-----BEGIN PRIVACY-ENHANCED MESSAGE-----
Proc-Type: 2001,MIC-CLEAR
Originator-Name: webmaster@www.sec.gov
Originator-Key-Asymmetric:
MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen
TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB
MIC-Info: RSA-MD5,RSA,
UbAb2O8HlbO50HMrVxa7rCfDpblMhuWGQS+PLGQ21NjTPobNkhiHuaThcDkiiovc
3gBYT7/e4ltdguJijhOpUA==
<SEC-DOCUMENT>0000950123-00-003149.txt : 20000403
<SEC-HEADER>0000950123-00-003149.hdr.sgml : 20000403
ACCESSION NUMBER: 0000950123-00-003149
CONFORMED SUBMISSION TYPE: 20-F
PUBLIC DOCUMENT COUNT: 6
CONFORMED PERIOD OF REPORT: 19991231
FILED AS OF DATE: 20000331
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: CELANESE AG
CENTRAL INDEX KEY: 0001095442
STANDARD INDUSTRIAL CLASSIFICATION: PLASTICS, FOIL & COATED PAPER BAGS [2673]
IRS NUMBER: 000000000
STATE OF INCORPORATION: I8
FISCAL YEAR END: 1231
FILING VALUES:
FORM TYPE: 20-F
SEC ACT:
SEC FILE NUMBER: 001-15419
FILM NUMBER: 590744
BUSINESS ADDRESS:
STREET 1: INSUSTRIEPARK HOECHST BUILDING F-821 D-6
STREET 2: FRANKFURT AM MAIN GERMANY
CITY: FRANKFURT
BUSINESS PHONE: 6930514000
MAIL ADDRESS:
STREET 1: INDUSTRIEPARK HOECHST BLDG F-821 D-65926
STREET 2: FRANKFURT AM MAIN GERMANY
CITY: FRANKFURT
STATE: I8
</SEC-HEADER>
<DOCUMENT>
<TYPE>20-F
<SEQUENCE>1
<DESCRIPTION>CELANESE AG
<TEXT>
<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 31, 2000
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 20-F
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
COMMISSION FILE NUMBER 1-15419
CELANESE AG
(Exact name of Registrant as specified in its charter)
CELANESE CORPORATION
(Translation of Registrant's name into English)
FEDERAL REPUBLIC OF GERMANY
(Jurisdiction of incorporation or organization)
65926 FRANKFURT AM MAIN, GERMANY
(Address of principal executive offices)
Securities registered pursuant to Section 12(b) of the Act.
<TABLE>
<CAPTION>
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
------------------- -----------------------------------------
<S> <C>
Ordinary Shares with no par value New York Stock Exchange
</TABLE>
------------------------
Securities registered or to be registered pursuant to Section 12(g) of the
Act
NONE
(Title of Class)
------------------------
Securities for which there is a reporting obligation pursuant to Section
15(d) of the Act
NONE
(Title of Class)
------------------------
Indicate the number of outstanding shares of each of the issuer's classes
of capital or common stock as of the close of the period covered by the annual
report:
Ordinary Shares with no par value...........................55,915,369
(as of December 31, 1999)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No [ ]
Indicate by check mark which financial statement item the registrant has
elected to follow.
Item 17 [ ] Item 18 [X]
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
PART I
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Item 1. Description of Business............................. 3
Introduction.............................................. 3
Background................................................ 3
Segment Overview.......................................... 4
Strategy.................................................. 5
Segments.................................................. 6
Other Activities.......................................... 18
Discontinued Operations................................... 18
Raw Materials and Energy.................................. 18
Intellectual Property..................................... 19
Research and Development.................................. 19
Environmental and Other Regulation........................ 20
Employees................................................. 22
Item 2. Description of Property............................. 23
Item 3. Legal Proceedings................................... 25
Item 4. Control of Registrant............................... 28
Item 5. Nature of Trading Market............................ 29
General................................................... 29
Trading on the Frankfurt Stock Exchange................... 29
Trading on the New York Stock Exchange.................... 30
Item 6. Exchange Controls and Other Limitations Affecting
Security Holders.......................................... 31
Item 7. Taxation............................................ 31
Item 8. Selected Financial Data............................. 35
Item 9. Management's Discussion and Analysis of Financial
Condition and Results of Operations....................... 38
Introduction.............................................. 38
1999 Compared with 1998................................... 40
1998 Compared with 1997................................... 47
Liquidity and Capital Resources........................... 51
Environmental Matters..................................... 52
Market Risks.............................................. 53
Year 2000................................................. 55
Introduction of the Euro.................................. 56
Outlook................................................... 56
Item 9A. Quantitative and Qualitative Disclosures about
Market Risk............................................... 56
Item 10. Directors and Officers of Registrant............... 58
Item 11. Compensation of Directors and Officers............. 63
Item 12. Options to Purchase Securities from Registrant or
Subsidiaries.............................................. 64
Item 13. Interest of Management in Certain Transactions..... 64
<CAPTION>
PART II
<S> <C>
Item 14. Description of Securities to be Registered......... 65
<CAPTION>
PART III
<S> <C>
Item 15. Defaults Upon Senior Securities.................... 65
Item 16. Changes in Securities and Changes in Security for
Registered Securities..................................... 65
<CAPTION>
PART IV
<S> <C>
Item 17. Financial Statements............................... 65
Item 18. Financial Statements............................... 65
Item 19. Financial Statements and Exhibits.................. 65
Index to Consolidated Financial Statements.................. F-1
</TABLE>
------------------
i
<PAGE> 3
INTRODUCTION
Celanese AG is incorporated as a stock corporation organized under the laws
of the Federal Republic of Germany. As used in this Annual Report, "Celanese"
refers to Celanese AG, its consolidated subsidiaries and, except for accounting
purposes, its non-consolidated affiliates. For accounting purposes, "Celanese"
refers solely to Celanese AG and its consolidated affiliates. See Note 1 to the
Consolidated Financial Statements for Celanese contained in this Annual Report
(the "Consolidated Financial Statements").
------------------------
ADDITIONAL INFORMATION
Celanese furnishes its U.S. shareholders with annual reports in English.
These annual reports include a review of operations and annual audited
consolidated financial statements prepared in conformity with U.S. generally
accepted accounting principles ("U.S. GAAP"). Celanese also furnishes its U.S.
shareholders quarterly reports in English in accordance with U.S. GAAP that
include unaudited interim consolidated financial information. Celanese furnishes
its U.S. shareholders in English, all notices of shareholders' meetings and
other reports and communications that are made generally available to
shareholders. Celanese transmits English versions of these notices, reports and
announcements to ChaseMellon Shareholder Services, Celanese's transfer agent and
registrar in New York, New York. The transfer agent arranges for the prompt
mailing of copies of these materials to all of Celanese's U.S. shareholders. As
a foreign private issuer, Celanese is exempt under the U.S. Securities Exchange
Act of 1934 (the "Exchange Act") from the proxy rules and the short-swing profit
recovery provisions of Section 16 of the Exchange Act.
Celanese is subject to the informational requirements of the Exchange Act
and files reports and other information with the Securities and Exchange
Commission (the "Commission"). Reports and other information filed by Celanese
may be examined, without charge, at the public reference facilities maintained
by the Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C., 20549,
and at the Commission's regional offices located at Suite 1400, Citicorp Center,
500 West Madison Street, Chicago, Illinois, 60661-2511 and Room 1300, Seven
World Trade Center, New York, New York 10048. Copies of such materials are also
available by mail from the Commission's Public Reference Branch at 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates. More information on
the public reference rooms can be obtained by calling the Commission at
1-800-SEC-0330. The Commission also maintains a Web site (http://www.sec.gov)
that contains reports, proxy and information statements and other information
regarding registrants, such as Celanese, that file electronically with the
Commission. Shares of Celanese are traded on the New York Stock Exchange; the
materials submitted by Celanese to the New York Stock Exchange are also
available for inspection and copying at their offices located at 20 Broad
Street, New York, New York 10005.
The Consolidated Financial Statements were prepared in accordance with U.S.
GAAP for all periods presented. The Consolidated Financial Statements reflect,
for the periods indicated, the financial condition, results of operations and
cash flows of the businesses transferred to Celanese from Hoechst
Aktiengesellschaft ("Hoechst") in a demerger which became effective on October
22, 1999. The Consolidated Financial Statements and other financial information
included in this Annual Report, unless otherwise specified, have been presented
to exclude the effects of discontinued operations. See "Item 1. Description of
Business-Discontinued Operations". The Consolidated Financial Statements, for
the periods prior to the effective date of the demerger from Hoechst, assume
that Celanese had existed as a separate legal entity with five business
segments, Acetyl Products, Chemical Intermediates, Acetate Products, Ticona and
Performance Products, as well as the other businesses and activities of Hoechst
transferred to Celanese in the demerger. The financial results of Celanese,
prior to the effective date of the demerger, have been carved out from the
consolidated financial statements of Hoechst using the historical results of
operations and assets and liabilities of these businesses and activities and
reflect the accounting policies adopted by Hoechst in the preparation of its
financial statements and thus do not necessarily reflect the
<PAGE> 4
accounting policies which Celanese might have adopted had it been an independent
company during those periods.
Effective January 1, 1999, Germany and 10 other member states of the
European Union introduced the euro or E as their common currency and established
fixed conversion rates between their existing sovereign currencies and the euro.
The Consolidated Financial Statements for each period presented on or before
December 31, 1998 have been prepared using the Deutsche Mark or DM and have been
restated into euro using the official fixed conversion rate between the euro and
the Deutsche Mark of DM 1.95583 per E1.00. Celanese does not represent that
these restated euro amounts for periods ended on or before December 31, 1998,
actually represent the DM amounts in the Consolidated Financial Statements as
prepared or could be converted into DM at the rate indicated. Since January 1,
1999, Celanese's Consolidated Financial Statements have been prepared in euro
and are no longer restated from Deutsche Mark into euro. U.S. dollar or U.S. $
amounts are unaudited and have been converted solely for convenience of the
readers for the year ended December 31, 1999 from euro into U.S. dollars, at an
exchange rate of U.S.$1.0070 per E1.00, the noon buying rate in the City of New
York for cable transfers in foreign currencies announced by the Federal Reserve
Bank of New York for customs purposes (the "Noon Buying Rate") on December 31,
1999. For information regarding recent rates of exchange between euro and U.S.$,
see "Item 8. Selected Financial Data-Exchange Rate Information." Celanese does
not represent that the U.S. dollar amounts presented in the U.S. dollar
convenience translation or any amounts translated from euro into other
currencies could have been converted from euro at the rates indicated.
On March 20, 2000, the Noon Buying Rate for the euro was U.S.$.9710 per
E1.00.
------------------------
FORWARD-LOOKING STATEMENTS MAY PROVE INACCURATE
This Annual Report contains certain forward-looking statements and
information relating to Celanese that are based on the beliefs of its management
as well as assumptions made by and information currently available to Celanese.
When used in this document, words such as "anticipate", "believe", "estimate",
"expect" and similar expressions, as they relate to Celanese or its management,
are intended to identify forward-looking statements. These statements are not
guarantees of future performance and involve risks and uncertainties that are
difficult to predict. Further, certain forward-looking statements are based upon
assumptions as to future events that may not prove to be accurate. Many factors
could cause the actual results, performance or achievements of Celanese to be
materially different from any future results, performance or achievements that
may be expressed or implied by such forward-looking statements. These factors
include, among other things: changes in general economic, business and political
conditions, fluctuating exchange rates, the length and depth of product and
industry business cycles, changes in the price and availability of raw
materials, actions which may be taken by competitors and by regulatory
authorities, changes in the degree of patent and other legal protection afforded
to Celanese's products, potential disruption or interruption of production due
to accidents or other unforeseen events, delays in the construction of
facilities, potential liability for remedial actions under existing or future
environmental regulations and potential liability resulting from pending or
future litigation, and various other factors, both referenced and not referenced
in this Annual Report. Should one or more of these risks or uncertainties
materialize, or should underlying assumptions prove incorrect, the actual
results, performance or achievements of Celanese may vary materially from those
described herein as anticipated, believed, estimated or expected. Celanese does
not intend, and does not assume any obligation, to update these forward-looking
statements, which speak only as of their dates.
