VANCOUVER, May 4 /CNW/ - Acetex Corporation announced today results for
the three months ended March 31, 2005, determined under Canadian generally
accepted accounting principles. These results include earnings for the period
of US $4.5 million and EBITDA (defined as operating earnings plus
amortization) of US $20.4 million. The earnings of US $4.5 million includes
non-operating expenses of US $1.6 million related to the transaction with
Celanese announced on October 27, 2004. Sales of US $146.3 million were
generated during the period from the sale of acetyls products and specialty
polymers and films.
"The margin expansion in the fourth quarter of 2004 in both our
businesses continued into the first quarter of 2005," said Brooke N. Wade,
Chairman and Chief Executive Officer of Acetex. "While we did see a slight
slowdown in demand near the end of the quarter, we believe events point to
continued improvement in business conditions supporting improving margins.
Efforts will continue on cost control and working capital optimization. In
acetyls, we enjoyed healthy demand and increased prices during the quarter. In
our specialty polymers and films segment, selling price improvements continued
despite the late quarter global weakness in demand."
"The proposed acquisition of Acetex by Celanese remains subject to
regulatory approval. As announced on March 11, 2005, the European Commission
transitioned into a Phase II review to obtain more information with respect to
the transaction. The Commission has noted on their website a provisional
deadline of July 26, 2005. Although we cannot comment on the approval process,
we will inform the public as soon as a final decision by the Commission has
been taken. The obligation of Celanese to complete the transaction is also
subject to the satisfaction of other customary conditions described in the
Arrangement Agreement."
Information in this press release including the attached interim report
to shareholders may contain forward-looking statements. By their nature, such
forward-looking statements involve risks and uncertainties that could cause
actual results to differ materially from those contemplated by the forward-
looking statements. They include actions of competitors, conditions in the
acetyls and other industries, worldwide economic conditions, and risks
attendant with acetyls and specialty polymers and films production and
distribution.
Acetex Corporation has two primary businesses - its European Acetyls
Business and the Specialty Polymers and Films Business. Our Acetyls business
is Europe's second largest producer of acetic acid and polyvinyl alcohol and
third largest producer of vinyl acetate monomer. These chemicals and their
derivatives are used in a wide range of applications in the automotive,
construction, packaging, pharmaceutical and textile industries.
Specialty polymers developed and manufactured by Acetex are used in the
manufacture of a variety of plastics products, including packaging and
laminating products, auto parts, adhesives and medical products. The films
business focuses on products for the agricultural, horticultural and
construction industries.
Acetex directs its operations from its corporate head office in
Vancouver, Canada. Acetex has plants in France, Spain, and Edmonton, Alberta,
and sells to customers primarily in Europe, the United States, and Canada.
Acetex's common shares are listed for trading under the symbol "ATX" on The
Toronto Stock Exchange, which has neither approved nor disapproved the
information contained herein.
A conference call is scheduled for May 5, 2005, at 11:30 EDT to discuss
these results. To participate, please call (416) 641-6446 ten minutes before
the start of the call. If you are unable to listen to the call at that time, a
recorded version is available for the three following business days by phoning
(416) 626-4100 and entering 21246326.
<<
ACETEX CORPORATION
FINANCIAL AND OPERATING HIGHLIGHTS
(thousands of U.S. dollars)
(unaudited)
Three Three
Months Ended Months Ended
March 31, March 31,
2005 2004
---------------------------
Sales $ 146,350 $ 127,951(3)
Net earnings (loss) for the period 4,504 (644)
Net earnings (loss) per share $ 0.13 $ (0.02)
Cash generated from operations(2) 12,347 7,191
Cash generated from operations per share(2) $ 0.36 $ 0.21
Cash position at end of period 47,016 56,278
EBITDA(1)
Acetyls Segment 16,393 10,943
Specialty Polymers & Films Segment 4,588 3,748
Corporate (593) (974)
---------------------------
20,388 13,717
-------------------------------------------------------------------------
Senior unsecured notes at end of period 265,000 265,000
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(1) Operating earnings plus amortization as stated on the consolidated
statements of operations. EBITDA is not a term that has an
established meaning under generally accepted accounting principles
and should not be considered in isolation from net earnings (loss) or
other amounts as calculated under generally accepted accounting
principles. EBITDA may not be calculated in a comparable manner to
other companies. The Company has calculated EBITDA consistently for
all periods presented.
(2) Calculated as cash flow from operations less increases in non-cash
operating working capital. This is not a term that has an established
meaning under generally accepted accounting principles and should not
be considered in isolation from net earnings (loss) or other amounts
as calculated under generally accepted accounting principles. Cash
flow may not be calculated in a comparable manner to other companies.
