CE-2013.9.30-10Q


 
 
 
 
 
UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549
_______________________________________________________
Form 10-Q
þ
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended September 30, 2013
 
Or
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
(Commission File Number) 001-32410
CELANESE CORPORATION
(Exact Name of Registrant as Specified in its Charter)
Delaware
(State or Other Jurisdiction of
Incorporation or Organization)
98-0420726
(I.R.S. Employer
Identification No.)
 
 
222 W. Las Colinas Blvd., Suite 900N
Irving, TX
(Address of Principal Executive Offices)
75039-5421
(Zip Code)
(972) 443-4000
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ  No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ  No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer þ
Accelerated filer o
Non-accelerated filer o (Do not check if a smaller reporting company)
Smaller reporting company o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o  No þ
The number of outstanding shares of the registrant’s Series A common stock, $0.0001 par value, as of October 15, 2013 was 157,672,305.
 
 
 
 
 



CELANESE CORPORATION AND SUBSIDIARIES

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

TABLE OF CONTENTS
 
 
Page
 
 
 
 
 
 
 
 
 
 
 
 
 


2




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

 
1,609

 
4,894

 
4,917

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

 
328

 
998

 
937

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

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

 
176

 
564

 
465

Equity in net earnings (loss) of affiliates
41

 
50

 
150

 
163

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

 
(1
)
 
—

Interest income
—

 
—

 
1

 
1

Dividend income - cost investments
22

 
1

 
69

 
85

Other income (expense), net
(2
)
 
3

 
1

 
4

Earnings (loss) from continuing operations before tax
228

 
186

 
654

 
584

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

 
129

 
445

 
543

Earnings (loss) from operation of discontinued operations
1

 
(3
)
 
3

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

 
—

 
—

 
—

Income tax (provision) benefit from discontinued operations
—

 
1

 
(1
)
 
1

Earnings (loss) from discontinued operations
1

 
(2
)
 
2

 
(2
)
Net earnings (loss)
172

 
127

 
447

 
541

Net (earnings) loss attributable to noncontrolling interests
—

 
—

 
—

 
—

Net earnings (loss) attributable to Celanese Corporation
172

 
127

 
447

 
541

Amounts attributable to Celanese Corporation
 

 
 

 
 

 
 

Earnings (loss) from continuing operations
171

 
129

 
445

 
543

Earnings (loss) from discontinued operations
1

 
(2
)
 
2

 
(2
)
Net earnings (loss)
172

 
127

 
447

 
541

Earnings (loss) per common share - basic
 

 
 

 
 

 
 

Continuing operations
1.08

 
0.81

 
2.80

 
3.43

Discontinued operations
0.01

 
(0.01
)
 
0.01

 
(0.01
)
Net earnings (loss) - basic
1.09

 
0.80

 
2.81

 
3.42

Earnings (loss) per common share - diluted
 

 
 

 
 

 
 

Continuing operations
1.07

 
0.80

 
2.79

 
3.40

Discontinued operations
0.01

 
(0.01
)
 
0.01

 
(0.01
)
Net earnings (loss) - diluted
1.08

 
0.79

 
2.80

 
3.39

Weighted average shares - basic
158,501,075

 
159,158,280

 
159,282,314

 
157,970,535

Weighted average shares - diluted
159,095,531

 
160,129,376

 
159,846,593

 
159,678,638


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

3



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

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

 
127

 
447

 
541

Other comprehensive income (loss), net of tax
 

 
 

 
 

 
 

Unrealized gain (loss) on marketable securities
1

 
—

 
1

 
—

Foreign currency translation
42

 
28

 
37

 
4

Gain (loss) on interest rate swaps
1

 
(2
)
 
4

 
(1
)
Pension and postretirement benefits
—

 
—

 
—

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

 
26

 
42

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

 
153

 
489

 
538

Comprehensive (income) loss attributable to noncontrolling interests
—

 
—

 
—

 
—

Comprehensive income (loss) attributable to Celanese Corporation
216

 
153

 
489

 
538


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


4



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

 
 