2
<PAGE> 5
PART I
ITEM 1. DESCRIPTION OF BUSINESS
INTRODUCTION
Celanese is a leading global industrial chemicals company with strong
competitive positions in its major products and production technologies.
Celanese's headquarters is currently located in Frankfurt am Main, Germany but
is expected to be relocated to Kronberg/Taunus, Germany in the near future. Its
business involves processing chemical raw materials, such as ethylene and
propylene, and natural products, including natural gas and wood pulp, into
value-added chemicals and chemical-based products. Celanese's leadership
position is based on two key factors: its significant market shares and
competitive cost structures in its major products. Celanese's competitive cost
structures are based on economies of scale, vertical integration, technical
know-how and the use of advanced technologies. For the year ended December 31,
1999, Celanese had net sales of E4,318 million and an operating loss of E521
million from continuing operations. At December 31, 1999, Celanese had
approximately 14,900 employees worldwide from continuing operations. Celanese
has 32 production plants and five research centers in nine countries. Most of
Celanese's facilities are located in the Americas, principally in the three
North America Free Trade Association, or NAFTA, countries: the United States,
Canada and Mexico. Celanese also has major operations, including significant
joint ventures, in Asia. In 1999, 60 percent of net sales was derived from sales
in North America, 37 percent from sales in Europe, 2 percent from sales in Asia
and Australia and 1 percent from sales in the rest of the world. Celanese has a
large and diverse global customer base comprised principally of major industrial
companies. In 1999, sales to the 10 largest customers of Celanese accounted for
less than 20 percent of its net sales and the single largest customer
represented less than 5 percent of its net sales. As of December 31, 1999,
Celanese had approximately 140,000 shareholders. Its ordinary shares are traded
on the Frankfurt Stock Exchange under the symbol CZZ and on the New York Stock
Exchange under the symbol CZ.
BACKGROUND
Celanese traces its roots to 1918 when The American Cellulose & Chemical
Manufacturing Company was founded in the United States by two Swiss brothers,
Drs. Camille and Henry Dreyfus, to produce acetate fibers for fabrics used in
linings, apparel and home furnishings.
Following the successful start-up of this company, Celanese expanded its
operations in the United States. In the mid-1940s, Celanese commenced operation
of facilities for the production of basic chemicals and chemical intermediates.
In the 1950s, Celanese became a supplier of acetate tow.
In the 1960s, Celanese further expanded the scope of its activities.
Celanese started production of non-cellulosic fibers, such as polyester and
nylon, and developed and commercialized acetyl copolymer resin technology.
Since the mid-1940s, Celanese constructed and acquired significant
production and research facilities in North America and abroad and also entered
into a number of joint ventures in North America, Europe and the Far East with
other acetates, basic chemicals and plastics producers. In particular, in the
technical polymers area, Celanese entered into two joint ventures, one with
Hoechst, which was named Ticona, and another with the Japanese company Daicel
Chemical Industries Ltd. ("Daicel"), named Polyplastics Co., Ltd.
("Polyplastics"), to manufacture and market acetyl copolymer resins based on
Celanese licensed technology.
In 1987 Hoechst acquired Celanese Corporation. Following the acquisition,
Hoechst proceeded to integrate its complementary chemicals and technical
polymers operations with the businesses of Celanese, establishing a combined
basic chemicals, acetates and technical polymers business of global scale.
In 1994, Hoechst embarked on a comprehensive review and re-evaluation of
its strategic goals. Hoechst decided to concentrate on life sciences and to
transfer operational responsibility for the different businesses to the
management of legally separate companies. As a result of this process, Hoechst's
basic
3
<PAGE> 6
chemicals and acetates businesses were combined and were reported by Hoechst
under its Celanese segment and Hoechst's technical polymers businesses were
combined and were reported by Hoechst under its Ticona segment.
In implementing the strategy to realign and to change the focus of its
business, Hoechst restructured and divested many of its activities in the
industrial sector. As part of this process, Hoechst shareholders, at an
extraordinary general meeting on July 15 and 16, 1999, approved the demerger, or
spin-off, to Celanese AG of the basic chemicals, acetates and technical polymers
businesses that were reported by Hoechst in its Celanese and Ticona segments, as
well as some other businesses and activities of Hoechst. The demerger became
effective on October 22, 1999. On that date Hoechst distributed all of the
outstanding shares of Celanese to Hoechst's shareholders, with each Hoechst
shareholder receiving one Celanese share for every 10 Hoechst shares owned.
SEGMENT OVERVIEW
Celanese is an integrated company that operates through five principal
business segments: Acetyl Products, Chemical Intermediates, Acetate Products,
Ticona and Performance Products.
Acetyl Products. This segment produces and supplies acetyl products,
including acetic acid and vinyl acetate monomer. Acetic acid is a commodity used
in the production of other basic chemicals. Vinyl acetate monomer is primarily
used in a variety of adhesives, paints and coatings. Celanese is the world's
leading producer of acetic acid and vinyl acetate monomer and the largest
producer of methanol, the major raw material used for the production of acetic
acid, in North America.
Chemical Intermediates. This segment produces and supplies chemical
intermediates, including acrylic acid, acrylates, organic solvents and other
intermediates. Acrylic acid and acrylates are used in the manufacture of
superabsorbent polymers, paints and coatings, adhesives and in water treatment
applications. Most of the other chemicals produced in this segment are organic
solvents and intermediates for pharmaceutical, agricultural and chemical
products.
Acetate Products. This segment primarily produces and supplies acetate
filament and staple, and acetate filter products. Products from this segment are
found in fashion apparel, linings, home furnishings and cigarette filters.
Celanese is one of the world's leading producers of acetate tow, including
production by its joint ventures, and acetate filament.
Ticona. This segment develops and supplies a broad portfolio of high
performance technical polymers for application in automotive and electronics
products and in other consumer goods, often replacing metal or glass. Together
with its 45 percent-owned affiliate Polyplastics and its 50 percent-owned
affiliate Korea Engineering Plastics Company Ltd. ("Korea Engineering
Plastics"), Celanese is a leading participant in the global technical polymers
business.
Performance Products. This segment includes Trespaphan, the oriented
polypropylene, or OPP, films business, which produces thin films used in
packaging of products such as foodstuffs and cigarette packs, in labels and the
production of capacitors. It also includes Nutrinova, the high intensity
sweetener and food protection ingredients business.
4
<PAGE> 7
The chart below illustrates each segment's share of total segment net sales
to external customers in 1999. In total, the segments accounted for 99 percent
of Celanese's net sales in 1999.
1999 NET SALES TO EXTERNAL CUSTOMERS BY SEGMENT
GRAPH
<TABLE>
<S> <C>
Acetyl Products 34%
Chemical Intermediates 20%
Ticona 19%
Acetate Products 17%
Performance Products 9%
Other Activities 1%
</TABLE>
OTHER ACTIVITIES
The portfolio of Celanese contains other businesses and activities separate
from its principal chemical operations, consisting primarily of general
corporate functions and companies which provide infrastructure and procurement
services.
STRATEGY
Celanese's management has identified the following five key strategies for
continuing growth and increasing value for Celanese shareholders:
Strengthen Celanese's established global presence. Celanese operates
facilities throughout the world and intends to leverage its existing
infrastructure and expertise to expand in growth markets.
Enhance leading technology positions. Celanese intends to build on the
leading technology positions it holds in core products such as acetic acid,
vinyl acetate monomer, acrylic acid, and in a number of high performance
technical polymers.
Generate value-added solutions for customers. Celanese's Ticona segment
intends to continue to specialize in the development of new products and
applications for its products, often developing tailored solutions to meet the
specifications of its customers.
Achieve cost efficiencies through rationalization. Celanese is
implementing or intends to implement restructuring programs in each of its
businesses designed to:
- Reduce global manufacturing costs,
- Cut selling and general administrative costs,
- Lower costs for purchased raw materials, and
- Optimize its chemical supply chain.
Optimize Celanese's portfolio. Acquisitions, divestitures and joint
ventures will be an integral component of managing Celanese's asset base to
increase profitability and shareholder value. Celanese will continue to evaluate
its portfolio to create a more balanced mix of commodity and specialty products,
thereby reducing the cyclical effects in the chemical industry on Celanese and
to stabilize Celanese's earnings over the cycle. In the fourth quarter of 1999,
Celanese completed sales of a number of its non-core businesses, including its
ethylene oxide/ethylene glycol business, its U.S. and Japanese separation
products business, Celgard, its polyester business in Canada, and its interests
in the Dyneon fluoropolymer and Targor polypropylene joint ventures. In the
first quarter of 2000, Celanese sold its phosphorous and phosphorous derivatives
business conducted by the Thermphos Group and signed letters of intent for the
sale of its polyvinyl chloride business conducted by Vintron as well as its 50
percent interest in the
5
<PAGE> 8
Vinnolit polyvinyl chloride joint venture. Additional assets may be divested as
Celanese continues to evaluate its business portfolio. The chemical industry is
in the midst of a restructuring wave and Celanese intends to be an active
participant, whether through acquisitions, joint ventures or alliances, such as
Ticona's December 1999 acquisition of a 50 percent interest in Korea Engineering
Plastics, a leader in the marketing and production of polyacetals in Korea.
ACETYL PRODUCTS
The Acetyl Products segment consists of three business lines: Methyls,
Acetyls and Acetyl Derivatives. All business lines in this segment conduct
business using the "Celanese" trade name. The following table lists key Acetyl
Products and their major markets.
<TABLE>
<S> <C>
- -------------------------------------------- --------------------------------------------
KEY ACETYL PRODUCTS MAJOR MARKETS
- -------------------------------------------- --------------------------------------------
Methanol Formaldehyde, Acetic Acid and Methyl
Tertiary Butyl Ether or MTBE, a gasoline
additive
- -------------------------------------------- --------------------------------------------
Acetic Acid Vinyl Acetate Monomer, Acetic Anhydride and
Purified Terephthalic Acid or PTA, an
intermediate used in the production of
polyester resins, films and fibers
- -------------------------------------------- --------------------------------------------
Vinyl Acetate Monomer Paints, Adhesives, Paper Coatings, Films and
Textiles
- -------------------------------------------- --------------------------------------------
Acetic Anhydride Cellulose Acetate and Pharmaceuticals
- -------------------------------------------- --------------------------------------------
Acetate Esters Coatings, Inks
- -------------------------------------------- --------------------------------------------
</TABLE>
Business Lines
Methyls. The Methyls business line produces:
- Methanol, a basic chemical building block used in the production of a
variety of chemical intermediates;
- Formaldehyde, a methanol derivative primarily used to produce adhesive
resins for plywood, particle board, polyacetal engineering resins and a
compound used in making polyurethane;
- Paraformaldehyde, a solid form of formaldehyde used to make glyphosate
herbicides and in coating applications;
- Formcel(R), a water-free formaldehyde solution used in the production of
linking agents for coatings; and
- Polyol products such as pentaerythritol, used, for example, in coatings
and synthetic lubricants; trimethylolpropane, used, for example, in
synthetic lubricants; neopentyl glycol, used, for example, in powder
coatings; and 1,3 butylene glycol, used, for example, in flavorings and
plasticizers.
