6-K 1 a2141681z6-k.txt FORM 6-K FORM 6-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 REPORT OF A FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a- 16 OR 15d- 16 OF THE SECURITIES ACT OF 1934 For the month of August 2004 --------------------------------------------------------- Acetex Corporation ------------------------------------------------------------------------------- (Translation of registrant's name into English) 750 World Trade Centre, 999 Canada Place, Vancouver, British Columbia, Canada V6C 3E1 ------------------------------------------------------------------------------- (Translation of principal executive offices) [Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F] Form 20-F Form 40-F /X/ ----------- ----------- [Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.] Yes No /X/ ------------ ----------- [If "Yes" is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82-______________] This Form 6-K consists of a press release announcing Acetex's results for the three months period ended March 31, 2004. PAGE 2 [ACETEX LOGO] FOR IMMEDIATE RELEASE ACETEX REPORTS RESULTS FOR THE THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 2004 VANCOUVER, B.C., CANADA - JULY 26, 2004 - Acetex Corporation announced today results for the three months ended June 30, 2004, determined under Canadian generally accepted accounting principles. These results include net income of U.S. $1.1 million and EBITDA (defined as operating income plus amortization) of U.S. $15.4 million. Net sales of U.S. $129.0 million were generated during the period from the sale of acetyls and specialty polymers and films. For the six months ended June 30, 2004, net income was U.S. $0.5 million and EBITDA was U.S. $29.1 million. Sales for the same period were U.S. $256.8 million. "Results continue to improve as the outlook strengthens for our Acetyls and Specialty Polymers and Films Businesses," said Brooke N. Wade, Chairman and Chief Executive Officer of Acetex Corporation. "In our Acetyls Business, prices for VAM increased during the quarter and in our Specialty Polymers and Films Business, strong demand also allowed for price increases. To date, as is normal in the early part of an upturn, raw material costs have outpaced price increases delaying expansion in margins. Finally, our project in Saudi Arabia is progressing very well as we continue on track in the development and finalization of the project." 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 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 PAGE 3 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 Tuesday, July 27, 2004, at 11:30 a.m. Eastern Time to discuss these results. To participate, please call (416) 641-6706 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 21203270. For further information contact: Lynn Haycock (604) 688-9600 or via e-mail at haycock@acetex.com. PAGE 4 ACETEX CORPORATION FINANCIAL AND OPERATING HIGHLIGHTS SELECTED FINANCIAL INFORMATION (THOUSANDS OF U.S. DOLLARS EXCEPT PER SHARE) (UNAUDITED)

* Specialty Polymers & Films 2003 volumes are shown prior to the acquisition of AT Plastics in August, 2003. PAGE 5 ACETEX CORPORATION CONSOLIDATED BALANCE SHEETS (THOUSANDS OF U.S. DOLLARS)

See accompanying notes to interim consolidated financial statements. PAGE 6 ACETEX CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS AND DEFICIT (THOUSANDS OF U.S. DOLLARS EXCEPT PER SHARE DATA) (UNAUDITED)

*Number of shares outstanding at June 30, 2004: 33,908,854 See accompanying notes to interim consolidated financial statements. PAGE 7 ACETEX CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOW (THOUSANDS OF U.S. DOLLARS) (UNAUDITED)

See accompanying notes to interim consolidated financial statements. PAGE 8 ACETEX CORPORATION SEGMENTED INFORMATION (THOUSANDS OF U.S. DOLLARS) (UNAUDITED)

All amounts as at and for the three and six months ended June, 2003, were in the Acetyls segment. PAGE 9 ACETEX CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (TABULAR DOLLAR AMOUNTS EXPRESSED IN THOUSANDS OF U.S. DOLLARS, EXCEPT PER SHARE AMOUNTS) (UNAUDITED) THREE AND SIX MONTHS ENDED JUNE 30, 2004 AND 2003 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 interim consolidated financial statements of Acetex Corporation (the "Company") have been prepared in accordance with generally accepted accounting principles in Canada but do not include all disclosures that are required for the Company's annual consolidated financial statements. 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. 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 indicated in the next paragraph, 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 2003 Annual Report. During 2004, the Company has retroactively restated its consolidated statements of operations to present freight and handling costs recovered from customers in sales revenue and cost of goods sold. Previously, the amounts incurred had been offset against sales revenue. This change in classification has had no impact on operating earnings and net income (loss). (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. PAGE 10 (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:

PAGE 11 (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 as a result of the conclusion of the AT Plastics acquisition during 2003. The repriced options were provided to former AT Plastics employees and none were to directors and officers of Acetex Corporation. The fair value compensation expense of the repriced options was not significant for the quarter ended March 31, 2004.