The Company has calculated cash flow consistently for all periods
presented.
(3) See note 2(a) to the attached consolidated financial statements for a
description of reclassifications made to the 2004 reported amounts.
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Production Volume Information (tonnes)
Acetyls Segment
Acetic Acid 105,861 101,181
VAM - Pardies 32,402 37,549
Acetic Acid Derivatives 20,152 18,184
-------------------------------------------------------------------------
Specialty Polymers & Films Segment
Specialty Polymers 34,402 33,771
Films 3,948 4,213
-------------------------------------------------------------------------
ACETEX CORPORATION
CONSOLIDATED BALANCE SHEETS
(thousands of U.S. dollars)
(unaudited)
ASSETS March 31, Dec 31,
2005 2004
------------- -------------
(unaudited)
Current assets:
Cash and cash equivalents $ 47,016 $ 62,770
Accounts receivable 104,259 99,738
Inventory 69,544 63,619
Prepaid expenses and other 4,476 5,339
------------- -------------
225,295 231,466
Property, plant and equipment 239,397 249,132
Other assets 17,966 15,167
------------- -------------
$ 482,658 $ 495,765
------------- -------------
------------- -------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 101,125 $ 109,196
Employee future benefits 26,483 27,389
Revolving credit facility 21,877 21,411
Senior unsecured notes 265,000 265,000
------------- -------------
414,485 422,996
------------- -------------
Shareholders' equity:
Share capital 105,548 105,023
Additional paid-in capital 1,547 1,547
Deficit (33,334) (37,838)
Cumulative translation adjustment (5,588) 4,037
------------- -------------
68,173 72,769
------------- -------------
$ 482,658 $ 495,765
------------- -------------
------------- -------------
See accompanying notes to consolidated financial statements.
ACETEX CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS (DEFICIT)
(thousands of U.S. dollars except per share information)
(unaudited)
Three Three
Months Ended Months Ended
March 31, March 31,
2005 2004
------------- -------------
Sales $ 146,350 $ 127,951
Cost of goods sold 118,808 107,386
Amortization 7,734 7,533
------------- -------------
126,542 114,919
------------- -------------
Gross profit 19,808 13,032
Other operating expenses:
Selling, general and administrative 6,288 5,838
Research and development 866 1,010
------------- -------------
7,154 6,848
------------- -------------
Operating earnings 12,654 6,184
Other earnings (expense):
Interest expense (7,662) (7,932)
Transaction expenses (1,619) -
Equity income (loss) 119 (185)
Foreign exchange gain (loss) and other 1,275 1,289
------------- -------------
(7,887) (6,828)
------------- -------------
Earnings (loss) before income taxes 4,767 (644)
Income taxes 263 -
------------- -------------
Net earnings (loss) for the period 4,504 (644)
Deficit, beginning of period (37,838) (30,699)
------------- -------------
Deficit, end of period $ (33,334) $ (31,343)
------------- -------------
------------- -------------
Earnings (loss) per common share
Basic $ 0.13 $ (0.02)
Diluted $ 0.13 $ (0.02)
Weighted average number of common shares
outstanding
Basic 34,434,371 33,903,976
Diluted 35,581,752 34,341,953
(x)Number of shares outstanding at March 31, 2005: 34,464,319
See accompanying notes to consolidated financial statements.