Prices for most of the products in the Methyls business line are dependent
on world market prices for methanol, a commodity produced by numerous
manufacturers in all parts of the world. The principal raw material for these
products is natural gas, from which methanol is derived. Celanese purchases
natural gas from numerous sources and substantially all its North American
requirements of acetaldehyde, which is used in the making of polyols, from
Petroleos Mexicanos, the Mexican national oil company. Petroleos Mexicanos has
been a reliable supplier, but acetaldehyde is also available from other sources.
Celanese is a leading producer of acetaldehyde in Europe.
Most of Celanese's methanol production is used internally, principally in
the production of formaldehyde and acetic acid. The balance is sold to the
merchant market of which approximately one third is used for the production of
methyl tertiary butyl ether, or MTBE, which is a gasoline additive.
6
<PAGE> 9
On March 25, 1999, the governor of California issued an executive order to
phase out the use of MTBE by December 31, 2002 in California, and other states
are considering whether to implement similar phase-out programs. Since then, a
Blue Ribbon Committee sponsored by the United States Environmental Protection
Agency ("EPA") recommended that usage of MTBE should be significantly reduced.
Recently the Clinton administration proposed an amendment to the CleanAir Act
which would result in such a reduction. Since this proposal has not been adopted
by Congress and other states have not yet issued orders, it is premature at this
time to assess the future impact of these measures on Celanese. However, these
measures are likely to lead to reduced usage of MTBE and therefore may result in
increased overcapacity in methanol and may adversely affect prices for methanol
and Celanese's other products in the Methyls business line. Celanese does not
manufacture MTBE but sells methanol to customers who produce MTBE.
Acetyls. The Acetyls business line produces two principal products, acetic
acid and vinyl acetate monomer. Acetic acid is used to manufacture vinyl acetate
monomer and other acetyl derivatives. Celanese manufactures acetic acid for its
own use, for example, by the Acetyl Derivatives business line. Celanese also
sells acetic acid to third parties, including producers of purified terephthalic
acid, or PTA, and to other participants in the acetyl derivatives business.
Vinyl acetate monomer is used in a variety of adhesives, paints, films, coatings
and textiles.
Celanese is the world's leading producer of acetic acid and is also the
world's leading producer of vinyl acetate monomer, according to the Tecnon
Consulting World Network Acetic Acid and Vinyl Acetate 1996-2006 World Survey.
Acetyls, like other commodity products, are characterized by cyclicality in
pricing. The principal raw materials in this business line are ethylene, which
Celanese purchases from multiple suppliers; methanol, which Celanese
manufactures itself; carbon monoxide, most of which is manufactured by Celanese;
and butane, which is purchased from several suppliers. All these raw materials
are themselves commodities and are available from a wide variety of sources.
Celanese's production of acetyl products employs leading proprietary and
licensed technologies, including acid-optimization technology. Management
believes that Celanese's Clear Lake, Texas facility, which uses these
technologies, is one of the world's lowest cost acetic acid plants.
Acetyl Derivatives. The Acetyl Derivatives business line produces a
variety of solvents and other products, which in turn are used primarily in the
manufacture of cellulose acetate, paints and coatings, and adhesives.
Many products of the Acetyl Derivatives business line are derivatives from
Celanese's production of acetic acid and oxo alcohols. Primary products in this
business line are:
- Ethyl acetate, a solvent used in coatings, inks and adhesives and in the
manufacture of, among other things, photographic films and coated
papers;
- Butyl acetate, a solvent used, for example, in inks, pharmaceuticals and
perfume;
- Propyl acetate, a solvent used, for example, in inks, lacquers and
plastics;
- Methyl ethyl ketone, a solvent used, for example, in the production of
printing inks and magnetic tapes;
- Acetic anhydride, an agent in the preparation of cellulose acetate,
detergents and pharmaceuticals;
- Acetaldehyde, a major feedstock for the production of polyols and acetic
acid. Acetaldehyde is also used in other organic compounds such as
pyridines, which are used in agricultural products;
- Butyric acid, an intermediate for the production of esters used, for
example, in artificial flavors;
- Propionic acid, an organic acid used to protect and preserve grain; and
- Formic acid, an organic acid, used, for example, in textile dyeing and
leather tanning.
7
<PAGE> 10
Acetyl derivatives are commodity products characterized by pricing cycles.
The principal raw materials used in the Acetyl Derivatives business line are
acetic acid and various alcohols, all of which Celanese manufactures for its own
use as well as for sales to third parties, including its competitors in the
acetyl derivatives business.
Facilities
The Acetyl Products segment has production sites in the United States,
Canada, Mexico, Singapore, Spain, and Germany. Over the last few years, Celanese
has continued to shift its production capacity to lower cost production
facilities while expanding in growth markets. For example, in Singapore,
Celanese built a vinyl acetate plant which started production in the third
quarter of 1997, with a nameplate capacity of 170,000 metric tons per year and
an acetate esters plant which started production in January 2000 with a
nameplate capacity of 100,000 metric tons per year. At the same site, Celanese
is also completing an acetic acid plant with a nameplate capacity of 500,000
metric tons per year, which will use leading acid-optimization technology.
Celanese has completed closures of its high cost acetic acid plant in Frankfurt,
Germany, a full site closure of its acetaldehyde capacity in Lillebonne, France,
and has begun the process of a full site closure of its acetyl chemicals
capacity in Celaya, Mexico. Celanese also has a joint venture in Saudi Arabia
for this business segment.
Markets
The following chart illustrates the 1999 net sales by destination of
Celanese's Acetyl Products segment by geographic region.
1999 NET SALES BY DESTINATION - ACETYL PRODUCTS
GRAPH
<TABLE>
<S> <C>
North America 59%
Europe 26%
Asia/Australia 13%
Rest of World 2%
</TABLE>
In the Methyls business line, the markets for the methanol and formaldehyde
product lines are highly regional and highly dependent on the demand for
products made from methanol and formaldehyde. In addition to its own production
demands for these chemicals, Celanese's production is used by manufacturers of
chemical intermediates and, to a lesser extent, by manufacturers in the wood
products industry. Methanol and formaldehyde are mainly sold into the merchant
market to a few regional customers. Celanese typically enters into short-term
contracts for the sale of methanol. The sale of formaldehyde, primarily to
customers in the chemical derivatives industry, is based on long-term
agreements. Polyols are sold globally to a wide variety of customers, primarily
in the coatings and resins and the specialty products industries.
The Acetyls business line is a global business which has several large
customers, each of which purchases Celanese's products in different regions.
Generally, Celanese supplies these global customers under multi-year contracts.
The customers of the Acetyls business line produce polymers used in water based
paints, adhesives, paper coatings, film modifiers and textiles. Celanese has
long-standing relationships with most of these customers.
Acetyl derivatives are sold to a diverse group of regional and
multinational customers both under multi-year contracts and on the basis of
long-standing relationships. The customers of the Acetyl
8
<PAGE> 11
Derivatives business line are primarily engaged in the production of paints and
coatings and adhesives. In addition to its own demand for acetyl derivatives to
produce cellulose acetate, Celanese sells acetyl derivatives to other
participants in the cellulose acetate industry.
Competition
Principal competitors of Celanese in the Acetyl Products segment include
Methanex Corporation ("Methanex"), Perstorp Inc. and Borden Chemicals & Plastics
L.P. in Methyls; Acetex Corporation, BP Amoco p.l.c. ("BP Amoco"), Daicel,
Eastman Chemical Corporation ("Eastman"), Millennium Chemicals Inc.
("Millennium") and Union Carbide Corporation ("Union Carbide") in Acetyls; and
Eastman, Union Carbide, BP Amoco and Showa Denko K.K. in Acetyl Derivatives.
CHEMICAL INTERMEDIATES
The Chemical Intermediates segment consists of three business lines:
Acrylates, Oxo Products and Specialties. All business lines in this segment
conduct business using the "Celanese" trade name. The following table lists key
Chemical Intermediates products and their major markets.
<TABLE>
<S> <C>
- -------------------------------------------- --------------------------------------------
KEY CHEMICAL INTERMEDIATES PRODUCTS MAJOR MARKETS
- -------------------------------------------- --------------------------------------------
Acrylic Acid and Acrylates Superabsorbent Polymers, Coatings and
Adhesives
- -------------------------------------------- --------------------------------------------
Amines Agricultural Products and Water Treatments
- -------------------------------------------- --------------------------------------------
Carboxylic Acids Lubricants, Detergents and Specialties
- -------------------------------------------- --------------------------------------------
Oxo Alcohols Plasticizers, Acrylates, Esters, Solvents
and Inks
- -------------------------------------------- --------------------------------------------
</TABLE>
BUSINESS LINES
Acrylates. The Acrylates business line produces and supplies:
- Acrylic acid and a variety of acrylates, such as methyl acrylate, ethyl
acrylate, butyl acrylate and 2-ethylhexyl acrylate.
The primary end uses of acrylic acid and acrylates are in the manufacture
of:
- Superabsorbent polymers that are used, for example, in diapers;
- Paints and coatings;
- Adhesives; and
- Water treatment applications, such as flocculating agents.
Prices for acrylate products are subject to the cyclical trends in the
basic chemicals industry.
The primary raw materials for these products are propylene, which Celanese
purchases from a variety of sources, and oxo alcohols, which it produces itself.
The expansion of acrylic acid annual production capacity at the Clear Lake,
Texas plant to 290,000 metric tons was completed in the first half of 1998.
Celanese has expanded further into the European market by operating a plant
owned by The Dow Chemical Company ("Dow") at a site in eastern Germany, which
came on stream in February 2000. Through this project, Celanese produces acrylic
acid and esters, sharing 50 percent of the offtake with Dow.
Oxo. The Oxo business line produces organic solvents and intermediates
such as:
- Butanol, used as a solvent for lacquers, dopes and thinners, and as an
intermediate in the manufacture of chemicals, such as butyl acrylate;
9
<PAGE> 12
- Propanol, used as an intermediate in the production of amines for
agricultural chemicals and as a solvent for inks, resins, insecticides
and waxes;
- Butyraldehyde, used, for example, in the production of polyols,
alcohols, safety glass and fabric coatings, and as an intermediate for
2-ethylhexanol and butanol;
- Propionaldehyde, used, for example, in the manufacture of propanol, the
synthesis of fertilizers, and in flavor and fragrance chemicals; and
- 2-ethylhexanol, used as an intermediate, for example, for plasticizers
and fuel additives, and in the production of 2-ethylhexyl acrylate,
which in turn is used, for example, to manufacture water based resins
for paint, textiles and paper coatings.
Generally, demand for oxo products depends on developments in the
construction and automotive industries. Uses for this business line's products
are, to a large degree, in the manufacture of lacquers and paints, as well as in
plasticizers, which can be found in floorings, PVC flex cables, synthetic
leather and covers for car chassis. They are also used in smaller scale
automotive applications, such as safety glass, synthetic motor oils or as cetane
enhancers.
Prices for oxo products, like other basic chemical commodity prices, follow
cyclical trends.
The primary raw materials for these products are ethylene and propylene,
both of which are purchased from a variety of sources, and synthesis gas, which
is manufactured from crude oil or natural gas.
A substantial portion of the Oxo business line products is consumed by
other Celanese business lines.
Specialties. The Specialties business line produces:
- Carboxylic acids such as pelargonic acid, used in detergents and
synthetic lubricants, and heptanoic acid, used in plasticizers and
synthetic lubricants;
- Amines such as methyl amines, used in agrochemicals, monoisopropynol
amines, used in herbicides, and butyl amines, used in the treatment of
rubber and in water treatment;
- Oxo derivatives and special solvents, such as crotonaldehyde, which is
used by the Performance Products segment for the production of sorbates,
as well as raw materials for the fragrance and food ingredients
industry; and
- The CelActiv(R) catalyst product range, used in applications for
hydrogenation reactions and related processes, as well as the Hoecat(R)
catalyst product range, used in the hydrogenation of fatty acids, fats
and oils.
