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 September 30, 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_imagea01a34.gif
CELANESE CORPORATION
(Exact Name of Registrant as Specified in its Charter)
Delaware
(State or Other Jurisdiction of
Incorporation or Organization)
98-0420726
(I.R.S. Employer
Identification No.)
 
 
222 W. Las Colinas Blvd., Suite 900N
Irving, TX
(Address of Principal Executive Offices)
75039-5421
(Zip Code)
(972) 443-4000
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ  No o
Indicate by check mark whether the registrant has submitted electronically 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 October 10, 2017 was 135,636,382.
 
 
 
 
 

Table of Contents

CELANESE CORPORATION AND SUBSIDIARIES
Form 10-Q
For the Quarterly Period Ended September 30, 2017
TABLE OF CONTENTS
 
 
Page
 
 
 
 
 
 
 
 
 
 
 
 
 

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Item 1. Financial Statements
CELANESE CORPORATION AND SUBSIDIARIES
UNAUDITED INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2017
 
2016
 
2017
 
2016
 
(In $ millions, except share and per share data)
Net sales
1,566

 
1,323

 
4,547

 
4,078

Cost of sales
(1,181
)
 
(968
)
 
(3,443
)
 
(2,995
)
Gross profit
385

 
355

 
1,104

 
1,083

Selling, general and administrative expenses
(112
)
 
(81
)
 
(291
)
 
(232
)
Amortization of intangible assets
(5
)
 
(3
)
 
(14
)
 
(7
)
Research and development expenses
(19
)
 
(20
)
 
(53
)
 
(58
)
Other (charges) gains, net
—

 
(3
)
 
(58
)
 
(12
)
Foreign exchange gain (loss), net
4

 
(1
)
 
—

 
1

Gain (loss) on disposition of businesses and assets, net
(1
)
 
(1
)
 
(4
)
 
1

Operating profit (loss)
252

 
246

 
684

 
776

Equity in net earnings (loss) of affiliates
50

 
41

 
135

 
114

Interest expense
(32
)
 
(28
)
 
(91
)
 
(91
)
Refinancing expense
—

 
(4
)
 
—

 
(6
)
Interest income
1

 
—

 
2

 
1

Dividend income - cost investments
24

 
26

 
82

 
82

Other income (expense), net
(6
)
 
—

 
(2
)
 
(2
)
Earnings (loss) from continuing operations before tax
289

 
281

 
810

 
874

Income tax (provision) benefit
(57
)
 
(15
)
 
(153
)
 
(127
)
Earnings (loss) from continuing operations
232

 
266

 
657

 
747

Earnings (loss) from operation of discontinued operations
(5
)
 
(4
)
 
(14
)
 
(3
)
Income tax (provision) benefit from discontinued operations
1

 
1

 
2

 
1

Earnings (loss) from discontinued operations
(4
)
 
(3
)
 
(12
)
 
(2
)
Net earnings (loss)
228

 
263

 
645

 
745

Net (earnings) loss attributable to noncontrolling interests
(2
)
 
(1
)
 
(5
)
 
(5
)
Net earnings (loss) attributable to Celanese Corporation
226

 
262

 
640

 
740

Amounts attributable to Celanese Corporation
 

 
 

 
 

 
 

Earnings (loss) from continuing operations
230

 
265

 
652

 
742

Earnings (loss) from discontinued operations
(4
)
 
(3
)
 
(12
)
 
(2
)
Net earnings (loss)
226

 
262

 
640

 
740

Earnings (loss) per common share - basic
 

 
 

 
 

 
 

Continuing operations
1.68

 
1.84

 
4.71

 
5.08

Discontinued operations
(0.03
)
 
(0.02
)
 
(0.09
)
 
(0.01
)
Net earnings (loss) - basic
1.65

 
1.82

 
4.62

 
5.07

Earnings (loss) per common share - diluted
 

 
 

 
 

 
 

Continuing operations
1.68

 
1.83

 
4.69

 
5.06

Discontinued operations
(0.03
)
 
(0.02
)
 
(0.09
)
 
(0.01
)
Net earnings (loss) - diluted
1.65

 
1.81

 
4.60

 
5.05

Weighted average shares - basic
136,579,077

 
144,005,098

 
138,599,330

 
145,959,821

Weighted average shares - diluted
136,951,923

 
144,601,465

 
138,988,321

 
146,585,560


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

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CELANESE CORPORATION AND SUBSIDIARIES
UNAUDITED INTERIM CONSOLIDATED STATEMENTS OF
COMPREHENSIVE INCOME (LOSS)
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2017
 
2016
 
2017
 
2016
 
(In $ millions)
Net earnings (loss)
228

 
263

 
645

 
745

Other comprehensive income (loss), net of tax


 


 


 
 
Unrealized gain (loss) on marketable securities
—

 
(1
)
 
1

 
—

Foreign currency translation
42

 
(8
)
 
148

 
38

Gain (loss) on cash flow hedges
—

 
—

 
(1
)
 
1

Pension and postretirement benefits
(1
)
 
—

 
4

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

 
(9
)
 
152

 
38

Total comprehensive income (loss), net of tax
269

 
254

 
797

 
783

Comprehensive (income) loss attributable to noncontrolling interests
(2
)
 
(1
)
 
(5
)
 
(5
)
Comprehensive income (loss) attributable to Celanese Corporation
267

 
253

 
792

 
778


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


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CELANESE CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED BALANCE SHEETS
 
As of
September 30,
2017
 
As of
December 31,
2016
 
(In $ millions, except share data)
ASSETS
 
 
 
