes | () | | | | | | () | |
| | | | |
| State income taxes, net of federal benefit | () | | | () | | | | |
| Recognition of basis differences in investments in affiliates | | | | | | | | |
| Asset transfers between wholly owned foreign affiliates | () | | | () | | | | |
| Other, net | () | | | | | | | |
| Income tax provision (benefit) | () | | | () | | | | |
| | | | | |
Effective income tax rate | () | % | | () | % | | | % |
In December 2022, as part of its integration efforts for the M&M Acquisition (see Note 4) and to simplify future cash flows for purposes of acquisition debt repayment, the Company reorganized its foreign legal entity holding structure and relocated certain of its intangible assets to align with the acquired M&M foreign operations. The transfer of these assets between wholly owned foreign affiliates, generated a net deferred tax benefit of approximately $ million. The contractual provisions for these asset transfers provided for adjustments to the purchase price for business events occurring within the succeeding twelve months, and as a result, the Company recorded an additional deferred tax benefit of approximately $ million in 2023. In 2023, in furtherance of its integration strategy for the M&M Acquisition, the Company continued to relocate certain intangible assets to better align with the acquired M&M foreign operations. In addition, in late 2023, as part of its overall integration approach, the Company initiated a strategy to realign its European headquarters and principal operations to Switzerland to achieve operational efficiencies by leveraging an acquired site for future growth and improved alignment of ownership of intangible assets with future technology and innovation efforts to be conducted locally. These operational efficiencies are expected to include, (i) centralized regional manufacturing, sales and operational planning, procurement and business leadership and (ii) cost and facility savings.
million. In addition, the relocation of these intangible assets resulted in the utilization of approximately $ million of the Company's existing U.S. foreign tax credit carryforwards. These carryforwards had previously been offset by a full valuation allowance.Included in the Other, net line in the effective income tax rate reconciliation above are the U.S. GAAP gain in excess of the tax gain related to the formation of the Nutrinova joint venture (see Note 4) of $ million for the year ended December 31, 2023 and charges of approximately $ million related to transaction costs for the M&M Acquisition for the year ended December 31, 2022. In addition, included in the Other, net line in the effective income tax rate reconciliation above are U.S. benefits of foreign derived intangible income of $ million, $, and $ million; and changes in uncertain tax positions of $ million, $ million and $ million for the years ended December 31, 2023, 2022 and 2021, respectively. Deferred Income Taxes
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.
| | | | | Accrued expenses | | | | | |
| Inventory | () | | | () | |
| Net operating loss carryforwards | | | | | |
| Tax credit carryforwards | | | | | |
Intangibles and other | | | | | |
| Subtotal | | | | | |
Valuation allowance(1) | () | | | () | |
| Total | | | | | |
| Deferred Tax Liabilities | | | |
| Depreciation and amortization | | | | | |
| Investments in affiliates | | | | | |
| Other | | | | | |
| Total | | | | | |
| Net deferred tax assets (liabilities) | | | | () | |
______________________________
(1)
As a result of the TCJA, U.S. federal and state income taxes have been recorded on undistributed foreign earnings accumulated from 1986 through 2017. The Company's previously taxed income for its foreign subsidiaries significantly exceeds its offshore cash balances. The Company has not recorded a deferred tax liability for foreign withholding or other foreign local tax that would be due when cash is actually repatriated to the U.S. because those foreign earnings are considered permanently reinvested in the business or may be remitted substantially free of any additional local taxes. The determination of the amount of the unrecognized deferred tax liability related to the undistributed earnings is not practicable.
million that are subject to limitation. These net operating loss carryforwards begin to expire in 2025. As of December 31, 2023, the Company also had available state net operating loss carryforwards, net of federal tax impact, of $ million, $ million of which are offset by a valuation allowance due to uncertain recoverability. The Company also has foreign net operating loss carryforwards available as of December 31, 2023 of $ billion primarily for Malta, Luxembourg, Spain, the United Kingdom, Singapore, Switzerland, Hong Kong and China with various expiration dates. Net operating loss carryforwards of $ million in China began to expire in 2023 and are scheduled to continue to expire through 2028. Net operating losses in most other foreign jurisdictions do not have an expiration date. The Company acquired capital loss carryforwards of $ million as part of the M&M Acquisition (Note 4) that are subject to annual limitation due to the ownership change. The Company fully offset these capital loss carryforwards with a valuation allowance due to uncertain recoverability.•Tax Credit Carryforwards
The Company had available $ million of foreign tax credit carryforwards, which are fully offset by a valuation allowance due to uncertain recoverability and $ million of alternative minimum tax credit carryforwards in the U.S. The foreign tax credit carryforwards are subject to a ten-year carryforward period and begin to expire in 2027. The alternative minimum tax credits are subject to annual limitation due to prior ownership changes but have an unlimited carryforward period and can be used to offset federal tax liability in future years.
