CE-2013.9.30-10Q


 
 
 
 
 
UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549
_______________________________________________________
Form 10-Q
þ
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended September 30, 2013
 
Or
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
(Commission File Number) 001-32410
CELANESE CORPORATION
(Exact Name of Registrant as Specified in its Charter)
Delaware
(State or Other Jurisdiction of
Incorporation or Organization)
98-0420726
(I.R.S. Employer
Identification No.)
 
 
222 W. Las Colinas Blvd., Suite 900N
Irving, TX
(Address of Principal Executive Offices)
75039-5421
(Zip Code)
(972) 443-4000
(Registrant’s telephone number, including area code)
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 þ  No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ  No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer þ
Accelerated filer o
Non-accelerated filer o (Do not check if a smaller reporting company)
Smaller reporting company o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o  No þ
The number of outstanding shares of the registrant’s Series A common stock, $0.0001 par value, as of October 15, 2013 was 157,672,305.
 
 
 
 
 




CELANESE CORPORATION AND SUBSIDIARIES

Form 10-Q
For the Quarterly Period Ended September 30, 2013

TABLE OF CONTENTS
 
 
Page
 
 
 
 
 
 
 
 
 
 
 
 
 


2





Item 1. Financial Statements 
CELANESE CORPORATION AND SUBSIDIARIES
UNAUDITED INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2013
 
2012
 
2013
 
2012
 
 
 
As Adjusted
 
 
 
As Adjusted
 
(In $ millions, except share and per share data)
Net sales
1,636

 
1,609

 
4,894

 
4,917

Cost of sales
(1,290
)
 
(1,281
)
 
(3,896
)
 
(3,980
)
Gross profit
346

 
328

 
998

 
937

Selling, general and administrative expenses
(97
)
 
(113
)
 
(316
)
 
(354
)
Amortization of intangible assets
(6
)
 
(12
)
 
(26
)
 
(38
)
Research and development expenses
(24
)
 
(23
)
 
(73
)
 
(73
)
Other (charges) gains, net
(4
)
 
2

 
(11
)
 
(1
)
Foreign exchange gain (loss), net
(2
)
 
(4
)
 
(5
)
 
(4
)
Gain (loss) on disposition of businesses and assets, net
(2
)
 
(2
)
 
(3
)
 
(2
)
Operating profit (loss)
211

 
176

 
564

 
465

Equity in net earnings (loss) of affiliates
41

 
50

 
150

 
163

Interest expense
(43
)
 
(44
)
 
(130
)
 
(134
)
Refinancing expense
(1
)
 

 
(1
)
 

Interest income

 

 
1

 
1

Dividend income - cost investments
22

 
1

 
69

 
85

Other income (expense), net
(2
)
 
3

 
1

 
4

Earnings (loss) from continuing operations before tax
228

 
186

 
654

 
584

Income tax (provision) benefit
(57
)
 
(57
)
 
(209
)
 
(41
)
Earnings (loss) from continuing operations
171

 
129

 
445

 
543

Earnings (loss) from operation of discontinued operations
1

 
(3
)
 
3

 
(3
)
Gain (loss) on disposition of discontinued operations

 

 

 

Income tax (provision) benefit from discontinued operations

 
1

 
(1
)
 
1

Earnings (loss) from discontinued operations
1

 
(2
)
 
2

 
(2
)
Net earnings (loss)
172

 
127

 
447

 
541

Net (earnings) loss attributable to noncontrolling interests

 

 

 

Net earnings (loss) attributable to Celanese Corporation
172

 
127

 
447

 
541

Amounts attributable to Celanese Corporation
 

 
 

 
 

 
 

Earnings (loss) from continuing operations
171

 
129

 
445

 
543

Earnings (loss) from discontinued operations
1

 
(2
)
 
2

 
(2
)
Net earnings (loss)
172

 
127

 
447

 
541

Earnings (loss) per common share - basic
 

 
 

 
 

 
 

Continuing operations
1.08

 
0.81

 
2.80

 
3.43

Discontinued operations
0.01

 
(0.01
)
 
0.01

 
(0.01
)
Net earnings (loss) - basic
1.09

 
0.80

 
2.81

 
3.42

Earnings (loss) per common share - diluted
 

 
 

 
 

 
 

Continuing operations
1.07

 
0.80

 
2.79

 
3.40

Discontinued operations
0.01

 
(0.01
)
 
0.01

 
(0.01
)
Net earnings (loss) - diluted
1.08

 
0.79

 
2.80

 
3.39

Weighted average shares - basic
158,501,075

 
159,158,280

 
159,282,314

 
157,970,535

Weighted average shares - diluted
159,095,531

 
160,129,376

 
159,846,593

 
159,678,638


See the accompanying notes to the unaudited interim consolidated financial statements.

3




CELANESE CORPORATION AND SUBSIDIARIES
UNAUDITED INTERIM CONSOLIDATED STATEMENTS OF
COMPREHENSIVE INCOME (LOSS)

 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2013
 
2012
 
2013
 
2012
 
 
 
As Adjusted
 
 
 
As Adjusted
 
(In $ millions)
Net earnings (loss)
172

 
127

 
447

 
541

Other comprehensive income (loss), net of tax
 

 
 

 
 

 
 

Unrealized gain (loss) on marketable securities
1

 

 
1

 

Foreign currency translation
42

 
28

 
37

 
4

Gain (loss) on interest rate swaps
1

 
(2
)
 
4

 
(1
)
Pension and postretirement benefits

 

 

 
(6
)
Total other comprehensive income (loss), net of tax
44

 
26

 
42

 
(3
)
Total comprehensive income (loss), net of tax
216

 
153

 
489

 
538

Comprehensive (income) loss attributable to noncontrolling interests

 

 

 

Comprehensive income (loss) attributable to Celanese Corporation
216

 
153

 
489

 
538


See the accompanying notes to the unaudited interim consolidated financial statements.


4




CELANESE CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED BALANCE SHEETS
 
As of
September 30,
2013
 
As of
December 31,
2012
 
 
 
As Adjusted
 
(In $ millions, except share data)
ASSETS
 
 
 
Current Assets
 

 
 

Cash and cash equivalents
1,100

 
959

Trade receivables - third party and affiliates (net of allowance for doubtful accounts - 2013: $11; 2012: $9)
949

 
827

Non-trade receivables, net
293

 
209

Inventories
753

 
711

Deferred income taxes
50

 
49

Marketable securities, at fair value
44

 
53

Other assets
39

 
31

Total current assets
3,228

 
2,839

Investments in affiliates
857

 
800

Property, plant and equipment (net of accumulated depreciation - 2013: $1,665; 2012: $1,506)
3,391

 
3,350

Deferred income taxes
604

 
606

Other assets
498

 
463

Goodwill
787

 
777

Intangible assets, net
147

 
165

Total assets
9,512

 
9,000

LIABILITIES AND EQUITY
 
 
 
Current Liabilities
 

 
 

Short-term borrowings and current installments of long-term debt - third party and affiliates
224

 
168

Trade payables - third party and affiliates
739

 
649

Other liabilities
457

 
475

Deferred income taxes
25

 
25

Income taxes payable
152

 
38

Total current liabilities
1,597

 
1,355

Long-term debt
2,870

 
2,930

Deferred income taxes
61

 
50

Uncertain tax positions
203

 
181

Benefit obligations
1,546

 
1,602

Other liabilities
1,151

 
1,152

Commitments and Contingencies


 


Stockholders’ Equity
 

 
 

Preferred stock, $0.01 par value, 100,000,000 shares authorized (2013 and 2012: 0 issued and outstanding)

 

Series A common stock, $0.0001 par value, 400,000,000 shares authorized (2013: 183,781,497 issued and 157,692,320 outstanding; 2012: 183,629,237 issued and 159,642,401 outstanding)

 

Series B common stock, $0.0001 par value, 100,000,000 shares authorized (2013 and 2012: 0 issued and outstanding)

 

Treasury stock, at cost (2013: 26,089,177 shares; 2012: 23,986,836 shares)
(1,007
)
 
(905
)
Additional paid-in capital
753

 
731

Retained earnings
2,385

 
1,993

Accumulated other comprehensive income (loss), net
(47
)
 
(89
)
Total Celanese Corporation stockholders’ equity
2,084

 
1,730

Noncontrolling interests

 

Total equity
2,084

 
1,730

Total liabilities and equity
9,512

 
9,000


See the accompanying notes to the unaudited interim consolidated financial statements.

5




CELANESE CORPORATION AND SUBSIDIARIES
UNAUDITED INTERIM CONSOLIDATED STATEMENT OF EQUITY
 
Nine Months Ended
September 30, 2013
 
Shares
 
Amount
 
 
 
As Adjusted
 
(In $ millions, except share data)
Series A Common Stock
 

 
 

Balance as of the beginning of the period
159,642,401

 

Stock option exercises
128,791

 

Purchases of treasury stock
(2,102,341
)
 

Stock awards
23,469

 

Balance as of the end of the period
157,692,320

 

Treasury Stock
 

 
 

Balance as of the beginning of the period
23,986,836

 
(905
)
Purchases of treasury stock, including related fees
2,102,341

 
(102
)
Balance as of the end of the period
26,089,177

 
(1,007
)
Additional Paid-In Capital
 

 
 

Balance as of the beginning of the period
 

 
731

Stock-based compensation, net of tax
 

 
19

Stock option exercises, net of tax
 

 
3

Balance as of the end of the period
 

 
753

Retained Earnings
 

 
 

Balance as of the beginning of the period
 

 
1,993

Net earnings (loss) attributable to Celanese Corporation
 

 
447

Series A common stock dividends
 

 
(55
)
Balance as of the end of the period
 

 
2,385

Accumulated Other Comprehensive Income (Loss), Net
 

 
 

Balance as of the beginning of the period
 

 
(89
)
Other comprehensive income (loss), net of tax
 

 
42

Balance as of the end of the period
 

 
(47
)
Total Celanese Corporation stockholders’ equity
 

 
2,084

Noncontrolling Interests
 

 
 

Balance as of the beginning of the period
 

 

Net earnings (loss) attributable to noncontrolling interests
 

 

Balance as of the end of the period
 

 

Total equity
 

 
2,084


See the accompanying notes to the unaudited interim consolidated financial statements.



6




CELANESE CORPORATION AND SUBSIDIARIES
UNAUDITED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
 
Nine Months Ended
September 30,
 
2013
 
2012
 
 
 
As Adjusted
 
(In $ millions)
Operating Activities
 

 
 

Net earnings (loss)
447

 
541

Adjustments to reconcile net earnings (loss) to net cash provided by operating activities
 

 
 

Other charges (gains), net of amounts used
(8
)
 
(13
)
Depreciation, amortization and accretion
238

 
236

Pension and postretirement benefit expense
(16
)
 
7

Pension and postretirement contributions
(49
)
 
(151
)
Deferred income taxes, net
7

 
(87
)
(Gain) loss on disposition of businesses and assets, net
2

 
2

Refinancing expense
1

 

Other, net
(23
)
 
85

Operating cash provided by (used in) discontinued operations
(5
)
 

Changes in operating assets and liabilities
 

 
 

Trade receivables - third party and affiliates, net
(113
)
 
(62
)
Inventories
(34
)
 
1

Other assets
(82
)
 
15

Trade payables - third party and affiliates
100

 
58

Other liabilities
143

 
29

Net cash provided by (used in) operating activities
608

 
661

Investing Activities
 

 
 

Capital expenditures on property, plant and equipment
(259
)
 
(270
)
Acquisitions, net of cash acquired

 
(23
)
Proceeds from sale of businesses and assets, net
13

 
1

Capital expenditures related to Kelsterbach plant relocation
(6
)
 
(43
)
Other, net
(38
)
 
(62
)
Net cash provided by (used in) investing activities
(290
)
 
(397
)
Financing Activities
 

 
 

Short-term borrowings (repayments), net
(12
)
 
(7
)
Proceeds from short-term debt
154

 
50

Repayments of short-term debt
(51
)
 
(50
)
Proceeds from long-term debt
74

 

Repayments of long-term debt
(192
)
 
(32
)
Refinancing costs
(2
)
 

Purchases of treasury stock, including related fees
(102
)
 
(37
)
Stock option exercises
3

 
58

Series A common stock dividends
(55
)
 
(31
)
Other, net

 
28

Net cash provided by (used in) financing activities
(183
)
 
(21
)
Exchange rate effects on cash and cash equivalents
6

 
3

Net increase (decrease) in cash and cash equivalents
141

 
246

Cash and cash equivalents as of beginning of period
959

 
682

Cash and cash equivalents as of end of period
1,100

 
928


See the accompanying notes to the unaudited interim consolidated financial statements.


7




CELANESE CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
1. Description of the Company and Basis of Presentation
Description of the Company
Celanese Corporation and its subsidiaries (collectively, the "Company") is a global technology and specialty materials company. The Company’s business involves processing chemical raw materials, such as methanol, carbon monoxide and ethylene, and natural products, including wood pulp, into value-added chemicals, thermoplastic polymers and other chemical-based products.
In conjunction with the Company's focus on the Celanese brand, the names of the Company's reporting units have changed to engineered materials (formerly Advanced Engineered Materials), cellulose derivatives (formerly Acetate Products), food ingredients (formerly Nutrinova), emulsion polymers (formerly Emulsions), EVA polymers (formerly EVA Performance Polymers) and intermediate chemistry (formerly Acetyl Intermediates). There has been no change to the names or composition of the Company's business segments.
Definitions
In this Quarterly Report on Form 10-Q ("Quarterly Report"), the term "Celanese" refers to Celanese Corporation, a Delaware corporation, and not its subsidiaries. The term "Celanese US" refers to the Company’s subsidiary, Celanese US Holdings LLC, a Delaware limited liability company, and not its subsidiaries.
Basis of Presentation
The unaudited interim consolidated financial statements for the three and nine months ended September 30, 2013 and 2012 contained in this Quarterly Report were prepared in accordance with accounting principles generally accepted in the United States of America ("US GAAP") for all periods presented. The unaudited interim consolidated financial statements and other financial information included in this Quarterly Report, unless otherwise specified, have been presented to separately show the effects of discontinued operations.
In the opinion of management, the accompanying unaudited consolidated balance sheets and related unaudited interim consolidated statements of operations, comprehensive income (loss), cash flows and equity include all adjustments, consisting only of normal recurring items necessary for their fair presentation in conformity with US GAAP. Certain information and footnote disclosures normally included in financial statements prepared in accordance with US GAAP have been condensed or omitted in accordance with rules and regulations of the Securities and Exchange Commission ("SEC"). These unaudited interim consolidated financial statements should be read in conjunction with the Company’s consolidated financial statements as of and for the year ended December 31, 2012, originally filed on February 8, 2013 with the SEC as part of the Company's Annual Report on Form 10-K and updated to incorporate the effect of changes in the Company's pension accounting policy, filed on April 26, 2013 with the SEC as Exhibit 99.3 to a Current Report on Form 8-K.
Operating results for the three and nine months ended September 30, 2013 are not necessarily indicative of the results to be expected for the entire year.
In the ordinary course of business, the Company enters into contracts and agreements relative to a number of topics, including acquisitions, dispositions, joint ventures, supply agreements, product sales and other arrangements. The Company endeavors to describe those contracts or agreements that are material to its business, results of operations or financial position. The Company may also describe some arrangements that are not material but in which the Company believes investors may have an interest or which may have been included in a Form 8-K filing. Investors should not assume the Company has described all contracts and agreements relative to the Company’s business in this Quarterly Report.
For those consolidated subsidiaries in which the Company's ownership is less than 100%, the outside stockholders' interests are shown as noncontrolling interests.
The Company has reclassified certain prior period amounts to conform to the current period’s presentation.

8




Estimates and Assumptions
The preparation of unaudited interim consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the unaudited interim consolidated financial statements and the reported amounts of revenues, expenses and allocated charges during the reporting period. Significant estimates pertain to impairments of goodwill, intangible assets and other long-lived assets, purchase price allocations, restructuring costs and other (charges) gains, net, income taxes, pension and other postretirement benefits, asset retirement obligations, environmental liabilities and loss contingencies, among others. Actual results could differ from those estimates.
Change in accounting policy regarding pension and other postretirement benefits
Effective January 1, 2013, the Company elected to change its accounting policy for recognizing actuarial gains and losses and changes in the fair value of plan assets for its defined benefit pension plans and other postretirement benefit plans. Previously, the Company recognized the actuarial gains and losses as a component of Accumulated other comprehensive income (loss), net within the consolidated balance sheets on an annual basis and amortized the gains and losses into operating results over the average remaining service period to retirement date for active plan participants or, for retired participants, the average remaining life expectancy. For defined benefit pension plans, the unrecognized gains and losses were amortized when the net gains and losses exceeded 10% of the greater of the market-related value of plan assets or the projected benefit obligation at the beginning of the year. For other postretirement benefits, amortization occurred when the net gains and losses exceeded 10% of the accumulated postretirement benefit obligation at the beginning of the year.
Previously, differences between the actual rate of return on plan assets and the long-term expected rate of return on plan assets were not generally recognized in net periodic benefit cost in the year that the difference occurred. These differences were deferred and amortized into net periodic benefit cost over the average remaining future service period of employees. The asset gains and losses subject to amortization and the long-term expected return on plan assets were previously calculated using a five-year smoothing of asset gains and losses referred to as the market-related value to stabilize variability in the plan asset values.
The Company now applies the long-term expected rate of return to the fair value of plan assets and immediately recognizes the change in fair value of plan assets and net actuarial gains and losses annually in the fourth quarter of each fiscal year and whenever a plan is required to be remeasured. Events requiring a plan remeasurement will be recognized in the quarter in which such remeasurement event occurs. The remaining components of the Company's net periodic benefit cost are recorded on a quarterly basis. While the Company's historical policy of recognizing the change in fair value of plan assets and net actuarial gains and losses is considered acceptable under US GAAP, the Company believes the new policy is preferable as it eliminates the delay in recognizing gains and losses within operating results. This change improves transparency within the Company's operating results by immediately recognizing the effects of economic and interest rate trends on plan investments and assumptions in the year these gains and losses are actually incurred. The policy changes have no impact on future pension and postretirement benefit plan funding or pension and postretirement benefits paid to participants. Financial information for all periods presented has been retrospectively adjusted.
In connection with the changes in accounting policy for pension and other postretirement benefits and in an attempt to properly match the actual operational expenses each business segment is incurring, the Company changed its allocation of net periodic benefit cost. Previously, the Company allocated all components of net periodic benefit cost to each business segment on a ratable basis. The Company now allocates only the service cost and amortization of prior service cost components of its pension and postretirement plans to its business segments. All other components of net periodic benefit cost are recorded to Other Activities. The components of net periodic benefit cost that are no longer allocated to each business segment include interest cost, expected return on assets and net actuarial gains and losses as these components are considered financing activities managed at the corporate level. The Company believes the revised expense allocation more appropriately matches the cost incurred for active employees to the respective business segment. Business segment information for prior periods has been retrospectively adjusted (Note 18).

9




The retrospective effect of the change in accounting policy for pension and other postretirement benefits to the consolidated statement of operations is as follows:
 
Three Months Ended September 30, 2012
 
As Previously
Reported
 
Effect of
Change
 
As Adjusted
 
(In $ millions, except per share data)
Cost of sales
(1,285
)
 
4

 
(1,281
)
Gross profit
324

 
4

 
328

Selling, general and administrative expenses
(121
)
 
8

 
(113
)
Research and development expenses
(24
)
 
1

 
(23
)
Operating profit (loss)
163

 
13

 
176

Earnings (loss) from continuing operations before tax
173

 
13

 
186

Income tax (provision) benefit
(54
)
 
(3
)
 
(57
)
Earnings (loss) from continuing operations
119

 
10

 
129

Net earnings (loss)
117

 
10

 
127

Net earnings (loss) attributable to Celanese Corporation
117

 
10

 
127

Earnings (loss) per common share - basic
 
 
 
 
 
Continuing operations
0.75

 
0.06

 
0.81

Discontinued operations
(0.01
)
 

 
(0.01
)
Net earnings (loss) - basic
0.74

 
0.06

 
0.80

Earnings (loss) per common share - diluted
 
 
 
 
 
Continuing operations
0.74

 
0.06

 
0.80

Discontinued operations
(0.01
)
 

 
(0.01
)
Net earnings (loss) - diluted
0.73

 
0.06

 
0.79

 
Nine Months Ended September 30, 2012
 
As Previously
Reported
 
Effect of
Change
 
As Adjusted
 
(In $ millions, except per share data)
Cost of sales
(3,992
)
 
12

 
(3,980
)
Gross profit
925

 
12

 
937

Selling, general and administrative expenses
(379
)
 
25

 
(354
)
Research and development expenses
(76
)
 
3

 
(73
)
Operating profit (loss)
425

 
40

 
465

Earnings (loss) from continuing operations before tax
544

 
40

 
584

Income tax (provision) benefit
(32
)
 
(9
)
 
(41
)
Earnings (loss) from continuing operations
512

 
31

 
543

Net earnings (loss)
510

 
31

 
541

Net earnings (loss) attributable to Celanese Corporation
510

 
31

 
541

Earnings (loss) per common share - basic
 
 
 
 
 
Continuing operations
3.24

 
0.19

 
3.43

Discontinued operations
(0.01
)
 

 
(0.01
)
Net earnings (loss) - basic
3.23

 
0.19

 
3.42

Earnings (loss) per common share - diluted
 
 
 
 
 
Continuing operations
3.21

 
0.19

 
3.40

Discontinued operations
(0.01
)
 

 
(0.01
)
Net earnings (loss) - diluted
3.20

 
0.19

 
3.39


10




The retrospective effect of the change in accounting policy for pension and other postretirement benefits to the consolidated statement of comprehensive income (loss) is as follows:
 
Three Months Ended September 30, 2012
 
As Previously
Reported
 
Effect of
Change
 
As Adjusted
 
(In $ millions)
Net earnings (loss)
117

 
10

 
127

Pension and postretirement benefits
10

 
(10
)
 

Total other comprehensive income (loss), net of tax
36

 
(10
)
 
26

Total comprehensive income (loss), net of tax
153

 

 
153

Comprehensive income (loss) attributable to Celanese Corporation
153

 

 
153

 
Nine Months Ended September 30, 2012
 
As Previously
Reported
 
Effect of
Change
 
As Adjusted
 
(In $ millions)
Net earnings (loss)
510

 
31

 
541

Pension and postretirement benefits
25

 
(31
)
 
(6
)
Total other comprehensive income (loss), net of tax
28

 
(31
)
 
(3
)
Total comprehensive income (loss), net of tax
538

 

 
538

Comprehensive income (loss) attributable to Celanese Corporation
538

 

 
538

The retrospective effect of the change in accounting policy for pension and other postretirement benefits to the consolidated balance sheet is as follows:
 
As of December 31, 2012
 
As Previously
Reported
 
Effect of
Change
 
As Adjusted
 
(In $ millions)
Retained earnings
2,986

 
(993
)
 
1,993

Accumulated other comprehensive income (loss), net
(1,082
)
 
993

 
(89
)
The cumulative effect of the change in accounting policy for pension and other postretirement benefits on Retained earnings as of December 31, 2011 was a decrease of $760 million, with an equivalent increase to Accumulated other comprehensive income.
The retrospective effect of the change in accounting policy for pension and other postretirement benefits to operating activities in the consolidated statement of cash flows is as follows:
 
Nine Months Ended September 30, 2012
 
As Previously
Reported
 
Effect of
Change
 
As Adjusted
 
(In $ millions)
Net earnings (loss)
510

 
31

 
541

Pension and postretirement benefit expense

 
7

 
7

Pension and postretirement contributions

 
(151
)
 
(151
)
Deferred income taxes, net
(96
)
 
9

 
(87
)
Other liabilities
(75
)
 
104

 
29


11




The retrospective effect of the change in accounting policy for pension and other postretirement benefits to the business segment financial information (Note 18) is as follows:
 
Three Months Ended September 30, 2012
 
As Previously
Reported
 
Effect of
Change
 
As Adjusted
 
(In $ millions)
Operating Profit (Loss)
 
 
 
 
 
Advanced Engineered Materials
43

 
1

 
44

Consumer Specialties
70

 
2

 
72

Industrial Specialties
23

 
2

 
25

Acetyl Intermediates
62

 
1

 
63

Other Activities
(35
)
 
7

 
(28
)
Total
163

 
13

 
176

 
Nine Months Ended September 30, 2012
 
As Previously
Reported
 
Effect of
Change
 
As Adjusted
 
(In $ millions)
Operating Profit (Loss)
 
 
 
 
 
Advanced Engineered Materials
85

 
6

 
91

Consumer Specialties
184

 
5

 
189

Industrial Specialties
76

 
4

 
80

Acetyl Intermediates
199

 
4

 
203

Other Activities
(119
)
 
