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Celanese Corp - Quarter Report: 2018 September (Form 10-Q)

Table of Contents

 
 
 
 
 
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, 2018
 
Or
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
(Commission File Number) 001-32410
celanse_imagea01a34.gif
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 every Interactive Data File required to be submitted 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 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, smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer  þ
Accelerated filer  o
Non-accelerated filer  o
Smaller reporting company  o
Emerging growth company  o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 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 common stock, $0.0001 par value, as of October 12, 2018 was 133,757,973.
 
 
 
 
 

Table of Contents

CELANESE CORPORATION AND SUBSIDIARIES
Form 10-Q
For the Quarterly Period Ended September 30, 2018
TABLE OF CONTENTS
 
 
Page
 
 
 
 
 
 
 
 
 
 
 
 
 

2

Table of Contents


Item 1. Financial Statements
CELANESE CORPORATION AND SUBSIDIARIES
UNAUDITED INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2018
 
2017
 
2018
 
2017
 
 
 
As Adjusted
 
 
 
As Adjusted
(Note 2)
 
(In $ millions, except share and per share data)
Net sales
1,771

 
1,566

 
5,466

 
4,547

Cost of sales
(1,255
)
 
(1,183
)
 
(3,914
)
 
(3,449
)
Gross profit
516

 
383

 
1,552

 
1,098

Selling, general and administrative expenses
(129
)
 
(133
)
 
(412
)
 
(353
)
Amortization of intangible assets
(5
)
 
(5
)
 
(18
)
 
(14
)
Research and development expenses
(18
)
 
(19
)
 
(54
)
 
(53
)
Other (charges) gains, net
12

 
—

 
9

 
(57
)
Foreign exchange gain (loss), net
—

 
4

 
2

 
—

Gain (loss) on disposition of businesses and assets, net
(2
)
 
(1
)
 
(4
)
 
(4
)
Operating profit (loss)
374

 
229

 
1,075

 
617

Equity in net earnings (loss) of affiliates
66

 
50

 
180

 
135

Non-operating pension and other postretirement employee benefit (expense) income
25


23

 
77

 
67

Interest expense
(30
)
 
(32
)
 
(95
)
 
(91
)
Interest income
2

 
1

 
4

 
2

Dividend income - cost investments
26

 
24

 
92

 
82

Other income (expense), net
(1
)
 
(6
)
 
3

 
(2
)
Earnings (loss) from continuing operations before tax
462

 
289

 
1,336

 
810

Income tax (provision) benefit
(54
)
 
(57
)
 
(216
)
 
(153
)
Earnings (loss) from continuing operations
408

 
232

 
1,120

 
657

Earnings (loss) from operation of discontinued operations
(7
)
 
(5
)
 
(9
)
 
(14
)
Income tax (provision) benefit from discontinued operations
1

 
1

 
1

 
2

Earnings (loss) from discontinued operations
(6
)
 
(4
)
 
(8
)
 
(12
)
Net earnings (loss)
402

 
228

 
1,112

 
645

Net (earnings) loss attributable to noncontrolling interests
(1
)
 
(2
)
 
(4
)
 
(5
)
Net earnings (loss) attributable to Celanese Corporation
401

 
226

 
1,108

 
640

Amounts attributable to Celanese Corporation
 

 
 

 
 

 
 

Earnings (loss) from continuing operations
407

 
230

 
1,116

 
652

Earnings (loss) from discontinued operations
(6
)
 
(4
)
 
(8
)
 
(12
)
Net earnings (loss)
401

 
226

 
1,108

 
640

Earnings (loss) per common share - basic
 

 
 

 
 

 
 

Continuing operations
3.02

 
1.68

 
8.25

 
4.71

Discontinued operations
(0.04
)
 
(0.03
)
 
(0.06
)
 
(0.09
)
Net earnings (loss) - basic
2.98

 
1.65

 
8.19

 
4.62

Earnings (loss) per common share - diluted
 

 
 

 
 

 
 

Continuing operations
3.00

 
1.68

 
8.18

 
4.69

Discontinued operations
(0.04
)
 
(0.03
)
 
(0.06
)
 
(0.09
)
Net earnings (loss) - diluted
2.96

 
1.65

 
8.12

 
4.60

Weighted average shares - basic
134,519,301

 
136,579,077

 
135,336,704

 
138,599,330

Weighted average shares - diluted
135,499,390

 
136,951,923

 
136,387,703

 
138,988,321

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

3

Table of Contents

CELANESE CORPORATION AND SUBSIDIARIES
UNAUDITED INTERIM CONSOLIDATED STATEMENTS OF
COMPREHENSIVE INCOME (LOSS)
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2018
 
2017
 
2018
 
2017
 
(In $ millions)
Net earnings (loss)
402

 
228

 
1,112

 
645

Other comprehensive income (loss), net of tax


 


 


 
 
Unrealized gain (loss) on marketable securities
—

 
—

 
—

 
1

Foreign currency translation gain (loss)
(35
)
 
42

 
(52
)
 
148

Gain (loss) on cash flow hedges
4

 
—

 
9

 
(1
)
Pension and postretirement benefits gain (loss)
—

 
(1
)
 
1

 
4

Total other comprehensive income (loss), net of tax
(31
)
 
41

 
(42
)
 
152

Total comprehensive income (loss), net of tax
371

 
269

 
1,070

 
797

Comprehensive (income) loss attributable to noncontrolling interests
(1
)
 
(2
)
 
(4
)
 
(5
)
Comprehensive income (loss) attributable to Celanese Corporation
370

 
267

 
1,066

 
792


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

4

Table of Contents

CELANESE CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED BALANCE SHEETS
 
As of
September 30,
2018
 
As of
December 31,
2017
 
(In $ millions, except share data)
ASSETS
 
 
 
Current Assets
 

 
 

Cash and cash equivalents (variable interest entity restricted - 2018: $27; 2017: $19)
703

 
576

Trade receivables - third party and affiliates (net of allowance for doubtful accounts - 2018: $10; 2017: $9; variable interest entity restricted - 2018: $5; 2017: $5)
1,086

 
986

Non-trade receivables, net
279

 
244

Inventories
1,033

 
900

Marketable securities, at fair value
31

 
32

Other assets
48

 
54

Total current assets
3,180

 
2,792

Investments in affiliates
981

 
976

Property, plant and equipment (net of accumulated depreciation - 2018: $2,739; 2017: $2,584; variable interest entity restricted - 2018: $668; 2017: $697)
3,699

 
3,762

Deferred income taxes
170

 
366

Other assets (variable interest entity restricted - 2018: $4; 2017: $6)
413

 
338

Goodwill
1,064

 
1,003

Intangible assets (variable interest entity restricted - 2018: $23; 2017: $25)
317

 
301

Total assets
9,824

 
9,538

LIABILITIES AND EQUITY
 
 
 
Current Liabilities
 

 
 

Short-term borrowings and current installments of long-term debt - third party and affiliates
229

 
326

Trade payables - third party and affiliates
819

 
807

Other liabilities
347

 
354

Income taxes payable
137

 
72

Total current liabilities
1,532

 
1,559

Long-term debt, net of unamortized deferred financing costs
3,196

 
3,315

Deferred income taxes
246

 
211

Uncertain tax positions
154

 
156

Benefit obligations
547

 
585

Other liabilities
206

 
413

Commitments and Contingencies


 


Stockholders' Equity
 

 
 

Preferred stock, $0.01 par value, 100,000,000 shares authorized (2018 and 2017: 0 issued and outstanding)
—

 
—

Common stock, $0.0001 par value, 400,000,000 shares authorized (2018: 168,299,980 issued and 133,731,509 outstanding; 2017: 168,156,969 issued and 135,769,256 outstanding)
—

 
—

Treasury stock, at cost (2018: 34,568,471 shares; 2017: 32,387,713 shares)
(2,281
)
 
(2,031
)
Additional paid-in capital
222

 
175

Retained earnings
5,819

 
4,920

Accumulated other comprehensive income (loss), net
(219
)
 
(177
)
Total Celanese Corporation stockholders' equity
3,541

 
2,887

Noncontrolling interests
402

 
412

Total equity
3,943

 
3,299

Total liabilities and equity
9,824

 
9,538


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

5

Table of Contents

CELANESE CORPORATION AND SUBSIDIARIES
UNAUDITED INTERIM CONSOLIDATED STATEMENT OF EQUITY
 
Nine Months Ended
September 30, 2018
 
Shares
 
Amount
 
(In $ millions, except share data)
Common Stock
 
 
 
Balance as of the beginning of the period
135,769,256

 
—

Stock option exercises
—

 
—

Purchases of treasury stock
(2,180,758
)
 
—

Stock awards
143,011

 
—

Balance as of the end of the period
133,731,509

 
—

Treasury Stock
 
 
 
Balance as of the beginning of the period
32,387,713

 
(2,031
)
Purchases of treasury stock, including related fees
2,180,758

 
(250
)
Balance as of the end of the period
34,568,471

 
(2,281
)
Additional Paid-In Capital
 
 
 
Balance as of the beginning of the period
 
 
175

Stock-based compensation, net of tax
 
 
47

Balance as of the end of the period
 
 
222

Retained Earnings
 
 
 
Balance as of the beginning of the period
 
 
4,920

Net earnings (loss) attributable to Celanese Corporation
 
 
1,108

Common stock dividends
 
 
(209
)
Balance as of the end of the period
 
 
5,819

Accumulated Other Comprehensive Income (Loss), Net
 
 
 
Balance as of the beginning of the period
 
 
(177
)
Other comprehensive income (loss), net of tax
 
 
(42
)
Balance as of the end of the period
 
 
(219
)
Total Celanese Corporation stockholders' equity
 
 
3,541

Noncontrolling Interests
 
 
 
Balance as of the beginning of the period
 
 
412

Net earnings (loss) attributable to noncontrolling interests
 
 
4

(Distributions to) contributions from noncontrolling interests
 
 
(14
)
Balance as of the end of the period
 
 
402

Total equity
 
 
3,943


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

6

Table of Contents

CELANESE CORPORATION AND SUBSIDIARIES
UNAUDITED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
 
Nine Months Ended
September 30,
 
2018
 
2017
 
(In $ millions)
Operating Activities
 
 
 
Net earnings (loss)
1,112

 
645

Adjustments to reconcile net earnings (loss) to net cash provided by operating activities
 
 
 
Depreciation, amortization and accretion
258

 
231

Pension and postretirement net periodic benefit cost
(69
)
 
(60
)
Pension and postretirement contributions
(35
)
 
(36
)
Deferred income taxes, net
43

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

 
4

Stock-based compensation
53

 
32

Undistributed earnings in unconsolidated affiliates
(19
)
 
(19
)
Other, net
18

 
8

Operating cash provided by (used in) discontinued operations
4

 
7

Changes in operating assets and liabilities
 
 
 
Trade receivables - third party and affiliates, net
(114
)
 
(122
)
Inventories
(142
)
 
(14
)
Other assets
(60
)
 
(24
)
Trade payables - third party and affiliates
44

 
41

Other liabilities
97

 
57

Net cash provided by (used in) operating activities
1,195

 
745

Investing Activities
 
 
 
Capital expenditures on property, plant and equipment
(244
)
 
(180
)
Acquisitions, net of cash acquired
(144
)
 
(269
)
Proceeds from sale of businesses and assets, net
13

 
1

Other, net
(34
)
 
(9
)
Net cash provided by (used in) investing activities
(409
)
 
(457
)
Financing Activities
 
 
 
Net change in short-term borrowings with maturities of 3 months or less
(86
)
 
224

Proceeds from short-term borrowings
44

 
150

Repayments of short-term borrowings
(62
)
 
(91
)
Proceeds from long-term debt
—

 
—

Repayments of long-term debt
(56
)
 
(65
)
Purchases of treasury stock, including related fees
(250
)
 
(500
)
Stock option exercises
—

 
1

Common stock dividends
(209
)
 
(178
)
(Distributions to) contributions from noncontrolling interests
(14
)
 
(18
)
Other, net
(6
)
 
(19
)
Net cash provided by (used in) financing activities
(639
)
 
(496
)
Exchange rate effects on cash and cash equivalents
(20
)
 
31

Net increase (decrease) in cash and cash equivalents
127

 
(177
)
Cash and cash equivalents as of beginning of period
576

 
638

Cash and cash equivalents as of end of period
703

 
461


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

7

Table of Contents

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.
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, 2018 and 2017 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 and include the accounts of the Company, its majority owned subsidiaries over which the Company exercises control and, when applicable, variable interest entities in which the Company is the primary beneficiary. 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, 2017, filed on February 9, 2018 with the SEC as part of the Company's Annual Report on Form 10-K.
Operating results for the three and nine months ended September 30, 2018 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 ventures in which the Company owns or is exposed to less than 100% of the economics, the outside stockholders' interests are shown as noncontrolling interests.
During the three months ended March 31, 2018, the Company settled its dispute concerning the exercise of an option right by a partner in two of the Company's InfraServ equity affiliate investments. As a result of the settlement, the Company's ownership in InfraServ GmbH & Co. Gendorf KG and InfraServ GmbH & Co. Knapsack KG was reduced from 39% and 27%, to 30% and 22%, respectively.
The Company has reclassified certain prior period amounts primarily due to (1) the adoption of ASU 2017-07 (defined below in Note 2) and (2) to conform to the presentation of the Company's current reportable segments (Note 19).

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Table of Contents

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 Net sales, 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.
2. Recent Accounting Pronouncements
The following table provides a brief description of recent Accounting Standard Updates ("ASU") issued by the Financial Accounting Standards Board ("FASB"):
Standard
 
Description
 
Effective Date
 
Effect on the Financial Statements or Other Significant Matters
 
 
 
 
 
 
 
In August 2018, the FASB issued ASU 2018-14, Disclosure Framework - Changes to the Disclosure Requirements for Defined Benefit Plans.
 
The new guidance modifies the disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans by removing disclosures that no longer are considered cost beneficial, clarifying the specific requirements of disclosures and adding disclosure requirements identified as relevant.
 
January 1, 2020. Early adoption is permitted.
 
The Company is currently evaluating the impact of adoption on its financial statement disclosures.
 
 
 
 
 
 
 
In February 2018, the FASB issued ASU 2018-02, Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income.
 
The new guidance allows a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act and will improve the usefulness of information reported to financial statement users.
 
January 1, 2019. Early adoption is permitted.
 
The Company is currently evaluating the impact of adoption on its financial statements and related disclosures.
 
 
 
 
 
 
 
In August 2017, the FASB issued ASU 2017-12, Targeted Improvements to Accounting for Hedging Activities.
 
The new guidance improves the financial reporting of hedging relationships to better portray the economic results of an entity's risk management activities in its financial statements through changes to both the designation and measurement guidance for qualifying hedging relationships and the presentation of hedge results.
 
January 1, 2019. Early adoption is permitted.
 
The Company adopted the new guidance effective January 1, 2018, as part of the FASB's simplification initiative. The adoption of the new guidance did not have a material impact to the Company.
 
 
 
 
 
 
 
In March 2017, the FASB issued ASU 2017-07, Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost.
 
The new guidance clarifies the presentation and classification of the components of net periodic benefit costs in the consolidated statement of operations.
 
January 1, 2018.
 
The Company adopted the new guidance effective January 1, 2018, using the retrospective transition method, as part of the FASB's simplification initiative. See Adoption of ASU 2017-07 section below for additional information.
 
 
 
 
 
 
 
In October 2016, the FASB issued ASU 2016-16, Intra-Entity Transfers of Assets Other Than Inventory.
 
The new guidance requires the income tax consequences of an intra-entity transfer of assets other than inventory to be recognized when the transfer occurs rather than deferring until an outside sale has occurred.
 
January 1, 2018.
 
The Company adopted the new guidance effective January 1, 2018, as part of the FASB's simplification initiative. The adoption of the new guidance did not have a material impact to the Company.
 
 
 
 
 
 
 
In August 2016, the FASB issued ASU 2016-15, Classification of Certain Cash Receipts and Cash Payments.
 
The new guidance clarifies the presentation and classification of certain cash receipts and cash payments in the statement of cash flows.
 
January 1, 2018.
 
The Company adopted the new guidance effective January 1, 2018, as part of the FASB's simplification initiative. The adoption of the new guidance did not have a material impact to the Company.
 
 
 
 
 
 
 

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Table of Contents

Standard
 
Description
 
Effective Date
 
Effect on the Financial Statements or Other Significant Matters
 
 
 
 
 
 
 
In February 2016, the FASB issued ASU 2016-02, Leases. Since that date, the FASB has issued additional ASUs clarifying certain aspects of ASU 2016-02.
 
The new guidance supersedes the lease guidance under FASB Accounting Standards Codification ("ASC") Topic 840, Leases, resulting in the creation of FASB ASC Topic 842, Leases. The guidance requires a lessee to recognize in the statement of financial position a liability to make lease payments and a right-of-use asset representing its right to use the underlying asset for the lease term for both finance and operating leases. Subsequent guidance issued after February 2016 did not change the core principle of ASU 2016-02.
 
January 1, 2019. Early adoption is permitted.
 
The Company has substantially completed evaluating its population of leases, and the most significant impact relates to its accounting for manufacturing and logistics equipment, and real estate operating leases. The Company currently anticipates recognition of additional assets and corresponding liabilities related to leases in the range of $150 - $200 million upon adoption. The Company plans to adopt the standard effective January 1, 2019, utilizing the modified retrospective transition method.
 
 
 
 
 
 
 
In January 2016, the FASB issued ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities.
 
The new guidance updates certain aspects of recognition, measurement, presentation and disclosure of financial instruments.
 
January 1, 2018.
 
The Company adopted the new guidance effective January 1, 2018, using the modified retrospective approach, as part of the FASB's simplification initiative. The new guidance resulted in a cumulative-effect adjustment of less than $1 million to January 1, 2018 Retained earnings.
 