Current Assets
 

 
 

Cash and cash equivalents (variable interest entity restricted - 2017: $23; 2016: $18)
461

 
638

Trade receivables - third party and affiliates (net of allowance for doubtful accounts - 2017: $8; 2016: $6; variable interest entity restricted - 2017: $5; 2016: $4)
989

 
801

Non-trade receivables, net
260

 
223

Inventories
809

 
720

Marketable securities, at fair value
31

 
30

Other assets
63

 
60

Total current assets
2,613

 
2,472

Investments in affiliates
938

 
852

Property, plant and equipment (net of accumulated depreciation - 2017: $2,508; 2016: $2,239; variable interest entity restricted - 2017: $706; 2016: $734)
3,706

 
3,577

Deferred income taxes
201

 
159

Other assets (variable interest entity restricted - 2017: $6; 2016: $9)
306

 
307

Goodwill
995

 
796

Intangible assets (variable interest entity restricted - 2017: $25; 2016: $26)
303

 
194

Total assets
9,062

 
8,357

LIABILITIES AND EQUITY
 
 
 
Current Liabilities
 

 
 

Short-term borrowings and current installments of long-term debt - third party and affiliates
435

 
118

Trade payables - third party and affiliates
695

 
625

Other liabilities
343

 
322

Income taxes payable
77

 
12

Total current liabilities
1,550

 
1,077

Long-term debt, net of unamortized deferred financing costs
2,954

 
2,890

Deferred income taxes
195

 
130

Uncertain tax positions
153

 
131

Benefit obligations
845

 
893

Other liabilities
230

 
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: 168,024,095 issued and 135,636,382 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: 32,387,713 shares; 2016: 26,950,910 shares)
(2,031
)
 
(1,531
)
Additional paid-in capital
171

 
157

Retained earnings
4,781

 
4,320

Accumulated other comprehensive income (loss), net
(206
)
 
(358
)
Total Celanese Corporation stockholders' equity
2,715

 
2,588

Noncontrolling interests
420

 
433

Total equity
3,135

 
3,021

Total liabilities and equity
9,062

 
8,357


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

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CELANESE CORPORATION AND SUBSIDIARIES
UNAUDITED INTERIM CONSOLIDATED STATEMENT OF EQUITY
 
Nine Months Ended
September 30, 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
20,151

 
—

Purchases of treasury stock
(5,436,803
)
 
—

Stock awards
392,587

 
—

Balance as of the end of the period
135,636,382

 
—

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

 
(1,531
)
Purchases of treasury stock, including related fees
5,436,803

 
(500
)
Balance as of the end of the period
32,387,713

 
(2,031
)
Additional Paid-In Capital
 
 
 
Balance as of the beginning of the period
 
 
157

Stock-based compensation, net of tax
 
 
13

Stock option exercises, net of tax
 
 
1

Balance as of the end of the period
 
 
171

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

Cumulative effect adjustment from adoption of new accounting standard (Note 1)
 
 
(1
)
Net earnings (loss) attributable to Celanese Corporation
 
 
640

Series A common stock dividends
 
 
(178
)
Balance as of the end of the period
 
 
4,781

Accumulated Other Comprehensive Income (Loss), Net
 
 
 
Balance as of the beginning of the period
 
 
(358
)
Other comprehensive income (loss), net of tax
 
 
152

Balance as of the end of the period
 
 
(206
)
Total Celanese Corporation stockholders' equity
 
 
2,715

Noncontrolling Interests
 
 
 
Balance as of the beginning of the period
 
 
433

Net earnings (loss) attributable to noncontrolling interests
 
 
5

(Distributions to) contributions from noncontrolling interests
 
 
(18
)
Balance as of the end of the period
 
 
420

Total equity
 
 
3,135


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

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CELANESE CORPORATION AND SUBSIDIARIES
UNAUDITED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
 
Nine Months Ended
September 30,
 
2017
 
2016
 
(In $ millions)
Operating Activities
 
 
 
Net earnings (loss)
645

 
745

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

 
1

Depreciation, amortization and accretion
231

 
223

Pension and postretirement net periodic benefit cost
(60
)
 
(40
)
Pension and postretirement contributions
(36
)
 
(38
)
Deferred income taxes, net
(5
)
 
39

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

 
1

Stock-based compensation
32

 
23

Undistributed earnings in unconsolidated affiliates
(19
)
 
2

Other, net
8

 
11

Operating cash provided by (used in) discontinued operations
7

 
—

Changes in operating assets and liabilities
 
 
 
Trade receivables - third party and affiliates, net
(122
)
 
(82
)
Inventories
(14
)
 
36

Other assets
(24
)
 
53

Trade payables - third party and affiliates
41

 
16

Other liabilities
57

 
(50
)
Net cash provided by (used in) operating activities
745

 
940

Investing Activities
 
 
 
Capital expenditures on property, plant and equipment
(180
)
 
(186
)
Acquisitions, net of cash acquired
(269
)
 
—

Proceeds from sale of businesses and assets, net
1

 
8

Other, net
(9
)
 
(14
)
Net cash provided by (used in) investing activities
(457
)
 
(192
)
Financing Activities
 
 
 
Net change in short-term borrowings with maturities of 3 months or less
224

 
(347
)
Proceeds from short-term borrowings
150

 
39

Repayments of short-term borrowings
(91
)
 
(76
)
Proceeds from long-term debt
—

 
1,509

Repayments of long-term debt
(65
)
 
(1,095
)
Purchases of treasury stock, including related fees
(500
)
 