The following table summarizes information about stock options exercisable and outstanding at June 30, 2004:

PAGE 12 4. AT PLASTICS ACQUISITION: If the Acquisition of AT Plastics had been effective on January 1, 2003, the unaudited pro forma results of operations would have been as follows:

(1) Restructuring costs in AT Plastics prior to the Acquisition have been excluded. 5. RECONCILIATION OF NET EARNINGS (LOSS) FOR CANADIAN GAAP TO U.S. GAAP: Canadian and U.S. GAAP earnings are equivalent. PAGE 13 ACETEX CORPORATION MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (ALL REFERENCES IN U.S. FUNDS) 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 June 30, 2004, compared to the three months ended June 30, 2003, sales increased by $2.0 million to $76.7 million from $74.7 million. This increase resulted from an increase of 9% in sales volumes offset be a decrease in average product selling prices of 6% from 2003 to 2004. Industry newsletters indicate that pricing for the second quarter of 2004 measured in Euros compared to the first quarter of 2004 increased by 2.4% for VAM and rolled over for acetic acid. Contract prices for acetic acid and VAM in Europe have not yet been determined for the third quarter of 2004. For the six months ended June 30, 2004, compared to the six months ended June 30, 2003, net sales increased by 2.5% or $3.9 million to $159.4 million from $155.5 million. This increase resulted from an increase in average product selling prices of 3% from 2003 to 2004 which was offset by a decrease in sales volumes of 0.5%. Industry newsletters indicate that pricing for the first half of 2004 measured in Euros compared to the first half of 2003 decreased by 6% for acetic acid and increased by 3% for VAM. GROSS PROFIT Gross profit for the three months ended June 30, 2004, compared to the three months ended June 30, 2003, increased by 22% or $1.7 million to $9.0 million from $7.3 million. The increase in gross profit was primarily due to feedstock and other production costs per tonne which were 13% lower than the comparable quarter in 2003. The European contract price for methanol was Euros 260 in the second quarter of 2003 and decreased to Euros 225 in the fourth quarter of 2003 then decreased to Euros 190 in the first quarter of 2004. In the second quarter of 2004, the European contract price for methanol increased to Euros 200 and will increase to Euros 230 in the third quarter. The cost of natural gas is expected to remain steady as the pricing reflects recent stability in world oil prices. Gross profit for the six months ended June 30, 2004, decreased by 4.2% or $0.7 million to $16.7 million from $17.5 million in the comparable period of 2003. The decrease in gross profit was primarily due to higher the higher shipping costs offset by higher average selling prices and lower PAGE 14 feedstock and other production costs. The European contract price for methanol decreased by 20% from the first half of 2003 to the first half of 2004. OPERATING EARNINGS Operating earnings for the three months ended June 30, 2004, increased by $1.7 million to $6.1 million from $4.4 million for the comparable period in 2003. Operating income for the six months ended June 30, 2004, decreased by $1.1 million to $11.1 million from $12.3 million in the comparable period in 2003. The change in operating income was primarily due to the decrease in gross profit. SPECIALTY POLYMERS AND FILMS BUSINESS We acquired AT Plastics on August 5, 2003, and have consolidated its results of operations in our consolidated financial statements from that date. The analysis that follows has been prepared on a pro forma basis as if we had acquired the Business on January 1, 2003. NET SALES For the three months ended June 30, 2004, compared to the three months ended June 30, 2003, net sales increased by 15.2% or $6.9 million to $52.4 million from $45.4 million. Specialty volumes continued to improve with an increase of 4.4 million pounds or 10.8% versus last year. Continued strengthening of demand supported overall Polymers volume growth of 6.0 million pounds or 8.0% compared to the same period last year, on 4.0% higher average selling prices. Films volumes were up 34.1%, on 15.7% lower average selling prices. For the six months ended June 30, 2004, compared to the