 
 
 
 
 
 
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers. Since that date, the FASB has issued additional ASUs clarifying certain aspects of ASU 2014-09.
 
The new guidance requires entities to recognize revenue in a way that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services. The new guidance provides alternative methods of adoption. Subsequent guidance issued after May 2014 did not change the core principle of ASU 2014-09.
 
January 1, 2018.
 
The Company adopted the new guidance effective January 1, 2018, using the modified retrospective approach, as part of the FASB's simplification initiative. The adoption of the new guidance resulted in less than $1 million impact to the consolidated financial statements and related disclosures (See Note 20).
 
 
 
 
 
 
 
Adoption of ASU 2017-07
ASU 2017-07 requires an entity to report the service cost component in the same line item or items as other compensation costs arising from services rendered by the pertinent employees during the period. The other components of net benefit cost are required to be presented in the statement of operations separately from the service cost component and outside a subtotal of Operating profit (loss). The new guidance represents a change in accounting principle. The Company adopted ASU 2017-07 on January 1, 2018 using the retrospective transition method. The adoption of this accounting standard resulted in a change in certain previously reported amounts, as follows:
 
Three Months Ended September 30, 2017
 
As previously reported
 
Adoption of ASU 2017-07
 
As Adjusted
 
(In $ millions)
Cost of sales
(1,181
)
 
(2
)
 
(1,183
)
Selling, general and administrative expenses
(112
)
 
(21
)
 
(133
)
Operating profit (loss)
252

 
(23
)
 
229

Non-operating pension and other postretirement employee benefit (expense) income
—

 
23

 
23


10

Table of Contents

 
Nine Months Ended September 30, 2017
 
As previously reported
 
Adoption of ASU 2017-07
 
As Adjusted
 
(In $ millions)
Cost of sales
(3,443
)
 
(6
)
 
(3,449
)
Selling, general and administrative expenses
(291
)
 
(62
)
 
(353
)
Other (charges) gains, net
(58
)
 
1

 
(57
)
Operating profit (loss)
684

 
(67
)
 
617

Non-operating pension and other postretirement employee benefit (expense) income
—

 
67

 
67

The adoption of this accounting standard had no impact on the previously reported Earnings (loss) from continuing operations or Net earnings (loss) for this period.
3. Acquisitions, Dispositions and Plant Closures
Acquisitions
•
Omni Plastics
On February 1, 2018, using cash on hand and borrowings under the Company's senior unsecured revolving credit facility, the Company acquired 100% of the ownership interests of Omni Plastics, L.L.C. and its subsidiaries ("Omni Plastics"). Omni Plastics specializes in custom compounding of various engineered thermoplastic materials. The acquisition further strengthens the Company's global asset base by adding compounding capacity in the Americas. The acquisition was accounted for as a business combination and the acquired operations are included in the Engineered Materials segment.
Pro forma financial information since the respective 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 acquisition to identifiable assets acquired and liabilities assumed based on their estimated fair values as of the acquisition date. The excess of the purchase price over the aggregate fair values was recorded as goodwill. The Company calculated the fair value of the assets acquired using the income, market or cost approach (or a combination thereof). Fair values were determined based on Level 3 inputs including estimated future cash flows, discount rates, royalty rates, growth rates, sales projections, retention rates and terminal values, all of which require significant management judgment and are susceptible to change. The purchase price allocation is based upon preliminary information and is subject to change if additional information about the facts and circumstances that existed at the acquisition date becomes available. The final fair value of the net assets acquired may result in adjustments to the assets and liabilities, including goodwill. However, any subsequent measurement period adjustments are not expected to have a material impact on the Company's results of operations.

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Table of Contents

The preliminary purchase price allocation for the Omni Plastics acquisition is as follows:
 
As of
February 1, 2018
 
(In $ millions)
Cash and cash equivalents
2

Trade receivables - third party and affiliates
12

Inventories
13

Property, plant and equipment, net
19

Intangible assets (Note 7)
35

Goodwill(1) (Note 7)
84

Other assets
1

Total fair value of assets acquired
166

 
 
Trade payables - third party and affiliates
(8
)
Total debt
(12
)
Total fair value of liabilities assumed
(20
)
Net assets acquired
146

______________________________
(1) 
Goodwill consists of expected revenue and operating synergies resulting from the acquisition, all of which is deductible for income tax purposes.
The amount of pro forma Net earnings (loss) of Omni Plastics included in the Company's unaudited interim consolidated statement of operations was less than 1% (unaudited) of its consolidated Net earnings (loss) had the acquisition occurred as of the beginning of 2018. The amount of Omni Plastics' Net earnings (loss) consolidated by the Company since the acquisition date was not material.
•
Acetate Tow Joint Venture
In June 2017, Celanese, through various subsidiaries, entered into an agreement with affiliates of The Blackstone Group L.P. (the "Blackstone Entities") to form a joint venture which would combine substantially all of the operations of the Company's cellulose derivatives business and the operations of the Rhodia Acetow cellulose acetate business formerly operated by Solvay S.A. and acquired by the Blackstone Entities in June 2017. The parties were subsequently unable to reach an agreement with the European Commission on acceptable conditions to allow the proposed joint venture to proceed. The demands by the European Commission eliminated the advantages at the heart of the transaction. As a result, on March 19, 2018, the Company and the Blackstone Entities abandoned their agreement to form the proposed joint venture.
•
Nilit Plastics
In May 2017, using cash on hand and borrowings under the Company's senior unsecured revolving credit facility, the Company acquired the nylon compounding division of Nilit Group ("Nilit"), an independent producer of high performance nylon resins, fibers and compounds. Celanese acquired the nylon compounding product portfolio, customer agreements and manufacturing, technology and commercial facilities. The acquisition of Nilit increases the Company's global engineered materials product platforms, extends the operational model, technical and industry solutions capabilities and expands project pipelines. The acquisition was accounted for as a business combination and the acquired operations are included in the Engineered Materials segment. The Company allocated the purchase price of the acquisition to identifiable assets acquired and liabilities assumed based on their estimated fair values as of the acquisition date. The purchase price allocation was based on preliminary information. During the measurement period, the Company made certain adjustments to its purchase price allocation to adjust taxes and working capital, which resulted in a $2 million reduction to goodwill initially recorded.

12

Table of Contents

Plant Closures
•
Ocotlán, Mexico
On June 6, 2018, the Company announced the consolidation of its global acetate manufacturing operations by initiating the closure of its acetate tow manufacturing unit in Ocotlán, Mexico in 2018. The acetate flake unit will remain operational and is unaffected by these actions. The Ocotlán, Mexico operations are included in the Company's Acetate Tow segment.
The exit costs and shutdown costs related to the closure of the Ocotlán, Mexico acetate tow manufacturing unit (Note 14) are as follows:
 
Nine Months Ended
September 30, 2018
 
(In $ millions)
Restructuring(1)
2

Accelerated depreciation expense
12

Loss on disposition of assets, net
1

Total
15

______________________________
(1) 
Included in Other (charges) gains, net in the unaudited interim consolidated statement of operations.
The Company expects to incur additional exit and shutdown costs of approximately $5 million, primarily related to accelerated depreciation, through the remainder of 2018.
4. Ventures and Variable Interest Entities
Consolidated Variable Interest Entities
The Company has a joint venture, Fairway Methanol LLC ("Fairway"), with Mitsui & Co., Ltd., of Tokyo, Japan ("Mitsui"), in which the Company owns 50% of Fairway, for the production of methanol at the Company's integrated chemical plant in Clear Lake, Texas. The methanol unit utilizes natural gas in the US Gulf Coast region as a feedstock and benefits from the existing infrastructure at the Company's Clear Lake facility. Both Mitsui and the Company supply their own natural gas to Fairway in exchange for methanol tolling under a cost-plus off-take arrangement.
The Company determined that Fairway is a variable interest entity ("VIE") in which the Company is the primary beneficiary. Under the terms of the joint venture agreements, the Company provides site services and day-to-day operations for the methanol facility. In addition, the joint venture agreements provide that the Company indemnifies Mitsui for environmental obligations that exceed a specified threshold, as well as an equity option between the partners. Accordingly, the Company consolidates the venture and records a noncontrolling interest for the share of the venture owned by Mitsui. Fairway is included in the Company's Acetyl Intermediates segment.

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Table of Contents

The carrying amount of the assets and liabilities associated with Fairway included in the unaudited consolidated balance sheets are as follows:
 
As of
September 30,
2018
 
As of
December 31,
2017
 
(In $ millions)
Cash and cash equivalents
27

 
19

Trade receivables, net - third party and affiliate
10

 
9

Property, plant and equipment (net of accumulated depreciation - 2018: $120; 2017: $90)
668

 
697

Intangible assets (net of accumulated amortization - 2018: $3; 2017: $2)
23

 
25

Other assets
4

 
6

Total assets(1)
732

 
756

 
 
 
 
Trade payables
13

 
16

Other liabilities(2)
4

 
4

Total debt
5

 
5

Deferred income taxes
3

 
3

Total liabilities
25

 
28

______________________________
(1) 
Assets can only be used to settle the obligations of Fairway.
(2) 
Primarily represents amounts owed by Fairway to the Company for reimbursement of expenditures.
Nonconsolidated Variable Interest Entities
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 VIEs as of September 30, 2018, relates primarily to the recovery of capital expenditures for certain property, plant and equipment.
The carrying amount of the assets and liabilities associated with the obligations to nonconsolidated VIEs, as well as the maximum exposure to loss relating to these nonconsolidated VIEs are as follows:
 
As of
September 30,
2018
 
As of
December 31,
2017
 
(In $ millions)
Property, plant and equipment, net
46

 
53

 
 
 
 
Trade payables
29

 
25

Current installments of long-term debt
13

 
18

Long-term debt
62

 
76

Total liabilities
104

 
119

 
 
 
 
Maximum exposure to loss
141

 
164

The difference between the total liabilities associated with obligations to nonconsolidated VIEs and the maximum exposure to loss primarily represents take-or-pay obligations for services included in the Company's unconditional purchase obligations (Note 18).

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Table of Contents

5. Marketable Securities, at Fair Value
The Company's nonqualified trusts hold available-for-sale securities for funding requirements of the Company's nonqualified pension plans (Note 11) as follows:
 
As of
September 30,
2018
 
As of
December 31,
2017
 
(In $ millions)
Amortized cost
31

 
32

Gross unrealized gain
—

 
—

Gross unrealized loss
—

 
—

Fair value
31

 
32

6. Inventories
 
As of
September 30,
2018
 
As of
December 31,
2017
 
(In $ millions)
Finished goods
673

 
591

Work-in-process
63

 
57

Raw materials and supplies
297

 
252

Total
1,033

 
900

7. Goodwill and Intangible Assets, Net
Goodwill
 
Engineered
Materials
 
Acetate Tow
 
Industrial
Specialties
 
Acetyl
Intermediates
 
Total
 
(In $ millions)
As of December 31, 2017
643

 
149

 
40

 
171

 
1,003

Acquisitions (Note 3)
84

 
—

 
—

 
—

 
84

Exchange rate changes
(16
)
 
—

 
(1
)
 
(6
)
 
(23
)
As of September 30, 2018(1)
711

 
149

 
39

 
165

 
1,064

______________________________
(1) 
There were $0 million of accumulated impairment losses as of September 30, 2018.
The Company assesses the recoverability of the carrying amount 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, 2018 as the estimated fair value for each of the Company's reporting units exceeded the carrying amount of the underlying assets by a substantial margin.

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Table of Contents

Intangible Assets, Net
Finite-lived intangible assets 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, 2017
38

 
640

 
45

 
54

 
777

 
Acquisitions (Note 3)
—

 
32

 
—

 
3

 
35

(1) 
Renewals
6

(2) 
—

 
—

 
—

 
6

 
Exchange rate changes
(2
)
 
(17
)
 
(1
)
 
—

 
(20
)
 
As of September 30, 2018
42

 
655

 
44

 
57

 
798

 
Accumulated Amortization
 
 
 
 
 
 
 
 
 
 
As of December 31, 2017
(33
)
 
(496
)
 
(30
)
 
(32
)
 
(591
)
 
Amortization
(2
)
 
(12
)
 
(3
)
 
(1
)
 
(18
)
 
Exchange rate changes
2

 
13

 
1

 
—

 
16

 
As of September 30, 2018
(33
)
 
(495
)
 
(32
)
 
(33
)
 
(593
)
 
Net book value
9

 
160

 
12

 
24

 
205

 
______________________________
(1) 
Represents intangible assets acquired related to Omni Plastics (Note 3) with a weighted average amortization period of 11 years.
(2) 
During the nine months ended September 30, 2018, the Company extended a research and development technology agreement license, which will be amortized over a period of 5 years.
Indefinite-lived intangible assets are as follows:
 
Trademarks
and Trade Names
 
(In $ millions)
As of December 31, 2017
115

Acquisitions (Note 3)
—

Accumulated impairment losses
—

Exchange rate changes
(3
)
As of September 30, 2018
112

The Company assesses the recoverability of the carrying amount of its indefinite-lived intangible assets either qualitatively or by utilizing the relief from royalty method under the income approach annually during the third quarter of its fiscal year using June 30 balances or whenever events or change in circumstances indicate that the carrying amount of the assets may not be fully recoverable. In connection with the Company's annual indefinite-lived intangible assets impairment assessment, the Company did not record an impairment loss to indefinite-lived intangible assets during the nine months ended September 30, 2018 as the estimated fair value of each of the Company's indefinite-lived intangible assets exceeded the carrying amount of the underlying assets by a substantial margin.

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Table of Contents

Estimated amortization expense for the succeeding five fiscal years is as follows:
 
(In $ millions)
2019
22

2020
20

2021
19

2022
17

2023
14

8. Current Other Liabilities
 
As of
September 30,
2018
 
As of
December 31,
2017
 
(In $ millions)
Asset retirement obligations
4

 
19

Benefit obligations (Note 11)
30

 
30

Customer rebates (Note 20)
65

 
65

Derivatives (Note 16)
3

 
3

Environmental (Note 12)
25

 
14

Insurance
4

 
5

Interest
21

 
17

Restructuring (Note 14)
8

 
5

Salaries and benefits
109

 
113

Sales and use tax/foreign withholding tax payable
31

 
16

Other
47

 
67

Total
347

 
354

9. Noncurrent Other Liabilities
 
As of
September 30,
2018
 
As of
December 31,
2017
 
(In $ millions)
Asset retirement obligations
15

 
7

Deferred proceeds
45

 
47

Deferred revenue (Note 20)
7

 
6

Environmental (Note 12)
51

 
59

Income taxes payable
—

 
197

Insurance
40

 
43

Other
48

 
54

Total
206

 
413


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Table of Contents

10. Debt
 
As of
September 30,
2018
 
As of
December 31,
2017
 
(In $ millions)
Short-Term Borrowings and Current Installments of Long-Term Debt - Third Party and Affiliates
 
 
 
Current installments of long-term debt
74

 
63

Short-term borrowings, including amounts due to affiliates(1)
78

 
86

Revolving credit facility(2)
—

 
97

Accounts receivable securitization facility(3)
77

 
80

Total
229

 
326

______________________________
(1) 
The weighted average interest rate was 3.3% and 3.4% as of September 30, 2018 and December 31, 2017, respectively.
(2) 
The weighted average interest rate was 4.1% as of December 31, 2017.
(3) 
The weighted average interest rate was 2.9% and 2.1% as of September 30, 2018 and December 31, 2017, respectively.
 
As of
September 30,
2018
 
As of
December 31,
2017
 
(In $ millions)
Long-Term Debt
 
 
 
Senior unsecured term loan due 2021(1)
475

 
494

Senior unsecured notes due 2019, interest rate of 3.250%
347

 
360

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

 
400

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

 
500

Senior unsecured notes due 2023, interest rate of 1.125%
866

 
897

Senior unsecured notes due 2025, interest rate of 1.250%
346

 
359

Pollution control and industrial revenue bonds due at various dates through 2030, interest rates ranging from 4.05% to 5.00%
169

 
169

Nilit bank loans due at various dates through 2026(2)
10

 
11

Obligations under capital leases due at various dates through 2054
173

 
208

Subtotal
3,286

 
3,398

Unamortized debt issuance costs(3)
(16
)
 
(20
)
Current installments of long-term debt
(74
)
 
(63
)
Total
3,196

 
3,315

______________________________
(1) 
The margin for borrowings under the senior unsecured term loan due 2021 was 1.5% above LIBOR at current Company credit ratings.
(2) 
The weighted average interest rate was 1.3% and 1.3% as of September 30, 2018 and December 31, 2017, respectively.
(3) 
Related to the Company's long-term debt, excluding obligations under capital leases.
Senior Credit Facilities
In July 2016, Celanese, Celanese US and certain subsidiaries entered into a new senior credit agreement ("Credit Agreement") consisting of a $500 million senior unsecured term loan and a $1.0 billion senior unsecured revolving credit facility (with a letter of credit sublimit), each maturing in 2021. The Credit Agreement is guaranteed by Celanese, Celanese US and substantially all of its domestic subsidiaries (the "Subsidiary Guarantors").