(300
)
Stock option exercises
1

 
3

Series A common stock dividends
(178
)
 
(150
)
(Distributions to) contributions from noncontrolling interests
(18
)
 
(15
)
Other, net
(19
)
 
(35
)
Net cash provided by (used in) financing activities
(496
)
 
(467
)
Exchange rate effects on cash and cash equivalents
31

 
4

Net increase (decrease) in cash and cash equivalents
(177
)
 
285

Cash and cash equivalents as of beginning of period
638

 
967

Cash and cash equivalents as of end of period
461

 
1,252


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

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CELANESE CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
1. Description of the Company and Basis of Presentation
Description of the Company
Celanese Corporation and its subsidiaries (collectively, the "Company") is a global technology and specialty materials company. The Company's business involves processing chemical raw materials, such as methanol, carbon monoxide and ethylene, and natural products, including wood pulp, into value-added chemicals, thermoplastic polymers and other chemical-based products.
Definitions
In this Quarterly Report on Form 10-Q ("Quarterly Report"), the term "Celanese" refers to Celanese Corporation, a Delaware corporation, and not its subsidiaries. The term "Celanese US" refers to the Company's subsidiary, Celanese US Holdings LLC, a Delaware limited liability company, and not its subsidiaries.
Basis of Presentation
The unaudited interim consolidated financial statements for the three and nine months ended September 30, 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 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 and nine months ended September 30, 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

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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 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 August 2017, the FASB issued ASU 2017-12, Targeted Improvements to Accounting for Hedging Activities.
 
The new guidance improves the financial reporting of hedging relationships to better portray the economic results of an entity's risk management activities in its financial statements through changes to both the designation and measurement guidance for qualifying hedging relationships and the presentation of hedge results.
 
January 1, 2019. Early adoption is permitted.
 
The Company is currently evaluating the impact of adoption on its financial statements and related disclosures, but does not expect adoption will have a material impact.
 
 
 
 
 
 
 
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 January 2017, the FASB issued ASU 2017-04, Intangibles: Goodwill and Other: Simplifying the Test for Goodwill Impairment.
 
The new guidance simplifies subsequent measurement of goodwill by eliminating Step 2 from the goodwill impairment test.
 
January 1, 2020. Early adoption is permitted.
 
The Company adopted the new guidance during the three months ended September 30, 2017, as part of the FASB's simplification initiative. The adoption of the new guidance did not have a material impact to the Company.
 
 
 
 
 
 
 
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).
 
 
 
 
 
 
 

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Standard
 
Description
 
Effective Date
 
Effect on the Financial Statements or Other Significant Matters
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, but cannot quantify these at this time. The Company plans to adopt the standard effective January 1, 2019.
 
 
 
 
 
 
 
In January 2016, the FASB issued ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities.
 
The new guidance updates certain aspects of recognition, measurement, presentation and disclosure of financial instruments.
 
January 1, 2018. Early adoption is permitted.
 
The Company does not expect adoption will have a material impact on its financial statements and related disclosures.

 
 
 
 
 
 
 
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers. Since that date, the FASB has issued additional ASUs clarifying certain aspects of ASU 2014-09.
 
The new guidance requires entities to recognize revenue in a way that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services. The new guidance provides alternative methods of adoption. Subsequent guidance issued after May 2014 did not change the core principle of ASU 2014-09.
 
January 1, 2018.
 
The Company plans to adopt the revenue guidance effective January 1, 2018, using the modified retrospective approach. The Company has substantially completed its assessment of the potential impact on its financial statements and currently does not expect the adoption to have a material impact on its financial statements and related disclosures. Further, it does not expect to change the manner or timing of recognizing revenue as a majority of its revenue transactions are recognized when product is delivered.
 
 
 
 
 
 
 
3. Acquisitions, Dispositions and Plant Closures
Acquisitions
•
Acetate Tow Joint Venture
On June 18, 2017, Celanese, through various subsidiaries, entered into an agreement with affiliates of The Blackstone Group L.P. (the "Blackstone Entities") to form a joint venture which combines substantially all of the operations of the Company's cellulose derivatives business and the operations of the Rhodia Acetow cellulose acetate business formerly operated by Solvay S.A. and acquired by the Blackstone Entities on June 1, 2017. The Company's cellulose derivatives operations are included in the Consumer Specialties segment. The combined business will operate under a common governance structure through two separate joint ventures, each of which will be owned ultimately 70% and 30% by Celanese and the Blackstone Entities, respectively. One venture will primarily be comprised of the US operations being contributed and the other will be comprised of the remaining international operations being contributed. Closing of the transaction is subject to customary closing conditions, including: (i) waiting periods, clearances and/or approvals of the European Union and other jurisdictions requiring antitrust or similar approvals, and (ii) completion of the internal reorganization of the Company's cellulose derivatives business to facilitate the closing and operation of the joint venture post-closing. The agreement may be terminated by Celanese and/or the Blackstone Entities under certain limited circumstances, including if the closing is not consummated within one year of signing, which date may be extended by an additional 90 days, under certain circumstances. Pursuant to the terms of the agreement, once approved and upon closing, the Company is expecting to consolidate the joint venture results, subject to the Blackstone Entities' noncontrolling interest.
In connection with the agreement, the joint venture obtained commitments for credit facilities aggregating $2.4 billion to be entered into by the joint venture entities at the closing consisting of (i) senior secured ($135 million) and senior unsecured ($65 million) revolving credit facilities in an aggregate principal amount of $200 million, (ii) senior secured term loan facilities in an aggregate principal amount of $1.0 billion, (iii) a senior unsecured bridge facility in an aggregate principal amount of $800 million, which bridge facility will backstop the proposed issuance of $800 million senior unsecured notes by a joint venture subsidiary, and (iv) a senior unsecured term loan facility in an aggregate principal amount of $400 million. The credit facilities will be guaranteed by certain of the subsidiaries of the respective borrowers; however, only the $65 million senior