Cash and cash equivalents
1,100

 
959

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

 
827

Non-trade receivables, net
293

 
209

Inventories
753

 
711

Deferred income taxes
50

 
49

Marketable securities, at fair value
44

 
53

Other assets
39

 
31

Total current assets
3,228

 
2,839

Investments in affiliates
857

 
800

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

 
3,350

Deferred income taxes
604

 
606

Other assets
498

 
463

Goodwill
787

 
777

Intangible assets, net
147

 
165

Total assets
9,512

 
9,000

LIABILITIES AND EQUITY
 
 
 
Current Liabilities
 

 
 

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

 
168

Trade payables - third party and affiliates
739

 
649

Other liabilities
457

 
475

Deferred income taxes
25

 
25

Income taxes payable
152

 
38

Total current liabilities
1,597

 
1,355

Long-term debt
2,870

 
2,930

Deferred income taxes
61

 
50

Uncertain tax positions
203

 
181

Benefit obligations
1,546

 
1,602

Other liabilities
1,151

 
1,152

Commitments and Contingencies


 


Stockholders’ Equity
 

 
 

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

 
—

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

 
—

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

 
—

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

 
731

Retained earnings
2,385

 
1,993

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

 
1,730

Noncontrolling interests
—

 
—

Total equity
2,084

 
1,730

Total liabilities and equity
9,512

 
9,000


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

5



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

 
 

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

 
—

Stock option exercises
128,791

 
—

Purchases of treasury stock
(2,102,341
)
 
—

Stock awards
23,469

 
—

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

 
—

Treasury Stock
 

 
 

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

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

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

 
(1,007
)
Additional Paid-In Capital
 

 
 

Balance as of the beginning of the period
 

 
731

Stock-based compensation, net of tax
 

 
19

Stock option exercises, net of tax
 

 
3

Balance as of the end of the period
 

 
753

Retained Earnings
 

 
 

Balance as of the beginning of the period
 

 
1,993

Net earnings (loss) attributable to Celanese Corporation
 

 
447

Series A common stock dividends
 

 
(55
)
Balance as of the end of the period
 

 
2,385

Accumulated Other Comprehensive Income (Loss), Net
 

 
 

Balance as of the beginning of the period
 

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

 
42

Balance as of the end of the period
 

 
(47
)
Total Celanese Corporation stockholders’ equity
 

 
2,084

Noncontrolling Interests
 

 
 

Balance as of the beginning of the period
 

 
—

Net earnings (loss) attributable to noncontrolling interests
 

 
—

Balance as of the end of the period
 

 
—

Total equity
 

 
2,084


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



6



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

 
 

Net earnings (loss)
447

 
541

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

 
 

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

 
236

Pension and postretirement benefit expense
(16
)
 
7

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

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

 
2

Refinancing expense
1

 
—

Other, net
(23
)
 
85

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

Changes in operating assets and liabilities
 

 
 

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

Other assets
(82
)
 
15

Trade payables - third party and affiliates
100

 
58

Other liabilities
143

 
29

Net cash provided by (used in) operating activities
608

 
661

Investing Activities
 

 
 

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

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

 
1

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

 
 

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

 
50

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

 
—

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

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

 
58

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

 
28

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

 
3

Net increase (decrease) in cash and cash equivalents
141

 
246

Cash and cash equivalents as of beginning of period
959

 
682

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

 
928


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


7



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

8



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

9



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

 
(1,281
)
Gross profit
324

 
4

 
328

Selling, general and administrative expenses
(121
)
 
8

 
(113
)
Research and development expenses
(24
)
 
1

 
(23
)
Operating profit (loss)
163

 
13

 
176

Earnings (loss) from continuing operations before tax
173

 
13

 
186

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

 
10

 
129

Net earnings (loss)
117

 
10

 
127

Net earnings (loss) attributable to Celanese Corporation
117

 
10

 
127

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

 
0.06

 
0.81

Discontinued operations
(0.01
)
 
—

 
(0.01
)
Net earnings (loss) - basic
0.74

 
0.06

 
0.80

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

 
0.06

 
0.80

Discontinued operations
(0.01
)
 
—

 
(0.01
)
Net earnings (loss) - diluted
0.73

 
0.06

 
0.79

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

 
(3,980
)
Gross profit
925

 
12

 
937

Selling, general and administrative expenses
(379
)
 
25

 
(354
)
Research and development expenses
(76
)
 