The Company evaluates its deferred tax assets on a quarterly basis to determine whether a valuation allowance is necessary. Realization of deferred tax assets ultimately depends on the existence of sufficient taxable income of the appropriate character in the applicable carryback or carryforward periods. Changes in the Company's estimates of future taxable income and prudent and feasible tax planning strategies will affect the estimate of the realization of the tax benefits of these foreign tax credit carryforwards. As such, the Company is currently evaluating tax planning strategies to enable use of the foreign tax credit carryforwards that may decrease the Company's effective tax rate in future periods as the valuation allowance is reversed.
Uncertain Tax Positions
| | | | | | | | Increases in tax positions for the current year | | | | | | | | |
| Increases in tax positions for prior years | | | | | | | | |
| Decreases in tax positions for prior years | () | | | () | | | () | |
| Increases (decreases) due to settlements | () | | | () | | | | |
| | | | |
| | | | |
| As of the end of the year | | | | | | | | |
| | | | | |
| Total uncertain tax positions that if recognized would impact the effective tax rate | | | | | | | | |
Total amount of interest expense (benefit) and penalties recognized in the consolidated statements of operations(1) | | | | | | | | |
| Total amount of interest expense and penalties recognized in the consolidated balance sheets | | | | | | | | |
______________________________
(1)
The increase in uncertain tax positions for the year ended December 31, 2022 was primarily due to increases in foreign tax positions related to ongoing tax examinations, partially offset by releases due to completed examinations and statute closures.
16.
| | | | | | | | Cost of sales / Selling, general and administrative expenses | | Short-term lease cost | | | | | | | | | | Cost of sales / Selling, general and administrative expenses |
| Variable lease cost | | | | | | | | | | Cost of sales / Selling, general and administrative expenses |
| Finance lease cost | | | | | | | |
| Amortization of leased assets | | | | | | | | | | Cost of sales |
| Interest on lease liabilities | | | | | | | | | | Interest expense |
| Sublease income | | | | | | | | | | Other income (expense), net |
| Total net lease cost | | | | | | | | | | |
| | | | | Operating lease ROU assets | | Finance lease assets | | | | | | | Property, plant and equipment, net |
| Total leased assets | | | | | | | |
| | | | | |
| Liabilities | | | | | |
| Current | | | | | |
| Operating | | | | | | | Current Other liabilities |
| Finance | | | | | | | Short-term borrowings and current installments of long-term debt |
| Noncurrent | | | | | |
| Operating | | | | | | | Operating lease liabilities |
| Finance | | | | | | | Long-term debt |
| Total lease liabilities | | | | | | | |
| | | Finance leases | | | |
| | | |
| Weighted-Average Discount Rate | | | |
| Operating leases | | % | | | % |
| Finance leases | | % | | | % |
| | | | | | | | Operating cash flows from finance leases | | | | | | | | |
| Financing cash flows from finance leases | | | | | | | | |
| | | | | |
ROU assets obtained in exchange for finance lease liabilities (Note 20) | | | | | | | | |
| ROU assets obtained in exchange for operating lease liabilities | | | | | | | | |
| | | | | 2025 | | | | | |
| 2026 | | | | | |
| 2027 | | | | | |
| 2028 | | | | | |
| Later years | | | | | |
| | |
| Total lease payments | | | | | |
| Less amounts representing interest | () | | | () | |
| Total lease obligations | | | | | |
17.
) | | | | | | | | | | | | | | | | | Cost of sales | | Interest rate swaps | | | | | | | | | | () | | | () | | | () | | | Interest expense |
| |
| Foreign currency forwards | | | | | | | () | | | | | | | | | | | | Cost of sales |
| Total | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| Designated as Fair Value Hedges | | | | | | | | | | | | | |
Cross-currency swaps(1) | () | | | | | | | | | | | | | | | | | | Foreign exchange gain (loss), net |
| | | | | | | | | | | | | |
Designated as Net Investment Hedges(2) | | | | | | | | | | | | | |
Foreign currency denominated debt (Note 11) | () | | | () | | | | | | | | | | | | | | | N/A |
| () | | | () | | | | | | | | | | | | | | | N/A |
| |
| Total | () | | | () | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| Not Designated as Hedges | | | | | | | | | | | | | |
| |
| Foreign currency forwards and swaps | | | | | | | | | | () | | | () | | | () | |
| Foreign exchange gain (loss), net; Other income (expense), net |
______________________________
(1) million of the issued notes into a Japanese yen-denominated borrowing at prevailing yen interest rates, maturing on July 15, 2029. The swap qualifies and has been designated as a fair value hedge of the Company's foreign currency exchange rate exposure on the long-term debt of its Japanese yen-denominated subsidiary.
billion of the issued notes into and euro-denominated borrowings at prevailing euro interest rates, maturing on November 15, 2028 and November 15, 2030, respectively. The swaps qualify and have been designated as fair value hedges of the Company's foreign currency exchange rate exposure on the long-term debt of its euro-denominated subsidiary.(2) billion and $ million of the Acquisition USD Notes into a euro-denominated borrowing at prevailing euro interest rates, maturing on July 15, 2027 and July 15, 2032, respectively. The swaps and € billion of the Acquisition Euro Notes qualify and have been designated as net investment hedges of the Company's foreign currency exchange rate exposure on the net investments of certain of its euro-denominated subsidiaries.