18

Table of Contents

The Company's debt balances and amounts available for borrowing under its senior unsecured revolving credit facility are as follows:
 
As of
September 30,
2018
 
(In $ millions)
Revolving Credit Facility
 
Borrowings outstanding(1)
—

Letters of credit issued
—

Available for borrowing(2)
1,000

______________________________
(1) 
The Company borrowed $640 million and repaid $737 million under its senior unsecured revolving credit facility during the nine months ended September 30, 2018.
(2) 
The margin for borrowings under the senior unsecured revolving credit facility was 1.5% above LIBOR at current Company credit ratings.
Senior Notes
The Company has outstanding senior unsecured notes, issued in public offerings registered under the Securities Act of 1933 ("Securities Act"), as amended (collectively, the "Senior Notes"). The Senior Notes were issued by Celanese US and are guaranteed on a senior unsecured basis by Celanese and the Subsidiary Guarantors.
Accounts Receivable Securitization Facility
The Company has a US accounts receivable securitization facility involving receivables of certain of its domestic subsidiaries of the Company transferred to a wholly-owned, "bankruptcy remote" special purpose subsidiary of the Company ("SPE"). The securitization facility, which permits cash borrowings and letters of credit, expires in July 2019. All of the SPE's assets have been pledged to the administrative agent in support of the SPE's obligations under the facility.
The Company's debt balances and amounts available for borrowing under its securitization facility are as follows:
 
As of
September 30,
2018
 
(In $ millions)
Accounts Receivable Securitization Facility
 
Borrowings outstanding(1)
77

Letters of credit issued
29

Available for borrowing
5

Total borrowing base
111

 
 
Maximum borrowing base(2)
120

______________________________
(1) 
The Company borrowed $25 million and repaid $28 million during the nine months ended September 30, 2018.
(2) 
Outstanding accounts receivable transferred to the SPE was $185 million.
Other Financing Arrangements
On June 25, 2018, the Company entered into a factoring agreement with a global financial institution to sell certain accounts receivable on a non-recourse basis. These transactions are treated as a sale and are accounted for as a reduction in accounts receivable because the agreement transfers effective control over and risk related to the receivables to the buyer. The Company has no continuing involvement in the transferred receivables, other than collection and administrative responsibilities and, once sold, the accounts receivable are no longer available to satisfy creditors in the event of bankruptcy. The Company de-recognized $40 million and $38 million of accounts receivable during the three months ended June 30, 2018 and September 30, 2018, respectively.

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Table of Contents

Covenants
The Company's material financing arrangements contain customary covenants, including the maintenance of certain financial ratios, events of default and change of control provisions. 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. The Company is in compliance with all covenants related to its debt agreements as of September 30, 2018.
11. Benefit Obligations
The components of net periodic benefit cost are as follows:
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2018
 
2017
 
2018
 
2017
 
Pension
Benefits
 
Post-retirement
Benefits
 
Pension
Benefits
 
Post-retirement
Benefits
 
Pension
Benefits
 
Post-retirement
Benefits
 
Pension
Benefits
 
Post-retirement
Benefits
 
(In $ millions)
Service cost
2

 
—

 
2

 
1

 
7

 
—

 
6

 
1

Interest cost
26

 
1

 
27

 
—

 
78

 
2

 
80

 
1

Expected return on plan assets
(52
)
 
—

 
(50
)
 
—

 
(157
)
 
—

 
(148
)
 
—

Amortization of prior service cost (credit), net
—

 
—

 
—

 
—

 
—

 
—

 
—

 
(1
)
Special termination benefit
—

 
—

 
—

 
—

 
1

 
—

 
1

 
—

Total
(24
)
 
1

 
(21
)
 
1

 
(71
)
 
2

 
(61
)
 
1

Benefit obligation funding is as follows:
 
As of
September 30,
2018
 
Total
Expected
2018
 
(In $ millions)
Cash contributions to defined benefit pension plans
17

 
23

Benefit payments to nonqualified pension plans
17

 
21

Benefit payments to other postretirement benefit plans
1

 
5

Cash contributions to German multiemployer defined benefit pension plans(1)
6

 
8

______________________________
(1) 
The Company makes contributions based on specified percentages of employee contributions.
The Company's estimates of its US defined benefit pension plan contributions reflect the provisions of the Pension Protection Act of 2006.
12. Environmental
The Company is subject to environmental laws and regulations worldwide that impose limitations on the discharge of pollutants into the air and water, establish standards for the treatment, storage and disposal of solid and hazardous wastes, and impose record keeping and notification requirements. Failure to timely comply with these laws and regulations may expose the Company to penalties. The Company believes that it is in substantial compliance with all applicable environmental laws and regulations and engages in an ongoing process of updating its controls to mitigate compliance risks. 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.

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Table of Contents

The components of environmental remediation reserves are as follows:
 
As of
September 30,
2018
 
As of
December 31,
2017
 
(In $ millions)
Demerger obligations (Note 18)
31

 
28

Divestiture obligations (Note 18)
17

 
17

Active sites
15

 
15

US Superfund sites
11

 
11

Other environmental remediation reserves
2

 
2

Total
76

 
73

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, demerger, 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 18). Certain of these sites, at which the Company maintains continuing involvement, were and continue to be designated as discontinued operations when closed. 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 US Environmental Protection Agency ("EPA"), state governing bodies or private individuals consider such companies to be potentially responsible parties ("PRP") 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 the contaminants of concern, the potential impact thereof, the relationship of the contaminants of concern to its current and historic operations, 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 Diamond Alkali Superfund Site, which is comprised of a number of sub-sites, including the Lower Passaic River Study Area ("LPRSA"), which is the lower 17-mile stretch of the Passaic River ("Lower Passaic River Site"), and the Newark Bay Area. The Company and 70 other companies are parties to a May 2007 Administrative Order on Consent with the EPA to perform a Remedial Investigation/Feasibility Study ("RI/FS") at the Lower Passaic River Site in order to identify the levels of contaminants and potential cleanup actions, including the potential migration of contaminants between the Lower Passaic River Site and the Newark Bay Area. Work on the RI/FS is ongoing, with a goal to complete it in 2018.

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Table of Contents

In March 2016, the EPA issued its final Record of Decision concerning the remediation of the lower 8.3 miles of the Lower Passaic River Site ("Lower 8.3 Miles"). Pursuant to the EPA's Record of Decision, the Lower 8.3 Miles must be dredged bank to bank and an engineered cap must be installed at an EPA estimated cost of approximately $1.4 billion. The Company owned and/or operated facilities in the vicinity of the Lower 8.3 Miles, but has found no evidence that it contributed any of the contaminants of concern to the Passaic River. On June 30, 2018, Occidental Chemical Corporation ("OCC"), the successor to the Diamond Alkali Company, sued a subsidiary of the Company and 119 other parties alleging claims for joint and several damages, contribution and declaratory relief under Section 107 and 113 of Superfund for costs to clean up the LPRSA portion of the Diamond Alkali Superfund Site, Occidental Chemical Corporation v. 21st Century Fox America, Inc., et al, No. 2:18-CV-11273-JLL-JAD (U.S. District Court New Jersey), alleging that each of the defendants owned or operated a facility that contributed contamination to the LPRSA. With respect to the Company, the OCC lawsuit is limited to the former Celanese facility that Essex County, New Jersey has agreed to indemnify the Company for and does not change the Company's estimated liability for LPRSA cleanup costs. The Company is vigorously defending these matters and currently believes that its ultimate allocable share of the cleanup costs with respect to the Lower Passaic River Site, estimated at less than 1%, will not be material to the Company's results of operations, cash flows or financial position.
13. Stockholders' Equity
Common Stock
On September 17, 2018, the Company filed with the Secretary of State of the State of Delaware a Certificate of Amendment (the "Certificate of Amendment") to its Second Amended and Restated Certificate of Incorporation, as amended, to remove all references to the Company's Series B Common Stock, par value $0.0001 per share, therefrom and to redesignate the Company's Series A Common Stock, par value $0.0001 per share, as "Common Stock." Following the filing of the Certificate of Amendment, the Company no longer has series of its class of 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 Common Stock unless the Company's Board of Directors, in its sole discretion, determines otherwise.
The Company's Board of Directors approved increases in the Company's Common Stock cash dividend rates as follows:
 
Increase
 
Quarterly Common
Stock Cash Dividend
 
Annual Common
Stock Cash Dividend
 
Effective Date
 
(In percentages)
 
(In $ per share)
 
 
April 2017
28
 
0.46
 
1.84
 
May 2017
April 2018
17
 
0.54
 
2.16
 
May 2018
The Company declared a quarterly cash dividend of $0.54 per share on its Common Stock on October 17, 2018, amounting to $72 million. The cash dividend will be paid on November 8, 2018 to holders of record as of October 29, 2018.
Treasury Stock
 
Nine Months Ended
September 30,
 
Total From
February 2008
Through
September 30, 2018
 
2018
 
2017
 
Shares repurchased
2,179,058

(1) 
5,436,803

 
41,958,077

Average purchase price per share
$
114.73

 
$
91.97

 
$
61.62

Shares repurchased (in $ millions)
$
250

 
$
500

 
$
2,585

Aggregate Board of Directors repurchase authorizations during the period (in $ millions)(2)
$
—

 
$
1,500

 
$
3,866

______________________________
(1) 
Excludes 1,700 common shares reacquired pursuant to an employee clawback agreement.
(2) 
These authorizations give management discretion in determining the timing and conditions under which shares may be repurchased. This repurchase program began in February 2008 and does not have an expiration date.

22

Table of Contents

The purchase of treasury stock reduces the number of shares outstanding. 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.
Other Comprehensive Income (Loss), Net
 
Three Months Ended September 30,
 
2018
 
2017
 
Gross
Amount
 
Income
Tax
(Provision)
Benefit
 
Net
Amount
 
Gross
Amount
 
Income
Tax
(Provision)
Benefit
 
Net
Amount
 
(In $ millions)
Unrealized gain (loss) on marketable securities
—

 
—

 
—

 
—

 
—

 
—

Foreign currency translation gain (loss)
(31
)
 
(4
)
 
(35
)
 
44

 
(2
)
 
42

Gain (loss) on cash flow hedges
4

 
—

 
4

 
—

 
—

 
—

Pension and postretirement benefits gain (loss)
—

 
—

 
—

 
(1
)
 
—

 
(1
)
Total
(27
)
 
(4
)
 
(31
)
 
43

 
(2
)
 
41

 
Nine Months Ended September 30,
 
2018
 
2017
 
Gross
Amount
 
Income
Tax
(Provision)
Benefit
 
Net
Amount
 
Gross
Amount
 
Income
Tax
(Provision)
Benefit
 
Net
Amount
 
(In $ millions)
Unrealized gain (loss) on marketable securities
—

 
—

 
—

 
1

 
—

 
1

Foreign currency translation gain (loss)
(58
)
 
6

 
(52
)
 
143

 
5

 
148

Gain (loss) on cash flow hedges
8

 
1

 
9

 
(1
)
 
—

 
(1
)
Pension and postretirement benefits gain (loss)
1

 
—

 
1

 
4

 
—

 
4

Total
(49
)
 
7

 
(42
)
 
147

 
5

 
152

Adjustments to Accumulated other comprehensive income (loss), net, are as follows:
 
Foreign
Currency
Translation Gain (Loss)
 
Gain (Loss)
on Cash
Flow
Hedges
 
Pension
and
Postretirement
Benefits Gain (Loss)
 
Accumulated
Other
Comprehensive
Income
(Loss), Net
 
(In $ millions)
As of December 31, 2017
(176
)
 
2

 
(3
)
 
(177
)
Other comprehensive income (loss) before reclassifications
(58
)
 
9

 
1

 
(48
)
Amounts reclassified from accumulated other comprehensive income (loss)
—

 
(1
)

—


(1
)
Income tax (provision) benefit
6

 
1

 
—

 
7

As of September 30, 2018
(228
)
 
11

 
(2
)
 
(219
)

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Table of Contents

14. Other (Charges) Gains, Net
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2018
 
2017
 
2018
 
2017
 
(In $ millions)
Restructuring
(1
)
 
—

 
(4
)
 
(3
)
InfraServ ownership change
—

 
—

 
—

 
(4
)
Plant/office closures
13

 
—

 
13

 
(50
)
Total
12

 
—

 
9

 
(57
)
During the three and nine months ended September 30, 2018, the Company recorded a $13 million gain within plant/office closures related to a non-income tax receivable refund from Nanjing, China, in its Acetyl Intermediates segment.
During the nine months ended September 30, 2018 and 2017, the Company recorded $4 million and $3 million, respectively, of employee termination benefits primarily related to the Company's ongoing efforts to align its businesses around its core value drivers.
During the nine months ended September 30, 2017, the Company provided notice of termination of a contract with a key raw materials supplier at its ethanol production unit in Nanjing, China. As a result, the Company recorded an estimated $50 million of plant/office closure costs primarily consisting of a $24 million contract termination charge and an $18 million reduction to its non-income tax receivable. The Nanjing, China ethanol production unit is included in the Company's Acetyl Intermediates segment.
The changes in the restructuring reserves by business segment are as follows:
 
Engineered
Materials
 
Acetate Tow
 
Industrial
Specialties
 
Acetyl
Intermediates
 
Other
 
Total
 
(In $ millions)
Employee Termination Benefits
 
 
 
 
 
 
 
 
 
 
 
As of December 31, 2017
1

 
—

 
—

 
1

 
1

 
3

Additions
—

 
2

 
3

 
—

 
—

 
5

Cash payments
(1
)
 
—

 
—

 
—

 
—

 
(1
)
Other changes
—

 
—

 
—

 
—

 
(1
)
 
(1
)
Exchange rate changes
—

 
—

 
—

 
—

 
—

 
—

As of September 30, 2018
—

 
2

 
3

 
1

 
—

 
6

Other Plant/Office Closures
 
 
 
 
 
 
 
 
 
 
 
As of December 31, 2017
—

 
—

 
—

 
2

 
—

 
2

Additions
—

 
—

 
—

 
—

 
—

 
—

Cash payments
—

 
—

 
—

 
—

 
—

 
—

Other changes
—

 
—

 
—

 
—

 
—

 
—

Exchange rate changes
—

 
—

 
—

 
—

 
—

 
—

As of September 30, 2018
—

 
—

 
—

 
2

 
—

 
2

Total
—

 
2

 
3

 
3

 
—

 
8


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Table of Contents

15. Income Taxes
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2018
 
2017
 
2018
 
2017
 
(In percentages)
Effective income tax rate
12
 
20
 
16
 
19
The lower effective income tax rate for the three and nine months ended September 30, 2018 compared to the same period in 2017 is primarily due to the release of valuation allowances on net deferred tax assets in China and Singapore, reduction of the US statutory tax rate due to new tax legislation, commonly referred to as the Tax Cuts and Jobs Act (the "TCJA") and reduced losses not providing tax benefits in certain jurisdictions, partially offset by increases in valuation allowances offsetting US foreign tax credits due to the provisions of the TCJA.
In December 2017, the TCJA was enacted and was effective January 1, 2018. ASC 740, Accounting for Income Taxes, requires companies to recognize the effects of tax law changes in the period of enactment. This overhaul of the US tax law made a number of substantial changes, including the reduction of the corporate tax rate from 35% to 21%, establishing a dividends received deduction for dividends paid by foreign subsidiaries to the US, elimination or limitation of certain deductions (interest, domestic production activities and executive compensation), imposing a mandatory tax on previously unrepatriated earnings accumulated offshore since 1986 and establishing global minimum income tax and base erosion tax provisions related to offshore activities and affiliated party payments.
Due to the timing of the new tax law and the substantial changes it brings, the SEC issued Staff Accounting Bulletin No. 118 ("SAB 118"), which provides registrants a measurement period to report the impact of the new US tax law. During the measurement period, provisional amounts for the effects of the law are recorded to the extent a reasonable estimate can be made. To the extent that all information necessary is not available, prepared or analyzed, companies may recognize provisional estimated amounts for a period of up to one year following enactment of the TCJA.
For year-end 2017, the Company recorded provisional amounts for impacts of the new tax law including: the deemed repatriation tax on post 1986 accumulated earnings and profits, the deferred tax rate change effect of the new law, gross foreign tax credit carryforwards and related valuation allowances to offset foreign tax credit carryforwards. Certain items or estimates that result in impacts of the TCJA being provisional include: detailed foreign earnings calculations for 2017 and 2018, projected foreign cash balances for certain foreign subsidiaries and finalized computations of foreign tax credit availability. Finally, the Company considers it likely that further technical guidance regarding certain components of the new provisions included in the TCJA, as well as clarity regarding state income tax conformity to current federal tax code, may be issued. During the three months ended September 30, 2018, the Company recorded a benefit for increases to provisional amounts for foreign tax credits net of associated valuation allowances of $9 million and a benefit for increases to provisional amounts for the deferred tax rate change effect of the TCJA of $7 million. The Company also recorded a decrease to the provisional amount for deemed repatriation tax under the TCJA of $4 million. However, this decrease did not have any impact on the unaudited interim consolidated statement of operations, as it will be offset by US foreign tax credit carryforwards. The changes in provisional amounts are primarily due to refined estimates of foreign source income and expense apportionment during the credit carryforward period, refined estimates of foreign tax credits generated during the carryforward period, revised calculations of the deemed repatriation tax due to the issuance of proposed guidance and revised estimates of 2017 temporary items as part of the annual tax return preparation process. The Company will continue to refine provisional amounts for the impacts of the TCJA as more refined information and further guidance become available.
The Company evaluates its deferred tax assets on a quarterly basis to determine whether a valuation allowance is necessary. Realization of deferred tax assets ultimately depends on the existence of sufficient taxable income in the applicable carryback or carryforward periods. Changes in the Company's estimates of future taxable income and prudent and feasible tax planning strategies will affect the estimate of the realization of the tax benefits of these foreign tax carryforwards. As such, the Company is currently evaluating tax planning strategies to enable use of the Company's foreign tax credit carryforwards that may decrease the Company's effective tax rate in future periods as the valuation allowance is reversed.
During the nine months ended September 30, 2018, the Company's uncertain tax positions decreased $2 million, primarily due to favorable technical clarifications in Germany and foreign currency exchange fluctuations, partially offset by an increase in US positions.