The prices for these products are relatively stable due to long-term
contracts with customers whose industries are not, generally, subject to the
cyclical trends of commodity chemicals.
The primary raw materials for these products are olefins and ammonia, which
are sourced from the world market based on international prices.
Facilities
The Chemical Intermediates segment has production sites in the United
States, Germany and Mexico.
In the past several years, Celanese has expanded production at its Bay
City, Texas, its Bucks, Alabama and its Oberhausen, Germany, sites. These have
been low cost, incremental expansions of butanol, 2-ethylhexanol, alkyl amines
and carboxylic acid capacities that were made in response to increased demand
for these products from both customers and other Celanese business lines. These
expansions have reduced average production unit costs for all derivative
products.
10
<PAGE> 13
Markets
The following chart illustrates the destination of the 1999 net sales of
Celanese's Chemical Intermediates segment by geographic region.
1999 NET SALES BY DESTINATION - CHEMICAL INTERMEDIATES
GRAPH
North America 56%
Europe/Africa 35%
Asia/Australia 6%
Rest of World 3%
The market for the Acrylates business line is characterized by a large
number of medium and small customers and only a few large customers. These
customers are distributed across a broad range of acrylate end users. Celanese
focuses on the merchant market, where it is a preferred supplier because other
large suppliers are integrated forward into acrylate derivatives and compete
with many of these customers. Celanese believes a key to success in this
business is the ability to be a competitive and reliable supplier while
investing in the business to support long-term growth. Celanese's Oxo business
line has a broad customer base, and Celanese has long-standing relationships
with most of these customers.
The Specialties business line primarily serves global markets in the
synthetic lubricant, agrochemical, rubber processing and other specialty
chemical areas. Much of the Specialties business line involves "one customer,
one product" relationships, where the business develops customized products with
the customer, but the Specialties business line also sells chemicals which are
priced more like commodity chemicals.
Competition
The Chemical Intermediates segment competes with, among others, BASF AG
("BASF"), Rohm & Haas Company, Elf Atochem S.A. and Nippon Shokubai Co., Ltd in
Acrylates; and BASF, Eastman and Union Carbide in Oxo and Specialties. Air
Products and Chemicals, Inc. is also a significant competitor of the Specialties
business line.
ACETATE PRODUCTS
The Acetate Products segment consists of two major business lines, acetate
filament and acetate filter products, and one small business line, advanced
fiber materials. All these business lines use the "Celanese" brand to market
their products. The following table lists key products of the Acetate Products
segment and their major markets.
<TABLE>
<S> <C>
- -------------------------------------------- --------------------------------------------
KEY ACCETATE PRODUCTS MAJOR MARKETS
- -------------------------------------------- --------------------------------------------
Acetate Filament Fashion Apparel, Linings and Home
Furnishings
- -------------------------------------------- --------------------------------------------
Acetate Filter Products Cigarette Filters
- -------------------------------------------- --------------------------------------------
</TABLE>
Business Lines
Products from the two major business lines are found in fashion apparel,
linings and home furnishings and cigarette filters. Advanced fiber materials are
used in high temperature resistant products as well as in aerospace and in
industrial applications. According to the 1997 Stanford Research Institute
International
11
<PAGE> 14
Chemical Economics Handbook, Celanese is the world's leading producer of both
acetate tow, including production by its joint ventures, and acetate filament.
Acetate products are made by processing wood pulp with acetic anhydride to
form acetate flake. Celanese purchases from major suppliers wood pulp which is
made from reforested trees and produces acetic anhydride internally. The acetate
flake is then spun into acetate fiber in the form of a tow band or filament. The
Acetate Filament business line supplies products primarily to the textiles
industry. Demand for acetate filament is dependent on fashion trends and the
world economy. Recent fashion changes, such as the trend to casual office wear,
have negatively affected demand for lining and shell material. In addition,
depressed market conditions in Asia have significantly affected the overall
global textile business and negatively affected consumption of all fibers,
including acetate. Celanese is working more closely with downstream apparel
manufacturers and major retailers to increase awareness of acetate's suitability
for high end fashion apparel due to its breathable and luxurious qualities.
Celanese is also pursuing opportunities in other market segments such as men's
shirts and pants.
The Acetate Filter Products business line produces acetate tow, which is
used primarily in cigarette filters. Celanese has a 30 percent interest in three
manufacturing joint ventures with Chinese state-owned enterprises that produce
cellulose acetate flake and tow in China. World demand for acetate tow increased
substantially during the early to mid-1990s, principally as a result of
decisions by state-owned tobacco enterprises in China to convert production from
unfiltered to filtered cigarettes. With the Chinese conversion to filtered
cigarettes being substantially complete, demand growth from this source has
slowed significantly. Currently, the acetate tow market is characterized by
oversupply and projected demand growth is low.
The Acetate Products segment is implementing a major cost reduction and
operations improvement program. The program is directed toward achieving higher
productivity of employees and equipment. Celanese has announced major steps to
restructure its acetate products businesses as part of its strategy to maximize
its global manufacturing efficiency. The Drummondville, Canada acetate filament
facility will be shut down by the end of the first quarter of 2000. The Rock
Hill, South Carolina, acetate filament facility is scheduled to be phased out by
the end of the third quarter of 2001. The site will continue to produce acetate
flake, which is used as a raw material for acetate filament and acetate tow
production. Existing Rock Hill production will be shifted to Celanese's other
acetate filament plants and acetate filament capacity at Ocotlan, Mexico will be
expanded. As part of the rationalization of the manufacturing facilities of the
Acetate Products segment, Celanese plans to close Ocotlan's acetate flake
production by the third quarter of 2000. In addition, the filter products
business plans to permanently reduce annual acetate tow capacity by 10,000 tons
at Ocotlan by the third quarter of 2000. This will bring Celanese filter tow
capacity more in line with projected sales.
Facilities
The Acetate Products segment has production sites in the United States,
Canada, Mexico and Belgium, and participates in three manufacturing joint
ventures in China.
12
<PAGE> 15
Markets
The following chart illustrates the distribution of 1999 net sales of
Celanese's Acetate Products segment by geographic region.
1999 NET SALES BY DESTINATION - ACETATE PRODUCTS
GRAPH
<TABLE>
<S> <C>
North America 41%
Asia/Australia 32%
Europe 21%
Rest of World 6%
</TABLE>
In the acetate filament industry, Celanese's sales are made to a large
number of textile companies which range in size from the largest in the industry
to others which are quite small. The textile companies either weave or knit the
acetate filament yarns to produce greige fabrics. The greige fabrics are then
dyed and finished, either by the greige fabrics manufacturer or by converters
who buy the fabrics and contract with dyeing and finishing companies to process
the fabrics. The finished fabrics are sold to manufacturers who cut and sew the
fabrics into apparel for retail stores. The textile industry, in particular the
apparel portion of the industry, continues to undergo structural changes as
production moves from high-wage to low-wage countries. In recent years, this has
resulted in a changing customer base for all participants in the textile chain
from the yarn manufacturer to the garment manufacturer. Depressed market
conditions in Asia have reduced profitability in the textile industry throughout
the world, with many manufacturers in the textile chain reducing capacity,
vertically integrating with other manufacturers or exiting from the business.
Celanese's Acetate Products business has been adversely affected by these trends
in the industry.
Sales in the acetate filter products industry are principally to the major
tobacco companies that account for a majority of worldwide cigarette production.
Celanese typically enters into both long-term and short-term contracts with its
major customers. Celanese's contracts with its largest customer, with which it
has a long-standing relationship, have been entered into on a year-by-year
basis, and its second largest customer has been supplied under a long-term
contract that will expire at the end of 2000 and is being renegotiated. In
recent years, the cigarette industry has experienced consolidation. In the
acetate filter products industry, changes in the cigarette manufacturer customer
base and shifts among suppliers to those customers have had significant effects
on acetate tow prices in the industry as a whole.
Competition
Principal competitors in the Acetate Products segment include the Acordis
Group, Daicel, Eastman, Rhodia S.A. ("Rhodia"), Mitsubishi Rayon Company,
Limited ("Mitsubishi Rayon") and Novaceta.
TICONA
Ticona, the technical polymers segment, develops and supplies a broad
portfolio of high performance technical polymers.
13
<PAGE> 16
The following table lists key Ticona products, for which Ticona has
developed individual trademarks, and their major markets.
<TABLE>
<S> <C>
- -------------------------------------------- --------------------------------------------
KEY TICONA PRODUCTS MAJOR MARKETS
- -------------------------------------------- --------------------------------------------
Hostaform(R)/Celcon(R)(Polyacetals) Automotive, Electronics and Consumer
Products
- -------------------------------------------- --------------------------------------------
GUR(R) (Ultra High Molecular Weight Profiles, Battery Separators and Industrial
Polyethylene or PE-UHMW) Specialties
- -------------------------------------------- --------------------------------------------
Celanex(R)/Vandar(R) (Polyester Engineering Electrical, Electronics, Automotive,
Resins) Appliances and Consumer Products
- -------------------------------------------- --------------------------------------------
Vectra(R) (Liquid Crystal Polymers) Electronics, Telecommunications and
Automotive
- -------------------------------------------- --------------------------------------------
Fortron(R) (Polyphenylene Sulfide or PPS) Electronics, Automotive and Industrial
- -------------------------------------------- --------------------------------------------
Celanese(R) Nylon 6/6 Automotive
- -------------------------------------------- --------------------------------------------
</TABLE>
Ticona's technical polymers have chemical and physical properties enabling
them, among other things, to withstand high temperatures, resist chemical
reactions with solvents and resist fracturing or stretching. These products are
used in a wide range of performance-demanding applications in the automotive and
electronics sectors and in other consumer and industrial goods, often replacing
metal or glass.
Ticona is an innovation-oriented business. Ticona focuses its efforts on
developing new markets and applications for its product lines, often developing
custom formulations to satisfy the technical and processing requirements of a
customer's applications. Ticona's customer base consists primarily of a large
number of plastic molders and component suppliers, which are often the primary
suppliers to original equipment manufacturers, or OEMs. Ticona works with these
molders and component suppliers as well as directly with the OEMs to develop and
improve specialized applications and systems.
Prices for most of these products, particularly specialized product grades
for targeted applications, reflect the value added in complex polymer chemistry,
precision formulation and compounding, and the extensive application development
services provided. The specialized product lines are not particularly
susceptible to cyclical swings in pricing. In standard grades, pricing is much
more competitive, with many small minimum-service providers competing for volume
sales.
Product Lines
Following is a description of Ticona's principal product lines.
Polyacetals are sold under Ticona's own trademarks, Celcon(R) in North
America and Hostaform(R) in Europe and the rest of the world. Polyacetals are
used for mechanical parts, including door locks and seat belt mechanisms, in
automotive applications and in electrical, consumer and industrial applications
such as keyboards, ski bindings, and gears for appliances.
The primary raw material for polyacetals is formaldehyde, which is
manufactured from methanol. Ticona currently purchases formaldehyde in the
United States from Celanese's Acetyl Products segment and, in Europe,
manufactures formaldehyde from purchased methanol. Methanol is a readily
available commodity.
GUR(R), an ultra high molecular weight polyethylene or PE-UHMW, is an
engineered material used in heavy-duty automotive and industrial applications
such as car battery separator panels and industrial conveyor belts, as well as
in specialty medical and consumer applications, such as porous tips for marker
pens, sports equipment and artificial prostheses. Topas(R), a metallocene
catalyst based cycloolefin copolymer, or COC, is a newly engineered material.
