20-F 1 g20f-27280.htm 20-F

 

As Filed with the Securities and Exchange Commission on March 7, 2002

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, 2001

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)

61476 KRONBERG/TAUNUS, GERMANY
(Address of principal executive offices)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class
Ordinary Shares with no par value		 Name of each exchange on which registered
New York Stock Exchange

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 50,334,891
(as of December 31, 2001)

       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]

 

TABLE OF CONTENTS

Part I

Item 1.   Identity of Directors, Senior Management and Advisers 2
Item 2.   Offer Statistics and Expected Timetable 2
Item 3.   Key Information 2
      Selected Financial Data 2
      Exchange Rate Information 4
      Risk Factors 4
Item 4.   Information on the Company 9
      Introduction 9
      History and Development of the Company 9
      Business Summary 10
      Segment Overview 11
      Strategy 12
      Business Segments 14
      Other Activities 25
      Acquisitions and Divestitures 25
      eBusiness 26
      Raw Materials and Energy 26
      Research and Development 26
      Intellectual Property 27
      Environmental and Other Regulation 28
      Organizational Structure 31
      Description of Property 31
Item 5.   Operating and Financial Review and Prospects 36
      Basis of Presentation 36
      Major Events in 2001 37
      Financial Highlights 37
      Overview – 2001 Compared with 2000 38
      Selected Data by Business Segment 39
      Summary by Business Segment – 2001 Compared with 2000 40
      Summary of Consolidated Results – 2001 Compared with 2000 43
      Summary by Business Segment – 2000 Compared with 1999 47
      Summary of Consolidated Results – 2000 Compared with 1999 50
      Liquidity and Capital Resources 53
      Market Risks 57
      European Monetary Union 59
      Critical Account Policies and Issues 59
      New Accounting Standards   60
      Outlook    61
Item 6.   Directors, Senior Management and Employees    63
      Directors and Senior Management 63
      Compensation of Directors and Officers 65
      Incentive Plans 66
      Board Practices 67
      Employees 70
      Share Ownership 70
Item 7.   Major Shareholders and Related Party Transactions 71
      Major Shareholders 71
      Related Party Transactions 72
Item 8.   Financial Information 72
      Export Sales 72
      Legal Proceedings 72

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        Dividend Policy 75
        Significant Changes 75
Item 9.   The Offer and Listing 75
        Nature of Trading Market 75
Item 10.   Additional Information 79
        Articles of Association 79
        Material Contracts 82
        Exchange Controls and Other Limitations Affecting Security Holders 83
        Taxation 83
Item 11.   Quantitative and Qualitative Disclosures About Market Risk 87
        Interest-Rate Risk Management 87
        Foreign-Exchange Risk Management 88
        Commodity Risk Management 88
        Stock Based Compensation Risk Management 89
Item 12.   Description of Securities Other Than Equity Securities 89

PART II
Item 13.   Defaults, Dividend Arrearages and Delinquencies 89
Item 14.   Material Modifications to the Rights of Security Holders and Use of Proceeds 89
Item 15.   Reserved 89
Item 16.   Reserved 89

PART III
Item 17.   Financial Statements 89
Item 18.   Financial Statements 89
Item 19.   Exhibits 90
Index to Consolidated Financial Statements F-2

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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”).

BASIS OF PRESENTATION

       The Consolidated Financial Statements were prepared in accordance with U.S. Generally Accepted Accounting Principles (“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, also referred to as Hoechst, in a demerger that 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. 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, Technical Polymers 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 accounting policies which Celanese might have adopted had it been an independent company during those periods.

CURRENCY TRANSLATION

       Effective January 1, 1999, Germany and the 10 other member states of the European Union introduced the euro or € as their common currency and established fixed conversion rates between their existing sovereign currencies and the euro. Greece became the twelfth member of the European Monetary Union (EMU) on January 1, 2001. 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 €1.00. 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 the convenience of the readers for 2001 from euro into U.S. dollars, at an exchange rate of U.S. $0.8901 per €1.00, 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, 2001. For information regarding recent rates of exchange between euro and U.S. dollar, see “Item 3. Key Information – 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 February 25, 2002, the Noon Buying Rate for the euro was U.S. $0.8713 per €1.00.