six months ended June 30, 2003, net sales increased by 13.1% or $11.3 million to $97.4 million from $86.1 million. Specialty volumes improved with an increase of 7.3 million pounds or 9.3% versus last year. Overall Polymers volumes expanded by 10.7 million pounds or 7.1% compared to the same period last year, on 6.6% higher average selling prices. Films volumes were up 25.5%, on 11.0% lower average selling prices. The seasonal nature of the Films business dictates that approximately two-thirds of our volume is shipped in the second and third quarters. GROSS PROFIT Gross profit for the three months ended June 30, 2004, compared to the three months ended June 30, 2003 decreased by 18.6% or $1.4 million to $6.2 million from $7.6 million. The seasonal drop in natural gas prices due to lower heating demand has not materialized in the quarter, directly resulting in higher ethylene costs for the Company. Gross profit for the six months ended June 30, 2004, compared to the six months ended June 30, 2003 decreased by 12.1% or $1.6 million to $11.4 million from $13.0 million. Raw material costs have increased compared to last year, principally driven by a 25% increase in ethylene prices and 20% increase in vinyl acetate prices. PAGE 15 OPERATING EARNINGS Higher selling prices in polymers and increased volumes in both businesses did not offset substantially higher raw material costs in the period. Operating earnings for the three months ended June 30, 2004 were $3.2 million versus $4.5 million or 29% lower than one year ago. For the six months ending June 30, 2004, operating earnings were $5.3 million down $1.8 million or 25% from the $7.1 million last year. Substantially improved polymers mix and higher pricing coupled with higher consolidated volumes in both businesses were more than offset by higher raw material and energy costs. ACETEX CORPORATION CONSOLIDATED LIQUIDITY AND CAPITAL RESOURCES Cash provided by operations (prior to changes in noncash working capital) for the three months ended June 30, 2004, was $7.9 million compared to $2.9 million for the three months ended June 30, 2003. For the six months ended June 30, 2004, cash provided by operations (prior to changes in noncash working capital) was $15.0 million compared to $10.5 million for the six months ended June 30, 2003. 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 were at a maintenance level during the three months ended June 30, 2004, and totaled $2.1 million. Annual maintenance level capital expenditures are expected to be $3.5 million for the Acetyls Business and $5.0 million to $6.0 million for the Specialty Polymers and Films Business. In addition, a maintenance turnaround expected to cost $4.0 million at the Pardies, France facility is scheduled for the fourth quarter of 2004. Future capital expenditures could vary substantially if the Company is required to undertake corrective action or incur other environmental costs in France. The Company may also pursue selective expansion opportunities, including the acquisition of companies with complementary product lines. Consolidating Balance Sheet June 30, 2004

PAGE 16

Acetex Corporation Consolidating Income Statement Period Ended June 30, 2004

PAGE 17 Acetex Corporation Consolidating Statement of Cash Flow Period Ended June 30, 2004

NOTES 1. The consolidating financial statements illustrate the assets, liabilities, equity, revenues and expenses for Acetex Corporation on a legal basis, as well as for its subsidiaries which have guaranteed its 10-7/8% Senior Unsecured Notes (the "Notes") and the operating nonguarantor subsidiaries. 2. Separate financial statements concerning the subsidiaries guaranteeing the Notes (the "Guarantor Subsidiaries") have not been included as management has determined that they are not material to investors. The Guarantor Subsidiaries are wholly-owned and the guarantees provided are full, unconditional and joint and several. All of the Company's operations are conducted by nonguarantor subsidiaries. There are no restrictions on dividend payments amongst the Company and its subsidiaries. PAGE 18 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. ACETEX CORPORATION (Registrant) DATE: August 6, 2004 By: "Lori Bondar" ----------------------- Lori Bondar Chief Financial Officer

ACETEX CORP 6-K