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Table of Contents

In connection with the Company's US federal income tax audit for 2009 and 2010, the Company has received $192 million of proposed pre-tax adjustments related to various intercompany charges. In January 2018, the Company received proposed pre-tax adjustments for its 2011 and 2012 audit cycle in the amount of $198 million. In the event the Company is wholly unsuccessful in its defense and absent expected offsetting adjustments from foreign tax authorities, the proposed adjustments would result in the consumption of approximately $136 million of prior foreign tax credit carryforwards, which are substantially offset with a valuation allowance due to uncertain recoverability. The Company believes these proposed adjustments to be without merit and is vigorously defending its position.
The Company has initiated the appeal process for the 2009 and 2010 examination years. As negotiations progress, the Company will evaluate its position and will record any anticipated impacts accordingly. The Company does not currently anticipate a material impact from the appeals process related to the 2009 and 2010 examination years.
16. Derivative Financial Instruments
Derivatives Designated As Hedges
Net Investment Hedges
The Company uses derivative instruments, such as foreign currency forwards, and non-derivative financial instruments, such as foreign currency denominated debt, that may give rise to foreign currency transaction gains or losses to hedge the foreign currency exposure of net investments in foreign operations. Accordingly, the effective portion of gains and losses from remeasurement of derivative and non-derivative financial instruments is included in foreign currency translation within Accumulated other comprehensive income (loss), net in the unaudited consolidated balance sheets. Gains and losses are reclassified to earnings in the period the hedged investment is sold or liquidated.
The total notional amount of foreign currency denominated debt designated as a net investment hedge of net investments in foreign operations are as follows:
 
As of
September 30,
2018
 
As of
December 31,
2017
 
(In € millions)
Total
1,050

 
1,050


Cash Flow Hedges

In September 2018, the Company entered into a forward-starting interest rate swap to mitigate the risk of variability in the benchmark interest rate for an expected debt issuance in 2021. The swap was designated as a cash flow hedge and will be settled upon debt issuance.
The total notional amount of the forward-starting interest rate swap designated as a cash flow hedge is as follows:
 
As of
September 30,
2018
 
As of
December 31,
2017
 
(In $ millions)
Total
400

 
—

Derivatives Not Designated As Hedges
Foreign Currency Forwards and Swaps
Gross notional values of the foreign currency forwards and swaps not designated as hedges are as follows:
 
As of
September 30,
2018
 
As of
December 31,
2017
 
(In $ millions)
Total
693

 
740


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Table of Contents

Information regarding changes in the fair value of the Company's derivative and non-derivative instruments is as follows:
 
Gain (Loss) Recognized in Other Comprehensive Income (Loss)
 
Gain (Loss) Recognized in Earnings (Loss)
 
 
 
Three Months Ended September 30,
 
Statement of Operations Classification
 
2018
 
2017
 
2018
 
2017
 
 
(In $ millions)
 
 
Designated as Cash Flow Hedges
 
 
 
 
 
 
 
 
 
Commodity swaps
2

 
—

 
—

 
1

 
Cost of sales
Interest rate swaps
2

 
—

 
—

 
—

 
Interest expense
Foreign currency forwards
—

 
—

 
—

 
(1
)
 
Cost of sales
Total
4

 
—

 
—

 
—

 
 
 
 
 
 
 
 
 
 
 
 
Designated as Net Investment Hedges
 
 
 
 
 
 
 
 
 
Foreign currency denominated debt (Note 10)
9

 
(30
)
 
—

 
—

 
N/A
Total
9

 
(30
)
 
—

 
—

 
 
 
 
 
 
 
 
 
 
 
 
Not Designated as Hedges
 
 
 
 
 
 
 
 
 
Foreign currency forwards and swaps
—

 
—

 
(2
)
 
—

 
Foreign exchange gain (loss), net; Other income (expense), net
Total
—

 
—

 
(2
)
 
—

 
 
 
Gain (Loss) Recognized in Other Comprehensive Income (Loss)
 
Gain (Loss) Recognized in Earnings (Loss)
 
 
 
Nine Months Ended September 30,
 
Statement of Operations Classification
 
2018
 
2017
 
2018
 
2017
 
 
(In $ millions)
 
 
Designated as Cash Flow Hedges
 
 
 
 
 
 
 
 
 
Commodity swaps
6

 
1

 
1

 
3

 
Cost of sales
Interest rate swaps
2

 
—

 
—

 
—

 
Interest expense
Foreign currency forwards
1

 
(1
)
 
—

 
(1
)
 
Cost of sales
Total
9

 
—

 
1

 
2

 
 
 
 
 
 
 
 
 
 
 
 
Designated as Net Investment Hedges
 
 
 
 
 
 
 
 
 
Foreign currency denominated debt (Note 10)
44

 
(99
)
 
—

 
—

 
N/A
Total
44

 
(99
)
 
—

 
—

 
 
 
 
 
 
 
 
 
 
 
 
Not Designated as Hedges
 
 
 
 
 
 
 
 
 
Foreign currency forwards and swaps
—

 
—

 
15

 
(2
)
 
Foreign exchange gain (loss), net; Other income (expense), net
Total
—

 
—

 
15

 
(2
)
 
 
See Note 17 for further information regarding the fair value of the Company's derivative instruments.
Certain of the Company's commodity swaps and foreign currency forwards and swaps 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.

27

Table of Contents

Information regarding the gross amounts of the Company's derivative instruments and the amounts offset in the unaudited consolidated balance sheets is as follows:
 
As of
September 30,
2018
 
As of
December 31,
2017
 
(In $ millions)
Derivative Assets
 
 
 
Gross amount recognized
24

 
13

Gross amount offset in the consolidated balance sheets
9

 
4

Net amount presented in the consolidated balance sheets
15

 
9

Gross amount not offset in the consolidated balance sheets
2

 
3

Net amount
13

 
6

 
As of
September 30,
2018
 
As of
December 31,
2017
 
(In $ millions)
Derivative Liabilities
 
 
 
Gross amount recognized
12

 
7

Gross amount offset in the consolidated balance sheets
9

 
4

Net amount presented in the consolidated balance sheets
3

 
3

Gross amount not offset in the consolidated balance sheets
2

 
3

Net amount
1

 
—

17. Fair Value Measurements
The Company's financial assets and liabilities are measured at fair value on a recurring basis as follows:
Derivatives. Derivative financial instruments, including commodity swaps, interest rate swaps and foreign currency forwards and swaps, are valued in the market using discounted cash flow techniques. These techniques incorporate Level 1 and Level 2 fair value measurement inputs such as spot rates and foreign currency exchange rates. These market inputs are 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 commodity swaps, interest rate swaps and foreign currency forwards and swaps are observable in the active markets and are classified as Level 2 in the fair value measurement hierarchy.

28

Table of Contents

 
Fair Value Measurement
 
 
 
Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Total
 
Balance Sheet Classification
 
(In $ millions)
 
 
As of September 30, 2018
 
 
 
 
 
 
 
Derivatives Designated as Cash Flow Hedges
 
 
 
 
 
 
 
Commodity swaps
—

 
6

 
6

 
Current Other assets
Commodity swaps
—

 
3

 
3

 
Noncurrent Other assets
Interest rate swap
—

 
2

 
2

 
Noncurrent Other assets
Derivatives Not Designated as Hedges
 
 
 
 


 
 
Foreign currency forwards and swaps
—

 
4

 
4

 
Current Other assets
Total assets
—

 
15

 
15

 
 
Derivatives Not Designated as Hedges
 
 
 
 
 
 
 
Foreign currency forwards and swaps
—

 
(3
)
 
(3
)
 
Current Other liabilities
Total liabilities
—

 
(3
)
 
(3
)
 
 
As of December 31, 2017
 
 
 
 
 
 
 
Derivatives Designated as Cash Flow Hedges
 
 
 
 
 
 
 
Commodity swaps
—

 
2

 
2

 
Current Other assets
Commodity swaps
—

 
2

 
2

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

 
5

 
5

 
Current Other assets
Total assets
—

 
9

 
9

 
 
Derivatives Not Designated as Hedges
 
 
 
 
 
 
 
Foreign currency forwards and swaps
—

 
(3
)
 
(3
)
 
Current Other liabilities
Total liabilities
—

 
(3
)
 
(3
)
 
 
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, 2018
 
 
 
 
 
 
 
Cost investments
165

 
—

 
—

 
—

Insurance contracts in nonqualified trusts
40

 
40

 
—

 
40

Long-term debt, including current installments of long-term debt
3,286

 
3,171

 
173

 
3,344

As of December 31, 2017
 
 
 
 
 
 
 
Cost investments
159

 
—

 
—

 
—

Insurance contracts in nonqualified trusts
42

 
42

 
—

 
42

Long-term debt, including current installments of long-term debt
3,398

 
3,299

 
208

 
3,507

In general, the cost investments included in the table above are not publicly traded and their fair values are not readily determinable. The Company believes the carrying values approximate fair value. 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 fair value 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 fair value measurement hierarchy.

29

Table of Contents

The fair value of obligations under capital leases, which are included in long-term debt, is based on lease payments and discount rates, which are not observable in the market and therefore represents a Level 3 fair value measurement.
As of September 30, 2018, and December 31, 2017, 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.
18. Commitments and Contingencies
Commitments
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. The Company has accrued for all probable and reasonably estimable losses associated with all known matters or claims. 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 12).
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, 2018, are $84 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 significant risk (Note 12).
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, which extend through 2037. The aggregate amount of outstanding indemnifications and guarantees provided for under these agreements is $122 million as of September 30, 2018. Other agreements do not provide for any monetary or time limitations.
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.

30

Table of Contents

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. 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, 2018, the Company had unconditional purchase obligations of $1.5 billion, which extend through 2036.
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, insurance coverage disputes, commercial contracts, employment, antitrust or competition compliance, intellectual property, personal injury and other actions in tort, workers' compensation, chemical exposure, asbestos exposure, taxes, trade compliance, acquisitions and divestitures, claims of legacy stockholders, 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 and, based on the current facts, does not believe the outcomes from these matters will be material to the Company's results of operations, cash flows or financial position.
European Commission
In May 2017, the Company learned that the European Commission opened a competition law investigation involving certain subsidiaries of the Company with respect to certain ethylene purchases. The Company is cooperating with the European Commission. Because the investigation is on-going, and the many uncertainties and variables involved, the Company is unable at this time to determine the outcome of this investigation and whether, and in what amount, any potential fines would be assessed.

31

Table of Contents

19. Segment Information
Effective January 1, 2018, the Company reorganized its operating and reportable segments to align with recent structural and management reporting changes. The change reflects the movement of its food ingredients business from the Consumer Specialties reportable segment into the Engineered Materials reportable segment. The former Consumer Specialties reportable segment was renamed the Acetate Tow segment, and the former Advanced Engineered Materials reportable segment was renamed the Engineered Materials segment. This reorganization better reflects how the Company manages its food ingredients' related products commercially. Engineered Materials and food ingredients are both project-based models which focus on delivering customized solutions and are led by the same senior management team.
 

Engineered
Materials
 
Acetate Tow
 
Industrial
Specialties
 
Acetyl
Intermediates
 
Other
Activities
 
Eliminations
 
Consolidated
 
 
(In $ millions)
 
 
Three Months Ended September 30, 2018
 
Net sales
642

 
158

 
273

(1) 
835

(2) 
—

 
(137
)
 
1,771

 
Other (charges) gains, net (Note 14)
—

 
(1
)
 
(1
)
 
13

 
1

 
—

 
12

 
Operating profit (loss)
124

 
26

 
19

 
268

 
(63
)
 
—

 
374

 
Equity in net earnings (loss) of affiliates
62

 
—

 
—

 
2

 
2

 
—

 
66

 
Depreciation and amortization
31

 
21

 
10

 
26

 
2

 
—

 
90

 
Capital expenditures
25

 
9

 
5

 
34

 
2

 
—

 
75

(3) 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended September 30, 2017 - As Adjusted (Note 2)
 
Net sales
573

 
157

 
264

(1) 
684

(2) 
—

 
(112
)
 
1,566

 
Other (charges) gains, net (Note 14)
—

 
—

 
—

 
—

 
—

 
—

 
—

 
Operating profit (loss)
105

 
45

 
19

 
128

 
(68
)
 
—

 
229

 
Equity in net earnings (loss) of affiliates
47

 
—

 
—

 
1

 
2

 
—

 
50

 
Depreciation and amortization
30

 
10

 
10

 
26

 
4

 
—

 
80

 
Capital expenditures
19

 
9

 
6

 
36

 
4

 
—

 
74

(3) 
______________________________
(1) 
Includes intersegment sales of $0 million and $1 million for the three months ended September 30, 2018 and 2017, respectively.
(2) 
Includes intersegment sales of $137 million and $111 million for the three months ended September 30, 2018 and 2017, respectively.
(3) 
Includes a decrease in accrued capital expenditures of $4 million and an increase of $10 million for the three months ended September 30, 2018 and 2017, respectively.

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Table of Contents


 

Engineered
Materials
 
Acetate Tow
 
Industrial
Specialties
 
Acetyl
Intermediates
 
Other
Activities
 
Eliminations
 
Consolidated
 
 
(In $ millions)
 
 
Nine Months Ended September 30, 2018
 
Net sales
1,971

 
488

 
835

(1) 
2,567

(2) 
—

 
(395
)
 
5,466

 
Other (charges) gains, net (Note 14)
—

 
(2
)
 
(3
)
 
13

 
1

 
—

 
9

 
Operating profit (loss)
365

 
111

 
64

 
750

 
(214
)
 
(1
)
 
1,075

 
Equity in net earnings (loss) of affiliates
169

 
—

 
—

 
5

 
6

 
—

 
180

 
Depreciation and amortization
96

 
44

 
29

 
78

 
8

 
—

 
255

 
Capital expenditures
72

 
19

 
14

 
108

 
7

 
—

 
220

(3) 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
As of September 30, 2018
 
Goodwill and intangible assets, net
984

 
154

 
44

 
199

 
—

 
—

 
1,381

 
Total assets
4,056

 
1,078

 
850

 
2,719

 
1,121

 
—

 
9,824

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Nine Months Ended September 30, 2017 - As Adjusted (Note 2)
 
Net sales
1,633

 
511


771

(1) 
1,952

(2) 
—

 
(320
)
 
4,547

 
Other (charges) gains, net (Note 14)
(2
)
 
(2
)
 
—

 
(50
)
 
(3
)
 
—

 
(57
)
 
Operating profit (loss)
314

 
148

 
70

 
264

 
(179
)
 
—

 
617

 
Equity in net earnings (loss) of affiliates
128

 
—

 
—

 
4

 
3

 
—

 
135

 
Depreciation and amortization
82

 
30

 
28

 
78

 
8

 
—

 
226

 
Capital expenditures
43

 
22

 
16

 
84

 
8

 
—

 
173

(3) 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
As of December 31, 2017
 
Goodwill and intangible assets, net
902

 
154

 
46

 
202

 
—

 
—

 
1,304

 
Total assets
3,866

 
1,163

 
861

 
2,657

 
991

 
—

 
9,538

 
______________________________
(1) 
Includes intersegment sales of $3 million and $3 million for the nine months ended September 30, 2018 and 2017, respectively.
(2) 
Includes intersegment sales of $392 million and $317 million for the nine months ended September 30, 2018 and 2017, respectively.
(3) 
Includes a decrease in accrued capital expenditures of $24 million and $7 million for the nine months ended September 30, 2018 and 2017, respectively.

33

Table of Contents

20. Revenue Recognition
Accounting Policies
Revenue is recognized when performance obligations under the terms of a contract with a customer are satisfied. The majority of the Company's contracts have a single performance obligation to transfer products. Accordingly, the Company recognizes revenue when title and risk of loss have been transferred to the customer, generally at the time of shipment of products. Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring products and is generally based upon a negotiated, formula, list or fixed price. The Company sells its products both directly to customers and through distributors generally under agreements with payment terms typically less than 90 days.
The Company has elected to account for shipping and handling as activities to fulfill the promise to transfer the good. As such, shipping and handling fees billed to customers in a sales transaction are recorded in Net sales and shipping and handling costs incurred are recorded in Cost of sales. The Company has elected to exclude from Net sales any value add, sales and other taxes which it collects concurrent with revenue-producing activities. These accounting policy elections are consistent with the manner in which the Company historically recorded shipping and handling fees and taxes.
The adoption of ASU 2014-09 (Note 2) resulted in an immaterial impact to the individual financial statement line items of the Company's unaudited interim consolidated statement of operations during the three and nine months ended September 30, 2018.
Contract Estimates
The nature of certain of the Company's contracts gives rise to variable consideration, which may be constrained, including retrospective volume-based rebates to certain customers. The Company issues retrospective volume-based rebates to customers when they purchase a certain volume level, and the rebates are applied retroactively to prior purchases. The Company also issues prospective volume-based rebates to customers when they purchase a certain volume level, and the rebates are applied to future purchases. Prospective volume-based rebates represent a material right within the contract and therefore are considered to be separate performance obligations. For both retrospective and prospective volume-based rebates, the Company estimates the level of volumes based on anticipated purchases at the beginning of the period and records a rebate accrual for each purchase toward the requisite rebate volume. These estimated rebates are included in the transaction price of the Company's contracts with customers as a reduction to Net sales and are included in Current Other liabilities in the unaudited consolidated balance sheets (Note 8). This methodology is consistent with the manner in which the Company historically estimated and recorded volume-based rebates.
The majority of the Company's revenue is derived from contracts (i) with an original expected length of one year or less and (ii) contracts for which it recognizes revenue at the amount in which it has the right to invoice as product is delivered. The Company has elected the practical expedient not to disclose the value of remaining performance obligations associated with these types of contracts. However, the Company has certain contracts that represent take-or-pay revenue arrangements in which the Company's performance obligations extend over multiple years. As of September 30, 2018, the Company had $867 million of remaining performance obligations related to take-or-pay contracts. The Company expects to recognize approximately $144 million of its remaining performance obligations as Net sales in 2018, $234 million in 2019, an additional $182 million in 2020 and the balance thereafter.
The Company has certain contracts which contain performance obligations which are immaterial in the context of the contract with the customer. The Company has elected the practical expedient not to assess whether these promised goods or services are performance obligations.
Contract Balances
Contract liabilities primarily relate to advances or deposits received from the Company's customers before revenue is recognized. These amounts are recorded as deferred revenue and are included in Noncurrent Other liabilities in the unaudited consolidated balance sheets (Note 9).
The Company does not have any material contract assets as of September 30, 2018.
Disaggregated Revenue
In general, the Company's business segmentation is aligned according to the nature and economic characteristics of its products and customer relationships and provides meaningful disaggregation of each business segment's results of operations.