21

 
(98
)
Total
425

 
40

 
465

2. Recent Accounting Pronouncements
In July 2013, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2013-11, Presentation of Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists, an amendment to FASB Accounting Standards Codification ("ASC") Topic 740, Income Taxes ("FASB ASC Topic 740"). This update clarifies that an unrecognized tax benefit, or a portion of an unrecognized tax benefit, should be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward if such settlement is required or expected in the event the uncertain tax position is disallowed. In situations where a net operating loss carryforward, a similar tax loss, or a tax credit carryforward is not available at the reporting date under the tax law of the applicable jurisdiction or the tax law of the jurisdiction does not require, and the entity does not intend to use, the deferred tax asset for such purpose, the unrecognized tax benefit should be presented in the financial statements as a liability and should not be combined with deferred tax assets. This ASU is effective prospectively for fiscal years, and interim periods within those years, beginning after December 15, 2013. The Company does not expect the impact of adopting this ASU to be material to the Company's financial position or cash flows.
In July 2013, the FASB issued ASU 2013-10, Inclusion of the Fed Funds Effective Swap Rate (or Overnight Index Swap Rate) as a Benchmark Interest Rate for Hedge Accounting Purposes, an amendment to FASB ASC Topic 815, Derivatives and Hedging ("FASB ASC Topic 815"). The update permits the use of the Fed Funds Effective Swap Rate to be used as a US benchmark interest rate for hedge accounting purposes under FASB ASC Topic 815, in addition to the interest rates on direct Treasury obligations of the US government ("UST") and the London Interbank Offered Rate ("LIBOR"). The update also removes the restriction on using different benchmark rates for similar hedges. This ASU is effective prospectively for qualifying new or redesignated hedging relationships entered into on or after July 17, 2013. The Company does not expect the impact of adopting this ASU to be material to the Company's financial position, results of operations or cash flows.
In March 2013, the FASB issued ASU 2013-05, Parent's Accounting for the Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity, an amendment to FASB ASC Topic 830, Foreign Currency Matters ("FASB ASC Topic 830"). The update clarifies that complete or substantially complete liquidation of a foreign entity is required to release the cumulative translation adjustment ("CTA") for

12




transactions occurring within a foreign entity. However, transactions impacting investments in a foreign entity may result in a full or partial release of CTA even though complete or substantially complete liquidation of the foreign entity has not occurred. Furthermore, for transactions involving step acquisitions, the CTA associated with the previous equity-method investment will be fully released when control is obtained and consolidation occurs. This ASU is effective for fiscal years beginning after December 15, 2013. The Company will apply the guidance prospectively to derecognition events occurring after the effective date.
In February 2013, the FASB issued ASU 2013-04, Obligations Resulting from Joint and Several Liability Arrangements for Which the Total Amount of the Obligation is Fixed at the Reporting Date, an amendment to FASB ASC Topic 405, Liabilities ("FASB ASC Topic 405"). The update requires an entity to measure obligations resulting from joint and several liability arrangements for which the total amount of the obligation is fixed as of the reporting date as the sum of the obligation the entity agreed to pay among its co-obligors and any additional amount the entity expects to pay on behalf of its co-obligors. This ASU is effective for annual and interim periods beginning after December 15, 2013 and is required to be applied retrospectively to all prior periods presented for those obligations that existed upon adoption of the ASU. The Company does not expect the impact of adopting this ASU to be material to the Company's financial position, results of operations or cash flows.
3. Acquisitions, Dispositions, Ventures and Plant Closures
Acquisitions
In January 2012, the Company completed the acquisition of certain assets from Ashland Inc., including two product lines, Vinac® and Flexbond®, to support the strategic growth of the Company's emulsion polymers business. The acquired operations are included in the Industrial Specialties segment. Pro forma financial information since the acquisition date has not been provided as the acquisition did not have a material impact on the Company’s financial information.
The Company allocated the purchase price of the acquisitions to identifiable intangible assets acquired based on their estimated fair values. The excess of purchase price over the aggregate fair values was recorded as goodwill. Intangible assets were valued using the relief from royalty and discounted cash flow methodologies which are considered Level 3 measurements under FASB ASC Topic 820, Fair Value Measurement ("FASB ASC Topic 820"). The relief from royalty method estimates the Company’s theoretical royalty savings from ownership of the intangible asset. Key assumptions used in this model include discount rates, royalty rates, growth rates, sales projections and terminal value rates, all of which require significant management judgment and, therefore, are susceptible to change. The key assumptions used in the discounted cash flow valuation model include discount rates, growth rates, cash flow projections and terminal value rates. Discount rates, growth rates and cash flow projections are the most sensitive and susceptible to change as they require significant management judgment. The Company, with the assistance of third-party valuation consultants, calculated the fair value of the intangible assets acquired to allocate the purchase price at the acquisition date.
Ventures
On May 15, 2013, the Company and Mitsui & Co., Ltd., of Tokyo, Japan, announced they had signed an agreement to establish a joint venture for the production of methanol at the Company's integrated chemical plant in Clear Lake, Texas. The planned methanol unit will utilize natural gas in the US Gulf Coast region as a feedstock and will benefit from the existing infrastructure at the Company's Clear Lake facility. The planned methanol facility will have an annual capacity of 1.3 million tons and is expected to begin operations in mid-2015.

13




4. Marketable Securities, at Fair Value
The Company’s nonqualified trusts hold available-for-sale securities for funding requirements.
The amortized cost, gross unrealized gain, gross unrealized loss and fair values for available-for-sale securities by major security type are as follows:
 
As of
September 30,
2013
 
As of
December 31,
2012
 
(In $ millions)
Mutual Funds
 
 
 
Amortized cost
44

 
53

Gross unrealized gain

 

Gross unrealized loss

 

Fair value
44

 
53

See Note 16, Fair Value Measurements, for additional information regarding the fair value of the Company's marketable securities.
5. Inventories
 
As of
September 30,
2013
 
As of
December 31,
2012
 
(In $ millions)
Finished goods
560

 
514

Work-in-process
51

 
42

Raw materials and supplies
142

 
155

Total
753

 
711

6. Goodwill and Intangible Assets, Net
Goodwill
 
Advanced
Engineered
Materials
 
Consumer
Specialties
 
Industrial
Specialties
 
Acetyl
Intermediates
 
Total
 
(In $ millions)
As of December 31, 2012
 

 
 

 
 

 
 

 
 

Goodwill
297

 
249

 
42

 
189

 
777

Accumulated impairment losses

 

 

 

 

Net book value
297

 
249

 
42

 
189

 
777

Exchange rate changes
3

 
2

 

 
5

 
10

As of September 30, 2013
 
 
 
 
 
 
 
 
 
Goodwill
300

 
251

 
42

 
194

 
787

Accumulated impairment losses

 

 

 

 

Net book value
300

 
251

 
42

 
194

 
787

The Company assesses the recoverability of the carrying value of its reporting unit goodwill either qualitatively or quantitatively annually during the third quarter of its fiscal year using June 30 balances or whenever events or changes in circumstances indicate that the carrying amount of the asset may not be fully recoverable. In connection with the Company's annual goodwill impairment assessment, the Company did not record an impairment loss to goodwill during the nine months ended September 30, 2013 as the estimated fair value for each of the Company's reporting units exceeded the carrying value of the underlying assets by a substantial margin.

14




Intangible Assets, Net
Finite-lived intangibles are as follows:
 
Licenses
 
Customer-
Related
Intangible
Assets
 
Developed
Technology
 
Covenants
Not to
Compete
and Other
 
Total
 
 
(In $ millions)
 
Gross Asset Value
 

 
 

 
 

 
 

 
 

 
As of December 31, 2012
32

 
525

 
30

 
32

 
619

 
Acquisitions

 

 

 
7

 
7

(1) 
Exchange rate changes
1

 
10

 

 

 
11

 
As of September 30, 2013
33

 
535

 
30

 
39

 
637

 
Accumulated Amortization
 
 
 
 
 
 
 
 
 
 
As of December 31, 2012
(16
)
 
(480
)
 
(17
)
 
(23
)
 
(536
)
 
Amortization
(3
)
 
(19
)
 
(2
)
 
(2
)
 
(26
)
 
Exchange rate changes

 
(10
)
 

 

 
(10
)
 
As of September 30, 2013
(19
)
 
(509
)
 
(19
)
 
(25
)
 
(572
)
 
Net book value
14

 
26

 
11

 
14

 
65

 
______________________________
(1)  
Weighted average amortization period is 29 years.
Indefinite-lived intangibles are as follows:
 
Trademarks
and Trade Names
 
(In $ millions)
As of December 31, 2012
82

Acquisitions

Accumulated impairment losses
(1
)
Exchange rate changes
1

As of September 30, 2013
82

The Company assesses the recoverability of the carrying value of its indefinite-lived intangible assets annually during the third quarter of its fiscal year using June 30 balances or whenever events or changes in circumstances indicate that the carrying amount of the assets may not be fully recoverable.
Management assesses indefinite-lived intangible assets for impairment either qualitatively or by utilizing the relief from royalty method under the income approach to determine the estimated fair value for each indefinite-lived intangible asset. The relief from royalty method estimates the Company’s theoretical royalty savings from ownership of the intangible asset. Key assumptions used in this model include discount rates, royalty rates, growth rates, sales projections and terminal value rates. Discount rates, royalty rates, growth rates and sales projections are the assumptions most sensitive and susceptible to change as they require significant management judgment. Discount rates used are similar to the rates estimated by the weighted average cost of capital considering any differences in Company-specific risk factors. Royalty rates are established by management and are periodically substantiated by third-party valuation consultants. Operational management, considering industry and Company-specific historical and projected data, develops growth rates and sales projections associated with each indefinite-lived intangible asset. Terminal value rate determination follows common methodology of capturing the present value of perpetual sales estimates beyond the last projected period assuming a constant discount rate and low long-term growth rates.
If the calculated fair value as described above is less than the current carrying value, impairment of the indefinite-lived intangible asset may exist. In connection with the Company’s annual indefinite-lived intangible assets impairment assessment, the Company recorded an impairment loss of $1 million in Other charges (gains), net (Note 13) to write-off the total net book value of a trademark included in the Industrial Specialties segment. Other than this trademark, the estimated fair value for each of the Company's other indefinite-lived intangible assets exceeded the carrying value of the underlying asset by a substantial margin.

15




Specific assumptions, including discount rates, royalty rates, sales projections and terminal value rates, were updated at the date of the assessment to consider current industry and Company-specific risk factors from the perspective of a market participant. The current business environment is subject to evolving market conditions and requires significant management judgment to interpret the potential impact to the Company’s assumptions. To the extent market changes result in adjusted assumptions, impairment losses may occur in future periods.
The Company's trademarks and trade names have an indefinite life. For the nine months ended September 30, 2013, the Company did not renew or extend any intangible assets.
Estimated amortization expense for the succeeding five fiscal years is as follows:
 
(In $ millions)
2014
20

2015
11

2016
8

2017
7

2018
4

7. Current Other Liabilities
 
As of
September 30,
2013
 
As of
December 31,
2012
 
(In $ millions)
Salaries and benefits
97

 
74

Environmental (Note 11)
24

 
21

Restructuring (Note 13)
19

 
30

Insurance
13

 
15

Asset retirement obligations
23

 
38

Derivatives (Note 15)
15

 
23

Current portion of benefit obligations
47

 
47

Interest
32

 
23

Sales and use tax/foreign withholding tax payable
17

 
17

Uncertain tax positions
63

 
65

Customer rebates
37

 
44

Other
70

 
78

Total
457

 
475


16




8. Noncurrent Other Liabilities
 
As of
September 30,
2013
 
As of
December 31,
2012
 
(In $ millions)
Environmental (Note 11)
67

 
78

Insurance
53

 
58

Deferred revenue
30

 
36

Deferred proceeds(1)
930

 
909

Asset retirement obligations
22

 
26

Derivatives (Note 15)
3

 
8

Income taxes payable
2

 
2

Other
44

 
35

Total
1,151

 
1,152

______________________________
(1) 
Primarily relates to proceeds received from the Frankfurt, Germany Airport as part of a settlement for the Company to cease operations and sell its Kelsterbach, Germany manufacturing site, included in the Advanced Engineered Materials segment. Such proceeds will be deferred until the land and buildings transfer to the Frankfurt, Germany Airport (Note 20).
9. Debt
 
As of
September 30,
2013
 
As of
December 31,
2012
 
(In $ millions)
Short-Term Borrowings and Current Installments of Long-Term Debt - Third Party and Affiliates
 
 
 
Current installments of long-term debt
23

 
60

Short-term borrowings, including amounts due to affiliates
101

 
108

Accounts receivable securitization facility
100

 

Total
224

 
168

The Company's weighted average interest rate on short-term borrowings, including amounts due to affiliates, was 4.4% as of September 30, 2013 compared to 4.0% as of December 31, 2012. The weighted average interest rate on the accounts receivable securitization facility was 0.9% as of September 30, 2013.

17




 
As of
September 30,
2013
 
As of
December 31,
2012
 
(In $ millions)
Long-Term Debt
 
 
 
Senior credit facilities - Term C loan due 2016

 
977

Senior credit facilities - Term C-2 loan due 2016
976

 

Senior unsecured notes due 2018, interest rate of 6.625%
600

 
600

Senior unsecured notes due 2021, interest rate of 5.875%
400

 
400

Senior unsecured notes due 2022, interest rate of 4.625%
500

 
500

Credit-linked revolving facility due 2014, interest rate of 1.7%

 
50

Pollution control and industrial revenue bonds due at various dates through 2030, interest rates ranging from 5.7% to 6.7%
169

 
182

Obligations under capital leases due at various dates through 2054
248

 
244

Other bank obligations

 
37

Subtotal
2,893

 
2,990

Current installments of long-term debt
(23
)
 
(60
)
Total
2,870

 
2,930

Senior Notes
In November 2012, Celanese US completed an offering of $500 million in aggregate principal amount of 4.625% senior unsecured notes due 2022 (the "4.625% Notes") in a public offering registered under the Securities Act of 1933, as amended (the "Securities Act"). The 4.625% Notes are guaranteed on a senior unsecured basis by Celanese and each of the domestic subsidiaries of Celanese US that guarantee its obligations under its senior secured credit facilities (the "Subsidiary Guarantors").
The 4.625% Notes were issued under an indenture, dated May 6, 2011, as amended by a second supplemental indenture, dated November 13, 2012 (the "Second Supplemental Indenture"), among Celanese US, Celanese, the Subsidiary Guarantors and Wells Fargo Bank, National Association, as trustee. Celanese US will pay interest on the 4.625% Notes on March 15 and September 15 of each year which commenced on March 15, 2013. Prior to November 15, 2022, Celanese US may redeem some or all of the 4.625% Notes at a redemption price of 100% of the principal amount, plus a "make-whole" premium as specified in the Second Supplemental Indenture, plus accrued and unpaid interest, if any, to the redemption date. The 4.625% Notes are senior unsecured obligations of Celanese US and rank equally in right of payment with all other unsubordinated indebtedness of Celanese US.
In May 2011, Celanese US completed an offering of $400 million in aggregate principal amount of 5.875% senior unsecured notes due 2021 (the "5.875% Notes") in a public offering registered under the Securities Act. The 5.875% Notes are guaranteed on a senior unsecured basis by Celanese and the Subsidiary Guarantors.
The 5.875% Notes were issued under an indenture and a first supplemental indenture, each dated May 6, 2011 (the "First Supplemental Indenture"), among Celanese US, Celanese, the Subsidiary Guarantors and Wells Fargo Bank, National Association, as trustee. Celanese US pays interest on the 5.875% Notes on June 15 and December 15 of each year which commenced on December 15, 2011. Prior to June 15, 2021, Celanese US may redeem some or all of the 5.875% Notes at a redemption price of 100% of the principal amount, plus a "make-whole" premium as specified in the First Supplemental Indenture, plus accrued and unpaid interest, if any, to the redemption date. The 5.875% Notes are senior unsecured obligations of Celanese US and rank equally in right of payment with all other unsubordinated indebtedness of Celanese US.
In September 2010, Celanese US completed the private placement of $600 million in aggregate principal amount of 6.625% senior unsecured notes due 2018 (the "6.625% Notes" and, together with the 4.625% Notes and the 5.875% Notes, collectively the "Senior Notes") under an indenture dated September 24, 2010 (the "Indenture") among Celanese US, Celanese, the Subsidiary Guarantors and Wells Fargo Bank, National Association, as trustee. In April 2011, Celanese US registered the 6.625% Notes under the Securities Act. Celanese US pays interest on the 6.625% Notes on April 15 and October 15 of each year which commenced on April 15, 2011. The 6.625% Notes are redeemable, in whole or in part, at any time on or after October 15, 2014 at the redemption prices specified in the Indenture. Prior to October 15, 2014, Celanese US may redeem some or all of the 6.625% Notes at a redemption price of 100% of the principal amount, plus a "make-whole" premium as

18




specified in the Indenture, plus accrued and unpaid interest, if any, to the redemption date. The 6.625% Notes are senior unsecured obligations of Celanese US and rank equally in right of payment with all other unsubordinated indebtedness of Celanese US. The 6.625% Notes are guaranteed on a senior unsecured basis by Celanese and the Subsidiary Guarantors.
The Indenture, the First Supplemental Indenture and the Second Supplemental Indenture contain covenants, including, but not limited to, restrictions on the Company’s ability to incur indebtedness; grant liens on assets; merge, consolidate, or sell assets; pay dividends or make other restricted payments; engage in transactions with affiliates; or engage in other businesses.
Senior Credit Facilities
In September 2010, Celanese US, Celanese, and certain of the domestic subsidiaries of Celanese US entered into an amendment agreement with the lenders under Celanese US’s existing senior secured credit facilities in order to amend and restate the corresponding Credit Agreement, dated as of April 2, 2007 (as previously amended, the "Existing Credit Agreement", and as amended and restated by the 2010 amendment agreement, the "2010 Amended Credit Agreement"). The 2010 Amended Credit Agreement consisted of the Term C loan facility due 2016, the Term B loan facility due 2014, a $600 million revolving credit facility terminating in 2015 and a $228 million credit-linked revolving facility terminating in 2014.
In May 2011, Celanese US prepaid its outstanding Term B loan facility under the 2010 Amended Credit Agreement set to mature in 2014 with an aggregate principal amount of $516 million using proceeds from the 5.875% Notes and cash on hand.
In November 2012, Celanese US prepaid $400 million of its outstanding Term C loan facility under the 2010 Amended Credit Agreement set to mature in 2016 using proceeds from the 4.625% Notes.
In anticipation of the Company's change in pension accounting policy (Note 1), in January 2013, the Company entered into a non-material amendment to the 2010 Amended Credit Agreement with the effect that certain computations for covenant compliance purposes will be evaluated as if the change in pension accounting policy had not occurred. The amendment also modified the 2010 Amended Credit Agreement in other, non-material respects.
On April 25, 2013, Celanese US reduced the Total Credit Linked Commitment (as defined in the 2010 Amended Credit Agreement) for the credit-linked revolving facility terminating in 2014 to $200 million, and on September 10, 2013 to $81 million.
On August 14, 2013, the Company entered into a non-material amendment to the 2010 Amended Credit Agreement to facilitate certain of the transactions contemplated by the Company's intentions to establish a joint venture for methanol production in Clear Lake, Texas and to make other non-material amendments.
On September 16, 2013, Celanese US, Celanese, and certain of the domestic subsidiaries of Celanese US entered into an amendment agreement with the lenders under Celanese US’s existing senior secured credit facilities in order to amend and restate the corresponding 2010 Amended Credit Agreement (as amended and restated by the 2013 amendment agreement, the "Amended Credit Agreement"). The Amended Credit Agreement provides for a reduction in the interest rates payable in connection with certain borrowings and consists of the Term C-2 loan facility due 2016, the $600 million revolving credit facility terminating in 2015 and the $81 million credit-linked revolving facility terminating in 2014.
As a result of the Amended Credit Agreement, $1 million has been recorded as Refinancing expense in the unaudited interim consolidated statements of operations, which includes accelerated amortization of deferred financing costs and other refinancing expenses. In addition, the Company recorded deferred financing costs of $2 million, which are being amortized over the term of the Term C-2 loan facility. As of September 30, 2013, deferred financing costs of $28 million are included in noncurrent Other assets on the unaudited consolidated balance sheet.
As of September 30, 2013, the margin for borrowings under the Term C-2 loan facility was 2.0% above LIBOR (for US dollars) and 2.0% above the Euro Interbank Offered Rate ("EURIBOR") (for Euros), as applicable. As of September 30, 2013, the margin for borrowings under the revolving credit facility was 2.5% above LIBOR. The margin for borrowings under the revolving credit facility is subject to increase or decrease in certain circumstances based on changes in the Company’s corporate credit ratings. Borrowings under the credit-linked revolving facility bear interest at a variable interest rate based on LIBOR, plus a margin which varies based on the Company's net leverage ratio.

19




The estimated net leverage ratio and margin are as follows:
 
As of September 30, 2013
 
Estimated Total Net
Leverage Ratio
 
Estimated
Margin
Credit-linked revolving facility
1.58

 
1.50
%
The margin on the credit-linked revolving facility may increase or decrease 0.25% based on the following:
Total Net Leverage Ratio
 
Margin over LIBOR or EURIBOR
< = 2.25
 
1.50%
> 2.25
 
1.75%
Term loan borrowings under the Amended Credit Agreement are subject to amortization at 1% of the initial principal amount per annum, payable quarterly. In addition, the Company pays quarterly commitment fees on the unused portions of the revolving credit facility and credit-linked revolving facility of 0.25% and 1.50% per annum, respectively.
The Amended Credit Agreement is guaranteed by Celanese and certain domestic subsidiaries of Celanese US and is secured by a lien on substantially all assets of Celanese US and such guarantors, subject to certain agreed exceptions (including for certain real property and certain shares of foreign subsidiaries), pursuant to the Guarantee and Collateral Agreement, dated as of April 2, 2007.
As a condition to borrowing funds or requesting letters of credit be issued under the revolving facility, the Company’s first lien senior secured leverage ratio (as calculated as of the last day of the most recent fiscal quarter for which financial statements have been delivered under the revolving facility) cannot exceed the threshold as specified below. Further, the Company’s first lien senior secured leverage ratio must be maintained at or below that threshold while any amounts are outstanding under the revolving credit facility.
The Company’s first lien senior secured leverage ratios under the revolving credit facility are as follows:
As of September 30, 2013
Maximum
 
Estimate
 
Estimate, if Fully Drawn
3.90
 
0.99

 
1.53
The Amended Credit Agreement contains covenants including, but not limited to, restrictions on the Company’s ability to incur indebtedness; grant liens on assets; merge, consolidate, or sell assets; pay dividends or make other restricted payments; make investments; prepay or modify certain indebtedness; engage in transactions with affiliates; enter into sale-leaseback transactions or hedge transactions; or engage in other businesses.
The Amended Credit Agreement also maintains a number of events of default, including a cross default to other debt of Celanese, Celanese US, or their subsidiaries, including the Senior Notes, in an aggregate amount equal to more than $40 million and the occurrence of a change of control. Failure to comply with these covenants, or the occurrence of any other event of default, could result in acceleration of the borrowings and other financial obligations under the Amended Credit Agreement.
The Company is in compliance with all of the covenants related to its debt agreements as of September 30, 2013.
Accounts Receivable Securitization Facility
On August 28, 2013, the Company entered into a $135 million US accounts receivable securitization facility pursuant to (i) a Purchase and Sale Agreement (the "Sale Agreement") among certain US subsidiaries of the Company (each an "Originator"), Celanese International Corporation ("CIC") and CE Receivables LLC, a newly formed, wholly-owned, "bankruptcy remote" special purpose subsidiary of an Originator (the "Transferor") and (ii) a Receivables Purchase Agreement (the "Purchase Agreement"), among CIC, as servicer, the Transferor, various third-party purchasers (collectively, the "Purchasers") and The Bank of Tokyo-Mitsubishi UFJ, Ltd., New York Branch, as administrator (the "Administrator").
Under the Sale Agreement, each Originator will sell or contribute, on an ongoing basis, substantially all of its accounts receivable to the Transferor. Under the Purchase Agreement, the Transferor may obtain up to $135 million (in the form of cash and/or letters of credit for the benefit of the Company and its subsidiaries) from the Purchasers through the sale of undivided

20




interests in certain US accounts receivable. The borrowing base of the accounts receivable securitization facility is subject to downward adjustment based on the evaluation of eligible accounts receivables pursuant to the Purchase Agreement. As of September 30, 2013, the borrowing base was $131 million.
The Purchase Agreement expires in 2016, but may be extended for successive one year terms by agreement of the parties. The Company accounts for the securitization facility as secured borrowings, and the accounts receivables sold pursuant to the facility are included in the unaudited consolidated balance sheet as Trade receivables - third party and affiliates. Borrowings under this facility are classified as short-term borrowings in the unaudited consolidated balance sheet. Once sold to the Transferor, the accounts receivable are legally separate and distinct from the other assets of the Company and are not available to the Company's creditors should the Company become insolvent. All of the Transferor's assets have been pledged to the Administrator in support of its obligations under the Purchase Agreement.
On September 10, 2013, Celanese US prepaid $100 million of borrowings outstanding under the credit-linked revolving facility set to mature in 2014 using funds drawn under the accounts receivable securitization facility. As of September 30, 2013, the outstanding amount of accounts receivable transferred by the Originators to the Transferor was $193 million.
The Company's balances available for borrowing are as follows:
 
