Document
Table of Contents

 
 
 
 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________________________________________________
Form 10-Q
þ
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended March 31, 2017
 
Or
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
(Commission File Number) 001-32410
celanse_imagea01a28.gif
CELANESE CORPORATION
(Exact Name of Registrant as Specified in its Charter)
Delaware
(State or Other Jurisdiction of
Incorporation or Organization)
98-0420726
(I.R.S. Employer
Identification No.)
 
 
222 W. Las Colinas Blvd., Suite 900N
Irving, TX
(Address of Principal Executive Offices)
75039-5421
(Zip Code)
(972) 443-4000
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ  No o
Indicate by check mark whether the registrant has submitted electronically 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, smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer  þ
Accelerated filer  o
Non-accelerated filer  o
Smaller reporting company  o
Emerging growth company  o
(Do not check if a smaller reporting company)
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o  No þ
The number of outstanding shares of the registrant's Series A common stock, $0.0001 par value, as of April 11, 2017 was 139,453,306.
 
 
 
 
 

Table of Contents

CELANESE CORPORATION AND SUBSIDIARIES
Form 10-Q
For the Quarterly Period Ended March 31, 2017
TABLE OF CONTENTS
 
 
Page
 
 
 
 
 
 
 
 
 
 
 
 
 

2

Table of Contents


Item 1. Financial Statements
CELANESE CORPORATION AND SUBSIDIARIES
UNAUDITED INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS
 
Three Months Ended
March 31,
 
2017
 
2016
 
(In $ millions, except share and per share data)
Net sales
1,471

 
1,404

Cost of sales
(1,119
)
 
(1,014
)
Gross profit
352

 
390

Selling, general and administrative expenses
(83
)
 
(80
)
Amortization of intangible assets
(4
)
 
(2
)
Research and development expenses
(17
)
 
(19
)
Other (charges) gains, net
(55
)
 
(5
)
Foreign exchange gain (loss), net
—

 
3

Gain (loss) on disposition of businesses and assets, net
(1
)
 
—

Operating profit (loss)
192

 
287

Equity in net earnings (loss) of affiliates
47

 
38

Interest expense
(29
)
 
(33
)
Refinancing expense
—

 
(2
)
Interest income
—

 
1

Dividend income - cost investments
29

 
27

Other income (expense), net
1

 
—

Earnings (loss) from continuing operations before tax
240

 
318

Income tax (provision) benefit
(56
)
 
(60
)
Earnings (loss) from continuing operations
184

 
258

Earnings (loss) from operation of discontinued operations
—

 
1

Income tax (provision) benefit from discontinued operations
—

 
—

Earnings (loss) from discontinued operations
—

 
1

Net earnings (loss)
184

 
259

Net (earnings) loss attributable to noncontrolling interests
(1
)
 
(2
)
Net earnings (loss) attributable to Celanese Corporation
183

 
257

Amounts attributable to Celanese Corporation
 

 
 

Earnings (loss) from continuing operations
183

 
256

Earnings (loss) from discontinued operations
—

 
1

Net earnings (loss)
183

 
257

Earnings (loss) per common share - basic
 

 
 

Continuing operations
1.30

 
1.74

Discontinued operations
—

 
—

Net earnings (loss) - basic
1.30

 
1.74

Earnings (loss) per common share - diluted
 

 
 

Continuing operations
1.30

 
1.73

Discontinued operations
—

 
—

Net earnings (loss) - diluted
1.30

 
1.73

Weighted average shares - basic
140,643,860

 
147,413,234

Weighted average shares - diluted
140,997,403

 
148,131,114


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

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Table of Contents

CELANESE CORPORATION AND SUBSIDIARIES
UNAUDITED INTERIM CONSOLIDATED STATEMENTS OF
COMPREHENSIVE INCOME (LOSS)
 
Three Months Ended
March 31,
 
2017
 
2016
 
(In $ millions)
Net earnings (loss)
184

 
259

Other comprehensive income (loss), net of tax


 
 
Unrealized gain (loss) on marketable securities
—

 
1

Foreign currency translation
28

 
64

Gain (loss) on cash flow hedges
(2
)
 
—

Pension and postretirement benefits
5

 
—

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

 
65

Total comprehensive income (loss), net of tax
215

 
324

Comprehensive (income) loss attributable to noncontrolling interests
(1
)
 
(2
)
Comprehensive income (loss) attributable to Celanese Corporation
214

 
322


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


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Table of Contents

CELANESE CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED BALANCE SHEETS
 
As of
March 31,
2017
 
As of
December 31,
2016
 
(In $ millions, except share data)
ASSETS
 
 
 
Current Assets
 

 
 

Cash and cash equivalents (variable interest entity restricted - 2017: $13; 2016: $18)
501

 
638

Trade receivables - third party and affiliates (net of allowance for doubtful accounts - 2017: $6; 2016: $6; variable interest entity restricted - 2017: $5; 2016: $4)
886

 
801

Non-trade receivables, net
216

 
223

Inventories
717

 
720

Marketable securities, at fair value
31

 
30

Other assets
38

 
60

Total current assets
2,389

 
2,472

Investments in affiliates
874

 
852

Property, plant and equipment (net of accumulated depreciation - 2017: $2,307; 2016: $2,239; variable interest entity restricted - 2017: $724; 2016: $734)
3,571

 
3,577

Deferred income taxes
154

 
159

Other assets (variable interest entity restricted - 2017: $8; 2016: $9)
308

 
307

Goodwill
800

 
796

Intangible assets (net of accumulated amortization - 2017: $531; 2016: $524; variable interest entity restricted - 2017: $26; 2016: $26)
192

 
194

Total assets
8,288

 
8,357

LIABILITIES AND EQUITY
 
 
 
Current Liabilities
 

 
 

Short-term borrowings and current installments of long-term debt - third party and affiliates
107

 
118

Trade payables - third party and affiliates
615

 
625

Other liabilities
262

 
322

Income taxes payable
31

 
12

Total current liabilities
1,015

 
1,077

Long-term debt, net of unamortized deferred financing costs
2,851

 
2,890

Deferred income taxes
140

 
130

Uncertain tax positions
138

 
131

Benefit obligations
866

 
893

Other liabilities
237

 
215

Commitments and Contingencies


 


Stockholders' Equity
 

 
 

Preferred stock, $0.01 par value, 100,000,000 shares authorized (2017 and 2016: 0 issued and outstanding)
—

 
—

Series A common stock, $0.0001 par value, 400,000,000 shares authorized (2017: 167,965,429 issued and 139,552,553 outstanding; 2016: 167,611,357 issued and 140,660,447 outstanding)
—

 
—

Series B common stock, $0.0001 par value, 100,000,000 shares authorized (2017 and 2016: 0 issued and outstanding)
—

 
—

Treasury stock, at cost (2017: 28,412,876 shares; 2016: 26,950,910 shares)
(1,662
)
 
(1,531
)
Additional paid-in capital
149

 
157

Retained earnings
4,451

 
4,320

Accumulated other comprehensive income (loss), net
(327
)
 
(358
)
Total Celanese Corporation stockholders' equity
2,611

 
2,588

Noncontrolling interests
430

 
433

Total equity
3,041

 
3,021

Total liabilities and equity
8,288

 
8,357

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

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Table of Contents

CELANESE CORPORATION AND SUBSIDIARIES
UNAUDITED INTERIM CONSOLIDATED STATEMENT OF EQUITY
 
Three Months Ended
March 31, 2017
 
Shares
 
Amount
 
(In $ millions, except share data)
Series A Common Stock
 
 
 