34

Table of Contents

The Company manages its Engineered Materials business segment through its project management pipeline, which is comprised of a broad range of projects which are solutions-based and are tailored to each customers' unique needs. Projects are identified and selected based on success rate and may involve a number of different polymers per project for use in multiple end-use applications. Therefore, the Company is agnostic toward products and end-use markets for the Engineered Materials business segment.
Within the Acetate Tow business segment, the Company's primary product is acetate tow, which is managed through contracts with a few major tobacco companies and accounts for a significant amount of filters used in cigarette production worldwide.
The Company manages its Industrial Specialties and Acetyl Intermediates business segments by leveraging its ability to sell chemicals externally to end-use markets or downstream to its emulsion polymers business (within its Industrial Specialties segment). Decisions to sell externally and geographically or downstream and along the acetyl chain are based on market demand, trade flows and maximizing the value of its chemicals. Therefore, the Company's strategic focus is on executing within this integrated chain model and less on driving product-specific revenue.
Further disaggregation of Net sales by business segment and geographic destination is as follows:
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2018
 
(In $ millions)
Engineered Materials
 
 
 
North America
197

 
567

Europe and Africa
277

 
945

Asia-Pacific
145

 
403

South America
23

 
56

Total
642

 
1,971

 
 
 
 
Acetate Tow
 
 
 
North America
30

 
98

Europe and Africa
78

 
196

Asia-Pacific
44

 
163

South America
6

 
31

Total
158

 
488

 
 
 
 
Industrial Specialties
 
 
 
North America
93

 
274

Europe and Africa
126

 
400

Asia-Pacific
49

 
145

South America
5

 
13

Total(1)
273

 
832

 
 
 
 
Acetyl Intermediates
 
 
 
North America
205

 
599

Europe and Africa
176

 
558

Asia-Pacific
292

 
936

South America
25

 
82

Total(2)
698

 
2,175

______________________________
(1) 
Excludes intersegment sales of $0 million and $3 million for the three and nine months ended September 30, 2018, respectively.
(2) 
Excludes intersegment sales of $137 million and $392 million for the three and nine months ended September 30, 2018, respectively.

35

Table of Contents

21. Earnings (Loss) Per Share
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2018
 
2017
 
2018
 
2017
 
(In $ millions, except share data)
Amounts attributable to Celanese Corporation
 
 
 
 
 
 
 
Earnings (loss) from continuing operations
407

 
230

 
1,116

 
652

Earnings (loss) from discontinued operations
(6
)
 
(4
)
 
(8
)
 
(12
)
Net earnings (loss)
401

 
226

 
1,108

 
640

 
 
 
 
 
 
 
 
Weighted average shares - basic
134,519,301

 
136,579,077

 
135,336,704

 
138,599,330

Incremental shares attributable to equity awards
980,089

 
372,846


1,050,999

 
388,991

Weighted average shares - diluted
135,499,390

 
136,951,923

 
136,387,703

 
138,988,321

During the three and nine months ended September 30, 2018 and 2017, there were no anti-dilutive equity awards excluded from the computation of diluted net earnings per share.
22. Consolidating Guarantor Financial Information
The Senior Notes were issued by Celanese US ("Issuer") and are guaranteed by Celanese Corporation ("Parent Guarantor") and the Subsidiary Guarantors (Note 10). 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 the 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 unaudited interim consolidating statements of cash flows for the nine months ended September 30, 2018 and 2017 present such intercompany financing activities, contributions and dividends consistent with how such activity would be presented in a stand-alone statement of cash flows.
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.
The unaudited interim consolidating financial statements for the Parent Guarantor, the Issuer, the Subsidiary Guarantors and the non-guarantors are as follows:

36

Table of Contents

CELANESE CORPORATION AND SUBSIDIARIES
UNAUDITED INTERIM CONSOLIDATING STATEMENT OF OPERATIONS
 
Three Months Ended September 30, 2018
 
Parent
Guarantor
 
Issuer
 
Subsidiary
Guarantors
 
Non-
Guarantors
 
Eliminations
 
Consolidated
 
(In $ millions)
Net sales
—

 
—

 
565

 
1,483

 
(277
)
 
1,771

Cost of sales
—

 
—

 
(432
)
 
(1,105
)
 
282

 
(1,255
)
Gross profit
—

 
—

 
133

 
378

 
5

 
516

Selling, general and administrative expenses
—

 
—

 
(46
)
 
(83
)
 
—

 
(129
)
Amortization of intangible assets
—

 
—

 
(1
)
 
(4
)
 
—

 
(5
)
Research and development expenses
—

 
—

 
(7
)
 
(11
)
 
—

 
(18
)
Other (charges) gains, net
—

 
—

 
—

 
12

 
—

 
12

Foreign exchange gain (loss), net
—

 
(3
)
 
—

 
3

 
—

 
—

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

 
—

 
(3
)
 
1

 
—

 
(2
)
Operating profit (loss)
—

 
(3
)
 
76

 
296

 
5

 
374

Equity in net earnings (loss) of affiliates
401

 
411

 
286

 
64

 
(1,096
)
 
66

Non-operating pension and other postretirement employee benefit (expense) income
—

 
—

 
23

 
3

 
(1
)
 
25

Interest expense
—

 
(5
)
 
(33
)
 
(8
)
 
16

 
(30
)
Interest income
—

 
13

 
1

 
3

 
(15
)
 
2

Dividend income - cost investments
—

 
—

 
—

 
25

 
1

 
26

Other income (expense), net
—

 
—

 
1

 
(1
)
 
(1
)
 
(1
)
Earnings (loss) from continuing operations before tax
401

 
416

 
354

 
382

 
(1,091
)
 
462

Income tax (provision) benefit
—

 
(15
)
 
(10
)
 
(28
)
 
(1
)
 
(54
)
Earnings (loss) from continuing operations
401

 
401

 
344

 
354

 
(1,092
)
 
408

Earnings (loss) from operation of discontinued operations
—

 
—

 
(1
)
 
(6
)
 
—

 
(7
)
Income tax (provision) benefit from discontinued operations
—

 
—

 
—

 
1

 
—

 
1

Earnings (loss) from discontinued operations
—

 
—

 
(1
)
 
(5
)
 
—

 
(6
)
Net earnings (loss)
401

 
401

 
343

 
349

 
(1,092
)
 
402

Net (earnings) loss attributable to noncontrolling interests
—

 
—

 
—

 
(1
)
 
—

 
(1
)
Net earnings (loss) attributable to Celanese Corporation
401

 
401

 
343

 
348

 
(1,092
)
 
401


37

Table of Contents

CELANESE CORPORATION AND SUBSIDIARIES
UNAUDITED INTERIM CONSOLIDATING STATEMENT OF OPERATIONS
 
Three Months Ended September 30, 2017 - As Adjusted (Note 2)
 
Parent
Guarantor
 
Issuer
 
Subsidiary
Guarantors
 
Non-
Guarantors
 
Eliminations
 
Consolidated
 
(In $ millions)
Net sales
—

 
—

 
527

 
1,314

 
(275
)
 
1,566

Cost of sales
—

 
—

 
(407
)
 
(1,042
)
 
266

 
(1,183
)
Gross profit
—

 
—

 
120

 
272

 
(9
)
 
383

Selling, general and administrative expenses
—

 
—

 
(54
)
 
(79
)
 
—

 
(133
)
Amortization of intangible assets
—

 
—

 
(1
)
 
(4
)
 
—

 
(5
)
Research and development expenses
—

 
—

 
(9
)
 
(10
)
 
—

 
(19
)
Other (charges) gains, net
—

 
—

 
—

 
—

 
—

 
—

Foreign exchange gain (loss), net
—

 
—

 
—

 
4

 
—

 
4

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

 
—

 
(2
)
 
1

 
—

 
(1
)
Operating profit (loss)
—

 
—

 
54

 
184

 
(9
)
 
229

Equity in net earnings (loss) of affiliates
226

 
233

 
175

 
45

 
(629
)
 
50

Non-operating pension and other postretirement employee benefit (expense) income
—

 
—

 
20

 
3

 
—

 
23

Interest expense
—

 
(5
)
 
(28
)
 
(8
)
 
9

 
(32
)
Interest income
—

 
7

 
1

 
2

 
(9
)
 
1

Dividend income - cost investments
—

 
—

 
—

 
26

 
(2
)
 
24

Other income (expense), net
—

 
(2
)
 
—

 
(4
)
 
—

 
(6
)
Earnings (loss) from continuing operations before tax
226

 
233

 
222

 
248

 
(640
)
 
289

Income tax (provision) benefit
—

 
(7
)
 
(68
)
 
17

 
1

 
(57
)
Earnings (loss) from continuing operations
226

 
226

 
154

 
265

 
(639
)
 
232

Earnings (loss) from operation of discontinued operations
—

 
—

 
—

 
(5
)
 
—

 
(5
)
Income tax (provision) benefit from discontinued operations
—

 
—

 
—

 
1

 
—

 
1

Earnings (loss) from discontinued operations
—

 
—

 
—

 
(4
)
 
—

 
(4
)
Net earnings (loss)
226

 
226

 
154

 
261

 
(639
)
 
228

Net (earnings) loss attributable to noncontrolling interests
—

 
—

 
—

 
(2
)
 
—

 
(2
)
Net earnings (loss) attributable to Celanese Corporation
226

 
226

 
154

 
259

 
(639
)
 
226


38

Table of Contents

CELANESE CORPORATION AND SUBSIDIARIES
UNAUDITED INTERIM CONSOLIDATING STATEMENT OF OPERATIONS
 
Nine Months Ended September 30, 2018
 
Parent
Guarantor
 
Issuer
 
Subsidiary
Guarantors
 
Non-
Guarantors
 
Eliminations
 
Consolidated
 
(In $ millions)
Net sales
—

 
—

 
1,733

 
4,621

 
(888
)
 
5,466

Cost of sales
—

 
—

 
(1,337
)
 
(3,470
)
 
893

 
(3,914
)
Gross profit
—

 
—

 
396

 
1,151

 
5

 
1,552

Selling, general and administrative expenses
—

 
—

 
(156
)
 
(256
)
 
—

 
(412
)
Amortization of intangible assets
—

 
—

 
(3
)
 
(15
)
 
—

 
(18
)
Research and development expenses
—

 
—

 
(22
)
 
(32
)
 
—

 
(54
)
Other (charges) gains, net
—

 
—

 
—

 
9

 
—

 
9

Foreign exchange gain (loss), net
—

 
(3
)
 
—

 
5

 
—

 
2

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

 
—

 
(8
)
 
4

 
—

 
(4
)
Operating profit (loss)
—

 
(3
)
 
207

 
866

 
5

 
1,075

Equity in net earnings (loss) of affiliates
1,108

 
1,112

 
872

 
170

 
(3,082
)
 
180

Non-operating pension and other postretirement employee benefit (expense) income
—

 
—

 
70

 
8

 
(1
)
 
77

Interest expense
—

 
(15
)
 
(93
)
 
(25
)
 
38

 
(95
)
Interest income
—

 
31

 
5

 
7

 
(39
)
 
4

Dividend income - cost investments
—

 
—

 
—

 
89

 
3

 
92

Other income (expense), net
—

 
—

 
1

 
3

 
(1
)
 
3

Earnings (loss) from continuing operations before tax
1,108

 
1,125

 
1,062

 
1,118

 
(3,077
)
 
1,336

Income tax (provision) benefit
—

 
(17
)
 
(115
)
 
(83
)
 
(1
)
 
(216
)
Earnings (loss) from continuing operations
1,108

 
1,108

 
947

 
1,035

 
(3,078
)
 
1,120

Earnings (loss) from operation of discontinued operations
—

 
—

 
(2
)
 
(7
)
 
—

 
(9
)
Income tax (provision) benefit from discontinued operations
—

 
—

 
—

 
1

 
—

 
1

Earnings (loss) from discontinued operations
—

 
—

 
(2
)
 
(6
)
 
—

 
(8
)
Net earnings (loss)
1,108

 
1,108

 
945

 
1,029

 
(3,078
)
 
1,112

Net (earnings) loss attributable to noncontrolling interests
—

 
—

 
—

 
(4
)
 
—

 
(4
)
Net earnings (loss) attributable to Celanese Corporation
1,108

 
1,108

 
945

 
1,025

 
(3,078
)
 
1,108


39

Table of Contents

CELANESE CORPORATION AND SUBSIDIARIES
UNAUDITED INTERIM CONSOLIDATING STATEMENT OF OPERATIONS
 
Nine Months Ended September 30, 2017 - As Adjusted (Note 2)
 
Parent
Guarantor
 
Issuer
 
Subsidiary
Guarantors
 
Non-
Guarantors
 
Eliminations
 
Consolidated
 
(In $ millions)
Net sales
—

 
—

 
1,679

 
3,713

 
(845
)
 
4,547

Cost of sales
—

 
—

 
(1,311
)
 
(2,974
)
 
836

 
(3,449
)
Gross profit
—

 
—

 
368

 
739

 
(9
)
 
1,098

Selling, general and administrative expenses
—

 
—

 
(132
)
 
(221
)
 
—

 
(353
)
Amortization of intangible assets
—

 
—

 
(3
)
 
(11
)
 
—

 
(14
)
Research and development expenses
—

 
—

 
(23
)
 
(30
)
 
—

 
(53
)
Other (charges) gains, net
—

 
—

 
(7
)
 
(50
)
 
—

 
(57
)
Foreign exchange gain (loss), net
—

 
—

 
—

 
—

 
—

 
—

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

 
—

 
(6
)
 
2

 
—

 
(4
)
Operating profit (loss)
—

 
—

 
197

 
429

 
(9
)
 
617

Equity in net earnings (loss) of affiliates
640

 
640

 
439

 
122

 
(1,706
)
 
135

Non-operating pension and other postretirement employee benefit (expense) income
—

 
—

 
60

 
7

 
—

 
67

Interest expense
—

 
(17
)
 
(75
)
 
(23
)
 
24

 
(91
)
Interest income
—

 
19

 
3

 
4

 
(24
)
 
2

Dividend income - cost investments
—

 
—

 
—

 
85

 
(3
)
 
82

Other income (expense), net
—

 
(3
)
 
1

 
—

 
—

 
(2
)
Earnings (loss) from continuing operations before tax
640

 
639

 
625

 
624

 
(1,718
)
 
810

Income tax (provision) benefit
—

 
1

 
(139
)
 
(16
)
 
1

 
(153
)
Earnings (loss) from continuing operations
640

 
640

 
486

 
608

 
(1,717
)
 
657

Earnings (loss) from operation of discontinued operations
—

 
—

 
—

 
(14
)
 
—

 
(14
)
Income tax (provision) benefit from discontinued operations
—

 
—

 
—

 
2

 
—

 
2

Earnings (loss) from discontinued operations
—

 
—

 
—

 
(12
)
 
—

 
(12
)
Net earnings (loss)
640

 
640

 
486

 
596

 
(1,717
)
 
645

Net (earnings) loss attributable to noncontrolling interests
—

 
—

 
—

 
(5
)
 
—

 
(5
)
Net earnings (loss) attributable to Celanese Corporation
640

 
640

 
486

 
591

 
(1,717
)
 
640



40

Table of Contents

CELANESE CORPORATION AND SUBSIDIARIES
UNAUDITED INTERIM CONSOLIDATING STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
 
Three Months Ended September 30, 2018
 
Parent
Guarantor
 
Issuer
 
Subsidiary
Guarantors
 
Non-
Guarantors
 
Eliminations
 
Consolidated
 
(In $ millions)
Net earnings (loss)
401

 
401

 
343

 
349

 
(1,092
)
 
402

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

 
—

 
1

 
—

 
(1
)
 
—

Foreign currency translation gain (loss)
(35
)
 
(35
)
 
(31
)
 
(37
)
 
103

 
(35
)
Gain (loss) on cash flow hedges
4

 
4

 
2

 
2

 
(8
)
 
4

Pension and postretirement benefits gain (loss)
—

 
—

 
—

 
—

 
—

 
—

Total other comprehensive income (loss), net of tax
(31
)
 
(31
)
 
(28
)
 
(35
)
 
94

 
(31
)
Total comprehensive income (loss), net of tax
370

 
370

 
315

 
314

 
(998
)
 
371

Comprehensive (income) loss attributable to noncontrolling interests
—

 
—

 
—

 
(1
)
 
—

 
(1
)
Comprehensive income (loss) attributable to Celanese Corporation
370

 
370

 
315

 
313

 
(998
)
 
370

 
Three Months Ended September 30, 2017
 
Parent
Guarantor
 
Issuer
 
Subsidiary
Guarantors
 
Non-
Guarantors
 
Eliminations
 
Consolidated
 
(In $ millions)
Net earnings (loss)
226

 
226

 
154

 
261

 
(639
)
 
228

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

 
—

 
—

 
—

 
—

 
—

Foreign currency translation gain (loss)
42

 
42

 
65

 
74

 
(181
)
 
42

Gain (loss) on cash flow hedges
—

 
—

 
—

 
—

 
—

 
—

Pension and postretirement benefits gain (loss)
(1
)
 
(1
)
 
(1
)
 