As of
September 30,
2013
 
(In $ millions)
Revolving Credit Facility
 

Borrowings outstanding

Letters of credit issued

Available for borrowing
600

Credit-Linked Revolving Facility
 
Borrowings outstanding

Letters of credit issued
80

Available for borrowing
1

Accounts Receivable Securitization Facility
 
Borrowings outstanding
100

Letters of credit issued

Available for borrowing
31

10. Benefit Obligations
As discussed in Note 1, effective January 1, 2013, the Company elected to change its policy for recognizing actuarial gains and losses and changes in the fair value of plan assets for its defined benefit pension plans and other postretirement benefit plans.  This accounting change has been applied retrospectively to all periods presented.
The components of net periodic benefit costs are as follows:
 
Pension Benefits
 
Postretirement
Benefits
 
Pension Benefits
 
Postretirement
Benefits
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2013
 
2012
 
2013
 
2012
 
2013
 
2012
 
2013
 
2012
 
 
 
As
Adjusted
 
 
 
As
Adjusted
 
 
 
As
Adjusted
 
 
 
As
Adjusted
 
(In $ millions)
 
(In $ millions)
Service cost
9

 
7

 

 

 
26

 
21

 
2

 
1

Interest cost
39

 
42

 
3

 
3

 
116

 
127

 
8

 
9

Expected return on plan assets
(57
)
 
(51
)
 

 

 
(169
)
 
(153
)
 

 

Amortization of prior service cost (credit)

 
1

 

 

 
1

 
2

 

 

Total
(9
)
 
(1
)
 
3

 
3

 
(26
)
 
(3
)
 
10

 
10


21




Commitments to fund benefit obligations during 2013 are as follows:
 
As of
September 30,
2013
 
Total
Expected
2013
 
(In $ millions)
Cash contributions to defined benefit pension plans
22

 
30

Benefit payments to nonqualified pension plans
16

 
22

Benefit payments to other postretirement benefit plans
11

 
24

The Company’s estimates of its US defined benefit pension plan contributions reflect the provisions of the Pension Protection Act of 2006.
The Company participates in a multiemployer defined benefit plan in Germany covering certain employees. The Company’s contributions to the multiemployer defined benefit plan are based on specified percentages of employee contributions and totaled $5 million for the nine months ended September 30, 2013.
11. Environmental
General
The Company is subject to environmental laws and regulations worldwide that impose limitations on the discharge of pollutants into the air and water and establish standards for the treatment, storage and disposal of solid and hazardous wastes. The Company believes that it is in substantial compliance with all applicable environmental laws and regulations. The Company is also subject to retained environmental obligations specified in various contractual agreements arising from the divestiture of certain businesses by the Company or one of its predecessor companies.
The components of environmental remediation reserves are as follows:
 
As of
September 30,
2013
 
As of
December 31,
2012
 
(In $ millions)
Demerger obligations (Note 17)
27

 
31

Divestiture obligations (Note 17)
22

 
21

Active sites
24

 
28

US Superfund sites
13

 
15

Other environmental remediation reserves
5

 
4

Total
91

 
99

Remediation
Due to its industrial history and through retained contractual and legal obligations, the Company has the obligation to remediate specific areas on its own sites as well as on divested, orphan or US Superfund sites (as defined below). In addition, as part of the demerger agreement between the Company and Hoechst AG ("Hoechst"), a specified portion of the responsibility for environmental liabilities from a number of Hoechst divestitures was transferred to the Company (Note 17). The Company provides for such obligations when the event of loss is probable and reasonably estimable. The Company believes that environmental remediation costs will not have a material adverse effect on the financial position of the Company, but may have a material adverse effect on the results of operations or cash flows in any given period.
US Superfund Sites
In the US, the Company may be subject to substantial claims brought by US federal or state regulatory agencies or private individuals pursuant to statutory authority or common law. In particular, the Company has a potential liability under the US Federal Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, and related state laws (collectively referred to as "Superfund") for investigation and cleanup costs at certain sites. At most of these sites, numerous companies, including the Company, or one of its predecessor companies, have been notified that the Environmental Protection Agency, state governing bodies or private individuals consider such companies to be potentially responsible parties ("PRP")

22




under Superfund or related laws. The proceedings relating to these sites are in various stages. The cleanup process has not been completed at most sites and the status of the insurance coverage for some of these proceedings is uncertain. Consequently, the Company cannot accurately determine its ultimate liability for investigation or cleanup costs at these sites.
As events progress at each site for which it has been named a PRP, the Company accrues, as appropriate, a liability for site cleanup. Such liabilities include all costs that are probable and can be reasonably estimated. In establishing these liabilities, the Company considers its shipment of waste to a site, its percentage of total waste shipped to the site, the types of wastes involved, the conclusions of any studies, the magnitude of any remedial actions that may be necessary and the number and viability of other PRPs. Often the Company joins with other PRPs to sign joint defense agreements that settle, among PRPs, each party’s percentage allocation of costs at the site. Although the ultimate liability may differ from the estimate, the Company routinely reviews the liabilities and revises the estimate, as appropriate, based on the most current information available.
One such site is the Lower Passaic River Study Area. The Company and 70 other companies are parties to a May 2007 Administrative Order on Consent with the US Environmental Protection Agency ("EPA") to perform a Remedial Investigation/Feasibility Study ("RI/FS") of the contaminants in the lower 17-mile stretch known as the Lower Passaic River Study Area. The RI/FS is ongoing and may take several more years to complete. The Company is among a group of settling parties to a June 2012 Administrative Order on Consent with the EPA to perform a removal action on a small section of the river. The Company has also been named as a third-party defendant along with more than 200 other entities in an action initially brought by the New Jersey Department of Environmental Protection ("NJDEP") in the Supreme Court of New Jersey against Occidental Chemical Corporation and several other companies. This suit by the NJDEP seeks recovery of past and future clean-up costs, as well as unspecified economic damages, punitive damages, penalties and a variety of other forms of relief arising from alleged discharges into the Lower Passaic River.
In 2007, the EPA issued a draft study that evaluated alternatives for early remedial action of a portion of the Passaic River at an estimated cost of $900 million to $2.3 billion. Several parties commented on the draft study, and the EPA has announced its intention to issue a proposed plan in 2013. Although the Company's assessment that the contamination allegedly released by the Company is likely an insignificant aspect of the final remedy, because the RI/FS is still ongoing, and the EPA has not finalized its study or the scope of requested cleanup the Company cannot reliably estimate its portion of the final remedial costs for this matter at this time. However, the Company currently believes that its portion of the costs would be less than approximately 1% to 2%. The Company is vigorously defending these and all related matters.
Environmental Proceedings
On January 7, 2013, following self-disclosures by the Company, the Company's Meredosia, Illinois site received a Notice of Violation/Finding of Violation from the US Environmental Protection Agency Region 5 ("EPA") alleging Clean Air Act violations. The Company is working with the EPA and with the state agency to reach a resolution of this matter. Based on currently available information and the Company's past experience, we do not believe that resolution of this matter will have a significant impact on the Company, even though the Company cannot conclude that a penalty will be less than $100,000. The Meredosia, Illinois site is included in the Industrial Specialties segment.
12. Stockholders’ Equity
Common Stock
The Company’s Board of Directors follows a policy of declaring, subject to legally available funds, a quarterly cash dividend on each share of the Company’s Series A Common Stock, par value $0.0001 per share ("Common Stock"), unless the Company’s Board of Directors, in its sole discretion, determines otherwise. The amount available to pay cash dividends is restricted by the Company’s Amended Credit Agreement and the Senior Notes.
On April 25, 2013, the Company announced that its Board of Directors approved a 20% increase in the Company's quarterly Common Stock cash dividend. The Board of Directors increased the quarterly dividend rate from $0.075 to $0.09 per share of Common Stock on a quarterly basis and $0.30 to $0.36 per share of Common Stock on an annual basis beginning in May 2013.
On July 25, 2013, the Company announced that its Board of Directors approved a 100% increase in the Company's quarterly Common Stock cash dividend. The Board of Directors increased the quarterly dividend rate from $0.09 to $0.18 per share of Common Stock on a quarterly basis and $0.36 to $0.72 per share of Common Stock on an annual basis beginning in August 2013.

23




Treasury Stock
The Company’s Board of Directors authorized the repurchase of Common Stock as follows:
 
Authorized Amount
 
(In $ millions)
February 2008
400

October 2008
100

April 2011
129

October 2012
264

As of September 30, 2013
893

The authorization gives management discretion in determining the timing and conditions under which shares may be repurchased. The repurchase program does not have an expiration date.
The share repurchase activity pursuant to this authorization is as follows:
 
Nine Months Ended
September 30,
 
Total From
February 2008
Through
September 30, 2013
 
 
2013
 
2012
 
 
Shares repurchased
2,096,320

(1) 
853,388

 
15,238,847

(2) 
Average purchase price per share
$
48.58

 
$
43.19

 
$
39.58

 
Amount spent on repurchased shares (in millions)
$
102

 
$
37

 
$
603

 
______________________________
(1) 
Excludes 6,021 shares withheld from employee to cover statutory minimum withholding requirements for personal income taxes related to the vesting of restricted stock. Restricted stock is considered outstanding at the time of issuance and therefore, the shares withheld are treated as treasury shares.
(2) 
Excludes 11,844 shares withheld from employee to cover statutory minimum withholding requirements for personal income taxes related to the vesting of restricted stock. Restricted stock is considered outstanding at the time of issuance and therefore, the shares withheld are treated as treasury shares.
The purchase of treasury stock reduces the number of shares outstanding and the repurchased shares may be used by the Company for compensation programs utilizing the Company’s stock and other corporate purposes. The Company accounts for treasury stock using the cost method and includes treasury stock as a component of stockholders’ equity.

24




Other Comprehensive Income (Loss), Net
 
Three Months Ended September 30,
 
2013
 
2012
 
Gross
Amount
 
Income
Tax
(Provision)
Benefit
 
Net
Amount
 
Gross
Amount
 
Income
Tax
(Provision)
Benefit
 
Net
Amount
 
 
 
 
 
 
 
As Adjusted (Note 1)
 
(In $ millions)
Unrealized gain (loss) on marketable securities
1

(1) 

 
1

 

 

 

Foreign currency translation
44

 
(2
)
 
42

 
28

 

 
28

Gain (loss) on interest rate swaps
2

(2) 
(1
)
 
1

 
(2
)
 

 
(2
)
Pension and postretirement benefits

 

 

 
1

 
(1
)
 

Total
47

 
(3
)
 
44

 
27

 
(1
)
 
26

______________________________
(1) 
Amount includes $1 million of unrealized gains related to the Company's equity method investments' marketable securities.
(2) 
Amount includes $1 million of gains associated with the Company's equity method investments' derivative activity.
 
Nine Months Ended September 30,
 
2013
 
2012
 
Gross
Amount
 
Income
Tax
(Provision)
Benefit
 
Net
Amount
 
Gross
Amount
 
Income
Tax
(Provision)
Benefit
 
Net
Amount
 
 
 
 
 
 
 
As Adjusted (Note 1)
 
(In $ millions)
Unrealized gain (loss) on marketable securities
1

(1) 

 
1

 

 

 

Foreign currency translation
41

 
(4
)
 
37

 
4

 

 
4

Gain (loss) on interest rate swaps
7

 
(3
)
 
4

 
(1
)
 

 
(1
)
Pension and postretirement benefits

(2) 

 

 

(3) 
(6
)
 
(6
)
Total
49

 
(7
)
 
42

 
3

 
(6
)
 
(3
)
______________________________
(1) 
Amount includes $1 million of unrealized gains related to the Company's equity method investments' marketable securities.
(2) 
Amount includes amortization of actuarial losses of $1 million related to the Company's equity method investments' pension plans.
(3) 
Amount includes amortization of actuarial losses of $2 million related to the Company's equity method investments' pension plans.

25




Adjustments to Accumulated other comprehensive income (loss) are as follows:
 
Unrealized
Gain (Loss)
on
Marketable
Securities
 
Foreign
Currency
Translation
 
Gain (Loss)
on Interest
Rate Swaps
 
Pension
and
Postretire-
ment
Benefits
 
Accumulated
Other
Comprehensive
Income
(Loss), Net
 
(In $ millions)
As of December 31, 2012 - As Adjusted (Note 1)
(1
)
 
(23
)
 
(50
)
 
(15
)
 
(89
)
Other comprehensive income before reclassifications
1

 
41

 
(1
)
 

 
41

Amounts reclassified from accumulated other comprehensive income

 

 
8




8

Income tax (provision) benefit

 
(4
)
 
(3
)
 

 
(7
)
As of September 30, 2013

 
14

 
(46
)
 
(15
)
 
(47
)
13. Other (Charges) Gains, Net
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2013
 
2012
 
2013
 
2012
 
(In $ millions)
Employee termination benefits

 
(1
)
 
(3
)
 
(2
)
Kelsterbach plant relocation (Note 20)
(2
)
 
(3
)
 
(6
)
 
(5
)
Plumbing actions

 
4

 

 
4

Asset impairments
(2
)
 

 
(2
)
 

Commercial disputes

 
2

 

 
2

Total
(4
)
 
2

 
(11
)
 
(1
)
During the nine months ended September 30, 2013, the Company recorded $3 million of employee termination benefits related to a business optimization project which are included in the Industrial Specialties and Acetyl Intermediates segments.
The changes in the restructuring reserves by business segment are as follows:
 
Advanced
Engineered
Materials
 
Consumer
Specialties
 
Industrial
Specialties
 
Acetyl
Intermediates
 
Other
 
Total
 
(In $ millions)
Employee Termination Benefits
 

 
 

 
 

 
 

 
 

 
 

As of December 31, 2012
6

 
13

 

 
3

 
7

 
29

Additions

 

 
2

 
1

 

 
3

Cash payments
(2
)
 
(7
)
 

 
(2
)
 
(2
)
 
(13
)
Other changes

 

 

 

 
(1
)
 
(1
)
Exchange rate changes
1

 

 

 

 

 
1

As of September 30, 2013
5

 
6

 
2

 
2

 
4

 
19

Plant/Office Closures
 

 
 

 
 

 
 

 
 

 
 

As of December 31, 2012

 

 

 
1

 

 
1

Additions

 

 

 

 

 

Cash payments

 

 

 

 

 

Other changes

 

 

 

 

 

Exchange rate changes

 

 

 
(1
)
 

 
(1
)
As of September 30, 2013

 

 

 

 

 

Total
5

 
6

 
2

 
2

 
4

 
19


26




14. Income Taxes
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2013
 
2012
 
2013
 
2012
 
 
 
As Adjusted
 
 
 
As Adjusted
Effective income tax rate
25
%
 
31
%
 
32
%
 
7
%
During the three months ended March 31, 2012, the Company amended certain prior year income tax returns to recognize the benefit of available foreign tax credit carryforwards. As a result, the Company recognized a tax benefit of $142 million. The available foreign tax credits are subject to a ten year carryforward period and begin to expire in 2014. The Company expects to fully utilize the credits within the prescribed carryforward period.
On February 15, 2012, the Company amended its existing joint venture and other related agreements with its venture partner in Polyplastics Co., Ltd. ("Polyplastics"). The amended agreements ("Agreements"), among other items, modified certain dividend rights, resulting in a cash dividend payment to the Company of $72 million during the three months ended March 31, 2012. In addition, as a result of the Agreements, Polyplastics is required to pay certain annual dividends to the venture partners. Consequently, Polyplastics' undistributed earnings will no longer be invested indefinitely. Accordingly, the Company recognized a deferred tax liability of $38 million that was recorded to Income tax provision (benefit) in the unaudited interim consolidated statement of operations during the three months ended March 31, 2012, related to the taxable outside basis difference of its investment in Polyplastics.
The effective income tax rate for the nine months ended September 30, 2012 would have been 25% excluding the recognition of the above items. As compared to the nine months ended September 30, 2012, absent the effect of these events, the increase in the effective income tax rate for the nine months ended September 30, 2013 was primarily due to increased earnings in high income tax jurisdictions, losses in jurisdictions without income tax benefit and reassessment of the recoverability of deferred tax assets in certain jurisdictions. The rate for three months ended September 30, 2013 was favorably impacted by Mexico income tax refunds.
Liabilities for uncertain tax positions and related interest and penalties are recorded in Uncertain tax positions and current Other liabilities in the unaudited consolidated balance sheets. For the nine months ended September 30, 2013, the Company's uncertain tax positions increased $15 million due to interest and changes in uncertain tax positions in certain jurisdictions, and increased $6 million due to exchange rate changes.
The Company's US tax returns for the years 2009 through 2011 are currently under audit by the US Internal Revenue Service and certain of the Company's subsidiaries are under audit in jurisdictions outside of the US. In addition, certain statutes of limitations are scheduled to expire in the near future. It is reasonably possible that a further change in the unrecognized tax benefits may occur within the next twelve months related to the settlement of one or more of these audits or the lapse of applicable statutes of limitations. Such amounts have been reflected in the current portion of uncertain tax positions (Note 7).
15. Derivative Financial Instruments
Interest Rate Risk Management
To reduce the interest rate risk inherent in the Company’s variable rate debt, the Company utilizes interest rate swap agreements to convert a portion of its variable rate borrowings into a fixed rate obligation. These interest rate swap agreements are designated as cash flow hedges and fix the LIBOR portion of the Company’s US-dollar denominated variable rate borrowings (Note 9). If an interest rate swap agreement is terminated prior to its maturity, the amount previously recorded in Accumulated other comprehensive income (loss), net is recognized into earnings over the period that the hedged transaction impacts earnings. If the hedging relationship is discontinued because it is probable that the forecasted transaction will not occur according to the original strategy, any related amounts previously recorded in Accumulated other comprehensive income (loss), net are recognized into earnings immediately.

27




US-dollar interest rate swap derivative arrangements are as follows:
As of September 30, 2013
Notional Value
 
Effective Date
 
Expiration Date
 
Fixed Rate (1)
(In $ millions)
 
 
 
 
 
 
1,100

 
January 2, 2012
 
January 2, 2014
 
1.71
%
500

 
January 2, 2014
 
January 2, 2016
 
1.02
%
______________________________
(1) 
Fixes the LIBOR portion of the Company's US-dollar denominated variable rate borrowings (Note 9).
As of December 31, 2012
Notional Value
 
Effective Date
 
Expiration Date
 
Fixed Rate (1)
(In $ millions)
 
 
 
 
 
 
1,100

 
January 2, 2012
 
January 2, 2014
 
1.71
%
500

 
January 2, 2014
 
January 2, 2016
 
1.02
%
______________________________
(1) 
Fixes the LIBOR portion of the Company's US-dollar denominated variable rate borrowings (Note 9).
Foreign Exchange Risk Management
Certain subsidiaries have assets and liabilities denominated in currencies other than their respective functional currencies, which creates foreign exchange risk. The Company also enters into foreign currency forwards and swaps to minimize its exposure to foreign currency fluctuations. Through these instruments, the Company mitigates its foreign currency exposure on transactions with third party entities as well as intercompany transactions. The foreign currency forwards and swaps are not designated as hedges under FASB ASC Topic 815, Derivatives and Hedging ("FASB ASC Topic 815"). Gains and losses on foreign currency forwards and swaps entered into to offset foreign exchange impacts on intercompany balances are classified as Other income (expense), net, in the unaudited interim consolidated statements of operations. Gains and losses on foreign currency forwards and swaps entered into to offset foreign exchange impacts on all other assets and liabilities are classified as Foreign exchange gain (loss), net, in the unaudited interim consolidated statements of operations.
Gross notional values of the foreign currency forwards and swaps are as follows:
 
As of
September 30,
2013
 
As of
December 31,
2012
 
(In $ millions)
Total
841

 
902

Commodity Risk Management
The Company has exposure to the prices of commodities in its procurement of certain raw materials. The Company manages its exposure to commodity risk primarily through the use of long-term supply agreements, multi-year purchasing and sales agreements and forward purchase contracts. The Company regularly assesses its practice of using forward purchase contracts and other raw material hedging instruments in accordance with changes in economic conditions. Forward purchases and swap contracts for raw materials are principally settled through physical delivery of the commodity. For qualifying contracts, the Company has elected to apply the normal purchases and normal sales exception of FASB ASC Topic 815 based on the probability at the inception and throughout the term of the contract that the Company would not settle net and the transaction would result in the physical delivery of the commodity. As such, realized gains and losses on these contracts are included in the cost of the commodity upon the settlement of the contract.
In addition, the Company occasionally enters into financial derivatives to hedge a component of a raw material or energy source. Typically, these types of transactions do not qualify for hedge accounting. These instruments are marked to market at each reporting period and gains (losses) are included in Cost of sales in the unaudited interim consolidated statements of operations. During the nine months ended September 30, 2013 and 2012, the Company did not have any open financial derivative contracts for commodities.

28




Information regarding changes in the fair value of the Company’s derivative arrangements is as follows:
 
Three Months Ended
September 30, 2013
 
Three Months Ended
September 30, 2012
 
 
Gain (Loss)
Recognized in
Other
Comprehensive
Income (Loss)
 
Gain (Loss)
Recognized in
Earnings
(Loss)
 
Gain (Loss)
Recognized in
Other
Comprehensive
Income (Loss)
 
Gain (Loss)
Recognized in
Earnings
(Loss)
 
 
(In $ millions)
Derivatives Designated as Cash Flow Hedges
 

 
 

 
 

 
 

 
Interest rate swaps
(2
)
(1) 
(3
)
(2) 
(6
)
 
(4
)
(2) 
Derivatives Not Designated as Hedges
 

 
 

 
 

 
 

 
Interest rate swaps

 

(3) 

 

(3) 
Foreign currency forwards and swaps

 
(10
)
(4) 

 
(13
)
(4) 
Total
(2
)
 
(13
)
 
(6
)
 
(17
)
 
______________________________
(1) 
Amount excludes $1 million of gains associated with the Company's equity method investments' derivative activity and $1 million of tax expense recognized in Other comprehensive income (loss).
(2) 
Amount represents reclassification from Accumulated other comprehensive income (loss), net and is included in Interest expense in the unaudited interim consolidated statements of operations.
(3) 
Included in Interest expense in the unaudited interim consolidated statements of operations.
(4) 
Included in Foreign exchange gain (loss), net for operating activity or Other income (expense), net for non-operating activity in the unaudited interim consolidated statements of operations.
 
Nine Months Ended
September 30, 2013
 
Nine Months Ended
September 30, 2012
 
 
Gain (Loss)
Recognized in
Other
Comprehensive
Income (Loss)
 
Gain (Loss)
Recognized in
Earnings
(Loss)
 
Gain (Loss)
Recognized in
Other
Comprehensive
Income (Loss)
 
Gain (Loss)
Recognized in
Earnings
(Loss)
 
 
(In $ millions)
Derivatives Designated as Cash Flow Hedges
 

 
 

  
 

 
 

 
Interest rate swaps
(1
)
(1) 
(8
)
(2) 
(12
)
 
(11
)
(2) 
Derivatives Not Designated as Hedges
 

 
 

 
 

 
 

 
Interest rate swaps

 

(3) 

 

(3) 
Foreign currency forwards and swaps

 
(14
)
(4) 

 

(4) 
Total
(1
)
 
(22
)
 
(12
)
 
(11
)
 
______________________________
(1)
Amount excludes $3 million of tax expense recognized in Other comprehensive income (loss).
(2) 
Amount represents reclassification from Accumulated other comprehensive income (loss), net and is included in Interest expense in the unaudited interim consolidated statements of operations.
(3) 
Included in Interest expense in the unaudited interim consolidated statements of operations.
(4) 
Included in Foreign exchange gain (loss), net for operating activity or Other income (expense), net for non-operating activity in the unaudited interim consolidated statements of operations.
See Note 16, Fair Value Measurements, for additional information regarding the fair value of the Company’s derivative arrangements.
Certain of the Company's foreign currency forwards and swaps and interest rate swap arrangements permit the Company to net settle all contracts with the counterparty through a single payment in an agreed upon currency in the event of default or early termination of the contract, similar to a master netting arrangement. The Company's interest rate swap agreements are subject to

29




cross collateralization under the Guarantee and Collateral Agreement entered into in conjunction with the Term loan borrowings (Note 9).
 