FORWARD-LOOKING STATEMENTS MAY PROVE INACCURATE

       Investors are cautioned that the forward-looking statements contained in this Annual Report involve both risk and uncertainty. Many important factors could cause actual results to differ materially from those anticipated by these statements. Many of these statements are macroeconomic in nature and are, therefore, beyond the control of management. See “Forward-Looking Statements May Prove Inaccurate” in “Item 5. Operating and Financial Review and Prospects.”

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PART I

Item 1.    Identity of Directors, Senior Management and Advisers

     Not applicable.

Item 2.    Offer Statistics and Expected Timetable

     Not applicable.

Item 3.    Key Information

Selected Financial Data

       The following table presents selected consolidated financial information of Celanese. You should read this table in conjunction with “Item 5. Operating and Financial Review and Prospects,” the audited Consolidated Financial Statements and the notes to those statements that are included elsewhere in this Annual Report.

       The balance sheet data set forth below for 2001 and 2000, and the statement of operations data for 2001, 2000 and 1999, all of which are set forth below, are derived from the audited Consolidated Financial Statements included elsewhere in this Annual Report and should be read in conjunction with those financial statements and the notes thereto. The balance sheet data for 1999, 1998 and 1997 and the statement of operations data for 1998 and 1997 are derived from audited Consolidated Financial Statements not included in this Annual Report.

       Effective January 1, 1999, Germany and 10 other member states of the European Union introduced the euro as their common currency and established fixed conversion rates between their existing sovereign currencies and the euro. Greece became the twelfth member of the EMU on January 1, 2001. The Consolidated Financial Statements for each period ending on or before December 31, 1998 have been prepared using the Deutsche Mark and have been restated in euro using the official fixed conversion rate between the euro and the Deutsche Mark of DM 1.95583 per €1.00. Accordingly, the Consolidated Financial Statements for all periods prior to December 31, 1998 depict the same trends that would have been presented had they been presented using the Deutsche Mark. Because the consolidated financial information for those periods was originally prepared using the Deutsche Mark, it is not necessarily comparable to financial statements of other companies which originally prepared financial statements in a European currency other than the Deutsche Mark and subsequently converted that other currency into euro. Beginning January 1, 1999, Celanese’s Consolidated Financial Statements have been prepared in euro and are no longer restated from Deutsche Mark into euro.

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  Year Ended December 31,
 
  2001   2001     2000   1999   1998     1997  
 
 
   
 
 
   
 
  (unaudited)   (audited)
 
 
  U.S. $(1)   €     €   €   €     €  
 
 
   
 
 
   
 
  (in millions, except per share data, percentages and number of employees)
 
Statement of Operations Data:                                      
Net sales     4,537         5,097         5,207         4,318         4,344         4,951    
Cost of sales   (3,933 )   (4,419 )   (4,441 )   (3,621 )   (3,454 )   (3,862 )
Gross profit   604     678     766     697     890     1,089  
Selling, general and administrative expenses   (519 )   (583 )   (567 )   (570 )   (535 )   (575 )
Research and development expenses   (85 )   (95 )   (94 )   (79 )   (101 )   (133 )
Special charges(2)   (472 )   (530 )   (29 )   (559 )   (100 )   (103 )
Operating profit (loss)(3)   (470 )   (528 )   83     (521 )   168     267  
Interest and other income, net(4)   (4 )   (4 )   56     (71 )   (75 )   (83 )
Income tax benefit (provision)   123     138     (84 )   83     (109 )   (83 )
Minority interests   –     –     –     7     (40 )   (63 )
Earnings (loss) from continuing operations   (351 )   (394 )   55     (502 )   (56 )   38  
Earnings from discontinued operations   8     9     3     310     12     9  
Net earnings (loss)   (343 )   (385 )   58     (207 )   (44 )   47  
Earnings (loss) per common share –
   basic and diluted(5)
  (6.81 )   (7.65 )   1.09     (3.70 )   (0.79 )   0.84  