Balance as of the beginning of the period
140,660,447

 
—

Stock option exercises
12,500

 
—

Purchases of treasury stock
(1,461,966
)
 
—

Stock awards
341,572

 
—

Balance as of the end of the period
139,552,553

 
—

Treasury Stock
 
 
 
Balance as of the beginning of the period
26,950,910

 
(1,531
)
Purchases of treasury stock, including related fees
1,461,966

 
(131
)
Balance as of the end of the period
28,412,876

 
(1,662
)
Additional Paid-In Capital
 
 
 
Balance as of the beginning of the period
 
 
157

Stock-based compensation, net of tax
 
 
(8
)
Stock option exercises, net of tax
 
 
—

Balance as of the end of the period
 
 
149

Retained Earnings
 
 
 
Balance as of the beginning of the period
 
 
4,320

Cumulative effect adjustment from adoption of new accounting standard (Note 2)
 
 
(1
)
Net earnings (loss) attributable to Celanese Corporation
 
 
183

Series A common stock dividends
 
 
(51
)
Balance as of the end of the period
 
 
4,451

Accumulated Other Comprehensive Income (Loss), Net
 
 
 
Balance as of the beginning of the period
 
 
(358
)
Other comprehensive income (loss), net of tax
 
 
31

Balance as of the end of the period
 
 
(327
)
Total Celanese Corporation stockholders' equity
 
 
2,611

Noncontrolling Interests
 
 
 
Balance as of the beginning of the period
 
 
433

Net earnings (loss) attributable to noncontrolling interests
 
 
1

(Distributions to) contributions from noncontrolling interests
 
 
(4
)
Balance as of the end of the period
 
 
430

Total equity
 
 
3,041


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

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Table of Contents

CELANESE CORPORATION AND SUBSIDIARIES
UNAUDITED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
 
Three Months Ended
March 31,
 
2017
 
2016
 
(In $ millions)
Operating Activities
 
 
 
Net earnings (loss)
184

 
259

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

 
—

Depreciation, amortization and accretion
72

 
74

Pension and postretirement net periodic benefit cost
(20
)
 
(13
)
Pension and postretirement contributions
(11
)
 
(14
)
Deferred income taxes, net
14

 
(2
)
(Gain) loss on disposition of businesses and assets, net
1

 
—

Stock-based compensation
10

 
10

Undistributed earnings in unconsolidated affiliates
3

 
(1
)
Other, net
2

 
4

Operating cash provided by (used in) discontinued operations
(1
)
 
(1
)
Changes in operating assets and liabilities
 
 
 
Trade receivables - third party and affiliates, net
(79
)
 
(111
)
Inventories
9

 
29

Other assets
21

 
40

Trade payables - third party and affiliates
6

 
(8
)
Other liabilities
(19
)
 
21

Net cash provided by (used in) operating activities
192

 
287

Investing Activities
 
 
 
Capital expenditures on property, plant and equipment
(62
)
 
(70
)
Acquisitions, net of cash acquired
—

 
—

Proceeds from sale of businesses and assets, net
1

 
—

Other, net
(3
)
 
(5
)
Net cash provided by (used in) investing activities
(64
)
 
(75
)
Financing Activities
 
 
 
Net change in short-term borrowings with maturities of 3 months or less
6

 
(344
)
Proceeds from short-term borrowings
7

 
8

Repayments of short-term borrowings
(29
)
 
(63
)
Proceeds from long-term debt
—

 
170

Repayments of long-term debt
(53
)
 
(177
)
Purchases of treasury stock, including related fees
(128
)
 
—

Stock option exercises
—

 
1

Series A common stock dividends
(51
)
 
(44
)
(Distributions to) contributions from noncontrolling interests
(4
)
 
—

Other, net
(18
)
 
(24
)
Net cash provided by (used in) financing activities
(270
)
 
(473
)
Exchange rate effects on cash and cash equivalents
5

 
10

Net increase (decrease) in cash and cash equivalents
(137
)
 
(251
)
Cash and cash equivalents as of beginning of period
638

 
967

Cash and cash equivalents as of end of period
501

 
716


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

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Table of Contents

CELANESE CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
1. Description of the Company and Basis of Presentation
Description of the Company
Celanese Corporation and its subsidiaries (collectively, the "Company") is a global technology and specialty materials company. The Company's business involves processing chemical raw materials, such as methanol, carbon monoxide and ethylene, and natural products, including wood pulp, into value-added chemicals, thermoplastic polymers and other chemical-based products.
Definitions
In this Quarterly Report on Form 10-Q ("Quarterly Report"), the term "Celanese" refers to Celanese Corporation, a Delaware corporation, and not its subsidiaries. The term "Celanese US" refers to the Company's subsidiary, Celanese US Holdings LLC, a Delaware limited liability company, and not its subsidiaries.
Basis of Presentation
The unaudited interim consolidated financial statements for the three months ended March 31, 2017 and 2016 contained in this Quarterly Report were prepared in accordance with accounting principles generally accepted in the United States of America ("US GAAP") for all periods presented and include the accounts of the Company, its majority owned subsidiaries over which the Company exercises control and, when applicable, variable interest entities in which the Company is the primary beneficiary. The unaudited interim consolidated financial statements and other financial information included in this Quarterly Report, unless otherwise specified, have been presented to separately show the effects of discontinued operations.
In the opinion of management, the accompanying unaudited consolidated balance sheets and related unaudited interim consolidated statements of operations, comprehensive income (loss), cash flows and equity include all adjustments, consisting only of normal recurring items necessary for their fair presentation in conformity with US GAAP. Certain information and footnote disclosures normally included in financial statements prepared in accordance with US GAAP may 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, 2016, filed on February 10, 2017 with the SEC as part of the Company's Annual Report on Form 10-K.
Operating results for the three months ended March 31, 2017 are not necessarily indicative of the results to be expected for the entire year.
In the ordinary course of business, the Company enters into contracts and agreements relative to a number of topics, including acquisitions, dispositions, joint ventures, supply agreements, product sales and other arrangements. The Company endeavors to describe those contracts or agreements that are material to its business, results of operations or financial position. The Company may also describe some arrangements that are not material but in which the Company believes investors may have an interest or which may have been included in a Form 8-K filing. Investors should not assume the Company has described all contracts and agreements relative to the Company's business in this Quarterly Report.
For those consolidated ventures in which the Company owns or is exposed to less than 100% of the economics, the outside stockholders' interests are shown as noncontrolling interests.
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 Net sales, expenses and allocated charges during the reporting period. Significant estimates pertain to impairments of goodwill, intangible assets and other long-lived assets, purchase price allocations, restructuring costs and other (charges) gains, net, income taxes, pension and other postretirement benefits, asset retirement obligations, environmental liabilities and loss contingencies, among others. Actual results could differ from those estimates.