—

 
2

 
(1
)
Total other comprehensive income (loss), net of tax
41

 
41

 
64

 
74

 
(179
)
 
41

Total comprehensive income (loss), net of tax
267

 
267

 
218

 
335

 
(818
)
 
269

Comprehensive (income) loss attributable to noncontrolling interests
—

 
—

 
—

 
(2
)
 
—

 
(2
)
Comprehensive income (loss) attributable to Celanese Corporation
267

 
267

 
218

 
333

 
(818
)
 
267


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CELANESE CORPORATION AND SUBSIDIARIES
UNAUDITED INTERIM CONSOLIDATING STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
 
Nine Months Ended September 30, 2018
 
Parent
Guarantor
 
Issuer
 
Subsidiary
Guarantors
 
Non-
Guarantors
 
Eliminations
 
Consolidated
 
(In $ millions)
Net earnings (loss)
1,108

 
1,108

 
945

 
1,029

 
(3,078
)
 
1,112

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

 
—

 
6

 
13

 
(19
)
 
—

Foreign currency translation gain (loss)
(52
)
 
(52
)
 
(77
)
 
(95
)
 
224

 
(52
)
Gain (loss) on cash flow hedges
9

 
9

 
6

 
7

 
(22
)
 
9

Pension and postretirement benefits gain (loss)
1

 
1

 
1

 
1

 
(3
)
 
1

Total other comprehensive income (loss), net of tax
(42
)
 
(42
)
 
(64
)
 
(74
)
 
180

 
(42
)
Total comprehensive income (loss), net of tax
1,066

 
1,066

 
881

 
955

 
(2,898
)
 
1,070

Comprehensive (income) loss attributable to noncontrolling interests
—

 
—

 
—

 
(4
)
 
—

 
(4
)
Comprehensive income (loss) attributable to Celanese Corporation
1,066

 
1,066

 
881

 
951

 
(2,898
)
 
1,066

 
Nine Months Ended September 30, 2017
 
Parent
Guarantor
 
Issuer
 
Subsidiary
Guarantors
 
Non-
Guarantors
 
Eliminations
 
Consolidated
 
(In $ millions)
Net earnings (loss)
640

 
640

 
486

 
596

 
(1,717
)
 
645

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

 
1

 
1

 
1

 
(3
)
 
1

Foreign currency translation gain (loss)
148

 
148

 
191

 
232

 
(571
)
 
148

Gain (loss) on cash flow hedges
(1
)
 
(1
)
 
(1
)
 
(1
)
 
3

 
(1
)
Pension and postretirement benefits gain (loss)
4

 
4

 
3

 
6

 
(13
)
 
4

Total other comprehensive income (loss), net of tax
152

 
152

 
194

 
238

 
(584
)
 
152

Total comprehensive income (loss), net of tax
792

 
792

 
680

 
834

 
(2,301
)
 
797

Comprehensive (income) loss attributable to noncontrolling interests
—

 
—

 
—

 
(5
)
 
—

 
(5
)
Comprehensive income (loss) attributable to Celanese Corporation
792

 
792

 
680

 
829

 
(2,301
)
 
792



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CELANESE CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATING BALANCE SHEET
 
As of September 30, 2018
 
Parent
Guarantor
 
Issuer
 
Subsidiary
Guarantors
 
Non-
Guarantors
 
Eliminations
 
Consolidated
 
(In $ millions)
ASSETS
 
 
 
 
 
 
 
 
 
 
 
Current Assets
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
—

 
14

 
46

 
643

 
—

 
703

Trade receivables - third party and affiliates
—

 
—

 
122

 
1,098

 
(134
)
 
1,086

Non-trade receivables, net
37

 
515

 
257

 
444

 
(974
)
 
279

Inventories, net
—

 
—

 
301

 
775

 
(43
)
 
1,033

Marketable securities, at fair value
—

 
—

 
31

 
—

 
—

 
31

Other assets
—

 
22

 
16

 
57

 
(47
)
 
48

Total current assets
37

 
551

 
773

 
3,017

 
(1,198
)
 
3,180

Investments in affiliates
3,504

 
4,736

 
4,729

 
860

 
(12,848
)
 
981

Property, plant and equipment, net
—

 
—

 
1,228

 
2,471

 
—

 
3,699

Deferred income taxes
—

 
17

 
—

 
175

 
(22
)
 
170

Other assets
—

 
1,621

 
260

 
479

 
(1,947
)
 
413

Goodwill
—

 
—

 
314

 
750

 
—

 
1,064

Intangible assets, net
—

 
—

 
101

 
216

 
—

 
317

Total assets
3,541

 
6,925

 
7,405

 
7,968

 
(16,015
)
 
9,824

LIABILITIES AND EQUITY
 
 
 
 
 
 
 
 
 
 
 
Current Liabilities
 
 
 
 
 
 
 
 
 
 
 
Short-term borrowings and current installments of long-term debt - third party and affiliates
—

 
50

 
176

 
268

 
(265
)
 
229

Trade payables - third party and affiliates
—

 
—

 
303

 
650

 
(134
)
 
819

Other liabilities
—

 
45

 
296

 
298

 
(292
)
 
347

Income taxes payable
—

 
—

 
495

 
104

 
(462
)
 
137

Total current liabilities
—

 
95

 
1,270

 
1,320

 
(1,153
)
 
1,532

Noncurrent Liabilities
 
 
 
 
 
 
 
 
 
 
 
Long-term debt
—

 
3,326

 
1,580

 
203

 
(1,913
)
 
3,196

Deferred income taxes
—

 
—

 
67

 
201

 
(22
)
 
246

Uncertain tax positions
—

 
—

 
10

 
146

 
(2
)
 
154

Benefit obligations
—

 
—

 
265

 
282

 
—

 
547

Other liabilities
—

 
—

 
105

 
142

 
(41
)
 
206

Total noncurrent liabilities
—

 
3,326

 
2,027

 
974

 
(1,978
)
 
4,349

Total Celanese Corporation stockholders' equity
3,541

 
3,504

 
4,108

 
5,272

 
(12,884
)
 
3,541

Noncontrolling interests
—

 
—

 
—

 
402

 
—

 
402

Total equity
3,541

 
3,504

 
4,108

 
5,674

 
(12,884
)
 
3,943

Total liabilities and equity
3,541

 
6,925

 
7,405

 
7,968

 
(16,015
)
 
9,824


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CELANESE CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATING BALANCE SHEET
 
As of December 31, 2017
 
Parent
Guarantor
 
Issuer
 
Subsidiary
Guarantors
 
Non-
Guarantors
 
Eliminations
 
Consolidated
 
(In $ millions)
ASSETS
 
 
 
 
 
 
 
 
 
 
 
Current Assets
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
—

 
—

 
230

 
346

 
—

 
576

Trade receivables - third party and affiliates
—

 
—

 
89

 
988

 
(91
)
 
986

Non-trade receivables, net
38

 
482

 
279

 
385

 
(940
)
 
244

Inventories, net
—

 
—

 
277

 
672

 
(49
)
 
900

Marketable securities, at fair value
—

 
—

 
32

 
—

 
—

 
32

Other assets
—

 
60

 
12

 
93

 
(111
)
 
54

Total current assets
38

 
542

 
919

 
2,484

 
(1,191
)
 
2,792

Investments in affiliates
2,850

 
4,283

 
3,916

 
861

 
(10,934
)
 
976

Property, plant and equipment, net
—

 
—

 
1,145

 
2,617

 
—

 
3,762

Deferred income taxes
—

 
6

 
206

 
158

 
(4
)
 
366

Other assets
—

 
1,295

 
171

 
165

 
(1,293
)
 
338

Goodwill
—

 
—

 
314

 
689

 
—

 
1,003

Intangible assets, net
—

 
—

 
48

 
253

 
—

 
301

Total assets
2,888

 
6,126

 
6,719

 
7,227

 
(13,422
)
 
9,538

LIABILITIES AND EQUITY
 
 
 
 
 
 
 
 
 
 
 
Current Liabilities
 
 
 
 
 
 
 
 
 
 
 
Short-term borrowings and current installments of long-term debt - third party and affiliates
—

 
76

 
148

 
369

 
(267
)
 
326

Trade payables - third party and affiliates
—

 
1

 
300

 
598

 
(92
)
 
807

Other liabilities
—

 
71

 
302

 
273

 
(292
)
 
354

Income taxes payable
—

 
—

 
471

 
92

 
(491
)
 
72

Total current liabilities
—

 
148

 
1,221

 
1,332

 
(1,142
)
 
1,559

Noncurrent Liabilities
 
 
 
 
 
 
 
 
 
 
 
Long-term debt
—

 
3,128

 
1,254

 
233

 
(1,300
)
 
3,315

Deferred income taxes
—

 
—

 
—

 
215

 
(4
)
 
211

Uncertain tax positions
—

 
—

 
1

 
157

 
(2
)
 
156

Benefit obligations
—

 
—

 
277

 
308

 
—

 
585

Other liabilities
—

 
—

 
255

 
158

 
—

 
413

Total noncurrent liabilities
—

 
3,128

 
1,787

 
1,071

 
(1,306
)
 
4,680

Total Celanese Corporation stockholders' equity
2,888

 
2,850

 
3,711

 
4,412

 
(10,974
)
 
2,887

Noncontrolling interests
—

 
—

 
—

 
412

 
—

 
412

Total equity
2,888

 
2,850

 
3,711

 
4,824

 
(10,974
)
 
3,299

Total liabilities and equity
2,888

 
6,126

 
6,719

 
7,227

 
(13,422
)
 
9,538


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CELANESE CORPORATION AND SUBSIDIARIES
UNAUDITED INTERIM CONSOLIDATING STATEMENT OF CASH FLOWS
 
Nine Months Ended September 30, 2018
 
Parent
Guarantor
 
Issuer
 
Subsidiary
Guarantors
 
Non-
Guarantors
 
Eliminations
 
Consolidated
 
(In $ millions)
Net cash provided by (used in) operating activities
459

 
567

 
224

 
1,015

 
(1,070
)
 
1,195

Investing Activities
 
 
 
 
 
 
 
 
 
 
 
Capital expenditures on property, plant and equipment
—

 
—

 
(163
)
 
(81
)
 
—

 
(244
)
Acquisitions, net of cash acquired
—

 
—

 
(144
)
 
—

 
—

 
(144
)
Proceeds from sale of businesses and assets, net
—

 
—

 
—

 
13

 
—

 
13

Return of capital from subsidiary
—

 
—

 
225

 
—

 
(225
)
 
—

Contributions to subsidiary
—

 
—

 
(16
)
 
—

 
16

 
—

Intercompany loan receipts (disbursements)
—

 
(327
)
 
(12
)
 
(285
)
 
624

 
—

Other, net
—

 
—

 
(7
)
 
(27
)
 
—

 
(34
)
Net cash provided by (used in) investing activities
—

 
(327
)
 
(117
)
 
(380
)
 
415

 
(409
)
Financing Activities
 

 
 

 
 

 
 

 
 

 
 

Net change in short-term borrowings with maturities of 3 months or less
—

 
(33
)
 
11

 
(52
)
 
(12
)
 
(86
)
Proceeds from short-term borrowings
—

 
—

 
—

 
44

 
—

 
44

Repayments of short-term borrowings
—

 
—

 
—

 
(62
)
 
—

 
(62
)
Proceeds from long-term debt
—

 
285

 
327

 
—

 
(612
)
 
—

Repayments of long-term debt
—

 
(19
)
 
(13
)
 
(24
)
 
—

 
(56
)
Purchases of treasury stock, including related fees
(250
)
 
—

 
—

 
—

 
—

 
(250
)
Dividends to parent
—

 
(459
)
 
(611
)
 
—

 
1,070

 
—

Contributions from parent
—

 
—

 
—

 
16

 
(16
)
 
—

Common stock dividends
(209
)
 
—

 
—

 
—

 
—

 
(209
)
Return of capital to parent
—

 
—

 
—

 
(225
)
 
225

 
—

(Distributions to) contributions from noncontrolling interests
—

 
—

 
—

 
(14
)
 
—

 
(14
)
Other, net
—

 
—

 
(5
)
 
(1
)
 
—

 
(6
)
Net cash provided by (used in) financing activities
(459
)
 
(226
)
 
(291
)
 
(318
)
 
655

 
(639
)
Exchange rate effects on cash and cash equivalents
—

 
—

 
—

 
(20
)
 
—

 
(20
)
Net increase (decrease) in cash and cash equivalents
—

 
14

 
(184
)
 
297

 
—

 
127

Cash and cash equivalents as of beginning of period
—

 
—

 
230

 
346

 
—

 
576

Cash and cash equivalents as of end of period
—

 
14

 
46

 
643

 
—

 
703


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CELANESE CORPORATION AND SUBSIDIARIES
UNAUDITED INTERIM CONSOLIDATING STATEMENT OF CASH FLOWS
 
Nine Months Ended September 30, 2017
 
Parent
Guarantor
 
Issuer
 
Subsidiary
Guarantors
 
Non-
Guarantors
 
Eliminations
 
Consolidated
 
(In $ millions)
Net cash provided by (used in) operating activities
677

 
623

 
571

 
403

 
(1,529
)
 
745

Investing Activities
 
 
 
 
 
 
 
 
 
 
 
Capital expenditures on property, plant and equipment
—

 
—

 
(122
)
 
(58
)
 
—

 
(180
)
Acquisitions, net of cash acquired
—

 
(11
)
 
(12
)
 
(265
)
 
19

 
(269
)
Proceeds from sale of businesses and assets, net
—

 
—

 
—

 
20

 
(19
)
 
1

Return of capital from subsidiary
—

 
—

 
18

 
—

 
(18
)
 
—

Contributions to subsidiary
—

 
—

 
—

 
—

 
—

 
—

Intercompany loan receipts (disbursements)
—

 
(174
)
 
(25
)
 
—

 
199

 
—

Other, net
—

 
—

 
(1
)
 
(8
)
 
—

 
(9
)
Net cash provided by (used in) investing activities
—

 
(185
)
 
(142
)
 
(311
)
 
181

 
(457
)
Financing Activities
 
 
 
 
 
 
 
 
 
 
 
Net change in short-term borrowings with maturities of 3 months or less
—

 
245

 
5

 
(1
)
 
(25
)
 
224

Proceeds from short-term borrowings
—

 
—

 
—

 
150

 
—

 
150

Repayments of short-term borrowings
—

 
—

 
—

 
(91
)
 
—

 
(91
)
Proceeds from long-term debt
—

 
—

 
174

 
—

 
(174
)
 
—

Repayments of long-term debt
—

 
—

 
(1
)
 
(64
)
 
—

 
(65
)
Purchases of treasury stock, including related fees
(500
)
 
—

 
—

 
—

 
—

 
(500
)
Dividends to parent
—

 
(678
)
 
(571
)
 
(280
)
 
1,529

 
—

Stock option exercises
1

 
—

 
—

 
—

 
—

 
1

Common stock dividends
(178
)
 
—

 
—

 
—

 
—

 
(178
)
Return of capital to parent
—

 
—

 
—

 
(18
)
 
18

 
—

(Distributions to) contributions from noncontrolling interests
—

 
—

 
—

 
(18
)
 
—

 
(18
)
Other, net
—

 
—

 
(17
)
 
(2
)
 
—

 
(19
)
Net cash provided by (used in) financing activities
(677
)
 
(433
)
 
(410
)
 
(324
)
 
1,348

 
(496
)
Exchange rate effects on cash and cash equivalents
—

 
—

 
—

 
31

 
—

 
31

Net increase (decrease) in cash and cash equivalents
—

 
5

 
19

 
(201
)
 
—

 
(177
)
Cash and cash equivalents as of beginning of period
—

 
—

 
51

 
587

 
—

 
638

Cash and cash equivalents as of end of period
—

 
5

 
70

 
386

 
—

 
461


46

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23. Subsequent Event
On October 10, 2018, the Company signed a definitive agreement to acquire Next Polymers Ltd., an India based engineering thermoplastics compounder. The acquisition will be funded from cash on hand or from borrowings under the Company's senior unsecured revolving credit facility. The acquired operations will be included in the Engineered Materials segment. The Company expects the acquisition to close in the first quarter of 2019, subject to customary closing conditions, and does not expect the acquisition to be material to its 2019 financial position or results of operations.

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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, 2017 filed on February 9, 2018 with the Securities and Exchange Commission ("SEC") as part of the Company's Annual Reporting on Form 10-K ("2017 Form 10-K") and the unaudited interim consolidated financial statements and notes to the unaudited interim consolidated financial statements, which are prepared in accordance with accounting principles generally accepted in the United States of America ("US GAAP").
Investors are cautioned that the forward-looking statements contained in this section and other parts of 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 "Forward-Looking Statements" below and at the beginning of our 2017 Form 10-K.
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. Generally, words such as "believe," "expect," "intend," "estimate," "anticipate," "project," "plan," "may," "can," "could," "might," and "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 involve risks and uncertainties 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. 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.
Risk Factors
See Part I - Item 1A. Risk Factors of our 2017 Form 10-K and subsequent periodic filings we make with the SEC for a description of certain risk factors that you should consider which 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, expansions and maintenance;
•
the ability to reduce or maintain 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;
•
the ability to identify desirable potential acquisition targets and to consummate acquisition or investment transactions, including obtaining regulatory approvals, consistent with our strategy;

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Table of Contents

•
market acceptance of our technology;
•
the ability to obtain governmental approvals and to construct facilities on terms and schedules acceptable to us;
•
changes in tariffs, tax rates or legislation throughout the world including, but not limited to, adjustments, changes in estimates or interpretations that may impact recorded or future tax impacts associated with tax legislation in the US, commonly referred to as the Tax Cuts and Jobs Act (the "TCJA") enacted in December 2017;
•
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 claims or litigation, including investigations or enforcement actions, 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. We neither intend nor assume any obligation to update these forward-looking statements, which speak only as of their dates.
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, filtration applications, paper and packaging, chemical additives, construction, consumer and industrial adhesives, and food and beverage applications. Our products enjoy leading global positions due to our differentiated business models, large global production capacity, operating efficiencies, proprietary 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.
Effective January 1, 2018, we adopted Accounting Standards Update 2017-07, which clarifies the presentation and classification of the components of net periodic benefit costs in the unaudited interim consolidated statements of operations. See Note 2 - Recent Accounting Pronouncements in the accompanying unaudited interim consolidated financial statements for further information.