Balance Sheet Data:
Total assets   6,288     7,064     7,642     7,569     7,358     6,185  
Debt   784     880     1,165     948     1,479     1,888  
Shareholders’ equity(6)   1,967     2,210     2,843     2,866     2,736     1,250  
Dividends paid per share(7)   0.36     0.40     0.11     –     –     –  
Common stock   127     143     143     143     –     –  
Weighted average shares – basic and diluted   50,332     50,332     53,293     55,915     55,915     55,915  

Other Data:
Operating margin (%)   (10.36 )   (10.36 )   1.59     (12.07 )   3.87     5.39  
Depreciation and amortization of tangible
   and intangible assets
  372     418     388     339     312     290  
Capital expenditures on tangible fixed assets   206     231     235     262     345     368  
Trade Working Capital(8)   611     687     993     980     993     1,029  
Number of employees on a continuing basis
   (end of period) in thousands
  11.8     11.8     13.2     14.9     15.8     17.5  
(1)  The U.S. $ figures are unaudited and have been translated solely for the convenience of the reader at an exchange rate of U.S. $0.8901 per €1.00, the noon buying rate of the Federal Reserve Bank of New York on December 31, 2001.
(2) Special charges represent charges for the impairment of assets, litigation charges and restructuring charges, which include employee termination costs, plant and office closures and other costs. See Note 26 to the Consolidated Financial Statements.
(3) Hoechst acquired substantially all the 49 percent minority interest in its Mexican subsidiary, Grupo Celanese S.A., in December 1998, and contributed it to Celanese. If this minority interest had been contributed to Celanese as of January 1, 1998, Celanese’s operating profit for 1998 would have been reduced by €30 million, because of the amortization of goodwill associated with the acquisition.
(4) Interest and other income, net, represents equity in net earnings of affiliates, interest expense, and interest and other income, net, as set forth in the Consolidated Financial Statements.
(5) Earnings (loss) per common share – basic and diluted is calculated by dividing net earnings (loss) by the weighted average shares outstanding. At December 31, 2001, Celanese did not have any dilutive common stock equivalents. On the effective date of the demerger, Hoechst issued 55,915,369 shares of Celanese to existing Hoechst shareholders; these shares are deemed to be outstanding for 1999 and all prior periods presented.
(6) Shareholders’ equity increased significantly from 1997 to 1998 and reflects the contribution of net assets to Celanese by Hoechst prior to the demerger. The principal factors for this increase are the contribution of the minority interest in Grupo Celanese of €592 million, the contribution of Hoechst receivables amounting to €384 million, the transfer of some other activities from Celanese to Hoechst of €350 million and the recognition of a deferred tax asset in connection with the contribution of the Dyneon equity investment of €109 million. Dyneon was a joint venture with 3M in which Celanese had a 46 percent interest. In December 1999, Celanese sold its interest in Dyneon to 3M.
(7) See “Item 8. Financial Information – Dividend Policy.”
(8) Celanese defines trade working capital as trade accounts receivable from 3rd parties and affiliates net of allowance for doubtful accounts, plus inventories, less trade accounts payable to 3rd parties and affiliates.

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Exchange Rate Information

       Effective January 1, 1999, Germany and 10 other member states of the European Union introduced the euro as their common currency and established fixed conversion rates between their existing sovereign currencies and the euro. Currency exchanges traded the euro beginning on January 4, 1999. Greece became the twelfth member of the EMU on January 1, 2001. By March 1, 2002, the euro was the sole legal tender of all euro zone countries.

       Celanese began using the euro as its reporting currency on January 1, 1999 and pays dividends on its shares in euro. Furthermore, prices quoted for the Celanese shares on the Frankfurt Stock Exchange are quoted in euro.

       Fluctuations in the exchange rate between the euro and the U.S. $ will affect:

  • The U.S. $ equivalent for dividends received by U.S. holders of Celanese shares; and

  • The trading market price of the Celanese shares on the Frankfurt and New York Stock Exchanges.