As of
September 30,
2013
 
As of
December 31,
2012
 
(In $ millions)
Derivative Assets
 
 
 
Gross amount recognized
2

 
2

Gross amount offset in the consolidated balance sheets

 

Net amount presented in the consolidated balance sheets
2

 
2

Gross amount not offset in the consolidated balance sheets
2

 
2

Net amount

 

 
As of
September 30,
2013
 
As of
December 31,
2012
 
(In $ millions)
Derivative Liabilities
 
 
 
Gross amount recognized
19

 
32

Gross amount offset in the consolidated balance sheets
1

 
1

Net amount presented in the consolidated balance sheets
18

 
31

Gross amount not offset in the consolidated balance sheets
2

 
2

Net amount
16

 
29

16. Fair Value Measurements
The Company follows the provisions of FASB ASC Topic 820 for financial assets and liabilities. FASB ASC Topic 820 establishes a three-tiered fair value hierarchy that prioritizes the inputs used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurement) and the lowest priority to unobservable inputs (Level 3 measurement). This hierarchy requires entities to maximize the use of observable inputs and minimize the use of unobservable inputs. If a financial instrument uses inputs that fall in different levels of the hierarchy, the instrument will be categorized based upon the lowest level of input that is significant to the fair value calculation. Valuations for fund investments such as common/collective trusts and registered investment companies, which do not have readily determinable fair values, are typically estimated using a net asset value provided by a third party as a practical expedient.
The three levels of inputs are defined as follows:
Level 1 - unadjusted quoted prices for identical assets or liabilities in active markets accessible by the Company
Level 2 - inputs that are observable in the marketplace other than those inputs classified as Level 1
Level 3 - inputs that are unobservable in the marketplace and significant to the valuation
The Company’s financial assets and liabilities are measured at fair value on a recurring basis and include securities available for sale and derivative financial instruments. Securities available for sale include mutual funds. Derivative financial instruments include interest rate swaps and foreign currency forwards and swaps.
Marketable Securities. Where possible, the Company utilizes quoted prices in active markets to measure debt and equity securities; such items are classified as Level 1 in the hierarchy and include equity securities. When quoted market prices for identical assets are unavailable, varying valuation techniques are used. Common inputs in valuing these assets include, among others, benchmark yields, issuer spreads and recently reported trades. Such assets are classified as Level 2 in the hierarchy and typically include corporate bonds. Mutual funds are valued at the net asset value per share or unit multiplied by the number of shares or units held as of the measurement date.
Derivatives. Derivative financial instruments are valued in the market using discounted cash flow techniques. These techniques incorporate Level 1 and Level 2 inputs such as interest rates and foreign currency exchange rates. These market inputs are

30




utilized in the discounted cash flow calculation considering the instrument’s term, notional amount, discount rate and credit risk. Significant inputs to the derivative valuation for interest rate swaps and foreign currency forwards and swaps are observable in the active markets and are classified as Level 2 in the hierarchy.
Assets and liabilities measured at fair value on a recurring basis are as follows:
 
 
 
Fair Value Measurement
 
Balance Sheet Classification
 
Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Total
 
 
 
(In $ millions)
Mutual funds
Marketable securities, at fair value
 
44

 

 
44

Derivatives Not Designated as Hedges
 
 
 
 
 
 
 
Foreign currency forwards and swaps
Current Other assets
 

 
2

 
2

Total assets as of September 30, 2013
 
44

 
2

 
46

Derivatives Designated as Cash Flow Hedges
 
 
 

 
 

 
 

Interest rate swaps
Current Other liabilities
 

 
(7
)
 
(7
)
Interest rate swaps
Noncurrent Other liabilities
 

 
(3
)
 
(3
)
Derivatives Not Designated as Hedges
 
 
 
 
 
 
 
Interest rate swaps
Current Other liabilities
 

 
(3
)
 
(3
)
Foreign currency forwards and swaps
Current Other liabilities
 

 
(5
)
 
(5
)
Total liabilities as of September 30, 2013
 

 
(18
)
 
(18
)
 
 
 
 
 
 
 
 
Mutual funds
Marketable securities, at fair value
 
53

 

 
53

Derivatives Not Designated as Hedges
 
 
 
 
 
 
 
Foreign currency forwards and swaps
Current Other assets
 

 
2

 
2

Total assets as of December 31, 2012
 
53

 
2

 
55

Derivatives Designated as Cash Flow Hedges
 
 
 

 
 

 
 

Interest rate swaps
Current Other liabilities
 

 
(10
)
 
(10
)
Interest rate swaps
Noncurrent Other liabilities
 

 
(7
)
 
(7
)
Derivatives Not Designated as Hedges
 
 
 
 
 
 
 
Interest rate swaps
Current Other liabilities
 

 
(5
)
 
(5
)
Interest rate swaps
Noncurrent Other liabilities
 

 
(1
)
 
(1
)
Foreign currency forwards and swaps
Current Other liabilities
 

 
(8
)
 
(8
)
Total liabilities as of December 31, 2012
 

 
(31
)
 
(31
)

31




Carrying values and fair values of financial instruments that are not carried at fair value are as follows:
 
 
 
Fair Value Measurement
 
Carrying
Amount
 
Significant Other
Observable
Inputs
(Level 2)
 
Unobservable
Inputs
(Level 3)
 
Total
 
 
 
(In $ millions)
As of September 30, 2013
 
 
 
 
 
 
 
Cost investments
147

 

 

 

Insurance contracts in nonqualified trusts
62

 
62

 

 
62

Long-term debt, including current installments of long-term debt
2,893

 
2,706

 
248

 
2,954

As of December 31, 2012
 
 
 
 
 
 
 
Cost investments
156

 

 

 

Insurance contracts in nonqualified trusts
66

 
66

 

 
66

Long-term debt, including current installments of long-term debt
2,990

 
2,886

 
244

 
3,130

In general, the cost investments included in the table above are not publicly traded and their fair values are not readily determinable; however, the Company believes the carrying values approximate or are less than the fair values. Insurance contracts in nonqualified trusts consist of long-term fixed income securities, which are valued using independent vendor pricing models with observable inputs in the active market and therefore represent a Level 2 measurement. The fair value of long-term debt is based on valuations from third-party banks and market quotations and is classified as Level 2 in the hierarchy. The fair value of obligations under capital leases is based on lease payments and discount rates, which are not observable in the market and therefore represents a Level 3 measurement.
As of September 30, 2013 and December 31, 2012, the fair values of cash and cash equivalents, receivables, trade payables, short-term borrowings and the current installments of long-term debt approximate carrying values due to the short-term nature of these instruments. These items have been excluded from the table with the exception of the current installments of long-term debt.
17. Commitments and Contingencies
The Company is involved in legal and regulatory proceedings, lawsuits, claims and investigations incidental to the normal conduct of business, relating to such matters as product liability, land disputes, commercial contracts, employment, antitrust, intellectual property, workers' compensation, chemical exposure, asbestos exposure, prior acquisitions and divestitures, past waste disposal practices and release of chemicals into the environment. The Company is actively defending those matters where the Company is named as a defendant. Due to the inherent subjectivity of assessments and unpredictability of outcomes of legal proceedings, the Company's litigation accruals and estimates of possible loss or range of possible loss ("Possible Loss") may not represent the ultimate loss to the Company from legal proceedings. For reasonably possible loss contingencies that may be material, the Company estimates its Possible Loss when determinable, considering that the Company could incur no loss in certain matters. Thus, the Company's exposure and ultimate losses may be higher or lower, and possibly materially so, than the Company's litigation accruals and estimates of Possible Loss. For some matters, the Company is unable, at this time, to estimate its Possible Loss that is reasonably possible of occurring. Generally, the less progress that has been made in the proceedings or the broader the range of potential results, the more difficult for the Company to estimate the Possible Loss that it is reasonably possible the Company could incur. The Company may disclose certain information related to a plaintiff's claim against the Company alleged in the plaintiff's pleadings or otherwise publicly available. While information of this type may provide insight into the potential magnitude of a matter, it does not necessarily represent the Company's estimate of reasonably possible or probable loss. Some of the Company's exposure in legal matters may be offset by applicable insurance coverage. The Company does not consider the possible availability of insurance coverage in determining the amounts of any accruals or any estimates of Possible Loss.
Polyester Staple Antitrust Litigation
CNA Holdings LLC ("CNA Holdings"), the successor in interest to Hoechst Celanese Corporation ("HCC"), Celanese Americas Corporation and Celanese GmbH (collectively, the "Celanese Entities") and Hoechst, the former parent of HCC, were named as defendants for alleged antitrust violations in a consolidated proceeding by a Multi-District Litigation Panel in the US

32




District Court for the Western District of North Carolina styled In re Polyester Staple Antitrust Litigation, MDL 1516. In June 2008, the court dismissed these actions with prejudice against all Celanese Entities in consideration of a payment by the Company.
Prior to December 31, 2008, the Company had entered into tolling arrangements with four other alleged US purchasers of polyester staple fibers manufactured and sold by the Celanese Entities. These purchasers were not included in the settlement and one such company filed suit against the Company in December 2008 (Milliken & Company v. CNA Holdings, Inc., Celanese Americas Corporation and Hoechst AG (No. 8-SV-00578 W.D.N.C.)). In September 2011, that case was dismissed with prejudice based on a stipulation and proposed order of voluntary dismissal. One of the alleged US purchasers made a demand to the Company in February 2013 but has not filed a formal claim. The Company is evaluating its options, but does not believe a Possible Loss for this matter would be material.
Commercial Actions
In June 2012, Linde Gas Singapore Pte. Ltd. ("Linde Gas"), a raw materials supplier based in Singapore, initiated arbitration proceedings in New York against the Company's subsidiary, Celanese Singapore Pte. Ltd. ("Singapore Ltd."), alleging that Singapore Ltd. had breached a certain requirements contract for carbon monoxide by temporarily idling Singapore Ltd.'s acetic acid facility in Jurong Island, Singapore. The Company filed its answer in August 2012. Linde Gas is seeking damages in the amount of $38 million for the period ended December 31, 2012, in addition to other unspecified damages. The Company believes that Linde Gas' claims lack merit and that the Company has complied with the contract terms and is vigorously defending the matter. Based on the Company's evaluation of currently available information, the Company does not believe the Possible Loss is material. The arbitral panel has bifurcated the case into a liability and damages phase. The hearing for all liability issues took place in June 2013 and a ruling from the arbitral panel is expected during the three months ending December 31, 2013, with a hearing for damages issues thereafter, if necessary.
Award Proceedings in Relation to Domination Agreement and Squeeze-Out
The Company's subsidiary, BCP Holdings GmbH ("BCP Holdings"), a German limited liability company, is a defendant in two special award proceedings initiated by minority stockholders of Celanese GmbH seeking the court's review of the amounts (i) of the fair cash compensation and of the guaranteed dividend offered in the purchaser offer under the 2004 Domination Agreement (the "Domination Agreement") and (ii) the fair cash compensation paid for the 2006 squeeze-out ("Squeeze-Out") of all remaining stockholders of Celanese GmbH.
Pursuant to a settlement agreement between BCP Holdings and certain former Celanese GmbH stockholders, if the court sets a higher value for the fair cash compensation or the guaranteed payment under the Domination Agreement or the Squeeze-Out compensation, former Celanese GmbH stockholders who ceased to be stockholders of Celanese GmbH due to the Squeeze-Out will be entitled to claim for their shares the higher of the compensation amounts determined by the court in these different proceedings related to the Domination Agreement and the Squeeze-Out. If the fair cash compensation determined by the court is higher than the Squeeze-Out compensation of €66.99, then 1,069,465 shares will be entitled to an adjustment. If the court determines the value of the fair cash compensation under the Domination Agreement to be lower than the original Squeeze-Out compensation, but determines a higher value for the Squeeze-Out compensation, 924,078 shares would be entitled to an adjustment. Payments already received by these stockholders as compensation for their shares will be offset so that persons who ceased to be stockholders of Celanese GmbH due to the Squeeze-Out are not entitled to more than the higher of the amount set in the two court proceedings.
In September 2011, the share valuation expert appointed by the court rendered an opinion. The expert opined that the fair cash compensation for these stockholders (145,387 shares) should be increased from €41.92 to €51.86. This non-binding opinion recommends a total increase in share value of €2 million for those claims under the Domination Agreement. The opinion has no effect on the Squeeze-Out proceeding because the share price recommended is lower than the price those stockholders already received in the Squeeze-Out. However, the opinion also advocates that the guaranteed dividend should be increased from €2.89 to €3.79, aggregating an increase in total guaranteed dividends of €1 million to the Squeeze-Out claimants. The Company and plaintiffs submitted written responses arguing for alternative valuations during the three months ended December 31, 2011. In March 2013, the expert issued his supplementary opinion affirming his previous views and calculations. The Company has submitted written objections regarding the calculations and the court has set a hearing for January 28, 2014. Separately, no expert has yet been appointed in the Squeeze-Out proceedings.
For those claims brought under the Domination Agreement, based on the Company's evaluation of currently available information, including the non-binding expert opinions, and the fact that the court has not yet determined the applicable

33




valuation method, which could increase or decrease the Company's potential exposure, the Company does not believe that the Possible Loss is material.
For those remaining claims brought by the Squeeze-Out claimants, based on the Company's evaluation of currently available information, including that damages sought are unspecified, unsupported or uncertain, the matter presents meaningful legal uncertainties (including novel issues of law and the applicable valuation method), there are significant facts in dispute and the court has not yet appointed an expert, the Company cannot estimate the Possible Loss, if any, at this time.
Guarantees
The Company has agreed to guarantee or indemnify third parties for environmental and other liabilities pursuant to a variety of agreements, including asset and business divestiture agreements, leases, settlement agreements and various agreements with affiliated companies. Although many of these obligations contain monetary and/or time limitations, others do not provide such limitations.
As indemnification obligations often depend on the occurrence of unpredictable future events, the future costs associated with them cannot be determined at this time.
The Company has accrued for all probable and reasonably estimable losses associated with all known matters or claims that have been brought to its attention. These known obligations include the following:
Demerger Obligations
In connection with the Hoechst demerger, the Company agreed to indemnify Hoechst, and its legal successors, for various liabilities under the demerger agreement, including for environmental liabilities associated with contamination arising either from environmental damage in general ("Category A") or under 19 divestiture agreements entered into by Hoechst prior to the demerger ("Category B") (Note 11).
The Company's obligation to indemnify Hoechst, and its legal successors, is capped under Category B at €250 million. If and to the extent the environmental damage should exceed €750 million in aggregate, the Company's obligation to indemnify Hoechst and its legal successors applies, but is then limited to 33.33% of the remediation cost without further limitations. Cumulative payments under the divestiture agreements as of September 30, 2013 are $63 million. Most of the divestiture agreements have become time barred and/or any notified environmental damage claims have been partially settled.
The Company has also undertaken in the demerger agreement to indemnify Hoechst and its legal successors for (i) 33.33% of any and all Category A liabilities that result from Hoechst being held as the responsible party pursuant to public law or current or future environmental law or by third parties pursuant to private or public law related to contamination and (ii) liabilities that Hoechst is required to discharge, including tax liabilities, which are associated with businesses that were included in the demerger but were not demerged due to legal restrictions on the transfers of such items. These indemnities do not provide for any monetary or time limitations. The Company has not been requested by Hoechst to make any payments in connection with this indemnification. Accordingly, the Company has not made any payments to Hoechst and its legal successors.
Based on the Company's evaluation of currently available information, including the lack of requests for indemnification, the Company cannot estimate the Possible Loss for the remaining demerger obligations, if any, in excess of amounts accrued.
Divestiture Obligations
The Company and its predecessor companies agreed to indemnify third-party purchasers of former businesses and assets for various pre-closing conditions, as well as for breaches of representations, warranties and covenants. Such liabilities also include environmental liability, product liability, antitrust and other liabilities. These indemnifications and guarantees represent standard contractual terms associated with typical divestiture agreements and, other than environmental liabilities, the Company does not believe that they expose the Company to any significant risk (Note 11).
The Company has divested numerous businesses, investments and facilities through agreements containing indemnifications or guarantees to the purchasers. Many of the obligations contain monetary and/or time limitations, ranging from one year to thirty years. The aggregate amount of outstanding indemnifications and guarantees provided for under these agreements is $133 million as of September 30, 2013. Other agreements do not provide for any monetary or time limitations.

34




Based on the Company's evaluation of currently available information, including the number of requests for indemnification or other payment received by the Company, the Company cannot estimate the Possible Loss for the remaining divestiture obligations, if any, in excess of amounts accrued.
Purchase Obligations
In the normal course of business, the Company enters into various purchase commitments for goods and services. The Company maintains a number of "take-or-pay" contracts for purchases of raw materials, utilities and other services. Certain of the contracts contain a contract termination buy-out provision that allows for the Company to exit the contracts for amounts less than the remaining take-or-pay obligations. The Company does not expect to incur any material losses under take-or-pay contractual arrangements. Additionally, the Company has other outstanding commitments representing maintenance and service agreements, energy and utility agreements, consulting contracts and software agreements. As of September 30, 2013, the Company had unconditional purchase obligations of $3.7 billion which extend through 2034.
The Company holds variable interests in entities that supply certain raw materials and services to the Company. The variable interests primarily relate to cost-plus contractual arrangements with the suppliers and recovery of capital expenditures for certain plant assets plus a rate of return on such assets. Liabilities for such supplier recoveries of capital expenditures have been recorded as capital lease obligations. The entities are not consolidated because the Company is not the primary beneficiary of the entities as it does not have the power to direct the activities of the entities that most significantly impact the entities' economic performance. The Company's maximum exposure to loss as a result of its involvement with these variable interest entities ("VIEs") as of September 30, 2013 relates primarily to early contract termination fees.
The Company's carrying value of assets and liabilities associated with its obligations to VIEs, as well as the maximum exposure to loss relating to these VIEs are as follows:
 
As of
September 30,
2013
 
As of
December 31,
2012
 
(In $ millions)
Property, plant and equipment, net
113
 
118
 
 
 
 
Trade payables
50
 
41
Current installments of long-term debt
8
 
7
Long-term debt
137
 
140
Total
195
 
188
 
 
 
 
Maximum exposure to loss
315
 
273
The difference between the total obligations to VIEs and the maximum exposure to loss primarily represents take-or-pay obligations for services included in the unconditional purchase obligations discussed above.

35




18. Segment Information
 
Advanced
Engineered
Materials
 
Consumer
Specialties
 
Industrial
Specialties
 
Acetyl
Intermediates
 
Other
Activities
 
Eliminations
 
Consolidated
 
 
(In $ millions)
 
Three Months Ended September 30, 2013
Net sales
346

 
310

(1) 
299

 
795

(1) 

 
(114
)
 
1,636

 
Other (charges) gains, net
(2
)
 

 
(1
)
 
(1
)
 

 

 
(4
)
 
Operating profit (loss)
48

 
85

  
24

 
67

 
(13
)
 

 
211

 
Equity in net earnings (loss) of affiliates
30

 

  

 
3

 
8

 

 
41

 
Depreciation and amortization
27

 
10

  
13

 
22

 
4

 

 
76

 
Capital expenditures
14

 
33

  
8

 
45

 
2

 

 
102

(2) 
 
Three Months Ended September 30, 2012 - As Adjusted (Note 1)
Net sales
322

 
314

(1) 
297

 
785

(1) 

 
(109
)
 
1,609

  
Other (charges) gains, net
1

 
(1
)
 

 
1

 
1

 

 
2

 
Operating profit (loss)
44

 
72

 
25

 
63

  
(28
)
 

 
176

 
Equity in net earnings (loss) of affiliates
45

 

  

 

  
5

 

 
50

 
Depreciation and amortization
29

 
13

  
13

 
20

 
3

 

 
78

 
Capital expenditures
11

 
14

  
9

 
47

  
2

 

 
83

(2) 
______________________________
(1) 
Net sales for Acetyl Intermediates and Consumer Specialties include inter-segment sales of $114 million and $0 million, respectively, for the three months ended September 30, 2013 and $109 million and $0 million, respectively, for the three months ended September 30, 2012.
(2) 
Excludes expenditures related to the relocation of the Company’s polyacetal ("POM") operations in Germany (Note 20) and includes a decrease in accrued capital expenditures of $8 million and $4 million for the three months ended September 30, 2013 and 2012, respectively.


36




 
Advanced
Engineered
Materials
 
Consumer
Specialties
 
Industrial
Specialties
 
Acetyl
Intermediates
 
Other
Activities
 
Eliminations
 
Consolidated
 
 
(In $ millions)
 
Nine Months Ended September 30, 2013
 
Net sales
1,027

 
919

(1) 
882

 
2,412

(1) 

 
(346
)
 
4,894

 
Other (charges) gains, net
(6
)
 

 
(3
)
 
(2
)
 

 

 
(11
)
 
Operating profit (loss)
123

 
246

  
57

 
197

 
(59
)
 

 
564

 
Equity in net earnings (loss) of affiliates
115

 
3

  

 
7

 
25

 

 
150

 
Depreciation and amortization
83

 
30

  
37

 
65

 
12

 

 
227

 
Capital expenditures
35

 
76

  
19

 
116

 
6

 

 
252

(2) 
 
As of September 30, 2013
 
Goodwill and intangibles, net
366

 
276

 
60

 
232

 

 

 
934

 
Total assets
2,794

 
1,409

 
1,032

 
2,350

 
1,927

 

 
9,512

 
 
Nine Months Ended September 30, 2012 - As Adjusted (Note 1)
Net sales
962

 
905

(1) 
933

 
2,458

(1) 

 
(341
)
 
4,917

  
Other (charges) gains, net
(1
)
 
2

 

 
2

 
(4
)
 

 
(1
)
 
Operating profit (loss)
91

 
189

 
80

 
203

  
(98
)
 

 
465

 
Equity in net earnings (loss) of affiliates
143

 
2

  

 
3

  
15

 

 
163

 
Depreciation and amortization
84

 
33

  
41

 
59

 
10

 

 
227

 
Capital expenditures
28

 
48

  
25

 
122

  
13

 

 
236

(2) 
 
As of December 31, 2012
Goodwill and intangibles, net
372

 
276

 
65

 
229

 

 

 
942

 
Total assets
2,703

 
1,296

 
963

 
2,238

 
1,800

 

 
9,000

 
______________________________
(1) 
Net sales for Acetyl Intermediates and Consumer Specialties include inter-segment sales of $342 million and $4 million, respectively, for the nine months ended September 30, 2013 and $338 million and $3 million, respectively, for the nine months ended September 30, 2012.
(2) 
Excludes expenditures related to the relocation of the Company’s POM operations in Germany (Note 20) and includes a decrease in accrued capital expenditures of $7 million and $34 million for the nine months ended September 30, 2013 and 2012, respectively.

37




19. Earnings (Loss) Per Share
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2013
 
2012
 
2013
 
2012
 
 
 
As Adjusted
 
 
 
As Adjusted
 
(In $ millions, except share and per share data)
Amounts Attributable to Celanese Corporation
 
 
 
 
 
 
 
Earnings (loss) from continuing operations
171

 
129

 
445

 
543

Earnings (loss) from discontinued operations
1

 
(2
)
 
2

 
(2
)
Net earnings (loss)
172

 
127

 
447

 
541

 
 
 
 
 
 
 
 
Weighted average shares - basic
158,501,075

 
159,158,280

 
159,282,314

 
157,970,535

Dilutive stock options
230,110

 
292,661

 
229,920

 
1,054,012

Dilutive restricted stock units
364,346

 
678,435

 
334,359

 
654,091

Weighted average shares - diluted
159,095,531

 
160,129,376

 
159,846,593

 
159,678,638

Securities not included in the computation of diluted net earnings per share as their effect would have been antidilutive are as follows:
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2013
 
2012
 
2013
 
2012
Stock options
38,140

 
30,032

 
94,631

 
15,016

Restricted stock units

 
92

 

 
5,328

Total
38,140

 
30,124

 
94,631

 
20,344

20. Plant Relocation
In November 2006, the Company finalized a settlement agreement with the Frankfurt, Germany Airport ("Fraport") that required the Company to cease operations at its Kelsterbach, Germany POM site and sell the site, including land and buildings, to Fraport, resolving several years of legal disputes related to the planned Fraport expansion. Under the original agreement, Fraport agreed to pay the Company a total of €670 million. Title to the land and buildings will transfer to Fraport upon completion of certain activities as specified in the settlement agreement. Completion of those required activities is expected to occur no later than December 31, 2013. The agreement did not require the proceeds from the settlement be used to build or relocate the existing POM operations; however, based on a number of factors, the Company built a new expanded production facility in the Frankfurt Hoechst Industrial Park in the Rhine Main area in Germany.
The Company received its final payment from Fraport of €110 million during the three months ended June 30, 2011 and ceased POM operations at the Kelsterbach, Germany site prior to July 31, 2011. In September 2011, the Company announced the opening of its new POM production facility in Frankfurt Hoechst Industrial Park, Germany.

38




A summary of the financial statement impact associated with the Kelsterbach plant relocation is as follows:
 
Nine Months Ended
September 30,
 
Total From
Inception
Through
September 30, 2013
 
2013
 
2012
 
 
(In $ millions)
Deferred proceeds (1)

 

 
907

Costs expensed
6

 
5

 
119

Costs capitalized (2)
4

 
30

 
1,131

Lease buyout

 

 
22

Employee termination benefits

 

 
8

_____________________________
(1) 
Included in noncurrent Other liabilities in the consolidated balance sheets. Amounts reflect the US dollar equivalent at the time of receipt. Upon transfer of the land and buildings to Fraport, the deferred proceeds will be recognized in the consolidated statements of operations. Such proceeds will be reduced by assets of €6 million included in Property, plant and equipment, net and €103 million included in noncurrent Other assets in the consolidated balance sheets, to be transferred to Fraport or otherwise disposed.
(2) 
Includes a decrease in accrued capital expenditures of $2 million and $13 million for the nine months ended September 30, 2013 and 2012, respectively.
21. Consolidating Guarantor Financial Information
The Senior Notes were issued by Celanese US (the "Issuer") and are guaranteed by Celanese Corporation (the "Parent Guarantor") and the Subsidiary Guarantors (Note 9). The Issuer and Subsidiary Guarantors are 100% owned subsidiaries of the Parent Guarantor. The Parent Guarantor and Subsidiary Guarantors have guaranteed the Notes fully and unconditionally and jointly and severally.
For cash management purposes, the Company transfers cash between Parent Guarantor, Issuer, Subsidiary Guarantors and non-guarantors through intercompany financing arrangements, contributions or declaration of dividends between the respective parent and its subsidiaries. The transfer of cash under these activities facilitates the ability of the recipient to make specified third-party payments for principal and interest on the Company's outstanding debt, Common Stock dividends and Common Stock repurchases. The consolidating statements of cash flow for the nine months ended September 30, 2013 and 2012 present such intercompany financing activities, contributions and dividends consistent with how such activity would be presented in a stand-alone statement of cash flows. Previously, the Company presented such activity within the category where the ultimate use of cash to third parties was presented in the consolidated statements of cash flow. Prior amounts have been revised to conform to the current presentation.
The Company has not presented separate financial information and other disclosures for each of its Subsidiary Guarantors because it believes such financial information and other disclosures would not provide investors with any additional information that would be material in evaluating the sufficiency of the guarantees.

