Edgar Filing: Celanese CORP

CE-2012.3.31-10Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_______________________________________________________

Form 10-Q



þ	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended March 31, 2012
	Or
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

(Commission File Number) 001-32410

CELANESE CORPORATION

(Exact Name of Registrant as Specified in its Charter)



Delaware (State or Other Jurisdiction of Incorporation or Organization)	98-0420726 (I.R.S. Employer Identification No.)

222 West Las Colinas Blvd., Suite 900N Irving, TX (Address of Principal Executive Offices)	75039-5421 (Zip Code)

(972) 443-4000

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer þ

Accelerated filer o

Non-accelerated filer o (Do not check if a smaller reporting company)

Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

The number of outstanding shares of the registrant’s Series A common stock, $0.0001 par value, as of April 17, 2012 was 156,400,883.

CELANESE CORPORATION AND SUBSIDIARIES

Form 10-Q

For the Quarterly Period Ended March 31, 2012

TABLE OF CONTENTS



		Page

	PART I - FINANCIAL INFORMATION
Item 1.	Financial Statements	3
	a) Unaudited Interim Consolidated Statements of Operations for the three months ended March 31, 2012 and 2011	3
	b) Unaudited Interim Consolidated Statements of Comprehensive Income (Loss) for the three months ended March 31, 2012 and 2011	4
	c) Unaudited Consolidated Balance Sheets as of March 31, 2012 and December 31, 2011	5
	d) Unaudited Interim Consolidated Statement of Equity for the three months ended March 31, 2012	6
	e) Unaudited Interim Consolidated Statements of Cash Flows for the three months ended March 31, 2012 and 2011	7
	f) Notes to the Unaudited Interim Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	40
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	54
Item 4.	Controls and Procedures	54

	PART II - OTHER INFORMATION
Item 1.	Legal Proceedings	56
Item 1A.	Risk Factors	56
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	56
Item 3.	Defaults Upon Senior Securities	56
Item 4.	Mine Safety Disclosures	56
Item 5.	Other Information	56
Item 6.	Exhibits	57
Signatures		58

Item 1. Financial Statements

CELANESE CORPORATION AND SUBSIDIARIES

UNAUDITED INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS



	Three Months Ended
	March 31,
	2012		2011
	(In $ millions, except share and per share data)
Net sales	1,633		1,589
Cost of sales	(1,363	)	(1,238	)
Gross profit	270		351
Selling, general and administrative expenses	(134	)	(128	)
Amortization of intangible assets	(13	)	(16	)
Research and development expenses	(26	)	(23	)
Other (charges) gains, net	—		3
Foreign exchange gain (loss), net	1		1
Gain (loss) on disposition of businesses and assets, net	—		—
Operating profit (loss)	98		188
Equity in net earnings (loss) of affiliates	51		43
Interest expense	(45	)	(55	)
Refinancing expense	—		—
Interest income	1		1
Dividend income - cost investments	—		—
Other income (expense), net	2		3
Earnings (loss) from continuing operations before tax	107		180
Income tax (provision) benefit	76		(42	)
Earnings (loss) from continuing operations	183		138
Earnings (loss) from operation of discontinued operations	—		6
Gain (loss) on disposition of discontinued operations	—		—
Income tax (provision) benefit from discontinued operations	—		(2	)
Earnings (loss) from discontinued operations	—		4
Net earnings (loss)	183		142
Net (earnings) loss attributable to noncontrolling interests	—		—
Net earnings (loss) attributable to Celanese Corporation	183		142
Cumulative preferred stock dividends	—		—
Net earnings (loss) available to common stockholders	183		142
Amounts attributable to Celanese Corporation
Earnings (loss) from continuing operations	183		138
Earnings (loss) from discontinued operations	—		4
Net earnings (loss)	183		142
Earnings (loss) per common share - basic
Continuing operations	1.17		0.88
Discontinued operations	—		0.03
Net earnings (loss) - basic	1.17		0.91
Earnings (loss) per common share - diluted
Continuing operations	1.15		0.87
Discontinued operations	—		0.03
Net earnings (loss) - diluted	1.15		0.90
Weighted average shares - basic	156,542,424		155,966,259
Weighted average shares - diluted	159,080,760		158,666,687

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

CELANESE CORPORATION AND SUBSIDIARIES

UNAUDITED INTERIM CONSOLIDATED STATEMENTS OF

COMPREHENSIVE INCOME (LOSS)



	Three Months Ended
	March 31,
	2012	2011
	(In $ millions)
Net earnings (loss)	183	142
Other comprehensive income (loss), net of tax
Unrealized gain (loss) on marketable securities	—	—
Foreign currency translation	26	58
Unrealized gain (loss) on interest rate swaps	1	9
Pension and postretirement benefits	6	3
Total other comprehensive income (loss), net of tax	33	70
Total comprehensive income (loss), net of tax	216	212
Comprehensive (income) loss attributable to noncontrolling interests	—	—
Comprehensive income (loss) attributable to Celanese Corporation	216	212

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

CELANESE CORPORATION AND SUBSIDIARIES

UNAUDITED CONSOLIDATED BALANCE SHEETS



	As of		As of
	March 31, 2012		December 31, 2011
	(In $ millions, except share data)
ASSETS
Current assets
Cash and cash equivalents	727		682
Trade receivables - third party and affiliates (net of allowance for doubtful accounts - 2012: $9; 2011: $9)	928		871
Non-trade receivables, net	207		235
Inventories	753		712
Deferred income taxes	104		104
Marketable securities, at fair value	63		64
Other assets	35		35
Total current assets	2,817		2,703
Investments in affiliates	762		824
Property, plant and equipment (net of accumulated depreciation - 2012: $1,375; 2011: $1,316)	3,329		3,269
Deferred income taxes	562		421
Other assets	368		344
Goodwill	783		760
Intangible assets, net	202		197
Total assets	8,823		8,518
LIABILITIES AND EQUITY
Current liabilities
Short-term borrowings and current installments of long-term debt - third party and affiliates	155		144
Trade payables - third party and affiliates	758		673
Other liabilities	517		539
Deferred income taxes	19		17
Income taxes payable	22		12
Total current liabilities	1,471		1,385
Long-term debt	2,875		2,873
Deferred income taxes	138		92
Uncertain tax positions	176		182
Benefit obligations	1,435		1,492
Other liabilities	1,187		1,153
Commitments and contingencies
Stockholders’ equity
Preferred stock, $0.01 par value, 100,000,000 shares authorized (2012 and 2011: 0 issued and outstanding)	—		—
Series A common stock, $0.0001 par value, 400,000,000 shares authorized (2012: 179,741,924 issued and 156,375,729 outstanding; 2011: 179,385,105 issued and 156,463,811 outstanding)	—		—
Series B common stock, $0.0001 par value, 100,000,000 shares authorized (2012 and 2011: 0 issued and outstanding)	—		—
Treasury stock, at cost (2012: 23,366,195 shares; 2011: 22,921,294 shares)	(880	)	(860	)
Additional paid-in capital	641		627
Retained earnings	2,597		2,424
Accumulated other comprehensive income (loss), net	(817	)	(850	)
Total Celanese Corporation stockholders’ equity	1,541		1,341
Noncontrolling interests	—		—
Total equity	1,541		1,341
Total liabilities and equity	8,823		8,518

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

CELANESE CORPORATION AND SUBSIDIARIES

UNAUDITED INTERIM CONSOLIDATED STATEMENT OF EQUITY



	Three Months Ended
	March 31, 2012
	Shares		Amount
	(In $ millions, except share data)
Series A common stock
Balance as of the beginning of the period	156,463,811		—
Stock option exercises	341,655		—
Purchases of treasury stock	(444,901	)	—
Stock awards	15,164		—
Balance as of the end of the period	156,375,729		—
Treasury stock
Balance as of the beginning of the period	22,921,294		(860	)
Purchases of treasury stock, including related fees	444,901		(20	)
Balance as of the end of the period	23,366,195		(880	)
Additional paid-in capital
Balance as of the beginning of the period			627
Stock-based compensation, net of tax			8
Stock option exercises, net of tax			6
Balance as of the end of the period			641
Retained earnings
Balance as of the beginning of the period			2,424
Net earnings (loss) attributable to Celanese Corporation			183
Series A common stock dividends			(10	)
Balance as of the end of the period			2,597
Accumulated other comprehensive income (loss), net
Balance as of the beginning of the period			(850	)
Other comprehensive income (loss)			33
Balance as of the end of the period			(817	)
Total Celanese Corporation stockholders’ equity			1,541
Noncontrolling interests
Balance as of the beginning of the period			—
Net earnings (loss) attributable to noncontrolling interests			—
Balance as of the end of the period			—
Total equity			1,541