       The table below sets forth the Noon Buying Rates for the Deutsche Mark versus the U.S. $, restated in euro for all periods prior to January 1, 1999, and, for all subsequent periods, sets forth the Noon Buying Rates for the euro in U.S. $. For the calculation of the euro amounts for all periods prior to January 1, 1999, Celanese has restated the applicable Noon Buying Rate for the DM per U.S. $ into euro at the official fixed DM/euro conversion rate of DM 1.95583 per €1.00. This restatement matches the restatement into euro of the Consolidated Financial Statements, which, for all periods prior to January 1, 1999, were prepared in Deutsche Mark and restated into euro. Celanese does not represent that the U.S. $ amounts referred to below could have been or could be converted into euro at any particular rate indicated. The average amounts set forth below under “Average” are calculated as the average of the Noon Buying Rates on the last business day of each month.

Year   Low   High   Average   End  
 
 
 
 
 
1997         1.0398     1.2689     1.1244     1.0871  
1998       1.0548   1.2178   1.1115   1.1733  
1999       1.0080   1.1825   1.0660   1.0046  
2000       0.8270   0.9757   0.9231   0.9388  
2001                      
      July   0.8370   0.8797   0.8615   0.8752  
    August   0.8775   0.9165   0.9014   0.9090  
    September   0.8868   0.9310   0.9114   0.9099  
    October   0.8893   0.9181   0.9050   0.8993  
    November   0.8770   0.9044   0.8883   0.8958  
    December   0.8773   0.9044   0.8912   0.8901  
2002                      
    January   0.8594   0.9031   0.8832   0.8594  
    February (through February 25, 2002)   0.8613   0.8778   0.8715   0.8713  

       For a more complete discussion of exchange rate fluctuations and the hedging techniques used by Celanese to manage its exposure to these fluctuations, please see “Risk Factors” set forth below and “Item 5. Operating and Financial Review and Prospects – Market Risks” and “Item 11. Quantitative and Qualitative Disclosures About Market Risk.”

Risk Factors

       Many factors could have an effect on Celanese’s financial condition, cash flows and results of operations. Celanese is subject to various risks resulting from changing economic, environmental, political, industry, business and financial conditions. The principal factors are described below.

Celanese is an international company and is exposed to general economic, political and regulatory conditions and risks in the countries in which it has significant operations

       Celanese operates in the global market and has customers in many countries. Celanese has major facilities located throughout North America, Europe and the Pacific Rim, including facilities in China, Japan, Korea and

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Saudi Arabia operated through joint ventures. Its principal customers are similarly global in scope, and the prices of its most significant products are typically world market prices. Consequently, Celanese’s business and financial results are affected directly and indirectly by world economic, political and regulatory conditions.

       Conditions such as the uncertainties associated with war, terrorist activities, or political instability in any of the countries in which Celanese operates could affect Celanese by causing delays or losses in the supply or delivery of raw materials and products as well as increased security costs, insurance premiums and other expenses. These conditions could also result in or lengthen economic recession in the United States, Germany, Asia or elsewhere. Moreover, changes in laws or regulations, such as unexpected changes in regulatory requirements (including import or export licensing requirements), or changes in reporting requirements of the United States, German or European Union governmental agencies, could increase the cost of doing business in these regions. Any of these conditions may have an effect on Celanese’s business and financial results as a whole and may result in the volatility of the current and future prices for Celanese shares.

Cyclicality in the industrial chemicals industry has in the past and may in the future result in reduced operating margins or operating losses

       Consumption of the basic chemicals that Celanese manufactures, in particular those in acetyl and acrylic products, such as methanol, formaldehyde, acetic acid, vinyl acetate monomer, and acrylic acid, has increased significantly over the past 30 years. Despite this growth in consumption, producers have experienced alternating periods of inadequate capacity and excess capacity for these products. Periods of inadequate capacity, including some due to raw material shortages, have usually resulted in increased selling prices and operating margins. This has often been followed by periods of capacity additions, which have resulted in declining capacity utilization rates, selling prices and operating margins.

       Celanese expects that these cyclical trends in selling prices and operating margins relating to capacity shortfalls and additions will likely persist in the future, principally due to the continuing combined impact of five factors:

  • Significant capacity additions, whether through plant expansion or construction, can take two to three years to come on stream and are therefore necessarily based upon estimates of future demand.

  • When demand is rising, competition to build new capacity may be heightened because new capacity tends to be more profitable, with a lower marginal cost of production. This tends to amplify upswings in capacity.