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unsecured revolving credit facility and the $400 million senior unsecured term loan credit facility will be guaranteed by Celanese. Approximately $2.2 billion of the proceeds of the debt financing are expected to be used, in part, to repay certain of the parties' existing indebtedness and a $1.6 billion dividend to the Company.
•
Nilit Plastics
On May 3, 2017, using cash on hand and borrowings under the Company's senior unsecured revolving credit facility, the Company acquired the nylon compounding division of Nilit Group ("Nilit"), an independent producer of high performance nylon resins, fibers and compounds. Celanese acquired the nylon compounding product portfolio, customer agreements and manufacturing, technology and commercial facilities. The acquisition of Nilit increases the Company's global engineered materials product platforms, extends the operational model, technical and industry solutions capabilities and expands project pipelines. The acquisition was accounted for as a business combination and the acquired operations are included in the Advanced Engineered Materials segment.
Pro forma financial information since the respective acquisition date has not been provided as the acquisition did not have a material impact on the Company's financial information. The Company allocated the purchase price of the acquisition to identifiable assets acquired and liabilities assumed based on their estimated fair values as of the acquisition date. The excess of the purchase price over the aggregate fair values was recorded as goodwill. The Company calculated the fair value of the assets acquired using the income, market, or cost approach (or a combination thereof). Fair values were determined based on Level 3 inputs including estimated future cash flows, discount rates, royalty rates, growth rates, sales projections, retention rates and terminal values, all of which require significant management judgment and are susceptible to change. The purchase price allocation is based upon preliminary information and is subject to change if additional information about the facts and circumstances that existed at the acquisition date becomes available. The final fair value of the net assets acquired may result in adjustments to the assets and liabilities, including goodwill. During the nine months ended September 30, 2017, the Company made certain adjustments to its purchase price allocation to adjust taxes and working capital, which resulted in a $4 million reduction to goodwill. Any subsequent measurement period adjustments are not expected to have a material impact on the Company's results of operations.
The preliminary purchase price allocation for the Nilit acquisition is as follows:
 
As of
May 3, 2017
 
(In $ millions)
Cash and cash equivalents
4

Trade receivables - third party and affiliates
21

Inventories
37

Property, plant and equipment, net
36

Intangible assets (Note 7)
104

Goodwill(1) (Note 7)
136

Other assets
11

Total fair value of assets acquired
349

 
 
Trade payables - third party and affiliates
(8
)
Total debt (Note 10)
(12
)
Deferred income taxes
(26
)
Benefit obligations
(15
)
Other liabilities(2)
(45
)
Total fair value of liabilities assumed
(106
)
Net assets acquired
243

______________________________
(1) 
Goodwill consists of expected revenue and operating synergies resulting from the acquisition. None of the goodwill is deductible for income tax purposes.
(2) 
Includes a $29 million acquisition payment to Nilit Group after the date of close, which was paid as of June 30, 2017.

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During the nine months ended September 30, 2017, transaction related costs of $2 million were expensed as incurred to Selling, general and administrative expenses in the unaudited interim consolidated statements of operations. The amount of pro forma Net earnings (loss) of Nilit included in the Company's unaudited interim consolidated statement of operations was less than 1% (unaudited) of its consolidated Net earnings (loss) had the acquisition occurred as of the beginning of 2017. The amount of Nilit Net earnings (loss) consolidated by the Company since the acquisition date was not material.
•
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 nine months ended September 30, 2017, the Company made certain adjustments to its purchase price allocation to adjust property, plant and equipment, inventory and accounts receivable, which resulted in a $2 million reduction to goodwill. Any subsequent measurement period adjustments are not expected to have a material impact on the Company's 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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The carrying amount of the assets and liabilities associated with Fairway included in the unaudited consolidated balance sheets are as follows:
 
As of
September 30,
2017
 
As of
December 31,
2016
 
(In $ millions)
Cash and cash equivalents
23

 
18

Trade receivables, net - third party & affiliate
10

 
8

Property, plant and equipment (net of accumulated depreciation - 2017: $80; 2016: $50)
706

 
734

Intangible assets (net of accumulated amortization - 2017: $2; 2016: $1)
25

 
26

Other assets
6

 
9

Total assets(1)
770

 
795

 
 
 
 
Trade payables
14

 
15

Other liabilities(2)
4

 
2

Total debt
5

 
5

Deferred income taxes
3

 
2

Total liabilities
26

 
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 September 30, 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
September 30,
2017
 
As of
December 31,
2016
 
(In $ millions)
Property, plant and equipment, net
55

 
60

 
 
 
 
Trade payables
37

 
53

Current installments of long-term debt
19

 
10

Long-term debt
78

 
91

Total liabilities
134

 
154

 
 
 
 
Maximum exposure to loss
180

 
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 18).