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

CELANESE CORPORATION AND SUBSIDIARIES

UNAUDITED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS



	Three Months Ended
	March 31,
	2012		2011
	(In $ millions)
Operating activities
Net earnings (loss)	183		142
Adjustments to reconcile net earnings (loss) to net cash provided by operating activities
Other charges (gains), net of amounts used	(4	)	(9	)
Depreciation, amortization and accretion	77		75
Deferred income taxes, net	(94	)	(2	)
(Gain) loss on disposition of businesses and assets, net	—		—
Refinancing expense	—		—
Other, net	72		38
Operating cash provided by (used in) discontinued operations	—		(2	)
Changes in operating assets and liabilities
Trade receivables - third party and affiliates, net	(47	)	(108	)
Inventories	(32	)	(60	)
Other assets	19		(18	)
Trade payables - third party and affiliates	123		75
Other liabilities	(82	)	1
Net cash provided by (used in) operating activities	215		132
Investing activities
Capital expenditures on property, plant and equipment	(106	)	(77	)
Acquisitions, net of cash acquired	(23	)	(8	)
Proceeds from sale of businesses and assets, net	—		4
Deferred proceeds from Ticona Kelsterbach plant relocation	—		—
Capital expenditures related to Ticona Kelsterbach plant relocation	(21	)	(54	)
Other, net	(5	)	(16	)
Net cash provided by (used in) investing activities	(155	)	(151	)
Financing activities
Short-term borrowings (repayments), net	10		(5	)
Proceeds from long-term debt	—		11
Repayments of long-term debt	(8	)	(9	)
Refinancing costs	—		—
Purchases of treasury stock, including related fees	(20	)	(3	)
Stock option exercises	7		5
Series A common stock dividends	(10	)	(8	)
Preferred stock dividends	—		—
Other, net	—		(2	)
Net cash provided by (used in) financing activities	(21	)	(11	)
Exchange rate effects on cash and cash equivalents	6		12
Net increase (decrease) in cash and cash equivalents	45		(18	)
Cash and cash equivalents as of beginning of period	682		740
Cash and cash equivalents as of end of period	727		722

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

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, 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 months ended March 31, 2012 and 2011 contained in this Quarterly Report on Form 10-Q (“Quarterly Report”) were prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) for all periods presented. The unaudited interim consolidated financial statements and other financial information included in this Quarterly Report, unless otherwise specified, have been presented to separately show the effects of discontinued operations.

In the opinion of management, the accompanying unaudited consolidated balance sheets and related unaudited interim consolidated statements of operations, comprehensive income (loss), cash flows and equity include all adjustments, consisting only of normal recurring items necessary for their fair presentation in conformity with US GAAP. Certain information and footnote disclosures normally included in financial statements prepared in accordance with US GAAP have been condensed or omitted in accordance with rules and regulations of the Securities and Exchange Commission (“SEC”). These unaudited interim consolidated financial statements should be read in conjunction with the Company’s consolidated financial statements as of and for the year ended December 31, 2011, filed on February 10, 2012 with the SEC as part of the Company’s Annual Report on Form 10-K.

Operating results for the three months ended March 31, 2012 are not necessarily indicative of the results to be expected for the entire year.

In the ordinary course of business, the Company enters into contracts and agreements relative to a number of topics, including acquisitions, dispositions, joint ventures, supply agreements, product sales and other arrangements. The Company endeavors to describe those contracts or agreements that are material to its business, results of operations or financial position. The Company may also describe some arrangements that are not material but in which the Company believes investors may have an interest or which may have been included in a Form 8-K filing. Investors should not assume the Company has described all contracts and agreements relative to the Company’s business in this Quarterly Report.

For those consolidated subsidiaries in which the Company's ownership is less than 100%, the outside stockholders' interests are shown as noncontrolling interests.

The Company has reclassified certain prior period amounts to conform to the current period’s presentation.

Estimates and Assumptions

The preparation of unaudited interim consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the unaudited interim consolidated financial statements and the reported amounts of revenues, expenses and allocated charges during the reporting period. Significant estimates pertain to impairments of goodwill, intangible assets and other long-lived assets, purchase price allocations, restructuring costs and other (charges) gains, net, income taxes, pension and other postretirement benefits, asset retirement obligations, environmental liabilities and loss contingencies, among others. Actual results could differ from those estimates.

2. Recent Accounting Pronouncements

None.

3. Acquisitions, Dispositions, Ventures and Plant Closures

Acquisitions

On January 3, 2012, the Company completed the acquisition of certain assets from Ashland Inc., including two product lines, Vinac^® and Flexbond^®, which will support the strategic growth of the Company's Emulsions business (Note 6). In February 2011, the Company acquired a business primarily consisting of emulsions process technology from Crown Paints Limited. Both of the acquired operations are included in the Industrial Specialties segment. Pro forma financial information since the respective acquisition dates has not been provided as the acquisitions did not have a material impact on the Company’s financial information.

The Company allocated the purchase price of the acquisitions to identifiable intangible assets acquired based on their estimated fair values. The excess of purchase price over the aggregate fair values was recorded as goodwill. Intangible assets were valued using the relief from royalty and discounted cash flow methodologies which are considered Level 3 measurements under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 820, Fair Value Measurement (“FASB ASC Topic 820”). The relief from royalty method estimates the Company’s theoretical royalty savings from ownership of the intangible asset. Key assumptions used in this model include discount rates, royalty rates, growth rates, sales projections and terminal value rates, all of which require significant management judgment and, therefore, are susceptible to change. The key assumptions used in the discounted cash flow valuation model include discount rates, growth rates, cash flow projections and terminal value rates. Discount rates, growth rates and cash flow projections are the most sensitive and susceptible to change as they require significant management judgment. The Company, with the assistance of third-party valuation consultants, calculated the fair value of the intangible assets acquired to allocate the purchase price at the respective acquisition date.

Plant Closures

• Spondon, Derby, United Kingdom

In August 2010, the Company announced it would consolidate its global acetate manufacturing capabilities by closing its acetate flake and tow manufacturing operations in Spondon, Derby, United Kingdom (Note 13). The Company expects to serve its acetate customers under this proposal by optimizing its global production network, which includes facilities in Lanaken, Belgium; Narrows, Virginia; and Ocotlan, Mexico, as well as the Company's acetate affiliate facilities in China. The Company expects the closure of the acetate flake and tow manufacturing operations in Spondon, Derby, United Kingdom to occur during the second half of 2012. The Spondon, Derby, United Kingdom operations are included in the Consumer Specialties segment.

• Pardies, France

In July 2009, the Company completed the consultation process with the workers council on its “Project of Closure” and social plan related to the Company’s Pardies, France facility pursuant to which the Company ceased all manufacturing operations and associated activities in December 2009 (Note 13). The Pardies, France operations are included in the Acetyl Intermediates segment.

4. Marketable Securities, at Fair Value

The Company’s captive insurance companies and nonqualified trusts hold available-for-sale securities for capitalization and funding requirements, respectively.

The amortized cost, gross unrealized gain, gross unrealized loss and fair values for available-for-sale securities by major security type are as follows:



	Amortized Cost	Gross Unrealized Gain	Gross Unrealized Loss	Fair Value
	(In $ millions)
Mutual funds	63	—	—	63
As of March 31, 2012	63	—	—	63

Mutual funds	64	—	—	64
As of December 31, 2011	64	—	—	64

See Note 16, Fair Value Measurements, for additional information regarding the fair value of the Company's marketable securities.

5. Inventories



	As of	As of
	March 31, 2012	December 31, 2011
	(In $ millions)
Finished goods	549	511
Work-in-process	36	38
Raw materials and supplies	168	163
Total	753	712

6. Goodwill and Intangible Assets, Net

Goodwill



	Advanced Engineered Materials	Consumer Specialties	Industrial Specialties	Acetyl Intermediates	Total
	(In $ millions)
As of December 31, 2011
Goodwill	294	246	35	185	760
Accumulated impairment losses	—	—	—	—	—
Net book value	294	246	35	185	760
Acquisitions (Note 3)	—	—	8	—	8
Exchange rate changes	4	4	—	7	15
As of March 31, 2012
Goodwill	298	250	43	192	783
Accumulated impairment losses	—	—	—	—	—
Net book value	298	250	43	192	783

The Company assesses the recoverability of the carrying value of its reporting unit goodwill 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.