  • When demand is falling, the high fixed cost structure of the capital intensive chemicals industry leads producers to compete aggressively on price in order to maximize capacity utilization.

  • As competition in these products is focused on price, being a low-cost producer is critical to profitability. This favors the construction of larger plants, which maximize economies of scale, but which also lead to major increases in capacity which can outstrip current growth in demand.

  • Cyclical trends in general business and economic activity produce swings in demand for chemicals.

       Celanese believes that the basic chemicals industry, particularly in the commodity chemicals manufactured by Celanese’s Acetyl Products and Chemical Intermediates segments, is currently characterized by overcapacity, and that there may be further capacity additions in the next few years.

The length and depth of product and industry business cycles of Celanese’s markets, particularly in the automotive, electrical, construction and textile industries, may result in reduced operating margins or operating losses

       Some of the markets in which Celanese’s customers participate, such as the automotive, electrical, construction and textile industries, are cyclical in nature, thus posing a risk to Celanese which is beyond its control. These markets are highly competitive, to a large extent driven by end-use markets, and may be subject to overcapacity, all of which may affect demand for and pricing of Celanese’s products.

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Celanese’s operating margins may decrease if it cannot pass on increased raw material prices to customers or if prices for its products decrease faster than raw material prices

       Celanese purchases significant amounts of natural gas, ethylene, butane and propylene from third parties for use in its production of basic chemicals in the Acetyl Products and Chemical Intermediates segments, principally methanol, formaldehyde, acetic acid, vinyl acetate monomer, as well as acrylates and oxo products. Celanese uses a portion of its output of these chemicals, in turn, as inputs in the production of further products in the Acetyl Products, Chemical Intermediates and Acetate Products segments, as well as some products in the Technical Polymers Ticona, also referred to as Ticona, and Performance Products segments. Celanese also purchases significant amounts of cellulose or wood pulp for use in its production of cellulose acetate in the Acetate Products segment. Celanese purchases significant amounts of natural gas, electricity, coal and fuel oil to supply the energy required in its production processes.

       Although Celanese has agreements providing for the supply of natural gas, ethylene, propylene, wood pulp, electricity, coal and fuel oil, the contractual prices for these raw materials and energy vary with market conditions and may be highly volatile. Factors which have caused volatility in Celanese’s raw material prices in the past and which may do so in the future include:

  • Shortages of raw materials due to increasing demand, e.g., from growing uses or new uses;

  • Capacity constraints, e.g., due to construction delays, strike action or involuntary shutdowns;

  • The general level of business and economic activity; and

  • The direct or indirect effect of governmental regulation.

       Celanese is striving to improve profit margins of many of its products through price increases when warranted and accepted by the market, however, Celanese’s operating margins may decrease if it cannot pass on increased raw material prices to customers, or Celanese may not be able to capture the benefit of raw material price declines if raw material prices fall to levels below those at which Celanese is committed to purchase under forward purchase contracts. Even in periods during which raw material prices decline, as occurred during 2001, Celanese may suffer decreasing operating profit margins if raw material price reductions occur at a slower rate than decreases in the selling prices of Celanese’s products.

       Celanese’s policy allows the purchase of up to 80 percent of its natural gas and butane requirements, generally up to 18 months forward using forward purchase or cash-settled swap contracts. Throughout 2001 and during the second half of 2000, Celanese entered into forward purchase and cash-settled swap contracts for slightly less than 50 percent of its estimated natural gas requirements, generally for up to three to six months forward. As these forward contracts expire, Celanese may be exposed to future price fluctuations if the forward purchase contracts are not replaced, and if it elects to replace them, it may have to replace them at higher costs. Although Celanese seeks to balance increases in raw material prices with corresponding increases in the prices of its products, it may not be able to do so, and there may be periods when such product price increases lag behind raw material cost increases. In the future, Celanese may consider utilizing a variety of other raw material hedging instruments in addition to forward purchase contracts.