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Table of Contents

Change in accounting policy regarding share-based compensation
Historically, the Company recognized share-based compensation net of estimated forfeitures over the vesting period of the respective grant. Effective January 1, 2017, the Company elected to change its accounting policy to recognize forfeitures as they occur. The new forfeiture policy election was adopted using a modified retrospective approach with a cumulative effect adjustment of $1 million to Retained earnings as of January 1, 2017. See Note 2 - Recent Accounting Pronouncements for further information.
2. Recent Accounting Pronouncements
The following table provides a brief description of recent Accounting Standard Updates ("ASU") issued by the Financial Accounting Standards Board ("FASB"):
Standard
 
Description
 
Effective Date
 
Effect on the Financial Statements or Other Significant Matters
In March 2017, the FASB issued ASU 2017-07, Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost.
 
The new guidance clarifies the presentation and classification of the components of net periodic benefit costs in the consolidated statement of operations.
 
January 1, 2018. Early adoption is permitted.
 
The Company is currently evaluating the impact of adoption on its financial statements and related disclosures.
 
 
 
 
 
 
 
In October 2016, the FASB issued ASU 2016-16, Intra-Entity Transfers of Assets Other Than Inventory.
 
The new guidance requires the income tax consequences of an intra-entity transfer of assets other than inventory to be recognized when the transfer occurs rather than deferring until an outside sale has occurred.
 
January 1, 2018. Early adoption is permitted.
 
The Company does not expect adoption will have a material impact on its financial statements and related disclosures.
 
 
 
 
 
 
 
In August 2016, the FASB issued ASU 2016-15, Classification of Certain Cash Receipts and Cash Payments.
 
The new guidance clarifies the presentation and classification of certain cash receipts and cash payments in the statement of cash flows.
 
January 1, 2018. Early adoption is permitted.
 
The Company does not expect adoption will have a material impact on its financial statements and related disclosures.
 
 
 
 
 
 
 
In March 2016, the FASB issued ASU 2016-09, Improvements to Employee Share-Based Payment Accounting.
 
The new guidance simplifies several aspects of the accounting for share-based payment transactions, including the timing of recognizing income tax consequences, classification of awards as either equity or liabilities, calculation of compensation expense and classification on the statement of cash flows.
 
January 1, 2017. Early adoption is permitted.
 
The Company adopted the new guidance effective January 1, 2017, as part of the FASB's simplification initiative. The adoption of the new guidance did not have a material impact to the Company.

The Company changed its accounting policy regarding the recognition of stock-based compensation expense as part of the adoption (Note 1).
 
 
 
 
 
 
 
In February 2016, the FASB issued ASU 2016-02, Leases.
 
The new guidance supersedes the lease guidance under FASB Accounting Standards Codification ("ASC") Topic 840, Leases, resulting in the creation of FASB ASC Topic 842, Leases. The guidance requires a lessee to recognize in the statement of financial position a liability to make lease payments and a right-of-use asset representing its right to use the underlying asset for the lease term for both finance and operating leases.
 
January 1, 2019. Early adoption is permitted.
 
The Company is currently evaluating its population of leases, and is continuing to assess all potential impacts of the standard, but currently believes the most significant impact relates to its accounting for manufacturing and logistics equipment, and real estate operating leases. The Company anticipates recognition of additional assets and corresponding liabilities related to leases upon adoption. The Company plans to adopt the standard effective January 1, 2019.
 
 
 
 
 
 
 
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers. Since that date, the FASB has issued additional ASUs clarifying certain aspects of ASU 2014-09.
 
The new guidance requires entities to recognize revenue in a way that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services. The new guidance provides alternative methods of adoption. Subsequent guidance issued after May 2014 did not change the core principle of ASU 2014-09.
 
January 1, 2018. Earlier adoption was permitted, but not before December 15, 2016.
 
The Company is currently scoping its revenue contracts to assess the potential impact on its consolidated financial statements. The Company plans to adopt the revenue guidance effective January 1, 2018, although it has not yet selected a transition method. The Company currently does not expect the adoption to have a material impact on its consolidated financial statements, as a majority of its revenue transactions are recognized when product is delivered.
 
 
 
 
 
 
 

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3. Acquisitions, Dispositions and Plant Closures
Acquisitions
•
SO.F.TER. S.p.A.
In December 2016, the Company acquired 100% of the stock of the Forli, Italy based SO.F.TER. S.p.A. ("SOFTER"), a leading thermoplastic compounder. The acquisition of SOFTER increases the Company's global engineered materials product platforms, extends the operational model, technical and industry solutions capabilities and expands project pipelines. The acquisition was accounted for as a business combination and the acquired operations are included in the Advanced Engineered Materials segment. The Company allocated the purchase price of the acquisition to identifiable assets acquired and liabilities assumed based on their estimated fair values as of the acquisition date. The purchase price allocation was based on preliminary information and is subject to change if additional information about the facts and circumstances that existed at the acquisition date becomes available. The final fair value of the net assets acquired may result in adjustments to the assets and liabilities, including goodwill. During the three months ended March 31, 2017, the Company made adjustments to its purchase price allocation which primarily resulted in an increase of $3 million in property, plant and equipment and a reduction to goodwill of the same amount. Any subsequent measurement period adjustments are not expected to have a material impact on the Company's results of operations.
•
Nilit Plastics
On February 1, 2017, the Company signed a definitive agreement to acquire the nylon compounding division of Nilit Group, an independent producer of high performance nylon, resins, fibers and compounds. Subject to closing conditions, Celanese will acquire Nilit Plastics' nylon compounding product portfolio, customer agreements and manufacturing, technology and commercial facilities. The acquisition will be funded from cash on hand and from borrowings under the Company's senior unsecured revolving credit facility. The acquired operations will be included in the Advanced Engineered Materials segment. The Company expects the acquisition to close in the second quarter of 2017, subject to regulatory approvals and other customary closing conditions, and does not expect the acquisition to be material to its 2017 financial position or results of operations.
4. Ventures and Variable Interest Entities
Consolidated Variable Interest Entities
The Company has a joint venture, Fairway Methanol LLC ("Fairway"), with Mitsui & Co., Ltd., of Tokyo, Japan ("Mitsui"), in which the Company owns 50% of Fairway, for the production of methanol at the Company's integrated chemical plant in Clear Lake, Texas. The methanol unit utilizes natural gas in the US Gulf Coast region as a feedstock and benefits from the existing infrastructure at the Company's Clear Lake facility. Both Mitsui and the Company supply their own natural gas to Fairway in exchange for methanol tolling under a cost-plus off-take arrangement.
The Company determined that Fairway is a variable interest entity ("VIE") in which the Company is the primary beneficiary. Under the terms of the joint venture agreements, the Company provides site services and day-to-day operations for the methanol facility. In addition, the joint venture agreements provide that the Company indemnifies Mitsui for environmental obligations that exceed a specified threshold, as well as an equity option between the partners. Accordingly, the Company consolidates the venture and records a noncontrolling interest for the share of the venture owned by Mitsui. Fairway is included in the Company's Acetyl Intermediates segment.