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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 11) as follows:
 
As of
September 30,
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
September 30,
2017
 
As of
December 31,
2016
 
(In $ millions)
Finished goods
539

 
506

Work-in-process
45

 
45

Raw materials and supplies
225

 
169

Total
809

 
720

7. Goodwill and Intangible Assets, Net
Goodwill
 
Advanced
Engineered
Materials
 
Consumer
Specialties
 
Industrial
Specialties
 
Acetyl
Intermediates
 
Total
 
(In $ millions)
As of December 31, 2016
385

 
225

 
38

 
148

 
796

Acquisitions (Note 3)
130

 
—

 
—

 
—

 
130

Exchange rate changes
37

 
10

 
2

 
20

 
69

As of September 30, 2017(1)
552

 
235

 
40

 
168

 
995

______________________________
(1) 
There were $0 million of accumulated impairment losses as of September 30, 2017.
The Company assesses the recoverability of the carrying amount of its reporting unit goodwill either qualitatively or quantitatively annually during the third quarter of its fiscal year using June 30 balances or whenever events or changes in circumstances indicate that the carrying amount of the asset may not be fully recoverable. In connection with the Company's annual goodwill impairment assessment, the Company did not record an impairment loss to goodwill during the nine months ended September 30, 2017 as the estimated fair value for each of the Company's reporting units exceeded the carrying amount of the underlying assets by a substantial margin.

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Table of Contents

Intangible Assets, Net
Finite-lived intangible assets are as follows:
 
Licenses
 
Customer-
Related
Intangible
Assets
 
Developed
Technology
 
Covenants
Not to
Compete
and Other
 
Total
 
 
(In $ millions)
 
Gross Asset Value
 
 
 
 
 
 
 
 
 
 
As of December 31, 2016
36

 
509

 
35

 
53

 
633

 
Acquisitions (Note 3)
—

 
73

 
9

 
—

 
82

(1) 
Exchange rate changes
1

 
51

 
1

 
—

 
53

 
As of September 30, 2017
37

 
633

 
45

 
53

 
768

 
Accumulated Amortization
 
 
 
 
 
 
 
 
 
 
As of December 31, 2016
(27
)
 
(440
)
 
(26
)
 
(31
)
 
(524
)
 
Amortization
(3
)
 
(8
)
 
(2
)
 
(1
)
 
(14
)
 
Exchange rate changes
(1
)
 
(39
)
 
(1
)
 
—

 
(41
)
 
As of September 30, 2017
(31
)
 
(487
)
 
(29
)
 
(32
)
 
(579
)
 
Net book value
6

 
146

 
16

 
21

 
189

 
______________________________
(1) 
Represents intangible assets acquired related to Nilit (Note 3) with a weighted average amortization period of 14 years.
Indefinite-lived intangible assets are as follows:
 
Trademarks
and Trade Names
 
(In $ millions)
As of December 31, 2016
85

Acquisitions (Note 3)
22

Accumulated impairment losses
—

Exchange rate changes
7

As of September 30, 2017
114

The Company assesses the recoverability of the carrying amount of its indefinite-lived intangible assets either qualitatively or by utilizing the relief from royalty method under the income approach annually during the third quarter of its fiscal year using June 30 balances or whenever events or changes in circumstances indicate that the carrying amount of the assets may not be fully recoverable. In connection with the Company's annual indefinite-lived intangible assets impairment assessment, the Company did not record an impairment loss to indefinite-lived intangible assets during the nine months ended September 30, 2017 as the estimated fair value of each of the Company's indefinite-lived intangible assets exceeded the carrying value of the underlying assets by a substantial margin.
The Company's trademarks and trade names have an indefinite life. For the nine months ended September 30, 2017, the Company did not renew or extend any intangible assets.
Estimated amortization expense for the succeeding five fiscal years is as follows:
 
(In $ millions)
2018
19

2019
17

2020
15

2021
15

2022
14


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8. Current Other Liabilities
 
As of
September 30,
2017
 
As of
December 31,
2016
 
(In $ millions)
Asset retirement obligations
17

 
9

Benefit obligations (Note 11)
31

 
31

Customer rebates
59

 
51

Derivatives (Note 16)
9

 
3

Environmental (Note 12)
17

 
14

Insurance
4

 
6

Interest
18

 
15

Restructuring (Note 14)
6

 
16

Salaries and benefits
91

 
97

Sales and use tax/foreign withholding tax payable
23

 
21

Other
68

 
59

Total
343

 
322

9. Noncurrent Other Liabilities
 
As of
September 30,
2017
 
As of
December 31,
2016
 
(In $ millions)
Asset retirement obligations
10

 
20

Deferred proceeds
46

 
41

Deferred revenue
7

 
9

Environmental (Note 12)
54

 
50

Income taxes payable
6

 
6

Insurance
52

 
46

Other
55

 
43

Total
230

 
215

10. Debt
 
As of
September 30,
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
59

 
27

Short-term borrowings, including amounts due to affiliates(1)
75

 
68

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

 
23

Revolving credit facility(3)
220

 
—

Accounts receivable securitization facility(4)
81

 
—

Total
435

 
118

______________________________
(1) 
The weighted average interest rate was 3.0% and 3.1% as of September 30, 2017 and December 31, 2016, respectively.
(2) 
The weighted average interest rate was 1.2% as of December 31, 2016.
(3) 
The weighted average interest rate was 2.7% as of September 30, 2017.
(4) 
The weighted average interest rate was 2.0% as of September 30, 2017.