Intangible Assets, Net

Finite-lived intangibles are as follows:



	Licenses		Customer- Related Intangible Assets		Developed Technology		Covenants Not to Compete and Other		Total
	(In $ millions)
Gross Asset Value
As of December 31, 2011	32		513		27		22		594
Acquisitions (Note 3)	—		4		3		6		13		⁽¹⁾
Exchange rate changes	—		13		—		—		13
As of March 31, 2012	32		530		30		28		620

Accumulated Amortization
As of December 31, 2011	(13	)	(433	)	(14	)	(18	)	(478	)
Amortization	(1	)	(10	)	(1	)	(1	)	(13	)
Exchange rate changes	—		(11	)	—		(1	)	(12	)
As of March 31, 2012	(14	)	(454	)	(15	)	(20	)	(503	)
Net book value	18		76		15		8		117

______________________________


⁽¹⁾	Weighted average amortization period of intangible assets acquired was 6 years.

Indefinite-lived intangibles are as follows:



	Trademarks and Trade Names
	(In $ millions)
As of December 31, 2011	81
Acquisitions (Note 3)	2
Exchange rate changes	2
As of March 31, 2012	85

The Company’s trademarks and trade names have an indefinite life. Accordingly, no amortization expense is recorded on these intangible assets. For the three months ended March 31, 2012, the Company did not renew or extend any intangible assets.

Estimated amortization expense for the succeeding five fiscal years is as follows:



	(In $ millions)
2013	32
2014	21
2015	10
2016	7
2017	6

7. Current Other Liabilities



	As of	As of
	March 31, 2012	December 31, 2011
	(In $ millions)
Salaries and benefits	75	101
Environmental (Note 11)	20	25
Restructuring (Note 13)	41	44
Insurance	17	19
Asset retirement obligations	27	22
Derivatives (Note 15)	23	26
Current portion of benefit obligations	47	47
Interest	43	25
Sales and use tax/foreign withholding tax payable	18	16
Uncertain tax positions	73	70
Other	133	144
Total	517	539

8. Noncurrent Other Liabilities



	As of	As of
	March 31, 2012	December 31, 2011
	(In $ millions)
Environmental (Note 11)	76	71
Insurance	67	64
Deferred revenue	39	40
Deferred proceeds⁽¹⁾	920	892
Asset retirement obligations	38	42
Derivatives (Note 15)	9	13
Income taxes payable	3	2
Other	35	29
Total	1,187	1,153

______________________________


⁽¹⁾	Primarily relates to proceeds received from the Frankfurt, Germany Airport as part of a settlement for the Company to relocate its Kelsterbach, Germany Ticona operations, included in the Advanced Engineered Materials segment, to a new site (Note 20). Such proceeds will be deferred until the transfer of title to the Frankfurt, Germany Airport.

9. Debt



	As of	As of
	March 31, 2012	December 31, 2011
	(In $ millions)
Short-term borrowings and current installments of long-term debt - third party and affiliates
Current installments of long-term debt	39	38
Short-term borrowings, including amounts due to affiliates	116	106
Total	155	144

The Company's weighted average interest rate on short-term borrowings, including amounts due to affiliates, was 4.0% as of March 31, 2012 compared to 4.3% as of December 31, 2011.



	As of		As of
	March 31, 2012		December 31, 2011
	(In $ millions)
Long-term debt
Senior credit facilities
Term C loan facility due 2016	1,391		1,386
Senior unsecured notes due 2018, interest rate of 6.625%	600		600
Senior unsecured notes due 2021, interest rate of 5.875%	400		400
Pollution control and industrial revenue bonds, interest rates ranging from 5.7% to 6.7%, due at various dates through 2030	182		182
Obligations under capital leases due at various dates through 2054	248		248
Other bank obligations, interest rates ranging from 6.3% to 6.7%, due at various dates through 2017	93		95
Subtotal	2,914		2,911
Current installments of long-term debt	(39	)	(38	)
Total	2,875		2,873

Senior Notes

In September 2010, Celanese US completed the private placement of $600 million in aggregate principal amount of 6.625% senior unsecured notes due 2018 (the “6.625% Notes”) under an indenture dated September 24, 2010 (the “Indenture”) among Celanese US, Celanese, the Subsidiary Guarantors and Wells Fargo Bank, National Association, as trustee. In April 2011, Celanese US registered the 6.625% Notes under the Securities Act of 1933, as amended (the "Securities Act"). Celanese US pays interest on the 6.625% Notes on April 15 and October 15 of each year which commenced on April 15, 2011. The 6.625% Notes are redeemable, in whole or in part, at any time on or after October 15, 2014 at the redemption prices specified in the Indenture. Prior to October 15, 2014, Celanese US may redeem some or all of the 6.625% Notes at a redemption price of 100% of the principal amount, plus accrued and unpaid interest, if any, to the redemption date, plus a “make-whole” premium as specified in the Indenture. The 6.625% Notes are senior unsecured obligations of Celanese US and rank equally in right of payment with all other unsubordinated indebtedness of Celanese US. The 6.625% Notes are guaranteed on a senior unsecured basis by Celanese and each of the domestic subsidiaries of Celanese US that guarantee its obligations under its senior secured credit facilities (the “Subsidiary Guarantors”).

The Indenture contains covenants, including, but not limited to, restrictions on the Company’s ability to incur indebtedness; grant liens on assets; merge, consolidate, or sell assets; pay dividends or make other restricted payments; engage in transactions with affiliates; or engage in other businesses.

In May 2011, Celanese US completed an offering of $400 million in aggregate principal amount of 5.875% senior unsecured notes due 2021 (the “5.875% Notes”) in a public offering registered under the Securities Act. The 5.875% Notes are guaranteed on a senior unsecured basis by Celanese and the Subsidiary Guarantors.

The 5.875% Notes were issued under an indenture and a first supplemental indenture, each dated May 6, 2011 (the “First Supplemental Indenture”) among Celanese US, Celanese, the Subsidiary Guarantors and Wells Fargo Bank, National Association, as trustee. Celanese US pays interest on the 5.875% Notes on June 15 and December 15 of each year which commenced on December 15, 2011. Prior to June 15, 2021, Celanese US may redeem some or all of the 5.875% Notes at a redemption price of 100% of the principal amount, plus accrued and unpaid interest, if any, to the redemption date, plus a “make-whole” premium as specified in the First Supplemental Indenture. The 5.875% Notes are senior unsecured obligations of Celanese US and rank equally in right of payment with all other unsubordinated indebtedness of Celanese US.

The First Supplemental Indenture contains covenants, including, but not limited to, restrictions on the Company’s ability to incur indebtedness; grant liens on assets; merge, consolidate, or sell assets; pay dividends or make other restricted payments; engage in transactions with affiliates; or engage in other businesses.

Senior Credit Facilities

In September 2010, Celanese US, Celanese, and certain of the domestic subsidiaries of Celanese US entered into an amendment agreement (the “Amendment Agreement”) with the lenders under Celanese US’s existing senior secured credit facilities in order to amend and restate the corresponding Credit Agreement, dated as of April 2, 2007 (as previously amended, the “Existing Credit Agreement”, and as amended and restated by the Amendment Agreement, the “Amended Credit Agreement”). Our Amended Credit Agreement consists of the Term C loan facility, the Term B loan facility, a $600 million revolving credit facility terminating in 2015 and a $228 million credit-linked revolving facility terminating in 2014.

In May 2011, Celanese US, through its subsidiaries, prepaid its outstanding Term B loan facility under the Amendment Agreement set to mature in 2014 with an aggregate principal amount of $516 million using proceeds from the 5.875% Notes and cash on hand.

Borrowings under the Amended Credit Agreement bear interest at a variable interest rate based on LIBOR (for US dollars) or EURIBOR (for Euros), or, for US dollar-denominated loans under certain circumstances, a base rate, in each case plus a margin. The margin may increase or decrease 0.25% based on the following:



	Estimated Margin as of		Estimated Margin		Estimated Total Net Leverage Ratio as of
	Estimated Margin as of		Decreases .25%	Increases .25%	Estimated Total Net Leverage Ratio as of
	March 31, 2012		If the Estimated Total Net Leverage is:		March 31, 2012
Credit-linked revolving facility	1.50	%	not applicable	> 2.25:1.00	1.56
Term C	2.75	%	< = 1.75:1.00	> 2.25:1.00	1.56

The margin for borrowings under the revolving credit facility is currently 2.5% above LIBOR or EURIBOR, as applicable, subject to increase or reduction in certain circumstances based on changes in the Company’s corporate credit ratings. Term loan borrowings under the Amended Credit Agreement are subject to amortization at 1% of the initial principal amount per annum, payable quarterly. In addition, the Company pays quarterly commitment fees on the unused portions of the revolving credit facility and credit-linked revolving facility of 0.25% and 1.50% per annum, respectively.