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Table of Contents

The carrying amount of the assets and liabilities associated with Fairway included in the unaudited consolidated balance sheets are as follows:
 
As of
March 31,
2017
 
As of
December 31,
2016
 
(In $ millions)
Cash and cash equivalents
13

 
18

Trade receivables, net - third party & affiliate
10

 
8

Property, plant and equipment (net of accumulated depreciation - 2017: $60; 2016: $50)
724

 
734

Intangible assets (net of accumulated amortization - 2017: $1; 2016: $1)
26

 
26

Other assets
8

 
9

Total assets(1)
781

 
795

 
 
 
 
Trade payables
7

 
15

Other liabilities(2)
2

 
2

Total debt
5

 
5

Deferred income taxes
3

 
2

Total liabilities
17

 
24

______________________________
(1) 
Assets can only be used to settle the obligations of Fairway.
(2) 
Primarily represents amounts owed by Fairway to the Company for reimbursement of expenditures.
Nonconsolidated Variable Interest Entities
The Company holds variable interests in entities that supply certain raw materials and services to the Company. The variable interests primarily relate to cost-plus contractual arrangements with the suppliers and recovery of capital expenditures for certain plant assets plus a rate of return on such assets. Liabilities for such supplier recoveries of capital expenditures have been recorded as capital lease obligations. The entities are not consolidated because the Company is not the primary beneficiary of the entities as it does not have the power to direct the activities of the entities that most significantly impact the entities' economic performance. The Company's maximum exposure to loss as a result of its involvement with these VIEs as of March 31, 2017 relates primarily to the recovery of capital expenditures for certain property, plant and equipment.
The carrying amount of the assets and liabilities associated with the obligations to nonconsolidated VIEs, as well as the maximum exposure to loss relating to these nonconsolidated VIEs are as follows:
 
As of
March 31,
2017
 
As of
December 31,
2016
 
(In $ millions)
Property, plant and equipment, net
58

 
60

 
 
 
 
Trade payables
38

 
53

Current installments of long-term debt
10

 
10

Long-term debt
88

 
91

Restructuring reserves (Note 13)
27

 
—

Total liabilities
163

 
154

 
 
 
 
Maximum exposure to loss
221

 
240

The difference between the total liabilities associated with obligations to nonconsolidated VIEs and the maximum exposure to loss primarily represents take-or-pay obligations for services included in the Company's unconditional purchase obligations (Note 17).

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5. Marketable Securities, at Fair Value
The Company's nonqualified trusts hold available-for-sale securities for funding requirements of the Company's nonqualified pension plans (Note 10) as follows:
 
As of
March 31,
2017
 
As of
December 31,
2016
 
(In $ millions)
Amortized cost
31

 
30

Gross unrealized gain
—

 
—

Gross unrealized loss
—

 
—

Fair value
31

 
30

6. Inventories
 
As of
March 31,
2017
 
As of
December 31,
2016
 
(In $ millions)
Finished goods
508

 
506

Work-in-process
41

 
45

Raw materials and supplies
168

 
169

Total
717

 
720

7. Current Other Liabilities
 
As of
March 31,
2017
 
As of
December 31,
2016
 
(In $ millions)
Asset retirement obligations
19

 
9

Benefit obligations (Note 10)
31

 
31

Customer rebates
31

 
51

Derivatives (Note 15)
3

 
3

Environmental (Note 11)
13

 
14

Insurance
5

 
6

Interest
21

 
15

Restructuring (Note 13)
14

 
16

Salaries and benefits
53

 
97

Sales and use tax/foreign withholding tax payable
21

 
21

Other
51

 
59

Total
262

 
322


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8. Noncurrent Other Liabilities
 
As of
March 31,
2017
 
As of
December 31,
2016
 
(In $ millions)
Asset retirement obligations
10

 
20

Deferred proceeds
41

 
41

Deferred revenue
9

 
9

Environmental (Note 11)
50

 
50

Income taxes payable
6

 
6

Insurance
48

 
46

Restructuring (Note 13)
20

 
—

Other
53

 
43

Total
237

 
215

9. Debt
 
As of
March 31,
2017
 
As of
December 31,
2016
 
(In $ millions)
Short-Term Borrowings and Current Installments of Long-Term Debt - Third Party and Affiliates
 
 
 
Current installments of long-term debt
34

 
27

Short-term borrowings, including amounts due to affiliates(1)
73

 
68

Short-term SOFTER bank loans (Note 3)(2)
—

 
23

Total
107

 
118

______________________________
(1) 
The weighted average interest rate was 2.9% and 3.1% as of March 31, 2017 and December 31, 2016, respectively.
(2) 
The weighted average interest rate was 1.2% as of December 31, 2016.

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Table of Contents

 
As of
March 31,
2017
 
As of
December 31,
2016
 
(In $ millions)
Long-Term Debt
 
 
 
Senior unsecured term loan due 2021(1)
500

 
500

Senior unsecured notes due 2019, interest rate of 3.250%
321

 
316

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

 
400

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

 
500

Senior unsecured notes due 2023, interest rate of 1.125%
800

 
788

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

 
170

SOFTER bank loans due at various dates through 2021 (Note 3)(2)
—

 
47

Obligations under capital leases due at various dates through 2054
215

 
217

Subtotal
2,905

 
2,938

Unamortized debt issuance costs(3)
(20
)
 
(21
)
Current installments of long-term debt
(34
)
 
(27
)
Total
2,851

 
2,890

______________________________
(1) 
The margin for borrowings under the senior unsecured term loan due 2021 was 1.5% above LIBOR at current Company credit ratings.
(2) 
The weighted average interest rate was 1.6% as of December 31, 2016.
(3) 
Related to the Company's long-term debt, excluding obligations under capital leases.
Senior Credit Facilities
On July 15, 2016, Celanese, Celanese US and certain subsidiaries entered into a new senior credit agreement ("Credit Agreement") consisting of a $500 million senior unsecured term loan and a $1.0 billion senior unsecured revolving credit facility (with a letter of credit sublimit), each maturing in 2021. The Credit Agreement is guaranteed by Celanese, Celanese US and substantially all of its domestic subsidiaries (the "Subsidiary Guarantors").
The Company's debt balances and amounts available for borrowing under its senior unsecured revolving credit facility are as follows:
 
As of
March 31,
2017
 
(In $ millions)
Revolving Credit Facility
 
Borrowings outstanding
—

Letters of credit issued
—

Available for borrowing(1)
1,000

______________________________
(1) 
The margin for borrowings under the senior unsecured revolving credit facility was 1.5% above LIBOR at current Company credit ratings.
Senior Notes
The Company has outstanding senior unsecured notes, issued in public offerings registered under the Securities Act of 1933 ("Securities Act"), as amended (collectively, the "Senior Notes"). The Senior Notes were issued by Celanese US and are guaranteed on a senior unsecured basis by Celanese and the Subsidiary Guarantors.

14

Table of Contents

Accounts Receivable Securitization Facility
The Company has a US accounts receivable securitization facility involving receivables of certain of its domestic subsidiaries of the Company transferred to a wholly-owned, "bankruptcy remote" special purpose subsidiary of the Company ("SPE"). The securitization facility, which permits cash borrowings and letters of credit, expires in July 2019.
The Company's debt balances and amounts available for borrowing under its securitization facility are as follows:
 
As of
March 31,
2017
 
(In $ millions)
Accounts Receivable Securitization Facility
 
Borrowings outstanding
—

Letters of credit issued
45

Available for borrowing
58

Total borrowing base
103

 
 
Maximum borrowing base(1)
120

______________________________
(1) 
Outstanding accounts receivable transferred to the SPE was $173 million.
Covenants
The Company's material financing arrangements contain customary covenants, including the maintenance of certain financial ratios, events of default and change of control provisions. Failure to comply with these covenants, or the occurrence of any other event of default, could result in acceleration of the borrowings and other financial obligations. The Company is in compliance with all of the covenants related to its debt agreements as of March 31, 2017.
10. Benefit Obligations
The components of net periodic benefit cost are as follows:
 