Failure to develop new products and production technologies or to implement productivity and cost reduction initiatives successfully may harm Celanese’s competitive position

       Celanese’s operating results, especially in its Technical Polymers Ticona and Performance Products segments, significantly depend on the development of commercially viable new products and applications, as well as production technologies. If Celanese is unsuccessful in developing new products, applications and production processes in the future, its competitive position and operating results will be negatively affected. Likewise, Celanese has undertaken and is continuing to undertake initiatives in all segments to improve productivity and performance and to generate cost savings. There can, however, be no assurance that these initiatives will be completed or beneficial or that the estimated cost savings from such activities will be realized.

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Environmental liabilities and compliance costs may have a significant negative effect on Celanese’s operating results

       Costs related to Celanese’s compliance with and potential obligations under environmental laws for remediation of contaminated sites may have a significant negative impact on its operating results. These include obligations related to sites currently or formerly owned or operated by Celanese, or where waste from its operations was disposed. Celanese also has obligations related to the indemnity agreement contained in the demerger and transfer agreement between Celanese AG and Hoechst, also referred to as the Demerger Agreement. Celanese’s accruals for environmental remediation obligations may be insufficient if the assumptions underlying those accruals prove incorrect or if Celanese is held responsible for currently undiscovered contamination. See “Celanese and Hoechst have obligations to pay each other certain amounts, some of which are not yet determinable” below and “Item 4. Information on the Company – Environmental and Other Regulation.”

       Stricter environmental, safety and health laws, regulations and enforcement policies could result in substantial costs and liabilities to Celanese and could subject Celanese’s handling, manufacture, use, reuse or disposal of substances or pollutants to more rigorous scrutiny than at present. Consequently, compliance with these laws could result in significant capital expenditures as well as other costs and liabilities and materially adversely affect Celanese’s business and operating results.

       Furthermore, Celanese is involved in several claims, lawsuits and administrative proceedings relating to environmental matters. While Celanese does not believe, based upon currently available facts, that the ultimate resolution of any such pending matters will have a material adverse effect on Celanese’s operating results, an adverse outcome in any of them may negatively affect Celanese’s earnings in a particular reporting period.

Changes in environmental, health and safety regulatory requirements could have a significant negative effect on the demand for Celanese’s products

       New or revised governmental regulations relating to health, safety and the environment may also affect demand for Celanese’s products.

       Various United States programs, including the Voluntary Children’s Chemical Evaluation Program and High Production Volume Chemical Initiative, and various European Commission programs, including the White Paper on Strategy for a Future Chemicals Policy, will potentially require toxicological testing and risk assessments of a wide variety of chemicals, including chemicals used or produced by Celanese.

       Pursuant to the European Union regulation on Risk Assessment of Existing Chemicals, the European Chemicals Bureau of the European Commission has been conducting risk assessments on approximately 140 major chemicals. Some of the chemicals initially being evaluated include competitors’ products, such as styrene and 1,3-butadiene, as well as Celanese’s product vinyl acetate monomer or VAM. These risk assessments entail a multi-stage process to determine whether and to what extent the Commission should classify the chemical as a carcinogen and, if so, whether this classification, and related labeling requirements, should apply only to finished products that contain specified threshold concentrations of the chemical. In the case of VAM, a final ruling is not expected for several years. Celanese and other VAM producers are participating in this process with detailed scientific analyses supporting the industry’s position that labeling should not be required but that, if it is, should only be at high concentration levels. Because Celanese and the other VAM producers are in the early stages of the process, it is not possible for Celanese to predict the outcome or effect of any final ruling.

       Depending on the outcome of the above-mentioned assessments in the United States and Europe, additional requirements may be placed on the production, handling, labeling or use of the subject chemicals. Such additional requirements could increase the cost incurred by Celanese’s customers to use its chemical products and otherwise limit the use of these products, which could adversely affect the demand for these products.

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Celanese’s production facilities handle the processing of some volatile and hazardous materials which subject Celanese to operating risks which could adversely affect Celanese’s operating results

       Celanese’s operations are subject to operating risks associated with chemical manufacturing, including the related storage and transportation of raw materials, products and wastes. These hazards include, among other things:

  • Pipeline and storage tank leaks and ruptures;

  • Explosions and fires; and

  • Discharges or releases of toxic or hazardous substances.