39




The unaudited interim consolidating financial statements for the Parent Guarantor, the Issuer, the Subsidiary Guarantors and the non-guarantors are as follows:
CELANESE CORPORATION AND SUBSIDIARIES
UNAUDITED INTERIM CONSOLIDATING STATEMENT OF OPERATIONS
 
Three Months Ended September 30, 2013
 
Parent
Guarantor
 
Issuer
 
Subsidiary
Guarantors
 
Non-
Guarantors
 
Eliminations
 
Consolidated
 
(In $ millions)
Net sales

 

 
709

 
1,250

 
(323
)
 
1,636

Cost of sales

 

 
(477
)
 
(1,136
)
 
323

 
(1,290
)
Gross profit

 

 
232

 
114

 

 
346

Selling, general and administrative expenses

 

 
(18
)
 
(79
)
 

 
(97
)
Amortization of intangible assets

 

 
(2
)
 
(4
)
 

 
(6
)
Research and development expenses

 

 
(17
)
 
(7
)
 

 
(24
)
Other (charges) gains, net

 

 
(1
)
 
(3
)
 

 
(4
)
Foreign exchange gain (loss), net

 

 

 
(2
)
 

 
(2
)
Gain (loss) on disposition of businesses and assets, net

 

 

 
(2
)
 

 
(2
)
Operating profit (loss)

 

 
194

 
17

 

 
211

Equity in net earnings (loss) of affiliates
172

 
200

 
35

 
30

 
(396
)
 
41

Interest expense

 
(48
)
 
(8
)
 
(19
)
 
32

 
(43
)
Refinancing expense

 
(1
)
 

 

 

 
(1
)
Interest income

 
14

 
17

 
1

 
(32
)
 

Dividend income - cost investments

 

 

 
22

 

 
22

Other income (expense), net

 

 

 
(2
)
 

 
(2
)
Earnings (loss) from continuing operations before tax
172

 
165

 
238

 
49

 
(396
)
 
228

Income tax (provision) benefit

 
7

 
(63
)
 
(1
)
 

 
(57
)
Earnings (loss) from continuing operations
172

 
172

 
175

 
48

 
(396
)
 
171

Earnings (loss) from operation of discontinued operations

 

 
1

 

 

 
1

Gain (loss) on disposition of discontinued operations

 

 

 

 

 

Income tax (provision) benefit from discontinued operations

 

 

 

 

 

Earnings (loss) from discontinued operations

 

 
1

 

 

 
1

Net earnings (loss)
172

 
172

 
176

 
48

 
(396
)
 
172

Net (earnings) loss attributable to noncontrolling interests

 

 

 

 

 

Net earnings (loss) attributable to Celanese Corporation
172

 
172

 
176

 
48

 
(396
)
 
172


40




CELANESE CORPORATION AND SUBSIDIARIES
UNAUDITED INTERIM CONSOLIDATING STATEMENT OF OPERATIONS
 
Three Months Ended September 30, 2012
 
Parent
Guarantor
 
Issuer
 
Subsidiary
Guarantors
 
Non-
Guarantors
 
Eliminations
 
Consolidated
 
As Adjusted (Note 1)
 
(In $ millions)
Net sales

 

 
670

 
1,196

 
(257
)
 
1,609

Cost of sales

 

 
(467
)
 
(1,079
)
 
265

 
(1,281
)
Gross profit

 

 
203

 
117

 
8

 
328

Selling, general and administrative expenses

 

 
(34
)
 
(79
)
 

 
(113
)
Amortization of intangible assets

 

 
(4
)
 
(8
)
 

 
(12
)
Research and development expenses

 

 
(16
)
 
(7
)
 

 
(23
)
Other (charges) gains, net

 

 
6

 
(4
)
 

 
2

Foreign exchange gain (loss), net

 

 

 
(4
)
 

 
(4
)
Gain (loss) on disposition of businesses and assets, net

 

 
(1
)
 
(1
)
 

 
(2
)
Operating profit (loss)

 

 
154

 
14

 
8

 
176

Equity in net earnings (loss) of affiliates
126

 
151

 
44

 
37

 
(308
)
 
50

Interest expense

 
(48
)
 
(10
)
 
(18
)
 
32

 
(44
)
Refinancing expense

 

 

 

 

 

Interest income

 
14

 
16

 
2

 
(32
)
 

Dividend income - cost investments

 

 

 
1

 

 
1

Other income (expense), net

 
(1
)
 

 
4

 

 
3

Earnings (loss) from continuing operations before tax
126

 
116

 
204

 
40

 
(300
)
 
186

Income tax (provision) benefit
1

 
10

 
(58
)
 
(8
)
 
(2
)
 
(57
)
Earnings (loss) from continuing operations
127

 
126

 
146

 
32

 
(302
)
 
129

Earnings (loss) from operation of discontinued operations

 

 
(2
)
 
(1
)
 

 
(3
)
Gain (loss) on disposition of discontinued operations

 

 

 

 

 

Income tax (provision) benefit from discontinued operations

 

 
1

 

 

 
1

Earnings (loss) from discontinued operations

 

 
(1
)
 
(1
)
 

 
(2
)
Net earnings (loss)
127

 
126

 
145

 
31

 
(302
)
 
127

Net (earnings) loss attributable to noncontrolling interests

 

 

 

 

 

Net earnings (loss) attributable to Celanese Corporation
127

 
126

 
145

 
31

 
(302
)
 
127











41




CELANESE CORPORATION AND SUBSIDIARIES
UNAUDITED INTERIM CONSOLIDATING STATEMENT OF OPERATIONS
 
Nine Months Ended September 30, 2013
 
Parent
Guarantor
 
Issuer
 
Subsidiary
Guarantors
 
Non-
Guarantors
 
Eliminations
 
Consolidated
 
(In $ millions)
Net sales

 

 
2,121

 
3,699

 
(926
)
 
4,894

Cost of sales

 

 
(1,455
)
 
(3,369
)
 
928

 
(3,896
)
Gross profit

 

 
666

 
330

 
2

 
998

Selling, general and administrative expenses

 

 
(65
)
 
(251
)
 

 
(316
)
Amortization of intangible assets

 

 
(9
)
 
(17
)
 

 
(26
)
Research and development expenses

 

 
(48
)
 
(25
)
 

 
(73
)
Other (charges) gains, net

 

 
3

 
(10
)
 
(4
)
 
(11
)
Foreign exchange gain (loss), net

 

 

 
(5
)
 

 
(5
)
Gain (loss) on disposition of businesses and assets, net

 

 

 
(3
)
 

 
(3
)
Operating profit (loss)

 

 
547

 
19

 
(2
)
 
564

Equity in net earnings (loss) of affiliates
443

 
528

 
117

 
124

 
(1,062
)
 
150

Interest expense

 
(144
)
 
(27
)
 
(51
)
 
92

 
(130
)
Refinancing expense

 
(1
)
 

 

 

 
(1
)
Interest income

 
41

 
48

 
4

 
(92
)
 
1

Dividend income - cost investments

 

 

 
69

 

 
69

Other income (expense), net

 

 

 
1

 

 
1

Earnings (loss) from continuing operations before tax
443

 
424

 
685

 
166

 
(1,064
)
 
654

Income tax (provision) benefit
4

 
19

 
(176
)
 
(56
)
 

 
(209
)
Earnings (loss) from continuing operations
447

 
443

 
509

 
110

 
(1,064
)
 
445

Earnings (loss) from operation of discontinued operations

 

 
3

 

 

 
3

Gain (loss) on disposition of discontinued operations

 

 

 

 

 

Income tax (provision) benefit from discontinued operations

 

 
(1
)
 

 

 
(1
)
Earnings (loss) from discontinued operations

 

 
2

 

 

 
2

Net earnings (loss)
447

 
443

 
511

 
110

 
(1,064
)
 
447

Net (earnings) loss attributable to noncontrolling interests

 

 

 

 

 

Net earnings (loss) attributable to Celanese Corporation
447

 
443

 
511

 
110

 
(1,064
)
 
447





42




CELANESE CORPORATION AND SUBSIDIARIES
UNAUDITED INTERIM CONSOLIDATING STATEMENT OF OPERATIONS
 
Nine Months Ended September 30, 2012
 
Parent
Guarantor
 
Issuer
 
Subsidiary
Guarantors
 
Non-
Guarantors
 
Eliminations
 
Consolidated
 
As Adjusted (Note 1)
 
(In $ millions)
Net sales

 

 
2,044

 
3,684

 
(811
)
 
4,917

Cost of sales

 

 
(1,462
)
 
(3,339
)
 
821

 
(3,980
)
Gross profit

 

 
582

 
345

 
10

 
937

Selling, general and administrative expenses

 

 
(112
)
 
(242
)
 

 
(354
)
Amortization of intangible assets

 

 
(13
)
 
(25
)
 

 
(38
)
Research and development expenses

 

 
(48
)
 
(25
)
 

 
(73
)
Other (charges) gains, net

 

 
13

 
(8
)
 
(6
)
 
(1
)
Foreign exchange gain (loss), net

 

 

 
(4
)
 

 
(4
)
Gain (loss) on disposition of businesses and assets, net

 

 
(1
)
 
(1
)
 

 
(2
)
Operating profit (loss)

 

 
421

 
40

 
4

 
465

Equity in net earnings (loss) of affiliates
539

 
608

 
134

 
128

 
(1,246
)
 
163

Interest expense

 
(144
)
 
(31
)
 
(55
)
 
96

 
(134
)
Refinancing expense

 

 

 

 

 

Interest income

 
44

 
48

 
5

 
(96
)
 
1

Dividend income - cost investments

 

 

 
85

 

 
85

Other income (expense), net

 

 

 
4

 

 
4

Earnings (loss) from continuing operations before tax
539

 
508

 
572

 
207

 
(1,242
)
 
584

Income tax (provision) benefit
2

 
31

 
(42
)
 
(31
)
 
(1
)
 
(41
)
Earnings (loss) from continuing operations
541

 
539

 
530

 
176

 
(1,243
)
 
543

Earnings (loss) from operation of discontinued operations

 

 
(2
)
 
(1
)
 

 
(3
)
Gain (loss) on disposition of discontinued operations

 

 

 

 

 

Income tax (provision) benefit from discontinued operations

 

 
1

 

 

 
1

Earnings (loss) from discontinued operations

 

 
(1
)
 
(1
)
 

 
(2
)
Net earnings (loss)
541

 
539

 
529

 
175

 
(1,243
)
 
541

Net (earnings) loss attributable to noncontrolling interests

 

 

 

 

 

Net earnings (loss) attributable to Celanese Corporation
541

 
539

 
529

 
175

 
(1,243
)
 
541



43




CELANESE CORPORATION AND SUBSIDIARIES
UNAUDITED INTERIM CONSOLIDATING STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
 
Three Months Ended September 30, 2013
 
Parent
Guarantor
 
Issuer
 
Subsidiary
Guarantors
 
Non-
Guarantors
 
Eliminations
 
Consolidated
 
(In $ millions)
Net earnings (loss)
172

 
172

 
176

 
48

 
(396
)
 
172

Other comprehensive income (loss), net of tax
 
 
 
 
 
 
 
 
 
 
 
Unrealized gain (loss) on marketable securities
1

 
1

 
1

 

 
(2
)
 
1

Foreign currency translation
42

 
42

 
1

 
(4
)
 
(39
)
 
42

Gain (loss) on interest rate swaps
1

 
1

 
1

 

 
(2
)
 
1

Pension and postretirement benefits

 

 

 

 

 

Total other comprehensive income (loss), net of tax
44

 
44

 
3

 
(4
)
 
(43
)
 
44

Total comprehensive income (loss), net of tax
216

 
216

 
179

 
44

 
(439
)
 
216

Comprehensive (income) loss attributable to noncontrolling interests

 

 

 

 

 

Comprehensive income (loss) attributable to Celanese Corporation
216

 
216

 
179

 
44

 
(439
)
 
216

 
Three Months Ended September 30, 2012
 
Parent
Guarantor
 
Issuer
 
Subsidiary
Guarantors
 
Non-
Guarantors
 
Eliminations
 
Consolidated
 
As Adjusted (Note 1)
 
(In $ millions)
Net earnings (loss)
127

 
126

 
145

 
31

 
(302
)
 
127

Other comprehensive income (loss), net of tax
 
 
 
 
 
 
 
 
 
 
 
Unrealized gain (loss) on marketable securities

 

 

 

 

 

Foreign currency translation
28

 
28

 
(5
)
 
(1
)
 
(22
)
 
28

Gain (loss) on interest rate swaps
(2
)
 
(2
)
 

 

 
2

 
(2
)
Pension and postretirement benefits

 

 

 

 

 

Total other comprehensive income (loss), net of tax
26

 
26

 
(5
)
 
(1
)
 
(20
)
 
26

Total comprehensive income (loss), net of tax
153

 
152

 
140

 
30

 
(322
)
 
153

Comprehensive (income) loss attributable to noncontrolling interests

 

 

 

 

 

Comprehensive income (loss) attributable to Celanese Corporation
153

 
152

 
140

 
30

 
(322
)
 
153



44




CELANESE CORPORATION AND SUBSIDIARIES
UNAUDITED INTERIM CONSOLIDATING STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
 
Nine Months Ended September 30, 2013
 
Parent
Guarantor
 
Issuer
 
Subsidiary
Guarantors
 
Non-
Guarantors
 
Eliminations
 
Consolidated
 
(In $ millions)
Net earnings (loss)
447

 
443

 
511

 
110

 
(1,064
)
 
447

Other comprehensive income (loss), net of tax
 
 
 
 
 
 
 
 
 
 
 
Unrealized gain (loss) on marketable securities
1

 
1

 
1

 

 
(2
)
 
1

Foreign currency translation
37

 
37

 
4

 
(2
)
 
(39
)
 
37

Gain (loss) on interest rate swaps
4

 
4

 

 

 
(4
)
 
4

Pension and postretirement benefits

 

 

 

 

 

Total other comprehensive income (loss), net of tax
42

 
42

 
5

 
(2
)
 
(45
)
 
42

Total comprehensive income (loss), net of tax
489

 
485

 
516

 
108

 
(1,109
)
 
489

Comprehensive (income) loss attributable to noncontrolling interests

 

 

 

 

 

Comprehensive income (loss) attributable to Celanese Corporation
489

 
485

 
516

 
108

 
(1,109
)
 
489

 
Nine Months Ended September 30, 2012
 
Parent
Guarantor
 
Issuer
 
Subsidiary
Guarantors
 
Non-
Guarantors
 
Eliminations
 
Consolidated
 
As Adjusted (Note 1)
 
(In $ millions)
Net earnings (loss)
541

 
539

 
529

 
175

 
(1,243
)
 
541

Other comprehensive income (loss), net of tax
 
 
 
 
 
 
 
 
 
 
 
Unrealized gain (loss) on marketable securities

 

 

 

 

 

Foreign currency translation
4

 
4

 
1

 
4

 
(9
)
 
4

Gain (loss) on interest rate swaps
(1
)
 
(1
)
 

 

 
1

 
(1
)
Pension and postretirement benefits
(6
)
 
(6
)
 
(6
)
 
(3
)
 
15

 
(6
)
Total other comprehensive income (loss), net of tax
(3
)
 
(3
)
 
(5
)
 
1

 
7

 
(3
)
Total comprehensive income (loss), net of tax
538

 
536

 
524

 
176

 
(1,236
)
 
538

Comprehensive (income) loss attributable to noncontrolling interests

 

 

 

 

 

Comprehensive income (loss) attributable to Celanese Corporation
538

 
536

 
524

 
176

 
(1,236
)
 
538




45




CELANESE CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATING BALANCE SHEET
 
As of September 30, 2013
 
Parent
Guarantor
 
Issuer
 
Subsidiary
Guarantors
 
Non-
Guarantors
 
Eliminations
 
Consolidated
 
(In $ millions)
ASSETS
 

 
 

 
 

 
 

 
 

 
 

Current Assets
 

 
 

 
 

 
 

 
 

 
 

Cash and cash equivalents

 

 
398

 
702

 

 
1,100

Trade receivables - third party and affiliates

 

 
158

 
962

 
(171
)
 
949

Non-trade receivables, net
32

 
455

 
2,032

 
550

 
(2,776
)
 
293

Inventories, net

 

 
217

 
608

 
(72
)
 
753

Deferred income taxes

 

 
64

 
7

 
(21
)
 
50

Marketable securities, at fair value

 

 
44

 

 

 
44

Other assets

 
7

 
19

 
35

 
(22
)
 
39

Total current assets
32

 
462

 
2,932

 
2,864

 
(3,062
)
 
3,228

Investments in affiliates
2,052

 
3,846

 
1,728

 
588

 
(7,357
)
 
857

Property, plant and equipment, net

 

 
890

 
2,501

 

 
3,391

Deferred income taxes

 
3

 
508

 
93

 

 
604

Other assets

 
1,938

 
132

 
452

 
(2,024
)
 
498

Goodwill

 

 
305

 
482

 

 
787

Intangible assets, net

 

 
66

 
81

 

 
147

Total assets
2,084

 
6,249

 
6,561

 
7,061

 
(12,443
)
 
9,512

LIABILITIES AND EQUITY
Current Liabilities
 

 
 

 
 

 
 

 
 

 
 

Short-term borrowings and current installments of long-term debt - third party and affiliates

 
1,636

 
125

 
402

 
(1,939
)
 
224

Trade payables - third party and affiliates

 

 
297

 
613

 
(171
)
 
739

Other liabilities

 
65

 
377

 
417

 
(402
)
 
457

Deferred income taxes

 
21

 

 
25

 
(21
)
 
25

Income taxes payable

 

 
541

 
87

 
(476
)
 
152

Total current liabilities

 
1,722

 
1,340

 
1,544

 
(3,009
)
 
1,597

Noncurrent Liabilities
 
 
 
 
 
 
 
 
 
 
 
Long-term debt

 
2,466

 
812

 
1,614

 
(2,022
)
 
2,870

Deferred income taxes

 

 
13

 
48

 

 
61

Uncertain tax positions

 
6

 
26

 
171

 

 
203

Benefit obligations

 

 
1,311

 
235

 

 
1,546

Other liabilities

 
3

 
93

 
1,065

 
(10
)
 
1,151

Total noncurrent liabilities

 
2,475

 
2,255

 
3,133

 
(2,032
)
 
5,831

Total Celanese Corporation stockholders’ equity
2,084

 
2,052

 
2,966

 
2,384

 
(7,402
)
 
2,084

Noncontrolling interests

 

 

 

 

 

Total equity
2,084

 
2,052

 
2,966

 
2,384

 
(7,402
)
 
2,084

Total liabilities and equity
2,084

 
6,249

 
6,561

 
7,061

 
(12,443
)
 
9,512


46




CELANESE CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATING BALANCE SHEET
 
As of December 31, 2012
 
Parent
Guarantor
 
Issuer
 
Subsidiary
Guarantors
 
Non-
Guarantors
 
Eliminations
 
Consolidated
 
(In $ millions)
ASSETS
 

 
 

 
 

 
 

 
 

 
 

Current Assets
 

 
 

 
 

 
 

 
 

 
 

Cash and cash equivalents
10

 

 
275

 
674

 

 
959

Trade receivables - third party and affiliates

 

 
340

 
653

 
(166
)
 
827

Non-trade receivables, net
31

 
444

 
1,754

 
484

 
(2,504
)
 
209

Inventories, net

 

 
196

 
589

 
(74
)
 
711

Deferred income taxes

 

 
62

 
8

 
(21
)
 
49

Marketable securities, at fair value

 

 
52

 
1

 

 
53

Other assets

 
5

 
15

 
27

 
(16
)
 
31

Total current assets
41

 
449

 
2,694

 
2,436

 
(2,781
)
 
2,839

Investments in affiliates
1,692

 
3,437

 
1,579

 
570

 
(6,478
)
 
800

Property, plant and equipment, net

 

 
813

 
2,537

 

 
3,350

Deferred income taxes

 
5

 
509

 
92

 

 
606

Other assets

 
1,927

 
132

 
414

 
(2,010
)
 
463

Goodwill

 

 
305

 
472

 

 
777

Intangible assets, net

 

 
69

 
96

 

 
165

Total assets
1,733

 
5,818

 
6,101

 
6,617

 
(11,269
)
 
9,000

LIABILITIES AND EQUITY
Current Liabilities
 

 
 

 
 

 
 

 
 

 
 

Short-term borrowings and current installments of long-term debt - third party and affiliates

 
1,584

 
208

 
159

 
(1,783
)
 
168

Trade payables - third party and affiliates

 

 
269

 
546

 
(166
)
 
649

Other liabilities

 
40

 
267

 
475

 
(307
)
 
475

Deferred income taxes

 
21

 

 
25

 
(21
)
 
25

Income taxes payable

 

 
419

 
73

 
(454
)
 
38

Total current liabilities

 
1,645

 
1,163

 
1,278

 
(2,731
)
 
1,355

Noncurrent Liabilities
 
 
 
 
 
 
 
 
 
 
 
Long-term debt

 
2,467

 
872

 
1,597

 
(2,006
)
 
2,930

Deferred income taxes

 

 

 
50

 

 
50

Uncertain tax positions
3

 
6

 
23

 
149

 

 
181

Benefit obligations

 

 
1,362

 
240

 

 
1,602

Other liabilities

 
8

 
101

 
1,055

 
(12
)
 
1,152

Total noncurrent liabilities
3

 
2,481

 
2,358

 
3,091

 
(2,018
)
 
5,915

Total Celanese Corporation stockholders’ equity
1,730

 
1,692

 
2,580

 
2,248

 
(6,520
)
 
1,730

Noncontrolling interests

 

 

 

 

 

Total equity
1,730

 
1,692

 
2,580

 
2,248

 
(6,520
)
 
1,730

Total liabilities and equity
1,733

 
5,818

 
6,101

 
6,617

 
(11,269
)
 
9,000


47




CELANESE CORPORATION AND SUBSIDIARIES
UNAUDITED INTERIM CONSOLIDATING STATEMENT OF CASH FLOWS
 
Nine Months Ended September 30, 2013
 
Parent
Guarantor
 
Issuer
 
Subsidiary
Guarantors
 
Non-
Guarantors
 
Eliminations
 
Consolidated
 
(In $ millions)
Net cash provided by (used in) operating activities
144

 
58

 
650

 
44

 
(288
)
 
608

Investing Activities
 

 
 

 
 

 
 

 
 

 
 

Capital expenditures on property, plant and equipment

 

 
(172
)
 
(87
)
 

 
(259
)
Acquisitions, net of cash acquired

 

 

 

 

 

Proceeds from sale of businesses and assets, net

 

 

 
13

 

 
13

Deferred proceeds from Kelsterbach plant relocation

 

 

 

 

 

Capital expenditures related to Kelsterbach plant relocation

 

 

 
(6
)
 

 
(6
)
Return of capital from subsidiary

 

 

 

 

 

Contributions to subsidiary

 

 
(20
)
 

 
20

 

Intercompany loan receipts (disbursements)

 
4

 
(92
)
 

 
88

 

Other, net

 

 
(26
)
 
(12
)
 

 
(38
)
Net cash provided by (used in) investing activities

 
4

 
(310
)
 
(92
)
 
108

 
(290
)
Financing Activities
 

 
 

 
 

 
 

 
 

 
 

Short-term borrowings (repayments), net

 
92

 
(4
)
 
(8
)
 
(92
)
 
(12
)
Proceeds from short-term borrowings

 

 

 
154

 

 
154

Repayments of short-term borrowings

 

 

 
(51
)
 

 
(51
)
Proceeds from long-term debt

 
24

 
50

 

 

 
74

Repayments of long-term debt

 
(32
)
 
(119
)
 
(45
)
 
4

 
(192
)
Refinancing costs

 
(2
)
 

 

 

 
(2
)
Purchases of treasury stock, including related fees
(102
)
 

 

 

 

 
(102
)
Dividends to parent

 
(144
)
 
(144
)
 

 
288

 

Contributions from parent

 

 

 
20

 
(20
)
 

Stock option exercises
3

 

 

 

 