Topas has been developed to be used in applications where transparency, high
temperature resistance and gas barrier properties are key requirements, such as
in optical applications and packaging films for sterile medical devices and food
storage. Ticona is building the first commercial plant to produce Topas, which
is expected to come on stream in the second half of 2000.
14
<PAGE> 17
The basic raw material for GUR and Topas is ethylene, a widely available
commodity chemical with cyclical pricing. Smaller volume specialty co-monomers
for COC production will be manufactured by Ticona.
Polyesters such as Celanex(R) polybutylene terephthalate, or PBT, and
Vandar(R) are used in a wide variety of automotive, electrical and consumer
applications, including ignition system parts, radiator grilles, electrical
switches, appliance housings, boat fittings and perfume bottle caps. Impet-Hi(R)
polyethylene terephthalate, or PET, is a polyester which exhibits rigidity and
strength useful in large injection molded part applications. Riteflex(R) is a
co-polyester which adds flexibility to the range of high performance properties
offered by Ticona's other products. Liquid crystal polymers, or LCPs, such as
Vectra(R) are used in electrical and electronics applications and for precision
parts with thin walls and complex shapes. Fortron(R), a polyphenylene sulphide,
or PPS, product, is used in a wide variety of automotive and other applications,
especially those requiring heat resistance, including fuel system parts,
radiator pipes and halogen lamp housings, and often replaces metal in these
demanding applications. Fortron is manufactured by Fortron Industries, a 50-50
joint venture between Ticona and Kureha Chemicals Industry of Japan.
Celstran(R), Compel(R) and Fiberod(R) are long fiber reinforced thermoplastics,
which impart extra strength and stiffness, making them more suitable for larger
parts than conventional thermoplastics. Celanese(R) Nylon 6/6, a polyamide, is
resistant to lubricants and fuels, making it useful in automotive applications.
Raw materials for these products vary. Base monomers for polyesters, such
as dimethyl terephthalate or DMT and PTA, are widely available with pricing
dependent on the broader polyester fiber and packaging resins market conditions.
Smaller volume specialty co-monomers for these products are typically supplied
by a few companies. Celanese has entered into long-term contracts for the supply
of intermediate raw materials to produce Celanese Nylon 6/6.
Facilities
Ticona has polymerization, compounding and research and technology centers
in Germany and the United States, as well as additional compounding facilities
in the United Kingdom and Brazil. For the new COC materials, a Topas(R)
production facility is being built in Oberhausen, Germany, and is expected to
commence production in the second half of 2000. Polyplastics, in which Ticona
holds a 45 percent interest, completed the construction of a production facility
for polyacetals in Malaysia, which became operational in the first quarter of
2000. Polyplastics is a leading engineering resins supplier in the Asia/Pacific
region. In addition to Polyplastics, Ticona strengthened its position in the
Asia/Pacific region by acquiring a 50 percent share of Korea Engineering
Plastics in December 1999. Korea Engineering Plastics is a leader in the
marketing and production of polyacetals in Korea.
15
<PAGE> 18
Markets
The following chart illustrates the destination of 1999 net sales of the
Ticona segment by geographic region.
1999 NET SALES BY DESTINATION - TICONA SEGMENT
[PIE CHART]
<TABLE>
<S> <C>
North America 56
Europe/Africa 40
Rest of World 2
Asia/Australia 2
</TABLE>
Ticona's consolidated net sales do not include the sales of Polyplastics or
Korea Engineering Plastics, which are accounted for under the equity method. If
Ticona's portion of the sales made by Polyplastics and Korea Engineering
Plastics were included in the chart above, the percentage of sales sold in Asia/
Australia would increase substantially, reflecting Polyplastics' and Korea
Engineering Plastics' leading positions in those markets. Ticona's principal
customers are suppliers to the automotive industries as well as industrial
suppliers. These customers produce primarily engineered products, and Ticona
works closely with its customers to develop and improve specialized applications
and systems. Ticona has long-standing relationships with most of its major
customers, but it also uses distributors to reach a larger customer base. For
most of Ticona's product lines, contracts with customers typically have a term
of one to two years.
Competition
Ticona, together with its affiliates Polyplastics and Korea Engineering
Plastics, is one of the leading participants in the global technical polymers
business. Its principal competitors include Bayer AG, E. I. du Pont de Nemours
and Company ("DuPont") and General Electric Company. Smaller regional
competitors include Honeywell International Inc., Asahi/America, Inc., DSM NV
("DSM"), Mitsubishi, Royal Phillips Electronics N.V., Rhodia, Teijin Limited and
Toray Industries Inc.
PERFORMANCE PRODUCTS
The Performance Products segment consists of:
- the oriented polypropylene or OPP films business conducted by
Trespaphan, and
- the food ingredients business conducted by Nutrinova
These businesses use their own trade names to conduct business. The
following table lists key products of the Performance Products segment and their
major markets.
<TABLE>
<S> <C>
- -------------------------------------------- --------------------------------------------
KEY PERFORMANCE PRODUCTS MAJOR MARKETS
- -------------------------------------------- --------------------------------------------
OPP Films Packaging, Labeling and Electrical
Engineering (Capacitors)
- -------------------------------------------- --------------------------------------------
Sunett(R) Beverages, Confections, Dairy Products and
Pharmaceuticals
- -------------------------------------------- --------------------------------------------
Sorbates Dairy Products, Baked Goods, Beverages,
Animal Feeds, Spreads and Delicatessen
Products
- -------------------------------------------- --------------------------------------------
</TABLE>
16
<PAGE> 19
Business Lines
OPP Films. The OPP films business line, conducted by Trespaphan, was
formed in 1969. It manufactures and markets OPP films and is a significant
participant in the world-wide OPP films business and has a leading position in
Europe. Its OPP films are made from very pure polypropylene granules and are
oriented, high strength films which are very thin, ranging from 3.5um (0.0035
mm) to 100um (0.1 mm), which is about twice the diameter of a human hair. OPP
films are used in packaging of products such as foodstuffs and cigarette packs,
in labels and, because of their extreme purity, for highly technical purposes in
the production of capacitors.
The primary raw material of this business line is polypropylene, which is
readily available and is purchased from several third party suppliers. Prices
for the majority of this business's products are extremely sensitive to demand,
industry capacity and the cost of key raw materials.
Food Ingredients. The food ingredients business conducted by Nutrinova was
formed in 1997. Celanese's food ingredients business consists of two strategic
business lines: high intensity sweeteners and food protection ingredients, such
as sorbic acids and sorbates. Acesulfame K, a high intensity sweetener, marketed
under the trademark Sunett(R) is used in a wide variety of beverages,
confections and dairy products throughout the world.
The primary raw materials of this business line are diketene and sulfur
trioxide for Sunett(R) and ketene and crotonaldehyde for sorbic acids. Sunett
pricing for targeted applications reflects the value added in the precision
formulations and extensive technical services provided. Sorbates pricing is
extremely sensitive to demand and industry capacity and is not necessarily
dependent on the prices of raw materials.
Facilities
Trespaphan's primary activities are in Europe and North America, with
manufacturing plants in Germany, Mexico, France and South Africa. Trespaphan's
manufacturing plant in the United Kingdom was closed at the end of 1999 as part
of a strategic repositioning of the business. Nutrinova has production
facilities in Germany.
Markets
The following chart illustrates the destination of 1999 sales of the
Performance Products segment by geographic region.
1999 NET SALES BY DESTINATION - PERFORMANCE PRODUCTS
GRAPH
<TABLE>
<S> <C>
Europe/Africa 59
North America 28
Rest of World 10
Asia/Australia 3
</TABLE>
The market for OPP films is highly fragmented. Trespaphan has customers
mainly in the food packaging and tobacco industries. Nutrinova markets Sunett
directly, primarily to a limited number of large multinational and regional
customers in the beverage and food industry under long-term contracts. Nutrinova
markets food protection ingredients primarily through regional distributors to
small and medium sized customers and directly through regional sales offices to
large multinational customers in the food industry under contracts which
typically have one-year terms.
<PAGE> 20
Competition
Principal competitors of Trespaphan are Exxon Mobil Corporation, AET Inc.,
Formosa Plastics Corporation and Moplefan; Nutrinova's principal competitors are
Monsanto Company, Inc., Holland Sweetener Company, Eastman, Daicel, several
other Japanese manufacturers and several Chinese manufacturers.
OTHER ACTIVITIES
The most significant of Celanese's Other Activities are its general
corporate functions and companies which provide infrastructure and procurement
services.
DISCONTINUED OPERATIONS
As part of Celanese's plan to shed its non-core businesses, Celanese
divested the following businesses during 1999:
In September 1999, Teva Pharmaceutical Industries, Ltd. acquired all the
outstanding shares of Copley Pharmaceutical, Inc. ("Copley"), of which Celanese
owned approximately 52 percent.
In December 1999, Celanese sold the following non-core businesses and
investments:
- its polyester fiber and bottle resin business in Millhaven, Ontario,
Canada, to KoSa, a company owned by a consortium between Koch
Industries, a U.S. company, and a Mexican company owned by Isaac Saba.
- its ethylene oxide/ethylene glycol business to Old World Industries,
Inc.
- its U.S. and Japanese separation products business, Celgard, to Daramic
Inc., a wholly owned subsidiary of Polypore Inc. Celgard manufactures
and markets flat sheet separators for use in batteries, disposable
lighters and blood oxygenators, and hollow fiber membranes for degassing
liquids. Celanese expects to sell the remaining portion of this business
during 2000.
- its 46 percent holding in the fluoropolymer manufacturer Dyneon to the
Minnesota Manufacturing and Mining Company ("3M"). Dyneon, a joint
venture founded in 1996, was created to integrate the fluoropolymer
businesses of 3M and Hoechst.
- its 50 percent share in the polypropylene joint venture Targor to BASF.
Founded in 1997, Targor GmbH was created to integrate the polypropylene
businesses of BASF and Hoechst.
Celanese's gross proceeds from these transactions totaled approximately
E1,001 million.
In January 2000, Celanese sold its phosphorus activities conducted by the
Thermphos Group, which produces phosphorus and phosphorus derivatives, to a
consortium that includes Thermphos' management.
In February 2000, Celanese signed letters of intent with Advent
International Corporation, a private equity firm that advises institutional
funds for the sale of its subsidiary Vintron, a manufacturer of polyvinyl
chloride located in Knapsack/Hurth, Germany, as well as its 50 percent interest
in Vinnolit, a joint venture with Wacker Chemie GmbH and a leading European
producer of high performance polyvinyl chloride or PVC. Both transactions are
expected to be completed during 2000. For more information on Discontinued
Operations, see Note 5 to the Consolidated Financial Statements.
RAW MATERIALS AND ENERGY
Celanese purchases a variety of raw materials for use in its production
processes. Celanese has a policy of maintaining, when available, multiple
sources of supply for materials. Although some of Celanese's individual
businesses may have single suppliers for some of their raw materials, Celanese
is not dependent on a limited number of suppliers for essential raw materials.
Celanese obtains its supplies of raw materials from a number of countries.
Celanese has not experienced difficulty in obtaining sufficient supplies of raw
materials in recent years and believes that it will be able to obtain them in
sufficient
18
<PAGE> 21
quantities in the future. However, there can be no assurance that Celanese's
ability to obtain sufficient raw materials will not be adversely affected by
unforeseen developments. In addition, the price of raw materials may vary,
perhaps substantially, from year to year.
Celanese's production facilities rely largely on coal, fuel oil, natural
gas and electricity for energy. In the United States, these raw materials and
energy are predominantly purchased directly by Celanese's operating businesses.
With respect to Celanese's European operations, most of these raw materials are
centrally purchased by special purpose subsidiaries of Celanese which also buy
raw materials on behalf of third parties.