ACETEX CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(thousands of U.S. dollars)
(unaudited)
Three Three
Months Ended Months Ended
March 31, March 31,
2005 2004
------------- -------------
Cash provided by (used for):
Operations:
Net earnings (loss) for the period $ 4,504 $ (644)
Charges and credits to income not
involving cash:
Amortization 7,734 7,533
Pension expense (recovery) 114 114
Amortization of deferred financing costs 499 474
Amortization of bond premium (297) (297)
Unrealized foreign exchange (gain) loss (81) (174)
Distributions received from equity
investee in excess of income (126) 185
Changes in non-cash operating working
capital (19,903) (2,137)
------------- -------------
(7,556) 5,054
------------- -------------
Investments:
Purchase of property, plant and equipment (3,178) (1,971)
Other (2,946) (270)
------------- -------------
(6,124) (2,241)
------------- -------------
Financing:
Increase in long term debt 466 1,399
Increase in share capital 525 7
Increase (decrease) in pension obligation (393) 96
------------- -------------
598 1,502
------------- -------------
Foreign exchange gain (loss) on cash and cash
equivalents held in foreign currencies (2,672) (1,940)
------------- -------------
Increase (decrease) in cash and cash
equivalents (15,754) 2,375
Cash and cash equivalents, beginning of period 62,770 53,903
------------- -------------
Cash and cash equivalents, end of period $ 47,016 $ 56,278
------------- -------------
------------- -------------
See accompanying notes to consolidated financial statements
ACETEX CORPORATION
SEGMENTED INFORMATION
(thousands of U.S. dollars)
(Unaudited)
Specialty
Three months ended Polymers
March 31, 2005 Acetyls and Films Corporate Total
---------- ---------- ---------- ----------
Sales $ 96,991 $ 49,359 - $ 146,350
Cost of goods sold and
operating expenses 80,598 44,771 $ 593 125,962
Amortization 6,163 1,561 10 7,734
---------- ---------- ---------- ----------
86,761 46,332 603 133,696
---------- ---------- ---------- ----------
Operating earnings $ 10,230 $ 3,027 $ (603) 12,654
---------- ---------- ----------
---------- ---------- ----------
Interest expense 7,662
Transaction expenses 1,619
Equity income (loss) 119
Foreign exchange gain
(loss) and other 1,275
Income taxes 263
----------
Net earnings (loss) $ 4,504
----------
----------
As at March 31, 2005
Total assets $ 266,405 $ 202,739 $ 13,514 $ 482,658
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Specialty
Three months ended Polymers
March 31, 2004 Acetyls and Films Corporate Total
---------- ---------- ---------- ----------
Sales $ 82,768 $ 45,183 - $ 127,951
Cost of goods sold and
operating expenses 71,825 41,435 $ 974 114,234
Amortization 5,874 1,637 22 7,533
---------- ---------- ---------- ----------
77,699 43,072 996 121,767
---------- ---------- ---------- ----------
Operating earnings $ 5,069 $ 2,111 $ (996) 6,184
---------- ---------- ----------
---------- ---------- ----------
Interest expense 7,932
Equity income (loss) (185)
Foreign exchange gain
(loss) and other 1,289
----------
Net earnings (loss) $ (644)
----------
----------
As at March 31, 2004
Total assets $ 248,772 $ 204,641 $ 8,519 $ 461,932
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
ACETEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(tabular dollar amounts expressed in thousands of U. S. dollars,
except per share amounts)
(unaudited)
Three months ended March 31, 2005 and 2004
1. Operations:
Acetex Corporation was incorporated under the laws of the
Province of Alberta on December 1, 1994. It has two principal
businesses. The Acetyls Business consists of the production of
acetic acid and its derivatives from production facilities in
France and Spain and their distribution and sale primarily in
Europe. The Specialty Polymers and Films Business develops and
manufactures specialty plastic resins and film products for a
number of niche markets in North America and around the world
from a manufacturing facility in Edmonton, Alberta.
2. Significant accounting policies:
(a) Basis of presentation:
The consolidated financial statements of Acetex Corporation (the
"Company") have been prepared in accordance with generally
accepted accounting principles in Canada. They include the
accounts of Acetex Corporation and its subsidiaries, all of which
are wholly owned. The Company's 45% interest in Erfei A.I.E.
("Erfei"), a company subject to significant influence, is
accounted for by the equity method. Under this method, the
Company recognizes its proportionate share of cumulative post
acquisition income or losses and capital distributions of Erfei
as they are realized. All material intercompany balances and
transactions have been eliminated.
During 2004, the Company retroactively restated its consolidated
statements of operations to present freight and handling costs in
cost of sales. Previously, the amounts recovered had been offset
against revenues. This change in classification had no impact on
operating earnings and net earnings (loss).
Also during 2004, the Company retroactively restated its
consolidated statements of operations to classify foreign
exchange impacts on working capital as foreign exchange
losses/gains. Previously the amounts were recorded within
operating earnings. This reclassification has no impact on net
earnings (loss).
During 2005, the Company retroactively restated its consolidated
statements of operations to present commission expenses in
selling, general and administrative expenses and warranty/
quality claim expenses in cost of goods sold. Previously, these
two expenses were netted against sales revenue. This change in
classification has no impact on operating earnings and net
earnings (loss).
The consolidated financial statements have been prepared from the
books and records without audit; however, in the opinion of
management, all adjustments which are necessary to the fair
presentation of the results of the interim period have been made.
Except as noted as above, these interim consolidated financial
statements have been prepared on a basis consistent with, and
should be read in conjunction with, the annual consolidated
financial statements included in the Company's 2004 Annual
Information Form.
(b) Stock-based compensation:
The Company has a stock-based compensation plan. The Company
applies the fair value method of accounting for all stock-based
transactions, which includes stock options granted by the Company
to employees.