 
3

Series A common stock dividends
(55
)
 

 

 

 

 
(55
)
Return of capital to parent

 

 

 

 

 

Other, net

 

 

 

 

 

Net cash provided by (used in) financing activities
(154
)
 
(62
)
 
(217
)
 
70

 
180

 
(183
)
Exchange rate effects on cash and cash equivalents

 

 

 
6

 

 
6

Net increase (decrease) in cash and cash equivalents
(10
)
 

 
123

 
28

 

 
141

Cash and cash equivalents as of beginning of period
10

 

 
275

 
674

 

 
959

Cash and cash equivalents as of end of period

 

 
398

 
702

 

 
1,100


48




CELANESE CORPORATION AND SUBSIDIARIES
UNAUDITED INTERIM CONSOLIDATING STATEMENT OF CASH FLOWS
 
Nine Months Ended September 30, 2012
 
Parent
Guarantor
 
Issuer
 
Subsidiary
Guarantors
 
Non-
Guarantors
 
Eliminations
 
Consolidated
 
(In $ millions)
Net cash provided by (used in) operating activities
7

 
(54
)
 
396

 
382

 
(70
)
 
661

Investing Activities
 

 
 

 
 

 
 

 
 

 
 

Capital expenditures on property, plant and equipment

 

 
(132
)
 
(138
)
 

 
(270
)
Acquisitions, net of cash acquired

 

 
(23
)
 

 

 
(23
)
Proceeds from sale of businesses and assets, net

 

 
1

 

 

 
1

Deferred proceeds from Kelsterbach plant relocation

 

 

 

 

 

Capital expenditures related to Kelsterbach plant relocation

 

 

 
(43
)
 

 
(43
)
Return of capital from subsidiary

 

 

 

 

 

Contributions to subsidiary

 

 
(3
)
 

 
3

 

Intercompany loan receipts (disbursements)

 
4

 
(96
)
 

 
92

 

Other, net

 

 
(9
)
 
(53
)
 

 
(62
)
Net cash provided by (used in) investing activities

 
4

 
(262
)
 
(234
)
 
95

 
(397
)
Financing Activities
 

 
 

 
 

 
 

 
 

 
 

Short-term borrowings (repayments), net

 
96

 
(2
)
 
(9
)
 
(92
)
 
(7
)
Proceeds from short-term borrowings

 

 

 
50

 

 
50

Repayments of short-term borrowings

 

 

 
(50
)
 

 
(50
)
Proceeds from long-term debt

 

 

 

 

 

Repayments of long-term debt

 
(11
)
 
(5
)
 
(16
)
 

 
(32
)
Refinancing costs

 

 

 

 

 

Purchases of treasury stock, including related fees
(37
)
 

 

 

 

 
(37
)
Dividends to parent

 
(35
)
 
(35
)
 

 
70

 

Contributions from parent

 

 

 
3

 
(3
)
 

Stock option exercises
58

 

 

 

 

 
58

Series A common stock dividends
(31
)
 

 

 

 

 
(31
)
Return of capital to parent

 

 

 

 

 

Other, net
29

 

 

 
(1
)
 

 
28

Net cash provided by (used in) financing activities
19

 
50

 
(42
)
 
(23
)
 
(25
)
 
(21
)
Exchange rate effects on cash and cash equivalents

 

 

 
3

 

 
3

Net increase (decrease) in cash and cash equivalents
26

 

 
92

 
128

 

 
246

Cash and cash equivalents as of beginning of period

 

 
133

 
549

 

 
682

Cash and cash equivalents as of end of period
26

 

 
225

 
677

 

 
928



49




Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
In this Quarterly Report on Form 10-Q ("Quarterly Report"), the term "Celanese" refers to Celanese Corporation, a Delaware corporation, and not its subsidiaries. The terms the "Company," "we," "our" and "us," refer to Celanese and its subsidiaries on a consolidated basis. The term "Celanese US" refers to the Company’s subsidiary, Celanese US Holdings LLC, a Delaware limited liability company, and not its subsidiaries.
The following discussion should be read in conjunction with the Celanese Corporation and Subsidiaries consolidated financial statements as of and for the year ended December 31, 2012, originally filed on February 8, 2013 with the Securities and Exchange Commission ("SEC") as part of the Company's Annual Reporting on Form 10-K (the "2012 Form 10-K") and updated to incorporate the effect of changes in the Company's pension accounting, filed on April 26, 2013 with the SEC as Exhibit 99.3 to a Current Report on Form 8-K (the "April 2013 Form 8-K") and the unaudited interim consolidated financial statements and notes thereto included elsewhere in this Quarterly Report.
Investors are cautioned that the forward-looking statements contained within this Quarterly Report involve both risk and uncertainty. Several 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 "Special Note Regarding Forward-Looking Statements" below and at the beginning of our 2012 Form 10-K.
Special Note Regarding Forward-Looking Statements
Management’s Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") and other parts of this Quarterly Report contain certain forward-looking statements and information relating to us that are based on the beliefs of our management as well as assumptions made by, and information currently available to, us. You can identify these statements by the fact that they do not relate to matters of a strictly factual or historical nature and generally discuss or relate to forecasts, estimates or other expectations regarding future events. Generally, words such as "anticipate," "believe," "estimate," "expect," "intend," "plan," "project," "may," "can," "could," "might," "will" and similar expressions, as they relate to us, are intended to identify forward-looking statements. These statements reflect our current views and beliefs with respect to future events at the time that the statements are made, are not historical facts or guarantees of future performance and are subject to significant risks, uncertainties and other factors that are difficult to predict and many of which are outside of our control. Further, certain forward-looking statements are based upon assumptions as to future events that may not prove to be accurate and, accordingly, should not have undue reliance placed upon them. All forward-looking statements made in this Quarterly Report are made as of the date hereof, and the risk that actual results will differ materially from expectations expressed in this Quarterly Report will increase with the passage of time. We undertake no obligation, and disclaim any duty, to publicly update or revise any forward-looking statements, whether as a result of new information, future events, changes in our expectations or otherwise.
See Part I - Item 1A. Risk Factors of our 2012 Form 10-K and subsequent periodic filings we make with the SEC for a description of risk factors that could significantly affect our financial results. In addition, the following factors could cause our actual results to differ materially from those results, performance or achievements that may be expressed or implied by such forward-looking statements. These factors include, among other things:
changes in general economic, business, political and regulatory conditions in the countries or regions in which we operate;
the length and depth of product and industry business cycles particularly in the automotive, electrical, textiles, electronics and construction industries;
changes in the price and availability of raw materials, particularly changes in the demand for, supply of, and market prices of ethylene, methanol, natural gas, wood pulp and fuel oil and the prices for electricity and other energy sources;
the ability to pass increases in raw material prices on to customers or otherwise improve margins through price increases;
the ability to maintain plant utilization rates and to implement planned capacity additions and expansions;
the ability to reduce or maintain their current levels of production costs and to improve productivity by implementing technological improvements to existing plants;
increased price competition and the introduction of competing products by other companies;
market acceptance of our technology;

50




the ability to obtain governmental approvals and to construct facilities on terms and schedules acceptable to the company;
changes in the degree of intellectual property and other legal protection afforded to our products or technologies, or the theft of such intellectual property;
compliance and other costs and potential disruption or interruption of production or operations due to accidents, interruptions in sources of raw materials, cyber security incidents, terrorism or political unrest, or other unforeseen events or delays in construction or operation of facilities, including as a result of geopolitical conditions, the occurrence of acts of war or terrorist incidents or as a result of weather or natural disasters;
potential liability for remedial actions and increased costs under existing or future environmental regulations, including those relating to climate change;
potential liability resulting from pending or future litigation, or from changes in the laws, regulations or policies of governments or other governmental activities in the countries in which we operate;
changes in currency exchange rates and interest rates;
our level of indebtedness, which could diminish our ability to raise additional capital to fund operations or limit our ability to react to changes in the economy or the chemicals industry; and
various other factors, both referenced and not referenced in this Quarterly Report.
Many of these factors are macroeconomic in nature and are, therefore, beyond our control. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, our actual results, performance or achievements may vary materially from those described in this Quarterly Report as anticipated, believed, estimated, expected, intended, planned or projected.
Overview
We are a global technology and specialty materials company. We are one of the world’s largest producers of acetyl products, which are intermediate chemicals, for nearly all major industries, as well as a leading global producer of high performance engineered polymers that are used in a variety of high-value applications. As a recognized innovator in the chemicals industry, we engineer and manufacture a wide variety of products essential to everyday living. Our broad product portfolio serves a diverse set of end-use applications including paints and coatings, textiles, automotive applications, consumer and medical applications, performance industrial applications, filter media, paper and packaging, chemical additives, construction, consumer and industrial adhesives, and food and beverage applications. Our products enjoy leading global positions due to our large global production capacity, operating efficiencies, proprietary production technology and competitive cost structures.
Our large and diverse global customer base primarily consists of major companies in a broad array of industries. We hold geographically balanced global positions and participate in diversified end-use applications. We combine a demonstrated track record of execution, strong performance built on shared principles and objectives, and a clear focus on growth and value creation. Known for operational excellence and execution of our business strategies, we deliver value to customers around the globe with best-in-class technologies and solutions.
In conjunction with our focus on the Celanese brand, the names of our reporting units have changed to engineered materials (formerly Advanced Engineered Materials), cellulose derivatives (formerly Acetate Products), food ingredients (formerly Nutrinova), emulsion polymers (formerly Emulsions), EVA polymers (formerly EVA Performance Polymers) and intermediate chemistry (formerly Acetyl Intermediates). There has been no change to the names or composition of the Company's business segments.
2013 Highlights:
In July 2013, we announced a 100% increase in our quarterly Series A Common Stock cash dividend, increasing the quarterly dividend rate from $0.09 to $0.18 per share of Common Stock on a quarterly basis and $0.36 to $0.72 per share of Common Stock on an annual basis. The new dividend rate began in August 2013.
We signed a Memorandum of Understanding ("MOU") with PetroChina Limited to advance the development of synthetic fuel ethanol opportunities in China utilizing our proprietary TCX® ethanol process technology.

51




We introduced six significant new product platforms from our engineered materials business at K-Fair 2013, the premier global trade fair for the plastics industry, including:
Next generation GUR® UHMW-PE with step change in material performance and processing efficiencies
Hostaform® XGC Glass Reinforced POM with superior mechanical properties
Fortron® ICE PPS with improved productivity and properties
Hostaform® PTX POM series for flexible applications
Hostaform® LPT POM for molded fuel tanks
Hostaform® POM S series expanded to include new XT grades with improved toughness
We signed an agreement with Mitsui & Co., Ltd., of Tokyo, Japan, to establish a joint venture for the production of methanol at our integrated chemical plant in Clear Lake, Texas. The total investment in the facility is estimated to be $800 million. Our portion of the investment is estimated to be $300 million, in addition to previously invested assets at our Clear Lake facility. The planned methanol facility will have an annual capacity of 1.3 million tons and is expected to begin operations in mid-2015.
In April 2013, we announced a 20% increase in our quarterly Series A Common Stock cash dividend, increasing the quarterly dividend rate from $0.075 to $0.09 per share of Common Stock on a quarterly basis and $0.30 to $0.36 per share of Common Stock on an annual basis. This new dividend rate was effective for May 2013.
We signed a MOU with Pertamina, the state-owned energy company of the Republic of Indonesia, to begin the detailed project planning phase for the development of a fuel ethanol project in Indonesia. The MOU outlines the parties' intentions to establish a joint venture under which we would own a majority share and would license our leading TCX® technology to the joint venture under a separate technology licensing agreement. Under the detailed project planning phase of the MOU, we and Pertamina will select the first production location, initiate project permitting and negotiate coal supply and other industrial partner agreements. This phase of the MOU is expected to be completed by mid-2014.
We received the JEC Innovation Award for the first thermoplastic composite tailplane for a helicopter. The new composite tailplane of the AgustaWestland AW169 helicopter results in 15 percent weight reduction from conventional composites and contributes considerably to fuel savings and lower emissions.
We introduced a new generation of Thermx® PCT grades that deliver outstanding initial reflectance and reflectance stability under heat and light as required in light-emitting diode ("LED") lighting packages found in display backlight and general lighting.
We elected Edward G. Galante to our board of directors. Mr. Galante is a former senior vice president of Exxon Mobil Corporation.
Results of Operations
Change in accounting policy regarding pension and other postretirement benefits
Effective January 1, 2013, we elected to change our accounting policy for recognizing actuarial gains and losses and changes in the fair value of plan assets for our defined benefit pension plans and other postretirement benefit plans. We now immediately recognize changes in fair value of plan assets and net actuarial gains and losses annually in the fourth quarter of each fiscal year and whenever a plan is determined to qualify for a remeasurement during a fiscal year. The remaining components of net periodic benefit cost are recorded on a quarterly basis. For further discussion, see Note 1 - Description of the Company and Basis of Presentation in the accompanying unaudited interim consolidated financial statements.
In connection with the changes in accounting policy for pension and other postretirement benefits and to properly match the actual operational expenses each business segment is incurring, we changed our allocation of net periodic benefit cost. We now allocate only the service cost and amortization of prior service cost components of our pension and postretirement plans to each business segment on a ratable basis. All other components of net periodic benefit cost (interest cost, estimated return on assets and net actuarial gains and losses) are recorded to Other Activities as these components are considered financing activities managed at the corporate level. Financial information for prior periods has been retrospectively adjusted.

52




Financial Highlights
 
Three Months Ended
September 30,
 
 
 
Nine Months Ended
September 30,
 
 
 
2013
 
2012
 
Change
 
2013
 
2012
 
Change
 
 
 
As Adjusted
 
 
 
 
 
As Adjusted
 
 
 
(unaudited)
 
(In $ millions)
Statement of Operations Data
 

 
 
 
 
 
 

 
 

 
 
Net sales
1,636

 
1,609

 
27

 
4,894

 
4,917

 
(23
)
Gross profit
346

 
328

 
18

 
998

 
937

 
61

Selling, general and administrative expenses
(97
)
 
(113
)
 
16

 
(316
)
 
(354
)
 
38

Other (charges) gains, net
(4
)
 
2

 
(6
)
 
(11
)
 
(1
)
 
(10
)
Operating profit (loss)
211

 
176

 
35

 
564

 
465

 
99

Equity in net earnings of affiliates
41

 
50

 
(9
)
 
150

 
163

 
(13
)
Interest expense
(43
)
 
(44
)
 
1

 
(130
)
 
(134
)
 
4

Dividend income - cost investments
22

 
1

 
21

 
69

 
85

 
(16
)
Earnings (loss) from continuing operations before tax
228

 
186

 
42

 
654

 
584

 
70

Amounts attributable to Celanese Corporation
 

 
 

 


 
 

 
 

 


Earnings (loss) from continuing operations
171

 
129

 
42

 
445

 
543

 
(98
)
Earnings (loss) from discontinued operations
1

 
(2
)
 
3

 
2

 
(2
)
 
4

Net earnings (loss)
172

 
127

 
45

 
447

 
541

 
(94
)
Other Data
 

 
 

 
 
 
 

 
 

 
 
Depreciation and amortization
76

 
78

 
(2
)
 
227

 
227

 

Operating margin(1)
12.9
%
 
10.9
%
 


 
11.5
%
 
9.5
%
 


Other (charges) gains, net
 
 
 
 
 
 
 
 
 
 
 
Employee termination benefits

 
(1
)
 
1

 
(3
)
 
(2
)
 
(1
)
Kelsterbach plant relocation
(2
)
 
(3
)
 
1

 
(6
)
 
(5
)
 
(1
)
Plumbing actions

 
4

 
(4
)
 

 
4

 
(4
)
Asset impairments
(2
)
 

 
(2
)
 
(2
)
 

 
(2
)
Commercial disputes

 
2

 
(2
)
 

 
2

 
(2
)
Total other (charges) gains, net
(4
)
 
2

 
(6
)
 
(11
)
 
(1
)
 
(10
)
______________________________
(1)  
Defined as operating profit (loss) divided by net sales.
 
As of
September 30,
2013
 
As of
December 31,
2012
 
(unaudited)
 
(In $ millions)
Balance Sheet Data
 

 
 

Cash and cash equivalents
1,100

 
959

 
 
 
 
Short-term borrowings and current installments of long-term debt - third party and affiliates
224

 
168

Long-term debt
2,870

 
2,930

Total debt
3,094

 
3,098


53




Selected Data by Business Segment
 
Three Months Ended
September 30,
 
 
 
Nine Months Ended
September 30,
 
 
 
2013
 
2012
 
Change
 
2013
 
2012
 
Change
 
 
 
As Adjusted
 
 
 
 
 
As Adjusted
 
 
 
(unaudited)
 
(In $ millions, except percentages)
Net Sales
 

 
 

 
 

 
 

 
 
 
 
Advanced Engineered Materials
346

 
322

 
24

 
1,027

 
962

 
65

Consumer Specialties
310

 
314

 
(4
)
 
919

 
905

 
14

Industrial Specialties
299

 
297

 
2

 
882

 
933

 
(51
)
Acetyl Intermediates
795

 
785

 
10

 
2,412

 
2,458

 
(46
)
Other Activities

 

 

 

 

 

Inter-segment eliminations
(114
)
 
(109
)
 
(5
)
 
(346
)
 
(341
)
 
(5
)
Total
1,636

 
1,609

 
27

 
4,894

 
4,917

 
(23
)
Other (Charges) Gains, Net
 

 
 

 
 

 
 

 
 

 
 

Advanced Engineered Materials
(2
)
 
1

 
(3
)
 
(6
)
 
(1
)
 
(5
)
Consumer Specialties

 
(1
)
 
1

 

 
2

 
(2
)
Industrial Specialties
(1
)
 

 
(1
)
 
(3
)
 

 
(3
)
Acetyl Intermediates
(1
)
 
1

 
(2
)
 
(2
)
 
2

 
(4
)
Other Activities

 
1

 
(1
)
 

 
(4
)
 
4

Total
(4
)
 
2

 
(6
)
 
(11
)
 
(1
)
 
(10
)
Operating Profit (Loss)
 

 
 

 
 

 
 

 
 

 
 

Advanced Engineered Materials
48

 
44

 
4

 
123

 
91

 
32

Consumer Specialties
85

 
72

 
13

 
246

 
189

 
57

Industrial Specialties
24

 
25

 
(1
)
 
57

 
80

 
(23
)
Acetyl Intermediates
67

 
63

 
4

 
197

 
203

 
(6
)
Other Activities
(13
)
 
(28
)
 
15

 
(59
)
 
(98
)
 
39

Total
211

 
176

 
35

 
564

 
465

 
99

Earnings (Loss) From Continuing Operations Before Tax
 

 
 

 
 

 
 

 
 

 
 

Advanced Engineered Materials
79

 
89

 
(10
)
 
239

 
234

 
5

Consumer Specialties
106

 
72

 
34

 
317

 
274

 
43

Industrial Specialties
24

 
25

 
(1
)
 
57

 
80

 
(23
)
Acetyl Intermediates
70

 
65

 
5

 
206

 
208

 
(2
)
Other Activities
(51
)
 
(65
)
 
14

 
(165
)
 
(212
)
 
47

Total
228

 
186

 
42

 
654

 
584

 
70

Depreciation and Amortization
 

 
 

 
 

 
 

 
 

 
 

Advanced Engineered Materials
27

 
29

 
(2
)
 
83

 
84

 
(1
)
Consumer Specialties
10

 
13

 
(3
)
 
30

 
33

 
(3
)
Industrial Specialties
13

 
13

 

 
37

 
41

 
(4
)
Acetyl Intermediates
22

 
20

 
2

 
65

 
59

 
6

Other Activities
4

 
3

 
1

 
12

 
10

 
2

Total
76

 
78

 
(2
)
 
227

 
227

 

Operating Margin
 

 
 

 
 

 
 

 
 

 
 

Advanced Engineered Materials
13.9
%
 
13.7
%


 
12.0
%
 
9.5
%



Consumer Specialties
27.4
%
 
22.9
%


 
26.8
%
 
20.9
%



Industrial Specialties
8.0
%
 
8.4
%


 
6.5
%
 
8.6
%



Acetyl Intermediates
8.4
%
 
8.0
%


 
8.2
%
 
8.3
%



Total
12.9
%
 
10.9
%


 
11.5
%
 
9.5
%




54




Factors Affecting Business Segment Net Sales
The percentage increase (decrease) in net sales attributable to each of the factors indicated for each of our business segments is as follows:
Three Months Ended September 30, 2013 Compared to Three Months Ended September 30, 2012
 
Volume
 
Price
 
Currency
 
Other
 
Total
 
(unaudited)
 
(In percentages)
Advanced Engineered Materials
6

 
(1
)
 
2
 
 
7

Consumer Specialties
(7
)
 
6

 
 
 
(1
)
Industrial Specialties
1

 
(3
)
 
3
 
 
1

Acetyl Intermediates
(1
)
 

 
2
 
 
1

Total Company

 

 
2
 
 
2

Nine Months Ended September 30, 2013 Compared to Nine Months Ended September 30, 2012
 
Volume
 
Price
 
Currency
 
Other
 
Total
 
(unaudited)
 
(In percentages)
Advanced Engineered Materials
5

 
1

 
1
 
 
7

Consumer Specialties
(5
)
 
7

 
 
 
2

Industrial Specialties
(3
)
 
(3
)
 
1
 
 
(5
)
Acetyl Intermediates
(1
)
 
(2
)
 
1
 
 
(2
)
Total Company
(1
)
 

 
1
 
 

Consolidated Results
Three Months Ended September 30, 2013 Compared with Three Months Ended September 30, 2012
Net sales increased $27 million, or 1.7%, during the three months ended September 30, 2013 compared to the same period in 2012 primarily due to higher volumes in our Advanced Engineered Materials segment due to continued growth in automotive applications in the Americas and targeted growth programs in Asia.
Operating profit increased $35 million, or 19.9%, during the three months ended September 30, 2013 compared to the same period in 2012. This increase was primarily due to higher acetate tow pricing in our Consumer Specialties segment and a $12 million favorable impact from the cessation of production of acetate flake and tow at our Spondon, Derby, United Kingdom facility in November 2012.
As a percentage of net sales, selling, general and administrative expenses decreased from 7.0% to 5.9% for the three months ended September 30, 2013 compared to the same period in 2012 primarily due to a decrease of $8 million in selling, general and administrative expenses in Other Activities of which $10 million relates to lower pension and other postretirement benefit costs offset by a small increase in incentive compensation costs.
Dividend income from cost investments increased $21 million compared to the same period in 2012 principally due to the timing of the dividend payments from our cellulose derivatives ventures. Historically, our cellulose derivatives ventures paid an annual cash dividend during the three months ended June 30 each year, while in 2013 dividends are being paid quarterly.
Our effective income tax rate for the three months ended September 30, 2013 was 25% compared to 31% for the three months ended September 30, 2012. The effective income tax rate for the three months ended September 30, 2013 is favorably impacted by Mexico income tax refunds.

55




Nine Months Ended September 30, 2013 Compared with Nine Months Ended September 30, 2012
Net sales decreased $23 million, or 0.5%, during the nine months ended September 30, 2013 compared to the same period in 2012 primarily due to lower volumes and pricing in both our Industrial Specialties and Acetyl Intermediates segments partially offset by favorable currency impacts in those business segments and higher volumes in our Advanced Engineered Materials segment. Lower volumes and pricing in our Industrial Specialties segment reflect weak demand, increased competition and lower raw material costs. Lower volumes and pricing for downstream derivative products in our Acetyl Intermediates segment was primarily the result of customer outages, weak market conditions and lower demand in Europe. Higher volumes in our Advanced Engineered Materials segment are primarily due to increased penetration in automotive applications in the Americas and Asia and other targeted growth programs in Asia.
Operating profit increased $99 million, or 21.3%, during the nine months ended September 30, 2013 compared to the same period in 2012 primarily driven by our Advanced Engineered Materials and Consumer Specialties segments. The improvement in operating margin in our Advanced Engineered Materials segment was primarily due to increased volumes, a more favorable product mix and lower raw material costs, mainly polypropylene and ethylene. In our Consumer Specialties segment, higher acetate tow pricing and a $53 million favorable impact from the cessation of production of acetate flake and tow at our Spondon, Derby, United Kingdom facility in November 2012 drove operating margin up from 20.9% for the nine months ended September 30, 2012 to 26.8% for the nine months ended September 30, 2013.
As a percentage of net sales, selling, general and administrative expenses decreased from 7.2% to 6.5% for the nine months ended September 30, 2013 compared to the same period in 2012 primarily due to a decrease of $33 million in selling, general and administrative expenses in Other Activities of which $32 million relates to lower pension and other postretirement benefit costs.
Our effective income tax rate for the nine months ended September 30, 2013 was 32% compared to 7% for the nine months ended September 30, 2012. The lower effective tax rate in 2012 was primarily due to foreign tax credit carryforwards of $142 million recognized during the three months ended March 31, 2012, partially offset by $38 million of deferred tax charges related to changes in our assessment regarding the permanent reinvestment of certain foreign earnings from our Polyplastics Co., Ltd. affiliate.