INTELLECTUAL PROPERTY
Celanese attaches great importance to patents, trademarks, copyrights and
product designs in order to protect its investment in research and development,
manufacturing and marketing. Celanese's policy is to seek the widest possible
protection for significant product developments in its major markets. Patents
may cover products, processes, intermediate products and product uses.
Protection for individual products extends for varying periods in accordance
with the date of grant and the legal life of patents in the various countries.
The protection afforded, which may also vary from country to country, depends
upon the type of patent and its scope of coverage. In most industrial countries,
patent protection exists for new substances and formulations, as well as for
unique applications and production processes. Celanese monitors its competitors
and vigorously challenges patent and trademark infringement.
As patents expire, the products and processes described and claimed in
those patents become generally available for use by the public. Celanese
believes that the loss of no single patent which may expire in the next several
years will materially adversely affect the business or financial results of
Celanese.
Celanese also seeks to register trademarks extensively as a means of
protecting the brand names of its products, which brand names become more
important once the corresponding patents have expired. Celanese protects its
trademarks vigorously against infringement and also seeks to register design
protection where appropriate.
RESEARCH AND DEVELOPMENT
Celanese conducts its own research and development activities to increase
its competitiveness. Celanese's United States research and development functions
are located in Corpus Christi, Texas - Acetyl Products and Chemical
Intermediates; Charlotte, North Carolina - Acetate Products; and Auburn Hills,
Michigan and Summit, New Jersey - Ticona. Outside the United States, Celanese
has research facilities in Oberhausen, Germany - Acetyl Products, Chemical
Intermediates and Ticona; and Frankfurt, Germany - Ticona. Celanese entered into
an exclusive partnership with Symyx Technologies of Santa Clara, California for
research on the oxidation of hydrocarbons. Celanese also continues to source
some process technology from Axiva GmbH ("Axiva"). In December 1999 Celanese
signed an agreement with the owner of Axiva, Aventis Research & Technologies
GmbH & Co. KG, a Hoechst subsidiary, to purchase Axiva. In addition to the
process technology division, Axiva's business activities are in the areas of
engineering and production development consulting. The sale is expected to close
at the end of the second quarter of 2000. The estimated purchase price is
expected to be less than E40 million.
The Acetyl Products and Chemical Intermediates segments have been focusing
on improving core production technologies, for example, in acetic acid, oxo
products, acrylic acid, vinyl acetate monomer and polyols, on improving catalyst
development, and supporting both debottlenecking and cost reduction efforts. New
business opportunities for amines and oxo derivatives are developed in
conjunction with research and development support from both Oberhausen and
Corpus Christi technical centers.
The Acetate Products segment has been focusing on developing new fabrics
using acetate filament and new applications, such as wound dressings, for other
acetate materials and actively files patent applications worldwide for these new
applications.
19
<PAGE> 22
Research in the Ticona segment is focused on the development of new
formulations and applications for its products, improved manufacturing processes
and new polymer materials with varying chemical and physical properties. This
effort involves the entire value chain from improved polymerization and
compounding to working closely with end-users to identify new applications that
can take advantage of these high performance features. Ticona is continuously
improving compounding recipes to extend product properties and grades, while
offering grade consistency on a global basis. In addition, Ticona is developing
new polymerization and manufacturing technology in order to maintain low cost
leadership without sacrificing high quality processing. For example, Ticona has
developed a new technical material, Topas(R), a metallocene catalyst based
cycloolefin copolymer. Ticona's research efforts have focused on developing
manufacturing processes, and its market development efforts have focused on
specialized applications for Topas in such areas as high-performance films,
electronics, optical storage media and medical devices and packaging.
The research and development activities of the Performance Products segment
are conducted by the two businesses separately. Trespaphan's research and
development activities in Neunkirchen, Germany and Mantes, France, are focused
on the development of new film types for established and new applications.
Trespaphan also has focused on improving its manufacturing processes in order to
maintain low cost leadership as well as high quality for its film products.
Nutrinova's research and development activities in Frankfurt, Germany are
directed towards expanding its existing technologies and developing new
applications for existing products in close cooperation with its customers.
Celanese owns, or is licensed under, more than 10,000 patents relating to
its products and manufacturing processes, some of which are important to
specific commercial operations. As patents expire, the products and processes
described and claimed in those patents become generally available for use by the
public. No single patent or group of patents is considered material to the
business as a whole. Celanese also has licenses under patents and other
intellectual property developed by third parties, including Hoechst and its
current and former affiliates.
Celanese has developed and acquired technical information and owns patents,
some of which have been licensed to affiliates and others worldwide. Payments to
Celanese from these licenses in 1999 were E1 million.
Research and development costs are included in expenses as incurred.
Celanese's research and development costs for 1999, 1998 and 1997, were E79
million, E101 million and E133 million, respectively. For additional information
on Celanese's research and development expenses, see "Item 9. Management's
Discussion and Analysis of Financial Condition and Results of
Operations - Annual Results of Operations: 1999 Compared with 1998", and "1998
Compared with 1997".
In research and development activities, at December 31, 1999, Celanese
employed approximately 600 individuals, including approximately 200
professionals.
ENVIRONMENTAL AND OTHER REGULATION
Obtaining, producing and distributing many of Celanese's products involves
the use, storage, transportation and disposal of toxic and hazardous materials.
Celanese is subject to extensive, evolving and increasingly stringent national
and local environmental laws and regulations, which address, among other things,
the following:
- Emissions to the air;
- Discharges to surface and subsurface waters;
- Other releases into the environment;
- Generation, handling, storage, transportation, treatment and disposal of
waste materials; and
- Maintenance of safe conditions in the workplace.
20
<PAGE> 23
Celanese is subject to environmental laws and regulations that may require
it to remove or mitigate the effects of the disposal or release of chemical
substances at various sites. Under some of these laws and regulations, a current
or previous owner or operator of property may be held liable for the costs of
removal or remediation of hazardous substances on, under, or in its property,
without regard to whether the owner or operator knew of, or caused the presence
of the contaminants, and regardless of whether the practices that resulted in
the contamination were legal at the time they occurred. As many of Celanese's
production sites have an extended history of industrial use, it is impossible to
predict precisely what effect these laws and regulations will have on Celanese
in the future. As is typical for chemical businesses, soil and groundwater
contamination has occurred in the past at some Celanese sites, and might occur
or be discovered at other sites.
It is Celanese's policy to comply with all environmental, health and safety
requirements and to provide workplaces for employees that are safe and
environmentally sound. In some cases, compliance can be achieved only by
incurring capital expenditures. In 1999, Celanese's worldwide expenditures,
including those with respect to third party and divested sites, for compliance
with environmental control regulations and internal company initiatives totaled
E116 million, of which E14 million was for capital projects. Celanese's 2000
budget calls for expenses, including capital projects, of E122 million. It is
anticipated that stringent environmental regulations will continue to be imposed
on Celanese and the industry in general. Although Celanese cannot predict with
certainty future expenditures, management believes that the current spending
trends will continue.
Celanese is subject to claims brought by United States federal or state
regulatory agencies or private individuals regarding the clean-up of sites that
Celanese owns, owned, operated or where waste from its operations was disposed.
In particular, Celanese has a potential liability under the United States
Federal Comprehensive Environmental Response, Compensation, and Liability Act,
commonly known as Superfund, the United States Resource Conservation and
Recovery Act and related state laws for investigation and clean-up costs at
approximately 100 sites. At most of these sites, numerous companies, including
Celanese, or one of its predecessor companies, have been notified that the EPA,
state governing body or private individuals consider such companies to be
potentially responsible parties under Superfund or related laws. The proceedings
relating to these sites are in various stages. The clean-up process has not been
completed at most sites, and the status of the coverage under some insurance
policies for many of these proceedings is in litigation. Celanese regularly
reviews the liabilities for these sites and has accrued its best estimate of its
ultimate liability for investigation or clean-up costs, but, due to the many
variables involved in such estimation, the ultimate liability may vary from
these estimates. Expenditures for investigation, clean-up and related activities
have been E28 million for the three years ended December 31, 1999, with
expenditures in no year greater than E13 million.
Celanese's wholly-owned subsidiary, InfraServ Verwaltungs GmbH, is the
general partner of the InfraServ companies that provide on-site general and
administrative services at German sites in Frankfurt am Main-Hoechst, Gendorf,
Huerth-Knapsack, Wiesbaden, Oberhausen, Kelsterbach and Muenchsmuenster.
Producers at the sites, including subsidiaries of Celanese, are owners of
limited partnership interests in the respective InfraServ companies. In
connection with the demerger, Hoechst transferred all of its limited partnership
interests in InfraServ companies for all of Hoechst's production sites in
Germany except for Marburg, which is a life sciences production site, to
Celanese. All other arrangements and the activities involving the InfraServ
companies and their shareholders remain unchanged.
The InfraServ companies are liable for any residual contamination and other
pollution because they own the real estate on which the individual facilities
operate. In addition, Hoechst, as the responsible party under German public law,
is liable to third parties for all environmental damage that occurred while it
was still the owner of the plants and real estate. However, the InfraServ
companies have agreed to indemnify Hoechst from any environmental liability
arising out of or in connection with environmental pollution of any InfraServ
site. The partnership agreements provide that, as between the limited partners,
each limited partner is responsible for any contamination caused predominantly
by such partner. The limited partners have also undertaken to indemnify Hoechst
against such liabilities. Any liability which cannot be attributed to an
InfraServ partner is required to be borne by the InfraServ company in question.
The
21
<PAGE> 24
limited partners are also obligated to indemnify InfraServ Verwaltungs GmbH
against any such liability. In view of this potential obligation to eliminate
residual contamination, the InfraServ companies have recorded provisions
totaling approximately E262 million as of December 31, 1999, of which E55
million have been included in the consolidated reserves for environmental
liabilities of Celanese. If the InfraServ companies default on their respective
indemnification obligations to eliminate residual contamination, the limited
partners in the InfraServ companies have agreed to fund such liabilities,
subject to a number of limitations. To the extent that any liabilities are not
satisfied by either the InfraServ companies or the limited partners, these
liabilities are to be borne by Celanese in accordance with the Demerger and
Transfer Agreement entered into between Hoechst and Celanese (the "Demerger
Agreement"). As between Hoechst and Celanese, Hoechst has agreed to indemnify
Celanese for two-thirds of these demerged residual liabilities.
Some of Celanese's facilities in Germany are over 100 years old, and there
may be significant contamination at these facilities. Consistent with German law
and with agreements with the relevant governmental entities, Celanese is
addressing this contamination at its German facilities. With respect to German
sites, Celanese records a provision for environmental matters when it is
obligated by law, through irrevocable agreements with governmental authorities
or through firm commitments, to remediate the facilities. The provision includes
all costs estimated to be incurred over the next 10 years that are probable and
can be reasonably estimated.
Provisions are not recorded for potential soil contamination liability at
facilities still under operation, as German law does not currently require such
contamination to be remedied until the facility is closed and dismantled, unless
the authorities otherwise direct. If Celanese were to terminate operations at
one of its facilities or if German law were changed to require such removal or
clean-up, the cost could be material to Celanese. Celanese cannot accurately
determine the ultimate potential liability for investigation and clean-up at
such sites. Celanese adjusts provisions as new remedial commitments are made.
See Note 24 to the Consolidated Financial Statements.
It is difficult to estimate the future costs of environmental protection
and remediation because of many uncertainties, including uncertainties about the
status of laws, regulations and information related to individual locations and
sites. Subject to the foregoing, but taking into consideration Celanese's
experience to date regarding environmental matters of a similar nature and facts
currently known, Celanese believes that capital expenditures and remedial
actions to comply with existing laws governing environmental protection will not
have a material adverse effect on Celanese's business and financial results.
Celanese reserved, as of December 31, 1999, E395 million for environmental
matters.