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Table of Contents

 
As of
September 30,
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%
354

 
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%
884

 
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

Nilit bank loans due at various dates through 2026 (Note 3)(3)
12

 
—

Obligations under capital leases due at various dates through 2054
212

 
217

Subtotal
3,031

 
2,938

Unamortized debt issuance costs(4)
(18
)
 
(21
)
Current installments of long-term debt
(59
)
 
(27
)
Total
2,954

 
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) 
The weighted average interest rate was 1.4% as of September 30, 2017.
(4) 
Related to the Company's long-term debt, excluding obligations under capital leases.
Senior Credit Facilities
In July 2016, Celanese, Celanese US and certain subsidiaries entered into a new senior credit agreement ("Credit Agreement") consisting of a $500 million senior unsecured term loan and a $1.0 billion senior unsecured revolving credit facility (with a letter of credit sublimit), each maturing in 2021. The Credit Agreement is guaranteed by Celanese, Celanese US and substantially all of its domestic subsidiaries (the "Subsidiary Guarantors").
The Company's debt balances and amounts available for borrowing under its senior unsecured revolving credit facility are as follows:
 
As of
September 30,
2017
 
(In $ millions)
Revolving Credit Facility
 
Borrowings outstanding(1)
220

Letters of credit issued
—

Available for borrowing(2)
780

______________________________
(1) 
The Company borrowed $451 million and repaid $231 million under its senior unsecured revolving credit facility during the nine months ended September 30, 2017.
(2) 
The margin for borrowings under the senior unsecured revolving credit facility was 1.5% above LIBOR at current Company credit ratings.

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Table of Contents

Senior Notes
The Company has outstanding senior unsecured notes, issued in public offerings registered under the Securities Act of 1933 ("Securities Act"), as amended (collectively, the "Senior Notes"). The Senior Notes were issued by Celanese US and are guaranteed on a senior unsecured basis by Celanese and the Subsidiary Guarantors.
Accounts Receivable Securitization Facility
The Company has a US accounts receivable securitization facility involving receivables of certain of its domestic subsidiaries of the Company transferred to a wholly-owned, "bankruptcy remote" special purpose subsidiary of the Company ("SPE"). The securitization facility, which permits cash borrowings and letters of credit, expires in July 2019.
The Company's debt balances and amounts available for borrowing under its securitization facility are as follows:
 
As of
September 30,
2017
 
(In $ millions)
Accounts Receivable Securitization Facility
 
Borrowings outstanding(1)
81

Letters of credit issued
31

Available for borrowing
7

Total borrowing base
119

 
 
Maximum borrowing base(2)
120

______________________________
(1) 
The Company borrowed $85 million and repaid $4 million under its Accounts Receivable Securitization Facility during the nine months ended September 30, 2017.
(2) 
Outstanding accounts receivable transferred to the SPE was $153 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 covenants related to its debt agreements as of September 30, 2017.

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11. Benefit Obligations
The components of net periodic benefit cost are as follows:
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2017
 
2016
 
2017
 
2016
 
Pension
Benefits
 
Post-retirement
Benefits
 
Pension
Benefits
 
Post-retirement
Benefits
 
Pension
Benefits
 
Post-retirement
Benefits
 
Pension
Benefits
 
Post-retirement
Benefits
 
(In $ millions)
Service cost
2

 
1

 
2

 
—

 
6

 
1

 
6

 
—

Interest cost
27

 
—

 
28

 
1

 
80

 
1

 
84

 
2

Expected return on plan assets
(50
)
 
—

 
(44
)
 
—

 
(148
)
 
—

 
(132
)
 
—

Amortization of prior service cost (credit), net
—

 
—

 
—

 
(1
)
 
—

 
(1
)
 
—

 
(3
)
Special termination benefit
—

 
—

 
—

 
—

 
1

 
—

 
3

 
—

Total
(21
)
 
1

 
(14
)
 
—

 
(61
)
 
1

 
(39
)
 
(1
)
Benefit obligation funding is as follows:
 
As of
September 30,
2017
 
Total
Expected
2017
 
(In $ millions)
Cash contributions to defined benefit pension plans
17

 
20

Benefit payments to nonqualified pension plans
16

 
22

Benefit payments to other postretirement benefit plans
3

 
4

Cash contributions to German multiemployer defined benefit pension plans(1)
5

 
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.
12. Environmental
The Company is subject to environmental laws and regulations worldwide that impose limitations on the discharge of pollutants into the air and water, establish standards for the treatment, storage and disposal of solid and hazardous wastes, and impose record keeping and notification requirements. Failure to timely comply with these laws and regulations may expose the Company to penalties. The Company believes that it is in substantial compliance with all applicable environmental laws and regulations and engages in an ongoing process of updating its controls to mitigate compliance risks. The Company is also subject to retained environmental obligations specified in various contractual agreements arising from the divestiture of certain businesses by the Company or one of its predecessor companies.

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Table of Contents

The components of environmental remediation reserves are as follows:
 