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Also effective January 1, 2018, we reorganized our operating and reportable segments to align with recent structural and management reporting changes. See Note 19 - Segment Information in the accompanying unaudited interim consolidated financial statements for further information.
Results of Operations
Financial Highlights
 
Three Months Ended September 30,
 
 
 
Nine Months Ended September 30,
 
 
 
2018
 
2017
 
Change
 
2018
 
2017
 
Change
 
 
 
As Adjusted
 
 
 
 
 
As Adjusted
 
 
 
(unaudited)
 
(In $ millions, except percentages)
Statement of Operations Data
 
 
 
 
 
 
 
 
 
 
 
Net sales
1,771

 
1,566

 
205

 
5,466

 
4,547

 
919

Gross profit
516

 
383

 
133

 
1,552

 
1,098

 
454

Selling, general and administrative ("SG&A") expenses
(129
)
 
(133
)
 
4

 
(412
)
 
(353
)
 
(59
)
Other (charges) gains, net
12

 
—

 
12

 
9

 
(57
)
 
66

Operating profit (loss)
374

 
229

 
145

 
1,075

 
617

 
458

Equity in net earnings (loss) of affiliates
66

 
50

 
16

 
180

 
135

 
45

Non-operating pension and other postretirement employee benefit (expense) income
25


23

 
2

 
77

 
67

 
10

Interest expense
(30
)
 
(32
)
 
2

 
(95
)
 
(91
)
 
(4
)
Dividend income - cost investments
26

 
24

 
2

 
92

 
82

 
10

Earnings (loss) from continuing operations before tax
462

 
289

 
173

 
1,336

 
810

 
526

Earnings (loss) from continuing operations
408

 
232

 
176

 
1,120

 
657

 
463

Earnings (loss) from discontinued operations
(6
)
 
(4
)
 
(2
)
 
(8
)
 
(12
)
 
4

Net earnings (loss)
402

 
228

 
174

 
1,112

 
645

 
467

Net earnings (loss) attributable to Celanese Corporation
401

 
226

 
175

 
1,108

 
640

 
468

Other Data
 
 
 
 
 
 
 
 
 
 
 
Depreciation and amortization
90

 
80

 
10

 
255

 
226

 
29

SG&A expenses as a percentage of Net sales
7.3
%
 
8.5
%
 
 
 
7.5
%
 
7.8
%
 
 
Operating margin(1)
21.1
%
 
14.6
%
 


 
19.7
%
 
13.6
%
 


Other (charges) gains, net
 
 
 
 
 
 
 
 
 
 
 
Restructuring
(1
)
 
—

 
(1
)
 
(4
)
 
(3
)
 
(1
)
InfraServ ownership change
—

 
—

 
—

 
—

 
(4
)
 
4

Plant/office closures
13

 
—

 
13

 
13

 
(50
)
 
63

Total Other (charges) gains, net
12

 
—

 
12

 
9

 
(57
)
 
66

______________________________
(1) 
Defined as Operating profit (loss) divided by Net sales.

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As of
September 30,
2018
 
As of
December 31,
2017
 
(unaudited)
 
(In $ millions)
Balance Sheet Data
 
 
 
Cash and cash equivalents
703

 
576

 
 
 
 
Short-term borrowings and current installments of long-term debt - third party and affiliates
229

 
326

Long-term debt, net of unamortized deferred financing costs
3,196

 
3,315

Total debt
3,425

 
3,641

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, 2018 Compared to Three Months Ended September 30, 2017
 
Volume
 
Price
 
Currency
 
Other
 
Total
 
(unaudited)
 
(In percentages)
Engineered Materials
7

 
6

 
(1
)
 
—

 
12
Acetate Tow
5

 
(3
)
 
—

 
(1
)
 
1
Industrial Specialties
(1
)
 
5

 
(1
)
 
—

 
3
Acetyl Intermediates
(4
)
 
26

 
—

 
—

 
22
Total Company
1

 
14

 
(1
)
 
(1
)
 
13
Nine Months Ended September 30, 2018 Compared to Nine Months Ended September 30, 2017
 
Volume
 
Price
 
Currency
 
Other
 
Total
 
(unaudited)
 
(In percentages)
Engineered Materials
12

 
5

 
4
 
—

 
21

Acetate Tow
(2
)
 
(3
)
 
—
 
—

 
(5
)
Industrial Specialties
(1
)
 
5

 
4
 
—

 
8

Acetyl Intermediates
3

 
26

 
3
 
—

 
32

Total Company
5

 
14

 
3
 
(2
)
 
20

Consolidated Results
Three Months Ended September 30, 2018 Compared to Three Months Ended September 30, 2017
Net sales increased $205 million, or 13%, for the three months ended September 30, 2018 compared to the same period in 2017 primarily due to:
•
higher pricing across most of our segments.
Operating profit increased $145 million, or 63%, for the three months ended September 30, 2018 compared to the same period in 2017 primarily due to:
•
higher Net sales across all of our segments;

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partially offset by:
•
higher raw material costs across most of our segments.
Our effective income tax rate for the three months ended September 30, 2018 was 12% compared to 20% for the same period in 2017. The lower effective income tax rate for the three months ended September 30, 2018 compared to the same period in 2017 is primarily due to the release of valuation allowances on net deferred tax assets in China and Singapore, reduction of the US statutory tax rate due to the TCJA, and reduced losses not providing tax benefits in certain jurisdictions, partially offset by increases in valuation allowances offsetting US foreign tax credits due to the provisions of the TCJA.
See Note 15 - Income Taxes in the accompanying unaudited interim consolidated financial statements for further information.
Nine Months Ended September 30, 2018 Compared to Nine Months Ended September 30, 2017
Net sales increased $919 million, or 20%, for the nine months ended September 30, 2018 compared to the same period in 2017 primarily due to:
•
higher pricing across most of our segments;
•
higher volume in our Engineered Materials segment, primarily related to our base business driven by new project launches and pipeline growth, and Net sales generated from acquisitions. See Note 3 - Acquisitions, Dispositions and Plant Closures in the accompanying unaudited interim consolidated financial statements for further information; and
•
a favorable currency impact across most of our segments resulting from a strong Euro relative to the US dollar.
Operating profit increased $458 million, or 74%, for the nine months ended September 30, 2018 compared to the same period in 2017 primarily due to:
•
higher Net sales across most of our segments; and
•
a favorable impact of $66 million to Other (charges) gains, net. During the nine months ended September 30, 2017, we provided notice of termination of a contract with a key raw materials supplier at our ethanol production unit in Nanjing, China. As a result, we recorded a $24 million contract termination charge and an $18 million reduction to our non-income tax receivable, which did not recur in the current year. In addition, during the nine months ended September 30, 2018, we received a $13 million non-income tax receivable refund from Nanjing, China. See Note 14 - Other (Charges) Gains, Net in the accompanying unaudited interim consolidated financial statements for further information;
partially offset by:
•
higher raw material costs across most of our segments; and
•
higher spending of $52 million and $31 million in our Engineered Materials and Acetyl Intermediates segments, respectively.
Equity in net earnings (loss) of affiliates increased $45 million for the nine months ended September 30, 2018 compared to the same period in 2017 primarily due to:
•
an increase in equity investment in earnings of $34 million from our Ibn Sina strategic affiliate primarily as a result of an increase in our indirect economic ownership from 25% to 32.5% due to the startup of its polyoxymethylene ("POM") production facility in Saudi Arabia during the three months ended December 31, 2017 and an increase in methyl tertiary-butyl ether ("MTBE") pricing.
Our effective income tax rate for the nine months ended September 30, 2018 was 16% compared to 19% for the same period in 2017. The lower effective income tax rate for the nine months ended September 30, 2018 compared to the same period in 2017 is primarily due to the release of valuation allowances on net deferred tax assets in China and Singapore, reduction of the US statutory tax rate due to the TCJA and reduced losses not providing tax benefits in certain jurisdictions, partially offset by increases in valuation allowances offsetting US foreign tax credits due to the provisions of the TCJA.

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Business Segments
Engineered Materials
 
Three Months Ended September 30,
 
Change
 
% Change
 
Nine Months Ended September 30,
 
Change
 
% Change
 
2018
 
2017
 
 
 
2018
 
2017
 
 
 
(unaudited)
 
(In $ millions, except percentages)
Net sales
642

 
573

 
69

 
12.0
%
 
1,971

 
1,633

 
338

 
20.7
%
Net Sales Variance
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Volume
7
 %
 
 
 
 
 
 
 
12
%
 
 
 
 
 
 
Price
6
 %
 
 
 
 
 
 
 
5
%
 
 
 
 
 
 
Currency
(1
)%
 
 
 
 
 
 
 
4
%
 
 
 
 
 
 
Other
—
 %
 
 
 
 
 
 
 
—
%
 
 
 
 
 
 
Other (charges) gains, net
—

 
—

 
—

 
—
%
 
—

 
(2
)
 
2

 
100.0
%
Operating profit (loss)
124

 
105

 
19

 
18.1
%
 
365

 
314

 
51

 
16.2
%
Operating margin
19.3
 %
 
18.3
%
 
 
 


 
18.5
%
 
19.2
%
 
 
 
 
Equity in net earnings (loss) of affiliates
62

 
47

 
15

 
31.9
%
 
169

 
128

 
41

 
32.0
%
Depreciation and amortization
31

 
30

 
1

 
3.3
%
 
96

 
82

 
14

 
17.1
%
Our Engineered Materials segment includes our engineered materials business, our food ingredients business and certain strategic affiliates. Our engineered materials business develops, produces and supplies a broad portfolio of high performance specialty polymers for automotive and medical applications, as well as industrial products and consumer electronics. Together with our strategic affiliates, our engineered materials business is a leading participant in the global specialty polymers industry. Our food ingredients business is a leading global supplier of acesulfame potassium for the food and beverage industry and is a leading producer of food protection ingredients, such as potassium sorbate and sorbic acid.
The pricing of products by the Engineered Materials segment is primarily based on the value of the material we produce and is largely independent of changes in the cost of raw materials. Therefore, in general, margins may expand or contract in response to changes in raw material costs.
Three Months Ended September 30, 2018 Compared to Three Months Ended September 30, 2017
Net sales increased for the three months ended September 30, 2018 compared to the same period in 2017 primarily due to:
•
higher volume within our base business driven by new project launches and pipeline growth, and Net sales generated from acquisitions; and
•
higher pricing for most of our products, primarily due to pricing efforts to align with rising raw material and distribution costs.
Operating profit increased for the three months ended September 30, 2018 compared to the same period in 2017 primarily due to:
•
higher Net sales;
partially offset by:
•
higher raw material costs driven equally by methanol and nylon; and
•
higher spending of $10 million, primarily related to increased distribution costs and our acquisition of Omni Plastics, L.L.C. ("Omni Plastics"), as this acquired business incurs ongoing spending.


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Equity in net earnings (loss) of affiliates increased for the three months ended September 30, 2018 compared to the same period in 2017 primarily due to:
•
an increase in equity investment in earnings of $17 million from our Ibn Sina strategic affiliate as a result of an increase in our indirect economic ownership from 25% to 32.5% due to the startup of its POM production facility in Saudi Arabia during the three months ended December 31, 2017 and an increase in MTBE pricing.
Nine Months Ended September 30, 2018 Compared to Nine Months Ended September 30, 2017
Net sales increased for the nine months ended September 30, 2018 compared to the same period in 2017 primarily due to:
•
higher volume within our base business driven by new project launches and pipeline growth, and Net sales generated from acquisitions;
•
higher pricing for most of our products, primarily due to pricing efforts to align with rising raw material and distribution costs; and
•
a favorable currency impact, primarily resulting from a strong Euro relative to the US dollar.
Operating profit increased for the nine months ended September 30, 2018 compared to the same period in 2017 primarily due to:
•
higher Net sales;
partially offset by:
•
higher spending of $52 million, primarily related to our acquisitions of Omni Plastics and the nylon compounding division of Nilit Group ("Nilit"), as these acquired businesses incur ongoing spending, as well as increased distribution costs;
•
higher raw material costs, primarily for methanol, and freight costs; and
•
higher depreciation and amortization expense, primarily related to our acquired businesses.
Equity in net earnings (loss) of affiliates increased for the nine months ended September 30, 2018 compared to the same period in 2017 primarily due to:
•
an increase in equity investment in earnings of $34 million from our Ibn Sina strategic affiliate primarily as a result of an increase in our indirect economic ownership from 25% to 32.5% due to the startup of its POM production facility in Saudi Arabia during the three months ended December 31, 2017 and an increase in MTBE pricing, as well as $4 million from our Korea Engineering Plastics Co., Ltd. strategic affiliate due to favorable pricing.
On February 1, 2018, we completed the acquisition of 100% of the ownership interests of Omni Plastics. Omni Plastics specializes in custom compounding of various engineered thermoplastic materials. The acquisition further strengthens our global asset base by adding compounding capacity in the Americas. See Note 3 - Acquisitions, Dispositions and Plant Closures in the accompanying unaudited interim consolidated financial statements for further information.

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Acetate Tow
 
Three Months Ended September 30,
 
Change
 
% Change
 
Nine Months Ended September 30,
 
Change
 
% Change
 
2018
 
2017
 
 
 
2018
 
2017
 
 
 
(unaudited)
 
(In $ millions, except percentages)
Net sales
158

 
157

 
1

 
0.6
 %
 
488

 
511

 
(23
)
 
(4.5
)%
Net Sales Variance
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Volume
5
 %
 
 
 
 
 
 
 
(2
)%
 
 
 
 
 
 
Price
(3
)%
 
 
 
 
 
 
 
(3
)%
 
 
 
 
 
 
Currency
—
 %
 
 
 
 
 
 
 
—
 %
 
 
 
 
 
 
Other
(1
)%
 
 
 
 
 
 
 
—
 %
 
 
 
 
 
 
Other (charges) gains, net
(1
)
 
—

 
(1
)
 
(100.0
)%
 
(2
)
 
(2
)
 
—

 
—
 %
Operating profit (loss)
26

 
45

 
(19
)
 
(42.2
)%
 
111

 
148

 
(37
)
 
(25.0
)%
Operating margin
16.5
 %
 
28.7
%
 
 
 
 
 
22.7
 %
 
29.0
%
 
 
 
 
Dividend income - cost investments
26

 
24

 
2

 
8.3
 %
 
91

 
81

 
10

 
12.3
 %
Depreciation and amortization
21

 
10

 
11

 
110.0
 %
 
44

 
30

 
14

 
46.7
 %
Our Acetate Tow segment serves consumer-driven applications. We are a leading global producer and supplier of acetate tow and acetate flake, primarily used in filter products applications.
The pricing of products within the Acetate Tow segment is sensitive to demand and is primarily based on the value of the material we produce. Many sales in these businesses are conducted under contracts with pricing for one or more years. As a result, margins may expand or contract in response to changes in raw material costs over these similar periods, and we may be unable to adjust pricing also due to other factors, such as the intense level of competition in the industry.
Three Months Ended September 30, 2018 Compared to Three Months Ended September 30, 2017
Net sales were flat for the three months ended September 30, 2018 compared to the same period in 2017.
Operating profit decreased for the three months ended September 30, 2018 compared to the same period in 2017 primarily due to:
•
higher depreciation and amortization expense of $11 million. On June 6, 2018, we announced the consolidation of our global acetate manufacturing operations by initiating the closure of our acetate tow manufacturing unit in Ocotlán, Mexico in 2018. The acetate flake unit will remain operational and is unaffected by these actions. We expect to incur additional exit and shutdown costs of approximately $5 million, primarily related to accelerated depreciation, through the remainder of 2018. See Note 3 - Acquisitions, Dispositions and Plant Closures in the accompanying unaudited interim consolidated financial statements for further information; and
•
higher energy and raw material costs of $10 million, primarily related to acetic acid.
Nine Months Ended September 30, 2018 Compared to Nine Months Ended September 30, 2017
Net sales decreased for the nine months ended September 30, 2018 compared to the same period in 2017 primarily due to:
•
lower acetate tow volume and pricing due to lower global industry utilization.
Operating profit decreased for the nine months ended September 30, 2018 compared to the same period in 2017 primarily due to:
•
lower Net sales; and

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•
higher depreciation and amortization expense of $14 million, primarily due to the closure of our acetate tow manufacturing unit in Ocotlán, Mexico in 2018.
In June 2017, Celanese, through various subsidiaries, entered into an agreement with affiliates of The Blackstone Group L.P. (the "Blackstone Entities") to form a joint venture which would combine substantially all of the operations of our cellulose derivatives business and the operations of the Rhodia Acetow cellulose acetate business formerly operated by Solvay S.A. and acquired by the Blackstone Entities in June 2017. The parties were subsequently unable to reach an agreement with the European Commission on acceptable conditions to allow the proposed joint venture to proceed. The demands by the European Commission eliminated the advantages at the heart of the transaction. As a result, on March 19, 2018, we and the Blackstone Entities abandoned our agreement to form the proposed joint venture. See Note 3 - Acquisitions, Dispositions and Plant Closures in the accompanying unaudited interim consolidated financial statements for further information.
Industrial Specialties
 
Three Months Ended September 30,
 
Change
 
% Change
 
Nine Months Ended September 30,
 
Change
 
% Change
 
2018
 
2017
 
 
 