In the Demerger Agreement, Celanese agreed to indemnify Hoechst against
environmental liabilities for environmental contamination that could arise under
some divestiture agreements regarding chemical businesses, participations or
assets that were entered into by Hoechst prior to the demerger. Celanese and
Hoechst have agreed that Celanese will indemnify Hoechst against those
liabilities up to an amount of E250 million. Hoechst will bear those liabilities
exceeding E250 million, but Celanese will reimburse Hoechst for one-third of
those liabilities for amounts that exceed E750 million. See Note 4 to the
Consolidated Financial Statements.
Celanese believes it is in substantial compliance with all environmental,
health and safety laws and regulations and continues to devote attention to the
health and safety of its employees and the protection of the public health and
the environment in the regions where it operates. Such compliance has not had an
adverse effect on Celanese's competitive position or business. Celanese cannot
predict the effect of regulations that may be adopted in the future by
governmental bodies responsible for air, water and solid waste pollution
controls and employee and community health and safety.
EMPLOYEES
As of December 31, 1999, Celanese had approximately 14,900 employees
worldwide employed in continuing businesses. Celanese had about 6,300 employees
in the United States, 4,900 employees in Europe, 3,400 in Mexico, Brazil and
Canada, 140 employees in Asia and 160 employees in Africa. Many
22
<PAGE> 25
of Celanese's employees are unionized, particularly in Germany, Canada, Mexico,
Brazil and France. However, in the United States, fewer than one quarter of
Celanese's employees are unionized. Moreover, in Germany and France, wages and
general working conditions are often the subject of centrally negotiated
collective bargaining agreements. Within the limits established by these
agreements, the various subsidiaries of Celanese negotiate directly with the
unions and other labor organizations, such as works councils, representing the
employees. Collective bargaining agreements between the German chemical
employers associations and unions relating to remuneration typically have a term
of one year, while in the United States a three year term is typical. Celanese
offers comprehensive benefit plans for employees and their families and believes
its relations with employees are satisfactory.
ITEM 2. DESCRIPTION OF PROPERTY
Celanese's principal executive offices are currently located in Frankfurt
am Main, Germany, but are expected to be relocated to Kronberg/Taunus, Germany
in the near future.
As of December 31, 1999, Celanese had numerous production and manufacturing
facilities throughout the world. Celanese also owns or leases other properties,
including office buildings, warehouses, pipelines, research and development
facilities and sales offices.
The following table sets forth a list of the principal production,
manufacturing and other facilities of Celanese throughout the world, including
its joint venture properties.
<TABLE>
<S> <C>
- -------------------------------------------------------------------------------------------------------
CORPORATE CENTER
- -------------------------------------------------------------------------------------------------------
SITE LEASED/OWNED
- -------------------------------------------------------------------------------------------------------
Frankfurt am Main, Germany Owned by InfraServ GmbH & Co. Hoechst KG in
which Celanese holds a 27.2 percent limited
partnership interest
- -------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
- -------------------------------------------------------------------------------------------------------
ACETYL PRODUCTS
- -------------------------------------------------------------------------------------------------------
SITE LEASED/OWNED
- -------------------------------------------------------------------------------------------------------
Bay City, Texas, USA Owned
- -------------------------------------------------------------------------------------------------------
Bishop, Texas, USA Owned
- -------------------------------------------------------------------------------------------------------
Cangrejera, Veracruz, Mexico Owned
- -------------------------------------------------------------------------------------------------------
Clear Lake, Texas, USA Owned; the methanol operation of this
facility is owned by a joint venture
- -------------------------------------------------------------------------------------------------------
Edmonton, Alberta, Canada Owned
- -------------------------------------------------------------------------------------------------------
Frankfurt am Main, Germany Owned by InfraServ GmbH & Co. Hoechst KG in
which Celanese holds a 27.2 percent limited
partnership interest
- -------------------------------------------------------------------------------------------------------
Knapsack, Germany Owned by InfraServ GmbH & Co. Knapsack KG in
which Celanese holds a 42.0 percent limited
partnership interest
- -------------------------------------------------------------------------------------------------------
Pampa, Texas, USA Owned
- -------------------------------------------------------------------------------------------------------
Singapore, Singapore Owned
- -------------------------------------------------------------------------------------------------------
Tarragona, Spain Owned
- -------------------------------------------------------------------------------------------------------
</TABLE>
23
<PAGE> 26
<TABLE>
<S> <C>
- -------------------------------------------------------------------------------------------------------
CHEMICAL INTERMEDIATES
- -------------------------------------------------------------------------------------------------------
SITE LEASED/OWNED
- -------------------------------------------------------------------------------------------------------
Bay City, Texas, USA Owned
- -------------------------------------------------------------------------------------------------------
Bucks, Alabama, USA Owned
- -------------------------------------------------------------------------------------------------------
Clear Lake, Texas, USA Owned
- -------------------------------------------------------------------------------------------------------
Oberhausen, Germany Owned by InfraServ GmbH & Co. Oberhausen KG
in which Celanese holds an 84.0 percent
limited partnership interest
- -------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
- -------------------------------------------------------------------------------------------------------
ACETATE PRODUCTS
- -------------------------------------------------------------------------------------------------------
SITE LEASED/OWNED
- -------------------------------------------------------------------------------------------------------
Edmonton, Alberta, Canada Owned
- -------------------------------------------------------------------------------------------------------
Kunming, Yunnan, China Leased by a joint venture in which Celanese
has an interest
- -------------------------------------------------------------------------------------------------------
Lanaken, Belgium Owned
- -------------------------------------------------------------------------------------------------------
Nantong, Jiangsu, China Leased by a joint venture in which Celanese
has an interest
- -------------------------------------------------------------------------------------------------------
Narrows, Virginia, USA Owned
- -------------------------------------------------------------------------------------------------------
Ocotlan, Jalisco, Mexico Owned
- -------------------------------------------------------------------------------------------------------
Rock Hill, South Carolina, USA Owned
- -------------------------------------------------------------------------------------------------------
Zhuhai, Guandang, China Leased by a joint venture in which Celanese
has an interest
- -------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
- -------------------------------------------------------------------------------------------------------
TICONA
- -------------------------------------------------------------------------------------------------------
SITE LEASED/OWNED
- -------------------------------------------------------------------------------------------------------
Auburn Hills, Michigan, USA Leased
- -------------------------------------------------------------------------------------------------------
Bayport, Texas, USA Leased
- -------------------------------------------------------------------------------------------------------
Bishop, Texas, USA Owned
- -------------------------------------------------------------------------------------------------------
Florence, Kentucky, USA Owned
- -------------------------------------------------------------------------------------------------------
Frankfurt am Main, Germany Owned by InfraServ GmbH & Co. Hoechst KG in
which Celanese holds a 27.2 percent limited
partnership interest
- -------------------------------------------------------------------------------------------------------
Kelsterbach, Germany Owned by InfraServ GmbH & Co. Kelsterbach KG
in which Celanese holds a 100.0 percent
limited partnership interest
- -------------------------------------------------------------------------------------------------------
Oberhausen, Germany Owned by InfraServ GmbH & Co. Oberhausen KG
in which Celanese holds an 84.0 percent
limited partnership interest
- -------------------------------------------------------------------------------------------------------
Shelby, North Carolina, USA Owned
- -------------------------------------------------------------------------------------------------------
Summit, New Jersey, USA Owned
- -------------------------------------------------------------------------------------------------------
Wilmington, North Carolina, USA Owned by a joint venture in which Celanese
has a controlling interest
- -------------------------------------------------------------------------------------------------------
Winona, Minnesota, USA Owned
- -------------------------------------------------------------------------------------------------------
</TABLE>
24
<PAGE> 27
<TABLE>
<S> <C>
- -------------------------------------------------------------------------------------------------------
PERFORMANCE PRODUCTS
- -------------------------------------------------------------------------------------------------------
SITE LEASED/OWNED
- -------------------------------------------------------------------------------------------------------
Frankfurt am Main, Germany (Nutrinova) Owned by InfraServ GmbH & Co. Hoechst KG in
which Celanese holds a 27.2 percent limited
partnership interest
- -------------------------------------------------------------------------------------------------------
Neunkirchen, Germany (Trespaphan) Owned
- -------------------------------------------------------------------------------------------------------
Zacapu, Michoacan, Mexico (Trespaphan) Owned
- -------------------------------------------------------------------------------------------------------
</TABLE>
Also, other affiliates of Celanese have production facilities in Saudi
Arabia, Taiwan, Japan, South Korea and Malaysia. Polyplastics has its principal
production facilities in Japan and Taiwan.
In 1999, Celanese and its consolidated subsidiaries, in the aggregate, had
capital expenditures for the expansion and modernization of production,
manufacturing, research and administrative facilities of E262 million. In 1998
these expenditures amounted to E345 million. Celanese believes that its current
facilities and those of its consolidated subsidiaries are adequate to meet the
requirements of Celanese's present and foreseeable future operations.
For information on environmental issues associated with Celanese's
properties, see "Item 1. Description of Business - Environmental and Other
Regulation" and "Item 9. Management's Discussion and Analysis of Financial
Condition and Results of Operations - Environmental Matters." Additional
information with respect to Celanese's property, plant and equipment, and leases
is contained in Notes 10 and 21 to the Consolidated Financial Statements.
ITEM 3. LEGAL PROCEEDINGS
Celanese is involved in a number of legal proceedings and claims incidental
to the normal conduct of its businesses, relating to such matters as product
liability, tax assessments, competition, past waste disposal practices and
release of chemicals into the environment.
Plumbing Actions
CNA Holdings Inc. ("CNA Holdings") is a United States subsidiary of
Celanese that previously operated under the HNA Holdings, Inc. and Hoechst
Celanese Corporation corporate names and currently serves as a holding company
for Celanese's businesses in North America, including the United States business
now conducted by Ticona. CNA Holdings, along with Shell and DuPont among others,
have been the defendants in a series of lawsuits alleging that plastics
manufactured by these companies that were utilized in the production of plumbing
systems for residential property were defective or caused such plumbing systems
to fail. Based on, among other things, the findings of outside experts and the
successful use of Ticona's acetal copolymer in similar applications, CNA
Holdings does not believe Ticona's acetal copolymer was defective or caused the
plumbing systems to fail. In many cases CNA Holdings' exposure may be limited by
invocation of the statute of limitations since Ticona ceased selling the acetal
copolymer for use in the plumbing systems in site built homes during 1986 and in
manufactured homes during 1990.
CNA Holdings has been named a defendant in nine putative class actions, as
well as a defendant in other non-class actions filed in thirteen states and
Canada. In these actions, the plaintiffs typically have sought recovery for
alleged property damages and, in some cases, additional damages under the Texas
Deceptive Trade Practices Act or similar type statutes. Damage amounts have not
been specified. The putative class actions are pending in:
- the Ninth Judicial Circuit Court of Common Pleas of South Carolina,
Charleston County;
- the Territorial Court of the Virgin Islands, St. Croix Division;
- the Supreme Court of British Columbia, Canada;
- the Superior Court, Province of Quebec, Canada;
25
<PAGE> 28
- the Ontario Canada Court, General Division; and
- the U.S. District Court of the Eastern District of Texas, Texarkana
Division
A conditionally certified class action (of recreational vehicle owners) is
pending in the Chancery Court of Tennessee, Weakley County.
A putative class action (of insurance companies with respect to subrogation
claims), as well as an individual action (by Prudential Property & Casualty
Insurance Company with respect to its subrogation claims), are pending in the
United States District Court for the District of New Jersey and in the Superior
Court of New Jersey, Camden.