(c) Net earnings (loss) per common share:
Basic net earnings (loss) per share is calculated by dividing net
earnings (loss) available to common shareholders by the weighted
average number of common shares outstanding in the period. For
all periods presented, net earnings (loss) available to common
shareholders equals net earnings (loss). Diluted net earnings
(loss) per share is calculated by the treasury stock method.
Under the treasury stock method, the weighted average number of
common shares outstanding for the calculation of diluted net
earnings (loss) per share assumes that the proceeds to be
received on the exercise of dilutive stock options are applied to
repurchase common shares at the average market price for the
period.
3. Share capital:
(a) Authorized: Unlimited number of common shares.
(b) Issued:
Number of Assigned
common shares value
-----------------------------------------------------------------
Issued, December 31, 2003 33,901,438 103,059
Issued on exercise of options 3,333 7
-----------------------------------------------------------------
Issued, March 31, 2004 33,904,771 103,066
Issued on exercise of options 4,083 8
-----------------------------------------------------------------
Issued, June 30, 2004 33,908,854 103,074
Issued on exercise of options 26,315 84
-----------------------------------------------------------------
Issued, September 30, 2004 33,935,169 103,158
Issued on exercise of options 416,650 1,865
-----------------------------------------------------------------
Issued, December 31, 2004 34,351,819 $ 105,023
Issued on exercise of options 112,500 525
-----------------------------------------------------------------
Issued, March 31, 2005 34,464,319 105,548
(c) Stock options:
The Company's stock option plan provides for grants to directors,
officers and key employees. Stock options are granted having
exercise prices that are determined by reference to market prices
at the date of grant. Stock options vest and become exercisable
as to 50% on the first anniversary and as to 25% each on the
second and third anniversary of grant. Stock options expire
10 years from the date of grant. Exercise prices presented in the
table below are expressed in Canadian dollars.
During the quarter ended March 31, 2004, the Company repriced
232,272 stock options from an average exercise price per share of
$14.81 to $6.10. The fair value compensation expense of the
repriced options was not significant.
-----------------------------------------------------------------
Weighted
average
Number exercise
of options price
-----------------------------------------------------------------
Outstanding, December 31, 2003 3,534,471 $ 9.05
Exercised (3,333) (2.66)
Expired (30,238) (54.23)
-----------------------------------------------------------------
Outstanding, March 31, 2004 3,500,900 8.09
Exercised (4,083) (2.61)
Granted 150,000 5.55
-----------------------------------------------------------------
Outstanding, June 30, 2004 3,646,817 7.99
Exercised (26,315) (4.10)
Expired (6,916) (11.15)
Granted 100,000 6.75
-----------------------------------------------------------------
Outstanding, September 30, 2004 3,713,586 7.98
Exercised (416,650) (5.46)
Expired (82,370) (60.67)
-----------------------------------------------------------------
Outstanding, December 31, 2004 3,214,566 6.95
Exercised (112,500) 5.65
Expired (35,288) 38.66
-----------------------------------------------------------------
Outstanding, March 31, 2005 3,066,778 $ 6.63
The following table summarizes information about stock options
exercisable and outstanding at March 31, 2005:
-----------------------------------------------------------------
Options outstanding Options exercisable
-----------------------------------------------------------------
Range of Weighted Weighted
exercise average average
Prices exercise exercise
(CDN $ price Exercisable price
per share) Number (CDN $) number (CDN $)
-----------------------------------------------------------------
$2.60 - $5.49 519,869 $ 2.76 509,869 $ 2.75
$5.50 - $8.00 2,416,371 6.94 2,031,933 7.10
$8.01 - $81.60 130,538 16.35 130,538 16.35
-----------------------------------------------------------------
3,066,778 $ 6.63 2,672,340 $ 6.73
-----------------------------------------------------------------
-----------------------------------------------------------------
4. Reconciliation of Net Earnings for Canadian GAAP to U.S. GAAP.
Canadian and U.S. GAAP earnings are equivalent.
Acetex Corporation
Management's Discussion and Analysis of Financial Condition and Results
of Operations (all references in U.S. dollars)
Acetex Corporation (the "Company") operates two businesses, the Acetyls
Business and the Specialty Polymers and Films Business. The Acetyls Business
derives its revenues from the merchant market sales in Europe of its two
principal products, acetic acid and vinyl acetate monomer ("VAM"), as well as
from merchant market sales of acetic derivatives, including polyvinyl alcohol.
The Specialty Polymers and Films Business develops and manufactures specialty
plastic resins and film products for a number of niche end-markets primarily
in North America. The Company's results of operations are affected by a
variety of factors, including variations in the pricing of acetic acid, VAM,
and polyethylene and in the cost of its principal feedstocks, methanol,
natural gas, and ethylene.