       These operating risks can cause personal injury, property damage and environmental contamination, and may result in the shutdown of affected facilities and the imposition of civil or criminal penalties. The occurrence of any of these events may materially adversely affect the productivity and profitability of a particular manufacturing facility and Celanese’s operating results.

       Celanese maintains property, business interruption and casualty insurance which it believes is in accordance with customary industry practices, but Celanese cannot provide any assurance that this insurance will be adequate to fully cover all potential hazards incidental to its business.

       For more detailed information on environmental issues, see “Item 4. Information on the Company – Environmental and Other Regulation.”

Fluctuations in exchange and interest rates may affect Celanese’s operating results

       Celanese is exposed to market risk through commercial and financial operations. Celanese’s market risk consists principally of exposure to fluctuations in currency exchange rates and interest rates. Celanese has policies of hedging against changes in currency exchange rates and interest rates as described below.

       As Celanese conducts a significant portion of its operations outside the euro zone, fluctuations in currencies of countries outside the euro zone, especially the U.S. dollar, may materially affect Celanese’s operating results. For example, changes in currency exchange rates may affect:

  • The relative prices at which Celanese and its competitors sell products in the same market; and

  • The cost of items required in Celanese’s operations.

       From time to time, Celanese uses financial instruments to hedge its exposure to foreign currency fluctuations. The notional amounts under forward contracts outstanding at December 31, 2001 were €1,013 million.

       Celanese holds a variety of interest rate sensitive assets and liabilities to manage the liquidity and cash needs of its day-to-day operations. Celanese is primarily exposed to changes in interest rates in the U.S. dollar and the euro. To manage these risks, Celanese enters into interest rate swap agreements to reduce the exposure of interest rate risk inherent in Celanese’s debt portfolio. Celanese uses swaps for hedging purposes only. The maturities of these swaps depend on the underlying debt portfolio.

Celanese and Hoechst have obligations to pay each other certain amounts, some of which are not yet determinable

       Under the Demerger Agreement, Celanese agreed to indemnify Hoechst for environmental liabilities that Hoechst may incur with respect to Celanese’s German production sites, which were transferred from Hoechst to Celanese in connection with the demerger. Celanese also agreed to indemnify Hoechst against liabilities for environmental damages or contamination arising under 19 divestiture agreements entered into by Hoechst prior to the demerger. As the indemnification obligations depend on the occurrence of unpredictable future events, the costs associated with them are not yet determinable and may materially affect operating results.

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       Celanese’s obligation to indemnify Hoechst against liabilities for environmental contamination in connection with the divestiture agreements is subject to the following thresholds:

  • Celanese will indemnify Hoechst for the total amount of these liabilities up to €250 million;

  • Hoechst will bear the full amount of those liabilities between €250 million and €750 million; and

  • Celanese will indemnify Hoechst for one third of those liabilities for amounts exceeding €750 million.

       As of December 31, 2001, €20 million had been spent to date by Celanese for environmental contamination liabilities in connection with the divestiture agreements. Celanese has additional reserves of €111 million as of December 31, 2001, for this contingency and may be required to record additional reserves in the future.

       Also, Celanese has undertaken in the Demerger Agreement to indemnify Hoechst to the extent that Hoechst is required to discharge liabilities, including tax liabilities, in relation to assets included in the demerger, where such liabilities have not been demerged due to transfer or other restrictions. Celanese did not make any payments to Hoechst in 2001 in connection with this indemnity.

       Under the Demerger Agreement, Celanese will also be responsible, directly or indirectly, for all obligations to past employees of Hoechst businesses that were demerged to Celanese. Under the Demerger Agreement, Hoechst agreed to indemnify Celanese from liabilities (other than liabilities for environmental contamination) stemming from the agreements governing the divestiture of Hoechst’s polyester businesses, which were demerged to Celanese, so far as such liabilities relate to the European part of the business. Hoechst has also agreed to bear 80 percent of the financial obligations arising in connection with the government investigation and litigation associated with the sorbates industry for price fixing described in “Item 8. Financial Information – Legal Proceedings” and Note 24 to the Consolidated Financial Statements, and Celanese has agreed to bear the remaining 20 percent.