A putative class action pending in the Circuit Court of the Fifth Judicial
Circuit, Florida, Marion County was certified on behalf of homeowners who
claimed to have opted out of the national settlement discussed below. The Fifth
District Court of Appeals for the State of Florida reversed that ruling in an en
banc order filed in February 2000, which order is subject to further appeal.
In order to reduce litigation expenses and to provide relief to qualifying
homeowners, in November 1995, CNA Holdings, DuPont and Shell entered into a
national class action settlement, which has been approved by the courts. The
settlement calls for the replacement of plumbing systems of claimants who have
had qualifying leaks, as well as reimbursements for specified leak damage.
Furthermore, the three companies have agreed to fund these replacements and
reimbursements up to E944 million. There are additional pending lawsuits in
approximately 20 jurisdictions not covered by this settlement; however, these
cases do not involve (either individually or in the aggregate) a large number of
homes and management does not expect the obligations arising from these lawsuits
to have a material adverse effect on CNA Holdings. The allocation of certain
payments already made to the claimants and certain future payments was subject
to a binding arbitration between CNA Holdings and Shell, which was completed in
June 1999. Appeals from the arbitration decision were filed in the Supreme Court
of the State of New York, New York County and in the Superior Court of the
District of Columbia. In February 2000, CNA Holdings and Shell reached an
agreement which, among other things, resolved the appeals and other claims
between the parties, and pursuant to which Celanese paid an amount which was
fully accrued for in prior periods.
In 1995, CNA Holdings and Shell settled the claims relating to individuals
in Texas, owning 110,000 property units, who are represented by a Texas law firm
for an amount not to exceed E145 million. These claimants are also eligible for
a replumb of their homes in accordance with terms similar to those of the
national class action settlement. CNA Holdings' and Shell's contributions under
this settlement were subject to allocation in the above binding arbitration.
In addition, a lawsuit filed in November 1989, in Delaware Chancery Court
between CNA Holdings and various of its insurance companies relating to all
claims incurred and to be incurred for the product liability exposure led to a
partial declaratory judgment in CNA Holdings' favor. As a result, settlements
have been reached with a majority of CNA Holdings' insurers specifying their
responsibility for these claims.
Management believes that the plumbing actions are provided for in the
Consolidated Financial Statements and that they will not have a material adverse
effect on the financial position of Celanese. However, if Celanese were to incur
an additional charge for this matter, such a charge may have a material adverse
effect on the results of operations or cash flows in any given accounting
period. No assurance can be given that Celanese's litigation reserves will be
adequate or that Celanese will fully recover claims under its insurance
policies. For further information on this matter, see also Note 23 to the
Consolidated Financial Statements.
Fugitive Emissions Standards
In 1990, the EPA issued a notice of violation to CNA Holdings alleging that
its Rock Hill, South Carolina plant was subject to fugitive emissions standard
for benzene under the Clean Air Act based upon
26
<PAGE> 29
the volume of benzene used at the facility. CNA Holdings contested the notice of
violation because it believed it had correctly determined in 1984 that the
calculation of benzene usage for determining applicability of the standard did
not include amounts recirculated within the process after initial use. By 1991,
CNA Holdings met the fugitive emissions standard as interpreted by the EPA for
its three facilities that used benzene: Rock Hill, South Carolina, Narrows,
Virginia and Bishop, Texas.
In 1992, 1993 and 1995, the United States Department of Justice, on behalf
of the EPA, filed enforcement actions against CNA Holdings regarding the three
plants in federal district courts in South Carolina, Virginia and Texas seeking
penalties of up to $25,000 per day. The Virginia and Texas cases were, for most
of the time, stayed by consent of the parties while the South Carolina case was
litigated through denial of a petition for certiorari to the U.S. Supreme Court.
The appellate court in that case upheld the EPA's interpretation of the standard
but affirmed that CNA Holdings did not have notice of that interpretation prior
to August 1989; thus no penalties could be assessed prior to that date. The
appellate court remanded the case to the district court for a determination of
what penalty, if any, should be assessed for the period from August 1989 when
CNA Holdings received actual notice of EPA's interpretation through the plants'
achievement of compliance in September 1991. The parties have agreed to
non-binding mediation to aid settlement negotiations before resuming litigation
in the district court and are currently discussing the timetable for this
non-binding mediation.
Generic Pharmaceuticals Litigation
In September 1998, Great Neck Capital Appreciation Partnership filed a
complaint derivatively on behalf of Copley, a former subsidiary of Celanese
Americas Corporation ("Celanese Americas"), formerly known as Hoechst
Corporation in a Massachusetts Superior Court against six of Copley's directors,
which was thereafter amended to add Celanese Americas as a defendant. The
amended complaint alleged that Celanese Americas used Copley for its own
benefit, injured Copley's ability to compete and compromised the independence of
Copley's independent directors. The complaint also alleged that the six
directors allowed Celanese Americas to use Copley and otherwise breached their
fiduciary duties to Copley. In February 2000, a final judgment dismissing the
case was entered, with no costs or damages being awarded to the plaintiffs.
In May 1999, two Copley shareholders filed a complaint derivatively on
behalf of Copley in the Delaware Chancery Court against Celanese Americas,
Hoechst and five Copley directors. This complaint alleged that Celanese Americas
breached various fiduciary duties to Copley in connection with agreements
between Celanese Americas and Copley and also breached these agreements. It also
alleged that Celanese Americas took various actions with respect to the
management of Copley and its efforts to find a buyer for Copley and that it
prevented Copley from developing a product that would compete with a product
sold by an affiliate of Hoechst. In January 2000, a final judgment dismissing
the case was entered, with no costs or damages being awarded to the plaintiffs.
Antitrust
In 1998, Nutrinova Inc., a U.S. subsidiary of Nutrinova Nutrition
Specialties & Food Ingredients GmbH, then a wholly-owned subsidiary of Hoechst,
received a grand jury subpoena from the United States District Court for the
Northern District of California in connection with a criminal antitrust suit
relating to the sorbates industry. In May 1999, Hoechst and the U.S. Federal
government entered into an agreement under which Hoechst pled guilty to a
one-count indictment charging Hoechst with participating in a conspiracy to fix
prices and allocate market shares of sorbates sold in the United States. Hoechst
and the government agreed to recommend that the U.S. District Court fine Hoechst
E31 million. Hoechst also agreed to cooperate with the Government's
investigation and prosecutions related to the sorbates industry. The U.S.
District Court accepted this plea in June 1999 and imposed a penalty as
recommended in the plea agreement.
27
<PAGE> 30
In addition, the following 15 civil antitrust actions seeking monetary
damages and other relief for alleged conduct involving the sorbates industry,
have been filed in California, Tennessee, Wisconsin and Kansas naming Nutrinova
and other Hoechst and Celanese subsidiaries as defendants.
- Five actions, four filed in Superior Court of the State of California,
County of San Francisco, and one filed in the Superior Court of the
State of California, County of Sacramento, relating to indirect
purchasers of sorbates in California, were consolidated into a single
action in May 1999.
- Kelley Supply, Inc. v. Nutrinova Inc. and Hoechst AG, filed on July 1,
1999 in the Circuit Court for the State of Wisconsin, Dane County.
- Williams Foods, Inc. v. Eastman Chemical Co., and others, was filed on
December 3, 1999 in the District Court of the State of Kansas, Johnson
County.
- Orlando's Bakery v. Nutrinova Nutrition Specialties & Food Ingredients
GmbH, et. al. was filed on February 24, 1999 in the 20th Judicial
District, Chancery Court in Nashville, Tennessee.
- Seven separate actions involving plaintiffs who purchased sorbates
directly from manufacturers, their subsidiaries, and their agents in the
United States from 1979 through 1997 and filed in the United States
District Court for the Northern District of California were consolidated
into one single action in June 1999. On March 9, 2000, Hoechst AG,
Nutrinova, Inc., Nutrinova Nutrition Specialties & Food Ingredients
GmbH, CNA Holdings, and other defendants entered into a settlement of
this consolidated civil antitrust federal action. Under the settlement
agreement, which is subject to court approval, Hoechst AG and the named
Celanese subsidiaries will make a $20 million (approximately E20
million) payment in the first quarter of 2000. Pursuant to the Demerger
Agreement, Celanese's portion of the payment is approximately E4
million. This amount had been fully accrued for at December 31, 1999.
Except for the consolidated civil antitrust federal action, these actions
are in the early stages of litigation.
Although the outcome of the foregoing proceedings and claims cannot be
predicted with certainty, Celanese believes that any resulting liabilities, net
of amounts recoverable from Hoechst, will not, in the aggregate, have a material
adverse effect on Celanese's financial position. In the Demerger Agreement,
Hoechst agreed to pay 80 percent of liabilities that may arise from the
government investigation and the civil antitrust actions related to the sorbates
industry.
ITEM 4. CONTROL OF REGISTRANT
The capital stock of Celanese consists of ordinary shares, no par value
(Stuckaktien), which are issued in registered form.
Under the German Securities Trading Act (Wertpapierhandelsgesetz), holders
of voting securities of a German company listed on a stock exchange in the
European Union must notify the company of the level of their holding whenever it
reaches, exceeds or falls below specified thresholds. These thresholds are 5
percent, 10 percent, 25 percent, 50 percent and 75 percent of a company's
outstanding voting rights.
28
<PAGE> 31
The table below sets forth, as of December 31, 1999, the number of Celanese
ordinary shares held by holders of more than 10 percent of Celanese ordinary
shares and their percentage ownership, and the total number and percent of
Celanese ordinary shares owned by members of Celanese's supervisory board and
its management board and other officers of Celanese (including those 14 officers
of Celanese who are not members of the management board but have primary
responsibility for a Celanese global business or corporate function
("Officers")) as a group:
<TABLE>
<CAPTION>
IDENTITY OF PERSON OR GROUP SHARES OWNED PERCENT
--------------------------- ------------ -------
<S> <C> <C>
Kuwait Petroleum Corporation ("KPC").................... 14,400,000 25.8
Members of the supervisory and management boards and
Officers (31 persons)................................. 213,622 0.38
</TABLE>
Celanese has been informed that KPC, which is controlled by the Government
of Kuwait, had direct shareholdings representing approximately 25.8 percent of
the outstanding Celanese shares as of December 31, 1999. Celanese is not aware
of any voting agreements or other agreements of any kind between KPC and any of
Celanese's other shareholders. There is one KPC representative serving as a
shareholder representative on the supervisory board; however, KPC does not have
the voting power to ensure the election of its representative to the supervisory
board. KPC may have the ability, as a matter of German corporate law, to block
some corporate actions by Celanese which are subject to approval by shareholders
at a meeting with a majority of 75 percent of the votes cast or, as the case may
be, 75 percent of the share capital represented at the meeting. See "Item 10.
Directors and Officers of Registrant."
ITEM 5. NATURE OF TRADING MARKET
GENERAL
In connection with the demerger, the Celanese shares were listed on the
Frankfurt Stock Exchange and on the New York Stock Exchange. As Celanese shares
are in registered form, they were listed directly on the New York Stock Exchange
without the creation of a depositary receipt facility. The Celanese shares trade
on the New York Stock Exchange under the symbol "CZ" and on the Frankfurt Stock
Exchange under the symbol "CZZ" and under the German securities code number
(Wertpapierkennummer) 575 300.
The transfer agents for Celanese ordinary shares are Registrar Services
GmbH in Germany (the "Transfer Agent") and ChaseMellon Shareholder Services in
the United States (the "U.S. Transfer Agent"). As of March 17, 2000, Celanese
had approximately 140,000 shareholders. Approximately 7,000 of these
shareholders were U.S. holders. Approximately 13 percent of Celanese ordinary
shares were held by U.S. holders as of that date.
TRADING ON THE FRANKFURT STOCK EXCHANGE
The Frankfurt Stock Exchange, which is operated by Deutsche Borse AG
("Deutsche Borse"), is the