3

 
(73
)
Operating profit (loss)
425

 
40

 
465

Earnings (loss) from continuing operations before tax
544

 
40

 
584

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

 
31

 
543

Net earnings (loss)
510

 
31

 
541

Net earnings (loss) attributable to Celanese Corporation
510

 
31

 
541

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

 
0.19

 
3.43

Discontinued operations
(0.01
)
 
—

 
(0.01
)
Net earnings (loss) - basic
3.23

 
0.19

 
3.42

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

 
0.19

 
3.40

Discontinued operations
(0.01
)
 
—

 
(0.01
)
Net earnings (loss) - diluted
3.20

 
0.19

 
3.39


10



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

 
10

 
127

Pension and postretirement benefits
10

 
(10
)
 
—

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

 
(10
)
 
26

Total comprehensive income (loss), net of tax
153

 
—

 
153

Comprehensive income (loss) attributable to Celanese Corporation
153

 
—

 
153

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

 
31

 
541

Pension and postretirement benefits
25

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

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

 
—

 
538

Comprehensive income (loss) attributable to Celanese Corporation
538

 
—

 
538

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

 
(993
)
 
1,993

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

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

 
31

 
541

Pension and postretirement benefit expense
—

 
7

 
7

Pension and postretirement contributions
—

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

 
(87
)
Other liabilities
(75
)
 
104

 
29


11



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

 
1

 
44

Consumer Specialties
70

 
2

 
72

Industrial Specialties
23

 
2

 
25

Acetyl Intermediates
62

 
1

 
63

Other Activities
(35
)
 
7

 
(28
)
Total
163

 
13

 
176

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

 
6

 
91

Consumer Specialties
184

 
5

 
189

Industrial Specialties
76

 
4

 
80

Acetyl Intermediates
199

 
4

 
203

Other Activities
(119
)
 
21

 
(98
)
Total
425

 
40

 
465

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

12



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

13



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

 
53

Gross unrealized gain
—

 
—

Gross unrealized loss
—

 
—

Fair value
44

 
53

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

 
514

Work-in-process
51

 
42

Raw materials and supplies
142

 
155

Total
753

 
711

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

 
 

 
 

 
 

 
 

Goodwill
297

 
249

 
42

 
189

 
777

Accumulated impairment losses
—

 
—

 
—

 
—

 
—

Net book value
297

 
249

 
42

 
189

 
777

Exchange rate changes
3

 
2

 
—

 
5

 
10

As of September 30, 2013
 
 
 
 
 
 
 
 
 
Goodwill
300

 
251

 
42

 
194

 
787

Accumulated impairment losses
—

 
—

 
—

 
—

 
—

Net book value
300

 
251

 
42

 
194

 
787

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

14



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

 
 

 
 

 
 

 
 

 
As of December 31, 2012
32

 
525

 
30

 
32

 
619

 
Acquisitions
—

 
—

 
—

 
7

 
7

(1) 
Exchange rate changes
1

 
10

 
—

 
—

 
11

 
As of September 30, 2013
33

 
535

 
30

 
39

 
637

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

 
(10
)
 