See Note 18 for additional information regarding the fair value of the Company's derivative instruments. Certain of the Company's commodity swaps, interest rate swaps, cross-currency swaps and foreign currency forwards and swaps permit the Company to net settle all contracts with the counterparty through a single payment in an agreed upon currency in the event of default or early termination of the contract, similar to a master netting arrangement.
Derivatives Not Designated As Hedges
Foreign Currency Forwards and Swaps
Each 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.
) | | British pound sterling | | |
| Canadian dollar | | |
| Chinese yuan | | |
|
|
|
|
|
| | |
| | | | | | | |
|
|
| | |
| | | | | | | | | | | | | | | | | | | | | | | Insurance contracts in nonqualified trusts | | | | | | | | | | | | | | | | | | | | | | | |
| Long-term debt, including current installments of long-term debt | | | | | | | | | | | | | | | | | | | | | | | |
In general, the equity investments included in the table above are not publicly traded and their fair values are not readily determinable. The Company believes the carrying values approximate fair value. Insurance contracts in nonqualified trusts consist of long-term fixed income securities, which are valued using independent vendor pricing models with observable inputs in the active market and therefore represent a Level 2 fair value measurement. The fair value of long-term debt is based on valuations from third-party banks and market quotations and is classified as Level 2 in the fair value measurement hierarchy. The fair value of obligations under finance leases, which are included in long-term debt in the consolidated balance sheets, is based on lease payments and discount rates, which are not observable in the market and therefore represents a Level 3 fair value measurement.
19.
million and € million of such obligations. These amounts represent the maximum potential amount of future (undiscounted) payments that the Company could be required to make under the guarantees. The Company would be required to perform on these guarantees in the event of default by the guaranteed party.Maximum future payments under these obligations are $ million and € million for bank borrowings and the guarantee will remain in force until all guaranteed obligations are paid and the underlying debt agreements entered into by certain equity affiliates are terminated.
Environmental and Other Liabilities
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.
The Company has accrued for all probable and reasonably estimable losses associated with all known matters or claims. These known obligations include the following:
•Demerger Obligations
In connection with the Hoechst demerger, the Company agreed to indemnify Hoechst, and its legal successors, for various liabilities under the demerger agreement, including for environmental liabilities associated with contamination arising either from environmental damage in general ("Category A") or under divestiture agreements entered into by Hoechst prior to the demerger ("Category B") (Note 13). The Company's obligation to indemnify Hoechst, and its legal successors, is capped under Category B at € million. If and to the extent the environmental damage should exceed € million in aggregate, the Company's obligation to indemnify Hoechst and its legal successors applies, but is then limited to % of the remediation cost without further limitations. Cumulative payments under the divestiture agreements as of December 31, 2023 are $ million. Though the Company is significantly under its obligation cap under Category B, most of the divestiture agreements have become time barred and/or any notified environmental damage claims have been partially settled.
The Company has also undertaken in the demerger agreement to indemnify Hoechst and its legal successors for (i) % of any and all Category A liabilities that result from Hoechst being held as the responsible party pursuant to public law or current or future environmental law or by third parties pursuant to private or public law related to contamination and (ii) 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 been requested by Hoechst to make any payments in connection with this indemnification. Accordingly, the Company has not made any payments to Hoechst and its legal successors.
Based on the Company's evaluation of currently available information, including the lack of requests for indemnification, the Company cannot estimate the remaining demerger obligations, if any, in excess of amounts accrued.
million as of December 31, 2023. Other agreements do not provide for any monetary or time limitations.Based on the Company's evaluation of currently available information, including the number of requests for indemnification or other payment received by the Company, the Company cannot estimate the remaining divestiture obligations, if any, in excess of amounts accrued.
Purchase Obligations
In the normal course of business, the Company enters into various purchase commitments for goods and services. The Company maintains a number of "take-or-pay" contracts for purchases of raw materials, utilities and other services. Certain of the contracts contain a contract termination buy-out provision that allows for the Company to exit the contracts for amounts less than the remaining take-or-pay obligations. Additionally, the Company has other outstanding commitments representing maintenance and service agreements, energy and utility agreements, consulting contracts and software agreements. As of December 31, 2023, the Company had unconditional purchase obligations of $ billion, of which $ million will be paid in 2024, $ million in 2025, $ million in 2026, $ million in 2027, $ million in 2028 and the balance thereafter through 2042.