Three Months Ended March 31,
 
2017
 
2016
 
Pension
Benefits
 
Post-retirement
Benefits
 
Pension
Benefits
 
Post-retirement
Benefits
 
(In $ millions)
Service cost
2

 
—

 
2

 
—

Interest cost
27

 
—

 
28

 
1

Expected return on plan assets
(49
)
 
—

 
(44
)
 
—

Amortization of prior service cost (credit), net
—

 
—

 
—

 
(1
)
Special termination benefit
—

 
—

 
1

 
—

Total
(20
)
 
—

 
(13
)
 
—


15

Table of Contents

Benefit obligation funding is as follows:
 
As of
March 31,
2017
 
Total
Expected
2017
 
(In $ millions)
Cash contributions to defined benefit pension plans
5

 
20

Benefit payments to nonqualified pension plans
5

 
22

Benefit payments to other postretirement benefit plans
1

 
4

Cash contributions to German multiemployer defined benefit pension plans(1)
2

 
7

______________________________
(1) 
The Company makes contributions based on specified percentages of employee contributions.
The Company's estimates of its US defined benefit pension plan contributions reflect the provisions of the Pension Protection Act of 2006.
11. Environmental
The Company is subject to environmental laws and regulations worldwide that impose limitations on the discharge of pollutants into the air and water, establish standards for the treatment, storage and disposal of solid and hazardous wastes, and impose record keeping and notification requirements. Failure to timely comply with these laws and regulations may expose the Company to penalties. The Company believes that it is in substantial compliance with all applicable environmental laws and regulations and engages in an ongoing process of updating its controls to mitigate compliance risks. The Company is also subject to retained environmental obligations specified in various contractual agreements arising from the divestiture of certain businesses by the Company or one of its predecessor companies.
The components of environmental remediation reserves are as follows:
 
As of
March 31,
2017
 
As of
December 31,
2016
 
(In $ millions)
Demerger obligations (Note 17)
17

 
18

Divestiture obligations (Note 17)
16

 
16

Active sites
17

 
16

US Superfund sites
11

 
11

Other environmental remediation reserves
2

 
3

Total
63

 
64

Remediation
Due to its industrial history and through retained contractual and legal obligations, the Company has the obligation to remediate specific areas on its own sites as well as on divested, demerger, orphan or US Superfund sites (as defined below). In addition, as part of the demerger agreement between the Company and Hoechst AG ("Hoechst"), a specified portion of the responsibility for environmental liabilities from a number of Hoechst divestitures was transferred to the Company (Note 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 US Environmental Protection Agency ("EPA"), state governing bodies or private individuals consider such companies to be potentially responsible

16

Table of Contents

parties ("PRP") under Superfund or related laws. The proceedings relating to these sites are in various stages. The cleanup process has not been completed at most sites, and the status of the insurance coverage for some of these proceedings is uncertain. Consequently, the Company cannot accurately determine its ultimate liability for investigation or cleanup costs at these sites.
As events progress at each site for which it has been named a PRP, the Company accrues, as appropriate, a liability for site cleanup. Such liabilities include all costs that are probable and can be reasonably estimated. In establishing these liabilities, the Company considers the contaminants of concern, the potential impact thereof, the relationship of the contaminants of concern to its current and historic operations, its shipment of waste to a site, its percentage of total waste shipped to the site, the types of wastes involved, the conclusions of any studies, the magnitude of any remedial actions that may be necessary and the number and viability of other PRPs. Often the Company joins with other PRPs to sign joint defense agreements that settle, among PRPs, each party's percentage allocation of costs at the site. Although the ultimate liability may differ from the estimate, the Company routinely reviews the liabilities and revises the estimate, as appropriate, based on the most current information available.
One such site is the Diamond Alkali Superfund Site, which is comprised of a number of sub-sites, including the Lower Passaic River Study Area, which is the lower 17-mile stretch of the Passaic River ("Lower Passaic River Site"), and the Newark Bay Area. The Company and 70 other companies are parties to a May 2007 Administrative Order on Consent with the EPA to perform a Remedial Investigation/Feasibility Study ("RI/FS") at the Lower Passaic River Site in order to identify the levels of contaminants and potential cleanup actions, including the potential migration of contaminants between the Lower Passaic River Site and the Newark Bay Area. Work on the RI/FS is ongoing, with a goal to complete it in 2018.
In March 2016, the EPA issued its final Record of Decision concerning the remediation of the lower 8.3 miles of the Lower Passaic River Site ("Lower 8.3 Miles"). Pursuant to the EPA's Record of Decision, the Lower 8.3 Miles must be dredged bank to bank and an engineered cap must be installed at an EPA estimated cost of approximately $1.4 billion. The Company owned and/or operated facilities in the vicinity of the Lower 8.3 Miles, but has found no evidence that it contributed any of the primary contaminants of concern to the Passaic River. The Company is vigorously defending this matter and currently believes that its ultimate allocable share of the cleanup costs with respect to the Lower Passaic River Site, estimated at less than 1%, will not be material.
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 Company's Board of Directors approved increases in the Company's Common Stock cash dividend rates as follows:
 
Increase
 
Quarterly Common
Stock Cash Dividend
 
Annual Common
Stock Cash Dividend
 
Effective Date
 
(In percentages)
 
(In $ per share)
 
 
April 2016
20
 
0.36
 
1.44
 
May 2016
Treasury Stock
 
Three Months Ended
March 31,
 
Total From
February 2008
Through
March 31, 2017
 
2017
 
2016
 
Shares repurchased
1,461,966

 
—

 
35,804,182

Average purchase price per share
$
89.95

 
$
—

 
$
54.93

Shares repurchased (in $ millions)
$
131

 
$
—

 
$
1,966

Aggregate Board of Directors repurchase authorizations during the period (in $ millions)(1)
$
—

 
$
—

 
$
2,366

______________________________
(1) 
These authorizations give management discretion in determining the timing and conditions under which shares may be repurchased. This repurchase program began in February 2008 and does not have an expiration date.

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Table of Contents

The purchase of treasury stock reduces the number of shares outstanding. The repurchased shares may be used by the Company for compensation programs utilizing the Company's stock and other corporate purposes. The Company accounts for treasury stock using the cost method and includes treasury stock as a component of stockholders' equity.
Other Comprehensive Income (Loss), Net
 
Three Months Ended March 31,
 
2017
 
2016
 
Gross
Amount
 
Income
Tax
(Provision)
Benefit
 
Net
Amount
 
Gross
Amount
 
Income
Tax
(Provision)
Benefit
 
Net
Amount
 
(In $ millions)
Unrealized gain (loss) on marketable securities
—

 
—

 
—

 
1

 
—

 
1

Foreign currency translation
28

 
—

 
28

 
70

 
(6
)
 
64

Gain (loss) on cash flow hedges
(2
)
 
—

 
(2
)
 
—

 
—

 
—

Pension and postretirement benefits
5

 
—

 
5

 
—

 
—

 
—

Total
31

 
—

 
31

 
71

 
(6
)
 
65

Adjustments to Accumulated other comprehensive income (loss), net, are as follows:
 
Unrealized
Gain (Loss)
on
Marketable
Securities
 
Foreign
Currency
Translation
 
Gain (Loss)
on Cash
Flow
Hedges
 
Pension
and
Postretirement
Benefits
 
Accumulated
Other
Comprehensive
Income
(Loss), Net
 
(In $ millions)
As of December 31, 2016
1

 
(350
)
 