The Amended Credit Agreement is guaranteed by Celanese and certain domestic subsidiaries of Celanese US and is secured by a lien on substantially all assets of Celanese US and such guarantors, subject to certain agreed exceptions (including for certain real property and certain shares of foreign subsidiaries), pursuant to the Guarantee and Collateral Agreement, dated as of April 2, 2007.

As a condition to borrowing funds or requesting letters of credit be issued under the revolving facility, the Company’s first lien senior secured leverage ratio (as calculated as of the last day of the most recent fiscal quarter for which financial statements have been delivered under the revolving facility) cannot exceed the threshold as specified below. Further, the Company’s first lien senior secured leverage ratio must be maintained at or below that threshold while any amounts are outstanding under the revolving credit facility.

The Company’s first lien senior secured leverage ratios and the borrowing capacity under the revolving credit facility are as follows:



	As of March 31, 2012
			Estimate, if Fully	Borrowing
	Maximum	Estimate	Drawn	Capacity
				(In $ millions)
First lien senior secured leverage ratios	3.90 to 1.00	1.07 to 1.00	1.52 to 1.00	600

The balances available for borrowing are as follows:



	As of
	March 31, 2012
	(In $ millions)
Revolving credit facility
Borrowings outstanding	—
Letters of credit issued	—
Available for borrowing	600
Credit-linked revolving facility
Letters of credit issued	74
Available for borrowing	154

The Amended Credit Agreement contains covenants including, but not limited to, restrictions on the Company’s ability to incur indebtedness; grant liens on assets; merge, consolidate, or sell assets; pay dividends or make other restricted payments; make investments; prepay or modify certain indebtedness; engage in transactions with affiliates; enter into sale-leaseback transactions or hedge transactions; or engage in other businesses.

The Amended Credit Agreement also maintains a number of events of default, including a failure to make any payment of principal or interest when due, a cross default to other debt of Celanese, Celanese US, or their subsidiaries, including the 6.625% Notes and 5.875% Notes, in an aggregate amount equal to more than $40 million and the occurrence of a change of control. Failure to comply with these covenants, or the occurrence of any other event of default, could result in acceleration of the borrowings and other financial obligations under the Amended Credit Agreement.

The Company is in compliance with all of the covenants related to its debt agreements as of March 31, 2012.

10. Benefit Obligations

The components of net periodic benefit costs are as follows:



	Pension Benefits				Postretirement Benefits
	Three Months Ended March 31,
	2012		2011		2012	2011
	(In $ millions)
Service cost	7		7		—	—
Interest cost	43		46		3	4
Expected return on plan assets	(51	)	(50	)	—	—
Recognized actuarial (gain) loss	14		7		—	(1	)
Prior service credit	—		—		—	—
Curtailment (gain) loss	—		(1	)	—	—
Total	13		9		3	3

Commitments to fund benefit obligations during 2012 are as follows:



	As of	Expected for
	March 31, 2012	2012
	(In $ millions)
Cash contributions to defined benefit pension plans	56	160
Benefit payments from nonqualified trusts related to nonqualified pension plans	4	15
Benefit payments to other postretirement benefit plans	7	25

The Company’s estimates of its US defined benefit pension plan contributions reflect the provisions of the Pension Protection Act of 2006.

The Company participates in a multiemployer defined benefit plan in Germany covering certain employees. The Company’s contributions to the multiemployer defined benefit plan are based on specified percentages of employee contributions and totaled $1 million for the three months ended March 31, 2012.

11. Environmental

General

The Company is subject to environmental laws and regulations worldwide that impose limitations on the discharge of pollutants into the air and water and establish standards for the treatment, storage and disposal of solid and hazardous wastes. The Company believes that it is in substantial compliance with all applicable environmental laws and regulations. The Company is also subject to retained environmental obligations specified in various contractual agreements arising from the divestiture of certain businesses by the Company or one of its predecessor companies.

The components of environmental remediation reserves are as follows:



	As of	As of
	March 31, 2012	December 31, 2011
	(In $ millions)
Demerger obligations (Note 17)	34	34
Divestiture obligations (Note 17)	23	24
Active sites	21	20
US Superfund sites	14	14
Other environmental remediation reserves	4	4
Total	96	96

Remediation

Due to its industrial history and through retained contractual and legal obligations, the Company has the obligation to remediate specific areas on its own sites as well as on divested, orphan or US Superfund sites (as defined below). In addition, as part of the demerger agreement between the Company and Hoechst AG (“Hoechst”), a specified portion of the responsibility for environmental liabilities from a number of Hoechst divestitures was transferred to the Company (Note 17). The Company provides for such obligations when the event of loss is probable and reasonably estimable. The Company believes that environmental remediation costs will not have a material adverse effect on the financial position of the Company, but may have a material adverse effect on the results of operations or cash flows in any given period.

US Superfund Sites

In the US, the Company may be subject to substantial claims brought by US federal or state regulatory agencies or private individuals pursuant to statutory authority or common law. In particular, the Company has a potential liability under the US Federal Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, and related state laws (collectively referred to as “Superfund”) for investigation and cleanup costs at certain sites. At most of these sites, numerous companies, including the Company, or one of its predecessor companies, have been notified that the Environmental Protection Agency, state governing bodies or private individuals consider such companies to be potentially responsible parties (“PRP”) under Superfund or related laws. The proceedings relating to these sites are in various stages. The cleanup process has not been completed at most sites and the status of the insurance coverage for some of these proceedings is uncertain. Consequently, the Company cannot accurately determine its ultimate liability for investigation or cleanup costs at these sites.

As events progress at each site for which it has been named a PRP, the Company accrues, as appropriate, a liability for site cleanup. Such liabilities include all costs that are probable and can be reasonably estimated. In establishing these liabilities, the Company considers its shipment of waste to a site, its percentage of total waste shipped to the site, the types of wastes involved, the conclusions of any studies, the magnitude of any remedial actions that may be necessary and the number and viability of other PRPs. Often the Company joins with other PRPs to sign joint defense agreements that settle, among PRPs, each party’s percentage allocation of costs at the site. Although the ultimate liability may differ from the estimate, the Company routinely reviews the liabilities and revises the estimate, as appropriate, based on the most current information available.

One such site is the Lower Passaic River Study Area. The Company and 70 other companies are parties to a May 2007 Administrative Order on Consent with the US Environmental Protection Agency (“EPA”) to perform a Remedial Investigation/Feasibility Study (“RI/FS”) of the contaminants in the lower 17-mile stretch known as the Lower Passaic River Study Area. The RI/FS is ongoing and may take several more years to complete. The Company has also been named as a third-party defendant along with more than 200 other entities in an action initially brought by the New Jersey Department of Environmental Protection (“NJDEP”) in the Supreme Court of New Jersey against Occidental Chemical Corporation and several other companies. This suit by the NJDEP seeks recovery of past and future clean-up costs, as well as unspecified economic damages, punitive damages, penalties and a variety of other forms of relief arising from alleged discharges into the Lower Passaic River.

In 2007, the EPA issued a draft study that evaluated alternatives for early remedial action of a portion of the Passaic River at an estimated cost of $900 million to $2.3 billion. Several parties commented on the draft study, and to date, the EPA has not taken further action. The contamination allegedly released by the Company is likely an insignificant aspect of the final remedy, which would consequently limit the ultimate contribution from the Company. Because the RI/FS is still ongoing, and the EPA has not finalized its study or the scope of requested cleanup, and the Company's assessment that the contamination allegedly released by the Company is likely an insignificant aspect of the final remedy, the Company cannot reliably estimate its portion of the final remedial costs for this matter at this time. However, the Company currently believes that its portion of the costs would be less than approximately 1% to 2%. The Company is vigorously defending these and all related matters.