56



Business Segments 
Advanced Engineered Materials
 
Three Months Ended
September 30,
 
 
 
Nine Months Ended
September 30,
 
 
 
2013
 
2012
 
Change
 
2013
 
2012
 
Change
 
 
 
As Adjusted
 
 
 
 
 
As Adjusted
 
 
 
(unaudited)
 
(In $ millions, except percentages)
Net sales
346

 
322

 
24

 
1,027

 
962

 
65

Net Sales Variance
 

 
 

 
 

 
 

 
 

 
 

Volume
6
 %
 
 

 
 

 
5
%
 
 

 
 

Price
(1
)%
 
 

 
 

 
1
%
 
 

 
 

Currency
2
 %
 
 

 
 

 
1
%
 
 

 
 

Other
 %
 
 

 
 

 
%
 
 

 
 

Other (charges) gains, net
(2
)
 
1

 
(3
)
 
(6
)
 
(1
)
 
(5
)
Operating profit (loss)
48

 
44

 
4

 
123

 
91

 
32

Operating margin
13.9
 %
 
13.7
%
 
 

 
12.0
%
 
9.5
%
 
 

Equity in net earnings (loss) of affiliates
30

 
45

 
(15
)
 
115

 
143

 
(28
)
Earnings (loss) from continuing operations before tax
79

 
89

 
(10
)
 
239

 
234

 
5

Depreciation and amortization
27

 
29

 
(2
)
 
83

 
84

 
(1
)
Our Advanced Engineered Materials segment includes our engineered materials business which develops, produces and supplies a broad offering of high performance specialty polymers for application in automotive, medical and electronics products, as well as other consumer and industrial applications. Together with our strategic affiliates, our engineered materials business is a leading participant in the global specialty polymers industry.
Three Months Ended September 30, 2013 Compared with Three Months Ended September 30, 2012
Advanced Engineered Materials’ net sales increased $24 million, or 7.5%, for the three months ended September 30, 2013 compared to the same period in 2012 primarily due to increased volumes in the Americas and Asia. Volumes in the Americas increased across nearly all product lines primarily driven by continued growth in automotive applications. In Asia, volume growth was driven by targeted growth programs in consumer, industrial and automotive applications.
Operating profit increased $4 million, or 9.1%, for the three months ended September 30, 2013 compared to the same period in 2012. Increased volumes coupled with lower raw material costs of $5 million, mainly polypropylene, were partially offset by lower pricing and higher energy costs of $6 million.
Equity in net earnings (loss) of affiliates decreased $15 million for the three months ended September 30, 2013 compared to the same period in 2012 primarily due to a decrease in earnings from our National Methanol Company ("Ibn Sina") strategic affiliate of $11 million, largely driven by the timing of turnaround activity.
Nine Months Ended September 30, 2013 Compared with Nine Months Ended September 30, 2012
Advanced Engineered Materials’ net sales increased $65 million, or 6.8%, for the nine months ended September 30, 2013 compared to the same period in 2012 primarily due to increased volumes resulting from increased penetration in automotive applications in the Americas and Asia. Volumes in Asia also improved across all product lines due to targeted growth programs in consumer and industrial applications. Higher pricing and product mix, mainly for medical applications, also contributed to the increase in net sales for the nine months ended September 30, 2013.
Operating profit increased $32 million, or 35.2%, for the nine months ended September 30, 2013 compared to the same period in 2012 driven primarily by increased volumes, a shift in product mix to higher margin medical applications and lower raw material costs, mainly polypropylene and ethylene, partially offset by higher energy costs of $16 million.

57



Equity in net earnings (loss) of affiliates decreased $28 million for the nine months ended September 30, 2013 compared to the same period in 2012 primarily due to decreases in earnings from our Ibn Sina and Polyplastics Co., Ltd. strategic affiliates of $16 million and $8 million, respectively. The decrease in Ibn Sina earnings was largely the result of the timing of turnaround activity, lower methyl tertiary-butyl ether ("MTBE") pricing and lower sales volumes. Polyplastics Co., Ltd. earnings decreased due to unfavorable currency impacts and lower volume and pricing across all major products partially offset by lower raw material costs.
Consumer Specialties
 
Three Months Ended
September 30,
 
 
 
Nine Months Ended
September 30,
 
 
 
2013
 
2012
 
Change
 
2013
 
2012
 
Change
 
 
 
As Adjusted
 
 
 
 
 
As Adjusted
 
 
 
(unaudited)
 
(In $ millions, except percentages)
Net sales
310

 
314

 
(4
)
 
919

 
905

 
14

Net Sales Variance
 

 
 

 
 

 
 

 
 

 
 

Volume
(7
)%
 
 

 
 

 
(5
)%
 
 

 
 

Price
6
 %
 
 

 
 

 
7
 %
 
 

 
 

Currency
 %
 
 

 
 

 
 %
 
 

 
 

Other
 %
 
 

 
 

 
 %
 
 

 
 

Other (charges) gains, net

 
(1
)
 
1

 

 
2

 
(2
)
Operating profit (loss)
85

 
72

 
13

 
246

 
189

 
57

Operating margin
27.4
 %
 
22.9
%
 
 

 
26.8
 %
 
20.9
%
 
 

Equity in net earnings (loss) of affiliates

 

 

 
3

 
2

 
1

Dividend income - cost investments
21

 

 
21

 
68

 
83

 
(15
)
Earnings (loss) from continuing operations before tax
106

 
72

 
34

 
317

 
274

 
43

Depreciation and amortization
10

 
13

 
(3
)
 
30

 
33

 
(3
)
Our Consumer Specialties segment includes our cellulose derivatives and food ingredients businesses, which serve consumer-driven applications. Our cellulose derivatives business is a leading global producer and supplier of acetate flake, acetate film and acetate tow, primarily used in filter products applications. Our food ingredients business is a leading international supplier of premium quality ingredients for the food, beverage and pharmaceuticals industries.
Three Months Ended September 30, 2013 Compared with Three Months Ended September 30, 2012
Net sales for Consumer Specialties decreased $4 million, or 1.3%, for the three months ended September 30, 2013 compared to the same period in 2012 primarily due to lower acetate tow volumes resulting from the cessation of manufacturing of acetate flake and tow at our Spondon facility in November 2012 offset by higher acetate tow pricing across all regions reflecting continued strong demand.
Operating profit increased $13 million, or 18.1%, for the three months ended September 30, 2013 primarily due to higher acetate tow pricing partially offset by the impact of lower sales volumes and higher raw material costs of $6 million in our cellulose derivatives business. Operating profit also reflects a $12 million favorable impact from the cessation of production of acetate flake and tow at our Spondon, Derby, United Kingdom facility in November 2012, including lower energy and plant costs.
Dividend income from cost investments increased $21 million for the three months ended September 30, 2013 compared to the same period in 2012 due to the timing of the dividend payments from our cellulose derivatives ventures. In the prior year, our cellulose derivatives ventures paid an annual cash dividend of $83 million during the three months ended June 30, 2012, while in 2013 dividends are being paid quarterly.

58



Nine Months Ended September 30, 2013 Compared with Nine Months Ended September 30, 2012
Net sales for Consumer Specialties increased $14 million, or 1.5%, for the nine months ended September 30, 2013 compared to the same period in 2012 primarily due to higher pricing in the cellulose derivatives business partially offset by lower volumes in both the cellulose derivatives and food ingredients businesses. Acetate tow pricing increased 8% across all regions while volumes declined due to the cessation of manufacturing of acetate flake and tow at our Spondon facility in November 2012.
Operating profit increased $57 million, or 30.2%, for the nine months ended September 30, 2013 compared to the same period in 2012 primarily due to the increase in acetate tow pricing and a $53 million favorable impact from the cessation of production of acetate flake and tow at our Spondon, Derby, United Kingdom facility in November 2012, including lower energy and plant costs. Lower volumes and higher raw material costs of $18 million for both the cellulose derivatives and food ingredients businesses partially offset the higher pricing and lower costs for the nine months ended September 30, 2013 as did the absence of $6 million of insurance recoveries recorded in other (charges) gains, net during the three months ended June 30, 2012. Insurance recoveries were offset by a charge from our captive insurance companies included in Other Activities.
Dividend income from cost investments decreased $15 million for the nine months ended September 30, 2013 compared to the same period in 2012, related to dividends received from our cellulose derivatives ventures. In the prior year, our cellulose derivatives ventures paid an annual cash dividend of $83 million during the three months ended June 30, 2012, while in 2013 dividends are being paid quarterly.
Industrial Specialties
 
Three Months Ended
September 30,
 
 
 
Nine Months Ended
September 30,
 
 
 
2013
 
2012
 
Change
 
2013
 
2012
 
Change
 
 
 
As Adjusted
 
 
 
 
 
As Adjusted
 
 
 
(unaudited)
 
(In $ millions, except percentages)
Net sales
299

 
297

 
2

 
882

 
933

 
(51
)
Net Sales Variance
 

 
 

 
 

 
 

 
 

 
 

Volume
1
 %
 
 

 
 

 
(3
)%
 
 

 
 

Price
(3
)%
 
 

 
 

 
(3
)%
 
 

 
 

Currency
3
 %
 
 

 
 

 
1
 %
 
 

 
 

Other
 %
 
 

 
 

 
 %
 
 

 
 

Other (charges) gains, net
(1
)
 

 
(1
)
 
(3
)
 

 
(3
)
Operating profit (loss)
24

 
25

 
(1
)
 
57

 
80

 
(23
)
Operating margin
8.0
 %
 
8.4
%
 
 

 
6.5
 %
 
8.6
%
 
 

Earnings (loss) from continuing operations before tax
24

 
25

 
(1
)
 
57

 
80

 
(23
)
Depreciation and amortization
13

 
13

 

 
37

 
41

 
(4
)
Our Industrial Specialties segment includes our emulsion polymers and EVA polymers businesses. Our emulsion polymers business is a leading global producer of vinyl acetate-based emulsions and develops products and application technologies to improve performance, create value and drive innovation in applications such as paints and coatings, adhesives, construction, glass fiber, textiles and paper. Our EVA polymers business is a leading North American manufacturer of a full range of specialty ethylene vinyl acetate ("EVA") resins and compounds as well as select grades of low-density polyethylene. EVA polymers products are used in many applications, including flexible packaging films, lamination film products, hot melt adhesives, medical products, automotive, carpeting and photovoltaic cells.
Three Months Ended September 30, 2013 Compared with Three Months Ended September 30, 2012
Net sales increased $2 million, or 0.7%, for the three months ended September 30, 2013 compared to the same period in 2012 reflecting favorable currency impacts resulting from a strong Euro and Renminbi to the US dollar, partially offset by lower pricing in both our emulsion polymers and EVA polymers businesses. Lower pricing in our emulsion polymers business reflects lower raw material costs, primarily vinyl acetate monomer ("VAM") in Europe and Asia and ethylene in North America. Lower pricing in our EVA polymers business reflects softer demand across products in Asia and the Americas. Higher volumes in our

59



emulsion polymers business in Europe and Asia were offset by lower volumes in our EVA polymers business due to weak global demand.
Operating profit decreased $1 million, or 4.0%, for the three months ended September 30, 2013 compared to the same period in 2012 primarily due to lower pricing for both the emulsion polymers and EVA polymers businesses.
Nine Months Ended September 30, 2013 Compared with Nine Months Ended September 30, 2012
Net sales decreased $51 million, or 5.5%, for the nine months ended September 30, 2013 compared to the same period in 2012 reflecting lower pricing and volumes for both the emulsion polymers and EVA polymers businesses. Volume decreases in our EVA polymers business were driven by softer demand in Asia and the Americas, while lower pricing resulted from weak global demand and strong competition in several end-use applications, including hot melt adhesives and photovoltaic cells. Sales of our EVA polymers medical product applications decreased $5 million compared to the same period in 2012 though sales from medical product applications are expected in the fourth quarter of 2013. Lower volumes in our emulsion polymers business were driven by softer demand in North America, particularly in our paper and adhesives applications, slightly offset by volume increases in paper and adhesive applications in Europe and continued growth in innovative applications in paper and construction in China. Lower pricing in our emulsion polymers business was driven by lower raw material costs across all regions, primarily VAM in Europe and Asia and ethylene in North America.
Operating profit decreased $23 million, or 28.8%, for the nine months ended September 30, 2013 compared to the same period in 2012 primarily attributable to lower sales volumes and pricing in our EVA polymers business.
Acetyl Intermediates
 
Three Months Ended
September 30,
 
 
 
Nine Months Ended
September 30,
 
 
 
2013
 
2012
 
Change
 
2013
 
2012
 
Change
 
 
 
As Adjusted
 
 
 
 
 
As Adjusted
 
 
 
(unaudited)
 
(In $ millions, except percentages)
Net sales
795

 
785

 
10

 
2,412

 
2,458

 
(46
)
Net Sales Variance
 

 
 

 
 

 
 

 
 

 
 

Volume
(1
)%
 
 

 
 

 
(1
)%
 
 

 
 

Price
 %
 
 

 
 

 
(2
)%
 
 

 
 

Currency
2
 %
 
 

 
 

 
1
 %
 
 

 
 

Other
 %
 
 

 
 

 
 %
 
 

 
 

Other (charges) gains, net
(1
)
 
1

 
(2
)
 
(2
)
 
2

 
(4
)
Operating profit (loss)
67

 
63

 
4

 
197

 
203

 
(6
)
Operating margin
8.4
 %
 
8.0
%
 
 

 
8.2
 %
 
8.3
%
 
 

Equity in net earnings (loss) of affiliates
3

 

 
3

 
7

 
3

 
4

Earnings (loss) from continuing operations before tax
70

 
65

 
5

 
206

 
208

 
(2
)
Depreciation and amortization
22

 
20

 
2

 
65

 
59

 
6

Our Acetyl Intermediates segment includes our intermediate chemistry business which produces and supplies acetyl products, including acetic acid, VAM, acetic anhydride and acetate esters. These products are generally used as starting materials for colorants, paints, adhesives, coatings and medicines. This business segment also produces organic solvents and intermediates for pharmaceutical, agricultural and chemical products.
Three Months Ended September 30, 2013 Compared with Three Months Ended September 30, 2012
Acetyl Intermediates’ net sales increased $10 million, or 1.3%, during the three months ended September 30, 2013 compared to the same period in 2012 primarily due to favorable currency impacts resulting from a strong Euro and Renminbi to the US dollar partially offset by lower downstream acetyl derivative product volumes due to global oversupply and customer outages in Europe and the Americas.

60



Operating profit increased $4 million, or 6.3%, during the three months ended September 30, 2013 compared to the same period in 2012 primarily due to lower volume and pricing for downstream acetyl derivative products offset by favorable currency impacts from a strong Euro. Higher natural gas prices in North America were more than offset by savings from productivity optimization initiatives.
Nine Months Ended September 30, 2013 Compared with Nine Months Ended September 30, 2012
Acetyl Intermediates’ net sales decreased $46 million, or 1.9%, during the nine months ended September 30, 2013 compared to the same period in 2012 primarily due to lower volumes and pricing for downstream acetyl derivative products as a result of customer outages, weak economic conditions and lower demand.
Operating profit decreased $6 million, or 3.0%, during the nine months ended September 30, 2013 compared to the same period in 2012 primarily due to lower pricing, partially offset by lower raw material costs of $13 million, mainly ethylene, carbon monoxide and methanol, favorable currency impacts from a strong Euro and savings from productivity optimization initiatives.
On May 22, 2013, we announced our intent to sell our acetic anhydride facility in Roussillon, France, and our VAM production unit in Tarragona, Spain. No significant divestiture related expenditures were incurred for the nine months ended September 30, 2013. Such expenses have been recorded as Gain (loss) on disposition of businesses and assets, net in the accompanying unaudited interim consolidated statements of operations.
Other Activities
Other Activities primarily consists of corporate center costs, including financing and administrative activities such as legal, accounting and treasury functions, interest income and expense associated with our financing and our captive insurance companies. Other Activities also includes the components of our net periodic benefit cost (interest cost, expected return on assets and net actuarial gains and losses) for our defined benefit pension plans and other post retirement plans not allocated to our business segments. For further discussion see Note 1 - Description of the Company and Basis of Presentation in the accompanying unaudited interim consolidated financial statements.
Three Months Ended September 30, 2013 Compared with Three Months Ended September 30, 2012
Operating loss of $13 million for Other Activities decreased $15 million for the three months ended September 30, 2013 compared to the same period in 2012 primarily due to a decrease in selling, general and administrative expenses of $8 million and reductions in captive insurance reserves of $3 million. Selling, general and administrative expenses were lower primarily due to lower pension and other postretirement benefit costs of $10 million offset by a small increase in incentive compensation costs.
Nine Months Ended September 30, 2013 Compared with Nine Months Ended September 30, 2012
Operating loss of $59 million for Other Activities decreased $39 million for the nine months ended September 30, 2013 compared to the same period in 2012 primarily due to a decrease in selling, general and administrative expenses of $33 million and other (charges) gains, net of $4 million. Selling, general and administrative expenses were lower due to a $32 million decrease in pension and other postretirement benefit costs and a $9 million decrease in costs associated with business optimization initiatives offset by a $7 million increase in performance-based incentive compensation costs. Other (charges) gains, net were lower for the nine months ended September 30, 2013 primarily due to the absence of $6 million in insurance recovery costs compared to the same period in 2012. These charges were offset in our Consumer Specialties segment.
Liquidity and Capital Resources
Our primary source of liquidity is cash generated from operations, available cash and cash equivalents and dividends from our portfolio of strategic investments. In addition, as of September 30, 2013, we have $600 million available for borrowing under our revolving credit facility, $1 million available under our credit-linked revolving facility and $31 million available under our accounts receivable securitization facility to assist, if required, in meeting our working capital needs and other contractual obligations.
While our contractual obligations, commitments and debt service requirements over the next several years are significant, we continue to believe we will have available resources to meet our liquidity requirements, including debt service, for the next twelve months. If our cash flow from operations is insufficient to fund our debt service and other obligations, we may be required to use other means available to us such as increasing our borrowings, reducing or delaying capital expenditures,

61




seeking additional capital or seeking to restructure or refinance our indebtedness. There can be no assurance, however, that we will continue to generate cash flows at or above current levels.
On May 15, 2013, together with Mitsui & Co., Ltd., of Tokyo, Japan, we announced that we had signed an agreement to establish a joint venture for the production of methanol at our integrated chemical plant in Clear Lake, Texas. The planned methanol unit will utilize natural gas in the US Gulf Coast region as a feedstock and will benefit from the existing infrastructure at our Clear Lake facility. As a result, the total shared capital and expense investment in the facility is estimated to be $800 million. Our portion of the investment is estimated to be $300 million, in addition to previously invested assets at our Clear Lake facility. The planned methanol unit will have an annual capacity of 1.3 million tons and is expected to begin operations in mid-2015.
As a result of the National Emission Standard for Hazardous Air Pollutants for Industrial, Commercial, and Institutional Boilers and Process Heaters ("Boiler MACT") regulations discussed in Item 1A. Risk Factors in our 2012 Form 10-K, we will be required to make significant capital expenditures to comply with stricter emissions requirements for industrial boilers and process heaters at our facilities over the next two to three years. In October 2012, we received approval to proceed with replacing the coal-fired boilers at our Narrows, Virginia site with new, natural gas-fired boilers and construction began during the first half of 2013. We anticipate the project will be completed in mid-2015. Our total investment is estimated at over $150 million.
Total cash outflows for capital expenditures, including the specific projects above, are expected to be in the range of $375 million to $400 million in 2013 and $400 million to $500 million in 2014 due to the construction of the Clear Lake methanol unit and conversion of our coal to gas boilers at our cellulose derivatives plant in Narrows, Virginia.
On a stand-alone basis, Celanese and its immediate 100% owned subsidiary, Celanese US Holdings LLC ("Celanese US"), have no material assets other than the stock of their subsidiaries and no independent external operations of their own. Accordingly, they generally depend on the cash flow of their subsidiaries and their ability to pay dividends and make other distributions to Celanese and Celanese US in order to meet their obligations, including their obligations under senior credit facilities and senior notes and to pay dividends on Celanese Series A common stock.
Cash Flows
Cash and cash equivalents increased $141 million to $1,100 million as of September 30, 2013 compared to December 31, 2012. As of September 30, 2013, $702 million of the $1,100 million of cash and cash equivalents was held by our foreign subsidiaries. If these funds are needed for our operations in the US, we may be required to accrue and pay US taxes to repatriate these funds. Our intent is to permanently reinvest these funds outside of the US, with the possible exception of funds that have been previously subject to US federal and state taxation. Our current plans do not demonstrate a need to repatriate cash held by our foreign subsidiaries in a taxable transaction to fund our US operations.
Net Cash Provided by Operating Activities
Cash flow provided by operations decreased $53 million for the nine months ended September 30, 2013 compared to the same period in 2012, with operating cash inflows decreasing from $661 million to $608 million. Cash flow provided by operations for the nine months ended September 30, 2013 decreased primarily as a result of the absence of a $75 million cash dividend received from our Polyplastics Co., Ltd. strategic affiliate, a change in the timing of cash dividends received from our cellulose derivatives ventures and a change in trade working capital. In the prior year, our cellulose derivatives ventures paid an annual cash dividend of $83 million during the nine months ended September 30, 2012, while cash dividends received from our cellulose derivatives ventures during the nine months ended September 30, 2013 were $68 million and are being paid quarterly in 2013.
Cash used in trade working capital increased $44 million for the nine months ended September 30, 2013 compared to the same period in 2012. Cash used during the nine months ended September 30, 2013 is reflective of increases in trade receivables and inventories partially offset by increases in trade payables since December 31, 2012. Trade receivables increased due to higher net sales for the three months ended September 30, 2013 as compared to the three months ended December 31, 2012. The increase in inventory levels is the result of strategic plant operating decisions while the increase in trade payables is due to the timing of invoice receipts and cash payments associated with raw material purchases.
The decrease in cash provided by operations was partially offset by a $102 million reduction in pension plan and other postretirement benefit plan contributions made during the nine months ended September 30, 2013 compared to the same period in 2012.

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Trade working capital is calculated as follows:
 
As of
September 30,
2013
 
As of
December 31,
2012
 
As of
September 30,
2012
 
As of
December 31,
2011
 
(unaudited)
 
(In $ millions)
Trade receivables, net
949

 
827

 
932

 
871

Inventories
753

 
711

 
711

 
712

Trade payables - third party and affiliates
(739
)
 
(649
)
 
(685
)
 
(673
)
Trade working capital
963

 
889

 
958

 
910

Net Cash Provided by (Used in) Investing Activities
Net cash used in investing activities decreased $107 million for the nine months ended September 30, 2013 compared to the same period in 2012, with cash outflows decreasing from $397 million to $290 million. During the nine months ended September 30, 2013, capital expenditures relating to the relocation and expansion of our polyacetal ("POM") production facility in Frankfurt Hoechst Industrial Park, Germany amounted to $6 million, $37 million less than in the same period in 2012.
Cash outflows for capital expenditures, excluding capital expenditures relating to our German POM facility, were $259 million for the nine months ended September 30, 2013, $11 million lower than during the same period in 2012. Capital expenditures for the nine months ended September 30, 2013 are primarily related to capacity expansions, major investments to reduce future operating costs, improve plant reliability and environmental and health and safety initiatives. Acquisitions, net of cash acquired, decreased by $23 million with no acquisitions in the nine months ended September 30, 2013. In 2012, we acquired certain assets from Ashland Inc.
Net Cash Provided by (Used in) Financing Activities
Net cash used in financing activities increased $162 million for the nine months ended September 30, 2013 compared to the same period in 2012. The change in cash used in financing activities is primarily due to an increase in stock repurchase transactions of $65 million, a reduction in proceeds from stock option exercises of $55 million and higher Series A Common Stock dividends of $24 million offset by a $12 million reduction in net repayments on short-term borrowings and long-term debt. During the nine months ended September 30, 2013, we increased our Series A Common Stock quarterly cash dividend rate from $0.075 to $0.18 per share of Series A Common Stock.
Debt and Other Obligations
Senior Notes
In November 2012, Celanese US completed an offering of $500 million in aggregate principal amount of 4.625% senior unsecured notes due 2022 (the "4.625% Notes") in a public offering registered under the Securities Act of 1933, as amended (the "Securities Act"). The 4.625% Notes are guaranteed on a senior unsecured basis by Celanese and each of the domestic subsidiaries of Celanese US that guarantee its obligations under its senior secured credit facilities (the "Subsidiary Guarantors").
The 4.625% Notes were issued under an indenture, dated May 6, 2011, as amended by a second supplemental indenture, dated November 13, 2012 (the "Second Supplemental Indenture"), among Celanese US, Celanese, the Subsidiary Guarantors and Wells Fargo Bank, National Association, as trustee. Celanese US will pay interest on the 4.625% Notes on March 15 and September 15 of each year which commenced on March 15, 2013. Prior to November 15, 2022, Celanese US may redeem some or all of the 4.625% Notes at a redemption price of 100% of the principal amount, plus a "make-whole" premium as specified in the Second Supplemental Indenture, plus accrued and unpaid interest, if any, to the redemption date. The 4.625% Notes are senior unsecured obligations of Celanese US and rank equally in right of payment with all other unsubordinated indebtedness of Celanese US.
In May 2011, Celanese US completed an offering of $400 million in aggregate principal amount of 5.875% senior unsecured notes due 2021 (the "5.875% Notes") in a public offering registered under the Securities Act. The 5.875% Notes are guaranteed on a senior unsecured basis by Celanese and the Subsidiary Guarantors.