Contingencies
The Company is involved in legal and regulatory proceedings, lawsuits, claims and investigations incidental to the normal conduct of business, relating to such matters as product liability, land disputes, insurance coverage disputes, contracts, employment, antitrust or competition, intellectual property, personal injury and other actions in tort, workers' compensation, chemical exposure, asbestos exposure, taxes, trade compliance, acquisitions and divestitures, claims of current and legacy shareholders, past waste disposal practices and release of chemicals into the environment. The Company is actively defending those matters where the Company is named as a defendant and, based on the current facts, does not believe the outcomes from these matters would be material to the Company's results of operations, cash flows or financial position.
As previously reported, in July 2020, the Company settled a European Commission competition law investigation involving certain of its subsidiaries and three other companies related to certain past ethylene purchases. Shell Chemicals Europe and another group of corporate claimants have filed claims for damages with the District Court of Amsterdam against four companies, including Celanese, arising from those activities, and the first court hearing was held in late September 2023. The Company intends to vigorously defend itself against these claims. While it is possible that additional parties could assert demands or claims related to this matter, based on information available at this time, the Company does not expect ultimate resolution of this matter to have a material impact on its financial condition or results of operations.
20.
| | | | | | | | Taxes paid, net of refunds | | | | | | | | |
| Noncash Investing and Financing Activities | | | | | |
| Accrued treasury stock repurchases | | | | () | | | | |
| | | | |
Finance lease obligations (Note 16) | | | | | | | | |
| Accrued capital expenditures | () | | | | | | | |
Asset retirement obligations | | | | | | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
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) | | | | | | | | | |
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| | | | | | | | | | |
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| | | | | | | | | | (3) |
______________________________
(1) million, $ million and $ million for the years ended December 31, 2023, 2022 and 2021, respectively.
(2) million gain related to the formation of the Nutrinova joint venture included in Gain (loss) on disposition of businesses and assets, net in the consolidated statements of operations (
Note 4). (3) million, an increase in accrued capital expenditures of $ million and an increase in accrued capital expenditures of $ million for the years ended December 31, 2023, 2022 and 2021, respectively.
| | | | | | | | Brazil | | | | | | | | |
| Canada | | | | | | | | |
| China | | | | | | | | |
| France | | | | | | | | |
| Germany | | | | | | | | |
| India | | | | | | | | |
| Italy | | | | | | | | |
| Japan | | | | | | | | |
| Mexico | | | | | | | | |
| | | | |
| Singapore | | | | | | | | |
| South Korea | | | | | | | | |
| Spain | | | | | | | | |
| Switzerland | | | | | | | | |
| United Kingdom | | | | | | | | |
| U.S. | | | | | | | | |
| Other | | | | | | | | |
| Total | | | | | | | | |
Property, plant and equipment, net based on the geographic location of the Company's facilities is as follows:
| | | | | | | | | | | |
| As of December 31, |
| 2023 | | 2022 |
| (In $ millions) |
| Belgium | | | | | |
| Canada | | | | | |
| China | | | | | |
| Germany | | | | | |
| Italy | | | | | |
| Japan | | | | | |
| Mexico | | | | | |
| Netherlands | | | | | |
| Singapore | | | | | |
| South Korea | | | | | |
| Switzerland | | | | | |
| United Kingdom | | | | | |
| U.S. | | | | | |
| Other | | | | | |
| Total | | | | | |
22.
| | | | | | | | Europe and Africa | | | | | | | | |
| Asia-Pacific | | | | | | | | |
| South America | | | | | | | | |
| Total | | | | | | | | |
| | | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| Acetyl Chain | | | | | |
| North America | | | | | | | | |
| Europe and Africa | | | | | | | | |
| Asia-Pacific | | | | | | | | |
| South America | | | | | | | | |
Total(1) | | | | | | | | |
______________________________
(1) million, $ million and $ million for the years ended December 31, 2023, 2022 and 2021, respectively.
23.
| | | | | | | Earnings (loss) from discontinued operations | () | | | () | | | () | |
| Net earnings (loss) | | | | | | | | |
| | | | |
| | | | |
| | | | | |
| Weighted average shares - basic | | | | | | | | |
Incremental shares attributable to equity awards(1) | | | | | | | | |
Weighted average shares - diluted | | | | | | | | |
______________________________
(1), and shares of Common Stock for the years ended December 31, 2023, 2022 and 2021, respectively, as their effect would have been antidilutive. Excludes , and equity award shares for the years ended December 31, 2023, 2022 and 2021, respectively, as their effect would have been antidilutive.
24.
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| Asset impairments | () | | | () | | | () | |
| Plant/office closures | () | | | | | | | |
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