—

 
—

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

 
26

 
11

 
14

 
65

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

Acquisitions
—

Accumulated impairment losses
(1
)
Exchange rate changes
1

As of September 30, 2013
82

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

15



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

2015
11

2016
8

2017
7

2018
4

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

 
74

Environmental (Note 11)
24

 
21

Restructuring (Note 13)
19

 
30

Insurance
13

 
15

Asset retirement obligations
23

 
38

Derivatives (Note 15)
15

 
23

Current portion of benefit obligations
47

 
47

Interest
32

 
23

Sales and use tax/foreign withholding tax payable
17

 
17

Uncertain tax positions
63

 
65

Customer rebates
37

 
44

Other
70

 
78

Total
457

 
475


16



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

 
78

Insurance
53

 
58

Deferred revenue
30

 
36

Deferred proceeds(1)
930

 
909

Asset retirement obligations
22

 
26

Derivatives (Note 15)
3

 
8

Income taxes payable
2

 
2

Other
44

 
35

Total
1,151

 
1,152

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

 
60

Short-term borrowings, including amounts due to affiliates
101

 
108

Accounts receivable securitization facility
100

 
—

Total
224

 
168

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

17



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

 
977

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

 
—

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

 
600

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

 
400

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

 
500

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

 
50

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

 
182

Obligations under capital leases due at various dates through 2054
248

 
244

Other bank obligations
—

 
37

Subtotal
2,893

 
2,990

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

 
2,930

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

18



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

19



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

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

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

20



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

Borrowings outstanding
—

Letters of credit issued
—

Available for borrowing
600

Credit-Linked Revolving Facility
 
Borrowings outstanding
—

Letters of credit issued
80

Available for borrowing
1

Accounts Receivable Securitization Facility
 
Borrowings outstanding
100

Letters of credit issued
—

Available for borrowing
31

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

 
7

 
—

 
—

 
26

 
21

 
2

 
1

Interest cost
39

 
42

 
3

 
3

 
116

 
127

 
8

 
9

Expected return on plan assets
(57
)
 
(51
)
 
—

 
—

 
(169
)
 
(153
)
 
—

 
—

Amortization of prior service cost (credit)
—

 
1

 
—

 
—

 
1

 
2

 
—

 
—

Total
(9
)
 
(1
)
 
3

 
3

 
(26
)
 
(3
)
 
10

 
10


21



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

 
30

Benefit payments to nonqualified pension plans
16

 
22

Benefit payments to other postretirement benefit plans
11

 
24

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

 
31

Divestiture obligations (Note 17)
22

 
21

Active sites
24

 
28

US Superfund sites
13

 
15

Other environmental remediation reserves
5

 
4

Total
91

 
99

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

22



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

23



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

October 2008
100

April 2011
129

October 2012
264

As of September 30, 2013
893

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

(1) 
853,388

 
15,238,847

(2) 
Average purchase price per share
$
48.58

 
$
43.19

 
$
39.58

 
Amount spent on repurchased shares (in millions)
$
102

 
$
37

 
$
603

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

24



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

(1) 
—

 
1

 
—

 
—

 
—

Foreign currency translation
44

 
(2
)
 
42

 
28

 
—

 
28

Gain (loss) on interest rate swaps
2

(2) 
(1
)
 
1

 
(2
)
 
—

 
(2
)
Pension and postretirement benefits
—

 
—

 
—

 
1

 
(1
)
 
—

Total
47

 
(3
)
 
44

 
27

 
(1
)
 
26

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

(1) 
—

 
1

 
—

 
—

 
—

Foreign currency translation
41

 
(4
)
 
37

 
4

 
—

 
4

Gain (loss) on interest rate swaps
7

 
(3
)
 
4

 
(1
)
 
—

 
(1
)
Pension and postretirement benefits
—

(2) 
—

 
—

 
—

(3) 
(6
)
 
(6
)
Total
49

 
(7
)
 
42

 
3

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

25



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

 
41

 
(1
)
 
—

 
41

Amounts reclassified from accumulated other comprehensive income
—

 
—

 
8


—


8

Income tax (provision) benefit
—

 
(4
)
 
(3
)
 
—

 
(7
)
As of September 30, 2013
—

 
14

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

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

 
4

 
—

 
4

Asset impairments
(2
)
 
—

 
(2
)
 
—

Commercial disputes
—

 
2

 
—

 
2

Total
(4
)
 
2

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

 
 

 
 

 
 

 
 

 
 

As of December 31, 2012
6

 
13

 
—

 
3

 
7

 
29

Additions
—

 
—

 
2

 
1

 
—

 
3

Cash payments
(2
)
 
(7
)
 
—

 
(2
)
 
(2
)
 
(13
)
Other changes
—

 
—

 
—

 
—

 
(1
)
 
(1
)
Exchange rate changes
1

 
—

 
—

 
—

 
—

 
1

As of September 30, 2013
5

 
6

 
2

 
2

 
4

 
19

Plant/Office Closures
 

 
 

 
 

 
 

 
 

 
 

As of December 31, 2012
—

 
—

 
—

 
1

 
—

 
1

Additions
—

 
—

 
—

 
—

 
—

 
—

Cash payments
—

 
—

 
—

 
—

 
—

 
—

Other changes
—

 
—

 
—

 
—

 
—

 
—

Exchange rate changes
—

 
—

 
—

 
(1
)
 
—

 
(1
)
As of September 30, 2013
—

 
—

 
—

 
—

 
—

 
—

Total
5

 
6

 
2

 
2

 
4

 
19


26



14. Income Taxes
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2013
 
2012
 
2013
 
2012