63




The 5.875% Notes were issued under an indenture and a first supplemental indenture, each dated May 6, 2011 (the "First Supplemental Indenture"), among Celanese US, Celanese, the Subsidiary Guarantors and Wells Fargo Bank, National Association, as trustee. Celanese US pays interest on the 5.875% Notes on June 15 and December 15 of each year which commenced on December 15, 2011. Prior to June 15, 2021, Celanese US may redeem some or all of the 5.875% Notes at a redemption price of 100% of the principal amount, plus a "make-whole" premium as specified in the First Supplemental Indenture, plus accrued and unpaid interest, if any, to the redemption date. The 5.875% Notes are senior unsecured obligations of Celanese US and rank equally in right of payment with all other unsubordinated indebtedness of Celanese US.
In September 2010, Celanese US completed the private placement of $600 million in aggregate principal amount of 6.625% senior unsecured notes due 2018 (the "6.625% Notes" and, together with the 4.625% Notes and the 5.875% Notes, collectively the "Senior Notes") under an indenture dated September 24, 2010 (the "Indenture") among Celanese US, Celanese, the Subsidiary Guarantors and Wells Fargo Bank, National Association, as trustee. In April 2011, Celanese US registered the 6.625% Notes under the Securities Act. Celanese US pays interest on the 6.625% Notes on April 15 and October 15 of each year which commenced on April 15, 2011. The 6.625% Notes are redeemable, in whole or in part, at any time on or after October 15, 2014 at the redemption prices specified in the Indenture. Prior to October 15, 2014, Celanese US may redeem some or all of the 6.625% Notes at a redemption price of 100% of the principal amount, plus a "make-whole" premium as specified in the Indenture, plus accrued and unpaid interest, if any, to the redemption date. The 6.625% Notes are senior unsecured obligations of Celanese US and rank equally in right of payment with all other unsubordinated indebtedness of Celanese US. The 6.625% Notes are guaranteed on a senior unsecured basis by Celanese and the Subsidiary Guarantors.
The Indenture, the First Supplemental Indenture and the Second Supplemental Indenture contain covenants, including, but not limited to, restrictions on the Company’s ability to incur indebtedness; grant liens on assets; merge, consolidate, or sell assets; pay dividends or make other restricted payments; engage in transactions with affiliates; or engage in other businesses.
Senior Credit Facilities
In September 2010, Celanese US, Celanese, and certain of the domestic subsidiaries of Celanese US entered into an amendment agreement with the lenders under Celanese US’s existing senior secured credit facilities in order to amend and restate the corresponding Credit Agreement, dated as of April 2, 2007 (as previously amended, the "Existing Credit Agreement", and as amended and restated by the 2010 amendment agreement, the "2010 Amended Credit Agreement"). The 2010 Amended Credit Agreement consisted of the Term C loan facility due 2016, the Term B loan facility due 2014, a $600 million revolving credit facility terminating in 2015 and a $228 million credit-linked revolving facility terminating in 2014.
In May 2011, Celanese US prepaid its outstanding Term B loan facility under the 2010 Amended Credit Agreement set to mature in 2014 with an aggregate principal amount of $516 million using proceeds from the 5.875% Notes and cash on hand.
In November 2012, Celanese US prepaid $400 million of its outstanding Term C loan facility under the 2010 Amended Credit Agreement set to mature in 2016 using proceeds from the 4.625% Notes.
In anticipation of our change in pension accounting policy, in January 2013, we entered into a non-material amendment to the 2010 Amended Credit Agreement with the effect that certain computations for covenant compliance purposes will be evaluated as if the change in pension accounting policy had not occurred. The amendment also modified the 2010 Amended Credit Agreement in other, non-material respects.
On April 25, 2013, Celanese US reduced the Total Credit Linked Commitment (as defined in the 2010 Amended Credit Agreement) for the credit-linked revolving facility terminating in 2014 to $200 million, and on September 10, 2013 to $81 million.
On August 14, 2013, we entered into a non-material amendment to the 2010 Amended Credit Agreement to facilitate certain of the transactions contemplated by the Company's intentions to establish a joint venture for methanol production in Clear Lake, Texas and to make other non-material amendments.
On September 16, 2013, Celanese US, Celanese, and certain of the domestic subsidiaries of Celanese US entered into an amendment agreement with the lenders under Celanese US’s existing senior secured credit facilities in order to amend and restate the corresponding 2010 Amended Credit Agreement (as amended and restated by the 2013 amendment agreement, the "Amended Credit Agreement"). The Amended Credit Agreement provides for a reduction in the interest rates payable in connection with certain borrowings and consists of the Term C-2 loan facility due 2016, the $600 million revolving credit facility terminating in 2015 and the $81 million credit-linked revolving facility terminating in 2014.

64




As a result of the Amended Credit Agreement, $1 million has been recorded as Refinancing expense in the accompanying unaudited interim consolidated statements of operations, which includes accelerated amortization of deferred financing costs and other refinancing expenses. In addition, we recorded deferred financing costs of $2 million, which are being amortized over the term of the Term C-2 loan facility. As of September 30, 2013, deferred financing costs of $28 million are included in noncurrent Other assets on the accompanying unaudited consolidated balance sheet.
As of September 30, 2013, the margin for borrowings under the Term C-2 loan facility was 2.0% above LIBOR (for US dollars) and 2.0% above the Euro Interbank Offered Rate ("EURIBOR") (for Euros), as applicable. As of September 30, 2013, the margin for borrowings under the revolving credit facility was 2.5% above LIBOR. The margin for borrowings under the revolving credit facility is subject to increase or decrease in certain circumstances based on changes in our corporate credit ratings. Borrowings under the credit-linked revolving facility bear interest at a variable interest rate based on LIBOR, plus a margin which varies based on our net leverage ratio.
Our estimated net leverage ratio and margin are as follows:
 
As of September 30, 2013
 
Estimated Total Net
Leverage Ratio
 
Estimated
Margin
Credit-linked revolving facility
1.58

 
1.50
%
Our margin on the credit-linked revolving facility may increase or decrease 0.25% based on the following:
Total Net Leverage Ratio
 
Margin over LIBOR or EURIBOR
< = 2.25
 
1.50%
> 2.25
 
1.75%
Term loan borrowings under the Amended Credit Agreement are subject to amortization at 1% of the initial principal amount per annum, payable quarterly. In addition, we pay quarterly commitment fees on the unused portions of the revolving credit facility and credit-linked revolving facility of 0.25% and 1.50% per annum, respectively.
The Amended Credit Agreement is guaranteed by Celanese and certain domestic subsidiaries of Celanese US and is secured by a lien on substantially all assets of Celanese US and such guarantors, subject to certain agreed exceptions (including for certain real property and certain shares of foreign subsidiaries), pursuant to the Guarantee and Collateral Agreement, dated as of April 2, 2007.
As a condition to borrowing funds or requesting that letters of credit be issued under the revolving credit facility, our first lien senior secured leverage ratio (as calculated as of the last day of the most recent fiscal quarter for which financial statements have been delivered under the revolving facility) cannot exceed the threshold as specified below. Further, our first lien senior secured leverage ratio must be maintained at or below that threshold while any amounts are outstanding under the revolving credit facility.
Our amended first lien senior secured leverage ratios under the revolving credit facility are as follows:
As of September 30, 2013
Maximum
 
Estimate
 
Estimate, If Fully Drawn
(unaudited)
3.90

 
0.99

 
1.53

The Amended Credit Agreement contains covenants including, but not limited to, restrictions on our ability to incur indebtedness; grant liens on assets; merge, consolidate, or sell assets; pay dividends or make other restricted payments; make investments; prepay or modify certain indebtedness; engage in transactions with affiliates; enter into sale-leaseback transactions or hedge transactions; or engage in other businesses.
The Amended Credit Agreement also maintains a number of events of default, including a cross default to other debt of Celanese, Celanese US, or their subsidiaries, including the Senior Notes, in an aggregate amount equal to more than $40 million and the occurrence of a change of control. Failure to comply with these covenants, or the occurrence of any other event of default, could result in acceleration of the borrowings and other financial obligations under the Amended Credit Agreement.

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We are in compliance with all of the covenants related to our debt agreements as of September 30, 2013.
Accounts Receivable Securitization Facility
On August 28, 2013, we entered into a $135 million US accounts receivable securitization facility pursuant to (i) a Purchase and Sale Agreement (the "Sale Agreement") among certain of our US subsidiaries (each an "Originator"), Celanese International Corporation ("CIC") and CE Receivables LLC, a newly formed, wholly-owned, "bankruptcy remote" special purpose subsidiary of an Originator (the "Transferor") and (ii) a Receivables Purchase Agreement (the "Purchase Agreement"), among CIC, as servicer, the Transferor, various third-party purchasers (collectively, the "Purchasers") and The Bank of Tokyo-Mitsubishi UFJ, Ltd., New York Branch, as administrator (the "Administrator").
Under the Sale Agreement, each Originator will sell or contribute, on an ongoing basis, substantially all of its accounts receivable to the Transferor. Under the Purchase Agreement, the Transferor may obtain up to $135 million (in the form of cash and/or letters of credit for our benefit) from the Purchasers through the sale of undivided interests in certain US accounts receivable. The borrowing base of the accounts receivable securitization facility is subject to downward adjustment based on the evaluation of eligible accounts receivables pursuant to the Purchase Agreement. As of September 30, 2013, the borrowing base was $131 million.
The Purchase Agreement expires in 2016, but may be extended for successive one year terms by agreement of the parties. We account for the securitization facility as secured borrowings, and the accounts receivables sold pursuant to the facility are included in the accompanying unaudited consolidated balance sheet as Trade receivables - third party and affiliates. Borrowings under this facility are classified as short-term borrowings in the accompanying unaudited consolidated balance sheet. Once sold to the Transferor, the accounts receivable are legally separate and distinct from our other assets and are not available to our creditors should we become insolvent. All of the Transferor's assets have been pledged to the Administrator in support of its obligations under the Purchase Agreement.
On September 10, 2013, Celanese US prepaid $100 million of borrowings outstanding under the credit-linked revolving facility set to mature in 2014 using funds drawn under the accounts receivable securitization facility. As of September 30, 2013, the outstanding amount of accounts receivable transferred by the Originators to the Transferor was $193 million.
Balances available for borrowing are as follows:
 
As of
September 30,
2013
 
(unaudited)
 
(In $ millions)
Revolving Credit Facility
 

Borrowings outstanding

Letters of credit issued

Available for borrowing
600

Credit-Linked Revolving Facility
 

Borrowings outstanding

Letters of credit issued
80

Available for borrowing
1

Accounts Receivable Securitization Facility
 
Borrowings outstanding
100

Letters of credit issued

Available for borrowing
31

Share Capital
Our Board of Directors follows a policy of declaring, subject to legally available funds, a quarterly cash dividend on each share of our Series A Common Stock, par value $0.0001 per share ("Common Stock") unless the Board of Directors, in its sole discretion, determines otherwise. The amount available to pay cash dividends is restricted by our Amended Credit Agreement and the Senior Notes.

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On April 25, 2013, we announced that our Board of Directors approved a 20% increase in our quarterly Common Stock cash dividend. The Board of Directors increased the quarterly dividend rate from $0.075 to $0.09 per share of Common Stock on a quarterly basis and $0.30 to $0.36 per share of Common Stock on an annual basis beginning in May 2013.
On July 25, 2013, we announced that our Board of Directors approved a 100% increase in our quarterly Common Stock cash dividend. The Board of Directors increased the quarterly dividend rate from $0.09 to $0.18 per share of Common Stock on a quarterly basis and $0.36 to $0.72 per share of Common Stock on an annual basis beginning in August 2013.
Our Board of Directors authorized the repurchase of our Common Stock as follows:
 
Authorized
Amount
 
(unaudited)
 
(In $ millions)
February 2008
400

October 2008
100

April 2011
129

October 2012
264

As of September 30, 2013
893

The authorization gives management discretion in determining the timing and conditions under which shares may be repurchased. The repurchase program does not have an expiration date.
The share repurchase activity pursuant to this authorization is as follows:
 
Nine Months Ended
September 30,
 
Total From
February 2008
Through
September 30, 2013
 
 
2013
 
2012
 
 
 
(unaudited)
 
Shares repurchased
2,096,320

(1) 
853,388

 
15,238,847

(2) 
Average purchase price per share
$
48.58

 
$
43.19

 
$
39.58

 
Amount spent on repurchased shares (in millions)
$
102

 
$
37

 
$
603

 
______________________________
(1) 
Excludes 6,021 shares withheld from employee to cover statutory minimum withholding requirements for personal income taxes related to the vesting of restricted stock. Restricted stock is considered outstanding at the time of issuance and therefore, the shares withheld are treated as treasury shares.
(2) 
Excludes 11,844 shares withheld from employee to cover statutory minimum withholding requirements for personal income taxes related to the vesting of restricted stock. Restricted stock is considered outstanding at the time of issuance and therefore, the shares withheld are treated as treasury shares.
The purchase of treasury stock reduces the number of shares outstanding and the repurchased shares may be used by us for compensation programs utilizing our stock and other corporate purposes. We account for treasury stock using the cost method and include treasury stock as a component of stockholders’ equity.
Contractual Obligations
Except as otherwise described in this report, there have been no material revisions outside the ordinary course of business to our contractual obligations as described in our 2012 Form 10-K.
Off-Balance Sheet Arrangements
We have not entered into any material off-balance sheet arrangements.

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Critical Accounting Policies and Estimates
Our unaudited interim consolidated financial statements are based on the selection and application of significant accounting policies. The preparation of unaudited interim consolidated financial statements in conformity with US Generally Accepted Accounting Principles ("US GAAP") requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the unaudited interim consolidated financial statements and the reported amounts of revenues, expenses and allocated charges during the reporting period. Actual results could differ from those estimates. However, we are not currently aware of any reasonably likely events or circumstances that would result in materially different results.
We describe our significant accounting policies in Note 2 - Summary of Accounting Policies, of the Notes to the Consolidated Financial Statements included in our April 2013 Form 8-K. We discuss our critical accounting policies and estimates in the MD&A of our 2012 Form 10-K.
Effective January 1, 2013, we elected to change our policy for recognizing actuarial gains and losses and changes in the fair value of plan assets for our defined benefit pension plans and other postretirement benefit plans. We now immediately recognize changes in the fair value of plan assets and net actuarial gains and losses annually in the fourth quarter of each fiscal year and whenever a plan is determined to qualify for a remeasurement during a fiscal year. The remaining components of our net periodic benefit cost are recorded on a quarterly basis. Our critical accounting policy related to pension accounting is revised as follows. 
Benefit Obligations
We have pension and other postretirement benefit plans covering substantially all employees who meet eligibility requirements. With respect to its US qualified defined benefit pension plan, minimum funding requirements are determined by the Pension Protection Act of 2006. Various assumptions are used in the calculation of the actuarial valuation of the employee benefit plans. These assumptions include the discount rate, compensation levels, expected long-term rates of return on plan assets and trends in health care costs. In addition to the above mentioned assumptions, actuarial consultants use factors such as withdrawal and mortality rates to estimate the projected benefit obligation. The actuarial assumptions used may differ materially from actual results due to changing market and economic conditions, higher or lower withdrawal rates or longer or shorter life spans of participants. These differences may result in a significant impact to the amount of net periodic benefit cost recorded in future periods.
The amounts recognized in the consolidated financial statements related to pension and other postretirement benefits are determined on an actuarial basis. A significant assumption used in determining our net periodic benefit cost is the expected long-term rate of return on plan assets. As of December 31, 2012, we assumed an expected long-term rate of return on plan assets of 8.5% for the US defined benefit pension plans, which represent approximately 83% and 84% of our fair value of pension plan assets and projected benefit obligation, respectively. On average, the actual return on the US qualified defined pension plans' assets over the long-term (20 years) has exceeded 8.5%.
Another estimate that affects our pension and other postretirement net periodic benefit cost is the discount rate used in the annual actuarial valuations of pension and other postretirement benefit plan obligations. At the end of each year, we determine the appropriate discount rate, used to determine the present value of future cash flows currently expected to be required to settle the pension and other postretirement benefit obligations. The discount rate is generally based on the yield on high-quality corporate fixed-income securities. As of December 31, 2012, we decreased the discount rate to 3.8% from 4.6% as of December 31, 2011 for the US plans.
Other postretirement benefit plans provide medical and life insurance benefits to retirees who meet minimum age and service requirements. The key determinants of the accumulated postretirement benefit obligation ("APBO") are the discount rate and the health care cost trend rate. The health care cost trend rate has a significant effect on the reported amounts of APBO and related expense.
Pension assumptions are reviewed annually on a plan and country-specific basis by third-party actuaries and senior management. Such assumptions are adjusted as appropriate to reflect changes in market rates and outlook. Actuarial gains and losses generated by changes in actuarial assumptions are recognized in net periodic benefit cost annually in the fourth quarter of each fiscal year and whenever a plan is required to be remeasured.
We determine the long-term expected rate of return on plan assets by considering the current target asset allocation, as well as the historical and expected rates of return on various asset categories in which the plans are invested. A single long-term

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expected rate of return on plan assets is then calculated for each plan as the weighted average of the target asset allocation and the long-term expected rate of return assumptions for each asset category within each plan. Differences between actual rates of return of plan assets and the long-term expected rate of return on plan assets are recognized in net periodic benefit cost annually in the fourth quarter of each fiscal year and whenever a plan is required to be remeasured.
The estimated change in pension and postretirement net periodic benefit costs that would occur in 2013 from a change in the indicated assumptions are as follows:
 
Change in
Rate
 
Net Periodic
Benefit Costs
 
 
 
(In $ millions)
US Pension Benefits
 
 
 
Decrease in the discount rate
0.50
%
 
(8
)
Decrease in the long-term expected rate of return on plan assets(1)
0.50
%
 
12

US Postretirement Benefits
 
 
 
Decrease in the discount rate
0.50
%
 
(1
)
Increase in the annual health care cost trend rates
1.00
%
 

Non-US Pension Benefits
 
 
 
Decrease in the discount rate
0.50
%
 
(1
)
Decrease in the long-term expected rate of return on plan assets
0.50
%
 
2

Non-US Postretirement Benefits
 
 
 
Decrease in the discount rate
0.50
%
 

Increase in the annual health care cost trend rates
1.00
%
 

______________________________
(1) 
Excludes nonqualified pension plans.
Recent Accounting Pronouncements
See Note 2 - Recent Accounting Pronouncements in the accompanying unaudited interim consolidated financial statements included in this Quarterly Report on Form 10-Q for a discussion of recent accounting pronouncements.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Market risk for our Company has not changed materially from the foreign exchange, interest rate and commodity risks disclosed in Item 7A. Quantitative and Qualitative Disclosures about Market Risk in our 2012 Form 10-K. See also Note 15 - Derivative Financial Instruments, in the accompanying unaudited interim consolidated financial statements for further discussion of our market risk management and the related impact on our financial position and results of operations.
Item 4. Controls and Procedures
Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including the Chief Executive Officer and Chief Financial Officer, we have evaluated the effectiveness of our disclosure controls and procedures pursuant to Exchange Act Rule 13a-15(b) as of the end of the period covered by this report. Based on that evaluation, as of September 30, 2013, the Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures are effective.
Changes in Internal Control Over Financial Reporting
During the period covered by this report, there were no changes in our internal control over financial reporting that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II — OTHER INFORMATION
Item 1. Legal Proceedings
We are involved in a number of legal and regulatory proceedings, lawsuits and claims incidental to the normal conduct of our business, relating to such matters as product liability, land disputes, contracts, antitrust, intellectual property, workers' compensation, chemical exposure, asbestos exposure, prior acquisitions and divestitures, past waste disposal practices and release of chemicals into the environment. The Company is actively defending those matters where it is named as a defendant. Due to the inherent subjectivity of assessments and unpredictability of outcomes of legal proceedings, the Company's litigation accruals and estimates of possible loss or range of possible loss may not represent the ultimate loss to the Company from legal proceedings. See Note 11 - Environmental and Note 17 - Commitments and Contingencies in the accompanying unaudited interim consolidated financial statements for a discussion of material environmental matters and commitments and contingencies related to legal and regulatory proceedings. There have been no significant developments in the "Legal Proceedings" described in our 2012 Form 10-K other than those disclosed in Note 11 - Environmental and Note 17 - Commitments and Contingencies in the accompanying unaudited interim consolidated financial statements.
Item 1A. Risk Factors
There have been no material changes to the risk factors under Part I, Item 1A of our 2012 Form 10-K.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
The table below sets forth information regarding repurchases of our Common Stock during the three months ended September 30, 2013:
Period
 
Total Number
of Shares
Purchased
 
Average
Price Paid
per Share
 
Total Number of
Shares Purchased as
Part of Publicly
Announced Program
 
Approximate Dollar
Value of Shares
Remaining that may be
Purchased Under the Program
(2)
(unaudited)
July 1-31, 2013
 
398,947

(1) 
$
47.54

 
394,655

 
$
367,000,000

August 1-31, 2013
 
1,534,091

 
$
49.01

 
1,534,091

 
$
292,000,000

September 1-30, 2013
 
29,882

 
$
50.19

 
29,882

 
$
290,000,000

Total
 
1,962,920

 
 
 
1,958,628

 
 
______________________________
(1) 
Includes 4,292 shares withheld from employees to cover their statutory minimum withholding requirements for personal income taxes related to the vesting of restricted stock units.
(2) 
Our Board of Directors authorized the repurchase of our Common Stock as follows:
 
Authorized Amount
 
(In $ millions)
February 2008
400

October 2008
100

April 2011
129

October 2012
264

As of September 30, 2013
893


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Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
None.
Item 5. Other Information
None.

71




Item 6. Exhibits
Exhibit
Number
 
 
 
Description
 
 
 
3.1
 
Second Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to the Annual Report on Form 10-K filed with the SEC on February 11, 2011).
 
 
 
3.2
 
Third Amended and Restated By-laws, effective as of October 23, 2008 (incorporated by reference to Exhibit 3.2 to the Quarterly Report on Form 10-Q filed with the SEC on July 19, 2013).
 
 
 
10.1*
 
Amendment No. 2, dated August 14, 2013, among Celanese Corporation, Celanese US Holdings LLC, certain subsidiaries of Celanese US Holdings LLC, the lenders party thereto and Deutsche Bank AG, New York Branch, as administrative agent and as collateral agent.
 
 
 
10.2
 
Purchase and Sale Agreement, dated August 28, 2013, among Celanese Acetate LLC, Celanese Ltd., Ticona Polymers, Inc. and CE Receivables LLC (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed with the SEC on September 3, 2013).
 
 
 
10.3
 
Receivables Purchase Agreement, dated August 28, 2013, among Celanese International Corporation, CE Receivables LLC, various Conduit Purchasers, Related Committed Purchasers, LC Banks and Purchaser Agents, and The Bank of Tokyo-Mitsubishi UFJ, Ltd., New York Branch, as administrator (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed with the SEC on September 3, 2013).

 
 
 
10.4
 
Performance Guaranty, dated August 28, 2013, by Celanese US Holdings LLC in favor of The Bank of Tokyo-Mitsubishi UFJ, Ltd., New York Branch, as administrator (incorporated by reference to Exhibit 10.3 to the Current Report on Form 8-K filed with the SEC on September 3, 2013).

 
 
 
10.5*
 
Amendment Agreement, dated September 16, 2013, among Celanese Corporation, Celanese US Holdings LLC, certain subsidiaries of Celanese US Holdings LLC, the lenders party thereto, Deutsche Bank AG, New York Branch, as administrative agent and as collateral agent, and Deutsche Bank Securities Inc. as lead arranger and book runner.

 
 
 
31.1*
 
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
 
 
 
31.2*
 
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
 
 
 
32.1*
 
Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 
 
 
32.2*
 
Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 
 
 
101.INS*
 
XBRL Instance Document.
 
 
 
101.SCH*
 
XBRL Taxonomy Extension Schema Document.
 
 
 
101.CAL*
 
XBRL Taxonomy Extension Calculation Linkbase Document.
 
 
 
101.DEF*
 
XBRL Taxonomy Extension Definition Linkbase Document.
 
 
 
101.LAB*
 
XBRL Taxonomy Extension Label Linkbase Document.
 
 
 
101.PRE*
 
XBRL Taxonomy Extension Presentation Linkbase Document.
*     Filed herewith

72




SIGNATURES
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.

 
CELANESE CORPORATION
 
 
 
 
 
 
 
By: 
 /s/ MARK C. ROHR
 
 
 
Mark C. Rohr
 
 
 
Chairman of the Board of Directors and
 
 
 
Chief Executive Officer
 
 
 
 
 
 
 
 
Date:
October 21, 2013
 
 
By: 
 /s/ STEVEN M. STERIN
 
 
 
Steven M. Sterin
 
 
 
Senior Vice President and
 
 
 
Chief Financial Officer
 
 
 
 
 
 
 
 
Date:
October 21, 2013


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