As of
September 30,
2017
 
As of
December 31,
2016
 
(In $ millions)
Demerger obligations (Note 18)
30

 
18

Divestiture obligations (Note 18)
15

 
16

Active sites
14

 
16

US Superfund sites
10

 
11

Other environmental remediation reserves
2

 
3

Total
71

 
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 18). Certain of these sites, at which the Company maintains continuing involvement, were and continue to be designated as discontinued operations when closed. The Company provides for such obligations when the event of loss is probable and reasonably estimable. The Company believes that environmental remediation costs will not have a material adverse effect on the financial position of the Company, but may have a material adverse effect on the results of operations or cash flows in any given period.
US Superfund Sites
In the US, the Company may be subject to substantial claims brought by US federal or state regulatory agencies or private individuals pursuant to statutory authority or common law. In particular, the Company has a potential liability under the US Federal Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, and related state laws (collectively referred to as "Superfund") for investigation and cleanup costs at certain sites. At most of these sites, numerous companies, including the Company, or one of its predecessor companies, have been notified that the US Environmental Protection Agency ("EPA"), state governing bodies or private individuals consider such companies to be potentially responsible parties ("PRP") under Superfund or related laws. The proceedings relating to these sites are in various stages. The cleanup process has not been completed at most sites, and the status of the insurance coverage for some of these proceedings is uncertain. Consequently, the Company cannot accurately determine its ultimate liability for investigation or cleanup costs at these sites.
As events progress at each site for which it has been named a PRP, the Company accrues, as appropriate, a liability for site cleanup. Such liabilities include all costs that are probable and can be reasonably estimated. In establishing these liabilities, the Company considers the contaminants of concern, the potential impact thereof, the relationship of the contaminants of concern to its current and historic operations, its shipment of waste to a site, its percentage of total waste shipped to the site, the types of wastes involved, the conclusions of any studies, the magnitude of any remedial actions that may be necessary and the number and viability of other PRPs. Often the Company joins with other PRPs to sign joint defense agreements that settle, among PRPs, each party's percentage allocation of costs at the site. Although the ultimate liability may differ from the estimate, the Company routinely reviews the liabilities and revises the estimate, as appropriate, based on the most current information available.
One such site is the Diamond Alkali Superfund Site, which is comprised of a number of sub-sites, including the Lower Passaic River Study Area, 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 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

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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 to the Company's results of operations, cash flows or financial position.
13. 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
April 2017
28
 
0.46
 
1.84
 
May 2017
Treasury Stock
 
Nine Months Ended
September 30,
 
Total From
February 2008
Through
September 30, 2017
 
2017
 
2016
 
Shares repurchased
5,436,803

 
4,360,617

 
39,779,019

Average purchase price per share
$
91.97

 
$
68.80

 
$
58.71

Shares repurchased (in $ millions)
$
500

 
$
300

 
$
2,335

Aggregate Board of Directors repurchase authorizations during the period (in $ millions)(1)
$
1,500

 
$
—

 
$
3,866

______________________________
(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.
On July 17, 2017, the Company's Board of Directors approved a $1.5 billion increase in its Common Stock repurchase authorization.
The purchase of treasury stock reduces the number of shares outstanding. The repurchased shares may be used by the Company for compensation programs utilizing the Company's stock and other corporate purposes. The Company accounts for treasury stock using the cost method and includes treasury stock as a component of stockholders' equity.
Other Comprehensive Income (Loss), Net
 
Three Months Ended September 30,
 
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
44

 
(2
)
 
42

 
(2
)
 
(6
)
 
(8
)
Gain (loss) on cash flow hedges
—

 
—

 
—

 
—

 
—

 
—

Pension and postretirement benefits
(1
)
 
—

 
(1
)
 
—

 
—

 
—

Total
43

 
(2
)
 
41

 
(3
)
 
(6
)
 
(9
)

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Table of Contents

 
Nine Months Ended September 30,
 
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
143

 
5

 
148

 
51

 
(13
)
 
38

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

 
(1
)
 
1

 
—

 
1

Pension and postretirement benefits
4

 
—

 
4

 
(1
)
 
—

 
(1
)
Total
147

 
5

 
152

 
51

 
(13
)
 
38

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
1

 
143

 
1

 
5

 
150

Amounts reclassified from accumulated other comprehensive income (loss)
—

 
—

 
(2
)

(1
)

(3
)
Income tax (provision) benefit
—

 
5

 
—

 
—

 
5

As of September 30, 2017
2

 
(202
)
 
2

 
(8
)
 
(206
)
14. Other (Charges) Gains, Net
 
Three Months Ended September 30,
 
Nine Months Ended
September 30,
 
2017
 
2016
 
2017
 
2016
 
(In $ millions)
Employee termination benefits
—

 
(3
)
 
(4
)
(1) 
(11
)
InfraServ ownership change
—

 
—

 
(4
)
 
—

Asset impairments
—

 
—

 
—

 
(1
)
Other plant/office closures
—

 
—

 
(50
)
 
—

Total
—

 
(3
)
 
(58
)
 
(12
)
______________________________
(1) 
Includes $1 million of special termination benefits included in Benefit obligations in the unaudited consolidated balance sheets.
During the nine months ended September 30, 2017 and 2016, the Company recorded $4 million and $11 million, respectively, of employee termination benefits primarily related to the Company's ongoing efforts to align its businesses around its core value drivers.
A partner in the Company's InfraServ equity affiliate investments exercised an option right, which is currently being disputed, to purchase additional ownership interests in the InfraServ entities from the Company. The purchase of these interests will reduce the Company's ownership interests in InfraServ GmbH & Co. Gendorf KG and InfraServ GmbH & Co. Knapsack KG from 39% and 27%, to 30% and 22%, respectively. Accordingly, during the nine months ended September 30, 2017, the Company reduced the carrying value of these investments by $4 million. In addition, the Company has reserved certain amounts for dividends received from the investments since the exercise notification was received. The Company's InfraServ investments are primarily owned by entities included in the Other Activities segment.