2018
 
2017
 
 
 
 
 
As Adjusted (Note 2)
 
 
 
 
 
 
 
As Adjusted (Note 2)
 
 
 
 
 
(unaudited)
 
(In $ millions, except percentages)
Net sales
273

 
264

 
9

 
3.4
 %
 
835

 
771

 
64

 
8.3
 %
Net Sales Variance
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Volume
(1
)%
 
 
 
 
 
 
 
(1
)%
 
 
 
 
 
 
Price
5
 %
 
 
 
 
 
 
 
5
 %
 
 
 
 
 
 
Currency
(1
)%
 
 
 
 
 
 
 
4
 %
 
 
 
 
 
 
Other
—
 %
 
 
 
 
 
 
 
—
 %
 
 
 
 
 
 
Other (charges) gains, net
(1
)
 
—

 
(1
)
 
(100.0
)%
 
(3
)
 
—

 
(3
)
 
(100.0
)%
Operating profit (loss)
19

 
19

 
—

 
—
 %
 
64

 
70

 
(6
)
 
(8.6
)%
Operating margin
7.0
 %
 
7.2
%
 
 

 
 
 
7.7
 %
 
9.1
%
 
 
 
 
Depreciation and amortization
10

 
10

 
—

 
—
 %
 
29

 
28

 
1

 
3.6
 %
Our Industrial Specialties segment includes our emulsion polymers and ethylene vinyl acetate ("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 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, automotive parts and carpeting.
The pricing of our products within Industrial Specialties is influenced by changes in the cost of raw materials. Therefore, in general, there is a direct correlation between the cost of raw materials and our Net sales for most Industrial Specialties products. This impact to pricing typically lags changes in raw material costs over months or quarters.
Three Months Ended September 30, 2018 Compared to Three Months Ended September 30, 2017
Net sales increased for the three months ended September 30, 2018 compared to the same period in 2017 primarily due to:
•
higher pricing in our emulsion polymers business due to higher raw material costs for vinyl acetate monomer ("VAM") in Europe and Asia.
Operating profit was flat for the three months ended September 30, 2018 compared to the same period in 2017 primarily due to:
•
higher raw material costs of $13 million, primarily VAM;

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largely offset by:
•
higher Net sales.
Nine Months Ended September 30, 2018 Compared to Nine Months Ended September 30, 2017
Net sales increased for the nine months ended September 30, 2018 compared to the same period in 2017 primarily due to:
•
higher pricing in our emulsion polymers business due to higher raw material costs for VAM in Europe and Asia; and
•
a favorable currency impact resulting from a strong Euro relative to the US dollar.
Operating profit decreased for the nine months ended September 30, 2018 compared to the same period in 2017 primarily due to:
•
higher raw material costs of $39 million, primarily VAM;
largely offset by:
•
higher Net sales.
Acetyl Intermediates
 
Three Months Ended September 30,
 
Change
 
% Change
 
Nine Months Ended September 30,
 
Change
 
% Change
 
2018
 
2017
 
 
 
2018
 
2017
 
 
 
(unaudited)
 
(In $ millions, except percentages)
Net sales
835

 
684

 
151

 
22.1
%
 
2,567

 
1,952

 
615

 
31.5
%
Net Sales Variance
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Volume
(4
)%
 
 
 
 
 
 
 
3
%
 
 
 
 
 
 
Price
26
 %
 
 
 
 
 
 
 
26
%
 
 
 
 
 
 
Currency
—
 %
 
 
 
 
 
 
 
3
%
 
 
 
 
 
 
Other
—
 %
 
 
 
 
 
 
 
—
%
 
 
 
 
 
 
Other (charges) gains, net
13

 
—

 
13

 
100.0
%
 
13

 
(50
)
 
63

 
126.0
%
Operating profit (loss)
268

 
128

 
140

 
109.4
%
 
750

 
264

 
486

 
184.1
%
Operating margin
32.1
 %
 
18.7
%
 
 

 
 
 
29.2
%
 
13.5
%
 
 
 
 
Equity in net earnings (loss) of affiliates
2

 
1

 
1

 
100.0
%
 
5

 
4

 
1

 
25.0
%
Depreciation and amortization
26

 
26

 
—

 
—
%
 
78

 
78

 
—

 
—
%
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.
Pricing of acetic acid, VAM and other acetyl products is influenced by industry utilization rates and changes in the cost of raw materials. Therefore, in general, there is a directional correlation between these factors and our Net sales for most intermediate chemistry products. This impact to pricing typically lags changes in raw material costs over months or quarters.
Three Months Ended September 30, 2018 Compared to Three Months Ended September 30, 2017
Net sales increased for the three months ended September 30, 2018 compared to the same period in 2017 primarily due to:
•
higher pricing due to higher industry utilization rates, which positively impacted pricing for most of our products;

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slightly offset by:
•
lower volume for VAM, which represents all of the decrease in volume, due to a turnaround in Nanjing, China.
Operating profit increased for the three months ended September 30, 2018 compared to the same period in 2017 primarily due to:
•
higher Net sales; and
•
a favorable impact to Other (charges) gains, net. During the three months ended September 30, 2018, we received a $13 million non-income tax receivable refund from Nanjing, China.
partially offset by:
•
higher distribution and raw material costs, primarily for acetic acid and methanol.
Nine Months Ended September 30, 2018 Compared to Nine Months Ended September 30, 2017
Net sales increased during the nine months ended September 30, 2018 compared to the same period in 2017 primarily due to:
•
higher pricing due to higher industry utilization rates, which positively impacted pricing for most of our products;
•
a favorable currency impact resulting from a strong Euro relative to the US dollar; and
•
higher volume for acetic acid, primarily due to higher demand and competitor outages.
slightly offset by:
•
lower volume for VAM due to a turnaround in Nanjing, China.
Operating profit increased during the nine months ended September 30, 2018 compared to the same period in 2017 primarily due to:
•
higher Net sales;
•
a favorable impact of $63 million to Other (charges) gains, net. During the nine months ended September 30, 2017, we provided notice of termination of a contract with a key raw materials supplier at our ethanol production unit in Nanjing, China. As a result, we recorded a $24 million contract termination charge and an $18 million reduction to our non-income tax receivable, which did not recur in the current year. In addition, during the nine months ended September 30, 2018, we received a $13 million non-income tax receivable refund from Nanjing, China. See Note 14 - Other (Charges) Gains, Net in the accompanying unaudited interim consolidated financial statements for further information;
partially offset by:
•
higher distribution and raw material costs, primarily for acetic acid and methanol; and
•
higher spending of $31 million, primarily due to a duty exception in the free trade agreement between Europe and Mexico recognized during the nine months ended September 30, 2017, which did not recur in the current year, as well as increased freight costs.

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Other Activities
 
Three Months Ended September 30,
 
Change
 
% Change
 
Nine Months Ended September 30,
 
Change
 
% Change
 
2018
 
2017
 
 
 
2018
 
2017
 
 
 
 
 
As Adjusted
 
 
 
 
 
 
 
As Adjusted
 
 
 
 
 
(unaudited)
 
(In $ millions, except percentages)
Other (charges) gains, net
1

 
—

 
1

 
100.0
 %
 
1

 
(3
)
 
4

 
133.3
 %
Operating profit (loss)
(63
)
 
(68
)
 
5

 
7.4
 %
 
(214
)
 
(179
)
 
(35
)
 
(19.6
)%
Equity in net earnings (loss) of affiliates
2

 
2

 
—

 
—
 %
 
6

 
3

 
3

 
100.0
 %
Non-operating pension and other postretirement employee benefit (expense) income
25

 
22

 
3

 
13.6
 %
 
77

 
66

 
11

 
16.7
 %
Depreciation and amortization
2

 
4

 
(2
)
 
(50.0
)%
 
8

 
8

 
—

 
—
 %
Other Activities primarily consists of corporate center costs, including administrative activities such as finance, information technology and human resource functions, interest income and expense associated with our financing activities and results of our captive insurance companies. Other Activities also includes the interest cost, expected return on assets and net actuarial gains and losses components of our net periodic benefit cost for our defined benefit pension plans and other postretirement plans, which are not allocated to our business segments.
Three Months Ended September 30, 2018 Compared to Three Months Ended September 30, 2017
Operating loss decreased for the three months ended September 30, 2018 compared to the same period in 2017 primarily due to:
•
lower project spending and incentive compensation costs of $14 million;
largely offset by:
•
higher functional spending of $5 million; and
•
an unfavorable currency impact of $5 million resulting from a strong Euro relative to the US dollar.
Nine Months Ended September 30, 2018 Compared to Nine Months Ended September 30, 2017
Operating loss increased for the nine months ended September 30, 2018 compared to the same period in 2017 primarily due to:
•
higher functional spending and incentive compensation costs of $38 million;
slightly offset by:
•
a favorable impact to Other (charges) gains, net. A partner in our InfraServ equity affiliate investments exercised an option right to purchase additional ownership interests in the InfraServ entities from us. The purchase of these interests reduced our ownership interests in InfraServ GmbH & Co. Gendorf KG and InfraServ GmbH & Co. Knapsack KG (the "InfraServ Ownership Change"). Accordingly, during the three months ended June 30, 2017, we reduced the carrying value of these investments by $4 million, which did not recur in the current year. See Note 1 - Description of the Company and Basis of Presentation in the accompanying unaudited interim consolidated financial statements for further information.
Non-operating pension and other postretirement employee income increased for the nine months ended September 30, 2018 compared to the same period in 2017 primarily due to higher expected returns on plan assets. See Note 11 - Benefit Obligations in the accompanying unaudited interim consolidated financial statements for further information.

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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, 2018, we have $1.0 billion available for borrowing under our senior unsecured revolving credit facility and $5 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, 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.
Total cash outflows for capital expenditures are expected to be in the range of $325 million to $350 million in 2018 primarily due to additional investments in growth opportunities in our Engineered Materials and Acetyl Intermediates segments.
On a stand-alone basis, Celanese and its immediate 100% owned subsidiary, 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 our Common stock, par value $0.0001 per share ("Common Stock").
Cash Flows
Cash and cash equivalents increased $127 million to $703 million as of September 30, 2018 compared to December 31, 2017. As of September 30, 2018, $591 million of the $703 million of cash and cash equivalents was held by our foreign subsidiaries. Under the TCJA, we have incurred a charge associated with the repatriation of previously unremitted foreign earnings, including foreign held cash. These funds are largely accessible, if needed in the US to fund operations. See Note 15 - Income Taxes in the accompanying unaudited interim consolidated financial statements for further information.
•
Net Cash Provided by (Used in) Operating Activities
Net cash provided by operating activities increased $450 million to $1,195 million for the nine months ended September 30, 2018 compared to $745 million for the same period in 2017. Net cash provided by operating activities for the nine months ended September 30, 2018 increased primarily due to:
•
an increase in net earnings;
partially offset by:
•
unfavorable trade working capital of $117 million primarily due to an increase in inventory within our Engineered Materials segment as a result of business growth and our acquisition of Nilit in May 2017.
•
Net Cash Provided by (Used in) Investing Activities
Net cash used in investing activities decreased $48 million to $409 million for the nine months ended September 30, 2018 compared to $457 million for the same period in 2017, primarily due to:
•
a net cash outflow of $269 million related to the acquisition of Nilit in May 2017, which did not recur this year;
partially offset by:
•
a net cash outflow of $144 million related to the acquisition of Omni in February 2018; and
•
an increase of $64 million in capital expenditures related to growth opportunities in our Acetyl Intermediates and Engineered Materials segments.

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•
Net Cash Provided by (Used in) Financing Activities
Net cash used in financing activities increased $143 million to $639 million for the nine months ended September 30, 2018 compared to $496 million for the same period in 2017, primarily due to:
•
a decrease in net borrowings on short-term debt of $387 million, primarily as a result of higher borrowings under our revolving credit facility and accounts receivable securitization facility during the nine months ended September 30, 2017 in connection with the acquisition of Nilit and related to the timing of share repurchases of our Common Stock;
partially offset by:
•
a decrease of $250 million in share repurchases of our Common Stock during the nine months ended September 30, 2018.
Debt and Other Obligations
There have been no material changes to our debt or other obligations described in our 2017 Form 10-K other than those disclosed above and in Note 10 - Debt in the accompanying unaudited interim consolidated financial statements.
Other Financing Arrangements
During the nine months ended September 30, 2018, we entered into a factoring agreement with a global financial institution to sell certain accounts receivable on a non-recourse basis. These transactions are treated as a sale and are accounted for as a reduction in accounts receivable because the agreement transfers effective control over and risk related to the receivables to the buyer. We have no continuing involvement in the transferred receivables, other than collection and administrative responsibilities and, once sold, the accounts receivable are no longer available to satisfy creditors in the event of bankruptcy. We de-recognized $40 million and $38 million of accounts receivable during the three months ended June 30, 2018 and September 30, 2018, respectively.
Share Capital
On September 17, 2018, we filed with the Secretary of State of the State of Delaware a Certificate of Amendment (the "Certificate of Amendment") to our Second Amended and Restated Certificate of Incorporation, as amended, to remove all references to our Series B Common Stock, par value $0.0001 per share, therefrom and to redesignate our Series A Common Stock, par value $0.0001 per share, as "Common Stock." Following the filing of the Certificate of Amendment, we no longer have series of our class of Common Stock.
The Company declared a quarterly cash dividend of $0.54 per share on its Common Stock on October 17, 2018, amounting to $72 million. The cash dividend will be paid on November 8, 2018 to holders of record as of October 29, 2018.
There have been no material changes to our share capital described in our 2017 Form 10-K other than those disclosed above and in Note 13 - Stockholders' Equity in the accompanying unaudited interim consolidated financial statements.
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 2017 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 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 Net sales, 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 2017 Form 10-K. We discuss our critical accounting policies and estimates in MD&A in our 2017 Form 10-K.
Recent Accounting Pronouncements
See Note 2 - Recent Accounting Pronouncements in the accompanying unaudited interim consolidated financial statements included in this Quarterly Report for information regarding recent accounting pronouncements.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Market risk for the 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 2017 Form 10-K. See also Note 16 - Derivative Financial Instruments in the accompanying unaudited interim consolidated financial statements for further discussion of our market risk management and the related impact on the Company's 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 Rule 13a-15(b) under the Securities Exchange Act of 1934, as amended, as of the end of the period covered by this report. Based on that evaluation, as of September 30, 2018, 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
On February 1, 2018, we acquired 100% of the ownership interests of Omni Plastics, L.L.C. and its subsidiaries. See Note 3 - Acquisitions, Dispositions and Plant Closures in the accompanying unaudited interim consolidated financial statements for further information.
During the period covered by this report, there were no changes in our internal control over financial reporting that have 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
The Company is involved in a number of legal and regulatory proceedings, lawsuits, claims and investigations incidental to the normal conduct of its business, relating to such matters as product liability, land disputes, insurance coverage disputes, contracts, employment, antitrust and competition, intellectual property, personal injury and other actions in tort, workers' compensation, chemical exposure, asbestos exposure, taxes, trade compliance, acquisitions and divestitures, claims of legacy stockholders, 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 12 - Environmental and Note 18 - Commitments and Contingencies in the accompanying unaudited interim consolidated financial statements for a discussion of material environmental matters and material commitments and contingencies related to legal and regulatory proceedings. There have been no significant developments in the "Legal Proceedings" described in our 2017 Form 10-K other than those disclosed in Note 12 - Environmental and Note 18 - Commitments and Contingencies in the accompanying unaudited interim consolidated financial statements. See Part I - Item 1A. Risk Factors of our 2017 Form 10-K for certain risk factors relating to these legal proceedings.
Item 1A. Risk Factors
There have been no material changes to the risk factors under Part I, Item 1A of our 2017 Form 10-K.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Repurchases of our Common Stock during the three months ended September 30, 2018 are as follows:
Period
 
Total Number
of Shares
Purchased(1)
 
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, 2018
 
181,829

 
$
115.49

 
181,829

 
$
1,410,000,000

August 1-31, 2018
 
873,662

 
$
116.68

 
873,662

 
$
1,308,000,000

September 1-30, 2018
 
235,184

 
$
115.07

 
235,184

 
$
1,281,000,000

Total
 
1,290,675

(3) 
 
 
1,290,675

 
 
______________________________
(1) 
May include shares withheld from employees to cover their withholding requirements for personal income taxes related to the vesting of restricted stock.
(2) 
Our Board of Directors authorized the repurchase of $3.9 billion of our Common Stock since February 2008.
(3) 
Excludes 1,700 common shares reacquired pursuant to an employee clawback agreement.
See Note 13 - Stockholders' Equity in the accompanying unaudited interim consolidated financial statements for further information.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
None.
Item 5. Other Information
None.

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Item 6. Exhibits(1) 
Exhibit
Number
 
 
 
Description
 
 
 
3.1
 
 
 
 
3.1(a)
 
 
 
 
3.1(b)
 
 
 
 
3.2
 
 
 
 
4.1
 
 
 
 
31.1*
 
 
 
 
31.2*
 
 
 
 
32.1*
 
 
 
 
32.2*
 
 
 
 
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.
(1) 
The Company and its subsidiaries have in the past issued, and may in the future issue from time to time, long-term debt. The Company may not file with the applicable report copies of the instruments defining the rights of holders of long-term debt to the extent that the aggregate principal amount of the debt instruments of any one series of such debt instruments for which the instruments have not been filed has not exceeded or will not exceed 10% of the assets of the Company at any pertinent time. The Company hereby agrees to furnish a copy of any such instrument(s) to the SEC upon request.

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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 19, 2018
 
 
By:
 /s/ SCOTT A. RICHARDSON
 
 
 
Scott A. Richardson
 
 
 
Senior Vice President and
 
 
 
Chief Financial Officer
 
 
 
 
 
 
 
 
Date:
October 19, 2018

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