12. Stockholders’ Equity

Common Stock

The Company’s Board of Directors follows a policy of declaring, subject to legally available funds, a quarterly cash dividend on each share of the Company’s Series A Common Stock, par value $0.0001 per share ("Common Stock") unless the Company’s Board of Directors, in its sole discretion, determines otherwise. The amount available to pay cash dividends is restricted by the Company’s Amended Credit Agreement, the 6.625% Notes and the 5.875% Notes.

In April 2011, the Company announced that its Board of Directors approved a 20% increase in the Company’s quarterly Common Stock cash dividend. The Board of Directors increased the quarterly dividend rate from $0.05 to $0.06 per share of Common Stock on a quarterly basis and $0.20 to $0.24 per share of Common Stock on an annual basis beginning in August 2011.

Treasury Stock

The Company’s Board of Directors authorized the repurchase of the Common Stock as follows:



Date of Board Authorization	As of
Date of Board Authorization	March 31, 2012
	(In $ millions)
February 2008	400
October 2008	100
April 2011	129
Total	629

The authorization gives management discretion in determining the timing and conditions under which shares may be repurchased. The share repurchase activity pursuant to this authorization is as follows:



	Three Months Ended				Total From February 2008 Through
	March 31,				Total From February 2008 Through
	2012		2011		March 31, 2012
Shares repurchased	444,901		69,400		12,527,709
Average purchase price per share	$	46.34	$	43.42	$	38.07
Amount spent on repurchased shares (in millions)	$	20	$	3	$	476

The purchase of treasury stock reduces the number of shares outstanding and the repurchased shares may be used by the Company for compensation programs utilizing the Company’s stock and other corporate purposes. The Company accounts for treasury stock using the cost method and includes treasury stock as a component of stockholders’ equity.

Other Comprehensive Income (Loss), Net



	Three Months Ended March 31,
	2012				2011
	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	26	—		26	58	—		58
Unrealized gain (loss) on interest rate swaps	2	(1	)	1	14	(5	)	9
Pension and postretirement benefits	12	(6	)	6	6	(3	)	3
Total	40	(7	)	33	78	(8	)	70

Adjustments to Accumulated other comprehensive income (loss) are as follows:



	Unrealized Gain (Loss) on Marketable Securities		Foreign Currency Translation		Unrealized Gain (Loss) on Interest Rate Swaps		Pension and Postretire- ment Benefits		Accumulated Other Comprehensive Income (Loss), Net
	(In $ millions)
As of December 31, 2011	(1	)	(28	)	(57	)	(764	)	(850	)
Current period change	—		26		2		12		40
Income tax (provision) benefit	—		—		(1	)	(6	)	(7	)
As of March 31, 2012	(1	)	(2	)	(56	)	(758	)	(817	)

13. Other (Charges) Gains, Net



	Three Months Ended
	March 31,
	2012	2011
	(In $ millions)
Employee termination benefits	—	(4	)
Ticona Kelsterbach plant relocation (Note 20)	—	(13	)
Commercial disputes	—	20
Total	—	3

2012

No significant Other (charges) gains, net were incurred during the three months ended March 31, 2012.

2011

As a result of the Company's Pardies, France Project of Closure and the planned closure of the Company's Spondon, Derby, United Kingdom facility (Note 3), the Company recorded $1 million and $2 million, respectively, of employee termination benefits during the three months ended March 31, 2011. The Pardies, France facility is included in the Acetyl Intermediates segment.

During March 2011, the Company received consideration of $16 million in connection with the settlement of a claim against a bankrupt supplier. In addition, the Company also recovered an additional $3 million from the settlement of an unrelated commercial dispute. These commercial dispute resolutions are included in the Acetyl Intermediates segment.

The changes in the restructuring reserves by business segment are as follows:



	Advanced Engineered Materials		Consumer Specialties	Industrial Specialties	Acetyl Intermediates		Other		Total
	(In $ millions)
Employee Termination Benefits
As of December 31, 2011	8		18	—	5		11		42
Additions	—		1	—	—		—		1
Cash payments	(1	)	—	—	(1	)	(1	)	(3	)
Other changes	—		—	—	—		(1	)	(1	)
Exchange rate changes	—		1	—	—		—		1
As of March 31, 2012	7		20	—	4		9		40

Plant/Office Closures
As of December 31, 2011	—		—	—	1		1		2
Additions	—		—	—	—		—		—
Cash payments	—		—	—	—		—		—
Other changes	—		—	—	—		(1	)	(1	)
Exchange rate changes	—		—	—	—		—		—
As of March 31, 2012	—		—	—	1		—		1
Total	7		20	—	5		9		41

14. Income Taxes



	Three Months Ended
	March 31,
	2012		2011
Effective income tax rate	(71	)%	23	%

The lower effective rate for the three months ended March 31, 2012 is primarily due to foreign tax credit carryforwards partially offset by deferred tax charges related to changes in assessment regarding permanent reinvestment of certain foreign earnings.

During the three months ended March 31, 2012, the Company determined that it was beneficial to amend certain prior year income tax returns to recognize the benefit of available foreign tax credit carryforwards. As a result, the Company recognized a tax benefit of $142 million. The available foreign tax credits are subject to a ten year carryforward period and begin to expire in 2014. The Company expects to fully utilize the credits within the prescribed carryforward period.

On February 15, 2012, the Company amended its existing joint venture and other related agreements with its venture partner in Polyplastics Co., Ltd (“Polyplastics”). The amended agreements (“Agreements”), among other items, modified certain dividend rights, resulting in a cash dividend payment to the Company of $72 million during the three months ended March 31, 2012. In addition, as a result of the Agreements, Polyplastics is required to pay certain annual dividends to the venture partners. Consequently, Polyplastics' undistributed earnings will no longer be invested indefinitely. Accordingly, the Company recognized a deferred tax liability of $38 million that was recorded to Income tax provision (benefit) in the unaudited interim consolidated statement of operations during the three months ended March 31, 2012, related to the taxable outside basis difference of its investment in Polyplastics.

Subsequent to the execution of the Agreements during the three months ended March 31, 2012, the Company recorded a further net increase of $5 million to the deferred tax liability related to its investment in Polyplastics, comprised of $9 million recorded to Income tax provision (benefit) in the unaudited interim consolidated statement of operations partially offset by $4 million recorded to Foreign currency translation in the unaudited interim consolidated statement of comprehensive income (loss).

Liabilities for uncertain tax positions and related interest and penalties are recorded in Uncertain tax positions and current Other liabilities in the unaudited consolidated balance sheets. For the three months ended March 31, 2012, the total unrecognized tax benefits, interest and penalties related to uncertain tax positions decreased by $15 million for interest and changes in uncertain tax positions in US and foreign jurisdictions, and increased $6 million due to exchange rate changes.

The Company's US tax returns for the years 2009 and 2010 are currently under audit by the US Internal Revenue Service and certain of the Company's subsidiaries are under audit in jurisdictions outside of the US. In addition, certain statutes of limitations are scheduled to expire in the near future. It is reasonably possible that a further change in the unrecognized tax benefits may occur within the next twelve months related to the settlement of any of these audits or the lapse of applicable statutes of limitations. Such amounts have been reflected as the current portion of uncertain tax positions (Note 7).

15. Derivative Financial Instruments

Interest Rate Risk Management

To reduce the interest rate risk inherent in the Company’s variable rate debt, the Company utilizes interest rate swap agreements to convert a portion of its variable rate borrowings into a fixed rate obligation. These interest rate swap agreements are designated as cash flow hedges and fix the LIBOR portion of the Company’s US-dollar denominated variable rate borrowings (Note 9). If an interest rate swap agreement is terminated prior to its maturity, the amount previously recorded in Accumulated other comprehensive income (loss), net is recognized into earnings over the period that the hedged transaction impacts earnings. If the hedging relationship is discontinued because it is probable that the forecasted transaction will not occur according to the original strategy, any related amounts previously recorded in Accumulated other comprehensive income (loss), net are recognized into earnings immediately.

US-dollar interest rate swap derivative arrangements are as follows:



As of March 31, 2012
Notional Value	Effective Date	Expiration Date	Fixed Rate ⁽¹⁾
(In $ millions)
1,100	January 2, 2012	January 2, 2014	1.71	%
500	January 2, 2014	January 2, 2016	1.02	%

______________________________


⁽¹⁾	Fixes the LIBOR portion of the Company's US-dollar denominated variable rate borrowings (Note 9).