Acetyls Business
Sales
For the three months ended March 31, 2005, compared to the three months
ended March 31, 2004, sales increased by 17% or $14.2 million to $97.0 million
from $82.8 million. This increase resulted primarily from an increase in
average selling prices on a USD basis of 15% in addition to an increase in
sales volumes of 2% from first quarter 2004 to first quarter 2005. Industry
newsletters indicate that pricing for the first quarter of 2005 measured in
Euros compared to the fourth quarter of 2004 increased by approximately 2% for
acetic acid and VAM. Although pricing has not yet been set, these same
newsletters have indicated that contract prices for the second quarter of 2005
will increase by less than 5% over first quarter.
Gross Profit
Gross profit for the first quarter of 2005 compared to the first quarter
of 2004 increased by 60% or $4.7 million to $12.5 million from $7.8 million.
The increase in gross profit was primarily due to higher selling prices for
acetic acid and VAM, outpacing, feedstock costs.
The European contract price for methanol remained stable at Euros 230 per
metric tonne from the fourth quarter of 2004 to the first quarter of 2005 and
will rollover in the second quarter of 2005.
Operating Earnings
Operating earnings for the three months ended March 31, 2005 compared to
the three months ended March 31, 2004 doubled to $10.2 million from
$5.1 million primarily due to expanded margins, supplemented by slightly
higher sales volumes.
Specialty Polymers and Films Business
Sales
For the three months ended March 31, 2005, compared to the three months
ended March 31, 2004, net sales increased by 9.3% or $4.2 million to
$49.4 million from $45.2 million. Polymers specialty volumes increased by
4.9 million pounds or 11.8% versus last year demonstrating the continued
success of our targeted marketing program. Overall Polymers selling prices
increased by 29.4% compared to the same period last year, however, volumes
decreased 11.7 million pounds or 14.4%. Films volumes were down 20.3%, on
27.6% higher average selling prices.
Gross Profit
Gross profit for the three months ended March 31, 2005, compared to the
three months ended March 31, 2004, increased by 39.6% or $2.1 million to
$7.4 million from $5.3 million. The profit improvement was from the improved
product mix and unit price increases that allowed a partial reestablishment of
acceptable margin levels. However, this improvement was negatively impacted by
the strength of the Canadian dollar.
Operating Earnings
Operating earnings for the three months ended March 31, 2005 increased
$0.9 million or 42.9% to $3.0 million from $2.1 million. This improvement was
due to the improved margins offset by the appreciation of the Canadian dollar
and the impact of an adjustment to the bad debt reserves due to the bankruptcy
of a customer in the automotive industry.
Acetex Corporation Consolidated
Liquidity and Capital Resources
Cash provided by operations (prior to changes in non-cash working
capital) for the three months ended March 31, 2005, was $12.3 million compared
to $7.2 million for the three months ended March 31, 2004.
The Company expects to satisfy its cash requirements in the future
through internally generated cash and borrowings under the AT Plastics
revolver.
Capital Expenditures
Capital expenditures during the three months ended March 31, 2005,
totalled $3.2 million. Quarterly capital expenditures, consisting mainly of
plant maintenance related issues, were $1.3 million for the Specialty Polymers
and Film Businesses. Total expenditures for Acetyls were $1.9 million for
maintenance-level capital at the four European sites.
In addition, $3.0 million has been invested, during the first quarter
2005, in the previously announced project to construct an integrated acetic
acid, methanol and VAM production facility in Jubail, Saudi Arabia. This
investment is recorded in Other Assets on the consolidated balance sheet.
Summary of Quarterly Results
The selected financial information set out below includes the results of
operations of the Specialty Polymers and Films segment from August 5, 2003.
-------------------------------------------------------------------------
Q1/05 Q4/04 Q3/04 Q2/04 Q1/04 Q4/03 Q3/03 Q2/03
-------------------------------------------------------------------------
Sales 146,350 136,300 138,234 129,179 127,951 114,551 97,118 74,687
-------------------------------------------------------------------------
Net
earnings
(loss) 4,504 (8,425) 837 1,093 (644) (7,861) (10,412) (2,683)
-------------------------------------------------------------------------
Net
earnings
(loss)
per
share 0.13 (0.25) 0.02 0.03 (0.02) (0.23) (0.34) (0.11)
-------------------------------------------------------------------------
Prior quarter sales have been restated for the change in accounting
classification of freight and handling costs, commission expenses, and
warranty/ quality claim expenses.
>>
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