3

 
(12
)
 
(358
)
Other comprehensive income (loss) before reclassifications
—

 
28

 
(1
)
 
5

 
32

Amounts reclassified from accumulated other comprehensive income (loss)
—

 
—

 
(1
)

—


(1
)
Income tax (provision) benefit
—

 
—

 
—

 
—

 
—

As of March 31, 2017
1

 
(322
)
 
1

 
(7
)
 
(327
)
13. Other (Charges) Gains, Net
 
Three Months Ended March 31,
 
2017
 
2016
 
(In $ millions)
Employee termination benefits
(2
)
 
(5
)
Other plant/office closures
(53
)
 
—

Total
(55
)
 
(5
)
During the three months ended March 31, 2017 and 2016, the Company recorded $2 million and $5 million, respectively, of employee termination benefits primarily related to the Company's ongoing efforts to align its businesses around its core value drivers.
During the three months ended March 31, 2017, the Company provided notice of termination of a contract with a key raw materials supplier at its ethanol production unit in Nanjing, China. As a result, the Company recorded an estimated $53 million of plant/office closure costs primarily consisting of a $27 million contract termination charge and an $18 million reduction to its non-income tax receivable. The Nanjing, China ethanol production unit is included in the Company's Acetyl Intermediates segment.

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Table of Contents

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, 2016
1

 
9

 
2

 
1

 
3

 
16

Additions
—

 
1

 
—

 
—

 
1

 
2

Cash payments
—

 
(1
)
 
(1
)
 
—

 
(3
)
 
(5
)
Other changes
—

 
(8
)
 
—

 
—

 
—

 
(8
)
Exchange rate changes
—

 
—

 
—

 
—

 
—

 
—

As of March 31, 2017
1

 
1

 
1

 
1

 
1

 
5

Other Plant/Office Closures
 
 
 
 
 
 
 
 
 
 
 
As of December 31, 2016
—

 
—

 
—

 
—

 
—

 
—

Additions
—

 
—

 
—

 
29

 
—

 
29

Cash payments
—

 
—

 
—

 
—

 
—

 
—

Other changes
—

 
—

 
—

 
—

 
—

 
—

Exchange rate changes
—

 
—

 
—

 
—

 
—

 
—

As of March 31, 2017
—

 
—

 
—

 
29

 
—

 
29

Total
1

 
1

 
1

 
30

 
1

 
34

14. Income Taxes
 
Three Months Ended March 31,
 
2017
 
2016
 
(In percentages)
Effective income tax rate
23
 
19
The higher effective income tax rate for the three months ended March 31, 2017 compared to the same period in 2016 is primarily due to losses in jurisdictions with no tax benefit. The increase in losses primarily relates to the Company's notice of termination of a contract with a key raw materials supplier at its ethanol production unit in Nanjing, China (Note 13).
For the three months ended March 31, 2017, the Company's uncertain tax positions increased $7 million, primarily due to legislative changes in certain foreign jurisdictions and foreign exchange rate fluctuations.
The Company's US tax returns for the years 2009 through 2012 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 connection with the Company's US federal income tax audit for 2009 and 2010, the Company has received $192 million of proposed pre-tax adjustments related to various intercompany charges. In the event the Company is wholly unsuccessful in its defense, an actual tax assessment would result in the consumption of up to $67 million of prior foreign tax credit carryforwards. The Company believes these proposed adjustments to be without merit and is vigorously defending its position.
15. Derivative Financial Instruments
Net Investment Hedges
The Company uses derivative instruments, such as foreign currency forwards, and non-derivative financial instruments, such as foreign currency denominated debt, that may give rise to foreign currency transaction gains or losses to hedge the foreign currency exposure of net investments in foreign operations. Accordingly, the effective portion of gains and losses from remeasurement of derivative and non-derivative financial instruments is included in foreign currency translation within Accumulated other comprehensive income (loss), net in the unaudited consolidated balance sheets. Gains and losses are reclassified to earnings in the period the hedged investment is sold or liquidated.

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Table of Contents

The total notional amount of foreign currency denominated debt designated as a net investment hedge of net investments in foreign operations are as follows:
 
As of
March 31,
2017
 
As of
December 31,
2016
 
(In € millions)
Total
850

 
850

Derivatives Not Designated As Hedges
Foreign Currency Forwards and Swaps
Gross notional values of the foreign currency forwards and swaps not designated as hedges are as follows:
 
As of
March 31,
2017
 
As of
December 31,
2016
 
(In $ millions)
Total
457

 
508

Information regarding changes in the fair value of the Company's derivative and non-derivative instruments during the three months ended March 31, 2017 and 2016 is as follows:
 
Gain (Loss) Recognized in Other Comprehensive Income (Loss)
 
Gain (Loss) Recognized in Earnings (Loss)
 
 
 
Three Months Ended March 31,
 
Statement of Operations Classification
 
2017
 
2016
 
2017
 
2016
 
 
(In $ millions)
 
 
Designated as Cash Flow Hedges
 
 
 
 
 
 
 
 
 
Commodity swaps
(1
)
 
—

 
1

 
—

 
Cost of sales
Total
(1
)
 
—

 
1

 
—

 
 
 
 
 
 
 
 
 
 
 
 
Designated as Net Investment Hedges
 
 
 
 
 
 
 
 
 
Foreign currency denominated debt (Note 9)
(13
)
 
(6
)
 
—

 
—

 
N/A
Total
(13
)
 
(6
)
 
—

 
—

 
 
 
 
 
 
 
 
 
 
 
 
Not Designated as Hedges
 
 
 
 
 
 
 
 
 
Foreign currency forwards and swaps
—

 
—

 
1

 
7

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

 
—

 
1

 
7

 
 
See Note 16 - Fair Value Measurements for further information regarding the fair value of the Company's derivative instruments.
Certain of the Company's commodity swaps and foreign currency forwards and swaps permit the Company to net settle all contracts with the counterparty through a single payment in an agreed upon currency in the event of default or early termination of the contract, similar to a master netting arrangement.

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Table of Contents

Information regarding the gross amounts of the Company's derivative instruments and the amounts offset in the unaudited consolidated balance sheets is as follows:
 
As of
March 31,
2017
 
As of
December 31,
2016
 
(In $ millions)
Derivative Assets
 
 
 
Gross amount recognized
7

 
14

Gross amount offset in the consolidated balance sheets
2

 
4

Net amount presented in the consolidated balance sheets
5

 
10

Gross amount not offset in the consolidated balance sheets
1

 
2

Net amount
4

 
8

 
As of
March 31,
2017
 
As of
December 31,
2016
 
(In $ millions)
Derivative Liabilities
 
 
 
Gross amount recognized
5

 
7

Gross amount offset in the consolidated balance sheets
2

 
4

Net amount presented in the consolidated balance sheets
3

 
3

Gross amount not offset in the consolidated balance sheets
1

 
2

Net amount
2

 
1

16. Fair Value Measurements
The Company's financial assets and liabilities are measured at fair value on a recurring basis as follows:
Derivatives. Derivative financial instruments, including commodity swaps and foreign currency forwards and swaps, are valued in the market using discounted cash flow techniques. These techniques incorporate Level 1 and Level 2 fair value measurement inputs such as spot rates and foreign currency exchange rates. These market inputs are utilized in the discounted cash flow calculation considering the instrument's term, notional amount, discount rate and credit risk. Significant inputs to the derivative valuation for commodity swaps and foreign currency forwards and swaps are observable in the active markets and are classified as Level 2 in the fair value measurement hierarchy.