As of December 31, 2011
Notional Value	Effective Date	Expiration Date	Fixed Rate ⁽¹⁾
(In $ millions)
800	April 2, 2007	January 2, 2012	4.92	%
400	January 2, 2008	January 2, 2012	4.33	%
200	April 2, 2009	January 2, 2012	1.92	%
1,100	January 2, 2012	January 2, 2014	1.71	%

______________________________


⁽¹⁾	Fixes the LIBOR portion of the Company's US-dollar denominated variable rate borrowings (Note 9).

Foreign Exchange Risk Management

Certain subsidiaries have assets and liabilities denominated in currencies other than their respective functional currencies, which creates foreign exchange risk. The Company also enters into foreign currency forwards and swaps to minimize its exposure to foreign currency fluctuations. Through these instruments, the Company mitigates its foreign currency exposure on transactions with third party entities as well as intercompany transactions. The foreign currency forwards and swaps are not designated as hedges under FASB ASC Topic 815, Derivatives and Hedging. Gains and losses on foreign currency forwards and swaps entered into to offset foreign exchange impacts on intercompany balances are classified as Other income (expense), net, in the unaudited interim consolidated statements of operations. Gains and losses on foreign currency forwards and swaps entered into to offset foreign exchange impacts on all other assets and liabilities are classified as Foreign exchange gain (loss), net, in the unaudited interim consolidated statements of operations.

Gross notional values of the foreign currency forwards and swaps are as follows:



	As of	As of
	March 31, 2012	December 31, 2011
	(In $ millions)
Total	888	896

Information regarding changes in the fair value of the Company’s derivative arrangements is as follows:



	Three Months Ended						Three Months Ended
	March 31, 2012						March 31, 2011
	Gain (Loss) Recognized in Other Comprehensive Income (Loss)			Gain (Loss) Recognized in Earnings (Loss)			Gain (Loss) Recognized in Other Comprehensive Income (Loss)			Gain (Loss) Recognized in Earnings (Loss)
	(In $ millions)
Derivatives designated as cash flow hedging instruments
Interest rate swaps	(1	)	⁽¹⁾	(3	)	⁽²⁾	(1	)	⁽³⁾	(16	)	⁽²⁾
Derivatives not designated as hedging instruments
Interest rate swaps	—			—		⁽⁴⁾	—			—		⁽⁴⁾
Foreign currency forwards and swaps	—			(10	)	⁽⁵⁾	—			(12	)	⁽⁵⁾
Total	(1	)		(13	)		(1	)		(28	)

______________________________


⁽¹⁾	Amount excludes $1 million of tax expense recognized in Other comprehensive income (loss).


⁽²⁾	Amount represents reclassification from Accumulated other comprehensive income (loss), net and is included in Interest expense in the unaudited interim consolidated statements of operations.


⁽³⁾	Amount excludes $1 million of losses associated with the Company’s equity method investments’ derivative activity and $5 million of tax expense recognized in Other comprehensive income (loss).


⁽⁴⁾	Included in Interest expense in the unaudited interim consolidated statements of operations.


⁽⁵⁾	Included in Foreign exchange gain (loss), net for operating activity or Other income (expense), net for non-operating activity in the unaudited interim consolidated statements of operations.

See Note 16, Fair Value Measurements, for additional information regarding the fair value of the Company’s derivative arrangements.

16. Fair Value Measurements

The Company follows the provisions of FASB ASC Topic 820 for financial assets and liabilities. FASB ASC Topic 820 establishes a three-tiered fair value hierarchy that prioritizes the inputs used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurement) and the lowest priority to unobservable inputs (Level 3 measurement). This hierarchy requires entities to maximize the use of observable inputs and minimize the use of unobservable inputs. If a financial instrument uses inputs that fall in different levels of the hierarchy, the instrument will be categorized based upon the lowest level of input that is significant to the fair value calculation.

The three levels of inputs are defined as follows:

Level 1 - unadjusted quoted prices for identical assets or liabilities in active markets accessible by the Company

Level 2 - inputs that are observable in the marketplace other than those inputs classified as Level 1

Level 3 - inputs that are unobservable in the marketplace and significant to the valuation

The Company’s financial assets and liabilities are measured at fair value on a recurring basis and include securities available for sale and derivative financial instruments. Securities available for sale include equity securities. Derivative financial instruments include interest rate swaps and foreign currency forwards and swaps.

Marketable Securities. Where possible, the Company utilizes quoted prices in active markets to measure debt and equity securities; such items are classified as Level 1 in the hierarchy and include equity securities and US government bonds. When quoted market prices for identical assets are unavailable, varying valuation techniques are used. Common inputs in valuing these assets include, among others, benchmark yields, issuer spreads and recently reported trades. Such assets are classified as Level 2 in the hierarchy and typically include corporate bonds and other US government securities. Mutual funds are valued at the net asset value per share or unit multiplied by the number of shares or units held as of the measurement date.

Derivatives. Derivative financial instruments are valued in the market using discounted cash flow techniques. These techniques incorporate Level 1 and Level 2 inputs such as interest rates and foreign currency exchange rates. These market inputs are utilized in the discounted cash flow calculation considering the instrument’s term, notional amount, discount rate and credit risk. Significant inputs to the derivative valuation for interest rate swaps and foreign currency forwards and swaps are observable in the active markets and are classified as Level 2 in the hierarchy.

Assets and liabilities measured at fair value on a recurring basis are as follows:



	Fair Value Measurement Using
	Quoted Prices in Active Markets for Identical Assets (Level 1)	Significant Other Observable Inputs (Level 2)		Total
	(In $ millions)
Marketable securities, at fair value
Mutual funds	63	—		63
Derivatives designated as cash flow hedging instruments
Interest rate swaps	—	3		3		⁽¹⁾
Derivatives not designated as hedging instruments
Foreign currency forwards and swaps	—	3		3		⁽²⁾
Total assets as of March 31, 2012	63	6		69
Derivatives designated as cash flow hedging instruments
Interest rate swaps	—	(16	)	(16	)	⁽³⁾
Interest rate swaps	—	(9	)	(9	)	⁽⁴⁾
Derivatives not designated as hedging instruments
Interest rate swaps	—	—		—		⁽³⁾
Foreign currency forwards and swaps	—	(7	)	(7	)	⁽³⁾
Total liabilities as of March 31, 2012	—	(32	)	(32	)
Marketable securities, at fair value
Mutual funds	64	—		64
Derivatives not designated as hedging instruments
Foreign currency forwards and swaps	—	9		9		⁽²⁾
Total assets as of December 31, 2011	64	9		73
Derivatives designated as cash flow hedging instruments
Interest rate swaps	—	(21	)	(21	)	⁽³⁾
Interest rate swaps	—	(13	)	(13	)	⁽⁴⁾
Derivatives not designated as hedging instruments
Interest rate swaps		(2	)	(2	)	⁽³⁾
Foreign currency forwards and swaps	—	(3	)	(3	)	⁽³⁾
Total liabilities as of December 31, 2011	—	(39	)	(39	)

______________________________


⁽¹⁾	Included in noncurrent Other assets in the unaudited consolidated balance sheets.


⁽²⁾	Included in current Other assets in the unaudited consolidated balance sheets.


⁽³⁾	Included in current Other liabilities in the unaudited consolidated balance sheets.


⁽⁴⁾	Included in noncurrent Other liabilities in the unaudited consolidated balance sheets.

Carrying values and fair values of financial instruments that are not carried at fair value are as follows:



		Fair Value Measurement Using
	Carrying Amount	Significant Other Observable Inputs (Level 2)	Unobservable Inputs (Level 3)	Total
		(In $ millions)
As of March 31, 2012
Cost investments	148	—	—	—
Insurance contracts in nonqualified trusts	65	65	—	65
Long-term debt, including current installments of long-term debt	2,914	2,735	248	2,983
As of December 31, 2011
Cost investments	147	—	—	—
Insurance contracts in nonqualified trusts	69	69	—	69
Long-term debt, including current installments of long-term debt	2,911	2,719	248	2,967

In general, the cost investments included in the table above are not publicly traded and their fair values are not readily determinable; however, the Company believes the carrying values approximate or are less than the fair values.

As of March 31, 2012 and December 31, 2011, 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. Additionally, certain noncurrent receivables, principally insurance recoverables, are carried at net realizable value.

The fair value of long-term debt is based on valuations from third-party banks and market quotations.