Kuwait Petroleum Corporation holds a significant number of shares in Celanese and may be able to block some corporate actions

       Kuwait Petroleum Corporation owned 28.6 percent of the Celanese shares outstanding as of December 31, 2001. Kuwait Petroleum Corporation may have the ability, as a matter of German corporate law, to block some corporate actions by Celanese such as mergers, spin-offs and capital measures which require either a majority of 75 percent of the votes cast or 75 percent of the share capital represented at a shareholders’ meeting. Celanese is not aware of any voting agreements or agreements of any kind between Kuwait Petroleum Corporation and any of Celanese’s other shareholders. In addition, an officer of Kuwait Petroleum Corporation has been elected as one of the shareholder representatives on the Supervisory Board of Celanese.

Item 4.    Information on the Company

Introduction

       Celanese is incorporated as a stock corporation organized under the laws of the Federal Republic of Germany. Celanese’s registered office is located at Frankfurter Straße 111, 61476 Kronberg/Taunus, Germany, telephone +49 69 305 16000.

History and Development of the Company

       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.

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       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 acetate, 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. 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.

Business Summary

       Celanese is a leading global industrial chemicals company with strong competitive positions in its major products and production technologies. 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. The Celanese portfolio consists of five main business segments: Acetyl Products, Chemical Intermediates, Acetate Products, Technical Polymers Ticona and Performance Products.

       In 2001, Celanese had net sales of €5,097 million and an operating loss of €528 million from continuing operations. At December 31, 2001, Celanese had approximately 11,800 employees worldwide. Celanese has 30 production plants and five research centers in eleven countries. Most of Celanese’s facilities are located in the Americas, principally in the three North America Free Trade Agreement, or NAFTA, countries: the United States, Canada and Mexico. Celanese also has major operations, including significant joint ventures in Asia. In 2001, 53 percent of net sales was derived from sales in North America, 37 percent from sales in Europe, 8 percent from sales in Asia and Australia and 2 percent from sales in the rest of the world. Celanese has a large and diverse global customer base consisting principally of major industrial companies. In 2001, 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.

       Celanese’s aggregate capital expenditures for property, plant and equipment were €231 million in 2001, €235 million in 2000, and €262 million in 1999. North America, Europe and Asia accounted for 68 percent, 31 percent and 1 percent, respectively, of Celanese’s capital expenditures in 2001. The capital expenditures were financed by means of Celanese’s operating cash flows, cash reserves and additional funds drawn down from existing credit facilities. See also “Business Segments” for capital expenditures by business segment. For a description of principal acquisitions and dispositions of businesses during the last three years, see “Acquisitions and Divestitures,” “Item 5. Operating and Financial Review and Prospects – Summary of Consolidated Results – 2001 Compared to 2000 – Discontinued Operations”, and Note 6 to the Consolidated Financial Statements.

       As of December 31, 2001, Celanese had 50,334,891 shares outstanding and approximately 110,000 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.

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Segment Overview

       Celanese is an integrated company that operates through five principal business segments: Acetyl Products, Chemical Intermediates, Acetate Products, Technical Polymers Ticona and Performance Products.

       Acetyl Products. This segment produces and supplies acetyl products, including acetic acid, acetate esters, vinyl acetate monomer and polyvinyl alcohol. Acetic acid is a commodity used in the production of other basic chemicals. Acetate esters are used in coatings and inks. Vinyl acetate monomer is primarily used in a variety of adhesives, paints and coatings. Polyvinyl alcohol is made from vinyl acetate monomer and is used in adhesives, building products, paper coatings, films and textiles. Celanese is the world’s leading producer of acetic acid and vinyl acetate monomer and the largest North American producer of methanol, the major raw material used for the production of acetic acid. Celanese is the largest polyvinyl alcohol producer in North America and the second largest producer in the world.

       Chemical Intermediates. This segment produces and supplies chemical intermediates, including acrylic acid, acrylate esters, organic solvents and other intermediates. Acrylic acid and acrylate esters 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 acetate tow (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 filament and acetate tow, including production by its joint ventures in Asia.

       Technical Polymers Ticona. This segment develops, produces 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, its 50 percent-owned affiliate Korean Engineering Plastics Company Ltd., and Fortron Industries, its 50-50 joint venture with K