22

Table of Contents

During the nine months ended September 30, 2017, the Company provided notice of termination of a contract with a key raw materials supplier at its ethanol production unit in Nanjing, China. As a result, the Company recorded an estimated $50 million of plant/office closure costs primarily consisting of a $24 million contract termination charge and an $18 million reduction to its non-income tax receivable. The Nanjing, China ethanol production unit is included in the Company's Acetyl Intermediates segment.
The changes in the restructuring reserves by business segment are as follows:
 
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

 
2

 
—

 
—

 
1

 
4

Cash payments
(1
)
 
(2
)
 
(1
)
 
—

 
(3
)
 
(7
)
Other changes
—

 
(8
)
 
—

 
—

 
(1
)
 
(9
)
Exchange rate changes
—

 
—

 
—

 
—

 
—

 
—

As of September 30, 2017
1

 
1

 
1

 
1

 
—

 
4

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

 
—

 
—

 
—

 
—

 
—

Additions
—

 
—

 
—

 
29

 
—

 
29

Cash payments
—

 
—

 
—

 
(24
)
 
—

 
(24
)
Other changes
—

 
—

 
—

 
(3
)
 
—

 
(3
)
Exchange rate changes
—

 
—

 
—

 
—

 
—

 
—

As of September 30, 2017
—

 
—

 
—

 
2

 
—

 
2

Total
1

 
1

 
1

 
3

 
—

 
6

15. Income Taxes
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2017
 
2016
 
2017
 
2016
 
(In percentages)
Effective income tax rate
20
 
5
 
19
 
15
The higher effective income tax rate for the three and nine months ended September 30, 2017 compared to the same period in 2016 is primarily due to a release of $52 million in tax positions during 2016 due to audit settlements in the US and Germany and current year foreign exchange differences in certain jurisdictions where the functional currency differs from the local currency.
For the nine months ended September 30, 2017, the Company's uncertain tax positions increased $24 million, primarily due to the Nilit acquisition (Note 3) and foreign exchange 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.

23

Table of Contents

16. 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.
The total notional amount of foreign currency denominated debt designated as a net investment hedge of net investments in foreign operations are as follows:
 
As of
September 30,
2017
 
As of
December 31,
2016
 
(In € millions)
Total
750

 
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
September 30,
2017
 
As of
December 31,
2016
 
(In $ millions)
Total
797

 
508

Information regarding changes in the fair value of the Company's derivative and non-derivative instruments is as follows:
 
Gain (Loss) Recognized in Other Comprehensive Income (Loss)
 
Gain (Loss) Recognized in Earnings (Loss)
 
 
 
Three Months Ended September 30,
 
Statement of Operations Classification
 
2017
 
2016
 
2017
 
2016
 
 
(In $ millions)
 
 
Designated as Cash Flow Hedges
 
 
 
 
 
 
 
 
 
Commodity swaps
—

 
—

 
1

 
—

 
Cost of sales
Foreign currency forwards
—

 
—

 
(1
)
 
—

 
Cost of sales
Total
—

 
—

 
—

 
—

 
 
 
 
 
 
 
 
 
 
 
 
Designated as Net Investment Hedges
 
 
 
 
 
 
 
 
 
Foreign currency denominated debt (Note 10)
(30
)
 
1

 
—

 
—

 
N/A
Total
(30
)
 
1

 
—

 
—

 
 
 
 
 
 
 
 
 
 
 
 
Not Designated as Hedges
 
 
 
 
 
 
 
 
 
Foreign currency forwards and swaps
—

 
—

 
—

 
(1
)
 
Foreign exchange gain (loss), net; Other income (expense), net
Total
—

 
—

 
—

 
(1
)
 
 

24

Table of Contents

 
Gain (Loss) Recognized in Other Comprehensive Income (Loss)
 
Gain (Loss) Recognized in Earnings (Loss)
 
 
 
Nine Months Ended September 30,
 
Statement of Operations Classification
 
2017
 
2016
 
2017
 
2016
 
 
(In $ millions)
 
 
Designated as Cash Flow Hedges
 
 
 
 
 
 
 
 
 
Commodity swaps
1

 
1

 
3

 
—

 
Cost of sales
Foreign currency forwards
(1
)
 
—

 
(1
)
 
—

 
Cost of sales
Total
—

 
1

 
2

 
—

 
 
 
 
 
 
 
 
 
 
 
 
Designated as Net Investment Hedges
 
 
 
 
 
 
 
 
 
Foreign currency denominated debt (Note 10)
(99
)
 
2

 
—

 
—

 
N/A
Total
(99
)
 
2

 
—

 
—

 
 
 
 
 
 
 
 
 
 
 
 
Not Designated as Hedges
 
 
 
 
 
 
 
 
 
Foreign currency forwards and swaps
—

 
—

 
(2
)
 
12

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

 
—

 
(2
)
 
12

 
 
See Note 17 - 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.
Information regarding the gross amounts of the Company's derivative instruments and the amounts offset in the unaudited consolidated balance sheets is as follows:
 
As of
September 30,
2017
 
As of
December 31,
2016
 
(In $ millions)
Derivative Assets
 
 
 
Gross amount recognized
8

 
14

Gross amount offset in the consolidated balance sheets
2

 
4

Net amount presented in the consolidated balance sheets
6

 
10

Gross amount not offset in the consolidated balance sheets
2

 
2

Net amount
4

 
8

 
As of
September 30,
2017
 
As of
December 31,
2016
 
(In $ millions)
Derivative Liabilities
 
 
 
Gross amount recognized
11

 
7

Gross amount offset in the consolidated balance sheets
2

 
4

Net amount presented in the consolidated balance sheets
9

 
3

Gross amount not offset in the consolidated balance sheets
2

 
2

Net amount
7

 
1


25

Table of Contents

17. Fair Value Measurements
The Company's financial assets and liabilities are measured at fair value on a recurring basis as follows:
Derivatives. Derivative financial instruments, including commodity swaps 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.
 
Fair Value Measurement
 
 
 
Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Total
 
Balance Sheet Classification
 
(In $ millions)
 
 
As of September 30, 2017
 
 
 
 
 </