17. Commitments and Contingencies

The Company is involved in legal and regulatory proceedings, lawsuits and claims incidental to the normal conduct of business, relating to such matters as product liability, land disputes, contracts, antitrust, intellectual property, workers' compensation, chemical exposure, asbestos exposure, prior acquisitions and divestitures, past waste disposal practices and release of chemicals into the environment. The Company is actively defending those matters where the Company is named as a defendant. Due to the inherent subjectivity of assessments and unpredictability of outcomes of legal proceedings, the Company's litigation accruals and estimates of possible loss or range of possible loss (“Possible Loss”) may not represent the ultimate loss to the Company from legal proceedings. For reasonably possible loss contingencies that may be material and when determinable, the Company estimates its Possible Loss, considering that the Company could incur no loss in certain matters. Thus, the Company's exposure and ultimate losses may be higher or lower, and possibly materially so, than the Company's litigation accruals and estimates of Possible Loss. For some matters, the Company is unable, at this time, to estimate its Possible Loss that is reasonably possible of occurring. Generally, the less progress that has been made in the proceedings or the broader the range of potential results, the more difficult for the Company to estimate the Possible Loss that it is reasonably possible the Company could incur. The Company may disclose certain information related to a plaintiff's claim against the Company alleged in the plaintiff's pleadings or otherwise publicly available. While information of this type may provide insight into the potential magnitude of a matter, it does not necessarily represent the Company's estimate of reasonably possible or probable loss. Some of the Company's exposure in legal matters may be offset by applicable insurance coverage. The Company does not consider the possible availability of insurance coverage in determining the amounts of any accruals or any estimates of Possible Loss.

Plumbing Actions

CNA Holdings LLC (“CNA Holdings”), a US subsidiary of the Company, which included the US business now conducted by the Ticona business that is included in the Advanced Engineered Materials segment, along with Shell Oil Company (“Shell”), E.I. DuPont de Nemours and Company (“DuPont”) and others, has been a defendant in a series of lawsuits, including a number of class actions, alleging that plastic resins manufactured by these companies that were utilized by others in the production of plumbing systems for residential property were defective for this use and/or contributed to the failure of such plumbing. Based on, among other things, the findings of outside experts and the successful use of Ticona's acetal copolymer in similar applications, CNA Holdings does not believe Ticona's acetal copolymer was defective for this use or contributed to the failure

of the plumbing. In addition, in many cases CNA Holdings' potential future exposure may be limited by, among other things, statutes of limitations and repose.

In November 1995, CNA Holdings, DuPont and Shell entered into national class action settlements in the Cox, et al. v. Hoechst Celanese Corporation, et al., No. 94-0047 (Chancery Ct., Obion County, Tennessee) matter. The time to file claims against the class has expired and the entity established by the court to administer the claims was dissolved in September 2010. In addition between 1995 and 2001, CNA Holdings was named as a defendant in various putative class actions. The majority of these actions have now been dismissed. As a result the Company recorded $59 million in reserve reductions and recoveries from associated insurance indemnifications during 2010. The reserve was further reduced by $4 million during the year ended December 31, 2011 following the dismissal of the remaining US case (St. Croix, Ltd., et al. v. Shell Oil Company d/b/a Shell Chemical Company, Case No. XC-97-CR-467, Virgin Islands Superior Court) which was appealed during the three months ended September 30, 2011.

As of March 31, 2012, the class actions in Canada are subject to a pending class settlement that would result in a dismissal of those cases. The Company does not believe the Possible Loss associated with the remaining matters is material. As of March 31, 2012, the Company did not record any recoveries or reductions in legal reserves related to plumbing actions (Note 13) to Other (charges) gains, net in the unaudited interim consolidated statements of operations.

Polyester Staple Antitrust Litigation

CNA Holdings, the successor in interest to Hoechst Celanese Corporation (“HCC”), Celanese Americas Corporation and Celanese GmbH (collectively, the “Celanese Entities”) and Hoechst, the former parent of HCC, were named as defendants in two actions (involving multiple individual participants) filed in September 2006 by US purchasers of polyester staple fibers manufactured and sold by HCC. The actions alleged that the defendants participated in a conspiracy to fix prices, rig bids and allocate customers of polyester staple sold in the US. These actions were consolidated in a proceeding by a Multi-District Litigation Panel in the US District Court for the Western District of North Carolina styled In re Polyester Staple Antitrust Litigation, MDL 1516. On June 12, 2008 the court dismissed these actions with prejudice against all Celanese Entities in consideration of a payment by the Company. This proceeding related to sales by the polyester staple fibers business which Hoechst sold to KoSa B.V., f/k/a Arteva B.V., a subsidiary of Koch Industries, Inc. (“KoSa”) in 1998. In November 2003, KoSa sought recovery from the Company (Koch Industries, Inc. et al. v. Hoechst Aktiengesellschaft et al., No. 03-cv-8679 Southern District NY) alleging a variety of claims, including indemnification and breach of representations, arising out of the 1998 sale. During the fourth quarter of 2010, the parties settled the case pursuant to a confidential agreement and the case was dismissed with prejudice.

Prior to December 31, 2008, the Company had entered into tolling arrangements with four other alleged US purchasers of polyester staple fibers manufactured and sold by the Celanese Entities. These purchasers were not included in the settlement and one such company filed suit against the Company in December 2008 (Milliken & Company v. CNA Holdings, Inc., Celanese Americas Corporation and Hoechst AG (No. 8-SV-00578 W.D.N.C.)). On September 15, 2011, the case was dismissed with prejudice based on a stipulation and proposed order of voluntary dismissal.

Commercial Actions

In April 2007, Southern Chemical Corporation (“Southern”) filed a petition in the 190th Judicial District Court of Harris County, Texas styled Southern Chemical Corporation v. Celanese Ltd. (Cause No. 2007-25490), seeking declaratory judgment relating to the terms of a multi-year methanol supply contract. The trial court granted the Company's motion for summary judgment in March 2008 dismissing Southern's claims. In September 2009, the intermediate Texas appellate court reversed the trial court decision and remanded the case to the trial court. The Texas Supreme Court subsequently declined both parties' requests that it hear the case. On August 15, 2010, Southern filed a second amended petition adding a claim for breach of contract and seeking equitable damages in an unspecified amount from the Company. Southern amended its complaint again in June, August and November 2011, abandoning its declaratory judgment claim and adding new claims for fraud and tortious interference with a third-party contract. More specifically, Southern now claims the Company “materially misrepresented its intended use of the methanol to be supplied by Southern” and “violated the material terms of the contract and failed to correct these breaches after Southern provided notice.” These alleged breaches include “selling, transferring, swapping or tolling methanol to or with entities other than the Company and to entities or operations outside the U.S. or Mexico.” In the November 2011 complaint, Southern is seeking compensatory damages of $1.3 billion, as well as pre- and post-judgment interest, attorneys' fees and punitive damages equaling two times its actual damages. Southern also is seeking rescission or termination of the contract. Trial has been set for July 17, 2012. The Company is actively defending the matter. The Company believes that Southern's claims lack merit and that its alleged damages are inaccurate and, in any event, grossly inflated. Based on the Company's evaluation of currently available information, including that discovery is ongoing and involves foreign entities, the

plaintiff is seeking relief other than compensatory damages, the matter presents meaningful legal uncertainties (including the applicable damage theory(ies)), and there are significant facts and legal claims in dispute, the Company cannot estimate the Possible Loss for this matter, if any, in excess of immaterial amounts accrued.

Award Proceedings in relation to Domination Agreement and Squeeze-Out

The Company's subsidiary, BCP Holdings GmbH (“BCP Holdings”), a German limited liability company, is a defendant in two special award proceedings initiated by minority stockholders of Celanese GmbH seeking the court's review of the amounts (i) of the fair cash compensation and of the guaranteed dividend offered in the purchaser offer under the 2004 Domination Agreement (the “Domination Agreement”) and (ii) the fair cash compensation paid for the 2006 squeeze-out (“Squeeze-Out”) of all remaining stockholders of Celanese GmbH.

Pursuant to a settlement agreement between BCP Holdings and certain former Celanese GmbH stockholders, if the court sets a higher value for the fair cash compensation or the guaranteed payment under the Domination Agreement or the Squeeze-Out compensation, former Celanese GmbH stockholders who ceased to be stockholders of Celanese GmbH due to the Squeeze-Out will be entitled to claim for their shares the higher of the compensation amounts determined by the court in these different proceedings related to the Domination Agreement and the Squeeze-Out. If the fair cash compensation determined by the court is higher than the Squeeze-Out compensation of €66.99, then 1,069,465 shares will be entitled to an adjustment. If the court determines the value of the fair cash compensation under the Domination Agreement to be lower than the original Squeeze-Out compensation, but determines a higher value for the Squeeze-Out compensation, 924,078 shares would be entitled to an adjustment. Payments already received by these stockholders as compensation for their shares will be offset so that persons who ceased to be stockholders of Celanese GmbH due to the Squeeze-Out are not entitled to more than the higher of the amount set in the two court proceedings.