21

Table of Contents

 
Fair Value Measurement
 
 
 
Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Total
 
Balance Sheet Classification
 
(In $ millions)
 
 
As of March 31, 2017
 
 
 
 
 
 
 
Derivatives Designated as Cash Flow Hedges
 
 
 
 
 
 
 
Commodity swaps
—

 
3

 
3

 
Current Other assets
Derivatives Not Designated as Hedges
 
 
 
 


 
 
Foreign currency forwards and swaps
—

 
2

 
2

 
Current Other assets
Total assets
—

 
5

 
5

 
 
Derivatives Not Designated as Hedges
 
 
 
 
 
 
 
Foreign currency forwards and swaps
—

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

 
(3
)
 
(3
)
 
 
As of December 31, 2016
 
 
 
 
 
 
 
Derivatives Designated as Cash Flow Hedges
 
 
 
 
 
 
 
Commodity swaps
—

 
5

 
5

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

 
5

 
5

 
Current Other assets
Total assets
—

 
10

 
10

 
 
Derivatives Not Designated as Hedges
 
 
 
 
 
 
 
Foreign currency forwards and swaps
—

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

 
(3
)
 
(3
)
 
 
Carrying values and fair values of financial instruments that are not carried at fair value are as follows:
 
 
 
Fair Value Measurement
 
Carrying
Amount
 
Significant Other
Observable
Inputs
(Level 2)
 
Unobservable
Inputs
(Level 3)
 
Total
 
(In $ millions)
As of March 31, 2017
 
 
 
 
 
 
 
Cost investments
158

 
—

 
—

 
—

Insurance contracts in nonqualified trusts
49

 
49

 
—

 
49

Long-term debt, including current installments of long-term debt
2,905

 
2,796

 
215

 
3,011

As of December 31, 2016
 
 
 
 
 
 
 
Cost investments
155

 
—

 
—

 
—

Insurance contracts in nonqualified trusts
49

 
49

 
—

 
49

Long-term debt, including current installments of long-term debt
2,938

 
2,826

 
217

 
3,043

In general, the cost investments included in the table above are not publicly traded and their fair values are not readily determinable; however, the Company believes the carrying values approximate or are less than the fair values. Insurance contracts in nonqualified trusts consist of long-term fixed income securities, which are valued using independent vendor pricing models with observable inputs in the active market and therefore represent a Level 2 fair value measurement. The fair value of long-term debt is based on valuations from third-party banks and market quotations and is classified as Level 2 in the fair value measurement hierarchy. The fair value of obligations under capital leases, which are included in long-term debt, is based on lease payments and discount rates, which are not observable in the market and therefore represents a Level 3 fair value measurement.

22

Table of Contents

As of March 31, 2017 and December 31, 2016, the fair values of cash and cash equivalents, receivables, trade payables, short-term borrowings and the current installments of long-term debt approximate carrying values due to the short-term nature of these instruments. These items have been excluded from the table with the exception of the current installments of long-term debt.
17. Commitments and Contingencies
Commitments
Guarantees
The Company has agreed to guarantee or indemnify third parties for environmental and other liabilities pursuant to a variety of agreements, including asset and business divestiture agreements, leases, settlement agreements and various agreements with affiliated companies. Although many of these obligations contain monetary and/or time limitations, others do not provide such limitations. The Company has accrued for all probable and reasonably estimable losses associated with all known matters or claims. These known obligations include the following:
•
Demerger Obligations
In connection with the Hoechst demerger, the Company agreed to indemnify Hoechst, and its legal successors, for various liabilities under the demerger agreement, including for environmental liabilities associated with contamination arising either from environmental damage in general ("Category A") or under 19 divestiture agreements entered into by Hoechst prior to the demerger ("Category B") (Note 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, 2017 are $76 million. Most of the divestiture agreements have become time barred and/or any notified environmental damage claims have been partially settled.
The Company has also undertaken in the demerger agreement to indemnify Hoechst and its legal successors for (i) 33.33% of any and all Category A liabilities that result from Hoechst being held as the responsible party pursuant to public law or current or future environmental law or by third parties pursuant to private or public law related to contamination and (ii) liabilities that Hoechst is required to discharge, including tax liabilities, which are associated with businesses that were included in the demerger but were not demerged due to legal restrictions on the transfers of such items. These indemnities do not provide for any monetary or time limitations. The Company has not been requested by Hoechst to make any payments in connection with this indemnification. Accordingly, the Company has not made any payments to Hoechst and its legal successors.
Based on the Company's evaluation of currently available information, including the lack of requests for indemnification, the Company cannot estimate the Possible Loss for the remaining demerger obligations, if any, in excess of amounts accrued.
•
Divestiture Obligations
The Company and its predecessor companies agreed to indemnify third-party purchasers of former businesses and assets for various pre-closing conditions, as well as for breaches of representations, warranties and covenants. Such liabilities also include environmental liability, product liability, antitrust and other liabilities. These indemnifications and guarantees represent standard contractual terms associated with typical divestiture agreements and, other than environmental liabilities, the Company does not believe that they expose the Company to any significant risk (Note 11).
The Company has divested numerous businesses, investments and facilities through agreements containing indemnifications or guarantees to the purchasers. Many of the obligations contain monetary and/or time limitations, which extend through 2037. The aggregate amount of outstanding indemnifications and guarantees provided for under these agreements is $124 million as of March 31, 2017. 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.

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Purchase Obligations
In the normal course of business, the Company enters into various purchase commitments for goods and services. The Company maintains a number of "take-or-pay" contracts for purchases of raw materials, utilities and other services. Certain of the contracts contain a contract termination buy-out provision that allows for the Company to exit the contracts for amounts less than the remaining take-or-pay obligations. Additionally, the Company has other outstanding commitments representing maintenance and service agreements, energy and utility agreements, consulting contracts and software agreements. As of March 31, 2017, the Company had unconditional purchase obligations of $2.0 billion, which extend through 2036.
Contingencies
The Company is involved in legal and regulatory proceedings, lawsuits, claims and investigations incidental to the normal conduct of business, relating to such matters as product liability, land disputes, commercial contracts, employment, antitrust or competition compliance, intellectual property, workers' compensation, chemical exposure, asbestos exposure, taxes, trade compliance, prior acquisitions and divestitures, claims of legacy stockholders, past waste disposal practices and release of chemicals into the environment. The Company is actively defending those matters where the Company is named as a defendant and, based on the current facts, does not believe the outcomes from these matters would be material to the Company's results of operations, cash flows or financial position.
18. Segment Information
 
Advanced
Engineered
Materials
 
Consumer
Specialties
 
Industrial
Specialties
 
Acetyl
Intermediates
 
Other
Activities
 
Eliminations
 
Consolidated
 
 
(In $ millions)
 
 
Three Months Ended March 31, 2017
 
Net sales
487

 
218

 
245

(1) 
619

(1) 
—

 
(98
)
 
1,471

 
Other (charges) gains, net (Note 13)
—

 
(1
)
 
—

 
(53
)
 
(1
)
 