In September 2011, an expert appointed by the court hearing the Domination Agreement stockholders' claims to assist it in determining the value of Celanese GmbH rendered an opinion. The expert opined that the fair cash compensation for these stockholders (145,387 shares) should be increased from €41.92 to €51.86. This non-binding opinion recommends a total increase in share value to €2 million for those claims under the Domination Agreement. The opinion has no effect on the Squeeze-Out proceeding because the share price recommended is lower than the price those stockholders already received in the Squeeze-Out. However, the opinion also advocates that the guaranteed dividend should be increased from €2.89 to €3.79, aggregating an increase in total guaranteed dividends of €1 million to the Squeeze-Out claimants. The Company evaluated the non-binding opinion of the expert and submitted a written response during the three months ended December 31, 2011. The court then asked the expert to update his opinion. No hearing date has been set. No expert has yet been appointed in the Squeeze-Out proceedings.

For those claims brought under the Domination Agreement, based on the Company's evaluation of currently available information, including the non-binding expert opinion, the fact that the court has asked the expert to update his opinion, and the fact that the court may adopt this new opinion or apply its own (there are legal questions about the applicable valuation method), which could increase or decrease the Company's potential exposure, the Company does not believe that the Possible Loss is material.

For those remaining claims brought by the Squeeze-Out claimants, based on the Company's evaluation of currently available information, including that damages sought are unspecified, unsupported or uncertain, the matter presents meaningful legal uncertainties (including novel issues of law and the applicable valuation method), there are significant facts in dispute and the court has not yet appointed an expert, the Company cannot estimate the Possible Loss, if any, at this time.

Guarantees

The Company has agreed to guarantee or indemnify third parties for environmental and other liabilities pursuant to a variety of agreements, including asset and business divestiture agreements, leases, settlement agreements and various agreements with affiliated companies. Although many of these obligations contain monetary and/or time limitations, others do not provide such limitations.

As indemnification obligations often depend on the occurrence of unpredictable future events, the future costs associated with them cannot be determined at this time.

The Company has accrued for all probable and reasonably estimable losses associated with all known matters or claims that have been brought to its attention. These known obligations include the following:


•	Demerger Obligations

In connection with the Hoechst demerger, the Company agreed to indemnify Hoechst, and its legal successors, for various liabilities under the demerger agreement, including for environmental liabilities associated with contamination arising either from environmental damage in general ("Category A") or under 19 divestiture agreements entered into by Hoechst prior to the demerger ("Category B") (Note 11).

The Company's obligation to indemnify Hoechst, and its legal successors, is capped under Category B at €250 million. If and to the extent the environmental damage should exceed €750 million in aggregate, the Company's obligation to indemnify Hoechst and its legal successors applies, but is then limited to 33.33% of the remediation cost without further limitations. Cumulative payments under the divestiture agreements as of March 31, 2012 are $57 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 or its legal successors.

Based on the Company's evaluation of currently available information, including the lack of requests for indemnification, the Company cannot estimate the Possible Loss for the remaining demerger obligations, if any, in excess of amounts accrued.


•	Divestiture Obligations

The Company and its predecessor companies agreed to indemnify third-party purchasers of former businesses and assets for various pre-closing conditions, as well as for breaches of representations, warranties and covenants. Such liabilities also include environmental liability, product liability, antitrust and other liabilities. These indemnifications and guarantees represent standard contractual terms associated with typical divestiture agreements and, other than environmental liabilities, the Company does not believe that they expose the Company to any significant risk (Note 11).

The Company has divested numerous businesses, investments and facilities through agreements containing indemnifications or guarantees to the purchasers. Many of the obligations contain monetary and/or time limitations, ranging from one year to thirty years. The aggregate amount of outstanding indemnifications and guarantees provided for under these agreements is $197 million as of March 31, 2012. 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.

Purchase Obligations

In the normal course of business, the Company enters into various purchase commitments for goods and services which extend through 2028. The Company maintains a number of “take-or-pay” contracts for purchases of raw materials, utilities and other services. Certain of the contracts contain a contract termination buy-out provision that allows for the Company to exit the contracts for amounts less than the remaining take-or-pay obligations. The Company does not expect to incur any material losses under take-or-pay contractual arrangements. Additionally, the Company has other outstanding commitments representing maintenance and service agreements, energy and utility agreements, consulting contracts and software agreements. As of March 31, 2012, the Company had unconditional purchase obligations of $3.8 billion.

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. 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. Related to these variable interest entities, the Company has $6 million and $135 million of capital lease obligations included in current installments of long-term debt and Long-term debt, respectively, and $117 million of related machinery and equipment included in Property, plant, and equipment, net in the unaudited consolidated balance sheet as of March 31, 2012. The Company's maximum exposure to loss as a result of its involvement with these variable interest entities as of March 31, 2012 is included within the take-or-pay obligation discussed above and relates

primarily to contract termination penalties.

During March 2010, the Company successfully completed an amended raw material purchase agreement with a supplier who had filed for bankruptcy. During March 2011, the Company received consideration of $16 million in connection with the settlement of a claim against this bankrupt supplier. The consideration was recorded to Other charges (gains), net in the unaudited interim consolidated statements of operations in the Acetyl Intermediates segment. During April 2011, the Company received additional consideration of $1 million related to the same settlement.

18. Segment Information



	Advanced Engineered Materials		Consumer Specialties			Industrial Specialties	Acetyl Intermediates		Other Activities		Eliminations		Consolidated
	(In $ millions)
	Three Months Ended March 31, 2012
Net sales	317		264		⁽¹⁾	309	852	⁽¹⁾	—		(109	)	1,633
Other (charges) gains, net	—		(1	)		—	—		1		—		—
Equity in net earnings (loss) of affiliates	43		1			—	1		6		—		51
Earnings (loss) from continuing operations before tax	64		40			19	61		(77	)	—		107
Depreciation and amortization	27		9			15	20		3		—		74
Capital expenditures	7		16			8	31		8		—		70	⁽²⁾
	As of March 31, 2012
Goodwill and intangibles, net	391		280			74	240		—		—		985
Total assets	2,786		1,198			968	2,153		1,718		—		8,823
	Three Months Ended March 31, 2011
Net sales	328		266		⁽¹⁾	290	813	⁽¹⁾	1		(109	)	1,589
Other (charges) gains, net	(13	)	(1	)		—	18		(1	)	—		3
Equity in net earnings (loss) of affiliates	34		1			—	2		6		—		43
Earnings (loss) from continuing operations before tax	73		55			25	114		(87	)	—		180
Depreciation and amortization	21		12			10	25		4		—		72
Capital expenditures	17		13			12	15		2		—		59	⁽²⁾
	As of December 31, 2011
Goodwill and intangibles, net	391		277			54	235		—		—		957
Total assets	2,787		1,154			901	2,035		1,641		—		8,518

_______________________________________


⁽¹⁾	Net sales for Acetyl Intermediates and Consumer Specialties include inter-segment sales of $108 million and $1 million, respectively, for the three months ended March 31, 2012 and $108 million and $1 million, respectively, for the three months ended March 31, 2011.


⁽²⁾	Excludes expenditures related to the relocation of the Company’s Ticona plant in Kelsterbach (Note 20) and includes a decrease in accrued capital expenditures of $36 million and $18 million for the three months ended March 31, 2012 and 2011, respectively.

19. Earnings (Loss) Per Share



	Three Months Ended March 31,
	2012		2011
	Basic	Diluted	Basic	Diluted
	(In $ millions, except share and per share data)
Amounts attributable to Celanese Corporation
Earnings (loss) from continuing operations	183	183	138	138
Earnings (loss) from discontinued operations	—	—	4	4
Net earnings (loss)	183	183	142	142
Cumulative preferred stock dividends	—	—	—	—
Net earnings (loss) available to common stockholders	183	183	142	142
Weighted-average shares - basic	156,542,424	156,542,424	155,966,259	155,966,259
Dilutive stock options		1,855,015		1,992,598
Dilutive restricted stock units