—

 
(55
)
 
Operating profit (loss)
98

 
68

 
25

 
27

 
(26
)
 
—

 
192

 
Equity in net earnings (loss) of affiliates
42

 
1


—

 
1

 
3

 
—

 
47

 
Depreciation and amortization
24

 
11

 
8

 
26

 
2

 
—

 
71

 
Capital expenditures
10

 
6


4

 
20


1

 
—

 
41

(2) 
 
As of March 31, 2017
 
Goodwill and intangible assets, net
516

 
245

 
46

 
185

 
—

 
—

 
992

 
Total assets
2,803

 
1,300

 
775

 
2,576

 
834

 
—

 
8,288

 
 
Three Months Ended March 31, 2016
 
Net sales
350

 
244


253

(1) 
663

(1) 
—

 
(106
)
 
1,404

 
Other (charges) gains, net (Note 13)
(1
)
 
—

 
(1
)
 
—

 
(3
)
 
—

 
(5
)
 
Operating profit (loss)
88

 
78

 
31

 
114

 
(24
)
 
—

 
287

 
Equity in net earnings (loss) of affiliates
31

 
1

 
—

 
1

 
5

 
—

 
38

 
Depreciation and amortization
24

 
11

 
8

 
27

 
3

 
—

 
73

 
Capital expenditures
19

 
9


18

 
9


3

 
—

 
58

(2) 
 
As of December 31, 2016
 
Goodwill and intangible assets, net
517

 
244

 
46

 
183

 
—

 
—

 
990

 
Total assets
2,792

 
1,324

 
758

 
2,440

 
1,043

 
—

 
8,357

 
______________________________
(1) 
Net sales for Acetyl Intermediates and Industrial Specialties include intersegment sales of $97 million and $1 million, respectively, for the three months ended March 31, 2017 and $106 million and $0 million, respectively, for the three months ended March 31, 2016.
(2) 
Includes a decrease in accrued capital expenditures of $21 million and $12 million for the three months ended March 31, 2017 and 2016, respectively.

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Table of Contents

19. Earnings (Loss) Per Share
 
Three Months Ended
March 31,
 
2017
 
2016
 
(In $ millions, except share data)
Amounts attributable to Celanese Corporation
 
 
 
Earnings (loss) from continuing operations
183

 
256

Earnings (loss) from discontinued operations
—

 
1

Net earnings (loss)
183

 
257

 
 
 
 
Weighted average shares - basic
140,643,860

 
147,413,234

Incremental shares attributable to equity awards
353,543

 
717,880

Weighted average shares - diluted
140,997,403

 
148,131,114

During the three months ended March 31, 2017 and 2016, there were no anti-dilutive equity awards excluded from the computation of diluted net earnings per share.
20. Consolidating Guarantor Financial Information
The Senior Notes were issued by Celanese US ("Issuer") and are guaranteed by Celanese Corporation ("Parent Guarantor") and the Subsidiary Guarantors (Note 9). The Issuer and Subsidiary Guarantors are 100% owned subsidiaries of the Parent Guarantor. The Parent Guarantor and Subsidiary Guarantors have guaranteed the Notes fully and unconditionally and jointly and severally.
For cash management purposes, the Company transfers cash between the Parent Guarantor, Issuer, Subsidiary Guarantors and non-guarantors through intercompany financing arrangements, contributions or declaration of dividends between the respective parent and its subsidiaries. The transfer of cash under these activities facilitates the ability of the recipient to make specified third-party payments for principal and interest on the Company's outstanding debt, Common Stock dividends and Common Stock repurchases. The unaudited interim consolidating statements of cash flows for the three months ended March 31, 2017 and 2016 present such intercompany financing activities, contributions and dividends consistent with how such activity would be presented in a stand-alone statement of cash flows.
The Company has not presented separate financial information and other disclosures for each of its Subsidiary Guarantors because it believes such financial information and other disclosures would not provide investors with any additional information that would be material in evaluating the sufficiency of the guarantees.
The unaudited interim consolidating financial statements for the Parent Guarantor, the Issuer, the Subsidiary Guarantors and the non-guarantors are as follows:

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Table of Contents

CELANESE CORPORATION AND SUBSIDIARIES
UNAUDITED INTERIM CONSOLIDATING STATEMENT OF OPERATIONS
 
Three Months Ended March 31, 2017
 
Parent
Guarantor
 
Issuer
 
Subsidiary
Guarantors
 
Non-
Guarantors
 
Eliminations
 
Consolidated
 
(In $ millions)
Net sales
—

 
—

 
589

 
1,177

 
(295
)
 
1,471

Cost of sales
—

 
—

 
(443
)
 
(966
)
 
290

 
(1,119
)
Gross profit
—

 
—

 
146

 
211

 
(5
)
 
352

Selling, general and administrative expenses
—

 
—

 
(16
)
 
(67
)
 
—

 
(83
)
Amortization of intangible assets
—

 
—

 
(1
)
 
(3
)
 
—

 
(4
)
Research and development expenses
—

 
—

 
(7
)
 
(10
)
 
—

 
(17
)
Other (charges) gains, net
—

 
—

 
(6
)
 
(49
)
 
—

 
(55
)
Foreign exchange gain (loss), net
—

 
—

 
—

 
—

 
—

 
—

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

 
—

 
(2
)
 
1

 
—

 
(1
)
Operating profit (loss)
—

 
—

 
114

 
83

 
(5
)
 
192

Equity in net earnings (loss) of affiliates
183

 
174

 
101

 
43

 
(454
)
 
47

Interest expense
—

 
(6
)
 
(23
)
 
(7
)
 
7

 
(29
)
Refinancing expense
—

 
—

 
—

 
—

 
—

 
—

Interest income
—

 
6

 
1

 
—

 
(7
)
 
—

Dividend income - cost investments
—

 
—

 
—

 
29

 
—

 
29

Other income (expense), net
—

 
—

 
—

 
1

 
—

 
1

Earnings (loss) from continuing operations before tax
183

 
174

 
193

 
149

 
(459
)
 
240

Income tax (provision) benefit
—

 
9

 
(63
)
 
1

 
(3
)
 
(56
)
Earnings (loss) from continuing operations
183

 
183

 
130

 
150

 
(462
)
 
184

Earnings (loss) from operation of discontinued operations
—

 
—

 
—

 
—

 
—

 
—

Income tax (provision) benefit from discontinued operations
—

 
—

 
—

 
—

 
—

 
—

Earnings (loss) from discontinued operations
—

 
—

 
—

 
—

 
—

 
—

Net earnings (loss)
183

 
183

 
130

 
150

 
(462
)
 
184

Net (earnings) loss attributable to noncontrolling interests
—

 
—

 
—

 
(1
)
 
—

 
(1
)
Net earnings (loss) attributable to Celanese Corporation
183

 
183

 
130

 
149

 
(462
)
 
183


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Table of Contents

CELANESE CORPORATION AND SUBSIDIARIES
UNAUDITED INTERIM CONSOLIDATING STATEMENT OF OPERATIONS
 
Three Months Ended March 31, 2016
 
Parent
Guarantor
 
Issuer
 
Subsidiary
Guarantors
 
Non-
Guarantors
 
Eliminations
 
Consolidated
 
(In $ millions)
Net sales
—

 
—

 
583

 
1,139

 
(318
)
 
1,404

Cost of sales
—

 
—

 
(441
)